If you’re like most business owners, you probably think of trusts as powerful financial tools used by the ultra-rich. Well, you’d be wrong. They are powerful financial tools, but they’re not just for the rich. They’re used by all kinds of financially savvy business people who know about the benefits they offer and save a lot of money using them to their advantage.
You don’t have to have millions of dollars to take advantage of those benefits. As a business owners, the setup fees of a trust is usually worth while as you can save up to $32,000 per $100,000 of profit. You can set up a simple trust for a few thousand dollars plus annual trustee and administration fees.
In addition, if you have 2 wills drafted (personal & corporate) the corporate will allow you to avoid probate and save you thousand of dollars.
The goal of this posting is simply to make you more aware of trusts and what they can do for you and your estate plan. Keep in mind that trusts can be very complex and that you definitely need the help of a professional to know how a trust would help you in your specific situation.
If you have any questions on the above, please contact me at hugues.boisvert@andrewsrobichaud.com
Friday, February 18, 2011
Two wrong reasons for not having an estate plan...
You may be wondering, if estate planning is so important, why doesn’t everyone have an estate plan? The answer is part human nature and part misconception.
Human nature prevents us from talking, even thinking about our own mortality. We don’t like to say to ourselves: “Someday I will die or become incapacitated.” For the sake of our loved ones however, we have to deal with this. And because it can happen anytime, we should deal with it now, regardless of age.
People also wrongly believe that estate planning is only for the super-rich. The word “estate” somehow implies great wealth. But the fact is, an estate can be a house and several thousand dollars or a mansion and several million.
It’s simple. Whatever your age, whatever the size of your estate, a proper estate plan will ensure that it is passed along as you desire, with minimum taxes and with no complications or delays for your heirs.
Human nature prevents us from talking, even thinking about our own mortality. We don’t like to say to ourselves: “Someday I will die or become incapacitated.” For the sake of our loved ones however, we have to deal with this. And because it can happen anytime, we should deal with it now, regardless of age.
People also wrongly believe that estate planning is only for the super-rich. The word “estate” somehow implies great wealth. But the fact is, an estate can be a house and several thousand dollars or a mansion and several million.
It’s simple. Whatever your age, whatever the size of your estate, a proper estate plan will ensure that it is passed along as you desire, with minimum taxes and with no complications or delays for your heirs.
Monday, February 14, 2011
Business Owners: Why should you spend money on a shareholders agreement?
Business Owners: Why should you spend money on a shareholders agreement?
A shareholders’ agreement is an important and very helpful document when setting up a business, or when acquiring partial interest in a business. It sets out the privileges and responsibilities of the shareholders, and provides a means for setting out the principles upon which the shareholders intend to run the business and deal with unforeseen circumstance and contingencies. The biggest advantages of a shareholders’ agreement is that it helps to avoid disputes, thereby avoiding unnecessary costs, time and damage to a business. While it is best to create a shareholders’ agreement when the company is being set up, when all parties are more likely to be in a position to agree its contents, they can be agreed at any time – even if the company has been in business a number of years. If you don't have a shareholders agreement signed, it will easily cost you $50,000-100,000 in legal fees to litigate and resolve a shareholders dispute. In my opinion, it is worth to spend $2,500 to have a proper shareholders agreement in place.
Therefore, companies and shareholders MUST have a shareholders’ agreement for 10 main reasons.
Top 10 reasons why your company needs a Shareholders’ Agreement
Reason #1: Provides a customized relationship between shareholders and directors
Corporations often want to customize their relationship to create an arrangement which differs from the applicable corporate legislation, including shareholder voting entitlements, imposing share-transfer requirements, and providing for a dispute-settlement mechanism.
Reason #2: Voting entitlements
Shareholders in a corporation may want to exercise their power to vote on a basis different from the votes they have according to their share ownership. For example, it may be essential to provide for how the shareholders are to nominate and elect the directors.
