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March 18, 2021 by Cava Faulkner

Family businesses tend to bring to mind small mom and pop enterprises that make a profit but aren’t necessarily industry leaders. True, you can find mom and pop at the helm in many family owned and operated businesses. But an analysis done by Boston Consulting Group found family controlled businesses account for more than 30% of all companies with sales over $1 billion. So, mom and pop are doing pretty well for themselves.

What contributes to their success? Is it family values? A strong work ethic?

According to an analysis done by research analysts with the Center for Management and Economic Research at École Polytechnique and the Harvard Business Review, there is much more at work behind the success of family-owned businesses in the U.S. and globally. Their analysis showed family businesses have many unique attributes that set them apart from their other corporate counterparts and contribute to their success.

Here’s a brief review of what they found

Family businesses think and act in terms of longevity, making investment decisions looking at a minimum 10-20 year horizon and thinking multi-generationally, instead of just what’s needed right now.
They make prudent financial decisions often forgoing big returns available during good times in order to increase their odds of survival during downturns.
They are more conservative when it comes to their investments seeking only strong investments that are almost guaranteed on their returns, again sometimes forgoing the big wins in exchange for consistent smaller wins.
Family businesses take on less debt, 37% on average v. 47% for non-family business endeavors. Note this doesn’t mean no debt, but they tend to be less leveraged.
They diversify. The analysis found that family businesses diversified more than those with traditional corporate structures. Diversified businesses are more flexible and tend to pull ahead in leaner times.
They embrace global expansion. This brings vulnerability as well as potential. Family businesses tend to be more international, and that pays off in the long run.
They have a lower employee turnover rate. Talent sticks around, productivity increases, company culture strengthens, and the feedback loop continues. Employees really believe in the power of the team effort. Most importantly here, they don’t rely on financial incentives to keep team members. Instead they focus on creating a culture of commitment and purpose, avoiding layoffs during downturns, promoting from within, and investing in people.

These attributes complement each other and when combined have an effect that is greater than their parts. Resilience is the key over performance when it comes to family businesses. Whether family owned or not, your business may be able to adopt some of these attributes for success. If you want to prudently plan for your business’s growth, start by sitting down with us. As your Creative Business Lawyer®, we can help your business integrate some of these traits for success.

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.

March 17, 2021 by Cava Faulkner

In addition to checking professional references, conducting interviews, and running criminal background checks, many business owners also conduct credit checks on potential new hires to assess their suitability for the job. Such screening is obviously important for hiring high-level positions or those directly involved with handling money and/or making fiduciary decisions. But starting a couple decades ago, credit checks became fairly commonplace for even menial jobs—maintenance person and warehouse staff—that entail no fiscal duties whatsoever.

More recently, however, some companies have started reducing their use of pre-employment credit checks. This may be due to increased scrutiny from state legislators or the fact that so many Americans were negatively impacted by the recession that even those with otherwise excellent credit now have some blights on their record.

Whether or not to run credit checks on potential hires is still something that every business owner must decide for themselves based on the need to protect their company, balanced with the cost of such checks and the potential liability they present if not done correctly. For instance, Whole Foods paid out more than $800,000 in 2015 to settle a class-action lawsuit alleging the company didn’t properly disclose it was running credit checks on potential employees.

To help business owners weigh the risk and rewards, here are some steps companies should take before running pre-employment credit checks.

Determine What The Laws Are In Your State

Even though the Fair Credit Reporting Act (FCRA) makes it legal on a federal level for employers to use pre-employment credit checks, several states have passed legislation that’s much more strict and overrides these federal allowances.

Currently, 11 states have enacted laws that restrict how and when employers may use credit checks to make hiring decisions—and two of those states (Hawaii and Washington) bar employers from pulling such reports at all. Major metropolitan areas like New York City and Chicago also regulate employment credit checks.

According to the National Conference of State Legislatures (NCSL), some 20 states are on considering passing similar laws, so make sure you’re familiar with your state’s policies. Much of what you need to know can be found by checking with your state’s department of labor.

Follow Rules Set Our By FCRA

If your state allows such credit checks, you must still abide by FCRA’s guidelines, which require employers to take three actions:

Obtain an applicant’s consent before pulling a credit report.
Issue applicants advance notice—and a copy of the credit report—if the company is considering rejecting them on the basis of their credit.
Provide applicants with an adverse action notice if the company decides not to hire them because of the credit check.

