Take the Leap: Hiring Employees Is Not That Scary

I’ve been on an employment article kick lately, and my awesome business partner, Erin Ogden, will be making a presentation about “Business Growing Pains” to the Baraboo, Wisconsin Area Chamber of Commerce shortly, so I wanted to dust off this article I’d written a while back on LinkedIn and share it with the OG+S audience.  If you have questions about hiring employees and contractors, it’s something we deal with very regularly for our clients, so after reading, don’t hesitate to ask for more information.

“Yeah, we just plan on hiring independent contractors; much easier that way.”

How many times have I heard that? Basically, every time a Founder wants to start a company. The reality, though, is that almost everyone that works for your company is an employee, and if there was any wiggle room as to classification in the past – UBER killed it.

Why is Everyone Scared of Employees?

To be honest, I don’t know – that is to say I know, but I don’t understand why there is so much fear among Founders out there. Some of the reasons I hear often are:

  1. Payroll and Withholding. Founders don’t want to take the time to setup payroll and figure out withholding requirements. It takes a while, and paying payroll taxes and withholding is a bitter pill to swallow for a cash-strapped startup.
  2. Employment Agreements and Difficult Conversations. If you’ve read any of my previous posts, this is something I harp on often – Founders don’t like to have difficult conversations! In other words, hiring employees and setting expectations is hard and uncomfortable. They also think firing an independent contractor is easier and more straightforward.
  3. The Perceived Risk of Misclassification is Low. Many Founders think, “So what? He’s really an employee, but I have him classified as an independent contractor…what’s the worst that could happen?” I laugh especially hard when I hear that one — the risks and penalties are very high. Remember, the State of Wisconsin and the Federal Government want their MONEY so it’s in their interest to come after you! Just Google the word “misclassification” – what is the first thing that comes up?

What Does it Take to be an Independent Contractor, if I am going to hire that way?

Great question. While there is no tried and true formula – there are guidelines from the Wisconsin Department of Workforce Development. Remember, ALL of the below criterion must be met in order for a “worker” to be considered an independent contractor. They are:

  1. Requirement One: Maintain a separate business.
  2. Requirement Two: Obtain a Federal Employer Identification Number or has filed business or self-employment income tax returns with the IRS based on the work or service in the previous year.
  3. Requirement Three: Operate under specific contracts.
  4. Requirement Four: Be responsible for operating expenses under the contract.
  5. Requirement Five: Be responsible for satisfactory performance of the work under the contracts.
  6. Requirement Six: Be paid per contract, per job, by commission or by competitive bid.
  7. Requirement Seven: Be subject to profit or loss in performing the work under the contracts.
  8. Requirement Eight: Have recurring business liabilities and obligations.
  9. Requirement Nine: Be in a position to succeed or fail if business expenses exceed income.

However, EVEN IF all of the criterion are met – if the “totality of the circumstances” taken together still point to an employer\employee relationship, the worker is still an employee. So, a plumber could easily meet all 9 requirements, but do your workers? To distill the above 9 items, this is what I tell my clients: If you tell someone when to show up, how to do their job, and the reality is that the worker depends on the job for the majority of their income, they’re employees – plain and simple.

How Hard Is it To Hire Employees, really?

It’s not hard, and while withholding may seem tedious, that’s what an accountant can help you with. Additionally, hiring employees gives you a far greater level of control over 1) how they do their job; 2) how they look; 3) when they show up; 4) and if they can compete with you after leaving. Put another way, it’s hard to tell a plumber he can’t plumb for someone else after he fixes your toilet – i.e. enforcing “non competes” against independent contractors is hard — if not impossible.

So, get over your fear and take the leap! The systems you need for a successful business are the same regardless — and eventually, most Founders want employees, so bite the bullet and realize that everyone is probably one already, and the risk of “just hiring contractors” is costly, much moreso than setting up payroll.

