Author Archive: Lin Law

Maintaining limited liability under Wisconsin law

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This article by Lin Law LLC’s Attorney Emily E. Ames was featured in the August 3, 2020 issue of The Business News.

One of the primary reasons that businesses choose to organize as a separate legal entity, in the form of either a business corporation or limited liability company (LLC), is so that their shareholders, directors, and officers are shielded from personal liability for claims against the business. This concept is often referred to as “limited liability” or the “corporate veil.”

The veil, however, it not absolute. Under certain circumstances, the corporate veil may be pierced, or disregarded, by a court in order to hold the corporation’s shareholders, directors, or officers (or, in the case of an LLC, its members or managers) personally liable for claims against the business. This can include liability for unsatisfied debts and contractual claims.

The primary test for piercing the veil is the “alter ego” doctrine. This refers to a situation where an individual shareholder, director, or officer has essentially utilized the corporate entity as his or her alter ego. Unlike that of a comic book superhero, however, this alter ego is used not for good, but personal gain.

Under Wisconsin law, invoking the alter-ego doctrine in order to pierce the corporate veil requires a plaintiff to meet all three of the following elements:

1.     The individual shareholder, director, or officer controlled the business with respect to a particular transaction, such that the corporation had no separate mind, will, or existence of its own

2.     The individual shareholder, director, or officer used his or her control of the business to commit a fraud or wrong, to violation a statutory or other legal duty, or to act dishonestly or unjustly; and

3.     There was a causal connection between the first two elements and the plaintiff’s injury.

In other words, a court will pierce the corporate veil and hold an individual shareholder, director, or officer personally liable where he or she inappropriately utilized the corporate entity for his or her own personal gain, whether monetary or otherwise.

In evaluating the first element, courts will consider whether corporate formalities have been observed. These includes holding regular corporate meetings, maintaining all necessary corporate records, and segregating corporate assets from those of its shareholders. The second element often considers whether the corporate entity was adequately funded at inception or when a particular transaction took place. Under-capitalization can serve as evidence that the entity was created solely for purposes of shielding the shareholders’ personal assets. Finally, the first two elements must have actually caused or contributed to the plaintiff’s injury.

It’s important to note that piercing the veil is generally unnecessary to hold individual shareholders, directors, and officers personally liable for their own tortious conduct, even if the conduct was committed in the scope of the individual’s employment. The corporate veil may also be disregarded where the corporation has violated consumer protection laws promulgated by the Wisconsin Department of Agriculture, Trade and Consumer Protection, or in situations where piercing the veil is supported by a compelling public policy rationale.

So how does a closely-held corporation or single-member LLC maintain the limited liability? The primary line of defense is maintaining appropriate corporate formalities. For a business corporation, this means holding annual meetings and preparing minutes. At a minimum, the annual minutes should document the election of officers and directors and ratify any significant actions taken on the corporation’s behalf. An LLC must maintain its own bank accounts and records, and its members should ensure to conduct business only in the name of the LLC. While annual meetings are not statutorily required, significant transactions should be approved by the members in writing.

Limited liability is one of the primary benefits afforded to businesses incorporated or organized under Wisconsin law, but only if it is respected and maintained accordingly.

In the wake of COVID-19, many are considering their estate plans

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This article by Lin Law LLC’s Attorney Emily E. Ames was featured in the June 22, 2020 issue of The Business News.

In the midst of a global pandemic, people are spending more time at home and have more time on their hands. As a result, many are considering their estate plans, or lack thereof.

When people think of an estate plan, they often think of a last will and testament, which is the foundation of any estate plan. For those concerned with avoiding probate of their assets upon death, they may also consider a revocable trust (sometimes referred to as a “living trust”). Probate, which is the court-supervised process of winding up a decedent’s affairs, is often vilified in light of its public and sometimes tedious nature. But, whether or not probate avoidance is desired or necessary in a given situation will depend, in large part, upon the nature of the assets that comprise a person’s “estate.” In either case, it’s important to have a good understanding of the mechanics of your estate plan in order to avoid inadvertently circumventing it. For example, failure to title assets and prepare beneficiary designations appropriately are two good ways to upend an otherwise airtight estate plan.