Reason #3: The possibility of imposing share-transfers
The general rule is that no shares may be transferred without prior approval of the directors. This rule protects the shareholders from ending up in a business relationship with parties who are different from those initially agreed upon. Consequently, if not supplemented by other provisions, a shareholder that wishes to exit needs to obtain prior approval from the other shareholders and there is no assurance that such approval will be imminent. It is therefore vital to provide a predetermined method for transferring shares.
Reason #4: Preventing conflict between the shareholders by providing conflict-resolution methods.
Different forms of dispute-settlement methods, such as mediation or arbitration, are often included in shareholders’ agreements to avoid going to court to resolve such disputes.
Reason #5: Transferring of power
Shareholders’ agreements permit altering the distribution of power between directors and shareholders. Basically, it can restrict in whole or in part the powers of the directors to manage or supervise the management of the business and affairs for the corporation, and provide a greater degree of power to the shareholders.
Reason #6: Future shareholders
It is common in shareholders’ agreements to stipulate that all transfers and share issuances are conditional upon any new shareholder signing the agreement. Please note: this is not required if there is a unanimous shareholders agreement.
Reason #7: Addressing the quorum and other minimum requirements for director and shareholder meetings
It is important to address the minimum number of members necessary to carry out the business of the corporation.
Reason #8: Issues relating to the finances of the company
Shareholders may wish to regulate the distribution of the corporation’s profits in some manner. It may also be imperative to set out the relevant terms of debt financing in the shareholders’ agreement.
Reason #9: Potential inconvenience
A corporation can anticipate future situations and therefore a shareholders’ agreement can lay out possible solutions for potential problems such as deadlocks.
Reason #10: Impact of other agreements
Some shareholders are party to other agreements with respect to the corporation. The shareholders’ agreement may provide information on what to do if a shareholder breaches that other agreement.
The lawyer’s role in preparing this agreement requires him/her to learn as much as possible about the client’s objectives, needs, and fears. This information mentioned above is incorporated into the agreement in order to ensure that each agreement is designed to fit the unique needs and circumstances of each client.
Please do not hesitate to contact me should you have any questions on the above.
A shareholders’ agreement is an important and very helpful document when setting up a business, or when acquiring partial interest in a business. It sets out the privileges and responsibilities of the shareholders, and provides a means for setting out the principles upon which the shareholders intend to run the business and deal with unforeseen circumstance and contingencies. The biggest advantages of a shareholders’ agreement is that it helps to avoid disputes, thereby avoiding unnecessary costs, time and damage to a business. While it is best to create a shareholders’ agreement when the company is being set up, when all parties are more likely to be in a position to agree its contents, they can be agreed at any time – even if the company has been in business a number of years. If you don't have a shareholders agreement signed, it will easily cost you $50,000-100,000 in legal fees to litigate and resolve a shareholders dispute. In my opinion, it is worth to spend $2,500 to have a proper shareholders agreement in place.
Therefore, companies and shareholders MUST have a shareholders’ agreement for 10 main reasons.
Top 10 reasons why your company needs a Shareholders’ Agreement
Reason #1: Provides a customized relationship between shareholders and directors
Corporations often want to customize their relationship to create an arrangement which differs from the applicable corporate legislation, including shareholder voting entitlements, imposing share-transfer requirements, and providing for a dispute-settlement mechanism.
Reason #2: Voting entitlements
Shareholders in a corporation may want to exercise their power to vote on a basis different from the votes they have according to their share ownership. For example, it may be essential to provide for how the shareholders are to nominate and elect the directors.
Reason #3: The possibility of imposing share-transfers
The general rule is that no shares may be transferred without prior approval of the directors. This rule protects the shareholders from ending up in a business relationship with parties who are different from those initially agreed upon. Consequently, if not supplemented by other provisions, a shareholder that wishes to exit needs to obtain prior approval from the other shareholders and there is no assurance that such approval will be imminent. It is therefore vital to provide a predetermined method for transferring shares.
