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Opening a Brewery? 5 Business Issues to Consider

Posted by on Mar 27, 2015 in Lawyer Talk, Our Blog | 0 comments

Picture of beer

Let me begin by saying that I think microbrewery owners are a fascinating breed of entrepreneur. It is their love for the product that inspires them and their persistence and pursuit of perfection that allows some, but not all, to succeed as business owners. Not only that, but microbrewery ownership is one of the few types of businesses where “competitors” are not actually competing. There is a comradery amongst them that creates unlikely alliances that are mutually beneficial. But that is a subject best left to a future post. For now, let’s look at the top 5 business issues that a new brewery owner is likely to encounter.

One: Planning Stages – During the initial planning stages of the brewery, the owner will have to decide how much internal space is needed, parking availability, location, and expansion possibilities. An entire post could be written on the physical planning stage. The owner will need to decide whether purchasing or leasing a building is best for his/her business, how many customers he/she anticipates at peak hours, proximity to the type of customers that the owner wishes to attract, and whether the location chosen will accommodate expansion if the brewery out grows its current location.

The owner may decide to obtain a commercial loan, which will inevitably be in writing, however, if the owner instead uses startup capital provided by family and/or friends, it is strongly recommended that this is also documented and that repayment terms are reduced to writing. The best way to preserve any relationship when money is involved is to have a written agreement to refer to when one or both parties cannot remember what they actually agreed on. It is a common misconception that the better you know someone the less likely it is that you need a formal agreement in place.

Two: Structuring a Team – In addition to the employees that the owner will ultimately hire, it is important for the owner to have both a financial and a legal professional on board at the beginning. Many new owners try to forgo this step because they believe that it will be too expensive. In reality, it is more expensive not to. If, as a new owner, you cannot budget these types of professionals early on, it may be best to put off the venture until you can. The risks of trying to handle these aspects of the business are too great for a new brewery owner. If nothing else, the owner should begin interviewing these types of professionals during early planning so that, when the need arises, the owner will already have someone he/she knows to call on for assistance.

Three: The Law – A new brewery owner encounters a myriad of laws and regulations in order to get the business up and running. Federal and state laws, local regulations, taxing authorities, and licensing authorities all have a say in the brewery’s operations. It is not a bad idea, at this point, if the owner has not done so already, to get a beverage attorney or business law attorney that routinely works with brewers involved to help the owner sort through potential legal hurdles. An attorney may also be able to help the brewery owner locate any available grants or tax breaks in the area.

Four: Contractual Requirements – In addition to any early financial documentation, a brewery owner will be dealing with suppliers and vendors, reviewing real estate purchase agreements or leases, potentially entering into a distribution agreement with a third party distributor, and possibly entering into a partnership with a co-owner. Unless the owner also has a law degree, he/she may want to enlist the assistance of an attorney. Most attorneys do not try to brew their own beer and most brewery owners should probably try to avoid practicing law.

Five: Distribution – If the brewery’s beer becomes very popular, the owner may reach the point where he/she may now be able to sell the beer to stores and restaurants. This is definitely an accomplishment for the owner but opens up a whole new can o’ worms. Now the owner must enlist marketers and sales professionals who can help build awareness for the brand and get the product onto shelves. “Branding” and protecting the brand becomes a priority. The owner should enlist his attorney to trademark any logos, names, or taglines associated with his/her beer.

The five points above are in no way all inclusive but serve only as a way to get the discussion started. We hope to supplement this list in a future post and welcome any comments or suggestions on any information that would be helpful to the reader.

Beebe Law Group is physically located in SW Michigan and serves business owners in various industries throughout Michigan, including those in the beverage industry. It is also home to an in-house commercial real estate brokerage that assists its business clientele with purchasing and selling real estate as needed.

Trademark Bully or Trademark Protector?

