Tag: grand rapids business lawyer

What is a Michigan Registered Agent?

October 30, 2011 / Michael

As a Grand Rapids, MI business lawyer, this is a question I’ve been asked quite a bit. Due to the large number of corporations and limited liability companies (LLCs) formed in Michigan every year, it is important to know the requirements of a registered agent. Why? Because whether you form a Michigan corporation or a Michigan LLC, you are required to appoint a registered agent. The law for requiring one for Michigan corporations is here, and the law for requiring one for Michigan limited liability companies is here.

A registered agent can be an individual Michigan resident, or a domestic or foreign corporation (or LLC) authorized to transact business in Michigan. The registered agent of a Michigan corporation or LLC (I’ll refer to it as the “Company”) is the Company’s agent for the purpose of service of process. Service of process is the procedure used to give legal notice to the Company of a court or administrative proceeding against it. In other words, it’s how a Company is notified that it is being sued or that someone is bringing an administrative action against it.

Of course, to “serve process” on a Company, the Company is also required to have a registered office. Both the name of the registered agent and the street address (and mailing address if different than the street address) of the registered office must be included in the Articles of Organization (if the Company is a LLC) or Articles of Incorporation (if the Company is a Corporation).

Michael Lichterman is a relationship-based business attorney who leverages his business, marketing and legal knowledge to help business owners and entrepreneurs create a Foundation for Business Success™. This goes beyond merely drafting a set of documents – it’s about proactively preparing the business and the business owner for continued growth while remembering the “human side” of running a business. He best serves small business owners (less than 50 employees) and entrepreneurs. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients and their businesses – many of which have become great friends.

What Are Michigan Articles of Organization?

September 4, 2011 / Michael

You may have read my previous post on LLC Operating Agreements and thought, “that’s not the first step, is it?” Well, no, it’s not. The first step in legally forming a business should be to meet with a Michigan business lawyer to get the critical advice and help you need to make sure you get the full, legal benefits of forming the business.

The first documentation step in forming a Michigan Limited Liability Company (LLC) is to draft and file Articles of Organization (the “Articles”). Filing the Articles means that the business entity officially “exists.” Although the Michigan Limited Liability Company Act (the “Act”) doesn’t require a particular form for the Articles, it does set out what information is required in the Articles. For example:

The name of the LLC,
The purpose(s) for which it is formed,
The street and mailing address for the LLC’s registered agent,
Whether the LLC will be managed by a manager or by the members, and
How long the LLC will last.

Generally, I favor using the form from the State of Michigan Department of Licensing and Regulatory Affairs (click here for the form). Don’t let the simplicity of the form fool you. There are many important decisions that need to be discussed and decided with a Michigan business lawyer before knowing whether or not the state form is sufficient for your particular business. And in certain cases it is better to use custom-drafted Articles rather than the form, to make sure your goals and objectives for the business are accurately represented.

Have questions about getting your business “off the ground?” Want to make sure that your existing business was set up to give you the maximum protection and help reach your full potential? Call us at 616-827-7596 and schedule your business needs analysis meeting to have added peace of mind.

What Is a Michigan Benefit Corporation?

August 21, 2011 / Michael

Short answer – nothing . . . yet. You see, as a Grand Rapids, Michigan business lawyer I try to keep my “ear to the ground” when it comes to the future of business law – both here in Grand Rapids, Mi and nationally. There seems to be a growing national trend for state business laws to allow a “Benefit Corporation.” Five states already have such laws and Michigan is one of six states currently considering enacting B Corporation laws.

Generally speaking you can currently form two types of Corporations in Michigan – for profit or non profit. Yes, there are more, but those are the two most common. For profit Corporations can then elect to be treated as either a C Corporation or an S Corporation for tax purposes. Please note that you don’t “form” a C Corporation or S Corporation – that is a tax election (and a topic for a future blog post).

Benefit Corporations would function the same as C Corporations in terms of taxation, but would give businesses the fiduciary duty to consider non-financial interest when making decisions and require accountability through annual reporting. This is mainly accomplished and carried out by appointing a “Benefit Director.” The driving cause behind the Benefit Corporation is providing a way for business Corporations to further environmental, sustainability and other goals without running afoul of Director fiduciary responsibilities.

