Phillips Law Firm, Inc.

The Corporate Transparency Act – New Mandatory Reporting Requirements for American Businesses

2024-01-17T18:32:30Z

THE CORPORATE TRANSPARENCY ACT New Mandatory Reporting Requirements for American Businesses On January 1, 2024, the Corporate Transparency Act (CTA) went into effect. The CTA requires certain “reporting companies” to report their ownership information to the Financial Crimes Enforcement Network (FinCEN), a division of the United States Treasury. Although the CTA just went into effect, it was passed in 2021, to “protect the United States from bad actors who exploit anonymous shell companies to engage in money laundering, corruption, sanctions and tax evasion, drug trafficking, fraud, and a host of other criminal offenses with impunity, while legitimate businesses suffer from their misdeeds.” Under the CTA certain “reporting companies,” which are defined as any corporation, limited liability company or similar entity that was created by filing a document with the Secretary of State, are required to report their beneficial ownership information to FinCEN. There is substantial civil and criminal liability for failing to comply with the CTA. Reporting Deadlines: The due date for filing a report is controlled by its date of formation.

Newly Formed Companies: A reporting company formed on or after January 1, 2024, must file a report within 90 calendar days of its formation. After January 1, 2025, the report must be filed within 30 calendar days of the company’s formation.
Pre-existing Companies: For a reporting company that was formed before January 1, 2024, the company must file a report no later than January 1, 2025.

Exceptions to Reporting: Certain companies are exempt from reporting under the CTA.

Large Operating Companies. Companies that employ more than 20 full-time employees in the U.S. that have previously filed federal income tax returns reflecting more than $5 million in gross receipts or sales are exempt.
Inactive entities. Certain companies that have no assets and no revenue are exempt.
Highly Regulated Companies. Certain highly regulated entities, such as banks, credit unions, and investment companies are exempt

Information to be provided: Reporting companies that are not exempt, must report the identity of its “beneficial owners.” A beneficial owner is any individual who, directly or indirectly: (i) Exercises substantial control over a reporting company; or (ii) owns or controls at least 25% of the ownership interest of a reporting company. Substantial control means (1) the individual is a senior officer; (2) the individual has authority to appoint or remove certain officers or a majority of directors of the reporting company; (3) the individual is an important decision-maker; or (4) the individual has any other form of substantial control over the reporting company. For each beneficial owner, the reporting company must provide the following:

Full legal name
Date of birth
Complete current address
Unique identifying number from a driver's license or passport.
A copy of the document from which the unique identifying number was obtained.

Noncompliance Penalties: Any person who willfully fails to file reports, files false reports, provides false documents, or unlawfully uses or discloses reports is subject to:

Civil penalty: $500 per day.

Criminal Consequences: Fine of up to $10,000, 2 years imprisonment or both. The criminal penalty increases to $250,000, 5 years imprisonment, or both if other crimes are committed with the CTA violation.

If you have questions about the CTA or any other business matter, please do not hesitate to contact our office. For more information about the CTA please visit. https://www.fincen.gov/boi Paul Kellogg is an attorney in Cincinnati, Ohio with the Phillips Law Firm, Inc. Paul’s practice focuses on providing comprehensive estate planning and probate services to families and business owners, as well as serving as outside general counsel to entrepreneurs, real estate investors and businesses where he provides guidance and advice on a wide variety of transactions and disputes. He can be reached at (513) 985-2500 or via email at PJK@PhillipsLawFirm.com. The article is for educational and informational purposes only and does not constitute legal advice. Anyone contemplating taking legal action is urged to obtain proper legal advice from an attorney licensed in your particular jurisdiction.

How can you bring an action of undue influence?

2021-09-09T20:04:46Z

When your loved one’s will was read, you were shocked. It was nothing like the will they told you about. It wasn’t at all what you expected, and your inheritance no longer existed. They never told you that you’d be removed from the will or their estate plan as a beneficiary, and yet you find yourself in that position. Instead of you, a new caregiver has been named to receive an inheritance.

Should you suspect undue influence played a role in this decision?

It’s possible that the caregiver had an undue influence on your loved one or manipulated them into changing their will. If you believe that is what happened, then it’s important to start gathering evidence as quickly as you can. For example, if your family member already had a degenerative health condition, did they have the capacity to change the will? Were they able to comprehend the changes they were making? A good example of when they shouldn’t be making changes is if they have lapses in memory or confuse one person with another.

