October 16, 2025 • 32 mins
We map the legal moves that turn a young company into a funding-ready business, from entity choice and clean governance to strong contracts and bankable IP. Uma Bansal shares the checklists investors trust, the red flags that stall deals, and the timing for hiring counsel.
• choosing between LLC, S corp and C corp for growth and funding
• separating personal and business finances to avoid liability
• drafting robust contracts lenders respect
• converting IP into assets and collateral
• due diligence red flags and how to fix them
• corporate governance, minutes and resolutions
• compliance requirements in regulated industries
• key loan terms, covenants and default triggers
• bringing in investors with solid operating agreements
• when to hire an attorney and how to build your team
If you'd like to be a guest or get in touch with us, please visit our website at www.tdjequityllc.net or email us at team@tdjequityllc.net
If you need assistance in obtaining funding, book a free discovery call at www.tdjequityllc.net. Let us know the scope of funding 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!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:48):
Okay, we want to welcome you all to our Giving
Power to the Business Ownerwebinar webinar series.
And I'm your host, JacquelineJackson, a loan broker with TDJ
Equity Funding.
So we'll use this platform toactually educate businesses on
other strategies and insights ofyou successfully securing
(01:11):
funding.
So today our topic is on the lawside of getting funding.
And so today we are joined byUma Van Zell, the owner of the
Oracle Legal Group.
Her firm specializes incorporate law, intellectual
property, contracts, andhealthcare compliance.
Uma works closely with businessowners to protect and position
(01:33):
their companies for growth.
And today she's here to shareher insights on how legal
strategies connect to fundingand long-term business success.
We want to welcome you, uh Uma,and if you would give us a
little bit more about yourselfbefore we continue.
SPEAKER_02 (01:51):
Sure, sure.
Well, you know my name, you knowwhere I work.
I started the firm about 10years ago, and uh the focus of
our firm is really to be thatone place that businesses can
come to, and they get verypersonalized service.
And we try to hit all thosetarget areas that businesses
typically need.
Um, and really we love workingwith them and we we love
(02:14):
watching them grow and scale.
SPEAKER_01 (02:18):
Okay, so that sounds something that's definitely you
have a passion for business.
You and I have spoken before,and like I said, I realize
that's a passion.
You really want to help a lot ofbusiness be successful, and
that's why we all as a team wevoted to have you in uh because
we felt that you could reallybring some insights to helping
(02:38):
us with not just our clientele,but a lot of people out there
now.
And as you know, we talked aboutit, they're trying to start
their own business on their own,they're trying to get things set
up.
And one thing we've realized isthat a lot of times they don't
know how they should be set upproperly, or some things they
may run into when they try toget funding.
So that's why we wanted you tobe on today.
(03:00):
And again, thank you so much forbeing here.
So we want to start off if wecould.
Let's start the foundation.
When it comes to business ownersthinking about funding or even
getting set up, there are legalstructures that we kind of see a
lot of, you know, the LLC, the SCorp, and C Corp.
But if you would, would you uhactually give us some idea of
(03:22):
deciding between all three andhow they kind of work, if you
would, for us?
SPEAKER_02 (03:27):
Sure.
I mean, I think one thing umthat is important, and I think
lenders and investors want tosee is that clear separation
between yourself and thebusiness.
And that's why we have theseentities.
It also shields and protects youfrom a liability standpoint.
So the three that we see themost of are LCs, C Corps, and S
(03:50):
Corps.
Um, I can tell you we um workwith a lot of uh limited
liability companies.
Um, it tends to be a veryflexible structure.
Um, it's easy to make changes.
Um, you're able to have you knowmanagers that make the
decisions.
There's a lot of flexibility inthat structure without all of
that corporate formality.
(04:11):
Um, the C corp, on the otherhand, is a bit more formal, but
it is also a very beneficialstructure because essentially a
lot of times these biginvestors, if they if they're
looking to invest in yourcompany, they might prefer that
C Corp.
So whether you're choosing oneentity or the other depends on
your specific business.
(04:31):
But what I can say is that youwant to pick them over a sole
proprietorship because that doesnot demonstrate um really a
separation between you and thebusiness.
Also, it doesn't protect you incase there is a lawsuit or
another problem.
SPEAKER_01 (04:48):
Exactly.
And I'm glad you said thatbecause a lot of business owners
decide to come into a businessand they kind of just started
under maybe a DBA, you know,which is their name, and you
know, doing business as it's I'mgonna go down to the court and
I'm gonna sign up.
But when it comes to us lookingfor loans, when you do, like you
said, sole proprietor, when youdo a funding or a loan as a sole
(05:09):
proprietor, they have to go onyour personal, all personal.
You know what I'm saying?
So you've now, like you said,you've entwined your personal
and your business compared to,like you're saying, the setup of
this business's property, itprotects you, and that's what's
important.
That's why we're putting youhere.
That if they have any questionsabout that, we definitely want
them to reach out to you on thatas well.
(05:30):
Okay, thank you so much forthat.
The next one.
SPEAKER_02 (05:32):
Oh, absolutely.
I I hope that they understandhow important this and it is so
easy.
It is not difficult to formthese.
You can even form them on yourown, and ultimately, it's gonna
protect you, it's gonna protectyour business.
You want to keep your bankaccount separate, you want to
make sure your business is yourbusiness account, you know, not
your personal, you're not mixingthe two, uh, because that also
(05:56):
can cause problems, such aspiercing the corporate veil.
So everything you're saying isabsolutely correct, Jacqueline.
And and I really want to seethese startups and these young
companies do well.
SPEAKER_01 (06:08):
Right.
SPEAKER_02 (06:08):
And this is really step one.
SPEAKER_01 (06:10):
Okay, great.
Exactly.
So, what we're gonna do now isgo into the next question.
Again, we got these questionsthat come in from our
subscribers and a lot of ouraudience have put them in.
So, we want to talk aboutcontracts and agreement.
So, on contracts can make orbreak a deal, especially when it
comes to long loans that'sinvolved.
What common mistakes do you seebusiness owners make in their
(06:32):
contracts that could hurt themlater on?
SPEAKER_02 (06:36):
Well, that is a great question, actually.
Um, one thing that uh, you know,we see a lot of is vague or
incomplete contracts.
So, you know, I know thatsomebody might have a buddy and
they just have a handshake dealor they just have a one-page
agreement and they say, Oh, Itrust them.
Um, and maybe that relationshiphas worked for you and you've
not had a problem.
(06:57):
But the issue is that when aninvestor comes in or a bank
looks at that, they're not gonnalook very favorably at that
one-page agreement.
And that's not gonna give themthat sense of security, such
that they're gonna want to giveyou, you know, um, money to fund
your business.
And so I think, and it alsodoesn't secure your long-term
future.
I mean, you're looking to scaleyour business, you're looking to
(07:18):
grow it.
If you don't have solidcontracts in place, then it's
gonna be difficult for you to doso.
SPEAKER_01 (07:24):
Exactly.
And and on that note, from thefunding side, I want to mention,
like you said, if the contractsare not properly set up, like,
say for instance, and I know wetalked on this too, if you're
you're doing a partnership, sothat partnership agreement, or
you're buying another companyfrom a person or a company, um,
and those contracts are not setup, I guess legally, of the word
(07:45):
I want to use, for it's likehaving those type of uh locality
terms that they're looking foras a lender.
If it's not complete, it's notfilled out right, that is a
stopping thing.
So I don't think people realizethat you just can't do, like you
said, you and your buddy decideto fill something out, you know.
You right so I I can see whatyou're saying, and that's why
(08:05):
it's so important of what you'resaying.
