CORPORATE AND LLC MEETINGS, MINUTES & RESOLUTIONS

Business owners are often advised on the importance of holding annual meetings, documenting their minutes, and exercising proper corporate formalities as a method of preventing the “piercing of the corporate veil.”

However, although many people know they should be holding meetings and doing their minutes, our experience with new business owners who do not have a history of being in the “corporate” world or serving on a “board of directors” is often a feeling of confusion and cluelessness as to what meetings and minutes are and what purposes they serve.

Although the general purpose of meetings, minutes and resolutions are to document and authorize acts taken by an entity, company meetings can accomplish several other important goals that we feel are critical to a business’s long-term success, for example:

• Strengthen the corporate veil and asset protection
• Document goals and objectives of the business
• Structure tax planning and establish bookkeeping procedures
• Create a great reason for a tax-deductible trip (at least annually)
• Increase communication between the business owners
• Involve the family members and teach them about the operations of the business

In a corporation, you have a hierarchy that consists of shareholders that own the corporation, directors that establish the major policies and decisions for the corporation, and officers (President, CEO, Secretary, etc.) that perform and execute the daily activities for the corporation. In this three-level vertical hierarchy, officers are appointed by the directors who are in turn appointed by the shareholders.

In a Limited Liability Company or LLC, it’s a bit simpler in that you have Members that own the LLC and Managers that operate the day to day transactions.   The Managers are appointed and serve under the authority of the Members.

This illustration below depicts the standard structure of both corporations and LLCs:

CORPORATIONS—->Shareholders (Own)—->Directors (Direct)—->Officers (Manage)

LIMITED LIABILITY COMPANYS (LLC)—->Members (Own)—->Appoint Managers (Manage)—->Hire Employees (Work) 

In a corporation, there are generally two types of meetings; “Shareholder meetings” and “Board of Director meetings”.  In a small business, they are generally the same, but you may expand the ‘board’ to include family members and others to help you succeed.

In an LLC, I feel strongly there should be two types of meetings; “Member meetings” and “Board of Advisor meetings”. There is nothing that says you can’t have a Board of Advisors in an LLC.

What’s in a “Meeting”?

While the items that should be discussed and documented in the meeting will depend on the situation, in general, items discussed in a meeting and documented in minutes should include the following:

• Any Important Changes to your Business during the period since the last meeting, especially any changes to the corporate structure, ownership, management, key employees, company policy, governing documents, etc.;
• Any transactions or actions that require “consent,” “vote” or are otherwise required to be approved as required in the governing documents for the entity or under the laws of the state; and
• Major transactions for the company that are beyond what typically occurs in the day to day operations of the business (i.e. obtaining a loan, purchasing major assets, entering into a major contract, dissolving the corporation, etc.).

This list is not intended to be exhaustive. Conducting your meetings and keeping minutes should not be considered a burden and I encourage my clients to keep it as simple as possible. However, that will certainly depend on the type of transaction, size of the entity, and whether there is any disagreement among the attendees.

The ‘Minutes’ are the notes or records of the meeting. For example, who attended, what the votes were, suggestions, discussions, problems, and decisions.

Corporate resolutions, when documented properly, are literally the ‘decisions’ from the meeting. The resolutions confirm that certain transactions performed by the officers (in a corporation) have been authorized and approved by the directors, and in some cases, actions taken by the directors have been approved by the shareholders.

Similarly, for an LLC, minutes confirm that actions taken by the Managers have been approved by the Members. People who have ever tried to purchase or sell real estate through an entity often have lenders or escrow officers ask them for corporate resolutions approving the transaction. The purpose of this is so they (lenders or escrow) have signed documentation confirming that the one person that is signing the contract or deed in the transaction does actually have the approval of the other major decision-makers within that entity. Other entities that have been audited will know that the IRS often asks for meeting minutes as part of an audit.

Is it required?

In general, corporations are required to hold at least one annual meeting per year. I strongly encourage business owners hold the same meetings and meeting for LLCs. Although, many states don’t require that LLCs have such formalities, it is highly recommended in the legal industry for business owners to go through this process to strengthen the ‘veil’ of the LLC. It also encourages good recordkeeping, and can serve to enhance communication in the business. Moreover, there’s nothing wrong with doing more than the bare minimum that the law requires- it just makes good sense.

Is there an official procedure or process?

The procedure for the meetings and minutes can vary and is, in part, dependent on the language in the documents governing your entity (e.g. by-laws for corporations and operating agreement for LLCs). The laws of the state also set forth procedures when corporate/LLC records are lacking the particulars.

In most cases, there must first be official notice of the meeting that in many cases must conform with certain requirements, which can also be waived by those attending or not attending if properly documented. Next, there is typically a requirement for a certain number of attendees (i.e. a quorum) in order to conduct a valid meeting. When the meeting is held, the minutes are essentially notes of what happened in the meeting. The minutes should include who attended the meeting and when and where the meeting occurred. A “resolution” is a formal decision or act by the attendees of the meeting which also should also be documented in the minutes.

Involve the family and take advantage of a tax write-off

It’s very common for small business owners to have their adult children, and even teenagers participate on the Board of Directors of a Corporation or Board of Advisors for a Limited Liability Company (LLC). This is a fantastic opportunity to teach the children about the business and even basis entrepreneurship skills. Business owners should take the time to discuss finances, operations, potential growth and even the dynamics of employees or vendors and the impact they have on the business.

Moreover, the ‘meeting’ is a great opportunity to take a tax deduction. There is nothing wrong with an annual or semi-annual get-a-away to discuss the business. As long as it’s not extravagant and there is a valid meeting and discussion, the travel, dining and accompanying entertainment expense with the meeting can be justifiable on a tax return.

Take it seriously

Finally, those business owners that only consist of themselves or their spouses may find it silly to engage in what could be perceived as a pointless exercise in holding meetings or preparing minutes with ourselves. I believe adhering to these formalities is even more important when there is only one owner or director since an entity with just a single owner operating the company is under even more threat of being accused that their personal and their corporate identities have been merged (and therefore the corporate veil should be pierced). This is especially true in the case of money transactions between the single owner and the corporation which, if not properly documented, could be deemed comingling of funds or result in unfavorable treatment by the IRS.

Holding your meetings and documenting your minutes if often a private affair within your corporation and think of it like your insurance policy.   You hope that you never need it, but in the event of a lawsuit or an audit, you’ll be glad that you have it.

WFB Legal Consulting, Inc.–A BEST ASSET PROTECTION Services Group–Lawyer for Business

PERSONAL PRIVACY VERSUS ASSET PRIVACY- A UNIQUE PERSPECTIVE THAT WILL SURPRISE YOU

Contribution by Mark Kohler

Privacy is a big topic and it’s not just about being careful with whom you share your personal information. There are a lot of tricks and techniques out there on the ‘blogosphere’ that we can learn and implement. However, it can also be overwhelming trying to ‘hide’ our personal information in this day and age of technology, if not futile. It’s difficult to determine which strategies work and are worth the effort. The important point I want to make in this short article is that we need to understand what we are trying to protect, and then be targeted and exact in our privacy protection strategies.

Consider, for example, a distinction between personal privacy and asset or property privacy. Safeguarding our personal information from identity theft and not letting ‘the world’ know where we live, is very different than hiding a rental property or other business asset. Otherwise stated, our personal privacy is different than the privacy concerning the location of an asset private.

In daily practice we might, and in many instances as a business owner should be, willing to let people know who we are, where are office is, how to contact us, and follow us on social media. This could be a very important part of our marketing efforts to brand ourselves or our businesses.

In turn, I certainly don’t want the general public to necessarily know what assets I own. For instance, no one needs a potential stalker or disgruntled client or tenant, and especially a creditor or their attorney, to do a public record search and discover all their assets sitting there just waiting to be attached in a lawsuit.

 Personal Privacy

Here are some privacy action items that will help make the distinction between ‘personal and property’ privacy. First, here are some relevant practices that work great for personal privacy.

• Pay for a credit bureau tracking service and carefully monitor any activity they find.
• Keep critical data for both you and your family members, under a watchful eye. Items such as social security numbers, driver’s licenses, credit cards, bank account numbers, etc.
• Invest in a safe deposit box, or a carefully hidden fireproof safe for the house, and place important papers in it.
• Go paperless with an encrypted cloud hosting service to store all your data.
• Copy all contents of your wallet and keep in an encrypted cloud service, a safe, or a safety deposit box.
• Confirm that all firearms are properly registered and that the licenses are protected from theft.
• Move the contents of the glove compartment in your car to a locked box in the trunk.
• Consider the significance of the content you share on social media.
• Protect your incoming and outgoing mail, which might have sensitive information in it.
• Shred important documents and sensitive information with a quality cross-cut shredder at home and in your office.
• Install antivirus software on all business and family computers.
• Don’t keep sensitive information on laptops or smartphones.
• Remember to log out of your computer at home and at work, and use a security measure like a password or pass code on your mobile phone.

These strategies are a great place to get started and don’t cost a lot. They just take some time and effort but could have significant benefits and results.

More advanced strategies for personal protection may include some of the following:

• Since your personal address is probably already ‘out there’ (which is typical when we don’t vigorously guard our privacy), you may move or purchase a home for cash, and own or rent with a trust, an alias, or company name for the purposes of public record and utilities.
• Use a P.O. Box, CMRA, or ghost address for all mail deliveries and never give out your home address.
• Pay for everything with cash.
• Set up email under an alias and use your alias aggressively—but always legally—to maintain personal privacy.
• Follow specific rules when traveling. There are numerous privacy blogs where you can learn tips for what information to share when booking travel.
• Have no information about yourself or your work habits in public view. NEVER post personal information on Facebook.

These strategies again, don’t focus on protecting the privacy of specific assets, but rather your personal privacy. Notice that these techniques are personal in nature. The steps above don’t do anything at all to stop someone from finding the assets you own with some relatively simple searches on the web.

 Property Privacy

In contrast to personal information, when it comes to protecting the privacy of an asset, obviously the ‘type’ of asset is going to dictate certain options. Typically, we are helping clients implement privacy procedures for assets on public record. Assets such as 2^nd homes, raw land, rental property, cabins, beach houses, etc.… In contrast, assets that don’t have a ‘public recording’ are much easier to protect from public searches.

Here are some of the techniques we are using to help clients protect the privacy of assets and/or businesses:

• Always use an entity to hold title to income producing property for asset protection and Never hold title to property in your personal name.
• For property where asset protection isn’t necessary, utilize a land trust or privacy trust as they may be termed. They are revocable trusts for privacy, not irrevocable trusts that come with a lot of unintended consequences when it comes to flexibility and taxation.
• Implement a mail forwarding address service, P.O. Box, or CMRA for the company address and never give out your personal address or main operating business address.
• Pay for a Registered Agent service in every state you have an entity, to serve as your street address (required for every filed entity).
• Engage a property manager for your assets and share only the necessary contact information needed to maintain the relationship (you’re never sure what they may share with 3^rd parties in a crisis).
• Create a holding company (LLC) in a state such as Wyoming or New Mexico where the Managers and Members of the company aren’t listed on public record. Almost every other State discloses the ‘Manager’ of the LLC on public websites, and some States even disclose the actual owners/members. Be careful you understand what is listed on the State websites before registering your entity.
• Give Power of Attorney (POA) for someone to serve as the Manager of record for entities or Trustee for any trusts on public record, so your personal name isn’t used. Potentially even use a specific alias (legally) for this purpose.
• Always file your tax returns honestly and ethically, but vigorously protect what you share about your assets with any institution or professional that doesn’t have a legal duty to keep your information private (i.e. such as a bank, attorney or financial advisor).

What type of privacy strategies are best for you to utilize will generally depend on three factors, 1) your individual ‘risk tolerance’ (i.e. how much privacy do you desire), 2) the assets in question, and 3) your personal lifestyle choices about your public and private life that you are willing to share.

MY TAKE: Remember, the different privacy techniques that you can choose from will need to be carefully tailored to your situation and is generally only a part of an overall plan developed over time. However, many asset protection plans become so complicated that not even the client can explain how assets are held or how those assets were transferred. But such questions can be expected in depositions or a debtor’s examination, and a failure to fully and clearly explain what happened and why will make the court very suspicious and potentially give the court grounds to begin disregarding entities or setting aside transfers. Most judges start asking themselves, “What is really going on here?” If the structure of an entity for example, and transfer of assets are too complicated and not well explained, there is a much higher chance that the judge will find an intent to commit fraud on potential creditors. Indeed, the best asset protection plans are often simple plans, such as creating and funding an irrevocable trust for the benefit of your children.

