How do I obtain an Ohio commercial real estate broker lien?

Attorney Casey Taylor

First, let’s be clear: There is¬†no lien right for real estate brokers for property consisting solely of between one¬†and¬†four¬†residential units. (O.R.C ¬ß¬ß1311.85 and .86).

However, licensed real estate brokers do have lien rights in transactions involving commercial properties, i.e., anything other than between one and four residential units.  (O.R.C §§1311.86).

The lien rights extend to brokerage contracts for the provision of services for selling, purchasing, and leasing.  (O.R.C §§1311..86(A) and (B)).  They do not appear to cover the provision of property management services.

What is a lien?

In one sense, a lien does not get you anything more than the contract rights you already have: You have a signed listing agreement, you have earned your commission, you can sue in a court of competent jurisdiction, and you can thus get paid the amount of money you are owed.

But¬†as a practical matter, lien rights are tremendously powerful in “turning the tables” on a¬†property owner, giving quick, inexpensive and powerful leverage to the Realtor to resolve a commission dispute.

Why is a lien important?

Leverage often is the “whole ballgame.” ¬†So often, (a) debtors will avoid debts they clearly owe just because they can, for purposes of the time-value of money (by delaying the payment, they can use your money in the interim) and (b) the reality is that most creditors will not go to the trouble and expense of hiring and paying an attorney to collect the sums owed to them.

Litigation can cost as little as $20,000 per case, up to hundreds of thousands of dollars for a vigorously-contested action. ¬†So, the question for a Realtor claiming a commission is: Can I “check” or “checkmate” a property owner (seller or landlord) into recognizing, dealing with and paying my claim without the two years and tens of thousands of dollars in legal fees needed to vindicate that right?

A lien is a powerful tool — it encumbers real property

A lien is an encumbrance on real property.  In most cases, real property encumbrances have the same priority of the order of filing, i.e., the first-filed is paid first from the sale proceeds, the second, second and so forth.  (Ohio mechanics liens are the major exception to this rule, dating back to the date of first work on a project.)

This gives the lien holder two distinct advantages, many times powerful advantages: (a) their claim is secured against the real estate (i.e., the owner cannot further squander the equity in the property by a sale or mortgage) (b) the claimant has placed a cloud on the title with what may still be a disputed claim, effectively preventing the owner from selling or mortgaging the asset until the earlier of (i) the statutory expiration of the lien or (ii) the judicial disposition of the claim and the lien rights.

Thus, as a practical matter if the property owner wants to sell his property or take out a new mortgage or refinance an existing mortgage, he will have to “deal with” the Realtor’s claims before doing so.

A broker’s lien is unilateral — it does not require the owner’s signature or consent

Contrary to what many clients ask of us in a simple contract or tort claim (“please lien their property”), in most circumstances a lien¬†cannot¬†be placed against real property until either (a) the owner signs a voluntary instrument such as a mortgage or (b) the¬†conclusion¬†of¬†litigation, which usually takes¬†years. ¬†In the meantime, a defendant can sell¬†and mortgage the property, or otherwise encumber it, and then squander the asset without concern for the plaintiff’s claims. ¬†(This is constrained by concerns about fraudulent conveyance issues that will be discussed in another blog entry later.)

The right to place a unilateral lien against real estate is very narrow, being limited to government liens (such as tax liens, assessments, environmental liens, etc.) and mechanics liens (for work done on real property and materials delivered to real property for incorporation therein).

Commercial brokerage lien rights

O.R.C. ¬ß1311.86 provides such unilateral lien rights¬†for the collection of a commission in commercial transactions in¬†specific circumstances set forth in the statute. ¬†Being a unilateral filing, means that the Realtor claiming the lien simply signs and¬†files a piece of paper in the Hamilton County Recorder’s office. ¬†It does not require a signature (on the lien filing) of the property owner.

Statutory requirements

Because the lien arises from the statute, strict compliance with the statutory mandates will be required.  F. W. Winstel Co. v. Johnston, 103 Ohio App. 525, Paragraph 1 of the Syllabus (1st Dist. 1957).         These are set forth in O.R.C. §1311.86:

  • It is for¬†written¬†brokerage contracts only (O.R.C. ¬ß1311.86(A) and (B)).
  • It is for “for services related to selling, leasing, or conveying any interest in commercial real estate”¬†(O.R.C. ¬ß1311.86(A)) and “for services related to purchasing any interest in commercial real estate.”¬†(O.R.C. ¬ß1311.86(B)).
  • “The lien is effective only if the contract for services is in writing and is signed by the broker or the broker’s agent and the owner of the lien property or the owner’s agent.” ¬†¬†(O.R.C. ¬ß1311.86(A) and (B)).
  • The lien is for the broker only, not his salespersons. ¬†(O.R.C. ¬ß1311.86(C)(1).
  • The lien amount is either the brokerage commission due, or if due in installments only that portion due on conveyance. ¬†(O.R.C. ¬ß1311.86(C)(2) but in the case of commercial leasing, (O.R.C. ¬ß1311.86(C)(3).
  • Only the property subject to the brokerage agreement can be liened. ¬†((O.R.C ¬ß¬ß86(C)(5)).
Lien contents

