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One of the coolest parts of owning a business is getting to come up with its name. On the creative side, you’re choosing a name to represent and encapsulate the essence of your life’s work. On the practical side, you’re trying to come up with something that will most effectively grab the interest of potential customers.
Another issue you might not be aware of, though, is how many different laws exist related to naming your business. These laws vary state by state, so what’s legal in one place might not be legal in another. To this end, navigating state laws governing business names is something that not only startups must consider, but also those well-established companies that might expand into more than one state.
While it’s impossible to list all of those state laws here, there are several common factors most state-name laws center around. If you’re in the process of naming a new business or looking to extend your existing brand into a different state, here are a few of the areas you’ll need to consider:
Name availability
The first and most obvious thing you’ll need to determine is if the name you’ve chosen is already taken by another business—or is so similar to another company’s name that having two of the same would cause confusion. Each state government will have a specific department that controls business-name laws, and most of those departments have an online search function dedicated to this very purpose. Just Google your state’s “business name availability” to get started.
Entity-type semantics
Nearly every state has some requirements governing how a company’s name can reflect its entity type. For example, such laws will allow only a businesses that’s truly classified as a limited liability company or a corporation to use the words “limited liability company” or “corporation” in its name.
The same laws also stipulate how the entity type should be spelled out and punctuated. Some states, for example, allow you to use the abbreviation “LLC” if you’re a limited liability company, while others make you spell out the entity. Some even legally require the use of periods between each letter of the suffix, as in (L.L.C).
Professional Licensing
In many professions, such as law, medicine, and accounting, you’re required to be professionally licensed in the state in order to do business there. If this is the case for you, the business name you choose will not only have to adhere to your profession’s own licensing board, but also your state’s secretary of state (SOS).
In certain states, the name-approval process starts with getting approved by the licensing board, but in others, it starts with the SOS. To avoid wasted time and paperwork, be sure to check where your state starts the name-approval process before making any applications.
Similarly, business-name laws prohibit anyone who’s not licensed in the state to use certain professions in the company’s name, such as “engineer,” “architect,” and “interior designer,” even if you’re licensed in another state. This can get confusing and even controversial due to the fact that some professions, like massage therapy, are licensed in some states and not others.
In Florida, for example, only licensed massage therapists can use the title “massage therapist” in their business name. But in California, anyone can call themselves a massage therapist because no state-licensing requirements exist. However, only those who are actually licensed can legally call themselves a “licensed massage therapist” or “certified massage therapist,” providing alternatives for those who want their business to sound as professional as possible in states without licensing requirements.
Industries
Many states also have broad restrictions governing the use of certain industry terminology in your business name. For example, using terms like “banking,” “fidelity,” and “finance” can be restricted. Restrictions can also exist for general career areas like education, law enforcement, and medicine, as well as for more specific terminology from each individual field.
Investigate your chosen business name
Whether you’re getting ready to launch your business or you’re looking to expand into another state, we can assist you with the legal ins and outs of state-naming laws.
We offer a complete spectrum of legal services for business owners and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer you a LIFT Your Life And Business Planning Session, which includes a review of all the legal, insurance, financial, and tax systems you need for your business. Schedule online today.
2020 was a nightmarish year for many families. But thanks to recent legislation, you could see a silver lining in the form of major tax breaks when filing your income taxes this spring. First up, although it’s technically not a tax break, the IRS recently announced that the deadline for filing your 2020 federal income taxes has been pushed back from April 15 to May 17, 2021, which gives you an extra month to get your tax return handled.
The postponement applies to individual taxpayers, including those who pay self-employment taxes. But the extension does not apply to first-quarter 2021 estimated tax payments that many small business owners file. So if you file quarterly taxes, contact your tax advisor now, if you haven’t already done so.
Additionally, the CARES Act passed in March 2020 provides individual taxpayers with several hefty tax-saving opportunities, many of which are only available this year. What’s more, President Biden’s new relief package, known as the American Rescue Plan (ARP), which went into effect in March 2021, not only offers additional stimulus payments to most Americans, but it also includes significant tax relief for those taxpayers who lost their job and had to rely on unemployment benefits in 2020.