Keep in mind, if you request a credit report for a potential hire, you won’t get the same report sent to lenders. Instead, you’ll get a report designed for employers, offering a brief summary of the candidate’s credit history, but no credit score. Included in the report are current and past debts, bankruptcies, late payments, and the candidate’s debt-to-income ratio.

1. Obtain Consent For Credit Checks

Before running a credit check on a potential hire, you must notify them and get their written permission to do so. The credit check notice and authorization should be provided in a separate document that doesn’t hide the terms inside a bunch of other information, such as within a standard employment application.

2. Provide Warning Of Potential Adverse Action

If you’re thinking of not hiring the applicant over their credit, FCRA requires you give them a written notice stating as much. Additionally, you must give them a copy of the credit report as well as a copy of the Federal Trade Commission’s “A Summary of Your Rights Under the FCRA,” which explains how they can challenge any incorrect information in their history.

Although not required by law, it’s a good idea to use this opportunity to meet with the applicant and allow them to explain and/or correct their information. This make sense given that consumer groups have found up to one-third of all credit reports contain errors. Moreover, recent studies show that more than half of all unpaid consumer debt is for medical procedures, which are far less likely to be caused by a candidate’s reckless spending.

3. Issue Adverse Action Notice

If you ultimately decide not to hire an applicant based on their credit history, you must give them another document known as an “adverse action notice.” This informs them of the reason for not being hired and provides additional information on their consumer rights, including the right to dispute the report’s accuracy.

Use Credit Checks Judiciously

In addition to the legal liability, pre-employment credit check can also be somewhat costly and time-consuming to conduct properly. To this end, you should think carefully about whom you choose to run them on. They can have value for financially sensitive positions, but probably not for everyone who wants to work for you.

If you run such credit checks, you should be consistent by running them on all applicants for a specific position—or none at all. Such checks also work best when conducted in the later stages of the hiring process, so you’re not wasting time and money pulling them on candidates who won’t make the final cut.

If you plan to run pre-employment credit checks, consult with us to ensure you’re complying with your particular state’s laws and the FCRA. Credit screenings can be a useful part of your hiring process, and we’ll carefully review yours to be certain it’s done in the most efficient and secure way possible.

March 16, 2021 by Cava Faulkner

Whether your estate is modest or movie star worthy, the value of a good estate plan, properly handled, cannot be underestimated. A comprehensive plan can mean the difference between an expensive and unnecessary “time spent in court headache” for your loved ones or an easy “in your lawyer’s office” transition that allows your family time to grieve in peace. So, where did Carrie Fischer’s estate plan go wrong?

When a high profile celebrity passes away, we can learn a lot about the value of careful planning when using their estate plan as a case study.

Carrie Fisher is one of the celebrities whose proactive, yet faulty, planning gives us an excellent example to illustrate some key points that are important for you to understand for your family.

Even though Carrie Fisher worked with some of the best (read: most expensive) lawyers in Los Angeles, and she had created a trust to hold her assets, her estate plan failed, in our opinion, because it didn’t keep her assets out of court and passing privately to her heir, Billie Catherine Lourd.

Instead, Fisher’s lawyer created a Trust, and never ensured Fisher’s assets were transferred into the Trust. And while you may think this is malpractice on the lawyer’s part, it’s actually common practice.

We see this all the time when clients come to us with prior prepared estate plans — they’ve got beautiful documents that will not work when their families need them because their assets were never properly inventoried and transferred.

Fisher’s death brings this major issue in estate planning to light. As a result, Fisher’s Trustee, Dennis King, had to file a petition in court seeking to have Fisher’s assets transferred into her Trust.

The whole point of creating a Trust is to keep your family out of court and keep your affairs totally private.

Because Fisher’s Trust was not properly funded (the legal terminology for making sure your assets are transferred into Trust so you can keep everything private and out of court), all of her assets and who will receive them have been made public.

As a result, we know that Fisher left her estate to her daughter, Billie Lourd, and that it included cash accounts, several LLCs, real estate, a life insurance policy, personal belongings, and intellectual property rights. Having this information public leaves Lourd at risk. Unscrupulous parties now have access to details they wouldn’t otherwise know.