What should you do if you suspect undue influence?

If you believe that a person manipulated your relative into changing their estate plan, it’s time to take action. You’ll need to contact an attorney as soon as possible to begin a claim for undue influence using the evidence that you have established. To win a case for undue influence, it must be shown that undue influence was exercised against your loved one with the object of procuring a will in favor of particular parties. In order to sustain an allegation of undue influence, you must prove: (1) that the testator was "susceptible;" (2) that another person had the opportunity to exert the influence; (3) that improper influence was exerted or attempted; and (4) that the influence had the desired effect. You’ll want to have as much evidence as possible, such as notes or letters from your family member, copies of the previous will, witness statements from those who knew about the changes and other important information for the court. Having medical paperwork that details that your loved one wasn’t able to comprehend the changes they were making or wasn’t physically capable of making those changes may also help you prove your case in court. All is not lost if you find out that a will has been altered, but you do need to take action quickly to fight for your inheritance and the assets that you were supposed to receive from the will that was recently updated. Your attorney will help you put together a comprehensive case against the new will to try to get the court to invalidate it.

Will the Ohio courts enforce a noncompete agreement?

2021-09-09T20:03:09Z

Few components of employment contracts are more controversial than noncompete agreements. Companies ranging from fast food businesses that only pay minimum wage to startups hiring executives often demand that employees agree not to compete with the company in the future. Employees frequently sign these documents without considering their implications, and companies sometimes threaten to enforce them even when doing so is not truly necessary for their own financial protection. Businesses trying to protect their trade secrets and employees just trying to support themselves can find themselves worried about the potential enforcement of a noncompete agreement associated with an employment contract. Will the Ohio courts uphold a noncompete agreement if a former employee of a business starts a competing company or goes to work for a competitor?

An enforceable noncompete agreement must meet certain standards

A noncompete agreement doesn’t have any power until the company that had the worker sign the agreement asks for court enforcement. When a worker goes on to start their own business or to accept a job offer from a competitor, the former employer could try to stop them. Not all noncompete agreements will hold up under court scrutiny. Such agreements need to meet certain standards to hold up in court.

What makes a noncompete enforceable?

The agreement itself needs to be realistic. There typically need to be reasonable limitations on the restrictions the agreement places on the employee. Limiting its effect to a specific location or amount of time is usually a crucial part of making a noncompete agreement enforceable. The worker also needs to have received some kind of consideration for making the concession. In Ohio, the courts have held that not being fired is consideration enough when asked to sign a noncompete agreement, so the consideration need not be in the form of a payment. The second concern that court will consider is whether enforcing the agreement is necessary for a company’s financial protection. Stopping someone with no trade secret knowledge who only ever commanded minimum wage from pursuing the same position elsewhere could come across as a way to punish or control the worker rather than protect the business. Finally, the enforcement of the agreement must not create an undue hardship for the worker. Keeping someone out of any employment or preventing them from using their education to support their family could be an undue and unreasonable hardship. However, preventing someone from competing in a reasonable geographical area will be considered reasonable. In other words, an employee may not be allowed to work in Cincinnati, but would be allowed to work in Cleveland if your former employer does no business in Cleveland. Forcing an employee to relocate to find a job is usually not considered a hardship. Understanding what makes a noncompete agreement valid and enforceable in the eyes of the Ohio courts can help businesses and individuals determine how to handle a noncompete agreement dispute.

