Estate Planning Basics

Have you considered your estate plan recently? It's an easy thing to put off! Death and taxes are two things most people would rather not think about. But considering your estate is a very important thing for every person, and especially for a business owner.

What follows are a few things to think about as you consider your estate design:

1. Make a Will. In a Last Will & Testament, you decide who you want to inherit your property -- including real property, intellectual property, and personal property. You determine who will be in charge of ordering your estate after your death, and you also can name a guardian to care for your children that are minors should something happen to you and your spouse. We typically recommend re-examining your Will once every 5 years or so, or after a main event in your life.
2. Make an Advance Healthcare Directive. Under Georgia law, signing an AHD gives direction to a healthcare agent to make healthcare decisions for you in the event you are unable to make such decisions yourself.
3. Make a financial Power of Attorney. Such a document grants a trusted person the authority to make decisions over your property (including financial accounts) when you are unable to make such decisions due to incapacitation. 
4. Consider "Payable on Death" Accounts. Also known as "Beneficiary Designated" accounts, these allow you to name a beneficiary for certain bank accounts, retirement plans, and such vehicles. Upon your death, the money automatically goes to the beneficiary and does not move into your estate for probate. This transfer does not remove the value of that account from your estate (for estate tax purposes), however, and should be done with consideration from your trusted advisors.
5. Life Insurance. Life insurance often plays a major role in estate planning, particularly if there are outstanding debts which need to be handled at death. Also, in the life of business owners, business succession planning can be aided by strategic purchasing of certain types of life insurance (particularly permanent insurance, if the cash flow is right).
6. Consider the Tax Man. In 2015, the IRS will impose an estate tax at your death only if your taxable estate is worth over $5.43 million. (This exemption amount rises each year to adjust for inflation.) Married couples can utilize the "credit" of the other spouse, and so most families will not experience an estate tax burden. Remember, however, that the IRS considers all of your assets (including life insurance that you own and control, your business value, etc.) as part of the equation when considering the estate tax, and this tax can be a heavy burden when due. Careful planning and a good understanding can help minimize this tax. If you own a business, plan ahead for your successor. You may wish to consider a buy/sell agreement, business powers of attorney, or other business succession planning for your business.
7. Make final arrangements. Have a plan in place for your funeral arrangements, your memorial service, letters to friends and family, etc. Also, make sure you have kept your important documents in a very safe place for your executor to access. They will need access to your will, trust documents, deeds, account information, life insurance, debts, funeral information, retirement accounts, certificates, business documents, and other important information to carry out your wishes.

Considering these issues will go a long way in helping your family and friends in the event of your passing.

Employees at Will in Georgia

What is employment "at-will"? Under Georgia law, employees are considered to be at-will unless there is some other understanding (i.e., an employment agreement) between the employer and employee. (O.C.G.A. § 34-7-1).

According to Georgia law, an employer can fire an employee for any reason or no reason, good reason or bad reason. Georgia employment law gives employers very broad discretion in determining who will work for them, how long they will work, and when to let them go.

This discretion is not absolute, however. There are certain exceptions that employers must keep in mind, including (without limitation):

• Employers may not discriminate based on an employee’s age or disability. Public employers (i.e. government agencies whether state or local) may not discriminate based on race, color, religion, national origin, sex, disability, or age.
• Public employers must protect public employees who take "whistleblowing" actions against their employer.
• Employees may not be fired for taking time off to vote in primary or general elections, or for attending a court proceeding under a subpoena, for example.

Many employee rights in Georgia come from federal employment laws as well as certain worker's compensation and other provisions of state law. It is always a good idea, as an employer, to put together a robust employee handbook that covers policies and procedures for your employees. Also, if your company has sensitive and confidential information that employees access, it is a good idea to consider non-disclosure agreements and other "work-for-hire" arrangements for even employees who are "at-will."

Have you done your Annual Minutes?

In Georgia, after forming a corporation, you must stay in compliance with Georgia law to keep the liability protections afforded by the law. Limited liability is very important to the owners of a corporation, and not complying with some very simple steps can defeat one of the main purposes of operating in corporate form.  

The Georgia secretary of state does not require that you record minutes with their offices, but you should have various corporate documents prepared annually to comply with the Georgia corporate code.

Georgia corporate records

Georgia corporations must keep the following items with their corporate records at their principal place of business (i.e., in your minute book):

• Minutes from all meetings of the board of directors
• Minutes from all meetings of the shareholders
• Records of actions taken by shareholders in lieu of a meeting
• Records of actions taken by the board of directors in lieu of a meeting
• A record of all actions taken by a committee of the board of directors in place of the full board of directors
• An updated and accurate record of the shareholders, including their names, addresses, and number of shares owned by each

Georgia corporations also must pay an annual registration fee with the Secretary of State to avoid administrative dissolution.