If you're gonna do somecontracts, any type of
contracts, have attorney someoneto look over them and kind of
guide you because it will saveyou much money, you know, down
the line.
SPEAKER_02 (08:16):
Yes, yes.
I think I think you said itperfectly because you're, you
know, in the moment you mightsay, Hey, why do I have to do
this or why do I have to spendthis money on it?
But in the long term, you'reactually saving a lot of money
and a lot of problems.
SPEAKER_01 (08:31):
Exactly.
So that's what we definitelywant everybody to know when it
comes to contracts andagreements.
The next thing we want to talkabout, a lot of people starting
business.
Some people are coming up withintellectual property within
their business, right?
Uh, which is fresh ideals.
I do want you to explain whatintellectual property is and
actually how they need to makesure they're covered.
(08:51):
So a lot of small businessesdon't realize that brand or
process may actually be theirmost valuable asset.
How does properly secure andintellectual property make a
business more attractive, youthink, for lenders or even
investors?
SPEAKER_02 (09:04):
Absolutely.
So I think this is incrediblyimportant as well.
So when we're talking aboutintellectual property, we're
talking about patents, we'retalking about copyrights, we're
talking about trademarks, we'retalking about trade secrets.
Um, and they are protecting yourname, your logo, this is
protecting your inventions, thisis protecting your processes in
(09:27):
your company.
So this is this is this cancover a number of things in the
company.
And and having a proper IPprotection in place, it changes
it from just say a process tosomething that's actually an
asset, an asset that is atransferable asset to a
potential lender, or if you'reselling your company, they can
(09:50):
use it with collateral, exactly.
SPEAKER_01 (09:51):
They can use it with collateral.
You're right.
SPEAKER_02 (09:53):
That's a that's a great point.
That's a great point.
So for a lender, they can use itas collateral.
So we've just now transformedsomething that you're using in
your company into a veryvaluable asset.
Um, you know, and I guess toprovide you like an example, say
if you have like a uh like awearable device, um, you know,
(10:14):
that's something that you couldpotentially patent.
And then you can also trade.
SPEAKER_01 (10:25):
Okay, it seemed like you stopped.
Now you did.
Yeah, you're yeah, that's okay.
Yeah, I kind of went out alittle bit.
You're okay.
You're back in.
SPEAKER_02 (10:34):
We're okay.
Okay.
So um, as mentioned, I don'tknow if you heard about the
example I was just mentioning,but you know, you have, you
know, you have this wearabledevice, you've patented, you've
now trademarked the name, thelogo, and it's now a very
valuable asset for your company.
And so there's a lot of meaningand value to protecting your IP.
(10:59):
Also helps you to identify, hey,what are what is the valuable IP
in my company?
Makes you sit down and thinkabout that and think about ways
that you can protect it.
So it's it's important.
SPEAKER_01 (11:09):
It's important, exactly.
And again, definitely seek anattorney for help.
We have Uma on our referral pagewhere you guys can reach out to
her directly.
So you will be able to do thaton our website.
So we want to go into the duediligence red flags.
You know, we kind of talked onthat.
So when a lender or investor oranyone reviews a company,
(11:29):
because you deal with a lot ofpeople that do contracts and
help them, right?
What are some of the legal redflags do you see that can
probably stop it, the deals anddead tracks?
SPEAKER_02 (11:40):
Got it, got it.
Well, I'll say there's a numberof items, but I think some of
the main items, one we'vealready talked about, which is
those messy in uh you know,contracts and you know, not like
complete contracts.
Those are obviously one that isdefinitely a red flag.
Second is probably unclearownership.
You haven't outlined who theowners are, what the voting
(12:03):
procedures are, all of that istypically you'll find in a
shareholder agreement or anoperating agreement.
Um, and that's an extremelyimportant document that really
tells about the governance ofthe company.
Um, and then also not havingprotected intellectual property.
And then I would say probablycompliance.
You haven't done a great job ofmaking sure you have the proper
(12:24):
licenses in place and um youhaven't made sure that all of
that stuff is in order.
And then finally, litigation.
So if you have some biglitigations that are unresolved,
that's probably something thatyou should uh you have to at
least be able to explain howyou're gonna potentially resolve
that litigation.
SPEAKER_01 (12:42):
Exactly.
And that and that makes sense.
That's what I'm saying.
This is things that you need todo before you get in front of
the lender.
Yes.
That basically what you'resaying.
So, on a little bit to lead intothat, I know we talked about the
corporation setup.
Uh, lenders want to see a strongcompany, okay?
And usually they want to seeclean books and clean records,
(13:02):
okay?
So, how important is corporategovernance?
Uh, keeping minutes, records,you know, because a lot of us
don't think, you know, I do Ihave to do the records, do I
have to do the minutes?
So tell us how important is thatwhen it comes to actually
getting in for getting excuseme, getting financing?
SPEAKER_02 (13:20):
Oh, I think it's very important.
I don't know, in Jacqueline,your experience, but I, you
know, I've definitely seeninvestors come in and they'll
say, look, before we even fundyou, you're gonna have to have
all of the board resolutions inplace.
So they have to go backwards andthen fix all of their records,
um, which would have been mucheasier had they just had a
procedure.
(13:41):
Every time we make a majordecision, we write a board
resolution.
Whenever we have a meeting ofall the shareholders, we have
our minutes.
And it's different forcorporations, it's different for
LLCs.
It's important to understandwhat you have to do.
But once you know what to do,it's actually relatively easy to
do it.
And it's also just a greatpractice because you don't have
(14:02):
disputes uh between partners.
You can say, hey, listen, onOctober 4th, we decided as the
company that we're gonna getthis loan.
And here it's documented in aboard resolution.
So not only is it useful forwhen you're getting funding, but
it's also super usefulinternally.
SPEAKER_01 (14:20):
Right.
So that's how that would kind ofwork to kind of help them done.
Let to help them to do that.
Let me say this too on thispart.
You know, we've heard, I guess,uh, what is it, protection of
the veil or the veil prediction,uh, where if you're doing those
minutes, if you're doing thoserecords and compliance, I've had
lenders that private lenders askfor those documentation to see
(14:43):
that you are doing that.
So I think that's so important.
And if you don't know how,because like you can now, and
you can attest to this too.
We can go online and and and getcertain forms made up from
different companies.
But what we don't have is likewhat you just said.
Now let's talk about what'sgoing to keep you compliance.
They don't, they don't, youdon't, they don't come with
that, and that's why it'simportant, right?
(15:04):
To reach out to you becauseyou're saying the part that we
don't get if we go to thesecompanies or certain ones.
And I'm I mean, I'm not talkingabout everybody, I just know
what I've seen that come to us.
They've missed that part of theeducation I think that they can
get from you as an attorney toguide them.
I mean, what's your thoughts onthat?
SPEAKER_02 (15:22):
No, I think you're spot on.
I think that there's a lot ofgaps.
So, say if you do go to, youknow, the these companies online
that provide agreements.
Um, first off, these agreements,they're not complete.
They're missing things that arespecific to your particular
situation.
SPEAKER_01 (15:39):
Custom pieces you need to have.
SPEAKER_02 (15:41):
Yes, they're missing those custom pieces, and they
certainly can't advise you onthe overall compliance aspect.
They're they're not they're notout there to do that, they're
there to provide you umagreements uh without really
looking at the specifics.
And quite honestly, the devil'sin the details.
SPEAKER_01 (15:59):
Exactly.
Wow, how true that is.
Okay, so let's go our next onequestion.
This is dealing with regulatedindustry, okay?
So I know you specialize in thehealthcare compliance, you know,
not and you I know you said it'sso much into that, but you do
specialize in it.
