You should go over the benefits and potential drawbacks of sole proprietorships.
The U.S. Small Business Administration provides an overview of sole proprietorships. A sole proprietorship does not result in the creation of a separate business entity, and you have total control of your business. As a result, there is no separation between the assets and liabilities of your firm and your personal liabilities and assets.
As a sole proprietor, you can secure a trade name, and this structure could suit your needs best if you have a low-risk business. However, getting a loan from a bank and raising funds could prove challenging, and you could become personally liable for your firm’s debts.
It is essential to pinpoint the most suitable business structure before moving forward, especially since this decision has a significant impact on your liability, paperwork, how you can raise funds and the amount of taxes you owe. You should identify the best business structure from the start because converting to another business structure down the road could have negative consequences.
If you believe that setting up a sole proprietorship is the right call, make sure you evaluate the ins and outs of the process carefully.
]]>According to Forbes, title insurance is a type of insurance that will protect you against any third-party claims that arise following the initial title search and after you close on the property. Even if you have owned a property for many years, title issues can still arise, so it can be beneficial to purchase this type of insurance during the buying process.
Most title insurance policies will cover the cost of paying off an undiscovered lien or protecting you legally when someone else claims rights to your property. This type of insurance can also provide you with a settlement if you buy a property that had a forged deed provided by someone who did not own the home. Additionally, title insurance can protect your right to sell the home later on if an issue arises during a future title search.
Some of the most common issues title insurance can protect you against include boundary disputes, conflicting wills, property survey errors and building code violations. A title insurance policy can also protect you from liens from contractors, encroachments and improperly recorded documents.
Many buyers find that they never need to use their title insurance. And although this may be the case with your purchase, having this type of insurance can provide you with peace of mind in the event that an issue ever did arise with the title.
]]>This is why it is advisable to explore alternative dispute resolution before taking a dispute to litigation. Two popular routes of alternative dispute resolution are arbitration and litigation. According to FindLaw, mediation is usually a non-binding process, while arbitration is binding.
Mediation is more similar to counseling as compared to litigation. With mediation, a chosen mediator helps to guide the conversation between the feuding entities. Mediation attempts to have both parties come to a consensus regarding the dispute.
Mediation is usually “non-binding.” This means that if one party is unhappy with the results of mediation, the dispute may still end up in court.
Arbitration is more similar to litigation in its look and process. Instead of a “judge,” arbitration usually involves a “panel” of arbitrators. Typically, one party will select one arbitrator, the other will select the other, and then both parties will compromise on the third. However, it is also possible for both parties to agree on a single arbitrator, if desired.
Once the parties select the arbitration panel, both sides present their “case.” Then, like litigation, the panel will discuss the dispute and issue a “ruling.” Arbitration is typically binding, which means that neither party can take the case to litigation after an arbitration ruling.
Depending on the scope and nature of your dispute, it is possible that arbitration or mediation is an option. Alternative dispute resolution methods can save your precious time and money.
]]>However, it appears there are breaks in the chain of title. You may have to file a quiet title action before the transaction to buy the property can proceed.
The purpose of a quiet title action is to determine legal ownership of the property in question. If there is doubt or ambiguity about ownership or a break in the chain of title, the property has no marketable value. As a result, a title company will not issue title insurance without which you cannot obtain a mortgage loan.
Various issues may prompt a quiet title action:
A “cloud” on the title refers to something in the chain of title that is not clear. This could mean anything from a creditor lien in the record to someone claiming water rights on the property. Removing the cloud through a quiet title action will result in the property having a marketable title.
In California, you, as the plaintiff, must present a verifiable complaint that begins with a legal description of the property and ends with a specific request for the determination of your title versus an adverse claim. If you prevail in the quiet title action, the property becomes marketable and your ability to purchase that Palos Verdes dream home becomes a reality.
]]>The founding documents of your business may provide you with the right way to let a shareholder go. Business.com suggests companies refer to the shareholders’ agreement for guidance.
To set up a company that gives out ownership shares, you should establish the rights of each shareholder. Examples include describing the shareholders’ degree of control over the business and how to pay co-owners in the event of a company sale. Additionally, the agreement should dictate what shareholders must contribute to the business and other obligations. All shareholders must give their consent to the agreement.
Shareholders’ agreements bind the signatories to behave in a certain manner, plus they may prohibit specific kinds of misconduct. If your agreement describes particular rules for co-owners, you should have an easier time dismissing a shareholder if the person has violated a condition of conduct.
The agreement may include other details important to removing a shareholder, such as how to value the shares of the co-owner and ways to buy out the owner. This is important because your shareholder could feel cheated if you do not offer a proper price for his or her shares.
Without a shareholders’ agreement, you may have no choice but to negotiate with the shareholder for a buyout and departure from your company. Take the time to understand your legal options in case a dispute with a co-owner heats up.
]]>Finding the right property with the right conditions takes time. After you spend the time and money finding the right place, you need to ensure that your real estate contract has all the necessary conditions, provisions and clauses.
Every real estate contract should have contingencies. For example, you should have a statement that allows you to void the contract if the home inspection reveals major problems with the house.