Common Questions From First Time Real Estate Investors

2021-09-09T21:19:58Z

Common Questions From First Time Real Estate Investors Our Firm is frequently called upon to advise individuals who are interested in pursuing their first real estate investment property. Whether the investor plans to flip, buy-and-hold, or BRRRR (Buy, Rehab, Rent, Refinance, and Repeat), many of the questions we receive are the same. This article will address the most common questions in a broad manner. Question #1: Should I buy the property in my own name or through a limited liability company (LLC)? If you own or operate investment property while owning the property in your own name, your personal assets are at risk. A lawsuit can turn your investment into a liability, with extensive attorney’s fees, selling the property, or bankruptcy as your only options. This personal risk is why no attorney can recommend against using an LLC to own and manage investment property. As long as the laws regarding the operation of a LLC are followed, owning investment property through an LLC can significantly mitigate the risks and protect the investor’s personal assets. However, there is one little-known facet to owning investment property in an LLC: Ohio courts require for evictions from property owned by an LLC to be handled by an attorney. Question #1A: What if I keep the investment property in my own name but purchase an umbrella policy? There is a common misconception that a personal umbrella policy will provide insurance coverage for all lawsuits that arise from the operation of rental property. If you own investment property in your own name and you are sued by a tenant, your umbrella policy insurer may consider renting a unit in a dwelling as a business activity. Personal insurance policies generally do not provide insurance coverage for lawsuits arising from business activities. Owning and operating your investment property in an LLC, and obtaining the appropriate insurance for those activities, will significantly reduce your risk exposure. Question #2: How do I transfer property that is deeded in my own name into an LLC? You hire an experienced real estate attorney. Seriously, do not try to draft and record a deed on your own. Question #3: What if I make you (an attorney) a member of my LLC so that you can do the legal work in exchange for some of the profit? You would not believe how many clients ask this question, and how many lawyers get in trouble for not being familiar with the basics of the Ohio Rules of Professional Conduct. No, an Ohio attorney cannot enter into a business relationship with a client and provide legal services to that client. Question #4: I want to get into wholesaling, how do I start? “Wholesaling” is generally the practice of entering into a contract to purchase property from a seller with the purpose of finding another buyer to purchase the property from you for more money than you purchase the property from the seller. The wholesaler essentially acts like a broker whose income is the spread between the two sale prices. If you are entering into contracts to buy property (1) without the necessary funds or financing to close on the purchase, and (2) without the intention to close unless you find another party to buy the property, you are probably going to have legal problems. Some companies now sell wholesaling paperwork with instructions to have an attorney licensed in your jurisdiction to “approve” the paperwork. First, you should proceed with caution (or better yet, run in the other direction!) if someone offers to teach you how to “get rich quick” in exchange for a non-refundable fee. Second, there are significant legal risks inherent to wholesaling that should prevent an attorney from approving your scheme. Question #5: The closing agent offered me title insurance, should I buy it? My usual response to this question is: “Can you afford to walk away from the property?” When you buy real property in Ohio, you are buying the right to own and use the land described in the deed. But there is no guarantee that you are the only person with a legitimate claim to own and use that land. You are going to have an expensive problem if a lien, unreleased mortgage, heirs or spouses of prior owners make a claim to the property. These issues usually will prevent a bank from giving you a mortgage or prevent your property’s prospective buyer from being able to purchase the property. Title insurance (available through a title company at the time of closing) is an insurance policy with a one-time premium that insures you against these risks for as long as you own the property. The author of this article, Kyle E. Hackett, is an Ohio attorney who represents real estate development professionals and investors. This article is provided for educational purposes only. Please do not rely on this article as legal advice. Contact an attorney licensed in your jurisdiction if you have any questions or legal needs.

Could a land contract help you turn a property into income?

