Borders Out of Business — What Happens When a Business Closes?

Posted on September 9, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

Bought any good books lately? With the closure of all three Borders stores in Austin, Texas, earlier this year and the final liquidation of the entire chain expected to be complete by the end of September, readers have fewer brick-and-mortar bookstore shelves to browse.

“Closed for Business” a Sign of the Times

The demise of the 40-year-old bookselling retailer follows a nationwide trend in this tough economy. The most recent statistics from the Department of Labor show the number of businesses closing their doors exceeds the number of new businesses starting up over the past three years. And while winding down operations can present unique challenges for a large chain like Borders – which once boasted over 1,000 locations – there is a long checklist of issues that businesses of any size must run through before closing for good.

Legal Issues to Consider During Texas Dissolution

In general when dissolving an entity, Texas business owners must:

  • File a dissolution document and pay a filing fee
  • File various federal, state, county and city tax documents
  • Cancel tax identification numbers, registrations, permits, licenses and business names
  • Notify and pay employees, creditors, suppliers, vendors and contractors
  • Close bank accounts

Other specific legalities will apply depending on how your business entity was structured (corporation, LLC, partnership or sole proprietor). There are filing and notification deadlines, along with consequences for missing them or for filing the wrong form.

Your business’s own governing documents may contain various “winding down” requirements and obligations that may need interpretation in light of ever-changing federal, state and local laws and regulations.

What About Business Property and Contracts?

Many businesses will benefit from an evaluation of assets and property – physical and intellectual – owned, leased or licensed by the company or to others. Contracts of all types will need to be reviewed and, perhaps, renegotiated. You also may benefit from outside legal help if business assets need to be distributed to partners, co-owners, or company officers.

No matter how large or small your business is and no matter why it’s closing, an experienced Austin business attorney holding a CPA can work with you to make sure you follow the right steps once you’ve made the decision to shut down.

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Construction Employment on the Rise in Metropolitan Areas, Study Finds

Posted on September 6, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Litigation

According to a recent report by the Associated General Contractors of America, hiring for construction workers increased in 149 metropolitan areas in the last year. Among the locations that are seeing growth are the Austin, Dallas, Houston, Chicago and Cincinnati metropolitan areas.

On the other hand, the report also notes that some metropolitan areas are experiencing huge losses in construction jobs – such as the layoffs taking place in the Los Angeles, Las Vegas, Philadelphia and New York City areas.

According to Ken Simonson, the Chief Economist at the Associated General Contractors of America, the disparity in hiring can be attributed to different building trends in the private and public sectors.

“A lot of metro areas appear to be benefiting from growing demand from the private sector for new construction,” he told the Construction Magazine Network. “Declining public sector demand is clearly taking a toll on just as many metro areas, however.”

Construction Disputes

Although the growth in metropolitan areas is good news for the construction industry, it can also cause construction disputes among stakeholders such as contractors, subcontractors and investors. The most common reasons for legal disputes in the construction industry include:

  • delays with a project
  • work interruptions during a project
  • contracts that have not been drafted properly
  • defective materials
  • conflicts between contractors and subcontractors
  • changing the scope of the work after a project has begun
  • environmental problems
  • payment issues

If you are involved in a construction dispute, you don’t have to navigate the legal issues alone. By contacting an experienced construction litigation attorney, you can be advised of your rights and given the assistance you need with any court case that arises from the dispute.

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Reorganization Helps Austin Businesses Stay Afloat

Posted on August 31, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

Running a successful business can be challenging in any economy and the pressure only increases when times are tough. With the modest pace of the nation’s recovery from the current economic crisis, more and more businesses in Austin, and across the country, are feeling the crunch.

Many Austin businesses facing financial difficulties are finding that they need to reorganize in order to restore or improve their financial viability. Freescale Semiconductor is one of these companies.

After its recent reorganization, Freescale dramatically reduced its net losses from $538 million in the second quarter last year to just $168 million during the same period this year. This translates to a drop in net losses from $2.73 per share to 79 cents per share. Over the same time period, Freescale’s gross profit margin increased by nearly five percentage points, and it reported net operating earnings of $31 million, compared to a previous operating loss of $18 million.

