Time to Operate as a Real Business!

April 21, 2020

With many states passing laws that impose significant risk on employers who mischaracterize employees as independent contractors, you may be considering incorporating to strengthen your position that you are not an employee. If so, we think that’s smart. While the burden is on the employer to prove that a worker is not an employee, you can take action to help the people or companies who employ you to feel confident that they could successfully argue you are an independent contractor, and not an employee by incorporating your business and operating as a real business. On top of that, incorporating can save you money, protect your assets, and limit your liability. Up until now, you may have shied away from incorporation because of the upfront cost of hiring a lawyer or because you didn’t understand the benefits incorporating can bring to you. To help you decide whether incorporation is right for you, consider the following factors. Legal Protections Incorporating as a business protects your personal assets, if you properly maintain your corporate form. This means keeping your personal and business finances separate, and having all agreements be between your corporate entity and your clients and vendors. It may sound complicated, but it’s actually quite simple when you know how to do it, and it can provide you with a level of peace of mind that supports you to want to expand your business to the next level of income and impact. We’ve found that many of our clients who were stuck earning less money than they wanted, were able to get to their own next level of income success by incorporating and treating their business like a business. Tax Consequences Perhaps you have remained a sole proprietor so you don’t have to file a corporate tax return, but this is short-sighted and likely costing you a lot of money and opportunity for savings on your taxes. Think of it as stepping over dollars to pick up dimes, simply because the dollars were a little more difficult to pick up. Wouldn’t it be worth a little effort to pick up the dollar, if someone showed you how easy it could be? Filing a separate tax return for your business is not that difficult, and could save you a lot of money on your taxes PLUS allow you to write off expenses that you may not be writing off right now, and reduce your risk of tax audit. Filing as a sole proprietor or writing off business expenses on Schedule C of your personal tax return could increase your risk of audit by 7-9 times. And, on top of that, when you are a sole proprietor you need to pay payroll taxes on all of your income, whereas if you are incorporated and file your taxes as an S-Corporation, you only pay payroll taxes on the salary you pay yourself, which can be low (and reasonable), and you save yourself approximately 15% on the rest of your distributed income. If you have been considering incorporating as a business, now could be the time. Contact us and let’s discuss the possibilities for you and […]

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The Most Important Legal and Financial Actions To Take Right Now

April 14, 2020

As you already know, the COVID-19 pandemic means nothing is business as usual. Many states have implemented a “shelter-in-place” order to limit the spread of the disease; however, if you are not in a place with such an order, or if your parents are not following it, you may want to refer to our previous blog on how to talk to your parents and get them to stay home. Once you have attended to your (and your parents’) immediate needs, it will be time to consider more long term precautions. In this time of stress and chaos, your parents may be resistant to talking about estate planning. It may feel too pessimistic to plan for the worst in the midst of a scary situation. However, that’s exactly why it’s the most important time to do so. Plus, since hopefully you are staying inside, you may actually have the time to dedicate to getting these tasks taken care of. Here are actions you can, and should, take to ensure you and your family are protected both legally and financially. Update Your Health Care Documents Above all, you first need to ensure that both you and your parents have advance care directives. This will be an invaluable reference point for those who are assisting you, whether they be friends, family, or medical professionals. This directive should include instructions on your preferred methods of care and the contact information for each of your doctors. You must also clearly state who will be in charge of handling your affairs in the event of your death or incapacity. Even if you have done this already, I urge you to take out any existing documents now and review them. Have your circumstances changed? Do you have additions to make? Encourage your parents to do the same thing, and to communicate with you about what their directives say. Here’s an article to read, and share with your parents (and adult kids, if you have them) on the 3 parts of a Health Care Directive, and the 5 things you want to look for in your Health Care Directive right now, to ensure it’s up to date for Covid-19. If you are unsure whether your Health Care Directive is in ship-shape, call us, as your Personal Family Lawyer®, to take an expert look at them. Create a “Personal Resource Map”—an Inventory of Everything That Matters You might think that only the very rich need to worry about making specific plans for their assets. But not so fast. Do you have investments or a retirement account? Physical things like jewelry, musical instruments, or furniture? What about crypto? Or even social media accounts? In the event of your incapacity or death, your family members won’t know where to look for what you have, or how to access it, unless you’ve planned for that ahead of time. Somewhere between 49 and 80 billion dollars are currently unclaimed, or unable to be claimed, by family members of people who have passed away. This is money that individuals may have forgotten they had, or that they made no provisions to pass on to […]