The bottom line is that some feel, as do I, that asset protection planning should be based on the presumption that the entirety of the planning and its purpose will eventually become known to creditors. Asset protection plans that require secrecy can often times face a plethora of problems, from how not to disclose the structure or activity on tax returns, to how to keep a mad ex-spouse or disgruntled employee from talking to creditors. And don’t even think about going into bankruptcy without making a full disclosure about assets and transfers. The failure to make a full disclosure will usually lead to a denial of discharge, and the failure to make a truthful disclosure can amount to charges of perjury and bankruptcy fraud.

In the end, you should consider “property privacy” only to the extent that it complies with recognized legal and ethical safeguards. After all is said and done, simply stated, if asset protection is implemented correctly, at the end of the day it doesn’t really matter who knows what and how much you have.

PHONE 949-413-6535  WFB LEGAL CONSULTING, Inc.—Lawyer for Business– A BEST ASSET PROTECTION Services Group

WHAT ARE THE PRACTICAL QUESTIONS GENERALLY ASKED ABOUT LIVING TRUSTS?

WFB LEGAL CONSULTING, INC.–A BEST ASSET PROTECTION Services Group

LAWYER for BUSINESS

HOW DO BUSINESS ENTITY STRUCTURES COMPARE and WHAT ARE THE REASONS FOR FORMING THEM?

WFB LEGAL CONSULTING, INC.–A BEST ASSET PROTECTION Services Group

LAWYER for BUSINESS

WHAT’S THE BEST WAY TO LEGALLY STRUCTURE MULTIPLE BUSINESSES?

Most entrepreneurs are driven, curious and never content with the status quo. These traits are probably why so many of them dabble in multiple ventures. A restaurateur may open a wine shop; a personal trainer may launch a line of fitness apparel. There’s always a new opportunity out there somewhere, and diversifying your income can be a sound strategy.

If you are running multiple businesses or thinking about starting a second one, you may be wondering what the best approach is for legally structuring each business: should you have separate corporations/LLCs for each one or a big umbrella company to hold them all? Are there any limits to the number of companies one person can form?

Generally speaking, there are three popular ways to structure multiple businesses. There are advantages and disadvantages for each approach, and the best structure will depend on your personal situation. Here’s some general advice to consider, but always discuss your specific needs and details with your CPA and your lawyer.

1. Create Individual Corporations/LLCs:

First, there’s no limit to how many corporations or LLCs one person can form. Many entrepreneurs opt to file a new LLC or corporation for each of their start-up ventures. For example, you can form an LLC for your landscaping business and another LLC for the golf course you purchased.

The main advantage of this approach is that it isolates the risk to each individual business. Should a client sue your landscaping business, your golf course business will be protected. Likewise, if your golf course has a few down years, your landscaping business won’t have to share in any of the liabilities the golf course incurs.

The main downside with this approach is that it involves additional maintenance fees and paperwork. For example, you’ll need to pay to incorporate (form) an LLC for each business, as well as pay any annual maintenance fees and file appropriate forms with the state. You’ll also need to get separate business licenses and EINs for each business, and file tax forms for each corporation. For some entrepreneurs, this separate paperwork can be bothersome. But for others, the added fees are well worth it in order to protect each individual business from the others.

In particular, real estate investors often form an LLC for each property in order to shield each investment. If “Property A” is sued, you won’t be risking any of the assets belonging to “Property B” or “Property C.”

2. Put DBAs Under One Corporation/LLC:

Another common option is to file one LLC or corporation, and then set up multiple DBAs (Doing Business As) for each of the other ventures. Keeping with the previous example, you may have an LLC for “Ken’s Landscaping Services.” Then, if you start a golfing business, the LLC can file a DBA for “Ken’s Golf Course.” From a marketing perspective, you can run each business as if they are separate companies — use each individual business name, accept checks written to each business name, etc.

With this approach, each business venture can use the right branding and company name, while you simplify some of the annual maintenance. You just need to pay your annual LLC/corporation maintenance fees for the LLC/corporation (and not each individual DBA). If you need and/or use an EIN, you’ll just need one EIN.  And when it’s time to file your taxes, you can take the income earned from each DBA and report them in a single tax filing under the main LLC or corporation.

Each business venture (DBA) enjoys the legal protection of the main LLC/Corporation. For example, if something should happen to one of your DBAs, your personal assets will be shielded (assuming you filed the DBA under your LLC/Corporation). But, each DBA isn’t protected from the other DBAs. So, if one DBA is sued, all the other DBAs under the main LLC/corporation are liable for any monetary damages that result.

3. Create A Business Under A Holding Company.

In the third approach, you can create individual corporations/LLCs for each of your businesses and put them under one main holding corporation/LLC.

This scenario is common in a few situations. It is used for companies that are looking to be acquired or potentially spin off one of their businesses, as well as for established companies that are looking to start a new business so the established company will fund the new venture. As expected, this scenario can have complex tax and legal implications. Therefore, it’s best to consult with a tax adviser and attorney on the best way to structure a holding company and its subsidiaries.

The bottom line is there is no legal limit to how many business ventures you can start and run. Just make sure that you properly account for your liability risks when structuring these ventures and always have a lawyer and CPA on your team.

WFB Legal Consulting, Inc.–A BEST ASSET PROTECTION Services Group–Lawyer for Business

IS THERE SUCH A THING AS LANGUAGE DISCRIMINATION IN CA?

Language discrimination occurs when a person is treated differently because of that person’s native language or another characteristic of that person’s speech. For example, an employee may be subjected to language discrimination if the workplace has a “speak-English-only” policy but the employee’s primary language is something other than English. The employee may also be the victim of language discrimination if he or she is treated worse than other employees because he or she speaks English with an accent, or if the employee is told he or she does not qualify for a position because of a lack of English proficiency. Outside of employment, language discrimination may also occur if a person is denied access to businesses or government services because he or she does not speak English.

Many courts and governmental agencies consider language discrimination to be a form of discrimination on the basis of race or national origin, which are prohibited by well-established laws such as Titles VI and VII of the Civil Rights Act of 1964 (a federal law), and the California Fair Employment and Housing Act (a state law). These laws make it illegal for employers to discriminate against an employee because of his or her national origin. (“National origin” refers to the country that a person, or that person’s ancestors, came from.) But because the primary language a person speaks is closely related to the place that person came from, or the place that person’s family came from, being discriminated against for using that language, or because of characteristics having to do with that language, is essentially the same as that person being discriminated against because of his or her national origin.

California law generally prohibits employers from having “speak-English-only” policies in the workplace unless: 1) the employer can show some “business necessity” for the policy – that is, that there is an overriding and clearly job-related need for the policy (such as certain customer service positions), and 2) the employer notifies its employees about the policy, and when employees are required to abide by the policy. Even if the employer shows a “business necessity” for the policy, it must also show that there is no alternative practice to the policy that would achieve the business goals just as effectively. Similarly, in some states outside California where different laws may apply), the U.S. Equal Employment Opportunity Commission (“EEOC”) presumes that the mere existence of a “speak English-only” workplace policy is evidence of discrimination under federal law. Courts in other parts of the United States, therefore, also may require employers to show a business necessity for such policies.

Discrimination because of accent also violates an employee’s civil rights. In general, the standard applied in these cases is that the employee’s accent must “materially interfere with job performance” in order to justify any adverse action. In other words, an employee’s accent must have a significant negative effect upon the employee’s ability to do the job. Moreover, the employer must fairly and objectively assess the accent. Often there are subtle prejudices against some accents more than others.

An employer may not deny a person an employment opportunity because that person is not proficient or fluent in English, unless the job that person performs: 1) actually requires some English language skills (such as certain customer services positions), and 2) the person does not possess the particular type and level of English language skill required. For example, if a person is told that he or she does not qualify for a position because he or she is unable to speak or read English well enough, but the position is one that requires little or no communication, the person may have a claim of language discrimination.

Language discrimination exists outside the workplace as well. For instance, if a person is denied services by a business because he or she lacks English skills, this may be a violation of civil rights law. Such laws may also be violated if a person is unable to communicate with a government agency because the agency does not offer materials in that person’s language or have personnel who speak that person’s language. What should you do if you think you may have been subjected to language discrimination? If you think you may have been discriminated against by your employer because of your language, and the discrimination took place in California (and your employer has at least 5 employees), you may file a charge of national origin or language-based discrimination with the California Department of Fair Employment and Housing (“DFEH”) within one year of the discriminatory act.

If your employer has more than 15 employees (regardless of whether the discrimination took place in California or elsewhere), you may instead file a charge of national origin discrimination with the U.S. Equal Employment Opportunity Commission (“EEOC”). In California, you must do this within 300 days of the discriminatory act, and in other states, you may have only 180 days to do so. Filing a charge of national origin discrimination is the only way you can protect your right to sue your employer in court under California and federal law. (If your employer has fewer than 5 employees, or if you are employed by the federal government, you should consult an attorney).

WFB Legal Consulting, Inc.–A BEST ASSET PROTECTION Services Group–Lawyer for Business

REASONS YOU MIGHT LOSE A JOB OFFER DUE TO A BACKGROUND CHECK

From criminal history to bad reviews from former bosses, a pre-employment background screening can cost you a job opportunity for a number of different reasons. The vast majority of employers these days do extensive background checks on their job applicants before making an official hiring decision. Even if you have a job offer on the table, it might be conditional on you passing a background check first. Suffice it to say that these screenings are a very important step in the job interview process, and that they can impact your chances of landing or not landing a dream job. If you’ve never submitted to a pre-employment background check before, it can be unclear exactly what employers are looking for (or finding) in your past. Below, are some of the most common explanations for why your background check may have tarnished your job chances.

1. You have an extensive criminal history

One of the first things that employers are looking for on their applicant background checks is criminal history. The simple existence of a criminal conviction on your record doesn’t necessarily mean you will be disqualified from employment consideration. Most employers won’t look at misdemeanor offenses or older convictions as deal breakers, and people who aren’t repeat offenders are regularly given the benefit of the doubt that they are trying to rebuild their lives after a criminal offense. Violent criminals, sex offenders, notorious repeat offenders, or embezzlers, are just a few of the groups that will repeatedly lose job offers due to criminal history background checks.

Ultimately, though, know that different jobs have different standards as far as acceptable criminal history is concerned. For instance, you’ll be much more likely to get hired for a warehouse job with a criminal record than you will be to win a teaching position at a public elementary school, or be accepted as a bank teller at a financial institution.

2. You were not truthful on your resume

Background checks are great for uncovering an applicant’s criminal history, but they might be even better for unmasking bits of dishonesty on the resume or job application. Maybe you claimed a college degree that you don’t really have, or perhaps you provided incorrect information about a previous job title or hire date. Between background checks and employment or educational verification checks, an employer has a good chance of finding out if you were less than truthful on your resume. And if you so, even if the fib was minor and seemingly inconsequential to you, it can still cost you a job opportunity.

3. Your credit history is poor

Not all employers will look into your credit history. For jobs that involve the handling of money or finances, though, you might find yourself approving a credit history check. Quite simply, your prospective employer wants to know how you have handled your own finances in the past. And in such situations, substantial amounts of debt or evident money issues can mark you as someone who is not responsible enough for the job at hand.

4. Your driving record revealed issues

As with credit history, driving records are not something that every employer is going to look at. If you are going to be operating a vehicle as part of your job, then a driving history check should and will be a part of the applicant screening process. A speeding ticket or two shouldn’t hurt you, but if you’ve been charged with reckless driving or with operating a vehicle while intoxicated, then you’ll probably be out of the applicant pool as quickly as the hiring manager can shred your application.

5. A previous employer gave you a bad review

As part of a background check, hiring managers won’t just call the references you’ve listed to speak on your behalf, but they’ll also probably try to speak with your former bosses. There’s an obvious reason for this: your prospective employer wants to hear how you operate on a day-to-day basis. Are you friendly? Are you a hard worker? Is your work of a high quality? These are a few of the types of questions that a hiring manager might wish to ask your former bosses simply to get an idea of what kind of experience they would have with you as an employee.

Due to libel claims and other similar issues, some former employers won’t be willing to speak about you beyond confirming job titles, hiring dates, and salaries. However, if you left a job on bad terms or frequently had clashes with your boss, there’s a chance that information could come out during the pre-employment screening process that might just alter your hiring chances.

