Are You Protecting Your Business from Legal and Financial Pitfalls? With Matthew Fornaro

In this episode of "Cash and Sass," host Lisa Marie Robinson, the "sassy wealth queen" and founder of Transcendent Wealth, converses with business law attorney Matthew Fornaro. They explore essential financial and legal strategies for small business owners. Key topics include the importance of budgeting, cash flow management, and maintaining clear boundaries between personal and business finances to avoid legal complications. Matthew emphasizes the need for legal protections and professional guidance, while Lisa shares practical tips on financial planning. Together, they provide actionable insights to help entrepreneurs achieve long-term success and avoid potential pitfalls.

• Importance of financial management and budgeting for small business owners
• Legal considerations and protections for entrepreneurs
• Strategies for effective cash flow management
• Risks associated with commingling personal and business funds
• Necessity of maintaining clear financial records for legal protection
• Value of professional guidance from attorneys and accountants
• Establishing a financial roadmap to delineate personal and business expenses
• Importance of setting aside funds for legal and tax obligations
• Compliance with IRS regulations for business owners
• Building relationships with legal professionals for business support

Matthew Fornaro has been a business law attorney serving South Florida, including Coral Springs and Parkland, since 2003. Before starting his law firm, he was an attorney at two prestigious AmLaw 200 law firms focusing on civil litigation.  Matthew practices complex commercial litigation, including contract disputes.  Matthew, a member of the Florida Bar and District of Columbia Bar, also practices construction law, intellectual property law, homeowner and condominium association representation, and drafts and revises of business documents, including the formation of business organizations.  Matthew assists new business owners in choosing and drafting all legally required documents.  Matthew is involved in mentoring new attorneys, as both a graduate and instructor of the Kaufman Foundation’s FastTrac NewVenture Program, presented by the Broward County Office of Economic and Small Business Development and the City of Hollywood, as well as a graduate and instructor for the Florida State University College of Business Jim Moran Institute for Global Entrepreneurship Small Business Executive Program.  As a small business owner himself, Matthew is proud of his representation of businesses in our community and is also available to assist in all transactional and litigation needs.

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Transcript

0:01

Hi my sassy friend. Welcome back to another episode of Cash and Sass. My name is Lisa Marie. I am the sassy wealth queen and the brains behind this podcast and transcendent Wealth company. And with me today I have Matthew Fornaro and he has been a business law attorney serving South Florida, including Coral Springs and Parkland, since 2003. Before starting his law firm, he was an attorney at two prestigious Am law 200 law firms focusing on civil litigation. He assists new business owners in choosing and drafting all legal, excuse me, legally required documents. And as a small business owner himself, he is proud of his representation of small businesses. And I think it's really important that we have these conversations because as small businesses and entrepreneurs, we sometimes don't think about the legal issues or the legal things that could come up that can affect our cash flow and our money management. So welcome, Matthew. Thank you for being on my show. And just for us to start, can you give us a little bit of a background as far as, um, your money journey? And, you know, what we were talking about before was like how you were making sure you budgeted and you paid attention to your cash flow. Sure. Well, first, thanks for having me, Lisa Marie. I'm glad to be here. Um, you know, my, I guess for my business cash flow. It started when I started my own business almost ten years ago. So there's a big difference between money showing up every two weeks in your bank account when you work, versus you have a business and you have to go get the money yourself and budget it out and do everything. So my journey was kind of a process of elimination, learn on the fly kind of thing, because I didn't really have a huge business background when I started out my own law firm and my own business. So I kind of had to learn everything as I went, and as part of that was learning that, you know, when I started out, obviously my revenue was way lower than it is now. Um, so my expenses were pretty high for my startup and everything and getting started. So I had to figure out how to budget my limited amount of income at that time versus my expenses. And now, fortunately, I have more money, so my budgeting is a little easier. But that was a journey that I basically was trial and error and figured out. And then, you know, later on, once I figured out how business works and I did a couple programs on, uh, how business functions, I was better able to figure out how to budget my money and allocate everything and pre-plan and plan in case of, um, you know, in case of events or anything to better manage the money and cash flow in my business. So what's one thing that you did, um, that helped you better plan and prepare for some of the events that may come about. Well, one of the main things I did was I kind of wrote out as part of my written business plan. I also wrote out my budget per month of what I had as far as like insurance, um, you know, rent, uh, you know, like inter like internet phone, all those expenses. And I had to keep track of that, and I still do. And it was easier to figure out what's, you know, what fat can be trimmed, what's, you know, overhead, what's necessary, what I'm doing that's