Posted by on Mar 27, 2015 in Lawyer Talk, Our Blog | 0 comments

no bully pic

Protecting a brand that you have worked so hard to create is very important as a business owner, especially if you have a product or service that relies upon its branding to appeal to potential and existing customers. Also, your ideas are what set you apart from others. How disheartening would it be for you to come up with a really great name or design for something that you sell only to have another company take it away from you? It takes a lot of hard work to become a household name and/or to have someone immediately recognize your goods by the labeling. Your identity and reputation are important to your overall success. But, where do you draw the line? If you have embarked upon a mission to protect your trademark, at what point does protecting your mark just become bullying?

Normally, as an attorney, I would be shouting from the roof tops telling each and every one of you to do everything possible to protect your brand, but a story I read recently caused me to pause. While I still firmly believe in protecting your mark, there is a point where trademark protection becomes beating up on the little guy. Also, suing anyone and everyone without doing your homework on whether or not true infringement exists can prove disastrous and costly. I have two recent incidents of this to share, but today I will share just one. It involves a well-known individual by the name of Richard Branson.

Branson is a very successful entrepreneur who has started several companies using the word “Virgin” in the name of the venture. The Webster’s Dictionary defines the noun “virgin” as “a person who has not had sexual intercourse” and/or as a person “who does not have experience in a particular activity.” job, etc. The second definition is new to me. Branson uses the word “virgin” in things such as the following: Virgin airlines, Virgin Galactic, Virgin Mobile, and literally dozens of other enterprises under that brand. These brands relate to products and services in several categories of products and industries including, but not limited to, health & wellness, leisure, money, people & planetary issues, telecom, technology, and travel…whew! Branson has managed to slap his “Virgin” branding on almost everything it seems. So, if you try to use the word Virgin in the name of your company, product, or service, you better beware.

It has been recently reported that Branson has challenged at least 64 trademark registrations since 2012 for trademarks that incorporated the word “virgin.” The companies facing this opposition to their trademark registrations included craft breweries, non-profits, writers/publishers, and many other types of companies selling products or services with no apparent overlap with Branson’s Virgin brand.

In his defense, a trademark owner is charged with the responsibility of protecting the integrity of his or her trademark or risks losing it and Branson has chosen a word in his branding that is very commonly used. Trying to protect this mark has proven to be an expensive endeavor (legal fees etc.). But do we feel sorry for Branson or for the myriad of other business startups that have been forced to deal with his attorneys and challenges to their trademark registrations? It is expensive for them too and their wallets may not be as deep as Branson’s. It’s just business, right? Maybe not. Businesses around the world lose millions of dollars every year from easily preventable trademark infringements.

As a new business or an existing business introducing a new product line or marketing campaign, your first inquiry, when it comes to your branding strategy, should include whether or not the words, marks, and or designs that you are using and how you are using them is unique enough to become your own. If there is any chance that they are not, it may be wise to choose another. A good trademark search would be ideal. On the other hand, if you are the type of person that likes to pick fights on the playground and you have a pretty large budget to account for legal fees, by all means take a risk on that mark that someone else is using and try to differentiate it in some way. By nature, after all, entrepreneurs are risk takers. Just be weary of the types of risk that may end your business before it really gets started.

FSBO – Want to Save $9000+ When Selling Your Home?

Posted by on May 7, 2014 in Lawyer Talk, Our Blog | 0 comments

House with for sale tagIt’s hard to escape all of the ads and social media postings proclaiming that the housing market is HOT.  If you are selling your home and you already have a buyer, enlisting the assistance of a real estate sales person at that point simply does not make sense, economically speaking.  However, you may find the process of actually selling your home a little bit intimidating because you may still have questions and there is, of course, paperwork that must be professionally prepared in order to effectively consummate the sale.

Beebe Law Group helps people selling without a broker by providing competent legal advice and legal services, including preparation of all legal documentation.  What does this mean for you?  You can sell your home, pay only one professional, and walk away with more than $9000 in savings.  Our legal services for residential real estate typically run around 1% of the sale price of your home.  Had you used real estate agents, you would have paid 6% as a standard fee.  If you are a visual person, some numbers are listed below to help you conceptualize the savings:

Example:

Hypothetical sale price = $150,000

Real Estate Agents Commissions = $9000 (3% for each agent average) = $141,000 realized from sale minus other closing costs

For sale by owner fee using BLG = $1500 (1% of the sale price) = $$148,500 realized from sale minus other closing costs

What makes this even better?  We are licensed brokers.

