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Michigan Non Profit Corporations: 2018 Annual Statement Filing Deadline is October 1. Stay in Good Standing and Maintain your Corporate Formalities.

Good morning, all. I hope you are enjoying the summer. It is most definitely my favorite time to be in Michigan.

Today I received an e-mail from The Michigan Department of Licensing and Regulatory Affairs(“LARA”) reminding that all annual statements and reports for Non Profit Corporations are due October 1, 2018.

2017-09-01 18.01.03

 

At the end of last year LARA transitioned to an

electronic filing system – and disposed of the fax filing. This caused a significant delay in business filings – many of my clients experienced this headache first hand. See my post on this delay.

 

Per LARA’s announcement:

“There are a total of 62,202 Michigan nonprofit corporations and 1,582 foreign corporations that are receiving 2018 reports.”

 

 

“Annual reports must be filed no later than October 1 of each year and can be filed online at www.michigan.gov/corpfileonline. ”

For more information about LARA, please visit www.michigan.gov/lara

 

Consequences for Failing to File:

LARA also reminds that:

“Section 922 of the NPA provides that if a domestic nonprofit corporation neglects or refuses to file a report or pay a fee required by this act for two years, the nonprofit corporation will be automatically dissolved.

It also provides that if a foreign nonprofit corporation neglects or refuses to file a report or pay a fee required by this act for one year, the nonprofit corporation’s certificate of authority is subject to revocation under section 1042.

“A nonprofit corporation that has been automatically dissolved or certificate of authority revoked is not entitled to a certificate of good standing; its corporate name will be available for use by another entity, and no document will be filed on behalf of the corporation.”

Is your Corporation in Good Standing?

Occasionally I will have a business client come in and I will ask – just to make sure – “is your business still in good standing?”

The common answer is “I think so.”

And of course, after I perform a quick internet check

with the State of Michigan it is all too common that I discover that either the Company is “not in good standing” or worse, the company has been dissolved automatically for failure to file annual statements.

In Conclusion:

Business owners, if you get these annual statements from the State of Michigan, or from your attorney – do not disregard them! Ma

intain your Corporate Formalities.

Questions? Comments?

E-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauka

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Michigan Behind the Ball with Benefit Corporation Laws.

Good afternoon, all. It has been a while since my last post – I hope you all have been enjoying the summer.

I usually include in these posts a recent photo of downtown Grand Rapids where my office overlooks Rosa Parks Circle.

7.10 On one of my walks downtown last week I decided to take a different photo – the memorial of Rosa Parks – the courageous woman who  this part of downtown Grand Rapids is named after.

It is wonderful to see Rosa Parks, and all that she stood for, honored – prominently at the intersection of Monroe Center and Monroe Avenue.

People, particularly vulnerable people, who stand up for what is right, even in the face of fierce opposition, should be honored.

 

 

 

West Michigan is truly a unique place where business and philanthropy intersect unlike any other place.  Giving of time, talents and treasure to worthy causes is embedded in the culture of this community.

 

Because business as a force for good is part of the fabric of Grand Rapids, it only makes sense to me that social enterprises such as benefit corporations should be able to thrive in West Michigan.

BCorp Certification is Trending in Michigan…

Over the last several years more and more local businesses have becoming Certified B Corps through BLabs. West Michigan has the most concentration of BCorp businesses in the State.

Check out a March article from Rapid Growth Media on the strong presence of Bcorps in West Michigan.

Headlines in Grand Rapids have brought attention to the need for businesses to ask the question: Am I working to build a better community?

 

B-Corp certification is one way (certainly not the only way) for businesses to hold themselves accountable to being a good community partner.

 

Unfortunately, Michigan has no legal framework for BCorps – yet.

 

BCorps?

A few months back the State House tantalized social entrepreneurs, once again, with the possibility of benefit corporations (“Bcorps”) becoming a viable legal option to do business in the State of Michigan.

House Bills 5867, 5868 & 5869 were introduced on April 24, 2018, that would allow BCorps to be formed under Michigan Law.