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The Most Important Legal and Financial Actions To Take Right Now For You And Your Business

April 7, 2020

Owning a business is challenging even in the best of times. Add a global pandemic, the likes of which we have never seen in our lifetime, and it becomes much more overwhelming. Often, business owners try to compensate for shortcomings in their business by bringing in more and more revenue. For many people, however, business closures and quarantines have seemingly eliminated that option. At the moment, you may be running around like your hair’s on fire, trying to find any possible way to bring in more money. You may feel like you are too busy trying to control the present to worry about the future. Take some comfort in the fact that you’re not alone in feeling this. Now more than ever, though, it’s important to remember our “LIFT” principle. Take a breath and consider your legal, insurance, financial, and tax situation, and whether the pillars of LIFT can help you get through this time. If you need to talk with someone, to brainstorm options about how you can shift from your previous income model to one that will work virtually or in an innovative manner considering current conditions, reach out to us and schedule a call to see how we can help. If revenue is not an issue, and you are ready to pivot, awesome—do it, and let us know how we can support. Here are 3 things that you can do as you pivot to create the most stability for you and your team. Create or Update Your “Personal Resource Map” To put it bluntly, you need to be ready for the worst case scenario, both personally and professionally. Setting up an estate plan is important for every individual, even if you don’t think you are rich enough to need one. If you own anything—from a laptop computer, to a guitar, to a house—something will need to be done with it after your death. There’s also a possibility that you have assets that you have completely forgotten about, like that 401k from a job you had several years ago that you never rolled over. Currently there’s somewhere between 49 and 80 billion dollars in legal limbo that family members cannot claim due to a lack of preparation on the part of the deceased. You don’t want your assets to become trapped in gridlock instead of passed on to the people you love. When you own a business, there is a whole set of other issues to consider. Putting your wishes into an estate plan, regarding things like a succession plan, will be enormously helpful to whoever is managing your affairs in the event of your death or incapacity. If a whole estate plan feels too overwhelming right now, at least get an inventory of your assets and business in place, where everything is and how your loved ones/partners and team could access it, if you become ill or die. We’re supporting you to do this with a simple Personal Resource Map process.  We can help you with this on a 1:1 basis, fully virtually, just give us a call. Check Your Business Insurance Policy Now is the time […]

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4 Essential Strategies For Selling Your Business

March 31, 2020

As an entrepreneur, you’ve probably put lots of thought into the best ways to start and grow your business. But you likely haven’t put nearly as much effort into thinking about how you’ll sell it or exit it, in general. And if you decide that selling is the way to go, you’ll want to start considering that now, whether you are just starting out or have been in business for years. Putting your business up for sale is not something you want to do on the fly or without careful planning. You’ll need to clearly understand your company’s competitive position in the market, determine a realistic asking price, and carefully evaluate potential buyers’ suitability in order to position your business for sale. Before you put up a “For Sale” sign in your front window, review these four strategies to maximize your chances for success. Prepare your business for sale You don’t want to get stuck trying to sell your business at the last minute due to unforeseen circumstances, such as a debilitating illness or the arrival of new technology that renders your business model obsolete. It generally takes an average of two to four years to sell a business, so you should develop your exit strategy as soon as possible.Before you can come up with a sales price, you’ll need to gather and organize a hefty amount of documentation—financials, tax returns, business records, and other materials. What’s more, proper preparation is also vital for closing a sale: Buyers will be much more likely to purchase your company if they see you’ve taken the time to thoroughly prepare your sales portfolio. We can facilitate your planning and preparation by ensuring you have all of the proper records and documentation you need to properly value your business—and wow potential buyers. Effective valuation and pricing You no doubt want to see the maximum return on all of the hard work you’ve put into building your business, but you must be realistic. Valuing your operation should be based strictly on objective data like current market prices, cash flow, and growth forecasts. You can’t let emotions cloud your judgment, so seek the opinion of a professional appraiser for an optimal valuation. You must also determine the total cost of the sale. Before setting the price, carefully factor in all of the taxes, fees, and other expenses that will be deducted for the asking price, so you don’t end up shorting yourself. We can assist with accurately assessing all financial and tax obligations that come with a sale, as well as advise you on any potential legal issues that could influence the process. Vetting potential buyers While interested buyers will be investigating you and your operation, you should carefully vet them, too. Even if it’s a friend or colleague you know well, you’ll should carefully select and pre-qualify every potential buyer. And since you’ll be sharing sensitive company data with them, you should require buyers to sign a confidentiality agreement, not just to protect your privacy, but also to weed out those who aren’t serious. And don’t just sell to the first person to walk through […]