It’s also important to keep in mind that the will or revocable trust, which serve as an estate plan’s primary vehicle, are not the whole picture. A complete, well-rounded estate plan should also include a marital property agreement for married couples, powers of attorney for finances and health care, authorizations for the release of protected health information and electronically stored information to designated individuals, and documentation of the person’s wishes regarding funeral and burial arrangements.

For those who already have an existing estate plan in place, it’s important to periodically review and update the documents as time passes, considering not only changes in financial and personal circumstances, but also changes in applicable federal or state law. Just how often to review an estate plan depends, of course, both on the estate plan itself and the nature of the circumstances that have changed.

For example, an estate plan established upon the birth of a married couple’s first child may no longer be appropriate twenty or thirty years later, when the couple is approaching retirement. The focus of their existing estate plan was likely to name guardians and establish testamentary trusts for the benefit of the couple’s then-minor children, who are now grown adults, possibly with children of their own. The couple’s named fiduciaries, such as personal representative, trustee, and power of attorney, may have been parents, siblings, or other family members who are no longer the most appropriate choices for those roles, whether due to age, incapacity, or geographical location.

In updating their estate plan, this couple’s focus will likely have shifted from providing for their children to planning for the potential of future incapacity and long-term care needs. They may now wish to name one or more of their children as personal representative, trustee, and power of attorney. Depending on the couple’s net worth, they may need to consider implementing tax planning strategies within their estate plan, in order to mitigate potential estate tax consequences. In other words, their personal and financial circumstances have changed, and so too should their estate plan.

Should your high school grad’s college-readiness checklist include powers of attorney?

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Despite recent events, many high school graduates are now preparing to leave home, whether it be to attend college or join the workforce. While preparing for this enormous change in their child’s lives, many parents forget that they will no longer be able to make health care and financial decisions on their child’s behalf once he or she turns 18. Without the proper documents in place, parents must obtain a court order to exercise this authority on their adult child’s behalf, even if the child becomes incapacitated. For this reason, we recommend that all parents encourage their children to implement a Durable Power of Attorney, Power of Attorney for Health Care, and HIPAA Authorization for Release of Protected Health Information upon attaining age 18. In doing so, it may be helpful to have a better understanding of what these documents do.

Durable Power of Attorney: Authorizes the designated attorney-in-fact to act on the adult child’s behalf with respect to most financial matters. This could include managing bank accounts, paying bills, signing tax returns, applying for government benefits, applying for a lease, etc. Durable Powers of Attorney can be either immediate or “springing.” In order to activate a springing Durable Power of Attorney, the adult child must be deemed incapacitated by two different physicians (or, under recent legislation, one physician and one psychologist, physician’s assistant, or nurse practitioner).

Power of Attorney for Health Care: Authorizes the designated health care agent to make medical decisions on the adult child’s behalf if he or she is incapacitated. Like a springing (as opposed to immediate) Durable Power of Attorney, a Power of Attorney for Health Care must be activated upon the adult child’s incapacitation.

HIPAA Authorization for Release of Protected Health Information: Authorizes an adult child’s health care providers to release information to and discuss the child’s medical care with the designated individuals. Without this authorization, health care providers are legally prohibited from discussing the adult child’s care with third-parties, even if those third-parties are the child’s parents. Importantly, the HIPAA Authorization is effective even if the adult child’s Power of Attorney for Health Care has not yet been activated.

Nine times out of ten, a parent will never need to utilize these documents on their child’s behalf, but it’s always better to hope for the best and plan for the worst.

If you have questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Hindsight is 20/20, even for Kobe Bryant

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In a previous post, The Estate of Kobe Bryant, we discussed some of the potential challenges facing Kobe’s wife, Vanessa Bryant, as the likely heir of Kobe’s sizable estate. Recent court filings have revealed some of the details of Kobe’s estate plan, including one major flaw.