2021-04-12T00:59:13Z

Could a land contract help you turn a property into income? Maybe the stairs in the home you inherited from your parents are so steep you have to rebuild them for the property to qualify for a standard mortgage. Perhaps it just needs some sweat equity, but you don't want to take a huge hit in the purchase price by selling to someone who flips homes. You might even have a property in excellent condition that you would like to turn into a long-term stream of income rather than a one-time lump sum sale. Land contracts are a form of seller financing that can completely cut out real estate professionals and banks from a transaction, allowing the seller to keep more of the money and the buyer to pay fewer costs. Benefits also include the ability to sell a property that a buyer can't finance themselves or the opportunity to buy for someone who can't qualify for a standard mortgage. Still, there are some limits that you should be aware of when considering buying or selling a property on a land contract in Ohio. How are land contracts regulated in Ohio? Land contracts were abused by unscrupulous sellers of land to take advantage of unsuspecting buyers. As a result, the legislature passed laws to protect buyers. Some of the provisions now required by Ohio’s laws include that the land contract be properly executed in duplicate so that both the buyer and seller have a copy. The contract must contain the names and addresses of the buyer and seller, be dated, contain a legal description of the property, and state the purchase price, along with any down payment made by the buyer. The interest rate, payment amount, payment due date, and any charges or fees for services that are includable in the contract separate from the contract price must be in the contract. If the property has other mortgages, or encumbrances, the seller must disclose these to the buyer. The land contract must contain a provision that allows the buyer the opportunity to cure any mortgage default by the seller, and receive a corresponding credit against the land contract for curing the seller’s default on the mortgage. Perhaps the most important protection to the buyer required under Ohio’s land contract law is that the seller must cause a copy of the contract to be recorded with the County Recorder within 20 days of signing. Recording the land contract protects the buyer against future mortgages or attempted sales of the property. If the seller does not record the land contract, the buyer should independently record the land contract to protect the buyer’s interests. Once a year, the seller must provide an accounting to the buyer of the principal and interest paid on the land contract, along with the balance owed. At the end of the contract, the seller is usually required to provide a general warranty deed to the buyer. There are other provisions that must be followed in order to comply with Ohio’s land contract, and an attorney can help guide you through the legal requirements. What happens if the buyer defaults on a land contract? Every buyer is given 30 days under the law to cure a default. If the buyer does not cure the default, the seller may file a lawsuit against the buyer to declare the land contract forfeited, unless the buyer meets certain exceptions. If the buyer has paid in accordance with the land contract terms for five years, or if the buyer has paid at least 20 percent toward the purchase price of the land contract, then the seller may only foreclose on the land contract. Unlike a forfeiture where the buyer gets nothing, from the land contract foreclosure, the seller may only collect the unpaid balance owed on the land contract, and the buyer keeps any excess money as a result of the property being sold at a sheriff’s sale resulting from the foreclosure. Not every property is eligible for protection under the land contract laws. Ohio has limitations on land contract sales. One of the more unusual restrictions the state places on these agreements is the intentional exclusion of commercial and vacant land. Buyers using land contracts in Ohio are only protected by the law for a parcel of land that contains a dwelling. This does not mean commercial and vacant land may not be “owner financed” or sold through a different type of contract, called an executory contract, but the buyer does not have the protections afforded under the land contract law. Additionally, the seller's financial circumstances might affect whether they can afford to offer a land contract. Those who don't own their property outright yet or who have a high principal balance on their mortgage may not be able to sell the property on a land contract. There cannot be a mortgage worth more than the land contract for the seller to offer one as a financing option. Sellers should also be aware that most residential mortgages prohibit selling an interest in the mortgaged property pursuant to a land contract. What should a buyer do prior to entering into a land contract? Before entering into a land contract, a buyer would be well-advised to have a title search done on the property to see if the seller actually owns the property. More than one buyer has entered into a land contract that was too good to be true just to learn that the seller had no right to sell the property. A title search will also tell you if the seller has other judgments or liens that would affect the value of the property. Title exams are very affordable compared to buying a property that you later learn has an IRS lien, a mechanic’s lien, or multiple mortgages for more than the value of the property. If you are unsure what a property might be worth, have an appraisal done to determine the value of the property. If the seller has inflated the price in order to offer the property for sale on a land contract, consider other options or other properties. Hire an attorney to help you with the paperwork required for a land contract. An attorney with familiarity in dealing with land contracts will know what terms are required to make an enforceable land contract for both buyers and sellers. These expenses may seem burdensome initially, but will save both buyers and sellers a lot of trouble in the event of a default. As a seller, as with any arrangement where you allow someone to take up residence in a property you own, you also run the risk of the people living in your property damaging it during their time there. Background checks, credit checks, and down payments will help identify buyers that represent a low risk. Damaging the property is not significant if the buyer completes the purchase, but it can be an immense problem if the purchase falls through and the seller has to rehab the home due to damages. The land contract documents you execute are a crucial form of protection for you as a buyer or seller. Ensuring that you tailor the terms of your document to your needs can minimize the risks that you take when selling or buying a property on a land contract.

Denson v. Donald J. Trump for President, Inc.: When non-disclosure and non-disparagement provisions are too vague to understand.

