Incorporate in Nevada? Not so Fast

Many clients who come to our firm hear from someone that incorporating in Nevada is the way to go. It’s private, there are no state taxes, and it’s kind of sexy.


However, before you file those papers, think again. California tax laws may change your mind.

The reason to file in a particular state most often is motivated by tax issues. Most people believe that they won’t have to pay state income tax if they have a Nevada Corporation. The California Franchise Tax Board will determine if you do business primarily in California or not. If your federal tax return shows any “nexus” or connection with California, you will be taxed by California in accordance with the proportion of revenue that you receive in California.

Say, for example, your sales reps are in Nevada, but your main office and your home are in California. The Franchise Tax Board, in an audit, has the ability to look to see where your credit card and gas card charges are from. If it looks like you live in California, and it looks like your business is operating out of California, they can charge you California taxes. The amount of taxes you pay to California is also affected by the percentage of revenue you receive from California sales in relation to other states. So somebody with an internet business where the goods are shipped from a manufacturer in Florida to somewhere outside the state of California would not be subject to California tax. But if you are shipping from California, you are subject to California tax.

There are many exceptions to the rules, and specific circumstances that can change the result. That’s why it’s good to see an attorney who can help you sort out which state is best for incorporation. Our firm will walk you through the decision making process to make sure you accomplish the result that you want.

Disclaimer: The information provided is for informational purposes only and not for the purpose of providing legal advice. You should contact an attorney to obtain advice with respect to your particular issue or problem. Use of this information or any related information does not create an attorney-client relationship. The opinions expressed at or through this site are the opinions of the individual authors and does not reflect the opinions of any firm or attorney.

If I set up a living trust, does this guarantee that my estate will not have to go through a probate?

Unfortunately, despite what most people believe, the answer to this question is not always “No”. Yes, a properly drafted living trust is very effective at avoiding probate of your estate at death; however, there are several situations which can arise which will require some, or maybe even all, of your assets to still have to go through probate. In fact, many of the probate cases I handle for my clients are for one or two assets that were just not in the decedent’s living trust.
One primary reason for this is that when people create their living trust, especially when they try one of the “do it yourself” methods, they fail to properly “fund” the trust. What this means is that they do not re-title all of their assets like real estate, bank accounts, and brokerage accounts into their living trust.

Another reason for this is that people simply fail to review their trusts and assets on a regular basis to ensure that they are still funded in their trust. For example, it is extremely common that when you refinance your home, the lender will require you to pull the property out of your living trust to fund the loan. After escrow closes, people often forget to put the property back into their trust and then, when they pass away, they have a piece of real property out of their trust that requires a probate action to put it back in the trust.

Problems like this can be avoided by many easy steps. The most obvious and least expensive way to do this is to be sure all of your assets are funded in your trust and to have an annual trust review. Another important step really goes back to the formation of your estate plan and having the proper contingencies in place. This is in the drafting language in the living trust and all the supporting documentation to your living trust. With proper planning and evidence, there are ways to petition the court to transfer assets back into your living trust, even after your death, without a formal, lengthy, and expensive probate proceeding. To find out more about how you can ensure your living trust will avoid probate, call Amy Alvis at Alvis Frantz and Associates, A PC at (925) 516-1617.

Disclaimer: The information provided is for informational purposes only and not for the purpose of providing legal advice. You should contact your attorney to obtain advice with respect to your particular issue or problem. Use of this information or any related information does not create an attorney-client relationship. The opinions expressed are the opinions of the individual authors and does not reflect the opinions of any firm or attorney.

Corporations, Partnerships, LLC’s Oh My!

New business owners these days have enough to be concerned with besides their “legal entity”. Should I incorporate?...Can I be an LLC?...Just what is an LLC?.. Do I need a Partnership agreement if I have a partner? Do I need a shareholders’ agreement if there is more than one shareholder?...These questions are the most common when someone wants to make sure they are legally protected.