In March, the co-trustees of Kobe’s trust (his wife, Vanessa, and his former agent, Robert Pelinka, Jr.) petitioned a California court to amend the terms of Kobe’s trust to add Kobe and Vanessa’s youngest daughter, Capri Bryant, as a beneficiary. The trust, which was originally created by Kobe in 2003, was amended in 2011 and 2017 to add his and Vanessa’s first three daughters, Gianna (now deceased), Natalia, and Bianka Bryant, as beneficiaries.

Kobe and Vanessa failed, however, to update the trust subsequent to Capri’s birth in 2019, and the trust did not include an “afterborn children” provision (stating that any additional children born to Kobe and Vanessa would be included as beneficiaries of the trust). As a result, the trust provides for distributions of income and principal to provide for Vanessa, Natalia, and Bianka’s support, maintenance, and care during Vanessa’s lifetime. Upon Vanessa’s death, the remaining balance of the trust will be divided into equal separate shares for Natalia and Bianka only.

The petition filed by Vanessa and Mr. Pelinka therefore requests that the Court add Capri as an equal beneficiary of the trust. Under California law, a court may amend the terms of a trust if the requested modification is consistent with a material purpose of the trust. In this case, the court is likely to find that Kobe intended to provide equally for all of his children and amend the trust as requested. From Vanessa’s standpoint, however, the fact that the petition was necessary in the first place is an unwanted complication in the midst of an undoubtedly difficult time.

Ultimately, this story demonstrates that even celebrities fail to update their estate plans after significant life events, such as marriage, divorce, or the birth of a child. It is important to periodically review any existing estate plan, considering changes not only in financial and personal circumstances, but also in applicable federal or state law. Just how often to review an estate plan depends, of course, on both the estate plan itself and the nature of the circumstances that have changed.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Happy National Healthcare Decisions Day!

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National Healthcare Decisions Day, celebrated annually on April 16, is a nationwide initiative to inspire, educate, and empower the public and health care providers about the importance of advance healthcare planning. But what, exactly, is advance healthcare planning? Broadly speaking, advance healthcare planning is the process of formulating and documenting your beliefs and wishes in connection with your health care.

Issues to consider in this process include nursing home admission, end-of-life care preferences, and organ donation, just to name a few. After deciding what your wishes are in this regard, the next most important decision is selecting initial and successor health care agents. Your agents should be people that you trust to follow your wishes and make health care decisions on your behalf, if you should become incapacitated. Finally, once you know “what” and “who,” it is imperative that you memorialize your wishes in writing. In the State of Wisconsin, this can be accomplished via various advance health care directives, including Powers of Attorney for Health Care, HIPAA Authorizations for Release of Protected Health Information, and Declarations to Physicians (also referred to as a “Living Will”).

The Conversation Project, the nonprofit organization charged with managing and promoting National Healthcare Decisions Day, has various resources available on its website, including a COVID-19 specific conversations guide. The State Bar of Wisconsin has also made it’s excellent publication, A Gift to Your Family: Planning Ahead for Future Health Needs, available as a free download through April 25, 2020, in recognition of National Healthcare Decisions Day. We hope that these resources will be helpful to you and your family, no matter where you are in the process of your own advance healthcare planning.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

CARES Act Authorizes $349 Billion in Forgivable Small Business Loans

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On March 27, 2020, President Trump signed into law the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), authorizing the United States Small Business Administration (the “SBA”) to issue up to $349 billion in forgivable loans to eligible small businesses through June 30, 2020. SBA §7(a)-approved lenders will be begin processing loan applications as soon as April 3, 2020.

Under Section 1102 of the CARES Act, the “Paycheck Protection Program,” employers with five hundred (500) or fewer employees can borrow up to an amount equal to 2.5 times the employer’s average monthly payroll expense or $10 million, whichever is less. The Paycheck Protection Program waives a number of the requirements that are typically applicable to SBA loans, caps interest rates at four percent (4%), and provides for complete payment deferment (including payment of principal, interest and fees) for not less than six (6) months and not more than one (1) year.