Just Keep Going

 

In a first for us, I am reposting an earlier post because I was reminded of it this weekend.  My friend was in town for the Ironman competition again.  This time, instead of being in the race, she had two athletes she trained doing it.  She’ll be competing in the Arizona race in November.  This is one of my favorite posts and lessons.  I remind myself all the time:  Don’t stop. Just keep going.

I have a friend who has completed multiple Ironman competitions (7 of them, I believe).  For those not aware, an Ironman competition is a triathlon organized by the World Triathlon Corporation.  It consists of a 2.4-mile swim, a 112-mile bicycle ride and a marathon 26.2-mile run, done in that order and without stopping.  It is a full day starting at 7:00 am going until  the athlete is done or midnight, whichever happens first.  It takes a lot of training, determination, and just plain grit.  I asked her, “What is your strongest portion?  Swimming, biking or running?”  Her answer:  I don’t stop.  I just keep going.

What a brilliant answer!  Persistence.  No matter what you are doing, no matter what is in store, you just keep doing it.  Rain, heat, whatever.  You just keep going.  I get asked often what makes a good entrepreneur or business person, and often it comes down to the same thing. You just keep going.

That doesn’t mean you never vary course or change tactics.  Over the many years that my friend has been doing this, her life circumstances have changed, her body has changed. During the race, things don’t go as planned.  Cramps, nausea, a kick to the teeth in the swim.  But she knows her end game:  To get to the finish line.  That means sometimes training goes one way, others time another way depending on what is going on with her life.  Sometimes during the race, walking has to happen.  Ice packs to cool her down on some years, and gloves and stocking caps on other years.  But she just keeps moving forward to get her to the ultimate goal, the finish line.

How does that translate as a business?  Know what your finish line is.  Is it an exit through sale?  Hitting a sales goal?  Whatever it is completely depends on your business.  But whatever it is, know what it is.  Then come up with baseline knowledge and skills to get there (a/k/a a training plan).  And then, let the race go as it will, and react knowing your endgame.  Put on the ice packs, sip the chicken broth, slap on the sunscreen.  But most importantly, sometimes you have to just keep going.  And then you, too, will be an Ironman!

Exempt Employees: Administrative and Executive

Over the past few weeks, we have been discussing Employees, overtime, and who is exempt from those regulations.  Last week, we talked about determining who is exempt, and this week, we talk about two of the most popular types of exemptions – the Administrative and Executive Exemption.  Read below for more information!

Administrative Exemption

FLSA: To qualify for the administrative employee exemption under the FLSA, all of the following tests must be met:

  1. The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $455 per week;
  2. The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers; and
  3. The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance[1].

Wisconsin[2]: To qualify for the administrative exemption for overtime pay under the Wisconsin DWD regulations, all of the following tests must be met:

  1. Primary Duty: consists of the performance of office or nonmanual work directly related to management policies or general business operations of their employer or their employer’s customers, or
  2. Employee customarily and regularly exercises discretion and independent judgment; and
    1. Regularly and directly assists a proprietor, or an employee employed in a bona fide executive or administrative capacity; or
    2. Performs under only general supervision work along specialized or technical lines requiring special training, experience, or knowledge, or
    3. Executes under only general supervision special assignments and tasks; and
  3. Employee does not devote more than 20%, or in the case of an employee of a retail or service establishment who does not devote as much as 40%, of their hours worked in the workweek to activities which are not directly and closely related to the performance of the work described in subds. 1. through 2.; and
  4. Employee is compensated for their services on a salary or fee basis at a rate of not less than $700 per month.

Executive Exemption

FLSA:  To qualify for the executive employee exemption under the FLSA, all of the following tests must be met:

  1. The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $455 per week;
  2. The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
  3. The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent[3]; and
  4. The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion or any other change of status of other employees must be given particular weight.

