Mastering Business Foundations and Staying “Unshackled” with Aaron Young & Jacqueline Kuiper (EP006)

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Hi there. I'm Tom Powell, and you're watching and listening to the Powell perspective. And joining me today is Aaron Young with Laughlin and Laughlin Black, and the author of Unshackled, a new book. You actually get to talk about that here. And also with us today is Jacqueline Kuyper, attorney general counsel extraordinaire and yogi, as we recently learned here. Right. So who teaches people how to do yoga, become masters in yoga in Bali of all places. Right. Kind of a cool life. So thank you for joining us today. We're speaking about business and entities. And I want to go to something that is.

When you start a business, you don't think about ending the business. Right. The reality is that businesses we think can be these ongoing in perpetuity. That's why we have corporations. They'll outlast the humans that start it. And in your case, Aaron, that is true about Laughlin. That's true about a number of companies I've started over the years and many companies that you've seen, Jackie, over the years. But Jackie, we've come to find out some of the challenges and nuances of people not closing down companies properly and even the legal challenges that can come up. So for this course of the PAL perspective and when we get to the end of this, the know enough 2 we're going to be talking about what do you need to know in setting up your company that also leads you down the road of what when it comes time to properly shut it down? And maybe we'll be specific about Nevada because we get outside of that and it gets different for each state. And also I want to be clear, even though we do have legal expertise and business expertise, we are not giving specific legal advice. You need to search that out with a legal professional who's licensed in the state that you're doing business. But at Laughlin Black, we can be speaking about these things in general terms. So I'm going to open that up. Jackie, we've had an adventurous ride these last few years on entities that may or may not been closed down properly by clients we've worked with, even things that have been within our own portfolio. Can you maybe expand on that a little bit? Give me the horror.

I'll I'll go pretty high level and then let you fill in some of the, some of the color. But as you said, people start a business and don't think about winding it down, shutting it down, or what I would call kind of some of the worst case scenarios. And it can be really helpful just as an exercise to think about those things up front. One of the main reasons you would start for instance a limited liability company is to, one would think, limit your liability. But what does that mean? What does it look like if you own a limited liability company and your company is the one conducting business, it means that people that are, you know, that may have claims against the company, sue the company and the liability stops there. They can't come after you personally. And obviously there's caveats. Again we're not giving legal advice. There's situational things that would change, you know my position on that. But back to a normal case llc it is to limit the members liability relative to business claims or claims that people would have against the business. Now say you're in business for 10 years and you wind it down, you think you're done, you're shutting your doors, you don't have much for assets. End of the day it's been a good ride. Bye bye. What if someone wants to come and sue that llc? What if they think they have claims against the llc? You may know that they don't, but nothing prevents them from filing a suit and bringing claims. And then you as the member, what do you have to do? What's your obligation? Believe it or not, even in Nevada the statute says you got to go defend that. So it's a really valuable conversation to have with people just to level set expectations and say be aware so you can plan for it. You don't just get to shut the door and say lights off, bye bye. I wish it was that simple. You would think with limited liability companies that it could be that simple, but it's not.

It's not that simple. And it's not that simple with corporations or any other type of things. And it's definitely not that simple. If you were a simple sole proprietor, right, you started a business and didn't ever do anything, so you just fall into sole proprietor. Or you and your best friend started a business and you're automatically a partnership and you still have those liabilities. Post closing Aaron, what's been some of your views of seeing things that maybe either weren't set up properly in the beginning or definitely not wound up, wound down, whichever term you want to use, which by the way both terms are proper. It's a wind up or it's a wind down.

The thing that I think most beginners especially, but lots of people who are operating a company, they'll say this, this is my company, right? This is my company, that's my computer, that's My rental house. That's my computer. It's mine. Well, if you're using an entity and you're buying things through the entity and you're deducting things on the entity's tax return, those things all belong to the entity, not to you. An entity, whether it's a corporation or llc, is a paper person and has the same rights and responsibilities and opportunities and obligations that a human would have. And the reason it can limit the liability, as Jack, he was saying, the company's got responsibility, but the shareholder or member can potentially stay out of harm's way is because it's no different than if Tom and I had were doing something and they came after Tom, that's not necessarily going to bleed over onto me. Tom's a real person, by the way.

Not a paper person.

But if the paper person stays alive, even after the relationship or the business project is over, it's still alive and somebody who wants to come over to visit it can still do it. Whereas, you know, if the company is wound up or wound down and closed off and is now put to put to bed or put buried, it's over with. And we know because there are legal documents that say gone.

Then you can significantly cauterize any ongoing responsibility, unless there was fraud or something. But if it's just activities with business, sorry, we're out of business, you know, you can't take a toaster back to.

I'm trying to think of something. I was going to say Sears. I think there are still a few left. You can't return your camera to Kodak. They're not going to do anything. You can't go buy film from Kodak anymore. They're gone. It's over with. Their liability is now ended. And There are about 25 million business entities in the United States, some of which I bet are no longer active. The business purpose is gone. The owner might even be dead, but the company still exists, which means it still has the opportunity to have a liability. And anybody who's been the inheritor or remains in having the stewardship of that entity, they can get sucked into something that they didn't know existed. And that's why when you're starting, you want to start right. You want to raise it up right, just like you'd raise a child. Then you let that thing grow up and do all of its great adult work. But when its life is over, you want to end it and bury it and have a death certificate called a dissolution to say, this is done.

