# Ryan Reiffert, PLLC. > Business & Estate Planning Attorney in San Antonio --- ## Pages - [Claudia Cirlos](https://ryanreiffert.com/our-team/claudia-cirlos/): Claudia was born in San Antonio and raised in Laredo, Texas. She has over 6 years of experience working in... - [Trust Administration Services in San Antonio](https://ryanreiffert.com/trust-administration-services/): To ensure that your family and loved ones are adequately protected after you are gone, hire a trusts administration attorney in San Antonio, TX. - [Estate Planning to Avoid Probate in San Antonio](https://ryanreiffert.com/estate-plan-avoid-probate/): We can help with Estate Planning to Avoid Probate in San Antonio and surrounding areas. Call for San Antonio estate planning to avoid probate. - [Appointments](https://ryanreiffert.com/appointments/): - [Texas Incorporation Services](https://ryanreiffert.com/form-texas-corporation/): As a Texas Corporate Attorney, I offer many services for small businesses, growing businesses, and entrepreneurs. While the LLC may... - [What Should You Consider Before Signing a Commercial Lease?](https://ryanreiffert.com/commercial-lease/): What You Should Know Before You Sign a Commercial Lease  As a new or even experienced business owner, signing the... - [San Marcos Business Attorney](https://ryanreiffert.com/san-marcos/): A business & corporate lawyer in San Marcos, TX, Ryan Reiffert handles transactions, securities, small business, startups, estate planning & more. - [Our Team](https://ryanreiffert.com/our-team/): We provide high-quality legal services to investors, entrepreneurs, startups, and small and medium businesses in San Antonio and surrounding regions. - [S-Corporation: Tax Reduction and Liability Protection for Small Business](https://ryanreiffert.com/s-corporation/): If you need help with S-Corporation services, consult with a quality San Antonio small business attorney like Ryan Reiffert. Get a consultation today. - [Collection of All Infographics](https://ryanreiffert.com/free-resources/collection-of-all-infographics/): Law Offices of Ryan Reiffert, PLLC has made an effort to create a number of useful infographics for various practice... - [Nondisclosure Agreements: Q&A](https://ryanreiffert.com/nondisclosure-agreement-qa/): It is imperative to have a competent Business Attorney in your corner who has seen many of these NDAs and knows what he or she is looking at. - [What Is a Fiduciary Duty?](https://ryanreiffert.com/what-is-fiduciary-duty/): One of the areas in which corporate law and estate planning law have some amount of overlap is in the... - [Awards and Honors](https://ryanreiffert.com/awards-and-honors/):   See some of Ryan Reiffert's awards and honors in the list below.   - [Media Mentions](https://ryanreiffert.com/media-mentions/):   See some of Ryan Reiffert's features in the media below.   - [Fee Transparency](https://ryanreiffert.com/fee-transparency/): One of the most common questions that I am asked has to do with legal fees. Some people are (quite... - [Free Resources](https://ryanreiffert.com/free-resources/): I understand that it’s not always possible to hire an attorney. Whether due to availability of funds or any other... - [Contact](https://ryanreiffert.com/contact/): Contact form for your business issue. Do not send any privileged or confidential information. This form does not create attorney-client relationship. - [FAQ](https://ryanreiffert.com/faq/): Contains answers to some Frequently Asked Questions (FAQ) for Ryan Reiffert business attorney. If your question is not on this page, click the contact form! - [Blog](https://ryanreiffert.com/blog/): Get a business attorney’s perspective! This blog can educate and inform you on timely (or entertaining!) developments in the law. ***NOT LEGAL ADVICE*** - [Ryan Reiffert](https://ryanreiffert.com/our-team/ryan-reiffert/): Ryan Reiffert is a San Antonio, Texas corporate and estate planning attorney. He regularly represents startups, businesses, entrepreneurs and investors. - [Practice Areas](https://ryanreiffert.com/practice-areas/): Mission-critical services and legal expertise for your business to accomplish its goals, sideline risk, and grow, grow, grow! - [San Antonio Business & Estate Planning Attorney](https://ryanreiffert.com/): A business & corporate lawyer in San Antonio, TX, Ryan Reiffert handles transactions, securities, small business, startups, estate planning & more. ## Posts - [Debunking the Top 4 Myths About the Corporate Transparency Act](https://ryanreiffert.com/blog/debunk-cta-myths/): In a few previous posts, we discussed the Corporate Transparency Act (or CTA). The first article in the series was... - [Who is Exempt from the Corporate Transparency Act (CTA)?](https://ryanreiffert.com/blog/cta-exemptions/): The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, mandates certain... - [What is the Corporate Transparency Act or CTA?](https://ryanreiffert.com/blog/corporate-transparency-act-overview/): What is the Corporate Transparency Act (CTA)? In an age where transparency and accountability are paramount in corporate governance, the... - [What is Tax-Deductible in 2023? —Business Owner Update](https://ryanreiffert.com/blog/what-is-tax-deductible-in-2023/): For many business owners, being able to deduct meal and entertainment expenses can be incredibly helpful for marketing and conducting... - [Legal Zoom for Wills: an Attorney's Honest Review](https://ryanreiffert.com/blog/legal-zoom-for-wills-review/): Legal Zoom is a popular online platform that provides legal services, including the creation of wills. One of the most... - [Does an LLC Need a Board of Directors (or Board of Managers)?](https://ryanreiffert.com/blog/does-llc-need-board-directors/): Does an LLC Need a Board of Directors? If you are interested in starting an LLC, one consideration you need... - [What To Do If An Employee Steals From Your Company](https://ryanreiffert.com/blog/what-to-do-employee-theft/): What If An Employee Steals From Your Company? As a business owner, one of the most difficult and frustrating things... - [What Are The Differences Between a Real Estate Lawyer and a Realtor?](https://ryanreiffert.com/blog/differences-real-estate-lawyer-vs-realtor/): What Are The Differences Between Real Estate Lawyer and a Realtor? Real estate law can be a complex and confusing... - [Explainer: Per Stirpes vs Per Capita](https://ryanreiffert.com/blog/per-stirpes-vs-per-capita/): Introduction: Texas Estate Planning We prepare quite a few estate plans, Wills, and trusts for our clients. One question that... - [Are Meals and Entertainment Tax Deductible? 2022 Brings More Tax Changes](https://ryanreiffert.com/blog/meals-entertainment-tax-deductible/): The deductibility of meals and entertainment has long been a "hot topic" for business owners - and understandably so! Being... - [San Antonio Real Estate Attorney Ryan Reiffert Quoted in Redfin Regarding What to do if a Contractor Quits in the Middle of a Job](https://ryanreiffert.com/blog/ryan-reiffert-redfin-contractor-quit/): San Antonio real estate lawyer Ryan Reiffert recently was interviewed by Redfin's Julia Weaver for an important article containing guidance... - [Updating Your Estate Plan After a Divorce](https://ryanreiffert.com/blog/update-estate-plan-divorce/): Getting a divorce and the post-divorce period is full of emotional and financial turmoil for the divorcees. In such a... - [Doing Business In Mexico: How Has COVID-19 Affected the Texas-Mexico Border?](https://ryanreiffert.com/blog/business-mexico-covid/): How Has COVID-19 Affected the Communities along the Texas-Mexico Border? Federal Aid Helps Keep Pace Since the COVID-19 pandemic broke... - [6 Things to Know About Opening Non-Profits in Texas](https://ryanreiffert.com/blog/texas-nonprofits-6-things/): One question that I often get in the course of representing a business is whether, how, and how closely, a... - [Buying a Medical Practice: Business Lawyer's Corner](https://ryanreiffert.com/blog/buying-medical-practice/): Acquiring a Medical Practice ǀ A Guide for Doctors and Physicians Buying a medical practice is one of the significant... - [Noncompete Agreements and Nonsolicitation Agreements: What You Need To Know](https://ryanreiffert.com/blog/noncompete-nonsolicit-101/): What You Need to Know About Non-Competes and Non-Solicits as a Business Owner Today In this article, we will review... - [Texas Reinstates Franchise Tax Exemption for Veterans beginning in 2022!](https://ryanreiffert.com/blog/texas-reinstates-franchise-tax-exemption-veterans/): Texas Reinstates Veterans Franchise Tax Exemption Big News for 2022! Texas has reinstated the franchise tax exemption for veterans. This... - [New Estate Planning Rules For 2022](https://ryanreiffert.com/blog/estate-planning-rules-2022/): How Changes in 2022 Laws May Affect Your Estate Planning  This year, there are some known and proposed changes in... - [2022 Update: New Texas Laws going into force](https://ryanreiffert.com/blog/texas-laws-2022/): Texas Sees the Implementation of Twenty-Four New Bills As Of January 1, 2022 It’s been a busy time for Texas... - [Who Inherits Your Estate if You Die With No Will in Texas?](https://ryanreiffert.com/blog/inheritance-no-will-texas/): Who Inherits Your Estate if You Die With No Will in Texas? While most of us understand that having a... - [How To Obtain Letters Testamentary in Texas](https://ryanreiffert.com/blog/how-to-obtain-letters-testamentary/): What Are Letters Testamentary in Texas and How Can You Obtain Them?   After someone passes away, an executor or... - [Biggest Mistakes When Starting a Business - VIDEO](https://ryanreiffert.com/blog/business-mistakes-video/): What are the biggest mistakes that most new business owners make? While I obviously cannot tell you about ALL mistakes... - [Guide to Uncontested Probate in Bexar County](https://ryanreiffert.com/blog/uncontested-probate-bexar/): What Is An Uncontested Probate in Bexar County? Simply put, probate is the legal process that an estate goes through... - [What is Private Equity?](https://ryanreiffert.com/blog/what-is-private-equity/): While the term “private equity” may conjure visions of faceless businessmen in suits throwing around inscrutable finance jargon, odds are... - [How To Sue Someone in Small Claims Court (VIDEO)](https://ryanreiffert.com/blog/how-to-sue-small-claims/): SMALL CLAIMS 101: HOW TO SUE SOMEONE One question that I am asked with some frequency is, "I want to... - [Estate Planning Update: Texas Overhauls the Rule Against Perpetuities](https://ryanreiffert.com/blog/estate-planning-texas-rule-perpetuities/): Estate Planning Update Texas Overhauls the Rule Against Perpetuities Texas Estate Planning attorneys, sit up and take note! The Texas... - [How Bankruptcy Works](https://ryanreiffert.com/blog/how-bankruptcy-works/): How Bankruptcy Works: a short overview for businesses and individuals As a San Antonio business lawyer, I get all kinds... - [How to Withdraw From or Dissolve an LLC in Texas](https://ryanreiffert.com/blog/withdraw-dissolve-llc-texas/): How to Withdraw From or Dissolve an LLC in Texas Like any business enterprise, LLC ownership, called membership, can change... - [Breaking News: San Antonio has obtained a Temporary Restraining Order to mandate masks in schools!](https://ryanreiffert.com/blog/news-san-antonio-tro/): This blog post was co-written by Ryan Reiffert, San Antonio business and estate planning attorney, and Ishika Patel, an intern... - [DBA vs. LLC in Texas](https://ryanreiffert.com/blog/dba-vs-llc-texas/): Ask a Lawyer: DBA vs. LLC in Texas In this blog article, I will seek to answer one of the... - [Top 12 Surprising Facts About San Antonio](https://ryanreiffert.com/blog/facts-san-antonio/): Top 12 Surprising Facts about San Antonio While most of the articles that I publish here are related to business... - [Business Judgement Rule](https://ryanreiffert.com/blog/business-judgement-rule/): This article was written by Ishika Patel, an intern with the Law Offices of Ryan Reiffert, PLLC. The business judgment... - [Business Law Minute: Employment Contracts in Texas](https://ryanreiffert.com/blog/business-law-employment-contracts/): Business Law Minute: A Short Guide to Employment Contracts in Texas If you own a small business in Bexar County... - [Securities Update: FINRA Speaks Out On The Duty of Best Execution, Robinhood, Payment For Order Flow, and Market Manipulation](https://ryanreiffert.com/blog/best-execution-robinhood/): This past week (June 23, 2021), FINRA (the Financial Industry Regulatory Authority) issued its Regulatory Notice 21-23 entitled "FINRA Reminds... - [SCOTUS Protects Cheerleaders' Rights To Drop The F-Bomb](https://ryanreiffert.com/blog/scotus-cheerleader-fbomb/): A few weeks ago (June 7), I wrote here about some of the highest-profile Supreme Court cases of this term.... - [SAFEs for Startup Financing](https://ryanreiffert.com/blog/safes-for-startup-financing/): SAFEs (Simple Agreement for Future Equity) for Startup Financing In this article, we will attempt to provide a basic overview... - [Trial By Combat: The Sequel (My Interview with David Ostrom)](https://ryanreiffert.com/blog/trial-by-combat-update/): Roughly a year and a half ago, I wrote this blog article describing a man who requested a trial by... - [Real Estate Reactions: What is a Commercial Lease?](https://ryanreiffert.com/blog/real-estate-reactions-what-is-a-commercial-lease/): What is a Commercial Lease? Simply stated, a commercial lease is a lease that covers a commercial property (as opposed... - [How to Settle a Dispute With Your Contractor, Without Litigation](https://ryanreiffert.com/blog/contractor-disputes/): Are you concerned about the quality of work delivered by your contractor? Maybe they are not following the scope of... - [June Could Bring Some Big SCOTUS Rulings for 2021](https://ryanreiffert.com/blog/june-scotus-2021/): June is the last month of the Supreme Court's annual term. And, like so many of the rest of us,... - [Should I Hire an Attorney to Draft My Will, Or Do It Myself?](https://ryanreiffert.com/blog/draft-will-self-attorney/): Should I Hire a San Antonio Estate Planning Attorney to Draft My Will? IntroductionAll of us – well, many of... - [New Video: Can Businesses Require Employees Get COVID Vaccine?](https://ryanreiffert.com/blog/video-mandatory-vaccination/): Head on over to our YouTube channel for the latest video chronicling the updates in the saga of the COVID... - [EXPLAINER: Trade Secrets](https://ryanreiffert.com/blog/explainer-trade-secrets/): Trade secrets and other confidential or proprietary information can be some of the most valuable assets that a company owns.... - [CDC Lifts Mask Mandate for Vaccinated People - What Does It Mean For Your Business?](https://ryanreiffert.com/blog/cdc-mask-mandate/): The CDC has recently made major changes to its guidance for mask-wearing. On May 13, 2021, the CDC issued guidance... - [What are SPACs? (Video Explainer)](https://ryanreiffert.com/blog/spac-explainer/): SPACs, or Special Purpose Acquisition Companies, are very popular investment vehicles recently. In this three-minute explainer video, I provide an... - [VIDEO EXPLAINER: The Basics of Intellectual Property, with special guest Pete Adams](https://ryanreiffert.com/blog/intellectual-property-explainer/): On March 15, 2021, I had the first of my "conversations" videos with a good friend of mine, intellectual property... - [8 important reasons to have an estate plan right now](https://ryanreiffert.com/blog/8-reasons-estate-plan/): Estate planning is important. Here are eight important reasons to have an estate plan now. San Antonio business and estate planning attorney Ryan Reiffert. - [Texas Appellate Court Deals Another Blow to San Antonio’s Sick Leave Ordinance](https://ryanreiffert.com/blog/appellate-sick-leave/): San Antonio Sick Leave Ordinance gets another strike against it from the Fourth Court of Appeals. - [Texas has lifted its mask mandate! BREAKING NEWS!](https://ryanreiffert.com/blog/texas-lifts-mask/): - [Price Gouging Explained](https://ryanreiffert.com/blog/snowpocalypse/): - [GameStop, Hedge Funds, WallStreetBets, Stock Manipulation, and more (or, what the hell is going on in the stock market???)](https://ryanreiffert.com/blog/gamestop-market-mayhem/): What is going on with Gamestop and the market? What is a pump and dump? What is a short squeeze? Is any of this EVEN LEGAL? Read more… - [Intro to Estate Disclaimers in Texas](https://ryanreiffert.com/blog/estate-disclaimers-texas/): How to file a disclaimer of an estate in Texas. Some important considerations to examine before filing a disclaimer. - [Happy New Year! … here is the list of works that entered the Public Domain on January 1, 2021](https://ryanreiffert.com/blog/copyright-day-2021/): These works entered into the public domain on January 1, 2021. A corporate lawyer discusses copyrights. - [SEC Raises Some Exemption Caps, Expanding Access to Capital (& Integration Framework)](https://ryanreiffert.com/blog/sec-exemption-caps/): The SEC raised the caps for some exemptions for private securities offerings, clearing the way for improved private fundraising. - [Indian doctor tricked into buying “Aladdin’s Lamp” (complete with 100% real and totally not fake at all Genie) for $200k](https://ryanreiffert.com/blog/aladdins-lamp-fraud/): Corporate lawyer discusses a funny story of a contract gone wrong. - [SEC Expands Definitions of Accredited Investor and QIB, Widening Access to Private Offerings](https://ryanreiffert.com/blog/sec-accredited-investors/): Access to private securities offerings was broadened by expanding the Accredited Investor and Qualified Institutional Buyer definitions. Read more inside. - [EXPLAINER: CONTRACTS 101](https://ryanreiffert.com/blog/explainer-contracts/): This is an explainer meant to give you a basic understanding of contract law (written by a corporate lawyer with help from a law student) - [Top 10 Largest Mergers & Acquisitions since 2010](https://ryanreiffert.com/blog/top-10-ma-deals/): What were the largest 10 M&A deals of the last decade? A law student and corporate attorney discuss. - [How to Purchase (or Sell) a Business Now in 5 Steps](https://ryanreiffert.com/blog/5-steps-purchase-business/): How to purchase a business: the 5 steps you need to know from courting to closing. From Ryan Reiffert, San Antonio corporate lawyer. - [COVID-19 Waivers: When to Use Them, How They Protect You (Or, How They Sometimes Don’t), and A Few Things to Watch Out For](https://ryanreiffert.com/blog/covid-19-waivers/): Businesses and corporations are increasingly looking to contractual waivers for limiting COVID liability. Do they work? Should you use one? - [COVID-19 and Force Majeure: another look](https://ryanreiffert.com/blog/covid-19-and-force-majeure-another-look/): A transactional attorney and law student analyze COVID-19 in light of contractual Force Majeure or Act of God clauses. - [BREAKING NEWS: More Relief Coming for Small Businesses as Government Refills the Loan Program (a.k.a. PPP Round 2)](https://ryanreiffert.com/blog/ppp-refill/): Congress is taking the first steps toward expanding the Payroll Protection Program. What does your business need to know? Get the legal perspective here. - [INFOGRAPHIC: How a Startup Grows](https://ryanreiffert.com/blog/startup-infographic/): INFOGRAPHIC: how a startup grows. Ryan Reiffert, San Antonio business attorney provides some insight for your startup’s growth plan. - [Coronavirus relief: the CARES Act passes House & Senate, goes to White House [UPDATED]](https://ryanreiffert.com/blog/coronavirus-relief-act/): The House and Senate passed a $2T stimulus bill to address COVID-19. Will this benefit your small business? A business attorney’s perspective. - [Could the COVID-19 Coronavirus from Wuhan, China be a Terminal Illness for your Contract? Force Majeure, Acts of God, and Your Business](https://ryanreiffert.com/blog/covid-19-force-majeure/): San Antonio corporate lawyer Ryan Reiffert provides analysis of contracts and Force Majeure in light of COVID-19 - [Top 7 Questions to Ask Before Engaging a Business Attorney](https://ryanreiffert.com/blog/top-7-questions-to-ask-before-engaging-a-business-attorney/): Selecting corporate counsel for your business is an important decision. Here are seven questions to ask for this important engagement. - [Transition Services Agreements: overview and new developments](https://ryanreiffert.com/blog/transition-services-agreements-overview-and-new-developments/): Ryan Reiffert, a San Antonio corporate attorney updates you on Transition Services Agreements (TSAs) – a common deal document for mergers and acquisitions - [SECURE Act: dramatic changes for Estate Planning](https://ryanreiffert.com/blog/secure-act/): Estate Planning changes were implemented by Congress in January 2020 – Ryan Reiffert, San Antonio estate planning attorney and corporate lawyer, discusses - [Manager Held Personally Liable for Company Contract Breach](https://ryanreiffert.com/blog/manager-held-personally-liable-for-company-contract-breach/): Ryan Reiffert, San Antonio corporate attorney, discusses the alarming case of a manager who was held personally liable for a company contract - [Is Your Deal’s “Exclusive Remedy” Really Exclusive? Delaware Chancellors Say… Maybe Not](https://ryanreiffert.com/blog/transaction-remedies-delaware/): In this case, Delaware held that an “exclusive remedy” termination fee was actually not exclusive. Exercise caution when making deals. - [Kansas Man Demands ‘Trial By Combat’ to Settle Custody Dispute](https://ryanreiffert.com/blog/trial-by-combat/): A Kansas man has challenged his ex-wife and her attorney to a trial by combat with japanese samurai swords. - [Goldman Sachs Will Reject Your IPO if Your Board is All Straight White Men](https://ryanreiffert.com/blog/ipo-diversity/): In January 2020, David Solomon, CEO of Goldman Sachs, announced that the investment bank would refuse IPOs of companies with all-male boards of directors. - [Big Changes to Securities Offering Exemptions on the Horizon? SEC Seeks Comments on “Harmonization” of Exemptions](https://ryanreiffert.com/blog/big-changes-to-securities-offering-exemptions-on-the-horizon-sec-seeks-comments-on-harmonization-of-exemptions/): July 2019: the SEC signalled that it would be undertaking a review of securities offering exemptions. Startups, small businesses, and investors, take note! ## Faqs - [How much do you charge for a consultation?](https://ryanreiffert.com/blog/faqs/how-much-do-you-charge-for-a-consultation-2/): We charge a fee of $100 for the initial consultation. If you decide to move forward with us, the amount... - [What is Startup Law?](https://ryanreiffert.com/blog/faqs/what-is-startup-law/): Small businesses and startups often face many similar legal issues. It can be a tremendous benefit to you to have... - [What is an Outside General Counsel?](https://ryanreiffert.com/blog/faqs/what-is-an-outside-general-counsel/): An in-house general counsel (or GC) is an attorney who works inside of an organization and serves as the “quarterback”... - [How Do I Choose an Estate Planning Attorney?](https://ryanreiffert.com/blog/faqs/how-do-i-choose-an-estate-planning-attorney/): The short answer is the same as choosing a corporate attorney. Above all, you should choose someone you trust. Education... - [What is Estate Planning Law?](https://ryanreiffert.com/blog/faqs/what-is-estate-planning-law/): Estate Planning Law is a body of law that encompasses several different but inter-related goals. Fundamentally, it is about ordering... - [How Do I Choose a San Antonio Corporate Attorney?](https://ryanreiffert.com/blog/faqs/how-do-i-choose-a-san-antonio-corporate-attorney/): Above all, you should choose someone you trust. When evaluating corporate lawyers or business lawyers, education and experience are also... - [What is Corporate Law?](https://ryanreiffert.com/blog/faqs/what-is-corporate-law/): Corporate law (despite the name) is not just about corporations! Corporate attorneys practice business law and represent business entities, including... - [Do I really need an attorney?](https://ryanreiffert.com/blog/faqs/do-i-really-need-an-attorney/): Maybe. Sometimes it’s too early (or too late) for an attorney to get involved, and other times it’s the exact... - [What industries do you have experience in?](https://ryanreiffert.com/blog/faqs/what-industries-do-you-have-experience-in/): I have represented many companies in many different industries, including: technology, banking, oil & gas, real estate, medical & nursing,... - [Do I need to come into your office and meet you in person to retain you or receive legal services?](https://ryanreiffert.com/blog/faqs/do-i-need-to-come-into-your-office-and-meet-you-in-person-to-retain-you-or-receive-legal-services/): Not necessarily. While it is often preferable for you to come into the office for a first meeting, we can... - [Do you handle Personal Injury, Child Custody, Divorce, Immigration, or Criminal cases?](https://ryanreiffert.com/blog/faqs/do-you-handle-personal-injury-child-custody-divorce-immigration-or-criminal-cases/): No. You’ve heard the phrase “jack of all trades, but master of none” haven’t you? That isn’t me. I am... - [What payment methods do you accept?](https://ryanreiffert.com/blog/faqs/how-much-do-you-charge-for-a-consultation/): We accept cash, checks, wire transfer, Venmo, PayPal, Visa, Master Card, American Express, and Discover. If you wish to explore... - [Are you the right Law Firm for me?](https://ryanreiffert.com/blog/faqs/are-you-the-right-law-firm-for-me/): Choosing a lawyer or law firm to represent you is an incredibly important decision. I can deliver the personal attention... - [I need a quote. Whom do I contact?](https://ryanreiffert.com/blog/faqs/i-need-a-quote-whom-do-i-contact/): You can submit a request via email at info@ryanreiffert. com, or you can also request more information, including a fee... --- # Detailed Content ## Pages ### Claudia Cirlos - Published: 2024-09-10 - Modified: 2024-09-10 - URL: https://ryanreiffert.com/our-team/claudia-cirlos/ Claudia was born in San Antonio and raised in Laredo, Texas. She has over 6 years of experience working in the legal field as a legal assistant. The legal field allows her to fulfill both her passion for learning and for helping those in need. When she is not busy with work, she enjoys watching her kids play sports. She also enjoys spending time with her family, friends and especially her 6 children and two grandchildren. --- ### Trust Administration Services in San Antonio > To ensure that your family and loved ones are adequately protected after you are gone, hire a trusts administration attorney in San Antonio, TX. - Published: 2022-03-24 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/trust-administration-services/ If you want to ensure that your family and loved ones are adequately protected after you are gone, a Trust is often recommended as an estate planning strategy. As you are aware if you have read our information regarding different types of trusts.  Since the trustee is under a fiduciary duty to manage the trust for the benefit of the beneficiaries (in compliance with the trust instrument or declaration of trust), information about the trust is a critical component of that process. It is important to choose a trust administration team for your estate that you can count on. The basics of a Trust include: (1) the Trust will hold some or all of your property, as you may designate, (2) you can assign who gets what, and under what conditions or restrictions, timeframes, etc. in case of your demise in the trust instrument, and (3) all of this is managed by the trustee, who is - as noted before - under a fiduciary duty to the beneficiaries. Trusts are one significant strategy to help you avoid the probate process, if this is your goal. The trustee is obligated to provide the specified resources to the beneficiaries as directed in the trust instrument, and to manage the trust competently, as specified in the trust instrument. During your life or after your death, your loved ones may need to get in touch with the trustee (or successor trustee) for their rightful share of the proceeds, according to the rules you established in the trust instrument. Accordingly, selecting the right trust administrator is very important. How Does Trust Administration Work? Trust administration refers to a handful of tasks involved with (1) investment of trust assets, (2) disbursement of trust assets, as well as (3) ongoing trust management - all in compliance with the terms of the trust instrument. Depending on how you have set up the trust, trust administration can be simple or complicated. In some complicated cases, administering the trust may take significant time and expense, involving various actions and maintenance over a course of years. Trust administration requires a wide range of competencies, from skillfully reading the trust instrument, to intelligently investing the corpus of the trust. You can sometimes engage a bank, trust company, or certified public accountant to fill this role. Other times, you may wish to hire an estate planning attorney as a "one stop shop" for both legal guidance and trust administration. We are proud to offer two types of service in this regard: We can advise the trustee regarding his, her, or its duties, rights, and obligations with regard to managing the trust. We can serve as trustee, and can often provide a fee structure that is less expensive than the fee structure proposed by a bank or trust company (especially if the trust is a trust that we have drafted and are familiar with). Types of Trusts There is a wide range of trusts for various purposes, including: Marital trust Life insurance trust Generation-skipping trust Charitable trust Special needs trust Revocable trusts Irrevocable trusts and other types of trusts Can a Trustee be Removed for Mismanagement? Yes! As we discussed earlier, a Trustee of a trust serves under a fiduciary duty to the beneficiaries of that trust. A fiduciary duty is defined as "When someone has a fiduciary duty to someone else, the person with the duty must act in a way that will benefit someone else, usually financially. The person who has a fiduciary duty is called the fiduciary, and the person to whom the duty is owed is called the principal or the beneficiary. If the fiduciary breaches the fiduciary duties, he or she would need to account for the ill-gotten profit. The beneficiaries are typically entitled to damages. " Source: Cornell LII Legal Encyclopedia: Fiduciary Duty. Accordingly, the Texas Trusts Code (Texas Property Code) §113. 082 provides that: (a) A trustee may be removed in accordance with the terms of the trust instrument, or, on the petition of an interested person and after hearing, a court may, in its discretion, remove a trustee and deny part or all of the trustee's compensation if: (1) the trustee materially violated or attempted to violate the terms of the trust and the violation or attempted violation results in a material financial loss to the trust; (2) the trustee becomes incapacitated or insolvent; (3) the trustee fails to make an accounting that is required by law or by the terms of the trust; or (4) the court finds other cause for removal. (b) A beneficiary, cotrustee, or successor trustee may treat a violation resulting in removal as a breach of trust. (c) A trustee of a charitable trust may not be removed solely on the grounds that the trustee exercised the trustee's power to adjust between principal and income under Section 113. 0211. How Can a Trust Administration Lawyer Assist? Breaching your fiduciary duty as trustee is a pretty big deal, and can lead to serious liability and lawsuits! Hiring a trust lawyer can benefit you in two ways: (1) sound legal advice for a trustee, to help you avoid breaching your fiduciary duty, (2) actually serving as trustee (or substitute trustee/backup trustee) of the trust, and again, helping you avoid liability for any potential claims of fiduciary breach. A competent trust attorney can help locate beneficiaries and make disbursements. A lawyer can also help with annual disbursements and assist with interpreting and carrying out stipulations or conditions on the trust. Sometimes disbursement may only be made after reaching adulthood, or upon the occurrence of other events such as graduating school, getting married, etc. A quality trust attorney who has good business savvy and business experience can even advise and assist you with accounting and reporting requirements, and/or with locating an accounting professional who can address these issues for you. If you are a trustee, a quality trust and estate lawyer should be able to guide you in your duties as a trustee or provide full trust service management. Here are some of the matters you may be able to get help with. Accounting and reporting of trust Communication with beneficiaries Investment guidance Distributions to beneficiaries Structuring your trust transactions Tax considerations Trust interpretation Trust reformation Conclusion If you are a resident of Texas, and looking for advice on trust administration, please feel free to read more on our blog about how we may be able to assist, or contact us for a free consultation if you are in need of an attorney. --- ### Estate Planning to Avoid Probate in San Antonio > We can help with Estate Planning to Avoid Probate in San Antonio and surrounding areas. Call for San Antonio estate planning to avoid probate. - Published: 2022-03-16 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/estate-plan-avoid-probate/ The term probate refers to a legal process of property distribution upon your demise. An attorney consulted by the heirs of the estate is the one who typically initiates probate. In this process, a probate court will validate your will and authorize your will's executor to distribute your property to the beneficiaries as well as pay all taxes owed on your property. What If You Do Not Have A Will? If you do not have a will, another administrative proceeding (called an “heirship”) will take place for the court to decide how to divide your estate. In this scenario, the probate court will judicially determine who your heirs are, in accordance with the Texas Estates Code, and assign an administrator for your property and estate. This administrator will then follow the judge's order on the distribution of your estate. Importance of Avoiding Probate While Texas probate is a relatively simple and easy process to distribute your estate upon death, many people wish to avoid it – and there are some good reasons for that. The first reason is that probate can be a slow process and may take years for the court to finalize. This is especially true if the will is too complicated or someone contests your will, but even in the “ideal” case of a smooth probate, the process can take a few months. Secondly, avoiding probate can reduce costs. A complex or contested probate can also be a costly affair between attorney's fees, executor fees, and other administrative costs. While an uncontested probate in Texas tends to be fairly cheap, even a relatively small amount saved, is still a savings. Third, avoiding probate enhances privacy. As it is a legal proceeding, it takes place in public courts and becomes a public record. Many executors find this to be quite a significant annoyance as they will receive a flood of unsolicited mail and calls offering to buy their dead relative’s house and/or belongings. Ways to Avoid Probate In light of the above, many people desire to structure their estates to avoid the probate process. Here are a few ways that we can assist you with estate planning to avoid probate. Exemption by Size of Your Estate Having a small estate may give you an exemption from probate; the small estate affidavit is an expedited process due to small size, as is the affidavit of heirship. But these probate alternatives have very restrictive conditions for when they may be used. What if your estate is larger or composed differently and your estate is not eligible for a small estate affidavit or affidavit of heirship? Giving Away the Assets While You are Alive You can give away your property and assets to your loved ones while you are still alive. This way, no one will have to wait or go to court to get their share. You can give away your estate and assets to whomever you want as a gift, and there is no fee or court proceeding needed for such division of assets. Additionally, you will not have to pay any taxes or any other associated fee that you need for probate, if your gifts fall within the annual gift tax exemption or you have remaining estate tax exemption, etc. Establishing a Living Trust You can avoid probate by establishing trust because property held by a trust does not count as a part of your estate. This is because a trustee and not you are the owner of the trust property. Therefore, a trustee will be under no obligation to abide by the rules and regulations of your will. Leveraging Account Payable on Death or Beneficiary Designations You can designate bank accounts as payable to a designated distributee upon the account holder's death (this is called “payable on death” or POD for short). You can also nominate a beneficiary to receive all the assets of your 401(k), IRA, Pension, etc upon the primary holder’s death. Both of these methods pass by contract, directly to the beneficiary(-ies), outside of the probate process. A skilled estate planning attorney can assist you in using these mechanisms properly, in concert with the other elements of your comprehensive estate plan so that your heirs can bypass the probate process. Life Insurance Life Insurance will often function similarly to a POD or Beneficiary Designation. The proceeds will pas directly to the named beneficiaries by contract. It can help to have a skilled estate planning attorney help you harmonize your life insurance policy with the rest of your estate plan. Joint ownership of the Property Can make your partner or spouse a joint owner of your property. In this case, if you die, the property will automatically go to your spouse without any need for a probate process. Lady Bird Deeds & Transfer On Death Deeds If the only real asset of the estate is a homestead, using one of these automatic transfer deeds could allow you to bypass probate. The Lady Bird Deed in particular may even carry some added benefits when it comes to Medicaid issues Conclusion If you are a resident of San Marcos, Texas or San Antonio, Texas, and looking for advice on estate planning to avoid the probate process, get in touch with Law Offices of Ryan Reiffert, PLLC. We can  guide you on how to streamline your estate planning whether your goal is to avoid probate in the state of Texas, or not.   --- ### Appointments - Published: 2022-03-12 - Modified: 2023-11-02 - URL: https://ryanreiffert.com/appointments/ --- ### Texas Incorporation Services - Published: 2021-08-28 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/form-texas-corporation/ As a Texas Corporate Attorney, I offer many services for small businesses, growing businesses, and entrepreneurs. While the LLC may be the "entity of choice" for many people recently, the corporation still has many benefits. Among the services I offer, if you are looking to start a business and depending upon your choice of entity, I can help you create your Texas Corporation. Contact us today! Some benefits of a Texas Corporation: Limit Personal Liability: shield your personal assets from business liabilities Separate Legal Entity: also protection for Corporation's assets More Protection for Minority Shareholders: the Corporation typically provides more protection/voting rights for minority shareholders than the LLC and the Limited Partnership Asset Protection Planning: one or several Corporations are frequently used in asset protection planning (sometimes in conjunction with other entities Predictability and Appeal to Investors: Because Corporations are older, more rule-bound, and more traditional than LLCs, they are predictable for shareholders and hold a strong appeal for investors ... and more When you hire your Texas Corporate Lawyer to prepare your business entity - in this case, a Texas Corporation - there are four main sets of documents that must be prepared. While it is possible to prepare some of these documents yourself, it will likely be necessary to retain a competent Texas Corporate Attorney to prepare a quality set of documents that “covers all the bases. ” These three main sets of documents are: Certificate of Incorporation Organizational Resolutions (of different sorts) Officer and Director Appointments, Consents, and Resolutions Bylaws Below, I will outline a few of the relevant areas that you will need to consider with regard to your Corporation. Some of these are questions that your San Antonio Corporate Attorney will be required to ask you before he or she is able to form your entity; others are simply matters that will behoove you to consider. The Certificate of Incorporation The Certificate of Incorporation must be filed with the Texas Secretary of State, including any Amendments, etc. The other documents referenced above (and others) need not be filed with the Texas Secretary of State, but do need to be prepared, executed, and kept in the Corporation's minute book (and the events recited thereby, such as meetings, must, in fact, occur). The Texas Secretary of State publishes a simple, three-page version of the certificate of incorporation, accompanied by three pages of detailed instructions. This statutory form is the minimum required to form a Texas Corporation under the applicable legal requirements. A skilled and qualified Texas Business Attorney can help you with preparing a certificate of formation for your Texas Corporation that will be more tailored and customized to your particular goals and circumstances. Nominate a Registered Agent You will need to appoint a registered agent to accept service of process for the Corporation. Because Corporations (like LLCs, Partnerships, and other entitites) are not physical bodies that can be found and served with process like natural persons, every entity, including a Corporation, is required to keep on file with the Texas Secretary of State’s office a designation of registered agent – i. e. , the person who is designated and authorized to receive process on behalf of the Corporation or other entity. The person you select as your Corporation's registered agent should be someone reliable and someone you trust. Names and Name Availability Searches In the State of Texas (and in most other states), two entities cannot have the same name, or a confusingly-similar name. Accordingly, the Texas Secretary of State allows anyone to run a name availability search and reserve a name, each for a nominal fee (at present time, this fee is $1 per search). In addition, under Texas law, a Corporation must include in its name “Inc. ,” “Corp. ,” "Incorporated," or another similar word to put customers and counterparties on clear notice that the entity is a Corporation and not an individual. This is similar to the requirement that that Limited Partnerships include in their names “Ltd. ,” “Partners,” and that LLCs include "LLC. " DBAs (Doing Business As) Speaking of names, if you would like to do business under a different name than your Corporation's formal registered name, you will want to file an assumed name certificate. These are sometimes known as “DBAs” (“doing business as”). They’re simply nicknames – not entities. From time to time, people become very confused about the nature of DBAs. I prepared the attached video to attempt to clear up some of these common questions. Management Structure Unlike an LLC, a Corporation is required to have directors and officers. The directors serve in a fiduciary capacity for the shareholders, voting on certain major business decisions and appointing or removing the officers. The directors are referred to, in the aggregate, as a board of directors. The board of directors is required to hold meetings from time to time in order to conduct business. Directors are elected by shareholders at shareholder meetings (annual, plus one or more special meetings, per year). There are also certain, fundamental matters, where the shareholders are required to vote. Officers, on the other hand, manage the day-to-day affairs of the corporation, in compliance with the general direction given from the board of directors. Some officer positions that you will want to appoint will be: chief executive officer, chief operating officer, secretary, treasurer, and potentially others. Additionally, you should be aware that the individuals who you will nominate as directors and officers must consent to the appointment, and the appointment must be properly papered with resolutions and consents. After considering the alternatives, you should inform your Texas Business Attorney of who you would like to serve as your Corporation's directors and officers. Purpose Under Texas law, entities are required to declare their purpose on the certificate of formation. If a Corporation attempts to undertake an action that is outside of its declared purpose, the action might be declared null and void, under the doctrine of ultra vires (literally “beyond the powers”. ) Fortunately, Texas, like many other states, permits general purpose statements. If you would like to use a purpose clause other than a general purpose statement, we recommend that you discuss this with your Texas Business Lawyer to determine the best course of action. Privacy A Texas Corporation also provides a basic level of privacy and anonymity – it makes it somewhat harder to determine ownership of assets (certainly not impossible! just a little harder). While this privacy and anonymity is less than that found in some other states, it may still be a consideration for some. Texas Corporation Formation FAQs Other Considerations + Conclusion There are many more considerations that apply to the formation of your Texas Corporation that you will want to discuss. As a San Antonio business attorney, I counsel clients and new business owners on such matters on a weekly (sometimes daily) basis. Feel Free to contact me if you have any questions regarding the process of forming your Texas Corporation. --- ### What Should You Consider Before Signing a Commercial Lease? - Published: 2021-08-28 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/commercial-lease/ What You Should Know Before You Sign a Commercial Lease  As a new or even experienced business owner, signing the lease on a commercial space can be a complicated venture and, depending on availability, can demand some patience and a lot of homework. In the business world, knowledge is power. Unfortunately, lack of knowledge can trip you up and cause untold stress and financial and legal heartache. Before you venture into the world of leasing commercial property and signing a commercial lease, arm yourself with information. Research is your new best friend as you try to understand the type of property you need, the size, and all the other incidentals that go into leasing a commercial space. One of the best ways to do that is to speak with an experienced San Antonio business lawyer or a commercial real estate attorney who you can trust.   Understand Your Needs  Like anything else, it’s better to understand your needs before you seek out prospects. Looking at commercial property will be overwhelming without understanding exactly what you are looking for, the geographic area you want to target, and how much you can afford to pay. Consider your space. Some spaces will require modifications such as provisions for offices or cubicles within the larger area, or additional wiring for better communications systems. Consider your competition. Do you have competitors in the area? Will the landlord be able to lease to a competitor once you are in? You should understand the concept of exclusive-use phrasing in your lease as this may be very important to ensuring against competition setting up in the same building. Who is the building owner? The landlord? The landlord is often not the building owner. Know as much as you can about both. You would never go into a partnership with someone you didn’t know. Your lease is a business partnership. Check the public records, ask other tenants, ask your San Antonio commercial real estate lawyer or a commercial real estate professional. There are many ways a tenant/landlord relationship can go awry. Don’t let that happen to you.   Understand What Kind of Property and Area You Are Looking For  You may have a product with a specific demographic you want to be near, you may want your signage to be seen from the road, you may need industrial space with loading docks, or you may just be looking for a small office. Regardless of what you are looking for, you want to understand and target specific areas based on those needs and understand the different types of commercial properties.   Know the Laws  Regardless of whether the landlord or the broker assures you that you are fine under local zoning or other municipal or state laws, do your own homework. Once you are in, it becomes your headache to fix if you can’t operate legally under the current laws. Nuisance and environmental stipulations and regulations can also trip you up. The landlord or broker may not even be aware of them.   A Commercial Lease is a Different Animal  Although you may be familiar with a residential lease agreement, the similarity to commercial leases is that they are completely different animals. The world of the commercial lease is far more broad, more flexible, more negotiable, but it also offers less protections for you as a tenant. Consider that A commercial lease is typically for a longer term, usually from 3 to 5 years, is a legally binding contract between your business and the landlord, and is not easily broken. Because there is usually a good bit of money at stake, it is essential that you understand your terms before you sign on the dotted line. A commercial lease offers less in the way of consumer protections. Commercial leases aren’t subject to the same protections as residential leases. A commercial lease agreement is fully customized, not using a standardized format, and usually to the benefit of the landlord. Make sure you have read it and understand it completely. The good news! A commercial lease is far more flexible and negotiable. Depending on the market in your area and how eager the landlord is to lease the space, you may be able to work in some features to your advantage.   Know the Language of Commercial Leasing Commercial real estate and leasing have its own language. And you will do best to be fluent in that language before you go out into a commercial lease agreement. There are many terms you are likely to see in your commercial leasing journey, such as Base rent -- Base rent calculated on an amount per usable square foot Usable square feet -- Amount of square footage that is reserved for a tenant, not including shared spaces Rent increase -- Rental amount that can change from year to year typically based on a percentage of the rent. This can often be negotiated or capped. Lease deposit -- Monetary sum that holds space until the agreement is finalized. This is typically a security deposit plus two months rent. Security deposit -- Money held in advance against damages and to secure performance under the lease. Length of lease -- Indicates start and end dates of the lease term, typically from 3 to 5 years in duration Improvements -- Indicates the types of improvements or upgrades that can be made to the space. It will also set out who is responsible for the costs of these. These are typically negotiable. Grant of lease -- Clause that stipulates that the landlord will turn over the property upon all conditions being met Commencement date -- Date that tenant takes over and becomes responsible for rent and terms Extension -- Parties may agree to an extension of the agreement in writing Late fees -- Conditions by which a tenant, if late in paying rent, will be subject to extra fees, which may be a flat fee or percentage of the rent Taxes -- Outlines all taxes associated with the space and who is responsible for paying them. Obligation for repair -- Stipulates the types of repairs that the landlord and tenant are obligated to make and who will be responsible for making them Permits -- Parties will be required to get necessary permitting and licensing for improvements or repairs. Covenants -- Each party has a separate set of covenants setting out further requirements and responsibilities of each. Indemnity by tenant -- Removes liability from the landlord in cases of damage, loss, injury, or claims unless they are caused by omissions, willful acts, or gross negligence by the landlord. Rent abatement or adjustment -- The rent will be eliminated or adjusted in the event of fire or disaster. Condemnation -- Sets out what will happen if the property is taken by government powers of condemnation or eminent domain. Option to purchase -- Tenant has the right to purchase the property during the term of the lease for an agreed-upon price. It can also state that the tenant does not have the right of purchase.   Reviewing Your Lease When you are reviewing your lease, the way it is structured, what it covers, how much you will pay each month, and how your rent may increase are essential in understanding and budgeting for costs. The shorter-term you can negotiate, the easier you can move or close down, if necessary. When reviewing your lease, you want to fully understand who is paying for what in the way of Exterior or interior modifications Utilities Insurance Property taxes Exterior and interior maintenance Repairs Security Parking Some of these may be provided for under the “other costs” category. If there is any question, make sure that you ask the landlord and make sure that the provisions are in writing somewhere. After the basics, it’s then essential to look at some of the other, less obvious details of the terms. How can your lease be transferred if you choose to leave or the business ends up closing? Will you be allowed to assign the lease or sublet to another tenant? In either case, you will typically need to get prior written consent. Will you be required to sign a personal guarantee? This means that you will be personally responsible for the lease should the business fail and is a risk you may not choose to take on. If you choose or need to stay on past the lease expiration, how will any holdover rent be handled? In many cases, a landlord will add a clause that will make your business responsible for up to 250 percent of the monthly rent should you not be prepared to vacate at the end of the lease. This can and should be negotiated. If the landlord or owner fails to pay the mortgage on the property, will you be evicted even though you have paid your monthly payments on time? If you have a nondisturbance agreement, you will be allowed to stay and continue paying your rent to whoever eventually takes over the building. Consequently, it is essential to read and understand your commercial lease document fully. Many of the terms of a commercial lease will be to the benefit of the landlord but may be negotiable. Like any legal contract, you want to consider all possible scenarios and how they will be handled under the terms of the lease.   Getting Critical Legal Advice Enlisting the help of a commercial real estate attorney or San Antonio business lawyer can ensure that you haven’t missed any critical matters in the lease that may impact you and your business. If you are considering a new commercial space and need help researching or understanding a property or commercial lease agreement, contact the Law Offices of Ryan Reiffert, PLLC to schedule an appointment. --- ### San Marcos Business Attorney > A business & corporate lawyer in San Marcos, TX, Ryan Reiffert handles transactions, securities, small business, startups, estate planning & more. - Published: 2021-08-27 - Modified: 2024-08-13 - URL: https://ryanreiffert.com/san-marcos/ --- ### Our Team > We provide high-quality legal services to investors, entrepreneurs, startups, and small and medium businesses in San Antonio and surrounding regions. - Published: 2021-08-04 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/our-team/ We provide high-quality legal services to investors, entrepreneurs, startups, and small and medium businesses in San Antonio and the surrounding region with the same depth of legal knowledge and quality of advice as a much larger firm, but with a keener sense of business understanding. --- ### S-Corporation: Tax Reduction and Liability Protection for Small Business > If you need help with S-Corporation services, consult with a quality San Antonio small business attorney like Ryan Reiffert. Get a consultation today. - Published: 2021-06-24 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/s-corporation/ You may have heard of S-Corporations before. Odds are good that if you have heard of the S-Corporation, it was in the context of a tax reduction strategy. The S-Corporation is one of the great intersections of business entity liability protection, asset protection, and tax reduction. Which is one of the things they're good for. But they're also good for much more than that, as I discuss in this brief summary video from my YouTube channel. (PLEASE CONSIDER SUBSCRIBING FOR LEGAL NEWS AND EXPLANATIONS! )As I note in the video above, there is actually no such entity as an "S-Corporation"... the thing that people refer to as an "S-Corporation" is, from a legal perspective, just a regular corporation. Like any other corporation, from your neighbor's car washing business to the biggest behemoths of the Fortune 500. The "S" in "S-Corporation" actually is a tax distinction, not a legal distinction. An S-Corporation is a corporation that has validly filed with the IRS a Form 2553 Election by a Small Business Corporation, the effect of which is to pass all taxable effects from the entity through to the shareholders in proportion to their ownership of the corporation - including income, loss, credits, deductions, realized gains, etc. All of it. In contrast, a corporation that has not made the S-Election is called a C-Corporation (legally indistinguishable - just a corporation) because it is taxed under subchapter C rather than subchapter S. In practical terms, that means that the earnings of a C-Corporation are taxed twice - first the corporation itself pays taxes on its earnings at the corporate level; and taxed again as dividends, if and when such earnings are distributed to the shareholders. In almost all circumstances, being taxed as a C-Corporation is a very bad deal - something to be assiduously avoided if at all possible. In many cases, avoiding C-Corporation taxation actually is possible - via the S-Election, as filed on Form 2553. Here are some* of the benefits of using the S-Corporation for your business: Limited Liability & Asset Protection: Just like many other business entities (such as Limited Liability Companies (LLCs), C-Corps, Limited Partnerships (LPs), Limited Liability Partnerships (LLPs), and others) an S-Corporation, if formed properly, maintained properly, and run properly, can confer significant protection of personal assets against business liabilities. Avoid Double Taxation: Again like many other businesses (except for the C-Corporation), an S-Corporation allows for the avoidance of the double taxation characteristic of C-Corporations, in which earnings are taxed once at the entity level, and again as dividends to the shareholders. The resulting "compound" tax rate on a C-Corporation's earnings is higher than that achieved through most other entities. Reduce Payroll & Medicare Taxes: Largely Unique to an S-Corporation is the ability to reduce Payroll & Medicare taxes, by classifying a portion of the corporation's income as wages and another portion of the corporation's income as a distribution. The portion that is classified as a distribution will not be subject to Payroll or Medicare Taxes - in contrast, being classified as a sole proprietor, disregarded, etc. is likely to result in the entire income being subject to self-employment taxes. Simple Ownership Transfer: This is sort of a "turn the frown upside down" factor - an S-Corporation may only have one class of shares, so the transfer of ownership is easier. Additionally, an S-Corporation may not need to make basis adjustments to its property or comply with various potentially-complex accounting issues as a result of such a transfer. * list is not exhaustive or exclusive But, it's not all roses. Not only is an S-Corporation a relatively restrictive entity - if you don't qualify for the rules, your S-Election can be "busted" and you'll be diverted into a C-Corporation classification by default - but also it has certain characteristics that can be serious downsides, depending upon circumstances Here are a few* potential downsides and restrictions of an S-Corporation: "Phantom" Income: Limit on Payroll Exclusion The Corporate Form Limits on Shareholders * list is not exhaustive or exclusive The below infographic summarizes some of the benefits and downsides discussed above, against the sole proprietorship as a point of comparison. Keep in mind that other comparisons (against LLCs, Limited Partnerships, etc. ) are possible and relevant.  There are some other limitations on making an S-Election that are important to make you aware of - specifically, there are only three times that you may make an S-Election for your corporation by filing Form 2553. First, you can file your Form 2553 any time during the two and a half months (actually, two months and 15 days) after the beginning of the tax year the election is to take effect. So, if your tax year begins on January 1, you have until March 15 to make your S-Election. Second, you can file your Form 2553 any time during the first two and a half months (actually, two months and 15 days) of your corporation's existence for it to take effect during the first tax year - and actually, this is sort of the same thing as the above, if you think about it, but the tax year is just a lot shorter. So, therefore, if you form your corporation during a half tax year... let's say June 1, then you have until August 15 to make your S-Election. Third, you can file your Form 2553 any time during the year, in order to have it take effect in the following tax year. So, for example, if your tax year starts on January 1, you can make an S-Election any time before March 15 for the current year, or any time after March 15 for the following year. If you have any other questions about the S-Corporation Election, or want to consult with a quality San Antonio small business attorney, contact the Law Offices of Ryan Reiffert, PLLC for your free consultation. --- ### Collection of All Infographics - Published: 2021-06-12 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/free-resources/collection-of-all-infographics/ Law Offices of Ryan Reiffert, PLLC has made an effort to create a number of useful infographics for various practice area pages. In case you are having difficulty finding those infographics, or would like to compare and contrast them, on this page, we have collected all of them in one place. As always, please contact us with any questions.                                 --- ### Nondisclosure Agreements: Q&A > It is imperative to have a competent Business Attorney in your corner who has seen many of these NDAs and knows what he or she is looking at. - Published: 2021-06-10 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/nondisclosure-agreement-qa/ Attorney Q&A: The Nondisclosure Agreement (NDA) One of the first agreements that many startups, businesses, or entrepreneurs encounter (whether via being asked by someone else to sign one, or employing one themselves) is the Nondisclosure Agreement (sometimes referred to as a Confidentiality Agreement or abbreviated as simply "NDA"). At the Law Offices of Ryan Reiffert, this is one of the most common agreements that we are asked to draft or evaluate and mark up. I can't tell you how important it is to have a competent Business Attorney who has seen many of these NDAs and knows what he or she is looking at, in your corner. Signing an overly-restrictive NDA, as the recipient, or using an overly-permissive NDA, as the discloser, can spell disaster. But again, that's why you bring your Business Attorney with you.   What is an NDA? Simply put, an NDA prohibits either party from disclosing certain information shared with it by another party.   What information is covered by an NDA? We will get to this more below, but generally the NDA will contain a definition of "Confidential Information" or a similar term, defining information that is protected from disclosure.   Does an NDA go both ways? Does it prevent disclosures from A to B as well as from B to A? Sometimes yes, sometimes no - it certainly can, but it's not automatic or mandatory. Mutual Nondisclosure Agreements (sometimes called "MNDAs") are quite common, particularly in the early phases of M&A transactions. But, they don't necessarily carry such mutual obligations. It's also possible to have one-way, or unilateral Nondisclosure Agreements.   In what circumstances might you use an NDA? There are many diverse examples of circumstances where a company might employ an NDA. These include: Early-stage companies or businesses with significant intellectual property, trade secrets, or proprietary information might require their employees and independent contractors to execute NDAs (as well as noncompetes and other similar agreements) to protect the company's idea and preserve its first-mover advantage and its "stealth mode" in the market. Sometimes, an NDA can be required even as part of the interview process for potential employees or strategic partners, depending upon how early-stage the company is. If it's Other times, when an existing employee is promoted to a new role, where the employee will come into contact with confidential information that the employee did not have reason to encounter before, an NDA is generally advisable. Preliminary discussions to a significant transaction, such as a Merger or Acquisition will typically rely on a Mutual NDA (and other safety precautions); also likely to require a Mutual NDA would be a contemplated business succession deal, a partial (or total) asset sale, a significant stock investment, and many others. Two businesses that wish to enter into a joint venture will nearly always use an NDA to protect the trade secrets and proprietary information of each of them. An NDA will often be used to protect critical know-how, processes, intellectual property, and other secrets when a company outsources or contracts out part of its manufacturing or production processes (such as the creation of components). A startup company pitching potential investors will often request that those potential investors sign an NDA as a condition of receiving the private placement memorandum, viewing the pitch deck, or being given access to any other confidential materials. Two parties executing a litigation settlement may execute an NDA covering the terms (and, potentially, even the existence) of the settlement. Any other circumstance where one party has sensitive information that it desires to keep secret.   What's the penalty for breaching an NDA? Again, this can vary greatly from one Confidentiality Agreement to the next. Strictly speaking, the answer is "the penalty for breach is whatever the NDA says the penalty for breach is" but that's not helpful. There are three common types of penalty for breach of an NDA. First up is injunctive relief; this is quite common in NDAs, and the language will say something to the effect of "in addition to any other remedies available, the enforcing party may have equitable or injunctive relief from the court. " This is meant to authorize the court to issue an order prohibiting a party from breach (or further breach) of the Confidentiality Agreement. Ignoring a court order, of course, carries with it much stiffer penalties, including the possibility of jail time. The second possible remedy is a liquidated damages provision, per breach. This remedy, usually combined with one or more others, will state that because the damages are difficult to calculate, that the breaching party will owe liquidated damages of a certain set amount per breach. Texas law contains specific rules regarding liquidated damages provisions. If a business wishes to enforce a liquidated damages provision that is part of a contract, it must prove that: (1) the harm that would result from a breach was difficult to predict; and (2) the amount specified as liquidated damages constitutes a "reasonable estimate" of such difficult-to-predict harm. Both of these elements must be viewed in light of circumstances at the time the contract was formed. However, if the breaching party can demonstrate that the actual damages were substantially lower than the liquidated damages clause, the clause will be rendered unenforceable as a penalty or punishment (penalties and punishments are not allowed under Texas contract law). The third possible remedy is a liquidated damages provision, calculated as time in breach. Again, this remedy would usually be combined with injunctive relief and/or other remedies, but it would state that, for example, every day defendant is in breach or the Confidentiality Agreement, he or she owes $X. The same two conditions and analysis set forth above regarding reasonableness, penalty, etc. to determine the enforcement of the liquidated damages provision would apply.   Is an NDA enforceable? Generally, yes. There are a lot of exceptions and caveats to this rule - not least of which is, if you're talking about taking legal action against someone, do they have the money to pay your damages? But, assuming you can get an injunctive remedy, whether by contractual provision or otherwise, maybe the breaching party's being judgment proof doesn't matter or maybe it's worth the pain in the neck for some other reason.   How long does an NDA last? This is a simple question with a few different answers - one of which is relatively simple, the other of which is very complex and we'll only scratch the surface here. The simple answer is that the term of the confidentiality requirements under the confidentiality agreement is contractually defined, and it is whatever the agreement says it is. Obviously, for the case of a business trying to protect its ultra-sensitive proprietary data, trade secrets, or similar know-how, this not only makes sense, but istheeconomic reality - the founder, CEO, or whoever, of the business would not make the disclosures but for the kind of rock-solid, ironclad, permanent nondisclosure agreement envisioned by the terms of such an NDA.  But the reality may not be so simple. In Texas, there is case law holding that, if a contract's term is of indefinite length, then either party may terminate the contract at will. While I'm not aware of, and have never heard of, any court decision holding that a permanent NDA can be terminated at will, the argument is there to be made. So, what can you do? There are many options. You could make use of a choice of law clause, you could build in a long timeframe, you could make the NDA part of a larger contract covering other things, and/or you can simply roll the dice and guess/hope that the NDA would be enforced by a Texas court.   You never answered my question of exactly what the NDA covers. Can we go back to that now? Sure. An NDA will define the information that it covers with two mechanisms: (1) a definition of "Confidential Information" or a similar term that will most likely be quite broad and (2) a number of carveouts that exclude certain items from the definition of "Confidential Information". Here is a sample of a definition of "Confidential Information" from one NDA freely available online: For purposes of this Agreement, "Confidential Information" shall include all information or material that has or could have commercial value or other utility in the business in which Disclosing Party is engaged. If Confidential Information is in written form, the Disclosing Party shall label or stamp the materials with the word "Confidential" or some similar warning. If Confidential Information is transmitted orally, the Disclosing Party shall promptly provide writing indicating that such oral communication constituted Confidential Information. This is a very recipient-friendly definition of Confidential Information, being only limited to information with commercial value in the Disclosing Party's line of business (what about information that could be damaging? what about information that could be valuable in a different line of business? ) You may further notice that the Disclosing Party is required to mark the materials confidential, or verbally indicate that they are confidential. If the Disclosing Party forgets to do this, then perhaps they're not confidential. So this definition is great for the recipient, not so great for Disclosing Party. Let's look at a more expansive definition of "Confidential Information" The Parties shall (i) use reasonable efforts to maintain the confidentiality of the information and materials, whether oral, written or in any form whatsoever, of the other that may be reasonably understood, from legends, the nature of such information itself and/or the circumstances of such information’s disclosure, to be confidential and/or proprietary thereto or to third parties to which either of them owes a duty of nondisclosure (collectively, “Confidential Information”) This is a much broader definition. Rather than information with commercial value in the Disclosing Party's line of business, we now have "information and materials... that may be reasonably understood... to be confidential and/or proprietary. " Much broader. This definition also permits the stamping of materials as confidential ("from legends") but also allows enforcement based on "the nature of such information itself and/or the circumstances of such information's disclosure" - in other words, if the recipient knew or should have known that it was confidential based on the context. Now let's look at the "carveouts" from the definition of Confidential Information. Here's the definition from one free document: Receiving Party's obligations under this Agreement do not extend to information that is: (a) publicly known at the time of disclosure or subsequently becomes publicly known through no fault of the Receiving Party; (b) discovered or created by the Receiving Party before disclosure by Disclosing Party; (c) learned by the Receiving Party through legitimate means other than from the Disclosing Party or Disclosing Party's representatives; or (d) is disclosed by Receiving Party with Disclosing Party's prior written approval. This is a relatively standard formulation of the carveouts you'll see in any NDA, with the exception that the inclusion of (d) is sort of redundant and pointless. Of course the parties can waive in a signed writing - that's true whether you put that clause in the contract or not. In a lot of cases, I'd also expect to see something here about governmentally-mandated or court-ordered disclosures. That kind of thing. But, as carveout clauses go, this is pretty middle of the lane.   Should I use an NDA? Ah, the million-dollar question. If you have something worth protecting, yes! And if you don't have anything worth protecting, maybe! While there are plenty of situations where the NDA would be useless or there's nothing to protect, etc. , if you're asking the question, it probably means that you have some kind of secret that you're concerned about protecting.   I read an article by a Very Serious Person on the internet that he/she never signs NDAs. Does this mean people can just refuse to sign my NDA? Like any contract, you can't make someone sign your NDA. It's a free country and if they don't want to sign it, they don't have to sign it. But also like any other interaction or business encounter, you're free to walk away. I've seen this happen many times, including during my time as in-house counsel for a tech company. Leadership had an across-the-board, no-exceptions policy that anyone who wanted to interview to consult or work on the project had to sign the NDA. A few people objected, coming back with the "I don't sign NDAs, based on principle" line. Guess what happened? The company moved on. That person never heard from them again. So, it really comes down to whether the person on the other side of the table presents a sufficiently compelling value proposition that you're willing to forego the value that an NDA brings to the table (whatever that value is, to you), or whether there's another person waiting in line who won't make a fuss about the NDA. --- ### What Is a Fiduciary Duty? - Published: 2021-06-09 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/what-is-fiduciary-duty/ One of the areas in which corporate law and estate planning law have some amount of overlap is in the concept of fiduciary duties. An executor of an estate and a trustee of a trust, for example, each has a fiduciary duty to the beneficiaries. Similarly, a corporate director has a fiduciary duty to the shareholders... . but what does it actually mean to say that someone is subject to a fiduciary duty? Read on to learn more about what a fiduciary duty is and how it might impact you. What is Fiduciary Duty? Do you owe a fiduciary duty to anyone? Chances are that you do, but may not fully understand your legal obligations or inherent risks in that capacity. What are fiduciary duties and what are the risks if you don’t fulfill them as a business owner? Fiduciary Duty, Defined When you have a fiduciary duty toward another, you are legally responsible for acting in a trustworthy capacity within the relationship. This includes acting with professionalism and discretion, accepting the trust and confidence that the other person has placed in you. As a fiduciary, you owe the other party, or beneficiary, the highest degree of care and devotion. While there are many different duties that the law recognizes, none is held to as high an obligation as a fiduciary duty. Legally, a fiduciary duty obligates you to certain things. First, you have a legal duty to act in the other party’s best interests over your own. This also requires that you have no conflicts of interest that may cloud your duty to the other party. If you act in any way that is not in accordance with your fiduciary duty, you can be held in breach and potentially legally accountable for any consequences. Did You Agree to This Duty? Depending on the situation and your role in the relationship, a fiduciary duty may be inherent to that role. In other words, you are obligated to it without expressly agreeing to it. I'm going to say that again to be sure that you got it -a person can "accidentally" become a fiduciary without expressly agreeing to it! For instance, attorneys, company executives, financial advisors, and trustees all have fiduciary duties toward their clients, stockholders, investors, and other beneficiaries. An employee has a fiduciary duty toward their employer. A marriage partner, a parent, a therapist, a doctor -- whenever one person is acting in a place of trust and confidence in another, there is a fiduciary duty involved. Some common fiduciary roles and their beneficiaries can include both business roles and nonbusiness roles Lawyer/client Doctor/patient Executor of a will/beneficiaries Trustee/beneficiaries Real estate broker/purchasers Stockbroker/investors Agent/principal Corporate director/corporation and shareholders Company officer/owners of the corporation Partner/other partners In all these cases, if the person operating in a fiduciary role does not abide by their legal duties, the beneficiaries have the right to hold them accountable for any negative consequences. How Can This Affect You? In the business world, it’s important to understand the nature of your particular fiduciary duties and how they may expose you to liability if you fail to act within your legal responsibilities. For instance, if an attorney takes on a client, there is a fiduciary duty inherent in that relationship that says that the attorney will act in the best interests of the client and use professionalism and discretion when protecting that client’s interests. If the attorney realizes that is a potential conflict of interest between the new client and another or former client, he or she must immediately disclose that to both parties. They have the option to waive those conflicts. If that doesn’t happen, the attorney has the responsibility to remove himself or herself from representing the new client. This is required despite any personal cost to the attorney and is why attorneys in some jurisdictions will do a conflict search to ensure this doesn’t happen.   Fiduciary Duty and Personal Liability Fiduciary duty imposes personal liability on a person who has breached their duty. When a breach involves a lawsuit, the party in breach may be faced with serious consequences, including monetary penalties, damages, and legal fees. While there are insurance policies that will cover a beneficiary against a possible negligent breach, in most cases, the law will still impose liability on that person. If it is found that the breach was willful, insurance will usually not cover the liability. When a beneficiary claims a fiduciary breach, there are certain elements that must be proven in a successful claim. First, it must be proven that a fiduciary relationship existed. While many professional associations have that inherent to the relationship, a fiduciary duty is best proven when there has been a written agreement to that effect. Second, the fiduciary behaved in a way that was inconsistent with his or her legal duty and this created a breach of their fiduciary duty. The breach must have resulted in financial damages of some kind to the beneficiary. Finally, causation must be proven linking the breach of fiduciary duties to the harm to the beneficiary. Not all consequences of a fiduciary breach are necessarily legal ones. Even if you are not held legally liable for a breach, an accusation can hurt your professional reputation and future career.   How Does This Work With Joint Fiduciaries?   In the case where there are two or more individuals acting as co-fiduciaries, the fiduciary duty of each person will be joint and several. This means that each can be held fully responsible for a breach when both were involved. In a matter of joint fiduciaries, it is the responsibility of all fiduciaries to know what all other fiduciaries are doing and if anyone is acting in breach of their duty. If, as a co-fiduciary, your failure to exercise oversight allows another co-fiduciary to cause harm to a beneficiary, you can be held personally liable. Co-fiduciaries have a legal obligation to be aware of what each other is doing to ensure that the actions of the others are not harming a beneficiary.   Breach of Fiduciary Duty and Self-Dealing One of the most common causes of lawsuits against fiduciaries are claims of “self-dealing. ” This is when the fiduciary works in their own interest to the harm of their beneficiary. In the case of self-dealing, a fiduciary will not only face removal and civil penalties, but he or she may also face punitive penalties and even criminal penalties depending on the nature and circumstances surrounding the breach.   Protecting Yourself From Breaches For anyone acting in a fiduciary capacity, the most basic step to keep yourself and your beneficiary protected is taking your duties as a fiduciary seriously. This involves constant oversight to ensure that you and any co-fiduciaries are not inadvertently or overtly breaching your duties. If you believe that there may be a conflict of interest, your options are disclosure and informed consent or resignation. Making a full disclosure and having a waiver signed by both parties will help protect you as a fiduciary. Conversely, if you are concerned about a potential conflict of interest, you may choose to remove yourself from your fiduciary role. If you become ill or incapacitated and cannot perform your fiduciary duties, it is crucial to take the appropriate measures to have someone assume your fiduciary role. In many cases, a document that has established a fiduciary role will also provide for an alternative party. Breaches in fiduciary duty can be harmful to a professional reputation and your business. If you have a fiduciary duty to any beneficiaries, you must understand your legal obligations and personal liability. When you are unsure of your responsibilities as a fiduciary or you think you may have been the victim of a fiduciary breach or corporate self-dealing, it is critical to get legal guidance. Contact the Law Offices of Ryan Reiffert, PLLC to schedule an appointment to understand your rights and options. --- ### Awards and Honors - Published: 2021-06-01 - Modified: 2024-09-24 - URL: https://ryanreiffert.com/awards-and-honors/   See some of Ryan Reiffert's awards and honors in the list below.   --- ### Media Mentions - Published: 2021-05-04 - Modified: 2022-04-21 - URL: https://ryanreiffert.com/media-mentions/   See some of Ryan Reiffert's features in the media below.   --- ### Fee Transparency - Published: 2021-03-26 - Modified: 2022-05-09 - URL: https://ryanreiffert.com/fee-transparency/ One of the most common questions that I am asked has to do with legal fees. Some people are (quite understandably) afraid to hire an attorney because of the steep hourly rates that can be involved. The almighty Billable Hour has been a cornerstone of the legal profession for decades. Attorneys are expensive; especially good attorneys. But we’re not as expensive as a company-destroying litigation or a lucrative business deal gone wrong. So, what to do about this? While I cannot wave a magic wand and make high-quality legal services free, I can work with your business to help you get more predictability with some alternative fee structures. Many times, an hourly rate is the cleanest option. Other times, it is not. Maybe all you need is a quick phone call from time to time.  We can do a subscription fee. Or maybe your project is a one-off, with nothing fancy.  We can do a flat fee. But, above all, I’ll make sure you’re aware of what direction the fee-clock is going. --- ### Free Resources - Published: 2021-03-26 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/free-resources/ I understand that it’s not always possible to hire an attorney. Whether due to availability of funds or any other reason, sometimes you’re just in a situation where you’ve got to do it yourself. I have gathered together some links to free legal resources that may help you out. This is not an exhaustive list. Not every free resource will be appropriate to you. In addition, there are occasionally free legal clinics scheduled by various organizations that may be able to help you, so you are encouraged to check your local community calendars for such free legal advice clinics. Be forewarned, though, that representing yourself in legal matters is not the easiest thing to do, and you can accidentally make things worse. Moreover, I make no warranty or guarantee regarding the quality or accuracy of any of the linked sites. Without any further ado, here are some helpful links. Texas Law Help is a website dedicated to providing free and reliable legal information to low-income Texans. It is a project of the Texas Legal Services Center, and is supported by the Texas Access to Justice Foundation, Texas Bar Foundation, Travis County Law Library, and Texas Legal Aid Organizations. The Texas Bar Lawyer Referral Information Service (LRIS) is the official lawyer referral service of the State Bar of Texas. While the LRIS staff is unable to provide legal advice, they maintain an extensive directory of participating attorneys in various geographic regions and practice areas that they can connect you with. The San Antonio Bar Association's Lawyer Referral Service (LRS) is the official lawyer referral service of the San Antonio Bar Association (SABA) and can refer you to attorneys in the San Antonio/Bexar County area. Find Legal Help is a project of the American Bar Association (ABA), provided as a public service by the American Bar Association’s Legal Services Division. Texas Riogrande Legal Aid (TRLA) formerly Texas Rural Legal Aid, is a legal aid provider focused on provides free civil legal services to residents in 68 Southwest Texas counties, and more. ABA Free Legal Answers is a virtual legal advice clinic. Qualifying users post their civil legal question to their state’s website. Users will then be emailed when their question receives a response. Attorney volunteers, who must be authorized to provide pro bono assistance in their state, log in to the website, select questions to answer, and provide legal information and advice. Volunteer attorneys will not answer criminal law questions. This is a map of legal aid programs provided by the Texas Courts. Please keep in mind that the courts do not provide direct legal services, represent individuals in legal matters, maintain a list of pro bono attorneys, or match individuals with pro bono attorneys. Please understand that funding for legal services is extremely limited and as a result, programs must turn away many with serious legal needs. The Texas State Law Library provides a list of legal clinics and hotlines. Not all areas of law are represented here, but you may be able to find some free legal help. If you have a probate, guardianship, elder law, or other related matter, the websites of Bexar County Probate Court 1 and Bexar County Probate Court 2 may have some relevant or helpful information for you. If you are looking to make certain corporate/entity filings, the Texas Secretary of State's Office is a good place to start your research. If you are looking to get a very basic introductory education on various legal issues, you can also begin by perusing my collection of infographics here. --- ### Contact > Contact form for your business issue. Do not send any privileged or confidential information. This form does not create attorney-client relationship. - Published: 2021-03-18 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/contact/ --- ### FAQ > Contains answers to some Frequently Asked Questions (FAQ) for Ryan Reiffert business attorney. If your question is not on this page, click the contact form! - Published: 2021-03-18 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/faq/ --- ### Blog > Get a business attorney’s perspective! This blog can educate and inform you on timely (or entertaining!) developments in the law. ***NOT LEGAL ADVICE*** - Published: 2021-03-18 - Modified: 2022-11-08 - URL: https://ryanreiffert.com/blog/ --- ### Ryan Reiffert > Ryan Reiffert is a San Antonio, Texas corporate and estate planning attorney. He regularly represents startups, businesses, entrepreneurs and investors. - Published: 2021-03-18 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/our-team/ryan-reiffert/ --- ### Practice Areas > Mission-critical services and legal expertise for your business to accomplish its goals, sideline risk, and grow, grow, grow! - Published: 2021-03-18 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/practice-areas/ --- ### San Antonio Business & Estate Planning Attorney > A business & corporate lawyer in San Antonio, TX, Ryan Reiffert handles transactions, securities, small business, startups, estate planning & more. - Published: 2021-03-18 - Modified: 2024-09-10 - URL: https://ryanreiffert.com/ --- ## Posts ### Debunking the Top 4 Myths About the Corporate Transparency Act - Published: 2024-02-26 - Modified: 2024-02-26 - URL: https://ryanreiffert.com/blog/debunk-cta-myths/ - Categories: Business Attorney, Business Law, Corporate Law, Corporate Transparency Act (CTA) In a few previous posts, we discussed the Corporate Transparency Act (or CTA). The first article in the series was an overview of the CTA, including its purpose, history, and so forth. In short, the CTA is a piece of anti-moneylaundering and anti-financial crimes legislation that is coming into force in 2024/2025, and will require the disclosure of  MYTH 1: I saw on Instagram that my LLC will cost $500 per day starting in January 2024. Should I just get rid of my LLC? ANSWER: This one isMOSTLY FALSE, but with a kernel of truth. Let's start with the kernel of truth. The CTA does carry a potential $500 per day penalty for noncompliance (plus worse criminal penalties). However, the way in which this information is presented (I've seen a lot of bad advice on social media to the effect of "YOUR LLC IS GOING TO COST YOU $500 PER DAY STARTING RIGHT NOW! ! ! ") is highly misleading. First of all, compliance with the CTA is pretty easy. You are required to make (and keeep up-to-date) a Beneficial Ownership Information (or "BOI") filing with the Financial Crimes Enforcement Network (FinCEN), a subsidiary of the U. S. Department of the Treasury focused on financial crimes such as money laundering and terrorist financing. It's a pretty straightforward process and you can see an overviewhere. Second, not all entities are subject to the same rules (which includes not only LLCs, but also Limited Partnerships and Corporations). Entities formed prior to January 1, 2024, must comply with the CTA by January 1, 2025. So, this potential penalty is quite a ways off for entities that existed before January 2024. Third, even for entities formed after January 1, 2024, the compliance deadline is 90 days from formation (dropping down to 30 days from January 1, 2025  MYTH 2: I heard that now LLCs/Corporations will no longer be private, and anyone can read or search my CTA report. How can I stay anonymous? ANSWER: This one is also MOSTLY FALSE. But again, there is a kernel of truth, so let's start with that. It is true that compliance with the CTA will require you to disclose, and keep up to date, the beneficial owners of your entity (or entities). The BOI filing must be made with FinCEN and law enforcement agencies can search the filings under certain circumstances. But only law enforcementcan search those filings. The BOI reports arenot shared with the general public! So, while you are disclosing the information and you're not anonymous to law enforcement, you may still have a great deal of anonymity with regard to the general public. As a result, if your main concern is anonymity from potential "litigation lottery" plaintiffs or nosy neighbors, the CTA should not overly concern you. On the other hand, if your main concern has to do with anonymity from money laundering enforcement agencies... well... we know some good criminal defense attorneys we'd be happy to put you in touch with!  MYTH 3: I heard the CTA applies toALLCorporations and LLCs. Is that true? ANSWER: This myth isFALSE. The CTA actually provides for a number of exceptions from registration. For example, large companies, banks, CPA firms, investment fund advisers, and similar companies are exempt from registration. You can read about CTA exemptions in more depth here.  MYTH 4: My LLC is just a single-member entity, and my friend told me that the CTA only applies to large corporations. I don't have to file, right? ANSWER: This one is definitelyFALSE. All entities filed with a state, tribe, or foreign country etc. permitted to do business in the United States are reporting companies under the CTA, unless they fall under one of the exemptions. I can certainly understand the thinking behind this myth. After all, numerous U. S. business laws and regulations only apply to larger companies - from Sarbanes-Oxley to the Securities Act of 1933 to Obamacare to various employment laws. However, the CTA is unlike those laws in that the CTA was specifically intended to target small and single member entities that are often used to hide the identity of individuals doing things that are... not quite legal.  ConclusionIf you need help making your CTA filing, contact us. We'll be happy to get a BOI filed on your behalf and keep you on the road to compliance. --- ### Who is Exempt from the Corporate Transparency Act (CTA)? - Published: 2024-02-21 - Modified: 2024-02-28 - URL: https://ryanreiffert.com/blog/cta-exemptions/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Corporate Transparency Act (CTA), Political Landscape, SEC (Securities and Exchange Commission) The Corporate Transparency Act (CTA), enacted as part of the National Defense Authorization Act for Fiscal Year 2021, mandates certain U. S. businesses to disclose beneficial ownership information to the Financial Crimes Enforcement Network (FinCEN). This article is the second article in a series that I am publishing to help guide clients through the new requirements of the CTA. You can read the first article in the series - an introductory overview of the CTA - here. While the overall aim of the CTA is to enhance financial transparency and combat illicit financial activities, some entities are intentionally excluded from the law. The CTA provides 23 specific exemptions for circumstances in which an entity need not file a report of Beneficial Ownership Information (BOI). The 23 Exemptions: Reporting Public Companies: This exemption mainly applies to very large companies who are subject to Securities and Exchange Commission (SEC) reporting and disclosure requirements already. If an entity is required to file reports such as Form 10-K, 10-Q, 8-K and so forth under the Securities Exchange Act of 1934 (the 1934 Act) as (A) an issuer of a class of securities registered under §12 of the 1934 Act or (B) subject to reporting under §15(d) of the 1934 Act, then the entity is exempt from the CTA. This exemption makes a certain amount of sense because it would be impractical, cost-prohibitive, and perhaps privacy-invading for a large company like Microsoft, Google, Berkshire Hathaway, or Wal Mart to disclose every single one of its public shareholders. Governmental Entities: Federal, state, local, and tribal governments, along with their subdivisions, are exempt. In order to qualify as a "government" an entity must be (A) established under federal, state, local, or tribal law and (B) exercise governmental authority on behalf of the United States, a State, a Tribe, or a political subdivision. Banking Entities: Banks are exempt. Banks are already extensively regulated, and it would be redundant to attempt to require CTA disclosures. For purposes of this exemption, the definition of Bank is found in: (A) §3 of the Federal Deposit Insurance Act, (B) §2(a) of the Investment Company Act of 1940, or (C) §202(a) of the Investment Advisers Act of 1940 Credit Unions: Credit Unions are exempt, probably for most of the same reason that banks are exempt. "Credit Union" is defined in §101 of the Federal Credit Union Act (FCUA). Bank Holding Companies/S&L Holding Company: Bank Holding Companies and Savings & Loan Holding Companies, as defined in §2 of the Bank Holding Company Act of 1956 and §10(a) of the Home Owners' Loan Act, respectively, are exempt. Presumably, again, these institutions are already heavily regulated Certain Money Businesses Already Registered with FinCEN: Any "money transmitting business" registered with FinCEN under 31 USC 5330 is exempt because it's already registered with FinCEN, so one would not expect much to be gained by registering with FinCEN a second time. So is a "money services business already registered with FinCEN under 31 CFR 1022. 380, presumably for the same reason. Registered Securities Brokers or Dealers: The terms "broker" and "dealer" are defined in §3 of the 1934 Act. If you are a broker or dealer and you are already registered under §15 of the 1934 Act, you are exempt. Registered Securities Exchanges or Clearing Agencies: The terms "securities exchange" and "clearing agency" are defined in §3 of the 1934 Act. If you are a securities exchange or a clearing agency and you are registered under §6 or §17A of the 1934 Act, you are exempt. Other 1934 Exchange Act Registered Entities: If you do not fall under exemption 1 (Reporting Issuer), exemption 7 (Broker/Dealer), or exemption 8 (Securities Exchange/Clearing Agency), but you are nonetheless registered with the SEC under the 1934 Act, you are exempt. Registered Investment Companies and Registered Investment Advisers (RIAs): If you are an "Investment Company" as defined in Section 3 of the Investment Company Act of 1940 and registered with the SEC under the same Act, you are exempt. If you are an "Investment Adviser" as defined in §202 of the Investment Advisers Act of 1940 and registered with the SEC under the same Act, you are exempt. Venture Capital Fund Adviser: The term "Venture Capital Fund Adviser" is defined in §203(l) of the Investment Advisers Act of 1940. If a VC Adviser has filed Item 10, Schedule A, and Schedule B of Part 1A of Form ADV, or any successor thereto, with the SEC, then that VC Adviser is exempt. Insurance Company: An "Insurance Company" within the meaning of §2 of the Investment Company Act of 1940 is exempt. That definition is as follows: "a company which is organized as an insurance company, whose primary and predominant business activity is the writing of insurance or the reinsuring of risks underwritten by insurance companies, and which is subject to supervision by the insurance commissioner or a similar official or agency of a State; or any receiver or similar official or any liquidating agent for such a company, in his capacity as such. " Insurance Producer Licensed By a State: an "insurance producer" that is authorized by a State and subject to supervision by the insurance commissioner or a similar official or agency of a State is exempt, provided that the "insurance producer" has an operating presence at a physical office in the US. Registered Entities Under the Commodities Exchange Act: An entity can qualify for this exemption in two ways. First, a "registered entity" as defined in §1a of the Commodity Exchange Act is exempt. Second, any of the following, if registered with the Commodities Futures Trading Commission (CFTC) is exempt: "futures commission merchant", "introducing broker", "swap dealer", "major swap participant", "commodity pool operator", or "commodity trading advisor" (per §1a of the Commodity Exchange Act), or a "retail foreign exchange dealer" (per §2(c)(2)(B) of the Commodity Exchange Act). Accounting Firms: Any public accounting firm registered under §102 of Sarbanes-Oxley is exempt Public Utilities: Any regulated public utility that provides telecommunications services, electrical power, natural gas, or water and sewer services within the United States is exempt. The term "regulated public utility" is defined in 26 USC 7701(a)(33)(A). Financial Market Utilities: A "financial market utility" designated by the Financial Stability Oversight Council in accordance with the Payment, Clearing, and Settlement Supervision Act of 2010 is exempt. Pooled Investment Vehicles Operated By Exempt Entities: A pooled investment vehicle operated by an exempt entity is also exempt if the exempt operating entity falls under exemption 3 (Banks),  exemption 4 (Credit Unions), exemption 7 (Securities Brokers/Dealers), exemption 10 (Investment Companies and RIAs), or exemption 11 (VC fund advisers). Certain Federally Tax-Exempt Entities: Certain entities described in §501(c) (including but not limited to 501(c)(3) charitable organizations) and accordingly tax-exempt under §501(a), certain political entities described in §527(e)(1), and certain trusts described in §4947(a)(1) or (2). Please note that this exemption does not necessarily extend to, for example,statedesignated nonprofit corporations. The corporation or other entity must qualify for the relevant federal tax exemption in order to be CTA-exempt. Entity Assisting a Federally Tax-Exempt Entity: An entity will be exempt from CTA on the basis of assisting a tax exempt entity (exemption 19) if it (A) operates exclusively to provide financial assistance to, or hold governance rights over, any entity described in exemption 19, (B) is a U. S. entity, (C) is beneficially owned or controlled exclusively by one or more U. S. citizens or lawful permanent residents, and (D) derives a majority of its funding or revenue from U. S. citizens or lawful permanent residents. Large Operating Companies: A "large operating company" is exempt. In order to qualify as a "large operating company" for purposes of the CTA an entity must meet each of the following: employs more than 20 full time employees in the United States (these terms are defined very specifically; consult your attorney! ); AND has an operating presence at a physical office within the United States; AND filed a Federal income tax or information return in the United States for the previous year demonstrating more than $5,000,000 in gross receipts or sales. For an affiliated group that filed a consolidated return, the applicable amount is the amount on the consolidated return. Subsidiaries of Exempt Entities: A wholly-owned subsidiary of an entity exempt from CTA reporting is also exempt from CTA reporting, except for exemption 6 (Certain Money Businesses Already Registered with FinCEN), exemption 18 (Pooled Investment Vehicles Operated By Exempt Entities), or exemption 20 (Entity Assisting a Federally Tax-Exempt Entity). Inactive Entities: An "inactive entity" is not required to file BOI reports under CTA. The CTA's definition of "inactive entity" is very strict, requiring  one to meet the following six criteria in order to be considered inactive: Existed on or before January 1, 2020; and Is not engaged in active business; and Is not directly, indirectly, wholly, or partially owned by a foreign person; and Has not experienced any change in ownership in the preceding twelve-month period; and Has not sent or received $1,000+, directly, indirectly, or through any affiliate, in the preceding 12 month period; and Does not otherwise hold any kind or type of assets Implications and Further Reading: While these exemptions serve various purposes, they also raise questions regarding potential loopholes and regulatory oversight. The CTA is a very new law, so it remains to be seen how some of these exemptions may develop, be broadened, or be narrowed. For more on the CTA, you can read our big list of CTA myths here or read our guide to CTA compliance. --- ### What is the Corporate Transparency Act or CTA? - Published: 2024-02-21 - Modified: 2024-02-28 - URL: https://ryanreiffert.com/blog/corporate-transparency-act-overview/ - Categories: Business Law, Corporate Law, Corporate Transparency Act (CTA), Political Landscape, Small Business What is the Corporate Transparency Act (CTA)? In an age where transparency and accountability are paramount in corporate governance, the Corporate Transparency Act (CTA) emerges as a significant legislative milestone. Enacted in the United States, the CTA aims to enhance corporate transparency by mandating certain disclosures regarding beneficial ownership information. Let's delve into what the CTA entails, its objectives, and the potential implications it holds for businesses and the broader economic landscape. Where did the CTA come from and what does it require? The Corporate Transparency Act, part of the National Defense Authorization Act for FY 2021, was signed into law on January 1, 2021. The primary purpose of the CTA is to prevent the concealment of illegal activities such as money laundering, terrorism financing, tax evasion, and other financial crimes facilitated through the use of business entities with opaque ownership. It requires certain corporations, partnerships, and limited liability companies (LLCs) to disclose information about their beneficial owners to the Financial Crimes Enforcement Network (FinCEN), a bureau of the U. S. Department of the Treasury. When do I have to comply with the CTA? Entities formed after January 1, 2024 must comply beginning now. For 2024, they have 90 days to file. Beginning 2025, newly formed entities will have only 30 days to file. Entities formed before January 1, 2024 must file by December 31, 2024. Key Provisions of the CTA: Beneficial Ownership Reporting: Covered entities are obligated to report information about their beneficial owners to FinCEN, including their names, dates of birth, addresses, and unique identification numbers (such as driver's license or passport numbers). Definition of Beneficial Owner: The CTA defines a beneficial owner as an individual who directly or indirectly owns or controls 25% or more of the ownership interests of a corporation or LLC, or exercises substantial control over the entity. Exemptions: Certain entities are exempt from reporting requirements, including publicly traded companies, certain financial institutions, and entities with a physical presence in the United States and a certain number of employees. Full list of entities exempt from CTA reporting here. Penalties for Non-Compliance: Failure to comply with the reporting requirements of the CTA can result in civil and criminal penalties. Implications of the Corporate Transparency Act: Enhanced Anti-Money Laundering (AML) Efforts: By requiring the disclosure of beneficial ownership information, the CTA provides law enforcement agencies with valuable insights into the ownership structures of corporations and LLCs, thereby facilitating efforts to combat money laundering and other financial crimes. Increased Corporate Transparency: Transparency regarding beneficial ownership can help deter individuals from using anonymous shell companies to engage in illicit activities, thereby promoting compliance with criminal law. Compliance Challenges for Businesses: While the CTA aims to enhance transparency, it also imposes compliance burdens on covered entities, particularly small and medium-sized businesses. Meeting reporting requirements may necessitate additional administrative resources and expenses. Global Impact: The enactment of the CTA reflects a broader global trend towards enhancing corporate transparency and combating financial crimes. In fact, the U. S. has been something of a laggard in comparison to international peers with regard to corporate transparency reporting. Many other countries already have CTA-like legislation on the books. Other ResourcesCurious about CTA compliance? Read our guide to CTA Compliance here. Did you hear something on instagram about the CTA? It may or may not be true. Read our big list of CTA myths here. Conclusion: The Corporate Transparency Act represents a significant step towards enhanced corporate transparency in the United States. By requiring the disclosure of beneficial ownership information, the CTA aims to combat illicit financial activities and enhance the integrity of the financial system. While compliance with the CTA may pose challenges for businesses, it is also expected to bring about a reduction in financial crime such as money laundering. --- ### What is Tax-Deductible in 2023? —Business Owner Update - Published: 2023-03-20 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/what-is-tax-deductible-in-2023/ - Categories: Tax Deductions For many business owners, being able to deduct meal and entertainment expenses can be incredibly helpful for marketing and conducting client matters. As I wrote last year, (See: Last year's post on deductibles here) COVID-19 impacted this area of US tax law. Though the Tax Cuts and Jobs Act (TCJA) of 2017 altered the “meals and entertainment” tax rules by making entertainment an entirely non-deductive expense and reducing meal tax deduction to 50%, changes were implemented last year as a response to the pandemic. However, things have reverted back for corporate taxes in 2023. Unfortunately, the value of the meal deduction is halved for 2023 in comparison with 2022 and entertainment deductions are largely ineligible whereas certain deductions were made last year. As indicated in the TCJA, meals are again eligible for either 50% or 100% deductibility. However, in both the case of meals and entertainment, the purpose or circumstance is critical to whether or not the expense is eligible for a deduction. This can be tricky at first, but here are some guidelines to simplify and outline what is or is not deductible in 2023. Meals As aforementioned, meals will be deductible for either 50% or 100% in 2023, depending on the purpose of the meal and the meeting. Here are tax deductions that will be 50% deductible: Business meals with clients Meals while traveling for work Food items for the office Meals at a conference Here are tax deductions that will be 100% deductible: Dinner for employees working late at the office Food for company holiday parties Food and beverages given to the public Treating 50% or more of your employees to a meal (a 50%  deduction applies if treating less than half of all employees) How to know what is considered a deductible expense The guidelines above should offer some clarity regarding what counts as a deductible business meal. But there are some other guidelines or aspects that could render your expense ineligible. Meals that are considered “lavish” or “extravagant” cannot be deducted. However, the IRS will not consider a meal lavish or extravagant if it “is reasonable based on the facts and circumstance. ” This means that even if you are dining at a deluxe restaurant or hotel, your expense can still be considered for a deduction. Grocery and convenience stores that mostly sell pre-packaged goods that are not meant for immediate consumption are not regarded as restaurants Employer-operated eating facilities are also not qualified as restaurants, even if managed by a third party service Also worth noting is that transportation costs to and from the restaurant are NOT considered part of the cost of a business meal. How to receive your deductions for meals Keeping records of relevant expenses is important to securing that you receive your deduction from the IRS. Though the IRS does not require receipts for meals totaling less than $75, you should still keep some sort of record for the expense. Things to note include: Total price of the meal after tip The date of the meal Who was in attendance Name of the restaurant How it related to your business and what matters were discussed Entertainment Deductions Again, entertainment expenses are largely ineligible for tax deductions in 2023. But, there is still hope! While things like golf expenses and sports games can not be deducted, there are several exceptions that allow for entertainment-related deductions, including: Expenses for events like company holiday parties Events like rewards trips Expenses for business meetings like chamber meetings, conferences, etc. Additionally, if your business involves the selling of entertainment, you can be eligible for expenses like hiring a comedian to play at your venue. Conclusion Overall, the return to TCJA rules means that there are generally fewer opportunities for deductions than in 2022. Meals will typically be considered 50% or 100% deductible, and most entertainment costs for marketing or client contact will have to come out of pocket. That means it is even more critical to be savvy about navigating and ensuring you secure the deductions you are eligible for this year. Understanding and staying updated on the rules of deductions can help you make the right decisions for your business in 2023! If you are a business looking for advice on meals and entertainment tax deductions, Ryan Reiffert can help you. He is a lawyer with extensive knowledge about business, estate planning, and related laws in the state of Texas. Contact us at (210) 817-4388 to schedule an initial consultation. --- ### Legal Zoom for Wills: an Attorney's Honest Review - Published: 2023-03-06 - Modified: 2024-03-11 - URL: https://ryanreiffert.com/blog/legal-zoom-for-wills-review/ - Categories: Estate Planning, Probate Legal Zoom is a popular online platform that provides legal services, including the creation of wills. One of the most common questions that I get has to do with the comparison of a Legal Zoom will to an attorney-prepared will. While Legal Zoom can be a convenient and affordable option for some people, it is definitely not for everyone. There are some attorneys out there who will tell you to NEVER use Legal Zoom for anything. They will tell you how terrible their documents are and have all kinds of horror stories for you. I am not one of those attorneys. Using Legal Zoom for creating a will is a great option for the right people under the right circumstances. For a certain set of customers, Legal Zoom has really done a great thing making legal services more accessible. But, for the wrong people or the wrong circumstances, a Legal Zoom will can be invalid, unwieldy, inappropriate, or even downright counterproductive. So let’s talk about those circumstances and some of the upsides and downsides to a Legal Zoom will. 1. Hope You Like Multiple Choice Tests! When you start the process of creating your Legal Zoom will, the online platform will run you through a series of questions – some of which may have some complicated legal ideas attached. If you have further questions about what exactly you are being asked to decide, there is no lawyer in front of you to help you understand (and if you call LegalZoom, their CSRs (who are not lawyers) cannot give you legal advice or explain legal concepts). If you answer these questions correctly, you are likely to end up with a quality document that will do what you need it to do. CONGRATULATIONS! If you answer these questions incorrectly, you are likely to end up with a document that would be great for someone else, but is not great for you. Best case scenario, such an inappropriate document could create some minor inconveniences; worst case, you could be handing your heirs an incipient controversy with legal fees twenty times what a will would have cost. The upshot is that, if you are comfortable doing a significant amount of research and educating yourself on what various legal terms mean, then a Legal Zoom will might be a good option for you. If you are not, you might rethink where you're getting your will done. 2. Hope Your Family Is Normal(ish)! One of the most common issues with using LegalZoom for a will is that it may not be tailored to your specific needs and circumstances. Legal Zoom's standard will template is written for a certain range of circumstances, and can be modified by the program to accommodate a few different scenarios within that range of circumstances. But what if your circumstances are outside of what the programmers envisioned? The Legal Zoom will template may not take into account unique family situations, atypical financial arrangements, or unusual assets you may own. This can lead to unintended consequences, or just a flat- out inability to accomplish what you set out to accomplish. Here, you might ask, with some justification “don’t lawyers use templates too? ” – and the answer is YES, WE DO. But here is the difference. When there is a mismatch between the template and the situation such as client goals, etc. , a competent estate planning lawyer knows what parts of the template can be changed, and what parts need to remain immovable. A lawyer can generally help you find a way to get anywhere you want to go (as long as it is legal! ), even if where you want to go is off-road from the template. With Legal Zoom, the template can only change so much. While this limitation is absolutely understandable from a perspective of Legal Zoom limiting their own liability, it is nonetheless a major limitation. 3. Legal Zoom Customer Service Reps Are Not Lawyers If you call Legal Zoom for help with your legal documents, you will not be talking to a lawyer, and the CSRs won’t give you legal advice. Let me say that again. If you call Legal Zoom, the Customer Service Representatives assisting you are not lawyers cannot and will not give you legal advice. Which means that if you are struggling to understand what some of those multiple choice questions mean... tough luck, you’re on your own! If you choose to work with a qualified estate planning law firm, on the other hand, you have a direct line to a real lawyer. 4. Legal Zoom Is Not Meant For Complicated Estates Legal Zoom is not geared to handle estates that are ultra-complicated or estates that may end up owing estate tax. These types of estates generally need customized documents in order to be the most tax-efficient. If you want to create trusts or restrictions in your estate, it is a virtual certainty that you are better off hiring an estate planning attorney. If your net worth is over $1M, it is a virtual certainty that you are better off hiring an estate planning attorney. If your estate has non-typical sources of income and assets, it is a virtual certainty that you are better off hiring an estate planning attorney. 5. What If You Have Questions Later? I, like many estate planning attorneys, typically recommend to my clients that they at least open and re- read their wills and other estate planning documents every 3-5 years. That doesn’t necessarily mean that we have to redo the entire thing every 3-5 years, just that you need to read it every 3-5 years to make up your own mind about whether we need to meet. What if you’re reading your will and you have a question? – “What on earth does THAT paragraph mean? ” “Why is THIS section here? ” “I don’t remember talking about THOSE points, is that right? ” If you worked with an estate planning attorney, you can set up a quick consult to go over those questions and put your mind at ease. If you used Legal Zoom... see point #3 above about non-lawyer CSRs 6. The Will Execution Ceremony Part of creating a valid will is how the will is executed. In Texas, that requires certain questions, recitations, sworn statements, witnesses, and a notary. As an estate planning attorney, I do these will execution ceremonies regularly. But as a layperson, odds are that you do not. As a result, there is a risk that the will created through LegalZoom may not be executed properly. If the execution ceremony is not conducted properly, this could invalidate the entire will! While LegalZoom provides instructions on how to properly execute the will, if the instructions are not followed correctly, your will could be thrown out entirely. And, of course, since Legal Zoom provided you with the correct instructions on how to do it, and YOU did not follow the instructions, they are not responsible. Also, if you're not sure that you're doing the execution correctly, and you call them to ask a question - see my point #3 above - you won't be talking to an attorney. Talk about a disaster! Should You Use Legal Zoom For Estate Planning? Some of you may have reached this point in the article and are thinking to yourselves “I can handle those things” or “those issues don’t apply to me” – that’s great. At this point in your life, you are a good candidate for Legal Zoom or any number of other DIY legal help providers. Go for it! And if you need help revising things in the future, call me! Other of you may have reached this point and decided Legal Zoom is not appropriate for you. If that is you, you should call a good estate planning attorney for help.   DISCLAIMER: I am not affiliated with Legal Zoom in any way. All logos, trademarks, etc. of Legal Zoom are exclusively the property of Legal Zoom --- ### Does an LLC Need a Board of Directors (or Board of Managers)? - Published: 2023-02-25 - Modified: 2024-05-24 - URL: https://ryanreiffert.com/blog/does-llc-need-board-directors/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, M&A, Securities, Small Business, Texas Does an LLC Need a Board of Directors? If you are interested in starting an LLC, one consideration you need to think about is how to structure your business. I get all kinds of questions on the LLC structure, things it can and cannot do. One common question, and the question I am going to address today: does an LLC need a board of directors? To get straight to the point,NO. It does notneeda board, but itcan havea board. A hallmark of LLCs in this area - as with so many other areas - is flexibility. However, there is the separate question of whetheryourLLC should have a board. Of course, consult with your lawyer because there are many pros and cons that come with choosing to have a board of directors for your LLC and the evaluation of your individual circumstances can’t really be done by anyone but you and your lawyer. Nonetheless, this article is intended to help you review some of the potential benefits and drawbacks of choosing to appoint a board of directors for an LLC - it is meant as a preliminary discussion-starter for you and your attorney; nothing else. Before any decisions are made, it is strongly advised to consult a business attorney who can help you ask more relevant and particular questions. If you are just starting out on your business venture, you may not know what an LLC is. An LLC - or limited liability company - is a legal entity that provides its owners with liability protection, if operated properly. Limited liability companies are something like more modern and more flexible versions of corporations/limited partnerships. This protection (if the entity is formed and operated correctly) provides that the owners, or members, are not personally responsible for the company's debts and legal obligations such as lawsuits or other claims. Only the company's assets are used to satisfy any debts or legal claims in the event of a liquidation or bankruptcy. An LLC can be a good choice for small businesses because of its flexibility and relative ease of operation. They are also a little easier to set up and maintain compared to other business structures. How do LLCs work? LLCs are typically run by their owners, who have the power to make all business decisions. However, the owners may choose to manage the business directly, or may choose to  appoint managers to run the day-to-day operations. These managers may or may not be members of the LLC. What is a Board of Directors? If you want to know whether or not a board of directors is the right move for your company, then you need a solid understanding of what a board directors actually is. A board of directors is a group of individuals that are elected each year by shareholders of a corporation to oversee the company's operation. The board is responsible for making business decisions, like setting corporate strategy, hiring executives, and approving major expenditures. What is a Board of Managers? Is It Different? If an LLC elects to have a board, the members of the board are generally called managers, rather than directors. The terminology is different, but the function is relatively similar. Does An LLC Need a Board of Directors (or a Board of Managers)? Unlike a corporation, an LLC is not required to have a board of managers (functionally analogous to a board of directors). It is optional. The LLC can, at its formation, elect to have a board or not have a board. From that point forward, the LLC must be managed according to that choice made at formation. If an LLC chooses not to have a board of directors, then the members of an LLC will directly make all business decisions. We call this being member-managed. It is a more direct and simpler style of management. It can be better for the most involved owners of closely-held companies without third-party investors. On the other hand, if the LLC does choose to have a board of directors, then the members of an LLC will elect managers who will sit as a board to appoint officers and make business decisions. We call this being manager-managed. It is a more indirect style of management that is more complicated but potentially requires much less effort from the members. It can be better for members who have many business interests and are not solely focused on this LLC. As mentioned above, a board of managers can have both benefits and drawbacks. Without evaluating the specifics of your LLC, let's get into a little bit more depth and detail on the potential advantages and potential disadvantages of electing to have a board of managers. Some Advantages of Having a Board of Managers (or Board of Directors) for an LLC 1. Access to Expertise One possible advantage of having a board of managers (board of directors) is that it can provide an LLC with access to a broad range of expertise. A board of managers (board of directors)s has the potential to bring on individuals with diverse backgrounds and skill sets. A new LLC can benefit from the additional resources and breadth of knowledge brought on by theboard of managers (board of directors). 2. Improved Governance Another advantage of having a board of managers (board of directors) is that it can help improve the LLC's governance. A board of managers (board of directors) can provide a higher level of oversight and accountability, ensuring that the company is being run in a responsible manner. The board can also ensure that members or officers are held accountable for their actions. 3. Increased Credibility A board of managers (board of directors) can also increase the LLC's credibility with investors and other stakeholders. This goes hand in hand with the improved governance. Investors may be more likely to invest in an LLC that has a board of managers (board of directors), because they feel more confident that the company is being run in a responsible and professional manner. 4. Long-Term Planning Finally, a board of managers (board of directors) can help an LLC with long-term planning. A board of managers (board of directors) can oversee, develop, and implement a long-term strategic plan. A growing LLC can benefit as it looks to grow or expand its operations. The board can provide guidance and support through new challenges and opportunities. Some Drawbacks of Having a Board of Managers (Board of Directors) for an LLC While there are several advantages to having a board of managers (board of directors), there are also some potential drawbacks to consider: 1. Increased Costs One main drawback of having a board of managers (board of directors) is the increased cost. The individuals will likely need to be compensated for serving on the board, which can be a significant expense for a budding LLC. Additionally, the LLC may consider investing in additional administrative support to help manage the board. 2. Reduced Control Another potential drawback of having a board of managers (board of directors) is that it can reduce the members' control over the company. With a board of managers (board of directors), members will need to consult with the board on major business decisions. The additional step of the board’s decision-making process may make decisions take longer especially if there are disagreements between the members and the board. 3. Increased Legal Obligations A board of managers (board of directors) can also increase the LLC's legal obligations because the board members will have fiduciary responsibilities to the company. A fiduciary duty means that they must act in the best interests of the LLC at all times. If the board fails to fulfill its fiduciary duty, it could lead to legal disputes and potential liability for the board members and the LLC. Conclusion In conclusion, an LLC is not required to have a board of managers or a board of directors, but there are situations where having one may be beneficial. A board can provide the LLC with access to expertise, improved governance, increased credibility, and support for long-term planning. However, having a board can also come with increased costs, reduced control for the members, and increased legal obligations. Ultimately, the decision to have a board should be based on the specific needs and goals of the LLC. It is important to consult your business partners and an attorney to carefully weigh the advantages and disadvantages before making a decision. --- ### What To Do If An Employee Steals From Your Company - Published: 2023-02-25 - Modified: 2024-05-24 - URL: https://ryanreiffert.com/blog/what-to-do-employee-theft/ - Categories: Business Attorney, Business Law, Services Related, Small Business What If An Employee Steals From Your Company? As a business owner, one of the most difficult and frustrating things to deal with is an employee stealing from your company. Frequently, the discovery of such a betrayal strikes employers as a complete surprise. Other times, of course, the theft is discovered because the employer had a suspicion and was looking for it. Unfortunately, employee theft is more common than you might think. In this article, we will discuss what to do if an employee steals from your company, as well as reviewing some Texas laws on employee theft as well as some tips and tricks for preventing and detecting employee theft. Texas Laws on Employee Theft Under Texas law, theft is a criminal offense that can be punished by imprisonment, fines, or both. Employee theft is generally not treated any differently than theft of other sorts. The severity of the crime/punishment depends on the value of the property stolen. If the value of the property stolen was $100 or less, the offense is a Class C misdemeanor. The allowable punishment is a $500 fine only (no jail time). If the amount stolen was between $100-$750, the offense is a Class B misdemeanor. The allowable punishment is up to 180 days in jail and a fine up to $2,000. If the amount stolen was between $750-$2,50, the offense is a Class A misdemeanor. The allowable punishment is up to 1 year of jail time and a fine up to $4,000. If the amount stolen was between $2,500-$30,000, the offense is a “state jail felony. ” The allowable punishment is between 6 months – 2 years in state jail and a fine up to $10,000. If the amount stolen was between $30,000-$150,000, the offense is a third-degree felony. The allowable punishment is between 2-10 years imprisonment and a fine up to $10,000. If the amount stolen was between $150,000-$300,000, the offense is a second-degree felony. The allowable punishment is between 2-20 years imprisonment and a fine up to $10,000. If the amount stolen was $300,000 or more, the offense is a first-degree felony. The allowable punishment is prison time of 5 years to 99 years and a fine up to $10,000. If an employee steals from your company, you have the right to report the theft to the police and ask that the police and prosecutors pursue criminal charges against the employee. However, depending upon the circumstances, it is possible that the prosecuting authorities may decline to prosecute the case, make a plea bargain with the alleged thief, or charge a lesser offense. Contrary to popular belief, it is not your decision on whether to “press charges. ” However, in addition to reporting the theft to the criminal authorities, you may be able to sue the employee for damages on a civil basis, including the value of the stolen property, any losses you incurred as a result of the theft, and any legal fees you incurred in pursuing the case. Most likely, your cause of action against such an employee would be for conversion. Conversion is a common law tort that involves the wrongful exercise of dominion and control over someone else's property. Conversion occurs when a person intentionally takes or uses someone else's property without permission, depriving the owner of its use. Success on a suit for conversion requires the plaintiff to prove that they owned (or had a right to possess) the property, that the defendant wrongfully exercised dominion or control over the property, and that the plaintiff suffered damages as a result. Needless to say, in a case of employee theft, the elements of conversion are quite likely to be present. Preventing Employee Theft It is often said that an ounce of prevention is worth a pound of cure. That is certainly true when it comes to employee theft. Implementing a few common-sense protocols and procedures can drastically reduce the opportunity and incentive for an employee to steal. Conduct Background Checks and Call References: One of the best ways to prevent employee theft is to conduct background checks before hiring, and call an employee’s references. This can help you identify candidates with a history of theft or financial problems. Establish Clear Policies: Clearly communicate your company's policies on theft, fraud, and embezzlement to your employees. Make sure your employees understand the consequences of violating these policies. Restrict Access to Valuables: Limit access to cash, inventory, and other valuable items. Only give access to employees who need it to perform their job duties. Implement Checks and Balances: Implement a system of checks and balances to prevent one person from having too much control over financial transactions or inventory management. Monitor Inventory and Financial Records: Keep a close eye on inventory levels and financial records. Conduct regular audits and review surveillance footage. Monitor Credit Card Statements: If any employees are given access to company credit cards, you should ensure that you strongly monitor your credit card statements. Educate Employees: Educate your employees on the importance of integrity and honesty in the workplace. Encourage them to report any suspicious behavior. Reward Good Behavior: Create a culture of honesty and integrity by rewarding employees who demonstrate ethical behavior. Conduct Exit Interviews: Conduct exit interviews with employees who leave your company to learn more about their reasons for leaving and to identify any potential issues with theft or fraud. Detecting Employee Theft Detecting employee theft can be difficult, as many employees are skilled at covering their tracks. However, there are some signs that can indicate that an employee is stealing from your company. These signs include: Unexplained shortages in inventory or cash flow. Missing or damaged inventory. Increased purchases of expensive items by an employee. Unusual or suspicious behavior, such as (unnecessarily) staying late or arriving early, taking very long breaks, refusing to take time off, etc. Employees who are struggling financially or have a history of financial problems. There are several other steps that you may consider implementing on an ongoing basis to detect future employee theft, including: Regularly Monitor Inventory: Keep a close eye on inventory levels and conduct regular audits to identify any discrepancies. This will help you identify any theft or losses. Periodically Analyze Financial Records: Analyze financial records regularly to detect any irregularities, such as unexplained transactions or unusual expenses. This can help you identify any fraudulent activity or theft. Use Surveillance Cameras: Install surveillance cameras in areas where theft is likely to occur, such as cash registers, storage rooms, and inventory areas. This will help you monitor employee behavior and detect any suspicious activity. Conduct Background Checks: Conduct background checks on new hires and monitor employees with access to cash or inventory. This can help you identify any previous history of theft or financial problems. Encourage Employees to Speak Up: Encourage employees to report any suspicious activity or behavior. Establish a confidential reporting system to allow employees to report any theft or fraud without fear of retaliation. What to Do When You Discover Employee Theft If you discover that an employee has stolen from your company, you should take immediate action to protect your business. However, as tempting as it may be, it is important NOT to immediately confront the employee. Confronting the employee could cause the employee to destroy evidence before you can build your case; or, in the event that your suspicion is wrong, you will have falsely accused an innocent employee of theft. Start your investigation by consulting with your company attorney on a confidential basis. One good potential course of action is to conduct an internal investigation and collect evidence of the theft. This may include reviewing surveillance footage, conducting interviews with employees, and reviewing financial records. You may also conduct a financial analysis that may highlight any irregularities. After your investigations are concluded and you have consulted with counsel, there are a number of actions that you can take, including: Terminating the employee's employment. Contacting law enforcement and reporting the theft. Pursuing legal action against the employee. Conducting a review of your internal controls and making changes to prevent future theft. Educating your employees on the importance of honesty and integrity in the workplace. Conclusion Employee theft can have a significant impact on your business, but there are steps you can take to detect and prevent it. By understanding Texas laws related to employee theft and taking proactive steps to protect your business, you can reduce the risk of theft and minimize the impact if it does occur. If you suspect that an employee is stealing from your company, it is important to take action immediately to protect your business and pursue justice.   --- ### What Are The Differences Between a Real Estate Lawyer and a Realtor? - Published: 2023-02-13 - Modified: 2024-05-24 - URL: https://ryanreiffert.com/blog/differences-real-estate-lawyer-vs-realtor/ - Categories: Real Estate What Are The Differences Between Real Estate Lawyer and a Realtor? Real estate law can be a complex and confusing area, with many different players involved in the buying and selling of property. As a real estate attorney in Texas, I work with realtors and other real estate attorneys regularly. One question that I am asked from time to time – usually by someone who is just breaking into the real estate game -  is: what are the main differences between a real estate lawyer and a realtor, and how do I know when I need one vs. when I need the other? There are many significant differences between the two, and they fulfill vastly different roles. In this article I will try to explain the most basic differences and give you some tips on dealing with each one. Realtors A realtor is a licensed intermediary who acts as a go-between, connecting buyers and sellers in a real estate transaction. A realtor’s primary role when representing a buyer is to help the buyer locate and view properties, generally through use of the Multiple Listing Service (MLS), which is something like a “proprietary Google for realtors,” as well as writing offers and negotiating the buyers’ side of any offers. There are many services that have aimed to replace realtors and their closely-guarded access to the MLS in this regard, such as Zillow, Redfin, and others. These alternatives have met with mixed success. A realtor’s primary role when representing a seller is primarily as a marketer. The realtor will assist with various phases of the marketing of a property, including suggesting pricing for a property, arranging photography, videography, or staging of a property, listing a property on the proprietary MLS, negotiating the sellers’ side of any offers, arranging tours and open houses, and more. Realtors often have a good understanding of the local real estate market and are often able to provide valuable advice on pricing, marketing strategies, and the buying or selling process. However, when engaging with a realtor on either the buy-side or the sell side, it behooves you to remember that realtors are generally paid by commission. Accordingly, they have a financial interest in getting a deal closed, and may be less likely to advise you to walk away from a bad deal. Here are a few pitfalls to be wary of when considering a realtor: Realtors are not ethically prohibited from undertaking a “dual representation. ” A “dual representation” means representing both buyer and seller in the same transaction. If this seems like a conflict of interest to you, you would be correct. Real estate lawyers, who are subject to much stricter ethical standards, are flatly prohibited from a “dual representation” based on this conflict of interest. Needless to say, we recommend against consenting to your realtor entering a “dual representation. ” A realtor’s commission is always negotiable. Many realtors will present a commission as “fixed at 3%” but this is not the case. A realtor who really wants to work with you will generally be willing to reduce their commission. Fees tend to be especially negotiable on the sell-side, where nearly 100% of the effort and time is involved in the initial photography/listing. While realtors are often very knowledgeable about the real estate market, they do not have actual legal training with regard to contract law or other legal topics. Accordingly, you should exercise caution when the contract departs too much from the “standard form” that realtors work with. In other words, when a sophisticated counterparty with a custom contract comes to play, a realtor cannot help you. The quality of realtors is uneven. It generally takes 1 to 4 months to become licensed as a realtor in Texas, and a degree is not required. Compared to the 7 years (4 years undergraduate degree + 3 years doctoral degree) required for admission to the bar, it’s much, much easier to become a realtor. While there are some very competent realtors in the market, there are also some who are... well, not. Choose very carefully. Real Estate Lawyers A real estate lawyer, on the other hand, is a legal professional who focuses on the laws and regulations related to real estate. They may advise on commercial transactions and development as well as zoning, easement, or regulatory matter. They may deal with complex mineral rights transactions or transactions involving large amounts of land with potential challenges. A real estate lawyer is usually not involved in standard residential transactions, due to the standardized nature of such transactions and the general absence of legal issues, although exceptions do exist. In the context of a real estate transaction, the real estate lawyer may provide legal advice to clients on the meaning and consequence of legal documents, as well as counsel his clients on business strategy and negotiation strategy. In the context of a higher-value purchase, the real estate purchase contract’s representations, warranties, closing conditions, covenants, deliverables, etc. will all generally be heavily negotiated. In virtually all cases, it is necessary for this negotiation to flow through attorneys. Here are a few pitfalls to consider when engaging a real estate attorney: Real estate lawyers can be expensive. While realtors charge a percentage commission payable if the deal closes, an attorney may cost between $200 to $1,500 per hour, depending on the attorney’s level of skill and the demand for his or her time. And the attorney’s bill will be due whether the deal closes or falls through or gets put on hold or anything else. If you do not have a clear vision of what you want the attorney to do, you may end up with a large legal bill. You certainly do not want to bring an attorney with you every time you want to look at a possible house to buy. Bringing the attorney in at the right time – not too early, not too late – is key. Attorneys can be very specialized – be sure you find one with real estate experience. If you are doing a commercial real estate development deal, you do not want to hire a personal injury attorney! If you have a dispute over an easement brewing, you don’t want someone who mainly practices criminal defense! Before engaging the attorney, it is a good idea to ask them what their primary practice area(s) are. Be sure to get someone whose experience and skillset matches your problem. Attorneys can sometimes make the process adversarial – not every person on the other side will appreciate talking with an attorney, and it can be seen as an escalation or a hostile act to “lawyer up. ” Nonetheless, it is important to protect yourself. A real estate lawyer may also be involved with disputes related to the real estate purchase contract, such as title disputes, zoning issues, and mortgage problems as well as the termination, modification, or extension of the real estate purchase contract (and under what circumstances such termination, modification, or extension is permitted or required). They may also assist with the related compliance issues. Conclusion While realtors and real estate lawyers may work together on a real estate transaction, their roles and responsibilities are distinct. This was mentioned above, but it’s important enough to repeat here: while realtors are knowledgeable about the real estate market, they are not trained in the law. They cannot provide legal advice (and you wouldn’t want them to! ) Although realtors and real estate lawyers may both play a role in the real estate industry, they serve different purposes and have distinct areas of expertise. If you are buying or selling a property, it is important to understand the role of each professional and how they can help you achieve your goals. If you need legal advice and representation in a real estate transaction, please contact us for a consultation. On the other hand, if you need help with the marketing and sale of a property, we would be happy to make an introduction to a competent realtor.   --- ### Explainer: Per Stirpes vs Per Capita - Published: 2023-02-10 - Modified: 2024-05-24 - URL: https://ryanreiffert.com/blog/per-stirpes-vs-per-capita/ - Categories: Estate Planning, Probate Introduction: Texas Estate Planning We prepare quite a few estate plans, Wills, and trusts for our clients. One question that we get from time to time when discussing how to allocate inheritance to generations after the first is: “what’s the most fair way to distribute? ” This being Texas, it won't surprise you to know that there are many, many diverse opinions on how to divide one's estate, and with a bit of clever planning, we can accomplish almost any goal. There are two common ways to designate the distribution of assets through a Will or trust, which we estate planning lawyers have cleverly used latin names for, so that you know we’re fancy – per capita and per stirpes. These mean, roughly, “by head” and “by branch,” respectively. Before we get into a detailed explanation, let’s take a quick pit-stop and cover some vocabulary that is important to understand when discussing estate planning: Heir – a person that is entitled to another person’s property upon their death, whether by reason of Will, Trust, or the law of intestate succession Testator – person who has made a Will Trust – a component of many estate plans, a Trust is in some ways an alternative to a Will in the context of estate planning, although it can also be used for asset protection and many other things Will – shorthand for a Last Will and Testament; this is a document prepared during a person's lifetime and directs the disposition of assets at their death (as well as other things) Per Capita (Scenario 1) The best way to begin to understand the differences between per capita and per stirpes is through a few examples. Here is the first example: T writes a valid Will during his lifetime. T has two children, A & B. Child A has one child, Grandchild A1. Child B has two children, Grandchildren B1 & B2. Further, A1 has three children of his own – Great-Grandchildren G1, G2, and G3. T names A, B, B1, and B2 as his heirs under his Will, with shares per capita, but does not name A1, G1, G2, or G3 in his Will. In this example, T is the Testator because he or she is the one writing the Will. A, B, B1, and B2 are heirs because they are named in the Will. A1 is not an heir because he/she is not named in the will. G1, G2, and G3 are also not heirs, for the same reason. As mentioned above, per capita means “by the head. ” To distribute assets per capita means that the assets are distributed evenly among all heirs – each heir or “head” gets an equal amount, regardless of whether that heir is a child, grandchild, spouse, best friend, or anything else. Continuing with the above example, in the case of per capita distribution under this Will, each person that T named an heir would receive an even amount of the assets. So, Child A, Child B, Grandchild B1, and Grandchild B2 would each receive 25% of T's estate, while Grandchild A1, and Great-Grandchildren G1, G2, G3 would receive nothing (they are not named in the Testator’s Will, and the death of an Heir does not change that, unless the Will specifies otherwise). Suppose now that Child B dies (or suppose the death of any other heir), the assets would be distributed among the remaining three heirs at approximately 33% each. Again, A1, G1, G2, and G3 get nothing because they are not heirs. Per Capita (Scenario 2) Let’s change the example above very slightly: T writes a valid Will during his lifetime. As before: T has two children, A & B. Child A has one child, A1. Child B has two children, B1 & B2. Further, Child A1 has three children of his own – G1, G2, and G3. However, this time the following things are different: T names all of the above-named descendants in his Will, to share per capita. T does not exclude anyone from his Will like he did before. In this example, T is still the Testator because he or she is the one writing the Will. A, B, B1, and B2 are still heirs. However, this time A1, G1, G2, and G3 are heirs as well. In this case, upon T’s death, each of A, B, B1, B2, A1, G1, G2, and G3 would evenly share in the assets – receiving 1/8th share (or 12. 5%) each. Suppose that Child A pre-deceases T under this Will with per capita distribution rules. In this case, each of B, B1, B2, A1, G1, G2, and G3 would receive 1/7th (or approximately 14. 3%) each. Question: What would happen if, instead, all three of G1, G2, and G3 pre-deceased T? Answer: A, B, B1, B2, and A1 would receive 1/5th (20%) each. Again, the bottom line with per capita is that it does not matter where an heir sits in the family tree with relation to the Testator. All heirs get an equal share per head. The math is simple. All shares are equal. But there is another way of distributing estate assets that can also be considered fair - that alternative method of dividing shares is called per stirpes. Per Stirpes Let’s continue with the previous example, with one small change: T writes a valid Will during his lifetime. As before: T has two children, A & B. Child A has one child, A1. Child B has two children, B1 & B2. Further, A1 has three children of his own – G1, G2, and G3. T names all of the above-named descendants in his Will. T does not exclude anyone from his Will. However, this time the following thing is different: T specifies that the beneficiaries are to share per stirpes. In this example, T remains the Testator because he or she is the one writing the Will. A, B, B1, B2, A1, G1, G2, and G3 all remain heirs as well. Their shares, however, will be determined per stirpes rather than per capita. As mentioned above, per stirpes means “by the branch. ” In order to understand per stirpes, it may help to visualize or sketch out a family tree. If all of the heirs are alive at the time of T’s death, and T has designated a per stirpes distribution to his heirs, Child A and Child B would each receive 50% of T’s estate because they are living immediate children. Each of A1, B1, B2, G1, G2, and G3 would receive nothing, as their shares are included in the 50% that A and B have each received. To illustrate how per stirpes works, let’s suppose that some of the heirs have pre-deceased T. Question: If Child B was already dead at the time of T’s death, who are the heirs and what shares do they inherit? Answer: Child A receives the same 50% from the previous example. Child B’s children, B1 & B2, would get 25% each – this represents one-half of their parent B’s share (you can calculate their share as 50% of 50%). In a per capita distribution, (assuming for a moment that G1, G2, and G3 are not heirs) each of A, B1, and B2 would receive 33. 3%, rather than the 50%/25%/25%. Hopefully from this example, you can see how the different methods of distribution matter, as well as see that a family tree can be extremely helpful. Let's try another example. Question: Suppose, instead, that both A and B were dead at the time of T’s death. What shares do the living heirs inherit? Answer: In this case, B1 and B2 get 25% each, representing one-half of their parent B’s 50%. However, A1 steps into the shoes of his parent A, and receives A’s full 50%. This is again notably different from a per capita distribution in which (assuming for a moment that G1, G2, and G3 are not heirs) each of A1, B1, and B2 would receive 33. 3%. It is also, interestingly, identical to the shares in the example immediately before, because A1 was the only heir of A. Let's run through one more example. Question: Suppose that A and A1 are both dead at the time of T’s death, but all other heirs are alive. What shares do the living heirs inherit? Answer: In this case, G1, G2, and G3 will evenly split A’s (A1’s) 50% share, receiving 16. 6% each. B receives 50%. If this has all made your head spin, the following visuals may be helpful for understanding the difference between per capita and per stirpes: Conclusion We hope that this explanation has been useful for you in understanding the terms per capita and per stirpes. If not, please feel free to give us a call for a consultation and we'd be more than happy to help you figure out a strong estate planning strategy that will work for your circumstances and your family. --- ### Are Meals and Entertainment Tax Deductible? 2022 Brings More Tax Changes - Published: 2022-06-03 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/meals-entertainment-tax-deductible/ - Categories: Tax, Tax Deductions, Tax Planning, Uncategorized The deductibility of meals and entertainment has long been a "hot topic" for business owners - and understandably so! Being able to deduct these potentially-significant marketing expenses can be a game changer for many small businesses. The COVID-19 pandemic has occasioned many changes in the corporate sector and in US tax law, including the oft-asked question of the "meals and entertainment" tax rules. There have been some significant tax changes surrounding meals and entertainment deductibility. The Tax Cuts and Jobs Act (TCJA) of 2017 significantly changed deductions, expensing, depreciation, tax credits, etc. In 2018, Congress made further changes to meals and entertainment tax deductibles. The 2017 rule changes made business entertainment an entirely non-deductive expense while reducing meal tax deduction to 50%. But recently, that has changed somewhat. Writing off your business's meal and entertainment expenses can be confusing. Your meals and events now can be eligible for either 100% or 50% deductibility. However, whether they are 100% or 50% deductible depends on the purpose of the meals and entertainment. Confused yet? You're not alone. Let's dig in a little bit more and try to offer some clarity. Changes to Meal and Entertainment Tax-Deductibility Initially, the TCJA did not allow businesses to makeanydeductions on entertainment and reduced the meal expense deduction to only 50 percent. Many business owners were up in arms about these changes (believe me! I heard about it directly from a lot of y'all! ) However, the Consolidated Appropriations Act (CAA) of 2021 made some temporary additional changes to give the restaurant industry a boost, due in part at least to the hard times that many restaurants had fallen on as a result of the COVID-19 pandemic. TCJA Changes in 2020 Then, TCJA made some changes to its regulations in October 2020. The final regulations act as a guide for businesses on the treatment of meals and entertainment tax deductions. The notice by IRS clearly states that a meal will only qualify for a full tax deduction if it is served on an occasion that has nothing to do with entertainment. If you have a meal at an entertainment event, this meal will only be eligible for a 50 percent deduction. However, the invoice must mention food and beverages separately. Furthermore, you have to ensure that the meal is not too extravagant. In addition, the taxpayer must be present at the time of serving in order for the meal to qualify as deductible. The "present" person can be a business owner or an employee of the taxpaying entity. Luckily, any incidental expenses associated with meals (such as taxes, tips, and delivery fees) are also deductible expenses, if the meal is deductible. The purpose of temporary changes to CAA is to offer added benefits to the businesses and their employees for the purpose of economic stimulus. However, you must remember that the 100 percent meal tax deductibility is only applicable until December 31, 2022 - although, of course, Congress may decide to change the law to extend the benefit yet again at any time. So if you are a business, it’s important that you benefit from these temporary reforms allowing 100 percent deductions. If you are unsure, it is best to hire a tax expert or speak to your accountant and maximize your benefits. 2022 Meal and Entertainment Tax Deduction - Quick Reference Chart On December 27, 2020, the U. S government signed the Consolidated Appropriations Act to make further changes to meal and entertainment deductions. For instance, businesses will be eligible for a 100% deduction on food and beverages purchased from restaurants in 2021 and 2022. The chart below will hopefully help you understand these changes better. Expenses Percent of Deduction allowed Client entertainment such as golf games, concert tickets No deduction allowed Meals with business partners or clients 50% deductible  - this can be 100% deductible if you purchase your meals from a restaurant Office meals and snacks 50% deductible  - this can be 100% deductible if you purchase your meals from a restaurant Company’s party 100% deductible Meals and entertainment that are included in the compensation 100% deductible   So, if you are a business owner having dinner with a client at a restaurant, this meal will be 100% tax-deductible (at least for 2022! ). On the other hand, if you are serving lunch to a client but purchased the meal from a grocery store, this meal will be eligible for 50% tax-deductible (again, for 2022 or until the law changes again). The Non-Deductible Expenses First, let's get the non-deductible expenses out of the way. Some certain items and events are not eligible for any tax deductions under any circumstances, and these are: Meals that you have with a client or business partner during entertainment Sporting event tickets Club memberships as well as club-related expenses Transportation expenses associated with a business meal, even if the meal was at a restaurant 100 Percent Deductible Expenses As a business, you can enjoy 100 percent meal and entertainment tax deductibles under certain other circumstances as well, such as Company Parties: meals are 100% deductible if you are serving them at a company-wide party (such as a Christmas Party or an Employee Appreciation Party, etc) Marketing To The Public: food and drinks provided to the public free of charge, for example at a marketing event for prospective clients are also 100% deductible Cafeterias and Employer-Provided Food: food is 100% deductible if it is a part of taxable compensation for the employees (such as an employer-sponsored meal program or cafeteria for employees); the catch is that it must also be included on the employee's W-2 50 Percent Deductible Meal Expenses There are many meal expenses with 50% tax deductibility. Some of the most common scenarios eligible for the 50 % deductible level are: When you have a meal with a client while discussing work (however, the dinner must not be "lavish" or else the deduction may be disallowed) Meals are served to the employees at a conference when the meal price is comparatively more than the conference's ticket price. Employees having a meal while traveling for work. Treating a team of employees by taking them out for a meal. However, if you are taking out more than 50 percent of your workforce for a meal, this meal will be eligible for 100 percent tax-deductible (recall the "company party" rules above). Food served during a board meeting. Dinner that you provide for employees working late. Restaurant Meals Modifications The restaurant industry took the biggest economic hit during the COVID-19 pandemic. Once again, the credit for these amendments or modifications goes to the CAA. As of 2022, for all the meal costs incurred or paid during 2021 and 2022, businesses may be eligible to claim a 100 percent deduction when purchasing meals from restaurants. This means all meals eligible for a 50 percent deduction qualify for 100 percent tax deductibility during 2021 and 2022. However, these temporary tax deduction measures are only applicable for meals. Entertainment expenses are still non-deductible. The Inland Revenue Service (IRS) published Notice 2021-25 and 2021-63 dealing with the 100% meal deduction issue. Both notices provide businesses with additional guidelines on applying a 100 percent meal tax deduction. If you are looking for additional guidance on the topic, these two notices are a great place to start. And keep in mind that if your meal falls short of the criteria in the IRS Notices, all is not lost. Meals that do not qualify for a full 100 percent deduction may still be eligible for 50 percent deductions. What Qualifies as a Restaurant? For a meal to be 100 percent deductible, it has to be purchased from "a restaurant". And while historically the meaning of that term is obvious, in recent years it has become a little bit more slippery, between in-house cafeterias, coffee bars that serve food, food trucks, travelling chefs, pop up restaurants, movie theaters that serve dinner and drinks, takeout-only food stands, food delivery services, ready-made meal prep services, and many many more. So which of these is a restaurant and which isn't? Fortunately, Notice 2021-25 by the IRS defines a restaurant. A restaurant is a business that cooks and sells food as well as beverages to its diners for immediate consumption. However, it does not matter whether the food preparing business serves the food on the premise or as a takeaway service. A business is not a restaurant if it sells prepackaged food that is not for immediate consumption. These include convenience stores, grocery stores, liquor stores, specialty food stands, vending machines, and drug stores. What if you are a business with an in-house cafeteria - your own eating facility that cooks and serves food? In that case, your food will not be eligible for 100 percent deductibility. This applies to on-site food facilities contracted out to or operated by third-party food preparers as well. On the other hand, if you buy a meal from a restaurant and bring it to the office to eat, it is eligible for a 100 percent tax deduction. Similarly, if you are having a meal with a client within the restaurant's premises, it also qualifies for maximum tax deductibility. According to IRS Notice 2021-63, as a taxpayer, your business can treat meal allowance as 100 percent deductible. However, you must meet the pre-requisite to substantiate this expense, or the expense qualifies for a 100 percent temporary meal deduction. Conclusion Many work-associated meals can be eligible for 50 percent or 100 percent tax deductibility, if you will just do your homework. And while may be some exceptions, it will benefit your business to learn more about these rules (and of course, always save your receipts! ) Also, always remember that none of the TCJA rules allow entertainment to be eligible for a tax deduction. If you are a business looking for advice on meals and entertainment tax deductions, Ryan Reiffert can help you. He is a lawyer with extensive knowledge about business, estate planning, and related laws in the state of Texas. Contact us at (210) 817-4388 to schedule an initial consultation. You can also read about other 2022 legislative changes here. --- ### San Antonio Real Estate Attorney Ryan Reiffert Quoted in Redfin Regarding What to do if a Contractor Quits in the Middle of a Job - Published: 2022-05-24 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/ryan-reiffert-redfin-contractor-quit/ - Categories: Uncategorized San Antonio real estate lawyer Ryan Reiffert recently was interviewed by Redfin's Julia Weaver for an important article containing guidance for homeowners who have contractors quit on them in the middle of a job. The portion of the article where I was quoted was this: Don’t let the contractor get “ahead of you” The first thing to do is prepare for a contractor to quit in the middle of a job and never let a contractor get “ahead of you. ” While many contractors are honest and hardworking, some  will request a large amount upfront and then disappear without doing much or any work. In your agreement, set forth a schedule for progress payments according to the percentage completion of the job. Something like paying every 10% or every 25% completed. And from this amount, you withhold 5% or 10% as “retainage” that you will hold until full job completion. As a result, if the contractor ever disappears, you are not harmed, and you can hire someone else to complete the job. The contractor has a financial incentive to complete the job on time for the full payment. As for the cost of materials, you should either require receipts with the exact amount spent on the materials or have materials delivered directly to the site. If you paid the contractor upfront and/or let them get ahead of you on the job, you may have to resort to legal remedies such as a lawsuit. Always have a good solid contract drafted by a qualified real estate attorney and ensure that you get a personal guarantee from as many people as possible – the contractor and anyone else you can. If a corporation or LLC signed, you can sue that entity, but the entity can be emptied, and the assets moved around, resulting in a much harder time for you. – Ryan Reiffert, Attorney at the Law Offices of Ryan Reiffert in San Antonio, TX   As a San Antonio real estate lawyer, I have seen clients and others in the field get burned over and over by failing to adhere to one or more of these key principles. If you do not always keep financial incentives at the top of your mind and at the forefront of your concerns, you stand the potentially be taken advantage of by an unscrupulous contractor. An ounce of prevention is worth a pound of cure. Some of my clients have experienced this firsthand. This is why using a well-drafted real estate contract up front is so important, and why it is absolutely crucial to have a competent real estate attorney helping you with your earnest money contracts or other real estate acquisition agreements. For other real estate insights, stay tuned to this blog.   --- ### Updating Your Estate Plan After a Divorce - Published: 2022-05-18 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/update-estate-plan-divorce/ - Categories: Estate Planning, Probate Getting a divorce and the post-divorce period is full of emotional and financial turmoil for the divorcees. In such a chaotic and potentially upsetting time, revising your estate planning may not even cross your mind. After all, you're starting a new chapter in your life after the divorce, and your end-of-life planning may be the last thing on your priority list. However, while you are getting a divorce or after getting a divorce, it is absolutely critical that you take certain steps to revise, update or change your estate plan to reflect your new wishes and your new reality. If you do not take care of this matter, the division of your assets may not go as you intended, and your ex-spouse or ex-in-laws may also get what they do not deserve. Therefore, if you are someone in the midst of a divorce process or have recently (or even not-so-recently) been through a divorce, this post is for you! We will share some helpful tips and thoughts about changing your estate plan. 6 Steps for Revising Your Estate Plan During or After Divorce Here are six valuable tips that will help you with updating your estate plan after a divorce. Revoking the Old will and Making a New One While you are getting divorced or after the finalization of your divorce, your first step must be to revoke your old will and replace it with a new one. If you do not have a will yet, this is the perfect time to remedy that oversight. To accomplish that, you can seek the assistance of an attorney with significant experience in estate planning law. You can even do so online or use a will-making software; however, this is something that can be a hit and miss. In the event that you complete the form incorrectly, or botch the execution ceremony of the will, you may have an inappropriate document, or a document that will be impossible for the court to admit to probate. Here is what your will allows you to do. You can leave your property and assets to your loved ones. It is absolutely your choice on who gets what, and sometimes you can even attach some conditions or create some trusts. The people you nominate to receive your assets upon your death are known as beneficiaries or heirs. You also must name an executor, a person who will ensure that the distribution of your assets goes as per the instructions in the will. Your executor can be ANYONE - and while it is frequently your spouse, a relative, a friend, or an attorney - really it can be anyone you trust. In case you do not have a will, the court will appoint an administrator (similar to an executor) on its own discretion to carry out the distribution of your estate and finances. If you have young children, you must take care to nominate a guardian to take care of them. Naming New Beneficiaries Always remember that if you made your ex-spouse or ex-in-laws a beneficiary in your will, then you must revoke, revise or change your estate plan immediately when divorce papers are filed. While a final divorce decree often invalidates a bequest to an ex-spouse (in most states), this begs the question: what happens if you die before the divorce is finalized and the divorce decree entered? This may come as a shock to you, but if you die during the divorce process before the divorce is finalized by the judge's signing the divorce decree, and without creating a new will, your spouse may still be a beneficiary while you now do not intend to share anything with them. Moreover, the rest of your will may remain the same; although again in some states, a final decree of divorce removes ex-spouse's relatives from the will. Rather than wait on the long, drawn-out court process, why not revise your estate plan immediately? Many people who have been through a divorce would tell you that the process can drag on, and on, and on, and ... . you get the picture. We hope you agree that this qualifies the matter of revising your estate plan as urgent! Name Your Executor Wisely Have you named your former spouse or a former in-law as the executor of the will? In that case, you most likely would not want them to be the executor of your will or in charge of your estate upon your demise. Therefore, you can remove them as an executor immediately by changing your will. Once again, some states' laws automatically revoke your ex-spouse's status as an executor of your will or serve as a trustee of your property or trust. In this case, if you have nominated an alternate/backup executor in your will, it is going to serve the purpose. But why take the chance, and why wait? Make your revisions to your estate plan early on in the divorce process and buy yourself some peace of mind! A quick piece of advice here, though. When choosing an executor of your will, it is wise to ensure it is not someone controversial. If an executor is someone the other beneficiaries do not like, it may cause more dissent and litigation. Nominating the Guardians of Young Children If you have minor children, then you must always nominate a guardian who would take care of them if you should die before they reach age 18. This will be the person you will be the legal custodian of your children. The job of the guardians will be to raise your children as per your wishes (if any). In case both you and your ex-spouse die without nominating a guardian, then the court will appoint a guardian for your underage children. Let us suppose you do not wish your ex-spouse to raise your kids just because you want nothing to do with them. In that case, unfortunately, you may not get your way and the courts would likely deem your former partner as a guardian, absent some sort of glaring problems. Nonetheless, it is important to update your declaration of guardian. Update Each Beneficiary Designation Assets held in an account bearing a beneficiary designation pass by contract upon the death of the holder - they are what we call "non-probate assets" meaning that they do not pass through the probate process and are not controlled by the provisions of the will. So, during a divorce or after a divorce, the accounts and assets of your estate will be divided. In this case, you may want to redistribute your estate and assets and re-designate various beneficiaries to effect your desired distribution of assets. Therefore, you must update your beneficiaries’ designations on various documents. These include: Your life insurance policy Retirement accounts, including 401 (k) and IAs Your pay-on-death bank account nomination Your transfer-on-death bank account Others Make sure to revise the designations and nominations for each beneficiary account as per your wishes. To nominate new beneficiaries in your new estate plan, you must do the following: Submit a written request to nominate new beneficiaries or heirs Request your banks, employers, and other entities such as insurance companies to send you the confirmation of the new documents as soon as possible. A divorce may automatically remove your ex-spouse as a beneficiary of your IRAs, 401 (k), employer's life insurance coverage, and pensions. However, it is best not to rely on "automatic" provisions and to put the changes into place yourself. However, suppose you nominated your spouse as a beneficiary of your employer's life insurance coverage. In this case, the Employment Retirement Income Security Act (ERISA) may protect your ex-spouse from the consequences of the divorce (likely contrary to your wishes! ). This is because, according to ERISA, the employer will hand over the funds to the beneficiaries mentioned in your plan documents. Unless you have made sure you changed your employer's life insurance policy and struck off the name of your former spouse. Making New Powers of Attorney Revising your estate plan also may require making a new medical power of attorney and/or statutory durable power of attorney. This is the document that will give authority to the person you nominate to act on your behalf. This way, if you are not present, suffer from dementia, are unconscious for a long period, or are left incapacitated (such as in a coma), the person with the appropriate power of attorney will be able to make financial and medical health decisions on your behalf. Texas law provides for separate power of attorneys for your finances (durable) and health-related decisions (medical). The person making financial decisions on your behalf does not necessarily need to be in charge of making health decisions for you. For example, you can leave an attorney or trust responsible for making financial decisions on your behalf; your son, daughter, or a loved one can have a power of attorney to make a medical decision when you cannot do so anymore due to physical and mental health issues. Want to Revise/Update or Change Your Estate Plan? No Problem If you are someone going through a divorce and wish to renew or change your estate plan, Ryan Reiffert can help you. He is a lawyer who has extensive knowledge about estate planning and related laws in the state of Texas. --- ### Doing Business In Mexico: How Has COVID-19 Affected the Texas-Mexico Border? - Published: 2022-03-29 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/business-mexico-covid/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Economics, Mexico, Texas How Has COVID-19 Affected the Communities along the Texas-Mexico Border? Federal Aid Helps Keep Pace Since the COVID-19 pandemic broke out in 2020, the communities along with the Texas-Mexico border suffered a great deal economically. Elevated mortality rates and infection amongst the population were two main challenges. This resulted in the shutdown of entry ports and the collapse of local trade. In some border communities, a lack of investment and resources increases the risk of the virus spreading. For instance, the southern Texas area has been one of the high infection areas with the highest cases per capita in the United States. Another report states that people living in the rural Rio Grande Valley in the state of Texas were at higher risk. This was due to little to no access to adequate healthcare service and lack of infrastructure. Why does the Texas-Mexico Border Suffer? This limited access to healthcare facilities and hospitals, in combination with Border Patrol checkpoints, has forced people to choose whether they would want to get healthcare or risk deportation. Therefore, the situation has led to an increase in the risk of infection spreading amongst the border residents. For instance, McMullen County in the state of Texas had one of the highest per-capita fatality rates at 673. This was higher than any other counties in the southern border region. The second state in the lead was Maverick Country, with 620 deaths per capita. In fact, the top 10 counties with the highest per-capita deaths in the nation were all communities in southern Texas. According to the New York Times report, last summer, southern Texas housed one of the top five communicates with the highest infection rate in the United States. These were the areas all linked to the Texas-Mexico border with the highest rates of unemployment, poverty, and an increasing population without access to health insurance. That said, the subsequent federal aid is helping these communities keep pace. The federal pandemic relief policies have helped boost the Texas-Mexico border economy to enable economic growth. On top of that, a recent restoration of US trade with Mexico has also resulted in a migration surge supporting recent border economic activity. Why Texas-Mexico Border Plays a Significant Role The Texas-Mexico border plays a vital role in the economy of the state. The international trade at this border amounts to around $350 billion annually. Plus, the economy also relies on Mexican citizens to cross over to the US to work and shop. According to statistics, around 30% of border retail sales come from Mexican shoppers. However, as the COVID-19 pandemic started spreading, the government closed the US border. This resulted in a decline in cross-border traffic, trade, and tourism. As the situation got worse over time, the border economy at the Texas-Mexico border came to a grinding halt. Tom Fullerton, who teaches economics at the University of Texas in El Paso, said that the retail sales sports of the areas should have been $1 billion by the end of 2020. However, due to the restrictions on cross-border travel by the US government, El Paso missed the billion mark by $200 million. While some businesses may recover, others did not last long enough to find consolation in reopening the borders. According to the Hispanic Chamber of Commerce, El Paso, at least 30% of small veteran and women-owned businesses had to close their doors for good due to the travel restrictions in March 2020. Apart from the border-crossing and trade challenges, the Texas-Mexico border also suffered the negative impact of having a large service sector. The sector could not shift to work-from-home like other industries. Thanks to the federal aid that has helped the border economy emerge from this crisis, things are now picking up pace. How Is Federal Aid Helping the Texas-Mexico Border Economy? The aid by the US government is providing a cushion to the Texas border area to reduce the inverse effects on the economy. One of the main reasons behind the improvement in the Texas-Mexico border economy is the wide range of relief programs offered by the federal government. These include: Consolidated Appropriations Act 2021 Coronavirus Aid, Relief and Economic Security aka CARES Act American Rescue plan Act, 20201 Texas is the state that has received the second-highest amount of federal aid to boost the economy. Peter G. Peterson Foundation Reported that till January 2022, the total amount of federal aid injected into Texas had been approximately $322 billion. The best part is that there was no discrimination when it came to the distribution of aid money to the recipients. Whether big or small, all areas received equal amounts of supplemental unemployment benefits and stimulus payments. Therefore, the low-income communities, including the Texas-Mexico border, received a comparatively higher sum of money than their actual income. Did you know that along the Texas border, the$600 per week supplemental unemployment benefit by the federal government had a much wider impact than anywhere else in the state? Not to forget that the unemployment benefits in each state are different, with an average amount of $385 per week across the United States. Now adding the $600 of Supplemental unemployment benefits to the $385 per week brings the total benefit amount to $985. The Texas-Mexico borders' workers received a weekly wage of $609 per week before the rise of a pandemic. Therefore, federal aid actually raised the workers' border wage by 62 percent. The rest of the state was not that lucky and only received an unemployment benefit with a 17 percent raise. So, you can see how a fiscal stimulus aided the communities on the Texas-Mexico border in fighting the initial pandemic-associated decline in trade and economic activities. The stimulus offered by the federal government gave rise to local demand. On the other hand, as the cross-border shoppers could not get into the country, the extra money encouraged the local shoppers to provide business to local retail sales. How US-Mexico Trade is Paving the Way As the trade between the United States and Mexico is getting better, it is further helping the Texas-Mexico border community to recover from the adverse effects of the coronavirus pandemic. According to the stats, the trade percentage between the US and Mexico fell by 53 percent by May 2020. However, it spiked up again in June 2020 and reached 78 percent by July 2020. The North American Free Trade Agreement 1994 between both countries resulted in highly integrated cross-border production relations. As the US manufacturers heavily rely on inventory supply chains from Mexico, the Texas-Mexico border communities benefit from being the channel that enables trade between the two countries. The Federal Reserve Bank of Dallas, Texas, published a study in 2013. This study suggested that if manufacturing increases by 10% on the Mexican border, this triggers an employment boost on the Texan side of the border. For example, employment in the local communities increase by 6. 6% in McAllen, 4. 6% in Laredo, 2. 8% in El Paso, and 2. 2% in Brownsville. Overall Economic Boost in Texas-Mexico Communities There is no denying that the job losses across Texas and the entire county have been more or less the same since the COVID-19 pandemic. However, you may be surprised to know the unemployment in the Texas border area is 0. 4% lower compared to what it used to be in a pre-pandemic era. The Texas-Mexico border has outperformed the rest of the state in education services, health services, mining, construction, information services, manufacturing, leisure, and hospitality. That is the reason why employment in the border areas will grow almost by 4. 6% by the end of December 2021. This is actually not bad when you compare it to the state’s overall increase in employment rate at 5. 1% during the same time period. Therefore, it is safe to say that despite all the setbacks to the Texan economy due to the pandemic outbreak, the economy on the Texas-Mexico border has done really well. Although the federal government will slowly discontinue the stimulus payments, it may create supply-chain bottlenecks for the time being. However, the increased investment interest by the investors and companies in this region helped boost the economy in the post-pandemic world. Thanks to the reopening of the border crossing between the US and Mexico in November 2021, the influx of workers and shoppers is further supporting the economy and boosting commercial activity in the local communities. Want to Trade on the Texas-Mexico Border? No Problem! When establishing a business in the Texas-Mexico border region, hiring legal assistance should be your top priority. So, if you are a business owner, investor, or a company, thinking about investing in the growing economy of the Texas-Mexico border, it is important to consult a high-quality corporate lawyer. Contact usat (210) 817-4388 to schedule a FREE initial consultation. --- ### 6 Things to Know About Opening Non-Profits in Texas - Published: 2022-03-23 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/texas-nonprofits-6-things/ - Categories: Uncategorized One question that I often get in the course of representing a business is whether, how, and how closely, a for-profit business can coordinate with a nonprofit business. Sometimes the question is borne of an intent to evade taxes (which is illegal, and which we never condone) while more often it is borne of an intent to both profit and do good for the world.  This guest post addresses some of those concerns. For any questions, you can contact us here. The following is a guest post written by Pamela Edward:   6 Things to Know About Opening Non-Profits in Texas Image Source: Pexels The United States has the most nonprofits in the world, at about 1. 5 million. In the state of Texas alone, nonprofits are estimated to number at more than 130,000. If you’re somebody with a passion for helping others, you may want to join these ranks, too. However, when starting a nonprofit there are more things to consider than just how you want to help. If you’re thinking of opening your nonprofit in Texas, here are some important things to keep in mind: 1. You’re not exempted from all taxes As a nonprofit your organization will be exempted from taxes, assuming you’ve already filed for federal and Texas State tax exemptions. However, this doesn’t mean that you or anyone else connected with the work of the nonprofit is similarly exempted from taxes. According to the IRS, only employees who earn less than $100 per calendar year are not required to pay income tax. This is something you’ll want to keep in mind for yourself and your team. 2. Reports must be updated yearly In Texas, nonprofits are required to file either annual or periodic reports. These typically require details of the organization, the registered agent, the board members, and some financial records. The financial records are usually comprised of IRS Form 990, state reports, and statements of activities that are best filed by a financial team. These reports serve the purpose of showing transparency for the public and for donors. As such, although some reports are only required to be filed every four years, it’s best practice to publish them yearly. This ingratiates you with decision-makers who want to review updated information regularly. 3. You’re better off upskilling too Even if you’ve got a passion for helping others, nonprofits are just as technical as ordinary businesses. Thus, in order to protect the well-being of your projects, you should also consider learning the tools of the trade. One way to do so is by upskilling your abilities as an operations manager. This will mean learning how to allocate tasks, oversee departments, and make budgets. As explained by the Bureau of Labor and Statistics (BLS), operations managers are essential in every organization to ensure that day-to-day activities are as effective and strategic as possible. You could also onboard a general manager for this task, but as the founder of a nonprofit, it’s best if you’re also capable of handling these responsibilities. 4. You can contest power of attorney One of the primary requirements of starting a nonprofit is to have a registered agent. These individuals will be responsible for receiving all of your organization’s legal notices. In Texas, this may either be an accountant or, most commonly, an attorney who has a physical office and practice in the state. These agents are integral to any nonprofit's legal compliance. That said, you should know that you do have the option to contest the decisions and actions of these agents if, for instance, you suspect that they’re not acting in your best interest. In Texas, this means getting the aid of other attorneys to seek a settlement or mediation. Hopefully, your nonprofit won’t experience such a trial. But it’s important to be prepared for it, just in case. 5. Your board members actually need credentials In Texas, a nonprofit’s organizational structure must include at least three non-related directors, a president, and a secretary. These individuals oversee the nonprofit's operations. Despite this responsibility however, nonprofits sometimes select officers who are not very well versed in the demands of the organization. While these officers may mean well, board members who aren’t experienced won’t add much to your cause. Thus, when looking for board members, try to find those with relevant credentials. Some of the best places to look are among your experienced volunteers, your donor base, and even the community you serve. By looking in these areas, you’re more likely to find diverse candidates with valuable insights and talents. 6. Non-profits don’t survive on goodwill alone Lastly, the harsh but undeniable truth is that many nonprofits struggle with finances even if their causes are supported. In fact, since the pandemic began in 2020, more than one third of all U. S. nonprofits have faced financial jeopardy. Recent studies have also concluded that 38% of nonprofits may close within just two years. Therefore, before you even start your nonprofit you should have a solid financial game plan. This means crystallizing a donor base, an income generator, and a crisis plan in case things go south. This way, your organization won’t be as vulnerable to sudden economic shifts. It’s not easy to open, let alone sustain, a nonprofit. But this hard work does pay off when you can positively impact your community. With the proper preparation, you can ensure that your efforts are effective and long-lasting. For more on legal advice and nonprofits in Texas, please visit our blog again. Written by Pamela Edward for ryanreiffert. com --- ### Buying a Medical Practice: Business Lawyer's Corner - Published: 2022-03-07 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/buying-medical-practice/ - Categories: Business Attorney, M&A Acquiring a Medical Practice ǀ A Guide for Doctors and Physicians Buying a medical practice is one of the significant professional decisions with financial constraints and obligations. Therefore, if you are a doctor or a physician, it is vital for you to seek adequate professional legal and financial advice before signing that sales deed. This is where this post is going to help as you will learn about the factors you need to consider when acquiring a medical practice. Things to Consider when Acquiring a Medical Practice It is every doctor/physician's dream to own a private medical practice someday. The medical practice of your own can help offer the treatments of your choice and have more control over your patient's care. That said, acquiring a medical practice sounds easier than it actually is and comes with its own sets of perks, challenges, and risks. Therefore, it is imperative that you understand the entire process of buying a medical practice. So, without further ado, let us dive right in and look at the factors you must consider. Know Your Needs Knowing your needs is the very first and the most important aspect to consider when deciding to acquire your own medical practice. For this, you will need clarity on what type of medical treatments you would be offering at your new facility. You must also think about the patients you wish to treat and the area where you want to open your practice. This will not only help you narrow down your choices but also focus on specific goals instead of planning haphazardly. Gauging the Existing Culture If you are thinking about acquiring a medical practice that is already operational, you must consider numerous factors other than your needs and locale. Ask yourself the following questions first: Does your area of specialization align with what the medical practice currently offers? Does the area/location of the practice have patients that may need the treatment you specialize in? Or is there a demand for what you specialize in? Will you continue to serve the existing patients of the practice or target new patients? For the latter, you may require a marketing strategy to attract patients looking for the treatments you plan to offer. Will you be taking over the existing staff or hiring your own team? Speaking to the practice's existing staff and patients may help you highlight problematic areas or issues faced by the practice. Will you need to make additional financial investments into buying equipment? What is the current management model of the medical practice? Do practice staff organize and document all medical records, bill, and payments? How? Apart from the abovementioned questions, you must also learn about the current patients' onboarding process. Learning about the resolution strategy for billing disputes will also help you gain insight into how smooth the medical practice’s operations are. Understanding Corporate Practice of Medicine (CPOM) Corporate Practice of Medicine or CPOM is a legal guideline that protects the interest of patients against the commercialization of medical practices. According to CPOM guidelines in Texas, corporations and businesses cannot practice medicine unless they meet certain exceptions. Similarly, non-physician entities or corporations cannot employ a doctor to offer healthcare services in the state of Texas. CPOM is also applicable when it comes to structuring the acquisition of medical practice. If the sales transaction is purely asset-based, you must select the type of entity buying the assets, and this entity must comply with the CPOM. A Non-Binding Letter of Intent Once you have selected the medical practice you wish to buy, you may consider agreeing to a letter of intent which is a non-binding agreement. The letter states certain terms, conditions, and expectations from both parties and can also be a document for resolving issues before completing the purchase process. A letter of intent may also set the groundwork for your final purchase agreement. Image Source: Pexels A Thorough Investigation Never Hurts No matter how great or well-organized the medical practice may appear to be, it is always wise to be diligent in your approach. After all, you need to ensure that the practice you wish to buy is worth it and offers long-term value. Read more about the due diligence process here. Some areas you need to focus on include: Cash flow Revenue records and future forecast Practice’s current accounts payable and accounts receivable Current assets Debts Permits/licenses Ongoing contracts Equipment including the condition You must also get an appraiser to assess the current state and integrity of the building. This will ensure that the medical practice you wish to acquire is compliant with the local building code and is in a safe condition. If you are working with an attorney, you may even request a background check on the seller to ensure there is no ongoing litigation or financial claims pertaining to the medical practice. All of this information and answers to questions will help you determine the financial feasibility of the medical practice while eliminating the chances of any potential risks. Additionally, this will also give you peace of mind that you will get your money's worth if you ever decide to sell the medical practice in the future. It is a Numbers Game While the price that the seller is asking does play a major role in whether you can afford to acquire a medical practice, there are other cost factors you need to consider. For instance, you need to determine how much will it cost you to run this practice? Would you need to buy more equipment or make enhancements to the practice's infrastructure and décor to bring it up to the standards that you have in mind? To determine all of these costs, you must make a comprehensive list of all operational expenses such as: Utility bills Payroll Building repair and maintenance Equipment repair and maintenance Medicinal and other inventory IT services Cost of making any changes to practice's infrastructure Hiring new employees etc Purchase of new equipment Buying new furniture making other aesthetic improvements Feel free to add any other expenses specific to your needs or circumstances. The calculation of all your money coming in and going out will help you determine whether this practice will be profitable once you have acquired it. Your Financing Options Now that you know your needs, the costs, and how much money you need, it is time to start searching for sources to finance your new medical practice (unless you have enough cash in hand).  You have to remember that this may be a personal or commercial loan, and the lenders will consider your credit history as well as your personal finances. Therefore, you must seek an accountant or financial advisor to determine your eligibility to secure a bank loan. Tips for Acquiring a Medical Practice Apart from the abovementioned factors, here are some additional tips that will help you understand and ace the acquisition of medical practice. Image Source: Pexels Understanding the Sale Process The acquisition of medical practice is a 3-step process that involves negotiation, exchanging of contracts, and completion. In negotiation, you sit down with the seller to discuss what you are buying and for what price. You will most likely be entering into a document known as “Heads of Agreement. ” Usually, it is a seller’s responsibility to draft a Sale Agreement and forward it to you. In exchange for the contract, both parties sign the contract, and you (as a buyer) pay the deposit. The date you pay the full payment owed to the seller is known as the completion. Get an Itemized Purchase Summary You will not need to pay stamp duty on intellectual property. However, you will be paying duty on other assets included in the sales deed. Therefore, you must ask the seller to provide an itemized list summary with the price of each asset. It would also be wise to get legal advice from an attorney specializing in the acquisition of medical practice. Lease Validity While acquiring a medical practice, you need to find out if the sale is dependent upon or requires you to obtain a long-term lease. But watch out! Commercial leases can be tricky. Take a few minutes to review our guide on commercial leases here. Explore the Restrictive Covenant Option In some cases, you can restrict the seller practitioner from practicing within a certain radius of your premise for a specific time period. However, you must first explore whether you can apply such restrictive covenants. Once again, you will require the assistance of a legal attorney to ensure the enforcement of any such terms and conditions. Transparency in Communication Keeping communications with the seller, attorney, and other authorities when acquiring a medical practice helps you save time money and avoid frustrations. If you plan to make amendments to the terms related to the sale, then you must communicate any such changes to all parties immediately. No Room for Emotions It may not sound of much importance for you, but you must keep your emotions at bay and approach acquiring a medical practice purely with business acumen. Remember, you are spending a lot of money, and emotional highs or lows may lead to wrong decisions. So always sideline the emotions. Post Sales Obligations It would be best if you did not forget to take out practice insurance once your sales date finalizes and the entire process is over. You need to ensure that you have all the licenses and insurances before you start practicing. Conclusion If you are a doctor or a physician thinking about acquiring medical practice in Texas, obtaining competent legal counsel should be one of your top priorities. Contact Ryan Reiffert, an experienced lawyer with a heart of an entrepreneur, to help you through the process of acquiring a medical practice. Contact us or give us a call at (210) 817-4388 to schedule a FREE initial consultation. --- ### Noncompete Agreements and Nonsolicitation Agreements: What You Need To Know - Published: 2022-02-09 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/noncompete-nonsolicit-101/ - Categories: Contracts What You Need to Know About Non-Competes and Non-Solicits as a Business Owner Today In this article, we will review (a) what is a noncompete? (b) what is a nonsolicit? and (c) how have some states changed their views of these agreements over time. With today’s employment landscape, many companies often have business identities, offices, and employees scattered throughout the country as well as globally. If you are one of these employers, there are several recent changes to employment laws as they apply to non-competes and non-solicits that you should be aware of in Illinois, Oregon, Nevada, and Washington, D. C. Even if you don’t conduct business or have employees in those states, it’s important to keep in mind that a national trend is brewing against these covenants that may affect you in the future. How Non-Competes and Non-Solicits Are Treated Varies From State to State Non-compete and non-solicit covenants are frequently found in employment agreements or separation agreements. They impose limits to what the former employee can do in the way of performing other work that competes with their employer’s business in terms of both geographic limitations and the types of work that can be done during the limitation time period. Most of these begin at employment and then last for a specific period of time after that employment ends. In the past, enforceability was subject to state contract laws, and courts had been flexible and discretionary in their enforcement. But now, more states are limiting non- competes and taking a more clearly defined stance to ensure little wiggle room for interpretation. Many States Have Been Making Changes In Their Noncompete and Nonsolicit Laws As mentioned above, the political winds are a-changin' and with them are changing the laws governing noncompetes and nonsolicits.   Below, we will discuss some of those legal changes. Please note (and I'll remind you again below) that this is not legal advice, but just examining the statutes in these jurisdictions to provide some examples and hints of how noncompetes in other jurisdictions may change. At the end of this article, I'll give some insight into how Texas's noncompete and nonsolicit laws work. Example 1: Changes in the Illinois Freedom to Work Act Illinois is one of the states that has made some significant changes to the way it approaches noncompetes and nonsolicits; we will briefly discuss these items. PLEASE NOTE THAT I AM NOT ADMITTED IN ILLINOIS, AND AM DISCUSSING THESE STATUTORY CHANGES FROM A "POPLITICAL LANDSCAPE" PERSPECTIVE ONLY. THIS IS NOT AN OPINION ON OR ADVICE REGARDING ILLINOIS LAW. As of January 1, 2022, the Illinois Freedom to Work Act was amended as follows: Definition of non-compete covenant – As of January 1, 2022, the IFWA amendment defines a non-compete covenant as one imposing financial consequences of any employee to perform work 1) for another employer for a specific time period, 2) for another employer in a specific geographical area, or 3) for another employer that is similar to work they are doing for the employer as part of the agreement. Definition of a not-to-solicit covenant – As of January 1, 2022, the IFWA amendment further defines a not-to-solicit covenant as one imposing financial consequences of any employee who 1) solicits others of that employer’s employees for employment elsewhere or 2) solicits services or products that interfere with the employer’s current or prospective relationships with employees, clients, vendors, suppliers, or other business relationships. It does not specifically address independent contractors, but loosely defines an employee as “any individual permitted to work by an employer in an occupation. ” Non-compete salary requirements – Employers are prohibited from entering into non-compete agreements with employees earning $75,000 or less annually. This threshold will increase every five years by $5,000 until it reaches $90,000 in 2037. Non-solicit salary requirements – Employers are prohibited to enter into not-to-solicit covenants with any employees who make $45,000 or less annually. This threshold will increase every five years by $2,500 until it reaches $52,500 in 2037. Employer’s obligation – Any employer requesting a non-compete or not-to-solicit must 1) advise the employee in writing to consult with legal counsel before executing it, and 2) provide the employee with a copy at least two weeks prior to the start of employment. Any failure of these will render the covenants unenforceable. Limitations regarding terminated employees – Employers are prohibited from entering into any non-compete or not-to-solicit agreements with any employee who has been terminated, furloughed, or laid off as a result of circumstances related to COVID-19 unless compensation equal to the employee’s base salary is offered during that enforcement period. Limitations regarding collective bargaining agreement – Any non-compete entered into with employees covered under specific collective bargaining agreements or those broadly defined as the construction industry are unlawful and void. Under the IFWA amendment, non compete and not to solicit covenants are allowable if The employee is adequately compensated It is ancillary to the employment relationship only as far as the protection of the business or the employer Does not impose undue hardship on the employee and is not injurious to the public Those who may be subject to these covenants are employees who have worked for at least two years for the employer after signing an agreement or those who were employed plus provided professional or financial benefits as part of their employment. Under the amended IFWA, an employee who prevails in a claim brought by their employer or counterclaim has the right to recover court costs and reasonable attorneys fees. The amendment does not apply to any agreements entered into prior to January 1, 2022. Example 2: Modifications to Oregon’s Non-Compete Laws The second state that has made some good changes to its noncompete laws is Oregon. AGAIN, PLEASE NOTE THAT I AM NOT ADMITTED IN OREGON, AND AM DISCUSSING THESE STATUTORY CHANGES FROM A "POLITICAL LANDSCAPE" PERSPECTIVEONLY. THIS IS NOT AN OPINION ON OR ADVICE REGARDING OREGON LAW. Amendments made to Oregon’s non-compete statute ORS 653. 295 also went into effect on January 1, 2022 and further clarify and restrict non-compete covenants in the state of Oregon. 12-month non-compete limits – While the former law called for the prohibition of non-compete covenants exceeding 18 months after termination, the new amendment changes that time limit to 12 months. Non-compete salary requirements – As of January 1, 2022, a non-compete covenant is void when the employee is not exempt under state wage and hour laws but does not earn over $100,533 per year, adjusted for inflation, at the time of termination. For those covenants entered into before the changes, the employee's gross annual salary had to exceed the median income for a four- person family determined by the U. S. Census Bureau. If an employee is nonexempt or does not meet this salary requirement, non-compete covenants may only be enforceable if the employer agrees to the greater of 1) 50% of the employee’s gross annual base salary and commissions at the time of termination, or 2) 50% of $100,533, adjusted for inflation, whichever is greater. This salary requirement does not apply to those employees who are considered on-air talent. Changes governed by this amendment do not modify the following, which are still in effect in Oregon: An employer must inform their employees of any non-compete requirements in their written employment offer at least 14 days prior to the beginning of employment or an employee’s advancement. The employer must provide the employee a copy of the executed agreement within 30 days of their termination. Non-competes do not apply to independent contractors. Non-competes do not apply to bonus restriction agreements. Interestingly, any non-compete covenants that are entered into after the effective date of January 1, 2022 that are non-compliant will be considered void - not just voidable. Example 3: Modifications to Nevada’s Non-Compete Laws The third state on our list is the Silver State - Nevada. AGAIN, PLEASE NOTE THAT I AM NOT ADMITTED IN NEVADA, AND AM DISCUSSING THESE STATUTORY CHANGES FROM A "POLITICAL LANDSCAPE" PERSPECTIVEONLY. THIS IS NOT AN OPINION ON OR ADVICE REGARDING NEVADA LAW. On October 1, 2021, an amendment went into effect to Nevada’s NRS 613. 195 governing non-compete covenants. The changes include: A ban on non-compete covenants for hourly workers who are “paid solely on an hourly wage basis, exclusive of any tips or gratuities. ” Former employees who challenge and win in actions against non-competes can be awarded reasonable attorneys’ fees. NRS 613. 195 already prohibited covenants that restricted former employees from working for former customers or clients of the employer if 1) they did not solicit them, 2) the customer or client voluntarily left the services of that employer and chose to seek the services of the former employee instead, and 3) the former employee is otherwise complying with any other limitations in their non-compete. The amendment further clarifies that the employer may not seek any action to restrict these. Judges in Nevada were required to revise unreasonable non-competes, but the revisions were only required when the employers brought the action. The new laws now extend the requirement of judicial revision in actions brought by an employee. Example 4: Modifications to Non-Competes in Washington, D. C. The fourth "state" on our list is not really a state, but rather a self-governing city outside of any state and the Nation's Capitol - Washington, D. C. AGAIN, PLEASE NOTE THAT I AM NOT A WASHINGTON, D. C. LAWYER, AND AM DISCUSSING THESE STATUTORY CHANGES FROM A "POLITICAL LANDSCAPE" PERSPECTIVEONLY. THIS IS NOT AN OPINION ON OR ADVICE REGARDING WASHINGTON, D. C. LAW. While the Washington, D. C. Ban on Non-Compete Agreements Amendment Act of 2020 took effect in March of last year, the date it would be officially applicable and enforced still remained unclear amidst concerns by the business community. As it stands, there may be forthcoming changes to the ban. The ban faced serious backlash from some in the business community regarding intellectual property rights and the possible prohibition of employers from including conflict of interest provisions in employment agreements. The new applicable date that is being considered is April 1, 2022. Example 5: Possible Federal Rules Last July, President Biden issued an Executive Order that encouraged the FTC to exercise authority over unfair non-compete covenants or other agreements that unfairly hinder employee mobility. While it has not yet issued any ruling about this, it is possiblethat the FTC may move to restrict non-competes nationwide. What Does Texas Have to Say? While it's certainly enlightening to consider what is happening around the country, in different states, and so forth, I am a Texas business lawyer; therefore, the odds are good that if you're reading this article, you're concerned about Texas law. Let me address that concern for you a little bit. What Employers Need to Keep in Mind Employers need to monitor these developments, especially when they have business entities and employees in states that have a limited use of non-competes and non-solicits. As a rule of thumb, non-competes and no-solicits should be no broader than what is necessary to protect their business interests and clearly state its purpose as the protection of trade secrets and confidential business information. Courts are not likely to enforce broad non-competes in general, and with the changes in laws, may not even have the authority to do so. But even with non-compete and non- solicit restrictions and bans, employers still have the ability to protect their interests and assets if agreements are properly tailored and other protections are put in place. If you are an employer or employee with questions about non-compete and non-solicit covenants and their enforceability, we would be happy to answer any questions you may have. At the Law Offices of Ryan Reiffert, PLLC, we have reviewed thousands of employment contracts in a multitude of industries and can help direct you in yours. Contact us online or call us at (210) 817-4288 to schedule a consultation. --- ### Texas Reinstates Franchise Tax Exemption for Veterans beginning in 2022! - Published: 2022-02-01 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/texas-reinstates-franchise-tax-exemption-veterans/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Small Business, Texas Texas Reinstates Veterans Franchise Tax Exemption Big News for 2022! Texas has reinstated the franchise tax exemption for veterans. This will save veterans who want to form an LLC, veterans who want to form a corporation, and so forth, on their franchise taxes for that entity that would otherwise be due to the State of Texas. For more details, read below: Veterans Franchise Tax Exemption in Texas Has Been Reinstated  As of the first of this month, the Texas Comptroller has reinstated some important veteran-owned business benefits, which were in effect from 2016 through 2020. The new benefits are similar to the old ones, and will expire on January 1, 2026. Veterans who quality may benefit from a refund for filing fees as well as an exemption from Texas franchise taxes for the first five years of the existence of the business. The franchise tax is a privilege tax that is imposed on any entity that is formed, organized, or does business in the State of Texas. This tax exemption for veteran-owned businesses can potentially save veterans a sizable amount of money, depending on the business’s profitability. Qualifying for the Exemption In order to qualify, a business must be considered a"new veteran-owned business". This requires that the business must Have been formed or organized in Texas either on or after January 1, 2016 and before January 1, 2020, or on or after January 1, 2022 and before January 1, 2026; Be 100 percent owned by a natural person or persons, each of whom must have been honorably discharged veterans from a branch of the United States Armed Services – proof of veteran status may be obtained by providing a copy of the DD214 to the Texas Veterans Commission; Request a Letter of Verification of Veteran’s Honorable Discharge for each owner from the Texas Veterans Commission. Once all the owners of the company have received their honorable discharge verification letter, they each must complete Comptroller Form 05-904, enter their name, alpha-numeric identification code from the verification letter, and their percentage of ownership in the company. Once the business owner(s) have the forms necessary to certify their veteran status, they can proceed with the formation of the business through the Texas Secretary of State. This process typically takes about a month depending on the volume of requests. If the company no longer meets the qualification criteria during the first five years of operation, the business must notify the Comptroller’s office and they will no longer be qualified for the exemption. What if You Formed Your Business During the Last Exemption Period and Did Not Take Advantage of the Franchise Tax Exemption? If you owned a veteran-owned new business between January 1, 2016 and January 1, 2020, you may be able to still benefit from that exemption. You must fulfill all the steps above and send the information to the Secretary of State at corpcert@sos. texas. gov with a cover letter giving all the pertinent information. If you meet the requirements for qualification, you will receive a refund. How Does Waiving the Franchise Fee Help Veteran Business Owners?   The original bill was put into effect to help assist veterans with forming small businesses by waiving some of the fees and taxes for them in the first five years of the company’s existence. While there are some extraneous hoops that must be jumped through, this exemption can represent substantial tax savings, particularly if the business becomes very profitable. In addition to this tax exemption, the Texas Veterans Commission offers veteran entrepreneurs valuable resources, counseling, and direction for starting new businesses. From writing a business plan to offering free business assistance, training, and financing ideas, the commission is a wealth of information for veterans who are considering starting businesses of their own. If you have questions about the new veteran’s franchise tax exemption or would like assistance with the formation of your business, we would love to help you. Contact the Law Offices of Ryan Reiffert to get some individualized help and your questions answered. --- ### New Estate Planning Rules For 2022 - Published: 2022-01-25 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/estate-planning-rules-2022/ - Categories: Estate Planning, Investments, Probate, Small Business, Texas How Changes in 2022 Laws May Affect Your Estate Planning  This year, there are some known and proposed changes in our laws that may have an effect on your estate planning initiatives going forward. While these may be important for some individuals and have little impact on others, it's still good to understand them so you can make the best decisions based on your set of financial circumstances. 2022 Changes in Monthly Retirement Benefits From Social Security Social Security and SSDI make cost of living adjustments annually. But because inflation has been low for many years, there were few substantial increases over the past two decades. Enter 2022, with the annual inflation rate at the end of November, 2021 coming in at 6. 8 percent, the highest it has been since 1982. Consequently, the cost of living increase for Social Security benefits for 2022 is 5. 9 percent. This is the most significant cost of living adjustment since 2009, when we saw a 5. 8 percent increase. 2022 Changes in Medicare As of 2022, there is an increase in Medicare Part B premiums to $170. 10. If your income is over $91,000 for an individual, or $182,000 for a couple, the Income-Related Monthly Adjust Amount can potentially increase your Medicare premiums up to $578. 30 per month, depending on your income. In addition to Part B premium increases, there are additional Medicare changes regarding premiums, deductibles, and copayments. 2022 Changes in SSDI and For Families With Disabilities Social Security Disability is more fluid than Social Security retirement benefits as SSDI benefits are tied to different variables. According to the Social Security Administration, an average social security disability benefit of $1,282 will be increased to $1,358 beginning this month. In addition to this increase, other disability-related programs have also experienced some changes. The maximum contribution to ABLE Act accounts has increased to $16,000 from $15,000. Under the ABLE Act, those with disabilities can use specifically created accounts for their qualified expenses, including housing, transportation, and education. Other Social Security Changes for 2022 Other changes to Social Security in 2022 include the following: In order to earn the maximum four credits toward Social Security in 2022, you must earn $6,040 or $1,510 per quarter. The maximum taxable wage base for Social Security is now $147,000. If you turn 62 during the year, your full retirement age is now 67. If you turn 62 in 2022 and currently collect benefits, those will be reduced by 30 percent of the benefit of your full retirement age. If you work until your full retirement age and are currently collecting benefits, your annual earning limitation is now $19,560. At full retirement age, the earning limit goes away. The maximum Windfall Elimination Provision deduction is now $512 for 2022. Changes in Certain Tax Deductions and Credits Sometimes, it seems that Congress makes tweaks and changes to the tax code every year! Well, 2022 is no different! There are many small (and some not-so-small) changes to the tax code that you should be aware of for 2022. We won't cover every single tax change in this blog post (maybe another time) but here we will highlight a few of the changes that might have a particular impact on estate planning. As always, consult your attorney, accountant, banker, and financial advisor before taking any action! Changes in Earned Income Tax Credit The Earned Income Tax Credit, available to low to medium wage earners, (typically parents, but non-parents can also qualify), has now increased to $6,935. 2022 Changes in Standard Tax Deductions While standard deductions have gone up for 2022, from $12,550 to $12,950 for an unmarried individual and from $25,100 to $25,900 for married couples, this will not be available until you file in 2023. Gift Taxes While you don’t pay any actual gift taxes until lifetime gifts exceed the current threshold of $12. 06 million (which inflation has brought up from $11. 7 million last year), you still must file an annual return for any gifts you have given over $16,000 this year, up from $15,000 last year. Other Changes Affecting Wealthier Individuals The estate tax exemption will mean the most to high-net-worth individuals, allowing a married couple to pass on up to $24. 12 million without paying estate taxes ($12. 06M times two, due to the portability election - if you're wondering what that is, check beck soon for an explainer). While there are nuances that can affect this, most individuals will not have to worry about estate taxes. But since the estate tax exemption is scheduled to drop back down to around $5 million on January 1, 2026, individuals should make use of gifts while they can since the IRS has already confirmed there will be no clawback period if an individual passes after the credit has been reduced. The elimination of the Backdoor Roth 401(k) and other IRA conversion loopholes will survive for now. While the Build Back Better Act would have ended these strategies, these are on hold, along with many other issues still on the table. Even if the legislation is passed, it may possibly be postponed by Congress until 2023, but this is an unknown for now. In addition, our current interest rate landscape makes other specific estate planning strategies particularly attractive, but they may not be available in the future. What Do These Mean For Your Estate Planning? While many of the larger potential changes continue to be on hold with the BBB Act in a state of flux, individuals should always keep abreast of potential tax and legislation changes to understand how they may affect their individual financial picture. Estate planning can be complicated, especially for those with significant wealth. Individuals should meet with their estate planning lawyer periodically to look at what is ahead on the horizon and discuss how they may be affected. This is particularly critical during years like 2022 when there are so many potential changes on the table. If you have questions about how this year’s changes will affect your unique financial circumstances, we would be glad to help. Contact the experienced San Antonio estate planning attorneys at the Law Offices of Ryan Reiffert, PLLC to learn more about how we can assist you. --- ### 2022 Update: New Texas Laws going into force - Published: 2022-01-12 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/texas-laws-2022/ - Categories: Business Law, Political Landscape, Small Business, Texas Texas Sees the Implementation of Twenty-Four New Bills As Of January 1, 2022 It’s been a busy time for Texas lawmakers, with two dozen new laws that took effect last week. While these were all passed during the regular session, and most deal with tax requirements and exemptions, there are some that are particularly actionable for particular populations. Whether you are a disabled veteran, a charitable organization, a website owner, or a backyard chicken keeper, there may be something for you in 2022’s new laws. HB 115 - Revised Eligibility Requirements For Properties Owned By Charitable Organizations House Bill 115 amended the Tax Code and revised eligibility requirements for properties owned by charitable organizations, specifically those properties used to house and service the homeless population. It also removes the requirement that properties must be located on a single campus but added the requirement that all housing offered must be considered permanent housing. HB 531 - Floodplain Notice Requirements for Landlords House Bill 531 amended the Property Code and requires all landlords owning property in 100-year floodplains to provide written notice of the fact to any potential tenants and advise the tenant if the property has experienced flooding within the past five years. If a landlord does not provide this information and the tenant suffers significant loss in a flood on the property, the tenant has the right to terminate the lease. HB 1197 - Extended Tax Breaks for Churches House Bill 1197 amended the Tax Code to increase the time that property used for worship owned by a religious organization can be exempted from paying property taxes from six to 10 years. HB 1445 - Dental and Medical Billing Services House Bill 1445 amended the tax code to exclude dental or medical billing services before the submission of an insurance claim for services that are subject to sales and use taxes. HB 1689 - Amendments to Insurance Code Regarding Reinsurance House Bill 1689 amended the Insurance Code regarding reinsurance under the Dodd-Frank Act. It requires that credit be allowed when reinsurance is surrendered to an insurer in a reciprocating jurisdiction. The insurance commissioner is required to publish a list of reciprocal jurisdictions and assuming insurers who satisfy the necessary conditions for that credit. When an insurer ceases to meet those requirements, that insurer’s eligibility can be revoked or suspended. HB 2237 - Updates Regarding Mechanic Liens House Bill 2237 amended both the Insurance and Property Codes to update their provisions concerning contractor’s, mechanic’s, and materialman’s liens, including revising deadlines to file a claim, time limits to bring suit to foreclose on a lien, and deadlines for notices for particular claims. It further clarifies, revises, and expands definitions of some terms and lien rights, requirements, and objectives. HB 2535 - Amendments to Appraisal Standards House Bill 2535 amended the Tax Code and requires the appraiser who determines the market value of real property to analyze and exclude the value of animal out structures such as pens and coops that are used in noncommercial personal food production. HB 2730 - Eminent Domain Amendments House Bill 2730 amends the Property Code in a number of ways related to matters of eminent domain regarding pipeline and electric right-of-way easements. It revises provisions concerning the appointment of special commissioners in an eminent domain case, setting a deadline for that appointment, and a provision for alternates. It further amends the Government Code to require that the landowner’s bill of rights include a statement notifying a property owner of his or her right to file a complaint with the Texas Real Estate Commission concerning misconduct by an easement or right-of-way agent on behalf of an eminent domain authority. Bill 2730 further amends the Real Estate License Act, Occupations Code with regard to a certificate of registration for an easement or right-of-way agent to Require the TREC to approve the coursework completed for issuance or renewal of a certificate Authorize the TREC to issue a probationary certificate Authorize the TREC to suspend or revoke a certificate if the holder accepts financial incentive to accept compensation for the property that is too low HB 3131 - Certificate of Formation Amendments House Bill 3131 amends the Business Organization Code requiring that a certificate of formation include the mailing address for various business entities such as a domestic partnerships, limited partnerships, LLCs, professional associations, cooperatives, or real estate investment trusts. HB 3177 - Elimination of "Double Dip" Franchise Tax House Bill 3777 amended the Tax Code to ensure that federal income tax and franchise tax-exempted expenditures by a nonprofit corporation to rehabilitate a property leased to a tax-exempt property in a disqualified lease are not ones that are eligible for a franchise tax credit for an historic structure rehabilitation. HB 3788 - Allow Remote Training for Appraisal Review Board House Bill 3788 amended the Tax Code to allow appraisal review board members to complete training and continuing education remotely. HB 3961 - Requiring Assisted Living and Nursing Facilities to Post Certain Information House Bill 3961 amended the Health and Safety Code, now requiring that any licensed assisted living, nursing, or other long-term care facility providing care to those assisted by the state’s long-term care ombudsman to post that information on their website, their role in advocating for residents, and include their toll-free number. HB 3971 - Amend Appraisal Standards To Include Decrease In Value From Historic District Restrictions House Bill 3971 amended the Tax Code and requires that a chief appraiser determining the market value of property within a historic district for property tax purposes to consider the effect of any restrictions that are placed on the owner by that designation regarding their ability to alter, repair, or improve the property. HB 4638 - Amendments to Special District Local Laws House Bill 4638 amended the Special District Local Laws Code to create municipal management districts, provide authority to issue bonds, and impose assessments, fees, and taxes. SB 23 - Require Voter Approval Before Defunding Police Senate Bill 31 amended the Local Government Code to require voter approval in counties with a population exceeding one million before reducing or reallocating resources for law enforcement agencies. Anyone who believes that they reside in a county that fits that criteria and the county has reduced or reallocated funds can file a complaint with the criminal justice system of the governor’s office. SB 41 - Amendments Regarding Civil Court Fees Senate Bill 41 amended several codes concerning civil court fees and the collection of fees payable to the local government in civil cases. SB 43 - Amendments To Wrap Mortgage Regulations Senate Bill 43 amended the Finance Code to regulate wrap mortgage loan origination. It also enacted licensing and registration requirements and authorized administrative penalties. SB 792 - Disabled Veterans' License Plates and Parking Senate Bill 792 amended the Transportation Code to enable disabled veterans to receive specific specialty license plates and revised parking restrictions to recipients of those plates. SB 794 - Property Tax Exemption For Disabled Veterans Senate Bill 794 amended the Tax Code to clarify the eligibility of property tax exemption for disabled veterans. SB 855 - Website Operators Must Disclose True Owner Of Audiovisual Or Commercial Recordings Senate Bill 855 amended the Business & Commerce Code to require website owners or operators who use third-party audiovisual or commercial recordings to disclose the true owner of those recordings. Non-disclosure can result in action against the site owner or operator. SB 911 - Regulation of Food Delivery Businesses Senate Bill 911 amended the Alcoholic Beverage Code, Business & Commerce Code, and Local Government Code to regulate food delivery businesses, requiring proper permits and licensing. SB 1280 - Removal of Certain Securities Violations Senate Bill 1280 amended The Securities Act, Government Code to remove certain securities violations. SB 1449 - Modify Property Tax Exemptions For Income-Producing Properties Senate Bill 1449 amended the Tax Code, increasing the taxable value threshold for exemption of property taxes for income-producing property. SB 1524 - Apprenticeship Pilot Program Senate Bill 1524 amended the Tax Code to establish a pilot program to benefit those who employ apprentices for at least seven months a year.  ConclusionLast September saw an influx of laws regarding many high-profile and volatile issues, but this last set of laws seems sleepy in comparison, affecting far smaller demographics. But if you are a disabled veteran, a food delivery service, or even a backyard chicken keeper, they may have an affect on your life and it will behoove you to pay attention since they have all gone into effect as of January 1, 2022. --- ### Who Inherits Your Estate if You Die With No Will in Texas? - Published: 2021-12-30 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/inheritance-no-will-texas/ - Categories: Uncategorized Who Inherits Your Estate if You Die With No Will in Texas? While most of us understand that having a will is important, many simply put it off for “someday. ” Unfortunately, “someday” is often too late. Passing without a valid will means that you have died intestate, and distributing your estate now becomes the responsibility and decision of the courts. Without a will, who gets your assets, who acts as guardian to your children, and even who administers the distribution of your estate is decided by the probate court, not you.   The Purpose of Having a Will  Your will is the legal document that clearly defines your wishes regarding the distribution of your estate after you die. When a valid will is in place, it sets out how you want your estate distributed, who you want as the executor of your estate, who you choose as guardian to your children, and many other important decisions. Having a will ensures that you choose how your estate is distributed, not the court.   What Does Dying Intestate Mean? If you die without a will, you will have died "intestate". And no, it does not have anything to do with the intestines. The word "intestate" entered the English language somewhere around the 14th century, from the Latin intestatus, which is composed of two parts: (1) in (meaning "not") plus (2) testatus (meaning "having left a valid will"). The second of these, the Latin testatus, also gives us the English testate, meaning "having left a valid will. " Other English descendants of this cluster of latin words include detest, protest, testament, and testator. When a person dies intestate, Texas intestacy laws will dictate how your estate will be distributed, regardless of how you may have wished. During the intestacy probate process, the court will appoint an administrator who will be in charge of finding your heirs, compiling your assets, paying any remaining liabilities, and then distributing the remaining assets to heirs consistent with Texas Estates Code and intestate succession laws. In Texas, intestate succession will determine who and in what amounts your heirs will inherit your estate. Unfortunately, without a will, the distribution of your assets under intestate succession may or may not be what you envisioned for your estate. If You Are Married  Intestate succession in Texas depends upon the marital status of the decedent, whether or not there were children, and how assets were held. Under Texas intestate succession, if you die while you are married, your spouse will get a share of your estate depending on whether property is separate or community property, as well as depending upon how many children you have, and whether they are also your spouse's children. Any property acquired while you were married is considered community property under Texas law. If you die, your spouse will inherit all community property if there are no children. If there are children and they are all the current spouse’s, the spouse will still inherit the entirety of the community property. If there were children from a relationship outside the current marriage, only half of those assets would go to the current spouse and the other half to the other children. Separate property is property that you own separately. You may have owned it prior to the marriage or even acquired it during the marriage as a gift or inheritance. For purposes of inheritance, separate property is divided into personal property, such as cash, investments, vehicles or other personal items and real property which is any land and homes attached to it. In the case of a surviving spouse and children, the spouse would receive one-third of the separate personal property and a one third interest in separate real property, with the right to use it during their lifetime. Your children will receive everything else. Once the surviving spouse dies, the real property then reverts to the children. The below chart, prepared by the Bexar County Probate Courts, illustrates what might happen to the estate of a Married person with or without a child or other descendants, who dies without a will: If You Are Single (Unmarried, Widowed, or Divorced)   If you are single with no children when you die, your estate will pass to your parents, if they are both living, with both parents getting equal parts of the estate. If only one parent is alive, the remaining half will either go to your living siblings or their children. If there are no living parents, the entire estate will go to your siblings or their children. If there are no surviving parents, siblings, nieces or nephews, the estate is split between both sides of the family, each half passing to relatives on your mother’s and father’s side of the family. If there are no living descendants at all, the estate goes to the state of Texas. If you are single and have children, the entire estate passes to your children or grandchildren, depending on the generational degree of the relationship. Younger generations will only inherit that portion of the estate that the next older generation would have inherited had they survived. The below chart, prepared by the Bexar County Probate Courts, illustrates what might happen to the estate of an Unmarried person without a will:   Common-Law Marriage and Intestate Succession Texas recognizes common-law marriages and consequently gives the same inheritance rights to common-law spouses as those in traditional marriages. In order to be considered a common-law spouse, you must have represented yourselves as married and lived in the state of Texas, as well as satisfied various criteria set forth under the codes that govern common law marriage. It is beyond the scope of this article, but suffice it to say that proving common law marriage in Texas is a difficult task.   Children, Stepchildren, and Adopted Children  In today’s world, families represent various mixes of biological children, stepchildren, children born outside marriage, and adopted children. Texas intestate succession affords inheritance rights to children and adopted children (as well as children who are subject to adoption by estoppel), but not to stepchildren.   Assets That Are Not Passed Through a Will Texas’ intestacy laws will not apply to assets that are passed outside the probate process. These include Any assets held in a living trust Any property or assets that are held jointly with rights of survivorship Any bank accounts that have payable-on-death clauses Any life insurance proceeds that name a beneficiary Any retirement accounts such as IRAs, 401(k)s, or any other retirement account naming a beneficiary Securities held in transfer-on-death accounts Any property held under a transfer-on-death deed or title   There Will Usually Be Some Heir, Somewhere In the state of Texas, estate law ensures that if there are heirs to be found out there somewhere, they will get the benefit of your estate before the state does. But the fact remains that without a will, your estate may be divided or inherited by people who you had no wish for it to go to. Administering these types of estates can also be costly to the estate and leave less assets for your loved ones. Don’t leave your will for “someday. ” Speak with an experienced Texas probate attorney today to ensure that the things you worked so hard for go to the people you choose, not the ones the court chooses. For more information, or to schedule a consultation, call the Law Offices of Ryan Reiffert at (210) 817-4388 or contact us at our website. --- ### How To Obtain Letters Testamentary in Texas - Published: 2021-12-21 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/how-to-obtain-letters-testamentary/ - Categories: Estate Planning, Probate, San Antonio, Texas What Are Letters Testamentary in Texas and How Can You Obtain Them?   After someone passes away, an executor or personal representative will be named by the court to gather the assets of the decedent, pay bills, and make distributions according to that person’s last will and testament (if they had one). But before the executor can administer an estate according to the will, they will need to apply for the legal right to administer the estate - this process is called PROBATE. This will require the executor to obtain Letters Testamentary from the Probate Court, giving them that legal authority.   What is the Purpose of Letters Testamentary? Letters testamentary are a court order issued by the probate court legally entitling the executor to act on behalf of the estate and administer the will. During the administration of a will in Texas, most financial institutions and other entities will require a copy of the letters testamentary before they will grant the executor any information about or access to the decedent’s assets. This court order serves as proof to all involved that the executor has the proper legal appointment and qualification to administer the will and to gain access to all of the decedent’s necessary accounts.   How Are Letters Testamentary Obtained in Texas? In order to obtain letters testamentary in Texas, the probate court must approve the will and determine the qualification of the executor. To do this, the executor must file an application with the appropriate county court with the original will within four years of the decedent's death. A hearing will be scheduled, allowing the court to review the application, all documents filed and potentially listen to any objections by any other interested parties concerning the will of the decedent. Once an application is made, the court will issue and post a citation advising any interested parties that an application has been filed, the nature of the application, who has filed it, and when the hearing is scheduled. At this time, any interested parties may appear to contest the application. Once the probate court makes its ruling, the probate process can begin. In most cases, letters testamentary will be issued within 30 days of the hearing, unless further hearings are required. Once issued, the executor can present it to any third parties to evidence their authority to act on behalf of the estate.   What Happens if There is No Will? Letters testamentary is only issued when there is a valid will. If there is no will, an heir to the estate can submit an application to the court to act as administrator of the estate. The probate court will schedule a hearing to review any application and select an administrator of the estate based on Texas intestate laws. Once the court selects an administrator, it will provide that person with an order called letters of administration, giving them essentially the same legal access to the decedent's accounts as letters testamentary do. So, we call them something different, but functionally they are the same thing.   Getting the Assistance of an Experienced Texas Probate Attorney While obtaining letters testamentary is usually a straightforward process, this assumes that there is a properly drafted will in effect and nobody is contesting it. Obtaining this authority is only one small part of estate administration that will be required by the executor. Getting the help of a qualified Texas probate lawyer helps ensure that the process goes smoothly and can deal with any unforeseen matters that may arise. If you need assistance with obtaining letters testamentary, contact us at the Law Offices of Ryan Reiffert to schedule an appointment.   --- ### Biggest Mistakes When Starting a Business - VIDEO - Published: 2021-12-21 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/business-mistakes-video/ - Categories: Business Attorney, Business Law, Corporate Attorney, San Antonio, Small Business, Texas, Transactional What are the biggest mistakes that most new business owners make? While I obviously cannot tell you about ALL mistakes made in all businesses, I can (hopefully) tell you something about the legal mistakes that some of those business owners make. Starting a business is a huge step for anyone, and of course mistakes are inevitable. But learning from the mistakes and missteps of others (as well as their successes and victories) can give a new entrepreneur a "playbook" (or at least the beginnings of a "playbook") toward how to grow his or her new business venture, maximizing profit while limiting potential liability. It seems that nearly every media outlet has their own list of the biggest business mistakes. Take, for example, this list made by Inc. , which lists:. Drinking your own kool-aid. Getting into the entrepreneurial world for the wrong reasons. Not keeping an eye on the bank balance. Forgetting to lock down your intellectual property. Micromanaging for too long. Poor hiring decisions. Not focusing on sales enough. Failing to realize the importance of cash flow, not just profit. No customer engagement. Trusting your reports who tell you everything is fine. Building too much. Or this list from Entrepreneur, which has 9 similar reasons: Not spending enough money or spending too much money. Thinking you have no direct competitors. Making hiring decisions based on cost. Not setting attainable goals. Not thinking about marketing. Having too small margins. Thinking you can do it all yourself. Being incapacitated by fear of “what if’s. ” Putting your product first and people last. While all of these items are great tips for new businesses and entrepreneurs, I created a video on my YouTube channel to focus on the legal aspects of starting a new business. In this video from my YouTube Channel, I discuss five of the biggest legal mistakes that are made by entrepreneurs and new business owners. If you have any feedback on this video, I always appreciate getting an email or reading your thoughts in the comment section. I hope you will enjoy this video! --- ### Guide to Uncontested Probate in Bexar County - Published: 2021-11-18 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/uncontested-probate-bexar/ - Categories: Estate Planning, Probate, San Antonio, Texas What Is An Uncontested Probate in Bexar County? Simply put, probate is the legal process that an estate goes through after someone dies. During probate, the will is validated, and assets are formally passed to the deceased party’s heirs by the probate court. The probate court will also administer an estate when there is no valid will available.   What is the Purpose of Probate? While someone is alive, there are various avenues for transferring assets to another person. After death, however, that person is no longer available to transfer those assets. Before heirs can have access to any assets in an estate, they must be properly transferred. Probate is the process by which those assets are transferred from an estate to a decedent’s heirs after they are gone. In Bexar County, an uncontested probate takes care of the transfer of those assets. An uncontested probate is when an estate goes through the probate process without being challenged or contested by one or more of the deceased party’s heirs. Fortunately, a will contest doesn’t happen often, but when it does, it can tie up an estate for a long while in court and can be extremely costly to everyone involved.   The Process of Probating a Will in Texas During the probate process in Texas, the court will validate a will and officially appoint the executor, who will then begin administering the estate and distributing the assets to the decedent's heirs according to the terms of the will. If there isn’t a will in place, as part of the process of intestate heirship and administration, the probate court will appoint an attorney ad litem to investigate the family history of the deceased, interview the applicant and witnesses, and locate any possible heirs, etc. It will then appoint an administrator of the estate to value the estate’s assets, pay any debts and taxes, and distribute what is left to the heirs who are known and located. Without a will naming beneficiaries, the court will follow intestate succession rules to determine who will get the assets in the estate. In very general terms, intestate succession typically follows a pattern that looks something like: spouse (+ children of prior marriage), children, and parents first and then other family members and relatives afterward. However, these rules are complicated and may look very different depending upon the facts and circumstances. If the court can identify no heirs, the assets in the estate may go to the state (or "escheat").   Filing the Application for Probate After an individual’s death, an application for probate must be filed with the court. This is typically done by the executor named in the will (but it may be filed by others, depending upon the circumstances). After this is done, the court will post a notice that an application for probate has been filed. This notice gives anyone with an interest a two-week time window to make a claim in order to contest the will before it is admitted to probate. If there was no will, the applicant is also required to publish notice of the proposed heirship/administration in the newspaper specified in that county, and demonstrate to the court that publication has been completed.   Will Validation Once the waiting period is over, and if nobody has come forward to contest the will, it can then go forward as an uncontested probate in Bexar County. The court will schedule a hearing to officially recognize the person’s death (for this, a death certificate and other items may be required) and validate the will and the executor named in the will. If no will exists, the court will determine how probate will proceed, and an administrator will be appointed.   The Executor’s Job Begins One of the first things an executor must do is to notify any heirs and beneficiaries of the estate. If there is no will, the court will consider intestate succession when determining who will get the estate’s assets. If there were any debts left behind, the executor will also notify these creditors who can then file a claim against the estate.   Inventory of Assets The executor has ninety days to report assets to the court. The report must include an inventory of all properties, assets, appraisals of those assets, and any liabilities owed to or by the estate. Assets are placed into two categories. The first are probate assets. These are assets that are typically held in the decedent’s name only, without any rights of survivorship or designated beneficiaries. These will often include a home or real estate that is solely in the decedent’s name, any personal belongings, any personal bank accounts, or other assets that are not held in joint ownership. These assets must go through probate. Not all assets must go through probate to be transferred to heirs, however. Non-probate assets will not need to go through the probate process. These can include Any asset jointly owned with another person. These assets will immediately go to the joint owner. Assets that have designated beneficiaries, such as a life insurance policy Assets that are payable on death accounts. Certain accounts can have named beneficiaries and, when the account holder dies, the assets in that account go to the named beneficiary. Transfer on death deeds. These allow a property to go to the designated individual on the deed outside the probate process. Assets held in a living trust. Certain assets held in a living trust can pass to beneficiaries outside probate. Once an inventory is made of assets and debts, the executor will continue the administration of the estate. Each asset will require its own transfer process and it is the executor’s job to ensure that each is handled appropriately.   