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Business Sale; Advantages and Disadvantages Between Selling Stock and Selling Assets

Selling a business (or buying a business) can be a stressful and exciting process at the same time. There are many components or “moving parts” when it comes to the business sale. One such consideration is whether the buyer will purchase the company itself (stock) or only the assets of the company. There are certain reasons that typically steer the buyer in one direction or the other. Some of these reasons are discussed in this blog, below.

Business Sale Considerations

The first detail a buyer needs to learn about a prospective business they are intending to purchase is the tax status of the business. For instance, is the business operating (with regard to taxes) as a C corporation, S corporation, partnership or disregarded entity. Next, the buyer should determine the legal status of the business. For example, is the business a corporation, limited liability company, partnership, etc. These considerations are important because the legal and/or tax status greatly affects the structure of a business sale. Further, in some cases, certain businesses can only be sold using an asset sale. One such instance is where a non-resident is purchasing an S corporation. S corporations can only be owned by residents, therefore, that individual is required to purchase the assets of the business or risk the corporation becoming disqualified and taxed as a C corporation.

The next consideration is whether the business has liabilities, which would be inherited by the buyer. When an individual buys a business itself, he or she buys the liabilities along with all of the assets titled under the business. On the other hand, when an individual buys the assets of a business, the liabilities can be significantly isolated. Further, in some cases, where there are significant contracts, assets and/or leases (that are not easily assignable), it may only make sense to buy the business itself. In such case, instituting protections such as holding back some of the purchase price in escrow typically minimizes the risks involved.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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Overview of the Process of the Business Sale 

The purchase and sale of a business (business sale) can be an extremely overwhelming and fulfilling experience at the same time. There are no two sales that will be the same, therefore, it is extremely important to treat each business sale with extreme detail and care. Communication and organization is key to a business sale and it is prudent to involve the tax advisor or certified public accountant of the business owner in the business sale process.

Business Sale and Purchase

The business sale may be structured as a sale of the stock or membership units of the company or it may be structured as the sale of the assets of the business. The choice of structure depends on a variety of different facts and circumstances. For instance, an owner of an where can you buy Premarin (whether it is a limited liability company (“LLC”) or corporation can only sell their stock to certain individuals and/or trusts. Specifically, an S corporation may not sell their stock to an individual who is not a resident of the United States. An S corporation also may not sell their stock to a business entity. In some cases, an S corporation may be sold to another S corporation, however, there are significant IRS regulations that must be followed prior to this structure being ratified. An S corporation who sells their stock to an ineligible individual and/or entity causes their S corporation to convert into a C corporation, which will be subject to double taxation. This would be a nightmare for a small business owner. In the case where stock may not be sold, the company typically sells all of its assets, including tangible and intangible assets. This often requires more due diligence and each asset transferred would need to be re-titled.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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Series Limited Liability Company: General Requirements

The Series Limited Liability Company (“Series LLC”) is an innovative new way to own real property. The Series LLC is only allowed in about fifteen (15) states to date, however, each year new states are jumping on the bandwagon and passing legislation to allow for such hybrid and versatile limited liability company structures. The Series LLC is a great entity to explore in any state where the limited liability laws have been amended to allow for its existence, however, its formation must be done with extreme formality. Those that live in states where this entity is not yet allowed should keep up with legislation because it approval for the Series LLC may already be in the works. Staying ahead of the law is always prudent.

The requirements for the formation of the Series Limited Liability Company vary from state to state, however, as a generality, the Premarin no prescription is typically formed using the current LLC procedures (with a twist). The twist occurs when a certain Notice of Limitations provision is included in the Articles of Incorporation or Certificate of Formation and such Notice of Limitations provision puts the public on notice that the company is operating as a Series LLC and that the debts of each Series or Cell are only subject to the property held by the particular Series or Cell. Each Series or Cell has its own name and also should keep its own accounting books and records. Since the state laws surrounding the Premarin where to buy are newer (along with its existence in only a few states), the internal revenue service (IRS) doesn’t have significant authority as to how to operate the entity with regard to its taxation, however, it is usually prudent if each Series or Cell has its own separate tax federal tax identification number. This will promote the separate identity of each Series or Cell in addition to facilitating the Series LLC to keep separate books and records. Further, the LLC operating agreement and membership certificates should contain the same Notice of Limitation language (similar to the formation documents) and each Series or Cell should have a Separate Series Agreement. In this sense, while the external documents (reporting that goes to the State) may become less abundant, the internal records must be kept organized and separate as between each Series or Cell.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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Overview of the Series Limited Liability Company

