Archive for Sam Smith:

Basics of an Enforceable Contract

Contracts are a fundamental part of our economy.  Every time you buy something from a grocery store or a department store you are entering into a contract.  You don’t have to sign a piece of paper to enter into a valid and fully enforceable contract.  Some contracts can be oral while others must be reduced to writing.  So what exactly makes a contract binding?  There are two main requirements for a contract to be binding and enforceable:

1. Consideration
2. Mutual Assent

Consideration

Consideration is a legal term for quid pro quo.  In other words, consideration is something of value that is offered in exchange for something else of value.  In everyday experience, when you buy a box of Krispy Kreme donuts you give up some money and in exchange the store gives up the donuts.  Both the money that you give up and the donuts that the store gives up have value to the respective parties.  Essentially there are two separate concepts required for consideration to be valid and enforceable.

The first concept is the actual sought after exchange.  In legal circles this is called the “bargained for exchange“.  In my previous example when you go looking for Krispy Kreme donuts you are seeking out an exchange.  Additionally, the store that offers the donuts for sale is also seeking out an exchange.  In other words, there are at least two parties looking to exchange something that the other party has to offer.

The second concept involves giving up something of value in order to get something of presumably greater value.  However, often parties to contracts are seeking to exchange intangible items.  Unlike donuts and cash, intangible items might be something like a promise to provide a service.  A good example of this is the arrangement you have with your cell phone company.  The cell phone company promises to give up cellular bandwidth in exchange for your promise to pay them for such use at the end of each month.

Mutual Assent

Mutual Assent is another legal term for a shared understanding of contractual obligations between parties.  In other words, mutual assent is present whenever there is an offer from one party that is accepted by the other party.  Going back to the donut example, the grocery store offers the donuts for a specified price.  This is the offer.  When you give the cashier the asking price for the donuts you are accepting the offer and entering into a binding and enforceable contract.  Mutual asset cannot exist until both parties understand and agree to be legally bound by their respective obligations.

Most simple contracts do not require the assistance of counsel.  Contracts are really just common sense.  However, if you are an entrepreneur, doctor or other self-employed professional you will eventually get into more complicated transactions where legal technicalities will be ever present.  It is in these instances when you should have a professional draft and review your agreements.  A major cause of expensive business litigation is a poorly drafted contract.  Now you know contracts and knowing is half the battle!

Should You Hire A Lawyer to Draft Your Will?

In the age of information with tools like the internet it is very easy to find data and forms that will help you draft your own will.  Recently, Kiplinger published a quiz to help people finds ways in which to save money.  One of the questions is whether you should save money by drafting a will yourself.  Take the quiz and see what Kiplinger says – Click Here for the Quiz.

Naming Minor Children as Beneficiaries of Life Insurance

One way to provide a significant asset for your family is by purchasing life insurance. Many employers provide some life insurance as a benefit of employment. Additionally, you have the option of purchasing life insurance separately to augment the total payout after your death. Term life insurance can be relatively cheap. Depending on your age, it is possible to get a very large policy for very little money.

Naming a Beneficiary

Life insurance is essentially a contract between the policy owner (you) and the life insurance company where the insurance company agrees to pay a certain amount of money upon the death of the insured to a beneficiary that you choose.  There is usually a primary beneficiary and a secondary beneficiary (in case the primary is unavailable).  The beneficiary can be just about anyone.  Most people simply name their spouse as the primary beneficiary and their children as secondary beneficiaries.  A word of caution when naming beneficiaries:  under most state laws insurance companies cannot release insurance proceeds directly to beneficiaries who are minor children (typically children under the age of 18).  So, in the event that you (1) name your spouse as primary beneficiary and your children as secondary beneficiaries, and (2) you and your spouse die simultaneously (car wreck, plane crash), the insurance proceeds will be tied up until a court can determine a property guardian for the children.  It also means some of the proceeds will inevitably be spent trying to get the funds released to the children.