6. Your background check pulled up incorrect information

Sometimes, you can do everything right and still have your employment chances derailed by a background check. Ultimately, not every background check is going to be 100% accurate. For instance, a criminal conviction might have been filed on your record from a felon who shares your name. Or perhaps you’re a victim of identity theft, and that fact has left your credit in ruins. For these reasons, it’s a good idea to do a test background check on yourself before heading into the interview. If you find any incorrect information, you can contact the appropriate courts or agencies to get everything fixed and put in proper order.

Also remember that if you do lose a job opportunity because of a background check, you have a right to know why. The employer needs to provide you with a written explanation for the decision, and you are legally permitted to request a free copy of the background check report that cost you the job. If the report was inaccurate, you can dispute the findings and get your name cleared so that you have a better shot at getting a job next time around.

10 THINGS EMPLOYERS MUST AVOID WHEN IT COMES TO OVERTIME PAY

Generally, unless you fall within a specific exemption, your employer is legally required to pay you time and a half for all overtime worked. However, as reported by AOL Jobs and USA Today, the number of lawsuits filed by employees alleging that they were owed overtime pay is skyrocketing. As an employment attorney, I’ve seen lots of maneuvers, but below are the 10 most common problems that I’ve seen employers use to avoid overtime pay:

1. Advising the employee that because he/she earns a salary, he/she isn’t entitled to overtime.

Many employers and most employees think that, once you’re paid on a salary basis, you lose your right to overtime pay. That isn’t the case. Unless you make at least $455 per week (there’s a bill pending in Congress to try to raise this amount), you don’t fall within any salary exemption. Plus, you still must fit within one of the exemptions to the Fair Labor Standards Act as well, or you must be paid for all your time.

2. Improperly classify the employee as an ‘independent contractor.’

Some people classified as independent contractors are really employees. If your company controls the time, place and manner of your work; if you can’t work for other companies, can’t hire your own assistants, answer to company work rules and the company sets your hours, the law would probably consider you an employee. If you signed an independent contractor agreement and think you’re misclassified, you are losing more than your overtime. You are also paying your company’s share of employment taxes.

3. Require employees to log in hours ‘off the clock.’

I’ve heard of employers that force employees to clock out for lunch, even if they work through lunch. Or they demand employees clock out and stay late. Maybe there’s no time clock at all, and you’re asked to sign a time-sheet every week saying you worked 8 hours a day. This is not always the best evidence of your classification as exempt vs. non-exempt. if you litigate and you signed a paper or clocked in and out, it could be claimed that you are lying about your overtime.

4. Combine non-exempt duties.

Even if you have an exempt job, some employers try to save money by cutting non-exempt jobs and giving those duties to exempt employees. Double the work, same pay. For example, if your managerial job also requires you to be the receptionist, you are probably entitled to overtime pay for your non-exempt duties.

5. Expect employees to be on-call.

If you have to jump anytime there’s an emergency and if you can’t use your “free” time freely, you may be entitled to be paid for your time on-call. If the company says you have to stay within a certain mileage from the office, that you must return calls within a short time (such that you can’t even go out and cut the grass or go to the movies should you so choose), or if the calls come in every 10 minutes so that doing anything else is impossible, you may be entitled to be paid overtime for your on-call time.

6. Give off-hours duties.

This is how it works: Employers require employees to arrive at the workplace several minutes before clocking in to put on a uniform or do other prep work, have before-hours or after-hours meetings, mandatory training, and other duties that are off the clock. If you’re in this situation, you may be entitled to be paid for any time you are mandated to be present at work. Truly voluntary training, such as going to an outside company to get a certification you want to increase your chances of promotion, even if the company pays for it, is probably not work time such that you’re entitled to be paid. If you’re told that failure to attend the training will result in some adverse consequences, it isn’t voluntary.

7. Expect the employee to do work from home.

If your job requires you to answer emails, respond to texts, or otherwise work from home after you leave, you are probably entitled to be paid for those hours. No, you can’t charge for time you took a shower, ate dinner, or watched TV, but you can charge for the time you actually spent working. A recent survey by Good Technology found that most Americans do an extra 30 hours of work per month from home.

8. Tell employees to wait before clocking in.

If your employer requires you to come in, only to make you wait until they need you before you’re allowed to clock in, you’re probably entitled to be paid for your waiting time. If you aren’t told you can leave the premises, you can’t do anything else like go shopping or eat lunch, and you must be available when the work comes in, you are working. If you work in the copy room and play online games while waiting for the next job to come in, you’re probably entitled to be paid for that time.

9. Require employees to volunteer.

Many companies are involved in civic and charitable work. They may ask for volunteers to help with, say building houses for Habitat for Humanity. If you can volunteer or not, without consequences, then you’re working for free. But if your employer requires you to participate, supervises your work, and if you will suffer consequences for not “volunteering,” you are likely required to be paid.

10. Pretend not to know employees are toiling through lunch.

Your employer may look the other way if you work through lunch or after you clock out. That doesn’t excuse the employer from paying overtime. They may claim they didn’t know, but if the company suffers or permits you to work extra hours, you must be paid. That’s why many companies have written policies that require discipline, even termination, for failing to report all hours worked.

“PIERCING THE VEIL” – ARE YOU APPROPRIATELY MAINTAINING YOUR LLC OR CORPORATION?

There are limits to how much liability protection an entity can serve to provide. Even though the presumption is that a legal entity such as an LLC or corporation is separate from the owners and management, i.e., “veil piercing” is rare, don’t shoot yourself in the foot by doing things, such as commingling business and personal funds, or failing to do things such as entity maintenance or appropriately title assets that would rebut this presumption.

Here is a brief snapshot of a few recent court cases throughout the country that have discussed “piercing the veil” and some of the factors that were considered:

In a case called Knopf v. Phillips (S.D.N.Y., 2016), which was decided last month (December 2016), the number one factor as to whether or not the “veil” of corporate/entity protection should be “pierced” was the disregard of corporate formalities. The court ruled that the plaintiffs adequately pleaded a claim for veil piercing/alter ego because the defendant had “abused the corporate form” to defraud the plaintiffs. Another factor which is often analyzed in these cases, including this one, is the fact that the defendant has “undercapitalized” his business as evidenced by the inability to pay debts, in conjunction with the fact that the defendant had diverted thousands of dollars from one entity to another entity despite the inability to pay its debts. The takeaway from this case is that if you’re going to setup an entity, take the time to treat it as a separate entity and be sure you have enough funds inside the business to service debts of the business.

A few months earlier (October 2016), 5^th Circuit Federal Court of Appeals, a case called Janvey applied some of the same analysis as in Knopf yet because of the facts, reached a different conclusion. In Janvey, it involved a parent company and a subsidiary and whether the parent company should be liable for the actions of the subsidiary. Here, the outcome was in favor of the parent company that the “veil” should not be pierced between the subsidiary and the parent company, and one of the factors the court looked at was how assets of the subsidiary were titled and how the subsidiary was operated. Had there been a disregard and failure to appropriately hold title of the subsidiaries assets in the name of the subsidiary rather than the parent company, or had the overall operations of the subsidiary collapsed into the parent company where it would have been indistinguishable to differentiate between the subsidiary’s business operations and the parent company’s operations, the court might have more seriously considered allowing the veil to be pierced. This is one reason why in the real estate context it is important to ensure that if a parent company with subsidiary’s is going to be utilized, that assets are appropriately held and maintained by the subsidiaries rather than everything in the name of the parent company.

A case in Ohio in November 2016 involved factors the court looked at such as, “lack of corporate records” and “disregard of corporate roles”, as well as the entity’s inability to pay its debts to due siphoning of funds for personal use. In this case, the business had been unable to pay its debts and was essentially insolvent at the time the plaintiff was injured by the acts of the business, so the court (appellate court) decided there was more than enough facts to allow a jury trial to make a determination whether to pierce the LLC/corporate veil. This case highlights the importance to keep corporate records such as annual minutes.

Lastly, a case out of California last year (2016) called Boeing v. Energia highlights the importance of properly maintaining entities with the state, holding annual meetings, and keeping corporate records. The defendant was a parent company which had setup multiple subsidiaries to hold various assets such as licenses, etc., and some of the main reasons the court disregarded the corporate veil was because the subsidiaries were not properly maintained (Delaware) in terms of annual filings and payment of franchise taxes, and also because there was a dearth of corporate meetings and records held and maintained by the subsidiary. In applying Delaware law, despite a court’s reluctance to pierce the veil, it may do so when a “parent and subsidiary operate as a single economic entity” and there is an “overall element of injustice or unfairness that is present”.

MY TAKE: Although a typical requirement for the veil of your entity to be pierced by a plaintiff or injured party is that the entity was used to perpetuate fraud, illegal acts, or unlawful behavior, you nevertheless don’t want to open up yourself to a “pierce the veil” claim for failure to appropriately maintain your entity. Undertake a brief meeting outlining in your ledger a financial or management decision you made during the course of the year and the impact you hope it will have on your company. Do this annually and note your position with the company, the time, date, and who else may have been present at the meeting. A little investment of time may save you a big headache down the road.

WFB LEGAL CONSULTING, INC.–A BEST ASSET PROTECTION Services Group

LAWYER for BUSINESS

INTEGRATING ASSET PROTECTION AND ESTATE PROTECTION PLANNING

Whether your concern is for your personal assets or your business, various tools exist to keep your property safe from tax collectors, accident victims, health-care providers, credit card issuers, business creditors, and creditors of others.

To insulate your property from such claims, you’ll have to evaluate each tool in terms of your own situation. You may decide that insurance and a Declaration of Homestead may be sufficient protection for your home because your exposure to a claim is low. For high exposure, you may want to create a business entity or an offshore trust to shield your assets. Remember, no asset protection tool is guaranteed to work, and you may have to adjust your asset protection strategies as your situation or the laws change.

Liability insurance is a must in any line of defense

Liability insurance is important in any plan for asset protection. You should consider purchasing or increasing umbrella coverage on your homeowners policy. For business-related liability, purchase or increase your liability coverage under your business insurance policy. Generally, the cost of the premiums for this type of coverage is minimal compared to what you might be required to pay under a court judgment should you ever be sued.

A Declaration of Homestead protects the family residence

Your primary residence may be your most significant asset. State law determines the creditor and judgment protection afforded a residence by way of a Declaration of Homestead, which varies greatly from state to state. For example, a state may provide a complete exemption for a residence (i.e., its entire value), a limited exemption (e.g., up to $100,000), or an exemption under certain circumstances (e.g., a judgment for medical bills). A Declaration of Homestead is easy to file. You pay a small fee, fill out a simple form, and file it at the agency where your deed is recorded.

Dividing assets between spouses can limit exposure to potential liability

Perhaps you work in an occupation or business that exposes you to greater potential liability than your spouse’s job does. If so, it may be a good idea to divide assets between you so that you keep only the income and assets from your job, while your spouse takes sole ownership of your investments and other valuable assets. Generally, your creditors can reach only those assets that are in your name.

 Business entities can provide two types of protection—shielding your personal assets from your business creditors and shielding business assets from your personal creditors

Consider using a corporation, limited partnership, or limited liability company (LLC) to operate the business. Such business entities shield the personal assets of the shareholders, limited partners, or LLC members from liabilities that arise from the business. The liability of these owners will be limited to the assets of the business.

Conversely, corporations, limited partnerships, and LLCs provide some protection from the personal creditors of a shareholder, limited partner, or member. In a corporation, a creditor of an individual owner is able to place a lien on, and eventually acquire, the shares of the debtor/shareholder, but would not have any rights greater than the rights conferred by the shares. In limited partnerships or LLCs, under most state laws, a creditor of a partner or member is entitled to obtain only a charging order with respect to the partner or member’s interest. The charging order gives the creditor the right to receive any distributions with respect to the interest. In all respects, the creditor is treated as a mere assignee and is not entitled to exercise any voting rights or other rights that the partner or member possesses.

Certain trusts can preserve trust assets from claims

People have used trusts to protect their assets for generations. The key to using a trust as an asset protection tool is that the trust must be irrevocable and become the owner of your property. Once given away, these assets are no longer yours and are not available to satisfy claims against you. To properly establish an asset protection trust, you generally must not keep any interest in the trust assets or control over the trust. There are some exceptions and I would advise consulting with an estate attorney to discover these options.

Trusts can also protect trust assets from potential creditors of the beneficiaries of the trust. The extent to which a beneficiary’s creditors can reach trust property depends on how much access the beneficiary has to the trust property. The more access the beneficiary has to the trust property, the more access the beneficiary’s creditors will have. Thus, the terms of the trust are critical.