Wisconsin[4]To qualify for the executive employee exemption to overtime pay under the Wisconsin DWD regulations, all of the following tests must be met:

  1. Primary duty: Manages an enterprise, department, or subdivision (50% or more of his or her time)[5];
  2. Supervision: Customarily and regularly[6] directs the work of two or more other employees;
  3. Authority: Can hire and fire or suggest changes in status of other employees;
  4. Discretion: Customarily and regularly exercises discretionary powers;
  5. Nonexempt work: Is limited in performance of nonexempt work to 20% of weekly hours worked (or 40%, if an employee of a retail or service establishment); and
  6. Salary: Is compensated on a salary basis at a rate of not less than $700 per month.

Note: If an employee only executes tasks according to specific instructions or well-established systems, they are not exempt under this category. However, a detailed analysis should be completed, because there is flexibility in the application of this exemption.  For example, Radio Shack and Burger King Managers have been determined exempt under this category, even when their organizations had extensive manuals and operating policies that limited their discretion.  See Donovan v. Burger King Corp., 672 F.2d 221, 226 (1st Cir.1982) and Madely v. Radioshack Corp., 742 N.W.2d 559, 2007 WI App 244, 306 Wis. 2d 312 (Wis. App., 2007).

[1] “Matters of significance” is a loaded term – more information here: https://www.employmentlawhandbook.com/federal-employment-and-labor-laws/flsa/exemptions/administrative/discretion/

[2] Wis. Admin. Code § DWD 274.04(1)(b)

[3] “or their equivalent” means 2 part time employees = 1 full time employee etc.

[4] Wis. Admin. Code § DWD 274.04(1)(a)

[5] Assistant Managers can qualify for this exemption.

[6] “customarily and regularly” means “a frequency that must be greater than occasional but which, of course, may be less than constant.” 29 C.F.R. § 541.701.; Federal courts have held that an employee “customarily and regularly” supervises two full-time subordinates if he or she supervises subordinates who work a combined 80 hours per week at least eighty percent of the time.  Nicolai v. City of Whitehall (Wis. App., 2011)

Lola Teaches Problem Solving

Many of you already know Lola as our social media manager and holiday good wish giver.  Last week, she gave us a good lesson on problem solving.  We were in Cleveland, Ohio for my first half marathon since breaking my leg.  It was 6:00 am Eastern (a/k/a 5:00 am Central), and we were outside with Lola to go potty before getting in the car for the 7.5 hour ride home.

There was a rustle in the bushes, which meant she had to go check it out and chase after whatever was causing the rustle.  Of course, it was a skunk.  A skunk that sprayed her right in the face.  No harm was done to her, but man alive, did she smell.

So what do you do?  First, you make sure she does NOT go into the house.  Then you identify the problem and potential solutions.  Next you start looking at which of those potential solutions are feasible.  In our case, we identified the potential solutions of:

  1. Dog wash at local dog kennels
  2. Dog wash at a car wash

There was a local kennel that advertised being open 24/7.  However, after a phone call, it turns out they boarded dogs 24/7, not that you could bring a stinky dog in at 6:00 am.

There are quite a few car washes that have installed dog washes.  However, the nearest 24/7 one was 30 miles away, and the closest one opened at 8:00 am.   No one was going to last 30 miles with her in the back seat, and waiting 2 hours meant that we’d miss a meeting that night in Madison.  So first 2 solutions were no-go’s.

So, next solution session was how do we “home remedy” this?  Which brings us to the next step of problem solving: Start asking others.  The American Kennel Society and the Humane Society each suggested the following concoction:  Hydrogen peroxide, baking soda, and dish soap.  With a 24 hour CVS a few blocks away, this was a possibility – assuming it worked.  So, off I go to CVS.  On the way there, I get a call, “Further Google results say that shouldn’t go on her face.  They suggest buying douche.” OK, I start loading up my basket with what looks to be the beginning of the weirdest spa day ever, but I can’t find the hydrogen peroxide, and I strike up a conversation with the clerk.  It turns out her dog was sprayed by a skunk a few months ago.  She used the same remedy, and it worked!  Yay! There is a chance the next 8 hours won’t be pure misery.

