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The backbone of the American economy is small business.  Most small businesses in the U.S. are family- owned and many have been in existence for decades.  One of the most challenging tasks I have faced in my career as a business lawyer has been developing strategies to help families arrange for the transfer of their business to others — be it a child, another family member, or another party, to ensure the survival and continuity of the business.  This short article will touch on some of the main issues that a lawyer and his/her client should consider.

Family business owners typically seek to set up an orderly and affordable succession of the business when they decide to step back from the responsibilities of the day-to-day management of its  operations; however, they also have a keen interest in ensuring that the business will continue to provide for the needs of themselves and their spouse in order to keep them comfortable during their retirement years. Failure to properly plan for a smooth succession during the owner’s lifetime can lead to extraordinary costs, monetary losses, and even loss of the business itself.  In the past, experts have determined that over 70 percent of family-owned businesses do not survive the transition from founder to second generation ownership.  In my experience, given proper planning with ideas in advance of what is desired, a business succession plan may usually be put in place that minimizes expense and trouble, often to the mutual benefit and profit of everyone involved.

There are five primary considerations that anyone planning a family business succession should take into account:

First, determine the business owner’s long-term goals and objectives for the family business.  Sometimes continuation of the business does not make sense or is not attractive to others in the family.  The business may very well have a greater value to the owner and his/her family if it is sold instead to an outside party.

Second, determine the financial needs of the business owner and his/her spouse, and develop a viable plan that ensures their financial security.  The reason that a business owner toils his/her whole life to build up a business is to support themselves and their family, so transitioning to another owner should not defeat this purpose.

Third, decide who will manage the business and develop a management team. It is important to remember that management of a business and ownership of the business are not necessarily the same. Responsibility for the day-to-day management of the business may be placed in one particular child or relative, or even an outsider, while ownership of the business may be left to a group of children, a trust, a combination of relatives, or sometimes even loyal employees.  Regardless of its composition, it is not necessary that the ownership group be active in the business.

Fourth, determine who will actually own the business in the future and decide how to transfer the business to those individuals.  Such a transfer may be accomplished by a gift, sale, bequest, or other means, and many factors, including but not limited to the tax consequences resulting from a particular type of transfer, will influence the decision.  This decision may be further complicated where only some of the owner’s children are active in the business (such that he/she prefers to vest ownership in those children alone), but the owner may lack sufficient assets outside of the business to enable him/her to leave an equal share of their estate to each child without including an ownership interest in the business. A business succession plan must therefore provide a way to transfer wealth to the children who are not involved in the business. Business owners should also determine the most effective means of transferring ownership and the most appropriate time for the transfer to occur.  In this process, the business owner must decide if he/she will continue to control the business after the transfer of ownership is complete and also whether he/she will continue to receive economic benefits from the business after the transfer of ownership (this will depend on the resources of the business and the financial needs of the business owner and his/her spouse).

Fifth, minimize transfer taxes associated with the business transfer and ensure that the owner has an appropriate estate plan. Estate taxes alone can claim up to 40 percent of the value of the business which can often result in a business having to liquidate or to take on debt just to stay in business! To avoid a forced liquidation or the need to incur debt to pay estate taxes, there are many legal strategies that may be put in place by the business owner to minimize or eliminate estate taxes.  If there is any good news concerning taxes, it is this:  In 2014, the State of Georgia abolished all estate taxes; therefore, the only taxes that Georgia business owners currently need concern themselves with are federal estate taxes.

If you own a business and are thinking about the future of it, talk to your lawyer before it’s too late.

An experienced lawyer and businessman, Douglas Flint is a senior partner at Flint, Connolly & Walker, LLP and assists clients, both individuals and businesses, in a range of legal matters affecting business and real estate in litigation as well as out of court.  He graduated from Emory University School of Law and has practiced in north metro Atlanta for the entirety of his career.

IMG_0397 (1)On May 18, 2016, the U.S. Department of Labor (“DOL”), under the direction of the Obama Administration, announced dramatic changes to its regulation of the employer and employee relationship.  Regardless of one’s ideological opinion of these new mandates, the newly introduced government intervention will necessarily pose real and present consequences for many employers and employees.

The Fair Labor Standards Act (“FLSA”) was originally introduced in 1938, and currently any business:  (i) that has more than 2 employees and more than $500,000.00 in annual revenue, or (ii) is engaged in “interstate commerce”, is subject to DOL mandates instituted under the Act.  Effectively, the definition of “interstate commerce” has been expanded by the federal courts to include virtually any business activity in the U.S.