Keeping such information maintains compliance with Georgia law, and helps to protect the assets of both the corporation and its shareholders. We have a system for our clients that ensures that these minutes get done and filed on a timely basis -- allowing you to focus on building the company!

Radio Show

I recently had the opportunity to be on the Atlanta Legal Experts radio show with two fine lawyers -- Cade Parian of The Parian Law Firm, LLC and Jerbrina Johnson of JLJohnson & Associates, LLC. Hosting the show was Emily Rowell of Peachtree Offices, with her cohost, David Weinberg, a fellow lawyer.

We discussed all sorts of issues, from business liability to litigation, from divorce to trademarks. Check out the link to audio of the Radio Show for your enjoyment. 

Creating Value with Holding Companies

One of the more complex but fruitful endeavors that a growing business can work through is the development of value through the sum of its parts. Value in a company can be “mined” — so that revenue streams coming from different endpoints can become annuities for owners and shareholders. Also, generating numerous income streams provides diversification in a volatile marketplace.

As a business owner, you can look for value in intellectual property (trademarks, trade secrets, patents, that "secret sauce" that makes your business different), real estate (commercial property leases or residential property), and other aspects of your business, and consider creating a holding company that can accumulate this value while walling off liabilities. For example, you might own an LLC which holds all your trademarked intellectual property, and then license that IP to your other businesses. Or, as another example, you might create a holding company LLC that owns a building out of which your main business operates, providing revenue (and expenses) which go to the bottom line. 

Sometimes a company is worth more than simply the sum of its parts…

Legal Fees

Most businesses have a love/hate relationship with lawyers. People are generally aware that when you call a lawyer, you typically should be prepared to empty your wallet. You may be unaware, however, that many lawyers offer different types of payment methodologies for your case, depending on the time involved, the project required, etc.

For example, though most of our professional advice is billed by the hour (and portions of the hour), we often offer “flat fees” for certain types of projects — usually the projects that are fairly straightforward, like setting up a single member LLC or drafting a Will for an unmarried person with few assets. We also offer project billing for certain clients, which allows a business to budget a set amount per month for attorney’s fees over a certain time, and then “square up” after a set period. This method works well for businesses requiring a lot of set up work in the early stages of growth, without breaking the bank. We also offer retainer levels for companies and families that need to budget legal expenses over a period of time and do not want to worry about hourly rates for long term legal work.

Other fee methodologies vary from firm to firm and from case to case. Some business lawyers will take a contingency fee or a blended contingency and hourly fee for larger complex litigation or business transactional matters. Of course, every case is different, and each lawyer or law firm’s fee policies are different as well.

Here is the Georgia State Bar’s overview of lawyer’s fees. Concise and helpful.

Patents

The term “patent” generally means a right or privilege of protection granted to a person who invents new and useful processes, machines, or any new and useful improvement of a current invention. Examples of particular patents for inventions include biological patents, business method patents, chemical patents, and software patents. Patents are legal property rights applied to inventions (as opposed to works of art or literature), and they are governed and cataloged by the United States Patent and Trademark Office (Website). Typically, patent protection applies apply to such items as methods, processes, machines, software compilations, manufacturing designs, or even biological discoveries. 

Patent holders have certain rights of exclusive use and protection of their patented item. These rights allow patent holders exclusively to license, use, sell, market, and advance their product into the market. If another player encroaches on their patent right during the patent term, the patent holder has the right to sue for infringement. Such suits may result in various types of damages, including, without limitation, treble damages and attorneys’ fees levied against the infringing party.

Patents are protectable by inventors, however, only for a certain time before they expire. Approved patents can protect the owner generally for 20 years after the date on which the patent application is filed, but some patents provide shorter term protection. Patent protection is very important for businesses that center around unique and valuable products and/or ideas.

Copyrights

Have you ever wondered what it means to have a copyright? You see the symbol everywhere -- in almost every book, publication, website, and digital media you read or listen to. But what does it mean?

A copyright is intellectual property tied to the tangible expression of an underlying idea or concept. It's a right that protects the original author of both published and unpublished works. Common examples include songs or novels. The music or novel itself can be protected by copyright as it is tangibly expressed on a hard drive, CD, or the pages of a book.

Simply having a tune in one’s head, unfortunately, does not protect that tune. One must place that tune in tangible form (or “copy”) for the copyright protection to be secured. Registered copyrights give the holder protection for a period of time. Once the time period has elapsed, these works are open to others for reproduction and republication.

