The Importance of Family Business Succession Planning
Do you have a plan if the family business must change hands because of illness or retirement? Why is it important to start considering a business succession plan for your business? A succession plan will establish an orderly transfer of the management and ownership of the business to new managers and owners to avoid liquidation of the business, as well considering tax treatment and other anticipated expenses and allows incorporation of the family’s nontax objectives.
A Succession Plan controls future ownership and management transfers to different groups or designated transferees.
What is considered a family business? It is an enterprise owned and controlled by one or more families who plan on succeeding generations continuing to own and manage the business. Generally, only about 30% of these businesses survive the second generation and 12% the third generation.
Family businesses generate about 50% of our gross national product. The strength of the family business is independence, accomplishment and income for the family.
Why is a family Business Succession Plan so important? Estate taxes may be significant and is an important issue to be addressed. The estate tax plan involves providing funds to pay estate taxes upon the death of the founder of the company. Other strategies may involve transactions that are subject to income tax such as intra-family sales not involving grantor trusts.
As the principal of the family business starts to age, tension can develop concerning when the older generation should retire and turn over ownership and management to the younger generation. Another big concern is the effect of estate taxes on the business. Personal issues concerning siblings’ emotions and roles in the business are usually in the mix.
Once the decision is made to establish a succession plan, find a knowledgeable attorney who understands the company’s financial situation and the family dynamics. This person should have knowledge of the tax and related issues, including corporate, partnership, limited liability company, and employee benefit law and knowledge of the estate planning and administration issues.
A family needs to consider commencing a succession business plan at least ten years before retirement and implementing new management five years before the anticipated retirement date. This is important since many family businesses do not survive the death of the founder because of inadequate planning and insufficient cash to pay taxes and maintain the business’s viability. Many businesses will close or be liquidated in order to meet the needs of the family.
Employee-At-Will : Status in Texas and Employment Agreements
Texas is an “Employee-At- Will” state which gives few rights to an employee that are not created by statute or governed by labor regulations. At-will employees can be terminated for any reason, as long as the reason is not in violation of specific statutes or is not due to failure or refusal of the employee to commit an illegal act during employment. A Texas Employment Contract is of critical importance in order to create equal rights and obligations that are enforceable. An employment contract must directly limit the employer’s right to terminate an employee without good cause (a defined term) or provide for a “term” of employment that is firm. In the employment contract the employer should unequivocally indicate that termination of the employee’s job may only occur in specific defined circumstances. The contract may also set out the terms on which a company hires an individual or an individual hires a company.
If properly prepared, this employment contract is a legally binding agreement in Texas and is enforceable in a court of law. Discretionary flexibility in changing the job terms and conditions is limited by a Texas employment agreement and the newly created legal obligations of the employer.
Many common provisions included in employment agreements are:
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Employee’s job description
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Employee’s monetary and benefits compensation
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Protection of Trade Secrets and Confidential Information
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Non-compete covenants of varied length, time and geographic location
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Prior physical exam and/or drug testing program ongoing
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Notification of Company Policies and Procedures
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Terms of Notice of Resignation and Return of Company Property
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Terms of employment and duration of employment
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Severance issues
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For cause termination
An oral employment agreement in Texas with a term less than one year in duration or an agreement which can be fully performed within one year, is generally binding. Contract terms can flow from a number of sources which may include the following:
- Verbal agreements
- Agreements in writing or document form
- Agreements required by law
- Implied – not written but mutually understood to exist
- An offer letter
- An employee handbook
- A company notice board
- Collective agreements
- Emails
- Faxes
Wrongful dismissal is a breach in the way the employee is dismissed, i.e. without being given proper notice or following the procedures as terms or rights set out in the employment contract.
In order to modify a Texas employment contract, there must be a subsequent agreement (preferably in writing) between the parties. Under certain circumstances, the employer may need to make changes to the contract because of economic circumstances. Things that might may be modified include:
- Rate of pay
- Work time
- Duties and responsibilities
- Work Location
- Correcting an error in the contract
- Disciplinary action – check disciplinary procedures to make sure this is done properly
Employees may ask for a change in a contract to:
• Improve their work environment
• Secure a raise in pay
• Secure more vacation or holiday time
• Change work hours
A breach of the contract occurs when either the employer or the employee violates a condition or term in the contract. A breach may be the result of a verbal or an oral (implied) agreement. If you think a breach of contract has occurred, it is best, generally, about absent fraud or duress, to take the problem to the employer first and attempt to work out a solution. If you decide to take legal action, remember you will need to prove financial loss in order to receive compensation. Legal counsel action may prompt the employer to counter sue, if the employer thinks it has legal ground. An employer has the legal right to sue the employee for damages just as the employee has the right to sue the employer.
Texas Divorce / Texas Child Support Q and A
Q: How long is the divorce process?
A: In a Texas divorce there is a waiting period of a minimum of 60 days from the time you file the Original Petition commencing the lawsuit to the time the divorce may be finalized. Few divorces are finalized in this time-period. It is more likely that an uncontested divorce will take approximately 3 to 6 months and a contested divorce will likely will take much longer depending on the issues and conduct of the parties.