You see, Directors are legally obligated to act in the best interest of the Corporation’s shareholders. This could leave them open to the threat of lawsuit from one or more shareholders if they make a decision that is more mission driven (e.g. good for the community with potentially little or no benefit to the shareholders). Forming as a Benefit Corporation would not only allow for those types of “greater good” decisions but also hold them accountable via a Benefit Director and Benefit Officer(s), annual reporting and a shareholder right to enforce a higher standard of action.

If you are interested in reading the proposed legislation, you can find it here: Senate Bill 359, Senate Bill 360, House Bill 4615, and House Bill 4616.

I can see this being of particular interest here in West Michigan. We have a remarkable reputation for incorporating sustainability into our businesses and lives and for having a focus on the “greater good.” I’m looking forward to monitoring developments on Benefit Corporations in Michigan and will post again with any updates.

Business Membership Plans and How It Can Protect Your Business

July 10, 2011 / Michael

As many of my readers and business clients know, I bring a very unique background to being a Michigan Business Attorney. A degree in Finance, Vice President of a commercial equipment leasing company, small business owner and entrepreneur. This background and my own personal view on true client service caused me to step back and look at the way Michigan small businesses worked with their business lawyer.

Guess what? I didn’t like it. The most common model is based on the “billable hour.” I’ve experienced that both as a client (at the leasing company) and as an attorney. Yes, it’s true, I billed by the hour when I first opened my firm . . . it was all I was taught and all I knew. I quickly realized that billing by the hour is a lose – lose situation. When you’re billed by the hour you don’t want to talk with your attorney. Trust me, I know because I didn’t want to when I was a client. And it felt a little bit like giving the attorney a “blank check” because the bill would be for however much time it took. Sure there were estimates, but it wasn’t set in stone. I wanted to have a relationship with my clients, and I knew I couldn’t do that billing by the hour.

Then there was the flat-fee model. A specific dollar amount for a specific transaction. It still felt cold and impersonal. The reason was that it was “just a transaction.” Again, I wanted to have an ongoing relationship with my clients and many of them expressed an interest in something more than the “one off” transaction. Why? Because we’ve seen first hand the incredible value provided by ongoing counsel from a business lawyer (thankfully it was at a time that I wasn’t paying the bill!). Even with a flat fee for the services, once the transaction was over it was a case of “well, if you need anything else, just give me a call.” That was it!

I can tell you from personal experience that the followup call was rarely made. Why? Well, the simplest reason was the owner was busy running the company and it didn’t come to mind. Another common reason was fear of the cost involved for making that call. I knew there had to be a better way. So I thought about what I would have wanted as a business owner who wanted to help ensure the longevity of my business: ongoing guidance, value and a reasonable fee.

The result? The Lichterman Law Business Membership Program. Sounds awfully official doesn’t it? The aim of the business membership program is to provide small business owners and entrepreneurs with the ongoing legal guidance they need and want at a monthly flat rate they can afford. Membership levels range from our base Counsel Plan all the way up to our Pinnacle Plan. Each membership level is designed to provide small business owners with the most commonly needed business legal services. The best part (according to current business members) is the as needed phone and email access included in every plan level . . . and the kicker is that the phone/email access is not limited in any way.

The best part about our Business Membership Program is that it is the result of years of research, talking with dozens of business owners and business advisers about what they need and value most. It’s no surprise that many of those owners have or are current business membership participants. It truly is created for business owners, by business owners.

Despite offering business membership plans for the past few years, you probably haven’t heard much about it. That’s because we are very selective in who we offer business membership plans to so that we can provide the unsurpassed level of client service for which we are known. We’ve had so many business owners tell us to spread the word, that we finally decided to unveil it more publicly (starting with this and future blog posts).

You can get started by reading more about our philosophy by clicking here. Then call at 616-827-7596 to find out if you qualify for a business membership plan. Remember, we take a limited number of monthly membership clients and it is first come, first served, so call quick. We’ll even provide a 2 hour small business needs analysis meeting at no charge if you mention this blog post. Why wait?