This is exactly why a key part of our planning process is a thorough inventory of your assets, ensuring your assets are transferred into your trust (if you choose to keep your family out of court) and then a review of your assets and planning documents at least every three years, if not annually.

Proper estate planning can keep your family out of court and save your family precious time and money in the process. If you’re ready to create a comprehensive estate plan, start by sitting down with us. And, if you already have a plan in place, contact us to have it reviewed. Schedule online.

March 16, 2021 by Cava Faulkner

With all of the media about “digital wills” and “online estate planning” it could be tempting to think you can do your estate planning yourself, online. And, maybe you can. But, if you do, you need to know the potential pitfalls. Online estate planning could be a big trap for the unwary and actually leave your family worse off than if you had done nothing at all.

First and foremost, before you do any of your own online estate planning, it’s critical to understand your family dynamics, the nature of your assets, and what the state would say should happen to your assets if something happens to you. You see, whether or not you do estate planning, the state does have a plan for your assets if you become incapacitated or when you die. You need to know what that plan is, so you know whether or not you want to change it.

A good start on getting educated is this one hour training with my mentor, financial and legal expert Ali Katz, which clarifies what you can and should do yourself, for free, online. The easy-to-watch training gives you access to a free online tool that you can use to create the one thing that would be most important for your family: a “treasure map” listing everything you own, where it is, and how your loved ones can access it. This tool is free to use, and creating your own personal resource map will be a true gift for the people you love.

But Don’t I Need a Will and Cant I Just Do It Online?

Here’s the funny thing about estate planning: the one legal document that everyone thinks they need most actually does the least.

Every adult does need SOME estate planning. A will is always a good idea because it says who gets and who is in charge of distributing what you have. However, if the default law would have given your assets to the same people you would choose and authority to the person you would name anyway, then an online will would probably do nothing valuable for you at all.

A will does not keep your family out of court. And if drafted improperly, it could require the person you’ve named to handle things for you to get a bond, which is like an insurance policy. These can be hard to get for an executor who has less than a stellar credit score. If your named executor cannot get a bond, it would then mean the court would appoint a court ordered executor, and that can be costly for your estate. This is just one of the examples of how having a will prepared online, can create more expense for the people you love. Unfortunately, all of the online will preparation solutions I’ve reviewed don’t even mention this risk.

So, yes, you can do your own will online, but at what potential cost for the people you love?

The Problem with Online Wills

DIY online estate plans (and even many estate plans created by lawyers) usually include three to five basic documents: a will, a financial power of attorney, an advance health care directive, possibly a trust, and a legal guardian nomination if you have minor children.

But, honestly, completing these documents without counsel is simply not sufficient to guarantee your estate will be executed as simply, affordably, and effectively as you would wish.

For instance—are you sure there isn’t some missing consideration that could lead to turmoil as your family tries to figure it out? Did you know that most family fights don’t even happen over money, but over lack of clarity? Have you taken into account all your extended family, including stepchildren and ex-spouses? What will be done with all the personal, sentimental items you want to pass on to your children?

There have been far too many scenarios where seniors, even those who had some estate planning done, get caught in the court system or even declared incompetent, and then have court-appointed guardians named, who then drain their accounts. In many cases, their assets are taken before they can get to their kids. You don’t want that to happen to you or your family, right? If not, a do-it-yourself will won’t keep that from happening.

What about making sure your family knows what you have and where it is? An online will won’t tell them that. There’s somewhere between $49 billion and $80 billion being held in state departments of unclaimed property across the United States because someone died and their family lost track of their assets.

So how can you be sure you’ve got everything covered, legally?

With online wills and DIY estate planning docs, you wouldn’t even know what questions to ask to uncover the potential risks to the people you love, who deserve to receive what you’ve created in your life, without a big mess.

Think about this: do you know anyone who has lost family relationships because, after a loved one died, the family ended up in an irrevocable fight? Maybe this has even happened in your own family. It has definitely happened in mine and the consequences—both, financial and emotional—can be devastating.

And, it’s all unnecessary.