While there are dozens of potential tax breaks available for 2020, last week in part one of this series, we highlighted the first three of seven ways you can save big money on your 2020 tax return. Here in part two, we’ll discuss the remaining four ways you can save.
4. New Rules for Early Withdrawals From Retirement Accounts
If your finances were seriously impacted by last year’s economic turmoil, you may have needed to withdraw funds from your retirement accounts to cover your expenses. And thanks to new rules under the CARES Act, you have more flexibility to make an emergency withdrawal from tax-deferred retirement accounts in 2020, without incurring the normal penalties.
Typically, permanent withdrawals from traditional IRAs or 401(k) accounts are taxed at ordinary income rates in the year the funds were taken out. And pulling out money before age 59 1/2 would also typically cost you a 10% penalty.
But thanks to the CARES Act, you can avoid the 10% penalty (if under 59 1/2) on up to $100,000 in pandemic-related distributions from your retirement account in 2020. You are also allowed to spread such distributions over three years to reduce the tax impact. Or better yet, you can opt to put this money back into your retirement account—also within three years—and avoid paying taxes on the money all together.
However, because early withdrawals can negatively impact your retirement savings down the road, if you are looking to take advantage of this provision, you should consult with us, as your Personal Family Lawyer®, and your financial advisor first. Also, note that employers are not required to participate in this provision of the CARES Act, so you’ll also need to check with your plan administrator to see if it’s available at your workplace.
5. Medical Deductions
If you had hefty medical bills in 2020, you might be able to get some tax relief using increased deductions. Under the CARES Act, you can deduct any medical expenses above 7.5% of your adjusted gross income (AGI). Your AGI is your total income minus any other deductions you’ve already taken.
For example, if your AGI was $100,000, you can deduct qualified unreimbursed medical expenses that exceeded $7,500 in 2020. However, you have to itemize your deductions in order to write off these expenses, so meet with us to determine if this would make sense for your situation.
6. Earned Income Tax Credit
The Earned Income Tax Credit (EIC) is a refundable tax credit for low- and middle-income taxpayers that’s often overlooked. The amount of credit you can claim depends on your annual income and the number of kids you have—but people without kids can qualify, too.
Below are the maximum EIC amounts for 2020, along with the maximum income you can earn before losing the credit altogether. Note: You can’t claim the EIC if you are a married individual filing separately.
Number of children |
Maximum earned income tax credit |
Max earnings, single or head of household filers |
Max earnings, joint filers |
---|---|---|---|
0 |
$538 |
$15,820 |
$21,710 |
1 |
$3,584 |
$41,756 |
$47,646 |
2 |
$5,920 |
$47,440 |
$53,330 |
3 or more |
$6,660 |
$50,954 |
$56,844 |
Additionally, for the 2020 tax year, there are special rules for the EIC due to the pandemic: You can use either your 2019 income or your 2020 income to calculate your EIC and use whichever number gets you the bigger credit. This doesn’t happen automatically, though, so be sure to ask your tax professional to run the numbers both ways and choose the option that offers the most savings.
7. Child Tax Credit
If you have minor children aged 16 or younger, the Child Tax Credit is one of the most effective ways to reduce your federal income tax bill—and there are special rules for 2020 that can save you even more.
For your 2020 taxes, you can claim up to $2,000 per qualified child as a tax credit, and under rules due to the pandemic, you can use either your 2019 income or your 2020 income to calculate your credit—whichever year offers the most savings. The credit begins to phase out when your AGI reaches $75,000 for single filers, $150,000 for joint filers, and $112,500 for head of household filers.
What’s more, with the passage of Biden’s new ARP this March, the child tax credit is set to get even bigger in 2021. When you file your taxes next year, the per child credit will go up to $3,000 or $3,600, depending on your child’s age. Look for a future blog post detailing all of the new tax saving opportunities available under the ARP for 2021 and beyond.