As demonstrated by Freescale, reorganization can make the difference between survival and defeat for a business facing difficult economic times. Through reorganization, a business can cut its costs without doing further damage to the business. In some cases, reorganization may be limited to “trimming the fat,” while in others, it may involve more complicated transactions such as dividing a business into separate legal entities.

Because restructuring or reorganizing a business incorrectly can be highly counterproductive, it is essential to have a detailed and carefully crafted reorganization plan that is responsive to your company’s specific needs and circumstances.

If you are business owner in the Austin area and are thinking of reorganizing, an experienced business attorney with a CPA can help you explore your options and determine which path can best serve your long-term business goals.

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Austin Tech Startup Companies often Face Complex Business Issues

Posted on June 17, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

Austin tech startup Gazzang Inc. has been quite busy lately. The tech company, specializing in cloud security software, continues its aggressive productivity that began in 2010. Gazzang was established in 2008, but moved from Houston to Austin last year to take advantage of the fertile market of tech-savvy executives. The move also benefitted the startup financially, as Gazzang was able to raise $3.5 million from venture capital investments.

Gazzang is just one of hundreds of startup tech business in Travis County that is experiencing rapid growth. As we’ve discussed earlier, while most of the country is still suffering through the lagging effects of the recession, Austin continues to be a friendly place for technology startups to grow. Austin investors continue to reward promising young companies that make sound business decisions.

However, a successful venture needs more than a good idea and talent to make it happen, as unsound business decisions can quickly cause a company to fail. Complex business startups face a dizzying array of decisions that can have profound and long-lasting effects on the entity. Just a few of these business issues include:

  • Choosing the proper business entity: crucial choices on whether to form a LLC, S-Corporation or Limited Partnership.
  • The legal aspects of venture capital investments.
  • Financing: whether money should be obtained through a lender or a private investor and how the agreement should be structured.
  • Covenants not to compete: bringing in key personnel and executives from other businesses in the area may potentially infringe a non-compete agreement.
  • Real estate and lease agreements: many businesses have been doomed by terms of an unfavorable lease.

These are just a few of the tough decisions that new businesses face. An experienced Austin business attorney can be an invaluable asset to any company, especially one just starting up. Contact a Travis County business lawyer to discuss what choices are most appropriate for your entity.

Source: Austin Business Journal, “Former Phurnace VP joins Austin cloud security startup” June 16, 2011.

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Texas’ Largest Brokerage Firm Expands to Austin

Posted on April 20, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

The business landscape in Austin changed recently when Certified Business Brokers (CBB) announced its expansion into the Central Texas market. Based out of Houston, CBB has facilitated thousands of business transactions since 1974. In speaking to PRWeb, CEO Frank Stabler explained that “Austin’s diverse and dynamic business environment offers numerous opportunities for both buyers and sellers to achieve their goals.”

Stabler’s remarks reflect the growing business climate in Austin. A report by Portfolio.com indicates that the city experienced the highest growth in small business activity between 2006 and 2007 and expanded its job base by 15 percent between 2003 and 2009. According to Portfolio’s six part study to gauge the best areas for small business development, Austin prevailed over other cities such as Portland, Oregon; Raleigh, North Carolina; and Baton Rouge, Louisiana.

As the state capital, Austin is the center of education and government in Texas. Its growing cadre of technology companies leads it to be called the “Silicon Hills” of Texas. LegalZoom.com is one of its newest residents, moving from California amidst the Golden State’s worst budget crisis.

CBB boasts that clients and future customers will benefit from experienced professionals with expertise in mergers and acquisitions, business valuations and appraisals, among many other brokerage components. According to CBB, the resources and information other firms provide pale in comparison to CBB’s systems, processes, and extensive transaction database.

With strong business expansion comes the potential for business litigation, as not all investments are fruitful, and because disputes invariably arise. The most common issues involve fraud and misrepresentation in private offerings and other stock purchases. With the potential for costly litigation, it is prudent to contact an experienced business attorney if you hold concerns about a transaction or feel that misrepresentation or fraud was involved.

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New Texas Legislation Could Affect Austin Businesses

Posted on March 31, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

The Austin Business Journal reported that Texas lawmakers have over 7,500 pieces of proposed legislation to consider this session. Incredibly, over 5,000 of these bills could affect Austin businesses, and experts estimate that one in five bills will be signed into law at some point. Texas’ economic climate is much different one than a year ago, prompting the flurry of proposed laws.

