You have worked hard to build your business.  As you approach retirement, or the need to leave your business for other reasons, you should have a plan in place to wind up your business.  There are several different types of exit strategies.  Which one is right for you depends on factors like your customers, finances, your family, and your employees.

            The most obvious strategy is simply to close down the business.  When you close down the business you must be certain to properly wind down the business’ affairs.  Just because you have decided to leave the business does not mean that the business’ responsibilities and obligations immediately cease.  Final taxes must be filed and paid.  Outstanding vendors must be paid.  There should be a filing with the Secretary of State indicating that the business has been closed.  Failure to properly wind down the business may expose you individually.  For example, if the business has any unpaid debts, its assets should be used to satisfy those debts.  If you take the assets without paying the debts, you may be risking future creditor’s efforts against you personally to recoup those assets.

            Another exist strategy is to sell the business.  Someone from inside or outside the business takes over the day-to-day operation of the business, while you are released from the business.  In selling a business, the challenge is deciding on a sale price and the terms for payment.  You must negotiate with the buyer to determine the price.  Then the buyer must be able to buy the business.  He may do this by paying cash, taking a loan from a bank, taking a loan from you, or a structured payment plan over time based on the company’s profits.  The terms of a buy-sell agreement, and how the money is paid, are as various and negotiable as you want to make them.  However, they should be clearly defined in a written agreement so that no one is surprised and to protect all the parties in the future.  You want to be certain that in selling your business, you do not end up fighting later about getting paid.

            You may also choose to exit the business by giving ownership to a family member.  Again, the business continues but you are released from managing it.  For example, this is where a father hands the business down to his sons.  This may include a buy-sell agreement, like that discussed above.  Many times, the owner chooses to gift the business to his child or children.  When this is done, it may create a federally taxable gift.  You must have the business valued to determine whether any gift taxes are required, and then claim the transfer on a proper tax return. 

This year, 2012, offers a unique opportunity to make such a gift.  During this year, you can give up to $5 million; next year, it is only $1 million.  That is a difference of $4 million.  It is a use-it-or-lose it situation.  If you are considering giving your business to your family, then the next few months offers us a unique opportunity to give the business to your family without having to pay gift or estate taxes on a significant asset.

As you can see, there are specific financial, tax, and legal consequences to any decision to exit your business.  Whether you just close the doors, sell the business, or choose to gift it to someone, there are consequences and processes that should be followed to ensure compliance with the law, protect all involved, and minimize fees, costs, and liabilities. 

--Cassandra G. Jones, Esq.

The Nevada Secretary of State has yet again changed its fees, penalizing small business throughout the state.  Effective March 9, 2012, the Secretary of State issued a new regulation effectively eliminating the home-based business exception for any business that is an LLC or corporation.  This change is a $200 per year penalty on a small business, run out of a home, earning less than $26,000 per year, if that business was incorporated.

            I find this regulation difficult and frustrating.  One of the reasons I encourage clients to incorporate is to take advantage of the protections of law, including protecting themselves from claims made against their business.  Additionally, formally forming a business allows a business owner to take advantage of certain write-offs and discounts so as to minimize income taxes. 

            Running a business can be overwhelming, scary, and costly.  One of the ways many business owners start out is by working in their living room.  Many small business owners, acting wisely, incorporate their small business and then work out of their home for several months, years, or even forever.  They do this in order to minimize their overhead costs, and ensure the survival of their business.  We should be encouraging this kind of entrepreneurship.  We should be helping wise business owners who taking baby steps to firmly build their business’ foundations.

            Regulation R080-11, however, penalizes small business owners who take the time to build their business from their homes.  The new regulation now requires any LLC or corporation to pay the $200 annual business license fee even if the business is run entirely out of your home, and nets you less than $26,000 income per year.  The regulation only allows a waiver of the $200 fee if the home based business is run by a sole proprietorship – effectively penalizing the small business owner who takes steps formalize their business and protect themselves and their families.