To perfect a lien, the following steps must be followed:

  • The claimant must prepare, sign and have acknowledged (notarized) an affidavit containing each of the following: (a) name of the broker who has the lien, (b) the name of the owner of the lien property, (c) a legal description of the lien property, (d) the amount for which the lien is claimed, (e) the date and a summary of the written contract on which the lien is based, and the real estate license number of the broker. R.C. 1311.87(B)(2).
  • Additionally, the lien affidavit must state that the information contained in the affidavit is true and accurate to the knowledge of the broker. Id.
Lien deadlines

The timeframes within which a commercial broker’s lien must be filed are:

  • For¬†a sale of liened, the Affidavit must be recorded prior to the conveyance of the property. R.C. 1311.86 (B)(3).
  • For a purchase of liened property the Affidavit must be recorded within ninety days after the conveyance of the property. R.C. 1311.86 (B)(4).
  • For liens based upon a leasing commission, the Affidavit must¬†be recorded within ninety days after¬†a default by the owner in payment. R.C. 1311.86 (B)(5).
Notice to property owner

One other requirement not to overlook: ¬†“On the day the lien affidavit is recorded, the broker shall provide a copy of the lien affidavit to the owner of the lien property and, where a contract for the sale or other conveyance of the lien property has been entered into, to the prospective transferee, where known, either by personal delivery or by certified mail, return receipt requested. O.R.C. 1311.86 (B)(6).

Be careful — “Slander of title” claims can be nasty

If one files a lien against real property that is later determine to have been in bad faith, the lien claimant can find himself the target of a suit for a cause of action known as¬†“slander of title.” ¬†Slander of title is the tort of impairing title to someone’s real estate without a reasonable basis therefor. McClure v. Fischer Attached Homes, 2007-Ohio-7259, ¬∂ 21, 882 N.E.2d 61 (Clermont Co. C.P. 2007), citing Green v. Lemarr, 139 Ohio App. 3d 414, 433 (2d Dist. 2000).

The really bad part of a slander of title claim is that it can include an award to the¬†property owner of an award of his attorneys fees and a punitive damages amount. Additionally, the commercial brokerage lien statute specifically allows for the prevailing party to recover its attorney‚Äôs fees. O.R.C. 1311.88(C) (‚Äú[A] court may assess the nonprevailing parties with costs and reasonable attorney‚Äôs fees incurred by the prevailing parties.‚ÄĚ). However, in cases involving general slander of title claims (i.e., outside of the commercial brokerage lien context), the attorney‚Äôs fees have been limited to the those ‚Äúnecessary to counteract a disparaging publication,‚ÄĚ and did not include those incurred in prosecuting the slander of title. Cuspide Props. v. Earl Mech. Servs., 2015-Ohio-5019, ¬∂ 40 (6th Dist. 2015).

Thus, we recommend moving forward with the filing of an affidavit for a commercial broker’s lien cautiously, only where the broker is certain of the merits of his position and even then still willing to withstand the possible claim for slander of title from an owner.

Conclusion

The Finney Law Firm is privileged to have many real estate brokerage clients, including commercial Realtors.  The commercial lien right is a very powerful one, and one that we think is under-utilized in commission disputes.

Consider one of our attorneys to assist you in such a dispute, including the use of the right to a commercial lien.

Frequently, clients desire to lend money, seller-finance the sale of their business or other asset, buy and then lease out a building, or engage in some other business transaction because they are motivated by favorable business terms the transaction provides on its surface: A high rate of interest, a good return under a lease, or a more promising sale price than otherwise the seller would obtain, for example.

This entry asks a prospective private lender to think twice about the risks associated with this activity and to take as many steps to protect himself as possible under the circumstances.

Who is the “lender” and who is the “borrower”

For purposes of this entry, there are many circumstances in which a party is a “lender” and another is the “borrower.”