There are many types of asset protection trusts, each having its own benefits and drawbacks. These trusts include:

• Spendthrift trusts
• Discretionary trusts
• Support trusts
• Blend trusts
• Personal trusts
• Self-settled trusts

Since certain claims can pierce domestic protective trusts (e.g., claims by a spouse or child for support and state or federal claims), you can bolster your protection by placing the trust in a foreign jurisdiction. Offshore or foreign trusts are established under, or made subject to, the laws of another country (e.g., the Bahamas, the Cayman Islands, Bermuda, Belize, Jersey, Liechtenstein, and the Cook Islands) that does not generally honor judgments made in the United States.

Beware of fraudulent transfers

The court will ignore transfers to an asset protection trust if:

• A creditor’s claim arose before you made the transfer
• You made the transfer with the intent to defraud a creditor
• You incurred debts without a reasonable expectation of paying them

EEOC INCREASES SCRUTINY OF EMPLOYER ACTIONS TAKEN AGAINST PRESCRIPTION DRUG USERS

Prescription drug abuse has made national news in the last few years.  In fact, prescription opioid abuse and [the] heroin epidemic claims the lives of tens of thousands of Americans each year. This “epidemic” is harming far too many Americans and their families.

This does not mean, however, that employers should not be mindful of federal and state disability laws that protect those taking prescription drugs for valid medical conditions.  Two recent lawsuits brought by the Equal Employment Opportunity Commission (EEOC) alleging disability discrimination claims in violation of the Americans with Disabilities Act (ADA) underscore the importance of engaging in an interactive process with job applicants and employees and providing reasonable accommodations to those taking prescription drugs for medical conditions.

Failed Drug Test Due to Valid Prescription Drug Use

In September 2016, the EEOC filed a lawsuit in a South Dakota federal court against a casino on behalf of a job applicant after her pre-employment drug test revealed a positive drug test result.  According to the EEOC, the applicant suffered from a back and neck impairment, which limited her ability to perform certain tasks, such as lifting and bending.  After receiving the positive test result, the casino withdrew her job offer.  The EEOC alleges that when the applicant tried to explain to the casino that the positive drug test was due to legally prescribed pain medication, even offering to provide documents to support this, the casino still refused to hire her.

The crux of the EEOC’s lawsuit is that the casino’s refusal to hire an applicant taking lawful prescription drugs due to a disability violated the ADA.  The lawsuit also challenged the casino’s blanket policy requiring all employees, regardless of whether they work in safety-sensitive positions, to disclose their prescription or non-prescription drug use.

Doctor’s Note Stated Treatment Included Pain Medication

Two weeks later, the EEOC filed a complaint against a regional medical center alleging it terminated a physician after learning about his use of narcotic drugs to treat his chronic pain. According to the lawsuit, which was filed in Georgia federal court, the physician provided the medical center with a letter from his doctor, which stated that he was undergoing treatment for a chronic pain condition that limited the functioning of his musculoskeletal and neurological systems. The letter also stated that the physician’s treatment plan required him to take prescribed pain medication and receive spinal injections.

After receiving this letter the medical center removed the physician from the schedule pending further evaluation of his condition.  The medical center then notified the physician of its intention to terminate his contract unless he resigned because the medical center believed he could not meet the requirement of his job duties due to his pain medications and spinal injections.  The EEOC’s complaint alleged that the physician could have performed his job safely and competently and therefore the medical center’s termination decision and purported failure to have any dialogue with the doctor about the issue violated the ADA.

Per the EEOC’s press release issued in conjunction with the filing of this action, “[e]mployers have an obligation to conduct individualized assessments when they have a concern about an employee’s ability to safely perform his or her job duties. … [The] EEOC will continue to hold employers accountable when they summarily dismiss employees based on unsubstantiated fears about a perceived disability.”

Implications for Employers

My take on all of this: Employers can lawfully test employees for prescription drug abuse and can regulate such abuse in the workplace, including the testing of pre-employment applicants.  The ADA specifically states that tests for illegal drug use are not medical examinations and are not evidence of discrimination against recovering drug abusers when used to ensure the individual has not resumed the illegal drug use.  If an employee uses a prescription drug that is not prescribed to him or her, this is considered illegal drug use and the employer can impose discipline for violating its policy against illegal drug use.

However, that said, I believe these cases serve as a reminder that employers should avoid making adverse decisions based on misperceptions or a lack of information about the effect of prescription drug use on the employees’ ability to actually perform their job duties.  Moreover, employers should take precautions before implementing blanket drug-testing policies that do not account for the need under the ADA to engage in an interactive process with individuals taking prescription medications and, if necessary, then provide reasonable accommodations.  Finally, these cases demonstrate the importance of ensuring that certain policies and practices, including requirements that employees report their prescription drug use, be limited to those working in safety-sensitive positions.

Side Note: Long-Term Shift of Essential Job Functions May Remove Them as Mandatory Qualifications:

 As some employers may or may not know, The Americans with Disabilities Act (ADA) only requires employers to provide accommodations that allow the disabled employee or applicant to perform the essential functions of the job. The employer is not required to shift or remove essential job functions whether or not such accommodation would be reasonable. However, a new, unpublished decision from the Sixth Circuit Court of Appeals warns employers that by voluntarily relieving an employee of the need to perform essential functions of his or her original job, it may eventually lose its ability to later disqualify the employee from work due to inability to carry out those tasks.

In Camp v. Bi-Lo, LLC, the plaintiff worked as a grocery clerk for the defendant for 38 years. Due to childhood scoliosis, he could not lift more than 35 pounds. Over the years of his employment, he was relieved of such lifting, which was shifted to other employees. When a new manager assumed supervision of the plaintiff, he discovered this limitation, and referred him to corporate human resources for an evaluation of his ability to safely perform the job. Human resources concluded that the plaintiff could not perform the essential job functions due to the lifting restriction, basing its conclusion on a job description prepared 30 years after he began working for the company.

On appeal in a 2-1 decision, the Sixth Circuit reversed the lower court’s dismissal of the ADA claim, remanding the suit for trial on the question of whether lifting heavier weights is really an essential function of the position. The court concluded that because the plaintiff had been relieved of such lifting duties for so many years, created a factual question over whether the lifting requirement truly was an essential job function.

My Point of view: Employers frequently shift essential job functions with the intent of allowing an employee to transition back to work from an injury or illness. By definition, light duty jobs involve reassignment of essential job functions. However as illustrated by this decision, long term removal of such essential functions may eliminate the employer’s ability to later use the employee’s inability to perform them as grounds for ending employment. Any light duty program should be temporary in nature. When that time expires, light duty should end, and the decision to reinstate the employee should be based on whether he or she is capable of performing all essential functions of the original job at that time, with or without reasonable accommodation. Remember, ADA claims may be brought in Federal Court in any State in the union.

UNDERSTANDING WAIVER OF DISCRIMINATION CLAIMS AND EMPLOYEE SEVERANCE AGREEMENTS

 I. INTRODUCTION

DOES A LIVING TRUST PROTECT YOUR ASSETS?

Creating a trust to holds assets can help the grantor while he is alive and continue to serve him after his death. A living trust is created during the grantor’s lifetime. It transfers title (ownership) of the grantor’s property into the trust to be managed by a trustee for the benefit of a designated beneficiary. There are different types of living trusts and each can protect assets in a different way — or not at all.

Revocable Trust

A revocable trust determines how the grantor’s property is managed and distributed both while he is alive and after his death. However, the grantor retains the right to amend or even end (revoke) the trust. However, this type of living trust doesn’t protect the assets against the grantor’s creditors or avoid estate taxes because the grantor retains ownership of the assets.

Irrevocable Trust

An irrevocable trust is a trust that cannot be amended without the beneficiary’s permission. When the grantor dies, the assets are immediately distributed to the trust’s beneficiaries. This type of trust protects assets from creditors because the grantor no longer owns the property, so it cannot be seized to pay the grantor’s debts. It also avoids estate taxes because when the grantor dies, he is not the owner of the property, so trust assets cannot be taxed as part of his estate. As an added benefit, assets in an irrevocable trust avoid capital gains taxes.

Medicaid Laws

Any assets that can be withdrawn from a trust are not protected under Medicaid law. If a grantor suffers a catastrophic illness and has the ability to withdraw assets from a trust, Medicaid can force him to end the trust, if it is a revocable one, in order to use trust property to pay for his care. In contrast, assets in an irrevocable trust are safe because the grantor no longer owns the property. An irrevocable trust is the only living trust that protects assets from Medicaid costs.

Spendthrift Trusts

A spendthrift trust is a type of irrevocable trust that limits a beneficiary’s access to the assets in the trust. It is often used for a beneficiary who is fiscally challenged and can’t control his own spending. The terms of the trust include strict rules that dictate how often the trustee will distribute payments (or other assets in the trust) to the beneficiary. Aside from these periodic payments, the beneficiary has absolutely no access to the trust. This ensures that all assets in a spendthrift trust are protected until they are distributed to the beneficiary. In other words, while the assets remain in the trust, a beneficiary’s creditors have no right to the assets in the event she defaults on a loan. The trust can also be used to protect assets from a beneficiary’s spouse in the event of divorce.

Can a Living Trust Protect a Home From a Lawsuit?

A living trust refers to any type of trust you create during your lifetime rather than having it take effect upon your death. Transferring the title of a home to a living trust will only protect it from a lawsuit judgment if the terms of the trust are irrevocable. However, most state trust laws allow attachment of the home by judgment creditors if the transfer is fraudulent.

Must Be Irrevocable

State trust laws recognize the trust as irrevocable if the grantor, who is the person creating the trust, permanently relinquishes all ownership interests and control over the home and other assets in the trust. Moreover, grantors of irrevocable living trusts have no authority to amend or cancel the trust document after the date of creation. In contrast, a revocable living trust allows the grantor to retain control over the trust assets, control distributions to beneficiaries or even the authority to cancel the trust. For purposes of protecting the home from lawsuit judgment creditors, you cannot retain any authority over the trust; otherwise, state laws will continue to treat you as the owner of the home, which then allows a judgment creditor to attach it.

Qualified Personal Residence Trust

The permanence of an irrevocable living trust makes it one of the more extreme asset protection strategies. An alternative option is to create an irrevocable qualified personal residence trust, or QPRT, which allows you to retain a tenancy interest in the home. With a QPRT, you still transfer title to your home, but you retain the right to reside in the home for the period you specify in the trust document. Your right to occupy the home is an interest that has value, but a QPRT remains an effective strategy for protecting the full ownership rights of the home from judgment creditors.

Protection to Beneficiaries

Since the living trust you create will identify beneficiaries who will eventually receive the benefits of ownership in the home, it’s important consider the potential for their own judgment creditors to attach the home in the future. You can eliminate this possibility by including a spendthrift clause in the trust document that prohibits the trustee from transferring title in the home to anyone but the beneficiaries. Therefore, you can allow beneficiaries full use of the home, but as long as the trust remains the legal owner, lawsuit judgment creditors of the beneficiaries have no claim against the home.

Fraudulent Transfers

One significant limitation to using an irrevocable living trust to protect your home from a lawsuit creditor exists if you transfer the title to the trust after the creditor obtains a legal judgment. An irrevocable living trust only protects the assets you transfer to the trust against future creditors. However, your existing creditors can still attach the trust assets by claiming your transfer was fraudulent, meaning you do it for the sole purpose of avoiding attachment by an existing creditor.

Also, be sure to see a lawyer for business to discuss the options that are specifically applicable to your goals and corresponding needs when forming your business entity, in order to get the best asset protection available–see link below:

To avoid unwanted costly litigation and to continue to insulate yourself from a lawsuit personally. read all the BEST ASSET PROTECTION articles.

POUR-OVER WILLS IN TANDEM WITH TRUSTS

Few things in law are exactly what they sound like, but a pour-over will is one. When you die, it essentially “pours” some of your assets into another estate-planning mechanism for distribution to your beneficiaries. Pour-over wills generally work in tandem with trusts. They address assets that — for one reason or another — you did not transfer to your trust.