This regulation was passed in direct opposition to the Legislature’s actions in 2011.  A similar change to the exemptions to the business licensing exemptions was expressly rejected as part of Assembly Bill 78.  Regulation R080-11 acts as a penalty on small businesses, even though our elected officials have previously rejected such a change.

Whether you own a small business or not, I encourage you to write your state senator and assemblyperson to petition them to take action to have the Secretary of State’s Regulation R080-11 reversed and repealed.  If you do not know who your representative is, you may look up their information under the “Who’s my Legislator?” link on the right hand side of the Legislature’s website at www.leg.state.nv.us. 

--Cassandra G. Jones, Esq.

There are several types of business entities in Nevada.  Each entity has its own specific benefits, and drawbacks.  Which entity is right for your business depends upon many factors, including the size of your business, your goals, and the risk inherent in your industry. 

            Nevada offers limited partnerships.  A limited partnership is an agreement between several people to operate a business.  In a limited partnership, one partner – called the general partner – runs the business.  As the person running the business, the general partner is directly liable and at risk for any of the company’s liabilities.  Such liabilities might include broken contracts, bad debts, or claims for personal or property damage from customers or employees.  However, the limited partners (i.e. any partner who is not the general partner) are insulated from such claims.  Limited partnerships are taxed on a “flow through” basis, which means that the net profits of the limited partnership are reported on the partner’s tax returns directly.

            Nevada also has limited liability companies.  A limited liability company is owned by a member, or group of members.  The rights and responsibilities between the members are defined by an operating agreement.  Often, one or more members are singled out as the “manager,” or the person responsible for running the business.  Although this looks very similar to a limited partnership, the manager of an LLC is generally not at personal risk for the company’s liabilities.  Instead, under the protection of an LLC, there is a “veil” between the individual members and the business which protects the individuals from the business’s liabilities.  Generally, an LLC is taxed on a flow through basis like a partnership, although the members can elect to have it taxed like a corporation.

            A corporation is a business that is owned by shareholders.  The shareholders vote to elect a board, and the board runs the business.  Corporations have the strongest legal protection in that it shields the shareholder-owners from the liabilities of the business.  However, corporations are often highly structured with required annual meetings and may have complicated by-laws.  Additionally, corporations are directly taxed so that any income paid out to a shareholder as dividends often experiences a double taxation – once as profit for the corporation, and second as dividend income to the individual.  Such taxes, however, can be planned for and often minimized.

            Which business entity is best for you depends on a myriad of factors.  The level of protection you might need from business liabilities, the best way to minimize taxes, and the best structure for flexibility all need to be considered when forming a business entity.  There is no one-size-fits-all company.

--Cassandra G. Jones, Esq.

Despite the economy, I have seen many people endeavoring in a small business lately.  According to the US Census Bureau, Nevada has nearly fifty thousand businesses.  Over 55% of those businesses have four or fewer employees.  Small business really is the backbone of our community.  Many people work hard to operate their business, and to take care of their employees and family.

            What many small business fail to do, however, is to take advantage of the different business entities available in the state of Nevada.  Instead, these small businesses operate as sole proprietors or general partnerships.  A sole proprietor is any individual operating a business directly, without forming a business entity or registering with the secretary of state.  Similarly, a general partnership is a group of people directly operating a business, without forming a business entity or registering with the secretary of state.  A general partnership may or may not have a contract defining the rights between the partners.

As a sole proprietor or general partnership, there is nothing that distinguishes the business from the individual.  The individual must pay all the income and employment taxes directly.  It leaves the individual little flexibility to minimize income taxes.  On the other hand, a business entity often empowers the individual to plan their business and expenses in a way that minimizes the taxes owed to the government.

            Additionally, there is nothing that keeps the liabilities of the business separate from the individual.  There are many reasons that a business may have liabilities.  These liabilities may arise from a contract – like a lease or loan –- or from personal injury – like a claim for damage from a customer, or a worker’s compensation claim.  As a sole proprietor or general partnership, if the business is sued then so is the individual.  The individual’s assets and lifestyle are directly at risk of the business.  This risk is magnified in a general partnership, where the acts of one partner exposes each and every individual to personal risk.  However, by forming a business entity there is a “veil” placed between the individual and the business.  This veil is a protective barrier that keeps the individual’s home and lifestyle separate from the business’ liabilities.

