With the continuous media coverage over the recent tragic death of the actor Paul Walker, it should be a reminder to think about planning for your eventual passing, no matter what your age.
Many people come to estate planning lawyers or think about getting a living trust or a will when they are getting close to retirement; however, most everyone should think about the one event in your life that you can bet will happen, your eventual passing.
With Mr. Walker, several issues come up that it is too early to know the answer to. Even though he was only 40, how did he prepare for the eventuality that has now happened? His daughter moved to California from Hawaii to be near him. Since she is only 15, who is her legal guardian and where will she live now that he is gone?
I don’t know how much Mr. Walker was worth, but I am sure he had substantial assets and probably life insurance in place. Were those assets to pass directly to his daughter, to his parents, to the mother of his child? If he didn’t have a trust or will in place, the State of California would make those decisions. Good planning can involve preparing a trust to avoid the costs of probate court and set out exactly what should happen to your assets. In this case, a typical trust would have things in it to say how much money goes to his daughter, when, and under what conditions. Maybe that includes only giving half when she turns 25 and the other half when she turns 40. Maybe it includes provisions so that she can’t get anything if she starts abusing drugs or alcohol. These are just some of the concerns, even for a relatively young person planning for the “just in case.”
In terms of asset protection, if Mr. Walker was driving (although it sounds like he wasn’t) and was driving recklessly or under the influence, his estate would probably face a potential wrongful death suit from any passenger in the vehicle’s family. If his assets are not properly protected, all of the money and property he has earned could be open for a contingency lawyer to go after and his daughter or family could be left with nothing. Some early steps could help transfer some assets away from potential creditors and toward family, charities, or other places someone would want their money to end up after their death. A common misconception is that if you get a living trust online or even through an attorney, that you are protected. That is not the case. A living trust is a revocable agreement that provides no protection of your assets from potential creditors.
This is just another tragic situation that should remind people to be sure their affairs are in order for that “just in case” moment.
A common issue faced by entrepreneurs, founders, start-ups, and other small businesses is how to get documents when they need to raise money for their venture or enter into various agreements, hire employees, or protect their intellectual property. The cash strapped individuals often look to discount or free services online to help them do things like obtain sample templates, incorporate, or get other form documents they can use. There are definitely times you can use these sample form templates or online services and there is a link to some document / forms websites, term sheet resources, and sample financing documents on my Top Startup Resources page. There are private placement memorandum (commonly referred to as PPM) templates online that can give a starting point and I go over what a PPM is, why you need one, and what should be in one on this page.
Many entrepreneurs and founders are hesitant to talk to an attorney for fear of the dreaded hourly billing or unknown costs. The other concern is that many people fear or don’t want to deal with lawyers, either because they don’t know what to expect or there have been bad experiences they have experienced or have heard about. That is why many people avoid getting initial legal work complete when they are working on a startup idea. I have discussed in a recent article about some of the problems and reasons why founders need to get quality business, financial, and legal advice very early on in the process (See Business Start-Up Toolkit- A Guide to Lean Startup Legal & Advisors). I have also discussed in a separate article what to look for in a startup attorney. People often resort to online document templates or avoid putting things in writing or use online incorporation/document services. These things can have their use and can save money; however, there are ways to get these things done properly and avoid mistakes that can end up being much more costly in the long run (also discussed more in the Guide to Lean Startup Legal above).
I put resources and educational material up to help people make wise decisions on when to save money on my websites and blog; however, I also try to put things together to help entrepreneurs at a reasonable price when they need to spend the money to get their legal work performed.
I offer a variety of flexible payment terms for start-up legal services and offer a flat fee start-up package for a total of $5,000 that includes all the following early and formation stage legal service/documents:
- Reserve a corporate name
- Incorporate or form a limited liability company
- Prepare necessary bylaws or operating agreement to provide how the company is managed
- Prepare all formation corporate consents and resolutions by shareholders and/or board, corporate records, and minute book
- Prepare and file Form SS-4 Application for Employer Identification Number
- Prepare and file a qualification to do business as a foreign corporation in the state in which the company is located (if applicable)
- Prepare form of Indemnification Agreement for officers and directors
I was reading an article in this month’s (June 2012) Entrepreneur magazine by Ann C. Logue entitled “Beyond the Handshake- Having a business partner can be valuable. Having the wrong-or no-partnership agreements can be disastrous.” It details the experiences I hear every day by founders, entrepreneurs, and startups. Most know they need quality legal and business advice in the early stages of their growth, but don’t want to spend the money on it. With the advent of online document and template sharing, discount legal document prep companies, and companies out there like LegalZoom and RocketLawyer offering low-cost or free legal documents, I very often hear and see the impact that is having. I have worked both in the trenches of many a cash-poor startup and also as an attorney advising these same type of companies or founders and wanted to give some additional guidance and solutions from both perspectives.
Education and information are some of the most critical areas for any start-up. They need to know their product, know their market, learn how to commercialize their product or service, and how to go from idea to a functioning business. I put together a handbook with some of the common areas operationally, administratively, financially, and legally in my Startup Bootcamp 101 e-Book (Click to download free pdf) to provide some basic education on those aspects of business start-ups. There are web resources that I have tried to compile as well at this Blog, but there are tons of resources in the form of books and online materials. Some recommended books are Venture Deals by Brad Feld, the Lean Startup by Eric Reis, and the Startup of You by Reid Hoffman. I will discuss some of the do’s and don’ts when trying to stay within a “lean startup” mentality, but also when you do yourself a disservice by trying to cut corners to save money.
My site pBeta.Us is in development to provide entrepreneurs, founders, businesses, and really anyone tools, resources, guidance, and a forum to discuss the development of their own permanent beta. P-Beta is a state of being fluid and constantly changing and adapting to your environment, the market, and your personal or business needs.
Reid Hoffman, co-founder of LinkedIn, in his recent book “The Start-Up of You“ describes how running a start-up can be compared to how individuals should approach their career progression. He uses the term permanent beta to describe the process of what start-ups use and people can learn from. Beta has several definitions, but the core has to do with measuring existing change or whether change needs to occur. In finance, beta often has to do with volatility of pricing, so measuring how much change is involved. In the tech world, beta is often the label applied to so-called “beta tests” where a computer product or software is launched in its current state to see if there are any problems with the software that need to be fixed and to get a reaction from the market to measure other aspects related to marketing as well. It comes down to being willing to and measuring change based upon current conditions and the marketplace.