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Among the most difficult things for an entrepreneur to deal with is determining the right time to step out of the business and the right plan for doing so. It may be that it is time to pass the business on to the next generation of family members who are interested in keeping it going, or that it is time to sell the business or its assets. Business succession involves more than writing a will and dividing assets between one’s heirs after death. A successful succession plan takes into consideration the goals and needs of the family members as well as the orderly transfer of responsibility and control of the business. Selling the business outright requires a different plan, although many of the retirement issues are the same.
When does the planning process begin? The business owner can begin considering selling the business or succession planning at any time but certainly when family members become active in the business or the owner feels that the time for retirement is approaching. The early stages of succession planning focus on the family members themselves, identifying each individual’s capabilities, experience, expectations, and interest in the business. It may become apparent that not every family member is well-suited for the business, or that there are old issues that need to be resolved among them. During the initial planning, communication is very important and the business attorney can facilitate the identification of issues that might threaten the business in later years.
As the family-business owner begins to create the succession plan, he or she will consider the advantages and disadvantages of the various methods used to transfer a business to one’s heirs. Working with the business attorney and accountant, the family-business owner will explore options such as selling the business to family members or other successors, use of a buy-sell agreement, trusts, annuities, installment notes, family limited partnerships, outright gifts and life insurance policies.
If the business owner elects to sell the business outright, then process is more likely to focus on the timing of the sale. When is the business in the best position ro realize the great sale price? Is it better to take on a business partner who will eventually buy the owners shares? Should the owner sell the business entity or the just the assets?
Each plan requires the business owner to contemplate his or her eventual full retirement, possible disability or premature death. Our attorneys are experienced in helping individuals and families prepare for the future with comprehensive business succession and estate planning. Let us assist you in taking care of the business of your life.
According to NH RSA 281-A:5, every employer who employs individuals on a full or part-time basis is required to obtain Workers' Compensation Insurance for those employees. It does not matter if the employees are related either to yourself or each other.
RSA 281-A:2 VIII states that if a corporation or limited liability company has three, or fewer, executive officers or LLC members, and does not employ any other individuals, obtaining coverage is not mandatory but may be elected pursuant to RSA 281-A:3. In the event a fourth executive officer or LLC member joins the company, Workers' Compensation Insurance must be purchased.
Once coverage is in place, everyone in the company, including all officers or LLC members, are considered employees and automatically covered. Up to three executive officers or LLC members may then elect to be excluded per RSA 281-A:18a. Every employer who is subject to the Workers’ Compensation statute, RSA 281-A, or who elects to accept its provisions, must post a notice at the business that the employer is working under the provisions of this chapter.
It is important that you establish, document and maintain a consistent hiring procedure. Having such a procedure, and following it, will provide the basis for a defense against a hiring related claim. Usually, the process begins with an employment application. In general, the application should not ask questions about age (except to verify that the applicant is above the minimum age required by law for a specific job), sex or sexual orientation, race, color, marital status, maiden name, number names and ages of children and other dependants, religious creed, national origin, disability, pregnancy status, history of worker’s compensation claims, absences at prior jobs, arrest records that did not result in convictions or military history unless the job requires such background.
The application should not inquire about the applicant’s height and weight, except in specific job categories where guidelines have been established such as law enforcement. Similarly, the employer should not ask any medical questions. The employer should not seek information about organizations that the applicant may belong to such as political parties, although though it is permissible to ask about professional memberships that directly relate to the specific job in question. It is permissible to ask for a complete employment and educational history, and it is acceptable to inquire about gaps in employment periods.
During the employment interview, the interviewer should take care to only ask questions that have to do with the job. If the questions do not deal specifically with an applicant’s ability to perform the responsibilities associated with the job, they should not be asked. The application should have an acknowledgment, that the applicant signs, stating that the information contained in the application is true and accurate and that including incorrect information will result in termination. The application should include a statement indicating that if hired, an employee’s status is “at-will”, a consent and release for contacting references, prior employers, schools, any drug or alcohol testing, or criminal background checks if required by the position.
Interviews provide great opportunities to learn more about the applicant’s capabilities but can also lead interviewers into treacherous territory if they are not experienced. If you own a business and are unsure about how the interview should proceed, do not hesitate to speak with an attorney who can help you prepare appropriately.
There will be times when, even though you followed best practices during the hiring phase, you will need to terminate an employee. Termination presents a number of causes of action terminated employees may use to claim a wrongful discharge. Employers are advised to create policies and procedures that are applied consistently for all employees. Prior to firing an employee, the employer should document any problems, but in a manner that is consistently applied to all employees so that it does not appear that one specific employee was targeted. Regular performance reviews and the documentation of problems with all employees should be maintained in the personnel records. Additionally, a disciplinary policy should be followed with all employees and any discipline applied should be documented.
When terminating an employee, if the employer does not want to offer a long explanation to the employee, the reason it does give, should be real. Avoid making personal remarks that might humiliate the employee, or remarks that might lead the employee to think the termination is temporary. If you think the employee may become emotional, consider having a witness present. The employer should explain any severance pay, benefits continuation forms, profit-sharing procedures and other benefits available to the employee carefully and precisely.
The employee should be allowed to remove personal items at a time that permits the individual to maintain his or her dignity. The company should prepare a checklist of property that belongs to the company and these items should be accounted for, such as keys. The company should deny access to its computer system immediately upon discharge.
The termination should be documented for the personnel file immediately after it takes place. Attention should be paid to the details of the conversation and the reaction to the termination. Staff should be informed of the termination, and a simple statement is best. If the termination is for cause, it is best to keep that reason confidential and limited to an agreement with the employee that the company and employee simply part ways. Employees who have questions can meet with the company privately and customers should be contacted so they know how their needs will be met and by whom.
An employer who believes that the termination of a particular employee presents a problem for the company, should speak with an attorney prior to taking any action. For more information, please contact Emily Collinson at (603)524-4121.
Are you buying multiple properties? We recommend forming a separate LLC for each property. Having multiple entities prevents “spillover” liability from one property to another. For instance, you invest in two properties each valued at $500,000 and take title to both in one LLC. One of your tenants slips, falls and is injured at one property location, sues and wins a judgment for $1,000,000. A lien can be put on both pieces of property because they are held in the same LLC. If a separate LLC is created to hold each piece of real estate separately, then the lien could only be attached to the one location where the injury occurred. For this reason, many banks and lenders require separate LLCs for each property so that the security interest they hold in one property is not jeopardized by any other property. If you are interested in forming an LLC, please contact Attorney Jeanne S. Saffan at (603) 527-9179 or firstname.lastname@example.org.
Business Newsletter 6/12