March 22, 2024 • 37 mins
Unlock the secrets of equity funding with legal insight that could save your business from common yet costly mistakes. Join us as we sit down with Mickey Fox, a seasoned attorney with a wealth of knowledge in business, commercial, and real estate law. We tackle the complexities of legal documentation, the backbone of forming partnerships and securing investments. Whether you're eyeing a modest stake or a hefty venture, we shed light on the indispensable role of tailored legal contracts, and why the generic templates you find online won't cut it.
When it comes to establishing operating agreements or navigating partnerships, the devil is in the details. This episode underscores the importance of personalized legal advice over the deceptively cheap online solutions that could lead to bigger financial woes down the line. We talk about the unique DNA of every business and how it extends to its legal needs, with anecdotes that illustrate the real-world consequences of inadequate legal preparation. Plus, we provide a reality check on why lawyers should be your go-to for entity formation, not just your CPAs.
Lastly, we delve into the art of closing business deals with the finesse of a seasoned lawyer by your side. We discuss the intricacies of real estate and business acquisitions, including the importance of not mixing personal assets with business accounts, and the added credibility an attorney brings to your contract negotiations. For those in niche markets, we stress the importance of industry-specific legal expertise that can navigate the unique challenges of your field. Listen in and equip yourself with knowledge to make informed legal decisions that protect and propel your business forward.
A loan brokerage firm that acquires funding for business owners and real estate investors.
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If you need assistance in obtaining funding, email us at podcast@tdjequityfundinginsiders.net. Tell what the scope of funding is needed and the amount. A broker will contact you to discuss your funding needs. And remember, at TDJ Equity Funding, we do not force your funding needs into a lender's box but find a lender's box that fits you!
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Episode Transcript
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Introduction Announcement (00:13):
Ready to get the inside scoop on
equity funding?
Tune in to TDJ Equity FundingInsiders podcast for an in-depth
look at what it takes to accessfinancial capital and maximize
your investments, fromexperienced professionals,
including bankers, underwriters,loan officers and industry
(00:35):
experts, as they share theirunfiltered stories and valuable
lessons on securing funds.
Jacquelyn Jackson (00:47):
Welcome, dear listeners, to another exciting
episode of the TDJ EquityFunding Insiders podcast, your
go-to source for insights intothe world of financing, lending
and everything in between.
I'm your host, jacquelineJackson, and joining me today is
Legal Luminary, with a wealthof expertise in business,
commercial and real estate law.
This is one of three podcastepisodes that we will be
(01:09):
speaking about funding and howattorney plays a part in getting
funding.
This episode is aboutpartnerships.
We are thrilled to have ouresteemed Mickey Foxx, that's a
local attorney, to co-host withus today.
Mickey has a stellar reputation, specializing in business,
commercial and real estatematters.
His intensive experience alsocompromises compasses, corporate
(01:35):
and business consultant, aswell as business construction
and real estate legations atboth the state and federal level
.
So, without further ado, let'swelcome Mickey Foxx to our show
today.
Thank you for joining us.
Mickey Fox (01:50):
Jackie, I'm still stuck on luminary.
That was awesome.
I'm just absolutely excited tobe here.
I really appreciate you havingme on and I hope I can help
educate folks as to some of thethings that are going on behind
the scenes before you even getto the point of meeting you or
(02:12):
even through the process.
I've been practicing for about20 years now and it's amazing
how little folks really knowabout what's going on, and if I
can help everybody out and makeit a little easier, that's my
goal.
Jacquelyn Jackson (02:26):
Okay, and that's what we have in this show
is mainly about today, guys, isthat we have found, as being
loan brokers, that there is apart where your attorney needs
to play, and it doesn't reallymatter the amount of money, as
much as it is that you shouldhave them in place, whether it's
a hundred thousand or a millionthousand, we have a million
dollars.
Sorry for that.
(02:46):
We've actually found out thatthat is really important to have
the correct type of contracts,because if they're not correct,
underwriter is not acceptingthem.
That's the thing that we'refinding out, which is either
your deal is going to die orit's going to take extra months
to get it done.
So we have brought Mickey in asan attorney to actually give
you educational knowledge, right.
(03:08):
We're giving educationalknowledge of what you should do
is for a partnership and forwhat is needed on the lending
side.
So him and I are going to betalking he's from the legal side
, I'm talking from the side hasbeen a loan broker, or what we
see and what we deal with whenwe actually deal with a attorney
, with our clients.
So we're going to start offtoday with getting an
(03:30):
understanding of partnerships.
So, if you don't mind, talkabout the different types of
partnerships.
Mickey Fox (03:36):
Okay, first off, this is just for education,
right.
Every, every fact, everysituation makes things work a
little differently.
So please, if you get aquestion, don't assume I know
what I'm talking about.
Go talk to your attorney.
Generally, anybody gets inbusiness with somebody else.
They've got a partnership.
You don't have to have adocument written up to have a
(03:56):
partnership, okay, but youshould probably have one because
you know when you start thedeal, everybody thinks they know
what they're agreeing to, andthen, when the big money comes
on the table, you find thatnobody knows.
Jacquelyn Jackson (04:09):
It's a different story.
Mickey Fox (04:11):
So, you, you, you have various types of entities
that can be out there in theworld.
You've got just regularpartnerships, You've got sole
proprietorships, you've gotlimited liability companies,
you've got general partnerships,limited partnerships, um,
you've got corporations of allkinds, um, and each one really
(04:34):
does a a different kind of job.
So it really depends on whatyour business is, uh, what your
investors are doing, or that youhave investors or not, uh, and
and that sort of thing, as towhat kind of entity you need.
Jacquelyn Jackson (04:47):
Okay, which is very important, and on our
side of it, that entity has tobe legally set up right, so we
can't be going you can't begoing online and Google and
download legal documents and andturn them into us for you to
satisfy the requirement for aloan.
That's why we brought him on,so it's important to have those
(05:09):
documents in the right ones.
That's legally done, am Icorrect?
Mickey Fox (05:14):
We need to have them , so what that looks like when
we say legally done well,generally in order to do
business in the state of or instate of Texas.
I'm sorry, I'm all.
I also have a license inConnecticut to do business in
the state of Connecticut orTexas.
I did it again, see, before theshow.
They're not telling you, butJackie was doing all the flub
ups.
And now here I am.
She pushed it off on right.
(05:36):
But in order to do business, youneed to file with a security
state.
Um, you have to do that.
The law requires that you dothat.
That's why, that way, peoplecan look you up online, figure
out who you are, who to mail allthe hate mail to, or where to,
where to mail it at Um, and thatsort of thing.
But that's not everything youneed in order to get all the
(05:57):
protections and the otherbenefits of having an LLC or a
corporation.
Um, there's, there's somepaperwork that needs to go on in
the background.
So we start first with just theidea of the agreement.
So, even if you're a soleproprietorship and you want to
have an LLC, you need to have adocument that sets out what your
(06:17):
liabilities are, what yourlimitations on uh, on those
liabilities are, and whatamounts you want to contribute
in capital to your company orwhatever.
When you set up an entity, yousay I'm going to put some money
into that entity and then that'sall y'all got to collect from.
Okay, all right, you can't comeback and hit me personally, you
can't have my house, you can'thave my truck, that kind of
(06:38):
stuff.
So you want to have thatagreement in place.
Um, in the way I talk aboutagreements with people.
It's it's pretty simple.
That agreement's a discussionyou have either with yourself or
with your partners, um, to talkabout what everybody expects of
everybody else.
That agreement's not there forwhen things are going good Cause
when the money's rolling in,ain't nobody cares.
Jacquelyn Jackson (06:59):
Nobody's saying that, even read it.
Mickey Fox (07:02):
And that's the, that's the absolute truth.
Uh, but if you have a gooddiscussion beforehand, then when
things get rough, you've gotsomething you can fall back on.
You can say, okay, here's whatwe agreed we were going to do if
this happens, or here's what weagree we're going to do if that
happens.
And so you've got that agreementto fall back on the way.
I tell people it's like this iskind of like a prenuptial
(07:24):
agreement.
You're going to get into abusiness marriage, uh, with that
person and if something happens, that prenuptial agreement
might save you from divorce.
Nobody, business divorces areas bad, if not worse, than,
regular divorces, and and I'lltell you that business becomes
your child, right, and you wantto keep your child right and you
(07:46):
want custody.
You don't want you knowvisitation schedules and things
like that, right, so you can setall of that out in that.
In that first document.