  • Obviously, a simple monetary loan in which there is a lender and borrower is one such transaction.
  • Another occurs where an investor either owns a building and desires to rent it, or purchases one for leasing purposes. ¬†In addition, as a part of a leasehold transaction, the landlord may be putting into the premises significant sums in “tenant buildout costs.” ¬† Here, the renter is “using” the landlord’s money, his credit, and his asset, in exchange for monthly (read: deferred) payments. ¬†This is a form of “loan.”
  • When a seller is selling his busines, his building or another asset, and does anything other than take back 100% of the purchase price¬†at the time of conveyance, he is a “lender.” ¬†(And the worse situation is where the seller is taking a subordinate position to a lender who gets a first mortgage or other lien on the assets acquired. ¬†In such situation, the liklihood of the seller getting his “loaned” funds is significantly impaired, and the chance of default significantly higher.)
  • Even co-signing a loan or a lease, or guaranteeing the debt of another, is “lending” your credit¬†to the co-borrower.
Four important factors to consider

But consider these factors before “lending” your money, your asset, and your credit to a third party:

First, ask yourself: “Why can’t this buyer get conventional financing?” ¬†Banks are in the business of assessing and taking the risks associated with lending. ¬†If this “borrower” does not qualify for a bank loan, why should you be in the business of being a lender? ¬†Have you really fully assessed the risks of lending to this “borrower.”

Banks know experientially and actuarially the “warning signs” that predict loan defaults. ¬†Among these are an inability to come up with an adequate down payment, a poor credit score, a history of litigation, and other warning signs. ¬†I spoke with one lender recently, and they said they will never lend to people who fail to pay their taxes — ever.

Second, in my experience, a buyer of an asset is much more likely to raise defenses and counterclaims against a seller than the buyer would be able to as against a third party lender: Fraud in the inducement of the sale, property defects, misrepresentations in the business accounts, and simple contract breach.  Buyers will raise any and every excuse and defense against paying money they owe.

Third, the more desperate the “borrower” is, the more likely he is to agree to generous transaction terms: a high rate of interest, a high sale price, or some other above-market remuneration. ¬†And — I say this based on experience — borrowers who have no intention and no ability to pay back the “loan” are the most willing to agree to generous lending terms.

Fourth, if you are going to leap (into the position of being a lender), at the very least look first: do the kind of due diligence that a lender would — a credit check, a background check, reference checks, and a simple check of court clerks sites and bankrupcy court history for obvious signs of fiscal distress.

The ABCs of improving your position as a lender

So, you have made the decision to “lend.” ¬†What steps can you take to improve your position and increase the liklihood of getting your money paid back, with interest?

A. Certainly ask for a¬†personal guarantee of any “loan” to a corporate entity. ¬†Accepting simply a corporate signature, whether of a note maker, a tenant or the buyer of an asset, is asking for trouble, unless that company’s creditworthiness has been thoroughly ascertained

B. ¬†Don’t be shy about asking for the personal guarantee of the principal’s (or principals’) wife (or wives). ¬†If the borrower is earnest about putting their name, their assets and their creditworthiness behind a promise, and they have asked you to extend credit to them — then shouldn’t their wife also stand behind the obligation? ¬†Stating it differently, the most common and most obvious dodge of debtors avoiding their creditors is to place their assets in the name of their wife. ¬†Don’t let them avoid their obligations to you so easily.

C. Are there third parties who can guarantee the debt? ¬†A business partner? ¬†A parent? ¬†Who is interested in the success of this borrower’s business such that they would be willing to stand behind its obligations?

D. ¬†Look for assets to lien. ¬†Does the “borrower” (or his wife) own a house, stocks, jewelry, accounts receiveable, or equipment or inventory in their business? ¬†Are those assets presently free from any ¬†first lien against them? ¬†If so, and if the borrower is earnest about paying back your debt, then he should not have qualms with providing a security interest¬†against those assets to stand behind the loan. ¬†(Note: Please consult an attorney about how to properly take a lien in various assets; it can be tricky.)

E. Would some patience or a reduced price yield either a cash buyer or enable the buyer you have to go and get a bank or other third party loan?  If so, it may be wise to take one of those options.

Conclusion

Lending is an ultra-hazardous activity that should not be undertaken lightly.

There are exceptions where the seller’s main motivation is not necessarily getting payback of the loan: a parent helping a child; a business or building owner who is getting a great sale price for the asset, and perhaps much of it in cash; or simply a weak market with few buyers. And so long as our clients enter into a transaction understanding the risks of being a “lender,” we are fine with that decision.

But we see many clients seduced by more favorable terms from a borrower or seller-financed buyer who desperately needs their cash versus a stingier cash buyer.

Our suggestion: Think about taking the money and running instead.

The risks inherent in being a lender is why they say: “Cash is king.”

Ohio Supreme Court Justice Pat Fischer

In a case that was previously discussed here,  the Ohio Supreme Court issued an important ruling in a real estate valuation case, Terraza 8, LLC v. Franklin County Board of Revision, 2015-2063, yesterday.

R.C. 5713.03 was amended in 2012 ‚Äď allowing that the auditor may consider a recent sale price as the true value of real estate rather than shall, and requiring that the property be valued ‚Äúas if unencumbered.‚ÄĚ

Writing for a unanimous Court, Justice Fischer agreed with the property owner that recent changes to R.C. 5713.03 mean that County Auditors are no longer required to adopt a recent sale price as the true value of real estate, and that the purchase price in sale and lease back transactions can be rebutted by a showing that the sale price does not reflect the value of unencumbered fee-simple estate. The decision is available online here.

