I’ve just started a new Florida company. What is one procedure that I should implement immediately to protect my business and prevent a creditor from piercing the corporate veil?
As a general rule under Florida law, a shareholder or member will not be responsible for the debts and obligations of his, her or its corporation or limited liability company unless there has been fraud, improper conduct or a failure to follow and observe basic formalities of separation. Depending on what type of entity you have formed, the procedures may vary, but will include holding regular meetings of the managers, directors and/or officers, updating bylaws or operating agreements, maintaining ownership ledgers, filing an annual report with the state of Florida and maintaining separate bank accounts. One of our business attorneys can help you create a specific and detailed set of procedures for your company to help protect it from creditors.
I’m considering adding a partner/member/shareholder to my business, what are some important considerations?
- Will the new partner/member/shareholder purchase the ownership interest from an existing owner, or from the company/entity?
- How will voting rights be affected?
- Who will be responsible for day to day management?
- What type of decisions will require unanimous or super majority consent?
- Do I need to update the operating agreement/shareholder agreement/partnership agreement?
- Will the addition of the partner/member/shareholder affect any existing financing my company has?
- If in the future, I don’t get along with one or more partner/member/shareholder, what can I provide in the entity governing documents to address this issue?
- How to address future financial obligations related to the company/entity.
- What if I want to sell the business and my partner does not?
I’ve just started a new Florida company. Should I have a formal written agreement?
Yes, if there are two or more owners in most circumstances. An operating agreement or shareholder agreement can address the issues described in the question above titled “I’ve just started a new Florida company. What is one procedure that I should implement immediately to protect my business and prevent a creditor from piercing the corporate veil?”
How can my LLC be taxed?
- A Florida limited liability company, with more than one member, is a flexible entity from a tax perspective. Members in a multi-member Florida LLC may elect to be taxed in one of the following three ways: (i) as a partnership; (ii) as a S-corporation; and (iii) as a C-corporation. Only a C-corporation is liable to pay Florida income taxes. The others are not taxed, but the income is allocated and flows through to the owners.
- A Florida limited liability company, with only one member, may be taxed in one of the following three ways: (i) a disregarded entity; (ii) a S-corporation; or (iii) a C-corporation.
What is the Uniform Commercial Code?
The Uniform Commercial Code is a general set of rules and regulations that are reviewed and revised by the National Conference of Commissioners on Uniform State Laws and the American Law Institute that seek to standardize the legal framework that governs certain transactions, like borrowing money, securing debt, leasing, buying or selling goods and contracting for goods and services. Each state is responsible for adopting and implementing the UCC, or any portion thereof. Chapters 670 – 680, Florida Statutes set forth the Uniform Commercial Code as it has been adopted in Florida.
What is a statement of authority?
As provided in Fla. Stat. §605.0302, a limited liability company may file a statement of authority with the Florida Department of State. This facilitates establishing the authority of manager and officers to take action. The statement must include the name of the company as it appears on the records of the Florida Department of State, and the street and mailing addresses of its principal office. With respect to a specified status or position of a person in a company, whether as a member, transferee, manager, officer, or otherwise, the Certificate of Authority may state the authority or limitations on the authority of all persons having such status or holding such position to: (1) execute an instrument transferring real property held in the name of the company; or (2) enter into other transactions on behalf of, or otherwise act for or bind, the company. Moreover, the Statement of Authority may state the authority or limitations on the authority of a specific person to: (a) execute an instrument transferring real property held in the name of the company; or (b) enter into other transactions on behalf of, or otherwise act for or bind, the company.
I have an out-of-state company. Can I conduct business in Florida?
Yes, but you must domesticate your out-of-state company by qualifying it to do business in Florida before transacting business in Florida. Additionally, if you have an employee in Florida, you may also need to file and register with the Florida Department of Revenue for issues potentially involving sales tax and unemployment tax (referred to as reemployment tax in Florida). To find out how to domesticate your company, contact one of our business attorneys.
What is civil litigation?