With that you're going to needa certificate of formation from
the secretary of state or acertificate of incorporation it
depends on what you do andthat's the first legal document
(08:07):
that every bank's going to askfor, exactly Right, that, that
notice that you've actuallyfiled with the secretary of
state and that's going to carrythings like who your agent for
services, and it's going tocarry you know what the name of
the company is, the businessaddress, maybe the mailing
address, that kind of stuff.
The second thing that banksgoing to want is a copy of your
(08:28):
business document.
You're you're operatingagreement or your corporate
agreement.
Jacquelyn Jackson (08:33):
And I want to say on that how important that
is.
It's amazing how many businesscome to us to set up as LLCs or
in corporate and they do nothave an operating agreement.
And guys, I tell people andyou're going to give me your
side, I'm going to give you myside from a lender, from a
lender point of view, thatoperating agreement, it also
tells us the ownership and who'sdoing what in the company,
(08:55):
who's consigned the contract,who can open up this bank
account, who could actually dothis loan.
That's what's in there.
So you don't need to go, youdon't need to take that lightly.
That's what I'm saying and wetalking a partnership because,
like you said, when you go intothat possibility of divorce,
that can save you because itshows what we all agreed to.
So you can just sit downbecause this is what you said
and we're going to move on, orit tells that it's not going to
(09:17):
work anymore.
If nobody don't want to do it,then you're dissolved it, or
whatever the case may be.
So that's what we see,personally a little bit, but
also on the lending side, if youdon't have that operating
agreement where they can go inthere and see who's the owners,
because they're going to checkthe owners.
If you're 20% ownership at anybusiness, they want to check
everybody, so that's why that'simportant as well too, on my end
(09:37):
, on your end.
Mickey Fox (09:39):
Well, on top of what you're talking about, I think
you're talking about also thecompany having who has the
authority within the company tomake these transactions happen,
and that's the thing to go backin there right.
Some companies.
Let's just talk about an LLC,for instance.
Sometimes they're managed bymembers, Sometimes they're
managed by managers.
A manager doesn't really haveto be a member of that LLC.
(10:03):
It can be a third person or acompany that's doing the
management of that company.
But, that person or thatindividual, that entity is going
to have outlined in thedocument what their powers are,
what they can do without havingto get a vote of the members.
So generally, what we do is wecome through and, as we're
(10:24):
coming into a transaction thatinvolves funding and things like
that, we're looking forresolutions that give the
authority and the blessing tothe transaction, that approve
the individual whoever it isit's going to be signing the
documents.
That proves that and kind ofoutlines that process.
(10:45):
So what we want to do is wewant to have that documentation
proper as well, because that'swhat the banks are going to be
asking for.
This is what the underwritersare going to be looking for.
Does this person have theauthority to sign these
documents, or do I need morethan one person to sign these
documents Exactly?
Jacquelyn Jackson (11:01):
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Jacquelyn Jackson (12:27):
That's why I tell you it's so important and
operating agreement, I know theyhave more lines and they do.
You do not need to go and getone offline.
You really need to get with anattorney.
Mickey Fox (12:39):
Let me talk on this.
Okay, you know, it's kind oflike the Maytag repairman right,
you can pay me now or you canpay me later.
What I tell people is look,let's do things simply and
inexpensively for you at thebeginning and it looks like it's
really cheap.
You can go online and grab acompany agreement or something
like that.
But you really have to becareful.
(13:00):
I've had more than one occasionwhere we had to fix an awful
lot of stuff and it costs a lotof money.
When you think about it, this isgenerally going to read through
this thing and then they got totalk to you and find out what
it is you actually intended,what you actually wanted.
They're going to have to knowwhat's going on with this
transaction and figure out whatyou really need.
Then there may be a bunch ofpaperwork They've got to.
(13:21):
You know drop another operatingagreement.
There may have to be someresolutions and some other
things, and that's just to fixthat one small problem.
So it's much better to come upbeforehand and sit down and
speak with an attorney.
Find out if you're doing theright kind of thing.
First, find out if I've got anindividual I was just talking to
(13:43):
, who they've held themselvesout as an S-Corp and they're
actually an LLC.
S-corp is a tax election thatyou make and it doesn't affect
the company at all.
It doesn't change the status ofthe company.
It merely changes how you gettaxed.
But that S-Corp election, a lotof your CPAs will tell you well
, that's the thing to do, that'swhat you've got to do.
They can come back and bite youin the tail end when you go to
(14:06):
sell.
There's your king.
There's a deal about how youvalue the company and about how
you value it for tax on thatsale.
So it's good to come and talkto somebody first, get an
understanding about what's goingon and figure out is this the
right vehicle for me?
Jacquelyn Jackson (14:23):
And so let me make sure this because, again,
we're all learning this.
So, as an attorney, is thatwhere we should look at bringing
an attorney in to help us withthat piece.
Even though you talked aboutthe taxes and all that, we
should come to you when it comesto that operating agreement
based on what me and my partnerswant to do.
Mickey Fox (14:40):
Yeah, there are a lot of CPAs out there who will
file documents.
I'm not really comfortable witha CPA filing anything that has
to do with incorporating anentity.
Jacquelyn Jackson (14:51):
Yeah.
Mickey Fox (14:52):
I agree they understand at least the
bookkeeping, accounting andsometimes the tax side.
Not all accountants are createdequal, but it's good to come
down and sit with me for an hourand let me talk to you, or let
some of their attorneys sit down, talk to you and figure out
what is really good for yourbusiness.
What is it you want to do, whatwill save you the most money in
(15:14):
the long run and what makessense.
There's no sense if you're justdoing a landscaping service and
that's all you're doing ismowing lawns.
There's no reason to have acorporation.
It's just extra tax, extraforms, extra filings, things you
don't need to mess with.
Where you can do something,maybe with a very simple LLC.
Jacquelyn Jackson (15:36):
So what I'm seeing is that which I think we
all need to learn that becausewe have to be real.
You all know that a lot of stuffwhen it comes to business is so
many myths out there, and it'sa lot of truth, a lot of
falsehood, but it's also a lotof stuff that doesn't pertain to
you Doesn't mean it's wrong,it's just not fitting for you.
Like what you just saying,based on that business and I'm
going to say this to add to whatyou're saying when you don't
(15:58):
have it set up, like you'resaying, you went through the
process and then, like you hadthat one that you had to do
later In our case, that's calledtime and what happens is this
when you're looking at threemonths, four months for you to
possibly get approval which wecan get, approval is the
background stuff that didn'twork out, which is now they're
dealing with your contractbecause they got them and they
like, oh, this got to becorrected.
That's time, and some of thelenders will only give you an
(16:21):
offer that's good for maybe twoweeks to 30 days.
Mickey Fox (16:23):
And with the way the interest rates have been
running, it's hard to tellwhat's going to happen next.
Or even whether the banks aregoing to be able to lend.
Right now in the commercialspace, I know our regional banks
are really getting pressed sothey're not making a lot of
loans and it's really impactingbusiness.
So if you can get everything inline and have all your ducks in
(16:45):
a row, have a nice littlepackage ready, take with you to
you, then you're going to savetime, you're going to save
effort and it's going to go alot faster in general.
Right, you're just going to getit all together.
It's really important for me toemphasize be careful if you try
(17:06):
to download something from theinternet or if you listen to a
friend.
Everybody's situation isdifferent and lawyers always say
you know, their famous answeris it depends, and it does.
It depends on the facts whetheryou've got investors that are
actually investors, whetheryou've got partners who are
actually partners, whetheryou've got Mima, who is your
(17:28):
favorite grandson, and she'llmake you a loan.
Jacquelyn Jackson (17:31):
All that, the Profile Project, it all depends
on it and not the same.
Mickey Fox (17:35):
That's absolutely true.
So take a little time.
It's worth the hour or two thatyou may have to pay for.
Just to sit and talk and getsome good ideas of what's going
on.
My job at least this is the wayI see it my job as an attorney
is to educate you so that youhave the best possible
information to make businessdecisions that you can make.
(17:56):
There may be some liabilitypotential out there, some
exposure, but if you're aware ofit you can choose whether to
deal with it or to put it aside.
If you don't have thatinformation, you don't make the
choice.
Choice gets made for you.
Mmm, that is so let's be incontrol of our.
Jacquelyn Jackson (18:18):
So, yeah, lack of knowledge doesn't mean
it ain't gonna happen justbecause you didn't know about it
.
It still will happen, so that'sunderstandable.
So basically what we're tryingto emphasize, what you guys
today Like.