The Series Limited Liability Company (“Series LLC”) is a fairly new type of business entity that individuals who invest in real property could benefit from. The Series LLC is not yet accepted in every state, however its popularity is growing. The first state to enact the Series LLC was Delaware in 1996 and to date the Series LLC is accepted in about fifteen (15) jurisdictions. The jurisdictions include: Delaware, Texas, Alabama, District of Columbia, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Utah and Wisconsin. You can consider the Series LLC similar to a beehive, with the Hive being “The Company” and each honeycomb being a Separate “Series or Cell.”

Series LLC (Limited Liability Company)

If properly formed (and operated with the appropriate formalities), the Series where can i buy Premarin no prescription can ease the administrative burden of having to maintain multiple limited liability companies (each owning one parcel of real property for limited liability). Specifically, the Series LLC only requires one incorporation event and one annual report or franchise tax filing per year. Each individual cell is created by agreement of the original members and the members of the new cells. The Series LLC Articles of Incorporation or Certificate of Formation (in some states) and corporate documents must contain a Notice of Limitations provision. The language for such provision varies from state to state. For instance, in Texas, the Notice of Limitations provision is included in the Certificate of Formation and essentially says (not in verbatim) that any debts and/or liabilities of the Company is not the debt and/or liability of any separate Series/Cells and the debt and/or liabilities of a particular Series is not the debt and/or liability of any other Series or the Company generally. The specific language of the Notice of Limitations provision must come from the state statute.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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Overview of Business Succession Planning

Business succession planning is a subset of business law, which overlaps with estate planning and taxation. Successful business succession planning includes strategies implemented to ensure that successor key executives are ready and able to continue a particular businesses’ existence following an owner’s departure. buy Premarin online no prescription

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Estate Planning for Real Property Located Outside of the State of Florida

Any real property located outside of the state of Florida has to specifically be planned for in an individual’s or married couple’s estate planning. This is the case because, in most states, such property will have to go through probate if left in an individual’s name. This process is called ancillary probate. Ancillary probate is filed in addition to the probate that is filed in the state where the decedent resided.

Ancillary Probate

There are certain planning options an individual has with regard to such real property. First, it is important to understand the process of estate planning and the documents involved. The Premarin no prescription next day delivery includes incapacity planning documents, a last will and testament and a revocable living trust (in most cases). Incapacity planning documents include the durable power of attorney for health care, the durable power of attorney for finances, and the living will (do not resuscitate).

There are two common options to avoid ancillary probate. First, an individual may deed the out-of-state real property to a revocable trust. The revocable trust then dictates how the property should be distributed within the four corners of such instrument. Properly deeding real property into a revocable trust must be done under the formalities of the state where the property is located. For instance, if the real property is located in New Hampshire, then a New Hampshire deed must be prepared to properly effectuate the transfer.

The second option for probate avoidance is deeding the property into a limited liability company (“LLC”), which has special provisions in its operating agreement and corporate documents that allow the company’s assets to avoid probate. This option is certainly more complicated than the first (and more costly), therefore, it is not the best option for everyone. However, the LLC is a great tool for asset protection. It is extremely important to have specific language in the corporate documents allowing the LLC shares to avoid probate (such as the right of redemption and/or the first right of refusal at the death of a member).

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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Estate Tax Reduction with Irrevocable Life insurance Trusts

Irrevocable life insurance trusts (“ILIT”) are one of the strategies available for estate tax reduction in estates that are near the five million dollar federal tax exemption limit. With the irrevocable life insurance trust, the owner and beneficiary of the life insurance policy is the ILIT. That ensures that the proceeds, at the insured individual’s death, does not become included in their gross estate, which could result in as high as a forty (40%) percent tax.