Maximize Your Tax Savings for 2020
These are just a few of the numerous tax breaks available for 2020. Indeed, there are plenty of other deductions and credits that might be up for grabs depending on your situation. Meet with us, as your Personal Family Lawyer®, to make sure you don’t miss out on a single one. Contact us today to schedule your visit.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.
Legendary TV and radio host, Larry King, died at Cedars-Sinai Medical Center in Los Angeles on January 23rd, 2021 at age 87. Larry was hospitalized in December due to COVID-19, but he’d recently been moved from the ICU to a regular hospital room after recovering from the virus. However, the famed broadcaster suffered from a number of other health conditions over the years, including multiple heart attacks, kidney failure, and diabetes, and he passed away from sepsis that was the result of an unrelated infection.
Last week, in part one of this series, we discussed how Larry’s decision to create a handwritten will, rather than take the time to consult with legal counsel to properly update his plan for his impending divorce, is likely to result in a lengthy court battle between Larry’s seventh wife, Shawn Southwick King, and his surviving children. Moreover, we also noted that Larry would have been far better off using a Lifetime Asset Protection Trust, instead of a will, to distribute his assets to his children upon his death.
Here, in the second part of this series, we’ll first look at the different ways a Lifetime Asset Protection Trust would have benefited Larry’s children. From there, we’ll discuss the complications that are likely to arise given that two of Larry’s children died before he had the chance to update his plan—and the planning lessons we can take away from this mistake.
Lifetime Asset Protection Trusts: Airtight Protection For Your Child’s Inheritance
A Lifetime Asset Protection Trust is a unique estate planning vehicle that’s specifically designed to protect your children’s inheritance from unfortunate life events, such as divorce, debt, illness, and accidents. At the same time, the trust gives your children the ability to access and invest their inheritance, while retaining airtight asset protection for their entire lives.
For someone with as much wealth and as many heirs as Larry, a Lifetime Asset Protection Trust, built into his Living Trust, would have been an ideal vehicle to protect and pass on his assets to his heirs. To see why, let’s break down how these unique trusts work.
To avoid the court process of probate that’s inherent with a will-based plan, most lawyers will advise you to put the assets you’re leaving your kids in a revocable living trust—and this is the right move. But most living trusts are structured to distribute your assets outright to your children at certain ages or stages, such as one-third at age 25, half the balance at 30, and the rest at 35. Giving outright ownership of the trust assets in this way leaves them at serious risk of being lost or squandered.
While a living trust may protect your loved ones’ inheritance as long as the assets are held by the trust, once the assets are distributed to the beneficiary, all of the protection previously offered by your trust disappears. For example, let’s say Larry’s youngest sons Chance, 21, and Cannon, 20, both racked up serious debt while in college. If they were to receive one-third of their inheritance at age 25, creditors could take their money if it’s paid to them in an outright distribution.
The same thing would be true if Larry’s oldest son, Larry Jr., 58, got divorced soon after receiving his inheritance, only it would be his soon-to-be ex-wife who would claim a right to the funds in the divorce settlement.
In contrast, a Lifetime Asset Protection Trust gives a Trustee of your choice full discretion on whether to make distributions or not. The Trustee has full authority to determine how and when the assets should be released based on the beneficiary’s needs and the circumstances going on in his or her life at the time. And you can even choose to make your beneficiary the Trustee of their own trust (with some restrictions) for even more flexibility and control.
For example, if Larry Jr. was in the process of getting divorced or in the middle of a lawsuit, the Trustee could refuse to distribute any funds. Therefore, the Trust assets would remain shielded from his future ex-wife or a potential judgment creditor should Larry Jr. be ordered to pay damages resulting from a lawsuit.
And because the Trustee controls access to the inheritance, those assets are not only protected from outside threats like ex-spouses and creditors, but from your child’s own poor judgment, as well. For example, if Chance ever develops a substance abuse or gambling problem, the Trustee could withhold distributions until he receives the appropriate treatment.