How to Leave Insurance Proceeds to Children

There must be a way in which a parent can leave their insurance proceeds to their minor children if that is their objective.  Indeed, there are a few ways to handle this issue:

1. The Uniform Transfers to Minors Act or UTMA is a state law that allows you to name a custodian for minor children.  Designated custodians manage the property until the children reach the age of termination.  The custodian can be a family member or trusted friend.  Contact your insurance provider and they will usually have forms for this.  Essentially you will name your children as primary or secondary beneficiaries and also name a custodian in the event that the children are still minors when you die.
2. A living trust can be named as the beneficiary of the life insurance proceeds.  The living trust must name the children as beneficiaries of any and all insurance proceeds received by the trust.  Within the living trust you will set up a child’s trust as a road map of how the funds will be handled.  Contact your insurance provider and they can tell you their policy regarding living trusts.  Additionally, it is important to consult with an attorney before attempting to set up a trust.
3. An adult who you trust will use the proceeds to care for your children.  This person may be the guardian-to-be who is named in your will or elsewhere.

What Is A Will And Do I Need One?

Many people wonder if their loved ones will be taken care of after they die. It is not necessarily a pleasant thing to think about your own death. However, for planning purposes it is essential to think about those you leave behind. One of the ways to ensure that your wishes are fulfilled after you die is to have a will (aka, last will and testament).

WHAT IS A WILL?

Simply put a will is a legal instrument that sets forth your final wishes with respect to your property, the guardianship of your minor children (and their property), and the management of your estate. You can think of it as an instruction manual on what to do (and possibly not do) after you die.

Some other definitions you might need to be familiar with:

Estate: The total of all your assets, property entitlements and liabilities.

Executor: The individual appointed in a will to oversee the winding up of the decedent’s affairs (also known as a Personal Representative).

Intestacy: A set of rules designed to distribute a decedent’s property in the event that they have no will.

Living Will: A legal instrument that details your wishes with respect to the type of medical care you would or would not like to receive after certain life functions have ceased.

Testator: The person making the will.

Probate: A court supervised procedure for distributing your property and verifying the validity of your will.

There are several different types of wills including:

Holographic Will: A will written in the handwriting of the testator without any witnesses. The general rule is that the will must be completely written in the testator’s handwriting, dated, and signed, plus there must be a statement that the testator intends this writing to be his or her will. These are only valid in 28 states. North Carolina is one the 28 states that will recognize a holographic will but there are limited circumstances in which this can take place.

Oral Will: A will that is made verbally to witnesses. This is also known as a nuncupative will. Generally most states do not recognize oral wills. In North Carolina an oral will may be valid in very limited circumstances but it can never be used to modify a validly executed written will.

Self-Proved Wills: This is a standard written will that has been signed and witnesses by the request number of witnesses and includes a self-proving affidavit that has also been signed under oath before a notary by the Testator and the witnesses. This type of will makes the probate process easier because the will can be admitted to probate court without the testimony of the witnesses.

A valid will must be executed according to strict and technical rules developed by each state. In North Carolina for a will to be valid it must be in writing and signed by the Testator in the presence of two witnesses who also sign the will in the Testator’s presence. Additionally, the Testator must be at least eighteen years old and the will must be executed with “testamentary intent.” These requirements are highly technical and should not be attempted without consulting with an attorney.

A simple will should contain the following important parts:

1. Testator’s name and place of residence
2. Testamentary Intent
3. Personal information about your spouse, children and grandchildren
4. Residue Beneficiary with an alternate beneficiary
5. Guardian for minor children and an alternate guardian
6. Executor or Personal Representative and an alternate Executor or Personal Representative
7. Testator’s signature
8. Witnesses’ signature

It is important to remember that a will is a legal document.  The legal effect given to a will may depend upon adherence to very strict and technical rules.  Always consult with an attorney before executing a will.

DO I NEED A WILL?

