Are You Taking Care of Business?
“Why does running a business have to get in the way of doing business?” At On Point Business Administration, we’ve heard this from business owners countless times. They are frustrated with routine, but important, business administration efforts like governance, risk management and compliance. In the years that we’ve worked with business owners, there haven’t been many who enjoy taking care of every detail behind running their business. Let’s face it: In the time you have, you’d rather focus on growing your business rather than on running it, and this dictates your priorities.
The consequences of neglecting your business administration details could be significant, though. Implement these Taking Care of Business® tips today so your business can avoid these unwanted outcomes.
- Inadvertent Dissolution: RealCo was trying to purchase a commercial property. Just before the scheduled closing date, the lender informed RealCo that its charter had been dissolved because the company didn’t file its annual report with the state. RealCo was required to reinstate its charter before the lender would make the loan and the transaction could close. The reinstatement took time, delayed the closing, and was an added cost and aggravation for RealCo.
TCB Tip: If your company is required to file an annual report, file it on time. If you don’t, you could put important business transactions at risk and incur financial penalties. Calendar the report due date, set multiple reminders, and pay attention to them. If you hire a professional to file the report for you, don’t assume it’s been filed. Confirm that to be the case before removing it from your radar screen.
- Multi-Million Dollar Judgment: Kleen Janitorial is in the business of cleaning commercial offices. While driving a company vehicle, a Kleen employee was in a car accident. The other driver, who was seriously injured, filed a lawsuit against the company. Kleen had appointed a long-time employee to act as its registered agent to accept service of lawsuits. When the sheriff appeared at the company’s office to serve the lawsuit, the employee wasn’t in. The company’s temporary receptionist was, and she accepted service. Unfortunately, she didn’t understand the significance of the legal papers or the need to respond to them right away. She placed the documents in the employee’s desk “in box,” along with regular deliveries. As the employee stayed busy with his routine work responsibilities, the legal papers got buried. Kleen never responded to the lawsuit or appeared in court, and the court entered a default judgment against Kleen for millions of dollars.
TCB Tip: Hire a professional registered agent whose business is serving in that role and who has knowledgeable and experienced staff to appropriately handle the service of legal papers and other official documents.
- Unfavorable Contract Renewal: Acme was under an exclusive evergreen contract with a supplier. The contract had become undesirable, so Acme planned to renegotiate it or switch suppliers altogether when the term ended. When Acme’s purchasing manager reviewed the contract to confirm the expiration date, he discovered the contract had already renewed automatically since Acme didn’t notify the supplier in time that it wouldn’t be renewing. Unfortunately, the undesirable exclusive contract renewed for another three years.
TCB Tip: Note key dates for all contracts. These dates include, for example, the effective date, termination date, and non-renewal notice date. Calendar the deadlines and schedule several reminders to multiple individuals. If a contract requires that the company notify the other party of a particular action, like notice of non-renewal, strictly comply with the contract’s notice provisions to minimize the risk of the other party disputing the notice.
Taking care of business (“TCB”) means handling the business administration details of running your business in the right way, at the right time, efficiently and effectively. Even if there isn’t an important transaction in the works or on the horizon – like a sale of the business, capital-raising effort, or commercial loan – your business should be in order. Don’t think of it as a necessary evil. Consider it an opportunity for peace of mind knowing that your business is operating efficiently, managing risks, and in a position to succeed. The benefit will be priceless and worth the effort in the long run.
About the Author
Sheryl Nelson is a Thinking Bigger Foundational Partner
Sheryl is President of On Point Business Administration. Sheryl’s experience as a business and M&A lawyer provides a unique perspective to clients retaining On Point as outsourced Chief Administrative Officer.
That insight also benefits exiting business owners who need to get their businesses in order before going to market and responding to thorough due diligence requests from potential buyers.
You can reach Sheryl at: (816) 595-8620
Or visit: https://onpointtcb.com