Freedman & Grinshpun, PCPhiladelphia Lawyers | Cherry Hill | Legal Issues2024-02-19T19:19:05Zhttps://www.fglawpc.com/feed/atom/WordPressOn Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467212024-02-19T19:19:05Z2024-02-19T19:19:05ZSuccession planning can help ensure that a business can continue operating even after a change in leadership.
Some people who step into executive roles must complete a succession plan to comply with the terms of their employment contract. Those who own or help run a business might also decide to create a succession plan on their own.
In either scenario, the inclusion of the right details directly influences how useful and effective a succession plan will prove to be for a business. What does an owner or executive typically need to include in their succession plan?
Potential candidates from within the company
Succession planning often involves reviewing the performance and competence of current employees. Someone who regularly works with members of middle management or the sales team, for example, might know when one of those workers could potentially take over their job. Creating a list of viable succession candidates can be a useful part of a succession plan, especially if the executive or owner has begun planning for an imminent departure from their role.
Key training and credential needs
A succession plan can name a specific candidate to take over one's job. However, the strongest succession plans help identify the right party for a job based on their qualifications. A succession plan can include details about training, education and professional history that might set someone up to thrive in that position. Recognizing the professional background and training someone needs to do the job successfully is an important part of succession planning.
Otherwise undisclosed job functions and secrets
Anyone who runs a business probably performs far more job functions than their job description actually outlines. Tasks and responsibilities not included in the training or job description may require inclusion in a succession plan. Certain trade secrets may require disclosure for a replacement to adequately perform their job after someone retires or moves on to a new endeavor.
Someone who creates a succession plan may need to occasionally revisit and update their plan as the employee roster for their company changes and their job functions evolve. Taking the time to draft a thorough succession plan can help ensure that a company weathers any future leadership transition while avoiding significant challenges.]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467192024-01-18T17:28:09Z2024-01-18T17:28:09ZThe IRS may accept an offer in compromise
Although the IRS does generally expect to receive full payment for someone's financial obligations, the organization can also work with those who make a good faith attempt to resolve their tax debts. In some cases, people can potentially settle their tax debt and pay less than the full amount they owe.
The IRS allows taxpayers to propose an offer in compromise when they have fallen behind on their income tax obligations. An offer in compromise might involve a single lump-sum payment or regular payments spread out over months or even years. The taxpayer with past-due tax responsibilities typically needs to propose a specific repayment plan to the IRS when proposing an offer in compromise.
They need to balance the desire to reduce what they pay and keep their finances balanced with the need to pay as much as they can as quickly as possible. If the IRS accepts an offer in compromise, the taxpayer can potentially settle what they owe for less than the full balance of their unpaid tax bill. Someone who successfully makes an offer in compromise could avoid prosecution or additional financial penalties as interest continues accruing on what they owe the federal government.
Learning about different solutions for income tax debt may benefit those who are facing an audit or who have recently been notified about an underpayment of their income tax obligations.]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467172023-12-20T01:31:15Z2023-12-20T01:31:15ZA partnership buyout can potentially damage the business and the lasting relationship between the two partners. How can people approach the buyout process if they want to minimize conflict?
Comply with existing contracts
One of the most important factors in a partnership buyout is the terms previously set by the partners in their partnership agreement. Someone hoping to exit the company or purchase it from a partner may need to review their partnership agreement. That document can include certain rules for the buyout process that the partners will need to follow. Failing to review and comply with the agreement and other relevant contracts could lead to conflict and even litigation.
Set a value for the company
A buyout requires compensating someone for giving up their interest in the organization. That compensation may represent a specific portion of the organization's value based on initial investments and also the likely future income a partner will sacrifice by accepting the buyout. Many different valuation approaches can work in different scenarios. The partner proposing the buyout will need to choose the right valuation method based on the business type and other factors. That valuation will likely play a key role in negotiations with the partner.
Discuss the issue calmly
A buyout conversation could very easily turn confrontational, with one business partner accusing the other of misconduct or poor job performance. That approach may be cathartic but will likely lead to more conflict between the partners.
If someone wants to avoid litigation, they need to approach the matter calmly and give their business partner time to consider the idea before forcing them to make a decision. Someone who comes to the table with a specific offer may have an easier time convincing their partner that the buyout is a good option than someone who rushes into the conversation before they have addressed practical concerns. As a final note, it is often necessary to execute special contracts at the time of a buyout to protect the business from unfair competition or future lawsuits.