What’s more, you can write up guidelines to the Trustee, providing him or her with clear directions about how you’d like the trust assets to be used for your beneficiaries. This ensures the Trustee is aware of your values and wishes when making distributions, rather than simply guessing what you would’ve wanted, which often leads to problems down the road.
In addition to airtight asset protection, a Lifetime Asset Protection Trust can also be set up to give your child hands-on experience managing financial matters, like investing, running a business, and charitable giving. For an in-depth discussion of how this works as well as the other benefits offered by a Lifetime Asset Protection Trust, read our previous post, Lifetime Asset Protection Trusts: Airtight Protection For Your Child’s Inheritance.
Although a Lifetime Asset Protection Trust would have been a great way for Larry to protect and pass on his assets to his children, such trusts aren’t for everyone. That said, contrary to what you might think, Lifetime Asset Protection Trusts are not just for the super wealthy.
Indeed, these protective trusts are even more useful if you’re leaving a relatively modest inheritance, since the smaller the inheritance, the more at risk it is of getting wiped out by a single unfortunate event like a medical emergency or lawsuit. However, if your kids are going to spend the vast majority of their inheritance on everyday expenses and consumables, such trusts probably don’t make much sense.
Meet with us, as your Personal Family Lawyer®, to see if a Lifetime Asset Protection Trust is the right option for your family.
Larry Is Predeceased By Two of His Five Children
The final factor complicating Larry’s estate is the fact that two of his five adult children died just a few months before he did. His son Andy King, 65, unexpectedly passed away of a heart attack in late July 2020, while his daughter Chaia King, 51, died just three weeks later in August from lung cancer. Both children were from Larry’s marriage to his third wife, Alene Akins, who Larry wed in 1961.
While Andy and Chaia predeceased their father, Larry apparently didn’t update his estate plan to account for their deaths. Indeed, Larry’s handwritten will, which was created in October 2019, simply states that in the event of his death, “I want 100% of my funds to be divided equally among my children Andy, Chaia, Larry Jr., Chance, and Cannon.”
Had Larry worked with estate planning lawyers to keep his plan updated, rather than creating a handwritten will, his legal team would have ensured that his will and all of his other planning documents were immediately updated to account for the death of any of his beneficiaries. Along those same lines, had Larry worked with lawyers to amend his plan, his documents would have been drafted with provisions that would address the potential for one (or more) of his beneficiaries to pre-decease him, so even if his plan wasn’t updated, Larry’s assets would pass to the appropriate person or persons.
Based on California law, the share of Larry’s assets that would have passed to Andy and Chaia through his handwritten will are likely to pass to their children (Larry’s grandchildren), if they have any. However, this all depends on whether or not Shawn is able to successfully contest Larry’s handwritten will in court, which she has stated she plans to do. If she is successful, then Larry’s handwritten will would be deemed invalid, and his assets would be divided based on whatever previous estate plan Larry had in place.
Regardless of what happens to Andy and Chaia’s share of the estate, Larry’s plan should have been amended to account for their deaths. This brings us to our third and final estate planning lesson.
Lesson #3: Review your plan annually to make sure it’s up to date, and immediately modify your plan following events like births, deaths, divorce, and inheritances.
As Larry’s case shows, your plan won’t do you any good if it’s not regularly updated. Estate planning is not a one-and-done type of deal; your plan must continuously evolve to keep pace with changes in your family structure, the legal landscape, your assets, and your life goals.
And unfortunately, this kind of thing happens all the time. In fact, outside of not creating any estate plan at all, one of the most common planning mistakes we encounter is when we get called by the loved ones of someone who has become incapacitated or died with a plan that no longer works because it hasn’t been updated. Yet, by the time they contact us, it’s too late.
We recommend you review your plan annually to keep it current, and immediately update it following major life events like births, deaths, divorce, and inheritances. We have built-in systems and processes to ensure your plan is always up to date, so you won’t need to worry about forgetting anything.