This presents an overwhelming number of changes for small and midsized businesses, as most entities don’t have in-house counsel to monitor the Austin business law scene on a daily basis. What may have been an advisable transaction last year may no longer be in the company’s best interest, or vice versa. Because of this dynamic economy, prudent Austin businesses often rely on the skill and experience of a business attorney to guide them in business transactions. Below are a few of the proposed laws that could impact Austin businesses:

  • One piece of legislation would help businesses owned by disabled veterans when they are bidding for state contracts, as reported by KFDM Austin. The bill seeks to put these qualified companies in a category with businesses owned by minorities or women, therefore requiring Texas agencies to make efforts in awarding these groups a certain percentage of government contracts each year.
  • House Bill 433 was recently presented to the Small Business and Economic Development Committee. Said bill would present a state tax break to qualified manufacturing companies. The bill’s goal is to stop the loss of Texas manufacturing jobs and entice companies into expanding operations within the state.
  • Texas legislature continues its challenge to the federal health care legislation President Obama signed into law in 2010. The success or failure of the challenge could have a tremendous impact on healthcare-related businesses across in Travis County.

As Texas lawmakers mull over the 7,500 bills, remember that reputable business lawyers stay attuned to law changes that may impact their clients.

Source: SCNTX.com

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Austin Broker Indicted for Fraud through Ponzi Scheme

Posted on February 28, 2011 by admin

On behalf of John McDuff, Attorney at Law

Prominent Austin businessman and broker Kurt Barton appears in court today to begin addressing accusations of fraud. Barton was indicted on 33 counts of fraud, including money laundering, wire fraud and securities fraud. The case will proceed in Austin’s Federal District Court, where Barton is expected to plead not-guilty to the allegations.

The charges are based upon accusations by the U.S. Attorney’s Office that Barton raised $50 million dollars through fraudulent means. The indictment indicates that Barton used his connections through the Church of Jesus Christ of Latter-day Saints to find many of his investors. Details also claim that Barton used famous athletes such as Ty Detmer and Chris Weinke to convince people to invest in his endeavors concerning Triton Financial and related businesses.

Some of Barton’s investors began feeling duped several years ago when they initiated fraud litigation against him. They alleged that the former Triton CEO made misrepresentations concerning the use of funds that investors had entrusted to him. Federal authorities took note of the distressed investors and launched their own investigation, resulting in the pending criminal charges.

Since Barton is pleading not-guilty, his innocence will likely be determined by complex courtroom battles. This litigation will cover all the specific counts against the broker, with his intent being of paramount importance. The accusations don’t concern whether Barton made investments that proved to be poor decisions in hindsight. His guilt or innocence rests largely upon whether he knowingly misled investors through false statements or deliberate withholding of information.

This unfolding case provides an example of how fraud litigation can have a snowball effect. It can start with several unhappy investors initiating a civil lawsuit, and end up in a federal courtroom where the accused faces imprisonment and loss of assets. It underscores the importance of taking civil fraud litigation seriously.

Sources: Austin American-Statesman, “Former Triton chief indicted on charges of money laundering and fraud,” 2/15/2011; KXAN.com, “Former CEO heads to federal court,” 2/28/2011

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Austin’s Economy Bringing in New Business

Posted on January 11, 2011 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

Over the past few years, the country has seen a dramatic rise in unemployment rates, drop in housing prices and an economy struggling to recover. But the City of Austin is seeing growth and has an optimistic outlook for 2011.

The growth of Austin, Texas is based in part on California’s troubles. A recent Newsweek report notes that many employers are choosing Texas as a good place to avoid the high cost of living, taxes and unemployment rates of California, as they did with Arizona, Oregon and Nevada over the past decade. As a result, Texas is now home to more Fortune 500 companies than New York.

Newsweek also named Austin as one of the top 10 cities best situated for recovery, citing the strong economy of the capital. Forbes named Austin one of the most affordable cities in the country and Kiplinger’s placed Austin as number one on the list of top cities for the next decade.

New Businesses Coming

According to the Austin Business Journal, several new businesses have recently opened, bringing new employment opportunities to the area. Zed’s, an American style restaurant, will employ over 100 people and will add up to 50 more within the next year. The restaurant will also house two music venues with an amphitheatre that will hold 1,000 people; it is scheduled for a spring 2011 opening.