Section 1106 of the CARES Act provides that the principal balance of a loan obtained under the Paycheck Protection Program is forgivable in full, provided that the loan is used to pay for business continuity expenses, including: payroll (wages, health insurance, sick leave, retirement, and other benefits), mortgage interest expenses, rent expenses, and utility expenses. However, the total amount of the principal balance that is forgiven will be reduced if an employer lays off employees who are not subsequently rehired or reduces compensation to employees by more than twenty-five percent (25%) during the covered period (March 1, 2020, through June 30, 2020).

The SBA recently updated its website to include information regarding Paycheck Protection Program loans, including a sample application form.

If you have any questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

The Business News publishes guest legal column by Lin Law LLC

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The following article by Lin Law LLC’s Attorney Emily E. Ames was published in the March 30, 2020 issue of The Business News as Now is good time to review succession plan.

 

Preparing During a Pandemic: Does Your Business Have a Succession Plan?

In the midst of a global pandemic and the corresponding uncertainty regarding the future, now is a good time to review your business’ succession plan (if you have one) or to start putting one in place (if you do not). Unsure whether you have a business succession plan? Two basic but important questions for business owners to consider are: “what will happen to my business when I’m ready to retire?” and “what will happen to my business if I die unexpectedly?” If you do not have a good answer to one or both of these questions, it’s time to do some work.

At a minimum, it is important to ensure that your business has all the necessary documentation in place. For a limited liability company, this will primarily consist of a comprehensive Operating Agreement, and should also include consent resolutions executed by the members, which document important transactions and business decisions. For a corporation, this means up-to-date Bylaws, accurate and regularly-maintained corporate minutes, and a Shareholders’ Agreement or other similar Buy-Sell Agreement. The business should, ideally, have an Employment Agreement in place for all key employees.

There are also practical considerations to keep in mind. Does someone other than you have the log-in information for all hardware and important software? Does someone other than you have access to the information necessary to maintain essential business operations? If the answer to either of these questions is “no,” begin documenting these items as soon as possible.

Another issue to consider is whether you intend to pass the business on to an employee or business partner, or whether you would prefer to sell it to a third party. If the former, it is important to begin identifying potential successors and training them as soon as practicable. The sooner you start, the better. If the latter, consider how you will go about identifying an appropriate buyer and what you can do to make the business more marketable. In both cases, it’s important to understand what your business is realistically worth.

Keep in mind the interplay between your business succession plan and your estate plan, and ensure that the two are coordinated. Ideally, your Operating Agreement or Shareholders’/Buy-Sell Agreement will specify what happens to your ownership interest upon your death. These documents will frequently grant a right of first refusal for the corporate entity or other owners to purchase your ownership interest. If this is the goal, it’s important to have life insurance in place that will prevent any liquidity issues in the event the corporate entity wishes to exercise that option. However, if none of the other owners or the company are willing or able to exercise such option, your ownership interest will generally be distributed in accordance with the terms of your Will or Revocable Trust, if you have one, or the default laws of inheritance, if you don’t.

These issues are just a starting point, but they illustrate the importance of having an official business succession plan in place. While having no official succession plan for your business is still a plan, it’s not a very good one.

If you have any questions regarding this topic, please contact Lin Law LLC at (920) 393-1190.

Lin Law LLC Is Here for You

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Pursuant to Governor Evers’ Safer at Home Order, dated March 24, 2020, law firms are deemed an essential business and, as such, may continue to operate during the ongoing COVID-19 pandemic. Lin Law LLC will remain open and continue to serve our clients during this difficult and unprecedented time.

We will, however, conduct client meetings and other business via teleconference or videoconference to the extent reasonably possible, in order to protect our clients and staff. If you need to visit Lin Law LLC in person, we ask that you call ahead and maintain social distancing while visiting our office. We will update you, our valued clients, on any changes to these practices.

Wishing you and your family continued safety and health,

Lin Law LLC

Expanded Leave Under the Families First Coronavirus Response Act

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On March 18, 2020, President Trump signed into law House Resolution 6201, the Families First Coronavirus Response Act (the “Act”). The Act, which is applicable to employers with five hundred (500) or fewer employees, provides expanded paid and unpaid leave to employees in response to the ongoing COVID-19 pandemic.