So if people need it, they gotyou.
But for businesses, uh forbusiness owners in a highly
(16:23):
regulated industry, because yousaid that, what additional legal
steps should they take before uhactually presenting it to an
investor or to a lender?
What do you think that should beon that aspect?
SPEAKER_02 (16:36):
You're saying if they're in a very specific
industry like healthcare, wherethey have some things they need
to make sure typical.
Go ahead.
Well, I think they need to makesure that they're is it is it
pausing?
SPEAKER_01 (16:52):
Yeah, it was.
Okay, go ahead.
Okay, now go ahead.
I'm sorry.
SPEAKER_02 (16:56):
I think that they absolutely need to make sure
that they're doing things thatare legally compliant.
So sometimes even healthcarecompanies, they might not
realize that um perhaps they'rerunning a foul of anti-kickback
and STARK just in their referralrelationships with other
clinics, um, and they need tomake sure that their
(17:17):
documentation is also reflectingthe compliance aspect.
So, you know, if it is a HIPAAcompliant company, then you
know, making sure that even theagreements are discussing the
HIPAA compliance to make surethat the infrastructure is
actually HIPAA compliant.
So there's a lot more steps whenyou are in specific industries
(17:39):
and it's a lot more complex.
It's absolutely a case where youneed to have an attorney come
and look and make sure, doalmost like an internal legal
audit to make sure that you'recompliant.
SPEAKER_01 (17:51):
Right.
And I want to say that we'veactually helped a lot of health
cares, but we've had some uhthat come through and they have
had certain documents drawn up.
But when it comes to theircompliance, when we ask for
certain documents, then theyfind and we find out that their
document may not be the righttype that they needed.
They should have had additionalthis or additional that.
And that's where I saw when anattorney comes in, and like you
(18:13):
said, it's that feel you cangive them some compliance for
what they need to do, what theyneed to do in their area because
it all is also different byareas, too, by steps.
SPEAKER_02 (18:25):
Yes, yes, it's a lot, it's a lot, right?
SPEAKER_01 (18:29):
So industry regulation is really important
that if you're getting intothat, then you should definitely
look at getting an attorney tokind of make sure you set up
right.
You know, that's something youdon't do off your hip.
That's just my opinion.
Okay, so going to the next one.
Let's talk about riskmanagement.
Okay, so we're taking on debtmeans taking on risk.
(18:50):
What legal protection, likecontracts or policy, do you
recommend businesses have inplace to minimize maybe their
risks?
SPEAKER_02 (18:58):
Um, that's a great question as well.
Um, I would say that there's,you know, there's the external
and then there's the internalagreements.
So from an internal standpoint,we're talking about having the
operating agreement and theboard resolutions in place to
get that loan and to make surethat you have the authority to
get the loan and that you havethe votes in place and you have
(19:21):
the decision making, what'sgoing to happen when you have a
debt.
All of these things are internalquestions that should be
outlined in your operatingagreement.
If they're not, then that'ssomething that you guys need to
come together, talk about, putinto a board resolution as well.
And then externally, the loandocuments it themselves are very
(19:41):
important.
And one thing I've noticed isthat there's there's quite a bit
of variety out there.
It's not like there's just oneset of loan documents, they can
vary quite a bit.
And the obligations and thetriggers, the default triggers
can really vary.
So it's super important toreview them and to understand
them.
Uh, I think specifically with anattorney, unless you're very,
(20:03):
very experienced in this area,it can be quite tricky.
SPEAKER_01 (20:07):
Very tricky.
I've seen that.
So you are so right about that.
So again, I emphasize howimportant it is to have an
attorney with that, because wesee it at the loan table, at the
closing table, where thingscan't continue because of the
localities of the businessitself, and you didn't have the
proper document you needed to goforward.
(20:28):
And and they can't go forward,you know what I'm saying?
So it is well worth getting youto review what they have and
let's see to make sure yourcompliance based in the industry
you're in.
I mean, you think that'ssomething they would they should
look at trying to do as well?
SPEAKER_02 (20:41):
Yes, absolutely.
I think it's good to have yourducks in a row.
Things go much more smoothly.
The chances of you getting aloan increase.
Um, it just makes sense to getyour ducks in a row before you
you you take on debt or you takeon investors.
SPEAKER_01 (20:56):
Exactly.
So moving to the next one.
Now, this is something we know.
Now we deal with a lot of loans,and I know you've seen contracts
too, and they always, you know,they can be a little tricky.
Uh, but what are the threethings a business owner should
always look for in the fineprint before signing?
SPEAKER_02 (21:16):
That is a great question.
I think one thing I'll sayoverall is you need to review
the entire contract.
So I'll I'll name three that Ithink are very important, but as
a rule, I think it's incredible,incredibly important to review
the entire document.
As I mentioned, each loanagreement can be very different.
Um, I think in my experience,one thing I've noticed that's
(21:38):
important and sometimes, and itseems obvious, but somehow
people over forget to look atit, is the triggers for default.
So, what are the things that aregonna cause the loan to default?
It may not be the things thatyou might think, it might not
just be related to payment.
Um, so it's really important tounderstand what those triggers
are and to be comfortable withthem.
(21:59):
And obviously everybody shouldknow what they are.
SPEAKER_01 (22:03):
Right.
SPEAKER_02 (22:03):
Um, and then what happens after um, you know, a
default is triggered as well.
Um, I'd say the secondprovision, I think that is also
incredibly important, and it'sprobably not just one provision
in the document itself, it's theidea of whether the loan itself
can affect the freedom you haveto do things as a company.
(22:26):
So I'll give you an example.
So, for example, if you want totake on a new owner, you want to
have you know somebody come intothe company and take equity,
that change of control couldactually be limited by what's in
the loan agreement.
The loan agreement could say,hey, if you're if you're getting
a new investor, there's a changeof control, you will have to
(22:48):
inform us of it and get ourpermission.
Or it could just say you justhave to provide us notice of it.
But whatever the case is, ifit's affecting the way that
you're governing and runningyour company, you should know
what that is.
Um, so I think that's also veryimportant.
And that that might not just beone provision, that could be a
few different provisions in thewithin the agreement.
(23:09):
Um, and then finally, of course,you know, personal guarantees,
you know, who's taking out thesepersonal guarantees, and um, you
know, and that's something youshould know when you're getting
the loan agreement as well.
SPEAKER_01 (23:20):
Right.
And how would it affect your uhpersonal um property?
You know, is that going to beincluded in that?
Now, let me say this to add toit when you said triggers,
you're right.
One thing uh when you do usuallywhen you do a line of credit,
every year they want to do anaudit, and that audit consists
of financials.
They just want to see if you'restable, or you still do what you
(23:42):
have.
I've actually had a client thatin the midst of everything,
right for his year, he had toget a new CPA.
Found out the last CPA hadmessed up a lot of stuff, so it
just taking them a minute, andthen he called and said, Hey,
uh, they're talking about youknow, we can't use a line of
credit, you know, blah blahblah, because dah dah.
I said, Yeah, because in yourcontract, which you know, we
(24:03):
knew I didn't, it wasn't nothingwe brought out, but I found out
later with everybody that if youdo not have those documents,
then they have to stop the loan.
He didn't read that, uh, yeah,he didn't know that.
So he was don't get me wrong, hewas wound up getting his CPA and
all that stuff, but it was likea month and a half later that he
didn't use the line of credit.
(24:23):
So that is true when you say youhave to read all that and see
how it would affect you becausehe could have started four
months ago getting his CPA if heknew in a year I need to have
that, which we mentioned on ourletters, but again, he said he
didn't read even what we did, soyou are so absolutely, and
sometimes that loan will stopyou from getting a second loan,
(24:44):
it'll say, Hey, yes, you can'tget that second loan.