The answer to this question depends upon what you want to happen to your property and loved ones after you pass away. The bulk of your property can be distributed through a will. However, not all of your property is covered by a will. For instances, insurance benefits, retirement accounts and property owned as joint tenants with rights of survivorship already have designated beneficiary. Your cannot control the distribution of these assets with a will. It is possible to set up your estate in such a way that all of your property will be passed on to someone without using a will. But, remember that a will covers more than just property.

You need a will for designating who will be the guardian over your minor children and who will manage the affairs of your estate. You may also need a will if you want to leave property to a charitable organization. It is true that there are a variety of methods for planning your estate and a will should be a part of that plan. For most people, a will is the starting point for estate planning.

Understanding The Difference Between C Corporations And S Corporations

Based on many financial and technical factors, corporations are categorized into different types. Of these categories, two key types of organizations are ‘C Corporations’ and ‘S Corporations.’ A ‘C Corporation’ or a ‘C-Corp’ is a corporation that qualifies for the taxes under the Sub chapter C of the Internal Revenue Code of the Internal Revenue Service (IRS). Simply said, a C Corporation is a standard corporation and most of the organizations in the U.S. are incorporated as C Corporations. An ‘S Corporation’ or ‘Subchapter S Corporation’ on the other hand, enjoys special tax exemption under the Internal Revenue Code. An S Corporation is exempted from the Federal Corporate Income Tax.

Factors Differentiating C Corporations and S Corporations

TaxationTaxation is the key difference between the two types of corporations. C Corporations face double taxation. They face one form of taxation at the individual level, and the other at the corporate level. The government taxes the corporation on its profits and the company’s shareholders also pay taxes on the company driven earnings such as dividends or any other special payouts. S corporations are exempt from this form of taxation. Instead, profits and losses are passed on to the shareholders according to their stake in the company. The shareholders pay the taxes for an S corporation at the individual level. The shareholders deduct any business losses in their individual tax returns. Also, S corporations can elect to distribute money as profits rather than as salaries to the shareholders. These S corporation profits are exempt from Social Security and Medicare taxes. At the time of selling the corporation as well, the tax on the profits is lower for the S Corporations than for the C Corporations.

OwnershipA non-US citizen or a non-resident alien can own C Corporations, apart from US citizens. Only US citizens or resident aliens can own S Corporations.

Business EntityOther business organizations may own C Corporations, but they can’t own S corporations.

Number of Shareholders or MembersC Corporations can have an unlimited number of shareholders. The number of shareholders in an S Corporation is limited.

Stock types or ownership interestC Corporations can issue all types of stocks. S corporations can issue only one type of stock and they can’t issue preferred stocks

Timely Status ElectionThe IRS requires S Corporations to file for S Corporation status by the sixteenth of the third month of the tax year in which the election is due. Alternatively the company may file this form at anytime in the tax year preceding the tax year in which the election is to take place. An election completed within two and a half months of the beginning of the tax year is a timely election. An election made after the middle of the third month but before the end of the current tax year will be effective in the next tax year. C Corporations do not require any time frame.

An Additional ThoughtEach type of corporation has its own advantages and disadvantages. A well informed and well-thought out decision should be made upon the type of corporation you wish to file the articles for.

About the AuthorDavid Gass is President of Business Credit Services, Inc. His company publishes afree weekly e-newsletter on Small Business Consulting at their web site http://www.smallbusinessconsulting.com

Article source: Understanding The Difference Between C Corporations And S Corporations

10 Tips on Writing a Residential Lease Agreement

Any smart landlord will protect their legal interests with a residential lease agreement or rental agreement. Here are 10 tips that will help you properly write an airtight residential lease agreement. A properly written lease agreement will guarantee your rights to protect your property.

Know Your State/City’s Laws Your state and possibly city may very well have different property management laws. Some state’s, for example, require your lease agreement to have a warning for lead based paint for older buildings. This will also help you figure out what you can and cannot include in your lease agreement.

Make Your Lease Agreement as Clear as Possible Loose language, confusing terms, slang, short-hand, and a poorly written agreement can be misinterpreted into an interpretation that may not be in your favor.