            For example, many small businesses sign leases.  If the lease is in the name of the business alone (and not personally guaranteed by any individual), then only the business entity is liable in the event that there is a breach of contract.  Likewise, with a properly formed business, if the business is sued because a customer slips and falls, or because an employee unintentionally causes damage, then the business owner – an individual – is not at risk of being personally and individually responsible for the injury.

            There are several types of business entities in Nevada, including limited liability companies and corporations.  Each entity has its own specific benefits, and which one is right for your business depends upon your specific needs.  If you are operating a small business as a sole proprietor or general partnership, you should seriously consider forming a business entity to take advantage of the tax flexibilities and protection built into them.

--Cassandra G. Jones, Esq.

There are two types of child custody.  The first, physical custody, is about where the child lives and spends his or her time.  The second is legal custody.  Legal custody is separate and distinct from physical custody.  The court may determine each separately.  You may have legal custody, without having physical custody.

Legal custody involves the basic legal responsibility to make major decisions regarding the child, including those related to health, education, and religious upbringing.  Joint legal custody requires the parents to cooperate, communicate, and compromise to meet the best interests of their child.  In joint legal custody, the parents must consult with each other to make major decisions regarding the child’s upbringing.  When the parents with joint legal custody reach an impasse so that they cannot agree, they may petition the court to decide what is in the best interests of the child. 

Generally, a parent with joint legal custody has the right to access the child’s school, medical, and other records.  He has the right to know what is going on with the child, and to give input into those decisions. 

The Nevada Supreme Court has acknowledged that minor day-to-day decisions are generally made by the parent with whom the child resides.  However, if the residential parent assumes such control it does not mean that the other parent has no rights.  Indeed, most courts look favorably upon a parent with primary physical custody who volunteers legal custody information, including doing things like:  copying emails from teachers to the other parent; talking about what sports to enroll the child in before making that decision alone; providing contact information for the children’s teachers, coaches, and doctors; and providing advance notice of the children’s medical appointments, school events, and extracurricular activities.  Conversely, a parent who impedes this kind of information exchange may compromise their position with the family judge if their matter ever returns to court.

Some of the common mistakes parents make in joint legal custody, which later affects them in court, is the failure to communicate regarding what extra curricular activities the child is enrolled in.  When a residential parent unilaterally decides to enroll a child in sports, that deprives the other parent of his right to participate in parenting.  It may have additional financial ramifications, if the cost is to be split, and may affect parenting time if games or practice is during the other parent’s time.  

Another common error made in joint legal custody, is when the residential parent lists their new spouse or live-in significant other as the primary contact for the child above the other parent.  In the most egregious cases, the biological parent is not even listed which would preclude her from getting information from the child’s teachers, coaches, or doctors.  If this happens in a sports situation, it would mean that the step-parent gets a call if the child is injured before the actual parent does.  Then, if the parent calls the ER to check on her child, she could be denied access to any information. 

There is a very simple fix:  Make sure that the parents are always listed as the first two primary contacts.  Make sure teachers copy both parents with emails.  When you set a doctor’s appointment, send a quick email to that effect to the other parent.  Send an email to the other parent before making a decision on sports or extra-curricular activities. 

Co-parenting after divorce can be difficult.  In joint legal custody, both parents have the equal right and equal responsibility to make parenting decisions for the child.  There are some common mistakes that can be easily avoided, smoothing your working relationship with the other parent and preventing further court battles.  Communication is the key.

--Cassandra G. Jones, Esq.

Many times, clients know exactly who they want to receive their estate but they haven’t wrapped their arms around the process that occurs between end-of-life and asset distribution.  Several moving parts come into play.  The first is simply a significant change in the family dynamics.  Mom or dad is no longer present and center stage.  Family members are likely dealing with the various stages of grief (one of which is anger).  Even with no other challenges, these dynamics can put a person or a family on end for a period of time.

