The Estate Plan List (to get you started)

Will

Do you have a will?  If yes, is it up to date with people you chose to serve as executor and guardian?  Do you want to add or remove any beneficiaries?

Financial Power of Attorney

Do you have a durable financial power of attorney that names trusted people to take care of your financial matters if you are unable to?  How will your bills get paid if you are in the hospital?

Living Will

A living will is a healthcare document that details your end-of-life decisions.  Do you want to be kept alive by artificial means?  Are there some procedures you want to refuse (typically for religious reasons)?  For your living will to take effect, two doctors must agree that you have a terminal condition or are in a permanently unconscious state, and death is being prolonged with no reasonable chance for recovery.  The people you list in this document are merely for contact purposes–they have no decision-making authority.

Healthcare Power of Attorney

A healthcare power of attorney allows you to name people who will have authority to make healthcare decisions for you if you are unable to do so.  If you have a living will, your healthcare power of attorney cannot override your wishes in your living will.

Life Insurance

Why have life insurance?  Obvious reasons include providing money to those dependent on your income if you die.  Life insurance can also be used to pay off your debts so that you don’t burden your family with your financial liabilities, such as medical debt if you were hospitalized or had a lengthy illness.  You can purchase a policy designed to pay off the mortgage on the house if you want to be sure your children and family can keep the family home.  If you own a business, life insurance can be purchased to enable your business partners to buy out your shares and keep the business running smoothly.

There are more components to an estate plan, but the list above explains your first considerations when starting to plan.  This list is specific to Ohio.  Documents described above might be different in your state.

If you have any estate planning questions, email me at julie@juliemillslaw.com.

 

 

“Executive session” during a board meeting. What is it?

I have discussed executive sessions a couple of times in the past few months as they relate to my nonprofit clients, to school boards and Ohio’s Open Meetings Act, and to Freedom of Information Act (FOIA) requests.  What is an executive session?

A executive session is any meeting that is closed to the public and outsiders and where contents of the meeting are confidential, and is typically held within an otherwise open meeting (open to the public).  Very generally, executive sessions often occur when discussion involves legal issues and personnel issues.  I believe I see more mishandling of executive sessions and with violations of the law than witnessing smooth and compliant executive session meetings.

The intent behind open meetings legislation–often called “Sunshine Laws”–is to ensure transparency to the public with any group or public body that receives public funds or public support of any kind.  Because you receive public money, and make decisions regarding the public’s money or support, the public has a right to know what you’re doing and how you’re doing it.  However, some discussions need to be kept private, namely, most legal discussions, many discussions involving sensitive personnel issues, discussions involving large contracts, among other topics.  When, in the course of a board meeting, it becomes necessary to discuss sensitive topics, the board moves into private executive session.

Here is where this blog post goes from general executive-session discussion, to Ohio-specific discussion, and where I tend to see problems.

Problem #1: Abuse

The law is clear: public bodies are to vote and to conduct deliberations in public.  As with everything there are exceptions, but transparency is the rule.  Some boards will go into executive session excessively, and since the sessions are private, the public doesn’t know if the executive session is warranted or not.  This is why Ohio has 8 reasons for going into executive session, and the justification for your executive session must fit into at least one of those reasons.  See Ohio Revised Code Section 121.22(G)(1-8).  And, there can be no major decisions made in executive session.  There can be a lot of discussion, but an actual vote must be taken in a public meeting.

Problem #2: Procedure

I’ve been in a meeting that qualified as an “open meeting” where a board member stated that he wanted to break into an executive session, the board said “ok,” and then asked the public to leave.  This was a violation of Ohio law under the Open Meetings Act.

First, there must be a motion by a board member to “adjourn” or go into executive session.  That motion must, by Ohio law, contain the enumerated reason or reasons for going into executive session that are provided in Ohio Revised Code Section 121.22(G)(1-8): “If a public body holds an executive session to consider any of the matters listed in divisions (G)(2) to (8) of this section, the motion and vote to hold that executive session shall state which one or more of the approved matters listed in those divisions are to be considered at the executive session.”