Resolution of a Contested Will While most wills are administered without dispute and are consequently considered an uncontested probate in Bexar County, in some cases, heirs may question the authenticity or the terms of the will. This can lead to a will contest. Some common situations may increase the likelihood of a will being contested. When family members or children feel they have been treated unfairly or have been disinherited in favor of other relatives or friends, or the deceased party was elderly or disabled, heirs may find cause to contest the will. In Texas, an interested party, including a spouse, heirs, devisees, creditors, or anyone who may have a claim, can contest a will. In order to contest a will, however, there must be grounds. These can include Will revocation or proof that there was a subsequent will Undue influence Fraud Lack of testamentary capacity of the maker of the will Improper execution Mistakes Residency validity Let me reiterate: contesting a will is not easy. It is actually quite difficult, and quite expensive. A will contest must have firm legal grounds and offer significant evidence to be successful. During a will contest, if no settlement can be reached between the parties, the court will handle the matter similar to a civil claim, and the judge will make the final decision. For more information, you may wish to watch our video "What Is Probate? "   --- ### What is Private Equity? - Published: 2021-09-20 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/what-is-private-equity/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Dealmaking, Deals, Probate, Transactional While the term “private equity” may conjure visions of faceless businessmen in suits throwing around inscrutable finance jargon, odds are good that you interact with private equity-backed products and companies every day. Introduction to Private Equity Private equity firms are a significant behind-the-scenes force in the worldwide economy, including not only the tech startups and bankruptcy turnarounds you might have heard of, but also a great number of mainstream companies and small businesses. Many well-known large companies got their initial funding from private equity sources instead of through initial public offerings on public exchanges, and/or have funded operations through a loan or a preferred stock deal with a private equity fund at some point in time. Just because you don’t know the names of the private equity firms ... does not mean they’re not there! Private equity is a form of financing where significant capital is invested into a company, but NOT on the public market regulated by the U. S. Securities And Exchange Commissions – hence, it is private. Private equity financing is generally considered an “alternative asset class,” similar to other illiquid or alternative investments such as real estate, venture capital, cryptocurrency, non-traded REITs, private debt, or others.  As a result of that classification, Private Equity (i) is riskier, (ii) has a potentially higher rate of return, and (iii) is unavailable to most investors. How Does Private Equity Work? Private equity is funded directly through a private equity firm (or a subsidiary fund of a private equity firm... which is sort of the same thing) instead of through the open public markets such as NASDAQ or NYSE. Investors do not invest in portfolio companies directly – they invest indirectly, through the private equity fund. The private equity firm will raise capital and identify suitable investment opportunities. When a suitable investment opportunity is identified, it is up to the firm to negotiate the terms of the investment, typically without the input of individual investors. The returns of the investment will then be distributed to fund investors according to the agreed terms. Typically, once one fund is closed and investments are made, no more investments can be made in that fund, and no distributions are made from the fund until the occurrence of liquidity event(s). Investors who want to invest with that private equity firm will have to wait until the firm opens another fund, and investors who want to withdraw their money will be unable, or unable without a major penalty. Sometimes the investment agreement will set forth strict timetables for such investments; other times it will not. While the public (regulated) markets are generally open to everyone, because Private Equity invests outside of the public markets, it is not open to everyone – only to those who can “bear the risk” in the form of being an Accredited Investor. More about that later. What Are the Advantages of Private Equity? Private equity can have advantages for both investors and the companies they invest in. For the investor, private equity allows direct investment in private companies (these investment opportunities are not available to everyone and can allow for potentially higher returns – although that higher return is accompanied by higher risk), the ability to engage in the acquisition and sale of promising companies, and the possibility for larger returns and greater diversification. For an unsophisticated investor, private equity may not be ideal; but for a savvy player who understands the market and has an appetite for more risk, private equity can be a wonderful opportunity. For a company, private equity allows another means of access to much-needed capital without the stress of quarterly reports, annual reports, special reports, audited financials, and many other onerous disclosures and compliance required by regulators such as the SEC – not to mention the expensive law firms, expensive investment banks, and expensive accountants required to comply with such rules. Private equity also (despite its name) provides companies with an alternative to high-interest rate bank loans or, in the worst case, bankruptcy. But “private debt” doesn’t really have the same ring to it, does it? What Are the Disadvantages of Private Equity?   The advantages discussed above sound great. But the picture is not all roses. Private equity can also have disadvantages for both investors and the companies they invest in. For an investor, private equity is an illiquid asset class. As an illiquid asset, investors cannot sell their private equity investment as they please – the investor may be completely locked in, and “getting off the roller coaster early” may be simply not possible; in the cases where it is possible, the investment agreement is likely to provide that before a certain time, they face high losses due to fees and penalties. If the investor has a sudden need for cash – whether due to an unforeseen emergency, another investment opportunity, or anything else – the private equity investment may be unavailable for those needs. So investors should plan carefully. Moreover, private equity is generally a riskier asset class than an investment in a large public company, government bonds, or so forth. A portfolio company may fail and its value go to zero. While all parties hope against this result, it does occasionally happen, and investors should be aware of and ready for that. But wait! There’s more! Most private equity funds are structured as limited partnerships. This means that investors (who will invest as limited partners, with the general partner being controlled by the sponsor or fund manager), despite any level of ownership, will generally not have voting control or rights to appoint board members, managers, etc. or, indeed, any recourse at all, except in limited circumstances (for example, break of fiduciary duty by the general partner). Additionally, there is a risk that, due to the compensation structure typically used for a private equity fund, private equity firms/management could be incentivized to create a short term spike in value, at the expense of long-term value. A private equity firm making a control investment into a company will generally operate with a laser-like focus on generating profits. Once the company is generating profits, it is somewhat common for investors to make an “exit” – i. e. , withdraw from the company by selling it to a strategic buyer or taking it public. This can sometimes (certainly not always! ) be detrimental to the companies acquired by private equity buyers, as the short-term value the investors created in order to “exit” may not fully coincide with the long-term value that could have been created by a different strategic plan. For example, investors may load up a company with significant amounts of debt as a tool to create these kinds of returns, which could leave a company financially vulnerable once the private equity investor has left the scene. How Are Private Equity Investments Made? Private equity investing is part of the private market and cannot be accessed through a public exchange (in other words, all private equity operates pursuant to exemptions from registration pursuant to the Securities Act of 1933 and the rules promulgated thereunder by the SEC; frequently, – but not always – this means Section 4(a)(2) and Regulation D). Private equity is capital that is invested in a company, but unlike some other forms of investment, private equity investors may sometimes (but not always) take a majority ownership stake in that company. If the private equity firm takes a minority stake, it is not uncommon for certain protective terms to be added to the company’s governing documents and/or for the private equity firm to receive one or more board seats. Private equity firms typically manage and invest capital through one or more subsidiary funds, typically structured as limited partnerships by the private equity firm, which will control the fund’s general partner and make all decisions for the limited partnership as a result. Investment in private equity tends to come from large institutional investors or ultra-high net worth individuals who are both more able to dedicate large sums of capital over an extended period of time and more able to assess a private investment on its merits and/or request relevant financials without the mandatory disclosures required by the SEC. These investors are typically more sophisticated, require less oversight and protection, and are willing to take on more risk (with the promise of more return that that risk carries). These institutional investors may include large financial institutions, insurance companies, family trusts, college endowment funds, or pension and retirement funds. Private equity firms form funds, each having a specific fundraising goal. When they have hit their goal, the fund will be closed and they will then invest this money in private companies that they consider particularly promising, make acquisitions in struggling companies, or use the funds as working capital until a company can be publicly funded through an IPO or sold. In most cases, private equity funds invest in companies hoping to increase their value until they can be sold down the road at a profit. How Do Private Equity Firms Make Money? Private equity firms typically charge management and performance fees. Most private equity firms use the two and twenty (2-and-20) fee structure, which is a lucrative arrangement for the private equity fund managers, while also providing strong financial motivation to make money for investors. . The management fee (the 2% in 2-and-20) is charged on an annual basis, regardless of the performance of the company (the fee will be charged even if the fund performs poorly). Private Equity firms utilize the management fee to pay for daily expenses. Investors view management fees as a source of reliable and predictable income. The performance fee (the 20% in 2-and-20) is calculated as a percentage of the profits generated from the investment. The performance fee, often referred to as “carried interest,” is an incentivizing tool that promotes greater returns by rewarding good performance.   However, the carried interest is sometimes not paid if the return does not surpass a certain threshold, the hurdle rate. If the fund does not generate a profit that exceeds the hurdle rate, the general partner will not receive its compensation for the carry (the limited partners will still receive their share, and the management fee will still be charged). To further complicate matters, not all funds have a hurdle rate. How Do Private Equity Funds Actually Work? Private equity firms use capital raised from large institutional and accredited investors called limited partners. The firm invests this capital in companies that look promising from an investment standpoint. These may be companies with large growth potential, or companies that have stagnated or distressed but still show signs of possible growth. Some forms of private equity include: Funding for companies that are underperforming but have good investment potential — The intention for these investments is to make necessary changes to help them turn things around and help them grow and gain value. In some cases, private equity will take a distressed company’s assets and put them up for sale. Leveraged buyouts — Most private equity investment is used to acquire a company to improve it and either sell it or take it public. In the case of a leveraged buyout of a company, the private equity investor often uses a combination of equity funds and debt which the company will then repay. In the meantime, private equity investors work hard to improve the profitability of the company to reduce their repayment burden while increasing value. Through the use of a leveraged buyout, investors acquire a company using significant amounts of debt secured by the company’s assets, without leveraging a large portion of their personal or fund assets. Real estate private equity — When real estate prices are advantageous, private equity funds often focus investment on commercial properties and real estate investment trusts. Fund of funds — A fund of funds, or a multi-manger investment, is an investment strategy that involves an investment in other types of funds. These investments focus primarily on other mutual or hedge funds. Venture capital — A type of private equity investment, investors provide capital typically to entrepreneurs and start-ups for a minority ownership. Investing in a start-up is a risky gamble, as the start-up has not proven it can profit; however, if the start-up succeeds, investors can garner astronomically high returns. Each private equity firm’s investment array of companies is referred to as its portfolio, with each business a designated portfolio company. While limited partners are the main investors and have limited liability, the firm’s general partners are responsible for locating and operating the investments. While general partners may own a small percentage of the shares of these companies, they take on the full liability for the fund and usually make their money in management and performance fees. Key Differences Between Private Equity Investment and Venture Capital Investment Venture capital investment is a type of private investment, but it is different in very fundamental ways. Venture capital firms typically invest in small, emerging, or start-up companies showing promise. While venture capital investors will take ownership interest, usually it is a minority interest in the companies they invest in, making their profit when the company goes public, gets acquired, or by selling shares once the company becomes profitable. While there is a large risk investing in unproven companies, there is also a potential for equally large returns if the company does well. Private equity firms most often invest in traditional industries and companies that have been around for a while that show investment promise. Private equity firms take a majority ownership of those companies, often turning them around and selling them at a profit. Limited partners often see a great return while those who administer the fund make their money in management fees and performance fees intended to incentivize profits. Key Differences Between Private Equity and Public Equity Unlike private equity, public equity refers to the shares or ownership of a company that allows the public to buy rights in their business. Public equity investors face several challenges. Public companies are obligated to release financial records, on a specified schedule and containing specified information presented according to specified standards by the United States Securities and Exchange Commission (SEC). The requirement of publishing financial records allows for pressure from the public and governmental organizations, as well as generating significant expense due to professional fees such as legal fees, investment banker fees, and accounting fees. This interference by the government and the public can limit the ability of a public company to get work done.  However, unlike private equity investors, public equity investors acquire a liquid asset (their stocks in the public company can be sold, at any time, for cash). The Advantages Aren’t Just For Investors While private equity has had a bad rap in the business world in the past, newer strategies offer many advantages for private companies making use of this type of capital. Today’s private equity investors are typically much more interested in the acceleration and growth of the company than immediately selling off its assets. Newer private equity firms are holding on to their portfolio companies longer. Private equity investors are also often leaders in their field, offering commitment and added expertise that can help maximize a company’s value and meet new goals. This enables businesses to keep critical employees and offer them incentives and their own role in the company’s growth and future. Most investors want experienced management to stay on and continue in the company’s growth. Infusing the company with financial resources to fuel that growth and purchase new assets makes the company more valuable to all involved, not just the investors. For investors, private equity has outperformed public equities by 4 percent during the past two decades but it has also resulted in over 20 percent growth for the companies that were acquired. This is good for everyone. Learn More If you are interested in learning more about private equity and how you may use it to your advantage, contact the Law Office of Ryan Reiffert, PLLC online or call us at (210) 817-4388. We would be happy to answer your questions and may be able to offer some direction.   --- ### How To Sue Someone in Small Claims Court (VIDEO) - Published: 2021-09-16 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/how-to-sue-small-claims/ - Categories: General, Small Business, Texas SMALL CLAIMS 101: HOW TO SUE SOMEONE One question that I am asked with some frequency is, "I want to sue someone for $, can you help me? " And, to be honest, I usually can't help - at least not directly. I don't handle a whole lot of dispute work - it's just not my thing. And very few attorneys, either in San Antonio or in other cities, will be able to do a whole lot for your (let's say, for example) $3,000 of damages billing at $300 per hour. The legal bill will be larger than the entire amount due in 10 hours (or less, depending on the billing rate! ) But, there is some good news. Texas has a streamlined procedure for suing someone for an amount under $20,000. You can do it yourself, without an attorney. The only qualification is that the amount absolutely cannot be more than $20,000. This simplified process is called Small Claims Court, and it is run through the Justice of the Peace system in Texas. I made this YouTube video that I have been told is helpful, for explaining to people how they can sue someone without an attorney. If your exploration of my website has brought you to this blog post, I hope that you will watch the video and learn something. Of course, if you have any questions about how to sue someone in small claims court, I may not be able to help, since this is not really my practice area. But feel free to reach out, and if I don't know the answer, I'll try to refer you to someone who does. Enjoy! --- ### Estate Planning Update: Texas Overhauls the Rule Against Perpetuities - Published: 2021-09-13 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/estate-planning-texas-rule-perpetuities/ - Categories: Estate Planning, Political Landscape, San Antonio, Texas Estate Planning Update Texas Overhauls the Rule Against Perpetuities Texas Estate Planning attorneys, sit up and take note! The Texas legislature has revamped the Rule Against Perpetuities (or RAP) found in the Texas Trust Code §112. 036 to be dramatically simpler - and in virtually all cases much longer. The rule goes into effect on September 1, 2021. What is the Rule Against Perpetuities? The Rule Against Perpetuities is a deceptively complex legal rule that (traditionally) states that no interest is good unless it must vest - if at all - no later than 21 years after a life in being at the creation of said interest. Charitable trusts, it should be noted, are generally exempt. The Rule Against Perpetuities has delighted law professors and frustrated law students since its inception. Let me unpack this for just a moment: If A wills property in fee to B, this is valid. The fee interest vests upon A's death. If A wills property to B for B's life, then in fee to C, this is valid. B is alive, and the fee interest to C will vest at the time of B's death (who is alive at the creation of the interest). On the other hand, if A wills property to B for B's life, then to B's children for their lives, then to C's heirs at law, the bequest to C's children will fail because it could vest after 21 years from a life in being at its creation (suppose that B does not have children at the time of A's death). There are some good policy reasons for the Rule Against Perpetuities. For example, it is against public policy to allow excessive "dead hand control" by long-deceased grantors from many generations ago. We want to promote the free use, allocation, and reallocation of capital and property among the members of society, and allowing perpetual restrictions would frustrate this and reduce overall utility. After all, why should we honor the instructions and limitations on a trust drafted by someone who lived in 1820? If you're confused, don't sweat it. First, you're in good company - generations of law students have also been confused and frustrated by seemingly arcane legal doctrine of the Rule Against Perpetuities. Second, Texas has your back, and has passed a law MASSIVELY SIMPLIFYING the Rule Against Perpetuities. What Did Texas Do? Amidst a legislative session that has seen the passage of several highly controversial laws, this one flew under the radar. And, to be honest, I can see how an update to Estate Planning rules wouldn't exactly be cause for chanting in the streets or flipping over cars. Texas has replaced the "21 years from a life in being" and all the awkward calculations that that entails with a flat, easy to understand, 300 years. So, the new and improved Rule Against Perpetuities, Texas Edition is: no interest is valid unless it must vest, if at all, within 300 years of the creation of said interest. That's easier, right? In a word, yes. And for pre-September 1, 2021 trusts, the old rule remains in force. Why do this? Some other jurisdictions have abandoned the common law Rule Against Perpetuities entirely, causing many Texas residents to create (sometimes very large) generational trusts in those jurisdictions to avail themselves of the dead hand control available in such jurisdictions. Perhaps Texas was tired of missing out on that revenue? Bottom line: there might be some hiccups with creating trusts for the next few years - a fair bit of Estate Planning is built around avoiding the teeth of the Rule Against Perpetuities that you might see some uncertainties and oddities in trusts drafted over the next few years. Regardless, not many people live to be more than 289 years old. So this new and improved 300-year RAP should significantly extend the amount of posthumous control that can be exercised by Grantors, in just about every case that I can think of. Some So, law students, estate planners, and folks interested in protecting your assets and descendants, rejoice and congratulate the Texas legislature for simplifying the Rule Against Perpetuities. But, Did They REALLY Change the Rule Against Perpetuities THAT Much? There's one interesting limitation here, and a wrinkle here that should be mentioned. First, the law provides that real property may not remain in trust for longer than 100 years. It's an interesting limitation. We'll see how that goes. Second, this law revising the RAP was a "garden variety law" (HB 654). the Texas Constitution, which would, if in conflict, trump that law, states that "Perpetuities and monopolies are contrary to the genius of a free government, and shall never be allowed" (Article 1, § 26). There is, oddly, an argument to be made that Texas has adopted the common law version of the Rule Against Perpetuities in the Texas Constitution, which trumps and invalidates HB 654. Stay tuned everyone, I smell some litigation to has this out coming up somewhere around, oh... a life in being plus 21 years from now. In the meantime, skillful drafting with lots of "in the alternative" may be the order of the day for Texas estate planning attorneys. --- ### How Bankruptcy Works - Published: 2021-08-29 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/how-bankruptcy-works/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Small Business, Transactional How Bankruptcy Works: a short overview for businesses and individuals As a San Antonio business lawyer, I get all kinds of different questions about options available to businesses - from prospering and growing businesses who have questions about M&A, to troubled businesses who want to explore options for restructuring or liquidation like bankruptcy. Bankruptcy is based on federal law - the United States Bankruptcy Code - and there are federal courts exclusively devoted to hearing bankruptcy cases - the United States Bankruptcy Courts. Fundamentally, the bankruptcy process is intended to help financially troubled individuals and businesses to discard some or all of their debts or make a court-approved plan to repay those debts. Three Main Types of Bankruptcy There are, mainly, three different types of bankruptcy, designed for three different financial situations. One of these can apply to both businesses and individuals, another is primarily for businesses, and the third is primarily for individuals. These three types of bankruptcy are generally referred to according to the chapter of the U. S. Bankruptcy Code that establishes and governs that type of bankruptcy. Chapter 7 Bankruptcy (Liquidation) In a Chapter 7 bankruptcy, also known as a liquidation, all (or almost all) of the debtor's debts are extinguished, and all (or almost all) of the debtor's assets are distributed to the creditors. For an individual, a Chapter 7 Bankruptcy is essentially a case where the debtor gives all of its assets to its creditors, in exchange for al current debts. It can be thought of as something like "the nuclear option" when a Chapter 13 (discussed below) is not available or practical. Some individuals have gotten in big trouble during a Chapter 7 for attempting to hide assets or engage in fraudulent transfers of assets, ahead of the bankruptcy. For a business, a Chapter 7 is for a business that has, essentially, failed. The assets of the business will be sold, and the proceeds will be distributed to the creditors, in order of seniority by class of debt and proportionally within each class. A Chapter 7 bankruptcy is for the business that is worth less as a going concern than the sum of its parts. As a result of the Chapter 7, all the assets of the company would be sold, and the company would be terminated. Chapter 11 Bankruptcy (Restructuring) Chapter 11 is mainly for companies, not individuals. It is also known as a restructuring, because the debts of the company will be restructured, but the company will not be terminated or dissolved. A Chapter 11 bankruptcy will be appropriate in the situation where the business does make money, but simply cannot service its debt. In contrast to the Chapter 7 bankruptcy (liquidation), where the business is worth less as a going concern than the sum of its parts, in a Chapter 11 (restructuring), the business is worth more as a going concern than the sum of its parts. Depending upon the exact structure of the debts, some junior debt of the company may be extinguished. Other debts may stay in place. Perhaps senior debtholders will be paid off, or will remain as debt of the surviving company. There may be a "fulcrum class" of debt that will become the new equity or stockholders of the company. Chapter 13 (Wage Earner's Plan) A Chapter 13 bankruptcy is mainly for individuals with a regular income. This chapter allows individuals who have a regular income to "split off" part of that income to pay creditors and eventually pay down their debts. Chapter 13 is also often called a "Wage Earner Plan. " Generally these installment payments to creditors are structured to be made under a three-year to five-year plan. Some Other Types of Bankruptcy There are other, less common, types of bankruptcy protection that you may apply for under the Bankruptcy Code. Chapter 9 Bankruptcy: available to municipalities (such as cities, towns, and subdivisions of those cities and towns such as taxing districts, municipal utilities, and school districts, etc. ) that wish to reorganize. Chapter 12 Bankruptcy: available to family farmers and fishermen that desire debt relief Chapter 15 Bankruptcy: applicable to filings that involve parties from more than one country Voluntary vs Involuntary Bankruptcy Frequently, a bankruptcy case will be initiated by a debtor who files a petition with a U. S. Bankruptcy Court. The petition can be filed by an individual, jointly by spouses, or by a company. On other occasions, a person or business may be forced into bankruptcy by creditors, through the filing of an involuntary bankruptcy petition. An involuntary bankruptcy petition can only be made under Chapter 7 or Chapter 11. A great example of a case for an involuntary bankruptcy is the situation where the debtor has the ability to pay its debts, but not the willingness to do so. Alternatively, an involuntary bankruptcy might also be appropriate for a debtor who is headed toward bankruptcy but is paying its debts in an uneven or unfair way, and the creditors wish to charge that these uneven payments constitute fraudulent transfers and invoke the power of the court. The filing of an involuntary bankruptcy petition is relatively rare - but it does happen from time to time. More Information While bankruptcy representation is not presently one of the services that we offer at Law Offices of Ryan Reiffert, PLLC, we hope that this introduction has been helpful to you. If you do have a bankruptcy matter, we are more than happy to make a referral to a qualified colleague. Contact us for more information. --- ### How to Withdraw From or Dissolve an LLC in Texas - Published: 2021-08-17 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/withdraw-dissolve-llc-texas/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Small Business, Texas, Transactional How to Withdraw From or Dissolve an LLC in Texas Like any business enterprise, LLC ownership, called membership, can change over the course of its existence or members may choose to dissolve the business for various reasons. While withdrawing from the LLC will leave it in the hands of the remaining or new members, dissolving it will officially end its existence altogether. Whether the business is no longer profitable or you are simply choosing to remove yourself for personal reasons, withdrawing from or dissolving an LLC in Texas requires some essential procedural housekeeping, asset liquidation, and notifications to any remaining members, interested parties, and financial institutions.   The Texas Business Organizations Code Unlike many other states, there is not a law exclusive to LLCs in Texas. The Texas Business Organizations Code governs all business structures in the state. Whether you are withdrawing from an LLC in Texas or dissolving one, it is critical that these things are done within the bounds of state procedures. Getting the guidance of an experienced San Antonio business lawyer ensures that you are withdrawing from or dissolving your Texas LLC properly.   Consulting Your Operating Agreement If you decide to withdraw from an LLC in Texas, the first place you will want to consult is your operating agreement that was developed when the LLC was first established. During the formation of an LLC, most operating agreements will set out procedures for a member’s withdrawal, buy-out, or any other type of separation. These procedures will supersede any default procedures. The terms of your operating agreement will give you guidance on how to handle the withdrawal and your shares of the company. If your operating agreement makes no provision for that, you can ask the remaining members to amend the agreement, or you can follow the default set of procedures for the state of Texas.   How LLC Membership Withdrawals Typically Work To withdraw your membership or transfer your existing shares, your operating agreement will determine how a withdrawal must happen and how shares of an outgoing member must be distributed. The agreement may only require that you notify the other members of your intentions via a letter of resignation, but it may place additional restrictions on your withdrawal. If the terms of the agreement are violated, you may be in breach and forced to pay damages to the other members. When you are considering withdrawing from an LLC, there are two methods available to you. You can Transfer your portion of the membership Sell your portion of the membership If your operating agreement allows for a transfer, you may simply transfer all or a portion of your membership to the other remaining members. You may also be able to sell your shares to the remaining members or others outside the LLC. If you are considering selling to someone outside the existing membership, most operating agreements require that you offer your shares to the other members on a right of first refusal arrangement before offering them outside the membership. In most cases, any sale will also require the agreement of the other remaining members of the LLC. Depending on the agreement, members may also be able to remove a member. If this is the case, it is important to record any official voting outcomes in the minutes for critical documentation.   What Happens to Shares in a Membership Withdrawal? The LLC’s operating agreement should have a buy-out agreement that sets out how an outgoing member’s shares should be distributed. Shares of an LLC will typically be distributed similarly to the membership. They can be sold, transferred to another member, or taken in the form of income or assets. If the operating agreement makes no provision for the distribution of shares at withdrawal, you can ask the remaining membership to vote on an amendment to add a preferred option, or you can follow the Texas default procedure.   What Happens if a Member Has Died or Become Incapacitated? An operating agreement should always have language providing for the death or incapacitation of a member. The operating agreement will determine whether the LLC will only exist for the duration of an individual’s life or survive it. Depending on the agreement, shares may be distributed to the remaining membership or become part of that individual’s estate. In the state of Texas, if the last remaining member of an LLC dies, it doesn’t necessarily mean that it must dissolve. An LLC is considered personal property of the members. If the last member dies and that member is married, that membership may be considered community property unless the agreement states otherwise. If it is unstated in the documents, the membership may be assignable by the surviving spouse or other successor(s).   Do I Need to Report a Change in Membership With the State? Whether you are required to file a change of membership with the state will depend on how the LLC is managed. If the LLC has managers, any change in management must be made with the Secretary of State through the annual update on the Public Information Report or by filing an amendment to update the management information.   What If I Want to Dissolve the LLC? Dissolving an LLC in Texas requires keeping consistent with the operating agreement, the same as a withdrawal. An operating agreement will typically set out triggering events that must happen for an LLC to be dissolved and how the dissolution will happen. The triggering event may just be that the membership voluntarily agrees to dissolve the LLC, but the operating agreement will determine what it is and how this must be done. If there is no provision in the operating agreement, the Texas Business Organizations Code provides for essential winding up tasks that must be completed before an LLC can be dissolved. These include: Notice of the intention to dissolve the LLC to any claimants Dealing with any lawsuits against the LLC or any in which the LLC is considered a plaintiff Selling any property owned by the LLC or distributing it to the members Properly handling any of the LLC’s outstanding obligations or liabilities Notifying financial institutions and closing accounts in the name of the LLC Paying all taxes of the LLC’s A Certificate of Account Status can be requested by the Texas Comptroller of Public Accounts which will certify that all taxes have been paid and the LLC can be dissolved. Once all obligations and winding up tasks are complete, members must file the Certificate of Account Status and a Certificate of Termination with the state.   Getting Legal Assistance It is important that withdrawing from or dissolving an LLC be consistent with the business’ operating agreement or the Texas Business Organizations Code to ensure that it is done lawfully. Depending on your operating agreement, this may be a complicated process. At the Law Offices of Ryan Reiffert, PLLC, we are experienced San Antonio business law attorneys who help business owners develop and implement the best strategies for their LLC or other business entities. To learn more about how we can assist you, contact us.   --- ### Breaking News: San Antonio has obtained a Temporary Restraining Order to mandate masks in schools! - Published: 2021-08-13 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/news-san-antonio-tro/ - Categories: COVID-19, San Antonio, Small Business, Texas This blog post was co-written by Ryan Reiffert, San Antonio business and estate planning attorney, and Ishika Patel, an intern at Law Offices of Ryan Reiffert, PLLC Today brings San Antonio some breaking news in the COVID-19 saga. Local businesses and business owners will want to take note, as developments in the near future may become relevant to them. Historical Background As you may recall, in In May of this year, Governor Greg Abbott issued an executive order prohibiting “governmental entities” from requiring or mandating masks, as well as banning public schools from enforcing mask guidelines past June 4th, leading many to believe that the upcoming school year would be mask free. The retribution for disobeying these orders included a fine of up to $1000, which is a threat that overshadowed health concerns for many. While this mandate was controversial for many, the other side of the coin, as explained by Governor Greg Abbott was that “Texans should decide their best health practices, not the government. ” Texas has also passed a law designed to punish businesses that require proof of COVID-19 vaccination (in the so-called “vaccine passport” debate), subjecting them to loss of state contracts, licenses, operating permits, etc. Governor Abbot elaborated upon this decision stating that “Texas is open 100%, and we want to make sure  have the freedom to go where  want without limits”. This was yet another piece of controversial legislation, with, on the one hand, many Texans frustrated over health concerns, which they believe should be the Governor’s main priority, and on the other hand, many Texans who feel that the Governor did not act swiftly enough to stop various entities from requiring masks or vaccinations. Against this backdrop of controversy and Texas policies designed to thwart mask mandates and discourage businesses from requiring proof of vaccination, the “Delta” variant of COVID-19 emerged from India. The Delta strain of COVID-19, while not especially more lethal or deadly in the individual case, is significantly more contagious than the original strain of COVID and its previous variants, and has been spreading like wildfire across the United States in recent weeks, particularly in Texas and Florida. Add to this already combustible mix the observation that it is now August, and... just like every August, school will be starting again soon. Many children are unable to be vaccinated under the guidelines of the vaccines, and “kids are germ factories” is a joke-but-really-not-a-joke among parents for a very good reason. This is, of course, a recipe for disaster. San Antonio Files a Lawsuit The City of San Antonio and Bexar County were especially concerned with this possibility, and the possibility of harm to our teachers as well as the possibility of an uncontrolled infection among students and young people who not only could suffer themselves, but also could pass the Delta variant on to elderly or other vulnerable populations. Keep in mind, as well, that school is compulsory – unvaccinated young people may not decide to absent themselves from school due to the risk of COVID from unmasked persons. Accordingly, City and County leaders filed a lawsuit on Tuesday morning to enjoin Governor Abbott from enforcing his “no masks” executive order and seeking to return power to local officials in Bexar County and San Antonio. The City of San Antonio and Bexar County also asked the judge to grant a temporary restraining order (TRO) – a short-term emergency measure meant to protect the status quo while the court rules on the merits of the lawsuit – and the TRO was granted! The judge noted “I don’t do this lightly. ” What does this mean? It means that for at least the next few days (and possibly beyond that) San Antonio and Bexar County can mandate masks in various places – and they have swiftly moved to use that power already for schools and public buildings. Whether this lasts beyond the next few days will be determined in court. The court scheduled a hearing for a temporary injunction this coming Monday. Governor Abbott’s Press Secretary issued the following statement: Governor Abbott’s resolve to protect the rights and freedoms of all Texans has not wavered. There have been dozens of legal challenges to the Governor’s executive orders—all of which have been upheld in the end. We expect a similar outcome when the San Antonio trial court’s decision is reviewed by the appellate courts. The City of Dallas and the City of Austin are also pursuing their own legal challenges to the Governor’s mask mandate. What’s the legal basis for this lawsuit? You didn’t think that we would write a whole blog article on this without discussing the basis of the lawsuit, did you? San Antonio and Bexar County make a number of claims to support their lawsuit, including: That Governor Abbott’s mask ban is ultra vires under the Texas Disaster Act of 1975. If you’re not a speaker of Latin or an attorney, you may not be familiar with the phrase ultra vires. Literally, it means “beyond the power” – and in this circumstance, the argument is that the governor’s ban on local government mask mandates exceeds the power granted to him under the Texas Disaster Act of 1975. If this is correct, it matters not how well the Governor’s Executive Order is written (the first Executive Order, written back in 2020 contained, perhaps intentionally, a large loophole). If an action is shown to be ultra vires, it is to be treated as if it never happened, it is invalid, it is void ab initio (yes, more Latin - "from the start"). San Antonio and Bexar County argued that the Texas Disaster Act “gives the governor the authority to suspend statutes and regulations governing state officials and agencies, but not the statutes giving local governments the authority to manage public health within their own jurisdictions. ” In other words, the City and County are attempting to say that, while the Texas Disaster Act allows the Governor to suspend some statutes and regulations, there are other statutes and regulations that he may not suspend, and that public health type rules are the latter. This argument is similar to the argument made by the City of Austin and Travis County related to their mask mandate. In that case, the City of Austin had at least some limited success, prevailing on the Temporary Injunction. In the Alternative, the City of San Antonio and Bexar County seek to invalidate the Texas Disaster Act of 1975 The argument is that the TDA violates two clauses of the Texas Constitution (Suspension Clause and Separation of Powers Clause). This argument seems like a long shot, but who knows? The Suspension Clause states that only the Legislature has the power to suspend laws in the State; the Separation of Powers Clause states that no branch of government can exercise the powers that belong to another branch, unless explicitly allowed to do so. Using these two clauses, this section attacks the reach of the power that the Governor has, as it claims that only the Legislature has the “nondelegable power to suspend laws”, and the Chief Executive cannot abridge these powers, which makes the TDA unconstitutional and void altogether. The City of San Antonio and the County of Bexar sought out a “temporary injunctive relief to restrain the enforcement of Executive Order 38’s prohibition on mask mandates against the City or County pending a final judgment. ”. A temporary injunction was granted by the judge for San Antonio and Bexar County to issue mask mandates for schools, and a full hearing for a more permanent injunction is scheduled for Monday, August 16th, where they will decide the fate of the mask mandate in San Antonio. Mayor Ron Nirenberg leads this lawsuit and is passionate about protecting the city, as seen in an unofficial statement where he said: “unvaccinated kids shouldn’t be forced to gamble with their lives while the deck is stacked against them”. Could this Impact Businesses? In a word, yes. If the City of San Antonio is successful in its argument that public health powers may not be suspended by the Governor, due to the ultra vires nature of the Governor's order vis-a-vis the Texas Disaster Act of 1975, this would empower the City of San Antonio to issue any number of public health regulations, not just mask mandates in schools and government buildings. That could very easily include the kind of "all businesses must require masks" public health guidance that characterized so much of 2020 in San Antonio. If you're a San Antonio-area business owner, you definitely remember those regulations and city health inspections. Needless to say, depending upon what happens with the Temporary Injunction, it might benefit you to have a San Antonio business attorney on speed dial! Where to Get More Information We are actively monitoring the situation with the city. If you have any questions about what you can do to protect your business in this rapidly-changing situation, don’t hesitate to contact us.   --- ### DBA vs. LLC in Texas - Published: 2021-08-11 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/dba-vs-llc-texas/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Small Business, Texas Ask a Lawyer: DBA vs. LLC in Texas In this blog article, I will seek to answer one of the most common questions that I'm asked, which is: "should I use a DBA or an LLC for my business? " For most people, the quick answer is that an LLC provides much more benefit. What is the Difference Between a DBA and an LLC in Texas? One of the first things that an individual will do when starting a business is to establish a name and the legal entity by which they will do business. So which is best for your business in Texas, a DBA or an LLC? A DBA and an LLC are completely different types of business filings. When it comes down to which is the best option for your needs, both a DBA and an LLC will offer some benefits and disadvantages, but they are completely different options! Depending on you, your goals and your type of business, it’s important to look at the pros and cons to decide what will work best for you. Most importantly,a DBA does not provide liability protection or a "barrier to personal assets", but an LLC does! . If you're paying attention to nothing else in this entire article, that is the one thing you should take away. But, if you have space for two things to take away, the second is that you can do both! Of course, always remember that when you are forming any new company, getting the assistance of an experienced Texas business attorney can help. Now, let's get into a little more detail. DBA 101, What is It?  Operating a business as a DBA (short for doing business as) means that you are operating that business under a fictitious name or "trade name" or "assumed name". Instead of using your own legal name, the DBA, will be the official trade name of the business and the way you will market it to your clients or customers. DBAs, which are actually called Assumed Names in Texas, are governed by the Assumed Business or Professional Name Act. When an individual operates under a DBA, they are basically operating that business as a sole proprietor - hopefully you remember from the educational material I have created on LLCs, this is a BAD IDEA, and gives rise to unlimited personal liability. But an entity like a corporation, LLC, or partnership can also use a DBA. In this case, the corporation may want to use a DBA as a recognizable brand apart from its legal name. Having a DBA will allow the business owner to open up accounts in the DBA’s name, but these accounts and assets are officially owned by the individual or business that filed the DBA. In San Antonio, filing for a DBA only requires filing an Assumed Name Certificate Form with the Texas Secretary of State's Office with a nominal filing fee. Because the DBA is legally owned as a sole proprietorship or by another official business entity, all the DBA’s assets, as well as the business's liabilities, belong to the person or entity that filed for the DBA. And in most cases, operating as a sole proprietorship is a bad idea. The Pros and Cons of a DBA in Texas A DBA is easy and cheap to create, involving far less paperwork and requirements than creating an LLC. It keeps the taxes simple - BECAUSE IT IS NOT AN ENTITY AND HAS NO EFFECT ON TAXES - so the taxes will be paid by the owner and not by the DBA. It also affords the owner a small amount of privacy and the ability to create other affiliated DBAs without creating a whole new corporation or LLC. You can file as many DBAs as you would like and have additional associated DBAs without fundamentally changing the core legal operating documents of the business entity. There are, however, disadvantages to having your company set up as only a DBA. A DBA is merely a marketing alias and not a legal business entity or structure. Consequently, the DBA doesn’t have any of the legal protections that other business structures have. As I have highlighted a few times above already, this is a very significant drawback. The DBA also doesn’t protect the owner’s assets from claims and lawsuits. If someone chooses to file a lawsuit against a DBA, they are filing a lawsuit against the owner. If that is an individual, all your personal assets, including your home and bank accounts and any other assets, may be at risk. In other words, a sole proprietor who files a DBA is legally no different than a sole proprietor who does not file a DBA. LLC 101, What Is It?  While both DBAs and LLCs enable a business owner to name the business something other than their legal name, that is where the similarities stop. LLC is an acronym for limited liability company. Unlike a DBA, an LLC is a business structure that operates as a separate legal entity from the individuals who own it. One of the main reasons people choose to establish their business as an LLC is the protection from personal liability that it affords (if done correctly). If the LLC is sued, the owners are not personally responsible for any of its debts or legal liabilities, unlike a DBA. An LLC is managed by the owners, called members, or a manager that is hired by the owners. These members can be investors and have little day-to-day involvement with the company, but this must be set out in the operating agreement. Your share of an LLC may be sold or passed on in your estate, similar to a corporation. Whereas an LLC will have more structural requirements than a DBA, there are far fewer of them than a corporation. Pros and Cons of an LLC in Texas Unlike a DBA, an LLC provides a legal barrier between the owners and the business obligations or liabilities. When an LLC is sued or incurs debt, the owners generally cannot be held personally liable, and their assets are generally protected. A DBA does not offer that same strong barrier. An LLC offers some tax advantages over a DBA as well. Members have the flexibility of choosing how they want to pay taxes and often choose a corporate structure that affords greater tax advantages than a sole proprietorship. Although an LLC offers some important advantages, there are some procedural and registration complexities that must be legally attended to. In the state of Texas, LLCs are governed by the Texas Business Organizations Code. Forming an LLC requires the members to adopt an operating agreement that sets out company procedures. It must file articles of organization, elect a registered agent, register for an Employer Identification Number, and file an annual report with the Secretary of State, as well as maintain a minute book with resolutions and consents to show the entity's actions etc. Although creating an LLC is relatively simple, there are a few more procedural hoops than creating a DBA. Getting Professional Advice to Compare DBA vs. LLC in San Antonio What is best for your company? That depends. If you have questions about your options and what will work best for your enterprise, it’s always best to seek the legal advice of an experienced Texas business attorney. At the Law Offices of Ryan Reiffert, PLLC, we are San Antonio business law attorneys experienced in guiding business owners to make the right decisions for their companies. Contact us to learn how we can help. --- ### Top 12 Surprising Facts About San Antonio - Published: 2021-08-08 - Modified: 2024-05-02 - URL: https://ryanreiffert.com/blog/facts-san-antonio/ - Categories: San Antonio, Texas Top 12 Surprising Facts about San Antonio While most of the articles that I publish here are related to business law, corporate law, estate planning, probate, and other similar things, this week I thought I would take a slightly different approach and talk a bit about my hometown – San Antonio, Texas. San Antonio is one of the oldest cities in Texas. Having been originally settled by the Spanish (actually, Canary Islanders) in 1718. After Mexican independence in 1821, many white settlers from the United States began to settle in the territory of Texas (including major settlements in and around San Antonio, including the Villa de Bejar and the mission San Antonio de Valero), and in 1836, Texas gained independence from Mexico. One of the most pivotal clashes in Texas’s struggle for independence from Mexico was the Battle of the Alamo. While the Alamo remains a major tourist attraction in San Antonio today, this article will focus on 12 things about San Antonio that might surprise you, or that might have otherwise flown “below your radar. ” If you enjoy this article, or if you think I should have included another "weird fact" on the list, please contact me. 1. San Antonio is the most visited city in Texas While both Greater Houston and the Dallas-Fort Worth Metroplex area have a significantly larger population size than San Antonio, the River City trounces its big brothers when it comes to tourism – it is actually the 17th most visited city in the entire country! While this might come as a surprise to a native San Antonian, just consider some of San Antonio’s marquee attractions like Six Flags Fiesta Texas, the San Antonio Riverwalk, SeaWorld San Antonio, the Tower of the Americas, the San Antonio Missions Trail, Natural Bridge Caverns, the Witte Museum, the Pearl. This distinction is even more impressive when you consider the relatively small size of the San Antonio International Airport, which is – compared to Houston or DFW, or even Austin – relatively minor. But, then again, maybe that’s part of the charm of San Antonio. 2. Lanier High School Holds the World Record for the Most Tamales Ever Made If you’ve ever spent a Christmas holiday in San Antonio, you know how seriously we take our tamales around these parts. But Lanier High School, located just west of Downtown San Antonio, took the city’s tamale-love to the next level. Tamale fans from across the city (and this city has a lot! ) participated in the event coordinated by Lanier’s culinary program, smashing the world record for the most tamales ever made in one day. The tamale makers preparing an astonishing 17,132 tamales! The previous record was roughly 13,000 tamales. 3. San Antonio is One of the Most Haunted Cities in the United States One recent list compiled by Yahoo! Travel listed San Antonio as one of the most haunted cities in the entire country. Many other ghost hunters put San Antonio high on their lists of haunted cities. Some of the allegedly haunted locations in San Antonio include: The Alamo, where General Santa Ana and his Mexican army killed all but one of the 189 Texan defenders, including titanic figures such as Davy Crockett, Jim Bowie, William Barrett Travis, has more ghost legends than can be counted, beginning from shortly after the Siege of the Alamo and continuing through the present day The Emily Morgan Hotel, located across a Plaza from the Alamo itself, was recently ranked as the third most haunted hotel in the entire world! Beginning its life as a medical center in the early 1900s, the Emily Morgan hotel hosts legends of haunted 12th and 14th floors, haunted elevators, a haunted basement, a ghost bride, and much more! The Crockett Hotel, also located close to the Alamo, is probably the closest place to where more of the actual killing in the Battle of the Alamo took place. Rumors of ghostly Alamo defenders in the Crockett Hotel abound. The St. Anthony Hotel, which also has its fair share of ghost stories, made paranormal headlines with a mysterious and gruesome murder in 1965 – the echoes of which, some say, continue to haunt the St. Anthony. The Sheraton Gunter Hotel, once an Army headquarters (both for the US Army and the Confederate Army), was also the scene of one of the bloodiest murders in the history of San Antonio. The Black Swan Inn was featured on the TV Show Ghost Adventures, and many guests are rumored to have encountered haunting things during their stays. The Spanish Governor’s Palace, which was never actually home to any governors, but was used as a captain’s palace and an executioner’s arena, is rumored to have ghosts of young children, as well as the victims of the executions that took place here. San Fernando Cathedral is holy ground – one of the oldest landmarks in San Antonio, and the site of countless deaths and burials. Who knows what ghosts linger in and around this major Catholic church. The Haunted Railroad Tracks are one that many San Antonians have heard of. The legend tells of a school bus that stalled on the railroad tracks at Villamarin and Shane in the 1940s, and was hit by an oncoming train (all occupants of the bus were killed instantly). As the story goes, if you cut your car’s engine and leave the transmission in neutral when your car is on the tracks, the ghostly children will push your car off the tracks – and if you sprinkle talcum powder on your bumper, you may see some tiny, ghostly handprints. The Briscoe Western Art Museum, formerly the Hertzberg Circus Museum, was originally the house of John McMullen – who now is said to haunt the Briscoe. Mr. McMullen met an untimely end in 1853, being murdered by a robber in the course of a home invasion. Freeman Coliseum was originally the site where Teddy Roosevelt trained the Rough Riders. Legends tell of ghosts of past bull-riding accidents and specters of past Rough Riders. Woman Hollering Creek, off of Interstate 10 between San Antonio and Seguin, is sometimes said to be haunted by the Mexican-American ghost La Llorona. Some believe this inconsolable women is mourning her children, others believe she mourns her husband, and still others believe that it is nothing but a trick, to lure kind outsiders for some unknown sinister purpose 4. San Antonio Holds the Guinness World Record for the Tallest Cowboy Boots in the World. The famous 35-foot sculpture of cowboy boots outside North Star Mall was created in 1980 by the Austin artist Bob “Daddy O” Wade. You can find the gigantic cowboy boots in all kinds of postcards and photographs of San Antonio, but one thing is for sure – sporting a weight of over 10,000 pounds as well as their Guinness World Record, these cowboy boots won’t be going anywhere for quite some time. 5. Teddy Roosevelt Recruited the Rough Riders at the Menger Hotel In a slight repeat of some of the “Haunted San Antonio” section above, Theodore “Teddy” Roosevelt famously recruited his rough riders at the Menger Hotel in downtown San Antonio. If you visit the Menger, be sure to check out its famous bar – it still sports several bullet holes from the Rough Riders, before they shipped out to Cuba! 6. The San Antonio Spurs are the Only Former ABA Team to Win an NBA Championship You almost certainly know that San Antonio is home of the NBA’s famous San Antonio Spurs – the city’s professional basketball team. The Spurs have racked up an impressive five NBA titles over the decades, and have been the home of such basketball legends as G. What you may not know is that the San Antonio Spurs are the only former ABA team to have won an NBA title! Now that’s impressive! Go Spurs Go! 7. San Antonio's Market Square is the Biggest Mexican Market Outside of Mexico Historic Market Square, located on West Commerce Street in downtown San Antonio, just a couple blocks away from other historic landmarks such as the Alameda Theater, San Fernando Cathedral, is the largest Mexican market outside of Mexico! This three-block outdoor plaza has two sections, the “El Mercado” section – with 32 specialty shops – and the “Farmers Market Plaza” section – with 80 shops. This historic market has been around since the 1700s! 8. San Antonio's San Pedro Park is the Oldest in Texas San Pedro Park is the oldest park in Texas, and the second-oldest park in the United States (becoming a park way back in 1852). The park has a skating plaza, dozens of hiking trails, a swimming pool, and more. 9. The Only World Heritage Site in Texas is in San Antonio There is only one UNESCO World Heritage Site in Texas – the San Antonio Missions. This honor was conferred in July of 2015. There are four (or five, depending on how you count! ) Missions included in the San Antonio Missions National Historic Park, which was honored as a World Heritage Site: The Alamo Mission Concepcion Mission San Jose Mission San Juan Mission Espada 10. Fiesta San Antonio Fiesta San Antonio, a 10-day festival held every April, began as a way to honor the memory of the Battle of the Alamo and the Battle of San Jacinto. Fiesta San Antonio includes the diverse events such as Fiesta at Hemisfair, the Texas Cavaliers River Parade, the Battle of Flowers Parade, the Fiesta Flambeau Parade, NIOSA (Night In Old San Antonio), Taste of the Republic, A Day In Old Mexico & Charreada, the Mariachi Festival, and more! 11. San Antonio has the First Modern Art Museum in the Southwest San Antonio has the first modern art museum in the Southwest. Marion Koogler McNay, an art teacher and heiress to an oil fortune, brought modern art to San Antonio in 1954 with the McNay Art Museum. The Museum, which was Marion Koogler McNay’s personal mansion, now hosts roughly 20,000 works, including the work of both high-profile artists such as Picasso and O’Keeffe, as well as local artists that you won’t see at art museums outside of Texas or the Southwest. 12. San Antonio is "Military City USA" San Antonio, with multiple Army and Air Force bases, is known as “Military City USA. ” Some of these installations include: Joint Base Camp Bullis Fort Sam Houston Lackland Air Force Base Randolph Air Force Base JBSA Kelly Annex --- ### Business Judgement Rule - Published: 2021-08-06 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/business-judgement-rule/ - Categories: Business Attorney, Business Law, M&A This article was written by Ishika Patel, an intern with the Law Offices of Ryan Reiffert, PLLC. The business judgment rule is a crucial principle for corporate directors and shareholders to understand as it protects the jobs and assets of each respectively. This post breaks down the rule into its main points so it is easier to digest. It will go through the structure of the rule, as well as famous examples and new modifications of it. This is a general overview of the rule and relevant topics though, and I advise everyone to consult with a business attorney for personalized advice. Duty of Care For the Business Judgement Rule to stand, the directors must prove that they upheld the duty of care, one of their many fiduciary duties. The duty of care, as defined by Cornell Law School, is “the principle that directors and officers of a corporation in making all decisions in their capacities as corporate fiduciaries, must act in the same manner as a reasonably prudent person in their position would”. Essentially, their actions should be objectively reasonable and understandable. For example, a teacher has a duty of care to their students to educate them, but not to file their taxes; they must teach in their best ability, and in a way that other teachers and professionals in their position would. The duty of care holds a large chunk of the standards expected to be held under the business judgment rule and effectively protects the shareholders against any ill-intended or outright irrational decisions made by directors. Duty of Loyalty Another important principle to understand is the duty of loyalty, which, according to Cornell Law School, “stands for the principle that directors and officers of a corporation in making all decisions in their capacities as corporate fiduciaries, must act without personal economic conflict”. Essentially, directors should not make decisions with their personal financial interests in mind, but instead with the shareholders interests. An example of a failure to meet the duty of loyalty is insider trading; this act uses personal financial gain to influence decisions, violating fiduciary duties of loyalty (and care). The duty of the fiduciaries, which in this case are usually the directors, is to preserve the assets of the company’s shareholders and to assure them that those assets are safe in someone else’s hands. This principle is not as relevant to the business judgment rule as the duty of care, but it is crucial to Unocal v. Mesa, which will be discussed later on in the post. Business Judgement Rule Corporate directors make hundreds of decisions a day, and because of human nature, they are bound to eventually make a mistake. It is safe to assume that most people in these positions take great care and deliberation with these large decisions, whether that be out of care for the company or for self-protection. No matter how careful someone is, however, when in such a risky business there is always a margin for error that can leave directors facing lawsuits and scrutiny; this is where the business judgment rule comes in. The business judgment rule is useful for directors because if it stands in a court of law, they are given the “benefit of the doubt” of some sorts, and will not be subjected to an entire fairness review—a process where the defendant is burdened with proving that the decision made was in good standing; this process is tedious and it can be very hard to win. The business judgment rule, according to the American Law Institute, is upheld when a director or officer: is not interested in the subject of his business judgment; is informed with respect to the subject of the business judgment to the extent the director or officer reasonably believes to be appropriate under the circumstances; and rationally believes that the business judgment is in the best interests of the corporation. If a situation in which shareholders believe the directors of their respective corporation have not upheld their duties were to occur, and a lawsuit is filed, the defendant can attempt to use the business judgment rule to avoid an entire fairness review. In this case, the plaintiff holds the burden of proving that a decision reached by a corporation's directors was in bad faith, or violated their duty of care or loyalty that they owe their shareholders. They are required to prove that the directors violated some or all of these outlined responsibilities to prove their case. If they do prove that the directors were not fulfilling the duty of care or duty of loyalty to the shareholders, the directors’ positions could be in jeopardy and the company will be financially liable. Because the definition of the business judgment is abstract and up for interpretation, it is applied slightly differently in each American state, but the general idea is universal. Unocal v. Mesa A good example of the business judgment rule being used is in the 1985 case of Unocal Corp. v. Mesa Petroleum Co. , a shareholder in the Unocal Corporation, offered Unocal’s shareholders a deal designed to induce a hostile takeover of the company; this was a common tactic in the 1980s, one used notoriously by Mesa’s Chairman. Mesa Petroleum designed this offer as a loaded two-tier deal to gain a controlling interest in the company. The front end of the deal contained a $54 stock buy-back, which was argued to be under-value; the back end contained junk bonds—very risky bonds that can be low-yielding. These bonds have some of the greatest returns, but also some of the lowest, and it is because of their immense risk that shareholders and investors tend to stay away from it. This deal bullies shareholders into tendering at the first tier, out of fear that they will get stuck with the junk bonds in the back, theoretically allowing Mesa’s takeover. The board of directors of Unocal then, in compliance with their fiduciary duties, discussed the action taken by Mesa and decided that it was a threat to the shareholders. Unocal’s board of directors returned with a selective self-tender offer to its shareholders stating: if Mesa becomes majority shareholder, Unocal will offer the remaining 49% of shareholders, that would otherwise be left with junk bonds, an exchange of debt securities valued at $72 a share, as well as the clause that excludes Mesa Petroleum from the proposal. The last clause is what made this case so controversial, as Mesa was still a shareholder in the company and was technically entitled to be included in the deal. This is also where the duty of loyalty comes in, as the Plaintiff claimed that Unocal would be financially interested in the deal, which violates their duty of loyalty. In addition to that, another conflict of interest arose, because once Mesa took over, they could easily replace the entire board; this is why their decision could be seen as a violation of their fiduciary duties. After the self-tender was offered, Mesa promptly sued the company, and the Delaware chancery court gave them a preliminary injunction which held that excluding Mesa Petroleum from the offer was legally impermissible. Later, the Delaware Supreme Court would overrule the Chancery court's ruling, arriving at the famous decision. The Supreme Court held that Mesa Petroleum's offer served as an immediate threat to Unocal and its shareholders and that the director’s response (the tender offer) was a proportional response to the said threat. This was a landmark ruling, as it expanded the traditional purpose and protection that the business judgment rule provided. Previously, the rule had not explicitly included situations where the directors had to make decisions in defense of its shareholders against potential threats, as well as the potential inherent bias that they could have in said decision. Modern Business Judgement Rule The original judgment rule “applies when directors are reasonably informed about their decision, disinterested and independent, and acting in good faith. ”, but as time went on, a new,  more modernized rule became necessary to adapt to the more expansive ways the rule was being applied. For this reason, BYU law professor, D. Gordon Smith adapted the business judgment rule into his version of it: the “modern business judgment rule”. This adaptation adheres to all the traditional points of the original, but also adds additional protection for directors “in cases where the independence of the board of directors is potentially undermined by a controlling stockholder or where the board of directors is financially interested in the transaction”. This adaptation to the rule protects directors in cases like Unocal v. Mesa, where the directors have a clear conflict of interest or are under pressure of a potential hostile takeover. Takeaway The traditional and modern business judgment rules alike both have a clear purpose to protect both shareholders and corporate directors from harm. The shareholder is promised loyalty, care, and good faith, which assures that their assets are safe while in someone else’s hands. While the original rule also allows directors to make difficult, yet necessary decisions, without pressure or worry of liability, the modern rule creates an extra layer of protection for these directors, especially pertaining to inherently biased decisions. As new strategies for takeovers and malice-intended deals increase, the modern business judgment rule serves as a just layer of protection and regulations in corporate relationships. --- ### Business Law Minute: Employment Contracts in Texas - Published: 2021-08-03 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/business-law-employment-contracts/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Small Business, Texas Business Law Minute: A Short Guide to Employment Contracts in Texas If you own a small business in Bexar County or anywhere else in Texas, it is likely that you have had to deal with employees in some capacity. In this article, I will attempt to demystify some of the legal concepts that surround employment contracts in Texas. If you are not already familiar with the basics of contracts, I suggest that you read this Contracts Explainer to help build your foundation of knowledge. Right to Work and At Will Employment Texas is both a “right to work” state, and an “at will employment” state. Many people get these two concepts confused. In this article, I will explain the difference between “right to work” and “at will employment” and also provide some basic tips and considerations for the small business owner who is considering an employment contract. The “right to work” is a labor & employment law which prohibits employers from basing hiring decisions on membership or non-membership in a labor union. Moreover, the “right to work” laws prohibit agreements between employers and labor unions that would mandate deductions of union dues from the paychecks of even non-union employees. As a result of employees opting out of union membership, and not being forced to pay union dues, employees receive increased compensation (at least in the short term) and, in turn, the union’s coffers dwindle and the union’s power is diminished. “At will employment” is another employment law concept. But it has nothing to do with unions. An at-will employment arrangement is an employment in which the employer may terminate an employee at any time, for any reason or no reason (except for an illegal reason, e. g. those reasons set forth under the Civil Rights Act of 1964). An ”at will employment state” is a state that permits an at-will employment relationship (i. e. employment not under a formal employment contract). Naturally, employers are free to voluntarily enter into formal employment contracts. States that do not permit at-will employment essentially impose an implied contract in all employer/employee relationships. Any termination must be for cause – i. e. , termination is only allowed for certain reasons. Contrast this with the more permissive “any reason or no reason” standard of an at-will employment. While there is no requirement for employers to present their employees with a contract, in today’s highly competitive employment market, employers are showing increasing interest in them. Unfortunately, the nature of these contracts can be quite complicated and difficult to understand when the language used is new for the layman. This can not only intimidate employees, but also trip up employers as well, if they do not have competent corporate counsel to assist them. Many employees even avoid asking exactly what the contract says, with fear of leaving a bad impression or coming off as incompetent, demanding, or worse – a litigation risk. While an employee contract will often not contain any worrisome, one-sided, or problematic language or provisions, some do. And this is why one of the first pieces of advice that a corporate attorney will dispense is “read the contract, read the contract, read the contract. ” Let’s discuss the anatomy of one of these employment contracts. Here are some common features that you may see in an employment contract in Texas: Job Description When agreeing to any job, it is important that there is an agreement or shared understanding on exactly what that job entails. The job description should be clearly stated in the contract so that both the employer and the employee are well aware of what tasks the employee will be responsible for/can be assigned to the employee once the employment commences. The expectations associated with the employees are also highlighted in the contract in order to minimize any confusion or issues further down the road. If your job includes any required daily benchmarks, be sure that they are clearly outlined in the agreement as well. Package Offered One of the first things an employee will notice or consider is the whole package that has been offered – this can include salary, retirement, insurance, and fringe benefits. The compensation an employee is set to receive is likely to be a central component of any employment contract. In most cases, the employment contract may include a breakdown of the salary that would include items such as: travel allowances housing allowances reimbursal for relocation medical, dental, vision insurance expenses In addition to the salary offered, the benefits that come with the job should also be clearly explained (although many benefits offerings have multiple choices on the “menu”). In most contracts, employers also take the initiate to include how often the employee will be paid, such as weekly, bi-weekly, monthly, or daily. All vacation, leave, or other paid time off information should also be clearly mentioned with the breakdown of paid and unpaid leave. Duration or Term of Contract Contracts are typically limited to a certain time period, referred to as the “term” or “duration” of the contract. In the case of the employment contract, it is of particular importance that the duration of employment be clearly articulated to avoid any confusion and hassle later on. It is also common for employers to hold on to employees once their contractual duration is completed. While it is ideal for a new contract to be written with the newer details and additions, it may also be a prudent inclusion for the initial contract to have a “default” provision of what will happen if an employee “holds over” without executing a new contract. You can think of this situation as presenting a similar problem to the issue of a renter or tenant who overstays his or her lease. Termination Conditions Like most important contracts, an employment contract should contain relatively specific/detailed terms and conditions for termination. Most employers have a clear idea as to what conditions lead to termination, and they will most likely list them in the details. But there can be other inclusions and this can vary from one employer to another. The termination conditions may include jargon such as 'for cause' and 'without cause'. For cause translates to a termination for a particular reason, and without cause means that the termination does not require a specific reason. Recall our earlier discussion of “at will” employment, in which we discussed that a without cause termination of employment is legal in the State of Texas. Some employment contracts may provide the right to challenge a termination in a court of law or through alternative dispute resolution procedures such as arbitration or mediation. Post-Employment Conditions In addition to the terms and conditions of employment reviewed above, terms and conditions that apply to the employees before and after they willingly leave a job may be included in the employment agreement or in any number of ancillary agreements. One example of this is the notice period that is required for an employee after submitting their resignation. Some companies clearly state that the employees will not be eligible to receive severance if they fail to complete their notice period. This is frequently a minimum of two to three weeks, though it may be longer. While working in a company, an employee may be provided with different amenities such as cars, gadgets and even identity cards. These items remain the property of the employer, and generally must be returned at the conclusion of the employment relationship, so it is also important to pay attention and keep track of all of these potential items. Confidentiality Agreement (Nondisclosure Agreement) Trade secrets and other confidential information are of immense importance to companies, which is why they are often keen to ensure that none of them are leaked. To ensure that ex-employees or ex-candidates don't go around sharing intimate secrets of the company, many employers ask employees or candidates to sign a confidentiality agreement. The confidentiality agreement is also known as the nondisclosure agreement or NDA, which I have written about before. This agreement holds employees accountable for any information leaked and provides a strong incentive to keep trade secrets, well... secret! If the agreement is breeched, it may result in a lawsuit and significant damages against the employee. A well-drafted NDA or Confidentiality agreement, created by a competent business attorney, will generally protect such trade secrets and confidential information for some time after the conclusion of the employment relationship. Such agreements are particularly useful when ex-employees join a competitor company (for obvious reasons). Drug Testing Some companies have decided to test their employees for any drugs that they might be using – this can be an employee work quality issue or a liability issue (or both! ). As a result,employers sometimes decide to include it in employee contracts so that the employees have no complaints when asked for random drug testing. Non-Competition Non-competition or in other words 'covenant not to compete' clauses are important for both the employer and the employee. Sometimes a noncompete is an entirely separate agreement; other times, it is just one part of an employment agreement. Essentially, it means that once an employee leaves a company, the employee is not permitted to compete with the company for a certain amount of time and/or in a certain geographic space. Different states have different laws on this topic, and you should consult a Texas business lawyer to advise you on Texas’s unique view of noncompete agreements. For example, a Texas court would look differently upon a noncompete covering the entire state of Texas for 10 years vs. a noncompete clause covering Bexar County for 3 months. It is strongly advised for employers to make sure a their noncompete has been drafted and/or reviewed by a lawyer, to avoid any problems in the future. Employees are also advised to take a consultation from a lawyer to ensure that they understand the significant decision of signing a noncompete. It is best not to take this decision lightly! Non-Solicitation It is a common practice for employees to recruit their friends and co-workers once they leave a company. Most times, this can be damaging to the company as employee turnover is not good for business. To prevent such things from happening, many companies include a non-solicitation clause in their employment contracts or ancillary agreements. With its help, many companies are able to prevent poaching of talent by ex-employees. More Information If you would like to reach out to us for more information, you can contact us here. Additionally, you can find lots of other educational content on our YouTube channel. Enjoy! --- ### Securities Update: FINRA Speaks Out On The Duty of Best Execution, Robinhood, Payment For Order Flow, and Market Manipulation - Published: 2021-07-10 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/best-execution-robinhood/ - Categories: Corporate Law, Deals, Funny, Investments, SEC (Securities and Exchange Commission), Securities, Transactional This past week (June 23, 2021), FINRA (the Financial Industry Regulatory Authority) issued its Regulatory Notice 21-23 entitled "FINRA Reminds Member Firms of Requirements Concerning Best Execution and Payment for Order Flow" which was pointed at, one suspects, some of the recent "free" brokerage services such as Robinhood . In this blog post, we will discuss what Payment for Order Flow (PFOF) is, explain how it has enabled "free" brokerage services such as Robinhood, highlight its (speculated or actual) role in the Gamestop stock fiasco, discuss the Duty of Best Execution, and outline some of the high points of the Finra 21-23 Regulatory Notice. Summary (TL;DR) In the case of "free" and some discount stockbrokers, PFOF has effectively replaced brokerage fees, with higher prices being charged to investors on trades as a result of investors getting marginally worse prices for their orders. In other words, that "free" or discount broker isn't as free as you think - you're paying for it with worse pricing on your executed orders. As a result of having its bills paid by someone other than the investors, a broker may have "split loyalties" (or, at least, the potential and/or appearance of "split loyalties") and an economic incentive that cuts against its duty to get investors the best price reasonably available (aka the Duty of Best Execution) - although acting on this economic incentive is not supposed to be legal. There is one narrative that this "split loyalty" was responsible for, or deeply involved in, some of the brokers' actions during the Gamestop short squeeze that drew public outcry and congressional scrutiny. Specifically, that perhaps a broker who was paying Robinhood large sums through PFOF asked or requested Robinhood to freeze buy orders of Gamestop stock, while allowing sell orders. This type of market manipulation, if it occurred, would be extremely illegal. FINRA has noticed the situation and has issued a press release "reminding" firms of their Duty of Best Execution. 