So this one is aboutpartnerships, because the end of
with us, with the loans, onceyou bring in a person with a
partnership, or you want to buythem In, you want to buy into a
(18:38):
partnership or you want to buythem out of a partnership, that
contract Determines.
If you can, I cannot do thatand that's what people don't
understand.
We've actually had a clientthat actually came to us that,
uh, wanted to buy out one oftheir partners and so happened
to want to buy him out, but Idon't know how it was done, but
it was done that he had to buyhim out four times the price.
Mickey Fox (19:01):
Now, how they got in there and they didn't mention,
didn't see it, the four yearslater, I have no idea what I
will tell you is is that peoplewill pull these contracts down
offline or get them, yeah, orsome, you know, reuse somebody
else's thing and they'll miss afew changes and that's what you
change is okay.
But really, before you getinvolved in that negotiation to
buy that partnership or to sell,you should probably talk with
(19:26):
your attorney and your accountand in here's why one.
You want to know what thisthing is actually worth.
And there are several differentways to value a business,
whether it be a multiple ongross earnings or net revenue,
or if it's an inventoryitemization and so forth.
The other thing is is you maynot want to buy the company
(19:48):
because you don't want to buythe liability.
You maybe you just want to buythe assets.
That's right.
You can do an asset sell there.
Jacquelyn Jackson (19:55):
These are the kind of things that can get
planned out and With an attorney, was this house a whole lot for
us to do by ourselves?
I'm just being what we look atin order for it to be right.
You guys, your stuff, lookright.
The ones that come in withattorneys that have done just
what you said it is smoother, islaid out, we close, is clean
(20:16):
and you know what you're gonnaspend up.
Mickey Fox (20:18):
Yeah, you know To the penny, almost really, what
you're gonna be spending on this, rather than coming into a deal
and having any surprise fees orsurprise amounts that you could
have pay out.
Yeah, everybody, everybodyknows what it's like, you know,
to go in and do a closing ontheir house and then look at
these extra charges and say, youknow what are the?
(20:39):
I had to bring money to theclothes.
What if the bank was takingcare of that?
So my goal, my goal, is to makesure that you understand,
before this happens, what'sgonna be expected of you, what
your valuation is, what thecosts are gonna be.
It's not always possible to getit down, you know, depending,
but that's my goal.
(21:00):
Let's get that out there.
So so you know what you know.
What are you getting into?
Nobody wants to get into a badthing.
Do diligence is more than justdoing the valuation.
It's making sure that you'vegot all your records straight,
that your accounting is doneright, that your inventory is
clear, that you don't have leanslying around out there.
(21:20):
It's part of underwriting,right, but it if I can do that
up front and maybe do a leancheck, then we can find out if
you've got a lean and we getthat thing paid off exactly, not
the middle of the loan, butbefore you ever get there
exactly, exactly because it was.
Jacquelyn Jackson (21:34):
It would mess you up and you don't want to
have that to happen, but you'renot having those things together
in the first place.
That's right now.
We're gonna actually in ourseries we got what we're gonna
be talking about purchasingbusiness, so that's gonna be one
of ours.
That's in this series thatwe'll talk about.
Well, you can kind of lay thatout, because I think, again, we
know from people coming to usthat they haven't looked at all
of that and I think a lot of isthat we're running our business
(21:56):
off our hill.
We don't think, oh, I can kindof get past some of this stuff
with the CPA and some of thisstuff.
Guys, if you try to do any typeof funding, if you try to do
lending, I'm telling you needthose guys.
I didn't realize how importantyou guys were into.
We start seeing you showing upat the closing, whether it's on
a zoom call or phone call,you're there.
So, even if you don't have anattorney, you're gonna have to
(22:17):
get a turn, whether you're gonnapay the lender to use theirs or
you need to get your own orhave it go when I have a turn,
hey the lender to use theirs.
Mickey Fox (22:24):
That attorney does not represent, you know and they
say that they'll say it.
But you know you're gonna bedoing contracts, doing other
things and you're gonna besigning on the dotted line, but
that is not your attorney andthat attorney that is not only
has the banks interest Art, andthat's what the attorney has to
do.
It's not that they're beingmean right exactly.
(22:45):
It's.
It's really good To know simplethings like you know, if you're
running your business bankaccount out of your personal
checking account, that's gonnacreate a problem when you get to
underwriting.
Jacquelyn Jackson (22:57):
You're gonna have it, it's yeah.
Mickey Fox (22:59):
Yeah, and and it creates another problem Just
legally, if you get sued becausethey're gonna be looking at
your personal bank account andyou're just intermingled, yeah
what you shouldn't do.
Yeah, and that's that's.
It's really common With withvery small businesses.
I see so many you know folkswho are just out Trying in a
(23:20):
long making a living and they'redoing okay making a living.
They co-mingle all their funds.
They they have a mess in theirreceipts.
Jacquelyn Jackson (23:28):
They're invoicing it's nothing
Long-lending we can do with that, because once you put that
person on your crate, that'ssomething we see.
That's why so we always excitedabout bringing you home.
Because, I'll be honest, I'vebeen in business for over 25
years and I will tell you thetruth personally, I didn't think
you don't need an attorneyuntil you about to get sued.
That's what I thought youshould have in, sorry.
Well, I found out that istotally wrong, but it's.
(23:50):
This is called preparation andwhen you prepare, your attorney
needs to be on that list so youcan be prepared for whatever may
come, based on you just havingthe right contracts.
And that's what I found outpersonally on my business as I
evolved.
I have a con.
I have attorneys that come inand do the certain contracts and
they are actually what is it?
When you, I'll be able to go tocourt.
(24:11):
My attorney says called way canbe legally.
What's the word?
It's a word that y'all use.
Go to court for.
Yeah, it got to be.
Where you can legally fight it.
In other words, because, if Ibreathe like, I brought him a
contract.
Mickey Fox (24:27):
Lots of put.
They put arbitration clauses incontract.
Yeah, I didn't have anarbitration clause in there,
you'll never get to court.
Jacquelyn Jackson (24:32):
Well, that's what I'm saying.
I have one that I had putoffline in the beginning, and
and so happen.
I turned around and went to youand he said, yeah, this is not
good.
I can't go to court with this.
Yeah, just so I had to pay forit, but it was the best thing I
ever paid for, because, fromthat point on, I mean it's a
certain respect you get whenpeople read the contracts and
(24:53):
stuff and they see, wow, you gotan attorney, dude, you know.
Mickey Fox (24:56):
They know that you have taken yourself serious
enough.
You're in the business.
Jacquelyn Jackson (25:00):
That's what the lenders look at.
They do.
Mickey Fox (25:02):
To go hire an attorney to get something that
makes sense, and I do a lot ofnegotiations where I have a
client in the other party, maybeunrepresented.
My goal is not to mess over theother party, Because these
folks want to do businesstogether and so really that's
what I want.
I want to get the business dealdone so that they can have that
(25:23):
relationship and they can go onand both of them make a lot of
money the more money they makethe happier I am.
They keep coming back Exactly,so it's really important to have
.
We have elements in a contractthat are necessary.
So that's probably what thatlawyer was telling you.
You've got to know who both theparties are.
(25:43):
You've got to know exactly whatthe contract's about.
You've got to know how muchit's for.
You've got to know when it hasto be done.
So every contract is a promisein exchange for another promise.
If you do this, I'll do that.
If you don't have that clearlydefined in your contract, then
you're going to be in courttrying to figure out what was it
(26:04):
we really meant, see, and when,the lender's asked for those
agreements.
Jacquelyn Jackson (26:10):
They're looking for just that they want
to see.
One has been put together by anattorney.
Is it official?
Does it have everything in itit needs to have?
Because that tells themespecially.
Let's just say, you're tryingto get a million dollars from a
lender.
He needs to know You're careful.
I mean no.
Mickey Fox (26:25):
So one of the things that I tell people is it's not
just that you get to contractwith everything in it that needs
to be there, but it's got to beput together in a way that the
underwriter expects to see itGotcha.
Jacquelyn Jackson (26:38):
It was one of the comfortable ways.
It is OK.
Mickey Fox (26:40):
If people are really comfortable with something,
they don't look as closely.
You're right, you are right, Iagree it looks like everything
is in order, everything is fine.
So that little bit of time andeffort you spent, a little bit
of money you spent getting anattorney to draft it up, it's
going to help out Becauseeverything is kind of.