not really like, uh, you know, part of the mission or whatever. So it was easier to keep track of everything once I wrote down my budget, went over my budget, figured out that I need X amount of dollars per every month in order to cover that budget. And then it was a lot easier to go from there. Yeah, because that's one of the things I tell everybody all the time is, you know, the first step has to be putting your, uh, putting the information on paper, the numbers. You got to know your numbers. And, you know, you even said, you know, if it's aligned with the mission and, you know, looking at it, once you look at it on paper, you can look and say, okay, with what I'm spending here or there. Is this aligned with my goals, my values, my mission. And if it's not okay, what do you do to change it? Right. And I think that's, you know, a lot of people think that a budget is to, uh, restrict. And it's actually it's not I call it a money roadmap. And I tell people all the time, you know, if you're listening for the first time, um, this, this may actually resonate if you're not. You mean, you've heard me say several times. So I'm going to say it again, a money roadmap. If you get on going some in a direction that you don't know where you're going, what is the first thing we do? We do a GPS, right? Tell us directions. Money a roadmap is basically the same thing as helping us get to where it's helping us do the things we want to do with our money. The goals and the values and our destination where we're heading. So why wouldn't we use a money roadmap to help us? You're not going to get in your car and just drive willy nilly to someplace you don't know where you're going, right? Without a GPS. And so, you know, when you look at it as a GPS, it really isn't to restrict you. It's to help you and support you get to get where you want to go, um, with your money and do the things that you want to do with your money. Right. You know, whether that's vacation or hire in a team leader or a team lead person or, you know, hiring a VA or, you know, some whatever that may be, right? Increasing your, your, the money you're paying yourself or, you know, whatever that may be. So I really think it's important that, um, we talk about the budgeting, we talk about the money so that people understand it's not a restriction. And it's not just for broke people. Yeah, I'm not broke. And I use my money road map daily. Okay. It is. It is a tool. And I will be. I will admit, sometimes life happens and I don't. And when I don't go to it, that is when things get messed up. I not add ten times, I'll forget something. So when I use that tool and I go to that tool, it helps me make sure that the money is going where it where it needs to go and where I want it to go. Um, and it helps me stay on top of things. No, it does, I mean, it's like you said, I mean, it's the road map as far as what you do and can't do regarding your business as far as your budgetary, I don't want to say restrictions, but your budgetary guide, and it helps you, you know, figure out what your bottom line is. I mean, if you don't know how much money you're spending, then how do you know what to do with the money you're making? Right? Right. Absolutely. I knowledge is power. So you've got to have the knowledge in order to make, um, uh, decisions and then be also very, uh. Knowledgeable decisions or decisions that are actually going to help you further in your business. I think that's truly, truly important. Uh, what are some of the things that you see from a legal perspective that small business owners may not think about, that it's a good reason to make sure you have you know, I actually had someone ask me this, um, they said that they had a person who was in a, uh, bigger business, and they were talking about how they put money up into an a separate account for legal issues for attorney fees, just in case they got sued or whatever. Something may happen. And they asked, did does does he, you know, does anyone do this this small business owners do it. And I chimed in and I said I didn't at one point. And then something happened. And let me just tell you, I now do, um, you know, we may not have to put as much money as some of the bigger corporations do. And just because you're a small business owner does not mean some type of legal issue will not come up. That's just not true. And thinking that will get you in a lot of trouble. Um, there are people out there who may decide they're going to come after you, or they want to break a contract. You know, and even if your contract is airtight, you still are going to need an attorney to help you fight that if they decide to fight it. So even if your your contract is great, you're still going to be paying some kind of attorney fees. Trust me on this. Been there, done that. It. So it just does. You know, I recommend and I told him, I said I recommend look put you know because it may be that you have someone look at con have hired an attorney to look at your contract. Those are still legal fees. So having money put aside, um, into a separate account and it being there so that if something happens or you decide you need, you want to hire an attorney to look at your contracts or, you know, look at your terms and conditions, whatever it is, then that is, um, I think it's important. So can you talk to my listeners from your perspective of what you've seen and what they can do to. So it's not stressful? Sure. You know. Sure. I mean, obviously, you know, your business is your livelihood. It's not a hobby. It's not, you know, something you do for fun. So you want to take it as seriously and professionally as possible. So as part of that, you have to understand that in order to have a successful business, you don't do it by yourself, no matter how small your team is. You try to have like a cadre of professionals who help you, so they worry about the other stuff, and then you worry about the business stuff and worry about your business either succeeding or