The Law Office of Robert Newton Blog

Back to the age-old question, “Do I need a will”? Readers can check the post “Last Will and Testament” to review the basic components of a will, and the post “What if I Die Without a Will” to review the laws of descent and distribution in Texas.

In Texas, almost every adult should have a will. A major reason to have a will is to avoid higher administration costs of the estate. Texans are fortunate because the State of Texas allows independent administration of an estate. Independent administration means that an executor only has to go to court to prove-up the will, qualify as executor, and file an inventory and appraisement. Everything else is done outside the court’s purview. In other words, a properly drafted will can greatly reduce the cost of administration of an estate.

A person also needs a will to dispose of estate property as desired. As you can see on the post, What if I Die Without a Will, the state’s default descent and distribution laws may not distribute your property the way you would want. For instance, if a person purchased property prior to getting married, the spouse may not end up with that property after the person dies. Similarly, siblings, nieces or nephews may receive property that the testator wouldn’t dream of leaving to them.

Another issue is minor children. Testator’s with minor children can detail in a will how minor childrens’ shares should be treated, such as minor trusts, guardians, etc. If a person dies intestate (without a will), the court gets to decide who should control the minor’s portion of the estate. And, it may not be who the testator would have named.

The size of an estate is not a good excuse to avoid signing a will because the size of an estate can change. After executing a will, it will remain in effect for the life of the testator unless it is revoked or amended. It is hard to predict ten, twenty, thirty, or even forty years into the future. For instance, a person may own property that could greatly appreciate in value, win the lottery, or receive some other windfall. Also, career earnings could increase along with investments. Even if a testator executes a will when her estate is small, the will would still distribute the estate in the manner the decedent requested.

Similarly, a will can speak to certain tax considerations that may not be important today, but could be important in ten or twenty years. The relevance could arise due to a change in the size of an estate or the change in tax laws, which seem to be changing annually. Such tax considerations could include a marital deduction or a similar tax consideration.

As always, you should seek an attorney licensed to practice law in your state for assistance with all your estate planning needs because each person and each family have different factual situations.

Attorneys are frequently asked whether a person needs a will. Almost everyone should have a will. A will, which is commonly known as a person’s “Last Will and Testament”, is a legal document that tells his/her survivors how the testator wants his/her assets distributed. Another common question is whether one should retain an attorney to draft a will. Although it is not required, it is highly recommended to retain an attorney to draft a will. Attorneys are familiar with the probate laws, trusts laws, family laws, property laws, and tax laws, all of which affect wills. Although certain websites offer estate planning packages, it is not wise to use them.

A last will and testament can appear in many forms. This post will focus only on the most basic components of a will from the perspective of Texas law.

Executor. An executor is the person named to administer the estate of the deceased. The executor (executrix if the person is a woman) should be at least 18-years old, competent, and responsible. The executor is responsible for opening the probate procedure, qualifying as the executor, notifying beneficiaries and creditors or the estate, itemizing the inventory of the estate, appraising the inventory of the estate, listing creditors, filing tax returns, and liquidating the estate, paying the creditors, and distributing the remaining assets to the devisees. Also, the executor will be interfacing with the court. The person drafting the will, also known as the testator, may also decide whether the executor should be paid for the efforts or whether the executor should post a bond to serve as executor.

Specific Bequests. The testator should name any assets or personal effects that he/she wants to go to someone specifically. Oftentimes, these items hold sentimental value or fill a need. Examples include a mother leaving her engagement ring to her daughter and a father leaving his baseball card collection to his son. Also, though, a testator may leave a car to a specific person or a specific amount of money to a grandchild.

Residual Estate. The residual estate is most clearly defined as “everything else”. After making specific bequests, the testator should name how he/she wants the remainder of his/her estate to be distributed. Otherwise, the laws of descent and distribution will control.

No-Contest Clause. Most testators decide to put a “no-contest clause” in his/her will.  A no-contest clause usually states that if anyone contests any part of the will, then such person will not receive any distributions from the estate. The purpose is to reduce the amount of bickering among family members.

Witnesses and Self-Proving Affidavit. Most wills have two witnesses. The witnesses greatly help to “prove-up” the will. Similarly, the self-proving affidavit is a statement by the testator that he/she did in fact sign the will, and at such time of signing, the testator was competent.

