Legal and Regulatory Issues for a Landscaping Business
Vision
Joe’s business has been very successful so far but there have been a few problems that will need to be taken care of before the business can move forward into greater profitability. Joe and his employee base of nearly 50 workers is able to stay busy with clients six days a week. Income is also generated by clients who rent equipment from the business, such as trucks, heavy earth moving equipment, lawnmowers and other landscaping equipment. Between rentals and landscaping work the revenue generated last year was greater than $500,000.
The business faces problems, though, as landscaping work is seasonal and employee turnover is high because of the slow production months. Joe has also had a problem with clients who do not pay promptly for services, leaving shortfalls in cash flow that leave Joe unable to pay the company’s bills. We must be able to fix these problems that result in the organization looking unprofessional and can lead to greater problems.
The high overturn is a direct effect of providing a service that is seasonal. During the winter months, specifically months with high cost holidays, there is far less work and the employees are forced to find other employment. This is unfortunately the nature of the service that is being provided. The organization will benefit from an influx of new employees when business picks up who will be at the beginning pay rates which will benefit the bottom line.
The other issue is that of clients not paying in a timely manner. In an article written by John Hall (2004) he covered a seminar in which tips on collecting on accounts were given. Bobby Ring, the owner and executive vice president of Meyer &Depew Co., explained what his company does to ensure timely payment. “[The} company has a clear cut policy that is outlined in payment terms on each sales agreement, including a 50 percent down payment before work begins.” (p.25)
Ring also went on to say, “It is vital to cash flow that customers understand payment terms and abide by them. He said that his technicians are not allowed to leave a job without collecting final payment. He also faxes a final invoice with cover sheet to commercial customers the day before completion of the work reminding them to have a check for payment in full for the technician.” (Hall, 2004, p.25)
This is just one method that would improve the company’s collection issues. The goal of the company is to become more profitable and widespread. It is complete necessary to become more professional in their dealings, specifically with customers and businesses that the company works with. Professionalism begins and ends with being paid for your services and being able to pay for services rendered unto you. The goal is a great relationship between both customer and service provider.
Legal and Regulatory Issues
There are five main things to consider when modifying this landscaping business. By changing to sole proprietorship, Joe will need to understand and determine the best path based on these factors.
The factors are explained by Reed in Chapter 12 of the Legal and Regulatory Environment of Business. The number one factor, as it is in most cases, is the cost. The second concern is the continuity or stability of the organization. Thirdly, the concern of the control of decisions. Fourth, the personal liability of the owners and finally, the taxation of the organization’s earnings and its distribution of profits to the owners. (2002, p.344)
Cost may not be a factor for Joe’s landscaping company right now, but the idea of continuity is. The company is tied directly to Joe; he is the company and is the main dependent on how stable the organization can operate. He is able to run the organization with a certain amount of flexibility as every decision comes down to what he wants. This is also the factor in managerial control. There will not be much conflict as all decisions will be made by Joe. This has proven to be a successful method for business and nothing needs to be changed in those regards. Joe has always been personally liable for all decisions, for all success and failure. The taxation of the organization is an important factor to consider as Joe is tied so closely to the organization that its income is in reality his income.
Advisors
The process of selecting advisors for your business is one that deserves careful consideration. First and foremost, the organization needs to be in contact with a lawyer. There are many issues that can arise where the knowledge of a good lawyer would be beneficial.
One article (“Behavioral Interviewing”, 2004) gives a few tips for the selection of a top-notch lawyer. Since Joe will be handling all dealings with the lawyer it will be most important for him to be matched with the right lawyer. The article states the importance of focusing on behaviors and attitudes. Does the behavior of the lawyer match what Joe is looking for within his company? (p.12)
There are three measurements that will act as the main components of selecting a lawyer, “Measurement of competencies”, “assessment of the candidate’s work history” and “subjective information” including issues on whether the candidate will feel comfortable and challenged enough. (“Behavioral Interviewing”, 2004)
The second advisor Joe should be interested in working with would be a financial planner. Someone who can help him strengthen his finances and resolve the issues he has been having. Rebecca Dunn (2004) gives tips on how to select a financial planner. The financial planner will need to be well versed in all areas to be able to cover any issue that Joe may meet. With the planner you should be able to set measurable goals and the planner should work actively with you. It will be very important to be involved and in control of what the planner is doing. Joe should select someone he can work well with and has the same plans and aspirations for the company that he does. (p.18)
Sole Proprietorship
A sole proprietorship is a business that is owned by one person. According to FindLaw, a public resource for legal issues, “proprietorship can have employees, however, and, except for a few restrictions that vary from state to state, can operate any type of business. If you conduct a business without co-owners and take no legal steps to become another form of business, then you are a sole proprietor with respect to that business even if you are not aware of this fact. A person who, for example, on a part-time basis paints pictures in her home which she exhibits and sells is a sole proprietor with respect to her paintings and therefore must comply with all applicable tax, licensing and other regulations.” (public.findlaw.com)
Fortunately for the owner of a sole proprietorship, they are not taxed as a corporation and the proprietor will only have to undergo his personal taxes.
This type of legal identity is inexpensive and informal. Joe will be doing himself a service by keeping his already successful business simple and to the basics. By keeping his operations essentially on a street level, but mindful of the proper professionalism, he will appear more accessible to clients and easier to work with.
The main purpose of modifying this business is to streamline the product and to create a greater sense of professionalism and ultimately to improve profits. By using his past success as a jumping off point Joe can use these tools to resolve financial issues, improve customer service and protect himself and his company. Joe has done well on his own by keeping the business at the street-level and remaining a sole proprietorship. It will continue to benefit him in the future.
