Florida Annual Report for LLC’s, Corporations and Partnerships due by May 1

Many of you have corporations and limited liability companies domiciled in Florida and other states. As you know, to keep those companies active, it is necessary in most states to file some variety of an annual report or franchise report. You will likely receive emails or mail to your principal address listed in the state records, but often it looks like junk mail that can be ignored, or is sometimes set aside and just simply forgotten. There are also companies that send very official looking letters offering to update your records for a fee. These updates are advertisements and may or may not include filing your state annual report. You can tell if they are advertisements by looking carefully at the fine print.

For those of you doing business in Florida, the Florida Department of State, Division of Corporations requires each organized business doing business in the state, whether a corporation, limited liability company, or partnership, whether domiciled or just licensed to do business in the state, to file an annual report between January 1st and May 1st of each year in order to maintain an active status in Florida. The annual report is used to confirm or update the Florida Department of State, Division of Corporation’s records, including information related to the managers, members, officers and directors, the registered agent or registered office, the principal address or mailing address, and the federal employer identification number. For other states, similar reports and fees will also be required. The timing varies and it is important to check the dates so that you do not miss important deadlines.

If the annual report is timely filed between January 1st and May 1st, the reporting fee is as follows: $150 for a profit corporation; $61.25 for a not for profit corporation; $138.75 for a limited liability company; and $500 for a limited partnership or limited liability limited partnership. A $400 late fee will be assessed for any report filed after May 1st for profit corporations, limited liability companies, limited partnerships and limited liability limited partnerships. Failure to file an annual report by the third (3rd) Friday of September will result in the administrative dissolution or revocation of the business entity on the records of the Florida Department of State.

In addition, the Florida LLC Act has been revised and restated in whole. Effective January 1, 2014, any new limited liability company formed will need to be formed pursuant to the new Act. Any existing entity will need to amend its operating agreement and articles to reflect the new Act no later than December 31, 2015. With that in mind, we are recommending to clients that the amendments be done now and that the Annual Report filing be made reflecting the new Act requirements, specifically, the elimination of the concept of Managing Member. We also recommend filing a Statement of authority recognizing those in your company authorized to act on behalf of the LLC. This may avoid the need to file additional amendments during the year.

We are ready and able to assist you in amending your operating agreements and answering questions regarding the new Act. We are also available to assist you in properly filing your annual report in Florida and assisting you with other states.

The annual for Florida report can be submitted electronically on Sunbiz.org. Annual reports filed using credit card, debit card or Sunbiz E-file Accounts through the E-Filing tab on Sunbiz.org are processed immediately and should be posted on Sunbiz.org within twenty-four (24) hours. Check and money order payments must be submitted by mail and are processed within twenty-one (21) days, so e-filing is the preferred method of filing. For Delaware companies, the annual reported can also be submitted by following this LINK.

The e-filing process is very simple and can be completed in minutes. An Overview and Step-by-step instructions for completing the annual report can be found HERE.

If you have any questions or concerns, please let us know and we would be happy to assist you with completing the annual report.

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Sweat Equity v. Money Investors: Who Makes the Rules? [The Golden Rule of Business]

Many years ago, while working as the General Counsel to a large public company going through a Chapter 11 Bankruptcy, I learned that the Golden Rule as we all learned it in kindergarten [do unto others as you would have other do unto you] is not the only Golden Rule when it comes to business. I certainly support and believe in the Golden Rule we learned in kindergarten and try my best to adhere to it, but when it comes to money and business, I have learned that the Golden Rule really is: the person with the gold makes the rules.

In business large and small, there is often reward and equity for those who have a great idea or are the work horses driving success (the “Sweat Equity Owner”). Typically, however, the greatest percentage of equity and, hence, the greatest return in pure dollars, goes to the person who put up the money in the first place (the “Cash Equity Owner”). Once the business gets going, this often leads to resentment of the Sweat Equity Owner and frustration of the Cash Equity Owner.

Not surprisingly, the Sweat Equity Owner often feels like he has worked harder and should be compensated for the hard work and ideas. In addition, the family of the Sweat Equity Owner has started to feel the pain of long hours and missed meals and events, resenting the Cash Equity Owner whose life and lifestyle has not changed at all.

The Cash Equity Owner is frustrated because the project is taking longer than expected to show a return and the Sweat Equity Owner continues to ask for cash, primarily to meet living expenses in the form of  salaries for business personnel. The Cash Equity Owner usually has other investments or businesses and more business experience and wants the Sweat Equity Owner to work differently and take his advice on how to get the work done more quickly so that product can get to market faster. His family (or fund investors) wants to know when they will see a return on investment.

Not to sound like a broken record on the reasons for Business Divorce, but there are some things that can be done at the onset of a relationship to avoid these dilemmas. Too often, when the relationship is formed, there is no substantive discussion of duties, timing for deliverables and exit strategy for the Cash Equity Owner. The conversations are very high level and never transcribed into a detailed agreement. One party calls cash loans while the other considers it equity.