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Can Bankruptcy Save Your Business?

March 24, 2020

If you’re struggling with debt, but don’t want to shut down your business, bankruptcy might be one way to save your company. While this may sound paradoxical, many big corporations— American Airlines, General Motors, and Kodak—have successfully used bankruptcy to restructure debt and get a fresh start. The main difference between you and a big corporation filing bankruptcy is that if you use personal bankruptcy (either Chapter 7 or Chapter 13) to discharge or restructure your debt, it will impact your personal credit. In contrast, a Chapter 11 bankruptcy used by big corporations doesn’t hurt the credit of corporate officers or shareholders. However, a few years of negative credit may be a valid option to give you another chance to rebuild your business. But deciding between Chapter 7 and Chapter 13, or whether to use bankruptcy at all (as opposed to negotiating directly with creditors), are big decisions—but ones we can help you evaluate. How does Chapter 7 work? Chapter 7 is a liquidation bankruptcy, which means all of your non-exempt assets (including your business assets) will be sold off by a court-appointed trustee to repay your creditors. This can let you wipe your personal debts clean and start over, albeit without credit available to you for some time. And though your personal assets will be included in the bankruptcy estate, you can use exemptions to protect this property. In fact, if you don’t have a high income or significant assets, you might be able to use exemptions to protect all of what you do have using what’s known as a “no-assets case.” This is designed to ensure business owners have enough assets to sustain themselves while they get back on their feet. How does Chapter 13 work? Chapter 13 lets you keep your assets and repay some or all of your debts through a court-approved payment plan lasting three or five years. By filing Chapter 13, the court grants an “automatic stay” stopping ALL creditors from pursuing you. This temporarily halts repossession of your business and personal property, allowing you to potentially lower your payments—or at least give you time to catch up on those you’re behind on. When it comes to secured debts, you can give up the collateral and convert the debt to an unsecured claim, or keep the property and continue to make payments through your repayment plan. What’s more, you typically pay only a portion of your unsecured debts, and the remainder is discharged (forgiven) at the end of the bankruptcy, provided you kept up with payments. However, Chapter 13 requires that you pay off certain “priority” debts—back taxes, child support, and alimony—in full, regardless of your income. Start with a clean slate Both types of bankruptcy can improve your financial situation and let you re-focus on your business, without closing your doors. However, bankruptcy is not a panacea, and if you fail to meet your court-ordered obligations, you can face serious consequences. Given this, consult with us as your Creative Business Lawyer® to see if either of these bankruptcy options (or negotiating directly with creditors) are right for you. This article is a service […]

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Use Estate Planning to Ensure Your Legacy Doesn’t Get Erased