A Small Business Horror Story

June 19, 2011 / Michael

From time to time I will reference the blog posts of some of my colleagues. In this case, the story was so typical of similar ones I’ve experienced and the post was so well written, I’m reproducing it here with permission. The author is Business Lawyer Gina Bongiovi of the Bongiovi Law Firm in Las Vegas, NV. If you or someone you know owns or plans to start a business in Las Vegas, I strongly recommend contacting Gina. As a Grand Rapids, MI business lawyer I assure you that these same situations crop up here in West Michigan. Enjoy the post and please share your thoughts with a comment.

When I sign a new monthly retainer client, I always conduct what I call a “legal checkup” on the business. I review the company’s formation, licensing, employee or contractor agreements, lease agreements, service agreements, etc. to find ways I can better protect the company and its owners.

Wait, let me clarify. I *request* these documents in order to review them. Often, it takes the owners a while to gather all the information to give me and sometimes they simply ignore my requests, preferring that I instead put out fires. While I’m great at putting out fires, my real value lies in working proactively – modifying these documents to better protect the company before a fire breaks out.

One particular client was in an LLC with another person. We’ll call them Jack and Bill.* Jack requested the initial meeting with me, apparently without telling Bill. Bill walked in during our meeting, demanded to know “who the hell” I was, and threw a fit, yelling at the top of his lungs that “we don’t need no &*%$ attorney!” Following that outburst, I gently asked Jack to send me a copy of the company’s operating agreement. He said it was the one that came with the corporate binder he got when he formed the company and he had no idea where the binder even was. Seeing the writing on the wall, that this partnership was going to crumble sooner rather than later, I made a more urgent request to see the operating agreement. And I requested the operating agreement every few days for the next two months with no response.

A month ago, Jack called to say Bill was leaving the company. I again asked for the operating agreement to make sure Bill’s exit was in compliance with its terms. I also suggested that Bill be removed as a signer on all company bank accounts as soon as humanly possible. No response.

Last week Jack called in a panic. While he was at the bank removing Bill as a signer on the account, Bill was at a different branch, withdrawing $21,000 in cash from the company’s checking account.

Because Bill was still a signer on the account, the bank had no choice but to give him the money.

Because the operating agreement didn’t restrict an LLC member’s ability to take money out of the account, Bill didn’t breach any agreement.

And because Bill pulled the money out in cash, there was no way to stop payment.

Jack’s only option would be to file a lawsuit against Bill, hope that he wins, and then hope that he could collect the money. Of course, a lawsuit would drag on for months and more likely years, tying up company resources in what is probably a losing battle. Plus, even if Bill lost, he could file bankruptcy and then the company would have lost the original $21,000, plus attorney fees, plus time lost while embroiled in a lawsuit.

Lessons learned:

1) make sure your operating agreement is thorough and addresses issues like when a member can take money out of the account,

2) if someone leaves the company, remove them from the bank account IMMEDIATELY. Unless you notify the bank that someone is no longer an owner, the banker has no way of knowing not to give an owner access to company funds.

* Names have been changed to protect the innocent.

Michael Lichterman is an estate planning and business planning attorney who helps families and business owners create a lasting legacy by planning for their Whole Family Wealth™. This goes beyond merely planning for finances – it’s about who your are and what’s important to you. He focuses on estate and asset protection planning for the “experienced” generation, the “sandwich generation” (caring for parents and children), doctors/physicians, nurses, lawyers, dentists, professionals with minor children, family owned businesses and pet planning. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

Is Life Insurance Asset Protected in Michigan?

March 27, 2011 / Michael

As a Grand Rapids, Michigan estate planning and asset protection attorney I’ve been asked several times, “Is life insurance protected from my creditors?” And sometimes it’s more specific, “is the cash value of life insurance protected from my creditors.”

