Articles Archives - Page 7 of 8 - Wetherington Hamilton, P.A.

Collection of Fraudulent Transfers Made to a Spouse in the State of Florida

January 13, 2015/in Articles, Debt Collection/by Ted Hamilton

Often a creditor, in the attempt to collect on a judgment will find the judgment debtor has placed some or all assets into a joint bank account held with the judgment debtor’s spouse or the assets have been transferred in some way to a spouse. This may seem like a lost cause, but our recent experience has proven otherwise.

In Florida, under the Uniform Fraudulent Transfer Statute, transfers made to a spouse within 4 years of the transfer may result in a judgment against the judgment debtor’s spouse for the amounts transferred. To pursue the claim against the Spouse, the judgment creditor may either bring a separate action against the spouse who received the Fraudulent Transfer of assets or may use the Proceedings Supplementary Statute at 56.29 Florida statutes to execute on the existing Judgment.

The Florida Uniform Fraudulent Transfer Statutes at Chapter 726 defines a transfer as “every mode, direct or indirect, absolute or conditional, voluntary or involuntary, of disposing of or parting with an asset or an interest in an asset, and included payment of money, release, lease, and creation of a lien or other encumbrance.” This broad definition gives creditors extreme latitude in discovering and suing for transfers to a spouse. The definition would likely include, movement of assets into a bank account solely held by the spouse, paying for “stuff” which the debtor states is exclusively owned by the spouse, paying the spouse a salary for work not performed, and giving the spouse property of any kind which the spouse did not earn in any way. These fraudulent transfers will also occur if the judgment debtor transfers individual assets into jointly held property.

Debtors are clever in disguising their transfers. Other clever means of moving assets to the spouse include having the spouse own the shares of the company run, managed and controlled by the judgment debtor. The Spouse may receive a large salary for doing clerical work for the company along with stock payment distributions. This type of arrangement is difficult to spot due to the fact that judgment debtor will defend the quality and quantity of work of the spouse. What gives the judgment debtor away in this instance is the small salary paid to the judgment debtor for doing most if not all work for the company. Such an arrangement is actionable as a fraudulent transfer and can be pursued against the spouse.

Once the transfer exists, the determination as to whether it is fraudulent is defined by Florida Statutes Chapter 726. These sections make fraudulent transfers fairly easy to prove when they are made by the Judgment Debtor to the spouse after the Debtor knows there is a pending collections claim.

The creativity in disguising fraudulent transfers never ceases to amaze the attorneys at Wetherington Hamilton, P.A. With technology making transfers of money easier every day, the type fraudulent transfer will also expand. Our hope is that you will decide to pursue these claims to ensure that this type of activity is limited in the future.

Theodore J Hamilton, Esq.

What you need to know about Florida Construction Lien Law

August 13, 2014/in Articles, Construction Law/by Ted Hamilton

Do you know everything you need to know about Florida construction lien law? Below are some FAQ and answers that may give you exactly what you are looking for. Remember, at Wetherington Hamilton, P.A. we can help you in all areas of Construction Law.

What property can be liened? Liens can only attach to privately owned real estate. Government owned property is exempt from construction liens.

What services are lienable? In order for a lien to be filed the service must be related to the permanent improvement of privately owned real estate. This includes most services used to improve a property and most identifiable materials incorporated into a project whether the work was performed pursuant to a written contract or oral agreement. Services that do not provide a permanent benefit to the property, such as lawn care, are not lienable.

What Notice needs to be given? If there is a contractual relationship A notice to owner must be served on the owner within 45 days after providing the services or delivery of the goods. Failure to provide such notice can result in forfeiture of your right to file a lien for unpaid work. Keep in mind that the statue requires the owner to receive the notice within 45 days from the date the work was started on the jobsite or materials were delivered, unless professional services were provided, or as a laborer, unless it was mailed, by certified mail, return receipt requested, no later than 40 days after delivery of materials or commencing to provide services.

When should the lien be recorded? A Claim of Lien must be recorded within 90 days of the construction services provided, whether they are labor or material. A copy of the Claim of Lien must be served on the owner within 15 days from the date it is recorded. After serving and recording a Claim of Lien, the lienor must file a lawsuit to foreclosure the claim of lien within 1 year from the date it was recorded. However, if a “Notice of Contest of Lien” is filed by the owner, the lienor only has 60 days to file suit after the Lien is recorded. If a suit is not filed within the 1 year or 60 day deadlines (depending on the situation) the Claim of Lien is subject to dismissal.

By Attorney Kalei McElroy Blair

Going to Court

August 5, 2014/in Articles, General/by Ted Hamilton

You may wonder what the lawyers do when we, as we say, “are in court”. We go to court to argue our client’s case and do our best to be on the winning side.

