Buying a business is much more complicated than simply handing over a sum of money and receiving a business in return. On the flip-side, a seller of a business must do a lot more than just receive a sum of money in exchange for a business. Buying or selling a business involves complex laws and many moving parts. Additionally, there is more than one way to buy or sell a business. The best method to use will depend on the business being sold and the needs of the parties involved.
Selling a business is not like other consumer transactions, in which cash or credit is exchanged for a good or service. Instead, there are different methods used, with the two most common being asset sales and stock sales.
An asset sale is one in which the buyer purchases the seller’s assets. The buyer is only assuming responsibility for the liabilities that it chooses. If the buyer does not assume all of the seller’s liabilities, then the seller remains liable for them. If the business has shareholders, the seller will usually distribute the proceeds of the sale to the shareholders of the business through dividends or distributions. Shareholders are then liable for the taxes on the dividend they receive. The party selling the business remains liable for taxes on the asset sales, as well. There are some exceptions to these tax obligations in the event the business is a pass through entity, but generally, each party remains responsible for the tax implications on their income. Buyers often prefer this method of business sales.
Another method often used in the sale of a business is the selling of stock. In a stock sale exchange, the buyer is purchasing the outstanding stock of the business. Outstanding stock includes the shares of stock that are currently held by the shareholders, the shares that are held by instructional investors, and shares owned by the officers of the company. Like an asset sale, the proceeds of the stock sale are distributed through dividends or other distributions. Often times, a stock sale is preferred by seller. This is because it acts as a “clean break” for the seller’s shareholders.
Contact an Experienced Business Attorney Today
Whether you are considering buying or selling your business via asset sale, stock sale, or another method, an experienced attorney can be invaluable to the transaction. There are many legal challenges that can arise in the buying or selling of a business. Avoid adding extra stress to the situation and hire an attorney at the outset to handle unexpected issues as they arise. The experienced attorney at the Law Office of Kris Mukherji is here to help you from the first step in a transaction through its finalization. Contact us today for a consultation.Read More
An asset protection trust is a tool that is used to hold assets in a separate vehicle so that they cannot be taken by creditors. When an issue arises that could result in a lawsuit, the party seeking compensation will try to sue the party with the deepest pockets. An asset protection trust is an option for assets to be legally held in a separate tool so that the owner can still enjoy the benefits of the assets, but does not have direct ownership. There is both Domestic Asset Protection Trusts (DAPT) and Foreign Asset Protection Trusts (FATP). There are many advantages to an asset protection trust.
Legal Opportunity to Protect Assets
When facing a lawsuit and the possibility to paying a large sum of damages, there may be the temptation to conceal assets. This is illegal, and failure to disclose assets during a lawsuit could be considered perjury. An asset protection trust allows the owner to transfer ownership of their assets and avoid criminal charges. Creditors do extensive research to find assets. If you think that you will be able to successfully hide assets, you are wrong and will likely be caught. It is best to utilize legal means of asset protection.
Becoming a Less Favorable Subject of a Lawsuit
When someone is filing a lawsuit, they are likely going to target the party with the deepest pockets. When your assets are placed in an asset protection trust, you become a less favorable target for lawsuits. If the party being sued does not have assets that are available for creditors, the likelihood of being sued decreases. Plaintiff’s attorneys in civil lawsuits often work with a contingency agreement in place. This means that they do not collect money upfront for work to be completed, but instead will take a percentage of the damages awarded. The plaintiff’s attorney will likely conduct a preliminary search before taking on a case. If the attorney discovers the adverse party does not have assets to collect upon, then he or she is not likely to take the case.
The motivation behind most lawsuits is money. Having less money or fewer assets than other parties involved in a case may put you at an advantage. The less money you have, the less likely you are to be pegged an easy target to collect upon at the end of a lawsuit.
Hire an Experienced Asset Protection Attorney
We live in a litigious society. No one is immune to lawsuits. You do not have to be a billionaire to be concerned with protecting your assets and wealth. Speaking with an asset protection attorney can be a life-changing move. The attorney at the Law Office of Kris Mukherji is a member of the Asset Protection Council. This is a group of attorneys, CPAs, and Financial Advisors committed to asset protection. Contact us today to find out how we can help you protect your assets.Read More
Think about all the ways you try to protect your safety in day-to-day life – wearing a seatbelt when you are driving, making sure that the airbags in your vehicle function properly, having working smoke detectors in your home, and having renters/home insurance. These are just a few of the ways that average people protects themselves from injury, accident, or other unexpected life events. You are prepared for day-to-day emergencies, but are you prepared with someone to make medical decisions if you can not? Or someone who can take over your finances when you are unable to manage them? An estate plan can deal with these issues and more.
What is an Estate Plan?
Before you can have an effective estate plan, it is important to understand what that is. An estate plan is the method by which a person can dictate how his or her estate should be administered after death. It can also include contingencies for what should happen during one’s life should a person be unable to care for him or herself or make important decisions.
The most common part of an estate plan is a will. This is the document executed during one’s lifetime that dictates the way that assets will be distributed after death. The execution of a will has many strict requirements in the state of California. To ensure that it is properly prepared and executed, an estate planning attorney can help you.
While a will is the most commonly thought of estate plan, there are other components. A power of attorney is also part of an estate plan. This is legal documentation giving another individual power of attorney, or the ability to make decisions on behalf of another person. For example, a power of attorney can give another the ability to make financial determinations and health decisions.
How do I Set Up an Estate Plan?
The first step to establishing an effective estate plan is talking to an experienced attorney. An attorney will be able to explain the requirements needed for each element of an estate plan. The preparation of an estate plan begins with a discussion about what you want to happen with your assets following death. Your attorney will make sure that the documents are executed properly and will stand up to scrutiny of the court should there be any challenges.
Why Have an Estate Plan?
When people die without a will or any legal documentation describing what they want to be done following their death, they are leaving those decisions up to the courts. Probate is the process by which the courts will settle a deceased individual’s estate. If the deceased has a will, the court will verify the will and then the terms of the will are followed. Without a will or plan, the court decides how assets will be distributed. Without a will, or estate plan, you are leaving the future of your assets up to the courts. It is important to have an estate plan so that your wishes can be carried out after death.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