Completing LLC Organization Through Agreements

Completing LLC Organization Through Agreements

You have made the decision to start your own small business. That is great news! But what steps should you take now to properly organize your limited liability company?

In Wisconsin, the first step of limited liability company formation is to decide on a name and file Articles of Organization with the Wisconsin Department of Financial Institutions. The articles establish your business with the State of Wisconsin and specify whether your business is managed by members or managers, who will serve as your registered agent, and the principal location of your business.

Many individuals file articles online, but do not complete the other steps to best protect their business and to take full advantage of the limited liability protection provided for by a limited liability company.

The next step is to develop and execute an Operating Agreement for your limited liability company. An Operating Agreement guides how your new business will function. You will draft your Operating Agreement to determine voting rights and duties of members, management terms of members or managers, member ownership interest, and meeting requirements. The Operating Agreement, when fully executed, protects the members from personal liability for actions of the limited liability company. This point is important because without the executed Operating Agreement, the members will likely be subject to personal liability as they would be if they operated with a sole proprietorship or partnership. Resolutions by the organizers, members, and/or managers adopting the Operating Agreement and member lists should be executed at the same time.

The final step to develop your new limited liability company is to determine whether to draft a Buy-Sell Agreement. This agreement is very important to limit conflict when a limited liability company has multiple owners. The terms of this agreement determine the process for transferring business ownership and anticipates various scenarios which will likely lead to conflict. Such scenarios include the determination of the fair market value of the business and a selling member’s interest, what happens to the shares of a member in the event of death or divorce, how shares are transferred when a member retires, and who has the option to purchase ownership in the limited liability company.

The business attorneys at Anderson O’Brien are happy to provide you with personalized guidance on the topics covered in this post, as well as decisions regarding the nuances of the tax elections, management decisions, proper record-keeping, and other steps to formalize your new limited liability company.

 

Harassment Restraining Orders: What You Need to Know.

Harassment Restraining Orders: What You Need to Know.

Harassment restraining orders are appropriate when another person threatens, attempts or does strike, shove, kick or otherwise subjects you to physical contact; or repeatedly acts in a harassing or intimidating manner toward you for no legitimate purpose.  These types of restraining orders are commonly requested by victims of stalking.  To begin the process of requesting a harassment restraining order, the person seeking the order (petitioner) is required to file a petition for a temporary restraining order and motion for injunction hearing.  The petition includes the parties’ basic information as well as a statement of the facts providing the basis for why a harassment restraining order is being sought.

After the Court receives the petition, it will issue a temporary restraining order if the alleged conduct of the person whom a restraining order is being sought (respondent) meets the statutory definition of harassment.  A temporary restraining order requires respondent to stop harassing the petitioner, avoid the petitioner and any place occupied by the petitioner and to not contact the petitioner.  Regardless of whether a temporary restraining order is granted, the Court will schedule an injunction hearing to determine whether a harassment injunction is appropriate.  An injunction is the same as the temporary restraining order except that it can be in place for up to four years, whereas a temporary restraining order is in place only until the date of the injunction hearing.

At the injunction hearing, the petitioner is required to provide testimony and evidence as to why a harassment injunction is appropriate.  The respondent may also provide testimony and evidence if he or she wishes to contest the motion for injunction.  Based on the testimony and evidence, the Court will decide whether there are reasonable grounds to believe that the respondent engaged in harassment with intent to harass or intimidate the petitioner.  If such grounds exist, the Court will grant the injunction.  The determination of whether an injunction will be granted is very often fact specific.  If you have questions regarding a harassment restraining order, please contact the attorneys at Anderson O’Brien, Bertz, Skrenes and Golla, LLP.

 

When $100,000 is not $100,000 – Understanding Underinsured Motorist Limits in Wisconsin

When $100,000 is not $100,000 – Understanding Underinsured Motorist Limits in Wisconsin

Any regular reader of our newsletter, or attendee of our seminars, has heard the repeated importance about having enough underinsured motorist coverage (UIM) to protect yourself if you’re injured in an auto collision.  UIM coverage provides a pot of money to compensate you for injuries sustained in a crash if the at-fault driver does not have enough insurance to fully compensate you for your injuries.  In other words, once the at‑fault liability insurer pays its policy limit, your own insurance company steps into their shoes with its underinsured motorist coverage to pay you for any remaining uncompensated damages.

Unlike liability coverage or uninsured motorist coverage, a Wisconsin driver is not required by law to have underinsured motorist coverage.  However, if accepted (and you should), the lowest limit that can be provided is $50,000 per person / $100,000 per accident.  Considering the extremely low cost of UIM coverage, we strongly encourage that drivers get as high of limits as possible.  For example, my personal auto policy has $500,000 per person UIM coverage and it costs $26 per year.  Having sufficient UIM coverage is especially important in light of the fact that whatever your UIM policy limit, whether it is $50,000 or $500,000, is a dollar amount that you will never be able to recover the amount from your insurance company.

