I am just starting a new business. I see monthly statements from a number of businesses that charge 12% interest on any balances that are more than 30 days old. Can I simply start doing this on my statements?
Only if you have taken certain steps. First, to charge that rate of interest, you must have a certificate from the Kansas Uniform Consumer Credit Commissioner's Office. These are very inexpensive. Also, you need to have an agreement by the customer to charge interest. Most businesses are not aware of these requirements and are not in compliance with Kansas Law. In order to get an agreement from the customer to charge interest on past due accounts, it should be in writing. The best practice is to have the customer sign some type of new customer account card at the time you first do business with them, agreeing to pay interest on past due accounts at the highest amount allowed by Kansas Law.
QUESTION NO. 2
I have some customers who are not paying their bills. Will it cost me more than it is worth to file a lawsuit to collect the bill?
First, you need to make a determination as to whether or not this customer can pay the bill or has assets to satisfy the bill or any judgment you obtain. Filing fees with the court range from $19.50 to $66.50, depending on the amount of the debt. Some law firms will handle collection cases on a percentage basis, which means they charge you nothing until an amount is collected. Also, you may file an action in small claims court (where no attorneys are involved) for amounts up to $1,800.00.
QUESTION NO. 3
I am thinking of starting a new business. What type of entity is best for someone in my position?
There are a number of options including sole proprietorships, partnerships, limited liability companies and corporations. Each one has advantages and disadvantages. We always advise business clients to first consult with their accountant.
QUESTION NO. 4
A customer of mine recently filed for bankruptcy. Does that mean I will not get paid?
Not necessarily. In some bankruptcy cases, there are assets and the creditors will receive a pro-rata distribution of the assets. If it is a no asset case, you probably will not receive anything.
QUESTION NO. 5
I am a small contractor and did some work to improve someone's real estate. Can I obtain a mechanic's lien?
Yes. If you are a general contractor, you have 4 months from the date labor or materials were last furnished to the property to file a lien. If you are a sub-contractor, you have 3 months. Usually, this precipitates some action by the homeowner to pay the debt. If it does not, you have one year from the date your lien is filed to file a foreclosure action to have the property sold to satisfy your lien.
QUESTION NO. 6
I'm buying a business. Do I need a written contract?
We certainly would advise a written contract in every such situation. It is important that specific assets and liabilities that are involved in the transaction be clearly stated and all agreements between the parties be put in writing. This is the case for two reasons. Occasionally, someone will be dishonest or deceptive in such a transaction. While that is not usually the case, it can happen. More commonly, however, is a situation where one party understands one thing and the other party another. A written contract gets all of these matters out in the open so, hopefully, there are no misunderstandings. It is also important to check certain records to determine if there are any types of liens outstanding against any of the business assets.