Moving on to the financial issues; a trustee or executor will be appointed and certain inherent duties come with those titles.  Trustees and executors have the duty to communicate, the duty of no self-dealing, and the duty of undivided loyalty.  The duty to communicate requires reasonable communication to all of the beneficiaries.  The duty of no-self dealing means that the trustee/executor cannot take personal advantage of their situation and this can get tricky when he or she is also one of the heirs.  And, a trustee/executor must exercise the duty of undivided loyalty as each of the beneficiaries must get the same level of consideration and treatment (this does not mean an equal share of the assets if the documents provide otherwise).  No client, regardless of the size of the estate, should choose a trustee or executor who doesn’t have the internal mettle to “do the right thing.”

At a task level, the trustee/executor is required to gather the assets, account for the assets during the period of administration, and distribute net assets (after payment of the decedent’s allowable final bills).  While this could be is a relatively simple process, if the assets are not in a trust, or are complex assets (such as a business or an asset subject to a mortgage), these tasks become more challenging.  An executor or trustee needs to have both the intellectual stamina (to learn and manage this process in a short period of time) and the time to devote to the process.

In sum, the job of a trustee/executor is not easy.  The role requires a person who is strong in a crisis, smart and capable; who is available and possesses strong character.  If we objectively look at these criteria, not every family has such a person.  If that person is not obviously available, discussing this matter with your estate planning attorney may lead to creative or corporate solutions – because, focusing on the design of the plan is key to its ultimate successful implementation.  

--Darcy K. Houghton, Esq., of counsel

At Houghton Jones, A.P.C., we are passionate about helping our clients plan for abundant living and passing rich legacies.  We believe estate planning with our clients is not a one-time event, rather a relationship.  We want to continue helping you meet your goals for yourself, and for your heirs, even as your life, your circumstances, and the laws change.

We are excited to announce our new Maintenance Program.  We believe this cohesive approach to maintaining your trust-based estate plan will help you now and into the future. We have offered components of this program before, but never quite like this. 

You’ve done all this work in creating an estate plan.  Now what?  Make sure you keep it current! 

Services Available:

• Funding Workshops:  A regular workshop with Cassandra Jones, Esq., reviewing how to title assets in the name of your trust so that your trust is properly funded and managed.  This workshop offers a great opportunity to ask questions that have come up since you created your estate plan.
• Family Meetings:  Having your family, your successor trustee, and other agents understand your intent and how to follow through on your estate plan is vital.  The law office can mediate a meeting between you, your family, and/or your agents in order to ensure that your family and agents understand and can carry out your intentions. 
• Legal Vault:  This online repository provides for the storage of your entire estate planning documents online so they can be accessed at any time, from any place, and in an emergency.  An access wallet card is provided so that medical professionals can access your health care documents in the event of an emergency.
• Amendments & Restatements:  For many reasons, your estate plan will need review and updating.  Circumstances, life, and the laws change.  Make sure your plan does what you want it to do.

We offer each of these services al la carte, but also offer special Silver and Gold Membership.  As a Silver or Gold member, you have exclusive access to discounts and invitation only events.  Please contact our office at 775-882-1777 for more information.

We offer regular workshops to review how to title assets in the name of your trust so that your trust is properly funded and managed.  This workshop offers a great opportunity to ask questions that have come up since you created your estate plan.

At the workshop, Ms. Jones will review the following:

·         What does it mean to fund a trust?

·         What assets should be titled in the trust, verses beneficiary designations?

·         How to use your Certificate of Trust

·         Using Legal Vault

·         Taking your questions

These workshops are FREE for anyone who has signed their estate plan in the six months prior to the workshop or if you are a member of our Silver or Gold Maintenance plans.  Otherwise, there is a fee of $100 per workshop.

We have scheduled several workshops throughout 2012.  You can click on the button "Attend A Seminar" above and register for a Funding Workshop immediately.  We would like to ensure that we have enough materials for all participants.  We are looking forward to seeing you there!  