failing, not worrying about whatever. So that's why I encourage all my clients to, you know, have a business attorney standing by ready to assist them because you never know when they're going to be needed. But at the same time, I also tell them they need an accountant standing by, ready to help them with their accounting needs. They can't. Don't do your own accounting. And the same thing with other professionals who help you like a banker. Make sure you have a relationship with your bank, not just, you know, you show up at the deposit window and that's it. Like actually, you know, get to know a banker at your bank. So that way if you ever run into money issues or anything like that, they can help you. Same thing with like if you're doing e-commerce or you're doing something on the internet or whatever, make sure you have your IT person or your web person. Make sure that you know they're on your team and you have a relationship with them. So then that way you have a, you know, a group of professionals who help you focus or how they focus on the collateral issues, and then you focus on your business issues. And as part of that, you need to budget for that in your business plan and ultimately in your business budget, because that is a necessity. That's not a luxury in this day and age. You need that as part of your business. Yeah. I mean, I agree I mean, I tell my clients all the time, say, look, you know, and I tell people who are my clients, whether it's me or another fractional CFO, you need a fractional CFO. And the reason why is because they're going to look at the whole big picture, right where it comes to your money to help you reach those goals and those things that you want to do. They're literally going to help you manage that money, and they're going to basically be your partner in that. And at the same time, you if you've got a certain amount of money, you're going to want to certify financial planner, you're going to want an attorney, you're going to want to tax a tax accountant or accountant to prepare your taxes. Please don't prepare your own taxes, okay? Because there are things that change day to day. There are laws that change with that. And just like with a surf with a fractional CFO, we're going to be able to see things that you may not. And the attorneys have to, um, you know, stay up on the laws as far as legal laws, CPAs and enrolled agents have to stay in charge up in with the changes on those. So I tell people all the time, you know, yes, some of the things may overlap on what some of what we do. But like I don't prepare taxes, right. I have a team that does some bookkeeping. So therefore you can have me and my team do that and the fractional CFO. But I'm a fractional CFO, so I myself am my bookkeeper. I do have the experience in it. So therefore I can oversee it because I do have an accounting degree. Right? I come from that background and but you're not going to want legal advice from me. Promise. Okay. You don't. I have a business attorney, and I learned the hard way. Okay. And thankfully, um, I was already networking with that person, And he is my business attorney. He is who I go to. To have someone review my contracts. He is who I go to for the certain things. And you want to have someone in your corner like Matthew. Sam. Because they're just. They're just really, really important. Um, what are some of the things, though, that you have seen? Um. I don't know that come about that they may end up needing you for or like you've been able to help them avoid, um, uh, extreme costs later. Yeah, it's, you know, it's a lot of proactive activity, particularly at the start up of your business. And then if, you know, you come to me and you're already starting your business, it's kind of resetting, reevaluating things and putting things in place that help you avoid problems later on. It's a lot of making sure, like you have a written business plan, making sure you have governing documents. Like if you're a corporation, you have to make sure you have bylaws. If you're an LLC, you have to make sure you have an operating agreement, and you have to make sure that you comply. No matter how silly you think it is, you have to comply with legal formalities and things like that. So then that way, if anyone ever challenges you or whatever, you can show that you know this business isn't just your alter ego or a hobby, it's a legitimately run business. And that way you get the protection of having the business between you and, you know, whoever is making claims against you, whoever saying something. So a lot of the issues that come my way are things that could have been prevented by doing action, particularly early on with those documents that I said and like I said, complying with corporate formalities and making sure when you deal with people or deal with other entities, you have contracts in place. You just don't do things like willy nilly on a handshake or whatever. You have everything in place. So then that way, if there's an issue, you have documents that say what you do to solve that issue as opposed to, you know, having to figure it out yourself or go to court to figure it out. So that's a lot of the proactive advice, you know, to avoid a lot of situations. And then, you know, then we get into the reactive stuff or the situation already started, and we have to try to fix it sooner than possible and try to fix it as reasonably as possible to try to avoid a huge legal battle or a huge thing. So that's one of the things that I do when it's a reactive situation, is I try to get with my client and try to have them make intelligent business decisions regarding, you know, ultimate costs and ultimate issues that affect their business. Like, for instance, you know, you run your business and that's what you do. You don't professionally go to court and be a witness or you don't professionally do whatever. So what can we do to have you just focus on your business and not spend time doing like this lawsuit or dealing with