A Wall Street Journal article last weekend noted that the wealth of many baby boomers is tied up in businesses they own, and this could become a problem when it’s time for retirement unless they do some advance planning to smooth the transition.  The article listed six of the most common mistakes that business owners make when selling the business and how to avoid them:

Mistake #1: Creating a business that is too dependent on the owner.  A business that is largely dependent upon its owner for its success is likely to make potential buyers nervous.  Delegate responsibility well before selling the business to ensure a smooth transition.

Mistake #2: Ignoring the tax benefits of planning ahead.  If you anticipate transferring ownership within five years, do it sooner at a lower valuation to avoid larger gift taxes.

Mistake #3: Incorrectly valuing the business.  Get a realistic appraisal of the business well before retirement ; if selling the business won’t result in the returns you need for retirement, then adjust your plans or come up with a strategy to increase your income.

Mistake #4: Rushing to accept a rich offer.  Don’t become fixated on the best offer since large numbers are sometimes used as a distraction.  Consider all aspects of the transaction, including how employees will be treated and how the buyer will finance the purchase.

Mistake #5: Hiring a relative to do the deal.  Interview five or six law firms early in the process and ask questions about how the deal would be structured, how the attorneys can help with negotiations, the length of time to close and structuring compensation packages for family members who want to stay involved in the business.

Mistake #6: Underestimating the emotional impact of selling a business.  Plan your post-exit lifestyle before you sell; if you want to stay involved, consider consulting work or a scaled-down schedule that will allow you sufficient time to transition into retirement.

Contact our Orange County business planning law firm for the experience and legal acumen you need to protect your California business.

Deciding on the proper structure for a new business in California – sole proprietor, partnership, limited liability company (LLC) or corporation – will depend on the type of products or services your business will provide, the ownership structure and the financial situation.

While this infographic provides some good basic information on the decision-making process for determining the proper business structure, it also advises upfront that new business owners should consult with a California business planning attorney before choosing one:

Contact our Orange County business planning law firm for the experience and legal acumen you need to protect your California business.

If you have put a lot of sweat equity into building a business, it’s natural that you would want your business to endure beyond your years at the helm.  However, the Family Business Institute reports that just 30 percent of family-owned businesses survive past the second generation, and only 12 percent make it to a third generation.

A recent New York Times article examined several owners of family-run businesses to identify four primary traits that ensure longevity:

Willing to reinvent.  For family businesses that endure, the ability to reinvent themselves is one of the primary keys to successfully operating through the generations.  Whether it is expanding product lines or to new markets, the family businesses that continually find a way to reinvent themselves continue to prosper.

No employment promises.  Companies that base employment on skill rather than familial relationships also survive more readily than those that guarantee employment for family members.  Setting rigorous standards for family involvement is key.

Succession planning.  Strategic succession planning is another hallmark of long-lived family owned businesses.  Some family business CEOs choose their successor and some put it to a family vote; however they do it, successful family-owned companies make sure that best practices in succession planning are followed.

Outside counsel.  Family businesses that thrive for the long haul have either a board or a “kitchen cabinet” of outside advisers to help them with the big decisions.

Our California business planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us for asset protection and business planning strategies to meet your unique needs.

New Book Helps You Plan for and Protect Your Assets

Orange County, California (March 29, 2012) – There are few things in life more certain than death and taxes and perhaps, in today’s society, Law suits.  However, the fact is few people actually plan for them. 

In the New Book The Ladder of Success: An Asset Protection Planning Primer, Attorney Jeffrey R. Matsen (“Top 100 Attorneys in U.S.” Worth Magazine) has provided a straightforward and elementary description of what Asset Protection really is and demonstrates how it can be effectively implemented by taking various steps, like rungs on a ladder, to truly climb the ladder of success.

“The one constant over the many years of my practice and among the hundreds of different clients I have served is the imbalance of, on the one hand, their profound concern regarding Asset Protection, and on the other, their lack of understanding as to how to implement it,” says Attorney Matsen. “I have dedicated my career to assisting these clients in planning the fortification of their resources to ensure their financial security in the face of taxes, liability and creditor attacks.” 

The Ladder of Success: An Asset Protection Planning Primer explains:

• Why Plan?  The Need for Asset Protection
• The Limitations
• The Operating Business Entity
• Basic Estate Planning
• Bankruptcy Considerations, Exemptions and Marital Planning
• Liability Protective Entities for Investment Assets
• Domestic Asset Protection Trusts and Modular Planning Utilizing LLCs
• The Offshore Asset Protection Trust and the Modular Planning that Accompanies It
• Advanced Estate Planning Techniques
• Special Issues and Strategies for Physicians and Dentists
• Climbing the Ladder and Putting It All Together

Chock full of authoritative information about estate planning and asset protection, The Ladder of Success: An Asset Protection Planning Primer is one book every conscientious person should own.  “Nobody understands the nuances and practicalities of this area better than Jeff Matsen.  His unique ability of making issues clear for clients and their advisors is a gift.  This book is required reading for any layperson or professional who wants to learn more about asset protection and more importantly, take action,” says Bill Deitch, Leading Estate Planning Attorney, Chicago.