Yes, even if there are attorneys on staff at these online companies, they don’t get to know you and your family dynamics enough to spot the real issues that could arise. They are, instead, focused on a one-size-fits-all solution and easy answers to complex issues.

The Kind of Help Your Family Deserves

Even lawyers who specialize in estate planning often base their work on template documents, and have limited skill in getting to the heart of your family matters. Even if they are well-intentioned, they’re working with an old, traditional system that was born around the same time as word processing, and the lawyer’s focus is still very much on having the “best” documents. But the documents are only as good as the understanding a lawyer has about your family dynamics, the nature of your assets, how the law will apply to your situation, and how the documents can be written as simply as possible to achieve your wishes. You need much more than just a set of four or five filled-out template documents to address all those complexities. The way we see it is, if you want things to be as simple as possible for the people you love, when something happens to you, you want counsel to prepare a plan that achieves your desired objectives.

As a Personal Family Lawyer®, this is where we come in. We have specific training in how to educate you, empower you, and support you to make the right decisions for the people you love, while we get to know what really matters to you.

We do this through our Family Wealth Planning Session process. If, as a result of the process, we see that you really do have a very simple situation, and you want to create your documents yourself online, we support you to do that. If, as a result of the Family Wealth Planning Session you decide you do need us to draft a plan for you, we support you to choose the right planning fee for you.

We only take 8 individuals or couples through the Family Wealth Planning Session process each month, so we can ensure that the clients we work with get the attention they need to create a plan that actually works for the people they love.

We inventory your assets, ensuring they are all owned in a way that will keep your family out of court (if you wish) and conflict (which you surely do); and ensure everyone named in your plan has what they need and understands your choices. Most importantly, we ensure you understand your plan, and we ensure you pass along more than just your money.

Do it yourself estate planning is risky. While it may be better than nothing, it may also be worse. And it won’t be until after you are gone that your loved ones find out that answer. If you want to do the right thing by the people you love, you have three options for how to get started:

Book a Family Wealth Planning Session with me. It’s normally $750, but if you call and tell us you read this article and commit to doing just a bit of homework ahead of time, I’ll waive that Planning Session fee.

If you aren’t quite ready to call yet, and want to learn a little more first, go to http://www.PersonalResourceMap.com and watch the one-hour training there. Create your own Map and, then, if as a result of the training you decide you do need counsel from a lawyer, book a Family Wealth Planning Session with me after that. If you send me your completed map, I’ll not only waive the Family Wealth Planning Session fee, but I’ll also give you a $250 credit towards any planning you need. Be sure to mention you attended the training, and that you want to claim your $1000 of legal services.

If you want to talk for 15 minutes before your Family Wealth Planning Session, call my office or book a meeting online.

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.

March 13, 2021 by Cava Faulkner

Like many taxpayers, if you’ve already filed your federal income taxes for 2018, you may be surprised to discover you’re not getting a refund this time. If so, this was almost certainly due to the sweeping tax overhaul made by the 2017 Tax Cut and Jobs Act (TCJA).

Since personal tax rates were lowered by the TCJA, it’s natural to assume you would owe less taxes, not more. But as you may have discovered, this isn’t always the case.

Seeing that the TCJA was promised to offer most people a tax break, understanding why you might owe more taxes in 2018 (rather than less) can be confusing. The following questions and answers are designed to shed some light on this situation, so you can start revising your tax strategies for coming years.

Q: What Changed?

A: In addition to lowering personal income tax rates, the TCJA doubled the standard exemption to $12,000, added limits to deductions for state and local taxes (SALT), eliminated personal exemptions, set limits on deductions for home-mortgage interest, among many other changes.

Given all of the changes, you may find that you’re no longer withholding the proper amount of taxes from your paycheck and/or quarterly installments to the IRS. When filing, this can result in either overpaying your taxes (and getting a refund) or underpaying (and owing money).

Q: What does this mean for me?

A: In light of these new changes, you should carefully review your withholding and make adjustments if necessary. To help with this, the IRS published new withholding tables and updated its withholding calculator into which you can input your current tax data to see if you need to make any changes.

Q: How do I change my withholding?

A: If you work as an employee, you change your withholding by making adjustments to your W-4. If you work for yourself, you either increase or decrease your estimated quarterly payments.