Since the FLSA was enacted, it has been utilized as a vehicle for the Federal DOL to create regulations regarding minimum wages, weekly work hours, and other facets of the relationship between employees and employers.  While most people have a general familiarity with the “minimum wage” and “overtime” rules for hourly wage earners, less are familiar with the regulations that affect “salaried” employees.  Nonetheless, as a consequence of these new government mandates, it is important that business owners and managers, human resource managers, and salaried employees take the time to develop a full understanding of the impact of these new changes.

Beginning on December 1, 2016, any salaried employee who is paid less than $913.00 per week ($47,476.00 annually) will no longer be exempt from entitlement to overtime pay for work in excess of 40 hours per week.  Given that the overtime exemption was previously extended to employees making $455.00 per week ($23,600.00 annually), studies estimate that on December 1, over 4 million salaried employees will become eligible for overtime pay – overnight.  While the new regulations have been touted as an immediate pay increase for affected employees, some analysts caution that – much like the unforeseen consequences of the Affordable Care Act (Obamacare) – the unilateral decrease in exemptions may instead result in a reduction in the amount of income, hours, and advancement opportunities available to salaried employees who are currently exempt.

It must be noted that the amount of salary paid to an employee is only 1 of 2 tests for determining whether a salaried employee is exempt from overtime regulations.  In addition, after December 1, employees making more than $47,476.00 per year will only be exempt if they also qualify under one of the following exemptions:  (i) executive duties (such as management and supervisory duties and the ability to participate in decisions regarding the hiring, firing, or advancement of other employees); (ii) administrative duties (consisting of non-manual and independent work directly relating to the business operations of the employer); (iii) outside sales (in which the employee is regularly engaged in sales activities away from the employer’s place of business); or (iv) “highly compensated employees” (meaning, those employees who have managerial duties and who earn more than $134,004.00 per year).  Interestingly, the federal government also decreed that salaried attorneys, doctors, and teachers are exempt from the foregoing minimum wage protections.

While it is impossible to detail the nuances of these new regulations within the confines of this rather short column, the effect that these new regulations will have on small, medium, and large businesses and their employees cannot be overstated.  Employers who wait until December 1 to address these new changes will suffer substantially increased liability and risk.  In recent years there has been a dramatic increase in FLSA-related lawsuits by employees against employers as plaintiffs’ lawyers have increased their advertising and efforts to expand this area of litigation.  Moreover, if a business is found to have violated the FLSA, the penalties can be severe.  Consequently, an employer who fails to adopt adequate strategies to ensure that it is in compliance with the new regulations may likely find itself an unwitting defendant in such a suit.

These new regulations present considerations for employees as well.  As employers endeavor to respond to these new regulations by implementing lawful measures (such as requiring employees to “clock-in” and “clock-out”, converting employees from salary to hourly status, reducing employee hours and limiting their ability to perform work outside of the office, as well as any number of related measures), in an effort to reduce their exposure and ensure compliance with the new rules, employees may find themselves unhappy with the new federal regulations.  In order to limit the resulting strain, employers and employees should communicate in advance of the December 1 deadline to ensure that each has a full understanding of what new measures might be implemented to address the changes.

Employers and employees alike are advised to take the time to investigate the details of these new regulations, consult with their professional advisors and human resources departments, and develop a full understanding of how they may be affected by these new directives.

David L. Walker, Jr. is a partner with Flint, Connolly & Walker, LLP.  He focuses his legal practice to collaborate with business owners, mid-sized and closely held corporations, as well as real estate owners, developers, and contractors. David has a depth of knowledge in the areas of construction law, contracts, probate law and estate administration, and various matters related to the business operations of employers and business owners. 

IMG_7866As a show of solidarity with the law enforcement community, FCW will host a First Responder’s Day on Aug. 19 in appreciation of our local police officers, fire fighters, and other first responders.

Please join us at our offices in downtown Canton for an Open House from 3:30-8:30 pm for complimentary food and beverages, and to discuss your legal concerns free of charge.  Thanks for all you do to keep America safe!

FCW prevails again, this time in the Supreme Court.  On February 8, 2016, the Georgia Supreme Court unanimously denied certiorari, thus confirming our client’s victory in the Court of Appeals that we wrote about on January 6, 2016.

Original article in link below:

http://fcwlawfirm.com/great-news-for-fcw-client/  

 

KLA articleLiving through the death of a loved one is a tragic experience that most people will have to endure at some point in their lives.  Unfortunately, in many instances family members are forced to deal with stark financial realities while they are in the midst of their grieving.  The process of estate administration and handling finances after a death can present many questions and issues that are unfamiliar to the average citizen.