1. What Is Payment For Order Flow? So, Payment For Order Flow (PFOF) is exactly what it sounds like - a payment or compensation given to a brokerage for directing its order flow to a particular market maker for execution. Usually the PFOF is a rather small margin - fractions of a penny per share. But why do market makers want order flow? For a market maker, the key to making money is to be on "both sides" of as many trades as possible. So, there is one relatively innocuous explanation for PFOF - it enables market makers to increase their total number of trades, and increase the amount of money they're making. Fun Fact: PFOF was originally pioneered by Bernard "Bernie" Madoff, although that isn't what he's famous for! (he's famous for operating the largest Ponzi scheme in history, over $60B) But even in the early days of PFOF, traders using PFOF trading platforms began to notice that the prices they were receiving for their trades were slightly worse than the market price (buy orders were executed a bit higher, sell orders were executed a bit lower). Here's one way that something like that might work: PFOF broker routes order to market maker X; Market maker X aggregates a block of orders and determines whether it's a net buy or a net sell; before executing the net buy or net sell, market maker X informs its proprietary trading arm to play the other side of this trade; If the order is a net buy, the proprietary trading arm sells at a favorable price, before the PFOF order block is executed; if the order is a net sell, it buys at a favorable price, before the PFOF order block is executed;  as a result, the proprietary trading arm continually manages to capture a small margin on each of these trades, aggregating huge profits.   Doesn't seem quite fair, does it? Or, here's another way it might work: PFOF broker routes order to market maker X; Market maker X aggregates a block of orders; It turns out that, the buy price charged to the buy orders in the block, and the sell prices returned to the sell orders in the block, come in just a little bit further apart than the spread at the market based on the NBBO, or National Best Bid or Offer - maybe by a few cents per share - but because the stock price is moving around by at least that much, nobody really notices; the market maker, meanwhile, pockets a large profit based on this spread. Also seems unfair, right? After this practice emerged, and there were allegations that investors were getting prices worse than the NBBO, the SEC (US Securities and Exchange Commission) came in and examined the issue, focusing mainly on PFOF in the context of options (although PFOF is used for many different types of securities), and very nearly concluding that the practice should be outlawed entirely: While the fierce competition brought on by increased multiple-listing produced immediate economic benefits to investors in the form of narrower quotes and effective spreads, by some measures these improvements have been muted with the spread of payment for order flow and internalization In essence, the SEC concluded that, although it didn't like PFOF and there was a significant potential for abuse of PFOF, the pro-competitive (potential) results of PFOF outweighed the potential for abuse. In addition, at least for the time being, the SEC focused on PFOF with regard to options. Since that evaluation, the SEC has continued to watch PFOF closely, although the practice remains legal. Brokers are also required to provide reports under Rule 605 and Rule 606 which detail execution quality and PFOF statistics. While these reports can be difficult to find at some brokerages and typically "do not provide the level of information that allows a retail investor to gauge how well a broker-dealer typically fills a retail order when compared to the ‘national best bid or offer’ " they are nonetheless a required disclosure and may be useful to investors when evaluating or comparing brokerages. 2. How Does Payment For Order Flow Enable "Free" Brokerage Services Like Robinhood? Historically, a stockbroker would charge commission to investors in order to complete a trade. This commission would cover everything from the salaries of the brokers themselves and software involved in that actual trade to the overhead of the brokerage like rent, lights, and coffee. Eventually, different brokerages began to compete on price. But then, some enterprising brokers began to offer "commission-free" trading. How is this possible? Obviously, stockbrokers do not work for free, nor is rent or coffee free. So how can a company or an app offer stock trading for free? Simple. They fund operations with PFOF. So, rather than the commissions from the investors funding the operations of the broker, payments from the market maker fund the operations of the broker. As noted above, however, investors with those brokerages began to notice that they were receiving less than optimal pricing for such orders, and the SEC began to examine the practice - ultimately taking a dim view of the practice but concluding that it was legal (if only barely). To illustrate the problem here, a question: who is the client? who is the broker serving? The answer should be "of couse, the client is the investor" - but if the investor is not the person paying the bills, is that really the answer? After all if the tech industry privacy scandals, haven't we learned that "if you're not paying for the product, you are the product" rings true? Let that group of questions sit for just a moment while we examine the role (actual or alleged) of PFOF in the Gamestop disaster that I wrote about earlier. 3. What Was The (Alleged) Role of Payment For Order Flow In The Gamestop Clusterf**k? Robinhood, one of the "free" brokerages formerly beloved by reddit's wallstreetbets community, was at the heart of the Gamestop stock frenzy and subsequent mess. Robinhood funded its operations through PFOF, and accordingly was able to offer stock trading services "free" to its users/investors. Let's start with what went especially wrong during the Gamestop fiasco. When the price of Gamestop was racing up (due to an incipient short squeeze and perhaps other factors), Robinhood (and some other brokers) stopped accepting Buy orders for Gamestop stock, but was accepting Sell orders for the same stock. This is a big deal, especially in light of the Duty of Best Execution, which we will discuss in more detail below. There are two potential explanations: (1) If this freeze on Buy orders was due to prevailing market conditions, capital requirements, etc. , then it's not such a scandal. It's just a broker staying within its regulatory sandbox, and following the rules that it has been given. (2) If, on the other hand, this freeze on Buy orders was due to a cozy relationship that Robinhood had with a third party, it would be all kinds of illegal market manipulation and present a gigantic problem. The first explanation isn't so interesting. Let's talk about the second explanation. One particular market maker, Citadel Securities, was particularly profitable for Robinhood. Citadel Securities, which sits under the same affiliated-company group as Citadel LLC (its parent which operates a proprietary trading arm, which - recall from above - issupposedto be "firewalled") is a massive market maker for the US securities markets, capturing over 10% of all trading volume in the US. It is estimated that Robinhood accounted for 40% of Citadel's trading volume (and, presumably, Citadel accounted for a large percentage of the counterflowing PFOF - although greater or less than 40%, who can say? ). A sizeable incentive, to be sure. The plot, however, continues to thicken. Citadel LLC (the parent entity) has a short position in GameStop, and is invested with some other hedge funds that also have short positions in GameStop (including the now-infamous Melvin Capital). Following this, some reddit/wallstreetbets users notice that the short position is quite large, and a short squeeze happens (whether it happened naturally or was coordinated can be discussed another time - but it happened). Gamestop rises from $4 per share to at one point over $300 per share (as of the writing of this article, the price is around $190 per share). When you're short a stock, you have to pay interest to whoever you borrowed the stock from, as a percentage of value. So, the interest due in respect of short Gamestop shares rose by almost 100x. As did the cost to close out of the trade, go home, and lick your wounds. As part of this, Citadel LLC invests $2. 75B into Melvin capital, largely to cover the GameStop losses. Reuters has estimated that Melvin lost half of the value of the entire fund in Q1. And while we can't be certain that was all the Gamestop trade... what else could it be? Citadel and its affiliates stand with a massive loss from the whole fiasco, and is staring at the potential of it getting worse, as the short squeeze continues. At this point, Robinhood begins limiting its users ability to buy shares of GameStop (but not to sell), citing Can you see how this starts to look suspicious? A public outcry ensues, including congressional hearings and a delay of Robinhood's vaunted IPO and all kinds of different folks accusing Robinhood, Citadel, and Melvin of market manipulation or worse. Many of reddit's wallstreetbets users begin to leave Robinhood for other platforms that will let them buy shares of Gamestop, and many articles are written. Congress, by the way, ultimately does nothing (surprise! ) But as I said above, PFOF is legal. The SEC has looked at it. So what's the problem? To answer this question, I will discuss the Duty of Best Execution and consider what FINRA has to say about the PFOF-funded "free" brokers. 4. What is the Duty of Best Execution? The Duty of Best Execution is a duty that applies to brokers. A Broker is "legally required to seek the best execution reasonably available for their customers' orders" (SEC definition). Or, according to FINRA, "essentially obligates a broker-dealer to exercise reasonable care to execute a customer's order in a way to obtain the most advantageous terms for the customer. " What does this actually mean? Well, the best execution means something like the best price and the best speed. But the "reasonably available" and "reasonable care" modifiers here - as any lawyer can tell you - signals some discretion and "wiggle room" here. It means something like, the best price and speed that can be found considering the various circumstances, etc. A broker is supposed to consider factors such as the likelihood that a better price than the currently-quoted price can be obtained (this is often referred to as "price improvement"), the speed of execution, and the likelihood that the trade will be executed (at all). In light of these factors, and other pravailing market conditions, the broker is supposed to get the best execution for a customer's order that it reasonably can get. It is a very fact-dependant determination. In discussing the Duty of Best Execution, FINRA notes that "as the circumstances of each order and trading environment vary, so does the determination of what is best execution. " While above, much has been discussed about market makers, these are not the only options that broker-dealers have for executing a customer's order (and the Duty of Best Execution applies to all of them): The actual stock or equities exchange(s) A market maker An Electronic Communications Network (ECN) The firm may "internalize" the order Additionally, this is not, as the SEC has explained, merely a statutory or regulatory duty. A broker-dealer is a fiduciary and it bears the full responsibilities and all trappings that accompany that fiduciary relationship arising from the common law of agency. In sum, when FINRA describes the Duty of Best Execution as "a significant investor protection requirement," this is not an exaggeration. Both FINRA and the SEC have published a significant amount of guidance on this topic, and the recent market turmoil surrounding Gamestop has triggered a reminder from FINRA. 5. So, What's The Deal With This FINRA 21-23 Notice? FINRA issued this notice to "remind" firms that PFOF should not interfere with their Duty of Best Execution. And, of course, if it weren't interfering (or potentially interfering, or appearing to interfere... ), there would be no real reason to issue this kind of "reminder". Whether this "reminder" rises to the level of hinting that FINRA member firms are engaging in market manipulation is an open question (read the Notice for yourself and decide! ) FINRA is issuing this Notice to remind member firms of longstanding Securities and Exchange Commission (SEC) and FINRA rules and guidance concerning best execution and payment for order flow, which the SEC has defined very broadly to refer to a wide range of practices including monetary payments and discounts, rebates, or other fee reductions or credits. Under these rules and guidance, member firms may not let payment for order flow interfere with their duty of best execution. So let's break down what FINRA is saying here. First, FINRA discusses the Duty of Best Execution in general, including a review of the following factors that may be used in determining/evaluating whether the firm has used "reasonable diligence" to obtain best execution: 1. the character of the market for the security (e. g. , price, volatility, relative liquidity, pressure on available communications); 2. the size and type of the transaction; 3. the number of markets checked; 4. accessibility of the quotation; and 5. the terms and conditions of the order which result in the transaction, as communicated to the member and persons associated with the member. As noted above when we discussed the Duty of Best Execution, there ends up being a good amount of wiggle room, not only because some of these factors are inherently subject to uncertainty, but also because these factors may not always all point in the same direction. Nonetheless, these are useful "signposts" for a broker-dealer or other firm to consider. FINRA goes on to list 8 separate quality review factors ((1) price improvement opportunities (i. e. , the difference between the execution price and the best quotes prevailing at the time the order is received by the market); (2) differences in price disimprovement (i. e. , situations in which a customer receives a worse price at execution than the best quotes prevailing at the time the order is received by the market);19 (3) the likelihood of execution of limit orders; (4) the speed of execution; (5) the size of execution; (6) transaction costs; (7) customer needs and expectations; and (8) the existence of internalization or payment for order flow arrangements. ) that have been previously discussed in FINRA Notice 15-46, noting that it would be a violation of the Duty of Best Execution if the broker-dealer does not consider and compare the execution quality they receive under existing order routing compared to the quality they could get from other arrangements - in other words, FINRA is instructing broker-dealers that the Duty of Best Execution includes a duty to "comparison shop". What's more, this "comparison shopping" quality calculation may not include or refer to the PFOF payments! Also of critical importance, FINRA reminds us that the Duty of Best Execution is not transferable to another person or entity, and that (under SEC guidance) PFOF must not interfere with the broker's Duty of Best Execution. The broker-dealer who takes the customer's order is "stuck" with the duty. As a result, a firm that passes its order flow to a market maker or ECN that is known to provide poor execution with regard to price, time, etc. may, by sending that order flow, be in violation of the broker-dealer's Duty of Best Execution. Lastly, FINRA notes that the disclosures required of broker-dealers under SEC Rule 606 (which requires quarterly public reports showing to which venues the broker-dealers routed their order flow, as well as PFOF statistics for that flow) do not function as a cure for any potential Duty of Best Execution violations. Let's take one more "pit stop" and state the obvious, or the should-be-obvious. If the theory (discussed above) that Robinhood halted Gamestop buying because of a request from Citadel turns out to be true, this would be a flagrant violation of Robinhood's Duty of Best Execution. Stay tuned on that question, as FINRA and the SEC continue to sniff around. FINRA concludes its Notice 21-23 on a note that will, I suspect, sound ominous for the "free" brokers: FINRA recently expressed its support for the 's efforts to consider whether additional best execution requirements or guidance are needed to promote investor protection, and FINRA may evaluate whether further changes to its best execution rule are necessary or appropriate In other words - FINRA believes that PFOF is probably inconsistent with the Duty of Best Execution. FINRA has accordingly asked the SEC to initiate rulemaking, and if the SEC doesn't then FINRA might. Buckle up, folks. It's going to be an interesting ride. 6. Bonus Round: But Does MY Brokerage Take This Worrisome PFOF Money? It is a tough question to answer. But let me refer you to two sayings, one a little older, one a little newer: If you're not paying for the product, you are the product and There ain't no such thing as a free lunch In other words, there's not a broker in the world that offers truly free stock trading. If you think you're not paying a commission, it's just being priced into the trade some other, different, hidden, and possibly much worse, kind of way - you are definitely paying a commission, one way or the other. Here's a chart comparing the PFOF for Q1/Q2 of 2020, prepared by Richard Repetto of Piper Sandler, a NYC investment bank. As you can see, it compares the PFOF from TD Ameritrade, E*TRADE, Charles Schwab, and Robinhood. According to Repetto, with regard to Option PFOF, Schwab receives the lowest rates while TD Ameritrade and Robinhood receives the highest. With regard to Equity PFOF, Robinhood received the highest rates (while the rest of the industry discloses its trading statistics using the same metrics, Robinhood refuses to do so).   You can also watch this YouTube video on the topic of FINRA, the Duty of Best Execution, Robinhood, Gamestop, and the SEC: --- ### SCOTUS Protects Cheerleaders' Rights To Drop The F-Bomb - Published: 2021-07-02 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/scotus-cheerleader-fbomb/ - Categories: Funny, Off-Topic, Political Landscape A few weeks ago (June 7), I wrote here about some of the highest-profile Supreme Court cases of this term. Every year, the Supreme Court of the United States of America (hereinafter, SCOTUS), decides a handful of cases. It tends to backload the most controversial and high-profile of those cases toward the end of its term (i. e. , the interesting stuff usually shows up in June). To give you a (very) brief recap, we were watching for the outcomes of: a student free speech case; a(nother) challenge to Obamacare; a voting law/voting rights case; a gay rights vs. religious freedom case; We now have a ruling in one of the more entertaining of those cases. Mahanoy Area School District v. B. L. is the latest in a long line of student free speech cases, several of which have been quite high-profile. This case was an 8-1 decision, with only Justice Thomas dissenting . So far, at least, it appears that the worries of "6-3 decision after 6-3 decision" in the wake of Trump's appointees to the high court are without merit. Let's get to the facts. The crux of this case involves a high school cheerleader who was suspended for using naughty language on Snapchat (specifically, a few "F-Bombs") in response to disappointing tryout results. Actual Footage of Incident: The plaintiff was, at the time in question, a high-school freshman who tried out for a spot on the varsity cheerleading squad. She was not selected, and, in the sage words of Justice Breyer, "she did not accept the coach's decision with good grace. " She took to Snapchat's "stories" to voice her displeasure with two photos. Snapchat stories are deleted from Snapchat after a 1-day period, but others who view the stories can take copies of them, and herein lies the rub. One of the photos posted on Snapchat expressed her anger that she had been told a "year of jv" was required before advancing to the varsity squad, even though another freshman had been selected for the varsity squad. In the words of Justice Breyer, again, this photo contained "an upside-down smiley-face emoji. " Apparently nobody objected to the upside-down smiley-face emoji. The other photo showed the plaintiff B. L. together with one of her friends. Both fine young ladies were giving the one-finger salute to the camera, along with a caption that stated "F*** school f*** softball f*** cheer f*** everything" . Anyway, the 24-hour shelf-life (or half-life, since we're talking about bombs... ? ) of the story was plenty of time for one of B. L. 's friends to save a picture of the story and snitch on her to, apparently, the entire school. Once the photos reached school administration, B. L. was suspended from the cheerleading squad. A proportionate response was thus called for, and a federal lawsuit was filed. While you might question (with some very understandable and valid reasons) whether the Supreme Court should really be spending its time adjudicating disputes about high school cheerleading squads, the issue of student speech actually does rear its head from time to time. Recall, if you will, the 2007 Morse v. Frederick case - better known as the "Bong Hits 4 Jesus" case - in which the students lost in a 5-4 SCOTUS ruling that they could be punished for unfurling a "Bong Hits 4 Jesus" banner across the street from the school (not on school property! ! ! ). This case is one of my favorites because, while the students lost in court, they undoubtedly have claimed victory in the land of memes. Just search "Bong Hits 4 Jesus" and try not to chuckle at some of the results. But, back to B. L. and her Snapchat F-Bombs. B. L. won at the District Court on the grounds that there was no evidence her F-Bombs had interfered with the work of the school. The Third Circuit affirmed on a different basis (because the speech was off-campus; but cf. the rejection of this rationale by SCOTUS in Morse v. Frederick). SCOTUS specifically addressed the Third Circuit's rationale in its ruling, stating that there was no had and fast bright-line rule relating to on-campus/off-campus vis-a-vis determining what speech is protected, although it did state that schools will rarely have much of an interest/right to regulate off-campus "political or religious" speech (although it did not define that term, which in the pre-smartphone days might have been considerably less slippery than it has now become). SCOTUS also took pains to point out that, while schools have an interest in maintaining a learning environment under Tinker v. Des Moines Independent Community School District (the controlling precedent for many of these kinds of cases), they also have - or at least should also have - an interest in protecting free speech, even (especially) unpopular free speech. In its application of the Tinker rule, the 8-1 majority held that the student B. L. won. Justice Clarence Thomas dissented, maintaining his previous position that students have zero, zilch, nada, and nothing in the vein of free-speech rights. Thomas previously noted in Morse v. Frederick that during “the colonial era, ... teachers managed classrooms with an iron hand. ” This included, among other things, a Vermont case from 1859 that upheld a teacher's right to beat a student for calling him "old" - and, presumably, if teachers can beat students, they can certainly censor students. The other justices in the majority in that case didn't join Thomas's opinion. Justices Alito and Gorsuch joined the majority but also wrote separately to discuss in more detail some of the factors weighed by the court. They noted that this was the first time SCOTUS has addressed "true off-premises student speech" in light of the Morse v. Frederick ruling that "across the street from the school" is not really "off campus". It's not at all obvious to me that this distinction is meaningful in the age of the smartphone (Snapchat stories could be accessed on-campus or off-campus; it doesn't really map). For any future updates on legal developments, be sure to follow this blog, and check back regularly. To talk with us about representing your business, contact us here. --- ### SAFEs for Startup Financing - Published: 2021-06-30 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/safes-for-startup-financing/ - Categories: Business Attorney, Business Law, Investments, SEC (Securities and Exchange Commission), Securities, Small Business, Transactional SAFEs (Simple Agreement for Future Equity) for Startup Financing In this article, we will attempt to provide a basic overview of one of the simpler methods of equity fundraising utilized by startups - the "SAFE" which is an acronym for Simple Agreement for Future Equity. Is SAFE Financing Really Safe? What You Should Know as a Startup Founder or an Investor In the past, startups were typically funded by equity offerings or by loans secured by convertible notes. But recently, it has become common for many startups to offer their investors a hybrid type of security called a SAFE which stands for Simple Agreement for Future Equity. A SAFE is an agreement between an investor and the company where the investor agrees to give the company an upfront investment. In exchange, the investor gets a future equity stake upon an agreed-upon future trigger event. Similar to a convertible note, a SAFE allows a company to raise capital while affording an investor a future stake in the company.   The Background of SAFE Financing Developed in late 2013, SAFE fundraising was originally introduced by startup accelerator Y Combinator as a more convenient alternative to convertible notes for startup owners. SAFE financing allows a company to raise funds, but without a formal valuation of the company. The investor buys a future stake in the company’s equity, but, unlike a convertible note, it is not considered debt. In fact, there is no interest rate or even maturity date. Instead, the SAFE converts to equity shares upon a set “triggering” event. It may be helpful to understand the original purpose of SAFEs.   SAFEs were designed primarily with silicon valley startups in mind. A SAFE enabled venture capitalists to invest in a startup more quickly and efficiently, with the focus on seizing an opportunity, not necessarily the safety of the investment. The simple mechanisms of SAFEs were designed for these fast-growing startups to attract quick capital from investors without the formalities. While the first SAFES were designed for startups to raise small amounts of capital quickly, they are now being used more frequently to raise larger amounts of capital. Although they are becoming more commonplace, it's important to understand SAFE financing from both a founder’s and an investor’s standpoint.   How SAFEs Work Startups use SAFEs to raise capital by offering investors future equity shares at a pre-agreed trigger event in exchange for upfront capital. The investor is commonly offered a discount to the market value of shares when the SAFE does convert. There are typically two types of events that will trigger a conversion: a qualifying round when the company issues shares to raise additional equity investment, or an exit event when a company lists on an exchange or when it sells its shares or assets. When a founder is using SAFE financing to raise capital, it is important to fully understand the variables, including What events will trigger the conversion What terms to consider when negotiating a SAFE What steps must be taken to trigger the conversion How shares that are issued to investors will be calculated How the conversion will effect dilution The price at which the SAFE converts will be set out in its terms. Conversion price can be set based on a conversion discount, a valuation cap, or a combination of both. If the SAFE has both, the investor will get whichever affords the better share price. For both founders and their investors, SAFEs can be simpler, faster, and more cost effective than Series Seed or Series A equity financing. But there are potential pros and cons that should be considered by both a founder and an investor.   Good For Companies and Founders SAFEs tend to be very company-friendly and can be a good option for raising funds for a startup. For founders who are considering using SAFE fundraising, it can be easier and faster than typical convertible notes and equity fundraising. A SAFE is a simple format with fewer moving parts, so the terms can be negotiated and agreed upon easily and quickly. Because of this, there are less costs for transactional and legal costs for the founder. There is no need to worry about interest payouts, repayment of the investment, maturity dates, or negotiating extensions. It will merely convert to equity shares at the given triggering point that is set out in the terms of the SAFE. Similar to convertible notes, SAFEs don’t give away any company control or ownership until conversion, so investors have no voting rights about company matters. Although founders will typically like being able to raise capital without having to set a valuation, one major pitfall of SAFEs for founders is the potential effect it may have on capitalization and dilution as conversion will impact how much company they still own after the qualifying round is complete.   Are SAFEs Safe For Startup Investors? SAFEs, despite being company-friendly, are not as investor-friendly and may even be unsafe for early stage investors. Although SAFEs do have the same advantages as convertible notes in the way of conversion discounts and/or valuation caps, there is no certainty of a conversion ever happening at all. Consequently, SAFE investors take on almost all of the risk of the investment. In the case of a liquidation, SAFE investors are not entitled to any assets and have no leverage to force any repayment or favorable conversion if the company does not perform well. In addition, a SAFE will convert into SAFE preferred stock, not standard preferred stock, which has different liquidation preferences that should be considered when assessing it from an investor standpoint.   Getting Legal Advice for your Business and/or Investment Goals For anyone considering a SAFE, whether it is a company founder looking for funding or a potential investor, it’s important to understand the benefits and potential pitfalls considering the unique variables and context at play. Getting the guidance of a San Antonio business attorney that is experienced in startup financing can save you from making costly mistakes. Contact the Law Offices of Ryan Reiffert, PLLC if you would like more information on SAFE financing for your business. --- ### Trial By Combat: The Sequel (My Interview with David Ostrom) - Published: 2021-06-27 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/trial-by-combat-update/ - Categories: Funny, Off-Topic, Uncategorized Roughly a year and a half ago, I wrote this blog article describing a man who requested a trial by combat as a result of his acrimonious divorce and his difficult time spent in the Iowa family court system. While that article was certainly entertaining - to write, as well as to research, and hopefully to read as well - I never really expected that it would create much of a reaction. After all, my main practice is centered around business law and estate planning, most of the articles I write are centered around business law and estate planning, and most people who read my blog read it for news about business law and estate planning. So, while writing about the bizarre request for trial by combat was fun, it wasn't relevant. Well, something happened. I got an email from David Ostrom, the Kansas Swordsman himself, telling me that he enjoyed reading my article. So, I did the logical thing and asked him if he would be willing to appear on my YouTube channel.   --- ### Real Estate Reactions: What is a Commercial Lease? - Published: 2021-06-24 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/real-estate-reactions-what-is-a-commercial-lease/ - Categories: Business Attorney, Business Law, Real Estate, Small Business, Texas, Transactional What is a Commercial Lease? Simply stated, a commercial lease is a lease that covers a commercial property (as opposed to a residential property, an oil/gas property, or other leased interest). The lease will deal with different topics and concerns, since the space is being used for business and commerce rather than being used for living/residence. A commercial lease – just like any other lease - is a legally binding contract between two parties to rent a space. The commercial tenant, of course, may be anything from a sole proprietorship to a mid-market franchise to a large, multinational corporation. A commercial lease agreement sets out all (or hopefully all... or most) the relevant legal obligations between the parties and grants the commercial tenant certain specific rights. How Common is it for a Business to Lease vs. Own Property? It may surprise you to know that many businesses do not own the real property upon which their business is operated! It is in fact very common for businesses to rent or lease their real estate. Why Would a Business Lease Rather Than Own? There are many potential reasons for a business to lease rather than own. First, a business may choose to lease property because purchasing can mean a large, up-front capital investment, and/or locking in a long-term mortgage. A business may not have that amount of liquid cash and/or may not wish to obligate itself to that kind of expense. Second, owning a property exposes the owner to the potential volatility of the real estate market. If you buy the property and then there is an eminent domain action, or the real estate market writ large falls off a cliff, this could be a big problem for your business. While these scenarios would be somewhere between a major inconvenience to a minor problem for a business that is renting space, the impact to the commercial tenants would be much less severe, and they can often walk away. Third, owning land is a pain in the neck (and the wallet). It comes with all kinds of maintenance and upkeep, expenses, responsibilities, and various other headaches. If a water pipe breaks in the middle of the night, it’s not someone else’s responsibility to fix – it’s YOURS. If there is a break-in or vandalism event, it’s not someone else’s responsibility – it’s YOURS. If the air conditioner or heater needs to be replaced, it’s not someone else’s responsibility to replace – it’s YOURS. Of course, you can hire a property management company to mess with all of this stuff – but that’s another expense. Fourth, let’s not forget property taxes. The owner of property is responsible for the taxes. And, as the value of the property rises over the years, so do the taxes! Fifth, your business is in the business of... well, whatever its business is! it’s NOT in the real estate investment business. Are you a savvy enough real estate investor to know which investment opportunity is a good deal and which is a bad deal? Do you have the time to devote to learning the real estate market, or the appropriate subset of the real estate market? Bolting on a bunch of unnecessary real estate price risk – not to mention tying up a huge amount of capital – may not make sense if you’re not quite certain that you’re barking up the right tree. How is a Commercial Lease Agreement Different From a Residential Lease? Because a commercial lease is a fully-customized, legally-binding contract that can have long-term financial and legal implications, it’s critical for the business tenant to understand its rights and obligations under the terms of the lease before signing. While both a commercial lease and residential lease fundamentally function to lease space from a landlord to a tenant, the two types of lease are very different legal documents, because the context of each of these documents is so different from one another. Some of these differences are: Commercial leases tend to be significantly longer in duration than the typical one-year residential lease. The term of a commercial lease is usually three to five years in duration, but can sometimes be much longer. Most commercial lease agreements have varied terms to accommodate different tenants’ needs (a restaurant, for example, will have different needs from a gym, which will have different needs from an auto parts store; and so forth), as well as the needs that arise from a particular site (for example, leases will differ when in the middle of the city’s urban core vs. in the suburbs vs. in a rural small town). Consequently, there is generally no single cross-industry standardized format and agreements can vary greatly from lease to lease. Commercial and business tenants are often seen as more sophisticated than residential tenants. As a result, there are generally far fewer legal protections for tenants in a commercial lease, and the consumer laws (such as the Texas Deceptive Trade Practices and Consumer Protection Act (DTPA)) that protect individuals and residential tenants generally do not cover commercial lease agreements or the parties thereto. Commercial lease agreements are often more flexible and negotiable between the parties, with more ability to fully customize the terms – again, arising from the fact that commercial leases are often executed among two commercially savvy, sophisticated parties. These will include the rental amount, the term of the lease, what other costs are involved, what improvements are allowed, what communal areas are included, and many other critical matters. Know What Terms Are Best for Your Business  Because a lease agreement is a legal contract that can be fully customized depending on the needs of the parties, you want to go into negotiations fully understanding your needs. Unsurprisingly, most commercial leases are written with the landlord’s rights, needs, and protections in mind. If you would like to have some of your needs and protections addressed or included in the document, you will need to discuss, request, or negotiate that! Of course, before signing your lease, you should completely understand its terms and how they may impact your business. Not understanding what you are signing and what your rights are can have serious consequences after the fact. Description of the Property You Are Leasing A commercial lease should clearly set out the description of the property you are leasing in addition to what areas of the property you have use of such as parking, restrooms, kitchen areas, and other common areas. Rent Amount and What it Includes Commercial rent is typically calculated based on usable square footage. But it is important to understand what is considered in this usable square footage figure. Does the rent include utilities? Does it include your portion of the insurance and property taxes? Does it include any repairs? You may be obligating yourself to these things separately as “other costs” that should be thoroughly understood before you sign the lease since they can quickly add up. If the lease covers a space that is part of a center or other multi-tenant property, it is common for that lease to provide that the tenant is responsible for some percentage share of common-area maintenance (or CAM). From the landlord’s perspective, charging the tenants for CAM makes a great deal of financial sense. However, since it can theoretically be abused, tenants are often well-advised to request a cap on the year-over-year increase in CAM. What is a Triple-Net Lease? A triple net lease (or NNN lease) is a lease that makes the tenant responsible for its share of taxes, maintenance, and insurance. Triple net leases are very commonly used by real estate investment trusts (REITs) and other large real estate investors, because a triple-net lease reduces the variability among properties and allows for the investor to implement a more “pure play” investment strategy. What Your Lease Should Say About The Term & Termination As mentioned above, commercial leases tend to be longer-term than residential leases. And, of course, this is what landlords want! Longer-term tenants are more valuable, more stable, better for economic and strategic planning, so on and so forth. Of course, while some business owners don’t mind this longer lease, many other business owners don’t want to be tied to a longer lease! In some circumstances (especially in an unfavorable market) it may be possible to negotiate the term of the lease. Landlords may, on occasion, demand increased rent in exchange for a shorter lease term. Depending upon your business goals and objectives, this could be a fair trade. Two other prominent issues in the arena of lease terms are: (i) termination of the lease – how much notice is required, what fees are payable for termination, and under what circumstances can the lease be terminated and (ii) renewal terms – who can initiate a renewal term of the lease, how many renewal terms are there, what rate of rent will be paid, and how long are the renewal terms for? What Are the Terms of the Security Deposit? Your lease should address the amount of the security deposit and under what conditions you will receive this money back. The size of the security deposit is often negotiable, and will vary depending upon the size and quality of the leased premises. If the security deposit is large, this will be another up-front cost to begin your lease, so consider carefully. What Improvements You Can Make Under Your Commercial Lease ? A commercial lease should clearly set out what modifications or improvements you can make to the space and who is responsible for paying for them. This will become especially relevant in cases where the business leasing the space has specialized requirements (for example, a steakhouse with high-temperature searing/cooking equipment and high-speed ventilating that will accompany it, or a gym who wants to bolt equipment into the walls). Both tenants and landlords should be aware of lease requirements to return the space to its original condition once the lease is up, and/or what modifications are permitted under the lease (and what modifications are to be paid for by whom! ) What Is a Use Clause? Should My Commercial Lease Have a Use Clause? Some commercial leases have restrictive provisions that specify the type of activities that the tenant may and may not engage in on the property. This provision is called a “use clause” and it can be common with retail centers or office centers (but will be less common with more permissive types of property such as industrial). While a use clause can be very beneficial for a landlord, and is indeed mandatory for some rentals – because it will limit the landlord’s liability as well as protect the value of the property and (at least in theory) maximize rental revenue from the other connected rental sites by preventing uses that tenants or customers of tenants may find objectionable – a use clause may or may not be good for a business owner. One the hand hand, as a business owner, a broad use clause may allow you to expand into other lines of business in the future. On the other hand, a use clause (if the other tenants are required to sign the same or a similar use clause) can prevent obnoxious tenants from moving into nextdoor spaces and driving away your clients. For example, if you are operating a day-care center, a use clause that says no strip clubs are allowed in any of the sites adjacent is a good thing, because it eliminates one way that you could lose customers. What is an Exclusivity Clause in a Lease? Exclusivity clauses prevent a landlord from renting space to a competitor of yours or someone with a similar product. If yours is a customer-facing business of any sort, this is something you will want to be included in your lease. For a landlord, this can add value to the tenant and potentially raise the amount of rent the tenant is willing to pay. When evaluating exclusivity clauses, pay special attention to the way that the line of business is described. For example, consider the difference between “nail salon” vs “beauty salon” or “liquor store” vs “alcoholic beverage store” and so forth. Be sure to describe your business (and, potentially, future lines of business you may wish to expand into) properly in the exclusivity clause. Rent Increases in Your Commercial Lease It is common for a commercial lease to provide for an annual rent increase – sometimes the increase will be tied to an inflation rate, while other times it will be tied to a number specified in the lease itself. While a rent increase is customary in a commercial lease, a business owner should consider trying to negotiate a lower rate of increase or a percentage cap, etc. , to ensure that those rental increases don’t become unmanageable in the future. On the other hand, the landlord will want to negotiate a sustainable rate of rent increase, rather than squeezing every last drop of rent out of the tenant, as this may cause the tenant to move elsewhere, leaving the property vacant. Paradoxically, the result would be a long-term result of lower rent. Subletting or Assignment Provisions in a Commercial Lease In the event that you decide to move or your business is not successful, you don’t want to be left on the hook for paying rent for the remainder of the lease term. If you simply break the lease or move out without notice, you could be liable for all of the payments on the entire remaining duration of the lease. There are two alternatives available to consider in such a situation. One alternative is subleasing or subletting the property (which is where you become something like an “intermediate landlord” where the landlord leases to you and then you, in turn, lease to someone else). The other alternative is an assignment, where you would assign the lease to another person who would “step into your shoes” for the purpose of the lease. Both a sublet clause and an assignment clause offers the ability to have someone else cover rent for the remainder of the lease term if you cannot do so. Accordingly, reviewing the lease for whether sublease or assignment is allowed, and under what circumstances it is allowed (and whether the consent of the landlord is required), is usually good idea. Signage Provisions in Commercial Lease If your business relies on visible signage from the street, you will want to be sure that you are not prohibited from doing this in your lease agreement. Checking with local zoning regarding signage restrictions is also essential. ADA Compliance Rules in Commercial Lease If your business is open to the public and employs more than 15 people, the law requires you to comply with the Americans with Disabilities Act and make the space accessible for those with disabilities. Some buildings may be “grandfathered” in as long as significant changes are not made. Your lease should specify who will be responsible for any changes that must be made for compliance and who will pay for it. Other Resources – The Series LLC If you would like to learn more about some of the different options available for real estate investors to protect themselves, you can also listen to our video on the Series LLC here:     Getting Professional Assistance Because laws change constantly and there are many moving parts in a commercial lease agreement, components should be thoroughly examined from all angles. It is always advisable to get professional assistance before you sign any commercial lease agreement to understand your rights and your obligations. When you are considering a commercial lease, the San Antonio real estate attorneys at the Law Offices of Ryan Reiffert, PLLC are happy to help. Contact us to schedule an appointment. --- ### How to Settle a Dispute With Your Contractor, Without Litigation - Published: 2021-06-08 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/contractor-disputes/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Small Business, Texas Are you concerned about the quality of work delivered by your contractor? Maybe they are not following the scope of work you initially agreed to? Perhaps they’re taking twice as long as was agreed? Or maybe they’ve found some other loophole in the contract; some other way to take advantage of your business? If so, you are not alone; such disputes do arise from time to time in the corporate world between a business and its contractor(s). Ideally, every single contractor you ever hire will work diligently to deliver quality work within the designated budget. Perhaps most importantly, this “ideal contractor” will do so in a timely manner. Everyone leaves happy, and there’s no need to even consider going to court. However, this is not an ideal world, and things sometimes go sideways. Is the situation irretrievably poisoned? Is an expensive and time-consuming lawsuit the only option? ? Fortunately, no! This where having a high-quality San Antonio Business Attorney on speed dial can save you. We can parachute in to help you avoid a costly mess and (hopefully) save the day. If a contractor’s job goes awry, your first priority must be to make as much lemonade as you can, from the lemons you have been given. What does that look like? And perhaps more importantly, how? Let’s dive right into it. STEP 1: READ YOUR CONTRACT; READ IT CAREFULLY; THEN READ IT AGAIN! The contract that you signed with your contractor may (should! ) address certain significant aspects of the job, including the scope of work, the completion date and start date, and some sort of dispute resolution procedure. In the unfortunate event that your contract does not address these areas, buckle up and get ready for a wild ride. After that, remember to hire a competent Business Attorney to draft your next contract. Some of the common areas of dispute (which your contract will hopefully address) may include: Starting Date: unsurprisingly, this is the day the contractor is required to start the job. Completion Date: again, unsurprisingly, this is the date the contractor is required to complete the job. Material Costs: this clause will set forth who pays for material costs, and on what schedule they will be paid. Payment Schedule: when the contractor is paid – whether determined by time, completion percentage, deliverables, or any other metric. Some common options include: Full up-front payment Partial up-front payment, balance upon completion Progress payments according to percentage of completion, with retainage (common in construction) Progress payments according to specific deliverables (common in technology) Partial payments over a recurring schedule (common in time-limited, quasi-employment type contracting arrangements) Sometimes, a change in the middle of the project is unavoidable. This is why it’s always good planning to keep a contingency plan, just in case. Sometimes it is simply unavoidable that the schedule, scope of work, price, or other aspects of the deal will (must! ) change due to unforeseen circumstances (on both parties’ account). If so, then you and the contractor should take extra care to agree on the required changes in writing. For this, you can sign addenda or amendments, making any contract modification official. STEP 2: IF A PROBLEM ARISES, EARLY COMMUNICATION IS YOUR FRIEND! As soon as you are aware of a festering issue, speak directly and openly to your contractor to address it. Often, an incipient dispute can be resolved with a bit of genuine discussion before it escalates into a full-blown legal conflict. This is a more convenient and civil way to take care of the problem, while avoiding hassle and expenses of a protracted legal battle for both parties. It is entirely possible that the contractor is simply unaware of the problem, and will appreciate your calling his or her attention to it before rushing to the courthouse. You might find the above obvious to the point of unhelpfulness (it basically amounts to “just go talk about it” after all). Two quick observations about that: (1) for being “obvious” you’d be surprised by how many people skip it, and (2) we’re about to talk about what to do next if it doesn’t work. STEP 3: OUT-OF-COURT OPTIONS If a frank discussion has failed, you should not fall into the trap of believing litigation is your only path forward. If you or the contractor wishes to avoid litigation, there are some other options that will cost you much less than taking the matter to court. These include the following: STEP 3A: INDUSTRY & AGENCY CONFLICT RESOLUTION PROGRAMS Your state’s contractor licensing trade group or agency may have some sort of dispute resolution/conflict resolution program geared toward addressing general contractor disputes. You may consider submitting your dispute to one of these programs or groups. A word to the wise: these groups have a reputation for being biased towards the contractors, and that reputation is well-earned. Nonetheless, the cost savings may be worth the trade-off STEP 3B: MEDIATION Mediation is a non-adversarial dispute resolution process where a neutral third party, called the mediator, helps the two parties in conflict discuss and attempt to reach a resolution of the dispute. A mediator will often be a senior attorney with expertise in litigation or a retired judge. Mediators can also obtain several different types of certifications, both for their expertise in mediation (e. g. , the American Academy of Distinguished Neutrals) as well as for mediating particular types of cases (e. g. family law). They will hear the perspective of both parties, facilitate a mediated discussion between them, and ultimately attempt to convince both parties to agree to a mutually-agreeable settlement. All of that being said, you must remember that mediation is non-binding in nature. If you don’t consent to the proposed settlement at the end of the mediation, you do not have to accept it. STEP 3C: BINDING ARBITRATION As the name suggests, binding arbitration (unlike mediation) results a binding opinion/decision. The parties must abide by the outcome. In binding arbitration, an arbitrator – an attorney or a judge with significant experience in the field – will act as the decisionmaker. A binding arbitration is a little bit like an “express lane” trial, without a jury and without lots of the procedural frills, and there’s no right to appeal. The arbitrator will listen to your arguments and the contractor’s arguments. Then, the arbitrator will establish the facts and render a decision. There are many benefits to binding arbitration over a protracted court battle. It’s faster. There’s less procedural maneuvering. You often can’t have a class-action in arbitration. It’s private. It’s final and, except in rare circumstances, unappealable. STEP 4: ALL ELSE HAS FAILED; GO TO COURT - SMALL CLAIMS COURT, IF YOU CAN It should also be noted that of the steps above, you can combine various methods to mix-and-match the dispute resolution process that’s right for you. If the discussion, industry dispute resolution, mediation and/or arbitration process have all failed, you can file a case in small claims court. In Bexar County there are four Justice of the Peace (JP) courts that handle the flow of small claims court cases, and in most other counties in Texas, the procedure is similar. Small claims court has jurisdiction over disputes with amounts of up to $20,000. This is a mandatory jurisdictional cutoff and you can’t plead around it - meaning if the amount in dispute is greater than $20,000, small claims court is not available to you, even if you ask for less than the $20,000 (for example, if you have a claim of $21,000 or $22,000 and attempt to get into small claims court by only pleading for $19,900, the court WILL NOT HEAR YOUR CASE; it will be dismissed for want of jurisdiction and you’re headed to a different – and more expensive – court). You can file a claim in your local JP court, in any of the following JP precinct: The precinct in which you are located; The precinct in which the contractor is located; The precinct in which the project is located; While the procedural requirements of small claims courts are typically much less strict than County Court or District Court, you will nonetheless need to produce certain documents to prove your case, including: A copy of the contract, including any amendments or addenda thereto; Written record or agreement on time and scope of work (with photos, if at all possible); Receipts of any purchased material; If you want to learn more about the Small Claims Court process, you can watch this YouTube "explainer" that I prepared on the topic: STEP 5: CONCLUSION While you have every right to go to court to settle the dispute, it may cost you a lot. Not to forget, it will probably leave your project hanging in limbo for an extensive period of time (for years in a worst-case scenario). However, our business attorneys may be able to help prevent such as predicament, and ensure a quick outcome, not only by assisting with potential settlement negotiations, but also by assisting you with skillful contract drafting in the first place. Contact Law Offices of Ryan Reiffert, PLLC today for a free consultation! --- ### June Could Bring Some Big SCOTUS Rulings for 2021 - Published: 2021-06-07 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/june-scotus-2021/ - Categories: General, Political Landscape June is the last month of the Supreme Court's annual term. And, like so many of the rest of us, it likes to save the best for last. The United States Supreme Court generally issues some of its highest-profile rulings each June. During this SCOTUS term, there are a few things that people are likely to be watching: Just how conservative (and how reliably conservative) is the newest SCOTUS justice, Amy Coney Barrett? Is she more like an Alito or more like a Roberts? Similarly, how conservative (and how reliably conservative) is the second-newest SCOTUS justice, Brett Kavanaugh? How drastic of a shift on the court will the three Trump appointees (Gorsuch, Kavanaugh, and Barrett) produce? Since the court is now 6-3 Republican appointees to Democrat appointees, rather than 5-4, how will this look when it comes to actual rulings? The three liberals must gain two conservative defectors in order to form a five-justice majority, rather than needing just one, as was previously the case. Will Roberts and some of the other more centrist conservative justices continue to occasionally side with the liberals in an effort to bolster the Court's image as a nonpartisan institution? This is your brief (very brief) guide to some of the decisions that you might expect out of SCOTUS this month. Mahanoy Area School District v. B. L. : school speechThis case addresses the issue of what a student's online free speech rights are, vis a vis the student's school. While it is unfortunately, established precedent that student free speech rightswithinthe school are effectively nonexistent, the question of online speech is somewhat different. Brandi Levy, a Pennsylvania high school student, was a junior varsity cheerleader. When she tried out for varsity and was not selected, she posted an angry, vulgar message on snapchat. The school, in response, suspended her from the junior varsity squad for a full year. What will happen? Court watchers seem skeptical of the school's draconian punishment, but the question of whether they will issue a narrow ruling or a broader pronouncement on student online speech rights is an open question. California v. Texas: the Obamacare caseConservative lawyers, businesses, and state officials are again asking the court to invalidate the Patient Protection and Affordable Care Act (PPACA or ACA; more colloquially known as "Obamacare"). Their argument goes as follows: in 2012, SCOTUS upheld Obamacare the first time around on the grounds that the penalty for the individual mandate was a tax, and Congress had taxing power. While much speculation of a "switch in time" accompanied this ruling, and while the taxation power grounds was certainly an unexpected avenue of saving Obamacare, that's been the law for nearly 10 years. The Trump administration then reduced the tax to zero. Conservative attorneys, businesses, and state officials then launched this lawsuit, arguing that because the amount is zero, that the mandate is no longer a tax and the whole law should be thrown out. What will happen? Court watchers seem to be of the consensus that, based on oral argument, the law will again survive to fight (or tax (or not tax? )) another day. Brnovich v. Democratic National Committee: the voting law caseIn the wake of the 2020 election, Donald Trump blamed widespread voter fraud for his loss. Republican state lawmakers followed suit and passed a slew of "voting security" measures - some that seem sensible and reasonable, and others that don't. We won't get into the weeds on which is which. At issue in Brnovich: two such measures from Arizona. One measure requires election officials to discard ballots cast at the wrong voting precinct. The other measure criminalizes ballot harvesting. What is ballot harvesting? "Ballot harvesting is the gathering and submitting of completed absentee or mail-in voter ballots by third-party individuals, volunteers or workers, rather than submission by voters themselves directly to ballot collection sites" -Wikipedia What will happen? Court watchers seem to be mostly of the opinion that the Roberts court will uphold these two measures. They are more divided, however, on the question of whether the Roberts court will issue a narrow decision confined to these two particular Arizona measures, or whether SCOTUS may issue a more sweeping decision that would sanction other states' voting security measures as well. Fulton v. City of Philadelphia: gay rights vs religious freedomWhen screening foster parents, Philadelphia, like many other cities, relies on third parties to do much of the heavy lifting. This can include socially-oriented businesses, nonprofits, religious organizations, anything. One of those third parties is a Catholic social services agency that objects to gay marriage, and has requested that Philadelphia permit them to decline to place children with same-sex couples. Philadelphia's position is that all its third party contractors must follow the same set of anti-discrimination rules (which rules prohibit discrimination against same-sex couples). The Catholic agency cites its own religious freedom. What will happen? Court watchers seem to be, based on oral argument, somewhat skewed toward concluding that the Roberts court will side with the Catholic social services agency. While it is unlikely, a broad ruling here could potentially signal the court's willingness to revisit Obergefell. ConclusionBuckle up, folks. It's going to be an interesting June. And of course, as always, if you have any questions about how one of these cases might affect your business, please feel free to contact me to discuss your concerns. --- ### Should I Hire an Attorney to Draft My Will, Or Do It Myself? - Published: 2021-06-04 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/draft-will-self-attorney/ - Categories: Estate Planning, Investments, Probate, Small Business, Texas Should I Hire a San Antonio Estate Planning Attorney to Draft My Will? IntroductionAll of us – well, many of us – have seen some of the family drama, feuds, and fights that erupt over inheritances when a family member passes on. These inheritance disputes can get truly nasty and can for years or even decades. Family members who formerly got along suddenly have volcanic disagreements, festering resentments, and all sorts of other If you haven’t seen it up-close and personal from an estate that you have been directly involved with – and by the way, I truly hope that you haven’t – odds are you’ve at least heard about something like this from a friend, colleague, acquaintance, or something. And, odds are, they weren’t particularly happy about it. As a San Antonio Estate Planning Attorney, I have seen this situation more times than I care to count - and every time it's disappointing and heartbreaking, to see folks in the midst of a trying time of grief and loss to add fuel to the fire by fighting. There are a handful of methods you might try to avoid this kind of fight among your beloved sons, daughters, grandchildren, and so forth after you’re gone. One way is that you could simply ask them not to fight. We’re sure that’ll work. But if you’re not so sure, there’s another, much better way to ensure that they won’t be at each other’s throats. That way is to have a will! A well-drafted, properly-executed, ironclad Last Will and Testament – that will set forth precisely who gets what, who is to serve as executor/executrix, and many other things. Of course, there are many ways to have a Will in Texas. You can draft a holographic will; You can prepare a will using a proprietary fill-in-the-blank form; You can use an online legal service provider to help you prepare your own will; or You can contact an attorney who will work with you to prepare your will (and other documents). In this blog post, I will discuss some of the pros and cons of each of these methods of preparing a will. You might be saying to yourself "well, you're an attorney - of course you're going to tell me that EVERYONE should ALWAYS go see an attorney" ... it may surprise you to know that this is not my position. To be clear, under many circumstances, failing to hire a competent Texas Estate Planning Attorney can result in disastrous consequences. But as with so many things in the law, there's no one-size-fits-all answer here. Each of these four potential answers could be useful to a person under certain circumstances. My goal with this post is to give you some information that you can use to select the right method of preparing a will - FOR YOU. Holographic Wills: Pros and ConsA holographic will doesn't have anything to do with holograms. A holographic will is holographic in the sense that it is entirely in the handwriting of the testator (and signed). Entirely, you should note, meansENTIRELY. If any of the "will" is typewritten, the typewritten parts will be disregarded. What are the Potential Benefits of a Holographic Will? It is simpler with fewer formalities: the holographic will does not have to be witnessed and notarized like a more traditional will, and the holographic will can be written on anything (in one famous case, a holographic will scratched on a tractor fender was found to be a valid will). It is cheaper: a holographic will does not require any purchase of anything, other than a writing instrument and something to write on. It can be used very quickly in an emergency: unlike a typewritten will, which must be notarized and witnessed, and therefore requires some amount of planning and ceremony, a holographic will can be created informally, in an emergency, very quickly (indeed, this is theoretically one of the main purposes of the holographic will) Better than nothing: as you might have gathered from some of the other articles on this side, intestacy can be extremely expensive, and even if your holographic will has some problems, it's unlikely to be completely invalid - and passing away with a will that has some problems is better than passing away without any will at all (but worse than passing away with a proper, well-drafted will) What are the Potential Downsides of a Holographic Will? No legal guidance: without an attorney to guide you through the process of creating a will, it's possible that some of your instructions or bequests might not be legally permissible or enforceable and accordingly, it is possible that the court might disregard or reinterpret the problematic provisions or bequests. Not legal in every state: while holographic wills are legal in Texas, they are not legal in every state; and if you move to another state or country and/or die there, the jurisdictional rules could get weird. Possible vagueness or ambiguity: without expert drafting assistance and legal guidance, the words that you wrote down might be interpreted differently from the way that you had intended them (and, for obvious reasons, you aren't around to explain! ). Possible omissions: while an attorney who has drafted hundreds of wills has the ability to point out omissions and gaps in your will, ask probing questions, and help you prepare a complete plan, with a holographic will, you will have none of this assistance. Potential authenticity challenges: unlike a formal will, which is witnessed and notarized, a holographic will must rely on handwriting verification alone for its authentication. Does not extend to other estate planning documents: a holographic will does not extend to the other "typical" documents that form the estate plan that you might receive from one of the other sources of drafting a will - such as a medical power of attorney, durable power of attorney, physician directive (or living will), or HIPAA authorization. One bit of good news is that you can use both - draft a holographic will now, and then make an appointment with an attorney to draft a proper will later. If you would like to read more about holographic wills, you can do so here. Proprietary Fill-In-The-Blank Form Will: Pros and ConsSome office supply stores, general merchandise retailers, and various other types of stores offer cheap "fill in the blank" wills. While the cost of one of these "fill in the blank" wills is extremely low, they present some significant risks. What are the Potential Benefits of a Fill-In-The-Blank Will? Price: most obviously, these fill-in-the-blank wills are incredibly cheap. They generally run from roughly $10-$50. Some Legal Drafting: these forms have presumably been developed and/or edited by an attorney or attorneys somewhere along the line, and so would tend to reduce your risk profile (but note that, unless the form specifically states that it was developed by an attorney, you can't really know). Some Prompts: these forms will have some instructions that, again, would presumably have been developed with guidance from a lawyer or lawyers, at some point (again, check the fine print). What are the Potential Downsides of a Fill-In-The-Blank Will? No legal guidance: just as with a holographic will, you don't have an attorney advising you as to whether your bequests, instructions, etc. will be enforceable, unenforceable, or anything else. Likewise, if you have questions about the instructions provided with your fill-in-the-blank will, you're out of luck. Possible Vagueness or Ambiguity: again just as with a holographic will, although perhaps to a slightly lesser degree, if your instructions filled into the blank are unclear, vague, ambiguous, or subject to multiple conflicting interpretations, this could be an issue at probate. Even if the probate is uncontested, this could still create major problems for your executor! Possible omissions: again just as with a holographic will, although perhaps to a slightly lesser degree, if you have concerns or issues that go beyond the one-size-fits-all form provided by the fill-in-the-blank form, again, you're out of luck. Formal signing ceremony required: unlike a holographic will, in order for a typed (even partially typed) will to be valid, it must be properly witnesses and notarized. Under Texas law, you must execute the will in front of two disinterested witnesses and a notary - which is "old hat" for a law office (we do this every day), but for a DIYer, it can be a little bit (or more than a little bit) of a pain in the neck. Risk from incorrectly complying with the signing ceremony: there are various requirements for the execution ceremony to be valid, what it means to be a "disinterested" witness, etc. While an attorney could advise you with regard to the rules here, if the instructions on the fill-in-the-blank product are unclear or incorrect and you perform the signing ceremony incorrectly, your will may not be valid. Worst of all there will be no Wills Attorney to tell you that you've made a mistake! There are 50 states with 50 rules: where was the form produced? is it a one-size-fits-all form, or does it comply with your state's law? Laws change: has there been a change in the law since the form was published? Online Legal Service Provider: Pros and ConsThere are a handful of online legal service providers that have popped up and grown in the last several years. I won't name names, but you've very likely seen some of their advertisements. They offer to provide simple legal services provide help for you to self-solve some simple legal services. The form of this help typically will go something like: choose the document you want, answer some multiple choice questions (that you may or may not understand) about your situation and wishes, fill in some blanks, and voila! you have a legal document. While these providers have become much more common in recent years, and while they certainly do have their place, they also come with some downsides - they're not right for everyone! What are the Potential Benefits of Using an Online Legal Service Provider? Price: while online legal service providers are more expensive than a fill-in-the-blank product, they're still pretty cheap. They will save you some money in the short-term compared to hiring a real attorney. Some Legal Drafting: as with the fill-in-the-blank forms, the online forms have presumably been developed and/or edited by an attorney or attorneys somewhere along the line. A Little Bit of Guidance: frequently, the online legal service provider will have more instructions and guidance than the fill-in-the-blank products; and while they nonetheless lack the ability to render actual legal advice, there is often a "help chat" or an FAQ or something like that to consult, if find yourself utterly and totally lost. Some Prompts: as with the fill-in-the-blank products, online products will have some instructions that presumably have been developed with guidance from a lawyer or lawyers, at some point. What are the Potential Downsides of Using an Online Legal Service Provider? Difficult-To-Understand Multiple Choice Questions: I have had to clean up many legal messes made by folks who thought they were saving a buck by using an online legal service provider. The problem is, some of the multiple choice questions aren't exactly easily understandable. No legal guidance: just as with the fill-in-the-blank products and holographic wills, the lack of an attorney advising you on your bequests, instructions, etc. is a major downside. Likewise, if the instructions or clarification provided by the fill-in-the-blank product is not sufficiently helpful to get you "over the finish line" you have nobody else to ask. Online providers, again, are severely limited in their ability to answer questions as they are prohibited from "practicing law. " Possible Vagueness or Ambiguity: again just as with a fill-in-the-blank or holographic will, although perhaps to a slightly lesser degree, if any of the writing you do yourself is vague or ambiguous, this could be an issue at probate. Formal signing ceremony required: again, in order for a typed will to be valid, it must be properly witnesses and notarized. Therefore, in the State of Texas, you must execute the will in front of two disinterested witnesses and a notary - which for a DIYer, might not be the easiest thing Risk from incorrectly complying with the signing ceremony: as discussed above, there are various requirements for the execution ceremony to be valid. Without an attorney's advice, you risk performing the signing ceremony incorrectly, resulting in an invalid will. Hire an Attorney: Pros and ConsLast but certainly not least, we will discuss the traditional way of getting legal advice - consult with an actual attorney. Depending upon your physical location, there may be an abundance of local attorneys, a handful, only a few, or even (if you're really somewhere remote) perhaps none. Regardless, when looking at an attorney, it's important to select someone competent, someone you trust, and someone that you feel comfortable talking with. What are the Potential Benefits of Hiring an Attorney? Competence + Training: Most San Antonio Estate Planning Attorneys are likely to have a pretty good idea of what they're doing. Or, if not, theyknow what they don't know, and when it's time to bring in more expertise(the same, unfortunately, cannot be said for many laypeople). Significant Reduction of Downside Risk: Related to the previous point, because you have an extremely experienced advisor in your corner, the risk of something going horribly, catastrophically wrong with your will and, if applicable, the rest of your estate plan, is drastically lower. Easy and User-Friendly: A high-quality Texas Estate Planning Attorney will also likely be adept at answering any and all questions that you may have about the process, and guiding you smoothly through each step of the process. As a seasoned professional in the estate planning field with many years of customer service experience, your Trusts, Wills, and Estates Attorney will be able to answer many questions - perhaps not every single question you could ever come up with, but almost. Future Changes Are Easier: Let's say that in a year, or two years or five years (or 10 years or 20 years) you change your mind about what you want your Last Will and Testament to say, contain, direct, etc. Unfortunately, it's not as simple as writing in a correction! You may have to prepare a codicil, or in many conditions, an entirely new will. If you've used one of the other methods of preparing your documents, you're starting again from scratch. But if you've engaged an attorney to begin with, they most likely have your original set of documents, and the revisions will go much more smoothly. Other Estate Planning Documents: A competent Texas Estate Planning Attorney can help you prepare your medical power of attorney, durable power of attorney, physician directive (a. k. a. living will), HIPAA release, trust, designation of guardian, Lady Bird Deeds, Transfer on Death Deeds, and many other documents that you might want to be part of your estate plan. For any of the other options listed, you'll end up going a la carte for any of these other documents. Safekeeping: If you want an attorney to keep a copy of your Will, there are few places more secure than the locked file cabinet of a Trusts and Estates attorney. But if you have not engaged the services of an attorney, you'll have to make your own safekeeping arrangements. Keeping Up To Date: Occasionally, there are developments in the law related to Estate Planning, and if you want someone who's going to be up-to-date on the latest changes in the legal landscape that will inform your estate planning decisions, you should look to your attorney. What are the Potential Downsides of Hiring an Attorney? Expense: There's no way around it. The up-front expense of an attorney will be the highest of any of these options. And while it is undeniably true that, in most cases, this up-front cost is a good investment that will usually save money over the long run (not to mention that it will also save hassle and time), it's still an expense that not everyone is ready to incur. Risk Aversion: Lawyers are generally conservative and risk-averse, particularly Estate Planning Attorneys. We like to do things the right way and follow all of the rules. If you're someone who prefers to take some risks, you may find yourself occasionally at odds with your lawyer. Lawyer Jokes: You won't be able to tell quite so many lawyer jokes once you get to know your attorney. Just kidding! We know all the BEST lawyer jokes.   