The SBA Suggests 10 Key Steps for Starting a New Business

Once you’ve decided to start a new business, it can be tempting to simply moved forward with various tasks as they come to mind. While this may work for a few entrepreneurs, it’s always best to create an organized plan of action so you won’t waste time and cause problems for yourself that could easily have been avoided.

Fortunately, the SBA (Small Business Administration) provides excellent online materials that can help you plan the most useful way to start a new company – or expand the current reach of an existing one. Here’s a brief review of the ten important tasks that should normally be addressed first as you launch a new business.

The key steps for creating a solid foundation for your new business

  1. Decide where to locate your company. Prior to starting any market research, you’ll need to look at several cities to decide upon the best location for your business. This decision must be partly based on if you’ll be selling goods and services to your customers from a brick-and-mortar storefront or office – or if you’ll just be contacting potential customers on the phone or over the Internet. Be sure to select a location where many well-qualified job applicants live – as well as a city and state with reasonable business taxes;
  1. Develop a reliable market research plan. Once you’re certain about the goods or services your new business will sell, you must conduct market research to verify that there’s a definite need for what you’ll be selling in a specific location. This activity also involves identifying your potential customers and all known competitors; 
  2. Create a viable business plan. Most people starting a new business choose between a traditional business plan or a lean one for a basic start-up company. If you need to borrow money to finance your company, you’ll almost certainly have to provide a lender with a traditional business plan.

The traditional plan is normally very comprehensive – it describes your specific goods and services, provides a mission statement about what you seek to accomplish in the long run and names the initial team of professionals who will be running the company. It also states where the business will be located and how many employees you’ll need to hire. A traditional business plan should also describe the business structure you’ll be using, who will be handling specific tasks – and it should review your market analysis. Initial financial projections or earnings for the company should also be included.

In contrast, a lean start-up business plan may simply describe your goods and services, provide a statement about who will be running the company and state who you believe will be your most likely customers. It should also contain information about how you’ll initially finance the company and where it will be located;

  1. Make sure you have enough initial funding for the company. You and your business partners or advisors must determine how much money you’ll need to start your business. If you cannot raise this money among your business partners, then may have to try and obtain funds from venture capitalists or request a small business loan from a bank or through SBA resources. Other options include raising capital through crowdfunding or other online resources;
  2. Select the best business structure for your company. While many people run sole proprietorships if they’ll be handling all of the major company tasks themselves, others choose between forming such structures as partnerships, limited liability companies (LLCs) — or some type of corporation or cooperative;
  3. Decide upon the best name for your company. It’s a good idea to brainstorm with your partners or investors since you want to try and choose a name that clearly reflects the nature or “brand” of your business – as well as its spirit. Be aware that one of your first tasks will be to make sure the name you select is original and that it’s not already being used by anyone else;
  1. Be sure to register and protect your business name. After you’ve chosen the best name for your company, you’ll need to take steps to protect that name by properly registering it. Keep in mind that you may also need to register any trademark you’ll be using. Since additional ways of protecting your company name may also be required, you should always discuss this topic with your Houston business law attorney;
  2. You must request state and federal tax IDs. You will need to obtain an EIN (employer identification number) for many reasons. For example, you must have an EIN to open a bank account for your company and to pay taxes (among other tasks). Depending on the different states where your company will be operating, you may also need to obtain one or more state tax IDs;
  3. Obtain all required licenses and permits. Your specific type of business activity and where you’ll be working will determine the types of permits and licenses you must obtain, if any;
  4. Be sure to open one or more business accounts for your company. These most often include checking and savings accounts, credit card accounts and a merchant services account. Depending on the nature of your business and its initial size, you may be able to simply start with a checking account and then open other accounts as the need arises.

Please feel free to contact one of our Murray Lobb attorneys for legal advice as you address any or all of the various steps named above while starting a new business. We’ve had the opportunity to help many clients establish a wide variety of successful businesses in the past and are prepared to provide you will all the guidance you may need.