First, what do you need to protect? Unless you have more than $75,000 equity in your primary residence or if you have other investment property (including other businesses), you may not need to incorporate or form an LLC. You could be a sole proprietorship.
Here are the possible forms of doing business: sole proprietorship, general partnership, joint venture, limited partnership, limited liability partnership, limited liability company (LLC), S- Corporation, C-Corporation , Non-Profit Corporation, Professional Corporation.
In this short space, it is not possible to give all of the details, but generally speaking you should either incorporate or file an LLC if you want protection of your personal assets separate from your business. Both a corporation and an LLC require filings with the Secretary of State, payment of minimum taxes of $800 per year, keeping funds segregated (no paying your house payment out of your corporate bank account), and signing documents .
The difference between a corporation and an LLC is that an LLC does not require annual minutes, although you can opt to do them, and you can choose to treat your LLC like a partnership from a tax perspective while still providing protection from personal liability just like a Corporation does. Certain professions that are licensed by the State of California, such as Contractors, Cosmetologists, Auto Repair Shops, eg. cannot be LLC’s and must incorporate. You can be a single member LLC.
If you do not have a partnership or shareholders’ agreement in California, your partnership or corporation will be subject to the California Partnership Act, and the laws related to Shareholders’ agreements in the Corporations Code.
Alvis Frantz and Associates, A PC, located in East Contra Costa County emphasizes business, real estate and construction law as wells as trusts, estates and probate.  You can reach us at info@alvisfrantzlaw.com or visit our website http://www.alvisfrantzlaw.com/ . 

The information above is for general information only. It is not a substitute for seeking legal advice. Alvis Frantz and Associates A Professional Law Corporation - 2010 All Rights Reserved

LIVING TRUSTS AND ESTATE PLANNING: A MUST FOR EVERY BUSINESS OWNER

Business owners survive many challenges and for family businesses, there are some unique challenges to protect and preserve your business… and your family. A living trust is an estate planning tool business owners can use to help their business continue to run after their death.

LIVING TRUSTS CAN:

• Avoid probate. Probate is the legal process where the court validates your will, sees that your debts are paid, and interprets your will to determine how and to whom your assets are distributed. The major problems with probate are that it is expensive, lengthy, public, and it places all the control in the hands of the probate courts.

Having a living trust will ensure that your estate will be settled quickly, privately, and inexpensively as it keeps your estate out of probate and allows you to maintain full control over the distribution of your assets and your business.

• Minimize or Eliminate Estate Taxes. A living trust can provide a means to reduce, or even eliminate estate taxes. With fewer tax burdens, there are fewer debts to satisfy and a better outlook for the continued health of the business as well as your families’ future.

• Create a Business Succession Plan. Establishing a system within your business will create a plan for someone to succeed you so that your business can continue to run smoothly without you. The death of a business owner causes a number of problems which can be addressed with proper planning, one of which is that the value of your business may be drastically reduce without you there to run the show unless you plan ahead. Ask yourself:

       • Should the business remain in the family?
       • Are there capable successors/owners?
       • Should the business be sold? If so, to whom and at what price.

ESTATE PLANNING CAN:

• Minimize loss of business assets: What people may not consider is that often, assets from a business may have to be used to satisfy the personal debts of a business owner. When there are not enough personal assets to satisfy personal debts, the creditors/government will go after business assets to satisfy these debts. This may leave a business strapped or even insolvent. However, with proper estate planning, you can protect your business and allow it to continue and grow after you die.

• Plan for the financial needs of your estate. Take a look at your personal assets and debts. Can your family continue to survive based on your financial picture as it is today? If you do not have enough personal assets to cover your personal debts, start to put more money aside to cover those debts. Another option is to purchase life insurance. For many, life insurance can be a quick and less costly solution. Life insurance will provide you and your heirs with an immediate guarantee that when you die, the proceeds from the life insurance can be used to satisfy the personal debts, thereby, allowing your business to continue unharmed.
For many small business owners, it can be difficult to separate business and estate planning as they are each contingent on the other. With proper planning and advice, you can ensure that your family and your business will continue to survive when you are no longer there to hold the reins.

