Corporations are complex entities. There are many moving parts and people that make up the structure of a corporation. One such important group is the board of directors. The board of directors is responsible for representing the shareholders of a corporations. The board also establishes policies and procedures to oversee management and major company decisions that are made. The California Corporations Code Section 300(a) states “the business and affairs of the corporation shall be managed and all corporate powers shall be exercised by or under the direction of the board.” The board of directors is a powerful group of individuals within a corporation. Just how much power do they hold, though? The California Corporations Code can make it seem like the board holds all of the power in a corporation. This brings up the question of whether or not a board of directors must authorize filing a lawsuit that is brought in the name of the corporation.
Recently, the California Court of Appeals decided on this issue of authorizing lawsuits. In St. Mary’s Holy Apostolic Church of the East v. Benjamin, a religious corporation was bringing suit against its former board of directors. During trial, the president of the board of directors, who had verified the complaint, resigned. The defendants in this case argued that because the president who had verified the complaint resigned, the corporation lost its standing – meaning that there was no valid lawsuit.
The court did not agree with the defendant’s argument. Instead, they quoted precedent that declared, “a corporation has an inherent right to sue without the board adopting a resolution that specifically authorizes the action.” Thereby, the court rejected the argument that the plaintiff lacked standing. Furthermore, the court stated that a “corporate plaintiff is not required to prove it had authority to institute suit.” Finally, a “defendant may waive question regarding right to maintain action if not raised.” A board of directors has a lot of power, but they are not the penultimate ending to lawsuits if there is any change in the composition of the board of directors.
In addition to the California Court of Appeals rejecting the argument with precedent, the court also looked at the California Code of Civil Procedure. The Code of Civil Procedure, Section 446 does not require that there be board verification. Specifically, the code states that “when a corporation is a party, the verification may be made by any officer thereof.” In other words, the former president of the board of directors does not invalidate the lawsuit.
The business law attorney at the Law Office of Kris Mukherji is here to help you with your business planning needs. Whether you have questions regarding your corporation’s board of directors, pending lawsuits, or any other issue that can arise in the day to day aspects of a business, we can help you. With a proven track record of success, attorney Mukherji is a reputable business law attorney with years of experience. Contact us today for a consultation and get your business law needs handled.Read More
For most people, planning for their death is not an enjoyable activity. However, we must all come to terms with our mortality and make sure that we put a plan is in place for how our estates will be handled following our death. An estate plan can encompass many different documents and plans. When most individuals think of an estate plan, they think of a last will and testament. Is a will enough to protect your assets and save your family from struggling to deal with your assets? It might not be.
While a will can cover many assets and account for potential problems that might arise, there is no way to guarantee that it will cover any and all contingencies. This is not to say that a will is not beneficial. For any California resident, having a will in place is a great start to their estate planning process. A will can not be ignored. It is essential to include a will in your estate plan because it includes a lot of important information about your wishes after death.
Wills in California
A will is a legal document that outlines the way you would like your assets to be dispersed following your death. It provides written directions for the handling of your estate and provides a step-by-step process for your loved ones. Additionally, a will can include any final words that you wish to tell your loved ones. While the will provides the basic directions, there are additional documents that are needed to complete an estate plan.
Additional Estate Planning Documents
A will provides for the distribution of assets, but it does not provide for incapacitation or consider tax implications or benefits. Therefore, additional documents are necessary to complete you estate plan. There needs to be a plan in place in the event that you are suddenly unable to care for yourself. The following are additional documentation that should be included in an estate plan:
- Healthcare power of attorney: This is a legal document that names a person who will be responsible for your medical care in the event that you are unable to make decisions for yourself. This saves time and confusion during medical emergencies so that there is no delay in life saving decision making.
- Financial power of attorney: Similarly to a healthcare power of attorney, the financial power of attorney names a person to take over your financial decision-making when you are unable to.
- Healthcare Directive: A healthcare directive states what you wish to be done if you are incapacitated in the hospital. This is different than the power of attorney. This is prepared by you to dictate whether you want to be resuscitated, how long you want CPR to be performed, and etc.
The estate planning attorney at the Law Office of Kris Mukherji is here to help you create your estate plan. We want to help you create a complete estate plan to give you the reassurance that your affairs will be handled as you wish following your death. Do not wait on this important documentation and planning; contact us today.Read More
For most people, thinking about retiring is exciting. After years and years of hard work, you are finally able to spend your days relaxing and doing whatever you want. Without working, however, you no longer have a traditional income. This is where an individual retirement account (IRA) comes in handy. Part of the federal taxes you pay through your paycheck does go into Social Security so that you can receive income from after retirement, but for many people this is not enough income to sustain their lifestyle.
What is an IRA?
An IRA is a retirement savings account that was created in 1974 through the Employee Retirement Income Security Act, or ERISA. An IRA gives workers a way to save for retirement on their own, outside of Social Security or employer pension plans. During retirement, an individual is then able to receive income payments from the IRA. An IRA is a type of tax deferred retirement savings to give retirees more financial freedom after years of hard work.