7 Good Reasons for Starting a New Business in Houston

Although Hurricane Harvey took far too many lives and delivered devastating blows to Houston’s economy and infrastructure back in 2017, the city has since rebuilt much of what was lost and is once again helping many entrepreneurs start new companies.

Some outsiders unfamiliar with the Lone Star State’s “can-do” attitude are a bit surprised to hear this good news. After all, Hurricane Harvey flooded 165,000 homes in Harris County — and dumped more rain in the Houston area than any other storm in recorded U.S. history.

Yet despite the $80 billion or more in damages, Houston is busy thriving again. In fact, the city’s growing economy surely played a role in CNBC’s decision to name Texas the best state for business in 2018. The following list sets forth seven key advantages that are enticing various entrepreneurs to start their companies here.

Strong reasons why Houston is fully ready to help “grow” your new business

  1. The city is home to excellent business incubators and accelerators. They include the Houston Technology Center (HTC), once referred to by Forbes as one of “Ten Technology Incubators Changing the World.” In fact, Texas has ranked HTC as its largest technology business incubator and accelerator. Other incubators in the city include Station Houston and Fruition Technology Labs.

Back in 2015, our Texas Governor’s Office created a statewide list of business incubators that may also still prove helpful. Regardless of the type of product or service you’re trying to develop, you should be able to find an incubator in Houston that can help you creatively launch your business. Most of them offer unique resources – and can help you locate venture capitalists and others interested in investing in new companies.

  1. Based upon foreign tonnage, Houston remains the biggest port in the country. Back in 2016, the port handled 68% of all the Gulf Coast’s container traffic. You can ship your goods just about anywhere in the world from this port;
  1. Forbes’ 2018 list of best employers included eight (8) based in Houston. If you start a company here and regularly network with other corporate leaders, you may easily get the chance to learn how these other highly successful businesses are managing to provide the best working environments for their employees;
  1. There’s plenty of highly desirable office space available for businesses of every size. Furthermore, it’s often easy to find “co-working spaces” that can readily meet the needs of smaller companies with limited budgets;
  1. Houston remains a business-friendly city with leading companies representing a wide swath of industries. Depending on which business incubator or accelerator you choose to join, there’s a strong chance you’ll have the chance to network with leaders in the fields of energy, healthcare, aerospace, nanotechnology and information technology – just to name a few;
  1. The cost of living is reasonable – and there are no state taxes in Texas. Many Houston entrepreneurs choose to live in affordable suburbs such as Webster, Stafford, Katy, Deer Park and Brenham. Statistics indicate that many thriving new businesses are also run in those same areas;
  1. Houston has a well-developed and diverse transportation system. METRORail, busses, freeway systems and other options provide reasonable means for everyone to live and work in this large metropolitan city. With careful planning, you should be able to get to meetings across town without delay on most days;

If you have any questions about a business that you’d like to start, please contact one of our Murray Lobb attorneys. It’s been our privilege to provide general business and legal advice to entrepreneurs creating new companies for many years. When you get in touch, we can also help you decide which type of business structure will best serve your needs.

Obtaining an SBA Loan for Your Company

Although the SBA (Small Business Administration) doesn’t directly lend money to owners of small companies, it does create loan guidelines for general lenders, community development organizations and micro-lending institutions that partner with it. The SBA helps reduce the risks for these lenders as they select the most qualified small businesses seeking help.

SBA-guaranteed loans are designed to offer competitive fees and rates and applicants are usually offered helpful counseling during the application process.

You’ll know when you’ve found the best loan offer since it will provide you with one or more of the following benefits.

  • The need for little or no collateral
  • Flexible overhead requirements
  • Lower down payments

Although the stated reasons for securing a loan can vary, many companies seek loans to help them secure long-term fixed assets and basic funds to run their businesses. However, under certain circumstances, the amount you can borrow may be restricted based on how your company intends to use the money.

SBA loan funds are often sought for the following types of working capital and fixed assets

  • Revolving credit
  • Seasonal financing
  • Export loans
  • The refinancing of current business debt
  • Machinery
  • Real estate
  • Construction
  • Equipment
  • Remodeling

What types of eligibility requirements must be met to obtain a loan?