Jacquelyn Jackson (26:55):
There's just kind of a way we do things
laying everything out, and it'sdefinitely much easier than when
I have clients that come in andI will tell you everyone that
come in here and I had anattorney and we're like you're
going to get an attorney forthis or they're going to help
you, whatever.
It has been a lot longer.
The process is longer, guys.
So if you could just have anattorney to review your
documents, like I said, pay thatmoney to get it reviewed before
(27:18):
you actually come in to us willbe good.
Now, understand us being a loanbroker, we will refer you, we
will tell you you need to get anattorney because we can't help
you, but anyway.
So basically that's what I'mfinding out that is important to
have you guys on the teambefore you really really need
you, and it's not just to getsued, but it's just keeping your
(27:40):
paperwork properly right.
So, and it also works as wellif you have investors that want
to look into you, those guys aresmart too.
They want to see yourfinancials, they want to see the
agreements.
Mickey Fox (27:49):
They want to see yeah, they want to see that
everything's in order.
They want to understand thatyou've got your accounting in
order, that you've got yourbusiness processes in order, and
the larger you are, they wantto see policies and procedures.
They want to look at theagreements that you have with
your Exactly.
Let's pull this up.
I'll throw this out there.
Just last week, the Departmentof Labor changed the way it
looks at independent contractors, and it changed it radically.
(28:13):
So, having a good attorney thatyou have a relationship with, I
sent a memo out to all of myclients.
Here are the changes, here arethe things that have happened,
here's what you need to look forand, by the way, give me a ring
and we'll see if this is goingto affect you.
If you're building houses, ifyou're doing any kind of work
(28:33):
where you have 1099 employeesthe contractors it is possible
the Department of Labor comesback and says, no, no, we're
reclassifying them as employees.
That doesn't sound like a baddeal, but now you're on a hook
for taxes, unemploymentinsurance, work, all of that
stuff.
And so that's why, having thatrelationship with an attorney,
(28:56):
we can just pick up the phoneand say, hey, mickey man, I got
this problem.
And you'd be amazed how manytimes that happens.
I'd be driving down the road.
I'd get somebody to call me upand say hey, I've got a contract
with somebody that X, Y and Zis happening, and is this
something we need to dosomething about?
Jacquelyn Jackson (29:11):
now.
Or, and I'll tell them, and thatrelationship is really
important.
I know my guys and my girls too.
They go back and forth myclients with their attorneys and
their CPAs and I see thatthey're like, let me call my
attorney.
And then they call me I cangive me an answer.
So I know that relationship isimportant.
So it is really when you startgrowing and I think people don't
(29:31):
think, not that you try to geta million dollars, but even when
you're starting out, just tohave that set up in the
beginning will save you so muchgoing forward with your business
.
Because you all have a tendencyto keep us kind of straight.
I know that now you keep us,you straighten us out because
the way we're going is not thebest way for us.
(29:52):
So an attorney can look at.
This is what you need to haveand understand.
They have to understand theunderwriters.
They think like attorneys.
The closers they're likeattorneys.
Mickey Fox (30:02):
They're looking.
They have some very specificthings that they have to do.
They have a checklist.
Every closer to the checklistand that's exactly what I got a
checklist, you're right and yougo down the checklist and you're
looking for each item and youwant to be able to check it off.
And if I give you a packagewhere all of those items are
right out there in front, thenyou can get to close.
Jacquelyn Jackson (30:21):
Right.
Mickey Fox (30:22):
If not, you've got to stop and you've got to look
through things and try to figureout if this is, if this
particular section of thiscontract, meets that requirement
or not.
I don't want you to have tolook at that, right?
I don't want you to have tomake a call.
I want to make it easy.
The other thing is is that agood attorney, somebody who's
really invested in you and yourbusiness, is one who's going to
(30:42):
educate you?
They're going to know who youare as a person, know kind of
what your risk profile is.
They're going to understandyour business.
Like I see for contractors,you're going to know the
difference when you're in theparts mouth and if you don't,
well, you probably need to go tosomebody else, right?
Because otherwise you'respending all your time.
You're going to pay them tolearn.
(31:04):
Oh, and why pay an attorney tolearn something?
Jacquelyn Jackson (31:07):
That's ridiculous, get in what they
specialize.
And we brought you on because,like I said, a lot of people
call us real estate.
You can help them with realestate, you can help them with
contracts, and so that's why wehave you as our partnership,
which definitely want to let youall know that you can reach out
to Mickey Fox on your own.
You can pretty much Google andfind them, but if not, you can
reach out to us as well, becausewe definitely keep them there.
If people need anything, werefer them to him, because when
(31:29):
it comes to real estate andbusiness contracts and things of
that nature, we needed to makesure there was attorneys that
were available that could fitwhat you guys are looking for,
like what he's saying you don'tneed to be paying nobody to
learn and because that's whatthey're going to charge you for,
billing wise.
So that's why it's important toreach out to someone like
Mickey that specialize inwhatever you specialize in, I
(31:50):
guess, whatever kind of feel youand you want to make sure they
can relate, like if you're inconstruction, you want to
construction.
If you're a doctor, I know youdo doctors too, I do doctors too
.
Yeah, the attorney, you want tomatch that ability together,
right?
Mickey Fox (32:02):
Like I said, you want somebody who kind of
understands what your businessis.
You know I mean, look, I don'tknow anything about bakeries.
I can try.
You know, I will definitelycome in and try to help somebody
out, but I'll have to learn alot, right, but if it's a field
that I work in a lot, where Ijust kind of deal with a lot of
(32:23):
this stuff, I'm not an expert.
I'm not board certified oranything like that.
But I've done a lot of it andI've seen a lot of real estate
deals.
I've seen a lot of membershipinterest purchases or buybacks
and things like that, and sothat person's not just going to
know kind of how to lay thingsout, they're going to know what
to look for and they might beable to tell you hey, you need
(32:47):
to fix this before you get sued.
Jacquelyn Jackson (32:49):
Right, right, exactly.
Mickey Fox (32:51):
That's a big savings right there.
Jacquelyn Jackson (32:53):
It is.
It is.
They don't see it like that.
I know I've had thoseconversations and clothes and
some of the turns.
You know we have that talk withthe client and us and we're
just being real like how's thiscontract set up?
And if it's not set up likeit's needed, I'm like it's not
going to work for the lenders.
But the thing that was kind ofshocking the attorneys already
knew that they like your lendersnot going to accept this.
Mickey Fox (33:13):
One of the things to keep in mind, too, is if your
contract won't get passedunderwriting, you may be on a
hook to pay that money eventhough you can't get a loan, and
so you want to have the properclauses built into that contract
to allow that escape.
And you know, there's an awfullot there to try to keep up and
(33:35):
there are a lot of differentways to fund things.
You can partially fundsomething.
You can do a little bit of anote, you can do a little bit of
a bank loan.
You can do a little bit of abuyback, you can do an earn out.
There's just all kinds of waysof structuring things.
So, even if you can't grabaccess to the full amount of
capital that you need from alender like you, there are ways
(33:56):
to get them in the back end, solong as the lender because the
lender is going to want to stayprimary.
As long as they stay primary,they don't care, they get their
money, they're going to be fine.
Jacquelyn Jackson (34:06):
So long as it's got to have you guys in
there, because it really has anadd to it.
Well, I tell you what.
We really do appreciate youbeing here, but before we leave,
I would really like to hearwhat type of advice or nugget
you want to give our listenersfor the ending of this show
today.
What would you like to send outto them?
Your last thing to them?
Mickey Fox (34:25):
Don't be afraid to call.
I'm a regular person.
I put my pants on like mostpeople do, half asleep in the
dark.
But don't feel like yourproblem is something you can
necessarily push off.
We like to kick the can downthe road.
Talk to an attorney early on.
(34:47):
I'll tell you straight.
If it's something that I don'tthink you need to worry about,
I'll tell you I don't need themoney that bad.
Jacquelyn Jackson (34:54):
Right.
Mickey Fox (34:55):
But if it's something that I think you need
to plan for and you need tothink about, I'll tell you
straight.
And whether you use my serviceor somebody else, it doesn't
matter Whether you use myservices or somebody else.
Really, what I want is thatyou're protected, that you're
taken care of and that you getrespect.
That's really what it's about.
You're going to be able torespect the people you're
(35:17):
working with, and I need torespect my clients and they need
to respect me, and if we havethat, it's an awesome
relationship.
Jacquelyn Jackson (35:26):
Awesome and it works really good.
So again I want to thank youfor coming out again.
My pleasure and I want to saysomething to you guys a little
bit on a personal tip, dealingwith an attorney.
