Archive for September, 2008
California's Franchise Tax Board Hit with $388 Million Judgment
September 26th, 2008
By The XBanker
After 10 years of legal wrangling, Las Vegas investor Gilbert Hyatt scored a huge judgment last month against California’s notorious Franchise Tax Board (”FTB”).
At issue is licensing income Hyatt received on his patents in the early 1990’s. Hyatt claims he moved to Nevada in the fall of 1991. California asserts he moved in the spring of 1992, and owes over $50 million in state taxes, as well as penalties for fraud.
Hyatt filed suit in 1998 against the FTB claiming he was the victim of their fraud, abuse of process and invasions of privacy. Hyatt claimed the FTB falsified evidence during his audit to reach their desired results.
After a 14 week trial, a Nevada jury agreed with Hyatt. They awarded him $138 million in compensatory damages and $250 million in primitive damages.
Hyatt hopes the verdict “will send a message to the Franchise Tax Board that they cannot continue these kinds of tactics.” He further contends that reform is needed “of a very bad government taxation system that abuses tax payer rights.”
And yet Hyatt is realistic. He expects appeals from the FTB will tie up the case for quite some time. After all, California has lawyers on their payroll to fight this out for another decade.
Stay tuned. . .
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Improve Your Cash Flow: Collect Debts You Are Owed
September 15th, 2008
By The XBanker
Recently a friend called me about a debt she is owed. She operates a small business consulting firm and another small business owner stiffed her for about a grand. It’s not a huge amount of money, but collecting it would make a difference to her. (And since she provided the service, she should be able to collect.)
She was asking for my advice in collecting. An attorney was out of the question (too expensive – and the client is in a different state) and the collection agency she had contacted wasn’t interested in one small debt.
Here’s another option she might consider:
Dun & Bradstreet’s Debt Collection Services
Affordable Debt Collection Services
Their offerings include:
- DunsDemand Letter – send a “wake up call” to slow payers
- DunsDemand Letter Series – convey the seriousness of the delinquency and escalate the collection process by sending three letters
- Contingent Collection – an effective combination of DunsDemand Letters and telephone calls made by a professional collections agent
How it works:
DunsDemand Letters are sent within a 30 day period by Receivable Management Services, a D&B partner, on your behalf. These letters will be sent on RMS letterhead and will have a tear-off remittance included for your customers to mail their payments directly to you
Starting at just $25, these services aren’t expensive and might just do the trick. If your business is owed money, it might be worth a try.
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Does A Car Lease Affect My Credit?
September 12th, 2008
By The XBanker
Here’s a question from a reader:
Does signing a car lease and making those payments impact personal credit in any way? The short answer is, “It may.”
If the car lease is a personal lease, and is reported to the credit reporting agencies (most are, but not all), it will affect your credit. Whether it helps or hurts depends on all the other information in your credit report. If you already have a lot of debt and payments, then it could be negative. If not, it may be a positive.
Even if the lease doesn’t impact your score much, it can affect your credit in other ways. I recall one entrepreneur, for example, who was charged a higher rate for her mortgage due to an expensive car lease payment that appeared on her credit report. Except it wasn’t hers. When she got it removed, her interest rate improved.
If the vehicle is leased under a business lease, and does not appear on your credit report, then it will not affect your personal credit.
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The Time Has Come To Fight Foreclosures
September 12th, 2008
By The XBanker
In this difficult real estate market, many investors are advised to just turn in the keys and walk away from a property they can’t afford. The lender will sue for foreclosure, the borrower will not defend the case, and the property will be sold at a foreclosure sale.
In many states the lenders (or, in future years, those bottom feeders who buy such judgments for ten cents on the dollar) will pursue the borrower for a deficiency judgment. Meaning if you owed $400,000 back, you still owe $300,000. Years later you will still have someone chasing you for the money and your problems will continue long past turning in the keys on a failed investment.
It is now becoming clear that your best strategy is to fight a foreclosure. Hire an attorney to defend a foreclosure complaint. There are many defenses to be asserted, including a developing theory of predatory lending practices. As well, there are many appropriate procedural tactics which can be used to delay a foreclosure. When lenders run up against an aggressive defense, they are much more open to negotiating a settlement. They don’t want to spend a great deal of time or money on one case that has become a problem” for them. And as we know, they have a lot of cases to work on these days.
We are hearing of cases from around the country where lenders are becoming frustrated with defendant challenges to their foreclosure actions. Frequently, deals are struck whereby in exchange for the borrower allowing the foreclosure sale to proceed the lender agrees not to pursue a deficiency judgment and further agrees that the property value equaled the loan amount, thus avoiding the tax on forgiven debt. Borrowers are thus able to truly walk away from a property without the nagging concern of someone later pursuing a deficiency judgment or Uncle Sam later wanting money for debt forgiveness taxation. The attorney’s fees of between $2,000 to $5,000 in most cases are a small price to pay for getting clear of tens to hundreds of thousands of dollars in continuing obligations.
The time has come to stand up and fight foreclosures. Gain the leverage you need to release yourself from years of liability. Our office handles foreclosure matters in Nevada and California. In other states you will want to locate a competent real estate litigator in your area. Good luck.
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Does A Car Lease Affect My Credit?
September 12th, 2008
By The XBanker
Here’s a question from a reader:
Does signing a car lease and making those payments impact personal credit in any way? The short answer is, “It may.”