Lenders often first inquire about the parties holding ownership interests in the company, how it generates income and where it conducts business. They also inquire about the basic size of your business – based on the company’s number of employees, average annual receipts and other factors.

Of course, your ability to repay the loan is of keen interest to lenders, along with having a very secure business purpose. While a strong credit rating is highly desirable for obtaining loans, if you’re running a new company, certain start-up funds may still be made available to you.

Keep in mind that all lenders are entitled to establish their own, supplemental eligibility requirements for making an SBA-guaranteed loan – and they’re also entitled to ask about the following information.

  • If your company is properly registered and currently eligible to do business;
  • Whether your business is currently operating in the United States or one or more of its territories;
  • If you can easily document the time and money each business partner has already invested in the company;
  • If you can provide evidence of any recent, unsuccessful efforts to secure a non-SBA loan.

Can small companies operating as exporters of goods obtain loans from the SBA?

The SBA does try to help such companies. However, you’ll need to usually start your search for a possible lender by first contacting an SBA International Trade Specialist or the group’s Office of International Trade. Exporters often need help securing additional funds to cover their daily operating expenses, placing advance orders with suppliers and debt refinancing.

How should my company go about looking for a specific SBA-affiliated lender?

You’ll first need to spend five to ten minutes answering questions on the SBA website concerning your company’s present needs. You should then receive an email matching you to one or more interested lenders. It is then up to you to contact each potential lender to discuss possible rates, fees and other factors involved with structuring a loan. You’ll then need to submit applications and wait to receive responses.

If you do not receive any offers that you believe are favorable or viable, you can ask to speak to an SBA counselor again to see if there’s a better way for your company to try and secure the type of loan you need.

Please feel free to contact one of our Murray Lobb attorneys so we can provide you with further advice about obtaining business loans through SBA programs, private banks — or other reputable sources.

Many People Start New Businesses After Age 50

A large percentage of Americans launch new companies and careers after turning fifty. In fact, the term “encore entrepreneurs” has been coined to describe this steady trend. In her book, “Your Life Calling: Reimagining the Rest of Your Life,” Jane Pauley profiles some rather amazing people who’ve transformed their “retirement years.” Many of them are now realizing personal dreams that are helping others both locally and in distant parts of the world.

In a recent New York Times article addressing this topic, one man in his early sixties said that he’s so happy with his new company (which creates educational and training videos) that he may never retire. Fortunately, many larger cities often have “incubators” designed to help people get new companies off the ground — and venture capitalists who are eager to consider funding start-ups with a strong likelihood of success.

Texas remains a great state for new businesses

Every year, many media outlets rank multiple Texas cities as great places to design and build new companies. Be sure to review our Texas governor’s office publication entitled “Texas Business Incubators.”

Once you’ve got a great idea for starting a business, consider scheduling an appointment with your experienced Houston business law attorney to obtain the valuable legal advice you’ll need.

Here are some additional facts and figures that can provide useful insights into some of the best fields to enter (and others to avoid) as you move forward with getting your new company up and running.

Facts and statistics about older Americans starting new companies & becoming self-employed

  • Fifty-one percent (51%) of new start-up business owners are between the ages of 50 and 88. In fact, those aged 35-49 only start about 33% of new companies — and those age 35 or younger only form about 16% of them. Fortunately, you don’t often need a lot of money to get a new company off the ground. Many older entrepreneurs start their companies with $2,000 or less.
  • The Dallas Morning News reports that during each month in 2017, roughly 400 out of every 100,000 Texans became entrepreneurs. A large percentage of those individuals were seniors. Many of their businesses were formed in Austin, Dallas and Houston.
  • About 80% of new Texas business entrepreneurs start their businesses based upon immediately available opportunities – rather than the simple need to find work.
  • Between the year 2000 and 2016, the number of self-employed New Yorkers rose by 63.7 percent. While the country’s economic downturn back around 2008 certainly influenced that trend, it clearly isn’t the sole or main force behind it.
  • About 69% of Americans start their businesses at home.
  • Roughly 42% of all new businesses are formed as S-corporations and 23% are LLCs. Of course, a very large number of small businesses are simply run by solo entrepreneurs.