Reason #4: Preventing conflict between the shareholders by providing conflict-resolution methods.
Different forms of dispute-settlement methods, such as mediation or arbitration, are often included in shareholders’ agreements to avoid going to court to resolve such disputes.
Reason #5: Transferring of power
Shareholders’ agreements permit altering the distribution of power between directors and shareholders. Basically, it can restrict in whole or in part the powers of the directors to manage or supervise the management of the business and affairs for the corporation, and provide a greater degree of power to the shareholders.
Reason #6: Future shareholders
It is common in shareholders’ agreements to stipulate that all transfers and share issuances are conditional upon any new shareholder signing the agreement. Please note: this is not required if there is a unanimous shareholders agreement.
Reason #7: Addressing the quorum and other minimum requirements for director and shareholder meetings
It is important to address the minimum number of members necessary to carry out the business of the corporation.
Reason #8: Issues relating to the finances of the company
Shareholders may wish to regulate the distribution of the corporation’s profits in some manner. It may also be imperative to set out the relevant terms of debt financing in the shareholders’ agreement.
Reason #9: Potential inconvenience
A corporation can anticipate future situations and therefore a shareholders’ agreement can lay out possible solutions for potential problems such as deadlocks.
Reason #10: Impact of other agreements
Some shareholders are party to other agreements with respect to the corporation. The shareholders’ agreement may provide information on what to do if a shareholder breaches that other agreement.
The lawyer’s role in preparing this agreement requires him/her to learn as much as possible about the client’s objectives, needs, and fears. This information mentioned above is incorporated into the agreement in order to ensure that each agreement is designed to fit the unique needs and circumstances of each client.
Please do not hesitate to contact me should you have any questions on the above.
Weekly Q & A / Legal Questions for Entrepreneurs: What is a creditor-proofing plan?
This week I received a really important question:
What is a creditor-proofing plan?
It is a legal plan allowing you to protect your personal and business assets and benefits from various tax exemptions. You can achieve protection through the way you’re structuring your business, by changing who owns what. By consulting a business lawyer, you may be able to save Thousands of Dollars in taxes.
Every entrepreneur that I know is working extremely hard and are fully dedicated to their businesses. For most of them, they are so much busy running their businesses and keeping cash flow positive that they are sometimes loosing sight of extremely important issues. I mean protecting what they earned by working hard and taking risk. We all know that it is impossible to predict the future; in any event, what we can do is being diligent and proactive with our actions. The objective of creditor proofing plan is to highlight some easy ways to structure your businesses in order to protect yourself and your businesses against creditors and, in the process used at your advantage various tax exemptions.
What is a creditor-proofing plan?
It is a legal plan allowing you to protect your personal and business assets and benefits from various tax exemptions. You can achieve protection through the way you’re structuring your business, by changing who owns what. By consulting a business lawyer, you may be able to save Thousands of Dollars in taxes.
Every entrepreneur that I know is working extremely hard and are fully dedicated to their businesses. For most of them, they are so much busy running their businesses and keeping cash flow positive that they are sometimes loosing sight of extremely important issues. I mean protecting what they earned by working hard and taking risk. We all know that it is impossible to predict the future; in any event, what we can do is being diligent and proactive with our actions. The objective of creditor proofing plan is to highlight some easy ways to structure your businesses in order to protect yourself and your businesses against creditors and, in the process used at your advantage various tax exemptions.
Tuesday, February 1, 2011
Business owners: Ask your FREE legal question(s) related to business/tax law.
I am glad to announce that as of today, I would like to interact more frequently with business owners through my blog. In order to achieve this objective, I will once a week, choose and respond to 1 legal question received by the public. Your question(s) should be related to business/tax law. Please don’t be shy and send your legal question(s) at hugues.boisvert@andrewsrobichaud.com - Once a week, I will post on my blog the question and the answer. I am looking forward to receiving a lot of questions.
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