The purpose of this article is to provide information. Nothing stated herein should be construed as legal, tax, or financial advice. Consult an attorney, CPA or financial advisor for advice specific to your individuals needs.

SO WHAT'S IN A BUSINESS NAME?

When clients come to ALVIS FRANTZ AND ASSOCIATES to start a business, the last thing on their mind is protecting their name.  Often, it is presumed that when you incorporate it is covered.  But that is far from the truth.  Here are some of the ways most businesses address naming their company:

Fictitious Business Name (aka DBA - or "doing business as").  You can not always just start doing business tomorrow under any name you chose.  You must first determine if a FBN is even required and then, if you determine it is, a Fictitious Business Name Statement (FBNS) must be  filed in each county you conduct business.    How do you know if your business name will require a FBN and how do you get one, have one of our attorneys contact you or call (925) 516-1617 to speak with an attorney or schedule a consultation today.

Corporate Name:   When you incorporate, you must give your company a unique corporate name.  Did you know though that you do NOT have to use that same name to market your business?  You can actually do business under a FBN as well.  It is important however to know where and when to use each name.   Additionally, once you are incorporated, when you as an individual sign documents on behalf of your corporation, it is EXTREMELY important HOW you sign your name.  If you sign documents incorrectly, you could be opening yourself up to personally liability of claims against the corporation.

Trade Name: A trade name is your company name as it is most commonly used. So for example, if you use your name as a return address on a purchase order, that does not constitute a trademark, only your trade name.

Trademark or Service mark: A trademark is a word, phrase, symbol or design, or a combination of words, phrases, symbols or designs, that identifies and distinguishes the source of the goods of one party from those of others. A service mark is the same as a trademark, except that it identifies and distinguishes the source of a service rather than a product.  Trade Marks may or may not be registered. If a person has a federally registered mark, you can be stopped from using your name even if it is your corporate name, or your FBNS.  To fin out what is right for your business, have one of our attorneys contact you or call (925) 516-1617 to speak with an attorney or schedule a consultation today.

IS YOUR BUSINESS ON TRACK?

Have you achieved what you set out to do with your business? Has your business grown according to your plan? Did you even have a plan when you started?   It is not unusual to see many business owners start up without a plan for the where and how they want their business to go.  Most people simply believe that with hard work and determination alone, their business will succeed.

The ugly truth (as evidenced by the many "out of business" signs) is that this is rarely the case.  You work from sun up to sun down, and still don't see a profit or maybe have a "profit" on paper but have yet to start paying yourself a salary.  After time, you could end up resenting the business of your dreams and question if this is where you really want to be.  You want your business to work for you, not vice versa.

There are four important steps to help make lasting changes in the way you operate your business:

 1) Have S.M.A.R.T. goals. Most peoples' "goals" are so vaguely defined that they're really just dreams. S.M.A.R.T. goals are:

        Specific: your goals should be specific

        Measureable: your goals should be measurable

        Achieveable: your goals should be realistically achievable

        Relevant: your goals should be relevant to helping your business succeed

        Tell someone: verbalize your goals to someone else, the more the better.

Examples:

"I want to be the top shoe seller in the county" is vague and hard to measure, whereas "I want my business to earn $375,000.00 in gross revenue within nine months" is both specific and measurable"

"I want everyone to come to my store!" is a great and positive attitude but obviously unrealistic and really not that relevant if what you sell if high fashion shoes for women.  A more achievable and relevant goal would be "I want to earn the exclusive business of 5 top stylists in San Francisco."

2) Have a system for regularly measuring your progress against those measurable goals.  This way you can keep on track and readjust accordingly.