Awesome. And Laughlin Black through its service Provider with Laughlin has a service that can help walk people through that process.

Absolutely.

Awesome. So Jackie, I'm going to go down through this and get it a little bit more specific to just talk about some ugly things that can happen. So a company doesn't really have any creditors out there, but an attorney, and for lack of a more affectionate term, an ambulance chasing attorney says, look, we think that company caused some errors that were potentially fraud. Now, fraud for I think most people, they think fraud means it purposely did something or it stole something or it had ill intent. But within the legal language, fraud can simply be a, an error in representation, not even a misrepresentation.

It's very contextually dependent. Every state has its own definition of what I call little F fraud versus big F fraud. Big F fraud being an intentional act or an intent to deceive. Little F fraud. For example, in a bankruptcy context, you can have what's called a fraudulent transfer. And it just means say you're Uncle Joe and you have an old Cadillac that you're gifting to your nephew on his 16th birthday and everything is going along swimmingly, but four years later you have a car accident in your own car and you have a bunch of medical bills and you file bankruptcy. A trustee can go, oh, you transferred a car to your nephew that was a gift you didn't receive reasonably equivalent value in exchange for that.

Boom.

Little F fraud. So yeah, it's very, it's very contextually dependent.

Yeah. And so to Aaron's point of where business owners say I own this and let's use LLC as the example because I think that's more than 80% of companies are formed now are LLC. Is there really a term of an owner for an llc?

A member. A member.

It's members in most cases. Right. So they're members of llc and that can be a single member disregarded entity we've talked about in the past or multiple members. And so and then there's managers and a fair amount of people, especially when they DIY their llc. They do. I'm the manager member and I'm going to give myself the title of president and I'm going to sign everything and maybe it's even my name on the door. Right. Does that potentially create risk for people even while the entity is running?

But post close, I think so. Let's go back to the story about the attorney that you would maybe call an ambulance chaser, finish that line of questioning because you were going somewhere with that.

Well, so that attorney says, okay, this company, that manager Member name on the door scenario. You did all the marketing on there. We think it was involved in something where there was misinformation given out there. And we're going to call it fraud. We're not going to determine if it's big fraud, which would be criminal, or little fraud, which would be civil. We're just going to call it fraud in the paperwork. And the fraud in many states says we get six years of look back over the company, all your books and records, and the company wasn't properly shut down. What happens to that member?

Well, there's statutes that say what should happen, what, what you know can happen. I think in practice, what we have seen happen is that the member has to show up and defend and argue to the judge or whoever, you know, the magistrate, whoever is deciding the matter, if it's an arbitrator, a mediator, a judge, and say this claim is improper because, you know, so many different things. One, I shouldn't even be named. I'm a member on this. This company is done and gone. It's closed. But it depends. Every case is different, but ultimately the member has to show up and say, I shouldn't be here. The company is done and gone.

So. And let's go down that pathway.

In most states, a person can show up in what's called pro se. Right. Themselves.

Every state.

I don't know that any state, a person can show up and represent the company that they're a shareholder or member in.

A company must have counsel.

So all of a sudden you're a member within this company or a former member.

The company.

Former member, yeah. So Aaron and I were members and either one of us could be called, and by the way, called by not just the attorney sending it a request for information. Right. Serving a lawsuit. But then the judge can say, yeah, I'm compelling you to show up.

I've got a job.

Yeah, yes, we've seen that happen.

And then, by the way, the company has to retain counsel because it can't represent itself, which again then causes a member to have to write checks. So this can't be totally avoided. But there are a way. And so we're going to get into that scenario and we've only got a handful of minutes left. But this is that know enough to be dangerous.

Aaron Young, for the vast majority of people who are not actively involved in the legal system, if they have a complaint and it's not too painful of a complaint, and they know that the company's gone out of business, odds are, and especially if they can Do a quick search. You go, oh, it was dissolved, you know, two and a half years ago. Odds are most people are going to stop right there. Now if, if they think they're a little more sophisticated and they go, oh, that, you know, that Jackie, she's rich. And even if the company shut down, I don't know, maybe there's something to do. They can go get a lawyer and maybe even it's a contingency based lawyer. So they're, they're working on commission and the lawyer can do it. Do an asset search and very quickly see is there something obvious to get.

At which point they may choose to pursue some. Whatever their pain, love, whatever their pain point is this little fraud. Right, but, and we can talk about this on another show at length, but if you've organized yourself properly, which, if you do it yourself, odds are you won't even know what's possible. If you work with a professional, if you work with Laughlin Black, we're going to show you how, how that lawyer doing the asset search is going to find little or nothing worth chasing. At which point they'll say, I can still represent you, but not on commission. Now you need to pay me the 650 an hour. Which. One of the things we talk about a lot at Laughlin Black is about stopping lawsuits before they start. And the way you do it in this discussion about winding down is you just go through all the right legal processes and do it like a pro, like somebody who's experienced. If you follow the law, the law will virtually always.