In commercial tenant space, whether office, warehouse, manufacturing or retail, landlords typically want three-, five- or seven-year lease terms.  And this is reasonable given the cost of tenant build-out, Realtor commissions and the demands of their mortgage lenders.  It also is relatively standard in the marketplace.

However,¬†a tenant will rightfully reason that they can’t anticipate their space needs for a year much less over a seven-year period of time. ¬†The company might need to relocate, be bought out¬†or go out of business, ¬†the principal could die or become disabled, or the tenant’s business model could change substantially.

One concession I recommend that tenants request in a commercial lease is an early-termination option.  By having the right to walk away from a lease, it gives enormous flexibility and power to a tenant.  Recently, a landlord explained to me that he is glad to offer this tenant concession.

Typically, a termination option is not free.  Here are typical issues a landlord will want to discuss:

  • The lease termination option might not kick in until some period into the lease, say after the first year.
  • The landlord will want generous advance notice provisions, say three to six months to allow him to advertise and market the premises for re-letting to a new tenant.
  • An early termination fee of anywhere from three months to one year of base rent and CAM charges.
  • A reimbursement of Realtor fees paid (many times¬†paid up front, but calculated on the entire lease term value).
  • A reimbursement of tenant improvement costs.

So often I am consulted after the fact by a tenant who wants “out” of their lease on a document we were not asked to help negotiate, and the tenant is in a real spot. ¬†Sometimes in that circumstance the landlord is digging in his heels wanting the full rent and CAM amounts for the entire lease period — and they may well be entitled to that.

But if only the tenant had asked for this simple concession on the front end — when he had negotiating power — his life would be simpler and his finances richer.

__________

If you want to speak with our commercial leasing attorneys, ask for Issac T. Heintz, Eli N. Krafte-Jacobs or Christopher P. Finney.

For both landlords and tenants, there is curious and confusing phraseology in many if not most commercial leases relative to the payment of rent:

Rent will be paid without any set-off, counterclaim, deduction or recoupment whatsoever.

That sounds like (and is) a lot of legalese, but what does that mean?

It is, in fact, an important provision of commercial leases. ¬†What it means is¬†simply that rent is due from the tenant without delay or reduction based upon claimed breaches of the lease by landlord. ¬†Thus, if the tenant thinks he has defenses to the payment of rent, or claims against the landlord, he must bring them in a separate court action and not use the tactic of offsetting rent — and delaying an eviction — based upon meritorious or frivolous claims of landlord breach.

The provision is not unnecessarily unfair to one side or the other.  Rather, it is a business term for negotiation between the parties.

From a landlord’s perspective, he is surrendering possession of the Premises to tenant and tenant should, month in and month out, pay him for that possession. ¬†If the tenant is “starving” the landlord of rent, while the landlord has to pay his mortgage, taxes, maintenance and insurance, it is a painful and stacked deck against the landlord. ¬†Further, while each¬†month the tenant is getting the benefit of the bargain by occupying the premises, the tenant may prove uncollectible after months or years of litigation. ¬†Further, landlord does not want to find himself in the position of pursuing rent — all the way through a trial — if the defenses of the tenant are entirely fictitious and manufactured just to buy time against an eviction for a rent default.

From the tenant’s perspective, if the landlord has made his building unoccupiable by severely burdensome practices — noise, dust, odors, lack of access or parking, non-operational elevators, bugs, vagrants, etc. —¬†then why should he tender payment every month only to have to litigate in a separate forum to get some or all of that money back? ¬†Further, a landlord can similarly bleed a tenant dry by extracting rent during the tenancy while failing to maintain his building. ¬†And a landlord may prove judgment-proof as well at the end of litigation.

As a result of the weighing of the interests of the landlord and the tenant, there could be compromise language to sometimes standard form lease “no offset” language — for extreme circumstances that “put a tenant out of business.”¬† But¬†prying that door open even slightly to give the tenant an “argument” against eviction could lead to months or years of costly litigation against a tenant who otherwise would be paying rent monthly.

# # #

Our firm practices extensively in the area of commercial lease drafting and litigation to enforce the same in Ohio and Kentucky.  We invite you to use our professionals to assist you with your investment properties.  Isaac Heintz leads our practice as it relates to commercial lease drafting and Brad Gibson heads our litigation group for its enforcement or defense.

As we have grown, the vision of the Finney Law Firm is sharpening for our clients and the public: A broad array of services offered in one firm, each practice area delivered in a quality fashion.

At our core, we are a real estate firm, with experienced transactional attorneys, a title insurance company that insures residential and commercial titles, and commercial litigators who can address virtually every aspect of disputes relating to real estate: Eviction, foreclosure, title disputes, easement disputes, construction disputes and mechanics lien claims, as well as complex real estate litigation.