Which types of new businesses tend to succeed the most often?

  • Those offering insurance, real estate or financial services. After four years, about 58% of these are usually still viable.  Businesses in the financial realm often offer tax preparation, bookkeeping or payroll services.
  • Companies renting or leasing automotive equipment.
  • Legal service businesses.
  • Medical, dental and other healthcare services.
  • Religious organizations.
  • Specific types of administrative or company management services.

Types of new businesses that frequently fail sooner than others

  • Stores selling beer, wine and liquor
  • Auto dealerships
  • Oil and gas extraction service companies
  • Grocery stores
  • Beverage manufacturers
  • Furniture stores
  • Companies selling lawn and garden equipment

After going over your business plans with trusted family members or friends, consider reading more about the different types of business structures you can choose from and what’s normally involved with starting a new Texas company.

Hopefully, you’ll decide to join the many other Texans who’ve discovered that running a business when you’re older can be a very gratifying experience – one that can add even greater purpose to your life.

Our law firm invites adults of every age to contact one of our Murray Lobb attorneys for legal advice when either starting a new business – or simply needed help with one that’s already thriving.

Pursuing Federal Government “Set-Aside” Contracts

If you’re looking for new ways to “grow” your small business, you may want to learn more about qualifying to bid on federal government “set-aside” contracts. The Small Business Administration (SBA) says there are two basic types of these set-aside contracts. Both can result in highly lucrative contracts that might otherwise have been awarded to far larger companies

The difference between “sole-source” and general competitive bidding set-aside contracts

This “sole-source” type of set-aside contract is often awarded through a non-competitive bidding process when the government believes that only one single business can meet the contract’s requirements. Companies seeking to bid on these types of contracts must first register with SAM (the System for Award Management). Occasionally, these types of sole-source contracts may be managed so that competitive bids will be accepted.

However, most small businesses try to submit bids after qualifying for one of four main federal government set-aside contract programs that always consider competitive bids. Here’s a closer look at each of them.

The four main types of federal government set-aside contracting programs

  1. Women-owned companies. Each year, the federal government tries to award at least five percent of all federal contracting dollars to Women-Owned Small Businesses (WOSBs).

The goal is to try and help women gain access to more business contracts now since male-run companies were often favored during past decades.

  1. Companies owned chiefly by a disabled military veteran. At present, the SBA states that the federal government seeks to award about three percent of all federal government set-aside contracts to disabled-veteran owned businesses;
  2. 8 (a) business development program entities. These businesses are usually run by socially or economically disadvantaged owners. In some cases, they’re helped by forming joint ventures with more established companies. An SBA specialist may be assigned to help the owners gain a better understanding of how the federal government contracting process is designed to work. Each year, at least five percent of all federal contracting dollars are awarded to owners of these types of businesses;
  3. HubZone certified small businesses. For your company to qualify to bid on this type of set-aside federal government contract, it must be at least 51% owned and controlled by a U.S. citizen, an agricultural cooperative, a Community Development Program, an Indian tribe or a Native Hawaiian organization. The principal place of business for a HubZone company must be located in a qualified HubZone area. In general, these businesses are viewed as “distressed” and are often found in underrepresented rural or urban populations.

If you’d like to find out if your company can be certified to bid on federal government contracts under one of these four competitive set-aside programs, plan on meeting with your Houston business law attorney. You can then discuss the various challenges you may encounter while trying to become a small business contractor with the federal government. You can also ask how you might submit bids to any state government contracting programs.

After speaking with your lawyer, you may also want to pursue a special SBA training program. Even if your business cannot currently qualify for certification under one of the set-aside programs described above, you can still try to obtain specialized training that can help you better manage your employees while expanding your customer base without doing business with any government programs.

Please feel free to contact one of our Murray Lobb attorneys about your current interest in bidding on specific types of government or private enterprise business contracts. In addition to providing you with our best legal advice, we can also help you create the formal paperwork that you may need.