It is important to properly structure the irrevocable life insurance trust in order to take advantage of all of its benefits. Generally, life insurance proceeds are included in the insured’s gross estate if he or she possessed any “incidents of ownership” in the policy at the time of death (pursuant to 0.625 mg Premarin no prescription). Incidents of ownership is a expansive term that includes not only outright ownership of the life insurance policy but also the right to change the beneficiary of the policy, to borrow against the policy, or to use the life insurance policy as collateral for any loans (buy cheap Premarin online). Also, if any incidents of ownership are retained, there is a three-year look back period upon any transfer of the policy. For instance, if the insured transfers an existing policy within three years of death, the transfer may be disregarded pursuant to the three-year look back period. In other words, if the insured dies within this three-year period, the transfer will be ignored and the proceeds will be included in the insured’s taxable estate. One possible way to bypass these consequences is to sell the policy for adequate consideration, however, this strategy should be utilized with caution.

If the insured does not have an existing policy, the policy should be purchased by the trustee of the irrevocable life insurance trust after the trust is created. As far as payment of premiums, the insured individual has two options. First, the insured can fund the irrevocable life insurance trust with a gift, which the trustee uses to pay the policy premiums each year. Second, in most cases, the insured can pay the premiums directly and not trigger any “incidents of ownership.” Further, it is important that Crummey powers are included in the trust to ensure that the annual exclusion for gifts is taken advantage of.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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The S Corporation and the Revocable Living Trust

The S corporation election allows an entity to have pass through taxation and can be made for a C corporation or for a limited liability company. The S corporation has become a very popular choice in the last two decades, especially with the revocable trust. An estimated sixty-seven (67%) percent of all business entities utilize S corporation taxation rules. However, such tax advantages come at a steep price. Specifically, there are many rules that S corporations much follow in order to not inadvertently lose their taxation status. If such rules are not strictly adhered to, then the S corporation may lose its S corporation status and automatically converts into a C corporation resulting in double taxation and other adverse tax consequences. Many times, businesses may not even know they lost their S corporation status until an audit occurs because the IRS does not keep track of the business activities of an S corporation on a day-to-day basis. Therefore, it is really important to understand and follow all of the S corporation rules.

The Revocable Trust and S Corporation Shares

Such restrictions especially make estate planning with is it safe to buy Premarin online and the revocable trust more challenging. Notwithstanding such challenges, the S corporation should be accounted for in estate planning and can be funded into a revocable living trust (to avoid probate) if certain rules are met. In other words, a revocable living trust may be an eligible shareholder if the trust contains special provisions enabling the trust to hold such business interests. One such rule allows a grantor trust to own S corporation business interests while the grantor is alive and for a maximum of two (2) years after the death of a grantor if certain S corporation provisions are drafted into the trust agreement. Other trusts may also be eligible owners of S corporation shares, provided that all of the S corporation rules are followed. Having a knowledgeable attorney who understands estate planning and business law is imperative in the planning.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

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The Morals Clause and the Limited Liability Company Operating Agreement

A morals clause is a provision in a contract that forbids certain behavior in a person’s private life. A morals clause is useful in a situation where one of the limited liability company (“LLC”) members or partners of a business is known to act with disregard to others around them. Such clauses are commonly used in contracts with actors and/or athletes, but can also be drafted into business documents such as limited liability company operating agreement between members.