As always, if you have more questions, there is plenty more to read about our Estate Planning Services and Probate Services or if you may be able to take advantage of Alternatives to Probate. You can also Contact Us or Follow Us on YouTube. --- ### New Video: Can Businesses Require Employees Get COVID Vaccine? - Published: 2021-06-03 - Modified: 2024-01-22 - URL: https://ryanreiffert.com/blog/video-mandatory-vaccination/ - Categories: Business Attorney, Business Law, Coronavirus Relief, Corporate Attorney, Corporate Law, COVID-19, General, Small Business, Texas Head on over to our YouTube channel for the latest video chronicling the updates in the saga of the COVID reopening. In this video, attorney Ryan Reiffert discusses the latest guidance provided from the Equal Employment Opportunity Commission (EEOC) on whether businesses can require that their employees be vaccinated. As a "spoiler alert" the answer is, for the most part, yes. If you work in a business that has a significant contact to the medical, biotech, hospital, elder care, or similar market segments, this probably will not come as too much of a surprise to you - employers in those industries have been requiring their employees to get Influenza vaccines for years. And the good news for those folks is that the rules of the COVID vaccine are actually very similar. So, if you're in an industry that has required Flu vaccines before, this is probably old hat for you. For everyone else, take a look at the video for a more detailed explanation, and feel free to chime in if you have any questions or comments! --- ### EXPLAINER: Trade Secrets - Published: 2021-05-30 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/explainer-trade-secrets/ - Categories: Business Attorney, Business Law, Contracts, Copyright, Corporate Law, Deals, M&A, Small Business, Texas, Uncategorized Trade secrets and other confidential or proprietary information can be some of the most valuable assets that a company owns. Unsurprisingly, many companies are willing to go to great lengths (such measures occasionally becoming fodder for urban myths) to protect them. Fortunately, Texas law and Federal law provide companies with opportunities to protect these assets, if they take proper precautions, use the correct agreements, and follow certain procedures - of course, in consultation with legal counsel. While the protection afforded might not be perfect under all circumstances, it can still be quite strong. In addition, unlike certain other types of intellectual property (such as copyrights or patents), there is no time limit on the protection conferred by the information's status as a trade secret. What is a Trade Secret? The most widely-accepted definition of a trade secret, accepted by the United States Patent and Trademark Office (USPTO) and others is that a trade secret is information that meets four criteria: the information is not generally known (i. e. , it is secret); the information has economic value (actual or potential) by virtue of its being not generally known; the information has value to others who do not have access to it (and they cannot obtain it by legal means); and the person, entity, or business that holds the information takes reasonable efforts to maintain its secrecy. It is important to keep in mind that each of these four elementsmust existin order for information to be considered a trade secret  - and for the protections conferred by the same to continue. If any of these elements ceases to exist, then the protection conferred by the "trade secret status" will, likewise, cease to exist. Other than the obvious practical concerns, the added benefit of maintaining legal protection is a great reason to invest in security and secrecy. But let's not get ahead of ourselves. Protection of Trade Secrets Under Federal Law There are two main federal laws that govern the protection of trade secrets. The Economic Espionage Act of 1996 (the EEA) The Defend Trade Secrets Act of 2016 (the DTSA) The EEA criminalizes two main areas of misconduct with regard to trade secrets. The first major prohibition of the EAA is a theft of a trade secret "intending or knowing that the offense will benefit any foreign government, foreign instrumentality, or foreign agent. " This is codified in §1831 of the EAA. This part of the EAA is - obviously - limited to acts that are on behalf of, or for the benefit of, a foreign entity and cannot directly be brought to bear on theft or misappropriation of trade secrets that are for domestic competitors. Penalties for violation of this section of the EAA include for individuals, fines of up to $500,000  and imprisonment of up to 15 years; and for organizations, fines of up to $10 million. That's a pretty big hammer, by any measure. Notably, the EAA claims extraterritorial jurisdiction where (i) the offender is a U. S. citizen or resident; (ii) the offender is an entity organized under U. S. (or a State's) law;or(iii) part of the offense was committed in the U. S. Meaning that liability in a U. S. court for acts occurring outside of the U. S. is entirely possible, depending upon the circumstances. This first section of the EAA has been used for several high profile prosecutions, including the 2018 prosecution of Yanjun Xu, the deputy division director at China’s Ministry of State Security (or MSS - which is sort of like a hybrid of the U. S. FBI and CIA). Yanjun Xu was arrested in a sting operation in Belgium, which extradited him to the U. S. to face charges. Another example of the EAA's foreign-entity prohibitions was the high-profile prosecution of Chinese telecom giant Huawei by the DOJ in 2019. Huawei's defense/response essentially amounted to "this case is political theater and we are being unfairly targeted. " Both of these were part of a broader "China Initiative" undertaken by the DOJ and other agencies, focused on the ongoing efforts of Chinese companies and government agencies to steal U. S. trade secrets and intellectual property. But, what if the dishonest person or company stealing your trade secrets is not a foreign entity? This is where the second of the EAA's two major prohibitions - codified in §1832 - comes into play. This second area is theft of a trade secret that "is related to a product or service used in or intended for use in interstate or foreign commerce, to the economic benefit of anyone other than the owner thereof, and intending or knowing that the offense will, injure any owner of that trade secret" Penalties for the violation of this section of the EAA are somewhat less than the above, but nonetheless extremely severe: for individuals, imprisonment for up to 10 years (no fines); and for organizations, fines of up to $5 million. One notable item that may immediately jump out about this section of the law is that it requires the product or service be used (or intended to be used) in interstate commerce or foreign commerce. To the attorneys and legal nerds among you, the reason for this is probably obvious. In order for Congress and the Federal Government to have jurisdiction over a matter, it generally must have some aspect that crosses (or would cross) state lines. Otherwise, its regulation is solely the province of state governments and a federal law on the matter is unconstitutional. §1832 was notably used in the 2002 case United States v. Lange, in which a former employee of an aircraft-parts company attempted to sell his former employer's trade secrets to a rival business, and was prosecuted for his conduct under the EAA and several other laws, including wire fraud, securities fraud, and more. If you haven't noticed, there's one HUGE problem with what I have discussed above - the violations, remedies, etc. detailed under the EAA are all criminal in nature, and prosecutions for their violation must be brought by the Federal Government (which has limited resources; prosecutors do not and cannot investigate or prosecute every single instance of alleged misconduct, or evenactualmisconduct). An individual business or company doesnothave the right to bring an EAA action. So, while a business can always file a complaint with DOJ and request prosecutions, the decision to actually investigate, charge, prosecute, etc. is ultimately the prosecutor's - not the business's (victim's) - decision. Obviously, this is less than ideal. Which is one of the reasons we got the DTSA! The Defend Trade Secrets Act of 2016 or DTSA, unlike the EAA,doesprovide for a private, civil right of action that allows a business to sue in federal court when its trade secrets have been stolen or misappropriated. Forbes Magazine called the passage of the DTSA "The Biggest IP Development In Years" I'm inclined to agree with that assessment. The first verdict under the DTSA came in 2017 when a Pennsylvania jury in Dalmatia Import Group, Inc. v. FoodMatch Inc. et al. awarded Dalmatia $2. 5 million for the misappropriation of a recipe for fig spread by its former contract manufacturer and former distributor. $500,000 of the total $2. 5 million judgment was attributed to DTSA (other claims included trademark infringement and counterfeiting). While the DTSA parallels the UTSA (model state law) in many respects, it also has some very notable and unusual features. Perhaps the most striking of these is that the DTSA allows forex parte seizure ordersin "extraordinary circumstances" (such as cases where the alleged thief or misappropriator would destroy, hide, or cause publication of a trade secret if given notice. ) For those non-lawyers reading this, an "ex parte" order (which literally translated is "from the party/faction of") means that the statute permits a court to issue an order based on one party's request only, without notice, warning or an opportunity for a hearing to the other side. Even when limited to "extraordinary circumstances," this is strong medicine, indeed. One can understand how an ex parte remedy might be appropriate in this situation. By their very nature, the value of a trade secret is dependant upon secrecy, and swift action outside of the typical "notice and due process" framework might well be the best way to prevent further damage. Under the statute, an aggrieved party can petition the court to order federal marshals to seize “property necessary to prevent the propagation or dissemination” of the stolen or misappropriated trade secret. As noted above, the seizure would proceed without notice to the accused thief or misappropriator of the trade secret. Victims of a wrongful seizure may avail themselves of a damages award, attorney fees, and (in the case of bad faith) punitive damages. Another unique feature of the DTSA is its whistleblower protections. Suppose, for instance, that an employee of a company has knowledge of an actual or potential trade secret theft or misappropriation and wants to report it to the appropriate authorities. In order for the report to be meaningful, complete, actionable, etc. , it would have to include a fair amount of specificity, almost certainly including some amount of substantive disclosure of the trade secret. In other words,wouldn't the report of the violation, itself, technically be a violation of trade secret law? Well, in a lot of cases, the answer could be "yes. " But not to worry. The DTSA grants very broad legal immunity to whistleblowers to protect them from this scenario. Recognizing this, the DTSA provides that companies may receiveenhanced damages if employees are notified of their whistleblower immunity rights. This has, unsurprisingly, caused many employers to add language like the following to their HR manuals, policies & procedures, employment contracts, etc. that very closely tracks the statutory whistleblower-immunity provisions: An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in confidence to a Federal, State, or local government official or to an attorney solely for the purpose of reporting or investigating a suspected violation of law. An individual shall not be held criminally or civilly liable under any Federal or State trade secret law for the disclosure of a trade secret that is made in a complaint or other document filed in a lawsuit or other proceeding, if such filing is made under seal. An individual who files a lawsuit for retaliation by an employer for reporting a suspected violation of law may disclose the trade secret to the attorney of the individual and use the trade secret information in the court proceeding, if the individual files any document containing the trade secret under seal; and does not disclose the trade secret, except pursuant to court order. But the DTSA, being a federal law, suffers from the same jurisdictional problems that plague the EAA - to wit: the federal government cannot Constitutionally legislate on or regulate conduct that is solely within a state. It is the domain of that state and no other authority to exercise its police power and regulate such solely-internal affairs. What's a small business to do? Fortunately, most states (including Texas) do have trade secret laws on the books. Protection of Trade Secrets Under Texas Law You may have noted that both of these federal statutes discussed above are fairly recent legislation (1996 and 2016). And you might fairly ask: prior to the first of these in 1996, was the misappropriation or theft of trade secrets legal? Certainly not. The Espionage Act of 1917, which involved national defense information or classified information, has sometimes been used where the trade secrets had an impact on national security. But more broadly, trade secrets have been protected by courts under common law principles for quite some time, as well as having been granted statutory protection under various state laws based on the Uniform Trade Secrets Act (UTSA), originally published in 1979 and amended in 1985. First, we will take a brief look at common law protection of trade secrets. The Restatement of Torts, Section 757 defines trade secrets as follows: A trade secret consists of a formula, process, device, or compilation which one uses in his business and which gives him an opportunity to obtain an advantage over competitors who do not know or use it. Under this body of law, Texas recognized a cause of action for misappropriation, which consisted of the use, publication, sale, disclosure, etc. of a trade secret that was acquired via (a) a relationship of trust (for example, through a confidentiality agreement or NDA, through employment, through a fiduciary or agency relationship, etc. ), or (b) through fraud, theft, deception, bribery, computer hacking, or other improper means And for many years, this was the way that you would pursue a trade secrets case in Texas. But then, in 2013, over 30 years after the UTSA was released, Texas became the 48th state to come on-board, adopting the Texas Uniform Trade Secrets Act (TUSTA). Despite being late to the party, Texas now has a trade secrets law that looks a lot like most other states' trade secrets laws (and a lot like the federal DTSA). The definition of “trade secrets” under TUTSA is very similar to the definition outlined by USPTO. It is: information, including a formula, pattern, compilation, program, device, method, technique, process, financial data, or list of actual or potential customers or suppliers, that a. derives independent economic value, actual or potential, from not being generally known to, and not being readily ascertainable by, other persons who can obtain economic value from its disclosure or use; and b. is the subject of efforts that are reasonable under the circumstances to maintain its secrecy. The statutory trade-secret misappropriation claim established by TUTSA for the improper acquisition or disclosure of a trade secret has three distinct elements: a trade secret exists and is owned by the plaintiff; and the trade secret was improperly acquired; or the trade secret was disclosed or used without the owner’s permission; Often, proving ownership of the trade secret is not an issue, and is so intimately connected with the existence of the trade secret that it the two are essentially the same question. However, it can become an issue in unusual cases. For example, suppose the plaintiff company acquired a target company through a merger, asset acquisition, stock purchase, or other transaction. The plaintiff will not have standing to sue under the TUSTA unless it owns (owned) the trade secret at the time suit is (was) filed. Additionally, it should be noted that in large, TUSTA abrogates and replaces various common law claims of trade-secret misappropriation described above, however they are framed - if the conduct in question is governed by TUSTA, the common law tort of trade secret misappropriation is no longer a viable cause of action. Similarly, the common law tort claims for breach of confidential or fiduciary relationship, unfair competition, and others are no longer viable causes of action to the extent they seek relief for conduct that is now covered by the TUSTA statutory cause of action for trade-secret misappropriation. However, all of the above common-law claims nonetheless continue to exist, with respect to conduct that is not covered by TUTSA. Accordingly, they may be available in a TUTSA case if there is TUTSA conduct and other conduct actionable at common law. Additionally, TUTSA by its terms “doesnotaffect contractual remedies ... based upon misappropriation of a trade secret. ” So the enforcement provisions in your NDAs, employment contracts, and so forth are safe. TUSTA also, of course, does not supplant any criminal remedies (more on that below. ) Texas Criminal Penalties for Theft of Trade Secrets Remember the discussion of federal jurisdiction above? Well, it's true with regard to criminalizing conduct as well. The federal government also cannot criminalize conduct that occurs solely within a state, does not touch interstate commerce, etc. Fortunately for businesses that own trade secrets, however, Texas also criminalizes theft of trade secrets as athird-degree felonyunder §31. 05 of the Penal Code: A person commits an offense if, without the owner's effective consent, he knowingly:(1) steals a trade secret;(2) makes a copy of an article representing a trade secret;  or(3) communicates or transmits a trade secret. As with the EAA, all decisions to investigate, prosecute, plea bargain, etc. are up to the prosecutor handling the case, and not the company that was the victim of the alleged theft. Nonetheless, reporting the theft of the trade secret to the appropriate authorities is one more tool in your toolkit, and a third-degree felony is nothing to sniff at. Some Famous Trade Secrets The title of this post is a joking reference to "secret sauce" - but are there actually any sauce recipes out there that are truly secret? Turns out, there are. And a whole lot more. In the interest of keeping this post at least somewhat entertaining, here are 11 Legendary Trade Secrets: Coca-Cola: the Coca-Cola Company made the decision many years ago to protect its recipe as a trade secret rather than protecting it as a patent. Among other things, filing a patent requires a full disclosure, and patents expire after a period (usually 20 years). Supposedly, the ingredients are shipped to Coca-Cola factories in containers labelled only 1 through 9, with a ratio provided - the actual contents of Ingredients 1 through 9 are not printed on the ingredient packages. The recipe for Coca-Cola has spawned many urban legends and stories (some true, some untrue), including theories that the company still uses Coca leaves (with the cocaine removed from them), an NPR special that followed stories of maybe-original-maybe-alternate recipes being discovered in old cookbooks that the, a caper in which two employees stole the recipe and attempted to sell it to Pepsi (Pepsi whistleblew, and the two recipe thieves were arrested), urban legends about bugs being used in the formula, theories that the ingredients are produced by two different employees, so that each only knows half, an enormous vault at Coca-Cola corporate headquarters that supposedly contains the only written copy of the recipe, and more. McDonalds Big Mac Special Sauce: the special sauce was one of McDonalds's competitive advantages for years. Then in the 1980s, during some recipe reformulations and other corporate shake-ups, it was lost and couldn't be located. Fortunately, the Company was eventually able to retrieve it from a company who had helped produce it as a contract manufacturer. But, in an interesting twist, this little maneuver might have actually voided the Special Sauce's status as a trade secret, since McDonalds's ownership of the information might have lapsed (does the recipe belong to the contract manufacturer or to McDonalds? ). Nonetheless, it's unlikely that this hypothetical conflict is ever going anywhere, and you're reasonably certain to be able to get your Big Macs for the foreseeable future. Krispy Kreme Donuts: In 1933, Ishmael Armstrong bought the original Krispy Kreme doughnut shop (in Kentucky), from Joe LeBeau, a Frenchman from New Orleans. As part of the purchase, Mr. Armstrong and his nephew, Vernon Rudolph, also acquired the shop's secret donut recipt. More than 70 years later, they have kept the recipe a secret, locked in a safe in Winston-Salem, North Carolina (Krispy Kreme's headquareters). While it isn't so difficult to figure outwhatingredients go into a Krispy Kreme donut (under FDA rules, they are required to list the ingredients on the back of the dry donut mix they sell), finding out the ratioof those ingredients and howthey mix together might be a little harder. Regardless, if you ask a Krispy Kreme fan what makes the donuts so great, it isn't strictly their ingredients, but rather the ability to purchase the fresh (and warm! ) finished product that is so critical to the flavor of the donuts and the success of the company. The process that allows this is also a secret. Go figure. KFC (Kentucky Fried Chicken): 70 years ago, the white-suited Colonel Harland Sanders created a recipe for a tasty chicken coating containing 11 herbs and spices. The original, handwritten copy of the recipe - which is still used today at KFC - is hidden in a safe in Kentucky, and only a handful of trusted, high-level employees (presumably bound by the mother of all nondisclosure agreements), know its contents. For an added measure of security, KFC contracts out to two separate companies to blend the mixture - each blends only half of the recipe, without knowing what is in the other half. Each of the two outputs are then mixed together, and voila! you have your KFC chicken coating. Additionally, rumor has it that the select number of employees who are trusted with parts of the recipe are prohibited from socializing, travelling together, etc. Twinkies: Invented in 1930, the yellow spongy cake with the cream filling has been the poster-child for artificial food. Old television advertisements actually touted the health benefits of Twinkies: "Hostess Twinkies give your child energy to go on, plus protein to grow on," "The inside has a super-delicious cream filling," and "Hostess Twinkies supply whole egg protein for rich, red blood. " Imagine that. Nevertheless, the original manufacturer, Continental Baking Company (now Interstate Bakeries Corporation), opted to keep the recipe secret, opting for trade secret protection rather than patent. Today, some speculate that the ingredients continue to be kept secret more as a marketing device than any kind of real secret recipe (even if they're actually harmless, who wants to eat something that has 100 super-artificial-sounding ingredients you can barely pronounce? ) WD-40: This iconic spray is one of the go-tos for DIYers, handymen, and dads across America. With its blue & yellow can and narrow, red straw, WD-40 was originally developed in 1953. The chemist who invented it  (to prevent corrosion) sold the formula and his company for $10,000 just a few years later. Today, WD-40 is used for everything from its intended use of preventing corrosion, to removing adhesives, to cleaning tools and equipment, to lubricating things that just don't want to "un-jam". The company that makes WD-40 makes only WD-40 and no other product. Its secret formula was never patented so competitors couldn't copy it. The company does provide a list of a few chemicals that it says are NOT in WD-40: "silicone, kerosene, water, wax, graphite, chlorofluorocarbons (CFCs) or any known cancer-causing agents. " Like a few of the other products on this list, in order to keep the formula secret, the company mixes it in three different cities around the globe, before passing it on to contract manufacturers and others. The revered formula has only been removed from its bank vault a handful of times - once, when the company's CEO brought it out for the company's 50th birthday party. And because of course he did... he removed it from the vault armored and riding a horse like a knight. Listerine: The Listerine case is a law school classic. Dr. J. J. Lawrence invented the antiseptic liquid compound Listerine in the 1880s. He licensed his secret formula to J. W. Lambert and the Lambert Pharmacal Co. for a royalty on Listerine's sales. Lambert's successor entity made the royalty payments required under the contract for roughly 70 years, amounting to a total in excess of $20 million. Plot twist: in the meanwhile, Listerine's formula was revealed to the public, without any breach of contract or similar foul play - some folks just figured it out. Then, in the 1950s, the successor (now Pfizer), decided that because the formula was now public, it was not required to make any more royalty payments (the secret formula was not secret any more). The Lawrence family sued and won - the original royalty agreement made no mention of what was to happen if the trade secret were discovered by others, and in any event, Pfizer's marketplace and brand first-mover advantage from the time the formula had been secret was enormous. The New York Times Bestseller List: The New York Times Bestseller List is one of the most influential book lists in the world, and making the list will virtually guarantee a storm of interest and sales in an author's book. But What is the Times's definition of "a bestseller"? They won't say. And while you would think it's as simple as "a book that sells a lot is a bestseller" - it's not that simple. One book that sells 50,000 copies can be on the bestseller list, while another book that sells 60,000 copies will fall short. So, while we know that the times does poll bookstores about their sales numbers, it's not just a simple addition problem. What are the other factors? Times employees won't say. This practice has gotten the company some controversy from time to time. For example, William Peter Blatty, author of "Exorcist," sued the Times for $9 million in lost profits when his novel "Legion" was not included on the best-seller list in 1983. He lost the suit. Lena Blackburne Rubbing Mud: If you're not a baseball fan, you might not have heard of this one. In 1938, Lena Blackburne, who was a coach of the Philadelphia Athletics, was searching for a substance that would dull the surface of glossy new baseballs, making them easier to grip, but that would do so without breaking the rules of baseball or damaging the ball. Umpires had previously tried shoe polish, tobacco juice and the dirt beneath their feet to fix the balls. None of these worked. Eventually, Blackburne tried a concoction created from mud found at his favorite fishing hole in southern New Jersey. It worked, and didn't wreck the balls. The chief umpire signed off on the concoction, and the rest is history. Today, every Major League Baseball team uses the product, and nobody else knows exactly where the revered mud hole is. Google's Search Ranking Algorithm: Google is the most popular search engine in the world, and one of the most profitable companies in the world, largely as a result of its algorithm's ability to deliver relevant, on-point results in response to searches while filtering through spam and attempts at ranking manipulation. That's no easy feat. And while the ever-changing nature of the algorithm could give rise to an interesting academic discussion of whether the Google Search Algorithm is technically one trade secret or many, good luck getting your hands on this ultra-closely guarded secret. Irn-Bru: Launched in Scotland in 1901 by A. G. Barr Plc, Irn-Bru is a unique carbonated soft drink that is one of the most popular soft drinks in Scotland (in Scotland, its consumption and sales are roughly on par with Coke and Pepsi). Rumor has it that the full recipe is known to only three people in the world: Robin Barr (former Chairman), his daughter Julie Barr and one Director of the company A. G. Barr Plc, with the only written copy of the recipe locked inside a bank vault in Switzerland. If you want to learn more about the various facets of intellectual property (not just trade secrets, but also copyright, trademark, and patent), you can watch this video explainer, where I discuss many aspects of intellectual property law with my friend and colleague Pete Adams:   If you have questions about trade secrets or any of the other information in this article, contact us here. --- ### CDC Lifts Mask Mandate for Vaccinated People - What Does It Mean For Your Business? - Published: 2021-05-21 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/cdc-mask-mandate/ - Categories: Business Attorney, Business Law, Contracts, Coronavirus Relief, Corporate Attorney, Corporate Law, COVID-19, General, Political Landscape, Small Business, Texas, Uncategorized The CDC has recently made major changes to its guidance for mask-wearing. On May 13, 2021, the CDC issued guidance revising the risk levels and proposed mask requirements for various activities, for fully-vaccinated persons. Most social activities and group activities that had been restricted in light of the COVID-19 pandemic have been (for vaccinated persons at least) cleared back to the "green zone". This represents a judgment and scientific realization that the COVID-19 vaccines are quite good and quite effective. Fully vaccinated persons are cleared to participate in many (formerly) "high risk" activities without a mask, including being indoors in a bar, exercising and working out in an indoors environment,  visiting a movie theater, and more. While you are of course free (as always) to wear a mask to any of these activities you so choose, and while businesses are free (as always) to require masks on premises, this represents a significant step forward in guidance provided by the CDC, and a significant step toward "re-normalization" of our everyday social lives. A few other things to note, however, about this development: these shifts in the guidelines are not necessarily permanent - developments in the nature of the pandemic, including more transmissible variants, could cause further changes in guidance; much has been written about this "variant risk" and this is a fertile topic for research, as many of the variants are less susceptible to the vaccine (whether slightly less or significantly less) the CDC does not wield direct governing authority over the states - while many people, authority figures, governors, legislators, etc. (rightfully) do listen and pay attention to what the CDC has to say, this guidance from the CDC is ultimately "just" guidance and does not have a legally binding effect we still do not have a wonderful understanding of exactly how long the protection conferred by the vaccine lasts, and while it is likely at least a few months, we don't yet have a good sense for the true length of the protection conferred - if you consider a Flu shot, for example, the protection lasts between 1-2 years, and degrades over time, but on the other hand a Yellow Fever or MMR shot is good for life once the two-dose series is completed - therefore, just because you're in the "green vaccinated" group NOW, you're not necessarily in that group PERMANENTLY while this chart addresses primarily masking, another thing that we do know about COVID-19 is that it's primarily transmitted indoors, so whether you're vaccinated or unvaccinated, your risk profile will be lower with outdoor activites than with indoor activities the role of asymptomatic spreaders and the health effects of the virus on "long haulers" are still being studied - you should stay tuned to the news and what the authorities have to say because we're learning more about this disease every day. Now, specifically as to the legal consequences of this development: Probably not much. As I mentioned above, the CDC doesn't have a whole lot of direct legal authority. More likely this will have an indirect effect on the legal consequences that exist for businesses, as governors, city councils, legislators, etc. (who have all been "hiding behind" the CDC to justify mask mandates and social distancing guidelines, saying "look we need to trust what the experts and scientists are telling us") are now confronted with that expert guidance upon which they've been relying becoming drastically different. This could also, ironically, strengthen the case for some sort of vaccine passport - which implicates all kinds of crazy issues like potential HIPAA violations etc. I plan to cover some of the implications of this in a future post, but for now, let's say that there is an extremely interesting cluster of issues here. If you would like to hear about these developments in video form, please check out the below YouTube post.   For more information, contact us. --- ### What are SPACs? (Video Explainer) - Published: 2021-04-21 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/spac-explainer/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Dealmaking, Deals, Investments, IPOs (Initial Public Offerings), M&A, SEC (Securities and Exchange Commission), Securities, Transactional, Uncategorized SPACs, or Special Purpose Acquisition Companies, are very popular investment vehicles recently. In this three-minute explainer video, I provide an introduction to these versatile entities. Enjoy! (and don't forget to subscribe! ) --- ### VIDEO EXPLAINER: The Basics of Intellectual Property, with special guest Pete Adams - Published: 2021-04-15 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/intellectual-property-explainer/ - Categories: Uncategorized On March 15, 2021, I had the first of my "conversations" videos with a good friend of mine, intellectual property attorney Pete Adams. --- ### 8 important reasons to have an estate plan right now > Estate planning is important. Here are eight important reasons to have an estate plan now. San Antonio business and estate planning attorney Ryan Reiffert. - Published: 2021-03-20 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/8-reasons-estate-plan/ - Categories: Business Attorney, Business Law, Contracts, Estate Planning, Investments, Probate, Small Business, Texas 8 important reasons for a Texas resident to have an estate plan right now Death is a very challenging topic to discuss. However, avoiding the conversation can create real mess for your children, grandchildren, and other heirs, especially if any of them are disabled or have special needs. Good Estate Planning is the answer to many of those concerns. Moreover, without a proper estate plan, your assets might not be distributed as you intended and your loved ones could suffer the consequences in terms of time, money, and stress (not to mention taxes and litigation). Here are 8 important reasons to have an Estate Plan: 1. HAVE SOME PEACE OF MIND  Everyone needs a will. Unmarried persons, those that do not have children or those that do not have significant assets sometimes assume that they do not need a will. If you die without a will – which is referred to as dying “intestate”, the state law will determine the distribution of your assets, which may not be the way that you would want your property to be distributed. If you have children, and both parents die without a will, the court will declare who will be named as the guardians of your children. Not only might the court’s decision about guardianship be different from what you would want, but it could also lead to significant family disputes about who will assume guardianship. By setting forth your intentions in a will, you can ensure that your assets are distributed in accordance with your wishes, that your children are cared for by the guardians of your choosing, and that your personal matters remain private. 2. AVOID THE TIME AND COST OF PROBATE If you die intestate, the probate process is significantly more time-consuming and costly. A Court will oversee the distribution of your assets and the payment of your debts, which is often a slow and tedious process. Additionally, the court will require an annual accounting for all costs associated with the estate of an intestate decedent. 3. DIRECT FAMILY AND PHYSICIANS HOW TO MAKE HEALTH CARE DECISIONS Your Estate planning documents will also generally indicate advanced directives regarding health care decisions before your death. This is essential so that you may direct the making of medical decisions on your behalf in the event that you become incapable of doing so. Without an advanced directive, a hospital may do whatever it takes to keep you alive even if that is not what you would want under certain circumstances. An advanced directive allows you to express your end-of-life choices to your family and to carry those wishes out. 4. NAME EXECUTOR/PERSONAL REPRESENTATIVE By executing a will, you can specify whom you would like to serve as your executor to handle your probate estate. The executor has a significant amount of responsibility, from paying your debts and expenses, to deciding how your specific items of property will be allocated among your heirs. The personal representative also has the discretion to liquidate your assets, and distribute the cash proceeds, or distribute your assets in-kind to the heirs. 5. AVOID CONSERVATORSHIP UPON INCAPACITY If you become incapacitated without a valid power of attorney in the estate plan, it is very difficult for someone else (even a spouse) to administer or manage your estate for you. An extremely expensive and time-consuming court process known as guardianship must be undertaken to administer a conservatorship on your behalf. 6. RESTRICT ACCESS TO CHILDREN’S INHERITANCE In a case where the heirs are still minor or that they have poor financial judgement, the will may state that the inheritance be put into trust. This is called a “testamentary Trust. ” Such funds or inheritance in the trust must only be used for the best interests of the heirs, and the heirs ability to control the distribution of the funds is restricted. The will may also state when, and under what conditions, the inheritance may be accessible to the heirs. 7. ENSURE YOUR ASSETS WILL STAY IN YOUR FAMILY EVEN IF YOUR SPOUSE REMARRIES Maintaining in the will that the living spouse holds the remaining assets in trust ensures that these shall be passed on to the remaining children in the event that the living spouse remarries (i. e. , it prevents the new spouse from having much access to the funds). 8. AVOID BITTER FAMILY FIGHTS AND MAKE DIFFICULT TIMES EASIER When there is no clear and fair distribution of inheritance according to the will of the deceased, there can be arguments and fights between the family. A will would clearly state the fair division and distribution of the inheritance to the appropriate heirs. --- ### Texas Appellate Court Deals Another Blow to San Antonio’s Sick Leave Ordinance > San Antonio Sick Leave Ordinance gets another strike against it from the Fourth Court of Appeals. - Published: 2021-03-13 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/appellate-sick-leave/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Political Landscape, Small Business, Texas On March 10, 2021, the Texas Fourth Court of Appeals upheld a preliminary injunction against San Antonio’s divisive “mandatory sick leave” ordinance originally issued back in 2019. The ordinance has gone through several iterations, but the most recent incarnation, passed by an 8-to-3 vote in October of 2019 would have required companies and  nonprofits of all sizes operating within the city of San Antonio to provide 56 hours worth of earned paid sick leave per year to employees. The prior incarnation of the ordinance (which was put on hold in July of 2019) would have required businesses with more than 15 employees to accrue 64 hours of paid sick leave per year to each employee. For smaller employers (defined as employers with fewer than 15 employees), the amount would have been lower – 48 hours. Austin and Dallas have both passed similar ordinances. The revised ordinance, in any event, was challenged in court before it could take effect and an injunction was issued by the trial court in November 2019. Preemption The Fourth Court of Appeals rested its decision to uphold the injunction on preemption grounds, finding that the San Antonio sick leave ordinance was contrary to the Texas Minimum Wage Act. For the uninitiated, preemption is an extension of the doctrine that a lower political subdivision cannot overrule a higher politicial subdivision. So, if the state (or federal government) has passed a law on a subject, a city (or state, in the case of a federal law) cannot alter that law with its own law – those laws are “preempted” by the higher political body’s law. However, if the state (or feds) have not passed a law on a subject, then the city (or state) can freely legislate. The question with regard to preemption almost always comes down to: what is the exact scope of the law doing the preempting (and, accordingly, what is the scope of the preemption). Other Cities’ Sick Leave Ordinances: What Do They Tell Us? Perhaps most interestingly (and most worringly for supporters of the sick leave legislation), the reasoning put forward by the Fourth Court of Appeals in this case is strikingly similar to the reasoning put forward by the Third Court of Appeals when upholding a similar injunction against the City of Austin’s similar sick leave ordinance, handed down in November of 2018. That decision was appealed to the Texas State Supreme Court in March of 2019, and in June 2020, the Texas Supreme Court declined to hear the case. So, while the Texas Supreme Court has not officially issued an opinion on the subject, and while San Antonio city officials have not publicly stated whether they intend to appeal the Fourth Court of Appeals’s decision in this case to the Texas Supreme Court, one can’t help but wonder why the Texas Supreme Court would decline to hear Austin’s sick leave challenge, but then take San Antonio’s sick leave challenge one year later. Dallas’s ordinance met a similar (albeit preliminary) fate in federal district court. What’s a Business to do? So, while the show is certainly not over, the decisions are certainly not final, etc. , it does seem like a very steep uphill battle for San Antonio, Austin, and Dallas. In this climate, what should a business do? Well, something like “do nothing, but do it carefully” – and by that I mean, you can sort of relax for the time being, but keep an eye on what the appeals courts do, just in case something changes. --- ### Texas has lifted its mask mandate! BREAKING NEWS! - Published: 2021-03-04 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/texas-lifts-mask/ - Categories: Business Attorney, Business Law, Coronavirus Relief, Corporate Attorney, Corporate Law, COVID-19, Political Landscape, Small Business, Texas --- ### Price Gouging Explained - Published: 2021-02-23 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/snowpocalypse/ - Categories: Business Attorney, Business Law, Contracts, Corporate Law, Off-Topic, Political Landscape, Small Business, Texas --- ### GameStop, Hedge Funds, WallStreetBets, Stock Manipulation, and more (or, what the hell is going on in the stock market???) > What is going on with Gamestop and the market? What is a pump and dump? What is a short squeeze? Is any of this EVEN LEGAL? Read more… - Published: 2021-02-04 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/gamestop-market-mayhem/ - Categories: Business Law, Business Attorney, Corporate Attorney, Corporate Law, Investments, Political Landscape, SEC (Securities and Exchange Commission), Securities Unless you have been living under a rock the past few weeks, you have no doubt heard about, noticed, read about, or perhaps participated in the full-blown lunacy that is the GameStop stock market frenzy. Here’s your 2-minute summary. There is a reddit messageboard called WallStreetBets that describes itself as “like 4chan found a Bloomberg terminal”, and whose members self-describe as “degenerates,” “apes,” “retards,” “autists,” and more . GameStop is a brick-and-mortar video game retailer that has not had a great last couple of years. On top of the decline of malls and physical stores in favor of online shopping more generally, the video game industry specifically has experienced a shift away from physical discs toward digital products – so really a one, two punch of (1) Amazon selling discs that GameStop would have sold, and (2) digital downloads replacing discs. Add to that the COVID-19 pandemic doubling down on the pain to physical stores, and especially malls, and you have a sense of what GameStop’s last several quarters have been like. It was losing money before COVID-19, and now it’s really losing money. Not a company with great long-term prospects, right? Well, Wall Street thought so, anyway. Betting against GameStop (“shorting” the stock) accordingly became one of Wall Street’s favorite pastimes. Sort of shooting fish in a barrel (one analyst described GameStop as the “whipping boy” of Wall Street). At one point the stock had dropped under $4 per share. In any event, about a year ago, a member of WallStreetBets (his username is “deepfuckingvalue” if that gives you a sense of the community (hereinafter DFV)) took a look at GameStop and decided that, although it might not be the next Google, it wasn’t as bad of a company as the “smart money” thought. He bought the stock (going “long”) and loudly broadcast his view. You can go back and watch his original videos; they’re heavily “value investing” oriented. He comments on the fundamentals of the company and analyzes it compared to the rest of the market, engages in technical analysis, and all kinds of other related things (this is important because “Value Investing” is often (correctly) described as antithetical to speculation – and this distinction will come to bear a little more sharply later). WallStreetBets ridiculed him for making such a stupid decision. For a while. And then... The stock started going up, little by little. Turns out DFV was actually pretty smart, and had correctly diagnosed the “not good, but not so bad after all” state of the company. Again, this is a textbook value investing play: Analyze company Determine it’s worth $X per share Look at stock market Discover stock market is only pricing it at 25% of $X Buy shares Wait for market to realize it was wrong Sell shares Profit Some other things started happening. Ryan Cohen (cofounder of Chewy) acquired a major position in GameStop and joined the Board of Directors. The stock went up even more. And along the way, two things happened. One, the folks on WallStreetBets were, bit by bit, coming around to DFV’s point of view and buying the stock. Two, someone noticed that several major hedge funds had enormous, EXTREMELY aggressive (to the point of recklessness) short positions in GameStop (for a period, OVER 100% OF THE FLOAT! ! ). Q: OK, smarty pants. How can you short more than 100% of the float? Also, what is a float? A: The “float” of a stock is the number of shares available to trade (e. g. , how many shares are floating around). I’ll explain shorting a little bit more later, but let’s say the float is ONE share. I borrow it and short sell it. Then someone else borrows that same share and short sells it. There are now two shares short, even though the float is only one. Seems weird right? BUT, recall Economics 101: lending expands the money supply. Same principle. Q: I don’t understand all this nonsense about short selling. ‘Splain it to me please. A: Read the other ” Red Q&A” section down a little ways if you really need to understand short selling. But, bottom line is that it is a bet against the stock of a company. The strategy of shorting stocks is very popular with Hedge Funds. And eventually, it turned into a full-on frenzy. Buying, buying, buying. The WallStreetBets subreddit was full of memes encouraging its members to buy and hold (and not just WallStreetBets; many others were getting in on the action, too). The price of the stock rose and rose, then rocketed to over $400 per share last week. There were various shenanigans at the $400 peak, including brokerage shut-downs, allegations of dirty tricks by the short hedge funds, and much more. Today, the stock is back down to around $90 per share. So, there’s your history of what happened. I want to take this opportunity to talk about some of the allegations levelled at DFV and the WallStreetBets community, from a legal perspective. Specifically, was this a “pump and dump” scheme? (spoiler alert: probably not), was this an illegal short squeeze? is a short squeeze always illegal? (spoiler alert: only illegal if you collude to manipulate), did anything else illegal happen here? (spoiler alert: maybe) and much more. So, first issue – was this an illegal “pump and dump”? (SPOILER ALERT: I seriously doubt it) Unfortunately, the SEC has not provided us with a brightline and particularized rule on “pump and dump. ” You can read what the SEC has written about pump and dumps at investor. gov here.  Or, you can read the SEC’s “your money” guidelines on pump and dumps here. If you’re underwhelmed by the lack of specificity and frustrating generality of the foregoing, you’re not crazy. Most common definitions include the use of false or misleading information to increase stock values, manipulating the public into buying more shares and driving the price up, while the fraudsters sell after the price rises. There are a couple of key elements there that I want to focus on: False or misleading information The fraudsters sell at the peak As to the first part of this, “false or misleading information” – let’s consider what we know. In the case of GameStop, much of the information promoted on the WallStreetBets message board seems to fall into one of two buckets (A) value-based analysis of the stock that is true, or at the very least, a “good faith argument” or (B) memes and jokes (some of which are quite funny, many of which are borderline-incomprehensible, but few to none of which I’d classify as any kind of genuine argument or claim about stock value). If you go watch his video, the analysis (as mentioned at the beginning) is actually quite good, and quite typical of what you’d see from a “value investor” and – more to the point – even if you disagree with his thesis, he’s making real points based on real information; he’s not fabricating information or spreading falsehoods. This second bit raises the somewhat strange utterly absurd (and I cannot believe love that I’m about to type this following sentence) question of whether a joke meme can constitute the kind of false or misleading information required to support a pump and dump conviction. I would LOVE to read the brief making the case that a meme gorilla sitting in an emoji rocket ship with diamond emojis plastered all over it saying “HODL” and “Apes together strong” constitutes false and misleading information. If this happens, you can expect multiple blog articles just block-quoting sections of that brief, as they say, “for the lulz”. Anyway, here is a list of a few notable “pump and dumps” for your reading pleasure: Jonathan Lebed Jonathan Lebed was the subject of a 2001 BBC documentary called The Future Just Happened. In 1999-2000, the 15-year old Lebed would purchase penny stocks, then promote them on internet chat rooms and message boards using a computer in his bedroom in Cedar Grove, New Jersey. Lebed is notable for being the first minor prosecuted by the SEC for a securities violation. Lebed ultimately settled with the SEC out of court, not admitting any wrongdoing. He forfeited approximately $285,000 in profit and interest he had made in 11 trades. Notably, he was allowed to keep approximately half a million dollars, and he now operates a firm that specializes in penny stocks. Jordan Belfort Jordan Belfort is probably the most famous case of a pump and dump fraud, and one of the few people to serve “legit” prison time. This name will very likely be familiar to you from the Martin Scorsese film The Wolf of Wall Street starring Leonardo DiCaprio, Jonah Hill, Margot Robbie, and Matthew McConaughey. Jordan Belfort, through his firm Stratton Oakmont, defrauded investors of an estimated $200 million or more. He pled guilty to securities fraud, money laundering, and other crimes, and spend almost two years in prison, as well as paying $110 million in restitution (as with Lebed, he was allowed to keep a significant portion of his ill-gotten gains). He is now a motivational speaker. Barry Minkow Some people have referred to Barry Minkow as the “Mark Zuckerberg of the ‘80s”. His aim was to take his company, ZZZZZ Best Inc. to the pinnacle of the market, becoming the “General Motors of carpet cleaning” and to that end took the company public in 1986. Unfortunately, the documents used to validate the company’s worth were almost entirely forged, and the company plummeted from $280 million in value to virtual worthlessness. Minkow went to prison for about seven years. I suppose he really liked the food, because he decided to visit prison again later, after making more fraudulent statements about a different company. Enron While Enron engaged in many flavors of fraudulent activity, among them was a pump and dump scheme in 2001, wherein top executives of the company spammed bulletin boards with positive sentiment and spread false (positive) rumors about the stock. In concert with this, Enron also cooked its books to show significant profits and increase its stock price. But as with the rest, the ruse couldn’t continue, and Enron went bankrupt, causing massive losses to stockholders, creditors, employees, and more. Enron is notable as most pump and dumps take place with “penny stocks” – but Enron was among the bluest of the blue chip stocks of Wall Street, and a darling of many stock analysts. Go figure. Park Financial Group In 2007, the SEC charged Park Financial Group, based in Winter Park, Florida, and its principal, Gordon Cantley in connection with their conduct in 2002-2003 related to the Pink Sheet-traded company Spear & Jackson Inc.  You can read the press release here. I am highly doubtful that the “degenerates” cheering on GME on WallStreetBets look much like any of these notable cases. Also, as of February 3, DFV is ostensibly not selling the majority of his position. Second issue – is this short squeeze illegal? (SPOILER ALERT: Again, almost certainly not) Q: Wait a second Ryan. You said going short was like “betting against” a stock. How can you even do that? You can’t buy NEGATIVE shares of stock? (can you? ? ? ) What, do you just fly on out to Vegas and bet the casino that it will go down? A: OK, so... you kind of CAN buy negative shares of stock. Here’s how that works. I think that Stock X is going to go down. I go ask my friend (who owns Stock X) “can I borrow your share of Stock X? ” After considering his options (ha) for a moment, he says “OK, but you have to pay me some interest, based on the market value of the share, every day, for as long as you are borrowing it. And also, if I get nervous and ask you to give it back, you have to give it back to me. ” I consider his terms for a moment. “Deal” I say. He hands me his share of Stock X. I then immediately go down to the market and sell the share of Stock X for $5. 00. I am now “short” on Stock X. If Stock X drops to $2. 00 tomorrow, I will buy a share and go give it back to my friend, as promised, and I have made $3. 00 (less interest paid to my friend) on the deal. If, on the other hand, the price of Stock X rises to $6. 00 or $10. 00, my interest will go up significantly, as will my price to return the share of Stock X to my friend. Q: Damn dude, that seems pretty risky. What if the price of the stock goes up? Like, way way way way way way up? A: Yes. It is risky. But it can also be tremendously profitable, and there is an argument to be made that it’s important for liquidity. Anyway, that thing you’re describing where the price of the stock skyrockets due to all the other shares of Stock X being bought up is called a short squeeze. Now that we’ve got that out of the way... I have heard some misinformation kicked around on this one a little bit, including a post on YCombinator’s news site that “Short squeezes are illegal. Any brokerage that knowingly allowed a short squeeze to continue without taking action, could have potentially massive legal liabilities. That is another explanation beyond the 2 day settlement window that Webull published. ” – this is not accurate. Short squeezes are not per se illegal. One of the relevant pieces of guidance is SEC Regulation SHO (summary, full text). 7. Will close-out purchases required by Regulation SHO drive up a security’s price? Close-out purchases of stock will not necessarily drive up prices of such stocks. One of the primary purposes of Regulation SHO is to clean up open fail positions, but not to cause short squeezes. The term “short squeeze” refers to the pressure on short sellers to cover their positions as a result of sharp price increases or difficulty in borrowing the security the sellers are short. The rush by short sellers to cover produces additional upward pressure on the price of the stock, which then can cause an even greater squeeze.  Although some short squeezes may occur naturally in the market, a scheme to manipulate the price or availability of stock in order to cause a short squeeze is illegal.   From this, the question is: are a bunch of “degenerates” posting memes and urging one another to hold, and cause a short squeeze “a scheme to manipulate the price or availability of stock” – and again, to me it seems that the answer is almost certainly “no. ” This is a group of people who noticed (loudly, and rudely) the EXISTENCE of an opportunity for a short squeeze. Some commentators have observed that “acting in collusion to buy the stock is illegal” – and that may be the case. Putting aside the fact that it’s basically impossible to make a statement like “WallStreetBets is saying X” because it is a disorganized and quasi-anarchic forum with no unified voice, one of the loudest messages being trumpeted on WallStreetBets was: “Hey guys, these Hedge Funds really overextended themselves and got reckless with their aggressive short position; there is an opportunity to make money here if you buy. ” I don’t think that’s collusion or a “scheme to manipulate”; it’s the spreading of true market information. Almost anti-manipulation (is there a word for that? ). The hedge funds did over-extend and get reckless with their short. There was an opportunity to make money for those who went long. There were other messages that got repeated and got a lot of traction like “My family lost everything in the 2008-2009 crash caused by the Hedge Funds; I am buying this stock solely to spite them, and I don’t care if I lose my investment. ” Again, I don’t think that’s collusion or a scheme, but rather a statement of an individual’s position, beliefs, and intent. Collusion, on the other hand, would be  something like “I’ll buy if you buy, and then together we can artificially jack the price up and force this guy into a short squeeze. ” (which, by the way, hedge funds, major companies, and ultrawealthy investors have absolutely done to each other over and over and over and over again, and the SEC hasn’t said much; so if there are any SEC enforcement actions initiated against the WallStreetBets crowd after all, I’m sure you’ll hear a lot about “rules for thee but not for me”). End of the day, in my opinion, the case for securities manipulation liability is pretty flimsy. But I suppose we’ll see. Third issue – did anything else illegal happen here? (SPOILER ALERT: maybe... stay tuned) Along the way of this wild, wild, ride, there have been a lot of rabbit trails and potentially shady things. As one example, the no-fee broker RobinHood (formerly, but no longer beloved by WallStreetBets) had a number of trading shutdowns during this ruckus whereby folks were allowed to buy a few shares of GME (and about 5 other stocks) – it varied from five shares, to two shares to one share. But (and here’s the interesting part) selling those stocks was unrestricted, and buying other stocks was unrestricted. A class action lawsuit was filed. Now, to be fair, there seems to be a potential explanation here. Brokers are highly regulated. There are certain capital requirements and reporting requirements that they must keep on the right side of. If trading gets too frenzied, brokerages may have to put limits on trading to protect themselves. This is all true. So, the innocent explanation of the trading stoppages is: RobinHood was just doing what it had to do for compliance purposes; if it had kept trading open, it would have run afoul of its legal and regulatory responsibilities. OK, fair enough. But, there is also a more nefarious explanation. RobinHood doesn’t charge a fee to trade, so how does the business make money? Well, they sell stock trade data to high-speed algorithmic trading platforms, who make money on frontrunning retail investors and harvesting pennies from each transaction. A firm (Citadel) executes orders placed by RobinHood and also buys a lot of that data. That same firm has a significant stake in a couple of the hedge funds who had their hands furthest down the over-aggressive GameStop short cookie jar. This is also all true. So, the nefarious explanation of the trading stoppages is: Citadel wanted to stem the bleeding on its balance sheet and leaned on RobinHood and other brokers to repeatedly circuit-break the stock on its way up so that the damage to the hedge funds would be less catastrophic.  Does this ultimately hold water? Maybe. As a friend of mine once observed (in reference to an unrelated topic), “we all know that ‘golf course conversations’ happen, and you’ll never find a text or an email, but that conversation happened. ” What we do know is that Congress is holding hearings. I guess we’ll see what kind of return on investment those campaign contributions are. --- ### Intro to Estate Disclaimers in Texas > How to file a disclaimer of an estate in Texas. Some important considerations to examine before filing a disclaimer. - Published: 2021-01-26 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/estate-disclaimers-texas/ - Categories: Estate Planning I recently had a client whose case involved a somewhat unusual issue. For reasons that we won’t get into here, this client was hesitant about claiming the inheritance to which the client would be entitled in an heirship or probate proceeding. Now, I know what you’re thinking. “An inheritance sounds great, why on earth would I want to disclaim it? ” – and for most people, this is generally right. They can’t imagine disclaiming an inheritance. But, there may be good reasons for it. Again, without getting into the particulars, there are many reasons that someone might want to disclaim an inheritance, including: Perhaps the heir is already very wealthy – such an heir may wish to “move the inheritance down a generation” for tax-minimization or tax-planning reasons as part of an estate plan (why pay double inheritance taxes when the wealth moves down twice? ) Perhaps the heir is already well-off enough (if not “wealthy” then let’s say “comfortable”) and the deceased’s property is too much of a headache (for example, if the deceased was a hoarder with a badly contaminated house that isn’t worth much, and an overall tangled estate, it may make more sense for an heir to just walk away and not mess with it) Perhaps there were personal issues between the heir and the deceased, and the heir wishes to disclaim because he or she wants nothing to do with the deceased or his/her money Perhaps the would-be heir is on a spiritual journey (Ram Das declined his inheritance) Perhaps the estate is underwater (debts exceed assets), or the real estate has significant liens attached to it, that would cause problems for the heir from an asset-protection perspective Perhaps the property of the estate has uncertain or “scary” liabilities attached, for example: environmental contamination liabilities, tax liabilities, or unclear and uncertain personal injury liabilities Perhaps a piece of real estate is dilapidated and in disrepair, such that it will incur only liabilities, or significant repair expenses in the future, etc. , significantly greater than the value of the property   So let’s stipulate that, for whatever reason, you have determined to disclaim your inheritance. What now? Well, first and foremost, call a quality probate attorney. Correctly filing a disclaimer (and correctly understanding the consequences of that disclaimer) can be a complex matter. Your attorney will help you file a disclaimer by ensuring that it complies with the Texas Uniform Disclaimer of Property Interests Act. (Chapter 240 of the Texas Property code) In order for a disclaimer of an interest created by a Will or heirship (intestacy) to be valid, there are five requirements that must be met: The disclaimer must be in writing The disclaimer must unambiguously disclaim, refuse, and decline to accept an interest in or power over the property The disclaimer must sufficiently describe the interest or power disclaimed The disclaimer must be signed by the person making the disclaimer The disclaimer must be delivered to the estate’s personal representative or executor; if there isn’t one, the disclaimer must be filed with the relevant county clerk   Now, if you’re clever, you might have read item #3 and said to yourself “hmmm... could I disclaim part of an inheritance but not the other part? ” and the answer is... yes! So, maybe “I disclaim any interest in the biohazard hoarder house over there, but I still want to claim my share of the gold bars in the safety deposit box”... or “I disclaim all of the valuable stuff, but I do want my share of . ” Or any number of other variations you could come up with. Again, it is extremely, extremely important, before attempting something like a partial disclaimer with an heirship or probate proceeding, to consult your attorney and tax advisor. First, there are no do-overs with this kind of thing. Second, if your objectives are inheritance tax-related, it’s extremely important to do the calculations precisely and correctly. Third, and relatedly to each of the foregoing, there can be unforeseen consequences that result from a disclaimer. Another very quick note on timelines for disclaimer. The Texas Uniform Disclaimer of Property Interests Act doesn’t place a time restriction or deadline to file a disclaimer (i. e. , file a disclaimer within X, or you lose the chance). The prior law, however, did have a time restriction. For cases that might fall under the prior statute, it’s especially important to consult an attorney to determine whether the disclaimer will be valid. Finally, you might also have wondered why people don’t just disclaim property that has major liabilities attached to it all the time, as a method of avoiding “spillover” liability. Well, you can only disclaim (as pointed out above) interests created by a Will or heirship.   Until next time, folks. --- ### Happy New Year! … here is the list of works that entered the Public Domain on January 1, 2021 > These works entered into the public domain on January 1, 2021. A corporate lawyer discusses copyrights. - Published: 2021-01-02 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/copyright-day-2021/ - Categories: Business Attorney, Business Law, Copyright, Corporate Attorney, Political Landscape, Small Business As you may or may not know, today is the day that a great number of artistic works leave the protections of copyright law and enter the public domain. Specifically, works from 1925 (95 years ago). Probably the most notable work of the bunch is The Great Gatsby by F. Scott Fitzgerald. But that’s not the only notable work.  BBC’s Jane Ciabattari declares 1925 was “a golden moment in literary history. ” While “several years including 1862, 1899 and 1950″ are contenders, ” one year towers above these... . In fact, 1925 may well be literature’s greatest year”Books that came out in 1862, for instance, included Dostoevsky’s House of the Dead, Victor Hugo’s Les Misérables and Turgenev’s Fathers and Sons. But Gustave Flaubert’s novel of that year, Sallambo, set in Carthage during the 3rd Century BC, was no match for Madame Bovary. George Eliot’s historical novel Romola and Anthony Trollope’s Orley Farm were also disappointments. The year 1899 is another contender for literature’s best. Kate Chopin’s seminal work The Awakening was published then, as was Frank Norris’s McTeague and two Joseph Conrad classics – Heart of Darkness and Lord Jim (serialised in Blackwood’s Magazine). But Tolstoy’s last novel Resurrection, published also in 1899, was more shaped by his religious and political ideals than a powerful sense of character; and Henry James’ The Awkward Age was a failed experiment – a novel written almost entirely in dialogue. And in 1950 there were published books from Isaac Asimov (I, Robot), Ray Bradbury (The Martian Chronicles), Patricia Highsmith (Strangers on a Train), Doris Lessing (The Grass Is Singing) and CS Lewis (The Lion, the Witch and the Wardrobe). But other great fiction writers produced lesser works that year – Ernest Hemingway’s minor Across the River and into the Trees; Jack Kerouac’s The Town and the City, written under the influence of Thomas Wolfe; John Steinbeck’s poorly received play-in-novel-format Burning Bright and Evelyn Waugh’s only historical novel, the Empress Helena (Roman emperor Constantine’s Christian mother goes in search of relics of the Cross). But 1925 brought something unique – a vibrant cultural outpouring, multiple landmark books and a paradigm shift in prose style. Literary work that year reflected a world in the aftermath of tremendous upheaval. The brutality of World War One, with some 16 million dead and 70 million mobilised to fight, had left its mark on the Lost Generation. In Mrs Dalloway, Virginia Woolf created the indelible shell-shocked veteran Septimus Smith, “with hazel eyes which had that look of apprehension in them which makes complete strangers apprehensive too. The world has raised its whip; where will it descend? ”Before I nerd out any more, let’s take a quick detour into the context of the journey of various works into the public domain. Before 1998, copyrighted works had a 75-year exclusivity period before entering the public domain – the theory behind this being, basically, that a 75-year period of exclusivity was plenty of incentive for people to create artistic works. But Congress, in 1998, increased this from 75 years to 95 years in a law commonly known as the “Mickey Mouse Protection Act” (Mickey Mouse appeared in 1928, and will enter the public domain in 2023/2024 (unless, of course, Congress moves the goalposts again)). Of course, we can all be certain that the passage of this law was entirely out of concern for the artistic rights of creators and certainly had absolutely nothing to do with lobbying efforts by large and wealthy owners of particularly lucrative copyrights (like, oh... I don’t know... Mickey Mouse? ). Likewise, the previous copyright extension in 1976 certainly would not have had anything to do with lobbying efforts by the owners of any large or prominent copyrights. So what does it mean that a work enters the public domain? The public domain is a space where there are no intellectual property rights. The works that exist in the public domain may be used without fee, permission, attribution, restriction, or any of the other “typical” features of intellectual property/copyrights/etc. Without further ado, here is the incomplete, very partial, impromptu list of works that I believe are entering the public domain today, based on my research (disclaimer: double-check yourself that I have the publication date right before running out and risking a copyright violation with any of these) FILMS The Freshman The Merry Widow Stella Dallas Go West His People Lovers in Quarantine Pretty Ladies The Unholy Three BOOKS F. Scott Fitzgerald, The Great Gatsby Virginia Woolf, Mrs. Dalloway Ernest Hemingway, In Our Time Franz Kafka, The Trial (in German) Theodore Dreiser, An American Tragedy John Dos Passos, Manhattan Transfer Alain Locke, The New Negro (contributions by W. E. B. du Bois, Countee Cullen, Langston Hughes, Zora Neale Hurston, Claude McKay, Jean Toomer, and Eric Walrond) Sinclair Lewis, Arrowsmith Agatha Christie, The Secret of Chimneys Aldous Huxley, Those Barren Leaves W. Somerset Maugham, The Painted Veil Dorothy Scarborough, On the Trail of Negro Folk-Songs Edith Wharton, The Writing of Fiction Etsu Inagaki Sugimoto, A Daughter of the Samurai MUSIC Always, by Irving Berlin Sweet Georgia Brown, by Ben Bernie, Maceo Pinkard & Kenneth Casey Works by Gertrude ‘Ma’ Rainey, the “Mother of the Blues,” including Army Camp Harmony Blues and Shave ’Em Dry Looking for a Boy, by George & Ira Gershwin Manhattan, by Lorenz Hart & Richard Rodgers Ukulele Lady, by Gus Kahn & Richard Whiting Yes Sir, That’s My Baby, by Gus Kahn & Walter Donaldson Works by ‘Jelly Roll’ Morton, including Shreveport Stomps and Milenberg Joys Works by W. C. Handy, including Friendless Blues, Bright Star of Hope, and When the Black Man Has a Nation of His Own Works by Duke Ellington, including Jig Walk and With You Works by ‘Fats’ Waller, including Anybody Here Want To Try My Cabbage, Ball and Chain Blues, and Campmeetin’ Stomp Works by Bessie Smith, the “Empress of the Blues,” including Dixie Flyer Blues, Tired of Voting Blues, and Telephone Blues Works by Lovie Austin, including Back Biting Woman’s Blues, Southern Woman’s Blues, and Tennessee Blues Works by Sidney Bechet, including Waltz of Love, Naggin’ at Me, and Dreams of To-morrow Works by Fletcher Henderson, including Screaming the Blues Works by Sippie Wallace, including Can Anybody Take Sweet Mama’s Place Let’s close this installment of “literature nerd meets business lawyer explaining basics of copyright” with one more quote from BBC’s Jane Ciabattari: Was 1925 the greatest year in literature? The ultimate proof, 90 years later, is the shape-shifting the novel has undergone, still based on these early inspirations – and the continuing resonance of Nick Adams, Jay Gatsby and Clarissa Dalloway.  These characters from a transformative time are still enthralling generations of new readers. Happy New Year, y’all! --- ### SEC Raises Some Exemption Caps, Expanding Access to Capital (& Integration Framework) > The SEC raised the caps for some exemptions for private securities offerings, clearing the way for improved private fundraising. - Published: 2020-12-01 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/sec-exemption-caps/ - Categories: Uncategorized, Corporate Attorney, Corporate Law, SEC (Securities and Exchange Commission), Securities, Small Business In another move that should expand access to capital (see previous coverage of the slight expansion of the Accredited Investor standard here), the SEC on November 2, 2020 raised the caps on the amount that can be raised under certain offering exemptions. Accordingly, it is more important than ever to have your securities counsel on speed-dial. Here is the press release from SEC. As a baseline rule, the United States securities regulatory regime is: all offerings must either (a) be registered with the SEC (it is expensive and time-consuming to register; and ongoing compliance is also expensive and time-consuming), or (b) qualify for an exemption from registration.  As previously noted, the structure of registration exemptions has been criticized (Chairman Clayton described the current landscape as “a patchwork” in his statement in support of the amendments). The amendments here, which were approved along a party-line vote with all three Republican commissioners in favor and both of the two Democratic commissioners against, were described by the SEC in its press release as the “next step in the Commission’s efforts to improve the exempt offering framework for the benefit of investors, emerging companies, and more seasoned issuers. ” Similarly to the Accredited Investor changes, this is a relatively modest change in the overall scope of things, but it is still important to be aware of. It will increase access to capital, but likely by a modest amount – this won’t revolutionize the capital markets or anything. These changes included: significantly (almost 5x) raising the cap on equity crowdfunding under Regulation Crowdfunding (Regulation CF) from $1. 07 million annually to $5 million annually a 50% increase in the cap on Reg A+ offerings, from $50 million per year to $75 million per year doubling the maximum offering amount for Rule 504 of Regulation D from $5 million to $10 million expanding the “test-the-waters” accommodation available to Regulation Crowdfunding (Regulation CF) issuers These changes, very similar to the expansion of the Accredited Investor definition, are meant to expand the private capital markets. It’s a worthy goal, since it’s well-established that the cost of undertaking an IPO and the cost of being a public company are both major. As previously noted, in 2019, the amount of private capital-raising was over double the amount of public capital-raising ($1. 2 trillion vs $2. 7 trillion). In particular, commentators and observers are predicting that the Regulation CF amendments will have the biggest change on the fundraising landscape. I am inclined to agree. It is, no doubt, a common story for an issuer to start down the road of preparing a Regulation CF exempt offering, only to jettison such plans when confronted with the cost-benefit analysis of the expense of a Regulation CF exempt offering compared to the only $1. 07 million that could be raised in such an offering. The new cap of $5 million for Regulation CF should make this exemption significantly more appealing for companies considering taking advantage of it. The amendments also established a broad “integration framework”. You may wonder, what does that mean? Well, issuers often look at or consider multiple options from the “menu” of exemption safe harbors when evaluating their fundraising options. Not surprising, since the “patchwork” of exemptions has such different features (from differing filing requirements and disclosure requirements to different fundraising caps, etc). However, under SEC rules, when different offering exemptions are used, questions may arise as to the need to view the offerings as “integrated” for purposes of analyzing compliance. Integration can be a dangerous prospect for an issuer, and accidentally cause one or more of the offerings to go over the applicable fundraising cap. In these amendments, four additional non-exclusive safe harbors from integration were announced such that companies may make exempt offerings within 30 days of each other instead of the current six-month waiting period and offerings made pursuant to an employee benefit plan under Rule 701 will not be integrated with other offerings, amongst others. This provides additional benefits to private companies to enable them to plan more effectively for each fundraising round. Lastly, an “under the radar” change that may be bigger than you think – take note of the SEC’s new rules permitting certain special purpose vehicles or “SPVs” to invest in a single company under Regulation CF. Previously, an individual who wished to participate/invest in a Regulation CF offering was required  to hold securities in his or her own individual name. This is less than ideal for many reasons, both from the investor side (unnecessary administrative complexity, tax considerations, problems for family offices) and from the company/issuer side (massive shareholder lists and extensive cap tables with potentially thousands of names, and all the attending administrative complexities thereof) The new amendments allow for limited-purposes crowdfunding SPVs, provided that the SPVs meet certain conditions (essentially, SPVs that are specifically designed to avoid only the problem outlined above). Stay tuned to the blog for more updates.     This blog post is provided by Law Offices of Ryan Reiffert, PLLC for educational and informational purposes only and is not intended and should not be construed as legal advice. --- ### Indian doctor tricked into buying “Aladdin’s Lamp” (complete with 100% real and totally not fake at all Genie) for $200k > Corporate lawyer discusses a funny story of a contract gone wrong. - Published: 2020-11-21 - Modified: 2024-02-28 - URL: https://ryanreiffert.com/blog/aladdins-lamp-fraud/ - Categories: Funny, Off-Topic, Uncategorized Suppose someone offered to sell you Aladdin’s Lamp (complete with real, actual genie*), for $200,000. Would you maybe be a little skeptical? Or would you say “OH YEAH, Imma be a $%@#^*# billionaire”? Well, at least one doctor in India opted for the latter. *not cartoon Robin Williams genie, and not blue painted Will Smith genie; but a real actual supernatural creature with magic powers genie or djinn Let’s say you decide to go for it. But you’re a very clever* person, so you figure, “hey, I don’t need to pay the whole $200k up front... I get THREE WISHES of ANY DAMN THING I WANT, so I’ll put a down payment and then use a wish to pay for the rest” and you manage to get the seller to agree to sell you Aladdin’s Lamp for a deposit in the low, low amount of merely $41,600. Seems legit. *but not really all that clever because you believe that magic is (a) totally real and (b) for sale from some random dudes in India Spoiler Alert: there was no actual genie.  (if you are very clever, you might have guessed this plot twist because magic is not real and neither are genies; but if you didn’t, stay tuned there are more opportunities to spot super-obvious frauds coming up) This little gem of a story comes to us courtesy of BBC. A doctor in Meerut, a city in the Western part of India’s state of Uttar Pradesh filed a complaint with police. The doctor had been treating the mother of the two scammers. “Gradually they started telling me about a baba whom they claimed also visited their home. They started brainwashing me and asked me to meet this baba. ” Clearly, an auspicious start to a business relationship. The baba indeed did seem to perform some sort of rituals. I’m not clear on what rituals this baba performed, or whether they were particularly impressive rituals for a baba (or how this might have differed from the typical rituals of a baba? ), or anything like that... ? Full disclosure: the extent of my knowledge on Indian babas comes more or less exclusively from Karl Pilkington. Anyway, the story of the Aladdin-baba gets better. Apparently, the doctor began visiting the baba and “during one visit ‘Aladdin’ actually made an appearance in front of me” Spoiler Alert: it was not actually Aladdin.  (if  you are very clever, you might have guessed that from (a) the quotes around ‘Aladdin’ in the quote above; or, if you didn’t notice that, you might have equally guessed it from (b) the fact that Aladdin is either entirely fictional or a fictionalization of a real person who died a thousand-plus years ago; six of one or half a dozen of the other, I guess. ) The “Aladdin” was in fact one of the two scammers, dressed up as Aladdin. Some Indian media reports are claiming that THE TWO MEN ALSO PRETENDED TO CONJURE UP THE GENIE FROM THE LAMP. I’m not really sure why I put that in all caps, as we’re already at absurdity level 9,000. And again, it has to be restated... the victim was a Medical Doctor. He was an apparently well-educated dude. Spoiler Alert: the “Genie” was not actually a Genie.  It was apparently the mom’s (his patient’s) husband(? )(! ! ) Note: that link has a picture that I think is the actual lamp? Worth the click, y’all. (to be clear, the actual lamp that was involved in the fraud, not actual Aladdin’s lamp... but if you have a picture of actual Aladdin’s lamp, please comment below. I probably will not, however, pay you $200k (or even a $41k down payment) for it. The Indian media reports that “However, later, the doctor realized that he was being cheated. ” It’s not clear what was so far beyond the line of plausibility that he finally realized he was being cheated. Because  it wasn’t, you know, the magical creature he was allegedly being sold, the literal fictional character that looked sort of like his friend appearing to him, or the genie who looked sort of like his patient’s husband appearing to him. I’d really like to know what it was that caused this guy to FINALLY say “now wait just a minute, this is starting to get suspicious. ” Another gem from Indian media: According to the doctor, the Tantrik and his friend would often make him see a ‘jinn’ appearing from the magical lamp. But, they never allowed him to take it home saying that touching it would be ominous for him. They would often make him see a jinn. Not once but often. Like, “Oh hey Bob, good to see you again. Check out this supernatural magical creature that grants wishes just chilling in my living room. Oh, I showed it to you before? Well check it out again, it’s totally not fake. If you want to buy it, we can do a payment plan. Not sure? No big deal, it will be here next time you come over too. ” Just, WHAT? No word on what sort of charges are being filed against these two geniuses. But actually, they’re probably pretty good salesmen. And if you live in India, one of the scam capitals of the world, and don’t see this kind of thing coming... . I don’t know what to tell you. Maybe they should add a course on “magical creatures” to the medical school curriculum? I’m sure you could nab Hagrid for a visiting professorship; he’s probably unemployed now that the Harry Potter film series has come to a close. You can’t make this stuff up. Stay safe out there, folks. And, if someone offers to sell you a genie, chimera, griffin, pegasus, elf, phoenix, mermaid, boogieman, vampire, zombie, dragon, hydra, bigfoot, sasquatch, fairy, chupacabra, centaur, gnome, cockatrice, leprechaun, imp, manticore, troll, ogre, sphinx, goblin, or any similar creatures... . its probably not real and you should call the cops, lest you become famous for the wrong reasons. --- ### SEC Expands Definitions of Accredited Investor and QIB, Widening Access to Private Offerings > Access to private securities offerings was broadened by expanding the Accredited Investor and Qualified Institutional Buyer definitions. Read more inside. - Published: 2020-11-12 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/sec-accredited-investors/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Investments, SEC (Securities and Exchange Commission), Securities, Small Business If you have ever raised money as a startup, done private securities deals, raised money for private equity, or done other similar private securities market activities, you know how important the “Accredited Investor” standard is. HINT: if you want to get to exactly what the changes were, then please skip to Part 3 In the United States, the basic rule is that every offering of securities must be either registered with the Securities and Exchange Commission (SEC) or fall under an exemption from registration. Those exemptions generally have restrictions on (i) the amount that may be raised, (ii) the solicitation that may be done, and/or (iii) who may participate. Most relevant to the third of these considerations – who may participate – is the “Accredited Investor” standard set forth in Rule 215 and Rule 501(a) of Regulation D promulgated under the Securities Act of 1933, as amended (the 1933 Act), which flows through several of the other exemptions under the 1933 Act. This is very relevant because the process of filing a registration statement in the United States is very expensive, and the price of simply being a public company is also very high. In extreme summary, the basic idea behind the “Accredited Investor” standard is to allow sophisticated individuals who can “fend for themselves” to invest in securities not registered with the SEC (despite the expense to the company of said registration and compliance). While the goal behind this structure of exemptions for private offerings is to prevent securities fraud or abusive practices from taking advantage of the public at large (at which goal most would agree it has generally succeeded), this structure has received some criticism as sequestering the best, juiciest opportunities (exempt private securities offerings) for those who are already rich. And there’s probably a lot of truth to that criticism – several trillion dollars worth of truth, in fact; the SEC estimates that in 2019 issuers raised approximately 25% more funding through Regulation D exempt private securities offerings than through registered securities offerings open to the public ($1. 