General Steps to Take While Preparing to Sell Your Business

Selling your company at the proper time can provide you with greater freedom and added income as you pursue other business or personal goals. Whether you’re a sole proprietor who can move forward alone — or someone who must confer with business partners or a corporate board of directors, there are basic steps you can follow that can help streamline the process.

As you further contemplate this move, give serious thought to timing and be ready to explain why you’re making specific choices to prospective buyers; They’re sure to ask why you’re selling your company now. Also think about whether you should hire a professional business broker, especially if you don’t want to manage the sale on your own and are concerned about locating the best potential buyers.

Each of these key topics are discussed further below.

Are you prepared to tell qualified buyers why you want to sell your business now?

If sales are dropping or you’re currently losing a sizable portion of your customer base, you may want to postpone the sale for six months or a year. During that time, you may be able to rebuild the company and make it more viable.

Of course, business owners often want to sell their companies for many other reasons, including the following ones.

  • They’re eager to retire and simplify their lives – letting go of business activities.
  • They have current disputes with partners, co-owners or corporate board members, so they would just like to move on. Obviously, you’ll need to reference these issues in a very tactful yet honest manner if you have no other reasons for selling.
  • The sole owner (or another party) is facing a serious illness or impending death.
  • You want to keep working — but in a less stressful capacity. Be ready to share this in as upbeat a manner as possible – while being open and honest about the pressures of running the business.
  • You’ve developed a keen interest in a different business field and are eager to get your new venture up and running.

These are just a few of the reasons why people often choose to sell a business. Whatever you decide to tell prospective buyers – be as honest as possible since a failure to disclose current problems is unethical and could damage your reputation in the community.

If your business is losing value, be prepared to tell potential buyers (after carefully qualifying them) how they might reverse that trend. You can also explain why they may still want to simply purchase all your valuable vehicles and equipment.

Decide whether you should sell the business yourself – or hire other professionals

  • Legal advice can prove crucial. You’ll also need help drafting the various legal contracts and documents required to support a sale.
  • You’ll want to work closely with your accountant. All your business and tax records must be fully updated.
  • A business appraiser can prove very helpful. This individual can help you determine a fair asking price for your company.
  • Even a brief consultation with a business broker can benefit you. This person knows how to locate a healthy pool of potential buyers. This process can prove extra challenging if you do not want to run any public advertisements.

Be prepared to locate or create various documents while trying to complete a viable sale

You must be prepared to share all your basic financial statements and records for the past three or four years. It’s also crucial to create a comprehensive list of all your company equipment and fixed assets tied to your business accounts. (Be prepared to spend the necessary fees to repair all valuable vehicles, equipment and other goods involved with the final sale).

It’s also important to create a detailed list of your ongoing sales transactions and the names of the companies that currently provide all your company’s most critical supplies. Copies of all current contracts and leases should also be made available so qualified buyers can review them.

Be prepared to carefully decide which buyers may be the most dependable ones

Many business owners prefer to sell their companies to close family members, trustworthy employees, friends or current customers. You’ll need to choose wisely, especially since this type of sale often takes from six months to two years. 

Of course, never disclose private information about your business to potential buyers until after they’ve each agreed to sign non-disclosure agreements and qualified for financing plans that meet your requirements.  Be prepared to negotiate carefully – or ask your attorney to handle the negotiations on your behalf.

If you’re ready to sell a business – or just want to learn more about all the various legal and practical steps referenced above, please contact one of our Murray Lobb attorneys. We look forward to answering all your questions.

Small Businesses Often Make Crucial Legal Mistakes

Even highly competent employees sometimes make serious legal errors while handling human resource, management, accounting and other business tasks. Since federal, state and local laws are constantly being updated, you must regularly speak with numerous employees to be sure they’re making timely and lawful decisions.

Should the feedback you receive concern you, it’s always best to consult with your Houston business law attorney to be sure you know how to promptly correct any possible errors. Lawsuits are often filed over very basic legal mistakes.

What are some of the most common legal errors that businesses keep making?