SPEAKER_02 (24:47):
So it is so important to understand all of
those terms.
It may seem like a standarddocument, but it is not right,
right, exactly.
SPEAKER_01 (24:55):
Read all of it and what you don't understand, get
legal help to make sure youunderstand what you're reading.
Believe me, the money is wellways, is well worth the what you
have to go through without doingit.
It really is.
Okay, wonderful, wonderful.
So the next one I have, we'regonna talk about equity versus
debt.
Okay, now sometimesentrepreneurs bring in investors
(25:18):
instead of taking a loan.
Okay, we talked about that.
But what legal steps should abusiness owner take to protect
themselves and avoid disputeswhen bringing in, or like you
just said, bringing in apartner?
SPEAKER_02 (25:30):
Bringing in a partner.
Well, yes, absolutely.
And I think we've kind of talkedabout this before, but I'm gonna
talk about this document againbecause I think it's one of the
critical documents that preventslitigation and prevents
disputes.
Okay, and that is an operatingagreement or shareholder
agreement, depending on yourequity, your entity type.
(25:51):
Now, when it comes to anoperating agreement, you have to
think of this as theconstitution of your company.
SPEAKER_01 (25:57):
Now that's what the LLCs, right?
LLCs.
SPEAKER_02 (26:00):
That's with LLCs, yes.
SPEAKER_01 (26:02):
Okay.
Yes.
All right, go ahead.
SPEAKER_02 (26:04):
It is like the constitution of your company.
It it determines uh in thisdocument, you're determining
what the decision-making poweris, who gets to vote on what,
what are the major decisions,what are the minor decisions,
and what are the day-to-daydecisions and who is making
them, and who is part of thisvoting group that is making
(26:25):
these decisions.
It describes what happens if apartner dies, it describes what
happens if a partner getsdivorced, because that is a
concern too.
Um, it's going to talk aboutwhat happens if somebody wants
to transfer their ownership.
It's going to describe whathappens if there's a
distribution, how distributionsare made.
So, really, all the majorconflicts you're going to have
(26:47):
with your partner are actuallyaddressed in the document.
And if you can take the time,talk to an attorney, go through
each of these categories rightwhen you've started the company,
actually, is really the besttime to do it.
Then you're going to have aclear understanding with your
partner, and the chances of youhaving a dispute are going to be
much less.
If you do have a dispute, a lotof that is going to get resolved
(27:11):
by what's in that operatingagreement.
SPEAKER_01 (27:13):
Right, exactly.
And and let's emphasize thatbecause again, I want to say it
with you is that that is sobecause that's so important
because that is actually onedocument they definitely ask
for.
You know, you don't they're notlooking for you to explain.
A lot of time, I think whenpeople go to the bank, they
think, okay, I'm gonna explainthis, but you can't explain
because a lot of your paper goesbefore the deciding people
(27:36):
before you, and you see, andthat's what I think we don't
understand.
They're gonna look at thatoperating document, they're
gonna look who's all involvedand the percentage that they
have in the company.
So I don't think uh people thinkthat's so serious, they just
think, like you say, it's aform, it's just something to
fill out, something to have,right?
But but it's not, especially youcan start off on a hundred
(28:00):
thousand, two hundred thousand.
But when your company startsgrowing, and I have seen this,
and then they get to themillions.
The document years ago was neverright in the first place.
Now they got to pay off to getit correct because you're
expanding, which means you'rebringing in a lot of more people
that's gonna look at your booksand look at your setup and your
compliance, and that's wherethey lose it because they've
(28:21):
been pretty much doing it on thehip, you know, pretty much.
And now you're at the pointwhere it's the money time,
you're not set up, you know,properly how you need to be.
I know you have a lot of thosecoming to you, I guess a little
late is what they come to youand try to do some work with
that.
So that's something you all runin.
So give me, if you would, andthat we want to talk about um as
(28:43):
far as a legal advice.
If it was, if you could leavebusiness on one piece of legal
advice before they grow theirbusiness and start borrowing
money, okay?
Yes, what would that be?
SPEAKER_02 (28:58):
Well, I think we've been talking about it the entire
time.
It's basically get your legalhouse in order and do it from
day one.
It it truly is a foundation foryour company.
It's not only gonna help you toscale and to get investors and
to get funding, it's also gonnahelp you run the company
smoothly and it's gonna cause alot less conflict, it's gonna
(29:21):
make your life a lot easier, andfrankly, it's much cheaper.
It doesn't cost that much to getthese governance documents in
play, but it costs a lot ofmoney when there's a partnership
dispute.
A lot, a lot, and it's muchharder, much harder to resolve
and much harder to deal with.
So I think it's just get it inorder, don't be scared of it.
Sometimes people get uh you knowa bit put off by legal.
(29:43):
Get the right partner, get theright attorney to work with, and
they will step you through theprocess.
SPEAKER_01 (29:49):
To the process.
Well, we actually had someonethat sent something up to us uh
that asks you this.
It's about the timing, they say,of getting an attorney.
So when do you think?
A new business should look athaving an attorney on board when
they first think about businessor after they've kind of ran it
for a minute.
When do you think it's a goodtime to talk to an attorney?
SPEAKER_02 (30:09):
I think it's a good time to not talk to an attorney
when you have decided that youwant to actually move forward
with the business, unless youhave some questions.
If you are still deciding, youcan certainly talk to an
attorney before that point.
But I think when you're you'reserious, you're you're saying,
hey, it's time, I want to dothis.
Then I think it's important totalk to an attorney.
First off, you're gonna have toform that entity so you want to
(30:31):
form the right one.
And then from that point on, youwant to find an attorney who
will really guide you and tellyou, hey, this is what's
important now.
This is something we can waiton.
unknown (30:42):
Right.
SPEAKER_02 (30:43):
Because you might not need all of it from day one,
but there are certain things youdo need from day one.
SPEAKER_01 (30:49):
Okay, and that's whether your attorney can come
in and kind of help you withthat and kind of getting that
in.
Okay.
Well, listen, is it anythingelse you think our audience
should know?
You know, we deal with businessowners and real estate
investors, and so is it anythingyou can think of that you
definitely want them to be awareof as far as their business
setup and going forward?
SPEAKER_02 (31:10):
I mean, I would just say just find the right partners
you can work with, whetherthat's a CPA or an attorney, um,
or even your business partner.
I think it's all about havingthe right people in, you know,
who are there, who are cheeringyou on, who are on your side and
helping you grow and scale andjust have a successful business.
I really wish everybody the bestin their um in this journey.
(31:35):
It's it's an awesome journey,actually, to grow a business.
It's a scary journey.
It's a scary journey, yes.
SPEAKER_01 (31:42):
But it it it's a lot less scary if you have the right
team with you.
So I totally, totally agree.
Well, Miss Uma, I thank you somuch for being on our show
today.
It has been a powerful time.
Thank you for being here.
SPEAKER_02 (31:55):
Thank you.
Thank you so much, Jacqueline.
It's been a pleasure.
SPEAKER_01 (31:58):
It has.
And I want our audience to knowthat um want to thank her for
helping our audience understandthe legal strategies and the
funding really go hand in hand.
SPEAKER_00 (32:14):
We hope you enjoyed this episode of TDJ Equity
Funding Insiders Podcast.
If you'd like to be a guest orget in touch with us, please
visit our website atTDJquityLLC.net forward slash
podcast or email us at podcastat TDJ Equity Funding
Insiders.net.
(32:34):
Until next time, take care.
Okay, we want to welcome you all to our Giving
Power to the Business Ownerwebinar webinar series.