56 Trillion vs. $1. 2 Trillion). On August 26, 2020, the SEC took steps to address this by putting forward amendments to expand the definition of “Accredited Investor” found in Rule 215 and Rule 501(a). The amendments will open the doors for new people to qualify as “Accredited Investors” on the basis of their professional skills and knowledge, certificates, and experience, as well as for entities to qualify not on the basis of an asset test, but on the basis of an investment test. With the new expansion of this definition of Accredited Investor, SEC also expanded the definition of the qualified institutional buyer (QIB) in Rule 144 (A) under the 1933 Act. These amendments become effective 60 days after their publication. 1. Historical Background & The Original Definition As noted above, under the Rules promulgated under the 1933 Act, Accredited Investors and QIBs can participate in investment opportunities that are not available to the general public. These private investment opportunities generally involve more risk, as well as more potential upside (for example, private companies, private equity, hedge funds, and venture capital).  The SEC has been considering changes to the accredited investor structure for quite some time. The criteria for being an “Accredited Investor” have not changed much since 1982. The previous definition, set forth in Rule 501 of Regulation D, was (again, in extreme summary): Individual with annual income above $200,000 ($300,000 with  spouse) and expectation of maintaining the same income; Individual with net worth of over $1 million, exclusive of primary residence (individually or with spouse); Entity with assets above $5 million not formed for the express purpose of making the investment; Certain affiliates of an issuer (e. g. executive officers) may be considered accredited with respect to that issuer. Under regulation D, the SEC defines an accredited investor as those investors whose level of financial sophistication warrants a reduced need for protection. Essentially, accredited investors are knowledgeable and experienced enough to understand the risk that comes with investing in unregistered securities. 2. Criticism of the Original Definition As noted in the introduction above, many investors, regulators, and practitioners have observed that the previous method of determining “Accredited Investor” status – i. e. , primarily based on income and assets (with very narrow non-asset or non-income qualification criteria) – may not adequately capture other individuals with enough expertise to allow them to competently evaluate and participate in these private, unregistered, less-regulated offerings. In December 2015, A staff report from the SEC evaluated the history of accredited investor definition. In June 2019, the SEC issued a concept regarding it, “Solicited public comment on ways to simplify, harmonize and improve the exempt offering framework under the Securities Act”. In December 2019, the SEC suggested new rules to amend the definition to collect capital and expand the investment opportunities along with investor protection. In 2014 the Investor Advisory Committee of the SEC met to discuss updating the definition of an Accreddited Investor Also as mentioned above, there has been, over the years, various academic and popular criticism of the function and definition of Accredited Investors. Check the following resources: Reconsidering the SEC's “Accredited Investor” Definition Under the 1933 Act  Are The Accredited Investor Rules Unfairly Limiting Access To Good Investment Opportunities? 3. Amendments to Accredited Investor Definition Presumably after taking all of this into consideration, the SEC proposed the following amendments to the definition of Accredited Investor (AI): Adding as AI those individuals who qualify based on professional certifications, designations, or credentials as designated by the SEC from time to time (by order) Simultaneously with the foregoing, issuing an order that holders in good standing of Series 7, Series 65, and Series 82 licenses qualify as AIs under (1); An “invitation” for members of the public to propose to the SEC other professional certifications, designations, or credentials that they believe should qualify the holders thereof as AIs by order; Adding as “accredited investors” with respect to investments in a particular private fund the individual employees of the private fund who are “knowledgeable employees” of the fund Clarify that the following may qualify as AIs LLCs with >$5M that otherwise satisfy the definition of AI State-registered or SEC-registered investment advisers (section 203 Investment Advisers Act) exempt reporting advisers rural business investment companies (RBICs) Add a new category of AI for any entity, including Indian tribes, governmental bodies, funds, and entities organized under the laws of foreign countries, that own “investments,” as defined in Rule 2a51-1(b) under the Investment Company Act, in excess of $5 million and that was not formed for the specific purpose of investing in the securities offered; Include as AIs “family offices” with at least $5M in AUM and their “family clients” not specifically formed for the purpose of acquiring the offered securities, etc (as defined in the Investment Advisers Act; for more detail, see Rule 202(a)(11)(G)-1); and Add “spousal equivalent” to the AI definition, to permit spousal equivalents  to permit their assets to qualify as AIs; Most notably, the “professional certifications, designations, or credentials” amendment gives the  SEC the power and flexibility to subsequently designate categories of AI on an ongoing basis, based on its evaluation at that time. For instance, if self-regulatory organizations, educational institutions, industry bodies, or members of the public complete a program that provides the required level of sophistication, education, etc. then they can apply and the SEC could issue an order including them as AIs. 4. Amendments to QIB Definition Rule 144A, a rule under the 1933 Act, is a nonexclusive safe harbor provision that provides an exemption from registration for the sale of restricted securities to certain entities. Specifically, the rule is only available to entities that qualify as Qualified Institutional Buyers (or QIBs). The previous definition for QIBs included: Insurance Companies under the Securities Act of 1933 Investment Companies under the Investment Company Act of 1940 Small Business Investment Companies under the Small Business Investment Act of 1958 Certain public employee benefit plans Certain trust funds Business Development Companies under the Investment Advisers Act of 1940 Certain 501(c)(3) organizations Investment Advisers registered under the Investment Advisers Act of 1940 Similarly to the exemptions for Accredited Investors, the basic idea behind the 144A exemption for QIBs is that they are sophisticated parties who can look after themselves and therefore ought to be permitted to buy and sell restricted stock without SEC oversight. In the August 26, 2020 release, the SEC expanded the QIB definition in some similar ways to the expansion of the definition of AIs, namely including LLCs and RBICs in the list of entities that  may qualify under Rule 144A. In addition, the SEC added a new category (paragraph J) to the list of covered entities in Rule 144(a)(1)(i), which requires $100 million in owned and invested securities. The new paragraph will allow certain entities to qualify automatically upon meeting the required $100 million threshold (analogous to the “catch all” category of the Accredited Investor definition for those who own more than $5 million in assets). As a further result, Governmental bodies, bank-maintained collective investment trusts, and Indian tribes may now qualify and become eligible as QIBs. 5. Takeaways This isn’t as much of a seismic shift as it might seem. But it is a slight expansion. No doubt that some of those who level criticism at the AI definition as unfairly favoring the wealthy would view this development as too small of an update, not making any major changes to the “core” of the AI definition. And that perspective is fair. However, this is an expansion. Even if it’s a small expansion. So, there may still be some work to be done here, but the definition of AI and QIB has been modernized and updated – at least a bit – to reflect – at least some of – the developments in the landscape surrounding the definition since it was first promulgated. For private companies, startups, and investors seeking to take advantage of exemptions for private securities offerings, some updates to accredited investor documentation and diligence are likely in order. Stay tuned to the blog for more updates.     This blog post is provided by Law Offices of Ryan Reiffert, PLLC for educational and informational purposes only and is not intended and should not be construed as legal advice. --- ### EXPLAINER: CONTRACTS 101 > This is an explainer meant to give you a basic understanding of contract law (written by a corporate lawyer with help from a law student) - Published: 2020-10-26 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/explainer-contracts/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Dealmaking, Deals, M&A, Small Business, Texas This post was co-authored by Ryan Reiffert, San Antonio corporate & transactional attorney and Evan Janssen, a student at St. Mary’s School of Law Background Contracts are no strangers at the Law Offices of Ryan Reiffert, PLLC. I assist with and review personal transactions, business agreements, government procurement documents, investment contracts, and much more for individuals, business entities, and more on a daily basis. Some are 2 pages, some are 20 pages, some are 200 pages. But all share the same basic DNA: offer, acceptance, consideration. I bring you this first installment in the explainer series so that you can educate yourself on contract law and – hopefully – better recognize when it’s appropriate to bring in a professional. Contract law is one of the most ancient branches of law, having its roots in Greek and Roman law (in fact Plato’s last and longest dialog is titled The Laws ) and deals in part with the law of contract), and indeed there is evidence of contracts being made and fulfilled in ancient Mesopotamia, some 4 millenia ago. Our modern legal system is somewhat less remotely derived (although still plenty old), descending to us from English Common Law. When it comes to entering into a contract, it is actually not that difficult. In fact, it might sometimes be done almost-accidentally. As mentioned above, under Texas law, you can form a contract or a legally enforceable agreement when you have three simple elements (1) one party makes an offer, (2) the receiving party accepts this offer and (3) there is an exchange of “consideration”. Offer and Acceptance An offer must be made to begin the process. An offer exists when one party clearly expresses intent to enter into a contractual relationship that is bound by a specific set of terms. The offer gives the offeree the power to make a decision on whether or not there will be a contract. The offer needs to contain key information such as what, how, where, and the price. “Harder” language such as “You must”, “In order to accept”, or flat-out “This is an offer” make proposals look more like an offer. “Softer” language such as “If this makes you satisfied” or “Please call” looks much more like an invitation to negotiate and should not be seen as offers. The acceptance of that offer must be an agreement or a “meeting of the minds”. It cannot be an acceptance of a different offer. While this issue can generate a whole lot of thorny law-school problems under the UCC (especially when sophisticated parties send dueling purchase orders but nonetheless agree on essential terms like price, quantity, delivery time) that have been amusingly dubbed “the battle of the forms” the basic idea is that you must say “yes” to the offer in order to have an acceptance. If you propose different terms, you have made a counter-offer, which must then be accepted by the first party For instance, I make an offer to my coworker by offering to sell her my home stereo system for $250. If my coworker says nothing, and ignores my offer – this is not a contract, as my offer has not been accepted. If my coworker says “no; I don’t want a home stereo” – this is not a contract, as my offer has been explicitly rejected. If my coworker says “that piece of junk isn’t worth $250; I’ll give you $100” – this is also not a contract (it is a counter-offer). In order for a contract to be formed, my coworker must respond affirmatively to my offer to sell her my home stereo for $250. This could be by delivering a letter that says  “yes I will”; it could be by saying “I accept”; it could be by signing an agreement that sets forth the terms; it could be by nodding her head; or it could be by a handshake (one of the most famous handshake deals of all time gave rise to the Pennzoil v. Texaco case). Another lesson of that case is that contracts don’t necessarily need to be in writing to be enforceable. Keep that in mind for a discussion of the statute of frauds below. An acceptance must also be in compliance with any procedural instruction given in the offer. If the offer says “To constitute valid acceptance, you must call”, sending an email or a fax would not been seen as a valid acceptance. It is crucial that you follow any procedural instruction given with the offer in order to avoid potential avoidance or revocation. If there is no specific form of acceptance laid out, you may generally communicate your acceptance at your discretion. Finally, acceptance must occur when the offer is in effect. An offer is in effect as long as the stated time on the offer (ex: This offer remains open for 24 hours”) has not passed. If there is no time stated on the offer, the offer will remain open for a “reasonable” amount of time. What constitutes reasonable typically is decided by the trier of fact—either a judge or a jury. Offers may be revoked by the offeror at any time before acceptance. The offeror must communicate this revocation to the offeree. Under the “Mailbox Rule”, if acceptance has been sent before revocation, the contract will be enforced as accepted. For example, I send the offer to sell my home stereo station to my coworker on a Monday. The offer holds that a valid acceptance can be any form of communication (Phone, e-mail, mail, etc. ). On Tuesday morning, she decides that she wants to accept my offer by mail. She heads to the post office and sends a letter of acceptance in. That Tuesday afternoon, after not having heard back from my coworker, I decide to revoke the offer. I give her a call and tell her the offer is no longer open. On Wednesday, my coworkers letter of acceptance is received in the mail. Despite the fact that I had called her to revoke the offer not knowing she accepted, she had already accepted the offer thus creating a binding contract. An offer is considered accepted at the time that acceptance is communicated, no matter the form of communication. To avoid these potential problems, it is ideal to communicate your acceptance in the quickest way allowed in the offer. But wait. There is one more element required to turn a “mere agreement” into a binding contract recognized by the law – the element of consideration. Consideration The legal concept of consideration is a vital element in the law of contracts that benefits both parties and is essential for the party entering into a contract. As a matter of theory, it separates a contract (legally enforceable) from a “mere promise” (legally unenforceable). There has been much ink spilled over why mere promises are not legally enforceable; and in some very rare circumstances (e. g. , promises to give money to charity), they have been enforced. When looking at a gift promise the court will look to whether the offeree reasonable believed that the intent of the offeror was to induce the action. If the answer is yes, there is consideration and the promise will be enforced. We won’t get into the academic side of this debate too much here; the simplest explanation that I have heard is that a unilateral promise will not be enforced because the other party has not done anything or made any changes to its behavior that would warrant enforcement by the legal system which, having finite resources, ought to devote its time to those arrangements where the aggrieved party did make promises or take actions to consummate the bargain. On a basic level, consideration calls for bargain and exchange. A promise must induce the detriment, and the detriment must induce the promise. Consideration may include money, land, physical goods, a promise to do something that one is not required to do, or a promise to refrain from doing something (or any combination of these things) that one is permitted to do. It is fundamentally the “benefit” received under the contract. LEGAL NERD NOTE – “Peppercorn Consideration”: the term “peppercorn consideration” refers to consideration of a very low value exchanged by the parties as an explicit attempt to generate a contract. Sometimes this is one dollar, or five dollars, or (hence the name) a single peppercorn. As stated by the court in Chappell & Co Ltd v Nestle Co Ltd ( AC 87) “a peppercorn does not cease to be good consideration if it is established that the promisee does not like pepper and will throw away the corn”. Statute of Frauds The Statute of Frauds is a very old thing, and originally refers to an act of the English Parliament passed during the reign of Charles II, in 1677. Most of the States have adopted very similar rules.  In Texas, it is codified under the Business and Commerce Code, Chapter 26. The Statute of Frauds requires that, in order to be enforced as a legal contract, certain types of promises or agreements must be memorialized in writing, signed by the party to be charged, and with sufficient content to evidence the contract. The types of promises and agreements subject to the Statute of Frauds in Texas are: Certain Guarantees: a promise by an executor or administrator to answer out of his own estate for any debt or damage due from his testator or intestate, or a promise by one person to answer for the debt, default, or miscarriage of another person; Marriage Consideration: an agreement made on consideration of marriage or on consideration of nonmarital conjugal cohabitation; Long-Term Executory Contracts: an agreement which is not to be performed within one year from the date of making the agreement; Certain Real Estate Matters: a contract for the sale of real estate, or a lease of real estate for a term longer than one year; Certain Oil & Gas Matters: a promise or agreement to pay a commission for the sale or purchase of: (A) an oil or gas mining lease; (B)  an oil or gas royalty; (C)  minerals;  or (D)  a mineral interest;  and Certain Medical Matters: an agreement, promise, contract, or warranty of cure relating to medical care or results thereof made by a physician or health care provider as defined The purpose of the statute of frauds is to make fraud with regard to these particular subject areas more difficult. When someone wishes to undertake one of the listed transactions, a “he said, she said” will not cut it for these types of contracts. A written and signed document evidencing the agreement of the parties must be produced. The statute of frauds, however, is not a perfect defense. Take a situation where you contract someone to perform landscaping on your yard. If I enter into an agreement with John to trim my trees and mow my lawn, and he gases up and prepares his equipment and begins the job, I cannot void the agreement we made through the statute of frauds despite us never having written down the agreement. This exception is called Promissory Estoppel.  Promissory Estoppel protects a promisee who has relied to his detriment on the promise. Because John was reasonably induced into action to his detriment, promissory estoppel will save him from the statute of frauds. Promissory Estoppel is seen as a principle of “Fundamental fairness”. For a quick video explainer of the "does my contract need to be in writing" question, you can watch our YouTube explainer here: Ambiguity or Vagueness in Contracts Disagreement on the interpretation of a clause can happen at some point if the formed contract contains vague or has clauses that are reasonably subject to more than one interpretation (ambiguous). To avoid ambiguities in contracts, businesses or individuals should, first and foremost, READ THE CONTRACT CAREFULLY. It is best to hire a corporate lawyer that can assist in the forming of contracts, especially for business or large transactions. Aside from contract review and contract drafting, a high-quality corporate lawyer also assist with breach of contract matters Parol Evidence Rule Simply put, the parol evidence rule holds that a contract ought to be interpreted by looking at the “four corners of the document” only and not using external (or “parol”) evidence. It prevents the inclusion, use or consideration of external statements or words to help in the interpretation of the contract – such as, for example, an email, text message, or phone call between the parties not made part of the actual agreement itself. LANGUAGE NERD NOTE: for those of you wondering what on earth prisoners being released early has to do with contract law... that’s a different word – that’s PAROLE and it means exactly that: early release of a prisoner. PAROL, on the other hand, simply means an oral (as opposed to written) expression Interestingly, the words are very closely related; both of these words come to English from the ecclesiastical Latin parabola (meaning “speech”) to Anglo-Norman French parole (meaning “word” or “formal promise”). So “Parol evidence” means oral evidence, while a prisoner who is “Paroled” is released early based on his word (oral promise) that he will behave himself once released. Like most rules, there are exceptions to the parol evidence rule – namely, contracts with ambiguous clauses. If the contract itself can be shown to be ambiguous, vague, or unclear, then parol evidence may be admitted to help the finder of fact interpret and show its meaning. “OK, but wait a second, Ryan” you might ask. “You JUST said that parol evidence is derived from the word for ORAL evidence, but when you first explained this, your example was about emails and text messages above – those are obviously written. So which is it? ? ” And that’s a good point. Parol evidence means external evidence, not strictly oral-only evidence. But, think back to the time hundreds of years ago when the parol evidence rule was developed. Emails and text messages and various informal written communications... weren’t really a thing. The contract was a solemn, written document, and virtually any evidence outside of that document would have been unwritten. Avoiding Contract Ambiguity with Clear Drafting and Merger (or Integration) Clauses Most clients don’t want their offhand comments in a negotiation, or previous iterations of a contract, to be used to evaluate the contract. So, it’s important to draft a clear document. Avoid terms that are vague or may have dual meanings. When enumerating timelines, requirements, or metrics, be as specific and detailed as possible. Always define key terms. There are, in addition, other contract drafting tips that a competent corporate lawyer can help you with to avoid being hit with parol evidence. For example, a merger (or integration) clause may say something to the effect of: “This Agreement, including the Exhibits, Annexes, Attachments, and/or Schedules attached hereto and which are incorporated herein by reference, ] constitutes the full, exclusive, and sole agreement of the parties hereto and correctly states all rights, duties, and obligations of each party as of this document’s date, with respect to the subject matter of this Agreement. In the event that any term, condition, provision, requirement or specification set forth in this body of the Agreement conflicts with or is inconsistent with any term, condition, provision, requirement or specification in any exhibit and/or attachment to this Agreement, the provisions of this body of the agreement shall prevail. Any prior agreement, promises, negotiations, or representations between the parties not expressly stated in this document are not binding. All subsequent modifications shall be in writing and signed by the parties or else will be null and void ab initio. ” If you have ever signed a contract for anything, you have probably seen a clause that looks something like the foregoing. This clause is explicitly instructing a court to disregard and ignore any parol evidence. Drafting a clause like this to cover the correct matters and exclude the correct matters takes skill and experience offered by a high-caliber corporate attorney. Breach of Contract One party’s failure to fulfill any of its contractual obligations is known as a “breach” of the contract. The breach can range from anything from a late payment to a failure to deliver or perform. A breach of contract is typically classified into one of two types or “buckets” – a minor breach or a material breach. A minor breach occurs when part of the contract (an item, payment, etc. ) is not completed by a specified due date. A material breach occurs when the purpose of the contract has been completely wiped out. For example, if I enter a contract with a vendor for 15 laptops and they deliver me 15 televisions, the heart of the contract has been materially altered. Therefore, the delivery of the televisions is a material breach. Breaches then fall into one of two categories: an “actual breach” or an “anticipatory breach”. An actual breach is when one party refuses to perform the terms of the contract while an anticipatory breach is when one party repudiates a promise before the time for performance arises or elapses. Remedies from a breach typically come in the form of damages. Contract Damages: Expectation Damages vs. Reliance Damages There are a few ways to measure damages in a breach of contract case, and we will very (very very) briefly summarize them here. Expectation damages are essentially the “benefit of the bargain”. They can be seen as the market value of the promised performance (less the consideration promised but not given, if any). So, if I enter into a contract that I expect will result in revenues of $100, but I will be required to spend $60, my expectation damages are $40 – the profit I would have received had my counterparty fully performed the contract as required. The paradigm case for expectation damages is the “Hairy Hand” case (Hawkins v. McGee). Reliance damages, on the other hand, require that one of the parties act in reasonable reliance on the contract, to that party’s detriment. These damages are calculated by asking what it would take to restore the injured party to the economic position they were in before the party acted in reasonable reliance on the promise. These damages may be awarded after a breach of contract or by way of promissory estoppel. Specific Performance In other circumstances, damages may be an insufficient remedy, and a party may request an injunctive or equitable remedy. Think of a priceless or sentimental object or anything else that, for whatever reason, can’t really be fairly valued or given a dollar equivalent. In such circumstances, a party might ask for specific performance. Specific performance awards the aggrieved party the particular performance, or item, that was unjustly taken away or withheld from them. Specific performance is most commonly seen in contracts relating to real property but is generally used by the courts as a last resort. Notably, parties can include a clause in the contract that provides for specific performance as a remedy in the event of breach. Such a clause might read something like this: “In the event of any actual or threatened default in, or breach of, any of the terms, conditions and provisions of this Agreement, the Party who is or is to be thereby aggrieved shall have the right to specific performance and injunctive or other equitable relief of its rights under this Agreement, in addition to any and all other rights and remedies at law or in equity, and all such rights and remedies shall be cumulative. The Parties agree that the remedies at law for any breach or threatened breach, including monetary damages, may be inadequate compensation for any loss and that any defense in any action for specific performance that a remedy at law would be adequate is waived. Any requirements for the securing or posting of any bond with such remedy are waived by the Parties to this Agreement. ” As with the sample Merger/Integration clause above, there’s a good chance you’ve seen one of these before if you’ve been in business for a while. Also as with the sample Merger/Integration clause above, a good business attorney is extremely important to be able to correctly draft the Specific Performance clause to correctly match the terms of the contract and the terms of the underlying business deal. Quantum Meruit (Restitution) Quantum Meruit (aka restitution damages) is not strictly a contract theory of damages, but is very often pled in the alternative to contract liability. The phrase “quantum meruit” is latin for “as much as he has deserved”. This theory is sometimes referred to as quasi-contract, and can be deployed by a court when no contract existed, but the parties sort of acted as if there was, or one party gave the impression that there was, or some similar situation. Then, one of the parties gives benefit on that basis. Then the other party “breaches” (but, it’s not really a breach because it wasn’t really a contract... . ) Restitution damages are money damages that are awarded to an innocent party to compensate for the benefit that party gave. Unlike reliance, restitution will always involve a benefit from the innocent party to the other party. Discharge Sometimes the main obligations of a contract end which entails a termination of a contractual relationship. This is called discharge of a contract. There are three main types of discharge in contracts: 1) Impossibility/Impracticability- an excuse for the nonperformance of duties under a contract based on a change in circumstances, the nonoccurrence of which was an underlying assumption of the contract, that makes performance of the contract impossible or impracticable. Ex: Contract to remodel a house is rendered impossible due to destruction of the home. 2) Frustration of Purpose- occurs when an unforeseen event undermines a party’s principal purpose for entering into a contract so that the performance of the contract is radically different from what was originally contemplated by the parties. There is no reason to move along with the contract. Ex: You enter into a contract to buy a building for renting purposes. During the pending sale, the building is condemned by officials and labeled unsafe. You can likely use frustration of purpose to avoid your performance. 3) Force Majeure- an unforeseeable circumstance that prevents someone from fulfilling a contract. Typically seen as an “Act of God”. Get more information about a force majeure clause. Conclusion For an experienced and reputable legal counsel for your personal or business needs, Law Offices of Ryan Reiffert, PLLC is ready to guide you in both contract formation and enforcement. Getting a reputable corporate lawyer is paramount to protecting your company’s welfare, protecting your own assets, and growing your business without the threat of liability. With our experience in contract development and breach of contracts, our corporate lawyers will help you prevent such legal issues giving you more time to focus on your business. We offer a full range of professional services when it comes to legal matters that also include intellectual property copyrights and trademarks, employment agreements, and more. To know more about Law Offices of Ryan Reiffert, PLLC please call as at 210-817-4389 or Contact Us --- ### Top 10 Largest Mergers & Acquisitions since 2010 > What were the largest 10 M&A deals of the last decade? A law student and corporate attorney discuss. - Published: 2020-10-20 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/top-10-ma-deals/ - Categories: Business Attorney, Business Law, Corporate Attorney, Dealmaking, Deals, M&A This post was co-authored by Evan Janssen, a student at St. Mary’s School of Law, and Ryan Reiffert, San Antonio corporate & transactional attorney.   In this article, we will discuss the ten largest mergers or acquisitions worldwide since 2010. From media providers to food products, massive mergers and acquisitions between companies have been much more common this decade. In fact, the past 10 years has already seen five mergers with a deal value over $100 Billion, compared to a total of three with a $100B or greater deal value before 2010. As a corporate lawyer, it is important to stay up-to-date on what the market looks like and keep informed about what deals the major players are doing. Needless to say, these blockbuster deals present some interesting stories. Let’s take a look into who these major players are and how they ended up on this list. 10) Charter Communications Acquires Time Warner Transaction Value: $78. 7 B Closing Date: May 18, 2016 Who is this?  Charter Communications is an American telecommunications and mass media company, better known to many consumers as Spectrum. Spectrum is currently the second-largest cable operator in the United States and the fifth largest telephone provider based on residential subscriber line count. How it Happened: Charter tried several times over the years to acquire its rival Time Warner Cable (TWC) but failed on numerous occasions. Comcast, a competing telecom and media company, initially beat Charter to the punch and signed a proposed merger with TWC, but that merger fell through due to concerns by the DOJ that the sheer size of the combined company would give Comcast unprecedented control over the United States’ internet and television industries (control over 55% of the nation’s broadband capacity). About a month after the Comcast deal fell through, Charter announced its intent to purchase TWC. The deal faced less scrutiny due to the relatively smaller size of the companies and the acquisition was completed in May of 2016. Charter currently ranks #70 in the Fortune 500 list of largest United States corporations by total revenue per year ($45. 6 B). Fun Fact: Tom Rutledge, the CEO of Charter Spectrum, is currently the third highest paid CEO in the United States trailing only Tesla’s Elon Musk and Apple’s Tim Cook.   9) Cheung Kong Holdings Merges With Hutchinson Whampoa Transaction Value: $85 B Closing Date: June 3, 2015 Who is this? : The name Li Ka-shing might be unfamiliar to the average American, but in China, he’s as recognizable as Bill Gates, Warren Buffett, and other celebrity-billionaires. The 92 year old Chinese businessman is a major player both in China and globally and currently sits as the 30th richest person in the world with a net worth of $29. 4 B. The Cheung Kong group (owner of nearly 50% of Hutchinson Whampoa) was one of the largest developers of office, residential, hotel, and industrial properties in Hong Kong. Li Ka-shing owned Cheung Kong and Hutchinson Whampoa. How it Happened: Li Ka-shing made a splash in 2015 when he merged two of his own companies, Cheung Kong Holdings and Hutchinson Whampoa, to reorganize and form CK Hutchinson Holdings. Fun Fact: CK Hutchinson Holdings is known for its five core businesses: retail, infrastructure, energy, telecommunications, and ports/related services. The company operates in over 50 countries currently and brings in annual revenue of nearly $22B   8) AT&T Acquires Time Warner Transaction Value: $85. 4 B Closing Date: June 14, 2018 Who is This? : AT&T is the world’s largest telecommunications company in terms of revenue and market cap, and the largest provider of mobile telephone services. How it Happened: AT&T began talks to acquire Time Warner in 2016 – just a year after purchasing DirecTV for $48. 5B. AT&T’s competitor Comcast had previously acquired NBCUniversal to increase its media holdings, so AT&T saw the TWC acquisition as a necessary purchase to retain its top position in United States media by market share. The merger was heavily contested by the DOJ under antitrust laws but the U. S. District Judge for the District of Columbia ultimately ruled in favor of allowing the merger to proceed. After the merger, AT&T stands as the world’s largest media and entertainment company by revenue ($181 B annually) and is ranked #9 in the Fortune 500 list of largest United States corporations by total revenue. Fun Fact: AT&T is the second largest donor to U. S political campaigns and the top American corporate donor, contributing more than $47. 7 million since 1990.    7) Linde AG Merges With Praxair Transaction Value: $86 B Closing Date: June 2017 Who is This? :. Linde AG was a German company that merged with the American company Praxair, Inc. to form Linde PLC and become the world’s largest gas supplier. The company’s primary business is the manufacturing and distribution of atmospheric gases (oxygen, nitrogen, argon, etc. ) and process gases (carbon dioxide, helium, hydrogen, etc. ) How it Happened: Negotiations began in 2016 but were suspended several times due to disagreements on central governance issues. The deal was finally made in Summer of 2017 with the idea of combining Linde’s engineering & technology with Praxair’s operational excellence. Before the deal, Praxair dominated the Americas while Linde AG was a force in Europe, Middle East, Africa, and Asia. This deal was generally regarded as a “merger of equals”. Linde PLC is now the largest industrial gas company by market share and revenue. The company is ranked 444th on the Fortune Global 500 with annual revenue of $28. 23 B. Fun Fact: Linde PLC is a member of the Hydrogen Council, a group of companies involved in hydrogen vehicles. The company expects hydrogen vehicles to compete with electric vehicles such as those produced by Tesla.   6) Energy Transfer Equity Merges with its Affiliate, Energy Transfer Partners Transaction Value: $90 B Closing Date: October 19, 2018 Who is This? : Energy Transfer is one of America’s largest energy companies. Their core operations include transportation, storage, and terminalling for natural gas, crude oil, NGLs, refined products and liquid natural gas. How It Happened: Quite easily, actually – or at least as “easily” as a deal with nearly 12 figures of valuation can happen. The companies merged together in order to trade under common units on the NYSE. Energy Transfer Equity’s only asset is a 100% interest in Energy Transfer Operating L. P. (formerly Energy Transfer Partners). Energy Transfer Partners is engaged in natural gas and propane pipeline transport. Energy Transfer, headquartered in Dallas, Texas, currently brings in over $54 B in revenue. Fun Fact: Energy Transfer was formed in 1996 in East Texas with 200 miles of natural gas pipelines and 20 employees. In early 2019, Energy Transfer announced the opening of its first international office in Beijing, China.    5) Heinz Acquires Kraft Transaction Value: $100 B Closing Date: July 2, 2015 Who is This? : Heinz, an American staple best known for its ketchup and steak sauce, manufactures thousands of food products on six different continents. Kraft is similar, a massive American food manufacturing and processing conglomerate. I assume almost everyone has heard of, and/or eaten, numerous products from these two food powerhouses. How It Happened: Kraft announced it would merge with Heinz in March of 2015. The deal was largely arranged by Berkshire Hathaway Inc. and the Brazilian private equity and investment firm 3G Capital, who had jointly purchased Heinz two years prior. The strategy of working with a private equity firm such as 3G was a new one for Berkshire, but Warren Buffett, Berkshire’s chairman, has expressed satisfaction with its investment partnership with 3G. Just two weeks after the Heinz/Kraft merger, Berkshire Hathaway became a majority owner of Heinz after exercising a warrant to acquire 46 million shares, taking its ownership stake to 52. 5%. The resulting Kraft Heinz company is the fifth largest food company in the world  Fun Fact: Heinz sells 11 billion packets of ketchup a year, which is nearly two packets for every person on the planet.   4) AB InBev (Anheuser-Busch) Acquires SABMiller (and Spins Off Coors) Transaction Value: $107 B Closing Date: October 10, 2016 Who is This? : Similar to the previous merger, Anheuser-Busch (now AB InBev) has to be one of the most recognizable brands in the world as they provide something millions of Americans enjoy: Beer. From Budweiser, Bud Light, and Michelob Ultra to Stella Artois, Land Shark, and Shock Top and many smaller “craft” breweries, AB does it all. SABMiller was one of the top five global brewing companies with a range of over 150 beers, most notably Miller and Coors.  How It Happened: In September of 2015, AB made the acquisition bid for SABMiller which would unite the world’s two biggest beermakers. The DOJ approved the deal only on the condition that SABMiller spin off all its MillerCoors holdings in the US. As required under the agreement, SABMiller sold to Molson full ownership of the Miller brand portfolio. Molson Coors was formed in 2005 when Coors merged with Molson. After SABMiller divested itself of all interest in Miller Coors, Molson Coors became the largest brewer in the U. S. The agreement made Molson Coors the world’s third largest brewer. Revenue for Anheuser-Busch is currently $52 Bn and the company makes up over 1/4th of the market share of global volume beer sales  Fun Fact: In 1920 when national prohibition was introduced, Anheuser-Busch diversified into a long line of products including ice cream and bus bodies.    3) United Technologies Acquires Raytheon Transaction Value: $121 B Closing Date: April 3, 2020 Who is This? : United Technologies was an American multinational conglomerate headquartered in Connecticut. The company researched, developed, and manufactured products in areas including aircraft engines, aerospace systems, and elevators, among many others. The company was also a large military contractor, bringing in roughly 10% of its revenue from the US government. Raytheon was a major US defense contractor with core concentrations in weapons and electronics.  How It Happened: The two companies came to an agreement to merge together as equals to become Raytheon Technologies and form one of the most powerful aerospace and defense companies in the world. United Technologies was the nominal survivor, but the merged company was headquartered in Massachusetts where Raytheon was based. Raytheon Technologies is the second largest aerospace and defense company in the world with revenue just shy of $100 B, trailing only Boeing. Fun Fact: Early in World War II, physicists in England invented the magnetron, a specialized microwave-generating electron tub that improved the capability of radar to detect enemy planes. Raytheon received a contract to build the device. Raytheon’s research on the magnetron tube revealed the potential to use microwaves to cook food and in 1947, the company demonstrated the microwave oven for commercial use.    2) Dow Chemical Acquires DuPont  (Then Spins Off Three Entities) Transaction Value: $130 B Closing Date: August 31, 2017 Who is This? : Dow Chemical is an American multinational chemical corporation that manufactures plastics, chemicals, and agricultural products. DuPont is similar, a massive American chemical company founded in 1802. How It Happened: In late 2015, DuPont announced it would merge with Dow Chemical to form DowDuPont. The new company was equally held by the shareholders of both companies and maintained HQ from both former companies. In 2019, DowDuPont spun off into three separate public companies, Corteva (agricultural chemicals), Dow Inc (materials science), and DuPont (specialty product industries). Prior to the spinoffs, DowDuPont was the world’s largest chemical company in terms of sales. DowDuPont ranked #35 on the Fortune 500 list of the largest US public corporations with revenue of $86 B. Fun Fact: Dow Chemical’s products include artificial turf, materials for golf balls, and other recreational equipment. Its better-known products include Styrofoam insulation and the pesticide Lorsban.    1) Verizon Communications Acquires Vodafone Group Transaction Value: $130 B Closing Date: February 21, 2014 Who is This? : Verizon Communications is an American multinational telecommunications conglomerate based in New York City. Vodafone is a British telecommunications company predominately operating in Asia, Africa, Europe, and Oceania. How It Happened: In 1999, Vodaphone agreed to merge its US wireless assets with Bell Atlantic Corp (Verizon Communications) form Verizon Wireless. That deal gave Vodafone a 45% share of Verizon Wireless. In 2013, Vodafone agreed to sell all of their shares in Verizon Wireless to Verizon Communications giving Verizon Communications sole ownership. Vodafone used the proceeds from the deal to improve network quality in Europe and emerging markets, such as India. Verizon Wireless is the second largest wireless communications provider in the United States with over 150 million customers. In 2019, Verizon Communications brought in revenue of $132 B. Fun Fact: Verizon has the dubious distinction of having the “least loyal” customers of the 4 major telecommunication companies (Verizon, AT&T, T-Mobile, Sprint) despite having the broadest 4G LTE coverage. However, Verizon has been lauded as one of the best places to work in terms of both pay and benefits which likely helps Verizon maintain its strong reputation for customer service. --- ### How to Purchase (or Sell) a Business Now in 5 Steps > How to purchase a business: the 5 steps you need to know from courting to closing. From Ryan Reiffert, San Antonio corporate lawyer. - Published: 2020-10-04 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/5-steps-purchase-business/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, Dealmaking, Deals, M&A, Small Business, Texas How to Purchase (or Sell) a Business Now in 5 Steps So you want to purchase a business but you are not sure how to go about the process and close the purchase in the right way. LAW OFFICES OF RYAN REIFFERT, PLLC has published this guide to help you in this high-stakes process. Based on our experience in this sector, there are 5 major steps to consider while you are taking this important (and, hopefully, exciting! ) journey. My background in M&A allows me to counsel you to a streamlined process and a good result. Every buyer and seller must know and consider the following for a smooth transaction. Purchase a Business in 5 Steps Matchmaking Due diligence Select Acquisition Structure Closing Post-Closing Matters Step One: Matchmaking The first stage of dealmaking is more ill-defined than the others. Every company can be, in a sense,  said to be in the “matchmaking” phase more or less constantly throughout its lifetime. “But that’s silly,” you might say, “surely not every company is always thinking about making a deal. Sometimes they just want to go about their business and make their money. ” Sure, but what I mean by that is: every company is potentially a candidate for an unsolicited overture from another company. If your business received an unsolicited offer for TEN TIMES what the business is “worth” I’m willing to bet you’d at least give it some thought. Perhaps you’d ultimately accept or perhaps you’d ultimately decline. But I’ll wager you’d at the very least consider taking the money. And at that point, you’d be in the matchmaking phase of dealmaking. Other times, a company may intentionally put itself up for sale, perhaps engaging investment bankers to run the sale and  openly soliciting bids. In either case, the “matchmaking” part of an acquisition will often take the form of discrete, high-level discussions between senior management and/or board members of one company to senior management and/or board members of the other. Investment bankers may or may not be directly involved, and attorneys may or may not be directly involved (although the odds are good that they will be, at minimum, indirectly contributing to discussions). At this stage in the purchase, the main focus is on whether the business combination makes sense from a conceptual perspective. There is generally not (yet) a significant amount of legal work to do, and the details of the purchase will  not have come into focus (yet). At this stage, the role of a corporate lawyer is that of advisor and consultant to the buyer or seller. Many, many deals do not progress past this “matchmaking” stage, or they may visit and revisit this stage – perhaps an initial confidential conversation happens between buyer and seller, and one is not interested. No deal. Or, perhaps one or the other is interested, but the timing or valuation is not yet quite right. No deal. The point is, if your initial confidential overture is not productive, it is important not to despair. A roadblock at this stage is not necessarily final and permanent. “Business opportunities are like buses; there’s always another one coming” -Richard Branson Step Two: Due Diligence Once the parties have reached some sort of common conceptual understanding that a deal might make sense, it’s time to bring that conceptual agreement into the real world. This happens through due diligence. Due diligence is the principal period to evaluate the business before making the decision to buy. It is the common process in which each party looks at the capacity of the other party to convey what was guaranteed and to take some basic precautions to avoid unexpected scenarios and unwelcome surprises to both sides. Fun Fact: the phrase “due diligence” is also a term of art from a relatively different legal concept in securities law, related to liability protections for underwriters. So, if you hear “due diligence” in a securities context rather than a strictly M&A context, be aware that it could mean something a little different. You can think of due diligence as the “kicking the tires” phase of buying a car or the “home inspection” phase of buying a house. If you’re looking at the car or the house from the street, you may get one picture. But once you look under the hood, or get past the locked front door, you get a much more in-depth look at things... and that’s not to say there can’t be some hidden problems (there can be), but you’ll have a much better chance to discover them compared to just looking at it from the street. The due diligence phase of an acquisition or merger is also the phase where parties are most likely to execute confidentiality agreements and other deal documents such as exclusivity agreements, standstill agreements, lockups, shareholder agreements, and much more. It can also be a very expensive phase, as a major expenditure of time and expense by attorneys, staff, bankers, accountants, and other technical specialists may be required to make sense of the other party’s situation. But, compared to the cost of purchasing a business with hidden traps, problems or other liabilities, a quality due diligence exercise is an excellent investment. Corporate due diligence is very possibly the most serious and critical stage in deciding whether the deal is right and would be beneficial for both the parties. Many deals fail to make it past the due diligence phase, for one reason or another – this could be anything from one party declining to share key information (“what are you hiding and why? ”), to a party discovering a nasty skeleton in the closet (aren’t you glad you did your diligence? ), to a re-evaluation of price or deal terms in a way that breaks the previous agreement of the parties (“sorry, but we can’t pay you what we thought we could before, because of that undisclosed liability” “OK, then no deal”). And that’s OK. That’s why you spend the time at this step. Better to abort a deal after some diligence than get a seven-, eight-, or nine-figure case of buyer’s remorse! Due Diligence is like eating your vegetables... it might not be the most fun part of the meal (or the deal) , but you’ll be glad you did it.   In many situations, Law Offices of Ryan Reiffert can handle the entire legal due diligence process for one party to the contract. Other times, we have been brought in as co-counsel when a particularly complex corporate matter presents itself, or when, quite simply, more “firepower” is needed. Ultimately, though due diligence is a big process, it helps us know what our client is really looking forward to accomplishing by doing the deal (in industry parlance, identifying the “deal drivers”), and to counsel our clients on possible benefits and synergies versus the possible dangers and risk exposure. In addition, buy-side diligence and sell-side diligence are asymmetric. A buyer is concerned about kicking the tires as mentioned above – which, reduced to its simplest form is the question “am I getting what I think I’m getting, and what I’m paying for? ”. It is catechism among deal lawyers that reps and warranties don’t survive the closing. So, rather than solely relying on the seller’s bringdown certificate, the buyer needs to do its own homework on what’s there. This is essentially a hunt to discover hidden traps and dangers by digging into the contracts, regulatory issues, and finances. A seller, on the other hand, can have a more varied set of concerns. Of course, the seller must not only make organized and clear disclosure to the buyer to expedite the process, but the seller’s disclosure obligations as reflected in the schedules to the definitive acquisition agreement must be done correctly. Neglecting to include a material item in an exception schedule could be equivalent to giving your counterparty a walk-away option. But there could be many other concerns, from reviewing the buyer’s financial condition in a stock-stock deal, to identifying information that should not be disclosed until after closing (for example, trade secrets, pricing data, or customer lists whose disclosure would cause problems if the deal were to fail to close) Step Two (part a): Buy Side Diligence We work with your managers and C-suite, as well as financial and technical professionals before the client purchases a business to identify both “deal drivers” and “pain points”. This work includes a review of regulatory, financial, contractual, and technical obligations as well as an analysis of uninsured and insured liability of the contemplated deal. Many times, particularly in the case of closely-held businesses being sold by their founders, the identity of the seller and the identity of the business have become firmly intertwined. In such cases, during the diligence process we can identify the specific arrangements (noncompetes, nondisclosures, ongoing service contracts, and so forth) that will be appropriate to separate the two and allow a genuine sale of the business. Another somewhat common element for closely-held business, on the purchase side, is negotiating more nuanced elements of deal pricing such as earn-outs and clawbacks. These can be particularly valuable where the valuation of the target is not quite fully agreed, or to properly incentivize the founder during the ongoing service period. Step Two (part b): Sell Side Diligence Our due diligence helps the seller to negotiate, understand, and meet its (potentially fulsome) disclosure obligations but also gauge the buyer’s willingness and the ability to perform its obligations under the contract. We are not only concerned with meaningful and clear disclosure to “get the deal done” (although that is obviously a high priority), but also, to ensure we negotiate the correct transaction structure for the sale. In other words, with proper due diligence, we organize each deal as that particular deal should be organized, based on the relevant concerns. Not least of which is that in a competitive market place, the seller always needs to protect against those buyers who are shopping to collect inside information regarding the market and trade secrets that the seller may have developed. In this situation, we would recognize a need for a remedy to the unnecessary revelation of trade secrets, and potential other remedies for breach of contractual obligations. Step Three: Select Acquisition Structure This is the second step to purchase a business. Many times, based on either the initial discussions or based on discoveries made during due diligence and/or the seller’s disclosures, it will become clear that the buyer ought not buy the equity of the seller (perhaps there are legacy liabilities, or a hidden regulatory issue). Don’t despair! All is not lost! On such an occasion, we can restructure the deal to be an asset sale, or a partial asset sale, rather than a merger or stock purchase. It could be tangible business assets like trucks, machines, barrels of oil, or computers. It could be intangible assets like intellectual property (IP) rights, customer records, or assignments of contracts. At this stage, the difference between things like Asset Sales vs. Stock Sales becomes highly relevant! (special bonus, I'm quoted in the linked article, discussing the difference between these two common acquisition structures) This step of the acquisition process will also be critical for allocating risk!  If something unforeseen happens, who bears the consequence of that? For example, force majeure clauses. As before, the organization and structure of the deal depends on the deal – it is individual and unique and no two are alike. There is no fill-in-the-blank form or easy formula that allows somebody to purchase a business. It can be a messy thing. But, the good news is that I have the deal experience to help you make sense of it. I have helped sign, organize, structure, and close everything from multi-billion dollar corporate deals to small startup investments. Where there was a messy, muddled, complicated thing, I bring clarity, organization, strategy, and vision. And while you’ll hear me say “there’s no such thing as a guarantee in this business,” I can help you obtain appropriate assurances, allocate risk correctly, and get the deal done. Step Four: Closing What does closing mean? Quite simply, closing is when they money moves. It’s when “the deal  gets done. ” You can have a fantastic deal document, a great buyer, a willing seller, and the best intentions in the world, but if you can’t satisfy the conditions to closing, the deal will not happen. This is why it’s absolutely critical to have a competent business attorney in your side during the deal. The last thing you want, as a buyer or as a seller, is to get stuck in the purgatory of being subject to the executory period of an acquisition agreement, unsure of whether the deal will close or not. A whole host of things will often have to happen in order for the deal to close (again, every deal is different, so the closing conditions will depend upon the deal documents, and the deal documents will depend upon what makes sense under the circumstances). various certificates generally will have to be provided confirmatory diligence may have to be completed regulatory approvals may have to be obtained if there was a financing contingency, the bank’s diligence and approval will have to be satisfied a material adverse effect generally must not have occurred the reps and warranties must remain true  (and be certified as such) board approval or shareholder approval must have been obtained security interests, if any, must have been appropriately handled compliance with applicable laws must have been evaluated and confirmed consents to material contract assignments, if any, must have been obtained and much more... Those who have been in the sales arena understand the value of a good “closer” – and in light of the list above,  you can see why. This is what Law Offices of Ryan Reiffert brings to the table. We’ll swiftly get the deal closed, or swiftly determine why it can’t close and sound the alarm so that the purchase can proceed, or be called off and the parties can explore their next best options. Step Five: Post-Closing Matters (Integration, Covenants, Warranties, and Much More) For a seller of  a closely-held business, or a multi-generation family business, or a business where the owner has started from nothing, the closing can be a little bit like losing a family member or a beloved pet. The emotional impact of parting with your “baby” is real, and is more impactful than simply ink on a contract. Our experience in these kinds of business successions cases makes sure that the deal is going to be smooth for all parties. Writing your deal document precisely and intelligently is important – the wrong language can get your “exclusive remedy” thrown out. We take some extra steps to purchase a business properly when dealing with this kind of closely-held situation. Law Offices of Ryan Reiffert understand that in these kinds of cases the ownership, clients, and customers should be treated with honor, politeness, and kindness, beyond what is strictly required under the law, because they have an emotional attachment with the business. “a satisfied customer is the best business strategy of all” rings very true in this context. In such cases, while working with buyers, we also work to maintain the rights of previous owners and management, the reputation of the business, and much more. As with any deal, there is no one-size-fits-all remedy. While working with sellers, conversely, we make sure that the old management and owner of that business are leaving that business with great positioning to start their next chapter in business and life. These remedies often include things such as: post-closing covenants clawbacks, earnouts, and long-term employment contracts consulting agreements transition service agreements post-closing nondisclosure agreements noncompete agreements nonsolicitation agreements Retaining competent corporate counsel to negotiate and draft these agreements is critically important. Including a term  in one of these documents that is overly aggressive can potentially void the agreement, leaving you in a worse position than when you started. Not to mention the expense and hassle of a court fight! We are looking forward to working with you if you are willing to sell or purchase a business.  Contact us now. --- ### COVID-19 Waivers: When to Use Them, How They Protect You (Or, How They Sometimes Don’t), and A Few Things to Watch Out For > Businesses and corporations are increasingly looking to contractual waivers for limiting COVID liability. Do they work? Should you use one? - Published: 2020-09-21 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/covid-19-waivers/ - Categories: Business Attorney, Business Law, Contracts, Corporate Attorney, Corporate Law, COVID-19, Small Business, Texas, Uncategorized Maybe you’re thinking “oh God, another COVID article”? And if your business is closed, or isn’t customer-facing, or etc. , feel free to skip this one. But, if it’s not, this is timely stuff. I was recently quoted in Reuters and the NY Post, as well as a few other places, about COVID waivers and so, I thought it might be a good time to provide a little guidance on the topic. Background As you know, COVID-19 is a disease caused by the novel coronavirus, SARS-CoV-2. In the majority of people, COVID does not cause significant harm; but in a nontrivial minority of people, it can cause death due to respiratory failure, organ failure, or cytokine storm, and/or severe long-term complications including blood clots leading to brain, heart, or other organ damage. In short, COVID is no picnic. Plaintiff attorneys, unsurprisingly, are very much paying attention. If you do a search for “can I sue someone for COVID” or “COVID negligence lawsuit” or any kind of similar search, you’ll no doubt see what I’m talking about. And that sort of makes sense. For plaintiff attorneys whose regular diet is car accident lawsuits (and those cases are down drastically since folks are driving a whole lot less nowadays), they’ve got to make up that revenue somewhere. So, why not COVID? Given that most courts are still pretty gummed-up at the moment and many of these kind of lawsuits are already being filed, I think it’s safe to say that we’ve only seen the tip of the iceberg. Many businesses have begun requiring customers to sign COVID waivers as a condition to enter the premises (if you haven’t been asked to sign one yet, chances are good that you will nonetheless encounter one in the future). The idea – obviously – being to limit potential future liability. But, can a waiver really help with this? As ever, it depends. What a Waiver Can’t Help With There are many ways to circumscribe (not eliminate! ) potential liability here. One of those ways – the one I’m going to talk about today (as you probably guessed from the title) – is the proper use of waivers. BUT FIRST, you need to know that using a waiver isn’t a silver bullet. There are plenty of problems that a waiver won’t solve. First, it might be a lot LESS helpful if an employee attempts to sue (depending upon specific laws in your area, you may not be able to enforce a waiver against an employee, or certain other classes of people). In fact, it may do you more harm than good to require employees to sign such a waiver. For example, (i) employees generally cannot waive in advance their right to file workers compensation claims (which system will often pre-empt common law claims for injuries), (ii) waivers of EEO and NLRA rights are also generally invalid, (iii) asking an employee to sign a waiver may end up generating more distrust and cause the employee to question the employer’s efforts to control COVID. Second, a good waiver does not absolve you from responsibility for compliance with law and maintaining good sanitation procedures, contact tracing, and other “best practices” for controlling outbreaks of COVID-19. Third, there may be other specific quirks of your state law that affect what may or may not be waived. Some states take a dim view of these kinds of waivers, and courts will disfavor the agreements; enforcing an agreement there can range from merely difficult to virtually impossible. Other states have particular statutes that may limit the scope of a waiver, or require the waiver to be drafted in a very particular way. Fourth, in most jurisdictions, even a well-drafted waiver will NEVER be enforced with regard to intentional conduct or reckless conduct (you can waive “mere” negligence, and sometimes you can waive gross negligence). Fifth, a vague or difficult-to-understand waiver is not much better than no waiver at all; a well-drafted waiver must set forth the claims being waived with a fair amount of specificity in order to be enforceable, as well as being understandable and conspicuous. Which leads to the sixth point... . which is that using a waiver may actually end up scaring away some business, or may be off-putting for some customers. Tread carefully. Now, maybe I have talked you out of using a waiver (which is fine). Or maybe I haven’t (which is also fine). Either way, different businesses will have different answers to this question. What a Waiver CAN (Probably) Help With Potentially, everything not listed under the section above. Customers entering the premises. Delivery drivers, independent contractors, and vendors entering the premises. Anyone other than an employee entering the premises While waivers will not be able to give absolute immunity, they may limit or prevent certain liability. They also tend to highlight safety risk to customers, something that almost all customers can appreciate. Further, waivers tend to discourage people from taking legal action. The mere presence of a waiver may have the effect of preventing many customers from even filing a claim to begin with. Ultimately, they are not a bulletproof measure against lawsuits, but they can provide an added layer of protection. When You May Want a Waiver You may want to have a waiver for customers or patrons if your business involves some relatively-higher level of risk than average. What exactly those relatively-higher-risk businesses are, may continue to evolve over time as our understanding of SARS-CoV-2 deepens. However, at this point in time, it appears that the higher-risk situations are those in which people are in enclosed spaces, are in close proximity to one another, remove their masks, and/or touch many of the same items. My tentative list for such businesses: gyms hair salons and massage studios restaurants event venues (such as concerts and sports) movie theaters hotels While your business may not fall under one of these umbrella categories, you may still want to look into adopting a waiver. Frequently, a waiver will inspire some sort of confidence in customers as at least being cognizant of the ongoing COVID-19 problem. Sounds Awesome, How Do I Get One? You can draft your own, but ideally you will want to consult with an experienced corporate attorney or business law attorney to help you identify your particular risk profile. In addition to a waiver, you will definitely want to develop a safety and sanitation program to implement alongside your “sign here” program. Given the tumultuous times that surround us with COVID and business shutdowns and so forth, I have decided to include a sample waiver that you might want to read and consider using some of the terms. This document is provided strictly as an example; it is not legal advice and everyone’s situation may vary. You can download it below. Again, you are cautioned to consult an attorney before using this form, as it may not be enforceable under all circumstances or in all jurisdictions. Additionally, your particular business may have risks or concerns not addressed in this sample. SAMPLE COVID WAIVER --- ### COVID-19 and Force Majeure: another look > A transactional attorney and law student analyze COVID-19 in light of contractual Force Majeure or Act of God clauses. - Published: 2020-08-25 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/covid-19-and-force-majeure-another-look/ - Categories: Business Attorney, Business Law, Contracts, Coronavirus Relief, COVID-19 This post was co-authored by Evan Janssen, a student at St. Mary's School of Law, and Ryan Reiffert, San Antonio corporate & transactional attorney. In case you’ve been living under a rock, COVID-19 has dominated current events throughout 2020. For the science sticklers among you, a brief detour: COVID-19 is the name of the disease or set of symptoms (very creatively named for “corona virus disease of 2019”) SARS-CoV-2 is the virus that causes the COVID-19 disease (the SARS-CoV-2 designation denotes that the new virus is genetically closely-related to the coronavirus responsible for the SARS outbreak of 2003; as with many movies, the sequel is worse) The term coronavirus describes a type of virus. Most are not so bad (this one is bad). From city wide shutdowns to school, and business lockdowns, mask mandates, government stimulus, more stimulus, and much more, COVID-19 is something that the world simply was not ready for. This includes the legal world in many cases. But it is not just daily life that has been impacted drastically. Businesses across the world have been scrambling to check their contracts for the existence of a Force Majeure clause. We talked about this briefly before but we will go into a little more detail here. The existence, and exact language, of this clause could be the difference for countless contracts in determining whether, and how, a party will be required to uphold their obligation to the contract. Oftentimes, Force Majeure clauses are included by transactional attorneys as an afterthought to a contract, and their terms are not closely examined because the events seemed to be such a remote likelihood (“in case of war, riot, famine, or epidemic, this contract shall... ” “yeah right, like any of THAT is actually going to happen”) – but, in this case, the likelihood may have been higher than we thought, and it did actually happen.  If you want a quick recap on other potential implications of Force Majeure and covid-19, check outthis article from March.   https://ryanreiffert. com/blog/covid-19-force-majeure/ A Force Majeure is defined as an unforeseeable circumstance that prevents someone from fulfilling a contract (sometimes called an “Act of God”). The Force Majeure clause governs what is to happen in such a circumstance, therefore the precise effect of such a clause is a case by case question highly dependent upon the particular contractual language. Virtually all Force Majeure clauses contain- within the definition of the term- a list of events that the parties agree are qualifying events. Typical examples include riots, weather events (such as hurricanes or earthquakes), war, labor strike, and epidemics. Some have more terms, other terms, less terms, etc. COVID-19 is, of course, by any measure a global epidemic. Hence (obviously) if the term “pandemic”, “epidemic”, “viral outbreak”, “disease”, or another similar term appears explicitly in the Force Majeure clause, you have a slam dunk case that obviously triggers the clause. But, what if the Force Majeure clause is drafted more vaguely? – for example, if the contract states “the parties are excused from performance if there is a Force Majeure or Act of God” without any definition or clarification of those terms? As mentioned above, a Force Majeure typically refers to an event seen as an “Act of God” beyond the reasonable control of the parties. Black’s Law Dictionary defines an “Act of God” as “an act occasioned exclusively by violence of nature without the interference of human agency. ”  Similarly, under Texas law, an “Act of God” must not be caused or contributed to by human intervention.   The Texas Pattern Jury Charge is widely accepted by attorneys and judges as the most authoritative guide for drafting questions, instructions, and definitions in a broad variety of cases. The exact language used by the Texas Pattern Jury Charge on the instruction for an “Act of God” defense says it must be “caused directly and exclusively by the violence of nature, without human intervention or cause, and could not have been prevented by reasonable foresight or care. ”  So where does that leave us with the present situation of Covid-19?   In typical lawyer fashion, it depends.   The interesting part of what we’ve quoted above is the “exclusively by... nature” or “not... cause or contributed to by human intervention” bit. Does this mean that if human hands in some way caused or exacerbated the instant pandemic, that it is not a Force Majeure?   Here’s how that might look...   SARS-CoV-2 first emerged in Wuhan, China (Chinese officials have off-and-on claimed that the disease was introduced by foreigners). Let’s look at a couple of different scenarios.   Scenario #1: COVID-19 arose organically from one of China’s infamous wet markets Covid-19 was initially believed to be a disease born in a Wuhan wet market. Wet markets are those markets that sell live wild and domestic animals and animal meat, often under cramped and unsanitary conditions that are highly conducive to the spread of disease (it is the accepted scientific consensus that SARS (original SARS) and MERS emerged this way, in wet markets of other Chinese cities). Under such a narrative, existence of the virus in the wild and its accidental transmission to humans, sure, would be an Act of God. But, is the bringing together of hundreds of different wild animals from around the world under cramped and artificial conditions, from bats to ferrets, chickens to civet cats, , pigs to pangolins, bullfrogs to scorpions, perhaps enough of a “human intervention” to defeat a claim of Force Majeure? Maybe. But we’re not done. Let’s thicken the plot a bit more. Scenario #2: COVID-19 is an escaped experimental bioweapon/pathogen  Wuhan is the site of China’s equivalent of the American Centers for Disease Control – the high-security lab that deals with all the REALLY nasty diseases. Brett Weinstein, a renowned American Biologist, recently appeared in an interview with Joe Rogan, the host of one of the top podcast in the world, where he spoke on what he believed to be the true origin of the disease, a theory that has gained great momentum in the last several weeks.  “The virus itself has several components that suggest it was actually the result of manipulation in a lab,” Weinstein said. “It may have well escaped. ” There is tons of circumstantial evidence pointing towards a lab leak, Weinstein says, and he believes that no virologist is able to make a solid argument about how it may have evolved naturally.  Before you shout “conspiracy theory”, consider that (1) some very smart people believe this is plausible, (2) the following analysis could be the case for ANY escaped pathogen, and (3) many countries around the world operate virology labs just like this.  So, stipulate for a moment that Weinstein and others are correct. If it was created in a lab, this is very clearly a human intervention and cause; significantly moreso than something like “bringing weird animals together in a wet market”. Further, such a release would likely have been prevented by reasonable foresight or care. Either of these ideas would strike down an “Act of God” claim in Texas.   Scenario #3: Whatever the origin of the virus, China’s suppression of information caused the disease to grow beyond the possibility of control Whether the virus itself came from a lab, a wet market, or anywhere else, it is undeniable China still had a large hand in the spread of the disease such as suppressing information and lying to the world about the diseases existence, nature, contagiousness, lethality, etc. for months. While less conspiratorially-damning than havoc wrought by an artificially constructed virus, it is nonetheless possible that this would defeat an “Act of God” claim as the interference by the Chinese government is clear human intervention that prevented the disease from spreading naturally. To state it another way, if a building burns down due to a fire, but the building was equipped with a defective sprinkler system that should have stopped the fire, but failed to do so, is this an Act of God? Now, let’s ask another related question related to the role of “human hands” in this crisis: what if China’s malfeasance is being overstated? Or, what if it wouldn’t have mattered anyway? Actions taken by the governments and individuals across the world likely accelerated the spread of the disease – that much is indisputable – but, from what we know about the contagiousness of this particular virus (in virology parlance, its basic reproduction number, or R0), the spread may have been truly inevitable regardless. Stated another way, if a police state like China couldn’t stop the virus with the draconian lockdowns and other measures that we saw it take, then the rest of the world didn’t stand a chance of stopping it. So, this is a situation where those looking to beat an “Act of God” claim would focus on the human intervention aspect again. Even if the disease could have spread without it, it is likely that things would not have gotten as severe or dangerous without humans speeding up the spread. To wrap up, let’s leave the land of mere hypotheticals and venture into some real cases and case law.   Stay at home orders and curfews have directly affected many businesses’ abilities to perform as many businesses are unable to operate remotely (or can only partially operate remotely). Governmental orders requiring certain closures and supply chain variations are most properly classified as human elements. So, any delay or failure in performance resulting therefrom might even go to the “governmental act” language present in many Force Majeure clauses, as an independent basis to above-discussed the disease/virus clause.    For example, in Pacific Collective, LLC v. Exxonmobil Oil Corp. ,  its obligations are prevented or delayed, retarded or hindered by... laws, governmental action or inaction, orders of government... ”  The restaurant group argued the clause came in to effect when, in response to COVID-19, the Illinois governor issued an executive order restricting all restaurants to take-out only.   The judge in Hitz held that the Force Majeure clause was “unambiguously triggered” by the governor’s executive order. The decision stands as persuasive authority that Covid-19 closure orders qualify as “governmental action” to excuse contractual obligations under Force Majeure.   Bottom line: relying on an “Act of God” in your Force Majeure clause to get you out of a contract can work, but looks to be a complicated.   If a party cannot rely on a Force Majeure they still may be able to rely on the defense of or “impossibility of performance” or “frustration of purpose”. These are common-law contract defenses that typically only apply in extreme scenarios.   To evaluate impossibility of performance courts apply an objective assessment on whether the performance sought to be excused is impossible or impracticable, a party’s subjective capacity is irrelevant. Jurisdictions differ greatly in these assessments as some excuse performance only where it is truly impossible and others excuse performance when it is merely impractical.   In looking at frustration of purpose the focus is on whether the event at issue has removed the purpose of the contract as opposed to whether it has made a party’s contractual performance infeasible.   Now this next part may shock you.   Winning an impossibility/impracticability defense likely will vary state by the state.   Crazy, right?   But, since we are in Texas, here is one Texas case that might help you evaluate things. For other states, I recommend that you do your homework before going down this path.   In Tractebel Energy Marketing v. E. I. Du Pont De Nemours, there was dispute over a potential breach of contract between a power plant builder and the seller of emission reduction credits.  Tractebel Energy Marketing v. E. I. Du Pont De Nemours, 118 S. W. 3d 60 (2003). TPI (through Tractebel Energy as its agent) contracted with DuPont to buy 1,000 tons of credits for $1 million.  Du Pont was unable to produce the number or credits to TPI as a government regulation provided the ability for the credits to be cut in half by passing of future regulations.  After Du Pont had their credits cut in half, the New Jersey Department of Environmental Protection again threatened to further cut Du Pont’s credits again. Du Pont claimed that their breach of contract was excused under impossibility.   The court of Appeals of Texas (14th Dist. ) found the excuse of a contract due to impossibility in three scenarios: (1) the death or incapacity of a person necessary for performance, (2) the destruction or deterioration of a thing necessary for performance, and ... drumroll, please (3) prevention by governmental regulation.   Du Pont used the governmental regulation as the basis of their impossibility defense, but insufficient evidence led to them losing on this front.   While it did not provide relief in this case, the prevention by governmental regulation factor should have application to COVID-19 because of state and local governments issuing “stay-at-home” and “shelter in place” orders enforceable by law.    The morals of the story for all of this:  The law is likely to evolve as a result of the Covid-19 pandemic and one should keep an eye out for new precedent. Contract drafters will need to continue to be extremely careful drafting Force Majeure provisions. These clauses, like any other major contract or acquisition agreement, represent an allocation of risk between the parties, and a good allocation requires some thoughtfulness. It is very likely that future contracts will include more negotiation of whether the words “disease” and “pandemic” ought to appear in such clauses.   