Share

Legal Blog - Law Offices of Richard Palumbo

Thursday, August 6, 2015

Legal Tips from the Shark Tank

Lawyers are often mocked in pop culture as “sharks,” but a quick flip through the TV guide tells you the real sharks out there are in the business world. The ABC reality show “Shark Tank” has become a cultural phenomenon, inspiring tons of people to start their own businesses and invent new products.

If you are part of the wave of Shark Tank inspired entrepreneurs, here are some legal tips for you.

Don’t go into the Shark Tank, or into business, without a plan. On the show, the entrepreneurs that do the best are the ones that are the best prepared to answer all of the sharks’ questions. In the everyday business world the same is true. It’s just that it’s not sharks asking the questions - it’s investors, employees, and the other companies you are doing business with. 

Be prepared to take risks, but preferably not legal ones. Starting a business is a gamble, but it can be downright dangerous if you don’t fully comprehend the legal risks you are taking on. Several entrepreneurs have had their dreams crushed by the sharks because their business is just too big of a legal risk to invest in. In order to be successful in business you need to know what risks you face so you can plan around them.

Be prepared to negotiate. The sharks rarely buy into a business on the first terms offered to them by the entrepreneurs. In and outside the tank, the successful business owners and inventors are the ones prepared to negotiate to get a deal that is good for both parties. This often means giving up more equity than originally planned or revaluing assets to reflect market realities.

Patents are shark bait. The old saying “you’ve got to spend money to make money” is absolutely true in the innovation world. The sharks’ eyes light up when an inventor mentions that they have a patent on the idea or product they are pitching. That’s because patents are hard assets that you can buy, sell, license or build a business around. If you have a great idea, spend the money to patent it. 

Going head to head with the sharks is something only a few businesses do. But feeling like you have been thrown to the sharks is something all business owners and inventors can identify with. If you are looking for someone to help you navigate the legal issues your business is facing - from starting up, to scaling up, to selling out - consider contacting an experienced business law attorney today.


Wednesday, July 29, 2015

Business Succession Planning Tips

Business succession plans contemplate and instruct regarding any changes in future ownership and management of a business. Most business owners know they should think about succession planning, but few actually end up doing so. It is hard to think about not being in charge of the business you have built up, but a proper succession plan can ensure that your business continues long after you are there to run it, providing an enduring legacy.

Here are a few tips to keep in mind when you begin to think about putting a succession plan into place for your business.

  • Proper plans take time - often years - to develop and implement because there are many steps involved. It is really never too early to start thinking about how you want to hand off control of your business.

  • Succession plans are a waste of time unless they are more than a piece of paper. Involving attorneys, accountants and business advisors ensures that your plan is actually implemented.

  • There is no cookie-cutter succession plan that fits all businesses, and no one way to develop and implement a successful plan. Each business is unique, so each business needs a custom-made plan that fits the needs of all parties involved.

  • It may seem counterintuitive, but transferring a business between people who are familiar with the business - from one family member to another, or between business partners - is often more complicated than selling the business to a complete stranger. Emotional investments cannot be easily quantified, but their importance is real. Having a neutral party at the negotiating table can help everyone involved focus on what is best for the business and the people that are depending on it for their livelihood.

  • Once a succession plan has been established, it is critically important that the completed plan be continually reviewed and updated as circumstances change. This is one of the biggest reasons having an attorney on your succession planning team is important. Sound legal counsel can assist you in making periodic adjustments and maintaining an effective succession plan.

If you are ready to start thinking about succession planning, contact an experienced business law attorney today.


Friday, July 17, 2015

Top 3 Real Estate Tips for Small Businesses

The only real estate transaction most small businesses engage in is to enter into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid costly mistakes.

 

“Base Rent” is Not the Only Rent You Will Pay

Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, many commercial lease agreements are “triple net,” meaning that the tenant must also pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren't being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is tenant's responsibility to also pay a pro rata share of increases in real estate taxes. 

 

There’s No Such Thing as a “Form Lease”

Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They present these documents often with a rider, and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

 

Note the Notice Requirements

Your lease agreement may contain many provisions that require you to send notices to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.

 


Monday, July 6, 2015

C-Corporation Vs. S-Corporation: Which Structure Provides the Best Tax Advantages for Your Business?

The difference between a C-Corporation and an S-Corporation is in the way each is taxed. Under the law, a corporation is considered to be an artificial person. Shareholders who work for the corporation are employees; they are not “self-employed” as far as the tax authorities are concerned.

The C-Corporation

In theory, before a C-corporation distributes profits to shareholders, it must pay tax on the income at the corporate rate. Then, leftover profits are distributed to the shareholders as dividends, which are then treated as investment income and taxed to the shareholder. This is the “double taxation” you may have heard about.