Going to court usually means appearing before a judge and trying to convince him or her that they should rule in our client’s favor. Hearings for legal arguments may be held in the judge’s chambers or in a court room. Sometimes there is another attorney who is arguing his client’s side. Sometimes the other party doesn’t have an attorney and usually doesn’t have much of a chance. Sometimes the other party doesn’t show up at all. We usually win those cases.

Some cases may take much effort and preparation. We are armed with legal authority to support our client’s case. We may be making just legal argument at a hearing or there may be evidence presented from witnesses or documents, such as in trials. Trials may be lengthy endeavors and jury trials require the most effort. A jury is picked, testimony and evidence is presented and a convincing legal argument must be made.

Going to court may be a brief hearing at the beginning of a case, it may attempt to conclude the case, or it may be after months of prior hearings, depositions and hours of preparation. Sometimes we know exactly what will happen. Sometimes we have no idea. Sometimes we are surprised by something completely unexpected.

When we go to court we do our best to present a winning argument for our clients. Preparation, legal knowledge and experience of attorneys, and their staff, are the keys to obtaining a favorable decision.

By: Thomas K. Sciarrino, Esq.

Wage Garnishment – Good & Bad News

June 13, 2014/in Articles, Debt Collection/by Ted Hamilton

THE GOOD NEWS AND BAD NEWS FOR CREDITORS DOING A WAGE GARNISHMENT IN FLORIDA

Creditors enforcing payment of a judgment through a wage garnishment in Florida have some good news and some bad news. First the good. A judgment creditor can obtain a garnishment of a debtor s wages of up the 25% of the disposable income. It is also good news that the garnishment is continuing in nature and the deduction from wages continues from each paycheck until the judgment is paid. Garnishment is accomplished without advanced notice to the debtor.

Now for the bad news. Florida allows a head of household exemption from wage garnishment. A head of household is a debtor who provides more than one-half of the support of a dependent or other family member. Family members can include parents or grown children. The burden is on the debtor to prove head of household status. This is accomplished by filing a claim of exemption asserting the reason for the exemption. If the creditor objects, a hearing is held where the debtor testifies and can be cross-examined by the creditor about the entitlement to the exemption.

If an exemption is granted, the garnishment ends. If denied, the garnishment proceeds and funds are deducted from pay until the judgment is paid.

Unfortunately, there is more bad news. Florida considers wage of a head of household deposited in a bank account as also exempt. The funds do not lose their character as wages when deposited. Unless the debtor has other funds in the account that are not wages, the bank account will be exempt, if the debtor asserts and proves the exemption claim.

We can end this on some other good news for creditors. There can only be one head of household. If a creditor has a judgment against a husband and wife, and they are both working, the one making the least money can have wages garnished. Also, debtors often claim a right to exemption, but do not always prove their entitlement to it.

By: Attorney Thomas Sciarrino

Legal Medical Marijuana in Florida and You

May 12, 2014/in Articles, General/by Ted Hamilton

How might the proposed medical marijuana law affect your Florida community or condo? Will smoking pot for medicinal purposes become a legal right? Could someone smoke in their condo or home regardless of the nuisance this might impose? Last week we examined the proposed Florida constitutional amendment regarding medical marijuana. This week we examine the effect of this Amendment on Florida Communities.

Debate has surrounded medical marijuana for decades. If the Constitutional Amendment passes regarding the use of legal medical marijuana, the discussion will then focus on the rights of those affected by it. Maybe these questions need to be asked now. Questions such as “How will this Amendment affect your neighborhood?”; “What happens when you see your “young adult” neighbor smoking a joint next door on his back porch? Do you just assume he has a license for medical marijuana? Do you have a right to ask him?”; “How will medical marijuana affect our children?” All of these questions and more will become key issues in the
following years should the Medical Marijuana Amendment pass.

As with smoking tobacco, community associations will face the task of ensuring the rules and regulations of the community deal with the potential nuisance that could result from smoking pot.
These regulations could be similar to tobacco smoking laws in effect for indoor public areas. The Florida Legislature, if the Amendment is passed, will likely put a ban on smoking marijuana that is similar to tobacco. This ban, as with tobacco, would automatically allow the Association to prohibit smoking marijuana in public areas. It is also likely that the state legislature would pass laws only allow smoking of marijuana in a private home or specific medical facility created for the purpose of smoking marijuana. Such laws would mean the only effect on the Community would the smell of the smoke.

As a result, keep an eye out on our blog for further information should the Amendment pass in November as to how and when the State of Florida implements the law. Each Association will need to review their policies regarding smoking should the Marijuana Amendment pass to ensure compliance with the state regulations that will follow.

Should you have any questions regarding this issue, feel free to call Ted Hamilton at our office to discuss further how this potential amendment will affect your community.

