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Cleveland Business & Commercial Law Blog

Planning a new business venture in Ohio

When you are considering opening a business and striking out on your own, it is vitally important that you take the steps necessary to help ensure it is formed correctly and that the business plan is sound. As you are most likely aware, many new businesses fail, and you want to make certain that you have planned carefully enough to avoid that scenario.

Most businesses such as yours will need to obtain funding in order to begin. Banks and other lenders will normally require that you submit a business plan before they will agree to provide the financing that you will require. Your plan must thus be thorough and based on solid research about not only the product or service you will be offering, but also on matters like the intended location, traffic patterns and the available demand. You will need to include projections that are based on sound analysis and research.

How to register a business name in Ohio

The name used by a business may be descriptive of the enterprise or reflective of the individual forming the company. In some cases, an entrepreneur will have a great idea for a business name before issues such as financing and the choice of entity form are finalized. While some business names might not be at risk of being taken, others related to current trends might be vulnerable. Ohio allows for a business name to be reserved in advance of the company being established.

It is required that a business be registered with the Ohio Secretary of State, and filing the required registration forms will secure a business name. However, a name can also be reserved in advance of the business being formed. Name Reservation Form 534B is used to do so, and a $50 fee is required at the time of filing. This provides reservation of the name for 180 days. A renewal is possible as long as it is completed prior to the expiration of the original reservation.

Understanding entrepreneurial law in relation to debt financing

Ohio businesses may find that establishing an unsecured loan may cost more interest rates and may be harder to establish than a secured loan. An unsecured loan might require that the individual is extremely credit-reputable in order to be approved. Many entrepreneurs start their businesses by borrowing funds from family members, but not taking caution in this process could become problematic for both the business and their personal relationships in the future. An investor is essentially a share-holder in a business until they are repaid. If they are unhappy with a business's operations, they may be legally allowed to intervene in order to protect their investment.

Secured loans are implemented by established collateral that assures the loan will be repaid. The collateral can be used to satisfy the debt if there is ever a default on the loan. This can be a variety of assets, including commercial or private real estate, a certificate of deposit, stocks and bonds securities and a guarantor's signature.

How a business planning strategy can benefit Ohio business owners

Ohio business owners may benefit greatly from projecting their strong vision for the future of their company into a centralized business plan. While business plans were originally intended to unify all aspects of a company toward success, their role in business changed with shifting corporate culture. Business planning became the domain of those who wanted to seek funding for a one-time opportunity, such as venture capitalist funding or other types of outside investment.

The nature of business planning has come full circle as more business owners use strategic planning as part of the daily function of their companies. Business plans are still a great asset when seeking funding from an outside source as they demonstrate that a company has a clear direction and the means to reach its goals. However, business plans also give small businesses and startup companies the chance to build a stable foundation and realize improved long-term success.

Office park sold to foreign investor group

A large Ohio office park was sold to a Canadian investor group on Dec. 23. Summit Office Park, located in Independence, was sold to Summit Cleveland LP for $26.5 million. The prior owners, Aegon N.V., had owned the commercial real estate since 2009.

Located on Summit Park Drive and Rockside Road, Summit Office Park includes four buildings and a total of almost 500,000 square feet of office space. A spokesperson for the new owners of the properties said that the purchase was a long-term investment in the Northeast Ohio real estate market. The spokesperson also commented that the group felt Northeast Ohio was on the upswing, and they looked forward to watching the area rise to its potential.

Minority shareholders and disputes

In the course of any business, shareholder disputes may arise between those who hold minority and majority stakes in the company. This often occurs as a result of decisions taken by management or a board of directors. Contrary to the wishes of minority shareholders, the company could be expanding payroll, manufacturing new products and taking on new debt. Expansion of the business into a new market, from Ohio to New England, for example, could also spark controversy.

Contractual disputes among shareholders also pose a hazard to the smooth functioning of a business. If new shares are issued and the board elects not to offer an increased stake to a minority shareholder, the latter may consider it a breach of his pre-emptive contract rights. A shotgun clause that gives a shareholder the right to sell his stake can lead to a dispute over the fair market value of the shares if the original shareholder agreement didn't specify a price.

Considerations for removing an ineffective partner

Ohio business owners may face a situation of a business partner who is not performing well. There are alternative actions that can be taken so that the non-functioning partner is not an impediment to the success or growth of the business. The available steps could be determined by the organizational structure of the company and any agreements that exist between the owners.

If the business is set up as a corporation, the majority of the owners can make decisions and take actions that do not require input or agreement from the under-performing owner. Partnerships and limited liability companies do not have this option. Conflict resolution, either among the owners or with impartial third-party assistance, may lead to a workable agreement among the owners.

Sales contract breaches

Businesses engaged in the selling of goods often enter into sales contracts with buyers. These contracts are formed when a business agrees to supply goods to the buyer by a certain time, and the buyer agrees to pay money in exchange. Sales contracts are legal documents, and when a party breaches the contract, the breaching party can face negative consequences.

Breaches can be relatively minor, such as missing a delivery date. Minor breaches will most likely not result in a lawsuit. Material breaches are those that are so severe they destroy the contract itself. Examples would be providing a different item than that specified or failing to pay the money owed under the contract.

Choosing a business structure

An important decision that all Ohio business owners have to make is how to structure their entity. The legal structure that a person selects for their business will have a dramatic affect on taxes, liabilities and paperwork requirements. Some of the most common business structures that are used in Ohio are corporations, limited liability companies, partnerships and sole proprietorships.

Those who have businesses that they operate by themselves usually choose the sole proprietorship business structure. For one person working alone, a sole proprietorship may be appealing for its simplicity and its inherent tax benefits. However, choosing a sole proprietorship makes the business owner personally responsible for all of the company's liabilities.

Reasons to put an Ohio contract into writing

One of the easiest ways to have a deal nullified is to not put it in writing. In most cases, a court will rule that a contract does not exist unless it is written out. Having a physical document helps to outline the agreement and the obligations of both parties concretely.

The first step in putting together a valid contract is to address the intent of the contract. This could be anything from partners agreeing to split profits from a business or a service provider agreeing to outsource a portion of the project to a third party for completion. In addition to addressing the intent of the agreement, the major terms of the contract must also be considered. For instance, it may be worthwhile to specify the price of services performed or products sold and set deadlines for when payments must be made.

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