One of the first issues that must be confronted is “What should I do with the deceased person’s assets?”  If the deceased person (the “decedent”) took the responsible step of executing a will during his or her lifetime, the Executor must file the original copy of the will with the Probate Court of the county where the decedent lived at the time of his or her death.  In the typical un-contested will situation, the Court will then issue a document called the Letters Testamentary to the Executor giving him or her legal power to handle the decedent’s debts and assets and make all necessary transfers to carry out the will.   The Executor will then pay the estate’s debts and issue the remaining assets to the beneficiaries of the will.

Another question which must be answered is: “What assets are subject to distribution under the will?”  The assets of the decedent’s probate estate include all real estate, personal property (cars, clothing, furniture, etc.), and monetary assets that the decedent owned at the time of death.  The Executor must identify all such assets and distribute them according to the provisions of the will; however, before the Executor can make any distributions to the beneficiaries, he or she should contact potential creditors of the decedent and satisfy any legitimate debts that are subsequently claimed against the estate.

Conversely, there are some valuable assets that are not included in the decedent’s probate estate.  Life insurance benefits, 401k benefits, and other insurance or retirement benefits are governed by contract law rather than probate law, and thus they are not usually included in a probate estate.  These types of assets are beneficial to survivors because they pass directly to the named beneficiaries outside the probate process and are not usually subject to claims of the decedent’s creditors.  Therefore, it is crucial for people to ensure that they have named beneficiaries and successor beneficiaries for the accounts because if no such beneficiary is identified by the decedent prior to his or her death, then the money will be paid over to the probate estate assets and become subject to creditor(s) claims.

I recently executed a will for a young client who was facing a terminal illness.  He passed away shortly thereafter, leaving behind nearly a million dollars of medical debts and a scared, grief-stricken wife.  This unfortunate, but not entirely uncommon, situation left the wife asking a very important question: “Can I be held personally liable for the individual debts of my spouse, such as medical bills, car loans, or private student loans?”  Fortunately, Georgia is not a “community property state”, so you will not be liable for your deceased spouse’s separate debts or liabilities unless you co-signed for them.    Also, if a decedent had federal student loans, they will be completely discharged and cancelled upon death.

Families also need to be aware that Georgia law offers protection for a decedent’s surviving spouse and minor children through an optional distribution called “Year’s Support”.  Qualifying family members are entitled to petition the Court for a ‘Year’s Support’ by which they can request the court to set aside money and/or property from the decedent’s estate’s unencumbered assets for support and maintenance for a period of twelve months from the date of the decedent’s death.  The benefit of petitioning for a Year’s Support is that any Year’s Support assets will be the first priority issued out of the estate assets.  Effectively, this means that this money and property can be set aside for the family first and would be safe from any unsecured creditor’s claims against the estate.

It is important for all citizens to understand the legal process involving a death and their rights and responsibilities regarding a decedent’s assets and liabilities.  Georgia laws offer protection for surviving loved ones through Year’s Support distributions and spousal liability limitations, and these rules can be crucial to support families during such unfortunate times.  However, there can be many complexities to the general rules discussed in this article, making effective legal counsel essential for all families to properly prepare for the future and deal with a loss.

Kristyn Atkinson is an associate attorney at Flint, Connolly & Walker, LLP.   Kristyn grew up in Cherokee County, Georgia and earned her law degree at the University of Georgia School of Law.   She graduated with highest honors from the Georgia Institute of Technology with a Bachelor of Science in Business Administration.   

The following is a summary of an article entitled “The Unforgettable Death of My Forgotten Patient”, published in the Wall Street Journal in August 2015.

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In this article published in the Wall Street Journal in August 2015, a Milwaukee physician shares his story about a patient and the circumstances surrounding her medical treatment- circumstances that could have easily been prevented with a healthcare directive.

Ms. M arrived at the hospital with a large mass in her abdomen, causing her severe pain. In order to determine Ms. M’s options, doctors needed to be able to perform a biopsy on the mass. However, Ms. M had been deemed “non-decisional”-meaning she was no longer capable of making medical treatment decisions on her own behalf.

Without any known relatives or friends to provide consent, doctors were unable to perform any medical procedure considered “invasive”. In these cases, the next possible option is to obtain legal guardianship of the patient, which is typically a complicated process that can take months. And in most cases, once the patient is considered “non-decisional”, they don’t have months left to wait to obtain a guardian.

In the case of Ms. M, her situation might have been different if she had someone advocating in her best interest. Without an advance directive regarding the medical wishes of a patient, the doctors’ hands are tied when it comes to performing invasive procedures that could potentially save their patient’s life. Declaring a medical power of attorney can help prevent such an event from occurring. At Flint, Connolly and Walker, we can assist you with estate planning so that you are prepared for the future.

Douglas H. Flint is senior partner in the law firm of Flint, Connolly & Walker, LLP in Canton, Georgia, where he represents and assists both businesses and individuals with their legal matters.