BUSINESS ENTITIES — LIMITS ON LIMITED LIABILITY

The overriding benefit to doing business through an entity is limited liability. But there are numerous gaps in liability protection that may not be obvious. This article describes those gaps and how they may affect you. Continue reading

CHECKLIST FOR BUYING A BUSINESS

Where do you start when contemplating the purchase of a business? If you can address the following deal points, you will be ready to move forward:

Always Buy Assets, Not Shares of an Entity. If the business is owned by an entity, such as an LLC or a corporation, a buyer should refrain from purchasing shares or interests in the entity. Instead, the buyer should purchase the assets, such as goodwill, inventory, equipment and intangibles. This shields the buyer from liabilities, creditors, claims by disgruntled employees, etc. of the selling entity, and will generally increase future tax deductions for depreciation and amortization. Continue reading

THE TROUBLE WITH LOANS TO CHILDREN

Loans to children are a frequent source of family conflict — and often instigate lucrative estate litigation projects for lawyers. Here’s why.

Loan vs. Gift

There is a huge legal difference between a loan and a gift, namely that a gift does not have to be repaid. But loans may gradually mutate into gifts. For example, under Oregon law, a suit must be filed within six years to collect a debt. If no suit is filed, collection of the debt is barred by the statute of limitations. Thus, if a parent makes a loan to a child and takes no collection action for six years, the child has no legal obligation to repay and the loan has effectively become a gift. This has several consequences. First, and most important, the executor is probably barred from offsetting the child’s inheritance by the amount of the loan. In other words, the loan is irrelevant when determining the child’s share of the decedent’s estate.
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