C-Corporations enjoy many tax-related advantages :

  • Income splitting is the division of income between the corporation and its shareholders in a way that lowers overall taxes, and can avoid or significantly reduce the potential impact of “double taxation.” By working with a knowledgeable tax advisor, you can determine exactly how much money the corporation should pay you as an employee to ensure the lowest tax bill at the end of the year.
  • C-Corporations enjoy a wider range of deductible expenses such as those for healthcare and education.  
  • A shareholder can borrow up to $10,000 from a C-Corporation, interest-free. Tax-free loans are not available to sole proprietors, partners, LLC members or S-Corporation shareholders.

S-Corporation
S-Corporations pass income through to their shareholders who pay tax on it according to their individual income tax rates. To qualify for S-Corporation status, the corporation must have less than 100 shareholders; all shareholders must be individual U.S. citizens, resident aliens, other S-Corporations, or an electing small business trust; the corporation may have only one class of stock; and all shareholders must consent in writing to the S-Corporation status.

Depending on your situation, an S-Corporation may be more advantageous:

  • Electing S-Corporation tax treatment eliminates any possibility of the “double taxation” referenced above. S-Corporations pay no federal corporate income tax, but must file annual tax returns. Because losses also flow through, shareholders who are active in the business can take most business operating losses on their individual tax returns.
  • S-Corporations must still file and pay employment taxes on employees, as with a C-Corporation. An S-Corporation may not retain earnings for future growth without the shareholders paying tax on them. The taxable profits of an S-Corporation pass through to the shareholders in the year they are earned.
  • S-Corporations cannot provide the full range of fringe benefits that a C-Corporation can.

Monday, June 29, 2015

For How Long Should a Business Keep Tax Records?

There are many reasons for retaining tax records. They can be a useful guide for business planning, for tracking receipts and expenses, and in cases where the company or shares are being sold to outside parties. 

The IRS expects taxpayers to keep records for as long as they are needed to administer any part of the Internal Revenue Code. In other words, if you fail to keep records, and an item in a past return is questioned, you may not have the documentation you need to defend yourself and avoid taxes and penalties. In addition, insurance companies and creditors may wish to see tax returns even after the IRS no longer does. 

What is the "Period of Limitations" for a Tax Return? 

Generally, you must keep records that support income and deductions for a tax return until the "period of limitations" for that return elapses. This is the period during which you can still amend your return to get a refund or credit and during which the IRS can still assess more tax. It varies depending on the circumstances surrounding each return. 

  • If you owe additional tax, but you haven't seriously underpaid, committed fraud, or failed to file a return, the period is 3 years from the date taxes were filed. 
  • If you failed to report income that you should have reported, in excess of 25% of the gross income that you did report, the period is 6 years. 
  • If you filed a claim for credit or refund after you filed your return, the period is the later of 3 years after the return was filed or 2 years after tax was paid. 
  • If you filed a claim for a loss from worthless securities or a bad debt deduction, the period is 7 years. 
  • If you filed a fraudulent return or failed to file a return, the period is unlimited. 

Note: Returns filed before taxes are due are treated as though they were filed on the due date.

Other Periods of Limitations

Additionally, if you are an employer, you must keep employee tax records for at least 4 years after the later of the date the tax becomes due or the date it is paid.

For assets, you should keep records until the period of limitations elapses for the year in which you sell the property in a taxable transaction. You will need records to compute depreciation, amortization, or depletion deductions and to add up your basis in the property for purposes of calculating gain or loss. A business law attorney experienced in tax matters can further guide you in relation to your specific situation.


Wednesday, June 17, 2015

Selecting An Executor Post Mortem

The death of a loved one is a difficult experience no matter the circumstances.  It can be especially difficult when a person dies without a will.  If a person dies without a will and there are assets that need to be distributed, the estate will be subject to the process of administration instead of probate proceedings.

In this case, the decedent’s heirs can select someone to manage the estate, called an administrator instead of executor.  State law will provide who has priority to be appointed as the administrator. Most states’ laws provide that a spouse will have priority and in the event that there is no spouse, the adult children are next in line to serve. However, those that have priority can decline to serve, and the heirs can sign appropriate affidavits or other pleadings to be filed with the court that nominate someone else as the administrator. Once the judge appoints the nominated person they will then have the authority to act and begin estate administration.