Have questions?  Call or write. Telephone:  269-350-2082 or 269-873-4086 | Email: amber@beebelawgroup.com

The “I Should” Feeling: Akrasia

Posted by on Nov 12, 2013 in Lawyer Talk, Our Blog | 0 comments

Picture of procrastination

 

 

 

Akrasia and procrastination are related but they are not the same thing.  Procrastination can be associated with the act of simply “putting things off.”  It means to delay or to postpone.  We all do it.  We sit down to begin a project and instead of getting started right away we check our email, read the news, and laugh at peoples’ posts on Facebook.  Akrasia (pronounced “ah-KRAH-see-ah”) is the state of acting against one’s better judgment.  It is a much deeper phenomenon than mere procrastination.  It involves acting against reason.  Some philosophers associate it with a “weakness of will.”

When one is experiencing Akrasia, an individual has a ” I should” feeling that does not lead to a decision or an action even though logic and reason tells them that they should do something.  As an attorney, I often encounter this phenomenon with prospective small and medium sized business clients.  When just starting out with a business, entrepreneurers are faced with many “I should” scenarios but, in order to run a successful business, the “I shoulds” need to become “I did’s.”

One of the first “I shoulds” that causes the most trouble is failing to properly form and plan the business operations.  Systems, processes, and the related documentation need to be in place.  Advice of counsel is important in these beginning stages.  Instead, the new entrepreneurer hits the ground running, and, ultimately runs the business into the ground.  I have seen this happen with great business ideas and it is sad.  It is also expensive.  Waiting to consult counsel once the “you know what” hits the fan will add thousands to your legal costs.  I have litigated contracts cases in Federal court with clients whose sole evidence of a contract was hundreds of emails.  Had they had a written contract drafted in the beginning and the other side defaulted, (which is usually less likely with a well drafted contract), their legal costs would have been a fraction of what they actually paid to litigate.

Akrasia is not limited to just business owners.  Akrasia sets in with many people who know they need legal assistance but whose opinion of attorneys and/or the fees that they charge, causes them to avoid picking up the phone.  As a professional who likes to keep her clients out of trouble, I urge you to have a strategy for recognizing and combating Akrasia before it becomes a systematic problem.  If you are not sure that you “should” do something, give us a call.  It’s free and we will give you an honest answer.

 

Contact Us

Telephone: (269) 350-2082 or (269) 873-4086

Email: Info@beebelawgroup.com

http://www.beebelawgroup.com

 

Why a Pre-Closing May Be Your Best Bet

Posted by on Mar 21, 2013 in Lawyer Talk, Our Blog | 0 comments

Why a Pre-Closing May Be Your Best Bet

Pre-closings are rare in residential real estate transactions but may often prove to be a necessity in a commercial deal.  This is also called a “preliminary closing” and may only require the attendance of the parties’ attorneys and/or real estate agents.  Why would a pre-closing be rare in a residential deal and not a commercial one?  First, it is rare for attorneys to get too involved in a residential closing unless there is a problem or the purchase is contingent on the sale of another home.  Second, commercial closings often require more contractual stipulations prior to the actual closing date.

In a commercial transaction there is usually more involved in the deal than the purchase of land and/or a building.  Many times, the purchaser is buying certain portions of the business where the building is located.  What does this mean?  It means that there is more involved than a standard purchase agreement and deed transfer.  The purchaser may also be taking on the name of a preexisting business, i.e intellectual property rights, customers lists, active leases, business personal property, signage and contracts with third parties, as well as a host of other things.

Unlike a residential transaction where the closing statement may be compared to the purchase agreement that was “filled in” by the real estate agent, a commercial deal has many more moving parts that must fit nicely together before the parties ever get to the closing table.  A commercial transaction almost always requires the services of an attorney in addition to a real estate agent well versed in the type of property being sold.