We love Bikki at our office.
We love him.
I advise you guys to give him acall to see.
Even if you're not even thinkingthere, but if you're in
business, going in business, youneed to reach out to him.
(35:49):
He's the type that you can setup a appointment.
He can talk to you and he'sstraightforward.
You know about what you need todo and everything, and he's
working really well with a lotof the clients we send this way.
So definitely you all need tolook at reaching out to him and
also to our listeners.
If you like what you heard andwould like to stay informed
about getting money for yourbusiness, listen to TDJ Equally
(36:10):
Funding Insiders Podcast on allmajor podcast platforms.
If you would like to be a partof the funding Insiders
community, where we give outdocumentation and information to
the lending process and more,please sign up at
wwwtdjequallylcnet backslashpodcast.
Until next time, thank you andtake care.
Introduction Announcement (36:57):
Thank you.
Ready to get the inside scoop on
equity funding?
Tune in to TDJ Equity FundingInsiders podcast for an in-depth
look at what it takes to accessfinancial capital and maximize
your investments, fromexperienced professionals,
including bankers, underwriters,loan officers and industry
(00:35):
experts, as they share theirunfiltered stories and valuable
lessons on securing funds.
Jacquelyn Jackson (00:47):
Welcome, dear listeners, to another exciting
episode of the TDJ EquityFunding Insiders podcast, your
go-to source for insights intothe world of financing, lending
and everything in between.
I'm your host, jacquelineJackson, and joining me today is
Legal Luminary, with a wealthof expertise in business,
commercial and real estate law.
This is one of three podcastepisodes that we will be
(01:09):
speaking about funding and howattorney plays a part in getting
funding.
This episode is aboutpartnerships.
We are thrilled to have ouresteemed Mickey Foxx, that's a
local attorney, to co-host withus today.
Mickey has a stellar reputation, specializing in business,
commercial and real estatematters.
His intensive experience alsocompromises compasses, corporate
(01:35):
and business consultant, aswell as business construction
and real estate legations atboth the state and federal level
.
So, without further ado, let'swelcome Mickey Foxx to our show
today.
Thank you for joining us.
Mickey Fox (01:50):
Jackie, I'm still stuck on luminary.
That was awesome.
I'm just absolutely excited tobe here.
I really appreciate you havingme on and I hope I can help
educate folks as to some of thethings that are going on behind
the scenes before you even getto the point of meeting you or
(02:12):
even through the process.
I've been practicing for about20 years now and it's amazing
how little folks really knowabout what's going on, and if I
can help everybody out and makeit a little easier, that's my
goal.
Jacquelyn Jackson (02:26):
Okay, and that's what we have in this show
is mainly about today, guys, isthat we have found, as being
loan brokers, that there is apart where your attorney needs
to play, and it doesn't reallymatter the amount of money, as
much as it is that you shouldhave them in place, whether it's
a hundred thousand or a millionthousand, we have a million
dollars.
Sorry for that.
(02:46):
We've actually found out thatthat is really important to have
the correct type of contracts,because if they're not correct,
underwriter is not acceptingthem.
That's the thing that we'refinding out, which is either
your deal is going to die orit's going to take extra months
to get it done.
So we have brought Mickey in asan attorney to actually give
you educational knowledge, right.
(03:08):
We're giving educationalknowledge of what you should do
is for a partnership and forwhat is needed on the lending
side.
So him and I are going to betalking he's from the legal side
, I'm talking from the side hasbeen a loan broker, or what we
see and what we deal with whenwe actually deal with a attorney
, with our clients.
So we're going to start offtoday with getting an
(03:30):
understanding of partnerships.
So, if you don't mind, talkabout the different types of
partnerships.
Mickey Fox (03:36):
Okay, first off, this is just for education,
right.
Every, every fact, everysituation makes things work a
little differently.
So please, if you get aquestion, don't assume I know
what I'm talking about.
Go talk to your attorney.
Generally, anybody gets inbusiness with somebody else.
They've got a partnership.
You don't have to have adocument written up to have a
(03:56):
partnership, okay, but youshould probably have one because
you know when you start thedeal, everybody thinks they know
what they're agreeing to, andthen, when the big money comes
on the table, you find thatnobody knows.
Jacquelyn Jackson (04:09):
It's a different story.
Mickey Fox (04:11):
So, you, you, you have various types of entities
that can be out there in theworld.
You've got just regularpartnerships, You've got sole
proprietorships, you've gotlimited liability companies,
you've got general partnerships,limited partnerships, um,
you've got corporations of allkinds, um, and each one really
(04:34):
does a a different kind of job.
So it really depends on whatyour business is, uh, what your
investors are doing, or that youhave investors or not, uh, and
and that sort of thing, as towhat kind of entity you need.
Jacquelyn Jackson (04:47):
Okay, which is very important, and on our
side of it, that entity has tobe legally set up right, so we
can't be going you can't begoing online and Google and
download legal documents and andturn them into us for you to
satisfy the requirement for aloan.
That's why we brought him on,so it's important to have those
(05:09):
documents in the right ones.
That's legally done, am Icorrect?
Mickey Fox (05:14):
We need to have them , so what that looks like when
we say legally done well,generally in order to do
business in the state of or instate of Texas.
I'm sorry, I'm all.
I also have a license inConnecticut to do business in
the state of Connecticut orTexas.
I did it again, see, before theshow.
They're not telling you, butJackie was doing all the flub
ups.
And now here I am.
She pushed it off on right.
(05:36):
But in order to do business, youneed to file with a security
state.
Um, you have to do that.
The law requires that you dothat.
That's why, that way, peoplecan look you up online, figure
out who you are, who to mail allthe hate mail to, or where to,
where to mail it at Um, and thatsort of thing.
But that's not everything youneed in order to get all the
(05:57):
protections and the otherbenefits of having an LLC or a
corporation.
Um, there's, there's somepaperwork that needs to go on in
the background.
So we start first with just theidea of the agreement.
So, even if you're a soleproprietorship and you want to
have an LLC, you need to have adocument that sets out what your
(06:17):
liabilities are, what yourlimitations on uh, on those
liabilities are, and whatamounts you want to contribute
in capital to your company orwhatever.
When you set up an entity, yousay I'm going to put some money
into that entity and then that'sall y'all got to collect from.
Okay, all right, you can't comeback and hit me personally, you
can't have my house, you can'thave my truck, that kind of
(06:38):
stuff.
So you want to have thatagreement in place.
Um, in the way I talk aboutagreements with people.
It's it's pretty simple.
That agreement's a discussionyou have either with yourself or
with your partners, um, to talkabout what everybody expects of
everybody else.
That agreement's not there forwhen things are going good Cause
when the money's rolling in,ain't nobody cares.
Jacquelyn Jackson (06:59):
Nobody's saying that, even read it.
Mickey Fox (07:02):
And that's the, that's the absolute truth.
Uh, but if you have a gooddiscussion beforehand, then when
things get rough, you've gotsomething you can fall back on.
You can say, okay, here's whatwe agreed we were going to do if
this happens, or here's what weagree we're going to do if that
happens.
And so you've got that agreementto fall back on the way.
I tell people it's like this iskind of like a prenuptial
(07:24):
agreement.
You're going to get into abusiness marriage, uh, with that
person and if something happens, that prenuptial agreement
might save you from divorce.
Nobody, business divorces areas bad, if not worse, than,
regular divorces, and and I'lltell you that business becomes
your child, right, and you wantto keep your child right and you
(07:46):
want custody.
You don't want you knowvisitation schedules and things
like that, right, so you can setall of that out in that.
In that first document.
With that you're going to needa certificate of formation from
the secretary of state or acertificate of incorporation it
depends on what you do andthat's the first legal document
(08:07):
that every bank's going to askfor, exactly Right, that, that
notice that you've actuallyfiled with the secretary of
state and that's going to carrythings like who your agent for
services, and it's going tocarry you know what the name of
the company is, the businessaddress, maybe the mailing
address, that kind of stuff.
The second thing that banksgoing to want is a copy of your
(08:28):
business document.
You're you're operatingagreement or your corporate
agreement.
Jacquelyn Jackson (08:33):
And I want to say on that how important that
is.
It's amazing how many businesscome to us to set up as LLCs or
in corporate and they do nothave an operating agreement.
And guys, I tell people andyou're going to give me your
side, I'm going to give you myside from a lender, from a
lender point of view, thatoperating agreement, it also
tells us the ownership and who'sdoing what in the company,
(08:55):
who's consigned the contract,who can open up this bank
account, who could actually dothis loan.