The motion must be specific, not general.  For example, “I make a motion to adjourn into executive session after this board meeting to discuss the following reasons permitted by the Ohio Revised Code.  First, ORC section 121.22(G)(2), to discuss the purchase of public property at 555 Maple Street, where pre-disclosing information would provide unfair competitive advantage, and (3), conference with our attorney Mr. John Joe regarding legal matters.”  As stated, the reasons cannot be stated generally–“Public property discussion.”  The reasons given must be specific–“Discussion related to acquisition of 555 Maple Street.”  Another board member then seconds the motion.

Second, a board can’t state that they are going to discuss reasons (2) and (3), then discuss other reasons in the executive session.  Each executive session must be limited to the purposes stated. (Vermilion Teachers’ Assn. v. Vermilion Local School Dist. Bd. of Edn., 98 Ohio App.3d 524, 648 N.E.2d 1384 (6th Dist.1994)).  In fact, boards are to use wording directly from the statute (above) in their resolution to adjourn into executive session.

Problem #3: Confidentiality

Most board members are aware that executive sessions are private, and disclosing content from these sessions is unethical.  My guess is that most board members are unaware that disclosing what transpires in an executive session can be a violation of Ohio Revised Code Section 102.03(B), which is a first degree misdemeanor.

Problem #4: Consequences

Executive sessions are for discussion only.  All acts and deliberations must be taken in an open meeting.  Actions taken in executive sessions are void, as are actions taken in open meetings that are the result of an unlawful executive session.  Courts have invalidated actions taken by a board because the board had conducted improper executive sessions.

Removal of board members by a Court is another possible consequence of improper executive sessions, and violations of Ohio’s Open Meetings Act.  In two cases, school board members violated the Open Meetings Act by repeatedly holding lengthy executive sessions, then returning to the open board meeting to vote on matters discussed in the executive sessions with little to no public discussion.  (Evans v. Rock Hill Local School Dist. Bd. of Edn., 2005-Ohio- 5318 and In re: Removal of Kuehnle, 161 Ohio App. 3d 399, 2005-Ohio-2373.)

The foregoing cases, and Ohio’s Open Meetings Act’s purpose and language, make it very clear that transparency is expected of public boards, and deviation from transparency should have specific, statutory reasons behind it.  Executive sessions should be used when your reason fits into the list of reasons provided in the Ohio Revised Code, and actions resulting from the executive session must be taken in public during an open meeting.  Trying to justify excessive executive sessions to a court will be an uphill climb for any public body.

If you have any questions about executive sessions or Ohio’s Open Meetings Act, please email me at julie@juliemillslaw.com.

 

Coronavirus’ impact on contracts: can I cancel my vacation bookings? Get out of contract to buy a house?

The current coronavirus/COVID-19 pandemic has created several conditions most of us have not faced before.  It has been termed a national emergency.  For many, their incomes will be negatively impacted, any comprised health conditions may make travel prohibited or extremely dangerous, and life, in short, has been put on hold.

I have seen questions such as, “Can I cancel my vacation bookings without a penalty?” and “I’m in contract to buy a house but now I’m not sure I’ll have a paycheck to afford the home, moving expenses.  Can I back out of buying?”  Some companies are permitting vacation cancellations, maybe your seller will let you out of the real estate purchase contract.  What if they don’t?

In most contracts there is a force majeure contract provision that relieves the parties from performing their contractual obligations when certain circumstances beyond their control arise.  Your ability to claim relief under this clause depends on the terms of the contract and specifically the force majeure provision’s language.

See this excellent article for more information about force majeure provisions and how they might affect you and your ability to comply with contractual obligations.  The article is geared towards businesses but applies to individuals as well.

Happy “National Entrepreneurship Week”!

This week, February 15-22, 2020 is National Entrepreneurship Week (#NatlEshipWeek).  The U.S. has 30 million small businesses and entrepreneurs.  There is never a better time than now to start a business, and Ohio is a great state for business.  I posted on this blog on starting a business, the Small Business Administration offers a helpful guide, as does the Ohio Secretary of State here, and Ohio offers advice here.  So many of my clients who have started their businesses are going strong, and I hope you have the same success.  Here is my post from January 24, 2019, Starting a Business in Ohio:

The first of the year typically brings clients wanting to begin the new year by starting a business.  I enjoy working with people who want to pursue their dreams, whether it is working for themselves, or turning a hobby into income, or providing a product or service to others.  In addition to filing forms and preparing organizational documents, my role as your attorney is to take all steps necessary to protect you and your assets from personal liability.