 

There has been no movement on this bill.

 

Back almost two years ago the legislature proposed similar legislation which died in committee. For a review of the Former BCorp Bills, the House Fiscal Agency issued a Fiscal Analysis, check it out here. 

 

The Analysis provides good background on what the legislation would do. This is helpful for those who are not overly familiar with BCorps in general.

 

 

The latest proposed Bcorp Legislation

The current Bcorp legislation has some different language than the 2016 proposed language. I am assuming it conforms with the model BCorp Legislation. One difference is the definition of “general public benefit” to “specific public benefit” which would be defined under the new Bcorp law as:

 

“SPECIFIC PUBLIC BENEFIT” INCLUDES, BUT IS NOT LIMITED TO,
ANY OF THE FOLLOWING:
(i) PROVIDING LOW-INCOME OR UNDERSERVED INDIVIDUALS OR
COMMUNITIES WITH BENEFICIAL PRODUCTS OR SERVICES.
(ii) PROMOTING ECONOMIC OPPORTUNITY FOR INDIVIDUALS OR
COMMUNITIES BEYOND THE CREATION OF JOBS IN THE NORMAL COURSE OF
BUSINESS.

(iii) PRESERVING THE ENVIRONMENT.
(iv) IMPROVING HUMAN HEALTH.
(v) PROMOTING THE ARTS, SCIENCES, OR ADVANCEMENT OF KNOWLEDGE.
(vi) INCREASING THE FLOW OF CAPITAL TO ENTITIES THAT HAVE A
PUBLIC BENEFIT PURPOSE

 

Education on the “why” for BCorps.

Interested groups and local politicians have been educating the public on why BCorp laws would be a good thing for our state.

State Rep Hank Vaupe gave a discussion to a local chamber group on B-Corps two Septembers ago:

As Rep. Vaupe indicated “benefit corporations provide an opportunity for businesses to use the markets, rather than traditional charity giving, to advance their philanthropic missions.”

 

 

Michigan is behind the ball.

 

Over the last several years Michigan legislators have repeatedly introduced BCorp legislation – to no avail.

Check out this handout from Rep Barnett almost 8 years ago in support of the BCorp legislation he proposed in September 2010.

I found particularly interesting the very last section – it provides some comment on why some Michigan businesses may have been averse to the introduction of BCorp legislation. Feel free to read it and reach your own conclusions.

 

Michigan now ranks as one of the vast minority of states that has not enacted benefit corporation legislation.

 

Check out the Benefit Corporation website for a state by state legislative analysis.

 

Of particular note, just a few months back in February our neighboring State of Wisconsin has enacted Bcorp legislation.

 

I am hopeful for a more meaningful update on these Bills in the months to come…

 

Questions? Comments?

Jeshua@dwlawpc.com

http://www.dwlawpc.com

Connect with me on Twitter: @JeshuaTLauka

 

 

A Lawyer’s Reflections: The Way That Appears to be Right…But In the End Leads to Disaster.

Today I  took a photo of 50 Monroe in downtown Grand Rapids – right across the street from my office.

IMG_2426

The transformation of 50 Monroe, where my firm’s office used to be located for almost 20 years, is pretty fun to

watch.

I look forward to seeing the finished product.

As I posted a few days ago, there is a lot of development in Grand Rapids that makes downtown a fun place to be.

 

Now on to the topic of my post.

 

 

Lawyers are an easy target for scams…

 

 

 

I get strange e-mails all the time.

Most of these are allegedly from people from foreign countries, asking for legal services, or for me to assist with certain financial transactions that would compensate me significant money for little work.

 

This morning’s email.

Early this morning I received an e-mail from what appeared to be one of the attorneys at my office asking me if I was in the office and to respond to his e-mail and assist him with an urgent matter. The tone of the e-mail seemed strange.

Looking closer at the e-mail source, it was an impostor e-mail address.

Who knows what information my “colleague”  was going to ask me to provide him with because he “didn’t have access” that morning.

Nice try.

The lawyer scams are getting more creative these days.

 

Million Dollar Check.

