Chicago Business, Real Estate & Commercial Law Blog

Realistic view of finances essential before home purchase

Potential homebuyers in Illinois are typically eager to start touring properties for sale, but they should do some financial planning before looking at listings. Once they understand their ability to borrow and the total cost of homeownership, they will be better prepared to make a decision about a high-value purchase.

Ideally, a potential buyer should investigate their credit scores as a first step. People can accomplish this task online. Credit scores will determine whether an individual can qualify for a mortgage and what the interest rate would be. Checking a credit report also gives one the opportunity to fix errors, close unused accounts and take steps to increase an rating.

Stock option tax break might encourage employee-ownership

Illinois entrepreneurs and employees with startup ventures may feel a significant impact because of the U.S. tax overhaul. Under the new rules, individuals who get part of their compensation in the form of stock options can choose to defer the tax for the value of the shares.

Individuals who have stock options in startups must commonly decide whether or not to execute them within 10 years. If they leave the company, they have a period of three months within which to execute their options. The gains an employee realizes on the option shares are usually taxed as income by the IRS. The taxes on the transaction might reach far beyond the person's typical tax liability. Indeed, the value of a startup options package may be worth 10 times as much as the employee's salary, according to an attorney who advises people regarding startup equity offers.

Understanding non-compete agreements

Many Illinois businesses use non-compete clauses as part of their employment agreements. These are provisions in which the employees agree not to work for one of the company's competitors within a geographical area or within a certain time period. Businesses should be careful with how they use non-compete contracts so that they might avoid liability.

In order for non-compete agreements to be enforceable, they must meet certain guidelines. The employers must be able to demonstrate that violations would cause the employers irreparable harm.They must also be fair to both the employee and the employer. In Illinois, for example, the non-compete contracts that were used by Jimmy John's sandwich shops were found to be far too broad in scope. The company had made all of its employees agree to not work for another sandwich shop within three miles of any Jimmy John's location in the U.S. The company was forced to pay $100,000.

Changes in SBA rules may make financing easier

Entrepreneurs looking to start or expand a business in Chicago may have reasons for optimism in securing the necessary financing. Several indicators, including economic, governmental and administrative factors, point to an upswing in the probability of obtaining a Small Business Administration (SBA) loan.

Founded in the 1950s, the SBA has become a large factor in the ability of a startup company to obtain financing. The SBA can actually guarantee certain loans taken through lenders. With an SBA guarantee in place, lenders are more willing to issue loans to small businesses. To obtain the guarantee, the borrower must meet SBA requirements. In the past year, the new administration has shown itself to be business friendly, aided by a business-friendly Congressional majority. In the near future, some cumbersome SBA regulations may be eliminated.

Gauging the Chicago market

Depending on an investor's outlook, the city of Chicago, Illinois could either be a worthwhile or risky market to invest in. One issue to consider is that the city has lost residents for the past three years. It was the only major city in the United States to see a decline in population in 2016. Job growth was below the national average as of August 2017, which may explain why some have chosen to leave.

However, while commercial lending dropped 13 percent during the past year, the office sector has actually showed signs of growth. Rents have increased 24 percent while vacancies have declined 34 percent since 2012. Relocation of companies from the suburbs to the city itself as well as growth in the tech sector are two of the main drivers of this phenomenon. Shared office companies are also fueling demand for office space.

What to consider when starting a small business

Illinois entrepreneurs know that creating a business is a complex process. It requires planning and research to launch a successful company, and part of the planning process may involve talking to potential customers. Their input could help an entrepreneur create a product or service geared toward what the market desires. Talking with other business owners may also be useful for those looking to start their own company.

A company generally has a higher likelihood of success when there is a written plan. Business plans should have an executive summary that details why the company exists and what it aims to do. In addition to serving as a guide for the company today and into the future, it can also play a role in helping a business obtain a loan or investment capital. Choosing the right structure for a business may also increase its odds of success.

The risks of unmarried couple buying homes

Purchasing a home can be a big financial step for many people. However, for Illinois couples who are unmarried and considering purchasing a home together, it can be a financial misstep that they may regret should they decide to go their separate ways in the future.

Married couples are protected by many laws when they decide to get a divorce and divide their assets. Unmarried couples who decide to split and have to wrestle with dividing their assets are not afforded the same legal protections.

Home sellers with dual mortgages

Homeowners in Illinois who owe two mortgages on their home and who want to sell may be concerned if it is possible. However, the process of selling a home with two mortgages is not very different from that of selling a home with just one mortgage, but because there is a likelihood that the process may become difficult, it is important to understand the details.

Homeowners may use two mortgages for one house for a range of reasons, but they usually do so if they are unable to manage a 20 percent down payment and want to avoid paying for private mortgage insurance. Using a piggyback mortgage, the buyer will provide a 10 percent down payment for a property, obtain a mortgage to finance 80 percent of the home's selling price and then obtain a second mortgage for the remaining 10 percent. For individuals who can make both monthly payments on time, this may be a practical solution to buying a home.

Buying unlisted homes

People who are looking for homes in Illinois may spot a home that they like that is not for sale. However, even though it may not be on the open market, that does not mean that the homeowners may not be willing to sell.

The first step of buying a home that is not for sale is determining why the home is not on the market. There could be a number of reasons for this, and each one would require the person interested in buying the home tailoring his or her offer to accommodate the situation.

How to protect an idea under development

For some Illinois residents, the goal is to escape the corporate life and start their own companies. However, the first step in starting a company is usually the hardest. That step is actually telling someone about the idea that is going to launch the business. It is common for entrepreneurs to believe that their idea will be stolen or otherwise used in some form as soon as they make it known.

Fortunately, there are steps that someone can take to protect their intellectual property (IP). For instance, it may be possible to register for a utility patent or a trademark. At the earliest stages, it may be possible to use confidentiality agreements to ensure that ideas are not stolen or otherwise communicated to others without the owner's permission. While not foolproof, they communicate the intention that the idea is not to be shared freely with others.

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