Another contingency you may consider is the sale of an existing property. If you cannot sell your current or existing home by a specific date, you need a contingency that allows you to walk away from the new home purchase.
If you cannot purchase a new property with cash, you should also include a finance contingency that allows you to walk away if you cannot secure financing at an expected interest rate.
Include any seller expectations. For example, if you expect the seller to pay for upgrades or repairs, such as a new roof, you need to include these conditions in your contract.
In addition, closing costs include several types of fees, from escrow and title search fees to notary and recording fees. You need to clearly state which party, you or the seller, is responsible for paying these fees.
Finally, clearly state everything you want in the purchase, such as fixtures and appliances. You can even negotiate the window coverings.
Do not rely on a verbal agreement in any part of your real estate sale. To protect yourself and your finances, do some research and learn more about what to include in your real estate contract.
]]>Condos and other residences in multi-unit buildings often sell for somewhat less than their standalone counterparts. If you want to buy such a place, though, you are going to have to contend with at least one party wall.
Despite its festive name, a party wall is more functional than fun. These walls sit on top of property lines, making them have at least two owners. For example, you and your neighbor are likely to own half of the wall that separates your condos. That is, you own your side of the wall, and your neighbor owns his or hers.
Buying a place that has a party wall places some restrictions on you as a homeowner. Indeed, you may have a legal obligation to maintain and repair your side of the wall. You also may not be able to relocate the wall or renovate your home like you may want to do.
Most residences with party walls have existing party wall agreements. These agreements spell out each owner’s rights and responsibilities. They also usually have instructions for resolving disputes that inevitably arise between neighbors. Consequently, you must get your hands on the party wall agreement and understand its contents.
Ultimately, by conducting a thorough review of your party wall agreement before closing, you can avoid purchasing a property that has unacceptable restrictions.
]]>General partners may participate in profit-making activities and divide the proceeds. As noted by Forbes, a partnership agreement may outline each partner’s ownership stake and capital contributions. Terms may also establish a system for partners to resolve disputes or end their relationship.
California allows general partnerships to form without filing an official registration statement with the Secretary of State. If an individual starts performing work with another person to earn income, they may have already established a general partnership.
The members of a general partnership have joint liability in paying the enterprise’s expenses and obligations. The Corporate Finance Institute explains that businesses formed as general partnerships are not required to pay income taxes. Profits instead flow through the business to the general partners. Those profits are then taxed as income on each individual’s tax return.
A limited partnership business requires one individual acting alone as a managing “general” partner. He or she oversees the business operations and controls the enterprise. The other partners may then classify as “limited” partners. They may not take part in business activities and they also have limited control. Limited partners only lose up to the amount of money they invested. They could also divide profits as per an agreement.
Before starting a business venture with another individual, the parties may discuss establishing a general partnership. If one individual takes an active management role, the involved parties may wish to create a limited partnership agreement. The agreement could outline the degree of each individual’s ownership and liability.
]]>With a comprehensive partnership agreement, you provide a framework for you and your business partners to follow. Even though this agreement is likely to minimize disputes, you eventually may have to deal with disagreements.
According to Psychology Today, business partners should address disputes by having open-ended conversations with each other. If communication does not work, though, you may not want to waste valuable resources on expensive legislation. That’s where a dispute resolution clause comes in.
With a dispute resolution provision, you and your partners know the steps you must take to resolve your disputes. Your provision may mandate mediation or even arbitration. It also may describe what happens when partners reach an impasse.
Dispute resolution provisions are exceedingly common in partnership agreements. While including one may keep you and your partners out of court, your clause does not guarantee you can resolve all disputes. Therefore, you also may want your partnership agreement to include a provision for ending the partnership or perhaps even forcing out an uncooperative partner.
Ultimately, because dispute resolution clauses keep partners from gumming up the works, having one in your partnership agreement ensures you can focus on meeting customer demands instead of fighting with your partners.
]]>The Corporate Finance Institute explains that a shareholders’ agreement outlines the number of shares and their issue dates. The contract notes how much each shareholder owns. Terms typically include how often the company pays dividends or distributes cash to stockholders. Contracts also describe how a company issues its stocks and how investors may buy or sell them.
A shareholders’ agreement may protect a business and its shareholders from disputes that lead to litigation. Your contract may include details about how management makes its decisions. It could also explain when shareholders may vote on an outcome. Terms could illustrate how often board members change and how shareholders nominate or vote for them.
An agreement could outline each shareholder’s rights and responsibilities. You may, for example, outline the amount of time before a new stockholder may sell or transfer shares. Restrictive covenants may prevent a shareholder from investing in or working for a competitor.
Forbes reports that an effective agreement includes provisions that promote a balance between minority and majority shareholders. Corporate decisions rely on votes of approval. Stockholders with small ownerships may, however, sell their shares when they believe their votes do not influence the company’s direction. Provisions that certain decisions must receive unanimous shareholders’ approval may prevent disputes that could cause minority owners to sell.
Ironclad shareholder agreements may prevent disputes by stipulating ground rules for management decisions and voting rights. Protecting minority shareholders may attract investors that could offer your company meaningful and advantageous relationships.
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