In sum, it is advised that the parties to a commercial transaction hire professionals who are willing to hold a closing in two parts if necessary, a preliminary closing to make sure that the documentation is in order, funds are available, and duties will be fulfilled, and the actual closing where money changes hands and the final signing takes place.  We understand the importance of getting the deal done, but we also cannot ignore the need to get the deal done right!

Ad approved by Amber D. Beebe | Attorney & Licensed Real Estate Broker

Learn more about our in-house commercial real estate services: http://www.belluscommercial.com

 

Copyright 2013 All Rights Reserved

 

 

Pass Interference!!! Tortious Interference and Your Rights…

Posted by on Dec 5, 2012 in Lawyer Talk, Our Blog | 0 comments

So, you thought you had an agreement and, out of no where, someone interferes.  Instead of walking away with your tail in between your legs, you should know that you have legal rights.  Here is a brief introduction to the elements required for “tortious interference with contract.” If you can answer yes to these questions then you are likely to have a valid claim.

1.  Was there a valid contract existing at the time of the alleged interference?  If there was not an existing contract, was there a business expectancy rising to the level of a reasonable likelihood or probability of a business relationship.
2.  Did the interferer have knowledge of the contract or business relationship or expectancy?

3.  Was the alleged interferer a third party? If the interferer would be considered a party to the contract, it is unlikely that the plaintiff would be able to maintain a claim for tortious interference with contract as a contracting party generally may not be held liable for interfering with his or her own contract.

4.  Was the contract terminable at will? This issue most often arises in the context of employment contracts. It is unlikely that a terminable at-will contract will support a claim for tortious interference with contract because breach is a necessary element of the claim. However, tortious interference with an at-will contract may constitute tortious interference with a business relationship or expectancy.

5.  Was there a breach of the contract or termination or disruption of the business relationship or expectancy? In order to prevail on a claim for tortious interference with contract, the plaintiff must prove that the other party breached as a result of the interferer’s conduct. In order to prevail on a claim for tortious interference with a business relationship or expectancy, the plaintiff must prove that the business relationship or expectancy was terminated or disrupted.

6.  Was the interferer’s conduct the proximate cause of the other party’s breach of contract or termination or disruption of the business relationship or expectancy?

7.  Was the interference intentional?

8.  Was the interference improper? Factors to be considered in determining whether interference was improper include:
(a)  the interferer’s conduct;
(b)  the interferer’s motive;
(c)  the injured party’s interests;
(d)  the interferer’s interests;
(e)  the societal interests in protecting the freedom of action of the interferer and the      contractual interest of the other;
(f)   the relationship of the interferer’s conduct to the interference; and
(g)  the parties’ relationship to each other.

9.  What are the plaintiff’s damages?  Can they be determined?

10.  What are the defendant’s possible defenses?

FREE 10 Step Checklist for forming an LLC – You’re Welcome.

Posted by on Sep 12, 2012 in Lawyer Talk, Our Blog | 0 comments

A “Get You Started” Checklist For Organizing A Michigan Limited Liability Company

First, the fun part.  Select a name for your business.  Verify the name’s availability with the Michigan Department of Licensing and Regulatory Affairs.  You can do this yourself or engage an attorney to do so for you.  Note:  The name of the business must ultimately contain the words Limited Liability Company or the abbreviation LLC or LC or, if the entity is a Professional Limited Liability Company, the words Professional Limited Liability Company or the abbreviation PLLC or PLC.  Certain types of businesses must be formed as PLC’s.  The abbreviations LLC and PLC are typically used without periods between the letters.

Second, you may want to consider filing an application for reservation of name to reserve the desired business name. (The reservation is currently good for six months).

Third, discuss with your attorney which, if any, of the three corporate characteristics (centralized management, continuity of life, and free transferability of interests) should be adopted based on your specific situation. These characteristics may or may not be needed, so this discussion is important. If centralized management is to be adopted, the articles of organization must include a statement that management will be delegated to managers.