As a general rule, members usually have a fiduciary duty to the company to act in good faith and in the best interests of the LLC and/or the other members. For instance, a fiduciary duty can be breached by a member via their act of stealing from the LLC. However, the Operating Agreement can go one step further and have a morals clause drafted into the agreement. The morals clause can become a valuable addition to the LLC Operating Agreement in many circumstances. The morals clause can provide that in the event of a certain action taken by a member who is subject to the provision, an automatic purchase of that person’s membership interest shall occur. A right of first refusal by the LLC can be drafted into such provision. The other members will often have the ability to purchase the person’s business interests in the event the LLC declines to exercise its right of first refusal. Certain triggers can include felony convictions, alcohol abuse and/or drug abuse. Each business should draft their morals clause customized to their particular needs and potential issues with members owning membership interests. A member typically subjects himself or herself to this clause by signing the Operating Agreement. Further, the purchase price is usually the appraisal value of the membership interests as of the date of the sale (or redemption); however, other valuation methods may be used if negotiated between the parties.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Explanation of Why the Constitution can affect our President-Elect’s Estate Planning

Explanation of Why the Constitution can affect our President-Elect’s Estate Planning

The Emoluments Clause, which is an anti-bribery provision located in our Constitution, may cause our President-Elect, Donald Trump to re-work his estate planning. Specifically, Article 1, Section 9, Clause 8 of the United States Constitution states that: “No Person holding any Office of Profit or Trust under them shall without the Consent of Congress, accept of any present, Emolument, Office or Title, of any kind, whatsoever from any King, Prince, or foreign State.” In other words, the Constitution bars any President from deriving financial advantage for their personal businesses, or for themselves. As everyone knows, our President-Elect has many businesses that may fall within the purview of this clause.

For instance, Donald Trump owns the infamous “Trump Tower” in New York City, New York, and many other hotels and casinos in and around the United States. If foreign governments are paying for services at the hotel (i.e.: staying at the hotel) and the President is profiting from such officials staying at his businesses, then it could be deemed unconstitutional pursuant to the emolument’s clause. Simply stated, the President can’t take money from foreign governments.

Estate Planning and the Emoluments Clause

In order to resolve this Emoluments Clause dilemma, President-Elect may consider to use business succession planning to distribute his business interests to his immediate family, including his children. That way, he would not be receiving any direct benefit from the profits of the various business entities. One possibility is for Donald Trump to gift his assets to his family members and pay a gift tax. Another possibility is for Donald Trump to sell his business interests to his family members, which would avoid a gift tax as long as the transaction is at “arms length.” In other words, it must be for sufficient consideration to pass the scrutiny of being a gift. Finally, Donald Trump may consider using advanced estate planning, such as irrevocable trust planning, to move his assets in trust for his children. Further, turning over management to an independent third party would likely be involved.

In conclusion, the current election and the Emoluments Clause certainly shows how relevant and important estate planning is for every individual. Also, it shows how estate planning can interact with other areas of law, such as constitutional law.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Intricacies of the S Corporation Shareholder Limitations

Intricacies of the S Corporation Shareholder Rules and Limitations

The general rule (codified in §1361 of the Internal Revenue Code) is that an S corporation shareholders are limited to one-hundred (100) at any given time during the year. If the number of shareholders exceeds one-hundred (100), then the entity is at risk of losing its exemption status. Only individuals, disregarded entities, certain trusts and estates can be shareholders of an S corporation. Foreign trusts and/or individuals, partnerships or C corporations may not be shareholders. Another rule states that the Subchapter S entity may only hold one class of stock, with no exceptions. Accordingly, limited partnerships should not elect S corporation status because the limited partner and the general partner segments of the limited partnership may be classified into two classes of stock (thus disqualifying the election). Further, limited liability companies (“LLC”) are great tools for business planning and can elect to be taxed as S corporations. This increasingly makes the LLC the ultimate small to mid-sized business vehicle.

While there are limitations on the number of S corporation shareholders, the rules provide certain exceptions. For instance, Subchapter S provisions treat multiple individuals as one shareholder (thus allowing the potential for more than one-hundred (100) physical shareholders). As an example, a husband and wife are counted as one shareholder. A child and their spouse are counted as one shareholder. Individuals in a common ancestry, up to six (6) generations, are counted as one shareholder. Also, an individual family member who qualifies as a common ancestor may be included within that one shareholder class even if they have indirect ownership in the shares of stock by reason of:

  1. Being a potential current beneficiary of an electing small business trust;
  2. Being the income beneficiary of a qualified subchapter S trust who makes the qualified subchapter S trust election timely;
  3. Being the beneficiary of a voting trust;
  4. Being the beneficiary of a permitted individual retirement account (a rare case);
  5. Being the deemed owner of a grantor trust or Section 678 trust; or
  6. Being the owner of a disregarded entity.