legal issues. And so there's a cost benefit analysis there that a lot of clients, you know, I try to make them realize and I think I do a good job of it. But some people just they just don't learn. They'd rather, oh, we're in a lawsuit, let's fight or whatever. And they don't understand that not only are you laying out the money for your attorney and for your court costs and everything, but you're costing yourself revenue from your business, which is almost as important, if not more important than the money you're spending is the money you're not making. So that's why one of the things I encourage my clients to do is, like I said, make smart business decisions so that you can focus on your business and not have to worry about the legal issues. Yeah. And I mean, you know, and I'll be honest, I didn't think I would have to worry about it. And, um, in 2023, I got a rude awakening and I did. And, um, and that was even with the contract and I and he's you know, you're right. It's it's not only because of the stress it caused and and like, we end up settling, which is fine, but that was to the point to where it was because even though my contract was airtight, it was we could have kept fighting. And if we kept fighting, it was going to cost me more time, which was costing me money from from me making money. Right. Because that's where my focus was. Subconsciously, that's where my focus was, right. And paying the attorney. And he did the same thing. He and I talked and he said, look, yes, this is where we're at. And I and and I said, fine, as long as this, this and this. And he said, okay, I'm going to even do one better. I'm adding this. And he did. And we settled. But the stress from it, because there were some things that weren't as airtight as they should have been. Learned the hard way, and I didn't have money put aside for legal things that may pop up. That caused a lot of undue stress on my part. Now, I have since then corrected the situations right. I've made sure my contracts were reviewed. I made sure they were updated. I'm. He reviewed them, I made sure we got airtight, and then I made sure that I put money aside for these types of things because, you know, you just don't know. And you in today's age, you just you want to make sure that you're protecting your business. And on the LLC part, I'm going to go on. There are some states that are easier than others when it comes to your LLC and the governing bylaws, like South Carolina, I think is probably one of the easiest, especially if you're a sole owner. Um, my bylaws are really easy. It's just me, and I don't even have to file something every year. But you need to check with your attorney because every state is different. Literally every state is different. They are not the same. There are some that you have. You are required to file updated things every year. Um, and I just think that that's really, really important that we make sure you understand just because what I don't have to do, I'm in a state. I looked it up and I had my attorney help me look it up and make sure. And in my state, I'm doing what's required. Some states require more. And so you just have to make sure that you're following those guidelines and that you're doing. Because again, like you said, it's proactive. Right. And in the long run how much money it could save you. Whereas if you don't do these things, how much money it can cost you, because if you're not doing these things, then technically the court can come back and say you're not truly an LLC and you're not protected. No, it's true. I mean, you have to do those things. And obviously it's totally 50 states objective Subjective because each state has their own rules that govern their corporations. I mean, there's no national. And some are worse than others. There's some. Some are like, yeah, do you want me to? Do you want me? Give me your my next to kin as well. Yeah. There's some of them are a lot more extreme than others. That's why it's really important. And that's also why I stress. And I'm sure you're going to. Please don't co-mingle your funds, because that is actually one of the first things that can be basically make that LLC null and void is if your funds are all in one account, and because then to them you're not treating it as a true business. That's true. I mean, that's what I was talking about with corporate formalities. I mean, you have to have, you know, your annual shareholders meeting, whether it's just yourself having the meeting, but you get a record, you do it. You can't co-mingle funds, you can't use your business account to buy personal things. You can't use your personal things to buy business stuff. and you know, it's just running things above board and keeping up with formalities. That way you avoid situations. Yeah. And accidents are going to happen. And there's ways that you can. Um, I'll be honest. I've accidentally pulled out my business debit card instead of my personal debit card and swiped. Okay. It's happened. It doesn't happen often, but I have done it by accident, not thinking, and pulled out the wrong one. That's when. And then I'm able to go, oh, wait. Okay. My business needs to pay, my personal needs to pay my business back for that, because that wasn't, um, that wasn't supposed to go there. And I do, and I make sure it's notated correctly so it shows up on the books correctly. There are ways to do that. What he's talking about is, oh, I don't have enough money in my personal account, so I'm going to pay it out of my business. You can't. No no no no no. But a lot of people do it. I don't know. I see it. A lot of people do it and they don't. They're like, well, it's my business, so it shouldn't matter. Yes, it does, because long term, like you're talking about, if you ever end up in a lawsuit or someone sues your business, they can actually come after you personally. That LLC will not be able to protect you if you're doing that all the time, willy nilly. And and being a and basically that means not