March 17, 2020

When you think about those loved ones who’ve passed away, you probably don’t think very much—or even at all—about the “things” they’ve left you. And when they do leave something behind, what you likely cherish most about the object are the memories and feelings it evokes, not the thing itself. For the founder and CEO of New Law Business Model, Alexis Katz, the most treasured memento her late father left her wasn’t even something he intended to be special—it was just a random voicemail on her cellphone. And the message wasn’t meant to be anything sentimental. His message simply said, “Lex, it’s your dad. Call me back.” Following his death, Alexis loved listening to that message to hear her father’s voice. Of all the assets he left behind, that voicemail was what she cherished most. Until one day, she went to listen to the message and discovered it had been erased—and her father’s voice was lost to her forever. She still recalls that day as one of her worst ever, yet like most painful events, it taught her an important lesson. Losing that voicemail ultimately inspired Alexis to build a new feature into her family-centered model of estate planning, known as Family Wealth Legacy Passages. This feature, which is included in every plan we create, allows you to preserve and pass on something that’s inherently more valuable than any tangible asset you might leave your loved ones. Preserving your intangible assets We recognize that estate planning isn’t just about preserving and passing on your financial wealth and property when you die. When done right, planning allows you to share your family’s stories, values, and life lessons, so your legacy carries on long after you—and your money—are gone. Family Wealth Legacy Passages is a process that’s designed to not only ensure these intangible assets never get lost, but also to make the process of documenting them as easy and convenient as possible. In this process, we guide you to create a customized recording in which you share your most insightful memories and life lessons, not just for your children and grandchildren, but for generations to come. My favorite part about this process is that most of our clients tell us that going through it helps them surface things they would have never thought about regarding how they want to parent differently or things they want to share now, during life, not just leave behind a lasting legacy of love. To help inspire you, we’ve developed a series of helpful questions and prompts, which makes the process not only easy, but enjoyable. And this isn’t something you have to do on your own, which you’d probably never get around to doing, despite your best intentions. Instead, Family Wealth Legacy Passages is something we include as an integral part of our planning services—and it’s included at no extra charge with each plan we create. In the end, your family’s most precious wealth is not money, but the memories you make, the values you instill, and the lessons you hand down. And left to chance, these assets are likely to be lost forever just […]

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Use Estate Planning to Avoid Adult Guardianship—and Elder Abuse: Part 2

March 10, 2020

In the first part of this series, we discussed how some professional adult guardians have used their powers to abuse the seniors placed under their care. Here, we’ll discuss how seniors can use estate planning to avoid the potential abuse and other negative consequences of court-ordered guardianship. As our senior population continues to expand, an increasing number of elder abuse cases involving professional guardians have made headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, which took place in Nevada and saw more than 150 seniors swindled out of their life savings by a corrupt Las Vegas guardianship agency. The Las Vegas case and others like it have shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. Perhaps the most frightening aspect of such abuse is that many seniors who fall prey to these unscrupulous guardians have loving and caring family members who are unable to protect them. In the first part of this series, we detailed how criminally minded individuals can take advantage of an overloaded court system and seize total control of seniors’ lives and financial assets by gaining court-ordered guardianship. Here we’ll discuss how seniors and their adult children can use proactive estate planning to prevent this from happening. It’s important to note that any adult could face court-ordered guardianship if they become incapacitated by illness or injury, so it’s critical that every person over age 18—not just seniors—put these planning vehicles in place to prepare for a potential incapacity. Keep your family out of court and out of conflict Outside of the potential for abuse by professional guardians, if you become incapacitated and your family is forced into court seeking guardianship, your family is likely to endure a costly, drawn out, and emotionally taxing ordeal. Not only will the legal fees and court costs drain your estate and possibly delay your medical treatment, but if your loved ones disagree over who’s best suited to serve as your guardian, it could cause bitter conflict that could unnecessarily tear your family apart. Furthermore, if your loved ones disagree over who should be your guardian, the court could decide that naming one of your relatives would be too disruptive to your family’s relationships and appoint a professional guardian instead—and as we’ve seen, this could open the door to potential abuse. Planning for incapacity The potential turmoil and expense, or even risk of abuse, from a court-ordered guardianship can be easily avoided through proactive estate planning. Upon your incapacity, an effective plan would give the individual, or individuals, of your choice immediate authority to make your medical, financial, and legal decisions, without the need for court intervention. What’s more, the plan can provide clear guidance about your wishes, so there’s no mistake about how these crucial decisions should be made during your incapacity. There are a variety of planning tools available to grant this decision-making authority, but a will is not one of them. A will only goes into effect upon your […]