Most mistakes are made when employers try to be flexible with their rules. While compassion can go a long way toward helping you get along better with your employees, clarity and consistency are crucial. Always exercise caution when addressing the following issues.

  1. Each employee must be properly classified. You need to look at each position separately, based on all pertinent state and federal laws. If you simply decide to treat everyone as an “exempt” employee, you might be sued if you fail to provide proper overtime pay or adequate rest periods.
  2. Lunch breaks must be provided when required by law. Some employees may be entitled to a meal break after completing a specific number of hours during a shift.
  3. Make sure you’re properly labeling workers as either employees or independent contractors. You may hear from the IRS if you make this type of mistake. Take the time to speak with your lawyer about how you should carefully interact and communicate with independent contractors. Once a worker has strong legal grounds for believing that “employee” status has been conferred, you can be sued for specific benefits.
  4. You must be sure all employees understand what constitutes “sexual harassment.” If you’re sued in this field, one of your strongest defenses will be that you promptly trained all new managers and employees to help create a healthy work atmosphere. You must also develop a secure way for employees to submit complaints before problems escalate.
  5. You cannot punish or fire an employee for simply taking a leave of absence under the Family Medical Leave Act (FMLA). To protect yourself, keep accurate records of all employee evaluations being conducted at routine intervals. If you’re particularly concerned about the behavior of someone taking FMLA leave, ask your attorney when you should sit down with that employee to discuss why you’re carefully monitoring their work performance – before letting them go.
  6. Be sure to issue final paychecks on a timely basis to all employees who are leaving. Find out if you’re required to provide this type of check even before an employee has returned all employer-provided equipment, vehicles or other materials.
  7. You must handle making loans to employees in a very careful manner. While this is often a kind gesture, you must set up a formal repayment schedule. Never simply deduct a portion of what’s owed from each future paycheck.
  8. Be sure to properly handle all employer obligations under the Americans with Disability Act (ADA). You may need to make appropriate work accommodations and should always treat such workers fairly. Most disabled workers take great pride in being highly dependable and productive workers.
  9. COBRA healthcare coverage must be offered and administered properly. Give serious thought to creating a comprehensive package of this medical insurance paperwork so that it’s immediately ready to be given to qualified employees when they leave. Timing is critical so potential coverage won’t lapse.
  10. The Health Insurance Portability and Accountability Act (HIPAA) must be explained and handled appropriately. Employees have a right to privacy regarding their medical data and information – be sure you’re adequately protecting it while processing claims.
  11. Pension concerns must be addressed in a timely and proper manner. The Employee Retirement Income Security Act (ERISA) is a complicated law that requires extreme attention to detail. Always request legal advice when uncertain how to administer it.
  12. You must carefully handle all responsibilities under the Consumer Credit Protection Act (CCPA). You may need expert help calculating all your employees’ paycheck deductions for lawful wage garnishments – including those for child support and student loans. Look for highly respected software that may help your most experienced workers.
  13. Equal Pay Act. This law must be carefully followed since too many businesses keep failing to pay men and women fairly when handling similar work.
  14. Title VII concerns. Your company must avoid discriminatory practices when hiring, laying off and firing employees. Many businesses are learning to use multiple interviewers with highly diverse backgrounds so that fairness can be readily achieved.
  15. OSHA laws. You must make sure to keep adequate records covering all workplace accidents and injuries for an appropriate number of years — if you employ ten or more workers.

Should you have any questions about these topics, please contact your Murray Lobb lawyer to discuss your concerns. We have extensive experience providing legal advice to our clients so they can can readily comply with all federal, state and local laws.

Purchasing a Texas Franchise or Company Already in Business

Since only about twenty percent (20%) of new businesses survive past their first year, many savvy entrepreneurs prefer to buy a company or franchise that’s already up and running. That often proves wise – if the purchaser is willing to complete all the necessary research to make sure the current signs of financial success aren’t threatened by factors that no one is willing to disclose.

To make sure you handle all crucial due diligence inquiries properly, consider asking your experienced Houston business lawyers for the help and insights they can readily offer as you explore all the possible investment risks.

