If you are a retailer, there invariably are things that tend to fall by the wayside but should not, and disaster can result when they do. None of this is complex, but it all is important and sometimes goes under the radar.
Corporation/LLC upkeep
Failure to file periodic documents with the Secretary of State as required can put your corporation or LLC in default or suspended status. Requirements vary widely from state to state. Generally, however, any action a corporation/LLC takes while suspended can be a nullity. Furthermore, in some states, a corporate name can become "up for grabs" when a corporation loses its good-standing status. Do you want your name stolen? This is a good thing for your attorney to track. Law offices have "tickler" calendaring systems that keep track of deadlines. If you request it, your attorney will keep track of your corporate filing obligations for you.
Less critical but still important are corporate/LLC formalities: annual meetings and the like. Nobody outside of your corporation will know of a failure to accomplish internal upkeep of corporate formalities-until you are sued. Then, the plaintiff will attempt to use your lack of annual meetings, et cetera, as a basis for "piercing the corporate veil": holding the business's individual owners personally liable for corporate/LLC debts. Avoiding that is one of the principal reasons for operating as a corporation/LLC.
Lease consciousness
Every retailer knows that the market value of a retail business is very much a function of the terms of its lease. Most commercial leases-at least, if well negotiated from the tenant's standpoint-have option terms. Tenants always would rather have a five-year lease with three five-year options than a 20-year lease, since nobody can ever be sure what market forces might increase or decrease the amount of space needed (or eliminate the need altogether).
While the topic of commercial leases is worth a column of its own, the tip here is to have your attorney put on his calendar the expiration dates and dates to exercise options.
City hall
If a feature of your retail business is adult toys, you always are in danger of falling victim to some member of the local city council (or comparable county or township body), who decides that scolding your business on moral grounds would garner some free publicity for the next election, especially if you have a "love boutique" that might be seen as a target for one of those "anti-blight" adult zoning regulations. Full-on adult businesses already are subject to such regulations. However, if such a store is grandfathered but in a state that doesn't guarantee grandfather rights, it is subject to having its grandfathered status taken away.
Those are good reasons to read the local newspaper, especially if your business is in a smaller town. Also, many cities now put their city council agendas on the Internet, and it really is not very difficult to have someone check the agenda for the twice-monthly meetings to be sure you are not in harm's way.
Another way to keep tuned to the pulse of local political goings-on is to join the local chamber of commerce, particularly if you are in a smaller community. It keeps you connected with local politics, but it also kicks up the level of respect that you command. Politicians have a misguided sense that anyone engaged in any business having anything to do with sex must be some kind of a sleazy character, and a chamber membership gives you one inexpensive opportunity to demonstrate otherwise.
Insurance
It is important that you have a good insurance broker and have an open line of communication. A yearly review of your coverage with the broker just before renewal time is a good habit.
Hopefully, these random tips will help avoid dangerous traps.
Clyde DeWitt is a Los Angeles attorney whose practice has been focused on adult entertainment since 1980. He can be reached through ANB's offices or at [email protected]. This column does not constitute legal advice. Readers who believe anything reported in this column might impact them should contact their personal attorneys.