2021-04-01T16:43:53Z

Denson v. Donald J. Trump for President, Inc.: When non-disclosure and non-disparagement provisions are too vague to understand. Many clients have contacted our office with questions regarding the scope of their restrictive covenant agreements (RCAs). Sometimes these agreements preclude disclosing “confidential information and trade secrets,” which are defined by an endless array of items that leave you wondering whether anything you know about your former employer is not confidential. Sometimes these agreements prohibit you from publicizing anything negative about your old boss or company. These particular types of RCAs (i.e., non-disclosure and non-disparagement agreements) can leave you wondering if you are capable of even having an opinion of your former employer, let alone if you can file a lawsuit to seek a declaration of your rights. Before examining a recent high-profile RCA that failed at the trial court level, a couple basic tenets of RCA law should be discussed. The first regards the certainty of any material terms. Sufficient definiteness of material terms is important if the parties can be expected to know how to fulfill their obligations under the contract. Ambiguous terms tend to be construed against the drafting party since that party had the power to clarify those term(s) and failed to do so. Second, an RCA must be reasonable to be enforceable.[1] This generally means each restraint must not (1) be greater than is required for the protection of the employer, (2) impose an undue hardship on the employee, or (3) injure the public.[2] With these tenets in mind, let’s examine the recent order that voided an RCA in Denson v. Donald J. Trump for President, Inc., Case No. 1:20-cv-04737 (S.D.N.Y. March 30, 2021). Back in August 2016, Jessica Denson was a national phone bank administrator for President Trump’s campaign (the “Campaign”). The Campaign offered Denson the position on condition that she and other Campaign employees sign an Employment Agreement, which consisted of a form contract with non-disclosure and non-disparagement clauses. The Employment Agreement provided as follows: During the term of your service and at all times thereafter you hereby promise and agree:

Not to disclose, disseminate or publish, or cause to be disclosed, disseminated or published, and Confidential Information;
Not to assist others in obtaining, disclosing, disseminating, or publishing Confidential Information; [and]
Not to use any Confidential Information in any way detrimental to the Company, Mr. Trump, any Family Member, any Trump Company or any Family Member Company[.]

The Employment Agreement further defined ‘Confidential Information’ as: All information (whether or not embodied in any media) of a private, proprietary or confidential nature or that Mr. Trump insists remain private or confidential, including, but not limited to, any information with respect to the personal life, political affairs, and/or business affairs of Mr. Trump or of any Family Member, including but not limited to, the assets, investments, revenue, expenses, taxes, financial statements, actual or prospective business ventures, contracts, alliances, affiliations, relationships, affiliated entities, bids, letters of intent, term sheets, decisions, strategies, techniques, methods, projections, forecasts, customers, clients, contacts, customer lists, contact lists, schedules, appointments, meetings, conversations, notes, and other communications of Mr. Trump, any Family Member, any Trump Company or any Family Member Company. As to non-disparagement, the Employment Agreement states: During the term of your service and at all times thereafter you hereby promise and agree not to demean or disparage publicly the Company, Mr. Trump, any Trump Company, any Family Member, or any Family Member Company or any asset of any of the foregoing own, or product or service any of the foregoing offer, in each case by any of the Restricted Means and Contexts and to prevent your employees from doing so. Denson worked as an employee of the Campaign for about three months. A year later, she raised claims of sex discrimination, harassment, and slander against the Campaign. These allegations were publicized through her Twitter and GoFundMe accounts. When the Campaign attempted to compel arbitration based on Denison’s breach of her confidentiality and non-disparagement obligations, Denison filed suit in the Southern District of New York seeking (1) a declaration that the Employment Agreement is void and unenforceable and (2) to enjoin the Campaign from enforcing its Agreement. On March 30, 2021, Judge Paul G. Gardephe found the Campaign’s non-disclosure agreement to be unreasonably vague and thus unenforceable. He criticized the lack of any time limitation, finding the NDA’s application to “the term of your service and at all times thereafter” to be – as a practical matter – unlimited. This effectively means the Agreement could be read to bar Denson from breaching the Agreement for the rest of her life. As for the “confidential information” Denson was precluded from disclosing, the Court found the 35 categories of information to be likewise – as a practical matter – unlimited. Many of the categories – including “personal life,” “relationships,” and “political and business affairs” – were deemed to be undefined and vague, and the agreement gave President Trump carte blanche authority to decide at any time what information is private or confidential. The entities entitled to protection as third-party intended beneficiaries to the RCA were likewise vague, as President Trump alone is affiliated with more than 500 companies, let alone those affiliated with his family members. In sum, the terms of the RCA were not sufficiently definite to be enforceable. One might reasonably argue whether such RCA language is important given the varied legitimate interests political campaigns – particularly presidential ones – have in protecting. Legitimate interests could include information about private decisions and strategies about targeting voter populations, allocating financial and personnel resources, fundraising and marketing strategies, and analyzing campaign strengths and weaknesses. But even so, Judge Gardephe found the RCA as drafted was so broad that no campaign employee could reasonably know what they could disclose about the campaign – or when. Denson thus stands for the proposition that if a former employee cannot possibly know what speech she has agreed to forego, there can be no mutual assent between the parties to make the RCA enforceable. An important caveat here is that Denson (which may well ultimately be appealed to the Second Circuit Court of Appeals) presents a case where a federal judge applied New York contract law to the agreement at issue. A judge viewing these same facts under Ohio contract law may reach a different conclusion. For example, certain Ohio courts may have been more inclined to rewrite provisions found to be unreasonable as Ohio is a “blue pencil” state. But multiple Ohio courts have found fault in failing to include a temporal limit and may not be inclined to write in reasonable duration and geographical scope terms where none exist. As Denson illustrates, vague and indefinite terms can be problematic when it comes to understanding the legitimate business interests that a company seeks to protect in enforcing its RCAs. Most restrictive covenant agreements are not drafted as broadly as the Campaign’s Agreement. They usually include time and geographic limitations, albeit onerous ones that most former employees struggle to comply with. If you find yourself at a loss trying to understand the complexities and implications of your RCA, we are here to help. Consult one of our trusted attorneys to learn of your options in how best to deal with these restrictions. [1] See Raimonde v. Van Vlerah, 42 Ohio St.2d 21, 71 (1975). [2] Id.