By Theodore J. Hamilton

Legal Medical Marijuana in Florida

April 28, 2014/in Articles, General/by Ted Hamilton

Marijuana in Florida

Will you be lining up to sell medical or recreational marijuana in Florida soon? How do you feel about your neighbor smoking legal cannabis on their back porch right next to yours? This day may be coming sooner than you think. You don’t have to go to Amsterdam to legally smoke pot anymore, now you can go to Colorado or Washington. Florida may be next!

The trend of legal medical marijuana over the last few years in the United States has been the gradual loosening of state marijuana laws. Although federal laws have not changed, the drug is still classified as a Class I controlled substance; yet the Obama administration has said it will “not enforce” the Federal Laws which designate marijuana as a Class I controlled substance. More recently, the Department of Treasury issued guidance to banks stating that, “Regardless of the Federal Statutes making it a crime for a bank to hold drug money, the Treasury Department will not enforce this law at this time in reference to money coming into a bank from a marijuana vendor.

Based on the fact that the federal government is loosening its enforcement of Federal Law against marijuana, both Colorado and Washington have passed recreational marijuana laws. In fact, twenty one states have passed medical marijuana laws. While Florida legislature has considered several bills this year, none appears to be ready for passage.

In November all Florida voters will get a chance to vote on the issue and express their opinion on this matter of nationwide interest. The Florida Ballot in November will contain a medical marijuana constitutional amendment, which if passed, will allow the use of marijuana if prescribed by a physician for treatment of a “Debilitating Medical Condition”. A “Debilitating Medical Condition” is described in the proposed Amendment as cancer, glaucoma, positive status for human immunodeficiency virus (HIV), acquired immune deficiency syndrome (AIDS), hepatitis C, amyotrophic lateral sclerosis (ALS), Crohn‘s disease, Parkinson‘s disease, multiple sclerosis or other conditions for which a physician believes that the medical use of marijuana would likely outweigh the potential health risks for a patient. The amendment also puts deadlines on the state government to adopt regulations regarding licensing for “marijuana middle men” who are going to be able to track patients and dispense the drug with a valid prescription.

To get over the fact that the governor might not enforce the Amendment even if passed, the Amendment requires the state to adopt regulations to enact the Amendment. With the current administration, this will likely be stymied. The law requires the state to adopt rules within 9 months of the passing of the Amendment; otherwise any citizen has the right to file a court action to force the state to comply with the Amendment. This will force compliance through the courts.

The Amendment attempts to provide protections for abuse of the drug by providing an id card to all patients authorized to take the drug. These patients will be able to purchase the drug and supplies at licensed “Medical Marijuana Treatment Centers”. Each patient will also have a licensed personal health worker assigned to them.

So, you want to become a medical marijuana treatment center owner? Be careful, regardless of the Amendment the Federal Law on the books in the United States will still make it a crime. A new administration might decide to enforce Federal Law which will set up a challenge between the adopted Florida Amendment and the Federal Laws. IF you are still into this new business possibility, you will have to wait at least 9 months after the Amendment is adopted to open your shop. At that point, you will have to get licensed, which could take equally as long.

By: Theodore Jay Hamilton

The New Florida Limited Liability Company Act

January 22, 2014/in Articles, General/by Ted Hamilton

In the spring of 2013, the Governor of the State of Florida signed a new Limited Liability Company Act which took effect on January 1, 2014. Until January 1, 2015, Limited Liability Company’s (LLC’s) formed in Florida before January 1, 2014 will continue to be subject to the current law under Chapter 608 unless they elect to be governed by the new law after that date. The new law will apply to all LLC’s filed after January 1, 2014. After January 1, 2015 all LLC’s must adhere to the law. Some of the important changes included in the law are as follows:
• Defines more precisely the duties of members and managers and eliminates in the process the notion of “Managing Member”;
• Gives LLC’s the ability to assign authority or restricted authority to certain persons or groups in the LLC and authorizes the filing of Statements of Authority with the Florida Department of State to such effect;
• Adds more “non-waivable rules” regarding Operating Agreements. For Example, an Operating Agreement cannot call for waiver of certain rules including member’s right to seek judicial dissolution in certain situations and prohibiting indemnity rights for certain kinds of misconduct by the person seeking indemnification;
• Adding new provisions regarding service of process on all LLC’s and creating a new section of the Florida Statutes Chapter 48 that addresses such service of process;
• Retains the Olmstead Amendment made to the LLC Act two (2) years ago;
• Clarifies the rights and duties of the transferee of a membership interest;
• Changes the voting rights of members in certain circumstances;
• Disassociated members now have the right to disassociate at any time.

However, members who disassociate may be liable to the LLC for wrongful disassociation.