In certain circumstances, it may be necessary to change the initially appointed administrator during the administration process. Whether this is advisable depends on many factors. First, the initial administrator will have started the process and will be familiar with what remains to be done. The new administrator will likely be behind in many aspects of the case and may have to review what the prior administrator did. This can cause expenses and delays. Also, it is possible that the attorney representing the initial administrator may not be able to ethically represent the new one, again causing increased expenses and delays. However, if the first administrator is not doing his/her job, the heirs can petition to remove the individual and appoint a new one.

If you are currently involved in a situation where an estate needs to be administered, it is recommended that you speak with an estate planning attorney in your state.


Monday, June 8, 2015

Disaster DIY: Business Law Edition

Have you ever watched the TV show Disaster DIY on HGTV? The premise of the show is that many people have no idea what they are doing when it comes to home remodeling, but they try the “do it yourself” (DIY) approach  anyway. The host of the show then comes in to save the day, repairing what the DIYers have messed up, and teaching them how to do perform certain tasks.

This show has many parallels to the world of business law. It is tempting to try and find a DIY solution to legal issues. Budgets are tight, and professional legal advice can seem like a luxury when you are first starting out or struggling to meet quarterly goals, so many businesses adopt a DIY solution when what they really need is a good lawyer.

The Internet also encourages many businesses to DIY their legal issues, whether its access to legal info or various forms. But the problem is that advice on the Internet is not always accurate, particularly since business law is different in every state.

After pursuing the DIY route and disaster ensues,  business owners are forced to call in the professionals to clean up the mess.  Unlike the TV show, where the show’s producers cover the DIYers costs, the costs of fixing a legal DIY disaster rest solely on the business or the business owner. It often costs businesses significantly more to rework a legal framework that wasn’t carefully thought through. There are two reasons for this. First, proactive legal help is always going to be more cost effective than legal triage; it’s infinitely more costly to actively fight a pending lawsuit than it does to carefully draft and implement needed policies. Second, the results that even the best attorney can salvage from an awful situation are not likely to be as as ideal or as cheap as it would have been to avoid the disaster altogether.


Monday, May 25, 2015

Leaving a Timeshare to a Loved One

Many of us have been lucky enough to acquire timeshares for the purposes of vacationing on our time off.  Some of us would like to leave these assets to our loved ones.  If you have a time share, you might be able to leave it to your heirs in a number of different ways. 

One way of leaving your timeshare to a beneficiary after your death is to modify your will or revocable trust.  The modification should include a specific section in the document that describes the time share and makes a specific bequest to the designated heir or heirs. After your death, the executor or trustee will be the one that handles the documents needed to transfer title to your heir. If the time share is outside your state of residence and is an actual real estate interest, meaning that you have a deed giving you title to a certain number of weeks, a probate in the state where the time share is located, called ancillary probate, may be necessary. Whether ancillary probate is needed will depend upon the value of the time share and the state law.

Another way you could accomplish this goal is to execute what is called a "transfer on death" deed. However, not all states have legislation that permits this so it is imperative that you check state law or consult with an attorney in the state where the time share is located. A transfer on death deed is basically like a beneficiary designation for a piece of real estate. Your beneficiary would submit a survivorship affidavit after your death to prove that you have died. Once this document is recorded the beneficiary would become the title owner.

It is also important to investigate what documents the time share company requires in order to leave your interest to a third party. They may require that additional forms be completed so that they can bill the beneficiary for the annual maintenance fees or other charges once you have died.

If you want to do your best to ensure that your loved ones inherit your time share, you should consult with an experienced estate planning attorney today. 

 


Monday, May 18, 2015

Are Non-Compete Agreements Appropriate For My Business?

The aim of non-compete agreements is to bar departing employees from working for your business competitors or from starting a competing business. These agreements used to be reserved for high-level employees or people working in certain fields who had access to sensitive information. While non-compete agreements are becoming more common, they are only enforceable to a limited degree and in some states not enforceable at all.

In considering whether a non-compete agreement can be enforced, courts generally examine whether there is a legitimate business interest at stake and whether the agreement is narrowly crafted to protect that interest. Courts tend to disfavor restrictive covenants such as non-compete agreements because it limits commerce and can prevent an individual from earning a livelihood. Here are a few factors to consider when looking to implement a non-compete:

  • What is unique about my business? If there is something about your business that sets it apart from its competitors - a product, a process, a method of doing business - a non-compete agreement could protect your advantage. It might also be wise to consider other protections such as patents.

  • Over what area would I need a non-compete to apply? Would employees be barred from working at a competing business across the street? In the same city? Within 50 miles? Within the same state? The larger the radius, the less likely a court is to enforce it.

  • To which companies would a non-compete need to apply? Are your employees going to be able to get jobs in your field if they leave your company, or would your agreement make them essentially unemployable? Courts typically frown on agreements that leave people completely out of work.