Civil litigation is much broader than you think. It includes, but is not limited to:
– Estate and trust disputes, including will contest and undue influence
– Prosecution and defense of fiduciaries
– Disputes concerning real estate, and title and boundary issues, including quiet title actions
– Condominium disputes
– Corporate and business disputes
– Partner/shareholder disputes, including derivative actions – Banking disputes
– Contract disputes
– Products liability
– Construction disputes
– Personal injury, nuisance, trespass and other torts
– Professional malpractice
– Claims under the Americans with Disabilities Act
– Employee/employer claims including non-compete violations, confidential disclosure violations, and Florida Civil Rights Act, worker’s compensation and Family Medical Leave Act claims
Our firm has substantial experience in each of these areas.
How long does a case usually last?
There is no standard length of any case. Some cases may resolve in as little as a month, while others may take years. Every lawsuit is unique and your attorney can best help you understand the unique circumstances and chronology of your lawsuit.
I received a summons and complaint, what should I do?
If you receive documents that are marked “summons” or “complaint”, you should immediately call an attorney. Do not ignore these documents, as they indicate that someone has filed a lawsuit against you. Under Florida law, you must respond to these documents within a certain deadline. If you fail to respond within the deadline, the opposing party can request that the court enter a default and judgment against you, meaning that the court will grant the opposing party the relief that it has requested against you in its complaint.
Do I need an attorney to represent my business in court?
Yes, unless your claim is in small claims court.
What is alternative dispute resolution (“ADR”)?
Alternative Dispute Resolution is a procedure for settling disputes outside of the courtroom. Mediation and arbitration are examples of alternative dispute resolution. ADR may allow parties to control the process and the solution of their dispute. ADR, especially mediation, is the most common method of dispute resolution. Most civil actions filed in Florida will be mediated by agreement or order at some stage in the litigation process.
I have a construction defect claim, what should I do?
Under Florida law, you may have a claim that is subject to the mandatory pre-suit process provided under Chapter 558, Florida Statues. This process must be strictly complied with prior to filing a lawsuit. You should contact an attorney to advise you concerning this process. For further information about whether your particular claim is subject to this process, please contact one of our attorneys at 239-514-1000.
Can I recover my attorney’s fees if I am the prevailing party in a lawsuit?
Generally, no, unless this is specifically provided for by written agreement between the parties or by statute. However, even in the absence of such a written agreement or statute, there are certain strategies that your attorney can implement to provide you with an opportunity to recoup your prevailing party attorney’s fees.
How should I hold title to my property?
Choosing how to hold title to property is one of the most important decisions one will make in connection with a purchase of any real property. There are tax and estate planning considerations to contemplate before making this decision. Common examples include Tenants by the Entirety, Joint Tenants with Right of Survivorship, Tenants in Common, in the name of a Trust or in the name of a Corporation/LLC. We have extensive experience in advising our clients as to the best manner to take title to real property. If you have any questions, please do not hesitate to contact us.
What is the documentary stamp tax?
The documentary stamp tax is created and imposed by Chapter 201, Florida Statutes. It is imposed on promissory notes and other written obligations to pay money, as well as on deeds and other documents that transfer an interest in Florida real property. The tax is imposed at different rates depending on the document at issue. There are numerous exceptions and situations where the tax is not imposed. Our office has extensive experience advising clients with respect to the documentary stamp tax. If you have any questions regarding such tax, please contact our office.
What is the intangible tax?
The nonrecurring intangible tax is imposed by Chapter 199, Florida Statutes and is imposed on the value of obligations to pay money that are secured by mortgages or other liens on Florida real property. Our office has extensive experience advising clients with respect to the nonrecurring intangible tax. If you have any questions regarding such tax, please contact our office.
What is a notice to owner?
A notice to owner is a statutorily required notice under Chapter 713 Florida Statutes (Florida’s Construction Lien Law), that is given by a lienor, materialmen and/or laborer that performs work, provides material and/or provides labor to improve an owner’s property after a Notice of Commencement is recorded. Certain statutory required language, as well as statutory required deadlines, must be complied with to have a valid notice to owner. If you have any questions about a notice to owner that you have received, please contact our office to discuss.
Do I need a Phase I Environmental Site Assessment?