Next, have your attorney complete the articles of organization. These will identify the duration of the LLC, if other than perpetual, and includes the following:

  • Identify the resident agent and registered office.
  • Determine whether the LLC is to be managed by managers. If it is, a statement is required in the articles that it is to be so managed.
  • Make sure that at least one person who will be a member has signed the Articles of Organization.

Fifth, have your attorney file articles of organization and the filing fee with the Michigan Department of Licensing and Regulatory Affairs, Bureau of Commercial Services, Corporation Division. The articles will be given immediate effect on filing unless the articles state that the effective date is delayed (For a period of up to 90 days.) Expedited filing with one-hour, two-hours, and same-day service is also available.  Along with this step, file the certificate of assumed name, if appropriate. (An assumed name is good for five years.)

Sixth, this step is often overlooked but it is very important. Have your attorney prepare and execute the operating agreement. If the LLC is a single-member LLC, your attorney may prepare bylaws if an operating agreement is not desired.  Why do you need an operating agreement?  This is a subject best addressed by another post but, in brief, banks often require these for loans and, if you intend to pursue a public grant, or funding from a VC, these are typically required.  Another reason is that the operating agreement provides written direction for your company.  Remember, you may be the owner but your company is a separate entity and should be sustainable even in your absence.  Your operating agreement is similar to an instruction manual or road map for your business.

Seventh, obtain the employer identification number (EIN) for the LLC. (Under question 8a on IRS form SS-4, check “Other” and insert “Limited Liability Company” in the blank. The form should be signed by an authorized LLC member.) Note:  If the single member is an individual and the LLC does not have any employees, the single-member LLC is not required to have its own EIN and the individual’s social security number will be used instead. However, the IRS will issue an EIN to the LLC if the individual wants one and it is useful to obtain an EIN if you anticipate that you will be hiring employees in the near future.

Note: If a single-member LLC whose member is an individual has one or more employees, the IRS requires that the LLC obtain its own EIN as a sole proprietorship and maintain the employees’ filing requirements under the sole proprietorship’s EIN.  If the single member is a corporation, LLC, or some other entity, the single-member LLC is not required to have its own EIN and the parent company’s EIN will be used instead. However, the IRS will issue the LLC its own EIN on request.

Along with the previous step, complete and file the applicable tax registration form with the Michigan Department of Treasury. The form should be signed by an authorized LLC member.

Eighth, open a bank account. (If the bank so requests, provide it with a copy of the articles, certificate of assumed name, and operating agreement. The bank will require the SS-4 employer identification number.)

Next, this may also be an enjoyable step because it often involves the creation of a logo and the beginning of your marketing campaign.  Place the name of the LLC on all company material (e.g., letterhead, invoices, business cards).

The following step must be repeated each year.  Before February 15th of each year, complete and file an annual statement containing the names of the LLC’s resident agent and the LLC’s registered office. The form will come from the state. (Professional LLCs require additional certification of licensed persons.) Note that LLCs formed after September 30 do not need to file an annual statement on February 15 of the next year.

A business law attorney may guide you through all of the above steps.  The attorney will provide you with all of the documentation that you need based on your individual circumstances.  If you intend to use an attorney, and we recommend that you do, substitute the first step listed above with a 30 minute free consultation with Beebe Law Group PLC.

We hope this gets you started. Set your business up right at the beginning and avoid potential pitfalls later.

Article Approved by Amber D. Beebe, Managing Member

© 2012 Beebe Law Group PLC

Partnership Instruction Manual

Posted by on Jul 29, 2012 in Lawyer Talk, Our Blog | 0 comments

When you purchase a new computer, cell phone, or practically anything that comes in a box, it usually comes with an instruction manual. The manual gives you step by step instructions on how to use and/or put together the item that you purchased. There are some things that do not come with instructions that need them the most. One of these things is a newly formed partnership.