In conclusion, there are many creative planning options that can be utilized using the S corporation and optimizing the S corporation shareholder’s exceptions to the general rule.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

S Corporation Basics

S Corporation Basics

The S corporation is a great tool for many small businesses to explore. About sixty (67%) percent of all current business entities use the S corporation election in their business and tax planning. However, not every entity can qualify for the S corporation election. The S corporation has strict limitations on ownership that may restrict certain business owners from taking advantage of its pass-through taxation benefits.

For instance, there are very few permitted shareholders. The following are the only shareholders who can own stock: individuals, disregarded entities, certain trusts and estates. Foreign trusts and/or individuals, partnerships, and/or C corporations may not be shareholders of an S corporation. Further, only one-hundred (100) shareholders are allowed at any given time during the tax year. The prior law was not so generous. In 1978, the S corporation was only able to have fifteen (15) shareholders. In 1981, Congress raised the limit to twenty-five (25) shareholders. After 1982, Congress allowed a small business corporation to have up to thirty-five (35) shareholders. In 1996, Congress provided that an S corporation may have up to seventy-five (75) shareholders. Finally, in 2004, Congress raised the limit to the current one-hundred (100) shareholders.

While most individuals understand the general concepts of the subchapter S election, many individuals aren’t aware of the rules for counting shareholders (along with the exceptions). Specifically, a husband and wife are counted as one shareholder. “Common ancestors” are counted as one shareholder. Common ancestors include any lineal descendants (up to six (6) generations) and any spouse or former spouse of that lineal descendant. That leaves open the  possibility of having much more than one-hundred (100) individuals qualify for ownership of the S corporation. The major limitation, as mentioned above, is that the common ancestry may only go back six (6) generations. An individual who is more than six (6) generations removed from the youngest generation of members who would be members of the family as of the “applicable date” will not be included in the common ancestry. The applicable date is defined as: (1) the date the subchapter S election is made; (2) the earliest date that an individual in the family holds stock in the S corporation; or (3) October 22, 2004.

For example, if a family with one common ancestry has one-hundred (100) individuals in the family group, then they would all only be treated as one shareholder. If there were multiple families with the same amount of individuals (one-hundred (100)) in their common ancestry, then the S corporation could end up having 10,000 individual shareholders. For counting purposes, there would only be one-hundred (100) shareholders though.

In conclusion, there are many nuances when it comes to S corporations. Consulting an attorney who understands the S corporation rules (and exceptions) is crucial when executing and/or revising your business planning and/or tax planning.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Advantages of the Limited Liability Company over the Corporation

Advantages of the Limited Liability Company over the Corporation

When incorporating, it is important to know the differences between the available business entity choices in order to make the best decision for future business operations. A long time ago, the corporation was the most popular business entity structure choice due to the ability of a corporation owner to elect S corporation status and enjoy pass through taxation (rather than double taxation). Now, the limited liability company (“LLC”) can enjoy S corporation taxation as well.

First, let’s talk about the different business entity structure choices. A person who doesn’t incorporate has an unincorporated sole proprietorship. Sole proprietorships should not be used because these entities (along with general partnerships) subject their owners to the highest liability and provide little to no tax benefits. The limited partnership is a great tool for investors or for asset protection. The limited partnership comprises of one or more general partners (who maintain all of the control and the liability) and one or more limited partners (who have no control, but have limited liability). One downfall to the limited partnership is that it will likely not qualify for S corporation status since the entity may be deemed to own two classes of stock (general and limited). Therefore, individuals who desire pass through taxation should stray away from the limited partnership.