In the last 12 months, I have encountered among other missteps: companies in which the equity was never issued despite cash being infused; standard Bylaws from companies like Legal Zoom were used, but no one ever read or understood what they meant; Articles were filed on www.Sunbiz.org indicating the names of managers, managing members, officers, owners … who were not in fact in the positions indicated and who had no authority to act on behalf of the business; domain names and other intellectual property placed in the name of one owner instead of the business …. This list is hardly exhaustive, but all have led to expensive legal battles between business partners on break-up.

When I get the call, whether as an attorney or mediator, that business partners are seeking to terminate their business relationship, the first step in my analysis is to look at the agreements between the partners.  These documents become the guide on how to proceed. If they have been carefully crafted and reflect the partners intent, often the cost to the business as well as the individuals for navigating the business divorce is emotionally and financially insignificant —- Owners typically know what to expect and time is spent implementing already agreed plans. Without these written agreements or mutual acknowledgment of intent of unwritten agreements by the Owners, the cost in the first days of efforts to separate can be thousands, and at times, tens of thousands, of dollars.

At this point you are probably thinking that I am exaggerating, but in fact, if a lawsuit needs to be filed  in order to keep the business running and make it clear who has authority to act, the effort is significant and lawyer time and cost is high. We start by preparing a complaint seeking injunctive relief and serve it with requests for admissions, production of documents and interrogatories. At times, we demand a receiver be appointed if we are representing the Cash Equity Owner and our client is not ready or able to step in and run the business. We seek emergency hearings to ensure if our client in good faith believes irreparable harm to, or waste of, business assets will occur if action is not immediate.  We often need to include third parties such as the domain hosts or banks to require them to turn over account codes and keys or to freeze assets.

Courts do not like to get involved in daily business activities and if the situation  lacks clarity, the court may appoint a receiver on its own. Domains and intellectual property will need to be be place in escrow; bank accounts will need to be frozen or unfrozen; payroll companies, customers, vendors, employees will all need to be notified as to who has authority to direct activities just to keep the business operating  and attorneys will be stepping into conversations with domain hosts, bankers, customers, vendors and employees…. all while on the clock. By the way, the Receiver will hire an attorney as well and both the receiver and attorney will also be on the clock.

Back to the Golden Rule — needless to say, the Cash Equity Owner often has the gold necessary to stay afloat while the Sweat Equity Owner does not.

Although good friends and family members make great investors because they are trustworthy, life changes and needs change over time. By having a frank conversation up-front and documenting the deal, before money is invested, much of the financial and emotional cost can be minimized on business divorce and friendships and family relations can remain favorably intact. Like a good pre-nuptial, shareholder agreements, operating agreements, and buy-sell agreements, can minimize cost in the future and avoid undue emotional harm. To me, it is well worth spending a couple hours in frank discussion and a couple thousand dollars up-front when investing in a business to avoid a later fight at ten times that expense.

At the Walk Law Firm, we regularly advise clients on these matters and encourage open discussion between owners. We can work as company counsel or as counsel to a business owner in helping businesses sort through these issues.

Credibility Education for Tampa’s Small Businesses

Summary: Tampa Bay based company creates partnership with national and local businesses to provide credit and business growth strategies for qualified small businesses.

Tampa, FL – October 1, 2013 – Nationally recognized consumer and small business finance advocate, S.E. Day will host the For Small Business Only, LLC (FSBO) Business Education seminar.  Utilizing strategic alignments with corporate creditors and vendors, the FSBO seminar will provide qualified small businesses with credit building tools that assist in establishing their business credit profiles through credit reporting bureaus including Dun & Bradstreet’s PAYDEX® score.  The seminar is a one day event and will be held on October 22, 2013 at the Steinbrenner Pavilion (across from the Bucs stadium).

“The #1 challenge faced by every small business is successfully establishing business credit without using the owner’s personal credit,” states S.E. Day, founder of FSBO and host of The Legally Steal Show hosted by S.E. Day™.  “At FSBO, we work from the top down through innovation and strategy. We have aligned with major U.S. corporate creditors to provide credit tools and accounts that assist small businesses in building business credit and establishing their PAYDEX® Score.  We are also partnering with local small business owners and thought leaders like attorney Rochelle Walk to provide education and strategies to assist the participant in growing their businesses from sustainability to profitability.”

“Our firm represents and works with many small businesses and we strongly believe that success of small business is fundamental to the success of our economy ,” states Rochelle Walk, President and Owner of Walk Law Firm, PA.  “The FSBO Event will be an opportunity to provide the participants with education  regarding legal concerns and legal planning aspects of being properly prepared to grow their businesses to the next level.”

For further information and registration about the For Small Business Only Business Education seminar, please visit the website at www.ForSmallBusinessOnly.com or call 813-379-7248.  To determine if a business qualifies for credit products through FSBO, please email Info@ForSmallBusinessOnly; or, visit LinkedIn, click on groups, and join the For Small Business Only group today and get registered.

About For Small Business Only (FSBO)
FSBO is a Florida-based company providing qualified small business owners with practical knowledge and applications specifically designed to enhance their business presence and increase their bottom line.