Beyond that, we offer quality estate planning and probate administration and our transactional team rounds our its services with corporate formation and development, including acquisitions, dispositions and financing.

Isaac T. Heintz, Kevin J. Hopper, and Eli Krafte-Jacobs, along with paralegals Tammy Wilson and Misty L. Winkler, and Richard P. Turner at the title company, lead our transitional team day in and day out.

Our litigators are well-known for our public interest practice — handing legislative¬†and regulatory matters aggressively, confronting government officials who would illegally interfere with their life, their business and their fortune. ¬†Three times we have ascended to the U.S. Supreme Court, and three times we won the relief we sought with 9-0 victories there. ¬† We¬†apply this same sophistication and vigor to commercial litigation, personal injury, wrongful death and medical malpractice matters.

Bradley M. Gibson, Stephen E. Imm, Julie M. Gugino, and Casey A. Taylor along with paralegal Brandy E. Fitch are our quality litigation team.

Finally, we are proud to recently have expanded our litigation services to include labor and employment law with experienced litigator Stephen Imm.

When a client asks “do you do that,” I am proud to respond “yes, and we do it well. ¬†Let me introduce you to …..”

Let us know how we we can help with your business or personal opportunity or challenge.  It is with you in mind that we have assembled this team of quality practitioners.

We are excited to announce that Finney Law Firm attorneys Isaac T. Heintz and W.Z. “Dylan” Sizemore will present “Five Pillars of Success” to the Greater Cincinnati Home Builders Association on Wednesday, April 20th from 11:30 AM to 12:30 PM.

HBA members and non-members are invited, but non-members (“Future members”) must pay $25 to attend.

The seminar addresses the key steps that business owners should take in establishing and growing their businesses to maximize returns and minimize exposure to liabilities.  The presenters are knowledgeable and experienced business and real estate attorneys.

The Cincinnati Home Builders Association is a private organization of home builders and their vendors that is entrepreneurial and well-led.  They actively participate in civic matters of critical concern for the local economy and provide important educational opportunities for their members.  Finney Law Firm is proud to be a member.

A flyer with the details of the event is linked here. The location of the presentation is The Tile Shop, 3095 Disney Street Cincinnati, OH 45209.

Register online to attend this program. Reservations are required.

 

 

 

All residential and commercial users of electric generation service from Duke Energy Corp. and/or Cinergy Corp. from January 1, 2005 to December 31, 2008 are eligible for a rebate under a class action effectuated in the case Williams v. Duke Energy.  For residential users, the rebate will range from $40 to $400.  For commercial users the rebate is unlimited in size.

As described to me by one of the attorneys for the Plaintiffs, the settlement — nearly $81 million in all — means “real money,” especially for larger commercial users. ¬†Your business should not miss this opportunity, and it is even worthwhile for residential users to avail themselves of this windfall.

  • However, in order to obtain a refund,¬†consumers must complete and submit a form on-line or on paper by April 13, 2016.

The on-line form is quick and simple.  It should take fewer than five minutes to complete.  We strongly recommend that all of our eligible clients log onto http://dukeclassaction.com and complete the form. I just did it for my own residence, and it was super-quick and super-simple.

 

infographic of the 10 things Finney Law Firm can do for you

10 Things Finney Law Firm Can Do For You

Often times when people think of attorneys they think of lawsuits or criminal charges and as a result that is why they need an attorney. While attorneys are needed to help you deal with lawsuits and criminal matters that is not the end of the list of what an attorney can help you with. To help you get a better idea of how an attorney can help you I have compiled this list of 10 things that Finney Law Firm can do for you. While this list is by no means an all-inclusive list it is designed to show you areas where Finney Law Firm has the expertise to help you work through a matter and save you money or save you from legal headaches in the future.

1.  Real Estate Matters

In many states in the U.S. (Ohio and Kentucky are no exceptions) attorneys are involved in many of the steps of the real estate buying and selling transaction. Often times attorneys are involved behind the scenes in reviewing contracts, legal documents, preparing title opinions and more. In certain states attorney have more hands on involvement in that any closing involving real estate is done by an attorney or under their direct supervision.

Finney Law Firm attorneys can assist individual buyers and sellers in the buying and selling process for both residential and commercial properties. As a real estate buyer you can ask an attorney to look over your offer to purchase a home to make sure it represents your best interests. Sellers may also want to hire an attorney to review any purchase offers and explain to them the requirements they will be bound by if they accept that offer. Some land purchases involve more complicated matters like mineral rights, multiple pieces of land being sold in one package, or liens by having an attorney represent picture of seller disclosure statementyou gives you get extra protection by having the legal considerations addressed by someone trained in those matters.