Well, the answer is maybe yes, maybe no. You see, there is a seeming incompatibility between the statutory law and the case law (court-based law) in Michigan. In MCL 500.2207(1) it says that the proceeds of any life insurance policy payable to the wife, husband or children of the insured or to a trust for their benefit, including the cash value thereof, is exempt from claims of the insured’s creditors (read it by clicking here).

Seems to be pretty clear, right? Wrong. There are a couple of cases in Michigan where creditors were allowed to garnish the cash value of the insured’s (debtor’s) life insurance policy. The cases are:

Chrysler First Business Credit Corporation v. Rotenberg v John Hancock Mutual Life Insurance Co., 789 F. Supp 870 (1992) – read it by clicking here.
Schenck Boncher & Prasher v. Vanderlaan, 2003 Mich. App. Lexis 2082 (2003) – read it by clicking here

Well that sort of muddies the water, doesn’t it? And if you go back to MCL 500.2207(1) and read it in the context of 500.2207(2), you could read “cash value” to reference not the cash value during the insured’s lifetime, but rather only the cash value component of the proceeds after the insured’s death.

Here’s the kicker . . . there IS a way to fully protect life insurance cash value from creditors. That is the topic of a future blog post, so make sure to check back regularly.

And if you (or your client/customer) can’t wait that long. Call us at 616-827-7596 to schedule a Peace of Mind Planning Session to discover how to asset protect and tax-proof your life insurance and create a lasting legacy for generations to come.

What Is A Michigan Charging Order?

February 21, 2011 / Michael

As a Michigan Business Attorney and Estate Planning Attorney I have worked with numerous business owners and individuals to help protect their business and/or their family assets. In many cases that protection involves forming a Michigan Limited Liability Company (an LLC). One of the main reasons for forming LLCs is right there in their name . . . limited liability.

Many Michigan business owners desire to limit their personal liability for their business activities. The idea being, if the business is liable for some damage to a person, business or property, the business owner does not want his or her personal assets (home, financial accounts, cars, etc.) at risk for the business liability. Simply forming the LLC is not enough, but it is a good first step. I will discuss additional liability limiting steps in a future post.

It’s a fact of life for many businesses and business owners . . . the dreaded lawsuit. And what happens if you lose? Well, you become a “judgment debtor,” meaning you are a debtor to the individual(s) or business(es) that won the lawsuit against your business. And they have all sorts of “remedies” – actions they can take to collect on the court judgment amount. One of those is commonly referred to as a charging order.

A charging order is a court-authorized right granted to a judgment creditor to attach distributions made from a business entity (such as a LLC) to a debtor who is a Member in the entity. In a way, it is similar to garnishment of wages or income. It does not give the creditor ownership or management rights in the LLC.

Remember that a charging order was just one of the “remedies” available to a judgment creditor? Well, many business owners and individuals who want to protect their assets would like it to be the only remedy. Can you guess why? Let me know what you think by commenting on this post. I will let you in on the reason in my next post and uncover the Michigan law relating to the “charging order only” remedy.

You Pay For What You Get

January 30, 2011 / Michael

“You get what you pay for,” is a phrase that we’ve all heard so much it is has become almost a cliche. What I’ve come to realize is that, although “you get what you pay for” may not be true in all cases, “you pay for what you get” seems to be true in all cases. Whether the “cost” is money, like we typically think, or something intangible such as lost time, lost opportunity, worry, regret or pain.

You may have read my post about the Honda, the big screen and estate planning. The idea being that we “pay” (money, time, emotions, etc.) for something based on the perceived value it has to us. I was reminded of this when I talked recently with a nice gentleman. At one point he said, “that’s more than I’m willing to pay.” It doesn’t matter the context – estate planning or business planning – there’s a lot going on behind the scenes in that statement.

It could be a reflection of lack of concern, lack of understanding how things work (estate planning or business planning), not fully understanding the situation, or valuing other things higher than the estate planning or business planning being considered. Ultimately, I think it is a combination of all of these (and more), although I see the value comparison being the deciding factor in most situations.

I’m not saying any decision is good, bad or indifferent. I think it is good for us to understand how we make purchase decisions and to not forget all the non-monetary considerations that come into play and how they, ultimately, lead us to the decision we make.