The necessary actions in starting a business in Ohio will vary according to what type of business you’re starting.  Basic steps include:

This list is not exhaustive.  If you have employees, you should contact the Ohio Bureau of Worker’s Compensation and the Ohio Department of Job and Family Services to determine any steps you need to take.  Certain businesses will need to obtain special licenses and permits, particularly if your business involves preparing and selling food.

If you want to discuss starting your own business, contact me at julie@juliemillslaw.com.  It is never too late to become an entrepreneur in business-friendly Ohio.

If an LLC protects me, why get business insurance?

Business clients often ask me why, if they form their business as a limited liability company (LLC), would they need business insurance?  Doesn’t the LLC structure protect me from liability?

You can launch a business tomorrow simply by starting to do whatever your business does, without filing with the state, choosing a business entity.  If you want to sell widgets, you would get widgets and sell them.  You would be a sole proprietor, you would have a sole proprietorship structure to your business.  You would be your own boss, totally responsible for business decisions.  That sounds perfect to many people.  However, you would also be totally responsible for liabilities, and your personal assets would be vulnerable if your business was sued for whatever reason.  Your business’s money and property and your personal money and property are all at risk as a sole proprietor.  You might not only lose your business’s widgets in a lawsuit, you might lose your house.

To create a divide between “business” and “personal,” sole proprietors and people starting a business choose to incorporate.  The limited liability company (LLC) is a common choice of business entity in Ohio.  If your LLC is sued, only the business’s assets are at risk and your personal assets should be safe.  (“Piercing the corporate veil” in a lawsuit against an LLC could put personal assets at risk, but that is a topic for a different blog post.)  So, why would you need business insurance since your personal assets are protected?

The question becomes what happens if your business faces a large lawsuit.  For example, one of the widgets you sold was defective and caused a horrible personal injury to the customer who bought it.  Even if your company is found not liable, it could face financial ruin defending itself.  Business liability insurance protects the assets of your business.  Errors and omissions (E&O) insurance would cover the cost of defending your business in a lawsuit, while general liability insurance would cover your business in situations arising from negligence.

If you are a sole proprietor, or plan to start a business, incorporate your business to protect your personal assets.  Then, purchase business insurance to protect your business’s assets.

If you want to start a business in Ohio, or have any questions about LLCs, email me at julie@juliemillslaw.com.

 

 

10 Essential Steps to Start a Nonprofit–Final Step

Step #10:  Dissolving Your Nonprofit

Step #10 runs contrary to the title of the series, “10 Essential Steps to Start a Nonprofit,” but should be reviewed by those who are forming (or thinking about forming) a nonprofit.  Dissolving a nonprofit happens for many reasons: it becomes too difficult to raise funds or obtain grants; there are too few resources or revenue streams to offer programs or services; the mission or cause is no longer relevant or has been accomplished; or it has failed to file necessary forms and tax-exempt status has been revoked, leading the board of directors and voting members to vote to dissolve.  Whatever the reason, start with these steps (this list is not exhaustive!) to dissolve your Ohio nonprofit.

  1.  Have the board of directors and voting members vote to adopt a “resolution to dissolve.”  This resolution provides authority to move forward with the dissolution process.  In certain circumstances it is possible for directors alone to authorize dissolution–check to make sure you can proceed this way before starting.  Your dissolution should comply with the dissolution terms set forth in your code of regulations/bylaws.
  2. File a Certificate of Dissolution with the Ohio Secretary of State.
  3. File a Final Annual Report and Asset Disposition form with the Ohio Attorney General.
  4. File a tax clearance certificate with the Ohio Department of Taxation showing that all necessary tax obligations have been met.
  5. If your nonprofit had employees, you will need to notify the Department of Job and Family Services that contributions are either not required, or have been paid.
  6. On your IRS tax forms 990 or 990EZ, you will need to file a Schedule N (Liquidation, Termination, Dissolution, or Significant Disposition of Assets) as well as some organizing documents to notify the IRS that your nonprofit has dissolved.

