Trusted Advisors for Small Businesses

Transcription

1 SMALL BUSINESS FEATURE Attorneys, Accountants and Bankers: Trusted Advisors for Small Businesses By George N. Saliba, Deputy Editor John D. Cromie, partner and head of the corporate and business transactions group at the law firm of Connell Foley John D. Cromie, partner and head of the corporate and business transactions group at the 115-attorney law firm Connell Foley (offices in Roseland, Jersey City, Manhattan and Philadelphia), notes that small businesses with between two and 100 employees (more than 90 percent of New Jersey Business magazine s readership), often don t have significant in-house legal counsel. Of course, they also lack many other internal resources that large businesses have. Cromie explains, The lawyer, the accountant and the banker, in many respects, serve as real partners with the entity, trying to understand the business, its specific needs, how it fits into the marketplace and how its needs can be efficiently addressed. Here, we learn how small businesses can get the most from their relationships with bankers, accountants and attorneys. MAKING THE MOST OF YOUR LAW FIRM RELATIONSHIP On the law front, Cromie says that in an age of legal specialization (a good trend in his eyes), small companies nonetheless need well-rounded, problemsolving attorneys who have a broad legal knowledge base, with specialized attorneys used as needed. Each law firm is slightly different. At the law firm Hoagland Longo Moran Dunst & Doukas LLP (offices in New Brunswick, Clinton, Manhattan and Buffalo, New York), Managing Partner Gary J. Hoagland explains that a new client may call his firm for assistance in forming an entity (an LLC, for example), and an assigned attorney would be a future point of contact for general questions, directing the client to specialists. That gives clients the comfort of dealing with a small firm appearance, in that they are dealing with only one or two people, initially, Hoagland explains. Partner Susan K. O Connor adds that the firm s 80 attorneys are specialized. Melissa Klipp, partner in the technology, litigation and intellectual property practice group of Drinker Biddle and Reath, LLP (offices in Florham Park, Princeton and eight other cities) expresses her sentiments: The ideal situation for any company large or small is to find a lawyer who is a trusted advisor, because not every lawyer can do everything. If the company can find an attorney who can help it with setting up the company and putting the absolutely essential agreements into place, in the event that there are specialized issues that come up, that trusted advisor should be able to direct the business to the appropriate attorney either in his Gary J. Hoagland, managing partner at the law firm of Hoagland Longo Moran Dunst & Doukas, LLP 56 O CTOBER, 2006 Reprinted with permission from New Jersey Business magazine

2 Susan K. O Connor, partner at the law firm of Hoagland Longo Moran Dunst & Doukas, LLP or her office, or in another office. For his part, Robert Max Crane, deputy managing partner and co-chair of the corporate practice group at Sills, Cummis, Epstein & Gross, P.C. (offices in Manhattan and Newark), says that a small business should look to a large firm which has an industry focus. Our firm has found that an industry approach best serves our clients as we can provide a multi-disciplinary approach. For example, lawyers in our Life Sciences practice, where the firm has established a significant niche, understand the full range of issues affecting this sector as a whole. Of course, a small business owner can locate a law firm or attorney through referrals, while simultaneously ensuring the attorney or law firm suits the company s needs. Klipp notes that while it is not always a good idea to surf the Internet for an attorney, one can read the attorney s online biographies to at least discover his or her qualifications. Among a host of services, small businesses may seek legal assistance with: their entity formation (LLC, partnership, etc.); shareholder and operating agreements; succession planning; purchase and sale of the business; real estate issues; non-competition agreements; separation agreements; when they are being proactive regarding employment law issues; or financing-type issues. O Connor counsels that it is preferable to address a legal situation as soon as possible. The idea, of course, is to stem any [legal] issues before they become a problem, she explains. I have different types of clients. There are those who never see a lawsuit coming and are completely shocked and offended when it does come. Then I have clients where I am on a retainer, basically and they just call up with a quick question or two and get my advice on how to handle it. As for legal trends affecting small businesses, Drinker Biddle s Klipp notes the amendments to the Federal Rules of Civil Procedure, which will occur in December. That month, the rules that govern lawsuits in the federal courts will change to include the production (during discovery) of a company s electronically-stored information: s, instant messages, Internet usage, voic s and faxes. A suing former employee could ask for a company s electronically-stored documents, and in the process, information that may be unrelated to litigation may have to be produced to meet deadlines imposed by the court, or regulatory deadlines. Klipp says, [Companies] should have a document retention policy for their s, their backup tapes and related electronicallystored information that looks at functions with the end in mind. What do we need the back-up tapes for and how long do we really need to keep them? Do we have a simple policy in place that directs employees as to how they should use the Internet at their workstation? Do they know that they are not supposed to surf the Internet and download music, videos, or pornography?... Do they know that when they leave a voic , that it could someday be evidence in a lawsuit?... These kinds of things could actually be fatal to a small company if it is not properly prepared and if it hasn t been properly counseled. Klipp also stresses the importance of non-disclosure, non-compete and made-for-hire agreements to protect a small business work as well as its intellectual property (patents, trade secrets and copyrights). These [agreements] don t have to be terribly lengthy or involved, Klipp says. But, they have to be concise and accurate. That s a legal service that is not a huge expense, but is of huge importance because an ounce of prevention here is critical. Also, Gary Hoagland notes that small businesses need to handle reductions in workforce properly, so that they don t get sued by former employees in a protected class (e.g., over age 40). Melissa Klipp, partner in the technology, litigation and intellectual property practice group at the law firm of Drinker Biddle and Reath LLP 58 O CTOBER, 2006 Reprinted with permission from New Jersey Business magazine