How do you make a decision between two or more “purchases”? Maybe it’s getting an iPad versus purchasing more life insurance, maybe it’s leasing a new car versus purchasing a new one, or getting a “discount” haircut versus going to a salon. When you stop and think about the monetary and non-monetary considerations, how do YOU make your choices? I would love to hear what you think of this!

What is a Michigan Limited Liability Company (LLC)?

January 9, 2011 / Michael

As a Grand Rapids business lawyer, great folks routinely call our office and say “I need to form an LLC.” When I ask them why, the answers range from “because I want to start a business,” to “my buddy started one and said it was the best way,” to “my CPA suggested I form one.” This lets me know that there is some confusion among business owners and entrepreneurs about what, exactly, a LLC is.

As you can tell by the title of this post, LLC is the abbreviation for Limited Liability Company. The law on Michigan LLC’s can be found here. In short, a LLC is a form of legal business structure under which you can operate your business. Some other well-known forms of business structure are corporations and partnerships.

Michigan LLCs are typically more flexible in their formation and operation than corporations and typically provide a greater level of liability protection than a partnership. The “owners” of a LLC are called “Members.” There can be as little as one Member (referred to as a single-member LLC or SMLLC) and up to as many Members as you want (collectively referred to as multi-member LLCs or MMLLCs).

LLCs, like corporations, offer a certain level of liability protection for the owner’s personal assets if certain legal and practical steps are taken. This, combined with the flexibility mentioned above, is why many business owners choose to formally operate as a LLC.

This brief explanation would not be complete without mentioning everyone’s favorite topic…taxes. By default, LLCs are taxed as a “pass through entity.” That means that the profits and losses “pass through” the entity down to the owner(s) personal tax return…the LLC does not pay the taxes, the owner(s) does. Although that is the default, there are elections that can be made to be treated differently for tax purposes.

It is important to keep in mind that a LLC is not always the best way to form your Michigan business. The considerations mentioned above are just the “tip of the iceberg.” Starting a Michigan business without talking with a relationship-based Michigan business attorney could cost you (and your business) dearly down the road.

Looking to start a business or want to make sure your business has the correct foundation for continued success? Call us at 616-827-7596 for a comprehensive Small Business Strategy Session. Mention this blog post and we’ll waive the strategy session fee (a $1,250 value!).

Michael Lichterman is a relationship-based business attorney who leverages his business and legal knowledge to help business owners and entrepreneurs create a foundation for success™. This goes beyond merely drafting a set of documents – it’s about proactively preparing the business and the business owner for continued growth while remembering the “human side” of running a business. He best serves small business owners (less than 50 employees) and entrepreneurs. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients and their businesses – many of which have become great friends and trusted confidants.

Parents Waiving Liability For Their Child: Is YOUR Business Protected?

July 7, 2010 / Michael

Are you a business owners that provides or manages some form of activity to minor children? If so, do you typically have the parents sign a pre-injury liability waiver? Guess what? The Michigan Supreme Court recently reaffirmed that a parental pre-injury liability waiver is unenforceable under Michigan law. Why? Because a parent lacks authority, absent special circumstances, to bind his or her child by contract. Only time will tell what impact this has on the provision of recreational and sporting activities for kids and how much litigation crops up because of it.

If you’re interested in reading the actual court opinion, you can read it here.

What do you think? Is the law in Michigan right? If not, should the court have come to a different decision? How should we strike a balance between a business’ ability to “contract away” liability and the protection of young children no matter what the circumstances?

Michael Lichterman is an attorney specializing in estate planning and helping provide peace of mind to families and businesses in Grand Rapids, Grandville, Cascade, Forest Hills, Ada, Byron Center, Caledonia, and the surrounding areas. He specializes in “whole family wealth” planning for doctors, nurses, lawyers, other professionals with minor children, and the “sandwich generation” (caring for parents and children) – and does so from a Christian perspective. He takes the “counselor” part of attorney and counselor at law very seriously, and enjoys creating life long relationships with his clients – many of which have become great friends.

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