Wisconsin Business Law and Litigation
A blog dedicated to Wisconsin business law and business litigation matters, authored by Chris Moander of the Moander Law Firm.

As additional information to my most recent lease post, fellow attorney Sean Sweeney added a post discussing why you should at least try to negotiate your lease terms (a good idea)….so, since you are a business owner, give it a shot and take that risk!

Chris Moander is an independent attorney based in Milwaukee who is passionate about helping growing business navigate the legal waters of Wisconsin.

Forming an LLC, as a general rule, is pretty easy.  You contact the Department of Financial Institutions, file some paperwork, and *poof*…you have an LLC.  Actually, you don’t.  You have what amounts to an empty shell, a house with exterior walls.  Yes, you have ideas, some equipment, and maybe even funding, but the one factor, the one adverb you are missing is…how.  How will your company operate?  What is the internal machinery that will guide your company through its potentially infinite lifespan?  Enter the Operating Agreement. 

Because of the diversity in types of businesses and variety of potential markets to be accessed, operating agreements can differ drastically in content and design.  Factors such as the number of potential LLC members and the degree of business sophistication of each member can impact how an agreement is assembled.  In the next few posts, I will outline areas I think are essential to a good operating agreement.  Bear in mind that I could drone on and on about the finer details of operating agreements, but my intention here is to give some general information to show you why an operating agreement is worth getting for LLC’s with more than one member.

Focus Area #1 - Initial Capital Contribution

A good operating agreement requires a listing of issue interests and the allocation of those interests between listed members.  Period.  No debate on this.  If no record is made as to who-paid-what-and-when, huge problems arise. 

One reason I am so adamant about capital contribution descriptions is a simple one: it simplifies the dissolution process.  All the members agreed to the description, so it is clear how many shares each member owns - this accounting helps determine the internal power structure of the LLC, assuming it is member-managed versus manager managed. 

The capital contribution section can also delineate issues such as interest on capital contributions, the form of capital if it is returned to a member, or specific banking measures for each member’s capital investment.  However, the main point is make sure that each member’s capital investment is put into the operating agreement.

Focus Area #2 - Distribution of profits and losses

It is that simple.  Actually, it isn’t.  There are a number of ways to allocate profits and losses, but in doing the allocation, litigation costs are reduced and procedures solidified - time and again people want to fight over how much money they get, so why not formalize it in your operating agreement.  Further, members tend to feel better when they know the nuts and bolts of how they will get paid (assuming you are turning a profit). 

General Thoughts:

- It’s easy to get excited and move forward with a business before business matters are properly resolved.  The honeymoon between all LLC members eventually comes to an end.  Think preemptively at every turn.
- Always, always, always get things in writing; again, think preemptively.
- You will sleep better knowing that your business has procedures in place and in operation from Day 1 - reliable procedures allow a business to run more effectively.

Chris Moander is an independent attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

The recent economic downturn is the catalyst for a lot of people to leave their current employers - no raises, potential termination, and general unease result in folks wanting to go independent.  Aside from determining what one will do for fun and profit, locating space to work is a close second in terms of concerns.  Thus enter the commercial lease. 

Commerical leases are, in my mind, one of the harshed legal instruments out there.  Many contain provisions to the effect that tenants are responsible for maintaining the leased property no matter what the reason may be for damage. Responsibility ranges from minor repairs to flat-out complete rebuilding if the building is flattened.  Further, the mandatory insurance responsibilities of the tenant can be very large because they get to do the rebuilds and so on. 

Wisconsin views commercial leases as contracts and thus generally free of residential lease regulations.  Tenants are assumed to be sophisticated and capable of negotiating deals with landlords.  If you are about to sign a lease, consider the ramifications of binding yourself to a building that you don’t own. 

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

The Creditors’ Resource offers some advice for landlords when commercial tenants file bankruptcy.

While I’m not totally convinced that the U.S. economy has tanked, commercial bankruptcies certainly do happen and a prudent commercial landlord is smart to accept this fact - as always, preparation is key.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

My title is for you Pulp Fiction fans and another attempt at humor on my part. Where do you draw the line with your in-house collections and hand over the burden to a collections attorney? That’s not an easy question to answer, but there are a few markers that may help.

1. The account is 90 days overdue - if you’ve not heard from the debtor in three months, especially RE payments, the time has come to look at alternative methods of collecting.
2. You cannot reach the debtor by phone, mail, email, or any other method - yup, he/she/it is hiding from you. However, hiding does as well when you have the power of the judicial system behind you (although using lawsuits may not always be the best option)
3. All of a sudden, the debtor alleges some dispute over the debt, yet refuses to divulge the relevant details (date, nature of disputed charge, etc) of the dispute to you, or anyone for that matter.
4. The debtor breaks promise after promise after promise to pay - you want to believe the debtor will pay, but this tactic just buys time for the debtor.
5. You learn that other creditors are facing the same behavior by debtor as you are - i.e. not getting paid.

As always, this list is by no means exhaustive - there are a whole array of other signals indicating that you should consider outside collections help. Essentially, it is your company’s call whether to send debts out to an independent collector - consider how your internal collection team’s time is better spent working with willing or forgetful customers, versus investing resources chasing people who will not work with you until pressure is applied.

Moander Law Firm

Chris Moander is an Attorney handling business law matters, business litigation, and collections matters throughout Wisconsin.

I came across a series of posts on wind energy and taxes at the Tax Law and Business Organization Strategy blog. I have not read all seven yet, but Jack Howell has done a thorough job analyzing a huge number of issues that one may encounter when developing windpower on a property. WE Energies has pushed windpower for five years, so it is worth considering the tax implications of future development, such as selling of wind rights, the debate of royalties on windpower, and everyone’s favorite - wanting to push power back on the grid.