If you’ve yet to create a plan, have DIY documents you aren’t sure about, or have a plan created with another lawyer’s help that hasn’t been reviewed in more than a year, meet with us, as your Personal Family Lawyer®. We can ensure that your plan stays 100% current, so it works exactly as intended no matter what.
Don’t Do It Yourself
As Larry King’s story demonstrates, do-it-yourself planning can have terrible consequences for your loved ones—and in the worst cases, it can be even worse than if you had no estate plan at all. To ensure your plan works exactly as intended, contact us, as your Personal Family Lawyer®, to review and update your current plan, or create one if you have yet to do so.
With a Personal Family Lawyer® on your side, you’ll have access to the same planning tools and protections that A-list celebrities use, which are designed to keep your family out of court or conflict no matter what happens. Contact us today to learn more.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.
No matter who you are voting for on November 3rd, you may want to start considering the potential legal, financial, and tax impacts a change of leadership might have on your family’s planning. And as you’ll learn here, there are a number of reasons why you should start strategizing now, because if you wait until after the election, it will very likely be too late.
Although the election outcome is impossible to predict, some polls show Joe Biden with a healthy lead over Donald Trump and the Democrats could be poised to take a majority in both houses of Congress. Such a Democratic sweep will likely have far-reaching consequences on a number of policy fronts. But in terms of financial, tax, and estate planning, it’s almost certain that we’ll see radical changes to the tax landscape that could seriously impact your planning priorities. And while it’s unlikely that a major tax bill would be enacted right away, there’s always the possibility that when legislation does pass it could be applied retroactively to Jan. 1, 2021.
With that in mind, in this two-part series, we’ll outline the major ways Biden plans to change tax laws, so you can adapt your family’s finances and estate planning considerations accordingly. Although you may decide to put off any actual changes to your estate plan until after the election, if you have any big transactions on the horizon, or if you have an estate that could be worth $1 million or more when you die, we suggest you at least start strategizing now. That way, you’ll have plenty of time to take the appropriate action before the end of the year, which will undoubtedly be a chaotic period regardless of who wins the election.
Focus on high net-worth taxpayers
While Trump has yet to release any formal economic proposals for a second term, Biden’s proposed economic agenda is essentially focused on raising some $4 trillion of new revenue over the next 10 years. The vast majority of this revenue would come from increasing taxes on high net-worth individuals.
Under Biden’s plan, “high net-worth individuals” are taxpayers earning more than $400,000. Those earning less than that would generally not see an increase—and perhaps even a decrease—in taxes, at least in the short-term. At this point, however, it’s not clear if the $400,000 threshold would apply equally to singles, heads of households, and/or married joint-filing couples.
Although the specifics haven’t been fully ironed out yet, Biden’s plan would boost tax revenue in a handful of ways:
- Increasing the top personal income and capital-gains tax rates
- Reinstating the payroll tax on higher incomes
- Returning the federal estate and gift tax exemption to prior levels
- Eliminating the step-up in cost basis on inherited investments
- Capping itemized deductions
- Increasing the corporate tax rate
Increased personal income tax rates on the wealthy
Starting in 2018,Trump’s Tax Cuts & Jobs Act (TCJA) reduced the top federal income tax rates on individuals from 39.6% to 37%. Biden’s tax plan would put the top income tax rate back to 39.6% on personal income in excess of $400,000.
This means that everyone earning more than $400,000 a year would see a tax hike. On the other hand, those making less than $400,000 would see no change in their personal income tax rate.
Higher maximum tax rate for capital gains
One of the most dramatic changes proposed under Biden’s plan involves the way capital gains are taxed. Short-term capital gains (assets held for a year or less) are taxed at the ordinary income tax rates, and under Biden’s proposal, those rates would max out at 39.6%. But the tax rates for long-term capital gains would see an even bigger hike.