3)  Find an accountability partner. This is where the "Tell" portion of your "SMART" goals comes in.  When you verbalize your goals to an employee, a colleague, a business coach or even a friend or family member, this person can help follow up with you, see if you are on track. Furthermore, no one like to say they are going to do something, and then never follow through.  If you know someone is keeping tabs on you, you are more likely to work harder to meet what it is you said you would do.  This is one of the most important steps in goal setting.  It's like the scale at a weight loss group meeting.  Find someone you can trust and who will hold you accountable

4)  Make a business and marketing plan. Once you have your S.M.A.R.T. goals, how are you going to get there?  What do you need to do and how are you going to do it?  Before you even spend the first dollar to start your business (or this weekend if you are already in business),  sit down and develop a business plan.  This should reflect your goals, establish how your will measure your progress and most importantly, all the steps you will need to make to reach those goals. 

By following these steps you will be able to put your business in perspective, understand where it is you want to go, how your are going to get there.  By doing this at least once a year, you will be able to track your journey, see what has worked, what hasn't worked, revise and readjust both your goals and your plan to achieve them. 

Hey, That’s My Stuff!

My client wants to hire an expert consultant to make part of a product that my client is manufacturing. Both parties are very talented with respect to their particular areas of expertise, but they need each other in order to have a successful product. My client wants to make sure that he has all the rights to the finished product, and that the consultant can’t re-sell his part of the technology to someone else. The consultant feels that his contribution will revolutionize the industry that they are in, and wants money at the back end of the transaction based on the success of the product. For this, he is willing to charge a lower hourly fee up front.


How does this all get sorted out? First, I am grateful that my client came to me before having the Consultant start working. I can work through the details with my client, and document whose bringing what to the table. Another client didn’t, and now no one knows who owns what, with both parties claiming that they have full rights to the product. One issue that comes up most often is that the “concept” originator believes that there would be no product without his creativity. But there is a big difference between saying, “I have a concept for a restaurant where people can eat in their car” and actually creating a McDonalds® franchise. While everyone is friends, there are usually no issues, but when the money starts rolling in, if these matters are not sorted out in advance, disputes arise often leading to litigation.

There are several types of agreements associated with the process of creating “Intellectual Property.” There’s a Confidentiality or Non-Disclosure Agreement, a Work for Hire Agreement for high-level project managers/engineers, an Independent Contractors’ Agreement for the more common activities associated with work to be done, a Certificate of Originality, a Co-development agreement, a cross-licensing agreement a joint venture agreement and more. All of these agreements cover different aspects of the creation process, and have different remedies for a breach.

Call me for a consultation at 925-516-1617 to come see me if you are creating something that will have lasting value, whether it’s an invention, software technology, video games, artwork, music, or just an idea whose time will come. We’ll sort it out together.  http://www.alvisfrantzlaw.com/

The information above is not a substitute for seeking legal advice. Barbara Frantz, local resident for 17 years, has 34 years of legal experience, offering proven solutions for business owners to increase revenues and achieve their long range goals. Barbara is a lawyer with Alvis Frantz and Associates, your law firm providing confidence and security, because your business and your family are your highest priority in life. All Rights Reserved

WHEN DO ENTREPRENEURS NEED A LAWYER?

by Barbara A. Frantz, Attorney at Law

Some entrepreneurs wait until they have a legal problem before consulting an attorney. Others make an attorney part of their business team, just like their accountant, banker and marketing and sales force. Analyzing the legal costs over a five year period for companies who use attorneys preventively, shows a dramatic savings. The faster your business grows, the more likely you will need legal counsel to protect the wealth that you are building through your business.

Here are some guidelines for when you should hire an attorney:

• A regulatory agency (such as the Health Department) contacts you.

• You are going to sign your first big contract.

• You buy or lease your first office space.

• Someone wants to invest in your company.

• You're not sure about your insurance needs.

• You want to standardize your contracts.

• You are sued or are thinking of suing someone.

• You want to patent, trademark or copyright something.