Q: Do my spouse and I both have to hire attorneys?
A: No. But it is certainly in your best interest to hire an attorney for a consultation purposes and to review legal documents for your own protection. An attorney should not in the vast majority of cases represent both parties, so if one attorney is involved he or she will under law be looking out for the best interest of the client that hired him/her, while the other party is representing themselves (pro se).
Q: Will I have to go to court?
A: If the spouses reach agreement, one party will have to appear in Court. Often times, when the parties have worked out their own settlement, that agreement is signed by each of you and submitted to the court with only one party making a personal appearance to state to the Court that the agreement has been reached and to establish statutory requirements. If, on the other hand, you and your spouse cannot come to an amicable settlement through this process, you will both have to appear in court, and often on many occasions.
Q:Should I Move Out of the Marital Residence?
A: Be sure to consult with an attorney before leaving the marital residence. Leaving the home may be viewed as abandonment or actually declaring a new residence, especially if you are taking personal items with you (clothing, automobile, sentimental possessions, etc.). If children are involved issues may arise as to who currently has or should have primary possession of the children. Once you have voluntarily left the home, it may be difficult to move back in or obtain orders for primary or temporary possession.
Q:How Do I Get a Divorce?
A: Before getting divorced you or you and your spouse should decide that you absolutely want and need the divorce. Even though in the divorce process prior to final judgment everything is reversible, it is important that you realize that the road is sometimes very long and can be a difficult one to travel.
Q:What if I Do Not Want a Divorce?
A: The advent of a divorce is something that slowly builds. You may want to consult with your spouse about placing things on hold while you receive counseling. However, the need for a divorce is rarely something that happens over night. Your spouse may have made his or her mind up long ago that divorce is the only option. If your spouse has filed for divorce, you have no choice. The most important thing for you to do if your spouse has filed for divorce is promptly seek proper legal advice.
If your spouse has significant assets and you feel they may be considering divorce seek legal advice immediately. You may want to do some pre-planning to make sure you have complete copies of original and final documents and know where all the marital assets are located and to assure their status. Do not give your spouse time to stash, spend away and/or hide assets.
Q:Can You Modify Child Support Orders?
A: Making changes to an existing child support order is not uncommon. Most states will not allow a request for modification on a child support order unless a time-period (of 2 to 4 years depending on the state) has passed since the order was put into place. Keep in mind that child support orders cannot be increased or decreased on a whim. In Texas, you must show a change in circumstances. However, if the person paying child support’s income has gone up or down more than 25% you can request a change. IMPORTANT NOTE: If you agree to no child support in your first order (Final Decree) and your spouse has a significant income at that time, you may have waived a statutory right to future child support unless the income level at the time of the existing order increases or decreases significantly.
Q:Can I Deny My Ex-spouse Visitation, Possession or Access?
A: You can not and should not deny visitation or possession, unless the Court has modified the visitation or possession to allow it! Denying visitation or possession is one of the biggest mistakes made by most primary custodial parents – it is an act of contempt in Texas. You may believe you have a justifiable reason for denying the visitation or possession rights, but by law your are not permitted to do so absent extraordinary circumstances, usually involving gross neglect or physical abuse.
Q:How Do I Get Custody of My Child(ren)?
A: The first and most important step to getting custody of your child(ren) is to be an involved and hands-on parent and to be honest. Being a great parent is not always the easiest task during divorce, but it is important to carefully consider each and every action you take during a divorce and how it may or may not effect the child(ren). You will also need good legal representation. Child custody issues can become ugly and complicated no matter how good your intentions may be. Make sure you are prepared. Document everything.
Q:What if I Do Not Like the Judges Decision?
A: The purpose of the ruling is to establish what exactly should be stated in the Final Divorce Decree. Once the attorneys have drafted the Final Divorce Decree and both parties have agreed that it coincides with the ruling, it will be presented to the Judge for signing. Once the parties have agreed and signatures are signed, you will have to live with the decisions. If the divorce is highly contested and the Judge rules and you are unhappy with the results, you have only a small window to appeal the decision or request a new trial.
Q:What is Fair Spousal Support or Alimony?
A: If you and your spouse can not come to agreement on the need for or amount of spousal support to be paid, the length of time, and under what conditions, the spousal support will most likely be set by a Judge according to Texas law.
Q:How Much is Child Support?
A: See Graphic below and also read our blog on Texas Child Support Guidelines
Dallas Divorce Attorney
Julian Nacol
Nacol Law Firm P.C.
Call (972) 690-3333
Preventing Custodial Parent From Relocating Children Out of State
Mom and Dad are divorcing or have been divorced and are now sharing joint custody of their children in the same city in Texas. One parent receives a letter from the other parent’s attorney requesting that this parent be allowed to relocate the children to another state so he/she may take a better job position with another company! This is a dilemma no parent ever wants to experience! Child Custody cases involving interstate relocation jurisdiction issues cause much heartache and are costly legal battles.
What can a Parent do to protect themselves from children being relocated away from the non-moving parent to another state without her/his consent? How may this affect the parent’s relationship with the children?
