The Consequences of Failing to Fund a Bypass Trust

There is a widespread misunderstanding that if you and your spouse had set up a living trust, nothing needs to be done when the first spouse passes away except remove the deceased spouse’s name from bank accounts and real estate deeds.  If you were under this impression, you may be leaving a big headache for your heirs and subjecting half of your estate to 35 or 55 percent inheritance tax, unnecessarily.

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Why do I need a HIPAA and CMIA authorization?

When the principal has an existing advance health care directive (AHCD) or power of attorney for health care (PAHC), the Authorization for Use and Disclosure of Protected Health Information (“HIPAA-CMIA”) document may be used as a stand-alone document to grant the agent rights over the health information and medical records of the principal, instead of executing a new AHCD or PAHC solely for that purpose.

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Franchise Offerings

If you are interested in forming and filing a franchise for your existing business, there are several important legal issues to consider.

Business Opportunity vs. Franchise
There are two areas of law in this respect, namely, business opportunity and franchise law.  “Business opportunity,” which is legally known as Seller Assisted Marketing Plans, as defined under California Civil Code §1812.200 and are known as “SAMPs.”  SAMPs must register with the Attorney General’s Office of each state, as required, provide disclosure statements, and provide buyers with specific notice and disclosures.  The registration requirements, fees, and notice period are less than for a franchise.  The Seller Assisted Marketing Plan Act was written for and aimed at seller discount buyers (think Avon, Jafra, MaryKay, Herblife) and the sale of vending machines, racks or work-at-home paraphernalia.

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Different Entities versus an LLC

Choosing which type of entity to use is among the most important decisions a business can make. Most clients wish to avoid personal liability for the obligations of the business (an attribute of corporations) and may also wish to personally deduct the losses of the business and avoid double taxation of the income of and distributions from the business (attributes of partnerships). For businesses with these objectives, the limited liability company may offer the best of both worlds. An LLC is generally treated as a partnership for tax purposes. At the same time, the LLC’s members, like corporate shareholders, are not personally liable for the debts of the business.

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Buying a Business Checklist

 This Checklist is prepared by [Buyer] on [Date] for the business [Target’s Name].

I. Finding and Evaluating an Acquisition Candidate

A. Research
For those who have not already identified a business to purchase, this may be the most difficult step.  Following are possible sources of information about businesses that may be for sale:

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Choosing the State of Organization of the Limited Liability Company

The Act provides that the laws of the state or foreign country under which a foreign LLC is organized govern its organization and internal affairs and the liability and authority of its members, and that a foreign LLC may not be denied registration by reason of any difference between those laws and the laws of California. Corp C §17450. Therefore, the Act permits members to “forum shop” for the LLC Act deemed most compatible with the members’ business purposes.

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Medical Reimbursement Plans

Definition – Medical Reimbursement Plan
A medical reimbursement plan is any plan where an employer reimburses an employee for uninsured health or accident expenses incurred by the employee or his dependents.  The most common type of Section 105 plan is a self-funded health plan, where the employer has chosen not to insure health care benefits and to self-fund these benefits rather than pay premiums to an insurer. Section 105 plans are also frequently found inside Section 125 Cafeteria Plans in the form of Medical Flexible Spending Accounts (FSAs). It is acceptable, however, to implement a medical reimbursement plan alongside a conventional health insurance plan (to reimburse amounts not covered by insurance) and outside of a cafeteria plan.

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Myths of Corporate Formation and Compliance

Myth:  In order to form a corporation, I only need to file the Articles of Incorporation.
It is not true that a corporate entity is fully formed with the filing of the Articles of Incorporation (or in the case of a Limited Liability Company, the Articles of Organization).  Many times the question is asked, “I formed my new corporation by filing the Articles of Incorporation, now what do I need to do?”

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