We move on to the next step, testing the hypothesis.  We mix it all together and apply away.  Lo and behold!  She smelled less and less with each hosing.  She may have also been a tiny bit blonder.  The douche did knock down the smell considerably and added a summer freshness that wasn’t there before.  She wasn’t skunk-free, but it was definitely something we could deal with in the car.

Quite a few shakes from her later, and off we went.  Problem solved!

To summarize:

  1. Identify the problem
  2. Identify potential solutions
  3. Ask experts and others who have experienced the same
  4. Test drive the chosen solutions
  5. Learn from experiences to do better in the future

 

Wages and Overtime: Determining Who is Exempt

How does an employer determine if an employee is exempt under the FLSA and Wisconsin law?

Determining if an employee is exempt under the Fair Labor Standards Act (“FLSA”) and Wisconsin Department of Workforce Development (“DWD”) regulations is a multi-step process.  Additionally, an employee may be exempt under the FLSA as to overtime, but may not be exempt as to overtime under Wisconsin law.  Therefore, a multi-prong analysis is required to ensure that an employer is complying with both federal and Wisconsin law.

Step 1: Does the employee make at least $455.00\week on a salary basis (or $27.63\hr for Computer Employees)?  If the employee makes less than $455.00\week, they are not exempt from the FLSA, and the analysis stops there.

Step 2: Can the employee, via their actual job functionsbe defined as occupying an “exempt role”?  Note, that job description alone won’t meet the requirements – the actual day-to-day job functions must be inline with the exempt categories.  (i.e. if a company hires an employee for an “exempt” role, but their actual job functions are different, the employee may not qualify as “exempt” any longer).

In two weeks, we will discuss a few different exempt roles, most specifically – the Executive and Administrative Employee!

Who’s The Boss?

When setting up an LLC, whatever or whoever is helping you with the Articles of Organization asks a simple question: Is this going to be member-managed or manager-managed?  This question is often met with a somewhat blank stare.  So, if you did the same thing right now, you are not alone.  You should see what happens when I ask a sole member LLC owner which they are.

If you choose to have a member-managed LLC, all of the members participate in running the business.  All members play an active role in the day-to-day management of the company.  That means that all members are authorized to act as agents of the company and can make the company obligated to do things.  The members can sign contracts, take on liabilities, and generally act for the company.  Usually, there is an operating agreement talking about what decisions need to be made by majority, super-majority, and unanimous votes.

If you choose a manager-managed LLC, designated people are delegated responsibilities to operate the business so that all the members don’t have to chime in on business decisions.  The manager can be a member, or nonmember (yeah, an outsider) or a combination of members and nonmembers.  There can be one or several managers. The non-manager members in a manager-managed LLC are passive investors who are not involved in most business operations unless the operating agreement says their vote matters.  Usually, there is an operating agreement talking about which decisions the manager can make and which decisions are reserved to the members.

For example, some duties that might go to a manager are:

  1. Buy, sell, and lease Company property that does not represent a material part of the Company’s aggregate property;
  2. Insure the Company’s activities and property;
  3. Negotiate and sign all agreements, contracts, and other instruments or documents that are necessary or appropriate in the course for the Company’s regular business or that are authorized by general or specific action of the Members;
  4. Pay from the Company’s funds the consideration required under contracts or agreements;
  5. Establish and maintain books and records for the Company;
  6. Perform all other acts or activities customary or incident to the routine and day-to-day operation of a business such as that conducted by the Company;

Some duties that may remain reserved for members are:

  1. Sell, transfer, or otherwise dispose of all or substantially all the assets of the Company or its subsidiaries, whether in one or a series of related transactions;
  2. Borrow money or procure financing or refinancing, or mortgage or subject to another security interest any material portion of the Company’s assets;
  3. Issue additional Ownership Units;
  4. Enter into a merger transaction involving the Company in which the Members do not hold a majority of the economic and voting interests of the surviving entity;
  5. Amend the Articles of Organization or amend or revoke an Agreement.