That's what's in there.
So you don't need to go, youdon't need to take that lightly.
That's what I'm saying and wetalking a partnership because,
like you said, when you go intothat possibility of divorce,
that can save you because itshows what we all agreed to.
So you can just sit downbecause this is what you said
and we're going to move on, orit tells that it's not going to
(09:17):
work anymore.
If nobody don't want to do it,then you're dissolved it, or
whatever the case may be.
So that's what we see,personally a little bit, but
also on the lending side, if youdon't have that operating
agreement where they can go inthere and see who's the owners,
because they're going to checkthe owners.
If you're 20% ownership at anybusiness, they want to check
everybody, so that's why that'simportant as well too, on my end
(09:37):
, on your end.
Mickey Fox (09:39):
Well, on top of what you're talking about, I think
you're talking about also thecompany having who has the
authority within the company tomake these transactions happen,
and that's the thing to go backin there right.
Some companies.
Let's just talk about an LLC,for instance.
Sometimes they're managed bymembers, Sometimes they're
managed by managers.
A manager doesn't really haveto be a member of that LLC.
(10:03):
It can be a third person or acompany that's doing the
management of that company.
But, that person or thatindividual, that entity is going
to have outlined in thedocument what their powers are,
what they can do without havingto get a vote of the members.
So generally, what we do is wecome through and, as we're
(10:24):
coming into a transaction thatinvolves funding and things like
that, we're looking forresolutions that give the
authority and the blessing tothe transaction, that approve
the individual whoever it isit's going to be signing the
documents.
That proves that and kind ofoutlines that process.
(10:45):
So what we want to do is wewant to have that documentation
proper as well, because that'swhat the banks are going to be
asking for.
This is what the underwritersare going to be looking for.
Does this person have theauthority to sign these
documents, or do I need morethan one person to sign these
documents Exactly?
Jacquelyn Jackson (11:01):
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(11:22):
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(11:43):
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Jacquelyn Jackson (12:27):
That's why I tell you it's so important and
operating agreement, I know theyhave more lines and they do.
You do not need to go and getone offline.
You really need to get with anattorney.
Mickey Fox (12:39):
Let me talk on this.
Okay, you know, it's kind oflike the Maytag repairman right,
you can pay me now or you canpay me later.
What I tell people is look,let's do things simply and
inexpensively for you at thebeginning and it looks like it's
really cheap.
You can go online and grab acompany agreement or something
like that.
But you really have to becareful.
(13:00):
I've had more than one occasionwhere we had to fix an awful
lot of stuff and it costs a lotof money.
When you think about it, this isgenerally going to read through
this thing and then they got totalk to you and find out what
it is you actually intended,what you actually wanted.
They're going to have to knowwhat's going on with this
transaction and figure out whatyou really need.
Then there may be a bunch ofpaperwork They've got to.
(13:21):
You know drop another operatingagreement.
There may have to be someresolutions and some other
things, and that's just to fixthat one small problem.
So it's much better to come upbeforehand and sit down and
speak with an attorney.
Find out if you're doing theright kind of thing.
First, find out if I've got anindividual I was just talking to
(13:43):
, who they've held themselvesout as an S-Corp and they're
actually an LLC.
S-corp is a tax election thatyou make and it doesn't affect
the company at all.
It doesn't change the status ofthe company.
It merely changes how you gettaxed.
But that S-Corp election, a lotof your CPAs will tell you well
, that's the thing to do, that'swhat you've got to do.
They can come back and bite youin the tail end when you go to
(14:06):
sell.
There's your king.
There's a deal about how youvalue the company and about how
you value it for tax on thatsale.
So it's good to come and talkto somebody first, get an
understanding about what's goingon and figure out is this the
right vehicle for me?
Jacquelyn Jackson (14:23):
And so let me make sure this because, again,
we're all learning this.
So, as an attorney, is thatwhere we should look at bringing
an attorney in to help us withthat piece.
Even though you talked aboutthe taxes and all that, we
should come to you when it comesto that operating agreement
based on what me and my partnerswant to do.
Mickey Fox (14:40):
Yeah, there are a lot of CPAs out there who will
file documents.
I'm not really comfortable witha CPA filing anything that has
to do with incorporating anentity.
Jacquelyn Jackson (14:51):
Yeah.
Mickey Fox (14:52):
I agree they understand at least the
bookkeeping, accounting andsometimes the tax side.
Not all accountants are createdequal, but it's good to come
down and sit with me for an hourand let me talk to you, or let
some of their attorneys sit down, talk to you and figure out
what is really good for yourbusiness.
What is it you want to do, whatwill save you the most money in
(15:14):
the long run and what makessense.
There's no sense if you're justdoing a landscaping service and
that's all you're doing ismowing lawns.
There's no reason to have acorporation.
It's just extra tax, extraforms, extra filings, things you
don't need to mess with.
Where you can do something,maybe with a very simple LLC.
Jacquelyn Jackson (15:36):
So what I'm seeing is that which I think we
all need to learn that becausewe have to be real.
You all know that a lot of stuffwhen it comes to business is so
many myths out there, and it'sa lot of truth, a lot of
falsehood, but it's also a lotof stuff that doesn't pertain to
you Doesn't mean it's wrong,it's just not fitting for you.
Like what you just saying,based on that business and I'm
going to say this to add to whatyou're saying when you don't
(15:58):
have it set up, like you'resaying, you went through the
process and then, like you hadthat one that you had to do
later In our case, that's calledtime and what happens is this
when you're looking at threemonths, four months for you to
possibly get approval which wecan get, approval is the
background stuff that didn'twork out, which is now they're
dealing with your contractbecause they got them and they
like, oh, this got to becorrected.
That's time, and some of thelenders will only give you an
(16:21):
offer that's good for maybe twoweeks to 30 days.
Mickey Fox (16:23):
And with the way the interest rates have been
running, it's hard to tellwhat's going to happen next.
Or even whether the banks aregoing to be able to lend.
Right now in the commercialspace, I know our regional banks
are really getting pressed sothey're not making a lot of
loans and it's really impactingbusiness.
So if you can get everything inline and have all your ducks in
(16:45):
a row, have a nice littlepackage ready, take with you to
you, then you're going to savetime, you're going to save
effort and it's going to go alot faster in general.
Right, you're just going to getit all together.
It's really important for me toemphasize be careful if you try
(17:06):
to download something from theinternet or if you listen to a
friend.
Everybody's situation isdifferent and lawyers always say
you know, their famous answeris it depends, and it does.
It depends on the facts whetheryou've got investors that are
actually investors, whetheryou've got partners who are
actually partners, whetheryou've got Mima, who is your
(17:28):
favorite grandson, and she'llmake you a loan.
Jacquelyn Jackson (17:31):
All that, the Profile Project, it all depends
on it and not the same.
Mickey Fox (17:35):
That's absolutely true.
So take a little time.
It's worth the hour or two thatyou may have to pay for.
Just to sit and talk and getsome good ideas of what's going
on.
My job at least this is the wayI see it my job as an attorney
is to educate you so that youhave the best possible
information to make businessdecisions that you can make.
(17:56):
There may be some liabilitypotential out there, some
exposure, but if you're aware ofit you can choose whether to
deal with it or to put it aside.
If you don't have thatinformation, you don't make the
choice.
Choice gets made for you.
Mmm, that is so let's be incontrol of our.
Jacquelyn Jackson (18:18):
So, yeah, lack of knowledge doesn't mean
it ain't gonna happen justbecause you didn't know about it
.
It still will happen, so that'sunderstandable.
So basically what we're tryingto emphasize, what you guys
today Like.
So this one is aboutpartnerships, because the end of
with us, with the loans, onceyou bring in a person with a
partnership, or you want to buythem In, you want to buy into a
(18:38):
partnership or you want to buythem out of a partnership, that
contract Determines.
If you can, I cannot do thatand that's what people don't
understand.
We've actually had a clientthat actually came to us that,
uh, wanted to buy out one oftheir partners and so happened
to want to buy him out, but Idon't know how it was done, but
it was done that he had to buyhim out four times the price.
Mickey Fox (19:01):
Now, how they got in there and they didn't mention,
didn't see it, the four yearslater, I have no idea what I
will tell you is is that peoplewill pull these contracts down
offline or get them, yeah, orsome, you know, reuse somebody
else's thing and they'll miss afew changes and that's what you
change is okay.