Employing the right tactics while preparing for a business buyout, and seeking legal guidance accordingly, could take much of the stress and conflict out of the process.]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467152023-11-15T15:23:05Z2023-11-15T15:23:05ZIf they have diminished the estate
Failures by a personal representative could include leaving assets in an unsecured location where they end up stolen or failing to properly manage them so that they lose value. Sometimes, they fail to initiate probate proceedings or put their personal wishes ahead of the instructions provided by the testator. When the beneficiaries of an estate can show that the actions or omissions of a personal representative have directly diminished the value of the estate, they may be able to ask the courts to remove the representative from their role.
If they have become incapacitated
People often select someone they know and trust as their personal representative. Particularly if the decedent lived a long life, their personal representative could be at a very advanced age while handling estate administration. In scenarios where someone has begun to experience cognitive decline, it is often possible to remove them from their role as a personal representative of an estate.
If they face certain criminal charges
In theory, an individual's personal legal struggles will not automatically prevent them from serving as the representative of an estate. However, Pennsylvania law allows families to seek the removal of an individual accused of homicide or voluntary manslaughter. The only exception would be cases involving vehicular homicide.
Anytime that a personal representative makes major mistakes or fails to perform their duties, they can negatively impact a decedent's legacy and the inheritance of their chosen beneficiaries. Going to court to remove an ineffective personal representative is a difficult but sometimes necessary endeavor as a result.]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467132023-10-16T12:50:28Z2023-10-16T12:50:28ZYou have numerous options
Many people assume that they have to sell a family business during a divorce so that they can split up the money. But you actually have a few different options that you can consider if divorce ever becomes your chosen way to move forward with your life, and selling is just one of them.
For example, you could buy your partner's share of the business, either by making an outright purchase or trading your share of other – similarly valued – marital assets. Alternatively, you and your spouse could continue to work together as business owners, even though you are divorced. In your professional lives, nothing has to change. You just have to decide if the two of you can work together amicably once your personal relationship has changed.
Can you plan for this in advance?
One thing to consider as you start your business is using a prenuptial agreement. You may also want to use a partnership agreement so that the two of you can have an official professional relationship with a contract that you’ve both signed.
If you do this now, while the two of you are still on good terms, it can help you to better safeguard your interests – and theirs – in the event of divorce down the road. A partnership agreement can define what percentages of the business you own, what roles and responsibilities you have and things of this nature. A prenuptial agreement can help to determine how your financial assets should be divided, including the assets that you have in your business.
In other words, there are legal tools that you can use in advance to solve this problem before it even occurs. If you’re thinking of starting a business, it may be wise to consider all of these steps carefully so that you can get the proper paperwork in place. This can help to reduce conflicts, and it may protect your business from things that are outside of your control – such as your spouse asking for a divorce in the future.
]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467072023-09-12T11:12:17Z2023-09-12T11:12:17ZMismanagement of resources can lead to consequences
Occasionally, if the beneficiaries of an estate believe that the personal representative of the estate either embezzled or managed assets so incompetently that it generated a sizable loss, they can take legal action against the representative and hold them financially accountable for those failings. The courts could order someone to replace any resources misappropriated from the estate.
Financial obligations can pass to the representative
The more likely source of financial responsibility will be the economic obligations of the estate itself. The debts that the decedent owed before their passing will become the responsibility of the state. There will likely also be taxes that the estate needs to cover.
If the estate does not have sufficient resources to fulfill those obligations, the personal representative does not automatically become responsible for the balance owed. However, if there were enough resources and someone simply didn't use them properly, then they could have personal financial responsibility for the value of those assets.
Creditors and tax authorities could take legal action against the personal representative of an estate if they did not properly utilize the assets in an estate to pay financial responsibilities in the right order of priority. While they may not be responsible for the full balance of those debts, they could be responsible for the value of any assets that they distributed to beneficiaries instead of using them to repay creditors.
Learning more about what Pennsylvania requires from executors and administrators can help people avoid potentially expensive mistakes. Seeking legal guidance, which is an effort usually paid for by an estate, can help those serving in these roles to receive necessary support as well.
]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467052023-08-15T01:30:09Z2023-08-15T01:30:09ZGather financial records
Proper financial documentation is the cornerstone of proactive audit response. Company records can help establish how many sales the company completed and what supplies it purchased. Records can also help affirm claims that certain expenses were deductible as business costs. Thorough and accurate financial records going back years will typically be a necessary element of any business audit.
Seek professional support
There are specialized accountants and also lawyers who can assist during the audit process. Professional review of the financial records and tax returns can help a company's leadership better manage the audit and respond to questions about specific claims. Business owners and other taxpayers facing an audit or similar tax issues technically have the right to bring a lawyer to represent them during any interaction with the IRS. Having professional support may help people avoid situations in which they misrepresent themselves or let their emotions dictate their response.