Will virtually always be on your side. And if you leave one little crack, they'll find a way through.

Yeah, even the appearance of a crack, right, Jackie? I think.

So. Know enough to be dangerous in the winding down of a company. Aaron Young. Give it, give it to me. Tell me who's the WHO that they need to be talking to and what do they need to know to get started down that pathway?

Well, it's very self serving, but I will say there's a reason we've been in business for, since 1971. There's a reason we have thousands and thousands of clients all over the world. And it's because.

We know how to get you started, we know how to help you grow and we know how to close you down. It's inexpensive. It's just that final bit of stewardship to make sure the project is done. And so if you have any question that maybe there's something that's still leaving you open to risk, just give us a call and we'll talk you through it. And if there's something to do, we'll tell you what it is. And if you've done everything within our scope, we'll tell you that. We'll either refer you to somebody else or say, no, it appears that you've done everything right. Don't go it alone. Don't go by yourself.

So Jackie, on the Just enough to be dangerous. Isn't this something that I can just put away in my closet and forget about?

Please don't.

That would be so nice. So easy. It's not clean.

It's not clean. Well, Jackie, I'm going to let you jump off. I know you were tight on time tonight, so thank you so much for taking time to jump on. And I'm going to hang on to Aaron for just a minute and talk about his Unshackled book. But thank you for joining us and you can follow you. You also have a wonderful podcast out there, I believe that has been wtf.

Yes, we do. Wtf. Women Talk finance.

Women Talk finance. And I love your guests and your co host and your just awesome, awesome to watch.

Thank you for having me.

Thanks for joining Jackie. Take care. All right, Aaron, time to you know. So think of this as like you're sitting on the Johnny Carson show and we want to talk about your book. Tell me about your book and how do people get it and what does it mean?

There's several books, but the Unshackled Book is the one I'm the most excited about. Of everything I've ever done effectively, it's this. I learned a lot of things from a lot of people over the years and I encourage all business owners to do the same. Read, study, listen, talk to people are further down the road than you are.

I've had some good luck in scaling up companies where I could the company could run and I didn't have to be the most critical employee in that company. And people were always saying, well, how do you have all these different things that you're involved in but you never go to work? So I had to reflect on that and say, well, what things have we put in place across this group of diverse entities that makes it possible for them to run without me being there all the time and managing them? And that's what the book is really. It's how do you organize yourself from is my idea any good and what's the finish line look like and what things should I be working on and what things do I need to hire? So I surround myself with people who play at the things I have to work at. In other words, I suck at this. But Tom Powell's really good at it. If we get together, we will complement each other's skills and we'll grow faster. And then how do you keep score? How do you empower your management team? How do you build a culture that will be the glue that holds all your great values and systems in place even if you're not there? You notice Walt Disney Company still asks the question, what would Walt do? That's still a part of their culture. The traditions of Disney are still taught to every new employee. Why? Because the culture holds. It's the glue that keeps this thing viable and relevant. And the book Unshackled isn't about retiring necessarily, but is about how to own your own life, how to build businesses that you can participate in as much or as little as you want. But if you can't be there because you get sick, because you get hurt, because you start something new because you want to go do some service mission or some go explore the Amazon jungle and there's no cell coverage, you can do it because the business will operate the way you want it to, the way you've organized it for extended periods of time, even if you're not there. I'm delighted to say thousands and hundreds of companies have gone through the training. Thousands of people. We had pre orders on the book from 22 countries and we're getting all this feedback now from public, private, large, small, foreign and domestic companies going, oh this. As a matter of fact, I'll just drop a name to get on this podcast. I got off the phone with the new chief medical director of Amazon and he was able to take the job at Amazon because he was following the precepts of the book for his multiple medical clinics and assisted living and long term care facilities in Illinois. He left and went to Seattle and took a multimillion dollar position at Amazon. And he said it's because I'm unshackled from those businesses. Pretty freaking cool.

Congratulations and thank you for sharing it out there. And so the Know enough to be dangerous is the title of the book is Unshackled. And it, it follows along with what one of my mentors and longtime people that I've known is Dan Sullivan's who not how, as you say, we don't have to know how to do something. And again, in this DIY world, so many people want to do it themselves, which I think is great. But there's almost always someone better than yourselves. And when it really counts, you want to find the who. And so that's the know enough to be dangerous, which is know the who so that you can get this going. Well, Aaron, thank you. It's a pleasure to be working with you. I'm glad to be a co. Co launcher, founder, whatever. With this Laughlin Black as we're getting out there, it is for anybody that's interested in finding out it is an enterprise that is a white glove done for you, not do it yourself. For all of the complexities that have to do with being in business and having asset protection and such. So, Aaron Young, thank you. The book is Unshackled. I'm Tom Powell. The program is the Powell perspective. And we look forward to seeing you next time. Thank you.

Sam.