And DON'T FORGET to bring your binder!

The New Year has arrived and it’s time for resolutions!  From a financial legacy perspective, what resolutions do you have for 2012?  Below, I have listed my Top Five actions that each, if taken today, will have a lasting impact on your financial legacy.

First, develop or revisit your budget; are you making more than you are spending?  Especially if you do not know the answer to this, a budget, as painful as it may be to create, can really help you begin to develop some financial discipline. 

Second, revisit your insurance - specifically look at your disability, long term care and life insurance needs and compare your needs to your coverage – are your loved ones protected in the event that your income disappears?  Also, consider your insurance needs in an era of increasing income and potentially rising estate tax rates (I have frequently advised my clients that insurance will never be less expensive than it is today). 

Third, start or increase the rate at which you save.  Start with a basic savings account (for emergencies).  Once your savings account is full enough to offer a buffer, add an IRA or start investing in your retirement plan at work.  If you are already on this path, consider investing an additional 1% or more into your plan.  The power of compounding will allow your early contributions to really jump-start your retirement savings. 

Fourth, meet with your financial advisor and confirm whether or not you are on track for your retirement or other legacy goals and, if not, revisit actions one through three above. 

And, of course, fifth, develop or update your estate plan.  By working with your estate planning attorney you can assure that the legacy you pass works as you wish.  Make sure that you have appointed the proper decision makers to care for you or your loved ones at such time that you cannot. 

You have probably heard the above Top Five before.  Maybe you are thinking – I would love to do those things but don’t know where to start.  Rarely do any of us do this without a coach, counselor, or advocate.  Financial Advisors and accountants help many of us.  Also, many churches and employers offer financial planning classes and there are always books, DVDs and other training tools.  Take the time to start preparing for your future and the future of your loved ones – utilize these Top Five financial actions as the cornerstone to the financial legacy you provide for your loved ones!

--Darcy K. Houghton, Esq. (of counsel)

As the New Year approaches, I am reflecting on quite the year I have had in my business.  Yes, I am a lawyer.  But, I am also a small business owner.  I started out this year as a solo practitioner, running my own office, and grew my business this fall by taking over as the managing shareholder in an established law firm.  Needless to say, it’s been quite a year.  The New Year makes me reflect on all the people that have supported me and my small business. 

I want to thank my clients.  Serving them by helping them plan for abundant life and passing their legacies, or helping through difficult times in their life, is the reason I do what I do.  Sometimes you need some help planning, or navigating the waters of a death, custody dispute, or divorce.  I thrive on being able to help you through that.

 I want to thank my staff.  Truly, I could not do what I do without my amazing support staff.  They help me balance the needs of each client, keep me on track, and make me look good.  Do not be fooled:  I am only as good as the people that help me get through the day.  I think they are pretty awesome.

I want to thank my trusted advisors.  In my business, as in all small businesses, I am dependent upon the assistance of my banker, accountant, and other advisors.  Today, I could not be where I am – or have my own business – without them.  Indeed (after my husband), the first person who really believed that I could open my own business was my small business banker.  She helped me obtain the funding I needed to open, and helped me take the leap into self-employment.  Without my advisors, I wouldn’t be here.

I want to thank those who have made referrals to me.  I am dependent upon referrals and recommendations for business.  My reputation is my most valuable asset.  Thank you so much for trusting me with your friends and family by recommending me to them.

Finally, I want to thank my family.  Small business ownership is not for the faint of heart, nor is it ever just the effort of the “owner.”  My entire family has poured into this effort.  Even my children have gotten into the act, helping move me into my office and putting stamps on envelopes.  (Look, kids!  Stickers!)  My clients and my family are why I do this. I do not doubt that it would not be possible without either of them.

This is a personal note of thanks to so many people.  But every small business owner in this community, and beyond, similarly thanks their clients, staff, advisors, referral sources, and family.  We know your value, and we cherish it.  Thank you and happy New Year!

--Cassandra G. Jones, Esq.