2.  Business Planning

Are you planning on starting a new business, incorporating an existing business, or changing the corporate structure (i.e. going from an S Corporation to a C Corporation) of your current business? Many activities related to business planning should have an attorney involved in order to make sure everything is done properly. Changing your business status from a sole proprietor to a Limited Liability Company or a corporate form without doing the proper paperwork for taxes will leave you at risk with the federal and local tax authorities. While you may have unintentionally not filed some of the proper tax paperwork that will not stop any associated penalties. By working with a Finney Law Firm attorney you can be assured all your paperwork will be properly prepared and you will be fully informed as to what each document means to you in your business.

By working with an attorney to properly prepare your paperwork you have someone who is familiar with your business and will be ready, willing and able to help you should the need arise. While you can go hire an attorney at a moment’s notice to help out with legal issues, that attorney will not be as familiar with your business as one who has been working with you on an ongoing basis. For more information on the LLC form of a business see LLC see the article Why Do You Need An LLC.

3.  Family Planning/Estate Planning

Marriage

Planning on getting married soon? Do you and your spouse have assets you want to keep separate in case of divorce? While the love and bliss of courtship lead you to think the relationship will last forever things and people do change. If you or your significant other own part of a family business, own your own business, have a large sum of assets from inheritance or from earnings then it is advisable to get a pre-nuptial agreement prior to getting married. A pre-nuptial agreement is a document that can protect assets for both of the people about to be married. Unless properly prepared by an picture of fighting couple for divorce and family lawattorney and taking into account all assets a pre-nuptial agreement may not be worth much in the event of divorce. Therefore pre-marital planning should involve an attorney and the couple about to be wed. In many cases it may be best for each person to have their own attorney look over the pre-nuptial agreement to represent each person’s best interests.

Family

Now if you are married and have kids there are other considerations to take into account. Those considerations mostly revolve around making sure your children and/or spouse are taken care of in the event of your passing. This is where sitting down with an estate planning attorney comes into play. An estate planning attorney will sit down with you and review your assets and your goals for your assets in case of death. This could involve setting up trusts for your spouse and/or children, guardianship arrangements for minor children, living wills, health care power of attorneys and more.

Depending on the amount of assets you have to give to your family and how you want to distribute those assets a trust may be a better option for you. A trust not only preserves your assets for your children it can also make sure you children still get their inheritance in the event your spouse later remarries. Inheritance can get quite complicated so it is best to talk with an estate planning attorney to make sure your assets are distributed the way you want them to be. For more information on wills and guardianship see my article How a Will and Trust Factor Into Your Estate Planning.

4.  Legal Document/Contract Review

Have you been suddenly presented with a legal document with request for signature? Do you know what the document is meant to do and how you may be legally bound if you sign the document? If you don’t know what the language is saying or how it will impact if you sign it then by all means you should be speaking with an attorney to have them look over the document and explain to you what exactly is being asked of you. Common examples of legal documents you may be signing throughout your life include documents related to the purchase and sale of real estate, purchase or sale of a business, non-disclosure agreements for work or other purposes, waiver or release of liability paperwork, settlement documents and more.

Signing any legal document without having full understanding of what sort of obligations you may face is asking for trouble. While the language may not talk in dollars and cents terms you could end up owing plenty of money if you signed a legal document and then failed to do what was required of you under the terms of the document. An attorney will be able to review your legal document document for signatureand give you an opinion on what it is asking for and what risks you face in signing the document. Don’t sign just because the person giving it to you says it is ok, get another opinion before it is too late.

5.  Labor and Employment Law

Do you run a business where you are responsible for the hiring and firing of employees? Want to make sure any terminations or hiring are done correctly and there is minimal risk of you being sued for discrimination? Or maybe you are wanting to setup health plans or retirement plans for your employees and unsure of the way to go about setting up those plans?

If you answered yes to any of the above questions then you should be talking with a labor and employment law attorney who can prevent you from taking the wrong moves which end up costing you money and more. Having an effective attorney advocate at your side assures you that you can concentrate on working on your business while any legal issues are promptly dealt with for you.

6.  Bankruptcy

Unsure if you can manage paying off your debts? Afraid of losing your house because you are behind on payments? Worried that your debts are impacting your health due to the constant stress? Or maybe health related expenses have hurt you financially. All of the above situations can be resolved through filing for bankruptcy. You will not know if bankruptcy is suitable for your situation until you sit down and discuss your situation with a bankruptcy attorney and learn about what filing for bankruptcy means.

In bankruptcy you are asking a bankruptcy court to set aside your debts under Chapter 7 (not all debts may be discharged) or to reorganize your debts into a more manageable payment plan under Chapter 13. Determining which Chapter will work best for you is a decision to be made in conjunction with a bankruptcy attorney. picture of a wallet in a viceBusinesses as well as individuals are eligible to apply for bankruptcy when they are unable to pay their debts.

7.  Taxes, Taxes and more Taxes

Unaware of what taxes your need to pay for your business? Want to pay less to the Tax Man and let your family inherit more? Own a piece of property that you think you are paying too much taxes for? All of the above are matters that can be addressed by an experienced attorney at Finney Law Firm.