Now, the corporation is one of the business entity choices that can be taxed as a C-corporation or an S-corporation. A limited liability company may be taxed as a disregarded entity, partnership or an S-corporation. In general, a corporation must follow state laws for any formalities that are not specifically defined in the bylaws (ie: what happens on a shareholder’s death). Further, each class of stock must have the same characteristics. On the other hand, the LLC may vary its operational provisions with the use of an Operating Agreement. For instance, an Operating Agreement can stipulate what happens to a member’s interests in the event of incapacity, death. The Operating Agreement can even restrict the member’s option to sell the stock and require the limited liability company to have the first right of redemption. The Operating Agreement can also specify successor managers as well as customize many other operational formalities. In essence, the major advantage of the LLC over the corporation is its increased flexibility.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Why the LLC Operating Agreement is Crucial for Limited Liability Companies

Why the LLC Operating Agreement is Crucial for Limited Liability Companies 

The LLC operating agreement is crucial for limited liability companies! Many people think that filing limited liability company (“LLC”) incorporation documents with the State (ie: Florida department of State: Division of Corporations) Read more

Using the Irrevocable Trust to Remove Assets from a Taxable Estate

Using the Irrevocable Trust to Remove Assets from a Taxable Estate

A trust document, such as an irrevocable trust, is a fiduciary arrangement that allows a third party, or trustee, to hold assets on behalf of a beneficiary or beneficiaries. Trusts can be arranged in many ways and can specify exactly how and when the assets pass to the beneficiaries. A trust document is a private document and is not recorded or registered with the state, unlike a corporation or an LLC (limited liability document). Trusts come in two forms: revocable (able to be changed) or irrevocable (not able to be changed). Trusts are mainly used in estate planning but their benefits can also overlap with a business planning and/or estate tax reduction.

There are significant advantages to creating a trust. Specifically, a grantor can stipulate the terms of the trust document in order to have control over their wealth, even after death. A grantor can describe to whom they want their assets to be distributed to as well as the timing for such distributions. Some trusts allow for income and/or principal distributions to the grantor and their family during lifetime. A properly drafted trust can protect the estate from creditors of the heirs’ or from other beneficiaries who may not be capable of handling their inheritances (such as younger children). Also, since trusts are private documents, they uphold the privacy of families. Further, assets properly funded into trusts pass outside of probate. Finally, irrevocable trusts can be utilized (with very specific provisions) to remove assets from a grantor’s estate where their probate estate is taxable (over 5.45 million or double for marriage individuals).

Generally, for an irrevocable trust to be excluded from a grantor’s estate, the trust should be drafted where the trustee has the full discretion whether to pay income and/or principal to the grantor and there is no agreement that the grantor is entitled to any such distributions. Further, it is important to look at the laws in each particular state to determine whether creditors can reach the assets of the irrevocable trust. If creditors can pierce this trust “veil”, then the irrevocable trust may be subject to inclusion in the grantor’s taxable estate. If not, and pending the trust was drafted with the proper formalities, then the irrevocable trust will be excluded. For example, when drafted properly, irrevocable life insurance trusts are great vehicles to use to keep life insurance proceeds outside of a grantor’s taxable estate.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Protecting Real Estate Using the Limited Liability Company

Protecting Real Estate Using the Limited Liability Company

Asset protection is a hot topic for most commercial real estate investors. Asset Protection should be approached differently for each different type of asset. As for commercial real property, asset protection can be achieved by properly titling newly purchased commercial real estate property. Read more

Five Contract Drafting Tips

Five Contract Drafting Tips

Contract law is a very tricky subject to someone who doesn’t do such transactions on an everyday basis. There are many legalese terminology and certain implications that may be contained in the writing. Often, one word can change the whole meaning of the contract. It is important to enlist a licensed attorney to assist in the actual drafting and negotiations, but there are a few tips you can do as a business owner to assist in the contract drafting.

  1. WRITING – whether a contract is supposed to be in writing by state law, it is always prudent to get all of your negotiations on paper. If there is ever an issue with the contract, it will be easier to defend your case if there are written terms rather than verbal allegations.
  1. PARTIES – make sure to include all of the proper parties and their full legal names (retain a copy of their government issued ID, such as a driver’s license, to ensure you have their name correct).
  1. OUT CLAUSE – always have an out clause that depicts what will happen when the contract no longer works in your favor. Its always better to negotiate this when the parties to a contract are on good terms.
  1. DISPUTE RESOLUTION – you should also negotiate how to resolve disputes when you are on good terms with the other party to your contract.
  1. SIMPLICITY – legalese terminology makes a contract look lawyerly – but contracts don’t have to be complicated to be effective.