Therefore, it is important (required even) from the very beginning to figure out who is calling the shots: members or managers for the LLC.  Operating agreements can then help refine that decision.  So, if you don’t know which you are, pull out your best Tony Danza impersonation and look at your Articles of Incorporation.  Then, realize it was the kids in charge all along.

 

 

Wages and Overtime: Flexible Compensation and Salaried Employees

This is the first post in a series about wages and overtime, when it applies, and how to avoid costly mistakes.  As your company expands beyond the initial founders, keeping abreast of the multiple (and sometimes confusing!) wage and overtime regulations covering employees becomes incredibly important.  Here are two questions I’ve gotten recently, along with their answers:

Can a company compensate employees with Paid Time Off (“PTO”) in lieu of additional wages when said employee works overtime?

No: Unless specifically exempted, employees covered by the Fair Labor Standards Act (the “Act” or “FLSA”) must receive overtime pay for hours worked in excess of 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek. The Act does not require overtime pay for work on Saturdays, Sundays, holidays or regular days of rest.

Because the FLSA also sets the Federal minimum wage at $7.25 – “pay” means cash, not additional benefits like PTO or flexible work schedules.  Also note, that “averaging” employee hours to be ~40 in a one week period is not allowed.   So, if an employee generally works 80 hours in a pay period, he\she would still be entitled to overtime for any hours worked in excess of 40 in a week – even if the average is still 40 hours.

Note: This could change in the future though, the “Working Families Flexibility Act of 2017” would have allowed PTO compensation at 1.5x in lieu of overtime pay at the same rate – but failed to pass both chambers of Congress – the Bill could be reintroduced at any time.

All employees who receive a salary are exempt from minimum wage and overtime requirements under the FLSA and Wisconsin DWD regulations, right?

No: A salaried employee is not an exempt employee by virtue of being paid a salary. The individual must meet the tests established for being an executive, administrative, professional, outside salesperson or computer employee (under the FLSA). Being paid a salary is also not synonymous with being paid on a salary basis. To be paid on a salary basis, the employee must be guaranteed a set amount of wages regardless of the amount of time the individual works each week so long as he or she works at least one hour in the week. An employee is not paid on a salary basis if there are deductions from the guaranteed amount other than deductions made for either of the following reasons: absence of at least a full day for purely personal purposes when earned sick time has been exhausted under a bona fide sick plan or suspension for a serious violation of a safety policy.

Additionally, Wisconsin has slightly stricter requirements than the FLSA and very rarely exempts any employee from minimum wage requirements, but does (mostly) mirror the FLSA as to the overtime exemptions.  In other words, an employee may be exempt from overtime under federal law, but may not be similarly exempt under Wisconsin law.

In two weeks, we will tackle how to figure out which employees are “exempt.”

Is This Something?

Much like Letterman used to ask, “Is this anything?“,  clients often ask “Is this a trademark?” The answer to that depends on the answers to the following questions:

  1. Is whatever it is connected to the good or service being sold?  Will the customer see your product and the proposed mark together at the time they are buying the product?  If they can’t connect the two together, then no, it isn’t a trademark.
  2. Will the customer see the proposed trademark on the product at a later date and think, “Oh, the same people who made that last time must make this, too!” For example, they see your thing in Walgreens in Platteville then see it at Target in Green Bay, they will think “Yeah, I like that stuff from last time I had it. I’ll buy it again” and have confidence it came from the same source.  If instead, they think “Hmm, peanut butter.  This jar says its creamy, and that’s what I like. Chunky is the worst. Guess I’ll go with this one” and you thought “Creamy” was your mark, then no, it isn’t a trademark. It is a description of your product.
  3. Can people use the proposed mark to distinguish you among the sea of competitors?  Again, your customer is cruising the aisles looking for soap this time.  If all of the boxes of soap look the same, are they going to pick out yours? Or what if yours and someone else’s look awfully similar, are you sure they are putting yours in their cart instead of your competitor?  If you can’t help them distinguish (Go for the green box. Or the bottle has a giant D on it.), how do expect them to pick you? If they can’t use it to Pick Me! Pick Me!, then no, it isn’t a trademark.