Once you’ve carefully answered the following questions — and analyzed the various concerns mentioned — you should be better prepared to decide whether to purchase a specific business or franchise.

Important business questions to answer – and key concerns to evaluate

  1. Is the product or service a good match for your interests and experience? People are often most successful when they feel passionate about the business they’re running. Should you be entering a field that’s unfamiliar to you, be prepared to hire different consultants as needed. Of course, if you’re buying into a franchise, the corporate headquarters will usually offer valuable training and products to help you;
  2. Why is the business for sale now? Is the current owner truly planning to retire or move closer to family across the country? Ask the current owner very direct questions. If you’re trying to buy a franchise, you’ll need to obtain a copy of the Franchise Disclosure Document. (This was formerly known as the Uniform Franchise Offering Circular or UFOC). It will fully inform you about a franchise’s financial, legal and personnel history;
  3. What business location is best for you? Be sure to ask the current owner to provide you with a breakdown of the business’ most regular customers. Are they residents of nearby neighborhoods — or simply commuters who work in the area? What types of seasonal downturns, if any, should you expect in business profits? Be ready to purchase zip code-based demographic reports that can provide you with information about your current customer base. There are also different types of geographic-information-system software programs that can help you evaluate consumer trends tied to local neighborhoods and the most recent census. (Always be sure your business location can offer adequate parking);
  4. Do you have adequate financial knowledge and good funding sources for your purchase? Be sure to have your Houston attorney review all the general business or franchise contracts tendered to you. Only work with a trustworthy financial consultant who can help you review each company’s current operating expenses. Also, obtain the help of a qualified lender you’ve dealt with in the past – or someone who comes highly recommended by business contacts you’ve known for years;
  5. Determine if you’re personally willing to take a “hands-on” approach to running the franchise or business. Be prepared to pay good wages to any managers you must hire. Good ones can “make or break” a successful franchise – or any other type of business. Be sure to tell any impressive managers and employees you meet that you may keep many current staff members on in the future – once you’ve reviewed all employee files;
  6. Be sure to personally observe the current quality of customer service. Ask about the specific training that helped produce the successful parts of it. Be prepared to provide an employee orientation and training program that honestly promises good wages and job benefits so employees will know how important they are to you;
  7. Network with similar local business owners and managers in the area. If necessary, consider taking one or more of them to lunch or dinner so you can pose insightful questions about their most difficult daily challenges doing business in the area;
  8. Find out what types of marketing plans are currently in place and if you can expect any corporate support in this regard. If you aren’t buying a franchise, contact the nearest small business administration (SBA) office to see what types of marketing and business planning programs they can offer to you;
  9. Plan on developing some type of regular community “presence” that can benefit everyone. This may take the form of financially sponsoring one or two local children’s sports teams. When you pay for the equipment and help secure uniforms – often emblazoned with your company name or logo — everyone will likely benefit;
  10. After you’ve completed all due diligence inquiries, visit pertinent local government offices. Check to see what types of new building permits have been issued – and find out if any new zoning changes will soon be enforced that could negatively affect the business you’re hoping to purchase.

Finally, read all you can about what has helped so many successful businesses and franchises remain profitable over recent decades. The more you learn about each of these companies, the more likely you’ll be to succeed in running your own franchise or new company.

At Murray Lobb, we’re always ready to help clients who may soon buy an operating business or franchise. We can guide you through all the detailed due diligence inquiries – and draft all the contracts and other documents you’ll need.

How the Texas Business Opportunities Act Seeks to Help Consumers

One the main goals of the Texas Business Opportunity Act is to protect consumers interested in starting their own businesses from scam artists eager to defraud them out of their money. When ads appear on TV or via email — promising large profits in exchange for a small, initial investment – it’s never wise to assume a valid offer is being made.

Some of the most common business opportunity ads often claim that you’ll need to do very little work before you’ll start receiving your first profits. That’s rarely an honest offer since running a business is often hard work. Now that so many older Americans (and others) have been laid off from their jobs, it’s critical to carefully review each offer and look for “red flags” warning you of possible fraud.

