I recently bought a small business that my father established before his death about a year ago. The business consists of intellectual property (music he composed, books he wrote, a piano teaching method, and audio CD’s to accompany same) created and marketed solely by my father.
For the past year since my father’s death, my brother has “unofficially” been running the day-to-day operations of the business. I assumed ownership because my brother refused to, officially, and the Executor of the estate was going to close the business if no one stepped up before April 15.
My brother removed all business related property from my father’s house just before and soon after his death. We are not communicating. I am now the official owner of that business-related property. I need it, yet he is ignoring my written requests to transfer even minimal materials needed to reproduce and ship products to fill existing orders. So, I need to establish credit in order to purchase needed materials, so I can fill orders and keep the business running.
What is your advice for establishing first time owner/small business credit? Where can I order a free business credit report? And, any words of wisdom as to how to interact with my brother in this regard will be greatly appreciated … many, many thanks!
There are so many potholes and problem areas here that I’m not sure where to start.
I’m concerned about the fact your brother removed all the business related material, you bought the business, and he refuses to give it to you. When you bought the business did you obtain clear ownership of all the intellectual property and ownership to all works produced?
Before you even think of filling orders you need to resolve the issue of what you actually purchased as a business. Did you get the masters and artwork to even reproduce items?
It would be easy for your brother to make a claim against the business or hold you back or sue the hell out of you later if what you bought is full of holes. Heck, with all the business property in his possession he would be able to sell the business to someone else or continue it on his own.
Nobody is going to give you a loan as a start-up business with no track record. They might give you a business loan as an existing business but I’m not even sure if you have the historical business records to show the strength of this business as collateral for a loan.
Most startup companies are required to have their owners or officers personally guarantee the line of credit and so it’s just easier to use a dedicated personal credit card for business transactions. If you were willing to personally guarantee the loan you could look at LendingClub.com.
There would be no business credit report to pull if the company was not a registered corporation, LLC, etc. Did you get the business tax ID number?
Before you do anything I would strongly suggest you follow this three step approach.
Step 1 – I would suggest you make sure your purchase agreement successfully transferred all the intellectual property and exclusive right of ownership of the intellectual property to you. Without that, you’ve got nothing.
The best guy I know for intellectual property issues is:
Fred Samuels, Esq.
Cahn & Samuels, LLP
If you contact Fred, tell him Steve said “Hi.”
If your business purchase agreement cross the intellectual property hurdle then move on to step two.
Step 2 – you will need a local attorney that is licensed in your state to make sure your business is organized and registered properly in your state for you to conduct business.
If the local attorney says you are kosher and good to go then move on to step 3.
Step 3 – you will need a qualified accountant to help you make sure the business does not have any lingering tax liabilities and who can prepare a balance sheet or profit and loss statement to help you when you apply for a business loan or line of credit.
Frankly, if you don’t follow that reasonable path to deal with this the odds that this will wind up poorly are exceedingly high.
Please post your responses and follow-up messages to me on this in the comments section below.I Bought a Small Business. How Do I Get a Business Credit Card? - Eve by Steve Rhode