An Environmental Site Assessment is useful in determining whether prior activities on the property may result in liability under any one of a variety environmental protection laws including but not limited to the Federal Solid Waste Disposal Act, the Federal Clean Air Act, the Federal Clean Water Act, the Federal Resource and Conservation and Recovery Act of 1976, the Federal Comprehensive Environmental Response, Compensation and Liability Act of 1980, the Federal Superfund Amendments and Reauthorization Act of 1986, Chapters 161, 253, 373, 376 and 403, Florida Statutes, Rules of the U. S. Environmental Protection Agency, Rules of the Florida Department of Environmental Protection, and the rules of the Florida water management districts now or at any time hereafter in effect. A Phase I ESA is typically used in commercial transactions and not typically used in residential transactions. If one has any questions or thinks they may want to engage a professional to assist in obtaining a Phase I Assessment, please contact our firm.
What is an Estate Plan?
An estate plan normally refers to the set of documents, laws and directives that govern the management, decision making and disposition of your property and person during any incapacity and following your death. Everyone should have an estate plan, which may include a will, trust, durable power of attorney, beneficiary designations, designation of health care surrogate and living will. A well-executed estate plan, implemented with the assistance of an estate planning attorney, will have appropriate persons named to make decisions for you in the event of your incapacity, avoid problems for you and your loved ones during your life and after your death, reduce or eliminate taxes, shield assets from creditors and claims, and preserve your estate for the benefit of your beneficiaries.
Why do I need a Will or Trust?
Your will or trust allows you to direct what happens with your property (including your business) following your death. For people who do not have a will or trust, the laws of the state where they live, referred to as intestacy laws or the laws of descent and distribution, will determine who will inherit your property. This may result in property passing to relatives contrary to your wishes, especially if you have a blended family.
Importantly, your will names a personal representative to administer your estate after your death, and your trust names a trustee to administer your trust for your benefit while you are living as well as for your beneficiaries after your death. Your will also names guardians for your minor children in case you pass away unexpectedly.
What is Probate?
Probate is the court supervised administration and distribution of your property following your death pursuant to your will or the intestacy laws. Probate is a formal process requiring a series of filings with the Probate Court in order to determine the validity of your will, if any, appoint a personal representative, address any claims, account and distribute property to the beneficiaries of a person’s estate. First, a petition is filed to initiate the probate administration. Letters of Administration are then issued to the personal representative to evidence the personal representative’s authority to act on behalf of the estate. The personal representative, with the assistance of an attorney, is responsible for filing an inventory of the probate property, publishing notice to creditors, and accounting for receipts and disbursements made from the probate estate. When all duties of administration are complete, the court will enter an order discharging the personal representative and closing the estate..
Should I avoid Probate?
Many people prefer to create an estate plan designed to avoid probate because probate is a formal and often more costly process, generally taking a minimum of six months to complete. It is often more expensive than post-death administration of property outside of probate, due to the personal representative’s and attorney’s fees involved. Additionally, a probate administration is a matter of public record because it’s a court proceeding and not confidential. You may wish to avoid probate for these reasons.
What is a trust? Do I need one?
A trust is an agreement between a Grantor (also referred to as the Settlor or Trustor) and one or more Trustees to hold property for the benefit of the beneficiary or beneficiaries. The Grantor, Trustee, and initial beneficiary are usually the same with a revocable trust (also referred to as a living trust or revocable living trust), which is the typical trust used in an estate plan.
A revocable trust is entirely amendable or revocable by the Grantor during his or her lifetime; thus, the Grantor retains full control of his or her assets. The revocable trust accomplishes several important objectives. First, assets titled in the name of a revocable trust avoid probate. A revocable trust may also include tax planning, protect assets from beneficiaries’ creditors (including spouses of beneficiaries in the event of a death or divorce), provide for the professional management of assets for beneficiaries, provide for special needs of beneficiaries without disqualifying them from receiving government benefits, provide for the management of the Grantor’s assets during any period of being incapacitated, avoid the need for a guardianship of the Grantor or a beneficiary, and carry out business succession plans.
If your estate planning goals involve any of the benefits mentioned above, a revocable trust might be right for you.
If I have a trust, do I still need a will?