A W-4 determines how much income tax is withheld from your pay by your employer. You fill out a W-4 when you start a new job, but you can change it at any time. Specifically, the form asks you for the number of allowances you want to claim based on personal factors, such as being married and/or having children and filing as head of household.

The more allowances you claim, the less federal income tax your employer will withhold, which translates to more money in your paycheck. The fewer allowances you claim, the more federal income tax your employer will withhold, lowering your take-home pay.

It’s important that you withhold the proper amount from your paycheck or make quarterly payments. Don’t withhold enough, and you’ll owe the IRS at the end of the year. Withhold too much, and you might get a big refund, but you’ve basically given the government an interest-free loan for that year.

Maximize your tax savings

Adjusting your withholding is just one of many strategies you can use to save on your taxes. Indeed, the TCJA also changed tax laws that have the potential to affect your estate planning strategies as well. In light of this, when the 2018 tax season wraps up, we’ll be pairing up with one of our favorite local CPAs to bring you support and guidance that you can use to maximize your tax savings in 2019 and beyond. Contact us to learn more.

March 12, 2021 by Cava Faulkner

Like most entrepreneurs, you probably think about the many ways you can help your company take off and grow. But you should dedicate an equal amount of brain power to planning when and how you’ll sell what you’ve built. In fact, deciding when to sell your business can be just as important as deciding when to start one.

The day will come when it’s time to move on. Regardless of how things end, it can be difficult to determine the best time to capitalize on your creation. Here are four signs you may want to consider getting out of the game:

1. You’re drinking more and sleeping less

Many business owners can attest that being the boss can become so stressful that your entrepreneurial dream can feel like a nightmare. Certain businesses are so consuming that it’s unhealthy to remain in the driver’s seat for too long. And at a certain age, you may not have the energy needed to keep things growing at the pace you used to. It boils down to whether or not you still have that burning passion that initially got you hooked.

When you’re driven by an overwhelming desire to succeed, you can easily power through the long hours and drudgeries that come with the job. Once the thrill is gone, it’s often better to hand the reins to someone else.

Bottom line: If running the show is taking its toll, it’s time to come up with an exit plan ASAP.

2. The market outgrows your company

Markets used to evolve much slower, but technology has changed that. It has caused entire industries to become irrelevant, or at least far less profitable. For example, print media was a primary news source for many years. But since the internet went mainstream, print media has been struggling.

The same goes for taxicabs and Uber, retail storefronts and Amazon, and so on. It would be best to conduct a market analysis before launching, but these days, it’s easy to be blindsided by the flood of new innovations.

The key is to keep a close eye on your sector for possible threats, so you can get out before it’s too late. With the market’s exponential evolution, your exit window may be short, so be prepared to act fast.

3. Your company outgrows your skills

The leadership skills required to be successful often depend on your company’s stage of growth. Startups, for example, typically require leaders who are highly creative, flexible, and have the ability to sell people on their business ideas.

More mature companies, however, require leaders who are also excellent managers. This is why many companies bring in veteran C-Level Executives to handle growth and operations at a certain point.

Staying on top of these changes requires entrepreneurs to be extra self-aware. It can be confronting to realize your skill set no longer matches the needs of your company, yet it’s something that’s often inevitable. Sometimes, your company’s continued success depends on you stepping down with a wise plan.

4. An incredible opportunity presents itself

At some point, your business will reach its peak value, and cashing out at that stage may be your best option.

Sometimes, being bought out by a more established brand can provide your company with the resources it needs to reach the next level. If that’s the case, a sale could be a great way to get you cash in hand and your company the resources it needs to grow to its next level.

Entrepreneurial energy comes with a shelf life, so you might decide to pursue another business venture while you still have the youthful vigor needed to start again. If there are other terrific opportunities on the horizon, consider making your exit sooner, rather than later.

Taking the next step

Deciding to sell your business is a big step, and we can help you sort through the numerous legal, tax, and financial issues involved. We can also help with the labor-intensive process of actually selling your company.

From gathering all of the required documentation to negotiating sales terms, we can guide you at every step of the way. When it comes to making your exit as smooth and profitable as possible, with us as your Family Business Lawyer®, you already have an ace up your sleeve.

Lessons in Business Success from the World of the Best in Family Business