Purpose

When you create a trust, you transfer ownership of your assets into it. Then, when you die, your trust transfers them to your beneficiaries according to your directions. Some assets might escape the process. You might acquire a new piece of property, then neglect to transfer the deed into the name of the trust before you die. Some assets are not suited to trust ownership. Others don’t involve a title or deed, such as your grandmother’s antique wedding ring, so officially transferring ownership may seem unnecessary. A pour-over will automatically transfers these remaining assets into your trust when you die. You don’t have to itemize each asset. That would defeat the purpose. You simply state that anything you own not included in your trust should transfer to your trust when you die. Without such a will, the probate court distributes them according to your state’s laws of intestate succession, as though you had died without a will or any estate planning at all. Your non-trust assets would go to your closest living relatives, even if you didn’t want those relatives to receive them.

Probate

Your trust is usually the sole beneficiary of your pour-over will. Therefore, the assets caught by your pour-over will and transferred to your trust must usually pass through probate. Probate is the legal process that changes ownership from you to your trust. However, some exceptions exist. Some states do not require probate of small estates with values under a certain limit. For example, in California, the limit is $100,000. Because you’re not transferring all the assets in your pour-over will, but only the portion you did not place in your trust, their value might easily fall below the $100,000 threshold. Other states offer simplified probate procedures for small estates. Depending on the type of assets your pour-over will must move from your name into your trust’s name, if their value is not significant, the probate process might simply be a brief legal formality.

Variations

Your pour-over will is a document of your own creation so you can tailor it to fit your own estate needs. You’re not legally required to transfer ownership of your other assets to your trust. A pour-over will’s primary purpose is to catch assets you didn’t place in your trust so you can avoid your state’s laws of intestate succession. Instead, where they go is up to you. You can bypass your trust entirely and leave the assets caught in your pour-over will to named beneficiaries. You can also use a pour-over will to name guardians for your children. This issue is not normally something your trust documents would address. Typically then, when an attorney prepares your living trust, he/she will create a pour-over will at the same time as part of your trust documents.

Short Review

A pour-over will is like any other will, except that it has only one primary beneficiary, which is the testator’s living trust.  The pour-over will transfers assets to the trust to ensure that these assets will be subject to the distribution plan in the trust and will also receive the benefit of trust’s tax reduction provisions.
Why is it called a pour-over will?

Because it “pours” assets into the trust.

What assets are controlled by a pour-over will?

The will controls only probate assets, i.e., assets that are not in a trust, not in joint tenancy, not being inherited by a surviving spouse, and not in an IRA or 401K.  Probate assets are usually titled in the name of the decedent only.  However, probate assets can also be found in situations in which a mistake has been made, such as failing to name beneficiaries for an IRA or 401K.

Does a pour-over will have to go through probate?

That depends on the value of the probate assets that are controlled by the will.  If the probate assets add to up to more than $150,000, a probate is required.  If the amount does not exceed $150,000, the assets can be transferred to the trust by using declarations as authorized by California Probate Code section 13100.

What else does the pour-over will do beside transfer assets to the trust?

It also distributes tangible personal property, such as furniture, jewelry, clothing, etc., to the testator’s beneficiaries.  It nominates executors and guardians for the testator’s minor children.  The pour-over will also revokes prior wills.  The pour-over will might include other provisions, such as tax allocation clauses.

CALIFORNIA LAWS ON EMPLOYER USE OF AN EMPLOYEE’S ARREST AND CONVICTION RECORDS

A majority of employers perform criminal background checks when hiring for at least some positions. However, job seekers with criminal records have some legal rights. Both Federal and California laws place limits on how employers can use these records in making job decisions.

       1. California Protections for Job Seekers With Criminal Records

State laws provide a variety of protections for job seekers with criminal records. California places more restrictions on employers than many others. For example, California employers may not ask applicants about a prior arrest that did not lead to conviction, nor may they ask about an applicant’s referral to or participation in a pretrial or post-trial diversion program. Employers also may not seek or use records relating to these arrests. However, the law allows employers to ask about arrests for which the applicant is awaiting trial (for example, because the applicant is out on bail or has been released on his or her own recognizance pending trial).

California also prohibits employers from asking about convictions that have been sealed, expunged, or statutorily eradicated. Employers also may not ask about certain older marijuana offenses. However, an employer may ask job-related questions relating to a conviction. (California’s Department of Fair Employment and Housing publishes a guide on these and other limits on employer questions, Employment Inquiries.)

       2. Federal Protections for Applicants With a Criminal Record

There are two federal laws that protect applicants with criminal records, at least in some situations. The Fair Credit Reporting Act (FCRA) addresses the problem of accuracy. Criminal background checks may include errors, such as information on convictions that have been expunged, incomplete information (for example, failing to report that the person was exonerated of a crime or that charges were dropped), misclassification of crimes, multiple listings of the same offense, and even records that belong to someone else entirely.

The FCRA imposes obligations on employers who request criminal background checks and on the firms that provide them. Employers must do all of the following:

*Get the applicants written consent ahead of time.
*Tell the applicant if the employer intends to disqualify him or her based on the contents of the report. *The employer must also give the applicant a copy of the report.
*Notify the applicant after the employer makes a final decision not to hire him or her based on the information in the report.

Firms that run background checks also have obligations under the FCRA. They must take reasonable steps to make sure that the information they provide is accurate and up to date. If an applicant disputes the contents of the report, the agency must conduct a reasonable investigation. If the investigation reveals that the report was incorrect, the agency must inform the applicant and any other person or company to whom it has provided the report.

Title VII of the Civil Rights Act of 1964 also protects applicants and employees from discrimination in every aspect of employment, including screening practices and hiring. Therefore, because arrest and incarceration rates are so much higher for African Americans and Latinos for example, an employer that adopts a blanket policy of excluding all applicants with a criminal record might be charged with race discrimination.

The Equal Employment Opportunity Commission (EEOC) has issued guidance explaining how employers can screen out applicants whose criminal records pose an unreasonable risk without engaging in discrimination. In deciding whether a particular offense should be disqualifying, employers must consider:

*the nature and gravity of the criminal offense or conduct
*how much time has passed since the offense or sentence, and
*the nature of the job (including where it is performed, how much supervision and interaction with others the employee will have).

The EEOC has said that employers should give applicants with a record an opportunity to explain the circumstances and provide mitigating information showing that the employee should not be excluded based on the offense.

WHAT’S THE STORY ON THE $250,000/$500,000 HOME SALE TAX EXCLUSION? 

 https://bottledbusinesssense.com/monthly-message-blog/

A LEGAL GUIDE TO BUYING A CALIFORNIA BUSINESS

Buying A California Business? Here is a Legal Guide of Things to Look For and Do.  (Contribution by Melissa C. Marsh)

• contracts which affect the property, such as: equipment leases, maintenance contracts and similar agreements;
• taxes relating to the operation of the property, including: income taxes, payroll taxes, sales taxes, and real property taxes;
• employee wages and other benefits;
• amounts owed to suppliers; and
• existing obligations to both present and past customers.

AN ESTATE TRUSTEE’S STANDARD OF CARE

Trustee standard of care also is a constantly evolving area of law. Generally, Courts construe the trustee’s standard to be very high. Initially, the beneficiary does have the right, in most, but not necessarily all circumstances, to demand that the trustee disclose trust-related information. At that point, if the beneficiary believes that an impropriety has occurred, the beneficiary must, to the extent possible, expressly state the nature of the dispute or impropriety. The Courts are not uniform in determining the extent to which the beneficiary must initially present, if at all, evidence of the trustee’s alleged wrongdoing. Assuming that the beneficiary has stated a potentially valid claim, it is then the burden of the trustee to refute that claim with sufficient evidence. Assuming that the trustee can present sufficient evidence tending to refute the claimed impropriety, the beneficiary will want to present evidence establishing trustee wrongdoing.

The general standard of trustee care is stated in Cal. Probate Code §16040. The trustee should administer the trust with the reasonable care, skill, and caution that a prudent person would under the current circumstances to accomplish the purposes of the trust as determined from the trust wording. A trustee who has special skills is required to use those skills.

Generally, the trustee should not delegate responsibilities that the trustee can reasonably be expected to perform. However, in practice it is not uncommon for trustees to delegate certain responsibilities, and, by statute, in appropriate circumstances a trustee can delegate specific duties. Some of the responsibilities that might be delegated are investment, tax, legal and accounting in nature. The trustee must prudently select which agents to use, and must oversee those agents.

Confidentiality, self-interest, and impartiality: A trustee has a duty of confidentiality. The trustee has a general duty, but not in all circumstances, not to disclose to a third person information about the trust and the beneficiaries. However, the trustee might need to disclose certain information to properly administer the trust. More important, a trustee must not put his or her interests above those of the trust or the beneficiaries, and should avoid conflicts of interest with the trust and the beneficiaries. This can be a difficult area because it is absolutely permissible and common for a trustee also to be one of several beneficiaries. Although not a legal requirement, it has been my experience that a trustee should try to avoid even the appearance of self-dealing, or that he or she has placed his or her interests above those of the trust or beneficiaries. If potential conflicts exist, often disputes can be avoided by obtaining prior beneficiary or Court approval of the action to be taken. The trustee should act impartially between the competing interests of the various beneficiaries. Unless the trust specifies otherwise, the trustee should not favor a particular beneficiary or class of beneficiaries.

 Discretionary powers

 A trust will typically contain provisions that give the trustee discretionary powers, that is, the power to use his or her own judgment in specific circumstances. The amount of discretion is strictly construed from the language in the trust document and the intent of the trustor. Be cautious, however—even if the trust provides sole, absolute or uncontrolled discretion, Courts still require the trustee to act within the fiduciary standards and not in bad faith or in disregard of the purposes of the trust. In other words, if the issue of a trustee’s discretion is presented to the Court, the Judge will make a determination based on his or her own evaluation. Unless limited by the terms of the trust, the trustee also has other statutory powers. You should review the powers and limitations specified in the trust document, and also the powers listed at Probate Code §§16200-16249.

Co-trustees

 Some trusts have co-trustees, that is, a trust that has two or more people acting as trustees at the same time. Unless the trust provides otherwise, co-trustees must act unanimously. However, the trust can allocate powers unequally between co-trustees. And, in limited circumstances if a co-trustee is unavailable, the remaining co-trustees may act. If the co-trustees are stalemated on a decision, one or more of the co-trustees can file a Court petition for instructions. A co-trustee can be liable for a breach of duty by a co-trustee.

Investments and management

 The trustee has the duty to invest trust property for the benefit of the beneficiaries, subject to restrictions or limitations stated in the trust. The trustee’s investment powers are provided by the terms of the trust. If not derived from the trust, the investment powers are also derived by statute, case law and the factual circumstances. Generally, the trustee has the duty to make trust assets economically productive.

The trustee is subject to the Uniform Prudent Investor Act, unless the trust provides for a greater or lesser standard of care. A trustee must invest and manage the trust assets as a prudent investor would, by considering the purposes, terms, distribution requirements, and other circumstances of the trust. The trustee must exercise reasonable care, skill, and caution. A trustee’s investment and management decisions relating to individual assets and courses of action are evaluated in the context of the trust’s portfolio as a whole and as a part of an overall investment strategy reasonably suited to the trust’s risk and return objectives. Unless the trust states otherwise, the trustee has a duty to invest trust property, preserve it, and make it productive.

The trustee must consider the interests and needs of all beneficiaries, income and remainder, when making investment decisions. The beneficiaries may have conflicting interests. When two or more income beneficiaries have different personal income tax brackets, generally the trustee should strike a balance between them when determining how much to invest in certain assets. However, the trustee might be allowed to prefer one class of beneficiaries over another if the trust terms direct—this can be a difficult area and cause litigation concerns.

Accountings and information

 The general rule is that the trustee is required to keep the beneficiaries reasonably informed about the trust and its administration. However, there are important exceptions. Upon reasonable request by a beneficiary, the trustee must provide the beneficiary with a report of the information relating to the assets, liabilities, receipts, and disbursements of the trust, the acts of the trustee, and the particular terms of the trust that are relevant to the beneficiary’s interest.

Probate Code §16062 requires the trustee to provide an accounting at least annually, at termination of the trust, and upon a change of trustee to each beneficiary to whom current distribution of income or principal is authorized. However, the accounting or information might not be required if waived by the terms of the trust or the beneficiary, or the trust in question is revocable. The trustee must maintain proper accounts. Accounting requirements are beyond the scope of this discussion—for example, generally, the records might be required to differentiate between potentially confusing accounting aspects such as income and principal allocations.

ACCOMODATIONS IN THE WORKPLACE UNDER THE AMERICANS WITH DISABILITIES ACT (ADA)

The Americans with Disabilities Act (ADA) prohibits employment discrimination on the basis of workers’ disabilities. The ADA also requires employers to provide reasonable accommodations — changes to the workplace or job — to allow employees with disabilities to do their jobs.