Some nonprofits choose to just let the organization “expire”: the IRS revokes tax-exempt status after three years pass without filing the 990 tax form; the Secretary of State takes control of business records and lists the nonprofit as inactive if filing dates are missed, etc.  However, it is recommended (by me, for example) to complete the steps in the dissolution process so that you officially end the nonprofit corporation’s existence.  The main benefits of formal dissolution are that you make the organization beyond the reach of claimants and creditors, and you fulfill your obligations under Ohio law of distributing any remaining assets properly (i.e., to a like-minded nonprofit).

If you want to discuss how to dissolve a nonprofit, email me at julie@juliemillslaw.com.

10 Essential Steps to Start a Nonprofit (cont’d)

Step #9: Money and People!

You have completed most legal steps to forming your nonprofit, now it’s time to start the steps that help truly launch your organization, i.e., money and people.  Securing funding, forming partnerships—these steps will put your group in a position to accomplish your goals.

  1. Fundraising: know your state’s laws on fundraising that involve gambling or alcohol. Keep detailed financial records of the funds you receive.  If your events involve minors or animals, have waivers and releases ready!  Inquire when you need insurance for events.  Obtain the correct permits and permission from local authorities before your event.  If you are serving or selling food, be sure to check with your local health department and other agencies to see if you need to provide information.  This list is not exhaustive.
  2. Grants: educate yourself, your grant committee if you have one, and others who want to help with grants, on grant writing and the grant application process.  How you present your organization when applying for a grant affects how grant funders view your organization.  They are determining whether to give your group money from the application you submit.  Are your financials in order?  Are your goals and mission clearly described?  Are you organized, which implies trustworthiness with the money they give to you?
  3. Corporate sponsorships: one thing I learned when trying to identify potential corporate sponsors is that you want to look beyond what the corporation does and sells.  For example, animal related nonprofits tend to approach animal-related companies, e.g., pet food, pet supply, pet boarding companies.  This leaves out a potentially large source of funding.  A large contributor to local pet charities in my town is a basement foundation and repair company.  Another large sponsor of animal rescue-related charities in my area is a laptop repair and sales business.  Expand your outreach with companies!
  4. Partnerships: other organizations can be one of your greatest assets. Leverage your contacts in forming partnerships.  The food pantry you start would get much public view if you partner in an event with a group who fills bookbags with food to provide weekend meals for kids who suffer from food insecurity.  Contact organizations who might benefit from your group, and who might provide a benefit to yours.
  5. Media: send the word out to local media about your group, your events. Become familiar with preparing media releases.  Connect with Facebook groups, prepare a content calendar for posting on social media such as Facebook, Instagram, Twitter, Pinterest, etc.

Information about grant writing, fundraising, partnerships and related topics could fill a book.  The information above should serve to get you started in launching your organization’s work.  I’m happy to answer any questions–contact me at julie@juliemillslaw.com.

10 Essential Steps to Start a Nonprofit (cont’d)

STEP #8: WAYS TO LOSE YOUR TAX-EXEMPT STATUS

Most charities rely on donations to operate.  To attract donations, nonprofits will pursue tax-exempt status from the IRS so they can tell donors that their donations are deductible from their taxes.  People generally recognize the IRS code, 501c3, as an indicator that their donations are deductible.  Tax-exempt status makes it possible to secure grants, and makes the organization attractive to corporations and business who want to donate, for “good will” reasons and/or to receive a deduction off taxes.  Losing your tax-exempt status can be a huge blow to a charity, both financially and to the charity’s reputation.  Becoming knowledgeable on ways to lose tax-exempt status is crucial in running a tax-exempt nonprofit.

The federal government grants your organization tax-exempt status if you agree to certain behavior.  The government is saying, “we won’t make you pay certain taxes, but you now owe the public certain things (disclosure and accountability), and you must not do certain things.”  Not following the rules means that the IRS could revoke your organization’s tax-exempt status.