The Texas Family Code 153.002 Best Interest of Child states “The best interest of the child shall always be the primary consideration of the court in determining the primary consideration of the court in determining the issues of conservatorship and possession of and access to the child.”
The Texas Family code does not elaborate on the specific requirement for modification in the residency-restriction context, and there are no specific statutes governing residency restrictions or their removal for purposes of relocation. Texas Courts have no statutory standards to apply to this context.
The Texas Legislature has provided Texas Family Code 153.001, a basic framework on their public policy for all suits affecting the parent-child relationship:
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The public policy of this state is to:
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Assure the children will have frequent and continuing contact with parents who have shown the ability to act in the best interest of the child;
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Provide a safe, stable, and nonviolent environment for the child;
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Encourage parents to share in the rights and duties of raising their child after the parents have separated or dissolved their marriage.
How does The State of Texas treat an initial Child Custody determination?
Texas Family Code 152.201 of the UCCJEA states, among other things, that a court may rule on custody issues if the Child:
*Has continually lived in that state for 6 months or longer and Texas was the home state of the child within six months before the commencement of the legal proceeding.
*Was living in the state before being wrongfully abducted elsewhere by a parent seeking custody in another state. One parent continues to live in Texas.
*Has an established relationship with people (family, relatives or teachers), ties, and attachments in the state
*Has been abandoned in an emergency: or is safe in the current state, but could be in danger of neglect or abuse in the home state
Relocation is a child custody situation which will turn on the individual facts of the specific case, so that each case is tried on its own merits.
Most child custody relocation cases tried in Texas follow a predictable course:
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Allowing or not allowing the move.
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Order of psychological evaluations or social studies of family members
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Modification of custody and adjusting of child’s time spent with parents
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Adjusting child support
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Order of mediation to settle dispute
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Allocating transportation costs
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Order opposing parties to provide all information on child’s addresses and telephone #
Help to Prevent Your Child’s Relocation in a Texas Court by Preparing Your Case!
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Does the intended relocation interfere with the visitation rights of the non- moving parent?
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The effect on visitation and communication with the non-moving parent to maintain a full and continuous relationship with the child
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How will this move affect extended family relationships living in the child’s current location?
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Are there bad faith motives evident in the relocating parent?
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Can the non-moving parent relocate to be close to the child? If not, what type of separation hardship would the child have?
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The relocating parent’s desire to accommodate a new job, spouse, or other criteria above the parent-child relationship. A Parent’s personal desire for move rather than need to move?
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Is there a significant degree of economic, emotional or education enhancement for the relocating parent and child in this move?
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Any violation of an order or prior notice of the intended move or a temporary restraining order
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Are Special Needs/ Talents accommodated for the child in this move?
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Fear of child and high cost of travel expenses for non-moving parent or child to visit each other to be able to continue parent- child relationship.
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What other Paramount Concerns would affect the child concerning the relocation from the non-moving parent?
At the Nacol Law Firm PC, we represent many parents trying to prevent their child from relocating to another city or state and having to experience “A Long Distance Parental Relationship” brought on by a better job or new life experience of the relocating parent! We work at persuading courts to apply the specific, narrow exceptions to these general rules in order to have child custody cases heard in the most convenient forum in which the most qualifying, honest evidence is available; cases where the child’s home state or other basic questions are clarified, and cases where a parent has the right in close proximity with their child regardless of other less important factors.
Getting a Divorce from Your Addict Spouse
Has the time come to seriously start thinking about divorcing your Addict Spouse? After much heartbreaking soul searching has the time to break the downhill addictive spiral come for you and your family? Have you decided to stop the instability and damaging personal assaults the addictive spouse and parent has inflicted on the entire family?
Here are some possible questions you may ask yourself before making the final decision of divorcing your Addict Spouse:
- Have you acknowledged to yourself that your spouse is an addict?
- Have you acknowledged to your spouse that he/she is an addict?
- Has your life and that of your family become chaotic and unstable as a result of living with an addict?
- Have you gotten help for yourself and your spouse from an addiction expert?
- Have you attended counseling with your spouse and a knowledgeable addiction therapist?
- Have you or your family experienced serious negative consequences as a result of your spouse’s addiction?
- Have you considered or tried an intervention?
- Have you told your addict spouse that you are contemplating divorce unless he/she stops using?
- Are you now ready to leave the marriage and stop the pain?
You do not have to live in this current situation. Are you, as the non-addictive spouse, already the enabler in this relationship? Many times when the addictive spouse does seek professional help it is already too late for the marriage to survive.
If you have a family, addictive reality is very destructive to you and all family members involved. Most non-addictive family members feel very helpless in stopping the family unit from being destroyed or addressing the viability of the marriage.
(credit : National Institute on Chemical Dependency: http://nicd.inspirehealth.org/)
NACOL LAW FIRM P.C.
8144 Walnut Hill Lane
Suite 1190
Dallas, Texas 75231
972-690-3333
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Attorney Mark A. Nacol is board certified in Civil Trial Law by the Texas Board of Legal Specialization