The first three steps in this instruction manual for a partnership should probably include the following:
Step One – Choose your partner wisely. This should include the same sort of due diligence that you would employ when investigating a business that you wish to purchase. (Do this even if your potential partner is a friend, although entering into a partnership with a friend or family member should be approached with extreme caution).
Step Two – Get it in writing! You should absolutely have a written partnership agreement. This agreement should spell out the who, what, when, how, why, and when it terminates. A written agreement may seem too formal when you’re entering into a partnership with a friend or close colleague but, if you value your friendship, and your bottom line, this step should never be overlooked.

Step Three – Communicate, communicate, communicate! You and your partner should meet regularly and make certain that you remain on “the same page” when it comes to important issues that could affect your business AND your relationship with your partner.

A partnership can be a challenging endeavor but, when approached carefully and with scrutiny, it can be very rewarding and fulfilling. There are many more steps involved in forming a partnership but, if someone were to ask me, I would say that these first three steps are the most important. Happy business ventures!

 

Hire Beebe Law Group PLC to prepare your Partnership Agreement.  Visit our Contact Us page or call: (269 350-2082

Buying a business? Not so fast!

Posted by on Jul 23, 2012 in Lawyer Talk, Our Blog | 0 comments

You would not buy a car before running “the Carfax” or taking it for a test drive, so why would you buy an existing business without checking it out first? Investigating a business prior to purchase is called “due diligence” and it is an important step that should not be overlooked.

Before you ever begin to discuss the purchase price or when the purchase should take place, i.e. the closing, there are certain things that a responsible buyer should request from the seller. By way of example, the buyer should ask for the following:
1. Business tax returns;
2. Business financial statements;
3. Detailed list of assets;
4. Details on accounts receivable, debts, and other liabilities;
5. Current leases (these may need to be assumed by the buyer);
6. The deed and title insurance policy (if real estate is involved);
7. Contracts with customers, suppliers, and employees;
8. Licenses and permits;
9. Documentation related to any intellectual property;
10. If needed, a commitment from the seller to consult you at the beginning of the venture.

In addition to that listed above, there are several items that you will need to obtain from third parties and/or entities. A search should be conducted to see whether there are any UCC liens, tax liens, past or present lawsuits, customer complaints including those filed with the Better Business Bureau and/or the Attorney General. The buyer should also request a credit history for the business and the seller and check to see whether the entity is in good standing. For those incorporated in Michigan, a buyer can do this by visiting the Department of Labor and Economic Growth, or DLEG.

Buying an existing business can be exciting but, one should take care in the way in which the sale takes place and also determine, through a due diligence assessment, whether the sale should take place at all. Due diligence can be performed by competent legal counsel who will also assist you with preparation of the appropriate documentation. Do the work now and avoid any potential pitfalls that can lead to the demise of your business later.

In Brief: What you need to know about Financing Statements.

Posted by on Jul 17, 2012 in Lawyer Talk, Our Blog | 0 comments

One of the most important UCC regulations affecting small to medium sized businesses is the UCC-1 form. This is also called a Financing Statement. When a lender secures interest in a borrower’s personal property used as collateral, the lender files form UCC-1 with the state’s Secretary of State Office (or the appropriate state records office, depending on the State).
This form serves as a public notice of a lender’s interest in the assets for a business and is accessible public information. Lenders conduct lien searches prior to making a secured loan by checking the state’s UCC filings database to make certain that no other UCC-1 forms have been filed against the borrower’s collateral. If more than one lender files a UCC-1 against the same collateral, the one filed first has a priority claim should the borrower default or go bankrupt.

First lien security interests on all business assets are called “blanket liens.” By way of example, if a lender files a UCC-1 on “any equipment or machinery” as a blanket lien and you lease some equipment, the leasing company may do one of two things: (1) file its own UCC-1 form with the understanding that it is already a blanket lien or (2) establish a subordination agreement with the lender that allows the leasing company to recover its assets. If a subordination agreement is not made between the lender and the leasing company, the lender has a right to cover the leased assets until the blanket lien is satisfied.
Once a loan is paid off, the borrower should ask the lender to terminate the UCC-1 filing. Lenders will not proactively terminate these filings.

Remember that laws vary from state to state, so you should consult an attorney on matters concerning UCC filings, liens and security agreements.