Emergency Family and Medical Leave Expansion Act

Division C of the Act, subtitled the “Emergency Family and Medical Leave Expansion Act”, uses the existing Family and Medical Leave Act (FMLA) as a framework to provide eligible employees with the right to take up to twelve (12) weeks of job-protected leave. Eligible employees are those who have worked for the employer for at least thirty (30) calendar days and who are unable to work because they must care for their minor child due to the child’s school or care provider being closed or unavailable.

While the first ten (10) days of required leave may be unpaid, employers must provide up to ten (10) weeks of paid leave once the unpaid leave has been utilized by an employee. The required rate of pay is two-thirds (2/3) of the employee’s regular rate of pay, multiplied by the number of hours the employee would otherwise be scheduled to work, up to $200 per day or $10,000 in the aggregate.

Emergency Paid Sick Leave Act

Division E of the Act, subtitled the “Emergency Paid Sick Leave Act,” requires employers to provide up to eighty (80) hours of paid sick leave to eligible employees, regardless of how long the employee has been employed by the employer. Employees are eligible for paid sick leave under Division E if they are unable to work for any of the following reasons:

  • The employee is subject to a federal, state, or local quarantine or isolation order related to COVID-19;
  • The employee has been advised by a health care provider to self-quarantine due to concerns related to COVID-19;
  • The employee is experiencing symptoms of COVID-19 and is seeking a medical diagnosis;
  • The employee is caring for an individual who is subject to an order to quarantine or isolate by a public order or self-quarantine as advised by a health care provider;
  • The employee is caring for the employee’s child if the school or place of care for such child has been closed, or if the child care provider of such child is unavailable due to COVID-19 precautions; or
  • The employee is experiencing any other substantially similar condition specified by the Secretary of Health and Human Services in consultation with the Secretary of the Treasury and the Secretary of Labor.

Employees exercising sick leave must be paid at their regular pay rate or at the federal, state or local minimum wage, whichever is greater, not to exceed $511 per day or $5,110 in the aggregate. Employees who take paid sick leave to care for another individual or child are entitled pay of two-thirds (2/3) their regular rate. In these circumstances, the paid sick leave rate may not exceed $200 per day or $2,000 in the aggregate.

Available Tax Credits for Employers 

To help offset the burden to employers, the Act provides a refundable payroll tax credit for one hundred percent (100%) of qualified emergency leave wages (as provided by Division C) and qualified paid sick leave wages (as provided by Division E) paid by an employer through the end of 2020. The allowable credit amount for any calendar quarter cannot exceed the total employer payroll tax obligations on all wages for all employees.  However, if the amount of the credit that would otherwise be allowed is so limited, the amount of the limitation is refundable to the employer.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.

Happy International Women’s Day!

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Sunday, March 8, 2020 is International Women’s Day! This day, celebrated annually since 1911, honors working women worldwide. Most working women have a lot on their plate, and between their careers, their families, and all the other day-to-day goings-on, their estate plan is probably not at the top of their priority list. So, let’s take some time, in honor of International Women’s Day, to consider the unique challenges women face with regard to their estate plans.

Women in the United States live an average of 5 years longer than men. As a result, they are statistically likely to outlive their male spouses. Depending on each spouse’s level of involvement in the estate planning process, a new widow may or may not have a good understanding of how her estate plan works, and should consider having it reviewed to determine whether any updates are necessary.

Women are often caregivers not only for their children, but also for ageing parents (this has become so common that there’s a term for it: the “sandwich generation”). Women in this position should take the time to consider who will take over their responsibilities if they themselves become incapacitated. This may require ensuring that successor trustees, attorneys-in-fact for finances, health care agents, and/or guardians are named to take over those responsibilities.

Finally, women are often the peacekeepers in their families, and may wish to plan for and, hopefully, help soften the impact their passing will have on their spouse, children, and other family members. This could include leaving specific instructions regarding the disposition of tangible personal property (particularly items like family heirlooms), putting written procedures in place for managing the family cottage, and/or pre-planning their funeral and burial arrangements.

Planning for the future isn’t always easy, but doing so will help to ensure that your loved ones are provided for after you’re gone.

If you have any questions on this topic, please contact Lin Law LLC at (920) 393-1190.