Several years ago I received a nice check in the mail addressed to my law firm for approximately $1 Million.

It was related to a “request” from a foreign company (very far away, too far away to meet in person) to retain me as counsel in a business transaction in Michigan.

They wanted me to deposit the approx. $1 million check into our firm trust account, then disburse the check to the other party (less my legal fees, of course)
Fake Check for big bucks.

 

My first thought when the check came in…

Do they really think I am that stupid?

I know better.
Then it got me thinking, if I know better, then why do these scam artists really think I am going to fall for their  ploys?

Honestly, I receive countless of similar emails, fortunately, most of these emails get sent to my spam folder.

The answer becomes obvious when I peruse news headlines:

Estate planning lawyer gets 6 years in $46 million scheme preying on terminally ill

How awful is this headline? It breaks my heart just reading it.

 

Unwitting lawyer is suspended for arranging client loans to secure Nigerian inheritance

 

Just perform a google search and you can find other stories of lawyers in unethical situations…

“Attorney Pleads guilty to stealing $1.3 Million from clients”

“Traverse City Lawyer to Stand Trial, Accused of Embezzling from Elderly Clients”

 

The list goes on and on.

Well, there is, literally, my answer to my own question.

 

 

What is going on with our world?

As hard as it is for me to believe, these are real stories.

 

To answer my own question, the reason scam artists direct schemes at lawyers is because some lawyers fall for the schemes!

 

These con artists are relying on dollar signs trumping common sense and sound judgment in lawyers.

 

Proverbs 14:12 says “There is a way that appears to be right, but in the end it leads to death.”

I personally don’t believe that most people, including the people in the referenced headlines, wake up one day and decide to commit a crime, or make a serious lapse in judgment (like wiring a million dollars to a company in Nigeria) that costs them and others dearly.

I think people start with small compromises, that lead to big compromises. The proverbial “frog in the boiling water

The compromises that “appear to be right” in their own minds, but leads to devastation.
A Call to Leaders. Self-Examination.

As leaders in our families, business, non-profit, church, community, we find ourselves in positions with some varying degrees of power.

That power can easily be abused.

In small ways that lead to big ways.

This is a good call for daily self-examination: am I placing safeguard in my life to keep me from taking small steps in the wrong direction?

 

Questions? Comments? 

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauk

http://www.dwlawpc.com

Business Law Update: A Booming Downtown Real Estate Market Means Businesses Should Pay Careful attention to Contracts.

June 5, 2018 1 comment

Happy Tuesday, all.

I took this photo yesterday from the skywalk between the Amway Grand Plaza and the DeVos Place Convention Center. I like walking downtown and watching the development unfold.

6.4

It is an exciting time to be working or living in downtown Grand Rapids. Everywhere you look, real estate development is transforming the town.

Check out Experience Grand Rapids for a detailed list of all the current downtown development.

Not to rain on anyone’s parade (but that is kind of a lawyer’s job)…

With increased commercial activity comes increased opportunity to fall into legal pitfalls.

 

 

As I tell my clients – if you are in business for any amount of time, it is just a matter of time, you will probably get into a business dispute.

Real estate development is no exception. The more transactions, the more opportunity for hiccups along the way.  A Court opinion I read last week brought this reality to  my mind.

 

Case Study

Last week an unpublished Michigan court of appeals case was released that highlights some contract drafting pitfalls. You can check out the May 31st unpublished decision of Greater Faith Transitions, Inc. v Ypsilanti Community Schools here

 

The case was about a commercial lease in which Landlord also granted Tenant an option to purchase the Building.

These “lease with options to purchase” can pose interesting questions – as the facts of this case illustrate.

Summary of the Facts

  • On August 13, 2013, plaintiff and defendant entered into a lease with option to purchase a property in Ypsilanti owned by defendant.
  • The parties intended the lease to be effective until August 31, 2018.
  • Under the lease terms, plaintiff was required to make monthly rent payments and to pay for all utility bills, including water bills.
  • According to plaintiff, it had attempted to enforce its option to purchase the property in a text to defendant on February 2, 2017, that stated:
    I tried to call you to make you aware of the fact that we’re buying the church this year.
  • On February 13, 2017, defendant sent to plaintiff a letter from its attorney and a Notice to Quit Termination of Tenancy, claiming that plaintiff was in default of the lease for repeated failure to pay water bills.