being aboveboard, not treating it as a true business. Oh that's correct. I mean, you know, you're opening yourself up to liability because you're risking the corporate or LLC protection by you not complying with the rules and laws and just by, you know, half ass doing it. And then, you know, you're going to run in a situation where there's going to be a tax situation, it's going to be a legal situation. There's going to be a regulatory situation where someone's going to look at your records and be like, well, you know, you have a corporate account here that's supposed to be doing corporate things. Why are you shopping at the grocery store when that has nothing to do with your business? Or why are you paying for, you know, your kids trip to Disney World or whatever with your business going that has nothing to do with your business? Yeah. Very true. I mean, it's just honestly, it's, um, I just I think it's really, really important and to to go over these things and y'all, I know this is probably not the most fun money episode that you're going to listen to, and I cannot stress how important it is to know these things. If you truly want your business to thrive and you truly want it to go, you have to. These things that are stressful. If you take care of them now, then they don't become stressful later. And I can't stress enough how important it is, um, to to to have this information. Excuse me. And to have someone on your team who can help you determine what it is you need to do for your LLC, whether you're filing as an S Corp or not, but for your LLC in your particular state, because they're going to be able to help make sure that you are following the guidelines and they're going to be able to say, okay, no, you shouldn't do this. Now I am going to state. It doesn't matter what state you're in. Commingling is out. That is that literally that is the first thing that they will look for. Um, and I've had many people tell me that and a lot of them are like, okay, Lisa, help me. You know, I'm hiring you because I think I've been doing some of the things I shouldn't be doing. And that's one of the first things we do is we make sure that they're I help them create their money roadmap. And as their fractional CFO, I'm helping them make sure that their personal stuff's coming out of their personal and their business is coming out. And I make sure that it's running smoothly and those things aren't happening because it's so important. So I just really, really want to. I cannot stress it enough because it's just don't be one of the ones like me who finds it, or some of the other people who finds out that they should have been doing this. And then you go and have to hire an attorney, and all of a sudden it's affecting your cash flow because you didn't decide to put money up. Um, it doesn't have to be an extreme amount, but still put some money up and keep a couple thousand a few thousand aside. And even if you can't do that immediately, you can still start putting money up. Okay? I don't care, you know, starting is the key. And that's that's where I really want to stress that. I didn't immediately put $2,000 aside. I started at an amount, and I'm continuously putting it aside until I get to a figure I'm going to be happy with, But I'm still putting money up, okay? I'm still putting money up for that particular thing. And it's going to be set aside for that. Whether it comes. If it doesn't come great, there's still money there for whenever it may come. And I just think that's really, really important. Well, it's it's true. I mean, like we were talking about earlier in the broadcast. It's part of your budgeting process and you have to work it for it. I mean, it's not it's not a luxury. It's a necessity because you're going to run into issues at some point down the road. And like I said, whether it's legal, regulatory, tax, whatever, where you're going to have to pull out your records and show them to a third party, and you want to make sure that those records are legitimate, clean, with no blemishes on there or any crazy stuff on there. So you want to do that from the inception so you don't have to, you know, go through an audit or go through a lawsuit or something to figure out. Well, I guess I should have, you know, filed my annual corporate report. I guess I should have, you know, paid myself a salary as opposed to just taking it out of my corporate bank account and things like that. Yeah, very much so. Very true, very true. I appreciate you being on my show. Thank you very much for being here. Um, all of this stuff is really good. Huge gold nuggets. And I just think that, um, I hope that you pull out what it is you needed, and you really listened. Because I think it's really, truly important that you know what's required. Okay. If you're an S Corp, there are certain things that are required that, um, like Matthew was saying, you're supposed to have you're supposed to be on payroll. That is an IRS rule, period. You're supposed to have payroll taxes being taken out, not just an owner distribution. If you're an LLC and you're not filing as an S Corp, then you don't have to you, but you still need to show a transactional of how you're paying yourself, not co-mingling the funds. That's really let me put that stressed out. That's truly, truly important. Um, having money put aside for legal fees is just it's just smart having a business attorney who you have a relationship with and who's there to help you is just smart, because you never know when that may come about. And you want someone that knows your business and that you can trust. Um, so if you get anything out of that, I hope you take that information from that. Um, and, and, you know, just remember that all these things have to do with your money because it could cost you so much more later down the road if you're not taking care of these things now. So thank you very much for being on my show and my sassy listeners, remember, until next time, stay sassy. Thank you, Lisa Marie.