To qualify for credit products and trade accounts, participants with For Small Business Only, LLC must meet the following requirements: be in business for a period of one to two years; possess a current, legal business structure with their state’s Secretary of State; possess a complete business address and business telephone number (no P.O. Boxes allowed, home office addresses are acceptable); and, have an IRS issued tax ID number.

Contact

S.E. Day
The Legally Steal Show
813-379-7248 ph
FSBO@legallysteal.com
www.ForSmallBusinessOnly.com

Business Identity Theft: What is it? And how do I protect my business assets?

What is it?

Business identity theft is the fraudulent and unauthorized use of an entity’s identity.  It’s not just an information security breach. Rather, like consumer identity theft, business identity thieves impersonate the business or hijack the business’s identity in order to steal money or property, often by establishing lines of credit with banks and/or retailers. A corporate identity is an asset that needs protection!

Who is targeted?

The potential for more lucrative results has spawned an evolution of identity theft.  Rather than targeting a consumer, identity thieves are targeting unsuspecting businesses because businesses tend to have larger bank account balances, higher credit limits, and larger purchases made on behalf of a corporate entity generally don’t set off bells and whistles.  Small businesses are particularly vulnerable because they don’t have resources to constantly monitor accounts and records, and because they don’t have the structured security that large businesses have.

What is the result?

Generally, the damage that results from business identity theft is more severe than the results from consumer identity theft.  In consumer identity theft, the consequences tend to reach only the consumer targeted.  In business identity theft, the consequences affect the targeted business, but also the business’s employees and subcontractors, the business’s creditors, and the economy at large.

You might struggle obtaining a line of credit, which could impact operations. The cost of repairing or cleaning up the aftermath of a business identity theft can be costly with legal and accounting fees.

The terrible irony is that few businesses and business owners think about identity theft prevention as asset protection. But it actually is the most important asset protection plan a business can have.

How to prevent it?

At the Walk Law Firm, as Tampa small business attorneys, we advise our clients to take the same actions that public companies take:

  1. Protect your business information records – treat your EIN and Tax ID numbers like they are your social security number and limit access to all corporate records
  2. Monitor your corporate filings – many secretaries of state, including Florida, have email alert systems that notify you of any and all activity – enrolling in this service can provide early fraud detection
  3. Segregate Duties – accountants and auditors will tell you that no employee should be given access to all banking information as well as typical bank logins and passwords; segregate the duties relating to account access from those handling payroll and accounts payable
  4. Monitor your accounts and bills – frequent monitoring and reporting of suspicious transactions will limit your liability significantly
  5. Monitor the business’s credit report – routinely obtain a business credit report and review it for suspicious activity
  6. Train your employees to protect business information and to be aware of these crimes
  7. Be wary of phishing scams
  8. Install and utilize a firewall on your business computer and network
  9. Contact your creditors to ask about unusual activity

 

The Benefits of Year-End Corporate Record Keeping

With the end of 2012 fast approaching, it is an excellent time to review your record-keeping practices and make sure your records are updated.  As a small-business owner, you invest a significant amount of time and money to ensure your company’s progress and success, and taking the time now to update your records can help in a number of ways.

How to go about updating records?

Regardless of the form of entity, the manner or process for updating your records is fairly simple and straightforward.  First, it is important to review the entity’s governance documents – yes, the documentation you received and may not have read or reviewed since the time you organized your company – because this documentation will advise you as to how to proceed with corporate changes and updates.  So, if you have a corporation, this will be your articles of incorporation and your bylaws; if you have an LLC, this will be your articles of organization and your operating pr management agreement; and if you have a partnership, this will be your partnership agreement. You may have a shareholders’ or close corporation agreement, too.

Even if you have already implemented transactions, changes and updates in and to the business, it is important to ratify those actions by the manner or process defined in the governance documents.  Why?  In order to record the changes or updates and to evidence the fact that such modifications were authorized by the entity.   Failure to ratify and substantiate a change to the business can create issues like stalled or failed business transactions in the future or undue questions from the IRS or State when they audit. It is much easier to make these recordings contemporaneously with the actions so that later partners and outsiders do not question that authority. Also  as some of our clients will attest, the cost of recreating the history of the company years down the road so that you can sell or move or enter into a significant transaction is costly and time consuming.

Subject to the language in your governance documentation, many updates and changes can be authorized in writing.  Other updates may require a meeting – a board meeting, or a meeting between managers, members, or partners – and a vote.  In the event that you call a meeting, here are some things to keep in mind:

  • Be Prepared and Provide Sufficient Notice to Appropriate Parties
  • Make Sure You Have a Quorum or the Necessary Number of Voting Parties to Take Action and Know What Vote is Necessary to Approve the Actions Desired
  • Have an Agenda and Include Potential Ratification of Past Actions, and Other Potential Actions
  • Record Actions Taken at the Meeting and to whom Future Duties were Assigned
  • Get Feedback to Improve Meeting Process and Record-Keeping
  • Contact Outside Counsel in advance of the meeting if you have any questions and consider having counsel present if you anticipate a contentious issue or needing assistance documenting or explaining the situation

~ Rochelle Friedman Walk, Esq. and Matthew A. Welker, Esq., Walk Law Firm, PA