“Jeff Matsen is an expert to the experts in the asset protection field.  Those seeking asset protection often share common characteristics—such as wealth, business ownership, real estate ownership, considerable income and estate tax exposures, as well professional practice ownership—and I recommend they read Jeff’s book to protect their families,” states Joseph J. Strazzeri, Fellow, Southern California Institute; Co-founder, Laureate Center for Wealth Advisors. 

Tim Voorhees, JD, MBA President, Family Office Services;  Principal, Matsen Voorhees, Orange County, CA. explains “Because of Jeff’s broad, multi-disciplinary experience, he knows how to integrate protection from lawsuits with protection from taxes. Jeff’s ability to combine creditor protection with tax planning helps clients accumulate more wealth and maximize upside potential.” 

“Jeff Matsen is one of the best estate planning and asset protection attorneys in the country.  His knowledge, wisdom and direct experience have truly made him one of the elite group of top experts in his field. If you are concerned about protecting your assets and want to leave a legacy for future generations, I highly recommend you read this book,” says Stephen Fairley, CEO of The Rainmaker Institute, LLC, The Nation’s Largest Law Firm Marketing Company. 

 Marc Selden, Nationally Recognized Estate Planning Attorney, New York City, states “Jeff is widely recognized in the legal community as an asset protection guru.  In this book, Jeff does a wonderful job of explaining the principles and strategies of complex asset protection planning in a very clear and easy-to-understand way.”

The Ladder of Success: An Asset Protection Planning Primer,  $19.95, Paperback 179 pages, ISBN 978-0-9852041-1-2, is published by Wealth Strategies Counsel, and is available by calling 714-384-6527 or by visiting www.matsenvoorhees.com/book .

ABOUT  JEFFREY R. MATSEN

JEFFREY R. MATSEN, JD, received his law degree with honors from the UCLA School of Law and served as a Military Judge with the rank of Captain in the US Marine Corps.  Matsen has been a Professor of Law in Business, Estate Planning and Advanced Taxation. He is a highly sought-after and respected speaker and educator and has published numerous legal articles.  Matsen is the founder of “Wealth Strategies Counsel,” the Estate Planning and Business Transactions Department of Matsen Voorhees and Bohm, Matsen, Kegel & Aguilera, LLP, in Orange County, California.  His practice areas include: Business and Estate Planning, Asset Protection, Probate and Trust administration and litigation, Real Estate and Offshore structures.  Matsen has been designated one of the Nation’s “Top 100 Attorneys” by Worth Magazine, A “Super Lawyer” by Los Angeles Magazine and he is listed in The Best Lawyers in America.  The Nationally Renowned Attorney Rating Service, AVVO, has rated Matsen a perfect “10/10 Superb.” Besides continuing to achieve the highest “AV rating,” he has been designated a “Preeminent Lawyer” by the prestigious attorney rating directory, Martindale Hubble.

As both an Orange County estate planning attorney and a California business planning attorney, I see the results every day of failure to plan.  Most people have the best of intentions to plan for the future, but it is human nature to put off thinking about our deaths.  However, failing to plan for a successful business succession could result in the death of your business, affecting customers, employees and your own family.

Here are three common lethal errors in business succession planning:

Building the wrong bench – many business owners structure a management team based on what their business is today, rather than what customers will need tomorrow.  This can be the wrong move in a rapidly changing business environment, when the next generation of management needs to be able to fulfill the needs of future customers.

Making it a competition – one of the quickest ways to create a destructive work environment is to play “jump ball” with managers on who will ascend to company leadership.  Business owners who want to leave behind a healthy company should focus on building a strong team that can support the eventual successor.

Planning based on fear – most of us like to think we are irreplaceable, and worry what will happen when we are gone.  Your focus in business succession planning should be on customers, employees and your family so you can create a succession strategy that will serve them best.

For more information on California business succession planning, contact our Orange County business planning law firm.

Financial advisors are reporting that an increasing number of baby boomers are using retirement savings to start new businesses.  In fact, experts say that of the 600,000 new businesses started each year, nearly 10 percent are funded by 401(k)s and IRAs in what is known as a rollover business startup.

Many boomers are using retirement savings because of the lack of available private capital for funding startups, particularly for those who may have no track record of running a business.  Rolling retirement savings over into a new business can be tricky, however, and requires that the new company have a retirement plan that complies with federal rules for such a transaction.

An Orange County business planning attorney can help you ensure your new business meets these rules, as well as provide valuable assistance in helping you make other decisions about your new California business:

Business plan. Your top priority should be to develop a comprehensive business plan that will spell out what products or services you will be offering, market analysis, pricing, financing, location and financial projections.

Business structure. You have several choices in deciding on the right business structure for your start-up, including sole proprietor, partnership, limited liability company (LLC) or corporation.  This is when a consultation with a California business planning attorney is necessary, especially if you have personal assets you wish to shield from any potential business liabilities.

Business name.  A California business planning attorney can also be helpful once you have chosen a name for your business.  You should register your name as a DBA in the county where your business is based.  You will likely want to trademark your name as well.