Naming a Beneficiary
Given that IRA stands for individual retirement account, it is logical that only individuals can be the owners of an IRA. IRAs can not be owned by two individuals. While an IRA is meant to be a vessel for individuals to have more income during retirement, a trust can also be established using an IRA to name a beneficiary (or beneficiaries) to the IRA when the owner is deceased.
The owner of the IRA names a beneficiary and can dictate exactly how much money will be disbursed each month. In fact, the owner of an IRA can also dictate whether there are other criteria that a beneficiary must meet before he or she is able to receive the disbursement. This is ideal for those that want to stretch the value of an IRA for beneficiaries.
Benefits of an IRA Trust
There are many benefits to designating a beneficiary to your IRA and thereby making it a trust. The following are benefits of an IRA trust:
- Stretch the Value of Your Assets: As mentioned above, having control of the disbursement of the IRA can ensure that the assets in the trust last as long as you want them to. If you want the beneficiaries to receive payments for five, 10, 15, or however many years following your death, you are able to do that.
- Save the Beneficiaries from Themselves: Receiving an inheritance can tempt an individual to spend everything at once. They might get caught up in the excitement of having a lump sum of money. An IRA trust account allows the trust owner to ensure that beneficiaries are not tempted to spend their inheritance at once.
If you have questions about an IRA trust, appointing a beneficiary, or retirement planning generally, an estate planning attorney can help you. The knowledgeable estate planning attorney at the Law Offices of Kris Mukherji is here to help you with your retirement planning needs. We know that planning for retirement can be stressful, but Attorney Mukherji is dedicated to making it as smooth a process as possible. Contact us today to set you and your beneficiaries up for success.Read More
Recently, the California Supreme Court issued an opinion about the classification of individuals as either employers or independent contractors. In Dynamex Operations West, Inc. v. Superior Court of Los Angeles, the court reinterpreted existing case law surrounding whether or not workers should be classified as independent contractors or employers. The court ultimately rejected previous tests that were used to make the worker classification. The decision comes at the end of the California Industrial Welfare Commission (IWC) adopting wage orders that are more friendly to a worker who is an employee. The court developed a new three-step test to make worker classifications that will be discussed below.
Dynamex is a same-day courier service that provides businesses, and members of the public, same-day delivery and pickup service. Since 2004, Dynamex has classified their workers as independent contractors to save on costs. In 2005, an independent contractor of Dynamex filed suit for himself and other similarly situated workers that the classification of independent contractor was in violation of an IWC wage order number 9. Various litigation, rulings, appeals, and lower court tests set forth have led to the California Supreme Court ruling on this issue.
The “ABC” Test
The previous tests established by the courts included the instructions that if an employer is in control of the hours, wages or working conditions or creates a common law employment relationship, the worker is an employee. Additionally, “employ” includes the definition of “to suffer or permit to work.” In examining the previous case law and litigation, the court stated that the suffering or permitting to work definition cannot be taken literally. Instead, the court outlined the ABC test. An employee will be considered an employee for wage purposes when he or she has been “suffered or permitted to work” unless it can be proven:
- “The worker is free from the control and direction of the hirer in connection with the performance of the work, both under the contract for the performance of such work and in fact;
- That the worker performs work that is outside the usual course of the hiring entity’s business; and
- That the worker is customarily engaged in an independently established trade, occupation, or business of the same nature as the work performed for the hiring entity.”
The hiring entity must prove all three of these elements to establish that a worker is an independent contractor, not an employee.
What Does This Mean?
The classification of an employee or independent contractor is big deal for businesses in terms of costs. An independent contractor is responsible for his or her own Social Security and payroll taxes, whereas an employee has some of those costs paid for by the employer. This ruling has a large impact on those businesses in the “gig economy.” This includes rideshare drivers, delivery services, and a myriad of other businesses whose business models revolve around independent contractors performing their services. This ruling leaves many businesses with questions and concerns over the proper way to classify their employees.
If you have questions regarding the California Supreme Court ruling and how it may affect your business, seek advice from legal counsel. The knowledgeable business attorney at the Law Office of Kris Mukherji is here to help you understand this ruling and any potential ramifications it has on the operation of your business. Contact us today to find out more.Read More
You’ve just graduated from dental school and are ready to hit the ground running. There are several options available to you:
(1) You can apply for a job working for a dental company such as Western Dental;
(2) you can apply for a job at a preexisting dental office;
(3) you can start your own dental practice from ground up; and
(4) you can buy an already existing dental practice.
All the options mentioned above are viable options; however in this blog I will address the entrepreneurs out there who want to have their own business, but would rather buy a preexisting dental practice.
Why buy a pre-existing practice?
In a few words – instant access to patients and immediate cash flow. Unlike starting your own practice from scratch, buying a pre-existing practice gives you the advantage of an already existing client base, pre-existing billing system, a trained and established staff, which in turn translates to instant cash flow. Although the idea of buying a practice can seem daunting, with the proper guidance you can purchase your business and begin creating your future.