Business planning involves dealing with tax matters and understanding all the tax jurisdictions involved. Not only do you have to consider federal and state taxes but there are also the city, municipality, and possibly county taxes to take into account. Miss any payments to one of these tax collecting entities and your business will be at risk. By sitting down and discussing with an attorney what your business does and where it will be performing its business your attorney can better advise you as to what taxes you need to make sure are paid.

Property tax is another big issue for both residential and commercial land owners. Property tax collectors sometimes base their tax collection rates on the overall health of the real estate market in a region as opposed to your specific piece of land. Maybe you have change in situation that has lowered the value of your property but your property taxes still remain where they were before. An attorney will be able to look at your particular situation and then prepare the proper paperwork to request that your property valuation be looked at in order to get a possible downward adjustment in value thus reducing your property tax payment.

As mentioned in item 3 above a will can help you take care of your family in the event of your passing. Wills along with trusts can also shield your assets from estate taxes that can be charged to your estate. Also known as the ‚ÄúDeath Tax‚ÄĚ, this tax on your wealth can be minimized depending on the amount of wealth and how you deal with it now. As each individual has their own unique asset situation a consultation with an Estate Planning attorney will help you best decide how much of your assets get caught up in the ‚ÄúDeath Tax‚ÄĚ.

8.  Litigation

When faced with litigation the last thing you want to do is ignore any requests for information nor do you want to provide answers without the guidance of an attorney in order to save money on legal bills. The answers and the way you answer pre-litigation questions (depositions and/or interrogatories) can make or break a case for you. Therefore it is in your best interest to answer these questions with an attorney present so they can stop you from answering questions you should not be answering. By having an attorney represent you in litigation from the beginning you are bringing along a valuable partner who not only will have knowledge of your case but also have the skills to defend you in a court of law. If an attorney has to be brought in later to a litigation matter it will usually be the case that they will have to spend more time in order to become fully informed of the situation which will cost you more than if you had hired an attorney at the start.

Whether you are being sued for something your business did, something an employee of yours did or you are suing someone who injured you the attorneys at Finney Law Firm have a great depth of picture of gavelbackground and litigation experience to assist you in your litigation matter. Finney Law Firm has successfully litigated cases related to caregiver abuse of children, business transactions, personal injury cases, failure to disclose in residential and commercial real estate matters, contract disputes and more. Finney Law Firm has won a number of cases that have went before the U.S. Supreme Court.

9.  Personal Injury

If you have been injured by someone or someplace where the situation was preventable you may want to discuss your injuries with an attorney. Especially where you have suffered losses due to being unable to go to work, out of pocket medical bills, or other pain and suffering you may be able to be compensated for those losses. A lot of this depends on how the injury occurred and whether or not someone’s negligence leads to your injury. By talking with an attorney you get a better idea of where you stand if you do wish to seek recovery for your injuries.

10.  Criminal Matters

Are you being charged with a crime? Whether that crime is driving while under the influence (DUI), reckless driving, theft or something else having an attorney represent you for the criminal trial is your right. In order to determine the severity of the charges and the amount of jail time or fines you can face you need to speak with an attorney as soon as you are able to. Facing a criminal charge is not picture of prison cellsomething you should try and handle on your own as those who will be prosecuting you are professionally trained. By having a knowledgeable and experienced attorney like those found at Finney Law Firm on your side you can be assured you will be getting the best representation possible.

Do you have any questions about the services above?

Paul Sian is a licensed attorney in the States of Ohio and Michigan.  If you feel you need the services of an attorney or have questions about any of the services named above feel free to contact me at paul@finneylawfirm.com or via phone at 513-943-5668.  Connect with me on Twitter and Facebook.

why you need an LLC

Why Do You Need An LLC?

There may come a time when small business owners are confronted with the question of why do you need an LLC (also known as Limited Liability Company)? Is there something special that an LLC can provide to business owners that would nudge them towards getting an LLC versus operating on their own without any type of business operating form?   The biggest benefit to be had with an LLC is that of protecting ones’ personal assets from a debt or legal liability which may arise out of the business activities.

Like a corporation an LLC is a legal designation for your business. An LLC can be run by a solo business owner, as a partnership amongst different people or can even be owned by other corporations or other LLCs. An LLC provides the limited legal liability similar to what corporations have but offers the flexibility tax wise to be treated as a partnership or as a sole business owner. The federal government and most states don’t treat an LLC as a separate entity for tax purposes as a corporation is normally treated.   (For more information see https://www.sba.gov/content/limited-liability-company-llc)

The primary benefit for the LLC as mentioned above is shielding your personal assets from legal liability for a possible wrong committed by you or one of your employees while operating the business. Say for instance you run a food based business where you prepare meals for others to purchase. If someone was to get sick after eating your food and blamed you for the illness (whether your food was the cause of the illness does not really prevent someone from suing you if they believe otherwise), they could sue you for any injury suffered as a result of the food poisoning. On the basic and not very expensive side a claim could request something basic as paying for lost work days as well as some compensation for pain and suffering. At the extreme end if a person required extensive hospitalization due to the food poisoning or death was a result, those claims in the lawsuit could be quite large and therefore expensive.