Stay safe everyone.   --- ### BREAKING NEWS: More Relief Coming for Small Businesses as Government Refills the Loan Program (a.k.a. PPP Round 2) > Congress is taking the first steps toward expanding the Payroll Protection Program. What does your business need to know? Get the legal perspective here. - Published: 2020-04-22 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/ppp-refill/ - Categories: Business Law, Coronavirus Relief, COVID-19, Political Landscape, Small Business The $350 billion Paycheck Protection Program part of the CARES Act ran out in under two weeks(! ) and now the race is on to get in for the second round before it, too, runs out. You can also read about PPP, CARES act, Force Majeure, and other coronavirus-related topics. The program was plagued by many banks running out of funds early in the process. one of which ended up generating some massive class-action lawsuits (and they say plaintiff work is down in the crisis! ! ) Here are a few resources to read: 1. Banks say they ran out of PPP funding ‘within minutes 2. The Paycheck Protection Program 3. $349 billion coronavirus loan program for small businesses If you want to dig into the numbers so far, you can check out Covid Loan Tracker, which seems like a cool idea, but I cannot speak to its accuracy. As of the date of this post, the largest source of PPP loans appears to be small and regional banks. So, this may provide you an insight if you’re still looking to get funded. Now, for the details of “Round 2” of the PPP As an introductory disclaimer, the Senate version has passed, but the House has not passed the bill yet (a vote is expected on THURSDAY). In the previous version of the PPP contained in the CARES Act, many changes were made from the Senate-passed version to the House-passed version that eventually became law.  Accordingly, if a similar situation occurs with this version (not an unlikely prospect, given the disagreements about what “other stuff” (e. g. the amount of funding for testing, hospital, etc. ) is included in this bill), WHAT I DISCUSS BELOW MAY NOT BE THE FINAL VERSION OF THE BILL THAT PASSES THE HOUSE AND IS SIGNED INTO LAW. Please proceed with caution. As of the date this post is written, the bill contains: Additional $60 billion for small business disaster loans/grants (EIDLs) Additional $75 billion for hospitals Additional $25 billion for testing and... . the big one... .  Additional $320 billion for the PPP Of that $320 billion, $60 billion is specifically set aside for smaller lending institutions such as credit unions and community banks But, as you might have expected, this additional funding does not come without some strings. Both President Trump as well as several members of Congress were unhappy about large businesses applying for and getting large loans that were means for small businesses. Reuters noted that the following 500+ employee companies received the maximum $10 million under the PPP: Shake Shack* , Ruth Hospitality Group Inc , Potbelly Corp and Fiesta Restaurant Group , and Hallador Energy Co ), and various other media outlets also picked up the story (with some reports expanding the “name and shame” list to as much as 80 public companies(! ! )). President Trump went so far as to publicly request that Harvard (whose endowment clocks in around $40B) and large businesses return the money. At least one of those large businesses determined that it would give the loans back once they realized that they were taking money away from small businesses (the original intent, if not the letter, of the law).  Major kudos to Shake Shack for doing the right thing and supporting America’s small businesses. I have not heard of other large businesses giving the loans back, but if you have, please let me know in the comments. In any event, in the regs you can likely expect more focus on specific small business eligibility and a bit less leeway for those who are not the “intended” beneficiaries. In the meantime, many banks are expecting this round of PPP loans to fill up even more quickly than the first round, so I strongly recommend that you reach out to your banker as soon as possible. Also, as ever, it always pays dividends to have a competent transactional attorney on your side!   OTHER UPDATES: check out our youtube playlist on the mask mandate here more force majeure coverage here --- ### INFOGRAPHIC: How a Startup Grows > INFOGRAPHIC: how a startup grows. Ryan Reiffert, San Antonio business attorney provides some insight for your startup’s growth plan. - Published: 2020-04-12 - Modified: 2024-08-12 - URL: https://ryanreiffert.com/blog/startup-infographic/ - Categories: Business Law, Corporate Law, IPOs (Initial Public Offerings), SEC (Securities and Exchange Commission), Securities, Small Business, Uncategorized The attached infographic shows an example of a company’s journey from its beginning to initial public offering (IPO). Your startup may or may not follow this exact path – some stages may be compressed into one, and others may be separated into different parts. Your company may receive a buyout offer somewhere along the way. You may have more than just one cofounder, or you may have zero. You might not take venture capital. You might linger at the angel investor stage a bit longer. An IPO may not be your exit plan at all (i. e. , you may plan to stay private for as long as possible). Along your journey, you will need to comply with and become aware of securities laws (for example, accredited investor rules or increases to certain exemption caps or other developments) Certain other features will almost always be present (although in perhaps different forms) – the danger zone before becoming revenue negative, the need for mentors and connectors (frequently angel investors), and more. Regardless of what your journey will entail, you will need competent business advisors (corporate attorney, accountant, banker, and more) to help you navigate this path. You can visit our startup practice for more information. And above all, remember: EVERY BIG BUSINESS STARTED OFF AS A SMALL BUSINESS --- ### Coronavirus relief: the CARES Act passes House & Senate, goes to White House [UPDATED] > The House and Senate passed a $2T stimulus bill to address COVID-19. Will this benefit your small business? A business attorney’s perspective. - Published: 2020-03-27 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/coronavirus-relief-act/ - Categories: Business Attorney, Business Law, Contracts, Coronavirus Relief, Political Landscape, Small Business UPDATE: From what I am hearing, the SBA is currently working on regulations setting forth the details of the forgiveable loan program and other parts of the small business-centric portions of the statute – I have heard rumors that they will be released by Monday, but this is a rapidly changing situation, so please check back regularly, is vague and lacking detail in many key respects. But, the regulations should provide more clarity when released (which, again, rumors are that this will be done by Monday; but could be earlier or later, so stay tuned! ) UPDATE: the SBA has released the preliminary (Sample! ! ) application form for the Paycheck Protection Program. I am not aware of any banks taking applications yet, but you can review the application showing what information will be required. SIDE NOTE: these stimulus measures are distinct from the SBA disaster declaration loan program which has been open for several weeks Earlier this week, the Senate passed a record $2 TRILLION STIMULUS BILL dubbed the CARES Act (it stands for “Coronavirus Aid, Relief, and Economic Security Act”) to respond to the COVID-19 crisis caused by the novel coronavirus. Today, the House passed it.  President Trump is expected to sign the bill into law immediately  (also, read my previous article on COVID-19 and Force Majeure clauses. Some have blasted certain parts of this bill as being inadequate, but on the other hand $2 Trillion is a lot of money. I won’t get into the “shoulds” and “shouldn’ts” of politics here. SIDE NOTE: our devotion to legislative acronyms apparently has not waned in this crisis Additionally, please excuse the very flimsy analysis attached to this, as my main goal is to get the information out to you as soon as possible. In other words – WHAT is in this bill. Expect another post soon, outlining HOW you can apply for your piece of this to protect yourself, your business, your family, your loved ones, your employees, and our society and economy in this difficult time. The main parts of the bill are as follows: $560 Billion for individuals $500 Billion for big businesses $377 Billion for small businesses $339 Billion for state & local governments $153 Billion for public health ... and more So, here’s how those payments get broken down into a little bit more detail. Again, apologies for the flimsy analysis here, as this is meant to be informational. $560 Billion for individuals – two main categories here, (1) direct checks to individuals and (2) expanded unemployment benefits Direct checks to individuals: Most citizens will receive $1,200 each, for those making up to $75,000. For those who make between $75,000 and $99,000, the payments are scaled back. Those who make above $99,000 will not receive a check. Payment/income amounts are doubled for married couples that file jointly, increased for head of household, there are child credits, etc. You are not eligible if someone claims you as a dependant (even if you are an adult) Have been told that it will be automatic. You don’t need to file a form. (! ! ) Steve Mnuchin has stated that the expected timeline for payments is “within three weeks” (obviously, this is anecdotal and not necessarily binding guidance) Expanded Unemployment Benefits (included in individual aid): Eligible workers will receive an additional $600 per week on top of existing state unemployment benefits This does not scale depending upon your state (some states are more generous than others for existing state benefits – eligible unemployed workers will receive $600 of federal benefits whether their state benefits are $150 or $1,000) Self-employed people are eligible for unemployment benefits (gig workers, freelancers, independent contractors) (! ! ! ! ! ) $377 Billion in relief to small businesses, including: In this context, small business means 500 or fewer employees  The main components of the small business-focused portion of the bill are: (1) an emergency grant program and (2) a forgiveable loan program $10 billion is allocated for emergency grants of up to $10,000 per business, for small businesses to cover immediate operating costs $350 billion is allocated for the SBA to make loans of up to $10 million per business. If that loan is used for certain purposes (rent, payroll, etc. ) then there are some debt forgiveness options – provided that workers remain employed through the end of June NOTE: the mortgage, rent, and utilities must have been incurred prior to February 15 The maximum loan amount is $10 million while the interest rate on the loans can’t surpass 4%. $17 billion allocated for payments on existing SBA loans HERE is the website for the SBA’s COVID-19 response. This includes the applications for disaster declaration loans, which have been available for a few weeks. UPDATE: The forgiveable “paycheck protection” loan program (the largest part of the small business segment of the stimulus) has the following details, so far: loans  will be sized based on 2. 5 months of payroll (up to a maximum of $10 million or 4x various costs, including rent, payroll, mortgage, etc. ) Calculated based on: For established businesses, average monthly payroll for previous year For new businesses, average monthly payroll for January + February 2020 For seasonal businesses, February-June of 2019 Loans will be forgiveable at the end of the year provided that layoffs are avoided, the funds are used correctly.  NOTE: the forgiveness is NOT “all or nothing” – if you partially comply with the requirements, you can still receive partial forgiveness. Any “misused” expenses (i. e. other than rent, payroll, utilities, mortgage) will reduce the forgiveable amount Layoffs will reduce the forgiveable amount proportionally pay reductions of employees who make less than $100,000 (by 25% or more) will count against the forgiveable amount No personal guarantee, collateral, etc. will be required. However, certain eligibility criteria still apply. Banks will make the loans, which will be guaranteed by the SBA, and the underwriting standards will be significantly loosened; so, it is recommended to stay in touch with your banker over the coming days UPDATE: as of Monday afternoon, it appears that applications for this loan program are not open yet. Stay tuned. again, please keep in mind that the regulations setting forth more details are expected to be released in the coming days $500 Billion for big businesses including: Focused on saving big businesses such as the airlines, and preventing mass layoffs, divided into two main categories: (1) specific categories of business (airlines & national security) (2) programs or facilities established by the Federal Reserve designed to support lending to businesses, states, and municipalities Industry-Specific Categories $25 billion in loans & loan guarantees for passenger air carriers (and related businesses) $4 billion in loans & loan guarantees for cargo airlines $17 billion in loans & loan guarantees for businesses critical to national security Federal Reserve Category The remaining $454 billion (! ! ! ) Standards for awards are thus far vague and have been criticized Ban on stock buybacks, dividend payments, capital gain distributions, etc. (any company taking this assistance is prohibited from these for 12 months after the loan has been repaid) Ban on assistance to Trump-affiliated entities Compliance with employee-compensation directives of CARES Act Various other restrictions   $153 Billion for public health initiatives, including: Hospitals responding to the coronavirus get $100 billion $20 billion for veterans Community health centers, the CDC, and telehealth providers all received help, too   Other: $339 billion for State & Local Governments All payments on federal student loans are deferred through September 30 $15. 5 billion toward food stamps $8. 8 billion for schools to help them provide for student meals these are just SOME of the highlights; there is a long list of other specific programs receiving funding. There have been a lot of other actions taken in response to this crisis, including the Defense Production Act being used to force car manufacturers to start building ventilators, and much more. Stay tuned for future blog posts on the impact of this crisis! --- ### Could the COVID-19 Coronavirus from Wuhan, China be a Terminal Illness for your Contract? Force Majeure, Acts of God, and Your Business > San Antonio corporate lawyer Ryan Reiffert provides analysis of contracts and Force Majeure in light of COVID-19 - Published: 2020-03-22 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/covid-19-force-majeure/ - Categories: Uncategorized PLEASE FOLLOW THE ADVICE BEING GIVEN TO YOU BY MEDICAL PROFESSIONALS OR GOVERNMENT AUTHORITIES AS THE COVID-19 SITUATION DEVELOPS AROUND THE WORLD ANOTHER FORCE MAJEURE ARTICLE HERE Many people are now under quarantine or “social distancing” measures due to the novel coronavirus that was spawned in Wuhan, China and is now sweeping the globe. Of course, this virus could have some serious implications for your health, and it’s important to be responsible. But, the virus could also have some serious implications for your business. “But Ryan, you’re an attorney, not a doctor. What on earth do you have to say about the coronavirus? ” Well, I’m glad you asked. First of all, you should listen to medical professionals. Second, this article isn’t JUST blatant clickbait. It will consider the implications of coronavirus for something that all long-term contracts (and some short-term contracts) should have – a force majeure clause. If your long term contracts don’t have a force majeure clause, you could be playing with fire. I’ll explain why, if it isn’t already clear to you from seeing supply disruptions and similar occurrences. A quick Side Note on Terminology In this article, I use  “coronavirus” and “COVID-19” interchangeably. Technically, this is incorrect and neither of those is the proper way to refer to the virus itself.  Coronaviruses are a family of viruses, and there are many members of this family. Most of them cause only very minor symptoms, but some can be pretty nasty (like SARS or MERS). Think of it this way... “dogs” would include both Chihuahuas and Rottweilers, or “sharks” would include both Nurse Sharks and Great Whites. Likewise, the family “coronaviruses” includes many, many viruses that cause merely a small sniffle/cold and nothing more, but it also includes some much nastier viruses like SARS and MERS.  This particular coronavirus is unfortunately one of the more gnarly and contagious members of the family. Similarly, COVID-19 is technically the name of the illness/disease resulting from the virus (not the name of the virus itself). The virus itself has been named SARS-CoV-2. But that’s cumbersome. So, for the sake of convenience and readability, I’ll refer to it as “coronavirus” or “COVID-19”. Suppose you manufacture and sell widgets (and by the way, a “widget” in this context is simply a stand-in for a good; it could be any good) and, as part of your widget-manufacturing process, you depend on some components from a factory in Wuhan, China. As a result of the coronavirus and the changes to production schedules of Chinese factories caused by it, you can’t get the components you need this month. And it’s too short of notice to contract another factory to produce the components. So, you cannot make your widgets this month. It wasn’t your fault and it wasn’t your supplier’s fault (i. e. , it was not your fault for choosing a disruption-prone supplier). But you will miss your widget deliveries to your customers. Now we arrive at the point: who pays for the disruption? Your contract might address this situation. Especially if you retained a competent business attorney to draft or help you draft your contract. It might say “if you can’t make widgets due to a war, fire, or pandemic, you are relieved from performance and don’t owe any damages” (I’m simplifying). If it does, you’re cool. But if it doesn’t, you might be in some real trouble. “How could my contract cover this scenario? Was I supposed to predict the coronavirus 5 years ago when we drafted the contract? That is absurd. ” Predicting SPECIFICALLY THIS coronavirus – yes, you’re right... that would have been absurd. But a force majeure clause is much more than that. A force majeure clause will cover various situations that could cause a business disruption. Sample Force Majeure Clauses Here is one sample clause: Force Majeure. A party shall not be liable for any failure of or delay in the performance of this agreement for the period that such failure or delay (1) is beyond the reasonable control of a party, (2) materially affects the performance of any of its obligations under this agreement, and (3) could not reasonably have been foreseen or provided against, but will not be excused for failure or delay resulting from only general economic conditions or other general market effects. So, would the foregoing cover your widget disruption as a result of the COVID-19 coronavirus? Well, the delay in performance would definitely be beyond the reasonable control of the defaulting party. So, maybe yes. But, it could also be a general economic condition or general market effect. So, maybe no. My Assessment: Unclear  But, let’s thicken the plot a little bit. Let’s say that the virus itself did not directly cause the delay, but rather the cause was the resulting economic conditions and/or economy-wide quarantine & social distancing measures. Does this change the result? (and is that result different depending upon whether the economic effects are a result of “unenforceable” guidance from medical officials or a result of enforceable orders from governmental officials? ) Again, somewhat unclear. This situation is worse for both parties than a clear yes or no, because it does not clearly specify whether a situation like the COVID-19 Coronavirus will excuse performance. Ideally, this risk should have been allocated according to a business decision between the parties, and the clause drafted accordingly. What about a more detailed clause? Here is one example: Performance Excused Due to Force Majeure: Neither party is responsible for any failure to perform its obligations under this contract, if it is prevented or delayed in performing those obligations by an event of force majeure. Definition of Force Majeure: Force majeure for the purposes of this clause means: riot, war, invasion, act of foreign enemies, hostilities (whether war be declared or not), acts of terrorism, civil war, rebellion, revolution, insurrection of military or usurped power, government-ordered closures, requisition or compulsory acquisition by any governmental or competent authority, radiation or contamination or other hazardous properties of any explosive assembly or nuclear component, earthquakes, flood, fire, disease, epidemic, or other physical natural disaster, strikes, labor disputes, sit-ins, or industrial disputes, strike or industrial disputes, or direct results of any of the foregoing. So, what about this clause? Does this language cover the COVID-19 Coronavirus? Because it was drafted to include, at different places, both “epidemic” and “government-ordered closures” this clause seems to clearly include the Coronavirus. Verdict: Yes Or, on the other hand, if it had been agreed between the parties that an epidemic or resulting quarantines should be excluded from the definition of force majeure, you might see something like the following: Definition of Force Majeure: Force majeure for the purposes of this clause means: riot, war, invasion, act of foreign enemies, hostilities (whether war be declared or not), acts of terrorism, civil war, rebellion, revolution, insurrection of military or usurped power, requisition or compulsory acquisition by any governmental or competent authority, radiation or contamination or other hazardous properties of any explosive assembly or nuclear component, earthquakes, flood, fire, disease, or other physical natural disaster, strikes, labor disputes, sit-ins, or industrial disputes, strike or industrial disputes, or direct results of any of the foregoing; but excluding any delays or closures resulting from a public health condition, disease, or similar occurrence. So, what about this clause? Does this language cover the COVID-19 Coronavirus? Because it specifically excludes, by its terms, “public health conditions” and “disease” the answer is no. My Assessment: No “But why would I want to exclude health conditions and epidemics from the definition of Force Majeure? ” I don’t know that you necessarily would, but the point is that a skilled attorney can draft this clause to reflect whatever the parties agree is the allocation of risk, from a business perspective. Something that you should think about when it comes to doing business and/or drafting contracts. Another Quick Side Note: Impossibility & Impracticability There is another thing to understand in the context of analyzing a force majeure clause. Specifically, the “background” rights of the parties are relevant. One of the seminal cases of contract law, Taylor vs. Caldwell (from 1863), involved a theater owner who was excused from a contract to provide access to his theater, by reason of his theater having burned down (it was impossible for him to perform). But, how this doctrine would apply to particular circumstances is also less clear. It’s always a better practice to address in your contract exactly how you would like for an unforeseen circumstance to affect your contract (and which circumstances would be treated differently than others, if any). --- ### Top 7 Questions to Ask Before Engaging a Business Attorney > Selecting corporate counsel for your business is an important decision. Here are seven questions to ask for this important engagement. - Published: 2020-03-15 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/top-7-questions-to-ask-before-engaging-a-business-attorney/ - Categories: Business Attorney, Business Law, Corporate Attorney, Corporate Law, Texas Selecting corporate counsel for your business is an important decision – having the right advisor in your corner, who is not only a legal expert and a qualified attorney, but a true “counselor” as well, can be a critical component in protecting and growing your business. For an entrepreneur, a new business is a little bit like a baby – it can be fragile and needs care, but given the right protection and resources, can eventually become something truly amazing. Here are a few questions that you should ask before deciding on who you want to represent your “baby. ” 1. Generalist or Specialist? You probably want a business attorney who is somewhat specialized. If your business is going to be making deals and contracts, you will want a deal lawyer; whereas if your business is going to be getting into disputes, you want a litigator. If your business is heavy into real estate, you want a real estate lawyer (and if it isn’t, you don’t. ) If your business is heavy into intellectual property, you may want an intellectual property lawyer (and if it isn’t, you don’t. ) You should ask your potential attorney what practices he or she actively carries on. If the answer is “well, I kind of do everything” it might be better to find someone a little bit more focused on your area. If you’ve ever heard the phrase “jack of all trades, master of none” then you understand the point of finding someone with a bit more focus. Now, all of that isn’t to say that you should focus on finding someone who ONLY does ONE THING. Many attorneys have a secondary or tertiary unrelated practice area (for example, I also practice some Estate Planning Law – but I don’t litigate, I don’t practice family law, I don’t practice immigration law, etc. ; my other areas of practice are all business-centric) By the way, the Texas Board of Legal Specialization does certify attorneys in various areas, but as of yet, there is not a specific certification for business law. 2. Who will REALLY be Working on Your Matter? It is, unfortunately, has become quite common in the legal industry to have a division of labor between “rainmakers” and “service attorneys” – which is an industry-insider way of saying, the lawyer that gives you the sales pitch, and has the big shiny resume, is not the lawyer who’s going to be working on your matter. You will get his or her associate or paralegal (who you may not have even met) for the lion’s share of the work, and you’ll only get the man or woman whose name is on the door, for a few minutes’ cursory review (if that). I encourage you to ask your potential business lawyer who will actually be working on your matters on a day-to-day basis. If it isn’t the person pitching you, demand to meet that person. Do you trust him or her? Do they seem smart enough, attentive enough, etc. ? As I note on my hope page, I do not agree with this approach. My value proposition is simple: When you call my office, you will speak to me (unless I’m in a meeting, etc. ) When you ask me the question I recommend above, about who will actually be doing your work, the answer is: I will. 3. Fees and Transparency Attorneys can costs hundreds of dollars per hour. That’s no secret. That’s a lot of money for a startup or small business. Also no secret. And, just like hiring the cheapest doctor you can find to perform life-saving surgery or hiring the cheapest engineer you can find to build a house for your family isn’t necessarily the greatest idea, you don’t necessarily want to hire the cheapest attorney you can find to protect your business. But that doesn’t mean the only solution is to go hire the most expensive attorney you can find, either. You should ask about what kinds of transparency and predictability options exist, when considering whether a business attorney is the right one for you. You should ask about how likely it is that you will get a “surprise bill. ” You should ask them how often (if ever) they bill a client for 0. 1 hour. 4. Education While it’s definitely true that experience and on-the-job training count for an enormous amount in the legal field, you may want to ask your potential attorney where he or she attended law school. The late Supreme Court Justice Antonin Scalia once observed, when asked about hiring law clerks: “I’m going to be picking from the law schools that basically are the hardest to get into. They admit the best and the brightest, and they may not teach very well, but you can’t make a sow’s ear out of a silk purse. If they come in the best and the brightest, they’re probably going to leave the best and the brightest. ” Similarly, if you want to increase the odds that your business attorney will be one of the best and the brightest, a resume is one of the places to look. You should also consider any other degrees or certifications that an attorney holds. Of course, this is not to say that such certifications or degrees should be your sole focus. But a business attorney who is committed to education is a business attorney who is more likely to be informed of the latest trends and developments, and can bring that knowledge to bear protecting your business. 5. Who Are the Attorney’s Other Clients/Previous Clients? A lawyer has certain confidentiality obligations regarding the identity of his or her clients, so usually will not give you their names, unless the representation has been made public (such as by a press release, SEC filing, court filing, etc. ) But the lawyer should be able to give you some general sense of his or her practice – for example, “I have done dozens of deals in the tech industry” or “I represent construction clients frequently”. Some attorneys may show clients’ reviews on their websites (when the clients have consented to have their names or words publicly posted). A business lawyer who has experience representing other companies in your industry, other companies with similar market positioning, or other companies with similar structures or targets, should be your goal here. 6. Previous Experience After law school, attorneys are trained in many different ways – some are trained in the government; some are trained in prestigious but grueling “biglaw” shops; some are trained by small law firms; some are trained by businesspeople in in-house roles. This on-the-job training has a huge influence on your potential business attorney’s perspective, work product, and advice. You should ask about, and examine, your business attorney’s on-the-job training and work history. Did he or she go out on his own almost immediately? Did he or she “earn his chops” at big-name megafirms? Has he or she ever served as an in-house counsel or GC (or otherwise worked very closely with non-lawyer management)? Was he or she a clerk for a prestigious court, or a lawyer for a prestigious government agency? A lawyer who has been trained by other high-quality lawyers and worked successfully with businesspeople will generally bring much value to your business enterprise. 7. Business Sense I saved the best for last. If your business attorney is not “front and center” with the understanding that legal fees need to pay for themselves in terms of averted disasters, you may want to think again. If your business attorney does not proactively understand the economics of your business (e. g. it does not make sense to spend $1,000 to generate extensive legal comments on a contract for $200 worth of goods, but it may make sense to spend $1,000 on a form that will be used on many contracts for $200 worth of goods), you may want to think again. Litigation is expensive. Sometimes a court fight is called-for, but sometimes your only possible victory would be Pyrrhic. If your lawyer’s first response to everything is to fight, rather than to assess the larger picture, you may want to think again.   Contact us here for more information. --- ### Transition Services Agreements: overview and new developments > Ryan Reiffert, a San Antonio corporate attorney updates you on Transition Services Agreements (TSAs) – a common deal document for mergers and acquisitions - Published: 2020-03-06 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/transition-services-agreements-overview-and-new-developments/ - Categories: Corporate Law, Dealmaking, Deals, M&A, Uncategorized A key component of some M&A transactions is the Transition Services Agreement, or TSA. The TSA essentially answers the question: what services is the seller required to continue providing to the buyer, for how long, and upon what terms? The TSA is a separate legal agreement from the acquisition agreement, covering certain services to be provided from the seller to the buyer. The services provided pursuant to a TSA could include any manner of services, from accounting to IT, from management to HR. Of course, a TSA may have different terms depending upon the size of the transaction. When do I need a TSA? TSAs are most appropriate for two types of situations: Divestiture Transactions – in other words, the purchase and sale of part (but less than all) of one business to another. Most typically, a TSA will be appropriate when a larger company spins off or sells a division to a smaller company that does not have the infrastructure or in-house support to immediately absorb and support the division (in the converse situation – a larger company purchasing part of a smaller company – the larger company would likely already have the in-house capability to support the division). Key Person Transactions – in other words, a complete purchase of one business by another, where the selling business is run by, or intricately involved with, a key person who will eventually be leaving. The most common example of this is the Founder-CEO who started the business from nothing and has a very large degree of oversight and involvement with many different divisions. If the Founder-CEO is being bought out with an eye towards retirement or his/her next startup, then he/she will do significant damage to the purchased business by leaving immediately. A well thought-out and carefully-drafted TSA that methodically transitions and disentangles the Founder-CEO from the business over an appropriate time period will tend to preserve the most value. There is, of course, no point in having a TSA in a complete sale or acquisition without a key person, since all of the seller’s assets, divisions, and services are owned by the buyer indefinitely, and integration can proceed on the buyer’s timeline. What’s the pro and con of using or not using a TSA? When deployed poorly, a TSA can distract the seller’s post-transaction focus for longer than necessary and basically become a nuisance (after all, in the case of a divestiture, the seller is spinning the division off so that it can focus on other things). Another dangerous characteristic of a TSA is that it is a very effective tool of procrastination – it can give buyer and seller who still have some disagreements a way to “kick the can down the road” on some very important decisions (decisions which should not be procrastinated). When used properly, however, a TSA can lead to a faster close, as well as a smoother and less costly transition. This part – the “when used properly” part is when you’ll want to consult with an experienced corporate attorney, as well as your other advisors on the transaction. Below, I will discuss a few of the concerns and questions that you’ll want to specifically think about for your Transition Services Agreement. What’s the endgame? Broadly speaking, buyers can: (i) outsource to a third party, (ii) expand an existing internal department to cover the new business, or (iii) develop a new internal department to cover the new business. Or, depending on the contours and circumstances of the deal, there may be a fourth option (iv) terminate the service altogether. The terms of the TSA will be different for each of these scenarios. So, is the plan, for example, for seller to provide HR services to buyer for a short window while buyer finds a third-party to outsource the HR to? Or, will the buyer transition the target’s payroll to buyer’s own in-house payroll department? Or, will buyer develop its own in-house repair department while being supported by seller’s repair department? This “endgame” is one of the most important aspects of the Transition Services Agreement, and is something that your corporate lawyer, investment banker, business advisor, and any other professionals should be focused on from Day One. Define and draft a formal exit protocol. What form will the notice take? How much of a notice period is required? What final expenses will be “settled up” at that time? What will it cost? And what is included? The TSA is an unusual animal, in that it obligates the seller to provide a service that it isn’t in the business of providing. A TSA might require a car company, for example, to provide accounting services. Or, a financial consulting company might be providing HR functions. You get the idea. Therefore, cost drivers will need to be clearly identified and the method of calculating costs will need to be set forth with specificity. What’s excluded? Relatedly to a specific cost model, what services will be “additional” chargeable services under the TSA or services calculated under a separate cost model? Developing a list of services that are specifically not included in the TSA will help to more concretely define the relationship between the parties. Who are the points of contact? Since there will be a separation of business units, it’s generally a good practice to identify exactly who will provide and receive services, as well as who will provide and receive any requests for excluded services or chargebacks, and who will be the point of contact for any potential dispute. What level of service do you need (can you provide), really? As noted above, one of the sticking points of a TSA is that the seller isn’t really in the business of providing the type of service that the TSA provides, and the buyer’s endgame is to establish a means other than the seller to provide those services, anyway. So, as a buyer, it is important to be realistic about your demands for service levels; likewise, as a seller, it’s important to be realistic about what you can promise. A higher-than-necessary demand or promise will just create ill feelings (or worse yet, a breach! ) down the road. Rather, keep in mind that the goal here is for the buyer and seller to collaborate on disentangling the sold division as quickly as is reasonably possible – not to pick fights over service levels. Wait a second. I read all this on some other lawyer’s site. I thought you said there were new developments... ? Indeed there are. I’m going to talk primarily about privacy regulations here, but there are more. As the “typical” user of a TSA – small buyer, purchasing a spun-off division of a larger seller – you have a couple of potential regulatory hazards to be aware of. Some are new, some are not. One that isn’t new is HIPAA – personal health information that may be handled by the acquired division could have wide-ranging consequences. One that’s relatively new that you may not have heard of is GDPR. The GDPR is the General Data Protection Regulation, and is a privacy law that applies to consumers in the European Union. I won’t go into detail on the requirements of the GDPR in this post, but let’s focus on the “gating issue” of whether the law even applies. Pre-acquisition, your company may not have been subject to GDPR because you didn’t collect data on EU persons. But, suppose your new division either modifies your company’s target="_blank" rel="noopener">Contact me here to discuss further. --- ### SECURE Act: dramatic changes for Estate Planning > Estate Planning changes were implemented by Congress in January 2020 – Ryan Reiffert, San Antonio estate planning attorney and corporate lawyer, discusses - Published: 2020-02-22 - Modified: 2024-02-22 - URL: https://ryanreiffert.com/blog/secure-act/ - Categories: Estate Planning, Political Landscape, Probate Some Background Remember the almost government shutdown in 2019? Well, the Setting Every Community Up for Retirement Enhancement (SECURE) Act was part of the spending bill rushed through Congress to avoid the shutdown and keep the government open. As usual, it contained many new rules about all kinds of stuff. But for purposes of this post, I want to talk specifically about some rule changes that affect estate planning, including rules regarding IRA payouts to a deceased participant’s beneficiaries. “Why does Congress always insist on having acronyms for their laws? And wasn’t the shutdown in 2018? ? ” I don’t know why they love acronyms so much. And that was the other shutdown. Anyway, that law went into effect last month.  Your estate plan may now need some updating. “Sounds expensive. ” Hopefully not, but ignoring the changes could be a lot more expensive. Here are some of the major changes that were included (but, reminder: don’t try this by yourself, you should consult an estate planning attorney to evaluate your specific circumstances). 1. The End of Stretch IRAs (mostly) Before the SECURE Act, a designated beneficiary of an inherited retirement account could generally “stretch out” the retirement account by taking the required minimum distributions (or RMDs) from the account over the beneficiary’s life expectancy. “This sounds familiar. ” If you had a parent or grandparent leave an IRA, there is a good chance that your family already uses this estate planning tactic. Anyway, the result of these so-called “Stretch IRAs” was that the beneficiary could more-or-less indefinitely extend the benefit of tax-deferred investment returns, creating some pretty major tax savings. “That’s pretty clever. If I haven’t done this before, can I start now? ” After the SECURE Act, this indefinite stretching is generally no longer allowed.  In most cases, the account must be distributed in full within 10 years after a plan participant’s death. You can stretch out the tax-deferred investment returns over a 10-year period (which, to be fair, is still a pretty good amount of time... ), but you cannot extend it for full life expectancy. “So, Congress is forcing me to convert my tax-deferred investments into taxable investments on an accelerated schedule. This sounds a bit like a back-door inheritance tax. ” Yes, it does. “OK, but you said it’s mostly no longer the case... what’s the exception? ” The exception is somewhat narrow, unfortunately. Lifetime stretch rules, still with some modification, remain available to: a surviving spouse; minor children; disabled beneficiaries; chronically ill individuals; beneficiaries who are less than 10 years younger than the plan participant. “That’s not quite as bad as you made it sound. Some of those are still useful. ” Correct. There are still some beneficiaries eligible to use the stretching rules. However, some consideration will need to be given to beneficiary designations ahead of time. Essentially, you still have options, but it’s something you will have to think about to avoid potential traps. “Are there any other traps here? ” Well, if the primary beneficiary of your retirement account is a trust things could get messy. If the beneficiary is conduit trust (a trust that distributes all the income to the trust beneficiaries), the 10-year rule could cause punitive income consequences to the trust beneficiaries, who would then be forced to realize a significant amount of income over a shorter time. There are some alternatives, such as an accumulation trust. An accumulation trust would allow the accelerated IRA distributions to accumulate inside a trust, while distributions from the trust to the trust beneficiaries would still be subject to the trustee’s discretion. However, because the retirement account would nonetheless be required to distribute in full to the trust within 10 years, the accumulation trust itself would see higher tax rates. 2. RMD Age Increase and Contribution Rule Changes But, it’s not ALL bad. The SECURE Act raises the age at which an account owner is required to start making RMDs from an IRA. Now, the RMD requirement doesn’t kick in until age 72. “What was it before? ” Before it was 70½. So, you get another year and a half to grow the account on a tax-deferred basis, while considering strategies to minimize overall tax burden and optimize your estate plan. So, that’s a good thing. “OK. I think I get that. What’s the deal with the contribution rule changes? ”   The SECURE Act also removed the age 70 cap for making deductible IRA contributions. So, you can keep building up your tax-deferred account for a while longer. “This is not as interesting as the “back door inheritance tax” stuff you were talking about before. ” No, it isn’t. But you should know about it anyway. 3. What To Do? ? Revisit your estate plan with a competent estate planning attorney. You should give particular attention to: Beneficiary designations (Are the beneficiaries eligible to stretch? Is anyone else eligible to stretch? Is there a no-longer-ideal conduit trust somewhere in there? Should you change or eliminate the trust? ) Your plan for RMDs and contributions Any philanthropy or charitable giving that is included in your estate plan may need to be re-examined (the SECURE Act can cause some changes on Qualified Charitable Distributions (QCDs) that I have not explored in detail here) --- ### Manager Held Personally Liable for Company Contract Breach > Ryan Reiffert, San Antonio corporate attorney, discusses the alarming case of a manager who was held personally liable for a company contract - Published: 2020-02-16 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/manager-held-personally-liable-for-company-contract-breach/ - Categories: Contracts, Corporate Law, Texas The Court of Appeals for the Fifth District of Texas (this court sits in Dallas) recently issued a decision that should serve as a cautionary tale and another reminder to be careful what you sign, and draft your contracts carefully, in PMC Chase, LLP and Steve Turnbow v. Branch Structural Solutions, Inc. , 05-18-01383-CV (Tex. App. 2020). Branch Structural Solutions, Inc. (BSS) sued PMC Chase, LLC (PMC) and its manager Steve Turnbow (Turnbow) alleging breach of contract and quantum meruit, related to a contract that Turnbow signed. At trial, BSS dropped the claim for breach of contract against PMC (in favor of quantum meruit only), and pursued breach of contract against Turnbow, alleging that Turnbow had entered into the contract in his individual capacity. In case your eyes are glazing over  from all this legalese, let me translate for you: the liability protection that Turnbow thought he was getting from his LLC was worthless due to poor contract drafting & signing practices. The trial court found for BSS and agreed that Turnbow had entered into the contract in his individual capacity. Accordingly, it rendered a judgment against both PMC (for quantum meruit) and Turnbow in his individual capacity (for breach of contract). The Court of Appeals for the Fifth District of Texas, after review, affirmed the finding of personal liability for Turnbow. If you are a manager, owner, or officer of a company, this should alarm you. If you don’t follow the correct procedures when signing contracts, you could be personally on the hook. One particularly illuminating segment from the trial court transcript (quoted by the appellate court) is as follows: Q. And that contract would have been signed by you individually; is that correct? A. I was signing for my company. Q... . Where on this document does it say that you’re signing for your company? A. It doesn’t... . . Q. And is this document addressed to you and signed by you individually? Is that correct? A. Yes. Q. And nowhere on the document does it say that you’re signing on behalf of PMC Chase? A. No. You may be able to see where this is going. Ouch. PMC and Turnbow argued that Turnbow acted as only an agent of PMC, but the appellate court disagreed “It is well-settled that the law does not presume agency... . . When an agent seeks to avoid personal liability on a contract he signs, it is his duty to disclose that he is acting in a representative capacity and the identity of his principal. ” What’s more, parol evidence of an agency relationship rather than personal capacity was not sufficient to defeat the finding of personal liability. Again, I’ll translate: what the parties understood to be the case outside of the document was here found to be irrelevant, in light of the clear meaning of the actual document. “ contend the trial court erred ... “because both parties to the contract testified that they understood Turnbow to have signed the contract for PMC Chase. ” The contract, which neither side contends is ambiguous, bears Mr. Turnbow’s signature and does not mention PMC Chase or indicate representative capacity in any way. Thus, on its face, the contract unambiguously shows it is the obligation of Mr. Turnbow personally. ” Double ouch. Three takeaways here: Be careful with drafting and signing contracts. Seemingly small mistakes can have very big consequences. Don’t assume that once you’ve formed an entity, liability protection automatically attaches to everything you do permanently and forever. You can accidentally pierce your own corporate veil. Best practices are always relevant. The law does not presume agency. If have questions about this case, you can contact me here. Read the full opinion for yourself. --- ### Is Your Deal’s “Exclusive Remedy” Really Exclusive? Delaware Chancellors Say… Maybe Not > In this case, Delaware held that an “exclusive remedy” termination fee was actually not exclusive. Exercise caution when making deals. - Published: 2020-02-01 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/transaction-remedies-delaware/ - Categories: Corporate Law, Dealmaking, Deals, Delaware, M&A, Uncategorized The Delaware Court of Chancery is the premier forum for complex corporate law disputes. The Chancellors recently clarified some issues regarding the exclusivity (or lack thereof) of purportedly exclusive termination fees for M&A deals, including an exercise in precise reading of contractual language. Corporate lawyers and other deal professionals should all be paying attention. The Deal In April of 2018, two office supply wholesalers, Genuine Parts Company (GPC) and Essendant, Inc. (Essendant), signed a merger agreement – the companies would merge so as to better compete with others such as online and e-commerce office supply providers. Among the agreement’s provisions was a nonsolicitation covenant providing that after signing Essendant would not solicit competing offers The Deal... Gone Wrong But, there were also other parties interested in acquiring Essendant. One of these other parties, Sycamore Partners (Sycamore), eventually persuaded Essendant that it could offer a better deal. Essendant terminated its deal with GPC, paid the termination fee set forth in the agreement, and closed the deal with Sycamore. GPC was, unsurprisingly, not pleased with this turn of events. GPC sued, claiming, inter alia, that the contractual break fee was inadequate and not its exclusive remedy for termination of the deal (for reasons including Essendant’s alleged breach of other provisions of the agreement, such as a nonsolicitation covenant). Essendant disagreed. The Delaware Court of Chancery Decision This disagreement made it to the Delaware Court of Chancery, which rendered a decision on September 9, 2019. Vice Chancellor Slights wrote that: “Essendant now moves to dismiss... the payment of the termination fee is GPC’s exclusive remedy... . Specifically, the Agreement does not clearly and unambiguously provide that GPC’s remedy is limited to recovery of the termination fee in circumstances where, as here, GPC has well-pled that Essendant breached the Agreement’s non-solicitation provision. Accordingly, Essendant’s motion to dismiss must be denied. ” In short, the Chancery Court, after a close reading of the merger agreement, determined the termination fee would have served as the exclusive remedy if the competing transaction had not resulted from a material breach of the nonsolicitation covenant. However, the Chancery Court found that GPC had adequately alleged enough in total to infer that Essendant, at least indirectly, breached the nonsolicitation covenant, which breach, if proven, would render the break fee not the exclusive remedy. As a result, the Chancery Court declined to dismiss GPC’s claims for damages above and beyond the break fee. Read the full decision in Genuine Parts Company v. Essendant, Inc. The Takeaway This decision reminds us that where deal parties intend for pre-agreed termination fees to act as exclusive remedies and bar claims for additional damages, particular attention must be paid to the the exact language describing the circumstances under which such termination fee is the exclusive remedy. In other words, is the termination fee the exclusive remedy for all flavors of deal termination or is it only the exclusive remedy for some flavors of deal termination, and any terminations outside of that scope will fall to standard judicial remedies? When trying to set up an exclusive remedy or termination fee more generally, pay attention to the exact mechanics. Details matter. If you are a company considering an M&A deal or other corporate transaction, careful thought and planning are important.     FOOTNOTES  Specifically, the language of the nonsolicitation covenant in Section 7. 03(a) provided that Essendant was not to: (i) solicit, initiate, or knowingly encourage (including by way of furnishing non-public information), or take any other action to knowingly facilitate, any inquiries or the making of any proposal or offer (including any proposal or offer to stockholders), with respect to any Competing Transaction; (ii) enter into, maintain, continue or otherwise engage or participate in any discussions or negotiations with any Person in furtherance of such inquiries or to obtain a proposal or offer with respect to a Competing Transaction; (iii) agree to, approve, endorse, recommend or consummate any Competing Transaction; (iv) enter into any Competing Transaction Agreement; or (v) resolve, propose or agree, or authorize or permit any Representative, to do any of the foregoing. The Court wrote: As is typical in disputes arising from complex integrated contracts, the parties’ competing constructions of the Agreement beckon a whistle-stop tour through several of its interconnected provisions. Most important to Defendant’s motion is Section 9. 03(e), which provides, in part, “notwithstanding anything in this Agreement to the contrary (including Section 9. 02), in the event the Termination Fee is paid in accordance with this Section 9. 03, the payment of the Termination Fee shall be the sole and exclusive remedy of GPC” Essendant terminated the Agreement under Section 9. 01(g); therefore, it purported to pay the Termination Fee “in accordance with” Section 9. 03(a)(ii). As noted, Section 9. 03(a)(ii) contemplates termination of the Agreement “pursuant to” Section 9. 01(g), meaning “in conformity with” that provision. Section 9. 01(g) permits Essendant to terminate the Agreement “to enter into a definitive agreement with respect to a Superior Proposal to the extent permitted by, and subject to the applicable terms and conditions of, Section 7. 03(d)(ii)” Section 7. 03(d)(ii), in turn, allows for termination under Section 9. 01(g) if, “in response to the receipt of an offer or proposal with respect to a Competing Transaction that did not arise from any material breach of Section 7. 03(a), the Board determines in its good faith judgment ... that such offer or proposal constitutes a Superior Proposal” Finally, Section 7. 03(a) contains the Non-Solicitation Provision. ” If you have other questions about this article, CONTACT LAW OFFICES OF RYAN REIFFERT, PLLC --- ### Kansas Man Demands ‘Trial By Combat’ to Settle Custody Dispute > A Kansas man has challenged his ex-wife and her attorney to a trial by combat with japanese samurai swords. - Published: 2020-02-01 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/trial-by-combat/ - Categories: Funny, Off-Topic Yes, this really happened. No, it does not have anything to do with my normal topic of business law, M&A, securities, and related issues. Yes, I am going to write about it anyway – if nothing else, it’s an interesting bit of legal history. UPDATE HERE The Des Moines Register reported this bizarre story on January 13, and before that the Carroll Times Herald. It was then (perhaps unsurprisingly) picked up by dozens of major publications and legal bloggers across the country. While Game of Thrones fans may familiar with the practice, invoked several times in the HBO’s smash-hit TV series, it may come as a surprise to you that the concept is not entirely fictional. David Ostrom, 40, of Paola, Kansas, made the demand in a motion filed with an Iowa court, seeking to resolve a custody dispute. Noting that his ex-wife and her attorney have “destroyed legally,” Ostrom wrote that: I now wish to give them the chance to meet me on the field of battle, where I will REND THEIR SOULS from their corporal bodies As for the legal basis for the trial by combat, in his court filings, Ostrom noted that trial by combat “has never been explicitly banned or restricted as a right in these United States” and that it has been used “as recently as 1818 in British Court. ” The judge in this case was clearly less amused by Ostrom’s antics than the rest of us are, writing in his ruling: Until the proper procedural steps to initiate a court proceeding are followed, this court will take no further action concerning any motion, objection or petition filed by either party at this time Oddly enough, this is not the first time that a litigant has demanded a trial by combat to resolve a dispute.  In July of 2015, Richard Luthmann, a Staten Island attorney also demanded a trial by combat, which was also picked up by various legal news sites and bloggers such as, Silive, Washington Post, Above The Law, and Lowering The Bar. From the very beginning, it’s clear that we’re in for a colorful ride: 3. I make this affirmation in reply to the Plaintiff’s Opposition to the instant application, which can – when viewed in a light most favorable to opposing counsel – only be termed as a glorified comic book piled on top of pure and adulterated extortion wrapped in a transparent abuse of legal process. But wait, there’s more. Some more choice quotes and a historical tour of the history of trial by combat from that demand follow (NOTE: I cannot speak to the accuracy of the historical claims, but it at least sounds plausible. ) DEFENDANT DEMANDS TRIAL BY COMBAT 26. Defendant invokes the common law writ of right and demands his common law right to Trial By Combat as against Plaintiffs and their counsel, whom plaintiff wishes to implead into the Trial By Combat by writ of right. THE HISTORY OF TRIAL BY COMBAT 27. Wager of battle, as the trial by combat was called in English, appears to have been introduced into the common law of the Kingdom of England following the Norman Conquest and remained in use for the duration of the High and Late Middle Ages. Quennell, Marjorie; Quennell, C. H. B. (1969) , A History of Everyday Things in England (4 ed. ), B. T. Batsford at p. 64... . 43. In 1774, as part of the legislative response to the Boston Tea Party, Parliament considered a bill which would have abolished appeals of murder and trials by battle in the American colonies. It was successfully opposed by Member of Parliament John Dunning, who called the appeal of murder “that great pillar of the Constitution”. Shoenfeld, Mark (1997), “Waging battle: Ashford v Thornton, Ivanhoe and legal violence”, in Simmons, Clare, Medievalism and the Quest for the “Real” Middle Ages, Routledge, at p. 61. 44. The writ of right was the most direct way at common law of challenging someone’s right to a piece of real property. The criminal appeal was a private criminal prosecution instituted by the accuser directly against the accused. It was not, unlike the contemporary appeal, a proceeding in a court of superior jurisdiction reviewing the proceedings of a lower court. 45. Such a private prosecution was last conducted in the case of Ashford v. Thornton in 1818, as recorded in The Newgate Calendar. “Abraham Thornton”. The Newgate Calendar. The Ex-Classics Web Site. Pronouncing judgement in favor of the accused’s plea claiming the wager of battle, Justice Bayley of the King’s Bench said that: One of the inconveniences of this procedure is, that the party who institutes it must be willing, if required, to stake his life in support of his accusation. 46. The accusation was quickly withdrawn after this judgment. Parliament abolished wager of battle the following year, in 1819, and at the same time they also abolished the writ of right and criminal appeals. TRIAL BY COMBAT IN THE UNITED STATES 47. At the times of the ratification of the Bill of Rights in 1791, trial by combat was not outlawed in any of the Thirteen Original United States (including the State of New York), all of whom inherited British common law upon independence in 1776... . 54. The allegations made by Plaintiffs, aided and abetted by their counsel, border upon the criminal. As such, the undersigned respectfully requests that the Court permit the Undersigned to dispatch Plaintiffs and their counsel to the Divine Providence of the Maker for Him to exact His Divine Judgment once the Undersigned has released the souls of the Plaintiffs and their counsel from their corporeal bodies, personally and/or by way of a Champion. While Law Offices of Ryan Reiffert, PLLC has not and does not handle Trial by Combat matters, we would be more than happy to talk with you about a wide range of other topics. If you would like to learn more, contact us here. UPDATE: I was able to interview David Ostrom, the Kansas Swordsman himself. You can check out the full video here --- ### Goldman Sachs Will Reject Your IPO if Your Board is All Straight White Men > In January 2020, David Solomon, CEO of Goldman Sachs, announced that the investment bank would refuse IPOs of companies with all-male boards of directors. - Published: 2020-02-01 - Modified: 2024-01-23 - URL: https://ryanreiffert.com/blog/ipo-diversity/ - Categories: Corporate Law, Deals, IPOs (Initial Public Offerings), Political Landscape, Securities Goldman Sachs hardly needs an introduction – it is one of the largest, most prominent, and most prestigious investment banks and underwriters of initial public offerings (or IPOs) and an economic titan. This January, Goldman made some waves in the world of corporate boards. David Solomon, Goldman’s CEO, issued a bold statement from the World Economic Forum in Davos, Switzerland calling for increased diversity on companies’ boards of directors. More specifically, Solomon stated “We’re not going to take a company public unless there’s at least one diverse board candidate, with a focus on women. ” The rule will come into force on July 1, and for the time being will focus on US and European companies (Asia is not yet included in the firm’s rule). Solomon’s announcement comes on the heels of similar initiatives by investment managers BlackRock and  (they have announced will vote against board slates without female directors) and the State of California (in September 2018, California passed a law that would fine any public companies with all-male boards $100,000). So, what does this all mean? As an initial matter, one might anticipate some legal challenges going forward. So, stay tuned as to whether any of these initiatives ends up being challenged in court. One might also wonder about whether Goldman’s rival investment banks will follow suit, and whether other states may follow California’s lead. Another open question is how rigorously this rule will actually be enforced (will Goldman really stick to its guns and sit out the IPO of the Next Big Thing? We have no reason to doubt Solomon’s seriousness or candor, but... money talks). There is some good news – if you’re a private company and not planning to go public any time soon, don’t panic. None of these initiatives (yet) are targeting private companies. Solomon stated that “the performance of IPOs where there’s been a woman on the board in the US is significantly better than the performance of IPOs where there hasn’t been a woman on the board”. On the other hand, the Harvard Business Review concluded the evidence was unclear, performance-wise. “Evidence that board diversity benefits firms, however, has been mixed. A 2015 meta-analysis of 140 research studies of the relationship between female board representation and performance found a positive relationship with accounting returns, but no significant relationship with market performance. Other research has found no relationship to performance at all. ” Regardless of what direction this trend takes in the future, it seems fairly clear that there will be future developments of one sort or another. While the current initiatives are more or less exclusively focused on public companies, it is certainly possible that such diversity initiatives could expand into other arenas that would affect private companies (especially companies in highly regulated industries, such as banking, insurance, finance, telecommunications, healthcare, oil & gas, and others). The lesson for startups and entrepreneurs is clear(ish) – you would do well to keep an eye on how these board diversity initiatives develop. For more information, click here. --- ### Big Changes to Securities Offering Exemptions on the Horizon? SEC Seeks Comments on “Harmonization” of Exemptions > July 2019: the SEC signalled that it would be undertaking a review of securities offering exemptions. Startups, small businesses, and investors, take note! - Published: 2020-02-01 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/big-changes-to-securities-offering-exemptions-on-the-horizon-sec-seeks-comments-on-harmonization-of-exemptions/ - Categories: Corporate Law, SEC (Securities and Exchange Commission), Securities UPDATES TO THIS ARTICLE: Update 1 Update 2 On June 18, 2019, the U. S. Securities and Exchange Commission (the “SEC”) published a 211-page Concept Release on Harmonization of Securities Offering Exemptions (the “Release”), seeking comments related to the exempt offering framework for securities (and, as you might have guessed from the title, the harmonization of the various exemptions). The Current Capital-Raising Landscape The SEC notes, on page 16 of the Release, that exempt offerings now represent the significant majority of capital-raising transactions (specifically, exempt offerings accounted for $2. 9 trillion – over twice(! ! ! ) the $1. 4 trillion attributable to registered offerings). Here it is for you directly from the SEC Release: As the regulatory and operational framework for exempt offerings has evolved, the amount raised in exempt markets has increased both absolutely and relative to the public registered markets. In 2018, registered offerings accounted for $1. 4 trillion of new capital compared to approximately $2. 9 trillion that we estimate was raised through exempt offering channels.     That’s over twice as much capital raised in private, exempt offerings than public, registered offerings! In response to this trend toward exempt offerings over registered offerings, the SEC is undertaking a review of available offering exemptions and some related rules and regulations. Some of the most common offering exemptions (most of which require any securities restricted to be restricted securities) include: Section 4(a)(2) – transactions by an issuer “not involving any public offering” Rule 506(b) and 506(d) of Regulation D – a Form D safe harbor for private offerings that requires compliance with various restrictions including accredited investor restrictions (and other requirements not listed) Rule 504 of Regulation D – a Form D safe harbor for offerings of under $5 million/year (and other requirements not listed) Regulation A – a two-tier offering exemption with offering limits, including limits on issuer affiliates and requiring the filing of a Form 1-A with the SEC (and other requirements not listed) Instrastate Offering exemptions Section 3(a)(11), Rule 147, and Rule 147A – an exemption for in-state sales and offerings in compliance with the applicable state securities laws and regulations (and other requirements not listed) Regulation Crowdfunding Section 4(a)(6) – A Form C exemption for private offerings of less than $1. 07 million (and other requirements not listed) One of the most famous and influential decisions in the arena of securities law is SEC v. Ralston Purina 346 U. S. 119 (1953) in which the Supreme Court outlined that the Section 4(a)(2) exemption “should turn on whether the particular class of persons affected needs the protection of the Act. An offering to those who are shown the be able to fend for themselves is a transaction ‘not involving any public offering’. ” As the SEC outlined in its Release: The emphasis on the characteristics of the investors extends throughout the current exempt offering framework, in which the fewest conditions apply to an offering under an exemption where sales are restricted to accredited investors, while offerings that permit less wealthy or sophisticated investors to participate are subject to an assortment of disclosure requirements, offering and investment limits, and other conditions meant to mitigate the risk of not having the traditional protections of registration under the Securities Act. One of the fundamental tension that the SEC is grappling with in this Release seems to be the clear market trend toward exempt offerings (and various recommendations for harmonization by other parties, such as the 2012 Small Business Forum and 2018 Small Business Forum), as compared to the “can they fend for themselves” framework of Ralston Purina which one implictly tends to consider as a small minority of investments, not a 2/3+ slice of the pie. Comments Sought on Current Exemption Framework The bulk of the Release is dedicated to a discussion of, and a request for comments on, various elements of the current exemption landscape, including: The Definition of Accredited Investor: a test of individual income, joint income, and/or net worth meant to be an approximation of the sophisticated investor who can “fend for themselves” as outlined by Ralston Purina above. According to the SEC’s math, an aggregate of approximately 13. 0% of US Households qualify as Accredited Investors. In 2017, the US Department of the Treasury prepared a report that included recommendations to, among other things, revise the definition of Accredited Investor with the goal of expanding the pool of eligible sophisticated investors (for example, including an investor who is advised by a registered investment advisor or financial professional). Rule 506 of Regulation D: among other observations, the SEC notes that 89% of Rule 506 offerings take advantage of 506(b), as opposed to only 11% under 506(c); a comparison of the aggregate value raised thereunder is even more lopsided – $7. 3 trillion (or 94%) under 506(b) compared to $466 billion (or 6%) under 506(c). The Release further notes that: “while offerings under Rule 506(b) can have up to 35 non-accredited but sophisticated investors, non-accredited investors were reported as participating in only approximately 6% of Rule 506(b) offerings in each of 2015, 2016, 2017, and 2018... . Accordingly, it appears that the vast majority of issuers either are able to meet their capital needs through offerings to accredited investors only or, alternatively, may be limiting their Rule 506(b) offerings to accredited investors to avoid these disclosure requirements, which are generally similar to the non-financial disclosure requirements of a Regulation A offering and the financial statement requirements of a Form S-1 registration statement with reduced audit requirements. ” Regulation A: Regulation A, which has typically been called a “Short Form Registration,” was updated by the Jumpstart Our Business Startups (JOBS) Act in 2015. The main takeaway of this report is that Regulation A offerings are significantly less common than Regulation D offerings. Over the June 19, 2015 – December 31, 2018 period, 132 issuers reported $1. 4 billion raised under Regulation A (combined Tier 1 & Tier 2), while in comparison “36,900 issuers, other than pooled investment funds, each reported raising up to $50 million in reliance on Regulation D, totaling approximately $181 billion. ” Rule 504 of Regulation D: the requirements of Rule 504 mostly avoid the reliance on Accredited Investors that 506 contains, but generally lacks the “backup” of a broader 4(a)(2) exemption available to Rule 506. The main problem with Rule 504, according to the SEC’s report, is similar to the problem with Regulation A: almost nobody uses it. “From 2009-2018, two percent of the capital raised in Regulation D offerings under $5 million by non-investment companies was offered under Rule 504 (and under Rule 505, prior to its repeal), and 98% of the capital raised was offered under Rule 506... . n 2018, there were 85 additional new offerings that claimed a Rule 504 exemption as compared to 2017; however, the increased number of Rule 504 filings generally aligns with the decrease in the number of Rule 505 offerings over the same period (83 offerings). ” Intrastate Offerings: With regard to this exemption, there is something of an informational barrier because “Issuers conducting an offering pursuant to Rule 147 or Rule 147A are not required to file any information with or pay any fees to the Commission. Offerings conducted pursuant to Rule 147 or Rule 147A must be registered in the state in which they are offered or sold unless an exemption to state registration is available under the state’s securities laws. ” The main questions asked in the Release include: whether the introduction of Rule 147A (essentially a “loosening” of the requirements of Rule 147) has had a negative effect, what the relationship of such exemptions to regional (i. e. a small number of states, neither intrastate nor truly national in scope) ought to be, among other related questions Regulation Crowdfunding: One interesting note from the Release is that “Unlike issuers conducting Regulation A offerings, a minority of Regulation Crowdfunding issuers have reported conducting an offering under Regulation D in the past — about 14% undertook a Regulation D offering prior to the Regulation Crowdfunding offering — suggesting that Regulation Crowdfunding, at least based on data as of December 31, 2018, tends to bring new issuers to the exempt offering market rather than encouraging current issuers to switch between offering exemptions. ” Additionally, the utilization of Regulation Crowdfunding is noted to be “geographically concentrated, with just under a third of the offerings made by issuers located in California (approximately 32%), followed by New York (approximately 11%) and Texas (approximately 7%). ” Comments Sought on Other Related Areas The remainder of the Release discusses a few interconnected elements adjacent to the current exemption landscape. The principal areas on which the Release seeks comment include: Integration: Including previous guidance on integration of exempt offerings in which general solicitations are not permitted as well as those in which general solicitation is permitted, as well as harmonization of integration rules into a single doctrine and time periods and safe harbors. The integration rules have certainly “trapped” well-meaning private companies before, which was assuredly not the original intention. Simplification may help with compliance. Pooled Investment Funds: Specifically, comments regarding whether access to pooled investment funds should be expanded for non-accredited investors (currently, non-accredited investors seeking to invest in pooled funds have very limited options and cannot invest in private equity, venture capital, or hedge fund type pooled funds, because those funds must restrict their investor pools to preserve their own exemptions from registration and from other laws such as the Investment Company Act). Those who operate registered investment companies and business development companies (which investors generally can access as a pooled investment) should stay apprised of developments here, as should the private equity, venture capital, and hedge fund world. Secondary Trading: One significant disadvantage of private capital-raising is the relatively illiquid nature of the investment. Investors, accordingly, may be somewhat less willing to invest. While you might note that this supposed disadvantage has not prevented the private market from growing to twice the size of the public market in 2018, the brunt of investor hesitation is likely borne by smaller issuers (larger issuer means more investors means easier liquidity, even in private or restricted securities). The SEC is seeking comments on potential revisions to improve secondary market liquidity. It's important to stay on top of developments like this if you are active in the securities space, and especially important to have a competent securities attorney that you trust. While this summary is provided for educational purposes, if you would like to review the full text of the Release for yourself, you may do so on SECURITIES AND EXCHANGE COMMISSION. If you have other questions, you can contact me here. --- ## Faqs ### How much do you charge for a consultation? - Published: 2021-03-19 - Modified: 2022-05-09 - URL: https://ryanreiffert.com/blog/faqs/how-much-do-you-charge-for-a-consultation-2/ - Faq Categories: General We charge a fee of $100 for the initial consultation. If you decide to move forward with us, the amount paid will be applied to your retainer or to any fees incurred. --- ### What is Startup Law? - Published: 2021-03-19 - Modified: 2021-04-01 - URL: https://ryanreiffert.com/blog/faqs/what-is-startup-law/ - Faq Categories: Service Related Small businesses and startups often face many similar legal issues. It can be a tremendous benefit to you to have someone on your side who has “been there, done that” and can assist you with navigating the waters. I was previously General Counsel (for about 3 years) of a tech startup that raised over $10M and successfully launched a novel product on a worldwide basis. Click here for more information. --- ### What is an Outside General Counsel? - Published: 2021-03-19 - Modified: 2024-06-24 - URL: https://ryanreiffert.com/blog/faqs/what-is-an-outside-general-counsel/ - Faq Categories: Service Related An in-house general counsel (or GC) is an attorney who works inside of an organization and serves as the “quarterback” for various legal issues – providing additional insight on the risk involved to management and sometimes handling them directly, or other times managing an outside specialist. The main benefit of this arrangement is that involving a competent attorney sooner in the process can keep costs down. However, a full-time in-house GC can be expensive, and the cost is not always justified for a smaller business. In those situations, I am happy to be the “Outside GC” you keep on speed dial and “quarterback” or “triage” an uncertain issue for you. Click here for more information. --- ### How Do I Choose an Estate Planning Attorney? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/how-do-i-choose-an-estate-planning-attorney/ - Faq Categories: Service Related The short answer is the same as choosing a corporate attorney. Above all, you should choose someone you trust. Education and experience are also very relevant to estate planning. However, it is of particular importance in estate planning to select an attorney who can get along with (or, at the very least, relate to) many diverse family members and bridge any potential conflicts among them. --- ### What is Estate Planning Law? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/what-is-estate-planning-law/ - Faq Categories: Service Related Estate Planning Law is a body of law that encompasses several different but inter-related goals. Fundamentally, it is about ordering one’s property and holdings in a certain way to accomplish those goals, including: asset protection providing for family after death charitable donations reducing taxes streamlining the transfer of property upon death ... and more --- ### How Do I Choose a San Antonio Corporate Attorney? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/how-do-i-choose-a-san-antonio-corporate-attorney/ - Faq Categories: Service Related Above all, you should choose someone you trust. When evaluating corporate lawyers or business lawyers, education and experience are also highly important, since this field of law involves a large degree of planning and forthought --- ### What is Corporate Law? - Published: 2021-03-19 - Modified: 2021-04-01 - URL: https://ryanreiffert.com/blog/faqs/what-is-corporate-law/ - Faq Categories: Service Related Corporate law (despite the name) is not just about corporations! Corporate attorneys practice business law and represent business entities, including corporations, limited liability companies, partnerships, joint ventures, and other entities. Some corporate law issues that I regularly deal with include: formations, joint ventures, mergers and acquisitions, securities and investments, financings and debt, regulatory compliance, general contractual issues, and many more. My past work includes a spectrum experience from Wall Street blue-chip multibillion-dollar deals to small two-person businesses signing their first office lease. Click here for more information. --- ### Do I really need an attorney? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/do-i-really-need-an-attorney/ - Faq Categories: Service Related Maybe. Sometimes it’s too early (or too late) for an attorney to get involved, and other times it’s the exact right time. It depends very much on your particular facts and circumstances. We can explore this in your initial consultation. I would much rather establish a trusting, long-term business relationship with you than try to “sell you” on some legal services you don’t really need for a short-term profit. --- ### What industries do you have experience in? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/what-industries-do-you-have-experience-in/ - Faq Categories: Service Related I have represented many companies in many different industries, including: technology, banking, oil & gas, real estate, medical & nursing, investments & finance, holistic medicine, gyms & trainers, advertising & media, and many more. --- ### Do I need to come into your office and meet you in person to retain you or receive legal services? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/do-i-need-to-come-into-your-office-and-meet-you-in-person-to-retain-you-or-receive-legal-services/ - Faq Categories: General Not necessarily. While it is often preferable for you to come into the office for a first meeting, we can also arrange a virtual meeting, a video conference or a meeting at another location (such as a co-working space). --- ### Do you handle Personal Injury, Child Custody, Divorce, Immigration, or Criminal cases? - Published: 2021-03-19 - Modified: 2021-03-24 - URL: https://ryanreiffert.com/blog/faqs/do-you-handle-personal-injury-child-custody-divorce-immigration-or-criminal-cases/ - Faq Categories: General No. You’ve heard the phrase “jack of all trades, but master of none” haven’t you? That isn’t me. I am happy to take a secondary or consulting role on one of these types of matters for my existing clients, but I generally do not practice in these fields. --- ### What payment methods do you accept? - Published: 2021-03-19 - Modified: 2021-04-01 - URL: https://ryanreiffert.com/blog/faqs/how-much-do-you-charge-for-a-consultation/ - Faq Categories: General We accept cash, checks, wire transfer, Venmo, PayPal, Visa, Master Card, American Express, and Discover. If you wish to explore other forms of payment, please send an inquiry here. --- ### Are you the right Law Firm for me? - Published: 2021-03-19 - Modified: 2021-04-01 - URL: https://ryanreiffert.com/blog/faqs/are-you-the-right-law-firm-for-me/ - Faq Categories: General Choosing a lawyer or law firm to represent you is an incredibly important decision. I can deliver the personal attention and expertise to help solve your business issues. If your issue falls into one of my Practice Areas, let’s talk. Sometimes, I can’t help. In those cases, I’m happy to make a referral to an expert attorney in another field, a low-cost or pro bono legal service provider, or other resources. Either way, your initial consultation is free. Contact us. --- ### I need a quote. Whom do I contact? - Published: 2021-03-19 - Modified: 2021-04-01 - URL: https://ryanreiffert.com/blog/faqs/i-need-a-quote-whom-do-i-contact/ - Faq Categories: General You can submit a request via email at info@ryanreiffert. com, or you can also request more information, including a fee quote, on the Contact page. You are also welcome to call or write. ---