From the left, WLF Lawyers attorneys Sarah Wolk and Zack Levine, Wrap Express owner Ruben Zograbyan, Rita Hadjimanoukian (representing Supervisor Mike Antonovich), Suzanne Dunwell (Assemblymember Mike Gatto), and Chamber of Commerce Member John Steele, Friends of the Glendale Public Library.    Wrap Express, 1525 N,. Verdugo Rd., Glendale, CA, 91208, www.wrapexpress.com

 
Many entrepeneurs look to their friends and families for loans when starting a new business. While these sources can be vital to the launch of a new company, entrepeneurs should be careful to follow proper record-keeping procedures and thoroughly document these transactions to avoid problems down the road. When these offerings bleed the line between loans and investments, however, business owners should be wary of strict SEC regulations they may be violating, potentially tainting the start of their new venture. 

 

In general, the sale of stock in a business should be registered with the Securities Exchange Commission (SEC) under the Securities Act of 1933. While the specifics of such registration are beyond the scope of this article, the process can be both time-consuming and expensive for a small business owner interested in raising money for a start-up or increasing cash-flow.

 

To account for smaller offers, Regulation D of the 1933 Securities Exchange Act was enacted, which includes a number of "safe harbors" from ordinary registration procedures. If you are interested in raising money from a smaller pool of investors, including friends, family, small investment firms and banks, you may be eligible for an exemption under Regulation D provided that your investors meet certain qualifications. The most notable requirement for these investors is that they meet financial standards, namely, a net worth of at least $1,000,000.00 or income of at least $200,000.00 for the last two years (for couples, the prior earnings requirement is $300,000.00).

 

Not everyone interested in investing in your company quite meets these standards? Certain provisions under Regulation D also allow for up to 35 "unaccredited" investors who fall below the financial standards listed above. While you may be able to offer investment opportunities to unaccredited investors, there are a number of reasons you may want to reconsider. The disclosure requirements for unaccredited investors are nearly as onerous as those required for formal registrations of securities and there are additional filing requirements should you decide to sell your company.

 

If you are thinking about navigating Regulation D, or other securities regulations, feel free to contact our office to discuss your specific needs and goals. Even if you qualify for a safe harbor, there are still very strict regulations involved in offering investments and certain filings that must be completed following your first sale.

 

Your estate plan is a set of instructions for those who survive you. Whether you are directing those instructions to the Probate Court (as through a will), or a set of private individuals you designate (as through a living trust), those instructions are a snapshot of your wishes at the time the documents were drafted. We understand that most people would rather not revisit some of the decisions that have to be made when preparing an estate plan but while it is advisable to review these documents from time to time, they should absolutely be reconsidered after major life events, such as familial deaths, divorce, marriage, and the birth of children or grandchildren.

 

The most common circumstance for reviewing an estate plan seems to be divorce, or preparation for divorce. Depending on how your plan is drafted, however, some of the gifts and designations for former spouses may be revoked automatically after separation, while others require additional steps. In general, powers of appointment or gifts to an ex-spouse that name the individual generally, such as "I designate my husband" or "my spouse" are revoked at the time of marital dissolution, even if the spouse is named specifically in the recitals or introduction to a document.

 

The same automatic revocation is usually true of gifts and provisions made for step-children. However, where a provision naming a step-child is included in the estate plan of an individual who has passed away, some courts will allow the introduction of evidence to show that the decedent intended the gift(s) to survive the dissolution of marriage. The presumption is certainly that when a testator provides for his/her spouse's children, he/she normally intends to exclude children of an ex-spouse after dissolution, however this presumption can, and has been, rebutted. If you develop an independent relationship with the children of your spouse and wish to make a gift to such children in your estate plan, you should consider including the necessary provisions to make that gift survive dissolution. Alternatively, you can consider altering your estate planning documents after dissolution to provide those gifts specifically to the children and separate from your former relationship to their parent.

 

The automatic revocation discussed above applies to both "probate transfers," which are dictated by estate planning documents such as wills, trusts, and powers of attorney as well as certain benefit beneficiary designations in retirement plans or financial institution accounts, and joint tenancy, but not to life insurance policies. For more information on the process of changing or updating your estate plan, please feel free to contact our office to speak with an estate planning attorney.

 

Online auction sites allow users to sell directly to buyers for minimal transaction fees. While this easy access to a global marketplace of goods and services can be an attractive alternative to brick-and-mortar stores, buyers and sellers should be cognizant of the potential legal implications of completing a transaction that involves participants from multiple states.

 

When a sale through an online auction site turns sour, most service providers will offer some limited alternative dispute resolution process, such as arbitration or mediation. Where that alternative means of resolving a problem fails to adequately compensate an aggrieved buyer or seller, the parties are left with traditional means of litigation. When bringing a lawsuit, the plaintiff has the burden of establishing its case for jurisdiction when seeking to bring a lawsuit outside of the defendant's place of residence. In deciding the question of jurisdiction, a court will determine whether there was "purposeful availment of the benefits and protections of the forum state" in which the plaintiff is filing the lawsuit. Plaintiff's burden must be met with something more than just a transitory involvement in the forum by the defendant.

 

The specific case law varies from state to state but the current law in California holds that an ocassional sale on an auction site such as eBay does not lead to jurisdiction in California for out-of-state users. While this may be good news for California sellers facing disputes from past purchasers, auction users should take note of where they may be forced to bring a lawsuit if a dispute arises when buying or selling online.

Sincerely,
WLF Lawyers
www.WLFLawyers.com

  

  

  

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