  • How long would a non-compete need to last? The shorter the time an employee is restricted by the agreement, the more likely the court is to find the restriction reasonable.

  • Under what circumstances would the non-compete kick in? If an employee is fired, are they going to face the same restrictions as an employee voluntarily leaving your employ?

When considering any agreement with your employees, including restrictive covenants such as non-compete agreements, it is important to consult an experienced business law or employment law attorney who can properly advise you and help you craft an agreement that is likely to be enforceable.


Monday, May 11, 2015

Selecting An Executor Post Mortem

The death of a loved one is a difficult experience no matter the circumstances.  It can be especially difficult when a person dies without a will.  If a person dies without a will and there are assets that need to be distributed, the estate will be subject to the process of administration instead of probate proceedings.

In this case, the decedent’s heirs can select someone to manage the estate, called an administrator instead of executor.  State law will provide who has priority to be appointed as the administrator. Most states’ laws provide that a spouse will have priority and in the event that there is no spouse, the adult children are next in line to serve. However, those that have priority can decline to serve, and the heirs can sign appropriate affidavits or other pleadings to be filed with the court that nominate someone else as the administrator. Once the judge appoints the nominated person they will then have the authority to act and begin estate administration.

In certain circumstances, it may be necessary to change the initially appointed administrator during the administration process. Whether this is advisable depends on many factors. First, the initial administrator will have started the process and will be familiar with what remains to be done. The new administrator will likely be behind in many aspects of the case and may have to review what the prior administrator did. This can cause expenses and delays. Also, it is possible that the attorney representing the initial administrator may not be able to ethically represent the new one, again causing increased expenses and delays. However, if the first administrator is not doing his/her job, the heirs can petition to remove the individual and appoint a new one.

If you are currently involved in a situation where an estate needs to be administered, it is recommended that you speak with an estate planning attorney in your state.


Monday, April 27, 2015

Is a copy of a will sufficient?

Many people keep their important documents at home where they are easily accessible. It’s not at all uncommon to find people with a filing cabinet or even a shoe box containing passports, account statements, deeds, tax returns, birth certificates and social security cards. Wills are often added to these files once the estate planning process is completed. In choosing to store your important estate planning documents at home, however, you risk having the originals lost or destroyed in the case of fire, flooding or theft. So what happens if the original version of your will is lost or ruined?

Generally when a person dies, state law determines what must happen in the state probate proceeding. In most cases, the "original" of the will must be submitted to the probate court in the county where the person resided. If the original of the will cannot be located and provided to the court, there likely is a provision in your state's probate code that would permit the submission of a photocopy of that signed will.

In many cases, the attorney who prepared the will maintains a copy of the estate planning documents. Assuming, that the copy your attorney has could be submitted to the probate court, additional steps may need to be taken, and additional pleadings prepared in order to submit a copy.

Should you lose the original copy of your will, the best practice would be for you to execute a new will which would make things easier for your family and loved ones upon your death. In that case there would be better assurances that your wishes were followed and carried out. Preparing a new will should not take much time for your attorney. He or she likely still has the word processing file on his or her computer, and could easily modify it for you to execute again. If for some reason this is not done, you may wish to execute a document stating the original was destroyed in a flood or fire but that you did not intend to revoke it. However, it’s important to note that this may not be effective in every instance as many states have very strict requirements in terms of requiring originals and execution formalities.

To keep the originals of your estate planning documents safe, even in the face of disaster, you might consider purchasing a fireproof/waterproof safe for your home or rent a safe deposit box with a local bank where you can still easily access your documents but keep them secure off-site.


Archived Posts

2019
2018
December
November
October
September
August
July
June
May
April
March
February
January
2017
December
November
October
September
August
July
June
May
April
March
February
January
2016
December
November
October
September
August
July
June
May
April
March
February
January
2015
December
November
October
September
August
July
June
May
April
March
February
January
2014
2013
2012


The Law Offices of Richard Palumbo, LLC assists clients with Real Estate Law, Business Law, Probate, Evictions for Landlords and Property Damage matters in Rhode Island including Cranston, Warwick, Coventry, Johnston, Providence, Pawtucket, Central Falls and all areas throughout RI.



© 2019 Law Offices of Richard Palumbo, LLC | Disclaimer
535 Atwood Avenue, Suite 4, Cranston, RI 02920
| Phone: 401.490.0994

Business Law | Condominium Law | Evictions | Mortgage Foreclosures | Probate & Estate Administration | Insurance Law | Real Estate Law | Real Estate and Business Litigation | Real Estate Closings | | Resources

FacebookLinked-In PersonalLinked-In Company

Attorney Website Design by
Zola Creative