But really, before you getinvolved in that negotiation to
buy that partnership or to sell,you should probably talk with
(19:26):
your attorney and your accountand in here's why one.
You want to know what thisthing is actually worth.
And there are several differentways to value a business,
whether it be a multiple ongross earnings or net revenue,
or if it's an inventoryitemization and so forth.
The other thing is is you maynot want to buy the company
(19:48):
because you don't want to buythe liability.
You maybe you just want to buythe assets.
That's right.
You can do an asset sell there.
Jacquelyn Jackson (19:55):
These are the kind of things that can get
planned out and With an attorney, was this house a whole lot for
us to do by ourselves?
I'm just being what we look atin order for it to be right.
You guys, your stuff, lookright.
The ones that come in withattorneys that have done just
what you said it is smoother, islaid out, we close, is clean
(20:16):
and you know what you're gonnaspend up.
Mickey Fox (20:18):
Yeah, you know To the penny, almost really, what
you're gonna be spending on this, rather than coming into a deal
and having any surprise fees orsurprise amounts that you could
have pay out.
Yeah, everybody, everybodyknows what it's like, you know,
to go in and do a closing ontheir house and then look at
these extra charges and say, youknow what are the?
(20:39):
I had to bring money to theclothes.
What if the bank was takingcare of that?
So my goal, my goal, is to makesure that you understand,
before this happens, what'sgonna be expected of you, what
your valuation is, what thecosts are gonna be.
It's not always possible to getit down, you know, depending,
but that's my goal.
(21:00):
Let's get that out there.
So so you know what you know.
What are you getting into?
Nobody wants to get into a badthing.
Do diligence is more than justdoing the valuation.
It's making sure that you'vegot all your records straight,
that your accounting is doneright, that your inventory is
clear, that you don't have leanslying around out there.
(21:20):
It's part of underwriting,right, but it if I can do that
up front and maybe do a leancheck, then we can find out if
you've got a lean and we getthat thing paid off exactly, not
the middle of the loan, butbefore you ever get there
exactly, exactly because it was.
Jacquelyn Jackson (21:34):
It would mess you up and you don't want to
have that to happen, but you'renot having those things together
in the first place.
That's right now.
We're gonna actually in ourseries we got what we're gonna
be talking about purchasingbusiness, so that's gonna be one
of ours.
That's in this series thatwe'll talk about.
Well, you can kind of lay thatout, because I think, again, we
know from people coming to usthat they haven't looked at all
of that and I think a lot of isthat we're running our business
(21:56):
off our hill.
We don't think, oh, I can kindof get past some of this stuff
with the CPA and some of thisstuff.
Guys, if you try to do any typeof funding, if you try to do
lending, I'm telling you needthose guys.
I didn't realize how importantyou guys were into.
We start seeing you showing upat the closing, whether it's on
a zoom call or phone call,you're there.
So, even if you don't have anattorney, you're gonna have to
(22:17):
get a turn, whether you're gonnapay the lender to use theirs or
you need to get your own orhave it go when I have a turn,
hey the lender to use theirs.
Mickey Fox (22:24):
That attorney does not represent, you know and they
say that they'll say it.
But you know you're gonna bedoing contracts, doing other
things and you're gonna besigning on the dotted line, but
that is not your attorney andthat attorney that is not only
has the banks interest Art, andthat's what the attorney has to
do.
It's not that they're beingmean right exactly.
(22:45):
It's.
It's really good To know simplethings like you know, if you're
running your business bankaccount out of your personal
checking account, that's gonnacreate a problem when you get to
underwriting.
Jacquelyn Jackson (22:57):
You're gonna have it, it's yeah.
Mickey Fox (22:59):
Yeah, and and it creates another problem Just
legally, if you get sued becausethey're gonna be looking at
your personal bank account andyou're just intermingled, yeah
what you shouldn't do.
Yeah, and that's that's.
It's really common With withvery small businesses.
I see so many you know folkswho are just out Trying in a
(23:20):
long making a living and they'redoing okay making a living.
They co-mingle all their funds.
They they have a mess in theirreceipts.
Jacquelyn Jackson (23:28):
They're invoicing it's nothing
Long-lending we can do with that, because once you put that
person on your crate, that'ssomething we see.
That's why so we always excitedabout bringing you home.
Because, I'll be honest, I'vebeen in business for over 25
years and I will tell you thetruth personally, I didn't think
you don't need an attorneyuntil you about to get sued.
That's what I thought youshould have in, sorry.
Well, I found out that istotally wrong, but it's.
(23:50):
This is called preparation andwhen you prepare, your attorney
needs to be on that list so youcan be prepared for whatever may
come, based on you just havingthe right contracts.
And that's what I found outpersonally on my business as I
evolved.
I have a con.
I have attorneys that come inand do the certain contracts and
they are actually what is it?
When you, I'll be able to go tocourt.
(24:11):
My attorney says called way canbe legally.
What's the word?
It's a word that y'all use.
Go to court for.
Yeah, it got to be.
Where you can legally fight it.
In other words, because, if Ibreathe like, I brought him a
contract.
Mickey Fox (24:27):
Lots of put.
They put arbitration clauses incontract.
Yeah, I didn't have anarbitration clause in there,
you'll never get to court.
Jacquelyn Jackson (24:32):
Well, that's what I'm saying.
I have one that I had putoffline in the beginning, and
and so happen.
I turned around and went to youand he said, yeah, this is not
good.
I can't go to court with this.
Yeah, just so I had to pay forit, but it was the best thing I
ever paid for, because, fromthat point on, I mean it's a
certain respect you get whenpeople read the contracts and
(24:53):
stuff and they see, wow, you gotan attorney, dude, you know.
Mickey Fox (24:56):
They know that you have taken yourself serious
enough.
You're in the business.
Jacquelyn Jackson (25:00):
That's what the lenders look at.
They do.
Mickey Fox (25:02):
To go hire an attorney to get something that
makes sense, and I do a lot ofnegotiations where I have a
client in the other party, maybeunrepresented.
My goal is not to mess over theother party, Because these
folks want to do businesstogether and so really that's
what I want.
I want to get the business dealdone so that they can have that
(25:23):
relationship and they can go onand both of them make a lot of
money the more money they makethe happier I am.
They keep coming back Exactly,so it's really important to have
.
We have elements in a contractthat are necessary.
So that's probably what thatlawyer was telling you.
You've got to know who both theparties are.
(25:43):
You've got to know exactly whatthe contract's about.
You've got to know how muchit's for.
You've got to know when it hasto be done.
So every contract is a promisein exchange for another promise.
If you do this, I'll do that.
If you don't have that clearlydefined in your contract, then
you're going to be in courttrying to figure out what was it
(26:04):
we really meant, see, and when,the lender's asked for those
agreements.
Jacquelyn Jackson (26:10):
They're looking for just that they want
to see.
One has been put together by anattorney.
Is it official?
Does it have everything in itit needs to have?
Because that tells themespecially.
Let's just say, you're tryingto get a million dollars from a
lender.
He needs to know You're careful.
I mean no.
Mickey Fox (26:25):
So one of the things that I tell people is it's not
just that you get to contractwith everything in it that needs
to be there, but it's got to beput together in a way that the
underwriter expects to see itGotcha.
Jacquelyn Jackson (26:38):
It was one of the comfortable ways.
It is OK.
Mickey Fox (26:40):
If people are really comfortable with something,
they don't look as closely.
You're right, you are right, Iagree it looks like everything
is in order, everything is fine.
So that little bit of time andeffort you spent, a little bit
of money you spent getting anattorney to draft it up, it's
going to help out Becauseeverything is kind of.
Jacquelyn Jackson (26:55):
There's just kind of a way we do things
laying everything out, and it'sdefinitely much easier than when
I have clients that come in andI will tell you everyone that
come in here and I had anattorney and we're like you're
going to get an attorney forthis or they're going to help
you, whatever.
It has been a lot longer.
The process is longer, guys.
So if you could just have anattorney to review your
documents, like I said, pay thatmoney to get it reviewed before
(27:18):
you actually come in to us willbe good.
Now, understand us being a loanbroker, we will refer you, we
will tell you you need to get anattorney because we can't help
you, but anyway.
So basically that's what I'mfinding out that is important to
have you guys on the teambefore you really really need
you, and it's not just to getsued, but it's just keeping your
(27:40):
paperwork properly right.
So, and it also works as wellif you have investors that want
to look into you, those guys aresmart too.
They want to see yourfinancials, they want to see the
agreements.
Mickey Fox (27:49):
They want to see yeah, they want to see that
everything's in order.