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Use Estate Planning to Avoid Adult Guardianship—and Elder Abuse

March 3, 2020

Elder abuse can take a wide variety of forms, but we think the worst of the worst is caused by unscrupulous adult guardians appointed by a court to care for seniors who are no longer able to care for themselves. And though you may not want to believe such a thing could happen, you need to know that without the right planning in place, even the seniors in your own family could be at risk. In fact, there are currently 1.5 million American adults under guardianship, with an estimated 85% of them over age 65. All total, these guardians control nearly $273 billion in assets. And a 2010 report by the Government Accountability Office (GAO) found hundreds of cases where guardians were involved in the abuse, exploitation, and neglect of seniors placed under their supervision. Exploitation disguised as protection Although most of the reported abuse was committed by family members, an increasing number of elder abuse cases involving professional guardians have recently made the headlines. The New Yorker exposed one of the most shocking accounts of elder abuse by professional guardians, and the abuse suffered by these victims is so horrendous, it’s hard to believe. The case involved the owner of a Las Vegas guardianship agency, who was indicted on more than 200 felonies for using her guardianship status to swindle more than 150 seniors out of their life savings. The craziest part of this is that many of those seniors had loving and caring family members, who were unable to protect their senior family members. That case and similar cases of criminal abuse by professional guardians across the country has shed light on a disturbing new phenomenon—individuals who seek guardianship to take control of the lives of vulnerable seniors and use their money and other assets for personal gain. These predatory guardians search for seniors with a history of health issues, and they’re often able to obtain court-sanctioned guardianship with alarming ease. From there, they can force the elderly out of their homes and into assisted-living facilities and nursing homes. They can sell off their homes and other assets, keeping the proceeds for themselves. They can prevent them from seeing or speaking with their family members, leaving them isolated and even more vulnerable to exploitation. What’s more, though it’s possible for a guardianship to be terminated by the court if it can be proven that the need for guardianship no longer exists, a study by the American Bar Association (ABA) found that such attempts typically fail. And those family members who do try to fight against court-appointed guardians frequently end up paying hefty sums of money in attorney’s fees and court costs, with some even going bankrupt in the process. An open door for potential abuse Obviously, not all professional guardians exploit the seniors (known as wards) placed under their care. But with the combination of the exploding elderly population—many of whom will require guardians—and our overloaded court system, such abuse will almost certainly become more common. Indeed, as the swelling aging population strains court resources, strict oversight of professional guardians is likely to become increasingly more difficult, enabling […]

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pink inflatable flamingo on clear water during vacation

