Tuesday, June 25, 2013

Why Small Businesses Need Good Lawyers

          However small your business may be, having a business lawyer is not only a good idea, but the best way to save you time, anxiety, and even money. A smart patient doesn't wait until they are really sick before they look for the right doctor. And when they get sick, they don't rely on advice they read on the internet on how to fix it. A smart patient will find a doctor they trust long before they ever need them to help prevent illness and to treat them, just in case. So, too, should a smart small business not wait until they are involved in a lawsuit before finding a lawyer. There is no doubt that your small business will encounter legal concerns along the way, whether they be actual lawsuits, or simply contract negotiations, buying and selling, leasing property, or one of the other many issues which might arise in any small business. It is essential that you prepare ahead of time by finding a great lawyer and building that relationship of trust and confidence from the beginning. A lawyer will be much more effective in protecting you and addressing your company's legal issues if they know your business before-hand rather than trying to play catch-up when an issue arises.

So, how can your business actually use a lawyer? 
  • Draft a Shareholder Agreement (or Partnership Agreement, or Operating Agreement)
          While the name may change, depending on how your company is set up, the necessity for this agreement remains the same. This agreement deals with those messy situations that "will never happen" but, in reality, unfortunately happen all the time. It outlines what happens when some partner in the business dies, or quits, or there is some other parting of ways. It outlines how a buy-out can be calculated, and should address a whole laundry list of other contingencies to prepare your business for the hopefully unlikely, but potentially very messy, uncertainties it might face. 
  • Manage Employees
          If you have a business with any employees, you should have a lawyer to help prevent potential future issues, and to protect you if any should arise. You might have the need for employment contracts, non-disclosure or non-compete agreements. You may need advice related to firing employees, or to help avoid lawsuits by disgruntled former employees. 
  • Document your Deals
          Your business is likely to buy or lease real property at some point. It is also certainly likely your business will need to buy and sell goods or services. You shouldn't rely on forms drafted by the other party, as they are likely to benefit them more than your business. A good lawyer will ensure that the agreements entered into by your business are well-documented, and that your interests are protected.

         Your business lawyer should be able to offer you tailored services that meet your specific business needs. They should be able to give you general, as well as business-specific, legal advice. They will help you deal with a variety of legal concerns and be there to address all of your legal needs. Every dollar you spend to help lessen your chances of ever having to face litigation, and, in case you do have to face litigation, to have the confidence that you will have the upper hand, is money well-spent on your business. 

          If you would like to learn more about the business representation services offered by The Law Office of Keith R. Taylor, and how we can provide services tailored to your business' needs and budget, visit our website or give us a call at 352-795-0404 today. 

Thursday, June 13, 2013

Estate Planning for the Owner of a Small Business or Family Business

If you're an owner of a family business or another small business, do you have an estate plan? Does it address your business' needs? When you own a business, your estate planning needs become more complicated than just having a will. Consider the following questions to determine if your estate plan is adequate to protect your business:

Do you have a Will?
It may seem basic, but over half of Americans do not have a will. A will provides basic instructions about what should happen to your personal and business assets on your death. Especially if you are a sole proprietor of your business, you should create a will that effectively protects your beneficiaries, as personal assets can overlap business assets as well as liabilities. 

Do you need a Trust?
A trust is commonly used  by business owners to transfer their business to the person of their choice after their death. A revocable trust can designate you as grantor and trustee and can allow you to retain control over the assets in the trust (your business assets) during your lifetime. The trust is funded with existing assets and, when a certain event happens, the trust would disburse those assets to your chosen heir(s). You can determine what the triggering event would be, which could be the heir reaching a certain age or a certain life goal, such as graduation. You can also designate who will have control of the trust after your death by naming alternate trustees. The primary advantage of a trust is that it avoids probate; the probate process can be long and involved and can delay the shift in control of the business to your chosen heir(s). A secondary benefit is that if your chosen heir or heirs are too young or inexperienced to control the business at the time of your passing, the power to control the business can be given to someone else whom you trust to maintain the business until the heirs are old enough and responsible enough to take control themselves.

How can you minimize taxes?
There are many ways you can minimize taxes on your estate, and a financial advisor, or CPA can advise you as to all of your available options. However there are a couple of things you should consider. The first, is making annual gifts. There is a federal annual exclusion which allows annual gifts to an unlimited number of people without paying federal gift tax and a business owner can use this exclusion to gift shares of the family business to each heir, each year. Another option to consider is a family limited partnership. This partnership is created by the business owner or owners who would gift a business interest into the partnership, while retaining control over the business as general partners. The other members, limited partners, would have an interest in the business and income would be divided proportionally. This type of partnership can have estate tax benefits because the transfer of assets reduces the size of an owner's taxable estate.

Do you have a Shareholder Agreement?
If your company has more than one owner, a Shareholder Agreement (or Partnership Agreement, or Operating Agreement) considers and plans for a lot of circumstances in your business, including who and under what circumstances someone can be fired, bought out of the business, or quit, as well as planning for contingencies like divorce (in the case of a family business). Important from an estate planning standpoint, is that within this Agreement there can be what is generally described as a "buy-sell" provision, which controls what happens with one shareholder's stock in the company when that person dies. This agreement can determine who acquires the shares, whether it be the company, a family member, or some other individual. The primary benefit of this agreement is that it establishes a sale price for the business and for your share of the business, and the purchase of the shares can be funded by a life insurance policy, which can help ensure that surviving family members receive adequate compensation. A buy-sell agreement can also be entered into separate and apart from your shareholder agreement.

Estate Planning for business owners can be complicated, but it is essential to make sure your business and your family are secure after you're gone. You should speak to several professionals to determine if you have an estate plan that works for your business including an experienced business and estate planning attorney, a financial planner, and your accountant.

If you would like to learn more about the business or estate planning services offered by The Law Office of Keith Taylor, and how they can help you develop your own estate plan as a small business owner, visit our website, or call 352-795-0404 to set up a free consultation.