The following information will help explain some of the different ways that the Texas Business Opportunity Act tries to regulate the way that many programs go about seeking investors and operating in this state.

Types of business offers governed by the Texas Business Opportunity Act

  1. Those that require the buyer to pay at least $500 to begin setting up the business that’s being sold;
  2. Where the seller claims that you’ll earn back your initial investment (or more) in profits; and
  3. The seller promises to do one or more of the following acts to close the deal:

a). Provide you with a location – or help you find one (that’s not currently owned by you or the seller) where you can use or operate the goods or services being leased or sold by the seller;

 b.) Help you create a marketing, sales and production program (unrelated to a formal franchise business governed by separate laws);

 c.) Promises to buy back products, equipment or supplies (or goods made from them) provided to you so you can run the business.

To further protect the public from dishonest business offers, the Attorney General of Texas requires parties making offers that meet the description above to first register with the Secretary of State and provide any applicable bond or trust account required.

Whenever you become interested in investing in any business opportunity that even vaguely appears to be covered by the Texas Business Opportunity Act, it’s always best to review the matter with your Houston business law attorney. Our firm can check to be sure the seller’s company has formally registered with the Texas Secretary of State’s Office and posted all required funds.

As a potential investor, you should also be provided with key information (required by law) about any company – before ever tendering any money.

Legal disclosures companies must provide

When a business offer is made in Texas and is covered by the Texas Business Opportunity Act, the seller must provide specific information to the buyer ten (or more) days before any contract is signed by the parties and before any money is paid to the seller.

Here are some of the disclosures that must be provided.

  • Names and addresses of all parties directly affiliated with the seller in the business being marketed;
  • A specific listing of all services the seller is promising to perform for the buyer (such as setting up a product marketing program);
  • An updated, current financial statement covering the seller’s finances;
  • All details covering any training program being offered by the seller;
  • How all services will be provided by the seller regarding the products and equipment being sold – and all key terms involved with the leasing agreements covering business locations being provided to the buyer;
  • Information pertaining to any of the seller’s bankruptcies (or civil judgments obtained against the seller) during the last seven years.

The importance of distinguishing multi-level marketing offers from pyramid schemes

Make sure the business you’re interested in requires you to do some type of work (such as selling products or services) before paying you any profits. If you are only being urged to solicit additional participants in the business, there’s a strong chance that you’re being “tricked” into building a pyramid scheme that may earn you short-term gains before the entire investment program collapses.

Always obtain legal advice regarding any business that sounds too much like a quick way to earn a lot of money. Attractive shortcuts to huge profits – especially those promoted in many weekend hotel and restaurant seminars – are often sham operations.

Please contact our law firm so we can provide you with the legal advice you’ll need before investing in any new business opportunities.

Get Ready for the New Overtime Rule

May 18, 2016 – The U.S. Department of Labor has released its final rule on overtime under the Fair Labor Standards Act. The Administration estimates that the new rule will extend overtime protections to 4.2 million Americans who are not currently eligible under federal law. Once effective, the rule will raise the salary level from its previous amount of $455 per week (the equivalent of $23,660 a year) to $913 per week (the equivalent of $47,476 per year) in 2016. The rule will also raise the compensation level for highly compensated employees from its previous amount of $100,000 to $134,004 annually. The final rule also establishes a mechanism for automatically updating the salary level every three years, with the first update to take place in 2020. These changes take effect on December 1, 2016. The Final Rule can be viewed here: https://www.dol.gov/whd/overtime/final2016/

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The final rule does not make any changes to the duties test for executive, administrative and professional employees, which affects the determination of who is exempt from overtime. Administrative employees who do not meet the special provision for administrative employees will be eligible for overtime if they earn below the salary level set in the final rule and they work more than 40 hours in a week.

In response to the new overtime rule, employers have the option of:

A. Paying time-and-a-half for overtime work;

B. Raising the workers’ salaries above the new threshold;

C. Limiting worker’s hours to 40 per week; or

D. Some combination of the above.