A reasonable accommodation is assistance or changes to a position or workplace that will enable an employee to do his or her job despite having a disability. Under the ADA, employers are required to provide reasonable accommodations to qualified employees with disabilities, unless doing so would pose an undue hardship. Qualified employees are those who hold the necessary degrees, skills, and experience for the job; and who can perform its essential functions, with or without an accommodation.

Examples of accommodations include:
• making existing facilities usable by disabled employees—for example, by modifying the height of desks and equipment, installing computer screen magnifiers, or installing telecommunications for the deaf
• restructuring jobs—for example, allowing a ten-hour/four-day workweek so that a worker can receive weekly medical treatments
• modifying exams and training material—for example, allowing more time for taking an exam, or allowing it to be taken orally instead of in writing
• providing a reasonable amount of additional unpaid leave for medical treatment
• hiring readers or interpreters to assist an employee
• providing temporary workplace specialists to assist in training, and
• transferring an employee to the same job in another location to obtain better medical care.

These are just a few possible accommodations. The possibilities are limited only by an employee’s and employer’s imaginations—and the reality that one or more of these accommodations might be financially impossible in a particular workplace. As one might imagine, the ADA has spawned yet another crop of workplace experts, all eager to give tips to employers on what they must do to comply with the law. Most offer some type of checklist or list of steps to take to help meet the ADA’s provisions.

In truth, the checklists are most valuable for employees who want to get or keep a job. If you have a disability, you will be in the best possible bargaining position if you approach a potential employer with answers to the questions on their list.

Here are some things to ponder:
• Analyze the job you want and isolate its essential functions.
• Write down precisely what job-related limitations your condition imposes and note how they can be overcome by accommodations.
• Identify potential accommodations and assess how effective each would be in allowing you to perform the job.
• Estimate how long each accommodation could be used before a change would be required.
• Document all aspects of the accommodation—including cost and availability.

The ADA does not require employers to make accommodations that would cause them an undue hardship: significant difficulty or expense. To show that a particular accommodation would present an undue hardship, an employer would have to demonstrate that it was too costly, extensive, or disruptive to be adopted in that workplace.

The Equal Employment Opportunity Commission (EEOC), in its role as the federal agency responsible for enforcing the ADA, has set out some of the factors that will determine whether a particular accommodation presents an undue hardship on a particular employer:

• the nature and cost of the accommodation
• the financial resources of the employer—a large employer, obviously, reasonably being asked to foot a larger bill for accommodations than a mom and pop business
• the nature of the business, including size, composition, and structure, and
• accommodation costs already incurred in a workplace.

It is not easy for employers to prove that an accommodation is an undue hardship, as financial difficulty alone is not usually sufficient. Courts will look at other sources of money, including tax credits and deductions available for making some accommodations as well as the disabled employee’s willingness to pay for all or part of the costs.

THE 5 KEY STEPS TO CREATING YOUR ESTATE PLAN

The Basic Facts:

A living trust is a legal entity that can own property and direct distribution of that property after a person’s death, or if they become incapacitated.
One of the primary benefits of a living trust is that it isn’t subject to probate, or its associated costs and delays.
If you establish a trust, you (known as the grantor or settlor) appoint yourself as the initial trustee and primary beneficiary of the trust. You retain full and complete control over the property during your lifetime. In the living trust document, you appoint the individual(s) and/or entities that will take on the role as successor trustee when you can no longer act as the initial trustee. The trustee manages and distributes the trust assets according to the terms of the trust.

Probate:

When a person dies, the property from his estate can be transferred to the intended beneficiaries via a will. Probate is the process of properly transferring the estate to the rightful beneficiaries. This process is also used to collect any taxes due on the transfer of the property.

Living Trust Vs. Will:

A living trust is sometimes referred to as a “will substitute.” Although, in some respects, it does take the place of a will, a pour-over will is still necessary to distribute assets left outside the trust, as well as to nominate guardians for minor children. This type of will is used in conjunction with a trust—not as a trust substitute.
However, a will by itself only becomes effective at your death. A will does not avoid probate and does not protect you or the management of your assets in the event of your incapacity.

STEP 1: Identifying Your Estate Planning Goals:
Your overall estate planning goals are unique and any trust you create should accurately reflect them. Here are the critical reasons to consider a living trust: finances; probate avoidance; incapacity planning; and the ability to control assets after death.
Financial Cost
A living trust lets your loved ones avoid the legal costs associated with probate. It can also reduce, or even eliminate, any estate tax liability by properly using your estate tax exemption amount to the fullest extent. The current federal estate tax rate is assessed against the estate (as opposed to your designated beneficiaries) based upon the net value of the property transferred at your death, less the applicable estate tax exemption amount.
Because we have an estate tax system (not an inheritance tax system) at the federal and state levels, the beneficiary doesn’t pay taxes on the assets. Taxes may ultimately reduce the total amount the beneficiary receives, but the taxes don’t come out of the beneficiary’s pocket directly. Rather, they are paid out of the estate before the beneficiary receives the property.
Probate avoidance
Avoiding probate is in many ways linked with financial motivations. However, aside from wanting to avoid the legal fees that can come with probate administration, many people prefer to avoid probate so they can keep the distribution of their assets private. All information regarding your assets transferred through probate will become a matter of public record for anyone to see. Furthermore, probate can be a very lengthy process (averaging a year or more in California, for example). So, if you want your beneficiaries to have access to your assets sooner, and without the need for court involvement or approval, a living trust is clearly the best recourse. Remember: a will by itself does not avoid probate.
Incapacity planning
As the average life expectancy continues to rise, so does the likelihood that at some point you’ll become incapacitated. A will comes into effect only after your death. In contrast, through a Durable Power of Attorney, a designated trustee of your living trust can take control of your assets during your lifetime.
A well-drafted living trust will include disability/incapacity planning provisions and is designed to work in conjunction with a Durable Power of Attorney (POA). A POA should always be part of your estate planning package.
Retained control after death
A living trust lets you include further planning for minor children and for special assets and situations. You can also provide creditor and predator protection for surviving beneficiaries, which is difficult to accomplish through a standard will. For example, you can establish:
• Provisions creating an inheritance protection trust, which can last for the lifetime of the beneficiary and prevent those assets intended for the beneficiary from being included in lawsuits against the beneficiary. An inheritance protection trust can also protect the assets from the beneficiary’s spouse in the event of a divorce.
• Provisions to protect the beneficiary from himself. As an example, these provisions might allow trustee discretion when the beneficiary has a drug or alcohol problem.
• Provisions to create a special needs trust for any beneficiary who becomes disabled after the living trust has been executed, but before the trust assets are distributed. This would make certain that distributions to the special needs beneficiary would not make them ineligible for government assistance such as Social Security Death Index (SSDI) payments.
• Provisions that protect the trust assets should the surviving spouse remarry.

STEP 2: Identify The Parties:
Perhaps the most important decisions to make when it comes to creating a living trust is the choice of your successor trustee(s) and beneficiaries. Usually, when someone is looking to establish a living trust, they have a general idea to who they want to leave their assets. However, when it comes to selecting the person (or entity) who will be responsible for distributing the assets, there isn’t always an obvious choice.
Before executing a living trust, you should have a clear understanding of the powers and responsibilities you’ll be granting the trustee. Administering a trust can be complicated and time-consuming for the trustee. You’ll do yourself and your beneficiaries a disservice by selecting someone who isn’t up to the challenge.
A successor trustee doesn’t have to be a relative, but they must be someone you can trust completely. Family dynamics play an important role in the selection process, and you are the expert when it comes to your own family.
Blended families (e.g., second marriages, children from a previous relationship), same-sex couples, or families with no children, often have more difficulty in this stage of planning and are encouraged to seek legal counsel for guidance.
In many cases, a corporate trustee such as a trust company or a private fiduciary is the appropriate choice. Many financial firms and banks offer trust companies for a fee.

STEP 3: Determine How To Draft The Document:
There is a plethora of “do-it-yourself” trust-drafting pundits and online fill-in-the-blank solutions available for a fraction of the cost you’d pay for professional assistance. The drawback to these tools is that you’re creating a binding legal document without obtaining any legal advice specific to your situation. Most people create do-it-yourself trusts only to visit an attorney later with the expectation that the attorney will correct any deficiencies in the document with a simple amendment. This usually doesn’t work because most attorneys won’t take on the liability of having their name attached to the original trust. Instead, the attorney will most likely require a complete restatement of the trust, which often costs the same as if you’d had the attorney draft the trust in the first place.
Many estate planning attorneys offer a low-cost or free initial consultation, and it makes sense to take advantage of this consultation to determine your next steps. Retaining a qualified attorney will always save your estate money in the long run.

STEP 4: Funding The Trust:
A living trust only avoids probate to the extent that it is properly funded, i.e., that your trust includes as many of your assets as possible. If one of your motivations for creating a living trust is probate avoidance, you should make sure that the trust is funded with all your assets that would otherwise pass through probate. Typically, the critical asset to transfer into the living trust is any real estate you own. But you should also transfer your personal property, bank accounts, brokerage accounts, business interests, etc.
By the way, transferring your primary residence into a living trust doesn’t create a property tax reassessment in California, but you must file a preliminary change of ownership and the appropriate deed registering the transfer with the applicable county recorder. You can do the additional trust funding without professional help, but it often makes sense to have an attorney advise you regarding which assets should or should not be transferred.

STEP 5: Maintenance of The Trust:
Over time, there are going to be items you’ll want to update or change with respect to your trust. Common events that should prompt you to review and revise your trust document include (but are not limited to): marriage, divorce, birth in the family, death in the family, purchase of new real estate, refinance of existing real estate, change in the tax laws relevant to your trust, and significant increases in your assets. You should routinely review your document every three to five years.
REMEMBER PLEASE: Your estate plan shouldn’t end with the living trust, but rather begin there. At a minimum, your plan should include the following documents:
Pour-Over Will: This will directs that any assets you did not transfer to your living trust during your lifetime should be transferred to the trust and distributed according to the terms of your trust at your death. In addition, it should contain your nominations for guardians of any minor children in your care.
Durable Power of Attorney for Finances: This document authorizes your agent to transfer property to your trust and manage your financial affairs should you become unable to manage them yourself.
Power of Attorney for Health Care: Also referred to as a “Health Care Directive,” this document authorizes your designated agent to make medical decisions on your behalf when you are not able to. This document also typically contains your directions regarding prolonging life by artificial means in the event you become diagnosed with a terminal condition.
HIPAA Waiver: Under the Health Insurance Portability and Accountability Act of 1996 (HIPAA), hospitals, physicians, and other health care providers must take certain measures to protect patient information. A HIPAA waiver gives them permission to release your health information and medical records to people you designate.
Assignment to Trust: This document funds your trust with home and your personal belongings such as your household furnishings, artwork, jewelry, etc. It establishes your clear intention that you want to have your personal belongings distributed upon death according to the terms of your trust.
Certificate of Trust: This is a document you can give to financial institutions and others when they request a copy of your trust. It keeps the personal and financial information in your trust private while verifying that you actually have a trust.

POWERS OF ATTORNEY GENERALLY: WHEN AND HOW TO USE THEM.

What is a power of attorney?

A power of attorney is a contract between the “principal” and the “attorney in fact,” usually called the “agent.” The durable power of attorney is the most important estate-planning tool the attorney has, allowing the principal to appoint the person of his choice to make important financial and health-care decisions. It also allows the principal to give guidance in the exercise of those decisions.

Why is a power of attorney so important?

A will only becomes effective when the person making it dies, and a trust only applies to the person’s property; but a power of attorney is effective while the principal is living and often avoids court involvement in the family’s affairs. Without a power of attorney, it may be necessary to seek a court appointment to pay bills or manage property. Even more importantly, guardianship may be necessary to protect an incapacitated patient from bad treatment in a health- care facility.

An incompetent patient is under the complete control of a hospital or nursing home administrator. Family members and significant others can express their desires, but without guardianship or power of attorney they have little authority to enforce their decisions. This is a fact that many persons do not know. They often become complacent during periods when relations between the care provider and the family are friendly. However, if care at the facility fails to meet the family’s expectations or if there is a disagreement over what kind of treatment the patient should receive, the lack of a well-drafted power of attorney can be disastrous.