And I'm your host, JacquelineJackson, a loan broker with TDJ
Equity Funding.
So we'll use this platform toactually educate businesses on
other strategies and insights ofyou successfully securing
(01:11):
funding.
So today our topic is on the lawside of getting funding.
And so today we are joined byUma Van Zell, the owner of the
Oracle Legal Group.
Her firm specializes incorporate law, intellectual
property, contracts, andhealthcare compliance.
Uma works closely with businessowners to protect and position
(01:33):
their companies for growth.
And today she's here to shareher insights on how legal
strategies connect to fundingand long-term business success.
We want to welcome you, uh Uma,and if you would give us a
little bit more about yourselfbefore we continue.
SPEAKER_02 (01:51):
Sure, sure.
Well, you know my name, you knowwhere I work.
I started the firm about 10years ago, and uh the focus of
our firm is really to be thatone place that businesses can
come to, and they get verypersonalized service.
And we try to hit all thosetarget areas that businesses
typically need.
Um, and really we love workingwith them and we we love
(02:14):
watching them grow and scale.
SPEAKER_01 (02:18):
Okay, so that sounds something that's definitely you
have a passion for business.
You and I have spoken before,and like I said, I realize
that's a passion.
You really want to help a lot ofbusiness be successful, and
that's why we all as a team wevoted to have you in uh because
we felt that you could reallybring some insights to helping
(02:38):
us with not just our clientele,but a lot of people out there
now.
And as you know, we talked aboutit, they're trying to start
their own business on their own,they're trying to get things set
up.
And one thing we've realized isthat a lot of times they don't
know how they should be set upproperly, or some things they
may run into when they try toget funding.
So that's why we wanted you tobe on today.
(03:00):
And again, thank you so much forbeing here.
So we want to start off if wecould.
Let's start the foundation.
When it comes to business ownersthinking about funding or even
getting set up, there are legalstructures that we kind of see a
lot of, you know, the LLC, the SCorp, and C Corp.
But if you would, would you uhactually give us some idea of
(03:22):
deciding between all three andhow they kind of work, if you
would, for us?
SPEAKER_02 (03:27):
Sure.
I mean, I think one thing umthat is important, and I think
lenders and investors want tosee is that clear separation
between yourself and thebusiness.
And that's why we have theseentities.
It also shields and protects youfrom a liability standpoint.
So the three that we see themost of are LCs, C Corps, and S
(03:50):
Corps.
Um, I can tell you we um workwith a lot of uh limited
liability companies.
Um, it tends to be a veryflexible structure.
Um, it's easy to make changes.
Um, you're able to have you knowmanagers that make the
decisions.
There's a lot of flexibility inthat structure without all of
that corporate formality.
(04:11):
Um, the C corp, on the otherhand, is a bit more formal, but
it is also a very beneficialstructure because essentially a
lot of times these biginvestors, if they if they're
looking to invest in yourcompany, they might prefer that
C Corp.
So whether you're choosing oneentity or the other depends on
your specific business.
(04:31):
But what I can say is that youwant to pick them over a sole
proprietorship because that doesnot demonstrate um really a
separation between you and thebusiness.
Also, it doesn't protect you incase there is a lawsuit or
another problem.
SPEAKER_01 (04:48):
Exactly.
And I'm glad you said thatbecause a lot of business owners
decide to come into a businessand they kind of just started
under maybe a DBA, you know,which is their name, and you
know, doing business as it's I'mgonna go down to the court and
I'm gonna sign up.
But when it comes to us lookingfor loans, when you do, like you
said, sole proprietor, when youdo a funding or a loan as a sole
(05:09):
proprietor, they have to go onyour personal, all personal.
You know what I'm saying?
So you've now, like you said,you've entwined your personal
and your business compared to,like you're saying, the setup of
this business's property, itprotects you, and that's what's
important.
That's why we're putting youhere.
That if they have any questionsabout that, we definitely want
them to reach out to you on thatas well.
(05:30):
Okay, thank you so much forthat.
The next one.
SPEAKER_02 (05:32):
Oh, absolutely.
I I hope that they understandhow important this and it is so
easy.
It is not difficult to formthese.
You can even form them on yourown, and ultimately, it's gonna
protect you, it's gonna protectyour business.
You want to keep your bankaccount separate, you want to
make sure your business is yourbusiness account, you know, not
your personal, you're not mixingthe two, uh, because that also
(05:56):
can cause problems, such aspiercing the corporate veil.
So everything you're saying isabsolutely correct, Jacqueline.
And and I really want to seethese startups and these young
companies do well.
SPEAKER_01 (06:08):
Right.
SPEAKER_02 (06:08):
And this is really step one.
SPEAKER_01 (06:10):
Okay, great.
Exactly.
So, what we're gonna do now isgo into the next question.
Again, we got these questionsthat come in from our
subscribers and a lot of ouraudience have put them in.
So, we want to talk aboutcontracts and agreement.
So, on contracts can make orbreak a deal, especially when it
comes to long loans that'sinvolved.
What common mistakes do you seebusiness owners make in their
(06:32):
contracts that could hurt themlater on?
SPEAKER_02 (06:36):
Well, that is a great question, actually.
Um, one thing that uh, you know,we see a lot of is vague or
incomplete contracts.
So, you know, I know thatsomebody might have a buddy and
they just have a handshake dealor they just have a one-page
agreement and they say, Oh, Itrust them.
Um, and maybe that relationshiphas worked for you and you've
not had a problem.
(06:57):
But the issue is that when aninvestor comes in or a bank
looks at that, they're not gonnalook very favorably at that
one-page agreement.
And that's not gonna give themthat sense of security, such
that they're gonna want to giveyou, you know, um, money to fund
your business.
And so I think, and it alsodoesn't secure your long-term
future.
I mean, you're looking to scaleyour business, you're looking to
(07:18):
grow it.
If you don't have solidcontracts in place, then it's
gonna be difficult for you to doso.
SPEAKER_01 (07:24):
Exactly.
And and on that note, from thefunding side, I want to mention,
like you said, if the contractsare not properly set up, like,
say for instance, and I know wetalked on this too, if you're
you're doing a partnership, sothat partnership agreement, or
you're buying another companyfrom a person or a company, um,
and those contracts are not setup, I guess legally, of the word
(07:45):
I want to use, for it's likehaving those type of uh locality
terms that they're looking foras a lender.
If it's not complete, it's notfilled out right, that is a
stopping thing.
So I don't think people realizethat you just can't do, like you
said, you and your buddy decideto fill something out, you know.
You right so I I can see whatyou're saying, and that's why
(08:05):
it's so important of what you'resaying.
If you're gonna do somecontracts, any type of
contracts, have attorney someoneto look over them and kind of
guide you because it will saveyou much money, you know, down
the line.
SPEAKER_02 (08:16):
Yes, yes.
I think I think you said itperfectly because you're, you
know, in the moment you mightsay, Hey, why do I have to do
this or why do I have to spendthis money on it?
But in the long term, you'reactually saving a lot of money
and a lot of problems.
SPEAKER_01 (08:31):
Exactly.
So that's what we definitelywant everybody to know when it
comes to contracts andagreements.
The next thing we want to talkabout, a lot of people starting
business.
Some people are coming up withintellectual property within
their business, right?
Uh, which is fresh ideals.
I do want you to explain whatintellectual property is and
actually how they need to makesure they're covered.
(08:51):
So a lot of small businessesdon't realize that brand or
process may actually be theirmost valuable asset.
How does properly secure andintellectual property make a
business more attractive, youthink, for lenders or even
investors?
SPEAKER_02 (09:04):
Absolutely.