How is the probate process started?

2021-04-16T09:04:45Z

How is the probate process started? Before you jump into starting the probate process, it is important to understand the purpose of probate and to determine if probate will be needed. Probate is the process by which we settle the final affairs of an individual who has passed away by paying the final bills and distributing the assets to the appropriate people. An individual who dies without a will is said to have died intestate and his or her assets will be distributed according to the state’s law of decent and distribution. The person in charge of an intestate estate is an Administrator. An individual who dies with a will has died testate and his or her assets will be distributed according to the terms of the will by the Executor named in the will. Probate is not always necessary because many assets can be transferred without going through probate. These assets include retirement accounts (401(k)’s and IRA’s) that have a named beneficiary, life insurance payable to a beneficiary, assets owned jointly with another person, and accounts that contain a transfer on death or payable on death designation. These types of assets are payable directly to the named individual or surviving joint owner without going through probate. Probate is required for assets the individual owned in their own name that did not have a joint owner or a beneficiary. These types of assets can only be transferred after an estate is opened with the probate court. The estate is opened by filing the will with the probate court (if there is a will) along with an application for the Executor or Administrator to have authority to administer the estate. Once these initial documents are filed with the court, the Executor or Administrator is required to notify all of the decedent’s closest living relatives, and anyone named in the will that the probate process has been started. After the Executor or Administrator has been appointed, he or she is required to follow the Probate Court’s rules for preparing and filing an Inventory of the estate’s assets, paying creditors, distributing assets, and filing a full and final accounting of monetary activities with the Court. The process can be confusing, overwhelming, time consuming, and frustrating if you are not familiar with the legal process required in probate court. Hiring an experienced probate attorney can eliminate a lot of aggravation and potential liability by providing guidance and expertise on the probate court process. If you are worried about paying a lawyer to help you with the probate court process, be aware that in Ohio the legal fees are deducted from the estate after approval by the probate court. Generally, neither the Executor nor the Administrator are required to pay legal fees out of his or her pocket directly to the attorney providing assistance. Paul Kellogg is an attorney in Cincinnati with the Phillips Law Firm, Inc. Paul’s practice focuses on providing comprehensive estate planning and probate services to families and business owners, as well as serving as outside general counsel to entrepreneurs, real estate investors, and businesses where he provides guidance and advice on a wide variety of transactions and disputes. He can be reached at [nap_phone id="LOCAL-REGULAR-NUMBER-3"] or via email at PJK@PhillipsLawFirm.com. Please explore Paul’s other articles on estate planning, real estate, and business on the Phillips Law Firm Blog page. The article is for educational and informational purposes only and does not constitute legal advice. Anyone contemplating taking legal action is urged to obtain proper legal advice from an attorney licensed in your particular jurisdiction.