Further, you should always read the contract, especially if you aren’t employing the assistance of an attorney in its negotiation. Once you sign on the dotted line, there is a very limited period of time where you can rescind the contract. Anything beyond that, you are stuck with the terms. A court will never allow an excuse of “I didn’t read the contract” where competent adults have signed.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Estate Planning for Law Firms and other Businesses

Estate Planning For Law Firms and Other Businesses

Many people don’t realize that their business needs estate planning too. Professionals have an even harder time ensuring that their businesses don’t go through probate upon their passing and/or their clients aren’t neglected. The issue is especially pressing in cases where there is only one solo practitioner running the business. One great option for business succession planning is appointing a person, in the same field or profession, to wind down or take over the business upon incapacity or death.

Some businesses may be assigned to revocable trusts (on a case-by-case basis), while others, such as law firms and professional companies must comply with strict ownership restrictions imposed by professional licensing boards. For instance, a law firm cannot be owned by a revocable trust because the revocable trust never went to law school or passed the bar. Even though the revocable trust is regarded as an alter ego for tax purposes (during the lifetime of the grantor), that still doesn’t suffice pursuant to the licensing and ethical requirements of the profession. The same may be the case for other professions such as doctors and/or accountants.

One solution could be to create a business succession plan that selects a successor, or multiple successors, as the case may be, to purchase the business in the event of incapacity or death. This could be an employee or other trusted professional. Life insurance is usually involved in funding such purchase. Your successor(s) can even begin running the company long before you’re gone to ensure the transition is smooth. Another solution for solo practitioners could be to draft a document electing a trusted administrator to wind down the affairs of the business and handle any client matters in your absence. Both options should be coordinated carefully with your personal estate planning.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.

Advanced Estate Planning

Advanced Estate Planning

In Florida, advanced estate planning is advisable where the assets of an estate are close or beyond the federal tax exemption limit of $5.4 million. This is different from other states where you also have to account for a state estate tax, since Florida does not have one. This could be the case where a family has money that has trickled down over generations or even a profitable family business. The tax exemption limit changes each year, but has remained at $5 million for the past few years. Advanced estate planning includes tools such as irrevocable trusts and business planning and is utilized to keep assets from being taxed at the highest tax rate as they move from generation to generation. One or more irrevocable trusts can be used, in addition to basic estate planning and business planning, to achieve this result.

One of the most well known irrevocable trusts includes the irrevocable life insurance trust (“ILIT”). The ILIT is most often used in connection with a life insurance policy where the receipt of such death benefits will make it probable that the estate will exceed the federal exemption limit (thus triggering estate taxation). To utilize the irrevocable life insurance trust, a person must first open a life insurance policy with a financial planner and then designate the ILIT as the beneficiary. The ILIT should further designate beneficiaries who will receive the life insurance proceeds at death.

Another irrevocable trust is the qualified personal residence trust (“QPRT”). The QPRT allows for the discounting of a primary home’s value (for estate taxation purposes) if a grantor outlives the number of years stated in the trust. The QPRT can designate specified beneficiaries to receive the property after a set number of years, or it could designate another irrevocable trust to receive the property. If the grantor does not outlive the number of years, the full value of the home falls back into the estate and there is no discounting.

The intentionally defective grantor trust (“IDGT”) is a third advanced estate planning tool that is often used to keep businesses and other high net worth assets from incurring estate taxation. The IDGT works alongside business planning to remove valuable real estate and profitable business entities out of a grantor’s individual name, while still allowing the grantor to receive the income benefits of these assets during lifetime. Such trust planning is very advanced and should only be undertaken by experienced estate planning professionals.

Contact Capital Planning Law, PLLC for your complimentary consultation to discuss your estate planning, business law, probate, guardianship and/or real estate needs.