So I think this is incrediblyimportant as well.
So when we're talking aboutintellectual property, we're
talking about patents, we'retalking about copyrights, we're
talking about trademarks, we'retalking about trade secrets.
Um, and they are protecting yourname, your logo, this is
protecting your inventions, thisis protecting your processes in
(09:27):
your company.
So this is this is this cancover a number of things in the
company.
And and having a proper IPprotection in place, it changes
it from just say a process tosomething that's actually an
asset, an asset that is atransferable asset to a
potential lender, or if you'reselling your company, they can
(09:50):
use it with collateral, exactly.
SPEAKER_01 (09:51):
They can use it with collateral.
You're right.
SPEAKER_02 (09:53):
That's a that's a great point.
That's a great point.
So for a lender, they can use itas collateral.
So we've just now transformedsomething that you're using in
your company into a veryvaluable asset.
Um, you know, and I guess toprovide you like an example, say
if you have like a uh like awearable device, um, you know,
(10:14):
that's something that you couldpotentially patent.
And then you can also trade.
SPEAKER_01 (10:25):
Okay, it seemed like you stopped.
Now you did.
Yeah, you're yeah, that's okay.
Yeah, I kind of went out alittle bit.
You're okay.
You're back in.
SPEAKER_02 (10:34):
We're okay.
Okay.
So um, as mentioned, I don'tknow if you heard about the
example I was just mentioning,but you know, you have, you
know, you have this wearabledevice, you've patented, you've
now trademarked the name, thelogo, and it's now a very
valuable asset for your company.
And so there's a lot of meaningand value to protecting your IP.
(10:59):
Also helps you to identify, hey,what are what is the valuable IP
in my company?
Makes you sit down and thinkabout that and think about ways
that you can protect it.
So it's it's important.
SPEAKER_01 (11:09):
It's important, exactly.
And again, definitely seek anattorney for help.
We have Uma on our referral pagewhere you guys can reach out to
her directly.
So you will be able to do thaton our website.
So we want to go into the duediligence red flags.
You know, we kind of talked onthat.
So when a lender or investor oranyone reviews a company,
(11:29):
because you deal with a lot ofpeople that do contracts and
help them, right?
What are some of the legal redflags do you see that can
probably stop it, the deals anddead tracks?
SPEAKER_02 (11:40):
Got it, got it.
Well, I'll say there's a numberof items, but I think some of
the main items, one we'vealready talked about, which is
those messy in uh you know,contracts and you know, not like
complete contracts.
Those are obviously one that isdefinitely a red flag.
Second is probably unclearownership.
You haven't outlined who theowners are, what the voting
(12:03):
procedures are, all of that istypically you'll find in a
shareholder agreement or anoperating agreement.
Um, and that's an extremelyimportant document that really
tells about the governance ofthe company.
Um, and then also not havingprotected intellectual property.
And then I would say probablycompliance.
You haven't done a great job ofmaking sure you have the proper
(12:24):
licenses in place and um youhaven't made sure that all of
that stuff is in order.
And then finally, litigation.
So if you have some biglitigations that are unresolved,
that's probably something thatyou should uh you have to at
least be able to explain howyou're gonna potentially resolve
that litigation.
SPEAKER_01 (12:42):
Exactly.
And that and that makes sense.
That's what I'm saying.
This is things that you need todo before you get in front of
the lender.
Yes.
That basically what you'resaying.
So, on a little bit to lead intothat, I know we talked about the
corporation setup.
Uh, lenders want to see a strongcompany, okay?
And usually they want to seeclean books and clean records,
(13:02):
okay?
So, how important is corporategovernance?
Uh, keeping minutes, records,you know, because a lot of us
don't think, you know, I do Ihave to do the records, do I
have to do the minutes?
So tell us how important is thatwhen it comes to actually
getting in for getting excuseme, getting financing?
SPEAKER_02 (13:20):
Oh, I think it's very important.
I don't know, in Jacqueline,your experience, but I, you
know, I've definitely seeninvestors come in and they'll
say, look, before we even fundyou, you're gonna have to have
all of the board resolutions inplace.
So they have to go backwards andthen fix all of their records,
um, which would have been mucheasier had they just had a
procedure.
(13:41):
Every time we make a majordecision, we write a board
resolution.
Whenever we have a meeting ofall the shareholders, we have
our minutes.
And it's different forcorporations, it's different for
LLCs.
It's important to understandwhat you have to do.
But once you know what to do,it's actually relatively easy to
do it.
And it's also just a greatpractice because you don't have
(14:02):
disputes uh between partners.
You can say, hey, listen, onOctober 4th, we decided as the
company that we're gonna getthis loan.
And here it's documented in aboard resolution.
So not only is it useful forwhen you're getting funding, but
it's also super usefulinternally.
SPEAKER_01 (14:20):
Right.
So that's how that would kind ofwork to kind of help them done.
Let to help them to do that.
Let me say this too on thispart.
You know, we've heard, I guess,uh, what is it, protection of
the veil or the veil prediction,uh, where if you're doing those
minutes, if you're doing thoserecords and compliance, I've had
lenders that private lenders askfor those documentation to see
(14:43):
that you are doing that.
So I think that's so important.
And if you don't know how,because like you can now, and
you can attest to this too.
We can go online and and and getcertain forms made up from
different companies.
But what we don't have is likewhat you just said.
Now let's talk about what'sgoing to keep you compliance.
They don't, they don't, youdon't, they don't come with
that, and that's why it'simportant, right?
(15:04):
To reach out to you becauseyou're saying the part that we
don't get if we go to thesecompanies or certain ones.
And I'm I mean, I'm not talkingabout everybody, I just know
what I've seen that come to us.
They've missed that part of theeducation I think that they can
get from you as an attorney toguide them.
I mean, what's your thoughts onthat?
SPEAKER_02 (15:22):
No, I think you're spot on.
I think that there's a lot ofgaps.
So, say if you do go to, youknow, the these companies online
that provide agreements.
Um, first off, these agreements,they're not complete.
They're missing things that arespecific to your particular
situation.
SPEAKER_01 (15:39):
Custom pieces you need to have.
SPEAKER_02 (15:41):
Yes, they're missing those custom pieces, and they
certainly can't advise you onthe overall compliance aspect.
They're they're not they're notout there to do that, they're
there to provide you umagreements uh without really
looking at the specifics.
And quite honestly, the devil'sin the details.
SPEAKER_01 (15:59):
Exactly.
Wow, how true that is.
Okay, so let's go our next onequestion.
This is dealing with regulatedindustry, okay?
So I know you specialize in thehealthcare compliance, you know,
not and you I know you said it'sso much into that, but you do
specialize in it.
So if people need it, they gotyou.
But for businesses, uh forbusiness owners in a highly
(16:23):
regulated industry, because yousaid that, what additional legal
steps should they take before uhactually presenting it to an
investor or to a lender?
What do you think that should beon that aspect?
SPEAKER_02 (16:36):
You're saying if they're in a very specific
industry like healthcare, wherethey have some things they need
to make sure typical.
Go ahead.
Well, I think they need to makesure that they're is it is it
pausing?
SPEAKER_01 (16:52):
Yeah, it was.
Okay, go ahead.
Okay, now go ahead.
I'm sorry.
SPEAKER_02 (16:56):
I think that they absolutely need to make sure
that they're doing things thatare legally compliant.
So sometimes even healthcarecompanies, they might not
realize that um perhaps they'rerunning a foul of anti-kickback
and STARK just in their referralrelationships with other
clinics, um, and they need tomake sure that their
(17:17):
documentation is also reflectingthe compliance aspect.