The ABJ also reports that the Dallas-based Corner Bakery Cafe will be expanding its Texas presence as well. The company plans to nearly double the number of franchises in the state to 140, which will include the first franchise in the Austin area. John LaBarge, Corner Bakery’s vice president of franchise development, cites the large student population and strong economy of the city as reasons for the company’s expansion into Austin.

Working With an Attorney

Deciding to start a business or enter into a franchise agreement is a big step and there are many decisions to make. Whether you need help deciding which business entity is right for you, have tax questions or need help understanding the many business contracts and financial agreements you will need to enter into, it is important to work with an experienced Austin business law attorney who can help you make the right decisions for your business.

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Austin Banks Merging: Finding A Way to Survive in Hard Times

Posted on December 29, 2010 by admin

On behalf of John McDuff, Attorney at Law posted in Business Transactions

Two struggling Austin banks are poised to merge into an existing entity in the near future. Community State Bank on Ranch Road 620 and Westlake’s Treaty Oak Bank are working out the details of mergers with Carlile Bancshare Inc.

These acquisitions are a way for the banks to survive difficult financial circumstances. Carlile Bancshare reports that the banks’ names will change but that much will stay the same. Carlile has been acquiring troubled banks throughout Texas and the U.S. and found the two Austin banks to be good candidates to join their group.

Business Transactions in Austin

Mergers and acquisitions are just a few of the possible business transactions that Travis County entities can consider when they are looking to expand, change ownership or find a way to survive tough financial times. Some of the options that businesses have are:

  • Changing a business form: restructuring from a sole proprietorship to a limited partnership
  • Buying or selling a business
  • Asset purchases
  • Refinancing

Some businesses are not as troubled as the aforementioned banks and simply need help in the creation, negotiation or litigation of a business contract. Every Austin business typically needs to enter into contracts with many different parties to be successful. Below are just a few examples of the contracts that businesses routinely enter into:

  • Leasehold and real estate agreements
  • Contracts with suppliers
  • Contracts with customers or clients
  • Financing agreements
  • Non-compete contracts or covenants not to compete

The above contracts are a crucial component for every business but require experience and careful skill. A poorly drafted contract or a failure to negotiate important terms may have a negative and lasting impact upon any business. It is important to do things right the first time, because Texas law supports parties’ rights to freely contract with each other and is reluctant to modify or overturn a business agreement.

Source: News8Austin.com

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Dillard’s v. Highland Mall: Lease Agreement Battle Continues

Posted on November 19, 2010 by admin

On behalf of John McDuff, Attorney at Law posted in Business Litigation

Austin’s Federal District Court remains the battleground for a bitter contractual dispute between Dillard’s department store and the Highland Mall.

Dillard’s filed suit about a year-and-a-half ago in an effort to end its contractual relationship with the mall. Although Dillard’s signed a leasing agreement with Highland in 2007 to remain in the Austin mall until 2017, the store is now seeking a legal avenue that would let it leave the shopping center.

The Root of the Problem

Dillard’s efforts to end the business relationship stem from a significant decrease in Highland Mall shoppers and tenants; presumably resulting in lower amounts of sales income than Dillard’s envisioned when it signed the lease. The department store claims that Highland’s climbing vacancy rate is a breach of its guarantee to remain a “first-class mall”.

Highland Mall counters by pointing out that its vacancy rate was increasing before Dillard’s ever signed the lease in 2007. Highland contends that Dillard’s had or should have been aware of the mall’s dwindling occupancy rate – the current vacancy rate of 50 percent should not be a surprise to the department store. The mall has stated that it cannot survive without Dillard’s as its tenant.

The Lawsuit’s Status

The contractual litigation is likely to end only with the District Court’s decision, but Highland seems to be doing everything in its power to delay the progress of the lawsuit. For now, Dillard’s remains a tenant in the mall and Highland hopes it stays that way for as long as possible, ideally until 2017. In contrast, Dillard’s is pushing for a rapid resolution – one that allows it to close its Highland location.

The court has not yet set dates for hearings, but it appears that the parties will have a courtroom face-off in the near future.

Source: Austin Business Journal

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