They want to understand thatyou've got your accounting in
order, that you've got yourbusiness processes in order, and
the larger you are, they wantto see policies and procedures.
They want to look at theagreements that you have with
your Exactly.
Let's pull this up.
I'll throw this out there.
Just last week, the Departmentof Labor changed the way it
looks at independent contractors, and it changed it radically.
(28:13):
So, having a good attorney thatyou have a relationship with, I
sent a memo out to all of myclients.
Here are the changes, here arethe things that have happened,
here's what you need to look forand, by the way, give me a ring
and we'll see if this is goingto affect you.
If you're building houses, ifyou're doing any kind of work
(28:33):
where you have 1099 employeesthe contractors it is possible
the Department of Labor comesback and says, no, no, we're
reclassifying them as employees.
That doesn't sound like a baddeal, but now you're on a hook
for taxes, unemploymentinsurance, work, all of that
stuff.
And so that's why, having thatrelationship with an attorney,
(28:56):
we can just pick up the phoneand say, hey, mickey man, I got
this problem.
And you'd be amazed how manytimes that happens.
I'd be driving down the road.
I'd get somebody to call me upand say hey, I've got a contract
with somebody that X, Y and Zis happening, and is this
something we need to dosomething about?
Jacquelyn Jackson (29:11):
now.
Or, and I'll tell them, and thatrelationship is really
important.
I know my guys and my girls too.
They go back and forth myclients with their attorneys and
their CPAs and I see thatthey're like, let me call my
attorney.
And then they call me I cangive me an answer.
So I know that relationship isimportant.
So it is really when you startgrowing and I think people don't
(29:31):
think, not that you try to geta million dollars, but even when
you're starting out, just tohave that set up in the
beginning will save you so muchgoing forward with your business
.
Because you all have a tendencyto keep us kind of straight.
I know that now you keep us,you straighten us out because
the way we're going is not thebest way for us.
(29:52):
So an attorney can look at.
This is what you need to haveand understand.
They have to understand theunderwriters.
They think like attorneys.
The closers they're likeattorneys.
Mickey Fox (30:02):
They're looking.
They have some very specificthings that they have to do.
They have a checklist.
Every closer to the checklistand that's exactly what I got a
checklist, you're right and yougo down the checklist and you're
looking for each item and youwant to be able to check it off.
And if I give you a packagewhere all of those items are
right out there in front, thenyou can get to close.
Jacquelyn Jackson (30:21):
Right.
Mickey Fox (30:22):
If not, you've got to stop and you've got to look
through things and try to figureout if this is, if this
particular section of thiscontract, meets that requirement
or not.
I don't want you to have tolook at that, right?
I don't want you to have tomake a call.
I want to make it easy.
The other thing is is that agood attorney, somebody who's
really invested in you and yourbusiness, is one who's going to
(30:42):
educate you?
They're going to know who youare as a person, know kind of
what your risk profile is.
They're going to understandyour business.
Like I see for contractors,you're going to know the
difference when you're in theparts mouth and if you don't,
well, you probably need to go tosomebody else, right?
Because otherwise you'respending all your time.
You're going to pay them tolearn.
(31:04):
Oh, and why pay an attorney tolearn something?
Jacquelyn Jackson (31:07):
That's ridiculous, get in what they
specialize.
And we brought you on because,like I said, a lot of people
call us real estate.
You can help them with realestate, you can help them with
contracts, and so that's why wehave you as our partnership,
which definitely want to let youall know that you can reach out
to Mickey Fox on your own.
You can pretty much Google andfind them, but if not, you can
reach out to us as well, becausewe definitely keep them there.
If people need anything, werefer them to him, because when
(31:29):
it comes to real estate andbusiness contracts and things of
that nature, we needed to makesure there was attorneys that
were available that could fitwhat you guys are looking for,
like what he's saying you don'tneed to be paying nobody to
learn and because that's whatthey're going to charge you for,
billing wise.
So that's why it's important toreach out to someone like
Mickey that specialize inwhatever you specialize in, I
(31:50):
guess, whatever kind of feel youand you want to make sure they
can relate, like if you're inconstruction, you want to
construction.
If you're a doctor, I know youdo doctors too, I do doctors too
.
Yeah, the attorney, you want tomatch that ability together,
right?
Mickey Fox (32:02):
Like I said, you want somebody who kind of
understands what your businessis.
You know I mean, look, I don'tknow anything about bakeries.
I can try.
You know, I will definitelycome in and try to help somebody
out, but I'll have to learn alot, right, but if it's a field
that I work in a lot, where Ijust kind of deal with a lot of
(32:23):
this stuff, I'm not an expert.
I'm not board certified oranything like that.
But I've done a lot of it andI've seen a lot of real estate
deals.
I've seen a lot of membershipinterest purchases or buybacks
and things like that, and sothat person's not just going to
know kind of how to lay thingsout, they're going to know what
to look for and they might beable to tell you hey, you need
(32:47):
to fix this before you get sued.
Jacquelyn Jackson (32:49):
Right, right, exactly.
Mickey Fox (32:51):
That's a big savings right there.
Jacquelyn Jackson (32:53):
It is.
It is.
They don't see it like that.
I know I've had thoseconversations and clothes and
some of the turns.
You know we have that talk withthe client and us and we're
just being real like how's thiscontract set up?
And if it's not set up likeit's needed, I'm like it's not
going to work for the lenders.
But the thing that was kind ofshocking the attorneys already
knew that they like your lendersnot going to accept this.
Mickey Fox (33:13):
One of the things to keep in mind, too, is if your
contract won't get passedunderwriting, you may be on a
hook to pay that money eventhough you can't get a loan, and
so you want to have the properclauses built into that contract
to allow that escape.
And you know, there's an awfullot there to try to keep up and
(33:35):
there are a lot of differentways to fund things.
You can partially fundsomething.
You can do a little bit of anote, you can do a little bit of
a bank loan.
You can do a little bit of abuyback, you can do an earn out.
There's just all kinds of waysof structuring things.
So, even if you can't grabaccess to the full amount of
capital that you need from alender like you, there are ways
(33:56):
to get them in the back end, solong as the lender because the
lender is going to want to stayprimary.
As long as they stay primary,they don't care, they get their
money, they're going to be fine.
Jacquelyn Jackson (34:06):
So long as it's got to have you guys in
there, because it really has anadd to it.
Well, I tell you what.
We really do appreciate youbeing here, but before we leave,
I would really like to hearwhat type of advice or nugget
you want to give our listenersfor the ending of this show
today.
What would you like to send outto them?
Your last thing to them?
Mickey Fox (34:25):
Don't be afraid to call.
I'm a regular person.
I put my pants on like mostpeople do, half asleep in the
dark.
But don't feel like yourproblem is something you can
necessarily push off.
We like to kick the can downthe road.
Talk to an attorney early on.
(34:47):
I'll tell you straight.
If it's something that I don'tthink you need to worry about,
I'll tell you I don't need themoney that bad.
Jacquelyn Jackson (34:54):
Right.
Mickey Fox (34:55):
But if it's something that I think you need
to plan for and you need tothink about, I'll tell you
straight.
And whether you use my serviceor somebody else, it doesn't
matter Whether you use myservices or somebody else.
Really, what I want is thatyou're protected, that you're
taken care of and that you getrespect.
That's really what it's about.
You're going to be able torespect the people you're
(35:17):
working with, and I need torespect my clients and they need
to respect me, and if we havethat, it's an awesome
relationship.
Jacquelyn Jackson (35:26):
Awesome and it works really good.
So again I want to thank youfor coming out again.
My pleasure and I want to saysomething to you guys a little
bit on a personal tip, dealingwith an attorney.
We love Bikki at our office.
We love him.
I advise you guys to give him acall to see.
Even if you're not even thinkingthere, but if you're in
business, going in business, youneed to reach out to him.
(35:49):
He's the type that you can setup a appointment.
He can talk to you and he'sstraightforward.
You know about what you need todo and everything, and he's
working really well with a lotof the clients we send this way.
So definitely you all need tolook at reaching out to him and
also to our listeners.
If you like what you heard andwould like to stay informed
about getting money for yourbusiness, listen to TDJ Equally
(36:10):
Funding Insiders Podcast on allmajor podcast platforms.
If you would like to be a partof the funding Insiders
community, where we give outdocumentation and information to
the lending process and more,please sign up at
wwwtdjequallylcnet backslashpodcast.
Until next time, thank you andtake care.
Introduction Announcement (36:57):
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