3 Robert Max Crane, deputy managing partner and cochair of the corporate practice group at the law firm of Sills, Cummis, Epstein & Gross, P.C. Furthermore, businesses should have a succession plan in place, because, he says, it doesn t take very long for the good will of someone s work to disappear if he or she doesn t have a plan for the business after he or she dies. BANKING FOR SMALL BUSINESSES Bankers interviewed by New Jersey Business magazine note that small businesses take advantage of basic bank products such as checking accounts and online banking, but they also point to various emerging technologies. For instance, payroll cash cards are an option at some banks, in which business customers employees receive their salaries via a debit-like card. Senator Peter Inverso, president and CEO of Robbinsville-based Roma Bank, says many small businesses hire individuals who are either not banked or are underbanked (particularly recent United States immigrants). He explains, We believe these payroll cards offer a great opportunity not only for security (an employee might otherwise be exposed to theft), but the cards also [give employees] the opportunity to get a feel or understanding of what a bank can help them with. In other news, a product like PNC Bank s Remote Deposit allows a scanner to be attached to a small business computer which then scans the front and back of a check and remotely sends the electronic image to the bank. Without the check physically leaving the customer s site, it is deposited in the customer s bank account. Edward M. Puzio, PNC Bank s business banking territory sales manager for Northern New Jersey and Northeastern Pennsylvania says, Just the other day, we had a customer go on remote deposit and they are so excited about it that they have literally brought other businesses into their office building to show them. Basic products and new trends aside, businesses of course often turn to banks for loans and many bankers stress their efforts to help small businesses in that way. What we look for is relationship development, says Jack Daniel, vice president of commercial lending at Roma Bank. A $14,000 loan by a company could [produce] another loan for $14 million in a few years. I don t think we have ever turned a loan away here at Roma Bank because it was too small. PNC s Puzio has similar thoughts, noting that his bank s small loans start at just $2,500. Speaking broadly, he says that as competition in the banking industry increases, people look at what other institutions are doing to address customers needs. That said, tips for small businesses to obtain loans center around what Jack Hain, senior vice president of lending at Roma Bank calls a critical subject: the comprehensive business plan. That really forms the basis for negotiating and discussing loan needs with a bank, he says. It is a tremendous document to have in front of me as I begin to take a look at [a business ] requests and what its needs are. PNC Bank s Puzio adds that a business owner s personal credit should also be very clean. School loans should be paid off and one should have a quality personal banking relationship and handle his or her personal accounts satisfactorily, with no overdraft problems or late credit payments. He advises that business owners should borrow money in the business name to develop its credit history. Since PNC is a top U.S. Small Business Administration lender, Puzio explains that customers can get financing through that route. He adds, You don t want customers starting their business or growing their business to rely on things that don t make sense, like putting it on credit cards where the interest rates are very, very high. Of course, establishing a good business relationship with a financial institution is important, too. John Oldakowski, business banking director, Southern New Senator Peter Inverso, president and CEO of Robbinsville-based Roma Bank 60 O CTOBER, 2006 Reprinted with permission from New Jersey Business magazine