Plaintiff, tenant, sued its landlord, among other things, for interfering with its right to exercise its option to Purchase.  The trial court ended up dismissing Tenant’s lawsuit.

The tenant appealed.

The opinion of the Court of Appeals was interesting, essentially holding that the tenant’s claim for breach of contract was not ripe – since a contract was not yet breached. The tenant was not yet evicted.

(See opinion, page 2 – “Plaintiff claims that “Defendant’s improper use of summary proceedings to evict Plaintiff from the leased premises will breach the parties’ Lease
with Option to Purchase because Plaintiff will be deprived of its right to cure any defaults during the term of the Lease (i.e., through August 31, 2018) so that Plaintiff can exercise its option to purchase thereunder.”)

 

The ultimate ruling aside, the case, to me, provides a good opportunity to highlight a few drafting issues that can come up in commercial leases.

First, a general point I want to bring to the business owner’s attention:

Why Careful attention to Business Contracts is important – Freedom of Contract 

First and foremost, when entering a business contract each party should understand – they will be bound to the contracts they sign.

In a commercial lease context the courts’ mantra is “Freedom of Contract“.

The Court will look at the contract that the parties’ agreed to, and, absent extraordinary circumstances, enforce it by its term. (therefore in  a commercial lease you might see language such as the following “rent is due with no right of offset, setoff, counterclaim…”) In such instance, the landlord is telling the tenant that tenant has no right to withhold rent just because landlord may have breached a duty under the lease.

The Courts have recognized that commercial landlords and tenants are “free to contract”:

 

Drafting Issues.

Going back to the court opinion, it doesn’t appear to me from reviewing the opinion that the parties disputed that the tenant defaulted in failing to pay utility bills.

Question:

Did the lease have a provision that said that the “Option to Purchase” terminated if:

  • the tenant had been in default at any time?
  • or, only in Default at the time the Option was being exercised?
  • Or, did it say nothing on the subject of Default?

Another question:

was there a lease provision that strictly provided where “notices” must be sent?

e.g. – was it left up to the parties to interpretation whether or not notice delivered “via text message” was an appropriate method?

 

If these issues are plainly addressed in business contracts, then possibly, the parties avoid a lawsuit.

 

 

Questions? Comments?

e-mail: Jeshua@dwlawpc.com

http://www.dwlawpc.com

Twitter: @JeshuaTLauk

 

 

 

Staring Into the Eyes of a Fatherless Generation.

There’s nothing like a Michigan summer.

Memorial Day weekend means the beginning of summer – and, consequently, the end of the school year.

 

IMG_2377

 

Today was my last day of mentoring for the school year.  Unless my student moves  (which is always possible) I hope to see him in the Fall.

Most of my interaction with my student is asking questions and just trying to encourage him.

 

One question I asked him today while shooting basketballs during recess:

 

 

 

Do you think you will see your dad this summer?

His answer: I don’t know.

I will state the obvious: The fact that this elementary school aged boy doesn’t know if he will see his father for months is heartbreaking.

This reality is simply not how the world should be.

And, unfortunately, this story is typical.

 

Fatherless Generation

I took these statistics from the Fatherless Generation

  • 63% of youth suicides are from fatherless homes (US Dept. Of Health/Census) – 5 times the average.
  • 90% of all homeless and runaway children are from fatherless homes – 32 times the average.
  • 85% of all children who show behavior disorders come from fatherless homes – 20 times the average.  (Center for Disease Control)
  • 80% of rapists with anger problems come from fatherless homes –14 times the average.  (Justice & Behavior, Vol 14, p. 403-26)
  • 71% of all high school dropouts come from fatherless homes – 9 times the average.  (National Principals Association Report)

 

I look at these statistics, and ask myself:

is it worthwhile spending one hour a week during the school year with a boy who needs a positive male role model?