Include the Condition of the Rental Unit If the rental property is in good condition with no problems or damages then include that, if there are problems or damage then you need to go into specifics.

State Your Pet Policy Include whether or not you allow pet lovers to keep a pet on the rental property. If there are exceptions or restrictions list those too, you can get into for example the size of the animal you will allow, or the type of animals you allow or don’t allow.

State Your Right of Entry Be careful though, each states requires a specific amount of time you must wait after you notify the resident(s) that you want to enter their residence.

Do You Require a Security Deposit? If you do require a security deposit you must specifically state what is considered to be damage to the dwelling on the lease agreement. It is vital you clearly state the security deposit policy if you want to properly protect your legal right to keep that deposit.

Precisely State the Amount of Rent Include when the rent is due and when it is considered late; this will protect you against legal recourse if the tenant is continually late. Do what you can to prevent misunderstandings.

Repairs Covered or Not Covered It is the landlords responsibility to provide repairs for any fixtures, heating and cooling equipment, and included appliances.

Activities you Restrict If there is something you just absolutely cannot tolerate from your tenants then include that on your lease agreement. A code of conduct will give you the legal right to manage your property accordingly.

If the Lease Agreement is Breached What Will Happen? State what will happen if the tenant violates the lease agreement. If you want the right to terminate the lease if the tenant breaches the agreement made then you need to state that.

Why Choose Delaware as Your Corporate Home?

What state Incorporates more than a half-million business entities, including more than half of the Fortune 500 companies? New York? California? Illinois? No. No. No. That state is Delaware. With a population smaller than 88% of all states, this business-friendly state attracts more corporations than any of the major cities. Businesses choose Delaware simply because of their flexible corporate laws, highly respected Court of Chancery, a business-friendly State Government, and a customer service oriented Staff of the Delaware Division of Corporations.

Among the many business-friendly laws, Delaware does not require corporations to operate in the state, only to maintain a registered agent, who may be an individual resident, or an existing domestic corporation. Additionally, incorporations typically take 24 hours to process, however there are services that allow same day, and 2 hour filing. There is no corporate income tax for corporations incorporated in Delaware, but not transacting business in the state. Further, the cost to incorporate is one of the lowest in the country, and one person can hold all officer positions of the corporation. Officer names are not required to be listed in the articles of incorporation. Shares of stock owned by persons outside of Delaware are not subject to Delaware taxes.

Delaware maintains a separate corporate court system, called the Delaware Court of Chancery, that does not use juries, but only uses judges appointed for their expertise in corporate law. The Delaware Court of Chancery is a 210-year-old business court that has written most of the modern U.S. corporation case law. It is widely recognized as the nation’s most distinguished agency for dispute resolution involving corporate litigation. The state legislature takes seriously its role in keeping the corporation statute, and other business laws current. Their unique expertise in, and exposure to issues of business law are supreme. Currently the Court of Chancery has made docket information, and pleadings available over the Internet for civil actions filed in the Court.

Delaware’s State Government is business-friendly and accessible. The Division of Corporation is in the forefront of efficiency, and their professional staff provides prompt, friendly services to clients, attorneys, registered agents and others. The office of the Secretary of State operates more like a business rather than a government bureaucracy with its leading edge technology, and customer-service oriented staff.

Delaware may make sense for large corporations, however it may not be worth the effort for small, privately held corporation who do business in their home state. Although Delaware does not tax out of state businesses, taxes must be paid in the state the business is operating. While incorporating fees are lowest in Delaware, appointing a corporate agent to receive official notices in Delaware may negate any realized costs savings. All factors considered, Delaware is a premiere legal home to companies all around the world.

About the AuthorJay B Stockman is a contributing editor for Online Small Business Consulting Visit http://small-business-usa.com/ for more information.

Article source: http://www.contentdragon.com/content/business/why-choose-delaware-as-your-corporate-home/