Estate Planning: Safeguarding Your Business when Hindsight Is Not an Option

By Brittany Robinett

“What would you do to protect your loved ones?”  For most people, the instinctual response is “anything.”

Hourglass

It should follow that those individuals would plan to protect their families in case something unfortunate, such as terminal illness or death, befell them.  Statistics, however, speak to the contrary.  A recent poll revealed that too few Americans – a maximum of 50% – have wills in place.  Even fewer have arranged a living will or power of attorney to carry out their wishes in the event of incapacitation.  Perhaps such inaction stems from the misconception that wills are for the wealthy or from fear of thinking about the unpredictable end.  Regardless of social status, however, surprises are rarely welcomed by the survivors left to pick up the pieces.

Suppose I instead asked, “What would you do to protect your business?”  It seems to escape many small business owners that their personal estate includes, in fact, their business, and it is in their best interest to establish a plan for it to continue in their absence.  For both emotional and financial reasons, owners often resist relinquishing control; yet transfer of ownership, like death, is inevitable.  Planning for the future not only eliminates stress on the bereaved, but it is also cost-effective.

Consider some consequences that could arise if your business’s affairs were not in order.  If death or illness struck, could family members and co-owners tie up loose ends?  Would someone be familiar with all associated accounts, know how to run the business, and manage it accordingly?  How would the IRS value and tax your estate’s assets?  Would the estate be left to probate and at what expense to your loved ones?  When you weigh the risks, why wouldn’t you plan ahead?

Every business structure is unique, and the steps necessary to protect each differ.  Additionally, the personal interests of owners influence those steps.  Legal counsel can evaluate these concerns and advise the best course of action for a business to take.  While plans may differ, there are certain safeguards that all small business owners should consider adopting: a living will, a power of attorney, and a trust.

1)     A living will documents an individual’s healthcare wishes in the event of incapacitation.  Living wills ensure that these wishes will be carried out, even if the person cannot express them.

2)     Two types of power of attorney are recommended for business owners: a healthcare power of attorney and a durable financial power of attorney.  A healthcare power of attorney is a document appointing an individual to make healthcare decisions fulfilling the wishes of the incapacitated.  For various reasons, an owner might not want a person with healthcare power of attorney to have additional financial control.  Since incapacitated persons cannot legally contract, a financial power of attorney appoints someone to handle your financial affairs and run the business within the scope of your instruction.  Financial POAs may handle anything from paying bills, to handling paperwork, to managing the business in your absence.

3)     A trust permits an owner to transfer property with others while retaining some management authority and ability to recover income and benefits.  Since the trust owns your assets, there is no fear of them going into probate.  Essentially, it allows a business to run in your absence while freeing it from any personal debts and obligations upon death.

In the words of Lieutenant General Claude Christianson, “Your biggest enemy is the unknown and assumptions.”  Don’t be your own worst enemy.  Plan for today so that the fruits of your labor can be enjoyed tomorrow.  Those you leave behind will surely thank you for it.

Bexley Law Firm, LLC
http://www.bexleylawfirm.com

About the Author:  Brittany Robinett is a second year law student at the Georgia State University College of Law.

Preserving Privacy in a Publicized World: Maintaining an Online Presence while Protecting Personal Data

By Brittany Robinett

We live in a world where phonebooks are obsolete, maps rest in photo frames instead of dashboards, and online reviews are given preference over word of mouth.  When locating a carpet cleaner, people use their iPhones.  If they can’t MapQuest Peking Palace, they will order takeout from MuLan’s instead.  When choosing a doctor’s office, they choose the location with the highest Healthgrades reviews rather than trusting their co-worker’s opinion.

To summarize, Internet presence is everything in today’s business culture.  Why?  Because a business’s online image serves as its face and reputation; the more publicized the presence, the greater the trust consumers are likely to have.  In what Forbes refers to as the “mobile app culture,” small business owners are keystrokes away from countless, affordable advertising and marketing opportunities.  Yet, surprisingly, small business owners fail to maximize their online business opportunities for two reasons:

  1. They do not utilize the Internet to their fullest extent.
  2. They utilize online services without protecting themselves from legal oversight.

In her article “How Small Business Owners are Wrecking Their Own Chances of Success,” Forbes contributor Erika Anderson notes that only half of small businesses maintain a website or social media presence.  Although less shocking, those that do maintain an online presence do not take the precautions necessary to protect themselves from data breaches.  Some business owners are reluctant to develop an online presence, particularly where a website would be used to gather personal information from customers.  Such reluctance, though understandable, could be alleviated if businesses protected themselves by obtaining legal counsel.

Small businesses pride themselves on providing a higher quality of care from an intimate distance.  In a globalized, computer-centric generation, such intimacy may be necessarily achieved through a readily accessible link on a screen.  While convenient, this exposes both clients and companies to risks of privacy and security breaches.  These breaches may subject businesses to liability.  With this in mind, can “high quality” truly be delivered when the risk of legal errors runs concurrently “high?”

Contrary to popular belief, hackers don’t simply target large business corporations.  In 2013, USA Today reported that over half of small businesses in the country admitted to experiencing privacy breaches.  Over half of those businesses fell victim to multiple attacks.  The constant media coverage surrounding the recent (and massive) Target credit card breach might lead one to associate such financial fiascos with larger businesses; however, credit card breach is problem that more commonly plagues small businesses.  Where they are comfortable with their internal privacy policies, smaller business owners may be more reluctant to invest in more expensive software, to conduct more far-reaching background checks, and to pay extensive amounts for liability insurance.  However, data breaches more frequently occur externally, and they require that additional privacy measures be taken.

Most states require all businesses to report data breaches to the affected individuals, although many businesses chose to ignore breaches and let them go unnoticed.  However, this can subject businesses to hefty fines and negative publicity, as well as threats of consumer lawsuits.

Clearly, it is important for businesses to abide by online privacy policies.  Unfortunately, businesses that lack legal counsel might not know what steps to take to effectively follow those policies, nor know what steps to take when following those policies isn’t enough to protect them.  For these reasons, hiring legal counsel prior to a breach is often a legally effective solution.  Retaining an attorney can also be more cost efficient than hiring after a breach has occurred.  Prior to sharing personal data with payment processors and other third parties, businesses may contract with those parties to hold them liable for breaches occurring while personal information is in their hands.  Having an attorney prepare and execute the contracts may prevent any loopholes from going unnoticed and effectively bind third parties to their errors.  This greatly prevents the risk of consumer lawsuits.  As well as eliminating risks of immediate financial damages, an attorney’s legal oversight additionally eliminates the risk of a damaged reputation arising from a litigated breach.  Further, since data breaches are not 100% unavoidable, having attorney ensures that the correct measures will be taken immediately – preventing both businesses and their reputations from harm.

Ultimately, people chose a business because they trust it.  In a culture that most values the information on the screen in front of them, make sure the business behind that screen can be trusted.

Bexley Law Firm, LLC
http://www.bexleylawfirm.com

About the Author:  Brittany Robinett is a second year law student at the Georgia State University College of Law.