So, you know, if it is a HIPAAcompliant company, then you
know, making sure that even theagreements are discussing the
HIPAA compliance to make surethat the infrastructure is
actually HIPAA compliant.
So there's a lot more steps whenyou are in specific industries
(17:39):
and it's a lot more complex.
It's absolutely a case where youneed to have an attorney come
and look and make sure, doalmost like an internal legal
audit to make sure that you'recompliant.
SPEAKER_01 (17:51):
Right.
And I want to say that we'veactually helped a lot of health
cares, but we've had some uhthat come through and they have
had certain documents drawn up.
But when it comes to theircompliance, when we ask for
certain documents, then theyfind and we find out that their
document may not be the righttype that they needed.
They should have had additionalthis or additional that.
And that's where I saw when anattorney comes in, and like you
(18:13):
said, it's that feel you cangive them some compliance for
what they need to do, what theyneed to do in their area because
it all is also different byareas, too, by steps.
SPEAKER_02 (18:25):
Yes, yes, it's a lot, it's a lot, right?
SPEAKER_01 (18:29):
So industry regulation is really important
that if you're getting intothat, then you should definitely
look at getting an attorney tokind of make sure you set up
right.
You know, that's something youdon't do off your hip.
That's just my opinion.
Okay, so going to the next one.
Let's talk about riskmanagement.
Okay, so we're taking on debtmeans taking on risk.
(18:50):
What legal protection, likecontracts or policy, do you
recommend businesses have inplace to minimize maybe their
risks?
SPEAKER_02 (18:58):
Um, that's a great question as well.
Um, I would say that there's,you know, there's the external
and then there's the internalagreements.
So from an internal standpoint,we're talking about having the
operating agreement and theboard resolutions in place to
get that loan and to make surethat you have the authority to
get the loan and that you havethe votes in place and you have
(19:21):
the decision making, what'sgoing to happen when you have a
debt.
All of these things are internalquestions that should be
outlined in your operatingagreement.
If they're not, then that'ssomething that you guys need to
come together, talk about, putinto a board resolution as well.
And then externally, the loandocuments it themselves are very
(19:41):
important.
And one thing I've noticed isthat there's there's quite a bit
of variety out there.
It's not like there's just oneset of loan documents, they can
vary quite a bit.
And the obligations and thetriggers, the default triggers
can really vary.
So it's super important toreview them and to understand
them.
Uh, I think specifically with anattorney, unless you're very,
(20:03):
very experienced in this area,it can be quite tricky.
SPEAKER_01 (20:07):
Very tricky.
I've seen that.
So you are so right about that.
So again, I emphasize howimportant it is to have an
attorney with that, because wesee it at the loan table, at the
closing table, where thingscan't continue because of the
localities of the businessitself, and you didn't have the
proper document you needed to goforward.
(20:28):
And and they can't go forward,you know what I'm saying?
So it is well worth getting youto review what they have and
let's see to make sure yourcompliance based in the industry
you're in.
I mean, you think that'ssomething they would they should
look at trying to do as well?
SPEAKER_02 (20:41):
Yes, absolutely.
I think it's good to have yourducks in a row.
Things go much more smoothly.
The chances of you getting aloan increase.
Um, it just makes sense to getyour ducks in a row before you
you you take on debt or you takeon investors.
SPEAKER_01 (20:56):
Exactly.
So moving to the next one.
Now, this is something we know.
Now we deal with a lot of loans,and I know you've seen contracts
too, and they always, you know,they can be a little tricky.
Uh, but what are the threethings a business owner should
always look for in the fineprint before signing?
SPEAKER_02 (21:16):
That is a great question.
I think one thing I'll sayoverall is you need to review
the entire contract.
So I'll I'll name three that Ithink are very important, but as
a rule, I think it's incredible,incredibly important to review
the entire document.
As I mentioned, each loanagreement can be very different.
Um, I think in my experience,one thing I've noticed that's
(21:38):
important and sometimes, and itseems obvious, but somehow
people over forget to look atit, is the triggers for default.
So, what are the things that aregonna cause the loan to default?
It may not be the things thatyou might think, it might not
just be related to payment.
Um, so it's really important tounderstand what those triggers
are and to be comfortable withthem.
(21:59):
And obviously everybody shouldknow what they are.
SPEAKER_01 (22:03):
Right.
SPEAKER_02 (22:03):
Um, and then what happens after um, you know, a
default is triggered as well.
Um, I'd say the secondprovision, I think that is also
incredibly important, and it'sprobably not just one provision
in the document itself, it's theidea of whether the loan itself
can affect the freedom you haveto do things as a company.
(22:26):
So I'll give you an example.
So, for example, if you want totake on a new owner, you want to
have you know somebody come intothe company and take equity,
that change of control couldactually be limited by what's in
the loan agreement.
The loan agreement could say,hey, if you're if you're getting
a new investor, there's a changeof control, you will have to
(22:48):
inform us of it and get ourpermission.
Or it could just say you justhave to provide us notice of it.
But whatever the case is, ifit's affecting the way that
you're governing and runningyour company, you should know
what that is.
Um, so I think that's also veryimportant.
And that that might not just beone provision, that could be a
few different provisions in thewithin the agreement.
(23:09):
Um, and then finally, of course,you know, personal guarantees,
you know, who's taking out thesepersonal guarantees, and um, you
know, and that's something youshould know when you're getting
the loan agreement as well.
SPEAKER_01 (23:20):
Right.
And how would it affect your uhpersonal um property?
You know, is that going to beincluded in that?
Now, let me say this to add toit when you said triggers,
you're right.
One thing uh when you do usuallywhen you do a line of credit,
every year they want to do anaudit, and that audit consists
of financials.
They just want to see if you'restable, or you still do what you
(23:42):
have.
I've actually had a client thatin the midst of everything,
right for his year, he had toget a new CPA.
Found out the last CPA hadmessed up a lot of stuff, so it
just taking them a minute, andthen he called and said, Hey,
uh, they're talking about youknow, we can't use a line of
credit, you know, blah blahblah, because dah dah.
I said, Yeah, because in yourcontract, which you know, we
(24:03):
knew I didn't, it wasn't nothingwe brought out, but I found out
later with everybody that if youdo not have those documents,
then they have to stop the loan.
He didn't read that, uh, yeah,he didn't know that.
So he was don't get me wrong, hewas wound up getting his CPA and
all that stuff, but it was likea month and a half later that he
didn't use the line of credit.
(24:23):
So that is true when you say youhave to read all that and see
how it would affect you becausehe could have started four
months ago getting his CPA if heknew in a year I need to have
that, which we mentioned on ourletters, but again, he said he
didn't read even what we did, soyou are so absolutely, and
sometimes that loan will stopyou from getting a second loan,
(24:44):
it'll say, Hey, yes, you can'tget that second loan.
SPEAKER_02 (24:47):
So it is so important to understand all of
those terms.
It may seem like a standarddocument, but it is not right,
right, exactly.
SPEAKER_01 (24:55):
Read all of it and what you don't understand, get
legal help to make sure youunderstand what you're reading.
Believe me, the money is wellways, is well worth the what you
have to go through without doingit.
It really is.
Okay, wonderful, wonderful.
So the next one I have, we'regonna talk about equity versus
debt.
Okay, now sometimesentrepreneurs bring in investors
(25:18):
instead of taking a loan.
Okay, we talked about that.
But what legal steps should abusiness owner take to protect
themselves and avoid disputeswhen bringing in, or like you
just said, bringing in apartner?
SPEAKER_02 (25:30):
Bringing in a partner.
Well, yes, absolutely.