A copyright does not have to be registered, however, to be protectable. There are certain advantages to registration, and with the relative ease of registration, any valuable work should certainly be copyrighted. A copyright is automatically secured when a work is tangibly created, or fixed in a copy (i.e., on a CD or other media). “Copies” are material objects from which a work can be read, heard, viewed, or visually perceived either directly or with the aid of a machine or device, such as books, manuscripts, sheet music, film, videotape, DVD, CD, or cassette tape or microfilm (if you remember those ancient things).

Copyrights are registered through the U.S. Copyright Office, and those filed in or after 1978 will last for the author’s life plus 70 years after his or her death. Registration of copyright gives the author more definitive protection and rights under law and equity to sue and claim more hefty damages for infringement or abuse of one’s copyrighted material. Registration also allows an owner of a copyright to charge license fees or other permission fees (royalties) for others’ use of that copyrighted material.

Much more information about the types of Copyrights can be found on the U.S. Copyright office’s website. A brief article from that website reviewing the basics can be found here.

The Future of Law

We use Clio, a cloud-based time and expense tracking solution for legal professionals. Recently, Clio has published a blog regarding the Future of Law, and I thought it was interesting. The advance of technology allows for greater communication and more focused collaboration among lawyers and their staffs. Interesting to see what the future holds!

Click here to read the blog.

Trademark Quick Thoughts

We have recently seen an upsurge in the number of clients (businesses and individuals) interested in seeking trademark protection for certain words, phrases or symbols used to market their products or services. Confusion reigns about this protection. Most people seem to think that you can just start using a particular name for a particular product, file that name with the USPTO, and move along with your business. Nothing could be further from the truth!

Developing a trademark (or service mark) is something that should be done with care, caution, and with the input of trusted advisors. Marketing and legal departments should work “arm-in-arm” to ensure the most seamless transition from product manufacture to product marketing. A business should not presume that, because no other company is “using the name,” the USPTO will grant the registration of a particular trademark for a particular product.

Several general principles are important to note when considering a trademark.

• One major purpose of a trademark is to help customers or potential consumers identify the source or owner of a particular product.
• Both State and Federal law govern trademarks. The main federal statute on point is the “Lanham Act,” enacted in 1946 and recently amended in 1996.
• Distinctiveness is crucial in maintaining protection afforded by a trademark, and the courts (and regulators) categorize marks into four (4) main divisions:
  • Arbitrary (or Fanciful)
  • Suggestive
  • Descriptive
  • Generic
• The strongest marks are those which are arbitrary, meaning they have no correlation to the underlying product. Think, for example, about Apple, Nike, Nokia, or Sony. None of these words/marks have any relationship whatsoever to the respective products – Computers, Shoes, Cellphones, or TVs. The connection between the product and the mark is arbitary, and thus easy for the consumer to associate the brand with the underlying product distinctively.
• Suggestive marks are somewhat linked to their underlying product or service. The link is a “suggestion” which usually has a bit of an “Aha!” moment for the consumer. Coppertone or Blu-Ray are examples of marks that make a connection with the underlying product. These types of marks are afforded high protection.
• Descriptive marks actually describe the underlying product, and typically do not afford protection unless they have achieved a “secondary meaning.” In other words, the mark has been established as distinctive through extensive use of the mark in commerce. These types of marks (Honey Bunches of Oats, for example) are only granted protection if distinctiveness is shown.
• Generic marks do not receive protection, because they use words or concepts which are in the general public use to describe certain products. Someone selling Cellphone Brand cellphones would likely not receive trademark protection, because the name “Cellphone” is a generic word which is used generally to describe the product.

Too frequently, businesses believe that their intellectual property marks are protected simply because they have reserved a website URL or even because they have been given a name reservation by the Secretary of State. Entrepreneurs who do not take the time to review and consider their branding in light of trademark law run the risk of 1) losing any possible chance to make such brand distinctive, or 2) even worse, running afoul of some other entity’s rights in a particular mark.

The moral of the story for business owners, entrepreneurs, and marketing departments is:  Take the time to involve your trusted legal team in the concept BEFORE you push the product or service to market under a particular name!

Holding Companies

One of the more complex but fruitful endeavors that a burgeoning company can work through is the development of value through the sum of its parts.  Value should be “mined” — so that income streams can become annuities for owners.

Look for value in intellectual property (trademarks, trade secrets, patents), real estate (leases), and other pieces of the business, and consider creating a holding company that can accumulate this value while walling off liabilities.

Sometimes a company is worth more than the sum of its parts…