How to jeopardize your tax-exempt status:

  1. Inurement,” or private benefit.  First, as you read the definition of inurement, know that any amount can jeopardize tax-exempt status.  Second, inurement means to “benefit.”  The prohibition against inurement means that there shall be no using income or assets of a tax-exempt organization to unduly benefit an individual or organization that has a close relationship with the tax-exempt organization.  The inurement prohibition is absolute.  Assets and income are to be used to further the organization’s mission, period.
  2. Unrelated Business Income (UBI).  If your organization runs a business that produces income for your organization, but the purpose of the business is unrelated to your organization’s mission, then the organization is subject to tax on its income from the business.  If your tax-exempt organization provides clothing for shelters and low-income families, and receives income from a thrift store it runs, it is unlikely there would be a risk for UBI.  If your organization is a pet rescue and receives income from a nail salon business, the rescue might have UBI.
  3. Political campaign activity.  As with the inurement prohibition, any amount of political campaigning in support or opposition of a candidate is prohibited and could result in loss of 501c3 (tax exempt) status.  I counsel nonprofit clients that the organization can’t engage in political activity regarding a candidate, but can generally support or oppose an issue.  The tax-exempt “clean oceans” organizations can oppose a ballot initiative to ease pollution restrictions, for example.  I caution to proceed carefully, since tax-exempt status can be revoked if political activity is deemed to be “substantial,” and there are tests the IRS uses to determine this.

Guard your organization’s tax-exempt, 501c3 status.  Having to reapply is cumbersome if you lose this status, and it might give donors a reason to donate their money to an organization who has not behaved in ways that result in losing this designation.

If you have any questions about getting, maintaining, or losing tax-exempt status, email me at julie@juliemillslaw.com.

 

 

10 Essential Steps to Start a Nonprofit (cont’d)

STEP #7: EDUCATING YOUR BOARD

When I see articles on starting a nonprofit I rarely see “educate your board” yet this step is crucial.  Educate about what?  Why?

Educate about what? Inform about liabilities board members might face, educate about their duties and rights, educate on actions that could jeopardize the organization, particularly its tax-exempt status .  This list is not exhaustive.

Why?  Board members need to know what they are required to do, what laws govern their actions, how they can unwittingly get into trouble, among other reasons “why.”  In some situations, although uncommon, board members can face personal liability.

People have good intentions when forming a nonprofit that will pursue a charitable cause.  There are legal responsibilities and potential liabilities if you don’t do what you are supposed to as a board member.  Unfortunately, awareness of these duties and liabilities often comes after there’s an issue.

Board member responsibilities, in general (can be in addition to state law requirements):

  1. Duty of Care: duty to exercise reasonable care when he or she makes a decision for the organization. Reasonable care is what an “ordinarily prudent” person in a similar situation would do.
  2. Duty of Loyalty: A board member must never use information gained through his/her position for personal gain and must always act in the best interests of the organization.
  3. Duty of Obedience to the Mission: A board member must be faithful to the organization’s mission.  He or she cannot act in a way that is inconsistent with the organization’s goals. The board member is trusted by the public to manage donated funds to fulfill the organization’s mission.

Board members should have bylaws in place that govern the functioning of the organization.  They should be apprised of potential legal pitfalls that could impact them or the organization.  There should be short primers provided on open records laws, aka “Sunshine Laws,” and how they impact board meetings and public attendance; a primer on insurance, waivers and releases for events, protocol to be followed if someone is injured at an organization event; fundraising do’s and don’ts, liability with alcohol at fundraisers; political activity and what is permitted; among many other topics relevant to nonprofits.

Sitting on the board of a charitable organization can be rewarding, and board members do have a responsibility to educate themselves on what liability they could face.  Moreover, nonprofits should educate their boards on personal and organizational liability so board members can act accordingly, and avoid making decisions that unknowingly put themselves or the organization at risk.

If you have questions about board member liability, contact me at julie@juliemillslaw.com.

10 Essential Steps to Start a Nonprofit (cont’d)

STEP #6: ADDITIONAL FILINGS; APPLICATIONS; REGISTRATIONS

Depending upon the nature of your nonprofit or what activities you undertake for fundraising–e.g., bake sales, pet bakery sales, bingo tournaments, etc.–you might be required to register with other agencies or organizations.  For many nonprofits, it’s highly recommended that you register with certain organizations.  The listings below are often specific to Ohio, so be certain to check with your state’s agency or organization for registration information.

Places where you might be required to register:

Places where you might decide to register; information you might need:

For information about where you should register, email me at julie@juliemillslaw.com.