(Maybe) set time aside to meet
Some audits will require communication via mail and the submission of records directly to the IRS. Other audits may involve a professional coming to the business or the business owner going to an IRS location. Regardless of which approach is necessary, business owners should be aware of the possible risks and proactive about protecting themselves and their business's finances throughout the process. An audit does not necessarily result in financial penalties or prosecution, although people should be aware of the risks.
Ultimately, responding appropriately to notice of an upcoming audit can reduce the likelihood of a poor outcome.
]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=467012023-07-24T15:30:54Z2023-07-24T15:30:54ZWhat is mediation?
Mediation is a form of alternative dispute resolution (ADR) outside the courtroom. This form of dispute resolution offers many benefits, including:
A non-adversarial approach to the dispute
Privacy for the parties and their issues
The ability to choose a mediator that both parties are content with
Less expense in solving the conflict
Often, the opportunity to solve problems much faster
A non-binding conversation/negotiation that can lead to a binding agreement
Flexible options for solving conflict
In addition to the benefits above, a mediator provides a structured environment and acts as a neutral third party, which allows the parties to trust that they can speak honestly and in good faith.
The role of mediators is to help parties identify the underlying issues and assist them in finding solutions. If the parties can reach an agreement, that agreement can become binding if the parties want it to. However, that is not mandatory. The parties have significant control over the mediation process, hopefully leading to cooperation and collaboration.
]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=466992023-06-25T01:17:42Z2023-06-25T01:17:42ZStart working on a succession plan
Successful succession planning is vital for any family business’s long-term sustainability and growth. It involves identifying and developing the next generation’s skills, knowledge and capabilities to determine if they’ll lead a company effectively.
By implementing a comprehensive succession plan, you can better ensure a smooth transition of power and provide your children with the necessary tools to thrive in their new roles. The first and most important step in preparing your children to take over the family business is to assess their skills and interests.
While being a part of a family business may seem like a natural progression, it’s crucial to evaluate whether your children possess the aptitude and passion required for the industry. Conduct an honest assessment of their strengths, weaknesses and areas for development. This evaluation will help you identify skill gaps and provide targeted training and mentoring.
Provide well-rounded education and experiences
Education is fundamental in equipping your children with the necessary knowledge and skills to lead a business successfully. Encourage them to pursue relevant academic qualifications, such as business administration, management or entrepreneurship.
Additionally, expose them to diverse experiences within and outside the family business. This exposure can include internships, industry conferences and networking events. It will help to broaden their perspective, enhance their problem-solving abilities, and help them gain valuable insights into different aspects of the business world.
Emphasize ethical leadership and values
As your children prepare to take over the family business, instilling a strong sense of ethical leadership and upholding core values is going to be essential. Emphasize the importance of integrity, transparency and social responsibility in all business dealings.
By fostering a values-driven culture, you can help to ensure that your children lead with integrity, gain the trust of employees, customers and stakeholders and sustain the business’s reputation. Preparing your children to take over the family business is complex and multifaceted. But by following these steps, you can lay a solid foundation for their success.]]>On Behalf of Freedman & Grinshpun, PChttps://www.fglawpc.com/?p=466972023-05-30T13:51:07Z2023-05-30T13:51:07Zchange the legal type of a business when a different entity type would be more beneficial given current operations.
What are some of the reasons that people choose to adjust the legal type of the business they run?
They want to grow with minimal risk
What starts out as a simple sole proprietorship or partnership could grow into a very successful business. When thinking about expanding, owners and entrepreneurs often need to revisit the type of business they created to protect themselves from the financial and legal liability that comes from running a bigger company.
They want to bring in help or eliminate a partner
Perhaps someone started their business as a partnership with an investor or a family member, and they are now ready to assume full control over the organization so that their partner can retire or move on to a different project. Maybe someone started a business on their own and they now recognize that they would benefit from a partner or a board of directors helping guide company operations. Changing the business form can be a way to eliminate co-owners or to add other parties to the organization.
They want to change the function of the company
Perhaps what started out as a for-profit business model has proven to not work very well in the community. However, it has exposed a need for education or services in an adjacent niche. Someone may want to convert a for-profit business to a non-profit entity to change how their company operates. Others may want to shift a company created to provide services to instead produce products. When the function of a business will change, often the legal type of the business needs to shift as well.
The process of changing a business's legal type can be as challenging as forming a business when first starting an organization. Having appropriate support and a long-term perspective will make it easier for someone to start or rework a business.]]>