Current Wisconsin law allows insurers to define underinsured motorist by a “limits to limits” comparison.  The result is you will only be eligible for UIM coverage if your UIM policy limit is greater than the at-fault liability policy limit.  Similarly, current Wisconsin law allows insurers to reduce what it has to pay under its UIM coverage by whatever is recovered from the at-fault driver and his or her insurance company, often called a “reducing clause.”  This combination means no Wisconsin driver can actually recover the dollar amount of the UIM he or she purchased.

Hopefully, an example will help.  Joe is severely injured in a car wreck.  The at-fault driver has a $100,000 liability policy limit that the insurance company pays out to Joe.  This payment from the liability insurer does not fully compensate Joe for his injuries, and he turns to his own insurance company, with whom he has a $100,000 UIM policy.  Unfortunately, because both the liability insurance and UIM insurance have the same limit, $100,000, it means that there isn’t actually any underinsured motorist coverage available to Joe.  Because of the limits to limits comparison, only when the UIM policy limit is higher than the liability policy limit would Joe’s UIM coverage kick in.

To illustrate the reducing clause, lets change the above example to say that Joe has $250,000 in UIM coverage.  The at-fault insurance company still pays its $100,000 to Joe.  Now, because the $250,000 UIM limit is higher than the $100,000 liability limit, Joe is entitled to UIM coverage under his policy.  However, he is not entitled to $250,000 in UIM; instead he is only entitled to $150,000 because of the reducing clause ($250,000 – $100,000 = $150,000).

Regardless of what your policy says the UIM limit is, by virtue of the limits to limits comparison definition of underinsured motorist and reducing clauses, no Wisconsin driver actually knows how much UIM he or she will have available until after the accident and after he or she knows how much liability insurance the at-fault driver has.  As such, when you hear me or my colleagues harping about having plenty of UIM coverage, it is because if you have low limits of UIM, there is a good chance you will never get to use it, and if you do end up using it, it will always be less than the dollar amount you purchased.

 

Employers in Early 2021:  Review, Revise and Communicate FFCRA Leave and Vaccine Policies

Employers in Early 2021: Review, Revise and Communicate FFCRA Leave and Vaccine Policies

Although the succession in presidential administrations from Trump to Biden will almost certainly bring many changes to employment and labor law rules and regulations in 2021, the more immediate concern for Wisconsin employers is to review and, if necessary, revise their COVID-19 leave and vaccine polices. In either circumstance, employers should communicate their policies to employees as soon as possible.

1.)  COVID-19 Leave

The federal Families First Coronavirus Response Act (“FFCRA”) was originally enacted into law in March 2020 for qualifying leave that was taken between April 1, 2020 and December 31, 2020. But its requirements of mandatory leave expired on December 31, 2020. This means that mandatory paid leave at companies that employee less than 500 employees is no longer required.

However, the recent federal stimulus legislation signed by President Trump on December 27, 2020 allows that covered employers who voluntarily offer such leave may use payroll tax credits to cover the cost of leave benefits paid to employees through the end of March 2021. The legislation does not modify the qualifying reasons for which employees may take COVID-related leave, the caps on the amount of pay eligible employees are entitled to receive, or the FFCRA’s documentation requirements. However, an employer will not receive a tax credit for paid leave if an employee exceeds the maximum amount of FFCRA leave, whether that leave was taken in 2020 or 2021.

Upshot for Employers: An employer should consider whether it is in its best interest, and the best interests of their employees and their employees’ families, to continue to offer paid FFCRA leave. In either scenario, the company should draft and communicate its policy — whether it will continue paid FFCRA leave or not — for the benefit of all employees. Presumably an employer may modify the leave benefit to something less than the amount originally required under the FFCRA and still receive the tax credit, although the U.S. Department of Labor has not yet issued an opinion on such hybrid approach.

2.)  COVID-19 Vaccine

On December 16, 2020, the Equal Employment Opportunity Commission (EEOC) issued guidance that gives private employers the go-ahead to implement COVID-19 vaccine policies that would require employees to be vaccinated as a condition to continue employment, or at the least as a condition to returning to the physical workplace.

The distinguishing feature is that the vaccine is not a “medical examination.” If it were, then the Americans with Disabilities Act (ADA) would be implicated. The ADA limits the ability of an employer to require a medical examination to situations where the exam is “job-related and consistent with business necessity.”

But even though a required vaccine does not itself run afoul of the ADA, pre-screening vaccination questions may implicate the ADA’s limitation on disability-related inquiries, because the inquiries may elicit information about a disability.

Upshot for Employers: Employers should consider whether they will require their employees to receive a COVID-19 vaccination when it is available. Health care facilities will likely invoke such a requirement. But non-health care facilities should consider many factors before invoking a mandatory vaccine requirement, such as the ability to socially distance in the workplace, the availability and effectiveness of remote work options, and the general duty to keep a safe workplace. In either scenario, the astute employer will inform employees of its policy in writing. An employer that offers the vaccine to its employees should consider the benefit of using a third-party vendor. That vendor should be well-prepared with respect to when it may ask questions before administering the vaccine the ensure that there is no medical reason that would present the person from receiving it.