Where to Keep a Will. Where to leave the original of a last will and testament is a topic of interest amongst probate attorneys. The original will should be kept where it can be easily accessed. Contrary to popular opinion, a safe deposit box is not always the best place for a will. If a person dies and no other person has access to the safe deposit box, then someone will have to get a court order to get into the safe deposit box. Leaving the original in the top dresser drawer can be a good idea. Although it is not often accessed while one is alive, it is amongst the first places searched after one dies. Also, a copy of the will may be left with a trusted friend or an attorney. And, it is important that someone knows who has a copy.

Although this article focuses on the basic concepts of a last will and testament, there are a lot of other topics that may be of great importance, such as your financial scenario, tax bracket, and family situation. As always, you should seek an attorney licensed to practice law in your state for assistance with all your estate planning needs.

Part of running a corporation is observing corporate governance. A major part of corporate governance is holding stockholders’ meetings. The bylaws of a corporation will govern stockholders’ meetings. Below are the more important things to remember about a stockholder meeting.

When to Hold a Stockholders’ Meeting. Typically, stockholders’ meetings are held annually. However, special stockholders’ meetings may be called in accordance with your company’s bylaws or state law. A typical provision would allow shareholders representing 10% or more call a special stockholders’ meeting. The reason for special stockholders’ meetings could be to reshape the board, authorize a merger, sale of substantially all the assets of the company, or some other liquidation event.

Call of a Meeting. Stockholders’ meetings are typically called by either the board or shareholders representing a certain percentage of stock. The corporate bylaws should speak to the procedure.

Agenda. Stockholders’ meetings should follow an agenda. A typical very simple agenda for an annual stockholders’ meeting would be to close old business, elect members of the board of directors, open any new business, and adjourn. The agenda does not need to be anything real formal, but it should look professional.

Notice. Notice of the stockholders’ meeting usually must be provided no fewer than ten days’ prior to the meeting and no more than sixty days’ prior to the meeting. Check the company bylaws for the specific rules. If the company bylaws are silent to the notice requirements, then check the statutes of the state in which the company is incorporated.

Place of Meeting. Most bylaws and state statutes allow a corporation to hold its stockholders’ meetings within or outside the state of incorporation.

Quorum. Quorum must be established for any action to occur at the stockholders’ meeting. Quorum is typically defined as a majority of the voting stock being represented at the meeting by presence or proxy. However, it can be more or less depending upon the actions to be considered. The chairman of the board of directors typically recognizes quorum at the beginning of the stockholders’ meeting.

Election of Chairman of the Meeting and Secretary of the Meeting. This is usually a formality that elects the chairman of the board of director as the chairman of the meeting. Similarly, the corporate secretary is typically elected as secretary of the meeting. However, there are times when one or both are absent. The chairman of the meeting presides over the meeting. The secretary of the meeting takes the minutes.

Conduct of Meeting. There is really no set methodology for conducting stockholders’ meetings. Typically, larger corporations follow more formal rules. The general standard for conducting meetings is Roberts’ Rules. However, most corporate bylaws do not mention any set methodology. It is best, though, to have some order of formality. Usually, corporations follow a motion, second, discussion, vote format. For example, a shareholder would make a motion. Another shareholder would second the motion. The chairman of the meeting would then open the floor to orderly discussion. After discussion, the motion would either be tabled or voted upon.

Adjournment. All stockholders’ meeting should be formally adjourned. The adjournment closes the meeting.

Meeting Minutes. Sometime following adjournment, the secretary of the meeting should draft minutes of the stockholders’ meeting to be approved by the shareholders.

Estate planning is a term used to describe an individual’s desires and wishes upon his/her death. Estate planning includes a variety of documents. The most common documents are the below listed:

• Last Will and Testament
• Living Trust
• Power of Attorney
• Medical Power of Attorney
• Physician’s Directive
• Guardianship

Last Will and Testament

A last will and testament is what is most commonly referred to as the “will”. It describes the desires of a person when he/she dies. The most important part of the will is the distribution of the assets of the estate. The will also names the person who controls the process of distributing the assets of the estate. This person is called the executor. The will can also create a trust within itself, which is called a testamentary trust. The purpose of a testamentary trust is to transfer the assets of the deceased to the trust at the time of death. For more on trusts, see the below “living trust” section.