Because of the importance of this document, it should not be prepared without careful review of all provisions, nor executed without careful consideration and counseling. The attorney must particularly stress the responsibility borne by the agent. The attorney must also be alert to potential abuses of the power of attorney and decline to participate in either drafting or execution if it appears that an incompetent principal will be induced to sign a power of attorney.

Persons who sign powers of attorney do so out of a desire for privacy and to avoid court supervision of their affairs. They are also exercising a private right to contract. The powers granted may be durable–continuing despite disability–or springing–exercisable only on disability. Some attorneys recommend a springing power of attorney to avoid involving the agent in the principal’s affairs before the principal becomes incompetent. However, a springing power can be difficult to exercise and may leave a principal who is mentally competent but physically incapacitated without an advocate. For this reason the attorney may offer an immediate power of attorney that includes health powers so that the agent can act for the principal before the principal becomes unable to participate in medical decisions.

Why do powers of attorney include such long lists of powers?

Powers of attorney are strictly construed. A general grant of “all powers, not limited to the following” will add nothing to the laundry list of powers set forth, in most states. For example, a bank may require that the power of attorney specifically grant the power to deposit or withdraw before the bank will allow the agent to do banking. Therefore it is desirable to make the power of attorney detailed in naming specific powers.

Can the agent under a power of attorney make gifts for the principal?

The construction of a power of attorney is particularly strict relating to gifts and estate-planning. Under the general rule, an agent may not make gifts nor change the principal’s estate plan without an express authorization in the power of attorney. Although a recent California case upheld a gift of the principal’s home by an agent to herself, the extenuating circumstances point out the difficulty of justifying self-gifts without explicit authorization in the power of attorney. After the agent signed and recorded the transfer, the principal took several actions tending to show that he knew and approved of the transfer: he confirmed his intentions in a conversation with a County Recorder’s employee, he acknowledged receiving the deed in the mail after recording, and he had conversations with several disinterested individuals in which he described the transaction and his involvement [Estate of Stephens, 122 Cal.Rptr.2d 358 (Cal. 2002)]. Without such evidence, gifts by an agent to himself or herself would be likely to be overturned, if challenged.

What can the agent do if someone refuses to respect the power of attorney?

Banks, stock brokers, hospitals, and other third parties have the right to question the validity of a power of attorney. After all, they may be liable for damages if they negligently accept an invalid power of attorney and their customer or patient suffers a loss. Therefore, agents often get turned away when they try to use their powers at banks, credit unions, stock brokers, and other places. The agent should not just give up if the power of attorney is legitimate and he or she is justified in exercising the powers granted.

When the person to whom a power of attorney is presented is unfamiliar with the document or does not understand the agent’s right to act for the principal, a letter from an attorney often solves the problem. A thoughtful, yet sternly-worded, letter explaining the agent’s authority to act, requesting that the employee refer the matter to the institution’s legal department sometimes prompts the employee to decide to allow the agent to act for the principal.

Sometimes, the problem is that the power of attorney is stale. This just means that it is older than the bank officer or hospital administrator is accustomed to. A power of attorney does not expire, unless an expiration date is written into the document. However, if a bank officer is seeing a power of attorney that is a dozen years old for the first time, he or she may wonder whether it is still valid. A power of attorney that is more than 60 days old will not be accepted by most stock brokers. However, the fact that the power of attorney is older than the third party would like to see does not mean the power of attorney is no good. An attorney can probably cure the problem for the agent.

A stale power of attorney can be refreshed in several ways. One is to have the agent sign an affidavit that he or she is still authorized to act for the principal. An attorney can also sign an affidavit showing that the power of attorney is still valid.
For stock transactions, a Medallion signature is required. This does not mean that the original power of attorney must have had the principal’s signature guaranteed. It usually means only that the agent’s signature on the stock transfer instrument must have a Medallion guarantee.

Is a photocopy of a power of attorney valid?

Most powers of attorney include the following language: “A photocopy of this signed original shall be deemed to be, and should be accepted as, an original.” A copy of a power of attorney that includes this provision will be accepted for most routine uses. However, a real estate transaction will usually require an original signature and many agencies and institutions will demand to see the original. Therefore, it is smart to execute two or three original powers of attorney when doing one. That way, the agent is not out of business if a one-and-only original is lost or destroyed. Besides, the additional cost of doing two or three extra originals is small by comparison.

A QUICK GUIDE TO BUSINESS DEBT LIABILITY

Whether you can be held personally liable for the debts of your business depends on the structure of your business and how it was formed. Read on to learn more about when you are personally liable for business debts and when you are not.
Sole Proprietorship
You are likely a sole proprietor if you are the only owner of your business and you have not incorporated or set up a specific form of business entity for it. A sole proprietorship is not a separate legal entity. You and your business are considered the same and are equally liable for debts incurred by the business.
Since a sole proprietorship does not offer limited liability to its owner, creditors of the business can go after your personal assets in addition to business assets. This means that if the business does not have sufficient assets, creditors may sue you and try to collect the debt by taking your house, car, or other personal property.
Partnership
A partnership is an unincorporated business entity owned by two or more individuals. There are several types of partnerships.

General Partnership
A general partnership can be automatically created without any paperwork if two or more people agree to carry on a business or activity for profit. Each partner is considered a general partner and is personally liable for the debts of the partnership. If your business is a general partnership, you will be responsible for the obligations of the business.
Limited Partnership
In a limited partnership there is at least one general partner and at least one limited partner. The general partner is personally liable for partnership debts while the limited partner is not. This means creditors can collect from the personal assets of the general partner but not the limited partner.
Limited Liability Partnership (LLP)
An LLP is designed to shield all partners from personal liability for the debts of the business. In some states all partners enjoy limited liability but there are states that require an LLP to have at least one general partner. Also, in certain states the liability protection of the LLP only applies to negligence claims so all partners may still be liable for business debts arising out of a contract (such as business loans or credit cards).
Corporation
A corporation is an incorporated entity designed to limit the liability of its owners (called shareholders). Generally, shareholders are not personally liable for the debts of the corporation. Creditors can only collect on their debts by going after the assets of the corporation.
Shareholders will usually only be on the hook if they cosigned or personally guaranteed the corporation’s debts. However, shareholders may also be held liable if a creditor can prove corporate formalities were not followed, shareholders commingled personal and business funds, or the corporation was just a shell designed to shield liability. This is called piercing the corporate veil.

Limited Liability Company (LLC)
Similar to a corporation, an LLC offers limited liability to its owners (called members). Generally, members are not liable for the debts of the LLC unless they cosigned or guaranteed the debt personally. However, like a corporation, creditors may also be able to go after the members’ personal assets by piercing the corporate veil.

WHAT ARE SOME OF THE ESSENTIAL DIFFERENCES BETWEEN A CORPORATION, A LIMITED LIABILITY COMPANY (LLC), AND A LIMITED PARTNERSHIP?

Generally speaking, the main difference between an LLC and a partnership is that LLC owners are not personally liable for the company’s debts and liabilities. This means that creditors of the LLC usually cannot go after the owners’ personal assets to pay off LLC debts. Partners, on the other hand, do not receive this limited liability protection unless they are designated “limited” partners in their partnership agreement.

Also, owners of limited liability companies must file formal articles of organization with their state’s LLC filing office, pay a filing fee, and comply with certain other state filing requirements before they open for business. By contrast, people who form a partnership don’t need to file any formal paperwork or pay any special fees.

LLCs and partnerships are almost identical when it comes to taxation, however. In both types of businesses, the owners report business income or losses on their personal tax returns; the business itself does not pay tax on this money. In fact, LLC and partnerships file the same informational tax return with the IRS (Form 1065) and distribute the same schedules to the business’s owners (Schedule K-1, which lists each owner’s share of income).

The owners of a corporation are the shareholders. The owners of an LLC are its members. Beyond the name differences, there are other substantial differences between the two. An LLC has complete freedom to distribute its ownership stake to its members without any regard to a member’s capital contribution to an LLC. This becomes important when profits are distributed to each member. Although a certain member may not have invested as much as another member, an LLC’s operating agreement may specify that all members receive an equal share of the profits.

Be sure to see an attorney to discuss the options that are specifically applicable to your goals and corresponding needs—AND, see also:

http://www.avvo.com/legal-guides/ugc/business-entity-comparisons

CAN AN EMPLOYEE BE MADE TO WORK DURING LUNCH BREAKS?  

Yes, your employer can require that you remain on its premises during your meal period, even if you are relieved of all work duties. However if that occurs, you are being denied your time for your own purposes and in effect remain under the employer’s control and thus, the meal period must be paid. Minor exceptions to this general rule exist under IWC Order 5-2001 regarding healthcare workers. Pursuant to the Industrial Welfare Commission Wage Orders, if you are required to eat on the premises, a suitable place for that purpose must be designated. “Suitable” means a sheltered place with facilities available for securing hot food and drink or for heating food or drink, and for consuming such food and drink.

Furthermore, It is possible for an employer to force any employee to work through lunch, however for employees who are both Exempt and Salaried, hours worked do not matter, including working through lunch. If we instead have non-exempt hourly employees with a working lunch, the key phrase is “working”. These non-exempt employees have not been relieved of all duties, and have not been allowed to leave the premises. They not only must be paid for lunch as time worked, but the employer may also be subject to a fine.

THE ADVANTAGES OF HAVING A CA LLC

A California limited liability company (LLC) is probably the most flexible entity choice in terms of management and structuring economic sharing arrangements among the members. A California LLC also offers the following advantages:

• Personal limited liability protection for all members, such that unless a member personally guarantees a debt or obligation, or fails to form or maintain the LLC properly, the member may not be held personally liable for the LLC’s debts and obligations.
• Pass-through tax treatment to eliminate the potential for double taxation like a partnership and an S-Corporation.
• No restrictions on permitted members, such that non-resident aliens and corporations can be members of a California limited liability company (unlike an S–Corporation).
• Less burdensome local and state reporting requirements than those required by an S-Corporation.
• Less upkeep and maintenance than a typical corporation.
• Much greater flexibility than an S-Corporation when it comes to management; a California LLC can be structured to be managed by either its members (member-managed LLC) or an elected centralized management team (a manager-managed LLC) and the Operating Agreement can be drafted in such a manner that the members right to remove managers is limited.
• Much greater flexibility than an S–Corporation when it comes to income and loss distribution; for example, where one owner agrees to contribute all of the cash needed for the business, and another owner agrees to contribute his time or services by working full-time for the LLC, the parties might want to structure a preferred cash-on-cash return to the money partner. This can be easily done with an LLC, but would be very difficult to accomplish with an S-Corporation.
• Much greater flexibility when it comes to structuring the voting and profit participation rights of the LLC members. For example if a corporation is owned by two shareholders (one who owns 60% of the shares and the other 40% of the shares), the two shareholders would still have equal voting rights on the board of directors even though one shareholder is entitled to 60% of the profit and the other 40% of the profit. With a California LLC, the two owners can provide for a 60-40 profit split and voting split, which is very difficult to do with an S-Corporation.
• And, for the sole proprietor seeking to form a single member LLC, the ultimate benefit is that the owner of the LLC will not be required to file an additional tax return – just a Schedule C while simultaneously benefiting from the personal limited liability protection afforded to the member of an LLC.

BEST ASSET PROTECTION TIPS

I always suggest a course of continuing education where asset protection principles are concerned. Because your education is never really complete and should be ongoing nevertheless ,here are some BEST ASSET PROTECTION principles to carry around in your wallet:

1. Inventory Everything. Make a complete list of your assets and debts. It’s a good idea to do this every three-six months. Remember to think broadly. For example, do you own a vacation home or have retirement assets? Do you hold stock in another company? These may be susceptible to attack in litigation.
2. Research exemptions and protective entities. A few of your assets may be exempt from creditor actions because of federal or state laws. These typically include your personal residence, your pension or retirement fund, and your life insurance policy. These should be the few assets that are in your name. As for all other assets, consider setting protection in the form of LLC’s, S-Corporations, domestic trusts and perhaps offshore trusts (make sure your consult with a specialist to ensure foreign government credibility concerning offshore placements). “You can also layer the protection by using multiple entities. You can go even further and equity-strip the assets by taking loans against the assets or refinancing them. This allows the asset to be less attractive to creditors.
3. Avoid personal guarantees. A personal guarantee is when you pledge to be personally responsible for a debt. The result is that you essentially lose the protection of your company’s corporate status. Put a time limit on any bank-required loan guarantee and/or specify a particular asset as collateral. Nevertheless, clients may try to get a personal guarantee. Don’t allow it. Get another client please!
4.  Examine ALL contracts you sign. While your company’s corporate structure may provide some protection, it may not be enough if there’s a tort action or claim for fraud. In such cases, you may have personal liability. This is why I have always said that it’s important to provide liability protection in your contracts. This includes capping damages and even disallowing certain types of damages. ONLY sign contracts on behalf of your company—not in your name.  Avoid the chance the contract could later be considered a personal guarantee.
5. Buy insurance. While asset protection can be extremely helpful in avoiding personal liability, a creditor may still be determined to go after your assets. That’s why it is important to have insurance protection. Liability insurance covers business assets and damages for personal injuries and property damages that you or other people cause (such as your employees) while in the scope of running your business. Property insurance covers your company’s assets. Seriously consider an umbrella policy to cover exposure that goes beyond property insurance. It is inexpensive and readily available.