Where a lawsuit resulted in an costly claim against you and you don’t have limited liability company protection, the person suing you could seek recovery by going after your home, your cars, your savings, your kids college funds, retirement accounts and more. Even where some of your assets may be protected by state laws (homestead exemption for your home, retirement plan exemptions) the liability amount you owe does not go away unless you file for bankruptcy. What once started out as a business to help you make extra money has now become a liability that affects the money and assets you personally own. Having an LLC can limit your liability to just those of the business assets in the event of a lawsuit.

Types of Businesses Where You Would Want an LLC

As noted above a food based business in one to definitely consider having an LLC, as it is advantageous to protect your personal assets from any legal issues coming from operating that type of business. There are also plenty of other types of businesses to consider the LLC for and in fact you may want an LLC for just Food businesses need an LLCabout any type of business you run in order to have that added layer of protection. Businesses where you interact with people on a daily basis is a perfect example of where the LLC protection can come in handy.

One example of a business with regular interactions with people include cosmetic type businesses where you are applying makeup, creams, hair treatments and more on your paying customer. If someone were to have an allergic reaction to a hair dye that causes them to lose hair or suffer some sort of rash a lawsuit could be an end result. You can have all the signed disclaimers/waivers in the world to try and protect you, but if it is shown you are in some way negligent those disclaimers will not protect you.

Another business example where LLC protection is great to have is where you are driving people around or delivering products for pay.   In this case if someone were to get injured while you are driving them around or delivering something (i.e driving for Uber, Lyft or some other ride sharing company) you may be on the hook personally for any injuries suffered. While some of the ride sharing companies have insurance to cover your passengers (and maybe even cover you) they also are hoping your primary insurance covers any damage or injuries first and they will come in second to cover any claims.  A problem that could arise is your own insurance company denies coverage to you and any fare paying passengers since you did not disclose to the insurance company that you are transporting passengers in your car for pay.

Insurance and ride sharing is a complex topic that I will cover more in depth in a future article, but for purposes of this LLC article just know that if you don‚Äôt tell your insurance company that you are transporting people for pay they could deny any claims for injuries or damage resulting from your ‚Äúbusiness‚ÄĚ. If your insurance company won‚Äôt pay, and the ride sharing company pays for only part of the claim or decides not to pay anything at all, your personal assets are at greater risk than if you had LLC protection.

How The LLC is Run is Also Important 

Properly managing and operating the LLC is also critical. If the only thing you do is fill out the LLC paperwork, send it in to your local state business authority and nothing else, you will have little to no protection for personal assets in a lawsuit. With an LLC you must keep your personal and business assets separate. That means separate bank accounts, keeping separate your business expenses from your personal expenses, separate financial records and more. If you fail to keep the LLC separate from your personal assets a judge can find that you are not operating a true LLC business thus opening up your personal assets to be used to cover any damages you may pay to settle a lawsuit.

Having insurance for you and your business is also always advisable. When talking to your insurance company you should ask them about their umbrella policy option. Make sure you inform the insurance company about what your business does and the fact that you have an LLC that needs to be covered under the umbrella. Umbrella insurance policies are good to have since like an umbrella they provide good insurance coverage for you personally and for your business activities for many different types of claims that don’t necessarily fall under your homeowners or auto insurance policies.

For tax purposes, depending on the type of LLC you have setup and how you want to run your business there may be little to moderate change come tax filing season. Ultimately the profits you earn from running your business get reported on your tax returns. Doing the tax portion correctly and using all the correct forms is one piece of evidence that shows your LLC is indeed a true business. As with anything tax related it is always best to consult with a Certified Public Account or other tax professional who specializes in helping small businesses.

Final Thoughts on LLC

An LLC is a valuable means of protecting your personal assets from potential legal liabilities of your business. While you may do everything perfectly with Protect your assets with an LLCregards to your business, that does not mean someone won’t come along and sue you. Having an LLC set up to run your business with helps ensures that you have extra protection and limits the risk that your personal assets could be used to pay for damages arising out of a lawsuit. To determine if an LLC is best for you talk to a local business planning attorney or corporate attorney in your area.

Do you need an LLC or have more questions about forming an LLC?

Paul Sian is a licensed attorney in the States of Ohio and Michigan.  If you have any questions on forming an LLC, have questions about running your business, or have some business related legal questions feel free to contact me at paul@finneylawfirm.com or via phone at 513-943-5668.