4 Jersey for Wachovia, says, The best way for a business to establish and maintain a relationship with a bank is to look for a bank that is healthy and competitive with its peer banks, and then see how it performs from a service perspective. Once you find a strong bank, meet with the relationship managers who will be servicing your accounts and ask them questions to ascertain their knowledge about your industry, their expertise and their company s commitment to service. When you find a bank whose goal is to provide you with the best service experience, give them the opportunity to prove it. Over time, you will know if you made the right choice. As for future trends involving banks and small businesses, PNC s Puzio predicts that consistent relationships will be key, with a bank s service level also of importance. The one thing that is tied to this is the ability to marry technology [to the relationship], truly making it easy for customers, he says. CPAs SERVE MYRIAD ROLES FOR SMALL BUSINESSES Tom McNabola, CPA and managing director of Fair Lawn-based accounting firm Hunter Group With the advent of accounting software for small businesses, some accounting firms report they are doing less perfunctory work and acting more as advisors. Jeff Campo, CPA and managing partner of Wiss & Company, LLP, Livingston and Iselin says, What we are trying to do, instead of the daily grind work, is to think a little bit more abstractly with the client about where to take their business. That s the most valuable time they can get from us. How to strategically manage a business is critical, but accountants nonetheless perform a variety of work. A small business, for example, may in fact need bookkeeping assistance, or assistance with: payroll, preparation of quarterly reports, interaction with state tax authorities and sometimes assistance with banking relationships. Tom McNabola, CPA and managing director of Fair Lawnbased Hunter Group, says that as firms get bigger, they need financial statements for creditors and lenders. Also, the firm s owner will have to think about: succession planning; relationships with other owners; estate planning; and legal ways to reduce the company s tax burden. When a firm reaches $5 million in revenues, it starts to need increasingly sophisticated services. As for interacting with an accounting firm, McNabola says, If you let your accountant know what your plans are, he or she can help you take the right steps and avoid pitfalls like failing to register your business or not registering for sales tax collection... I think our biggest problems with the smaller businesses are that they call us up after something has gone wrong, as opposed to when they started their particular project, or had Jeff Campo, CPA and managing partner at the accounting firm Wiss & Company, LLP their idea. There are different advantages to being a partnership or an LLC, or corporation. So when you start your business is a good time to at least consult an accountant in your organizational process, the same way you would an attorney, to form your business. Once a relationship is formed with an accounting firm, McNabola says his firm likes to see clients no less than once a quarter and preferably once a month. and cell phones can permit contact as needed. Campo, at Wiss & Company, says he has clients who contact him nearly every day and others who speak to him once a month. We usually let them set the tone, he explains. For a secure and successful relationship, we have to understand that tone what they are looking for from us and how often they want that dialogue. By the same token, when it comes to changes in tax law, for example, his firm has to proactively alert the client. Commenting on communications technology, Steven P. Bortnick, partner at West Orangebased Bederson & Company, LLP, says that via the Internet, 62 O CTOBER, 2006 Reprinted with permission from New Jersey Business magazine

5 Steven P. Bortnick, partner at the accounting firm of Bederson & Company accountants can view their clients books and have an immediate interaction. We can help solve problems or answer questions much faster because of technology, he says. We can turn around our product, services, comments and advice much faster because of that. Campo notes that when it comes to small business owners, so much of their wealth is tied-up in the business that his firm often handles the owner s individual needs, as well. We don t do it in every instance, but we highly recommend that we handle both, he explains. It gives us a more holistic look at their entire lives, as opposed to just a snapshot of the business. CONCLUSION In the harried and complex world of running a small business, bankers, accountants and attorneys are steadfast in their commitment to helping small business owners achieve success, regardless of whether the business is of nascent or veteran status. Worthy relationships take time to build, but they may reap success in the long run. Reprinted with permission from New Jersey Business magazine N EW J ERSEY B USINESS 63