Living Trust

A living trust is a document that transfers the assets of a person into a trust and states under what conditions the assets may be distributed. The difference between a living trust and a testamentary trust is when the trust is created. A living trust is created prior to death. A testamentary trust is created at death. The purpose of a trust may be tax related, to protect assets against creditors, and to protect assets from the beneficiaries.

The trust has three key categories of people: (i) trustor (or settlor); (ii) trustee; and (iii) beneficiaries (which may be further defined into income beneficiaries, principal beneficiaries, and contingent beneficiaries). The trustee manages the assets in the trust in accordance to the trustor’s rules stated in the trust document. The most critical components of the trust document are when the assets (and income) may be distributed and how the assets (and income) may be used.

Power of Attorney

A power of attorney is the document that gives others’ the power to execute documents, sell assets, and buy stuff in the name of another. The power of attorney can be as expansive or limited as desired. For estate planning purposes, the power of attorney usually springs into effect upon the incapacitation of the granting party. It differs from the executor of a will because the power of attorney is only valid during the life of the granting party. Upon death those powers transfer to the executor.

Medical Power of Attorney

A medical power of attorney is different from a typical power of attorney because it only provides the named individuals the right to make medical decisions on behalf of the person granting the power. The medical power of attorney is an important document because the person named as the attorney-in-fact will be making decisions for the grantor when he/she is incapacitated. The medical decisions may not always be life-saving measures. It could simple procedures to increase quality of life or treat an otherwise non-life threatening condition. In fact, the below-described physician’s directive often answers questions regarding life-saving treatments.

Physician’s Directive

A Physician’s Directive describes the end-of-life wishes of an individual. The individual typically delineates what type of medical care he/she desires in the case of (i) a terminable condition; and (ii) an irreversible condition. A terminable condition is one that will end in death. An irreversible condition is one that may be somewhat treatable, but is not likely to improve.

Guardianship

Guardianship can be broken into two different types: guardianship over minors and guardianships over adults. Guardianships over minors state who parents (or other legal guardians) want to care for their children upon their death. Guardianships over minors can be a separate document or contained within the trust.

Guardianships over adults are somewhat different from guardianships over minors. It is quite easy to know if a child is a minority. For adults, though, guardianship often requires a court ordering that the adult is incapacitated and unable to make decisions for one’s self. This can get tricky if you have a family member that can pass as competent to others even when you know the person is not capable of making decisions for himself/herself. Before things get to that point, it would be wise to get a durable power of attorney to avoid any of these future sticky issues (although new one’s could arise).

Above all, one should speak to an estate planning lawyer before making any estate planning decisions. A lawyer versed in wills and trusts is almost certainly available in your area.

*This post is meant for general legal and business guidance only. You are strongly urged to obtain the representation of an attorney licensed to practice law in your home state. No post made to this website, no reading of any post, nor any comment you make in regards to any post is protected by attorney/client privilege or constitutes an actual or prospective attorney/client relationship.

You’ve started your company and you’ve done pretty well. However, you need to raise money to hire the next person, buy new equipment, or expand your marketing budget.

Three methods of fundraising may be available to you: debt, equity, or a hybrid of the two. This post will focus on the debt portion.

1. When to Use Debt. If leveraged properly, debt can be a viable way to finance your business needs. Debt should be used responsibly, though. The carry cost (the cost of your monthly/quarterly payment) should be within acceptable ratios to your revenue. Also, it should only be used to increase revenue and not to pay for existing expenses. Businesses that borrow money and don’t increase revenue will only fail with a much higher amount of debt. And, if the debt had a personal guarantee, the guarantor may have a host of additional problems after the business defaults.

There are a couple of exceptions to the general rule of borrowing money only to increase revenue. If a business’ revenue is steadily increasing and the business has a high expectation of the rate of growth continuing, then it could be acceptable to borrow money. Also, if revenue has declined due to outside factors that are temporary in nature, then it could be acceptable to borrow money.