The answer every time is “Yes.

I am not writing this post to: a) pat myself on the back or b) guilt anyone who is reading this.

I am just trying to illuminate a reality.

I often hear people say they cannot believe the poverty, brokenness, homelessness, addiction, that families are experiencing right in our own City. of Grand Rapids

It is true.

It is also true, that we can’t do everything, but we can do something.

What about you?

Are you working to build a better community?

E-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

Twitter: @JeshuaTLauka

My Thoughts on Social Enterprise: Am I Living Each Day with Conviction and Purpose?

Last week I mowed the lawn for the first time this year.

I didn’t have any gas to fill up the mower, so I just relied on the unknown amount of gas that had been in the mower over the winter.

As I was mowing the back yard, the largest portion of my lawn, I kept wondering – is this gas going to last the entire lawn? I really had no idea.

5.24

I like mowing the lawn because it gets me thinking outside of myself.

My thoughts shifted to a friend who had unexpectedly passed away in February. My friend was the same age as me, 37, he was in excellent health, married with young children. He died suddenly of a heart attack while vacationing with his family.

 

 

 

 

I am sure my friend had no idea that morning he woke up on vacation, that it would be his last on earth.

 

Mowing the lawn without knowing how much gas was in the tank reminded me of how none of us are promised tomorrow.

I had no idea when my mower was out of gas.

None of us knows when we will breathe our last breath.

It gave me pause to ask myself:

am I living each day with conviction and purpose?

am I living each day for what really matters?

 

I think we all could benefit from this “eternal” or “purposeful” mindset.

 

This “purposeful mindset”  is one reason why I love social entrepreneurs:

Those in business who are purposeful in using their business as a force for good.

 

And it is why I am excited about the proposed Benefit Corporation laws that have once again been introduced in the State Legislature.

 

My call to you:
Be purposeful.

Be eternally minded.

 

Questions? Comments?

Jeshua@dwlawpc.com

http://www.dwlawpc.com

Connect with me on Twitter: @JeshuaTLauka

 

Small Businesses and Startups: What you Don’t Know Can Hurt You.

It is truly starting to feel like summer in downtown Grand Rapids! This was the scene today from my office.

5.17.18

 

Summer is coming fast and so is Detroit Startup Week. Scheduled from June 18-22.

 

According to its website, Startup week is:

“A week long celebration of Detroit’s entrepreneurs. Volunteer-led and completely free for attendees, we are aiming to create a community driven event that builds a stronger startup ecosystem. Startup Week is held in dozens of cities around the world.”

 

Crain’s Detroit reported this week that the venue will be moved to outdoors where a crowd of 8,000 – 10,000 is expected, up from last year’s 6,500.

Crain’s reports that Startup week will consist of similiar “weeklong collection of panel discussions, speeches, activities, networking and competitions is bringing back its women-tailored entrepreneur events.”

Last year the week kicked off with Detroit’s Small Business Legal Academy.

I think it is no secret – that startup businesses would do well to get some basic legal  during their business startup

 

I had a client just yesterday send me this e-mail, below (unprompted) which I was given permission to share – it is extremely on point:

 

“I don’t think you understand how valuable your assistance is. A small guy like me, without you, would sign whatever they put in front of me and get into big trouble because of that someday.  The problem is that most small businesses don’t understand how critical legal review is either.” – client

 

The reality is that there are a host of legal areas that can turn into pitfalls for startup businesses – over the years I have written on quite a few of those areas, including:

Terms and Conditions in Contracts

Non-Competition Agreements

Entity Formation and Personal Liability

Personal Guarantees

 

Cash flow is a barrier for startups. This doesn’t mean you should avoid educating yourself on the legal issues affecting your business.

Take advantage of the resources available.

Consult with an attorney – Particularly law firms friendly to startup businesses.

 

e-mail: Jeshua@dwlawpc.com

www.dwlawpc.com

twitter: @JeshuaTLauka