• You're designing your employee policies and procedures manual.

• You plan to export products or set up offices outside your home state.

• New legislation is adopted that you think might have an effect on your business.

Look for an attorney that you feel comfortable with who emphasizes "business transactional law" or who calls him or herself a business and corporate lawyer. Some attorneys who call themselves corporate lawyers only specialize in "securities" (stock investments in corporations). For the most part, you will be paying an unnecessary premium for their expertise on your simple business matters. Do not be afraid to have several attorneys for different needs.

Whether you make an attorney part of your team or wait until you have a specific legal problem, you must set aside money for legal fees from every item you sell, or service you provide. That money may ultimately be used for your company's expansion, or to pay a small claims court judgment instead of lawyers' fees, but it should be budgeted. The type of business that you have and where you are located (Large city attorneys charge more than in suburban or rural areas) determines how much you set aside. A good rule of thumb is 1-1.5% of the retail price or hourly rate that you charge.

Finally, if you develop a relationship with an attorney before you need one, you will have the opportunity to share your business goals, your philosophy, and some company information that will allow them to do a better job for you.

So, when you are faced with a situation that fits the need for an attorney call  Barbara A. Frantz of Alvis Frantz and Associates PLC

(925) 516-1617 email: info@alvisfrantzlaw.com or for more information visit:  http://www.alvisfrantzlaw.com/

Disclaimer: The information you obtain at this site is not, nor is it intended to be, legal advice. You should consult an attorney for advice regarding your individual situation. We invite you to contact us and welcome your calls, letters and electronic mail. Contacting us does not create an attorney-client relationship. Please do not send any confidential information to us until such time as an attorney-client relationship has been established.

Do Business Owners Need Their Own David Horowitz?

by Barbara A. Frantz

In the process of melding Amy’s law practice and mine together, we needed to get a new merchant card account. This is the account that manages credit card charges from our clients. A client comes in, pays with a credit card, it gets deposited into our Client Trust Account, and after the work is done and our client is billed, we write ourselves a check from the Client Trust Account to our General Account. At that time, the money becomes ours. In the meantime, any fees that the merchant card company charges for the credit card transaction comes out of our General Account. There are several merchant card companies that offer this service, Elavon took over for Nova and is offered through Costco.

Each bank has services associated with a business owner’s bank account. Some services are on the computer only and others are through a “swipe” processor. The experience of comparing a new company with my old one was horrific. Every company starts out with about the same rate that they advertise: 1.99% of the charge on the computer, or 1.69% if you swipe the card plus 27 cents per transaction. But then when we dug deeper, the quagmire of variable rates begins.

If a client uses a card with no spending limit, such as Master Card World or Visa Signature, the card is considered “Not Qualified”, and the charge for the transaction can be as much as 7%. If the card is qualified, that is, it is a straight credit card with no rewards attached, you will get the 1.99%, but if the card includes rewards like the Southwest Chase Visa, you will pay at least 2.96% plus 33cents per transaction. If we don’t add the security code or the address on the charge we will pay 3.8% plus 33 cents per transaction. So the average probate avoidance living trust package could cost our firm as much as $105.

Business credit cards cost more to process than personal cards. Retail stores that have many transactions can pay even more. American Express cards cost the most to process. So the credit card companies make money on both ends of the transaction. The business is charged a premium for taking credit cards with rewards, and the consumer is charged a premium interest rate for using a credit card with rewards. This is a perfect project for David Horowitz as far as I am concerned.

The information above is not a substitute for seeking legal advice. Barbara Frantz, local resident for 16 years, has 34 years of legal experience, offering proven solutions for business owners to increase revenues and achieve their long range goals. Barbara has recently joined forces with Amy Alvis to form Alvis Frantz and Associates, a Professional Law Corporation.

For more details about the services that they provide, please visit http://www.alvisfrantzlaw.com/ or call 925-516-1617. All Rights Reserved.