And I think we've kind of talkedabout this before, but I'm gonna
talk about this document againbecause I think it's one of the
critical documents that preventslitigation and prevents
disputes.
Okay, and that is an operatingagreement or shareholder
agreement, depending on yourequity, your entity type.
(25:51):
Now, when it comes to anoperating agreement, you have to
think of this as theconstitution of your company.
SPEAKER_01 (25:57):
Now that's what the LLCs, right?
LLCs.
SPEAKER_02 (26:00):
That's with LLCs, yes.
SPEAKER_01 (26:02):
Okay.
Yes.
All right, go ahead.
SPEAKER_02 (26:04):
It is like the constitution of your company.
It it determines uh in thisdocument, you're determining
what the decision-making poweris, who gets to vote on what,
what are the major decisions,what are the minor decisions,
and what are the day-to-daydecisions and who is making
them, and who is part of thisvoting group that is making
(26:25):
these decisions.
It describes what happens if apartner dies, it describes what
happens if a partner getsdivorced, because that is a
concern too.
Um, it's going to talk aboutwhat happens if somebody wants
to transfer their ownership.
It's going to describe whathappens if there's a
distribution, how distributionsare made.
So, really, all the majorconflicts you're going to have
(26:47):
with your partner are actuallyaddressed in the document.
And if you can take the time,talk to an attorney, go through
each of these categories rightwhen you've started the company,
actually, is really the besttime to do it.
Then you're going to have aclear understanding with your
partner, and the chances of youhaving a dispute are going to be
much less.
If you do have a dispute, a lotof that is going to get resolved
(27:11):
by what's in that operatingagreement.
SPEAKER_01 (27:13):
Right, exactly.
And and let's emphasize thatbecause again, I want to say it
with you is that that is sobecause that's so important
because that is actually onedocument they definitely ask
for.
You know, you don't they're notlooking for you to explain.
A lot of time, I think whenpeople go to the bank, they
think, okay, I'm gonna explainthis, but you can't explain
because a lot of your paper goesbefore the deciding people
(27:36):
before you, and you see, andthat's what I think we don't
understand.
They're gonna look at thatoperating document, they're
gonna look who's all involvedand the percentage that they
have in the company.
So I don't think uh people thinkthat's so serious, they just
think, like you say, it's aform, it's just something to
fill out, something to have,right?
But but it's not, especially youcan start off on a hundred
(28:00):
thousand, two hundred thousand.
But when your company startsgrowing, and I have seen this,
and then they get to themillions.
The document years ago was neverright in the first place.
Now they got to pay off to getit correct because you're
expanding, which means you'rebringing in a lot of more people
that's gonna look at your booksand look at your setup and your
compliance, and that's wherethey lose it because they've
(28:21):
been pretty much doing it on thehip, you know, pretty much.
And now you're at the pointwhere it's the money time,
you're not set up, you know,properly how you need to be.
I know you have a lot of thosecoming to you, I guess a little
late is what they come to youand try to do some work with
that.
So that's something you all runin.
So give me, if you would, andthat we want to talk about um as
(28:43):
far as a legal advice.
If it was, if you could leavebusiness on one piece of legal
advice before they grow theirbusiness and start borrowing
money, okay?
Yes, what would that be?
SPEAKER_02 (28:58):
Well, I think we've been talking about it the entire
time.
It's basically get your legalhouse in order and do it from
day one.
It it truly is a foundation foryour company.
It's not only gonna help you toscale and to get investors and
to get funding, it's also gonnahelp you run the company
smoothly and it's gonna cause alot less conflict, it's gonna
(29:21):
make your life a lot easier, andfrankly, it's much cheaper.
It doesn't cost that much to getthese governance documents in
play, but it costs a lot ofmoney when there's a partnership
dispute.
A lot, a lot, and it's muchharder, much harder to resolve
and much harder to deal with.
So I think it's just get it inorder, don't be scared of it.
Sometimes people get uh you knowa bit put off by legal.
(29:43):
Get the right partner, get theright attorney to work with, and
they will step you through theprocess.
SPEAKER_01 (29:49):
To the process.
Well, we actually had someonethat sent something up to us uh
that asks you this.
It's about the timing, they say,of getting an attorney.
So when do you think?
A new business should look athaving an attorney on board when
they first think about businessor after they've kind of ran it
for a minute.
When do you think it's a goodtime to talk to an attorney?
SPEAKER_02 (30:09):
I think it's a good time to not talk to an attorney
when you have decided that youwant to actually move forward
with the business, unless youhave some questions.
If you are still deciding, youcan certainly talk to an
attorney before that point.
But I think when you're you'reserious, you're you're saying,
hey, it's time, I want to dothis.
Then I think it's important totalk to an attorney.
First off, you're gonna have toform that entity so you want to
(30:31):
form the right one.
And then from that point on, youwant to find an attorney who
will really guide you and tellyou, hey, this is what's
important now.
This is something we can waiton.
unknown (30:42):
Right.
SPEAKER_02 (30:43):
Because you might not need all of it from day one,
but there are certain things youdo need from day one.
SPEAKER_01 (30:49):
Okay, and that's whether your attorney can come
in and kind of help you withthat and kind of getting that
in.
Okay.
Well, listen, is it anythingelse you think our audience
should know?
You know, we deal with businessowners and real estate
investors, and so is it anythingyou can think of that you
definitely want them to be awareof as far as their business
setup and going forward?
SPEAKER_02 (31:10):
I mean, I would just say just find the right partners
you can work with, whetherthat's a CPA or an attorney, um,
or even your business partner.
I think it's all about havingthe right people in, you know,
who are there, who are cheeringyou on, who are on your side and
helping you grow and scale andjust have a successful business.
I really wish everybody the bestin their um in this journey.
(31:35):
It's it's an awesome journey,actually, to grow a business.
It's a scary journey.
It's a scary journey, yes.
SPEAKER_01 (31:42):
But it it it's a lot less scary if you have the right
team with you.
So I totally, totally agree.
Well, Miss Uma, I thank you somuch for being on our show
today.
It has been a powerful time.
Thank you for being here.
SPEAKER_02 (31:55):
Thank you.
Thank you so much, Jacqueline.
It's been a pleasure.
SPEAKER_01 (31:58):
It has.
And I want our audience to knowthat um want to thank her for
helping our audience understandthe legal strategies and the
funding really go hand in hand.
SPEAKER_00 (32:14):
We hope you enjoyed this episode of TDJ Equity
Funding Insiders Podcast.
If you'd like to be a guest orget in touch with us, please
visit our website atTDJquityLLC.net forward slash
podcast or email us at podcastat TDJ Equity Funding
Insiders.net.
(32:34):
Until next time, take care.
Popular Podcasts
On Purpose with Jay Shetty
I’m Jay Shetty host of On Purpose the worlds #1 Mental Health podcast and I’m so grateful you found us. I started this podcast 5 years ago to invite you into conversations and workshops that are designed to help make you happier, healthier and more healed. I believe that when you (yes you) feel seen, heard and understood you’re able to deal with relationship struggles, work challenges and life’s ups and downs with more ease and grace. I interview experts, celebrities, thought leaders and athletes so that we can grow our mindset, build better habits and uncover a side of them we’ve never seen before. New episodes every Monday and Friday. Your support means the world to me and I don’t take it for granted — click the follow button and leave a review to help us spread the love with On Purpose. I can’t wait for you to listen to your first or 500th episode!
The Joe Rogan Experience
The official podcast of comedian Joe Rogan.
Stuff You Should Know
If you've ever wanted to know about champagne, satanism, the Stonewall Uprising, chaos theory, LSD, El Nino, true crime and Rosa Parks, then look no further. Josh and Chuck have you covered.