Yes. Everyone should have a will whether they have a revocable trust as part of their estate plan or not. If you have a revocable trust as part of your plan, you should have a “pour over” will, in case you forget to title assets to your trust. True to its name, your pour over will simply “pours over” any assets in your probate estate to your trust at your death. Also, if you have minor children, your will names guardians to look after them in the event of your death.
What other estate planning documents should I have?
In addition to a will and, if appropriate, a revocable trust, everyone should have a durable power of attorney and advance medical directives. The power of attorney names an agent (also known as an attorney-in-fact) to deal with your finances in the event you are unable to do so. In Florida, advanced medical directives include a designation of health care surrogate and a living will. Your designation of healthcare surrogate names one or more representatives to make health care decisions for you in the event you are unable to act. Your living will contains your instructions for end of life care when you are beyond recovery and unable to make decisions for yourself.
I already have estate planning documents but recently moved to Florida. Do my estate planning documents need to be updated?
You should meet with a Florida attorney to review your current documents. Generally, some changes are recommended to make it clear that you are now domiciled in Florida and to change the governing law from your former state to Florida. It is also a good idea to execute Florida durable powers of attorney and advance medical directives because to assure that these documents will be recognized here in Florida in the event of your incapacity. There are also some Florida laws that may require changes to your estate plan, e.g. to comply with Florida restrictions on the devise of homestead property and the qualifications of nominated personal representatives.
When should I review my estate plan?
A good rule of thumb is to review your plan every five years or if there is a significant change in your life. This does not mean you will have to redo your entire plan every few years; however, changes in the law and changes in life situations often make updates necessary or worthwhile. For example, births, deaths, marriages, divorces, disabilities, changes in net worth, purchases or sales of businesses, and changes in tax or other relevant law are events that may require revisions to your estate plan.
Is the Federal Estate Tax? Are there any other taxes due at my death?
The federal estate tax is a 40% tax on the transfer of wealth at death. Although everyone is technically subject to estate tax, every individual has an exemption from tax on transfers of up to $5,490,000 during life or at death. Accordingly, only individuals with a net worth of $5,490,000 or more (including the value of lifetime gifts) may have a federal estate tax liability. Because the exemption is now portable between spouses, only married couples with a combined net worth of more than $10,980,000 will typically have a liability to pay estate tax. It is important to remember, however, that the exemption amount is subject to change at any time by an act of Congress, and was only $600,000 not too long ago.
There is also a 40% federal gift tax which applies to lifetime transfers. The federal gift tax ensures that the estate tax cannot be avoided by simply giving away property before death. The estate tax exemption discussed above is a combined estate and gift tax exemption, such that individuals may transfer up to $5,490,000 during life or at death and married couples may transfer up to $10,980,000 during their lives or at death without paying federal estate or gift tax.
A third 40% federal transfer tax, the generation skipping transfer tax (commonly abbreviated as the GST tax), ensures that wealthy families do not escape generations of federal estate and gift tax by leaving assets to trusts that benefit multiple generations. The GST tax applies to transfers to or in trust for grandchildren and more remote generations in excess of the GST tax exemption which is also currently $5,490,000.
In addition to the federal transfer taxes discussed above, many states also impose estate, gift, GST and inheritance taxes. Florida is not one of those states and has no state transfer taxes or income taxes on individuals; however, if you recently moved to Florida, it is important to meet with a Florida attorney to consider what may be done to avoid state taxes from your former state (if possible).
Why should I hire an estate planning attorney when I can do my estate plan online?
With the proliferation of inexpensive online do-it-yourself legal services, many people are tempted to save money and do their own estate plan without using an attorney. However, while low cost online service providers may provide legally valid estate planning documents, the documents are often generic and do not consider any specific circumstances, including family issues and tax planning. They also are often not properly executed. Accordingly, the documents that are printed and executed without advice may lead to family disputes, lost opportunities, and problems, and often end up costing families significant amounts of legal fees to address such problems. Hiring a competent Florida estate planning attorney should ensure that your estate plan carries out your wishes and protects you and your family and that appropriate estate planning techniques that are tailored to meet your specific needs are recommended.