McDonough speaks to Kiwanis Club
CEDAR CREEK LAKE–The Kiwanis Club of Cedar Creek Lake held their weekly meeting at Hectors Mexican Restaurant and heard from guest speaker Rick McDonough of McDonough Legal Services, PLLC.
McDonough focuses his legal practice on much smaller businesses after spending years in the corporate world. His years in the corporate world included legal support to the sales group and litigation among other services. “When I decided to set up my own solo practice a few years ago, before I moved here full time, I decided that I enjoyed what I was doing but I would enjoy doing it a lot more for much smaller companies,” said McDonough. He says now he gets the fun of dealing with business owners and entrepreneurs, preferring the hands-on aspect over the board of director’s approach.
During the presentation, McDonough spoke about how he helps his clients protect their assets and revenues. “So, when I talk to people who want to start a new business, I advise them to get some core advisors. Obviously, they need a lawyer, but they also need a tax advisor, a good insurance advisor,” says McDonough. He says all these people play an important role in putting together a business plan as well as operating a company within a whole. McDonough gave the legal options on setting up the business. He advises to always set up a separate legal entity for your business. “So, you’re not doing business as John Smith or John Smith LLC,” said McDonough. He recommends this because, its very inexpensive to set up a separate legal entity and you are hoping to shield your assets or family’s assets from some of the liabilities that come up when you are running a business.
Two different types of legal entities that you can set up are a Limited Liability Company (LLC) or an Incorporated (Inc). McDonough stated that the kind of legal entity you set up should be based on what your tax advisor advises you to do. As a frame of reference, most of McDonough’s clients are LLC’s. When coming up with a name for your LLC, McDonough suggests coming up with one that is unique for your product or service in the geography that you will be selling.
As one of the core advisors to your business, McDonough recommended an insurance advisor. Specifically, an experienced business insurance agent. Business insurance is vastly different from a homeowner’s insurance and car insurance policy. It is important to ensure that your business insurance covers all your business activities says McDonough. He advises doing this by making a list of the worst-case scenarios that could happen in your business and be honest with yourself. “A typical breach of contract claim will not be covered under an insurance policy,” says McDonough.
McDonough touched on contracts with customers also. Writing it down, because if you do not it’s an oral contract. It can become he said, she said and we have all been in situations where memories have faded over time. As a business owner, you should be clear on a product or service warranty also. How long does a customer have to come to you? What are your obligations? McDonough says that if you, the business owner does not have this written into the contract, the State of Texas will provide the buyer the benefit of what is called an implied warranty. In absence of contract, often the warranties are a lot longer than you thought and the revenues for those warranties will be a lot better for the customer than what you were planning on says McDonough.
He also provides some helpful tips to those who are beginning a business with a friend or relative. Make an operating agreement. “It generally defines the rights, duties of each of the partners and usually its focused on worse case scenario,” McDonough said. He suggests being prepared and not writing something down on a napkin, agreeing over dinner and a handshake or leaning on a “he’s my best buddy, my brother,” type situation. A buy sell agreement can also be helpful for partnership businesses when a partner’s situation may change. A partner may decide they don’t want to be in the business anymore, move out of state or unfortunately they may die and their spouse could inherit the business. All these situations need to be accounted for.
McDonough’s biggest takeaway for business owners is to plan. “Plan for the unexpected. Always feel comfortable that you can go back to something to look at. Okay the unexpected happened what was agreed upon up front? Whether it was with your business partner, your customer, your vendor, etc.,” said McDonough.
For more information on McDonough Legal Services, you can reach McDonough at (214) 641-9453 or firstname.lastname@example.org. For more information on the Kiwanis Club of Cedar Creek Lake or to get involved visit https://www.facebook.com/kiwanisofccl.