The fun part is that almost anything allowing those three things to occur can be a trademark.  It can be a color – when you see pink insulation, you think Owens Corning.  It can be a smell –  a chocolate scent at a jewelry store selling Le Vian diamonds.  Don’t forget the iconic shape of Coca-Cola bottle. Of course, logos, slogans and brand names work, too.

Whatever it is, it is what helps your customers call to their spouse while the spouse is at the store, tell them to pick up an item, and the spouse successfully accomplishes the task.  If that can happen, yeah, that’s something.

Real Estate Terms Worth Knowing

Over the past few weeks, we have gotten a bunch of questions from clients in regard to real estate transactions and some of the terms that inevitability come up in almost every deal.  This article aims to provide a quick and easy to understand guide to some of the terms we see most often.

Tenancy by the Entireties

This is a type of concurrent real estate ownership reserved for married couples.  The important distinctions with this type of ownership are as follows:

  • Not recognized in Wisconsin – but the same goals can be achieved with a contract that is recorded with the real estate
  • Reserved for married spouses
  • Creditors can only attach (a\k\a come after) the property for a joint debt of the spouses, not an individual debt of either one
  • Once created, a tenancy by the entirety cannot be terminated without the consent of both spouses. 

Tenancy in Partnership

This is also a special type of ownership of both real estate and personal property that is reserved for individuals working together in a partnership (of the business variety).  The important distinctions with this type of ownership are as follows and will largely be decided by the terms of the partnership agreement the partners have signed:

  • Reserved for Partners in a business partnership
  • Breaks down the “rights of ownership” in the partnership assets as follows:
    • Economic – a right to participate and share in the profits and surplus
    • Management – a right to manage the affairs (i.e. vote) of the partnership
    • Ownership – the right to “own” partnership assets, assign them, and the ability of creditors to attach to said assets for an individual partner’s debt

Tenancy in Common

Tenancy in Common is the most “common” (ha!) form of land ownership.  The important distinctions are as follows:

  • Between 2 or more people!
  • Each owner (tenant) has the ability to transfer or assign their interest in the property to someone else
  • Each tenant can own different percentages of the property.  For example, we could own property together – Collin: 20% You: 80%
  • There is no right of survivorship – when one tenant passes away, their ownership interest in the property is transferred via their Will.  (i.e. the other tenant does not get my share of the property automatically.)
  • Everyone, regardless of ownership percentage, is allowed full use and enjoyment of the property – in other words, I might only own 20%, but I still get to have a party at the property with all my friends!

Joint Tenancy

If you are married in Wisconsin, your primary residence is probably owned by you and your spouse, as joint tenants, with the right of survivorship – here are the details:

  • Ownership between 2 or more people!
  • Each person owns an equal interest in the property – for example, if there are 2 owners – each owns 50%; if there are 3 owners – each own 33.33%; if there are 4 owners – 25%
  • There is a right of survivorship – meaning, when one joint tenant passes away, their ownership interest automatically transfers (without a Will) to the other joint tenants.  If you die first, your spouse will automatically own the house without a court or lawyer having to get involved.
  • The joint tenancy can be terminated during life and will then convert to a tenancy in common.  This is an important distinction from Tenancy by the Entirety that we discussed above.

Future Interest

A future interest is a legal right to property ownership that does not include the right to present possession or enjoyment of the property.