Anderson O’Brien’s attorneys are well-versed to serve Wisconsin clients with respect to risk management and practical business steps involving COVID-19 leave and vaccination practices that comply with state and federal laws. They may be reached at andlaw.com or by calling 715-344-0890.

 

Defective Home Construction? Know Your Rights and Responsibilities

Defective Home Construction? Know Your Rights and Responsibilities

Are you thinking it is time to build your new dream home or do some remodeling to your existing home?  Are you a busy homebuilder just trying to keep up?  In either case, you should be aware of a Wisconsin statute that sets out procedures for addressing defects that arise as a result of construction and remodeling projects.

Wisconsin Statute 895.07 was created for claims against contractors and suppliers related to the construction or remodeling of a dwelling.  A dwelling is defined by the statute to mean more than just a new home.  A dwelling includes other existing structures on a residential premise, such as driveways, sidewalks, swimming pools, patios, terraces, fences, porches, garages and basements.

Wisconsin law provides that prior to entering into a written contract to construct or remodel a dwelling (or as soon as possible but before starting work if the contract is oral) a contractor shall give notice to the consumer of his or her rights under Section 895.07.  The specific language to be used may be found in Wisconsin Statute 101.148.

Should defects arise as a result of the project, Section 895.07(2) requires the consumer to give the contractor written notice describing the defects complained of no later than 90 working days before commencing action, such as a lawsuit or arbitration.  This notice must include a description of evidence that the consumer knows of, including expert reports, that substantiate the nature and cause of the defects.

Within 15 working days of receiving the consumer’s notice, the contractor has one of five options for responding.  Those options include: 1) offering to repair or remedy the defect at no cost to the consumer; 2) offering to pay money to settle the claim; 3) offering a combination of repair work and money; 4) rejecting the claims in total; or 5) proposing to inspect the property.

If the contractor chooses to inspect the property, the consumer must provide access within 15 working days.  Following the inspection, the contractor has 10 working days to respond to the consumer identifying one of the remaining four options listed above that the contractor chooses.

Contractors often use a host of suppliers for dwelling construction and remodeling work.  It may be the case that one of these suppliers bears responsibility for the defects.  In that case, the contractor may assert a contribution claim against the supplier.  Section 895.07 provides a procedure for making contribution claims.  The contractor must provide notice to the supplier within five days after receiving a consumer’s claim unless the contractor has taken no action to repair the defect, performed no destructive testing, not permitted the consumer to take action to repair the defect, has not interfered with or altered the property subject to the claim, and has not precluded the supplier from offering to remedy the defect or make repairs.

As a contractor, if you failed to give the notice required by Section 101.148 and are sued for construction defects, the court must stay the legal action and order the parties to comply with the notice requirements and the procedures in Sections 101.148 and 895.07.

Whether a consumer or a contractor, we hope your construction and remodeling projects go smoothly.  However, when that is not the case our litigation team at Anderson O’Brien is here to help.

 

Transfer on Death Deeds

Transfer on Death Deeds

As you begin to think about the best structure for your estate plan, you are likely guided by one thought, which is how do I avoid probate? The consensus about probate is that it can be costly and time consuming. For that reason, many people structure their estate plan with the hope that probate can be avoided. One way to do this is to create a trust and place your assets, that would typically need to go through probate, into the trust. However, sometimes the cost of implementing a trust can be impractical for the size of your estate. Therefore, another solution for some estates is to utilize a transfer on death deed to avoid probate.

A transfer on death deed is a document that is recorded with the register of deeds in the county where the property is located and designates a beneficiary to take title to the property upon the death of the sole owner or the last to die of multiple owners. This document can be cancelled or changed at any time by the owners of the property simply by executing and recording another deed that designates a different beneficiary or no beneficiary. Moreover, the owner of the property does not need any consent or permission by the beneficiary in order to make these types of changes.

The clear advantage to using a transfer on death deed is that it will bypass probate and as a matter of law the property will pass to the designated beneficiary. Furthermore, there is the added benefit that the owner of the property maintains full and complete control in their interest in the property during their lifetime. This document does not grant any type of current interest in the property to the beneficiary. It is only upon the death of the owner(s) that the beneficiary obtains the interest in the property. Therefore, it allows for the owner of the property to continue to use their property as they see fit, with the benefit that upon their death the property shall avoid probate and pass directly to the beneficiary.

Despite the advantages to the transfer on death deed, there are still some disadvantages to executing this type of document. For example, the transfer on death deed must be publicly recorded in order to be effective. Therefore, the identity of the beneficiaries will be available in the public record during the property owner’s lifetime. This can be problematic if the beneficiary is not a family member or if there is tension among the beneficiaries of the owner’s estate. Depending on the individual and their circumstances, it may be preferable to keep this type of information private and thus utilize a different strategy to avoid probate.

In light of the possible advantages and disadvantages, it will be important to seek the advice of an estate planning attorney before executing a transfer on death deed. An estate planning attorney will be able to analyze your situation and advise you on the best course of action to take in structuring your estate plan to avoid probate, which may include executing a transfer on death deed.

 

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