EMAIL MARKETING–WHAT CONCERNS SHOULD YOU BE AWARE OF?

Since 1998, California has prohibited individuals and companies from sending commercial email to those who have neither requested nor consented to receive the email, or with whom they do not have an existing business or personal relationship, unless:    The sender has either established a toll-free telephone number that recipients can call to stop future emails or included a valid email address that recipients can contact to stop future emails; and the subject line of the email begins with the four characters “ADV:” designating it as commercial communication, or “ADV:ADLT” designating it as sexual, adult material.

WHAT IS THE FOCUS OF A FRANCHISE DISCLOSURE DOCUMENT?

The Franchise Disclosure Document (FDD) is a legal document that franchisors must furnish to prospective franchisees, by law. The Federal Trade Commission (FTC) is the regulatory body that enforces it. That makes it kind of a big deal. The FDD contains information…facts and figures on the franchise business opportunity, and is provided to help you analyze the offering. You, as a prospective owner of a franchise, must receive the FDD at least 14 days before you are asked to sign any contract or pay any money to the franchisor or an affiliate of the franchisor. You have the right to ask for and get a copy of the disclosure document once the franchisor has received your application and agreed to consider it.

Look for more on this subject in next month’s August 2015 issue of the Bottled Business Sense Newsletter.

SOLE PROPRIETORSHIPS IS AN EASY DO-IT-YOURSELF, BUT BEWARE!

A sole proprietorship is the simplest form of doing business. All you need to do is just start selling your product or service. No Tax ID number (EIN) is required. No doing business as (dba) registration is required, although one is recommended for marketing purposes. No business bank account is required, although one is recommended for bookkeeping and audit protection. No extra tax return is required. All your income and expenses are reported on your 1040 Form, Schedule C.

One of the primary disadvantages of a sole proprietorship is the self-employment (SE) tax of 15.3 percent on the ordinary net income generated by your business. Ordinary income includes items such as sales of products or services, commissions, or short-term income in real estate if you are a real estate professional. SE tax doesn’t apply to passive income, such as rent, dividends, interest, or capital gain. When evaluating the possible tax ramifications and planning options of your sole prop, it’s critical to distinguish between ordinary income and passive income.

Another primary disadvantage of the sole proprietorship is the owner’s personal responsibility for the liabilities of the business. If you have exposure to risks, you may want to consider setting up an entity even if it’s unnecessary for tax purposes or any other reason.

Take a look at what it takes to set your business up as a Limited Liability Company.

1. Choose a Name

Your name will be the first thing people see or hear as it relates to your new business, so make it a good one. Next, make sure you are only one using the selected company name. You can do that with a free corporate name search in your state. 

2. Register the LLC and File Your Paperwork

Call WFBLC, Inc. and I’ll file your state’s Articles of Organization paperwork for only $600.00. 

3. Get Your LLC’s Tax ID

Before you can start operating as an LLC, you need an Employer Identification Number. This is like a social security number for your business, and one you’ll need before opening a business bank account. This is included in my price above. 

4. Create Your Operating Agreement

This document outlines the rights and obligations of the members of your LLC, as well as lists the distribution of income of the Limited Liability Company to its members. Your Operating Agreement doesn’t need to be filed with your state, however you do need to keep one on premises, signed, if you have other shareholders. This is separate and apart from the filing fees, and is particularized depending upon the particular needs of your company. 

5. File Business Licenses and Permits

Additionally, you should apply for any business licenses or permits you’ll need to operate your business. It’s best to do this before you start operating your business to avoid potential fees or issues down the road. This is usually accomplished through your local city or county offices. 

6. Keep Your LLC Compliant

Once you’re operating as an LLC, your work isn’t done for good. Each year, or every other year depending upon your state of residence, you will need to file your Statement of Information. The due date for this report depends on where you filed your LLC. For example, if you filed it in Michigan, Delaware, North Carolina, Georgia, Florida, or Texas, there’s a specific date that your annual report is due. In other states, it’s due on the anniversary of when you filed your LLC. 

7. Finally, Take Care of Loose Ends

Depending on where you’re based, you may need to publish your intent to form an LLC in a local newspaper. If you form an LLC in New York, for example, you are required to run that intent in an approved newspaper for 6 consecutive weeks. This is not so in California.

The Bottled Business Sense Show broadcasts every Tuesday at 10am PST, and provides practical business perspectives that uniquely emphasize both legal and media marketing strategies to protect and insure the longevity of your business.

Whether you’re trying to provide a startup business with some level of stability, or an established business with fool-proof asset and estate protection, or simply attempting to get a better return for your business marketing dollars, Bill Bernard and Rick Moscoso will expose potential pitfalls to insure the security and growth of your business, free from unwanted expense and the threat of litigation. You’ll learn how to implement marketing and protection tools equal to those used by today’s most successful corporations. The show is in simulcast video and audio at: http://www.bottledbusinesssenseshow.com

*All calls answered during live shows will be responded to in the comments section under that show at:  http://www.bottledbusinesssenseshow.com
See Also: http://www.blogtalkradio.com/bottledbusinesssenseshow for audio only.

Also, a continuing goal of mine is to help middle-income families access a proper estate vehicle to  secure and protect their assets in a manner that is both affordable, yet professionally guaranteed. “Put Your House in Order”, is a complete attorney-backed do-it-yourself estate plan. Please contact me to learn more about this unique opportunity.

I also provide the following asset protection offer: $600+filing fee for an LLC or Incorporation in all 50 states!

http://www.protectyourestate365.com 

http://www.businessassetprotection365.com

LEGAL BLOOM: THE FIRST INTERACTION BETWEEN AUTHENTIC DO-IT-YOURSELF PROGRAMS AND REASONABLE ATTORNEYS’ FEES

A continuing goal of mine is to help middle-income families access a proper estate vehicle to  secure and protect their assets in a manner that is both affordable, yet professionally guaranteed. Accordingly, I have developed “Put Your House in Order”, a complete attorney-backed do-it-yourself estate plan. Please contact me to learn more about this unique opportunity. I also provide the following asset protection offer: $600+filing fee for an LLC or Incorporation in all 50 states!

http://www.protectyourestate365.com

My target encompasses the growing group of people in today’s market whom I refer to as the “do-it-yourself” individuals.  These individuals possess, or indeed at the very least believe, that they can undertake certain contractual commitments by themselves without the help of a professional.  In that regard, I have targeted this group with the intent of providing them with unique opportunities to combine their own talent with that of a professional at a very affordable rate.

Product Overview

GET, “HOW TO AFFORDABLY CREATE YOUR OWN ESTATE PLAN LEGALLY-PUTTING YOUR HOUSE IN ORDER”– OUR COMPLETE PROGRAM THAT WALKS YOU THROUGH BUILDING YOUR OWN ESTATE PLAN, STEP-BY-STEP, IN THE COMFORT OF YOUR OWN HOME.

• Protect your family from the time-consuming and costly experience of going through probate.
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For Large Complex Estates, Contact Us For A Complimentary Consultation.

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 Recommendations:

Sharon Masler, Manager at Masler and Associates, Certified Public Accountant

Orange County, California Area

I highly recommend Protect Your Estate 365 to anybody who does not have an estate plan. Bill Bernard, Esq. can help you set up an estate plan that is most affordable to you with the assurance that it is prepared by an attorney, and most of all provides protection to you and your family from unexpected situations. Bill is a very experienced attorney and has been a wonderful resource for my clients.

Please see links below:

http://www.linkedin.com/company/wfb-legal-consulting-inc-/protect-your-estate-365-19871091/product?goback=%2Ebzo_*1_*1_*1_*1_*1_*1_%2Fwfb*5legal*5consulting*5inc*5&trk=biz_product_logo

http://www.protectyourestate365.com

http://www.businessassetprotection365.com

http://www.wfblegalconsulting.com

NICHE OF THE MONTH 

This month’s “Niche” is a follow-up to what was discussed last month.  I’ve actually had several questions posed as to the real potential value of obtaining an LLC or some corporate structure, such as an S-Corporation.  Many people feel that bloated insurance policies providing excess coverage is all that is required for operating a sole proprietorship.

Nothing could be further from the truth of course.  The greatest potential disadvantage of doing business as a sole proprietor is that you have unlimited personal liability on all business debts, as well as court judgments related to your business.  This goes far beyond general liability coverage for someone who might be injured on your premises, for instance.  A good example is as follows:

George is a sole proprietor of a small manufacturing business.  When business prospects look good, he buys $60,000 worth of supplies and uses them up producing his product.  Unfortunately, there’s a sudden drop in demand for his products and George can’t sell the items he’s produced.  When the company that sold George the supplies demands payment, he can’t pay the bill.

As a sole proprietor, George is personally liable for this business obligation.  This means that the creditor can sue him and go after not only George’s business assets, but other property as well.  This can include, of course, his house, his car, and his personal bank account.  Simply stated, good luck getting an insurance carrier to cover this scenario, and ultimately, the potential loss.

RELECT ON HOW MUCH YOU PROTECT WHAT’S YOURS!

My message this month is centered on employee awareness for small business owners. All too often, business owners make all or a combination of the following three critical mistakes: 1. They fail to form a business entity which feasibly can create protection from lawsuits filed by employees, suppliers and customers; 2. They fail to carry the appropriate amount of commercial insurance necessary for the operation of the business; and 3. They fail to distinguish between the proper organization of the business and the smooth running of the business as it regards employer obligations and employee rights under the law.

This month, I urge business owners to form a structured formal business entity capable of inside and outside protection– by that I mean protection from internal lawsuits as well as from external lawsuits. Contact G.A.I.T.E.way Business Solutions at www.gaiteway.net, in order to obtain the proper commercial insurance, health insurance and the full gamut of legal and coaching business expertise, in order to ensure the smooth operation of your business and the protection of its valuable assets. Finally, I would urge that every business owner create a twofold the level of protection through the utilization of a irrevocable living trust. With this great tool, you can provide a vehicle for the smooth transition of your assets after you pass, as well as an additional layer of protection for your business during your lifetime.

NICHE Highlights of the Month:
The focus this month is on high liability businesses. By that I mean businesses that are exposed to potential litigation more so than others particularly because of the type of products or services they provide.

For example, an in-home care facility exposes itself to potential litigation not only in terms of the elderly patients to whom they attend, but also by way of employees who often times are injured on the job as a consequence of having to engage in activities which include some heavy lifting, such as turning patients in different positions and helping them move from location to location for various reasons.

This is a prime example of the need not only for the establishment of a formal business entity to avoid liability exposure, but also a comprehensive user-friendly employee handbook that spells out specific duties and obligations of consequence in the employer-employee relationship. Such a handbook, usually comprising somewhere in the neighborhood of 30 to 35 pages in length, spells out federal, state and common sense practical applications which all lead to compliance with the law in a particular jurisdiction where the business is located. A handbook in and of itself will prevent potential litigation as long as all of the prerequisites are met by the owner of the small or large business.

The above example emphasizes the need for planning, preparing and protecting your business assets: through the initial application of deciding what business entity or corporate structure in particular is best suited to a business with high liability exposure; the preparation of those documents through contracts which specifically set forth how the entity will operate in conjunction with its products or services; and finally the ongoing protection that is received by the entity from an attorney who has employment experience—someone who can walk the business owner through the various stages required to ensure that the business is operating efficiently.

Please fill free to contact us at the BEST ASSET PROTECTION group available:
WFB Legal Consulting Inc., at 949-413-6535, should you have any further questions concerning the nature of your new or ongoing business.
*Please be advised that this communication is for general public informational use only and does not establish an attorney-client relationship. For more information, please contact WFB Legal Consulting, Inc.—A BEST ASSET PROTECTION Services Group at (949) 413-6535.