Long-term capital gains (assets held for more than a year) are taxed at lower rates than short-term gains to encourage long-term investment. Those rates are currently set at 0% for individuals with annual incomes up to $40,000, 15% for incomes between $40,001 and $441,450, and max out at 20% for incomes above $441,451.
The Biden plan, however, would create an entirely new tax bracket just for long-term capital gains in which gains for individuals with incomes higher than $1 million would be taxed at 39.6%. So if you’re making more than $1 million a year, you’d no longer see the benefit of lower capital gains rates.
Given the potential for an increased capital gains tax rate, if you earn more than $1 million a year and are considering a sale of capital-gains qualified assets, or if a sale will bump up your income, you may want to consider accelerating any large transactions, so they’re finalized before the end of the year. If this is the case for you, consult with us, along with your tax and financial advisors, right away for guidance about which transactions should be prioritized and how to maximize your tax savings on each one. Keep in mind, if you wait to contact us about such transactions until mid-November, it’s unlikely we are going to be able to accommodate your needs, so be sure to act now.
Increased Social Security tax on high-income earners
Another way Biden’s plan would raise tax revenue is by subjecting incomes above $400,000 to the Social Security tax. Currently, the 12.4% Social Security tax—also known as the payroll tax—applies only to the first $137,700 of your income. Earnings above that amount aren’t subject to the tax, and the cap goes up annually with inflation.
Biden proposes applying the 12.4% tax to wages and self-employment income starting at $400,001. This means the first $137,700 of your earnings will continue to be taxed at 12.4%, but you will pay no Social Security tax on additional earnings up to $400,000. However, any additional earnings exceeding $400,000 would be taxed at 12.4%.
The untaxed gap, or “doughnut hole,” on earnings between $137,700 and $400,001 would close over time with the annual increases for inflation. This change is designed to bolster the Social Security system by ensuring that the highest income levels are eventually subject to the full payroll tax.
In light of this proposed change, if you are expecting a bonus or other special end-of-the-year compensation, you should consider arranging for the money to be paid out by the end of 2020, rather than waiting until the start of 2021.
Increased estate and gift tax exposure
When it comes to estate planning, the most critical aspect of Biden’s proposed tax increases would be a major reduction in the federal gift and estate tax exemption. Starting in 2018, the TCJA doubled the gift and estate tax exemption from prior levels, increasing to $11.58 million for single taxpayers and $23.16 million for married couples. Any amounts above this exemption you give away during your lifetime or transfer upon your death are subject to a flat 40% tax.
The increased exemption amounts under the TCJA will sunset at the end of 2025, but if Biden wins the presidency, the enhanced exemption could be repealed much sooner. Indeed, Biden proposes to reduce the exemption back to at least the 2017 level of $5.45 million for individuals and $11.58 for couples.
There are others who suggest the federal gift and estate tax under Biden might even return to 2009 levels, when the individual exemption was set at $3.5 million and the estate tax rate was 45%. What’s more, seeing that in the past lawmakers have made estate tax rates retroactive, it’s possible that these changes could be applied retroactively and go into effect as early as Jan. 1, 2021.
Whatever the final outcome, it’s clear that if you have assets valued between $3.5 and $11 million, you need to seriously consider taking steps now to take advantage of favorable estate-tax exemption rates that may never be seen again. To this end, you should consider opportunities to transfer assets out of your estate now in order to lock in the higher exemption amounts.
That said, transferring assets out of your estate, whether done via gifting or other means, can take several weeks to plan, set up, and finalize, so avoid the temptation to wait until after the election to start planning. In fact, you should immediately meet with us, as your Personal Family Lawyer®, to discuss your options and get things started.
By setting your plan in motion now, you can have your strategies in place and ready to go, so you can pull the trigger (if needed) once election results are in.
Next week, we’ll continue with part two in this series on how to prepare your estate plan for a Biden presidency.
Proper estate planning can keep your family out of conflict, out of court, and out of the public eye. If you’re ready to create a comprehensive estate plan, contact us to schedule your Family Wealth Planning Session. Even if you already have a plan in place, we will review it and help you bring it up to date to avoid heartache for your family. Schedule online today.