So for example, if a minor child has land in trust that they can’t access until the age of 25, then the minor has a “future interest” in the property.

Fee Simple Absolute

If you ever have looked at the title policy from your last real estate transaction, the words “fee simple” are on there for sure.  This is a fancy word(s) that means “I own absolutely everything!” (as it relates to this property)

The greatest possible estate in land, wherein the owner has the right to use it, exclusively possess it, commit waste upon it, dispose of it by deed or will, and take its fruits. A fee simple represents absolute ownership of land, and therefore the owner may do whatever he or she chooses with the land.

Fee Simple Determinable

Fee Simple Determinable means ownership in land that will end automatically when a stated event or condition occurs and revert to the grantor or the heirs of the grantor.

So for example, I could sell you land to open a museum – and state in the sale documents, “Buyer may keep the land and own it, as long as it is used as a museum.  Once it no longer is a museum, it reverts back to me.”  This is commonly used with historic buildings, or in legacy estate planning (i.e. very wealthy individuals.)

Life Estate

I bet you know this one already because Life Estates used to be a very common estate planning tool used in Wisconsin.  Due to some changes to how Estate Recovery is administered, though, Life Estates have become less useful in recent years.

A Life Estate works like this:

Mom and Dad own a house.  They have discussed, and they know they will leave the house to their son, Billy, when they pass away.  However, rather than wait until that happens – Mom and Dad decide to transfer the house to Billy now – while retaining a “Life Estate” in the property.  A “Life Estate” allows Billy to own the property “on paper” but allows Mom and Dad the right to live in the house until both of them pass away.  An easy way to remember is, “I get to live my LIFE in my ESTATE and when I die, the property is Billy’s.”

Life Estates are a great tool to execute some of your estate plan prior to passing away and to help manage the inter-generational transfer of wealth by spreading it out over time.  Life Estates were also a popular Title 19 planning tool (nursing home planning) but as of 2014, Life Estates are now subject to Estate Recovery in Wisconsin – so their flexibility is limited.  More information is available here. 

We handle a ton of transactional work at OGS – whether it be an entire business, a piece of valuable intellectual property, or a piece of land.  If you have real estate and have questions – want to sell – or want to integrate your property into a comprehensive plan for the future – we can help!

“Its” Mystery Is Solved

 

I get this question probably once a year: What does I T S mean under my signature on the contract?

They are looking at the signature block at the end of an agreement and see this:

SELLER:

By:_______________________________________

Name: ___________________________________

Its:_______________________________________

Yeah, right there. I T S, otherwise, better known as “its,” the possessive form of “it.”  The blank is for the person signing the contract to write in his or her title to show why they have authority to bind the company to the contract.  So it might be its president, its managing member, or its chief marketing officer.

The reason for the title to be there is to confirm that the person signing CAN actually sign and obligate the company to act in accordance.  If the person signing is the slushie-machine filler, they probably don’t have the authority to make a decision about a commercial during the Super Bowl.  It’s a way to make sure the contract is binding.  The reason it says “Its” instead of “Title” is a choice of the drafter.  It doesn’t have to be “Its,” and most people don’t even notice or ask about it.

However, those who do notice, are puzzled, and ask are the best clients.  They are the ones actually reading and thinking about the contract.  They want to understand what is going on, and by asking, they are sending the signal that they care.  Once I explain the “its,” I usually get an embarrassed, “Oh, jeez! That was a stupid question. I should have known” in response.  But I always assure them that it wasn’t stupid to ask and to ask more questions.  Nothing is worse than not understanding what you are signing.  It is never a stupid question if it helps you understand your contract.

That means if you have a question, ASK!  I promise it won’t be the silliest one that I have heard.  I would rather you ask and know the answer, than you sit and wonder what something means.  Trust me, we will look much more stupid if the question comes up in litigation due to a misunderstanding than it does before everything is signed.