4 Critical Estate Planning Tasks to Complete Before Going on Vacation

February 25, 2020

Going on vacation entails lots of planning: packing luggage, buying plane tickets, making hotel reservations, and confirming rental vehicles. But one thing many people forget to do is plan for the worst. Traveling, especially in foreign destinations, means you’ll likely be at greater risk than usual for illness, injury, and even death. In light of this reality, you must have a legally sound and updated estate plan in place before taking your next trip. If not, your loved ones can face a legal nightmare if something should happen to you while you’re away. The following are 5 critical estate planning tasks to take care of before departing. Make sure your beneficiary designations are up-to-date Some of your most valuable assets, like life insurance policies and retirement accounts, do not transfer via a will or trust. Instead, they have beneficiary designations that allow you to name the person (or persons) you’d like to inherit the asset upon your death. It’s vital you name a primary beneficiary and at least one alternate beneficiary in case the primary dies before you. Moreover, these designations must be regularly reviewed and updated, especially following major life events like marriage, divorce, and having children. Create power of attorney documents Outside of death, unforeseen illness and injury can leave you incapacitated and unable to make critical decisions about your own well-being. Given this, you must grant someone the legal authority to make those decisions on your behalf through power of attorney. You need two such documents: medical power of attorney and financial durable power of attorney. Medical power of attorney gives the person of your choice the authority to make your healthcare decisions for you, while durable financial power of attorney gives someone the authority to manage your finances. As with beneficiary designations, these decision makers can change over time, so before you leave for vacation, be sure both documents are up to date. Name guardians for your minor children If you’re the parent of minor children, your most important planning task is to legally document guardians to care for your kids in the event of your death or incapacity. These are the people whom you trust to care for your children—and potentially raise them to adulthood—if something should happen to you. Given the monumental importance of this decision, we’ve created a comprehensive system called the Kids Protection Plan that guides you step-by-step through the process of creating the legal documents naming these guardians. You can get started with this process right now for free by visiting our user-friendly website https://propaplaw.kidsprotectionplan.com/ Organize your digital assets If you’re like most people, you probably have dozens of digital accounts like email, social media, cloud storage, and cryptocurrency. If these assets aren’t properly inventoried and accounted for, they’ll likely be lost forever if something happens to you. At minimum, you should write down the location and passwords for each account, and ensure someone you trust knows what to do with these digital assets in the event of your death or incapacity. To make this process easier, consider using LastPass or a similar service that stores and organizes your passwords. Complete […]

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The SECURE Act’s Impact On Estate and Retirement Planning—Part 2

February 12, 2020

In the first part of this series, we discussed the potential ramifications the SECURE ACT has for your estate and retirement planning. Here, we’ll look more deeply into additional strategies you may want to consider in light of the new legislation. On January 1, 2020, the Setting Every Community Up for Retirement Enhancement Act (SECURE Act) went into effect, and it could have big implications for both your retirement and estate planning strategies—and not all of them are positive. Last week, we discussed three of the SECURE Act’s most impactful provisions. Specifically, we looked at the SECURE Act’s new requirements for the distribution of assets from inherited retirement accounts to your beneficiaries following your death. Under the new law, your heirs could end up paying far more in income taxes than necessary when they inherit the assets in your retirement account. Moreover, the assets your heirs inherit could also end up at risk from creditors, lawsuits, or divorce. And this is true even for retirement assets held in certain protective trusts designed to shield those assets from such threats and maximize tax savings. Here, we’ll cover the SECURE Act’s impact on your financial planning for retirement, offering strategies for maximizing your retirement account’s potential for growth, while minimizing tax liabilities and other risks that could arise in light of the legislation’s legal changes. Tax-advantaged retirement planning If your retirement account assets are held in a traditional IRA, you received a tax deduction when you put funds into that account, and now the investments in that account grow tax free as long as they remain in the account. When you eventually withdraw funds from the account, you’ll pay income taxes on that money based on your tax rate at the time. If you withdraw those funds during retirement, your tax rate will likely be quite low because you typically have much less income in your retirement years. The combination of the upfront tax deduction on your initial investment with the lower tax rate on your withdrawal is what makes traditional IRAs such an attractive option for retirement planning. Thanks to the SECURE Act, these retirement vehicles now come with even more benefits. Previously, you were required to start taking distributions from retirement accounts at age 70 ½. But under the SECURE Act, you are not required to start taking distributions until you reach 72, giving you an additional year-and-a-half to grow your retirement savings tax free. The SECURE Act also eliminated the age restriction on contributions to traditional IRAs. Under prior law, those who continued working could not contribute to a traditional IRA once they reached 70 ½. Now you can continue making contributions to your IRA for as long as you and/or your spouse are still working. From a financial-planning perspective, you’ll want to consider the effect these new rules could have on the goal for your retirement account assets. For example, will you need the assets you’ve been accumulating in your retirement account for your own use during retirement, or do you plan to pass those assets to your heirs? From there, you’ll want to consider the potential income-tax […]

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