When getting a business off the ground, one common mistake business owners make is not establishing a solid legal foundation to protect their company from unforeseen situations and circumstances. The most effective and efficient way to provide this legal bedrock is by putting a set of key legal agreements for your startup in place.
Gleaned from years of business experience and advice from seasoned and highly successful entrepreneurs, we’ve outlined the core four legal documents that a company’s founders should put into place as soon as your business “idea” evolves into a reality.
1. Business Entity Agreements
When starting a business, it’s crucial to select the proper business entity structure in order to maximize tax savings and minimize personal liability. Some of the most popular entity structures include sole proprietorships, general and limited partnerships, C corporations, S corporations and limited liability companies (LLC or even an LLC taxed as an S-Corporation).
Once you choose the most advantageous structure, you should—and are sometimes legally required to—draft the proper entity agreements to lay the groundwork for how the business will be governed and operated. Different entity structures require different types of agreements. For example, C corporations require corporate bylaws, while LLCs use an operating agreement.
These agreements are legal documents that define each shareholder or member’s rights and responsibilities, along with establishing the provisions for running the company, both on a daily basis and in the event one person dies or becomes incapacitated—as well as if the company dissolves. Moreover, these agreements also outline how business communications will be handled, along with how disputes will be resolved.
You may also have a shareholder’s agreement or a partnership agreement, if there are multiple owners of the business, where you want to further define the relationship among the owners.
To avoid any conflicts, these agreements should be created and signed by all parties as soon as the company is launched. As your Creative Business Lawyer®, we can advise you on the entity structure that’s best for your business as well as draft entity agreements to ensure maximum protection.
2. Intellectual Property Assignment Agreements
When launching a new business, you should make sure that all of the intellectual property (IP) brought into the company by its founders before startup, as well as any IP that’s subsequently created by owners and/or employees once the business is operational, is owned by the company, not the individuals. Transfer of IP ownership from individual to the company is done using intellectual property assignment agreements.
These agreements “assign” the company with complete ownership rights to all intellectual property assets—patents, trademarks, and copyrights—that are used to conduct business. Such agreements are typically required by most venture capital investors, and they also help protect the company from competitors and/or trolls looking to steal your ideas or products.
As your Creative Business Lawyer®, we can help you draft IP assignment agreements, so you can retain total control of all IP assets that your business relies on to operate and grow.
3. Employee Contracts and Offer Letters
Unless you plan on running the company all by yourself, you should create comprehensive employment contracts and offer letters before hiring new employees. These agreements clearly lay out the terms and conditions of employment, so your team will understand exactly what’s expected from them.
Employees should be required to sign these documents, providing evidence that both parties are aware of the employment relationship’s scope and conditions. Employment contracts should also include any non-disclosure agreements (NDA) and/or non-compete agreements you require to ensure your company’s trade secrets and/or proprietary systems and products don’t fall into the hands of competitors.
4. Sales and Service Contracts
Whether your company sells products, provides professional services, or a bit of both, you should have legal agreements in place to clearly lay out the rights and responsibilities of both the business and its customers. Sales contracts typically lay out the key elements—price, payment and credit terms, tax responsibilities, warranties, and liability limitations—for the sale of products and other goods.
Service contracts, on the other hand, explain the fees, terms, and conditions under which your company provides services, along with spelling out the responsibilities and liabilities of each party. Ideally, service contracts should offer your company maximum flexibility for delivering the services, while also limiting its liability. Be sure the contract not only covers the traditional terms listed above, but also any unforeseen events or circumstances that may occur.
If you’re starting a new business, or have already started one but still need to draft the necessary legal agreements. We’re experienced in helping entrepreneurs protect their business interests and limit their liability by drafting comprehensive legal agreements. What’s more, we can also help you establish sound legal, insurance, financial, and tax systems for your business, to ensure it experiences maximum growth and minimum hardship.
We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule. Or, schedule online.