What business owners should know about succession planning

2021-02-25T21:34:40Z

You had a dream 15 years ago to launch your own IT consulting business and see it grow. Now, you’ve achieved that goal and are nearing retirement. You’re beginning to think about what will happen to your business in the future. Should you step down from your business and have a key employee or family member take it over?

Why business succession planning matters

Many business owners fail to develop business succession plans. However, having a business succession plan can help keep your business operating smoothly in case you pass away suddenly or become incapacitated. Your business succession plan will include:

Whom you have picked as a business successor
When or under what circumstances your business succession plan will happen
How your business succession will be funded (using life insurance to cover a business succession is common for those in business partnerships)
Your business’ standard operating procedures, employee handbook and other information
An estimated value for your business

Without a business succession plan, your business can flounder if you die suddenly or if you become incapacitated. Your family could fight over who should take over the business and how much it is worth. Those running your business may have a cash flow problem if you didn’t have an insurance policy to cover your business succession. Your business could be sold for less than its worth.

Getting help with business succession planning

You should consult an experienced attorney to help you make a business succession plan. An attorney can guide you to ensure you have made a solid plan and protected your business’ future.

You don’t want your business to suffer if you pass away suddenly or become incapacitated in an accident or because of an illness. With a business succession plan in place, you can make sure your business will thrive for years to come.

How is a Lawsuit Like a Three-Legged Stool?

