President Trump signed a new law in December that has taken effect this month called the SECURE Act (Setting Every Community Up for Retirement Enhancement Act). It includes a wide array of changes to retirement accounts that both individuals and business owners should know.
For individuals, here are a few highlights:
(i) being unable to perform (without substantial assistance from another individual) at least 2 activities of
daily living for a period of at least 90 days due to a loss of functional capacity,
(ii) having a level of disability similar (as determined under regulations prescribed by the Secretary in
consultation with the Secretary of Health and Human Services) to the level of disability described in
clause (i), or,
(iii) requiring substantial supervision to protect such individual from threats to health and safety due
to severe cognitive impairment.
Business owners should be aware of the following:
A financial adviser would be the best person to contact if you have any questions about how the SECURE Act affects your retirement, and a CPA would be a good person to contact regarding business credits. However, if you want to discuss how eliminating the IRA lifetime stretch might affect your estate plan, give Jesson & Rains a call.
By Attorney Kelly Rains Jesson
In addition to celebrating Christmas, Hanukkah, and Kwanzaa this month, December is National Write a Business Plan Month! The holidays are a time for reflection and a time to look forward to the future, and if you’re thinking of starting a business in 2020, you should consider spending some time during your holiday break writing a business plan. While a business plan is not a legal requirement for starting a business in North Carolina, there are some benefits:
Writing a business plan helps you figure out your ideal business structure. As we wrote here before, you have several choices of entity in North Carolina, and they each have their pros and cons.
Writing a business plan helps you attract investors, partners, and key employees because it helps them envision the future and it shows you are responsible, serious about the success of the business, and strategic. Some lenders will require a business plan before issuing a business loan.
Writing a business plan helps you create a budget by planning for expenses and estimating revenue.
Finally, you can include goals and milestones in your business plan and then celebrate when you reach them in 2021!
Everyone here at Jesson & Rains wishes you a Merry Christmas and a happy holiday!
October is National Women’s Small Business Month. Jesson & Rains is proud to represent and work for numerous women-owned businesses. Charlotte is an exciting place for women entrepreneurs. Last year, it was named the “#1 City in America For Female-Owned Business Growth.”
According to Andrew Soergel, Senior Writer for U.S. News and World Report, “[t]he annual State of Women-Owned Businesses Report – which pools data from the Census Bureau and the Bureau of Economic Analysis in determining the financial impact of such ventures – estimates America's total number of businesses headed by women ballooned 21% between 2014 and 2019 . . . . Overall business growth clocked in at just 9% during the same period. Revenues generated by women-led companies, meanwhile, climbed 21% to nearly $2 trillion, while the jobs they created rose by 8% to 9.4 million. Both growth totals eclipse the national average for companies headed by executives of either gender.”
Our very own Jesson & Rains partner, Kelly Rains Jesson, is a board member of the National Association of Women Business Owners (NAWBO). Founded in 1975, NAWBO is “the unified voice of over 10 million women-owned businesses in the United States representing the fastest growing segment of the economy.” NAWBO propels women entrepreneurs into economic, social and political spheres of power worldwide.
By Attorney Kelly Rains Jesson and Associate Attorney Danielle Nodar
Forming a corporation in the state of North Carolina is pretty easy to do yourself, but that may get business owners into trouble. Numerous corporations exist without any bylaws and without issuing any shares (especially those who do-it-themselves). Failing to complete all the steps can have negative consequences.
A corporation is owned by its shareholders. Shortly after a business is incorporated, it should issue shares to the owner(s). If there are no shares issued, there are no shareholders, and thus no owners. Why do so many business owners fail to complete this step? Probably for two reasons: (1) they don’t know this is the way it works and (2) in order to incorporate, all the Secretary of State’s office requires is that Articles of Incorporation be filed with its office. It does not require proof of bylaws or shares.
Shareholders do not manage the business just because they are shareholders. The Board of Directors manages the business. For small, family businesses, the shareholders and the directors are often the same people. However, these are still two distinct roles. Most business owners that have not issued themselves shares are simply acting like directors of the corporation.
To incorporate, the incorporator (could be a future director, shareholder, or third party, like an attorney) files Articles of Incorporation. North Carolina law states that if no directors are named in the Articles of Incorporation, the incorporator shall hold a “meeting” (can be informal) to name the initial directors. “The incorporators or board of directors of a corporation shall adopt initial bylaws for the corporation.” N.C.G.S. § 55-2-06 (emphasis added). The law states that there SHALL be bylaws, not that there MAY be bylaws. The bylaws govern the management and affairs of the corporation. The bylaws state how shares will be issued, how directors will be named/replaced, and how the company is managed.
So why should you care?
First, the liability protection corporation owners enjoy is at risk if you do not follow the corporate formalities required by North Carolina law. You risk having a creditor ask a court to “pierce the corporate veil,” making you personally liable for debts and judgments of the corporation. When a court “pierces the corporate veil,” it determines that the corporation and owner are basically the same, with the corporation serving as merely a shell for the owner to act. If this finding occurs, your personal assets can be used to satisfy corporate debts, which defeats one of main purposes of owning a corporation in the first place.