If the car lease is a personal lease, and is reported to the credit reporting agencies (most are, but not all), it will affect your credit. Whether it helps or hurts depends on all the other information in your credit report. If you already have a lot of debt and payments, then it could be negative. If not, it may be a positive.
Even if the lease doesn’t impact your score much, it can affect your credit in other ways. I recall one entrepreneur, for example, who was charged a higher rate for her mortgage due to an expensive car lease payment that appeared on her credit report. Except it wasn’t hers. When she got it removed, her interest rate improved.
If the vehicle is leased under a business lease, and does not appear on your credit report, then it will not affect your personal credit.
Read More »
In Credit Crunch, Business Comes First
September 8th, 2008
By The XBanker
Business owners are electing to pay business debts at the expense of personal debts, reports Experian(tm). In a comprehensive study covering 2.7 million business owners over the course of a year, the global information services company found that found that business owners with a severe mortgage delinquency were more likely to pay their business obligations instead of their mortgage.
Experian’s research showed that because of deteriorating equity, high mortgage payments and limited refinancing options, business owners chose to ensure the business’ survival, preserving their source of income at the risk of losing their home. That’s the bad news.
Here’s the good news:
Business owners were less likely to experience a 90+ day delinquency on their mortgage than other consumers. In fact, by April 2008, the average home owner was 1.5 times more likely to experience severe mortgage delinquency than the average business owner
Additionally, Experian’s study found that small-business owners are relying on commercial lending options more often than personal financing options, to support their businesses. We think that’s smart business and it may very well allow the business owner to keep their business even if they have to start over personally.
But of course, the downside is that business owners’ personal credit can impact their business financing. Experian, which sells a credit score that blends the business owner’s credit with the credit of the business, points out that consumer scores work great for assessing consumer risk, but their blended score performs nearly twice as well as a consumer score for assessing business risk.
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Grab Your Free Chapter!
September 4th, 2008
By The XBanker
Garrett Sutton and I contributed a chapter to the Entrepreneur Start Up Guide: Start Your Own Information Marketing Business. Our chapter was about how to finance your info marketing start up, and of course we talked about business credit and creative financing strategies!
Now you can nab a free chapter of the book here. It’s offered by Robert Skrob, the info marketing guru who pulled the book together (in an amazingly short period of time I might add!). And in the true tradition of info marketing, Robert’s offering a bunch of good free stuff for would-be entpreneurs.
We’ve learned a lot from Robert and his colleagues who authored chapters in the book. So if you’ve ever thought about getting paid for that stuff in your head, I would recommend you go ahead and get your chapter (or ideally the whole book!), get inspired, and GET STARTED!
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Less Privacy Ahead for Corporations?
September 3rd, 2008
By The XBanker
Are you aware of what certain U.S. Senators would like to see when it comes to corporate formations?
You might be very surprised.
The Incorporation Transparency and Law Enforcement Assistance Act, or Senate Bill 2956, was recently introduced by Senators Barack Obama, Carl Levin and Norm Coleman. These senators want to know exactly who owns each and every corporations or LLC formed in every U.S. state.
Granted, certain U.S. criminal minds have used corporate privacy to shield their fraudulent actions. Yet methods do exist to learn of this information. So why the concern? Some government officials now claim that international terrorists are using U.S. entities to hurt us. We have heard this song before as our civil liberties get chipped away. And so under this legislation the basic privacy in conducting one’s affairs will be sacrificed at the temple of complete government knowledge to combat what may not be a problem.
Stay tuned. But for now know that the bill as proposed would contain the following:
- Requires states to obtain a list of beneficial owners of each corporation or LLC formed under their laws.
- Requires states to ensure the beneficial owner information be updated annually.
- Requires states to provide information to law enforcement upon request.
- Requires entities with foreign beneficial owners to provide certification from an in-state formation agent that the formation agent has verified the identity of those owners.
- Establishes federal, civil and criminal penalties for persons knowingly providing false beneficial ownership information.
- Provides exemptions for publicly traded corporations since the Securities Exchange Commission already oversees them.
- Authorizes states to use an existing Department of Homeland Security to use already appropriated funds to meet the requirements of this Act.
- Gives states until October, 2011, to require beneficial ownership information.
- Requires the Treasury Secretary to issue a rule requiring formation agents to establish anti-money laundering programs to ensure they are not forming U.S. corporations or other entities for criminals or other suspect persons.
Problems Building Business Credit Part Two
September 2nd, 2008
By The XBanker
In a previous post, I replied to a reader who is skeptical about building business credit. Here is some more correspondence on this topic:
I appreciate your response to my question. My business is two years old and I have perfect business credit with DNB and an intermediate score with Experian. Additionally, far as personal credit, I did all I could to increase the score.
I have a student loan that will not be paid off any time soon. In the beginning I believed that building perfect business credit would be the perfect solution to my problem. Of course, after I followed the steps I realize ultimately personal credit still plays a factor. I have several trade accounts with small credit lines nothing serious.
But I am looking to obtain a line of credit from $100-$200,000.00 dollars. That is the reason I formed (my corporation) to acquire an existing company. Technically my company is a start up, but through building credit I established creditability of paying on time and my company has matured to the time banks require businesses.
Ms. Detweiler, I’ve been at this for six years with no results. I hired every consultant I can think of. Should I give up? What would you do in this case?
This is a great conversation, because it illustrates some of the myths floating around about business credit. Read the rest of this entry »
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