2. Types of Debt. Many different debt structures prevail in the finance industry. Often, the business’ industry has standard types of debt financing. For most small businesses, banks are a primary source of debt financing.

a. Small Business Loans. The Small Business Administration (SBA) has different loan programs available to small businesses. The 7(a) loan program is a special program that has different qualifications. The 504 loan program is more flexible on qualification, but the loan proceeds cannot be used for working capital, purchasing inventory, or refinancing. Another loan program is the Microloan Program. Microloans are short-term loans in an amount not to exceed $50,000. The loan proceeds may be used for working capital, fixtures, furniture and equipment, and inventory.

b. Lines of Credit. Lines of credit can be a relatively inexpensive way to finance a business. A credit card is an example of a line of credit. Usually, business lines of credit have lower interest rates, though. Lines of credit allow businesses to manage debt most effectively. When cash flow is high, the business can aggressively paydown the debt. When the business needs to hire a new employee or pay for costs associated with a job, the business can lean on the line of credit.

c. Standard loans. Of course, a business may also be able to get an old fashion loan. A common loan would be for a set term with a set interest rate (or method for calculating the interest rate), and a payment schedule. The loan may be collateralized (known as a secured loan). The loan may also require a guarantee from one or more of the business owners.

d. Convertible Note. A convertible note is a loan that can convert into equity. The whole loan or a portion of it may convert. Also, the conversion may be automatic or at the option of either the lender or the borrower.

3. Sources of Debt. A business can look several different places to find debt financing. First, look to the owners. Business owners can loan the business money. Another source of debt can be a bank. Local banks are good candidates, especially if the business has an operating account with the bank. Lending sites like www.prosper.com and www.lendingtree.com may also be a good source for funding. Of course, businesses may also look to outside investors.

It is a question that arises often. A typical scenario involves a customer failing to pay an invoice. To collect the unpaid invoice, the service provider sues the customer. In order to save the cost of hiring an attorney, the service provider purchases a self-help book and files the lawsuit himself. There is only one problem. The service provider is really a limited liability company or corporation, and the person suing is merely the owner of the business. The owner’s representation of the company is tantamount to the unauthorized practice of law.

One reason for the rule is because corporations, limited liability companies, and partnerships are considered persons separate from their owners and managing authorities. An exception does exist. First, if the company representative is an attorney, then obviously an attorney can represent the company. Second, the company representative may have the option of filing the lawsuit in the justice court.

Justice courts only have jurisdiction to hear cases that have damages of $ 10,000 or less. If the amount in controversy is greater than $10,000, then your business should hire an attorney. Please note you will have to pay filing fees and service fees. If you hire an attorney, then a retainer may also be requested.

The justice court complaint form is fairly simple to complete. If the plaintiff is only seeking damages, then it may be considered a small claims case. Some local justice courts have information on their websites to assist in the court procedure even though the court itself is not allowed to provide actual legal advice.

As a quick note, a plaintiff cannot sue for $10,000 if the true damages are higher. Otherwise, the claim will be dismissed for lack of jurisdiction.

*This post is meant for general legal and business guidance only, and only for the State of Texas. You are strongly urged to obtain the representation of an attorney licensed to practice law in your home state. No post made to this website, no reading of any post, nor any comment you make in regards to any post is protected by attorney/client privilege or constitutes an actual or prospective attorney/client relationship.

This post is a continuation on what to do if someone accuses you (or your website) of copyright infringement. To view that post, click here. You recently posted some really good content and discovered through a search that another blogger has stolen your article. What should you do? First, contact an attorney licensed to practice law in your jurisdiction. After contacting an attorney, he should review the Digital Millennium Copyright Act (DMCA). The DMCA provides very strict notice requirements for you to correctly allege copyright infringement of your material. The notification must be in writing and sent to the designated agent of the site owner that includes the following:

(i) A physical or electronic signature of a person authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

(ii) Identification of the copyrighted work claimed to have been infringed, or, if multiple copyrighted works at a single online site are covered by a single notification, a representative list of such works at that site.

(iii) Identification of the material that is claimed to be infringing or to be the subject of infringing activity and that is to be removed or access to which is to be disabled, and information reasonably sufficient to permit the service provider to locate the material.

(iv) Information reasonably sufficient to permit the service provider to contact the complaining party, such as an address, telephone number, and, if available, an electronic mail address at which the complaining party may be contacted.

(v) A statement that the complaining party has a good faith belief that use of the material in the manner complained of is not authorized by the copyright owner, its agent, or the law.

(vi) A statement that the information in the notification is accurate, and under penalty of perjury, that the complaining party is authorized to act on behalf of the owner of an exclusive right that is allegedly infringed.

17 U.S.C. 512(c)(3)(i)-(vi)

The above is the actual language of the notice requirements. “Service Provider” is interchangeable with the site owner. In addition, you should be able to find the designated agent on (i) the site owner’s website (probably on the terms of use); and (ii) the US Copyright’s Office. If you do not find the designated agent in either place, then it arguably has not followed the rules to avoid liability for copyright infringement.