2021-02-04T05:17:25Z

A three-legged stool is one of the simplest, yet most efficient devices ever created upon which a person can sit. A three-legged stool will never wobble, even if one leg is slightly shorter or longer than the other legs, because all three legs will rest upon the surface where it sits. The surface upon which a three-legged stool sits need not be perfectly flat, because a three-legged stool automatically conforms to an uneven surface. However, if you remove one of the legs of a three-legged stool, the stool becomes worthless. Trying to maintain your balance on a two-legged stool quickly becomes an exercise in futility. Eventually you will fall if you try to sit on a two-legged stool. The two-legged stool must be thrown away if it cannot be fixed. So how is a lawsuit like a three-legged stool? The three legs on a lawsuit are liability, damages, and collectability. Like the legs of the stool, the three legs of the lawsuit need not be identical. Liability, damages, and collectability only need to touch the surface upon which the case will be decided. The court is like the surface upon which a stool will rest, and every trial lawyer will tell you, no court is perfect. As courts have often stated, you are entitled to a fair trial, not a perfect trial. Provided the three legs of your lawsuit exist – liability, damages, and collectability – the lawsuit will be successful. However, if any one of the legs of a lawsuit is missing, the lawsuit is worthless just like the stool with a missing leg. When a person contacts our office with the desire to file a lawsuit against somebody, I sometimes tell the person what a lawsuit and a three-legged stool have in common. Let me explain my analogy with a series of real-life examples. LIABILITY: A man came to see me about an accident he had on a sidewalk in Cincinnati, Ohio. The man was middle-aged, walking near Findlay Market when he tripped on an elevated section of sidewalk caused by a tree root. The man fell to the ground, breaking his hip and crushing his knee. He required a knee and hip replacement as a result of the fall. He had very large medical bills and lost multiple months of income as he recovered. Being on a public sidewalk owned and maintained by the City of Cincinnati, collecting for the injuries to the man would be easy if I could establish liability against the City of Cincinnati for not maintaining the sidewalk. However, slip and fall accidents in Ohio are very hard to win. Ohio follows the open and obvious rule as to responsibility for avoiding obstacles when walking. In this case, the defect in the sidewalk was open and obvious to anyone focused on the surroundings. By not paying attention to where he was walking, the man tripped, fell, and was badly injured. Unfortunately, there are many cases from the Ohio Courts of Appeal and the Supreme Court of Ohio finding that a city has no liability for defects in a sidewalk that were open and obvious. Despite knowing that the City of Cincinnati could easily afford to pay for the serious injuries to the man as a result of the defect in the sidewalk, the law provided no way to obtain liability against the City of Cincinnati. My client had damages, and the responsible person could afford to pay, but the liability leg of my three-legged litigation stool was missing. I had to turn the case away. DAMAGES: A young man came to see me who had been in a motorcycle accident. He was riding his motorcycle on Dalton Street in Cincinnati when a lady pulled out in front of him from a parking lot. He crashed directly into the driver’s side door of the car demolishing his motorcycle and doing substantial damage to the car. Pictures from the accident scene looked horrific. No one could survive such a crash, I thought. Yet, here was the motorcycle rider telling me his story about how he was thrown over the handlebars upon impact, then flew over the top of the car, did a somersault in the air, and landed on his bottom in the roadway, completely unhurt. He could have been killed, and by all accounts, probably should have been killed. Instead, he had nothing more than a bruised ego. The insurance company for the driver of the car paid him fairly for the value of his motorcycle, but then refused to give him anything more for injuries sustained in the crash. He wanted to sue for nearly being killed in the crash. I turned the case away. Why? The missing leg on his lawsuit was a complete lack of damages. He was lucky to be alive but was otherwise uninjured. He only had a two-legged lawsuit. He had liability, and he had collectability from the insurance company, but he had no damages. Without damages, the case had no value, and was turned away. COLLECTABILITY: Another example involved a single mother who called me to discuss a horrible accident involving her son. He was a minor who had been riding a scooter on the highway. A car turned left in front of him, causing him severe brain damage as a result of the crash. The driver of the car admitted fault. The child riding the scooter would require 24-hour care for the rest of his life. The driver of the car had no insurance, no assets, and immediately filed bankruptcy after the accident occurred. The single mother did not drive, so she had no insurance that would cover the injuries to her son. Here again, I only have two legs on a three-legged stool. I have liability because the driver admitted being at fault for causing the accident. The injuries to the son would impact the family forever and would cost millions of dollars to provide the needed medical care. But from whom could I collect? The answer was nobody. The driver of the car had no insurance, no assets, and filed bankruptcy. The family had no auto insurance that might provide coverage. My three-legged stool had liability and damages, but collectability was missing. As much as I wanted justice for this family, I could not help. I had to turn away the case as being worthless. The three-legged stool analysis has served my clients well during my career. A select few people failed to heed my advice after I turned away a lawsuit because a leg on the three-legged stool was missing. For some, I learned later that another attorney took the case, took the person’s money, and then lost the case exactly as predicted. Occasionally, a person returns complaining about the money spent to obtain a bad result from the attorney who took the case. No one has ever returned to me to tell me that my analysis of the three-legged stool was wrong, and the other attorney had won the case. In other words, a person should put more trust in the opinion of an attorney who refuses to take your money after carefully analyzing your case, than an attorney who jumps at the opportunity to take your money just to obtain a bad result. If you have a case that you would like to discuss, I am happy to go through the analysis of liability, damages, and collectability of the three-legged stool with you. However, if the case is missing a leg from the three-legged stool analysis, I am going to decline the opportunity to take your money, because a stool with less than three legs is worthless.

Is it possible to remove a personal representative?

2020-12-14T16:44:31Z

When a loved one has passed, it’s necessary to administer the estate according to the plan. The person responsible for the estate administration is known as a personal representative. Typically, the personal representative will be named in a person’s will, although the court may appoint a personal representative if no one is identified in the estate plan. Sometimes referred to as the executor of an estate, the personal representative is tasked with gathering assets, determining their value, paying any outstanding debts, locating beneficiaries and keeping up a general accounting of the estate. These are important responsibilities. Sometimes, a personal representative will fail to carry out their duties according to the law. Other times, they may seek to abuse their authority for personal gain. This often leads to legal disputes. In some cases, it may be necessary to remove the personal representative and designate a new person to carry out the administration of the estate.

Situations where a personal representative may be removed

You can’t remove a personal representative just because you don’t like the person. A personal representative may only be removed for certain reasons, including:

Embezzlement
Fraud
Neglecting to perform their duties
Removal is necessary to protect the estate

You can request removal in certain situations. Other times, the probate court may take its own action to remove a personal representative. The job of a personal representative is no small task. Estate administration duties can be complex. The removal process is also complicated. You should discuss any concerns you may have with a skilled legal professional. Together, you can determine the best way to help resolve estate disputes.