Business permits and tax documents. You may need to acquire a city business license (different cities have different rates and some are more favorable than others), a federal and state employer identification number, and a number of other documents.  If you plan to lease a location, you should have your attorney review your commercial lease agreement.

Business insurance. Depending on what kind of business you plan to operate, you may need to secure liability insurance for your business.

For more information on starting a new business in California, contact our Orange County business planning law firm.

One of the main reasons that business owners form limited liability companies (LLCs) is to protect their personal assets from any business claims.   That protection is referred to as a liability shield.

However, if the proper steps are not taken to protect the liability shield of an LLC, a court may “pierce the veil” of the LLC and hold members personally liable for any claims.  Here are steps that LLC managers and members can take to protect their LLC liability shield:

Do Not Use the LLC for Serious Misconduct. The courts may pierce a LLC’s veil if members or managers use it to commit fraud or other serious misconduct.

Refer to the LLC in All Communications.  Members should expressly refer to the LLC in all dealings with third parties so it is understood they are dealing with the LLC, not with the LLC’s members in their individual capacities.

Keep Finances Separate.  To keep the LLC legally separate, all financial accounts for the LLC should be separate and apart from those of the individual members.

Keep the LLC Adequately Capitalized.  Some courts may pierce the veil if the LLC lacks adequate capitalization.

Follow the Rules.  Although LLCs do not have the same formal requirements as corporations, there are some rules that must be followed to protect LLC status.

Our California asset protection and estate planning law firm has been a trusted source for estate planning, asset protection and business transactions for more than 35 years.  Contact us today for asset protection and estate planning strategies to meet your unique needs.

With businesses shedding jobs faster than ever, many former employees are often left wondering if they have grounds for a wrongful termination suit.  California businesses should be informed about wrongful termination to ensure they are protected against a lawsuit.

Under California law, there are several ways that an employee can be wrongfully terminated:

Discrimination – employees cannot be terminated or otherwise discriminated against because of age, race, sex, religion or disability.

Insufficient Cause – this can be a gray area, but if an employee is terminated because they lost their temper at work and it is an isolated incident (i.e., not something they did every week), they could have grounds for a wrongful termination suit.

Whistleblowing – it is against the law for an employer to fire or retaliate in any fashion against an employee who has provided information to legal authorities about illegal behavior in the workplace.

Constructive Dismissal – this applies if employees feel they have been pressured to resign, their work environment was made so unpleasant that they could no longer do their job, if their wages have been reduced or they have suffered a demotion without cause.

Contact our Newport Beach business planning law firm for more information on California labor laws and regulations.

Last month, the America Invents Act was signed into law, which is the most comprehensive reform of the U.S. patent system in the past six decades.

The AIA enjoyed widespread partisan support, and is intended to unclog both the patent and the court system by putting measures in place to make it quicker to both obtain and validate a patent.

Many times, patent litigation is used as a weapon in corporate commerce – the AIA creates a system for challenging the validity of a patent that is anticipated to be much quicker and cheaper than going to court.

In addition, the U.S. patent system will undergo changes to bring it into line with other systems around the world, so American business can more easily protect its patents worldwide.  Under the AIA, the first inventor to file a patent application is the one who may receive the patent.

The AIA also makes it more difficult to legally challenge the sale of products with expired patent numbers.  The Act now limits standing to those who can prove actual harm for an out-of-date patent.

A benefit for inventors is that the Act now allows patent owners to protect their patents by providing additional documentation when patents are challenged on the basis of alleged inequitable conduct.

The various provisions of the AIA have differing effective dates; the U.S. Patent Office has a helpful chart you can access here to discover when each provision of the Act becomes effective.

Our Orange County business planning law firm takes protecting your business very seriously.  We can help you structure your company and operations policies to ensure your business intellectual property is fully protected.  Contact us for more information.

The IRS has announced a new Voluntary Worker Classification Settlement Program that will reward employers who voluntarily reclassify workers by imposing a minimal past payroll tax obligation.

As part of the IRS’ “Fresh Start” initiative, the Voluntary Classification Settlement Program (VCSP) allows employers to get into compliance by making a minimal payment covering past payroll tax obligations – generally 10 percent of that which could be assessed if the employer waited for an IRS audit, according to a Forbes.com post.

The IRS said that the VCSP is available to any business, government entity or tax-exempt organization “that currently erroneously treat their workers or a class or group of workers as nonemployees or independent contractors, and now want to correctly treat these workers as employees.”

Employers must apply for the program and the eligibility requirements include:

• Consistent treatment of workers in the past as non-employees,
• Have filed all required Forms 1099 for the workers for the previous three years
• Not currently under audit by the IRS
• Not currently under audit by the Department of Labor or a state agency concerning the classification of these workers

If eligible, employers must file Form 8952, Application for Voluntary Classification Settlement Program, at least 60 days before they want to begin treating the workers as employees.

In addition to a reduced past payroll tax payment, the IRS said that no interest or penalties will be assessed, and that employers will not be audited on payroll taxes related to the affected workers for prior years.

If you are a California business owner, our Orange County asset protection law firm can help you protect yourself and your business from legal judgments and claims.