*This post is meant for general legal and business guidance only. You are strongly urged to obtain the representation of an attorney licensed to practice law in your home state. No post made to this website, no reading of any post, nor any comment you make in regards to any post is protected by attorney/client privilege or constitutes an actual or prospective attorney/client relationship.

Blogging has become an incredibly popular tool used by businesses and individuals alike. Many bloggers have so much traffic to their site that other bloggers will post content on the popular blog. In addition, user generated content can appear on a blog. It is important, especially for professional bloggers, to have a minimum understanding of copyright issues that could arise from operating a blog.

You have a successful blog and someone else posts an article on your site. The following day, you receive an e-mail stating that someone else wrote the article on your website. After bouts of fear and anger run their course, you are left with one question, “What do I do?” First, contact an attorney licensed to practice law in your jurisdiction. Next, brush up on The Digital Millennium Copyright Act (DMCA). The DMCA governs many of the copyright questions that may arise for site owners.  Fortunately, the DMCA provides a safe harbor for site owners that do not know (or do not have reason to know) that material is infringing someone else’s copyright so long as the site owner follows certain rules. Below appear some of the more important parts of those rules. However, this list is not exhaustive and you really should contact an attorney licensed to practice law in your jurisdiction.

(i) The site owner must not have a financial benefit directly attributable to the allegedly infringing material;

(ii) The site owner must have designated an agent to receive infringement notices, such agent must have been identified on the site owner’s website along with such agent’s name, address, phone number, and e-mail address, and the same information must have been provided to the US Copyright Office;

(iii) The site owner must expeditiously remove or otherwise disable the allegedly infringing material;

(iv) The site owner must notify the author of the allegedly infringing material that the content has been removed or otherwise disabled;

(v) The site owner must forward any counter-notice to the original complainant; and

(vi) The site owner must repost or otherwise enable access to the allegedly infringing material if the original complainant has not filed suit within 10-14 days.

The statute anticipates the site owner to be proactive in resolving copyright matters. The information required for the designated agent should be in the Terms of Service. Additionally, the designated agent should be on file with the US Copyright Office. If a copyright matter does arise, an attorney should be on standby to allow you to react in an expeditious manner. As you can see, the law anticipates a lawsuit being filed within 10-14 days.

*This post is meant for general legal and business guidance only. You are strongly urged to obtain the representation of an attorney licensed to practice law in your home state. No post made to this website, no reading of any post, nor any comment you make in regards to any post is protected by attorney/client privilege or constitutes an actual or prospective attorney/client relationship.

A corporation is a formal arrangement that you file in regards to a business venture. Traditionally, the filing document is called the Articles of Incorporation. Now, different states have different names for the filing document such as Certificate of Incorporation or Certificate of Formation. On its simplest level, the Articles of Incorporation will include the following:

• name of the company
• registered agent and registered address
• business purpose
• number and name of initial director(s)
• authorized number of shares and par value

Name of Company

The name cannot be used by another venture that has a filing in the same state. In addition, you should be cognizant of trademarks. Each state has rules regarding how similar the names can be. If your corporate name sounds identical to another filed company, then the reviewer may reject it. Additionally, if the only difference is a geographic identifier, then it may not be accepted.

Registered Agent and Registered Office

One of the benefits of using a corporation is the limited liability protection to its shareholders. Corporations actually have their own taxpayer number and are considered a separate “person” in the eyes of the law so long as the rules are followed. Because a corporation is a different person, someone has to be listed to receive service in case the corporation is sued. This person is the registered agent. And, the registered office must be in the state in which you are incorporating. If you are incorporating in a state that is not where you live, then you can pay different companies to be registered agents for you.

Business Purpose

Your business purpose may be anything that is allowed by law. In fact, most Articles of Incorporations state that the corporation may perform any act allowed by law. You can limit the business purpose and there may be times that it is desired, but it is not required.

Number and name of initial director(s)

Each Corporation needs at least one director. For most startups, I would assume that the initial director would be you.

Authorized Number of Shares and Par Value

The number of shares you authorize will depend upon the imminent funding needs of your company. It is usually wise to authorize more shares than you intend to issue. This will allow you to sell stock in the future to others or yourself. Most startups only need to start with common stock. If you will be raising money, though, you should strongly consider also authorizing preferred stock.