It’s no secret that in dental school you are taught to be a dentist, to acquire the skills necessary to pass the board exams and work with patients. However, dental schools rarely if ever educate their dentists on the skills necessary to own and operate a business. As a dentist who owns a business, you are not just a dental specialist; you are also a business owner. Learning the skills necessary to purchase, operate and manage a business is necessary for your success. Below I will discuss the key elements necessary to acquiring a practice.
Location is key
When buying a practice, you want to make sure that the location is conducive for you and your family. Is this where you want to plant your roots? Is this where you want your children to go to school? These questions may not be important to you now, but as your family grows it is inevitable that you will want to address these points.
Building and working with your team of professionals
There are things in your life that you “know you know”. There are things in your life you “know you don’t know”. Then there are things in your life that you “don’t know you don’t know”. This third area is what we call the blind spot and generally blind spots in business are where things can go wrong. It is imperative that you work with professionals who are experienced with Dental Business Law and who can help you with the business purchase and transition. Following are some of the professionals that you should have on your team:
- Dental Business Attorney
- Creation of a new entity if necessary;
- Drafting business contracts;
- Drafting Re-treatment clause in your purchase agreement;
- Reviewing the current contracts to ensure full compliance;
- Drafting new agreement such as non compete.
- Dental CPA
- A CPA is necessary part of any dental practice to help you navigate the complicated financial issues. However, working with a CPA who specializes in dental practice is extremely important because they can help assist in analyzing the financial viability of the practice.
- Transition Consultant
- A transition consultant is more than just a “buyers agent”. Essentially a transition consultant will help in locating a practice, analyzing the practice and helping finalize the purchase of the practice.
Thorough Analysis of the practice
Once you have identified a practice that is for sale and one that you are interested in purchasing, the next step is conducting an initial analysis to determine the financial standing of your potential purchase.
Do the numbers make sense?
Based on the purchase price, and after making the necessary payments, would the cash flow allow for you to meet your financial needs?
If the answer to the above questions is yes, then the next step is to visit the practice and see firsthand how the business is run and whether the patient count matches what you have been told by the dentist. Interviewing and speaking with the seller on a few occasions will be necessary to get a true feel for the practice.
By this time you should have a good idea of what the seller is asking for, and you should have already been working with your transition consultant and CPA to calculate the numbers from the previous years. Conducting a thorough valuation should provide justification that the asking price is legitimate and can be supported by the financial numbers.
Making a Qualified Offer
Once your team has thoroughly reviewed the financials and is comfortable with the numbers, the next step is to make your offer. The offer should outline certain key sections such as:
- purchase price
- are you purchasing the real estate or leasing it
- are you purchasing the equipment, if so specify which ones you will purchase and which ones you will not;
This process can be scary for both the seller and buyer; therefore the more the parties can agree on earlier, the easier the transition to finalizing the sale.
Once you have submitted your offer, the next step is to apply for financing based on your purchase offer. Your team of professionals will be able to put you in contact with banks that deal with dentists and have a clear understanding of what is necessary during the process.
In order to apply for a loan you will likely need most of these documents:
- Buyers financials for the last 2 years
- Buyers credit check
- Buyers dental license
- Business valuation
- Income tax returns of the practice you are purchasing
- Business plan
- List of assets in the business that you will be purchasing
Drafting the Purchase Agreement
The agreement will clearly state the details of the sale. It is important to thoroughly review the document with your attorney to ensure that all the terms of the agreement have been stated. Some of the items that the agreement should outline are:
- Purchase price and the allocation of purchase price for tax purposes;
- Clearly identifying the assets being purchased;
- Warranties of the Seller and Buyer;
- Information regarding patient records;
- Covenant not to compete;
- How to handle patients who are returning to have work re-done
Once you have agreed to terms with the seller and the documents are being drafted, it is important to review the lease as well. Commercial leases are very different than residential leases and usually require the consent of the landlord before a new tenant can take over. Seller should notify the landlord that the business is being sold and the new landlord should be aware of the date that new buyer expects to take over the lease and should sign the lease. If the lease is at the end of its term, you can use that as a way to possibly renegotiate more favorable lease terms.
Take ownership and let the patients know
Once the documents have been signed and you have finally taken over ownership, a transition letter should be sent to all patients informing them that you will be taking over the practice. Use this opportunity to put the patients at ease by letting them know of your qualifications and informing them that the transition will be smooth and that it will not affect their level of care.
You are now ready to start your new practice. As expected, buying a new practice can be daunting but know that you don’t have go through it by yourself. Experienced professionals are available to guide you step by step during this process to ensure a smooth and painless transition. At the Law Office of Kris Mukherji, we pride ourselves on working hand in hand with our clients and ensuring a successful future. Call us at 858-442-5747 to discuss your new practice.Read More