Second, you will probably not be able to obtain an SBA loan if you do not have bylaws. These loans are backed by government guarantees. The government wants to make sure it is not lending to an entity that has not been set up properly. The SBA wants to make sure the bylaws do not contain provisions that make the loan risky.
Finally, another reason why we talk to our clients about shares and bylaws is for estate planning purposes. When a person passes away, they leave their property to beneficiaries. Shares of corporations are personal property. If a business owner has not issued himself or herself shares of the corporation, what is there to pass to their beneficiaries?
Further, as we explained above, corporations are managed by the board of directors and not the shareholders. Therefore, even if a shareholder owner passes their shares to their beneficiaries, that does not mean that the beneficiary now suddenly starts managing the company as a new director. If you are the sole director of your corporation, who will take over management when you pass away or are sick? The bylaws of a corporation will govern what happens when a director passes away or otherwise becomes unable to act.
We can do some pretty creative estate planning with owners of corporations. We can help them restrict management or ownership of shares to family members. We can ensure that their shares stay out of probate through using trusts, saving their families money.
For assistance with drafting bylaws, issuing shares, and implementing an estate plan, give Jesson & Rains a call!
By Attorney Edward Jesson
It happens more often than we would like to see, but sometimes work is complete, a dispute arises, and suddenly it is discovered that the contract that everyone assumed to be in place was not signed. This happens frequently in construction cases (most often seen with contracts between General Contractors and Subcontractors) but the issue can also rear its ugly head in any other contractual setting, especially where independent contractors are involved.
In legal terms, in order for an agreement between two parties to be binding and valid, there needs to be a “meeting of the minds”. Put simply, it needs to be clear that the parties to the contract intended that contract to govern the relationship between them. Most frequently, a signature on a contract signifies each party’s intent to be governed by that contract.
So what happens when, sticking with the construction industry example, a subcontractor performs all work under its subcontract agreement with the general contractor and then a dispute arises and it turns out the contract wasn’t signed?
Generally, when courts are confronted with an unsigned agreement, their default opinion will be that the parties never reached that “meeting of the minds” and therefore they did not intend to be bound by the terms of that contract.
However, this doesn’t mean that no contract between the parties existed and that the party seeking to enforce its rights under the agreement has no recourse. The court will next look to all other evidence which indicates what the agreement was between the parties. For example, if there were multiple drafts of a contract with different terms included, the court may decide that the earlier draft contracts that had parts removed from them at a later date is evidence that those removed contractual terms were not a part of the parties’ agreement.
Courts may also look to whether there was a “contract implied in fact” between the parties. In the general contractor subcontractor example, evidence that the general contractor asked the subcontractor to perform work and the subcontractor did perform that work would certainly be evidence of a “contract implied in fact”. It would be unreasonable for a court to decide that the subcontractor did that work and did not expect to receive any payment for that work. Oral agreements are oftentimes valid. There is no requirement that many types of contracts be in writing. Therefore, if you’re on the other side (someone completed work for you but you didn’t sign the contract), you don’t get a free pass! If you do not pay, you may find yourself on the receiving end of a lawsuit.
In any event, it is important to have a written contract signed by the parties. It sets the expectations of both parties – what they’re supposed to do in exchange for compensation. When it is reduced to writing, there are less evidentiary issues in court. When it is reduced to writing, it is less likely that there will ever be a lawsuit about the terms because a signed contract shows that all parties agreed to the terms.
The attorneys at Jesson & Rains are ready to assist with drafting and review of contracts, and, importantly, assist clients who find themselves in disputes arising from unsigned contracts. Just because you do not have a signed contract, it does not mean you have no rights.
By Associate Attorney Danielle Nodar
If you have ever formed a business through the Secretary of State’s office, you know that you get a lot of junk mail shortly thereafter. Recently, there have been some new schemes targeting North Carolina business owners through the mail. These mailings look like official government documents, and they quote statutes, cite scary penalties, and prompt the business to pay a fee for a certain “required” form.
One misleading mailing comes from the Filing Labor Compliance Department Services (FLCD), a Florida company that sends a “2019 Certificate of Status Request” form. This form implies that all business entities are required to obtain a Certificate of Status and return the form with a $78.00 fee. Another misleading mailing comes from NC Certificate Service, offering a 2019 Certificate of Existence for $74.50.
However, there is no state requirement that each registered business entity obtain an annual Certificate of Existence. A Certificate of Existence is only required if a business does business in another state. The certificate is issued by the North Carolina Secretary of State for a whopping fee of $10.00 online!
Finally, another mailing scheme comes from the Labor Compliance Department, also based out of Florida, and asserts that businesses are required to purchase state and/or federal labor law posters to display at the business address. The scam offers to provide a labor law compliance package for an $83.00 fee. This scam cites scary penalties for failing to display these posters in a visible location at the business. While the posters really may be required depending on the type of business, these posters can be obtained for free online from the North Carolina Department of Labor.
Do not blindly mail in a check when you receive mail like this. Read it carefully. Contact your attorney or the Secretary of State’s office before paying anything.
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