• Durivative Actions. Under the new law, a member may now maintain a durivative action if the other members do not take action within a reasonable time, not to exceed ninety (90) days. Furthermore, a demand is unnecessary if demand would be either futile or irreparable injury would result in waiting for other members to take action. The new act also provides procedures for the appointment of special litigation committee to investigate any durivative actions.
There are many other sections not addressed in this article. Please do not rely only on this article for legal advice. It is meant as a brief summary of the changes in the statute. Ultimately, a review of your LLC documents is recommended in light of the new law for all Florida Limited Liability Companies. If you have any further questions or would like further details on the law, please contact Theodore J. Hamilton at extension 14 in our office.

Limited Liability Companies in Florida

September 23, 2013/in Articles, General/by Ted Hamilton

For those intending to form a closely held operating business in Florida, the entity of choice, in most cases, will be a limited liability company (LLC) that elects to be taxed as a Subchapter S corporation.

Following the issuance of “check the box” regulations in 1997, eligible entities (including eligible LLCs) have been able to select their federal tax classification. Eligible entities, such as the LLC, may elect to be taxed as a C corporation, an S corporation, a partnership, or, in the case of single member LLCs, a disregarded entity. As a result, since 1997 practitioners have been able to select the best combination of state law attributes and federal tax treatment to achieve a legal structure suited to the particular needs of a business.

The LLC constitutes a hybrid structure that marries the benefits of an LLC (a function of state law) with those of an S corporation (a function of federal tax law). This marriage achieves three principal benefits: 1) protection of the owners’ interests in the company from their personal liabilities (“asset protection”); 2) protection of the assets of the owners from the liabilities of the enterprise (“limited liability”); and 3) the lowest federal employment tax liability for owners employed by the business. The LLC is the only Florida entity that provides all three of these benefits.

Asset Protection Benefit

Among the most material of these benefits is the protection provided by F.S. §608.433(4), which safeguards the membership interest of an LLC owner from loss by limiting a creditor to the remedy of a “charging order.” While a charging order provides a creditor with the rights of an assignee, which entitles a creditor to receive distributions to which the debtor-owner would otherwise have been entitled, the debtor-owner will continue to own its membership interest in the LLC and, otherwise, operate its business without interference from the creditor. The creditor cannot vote on business matters, inspect or copy business records, nor exercise any of the debtor-owner’s rights with respect to the management of the business. Conversely, the owners of a corporation (both S and C) have no similar benefit, as their creditors are not limited in their remedies to a charging order. Accordingly, the Florida LLC provides a distinct measure of “asset protection,” while the Florida corporation provides none.

Limited Liability Benefits

Of the limited liability entities in Florida offering both asset protection and limited liability, LLCs offer the most secure limited liability shield – a shield equivalent to that of a corporation. F.S. §608.701 provides that in any case in which a party seeks to pierce the veil of an LLC, the court must apply the same case law as would apply to the piercing of a corporate veil under similar circumstances. As a result of the Florida Supreme Court case Dania Jai-Alai Palace, Inc. v. Sykes, 450 So.2d 1114 (Fla. 1984), which held that a corporate veil could not be pierced without a showing of fraud or an improper purpose, the limited liability shield of a Florida corporation is among the most difficult to pierce in the United States. Mere disregard of corporate formalities, inadequate capitalization, informal loan transactions, and similar poor practices will not justify piercing the corporate veil in Florida.

Federal Tax Benefits

Why should a closely held operating business formed as a Florida LLC elect taxation as an S corporation? Taxation as an S corporation offers two principal advantages. First, the Internal Revenue Code of 1986, as amended, provides that the profits and losses of an S corporation flow through to the owners in a manner similar to a partnership, thus avoiding double taxation. Second, employee-owners may be able to reduce federal employment taxes by as much as 15.3 percent on the portion of their income equal to or below $87,000 per year, and 2.9 percent on income in excess of $87,000. This tax strategy, which is a function of reducing wages and increasing distributions, is only available to entities taxed as S corporations.

Finally, until 2003, C corporations enjoyed an advantage over S corporations, since C corporations were the only federal income tax entity where the health insurance costs of owner-employees were fully deductible. Pursuant to Code §162(l), beginning in 2003, regardless of the taxing entity chosen, all self-employed individuals can deduct 100 percent of the amount paid for accident and health insurance premiums.

Conclusion

Because of superior asset protection, limited liability, and tax savings, a substantial majority of Florida operating businesses will be best served by an LLC.

*Adapted from The LLC Envelope, Florida Bar Journal, December 2003.

Protecting Your Purchase Money Lien Rights

April 23, 2013/in Articles, General/by Ted Hamilton

Recently, our firm had the pleasure of handling a file which involved the potential creation of a purchase money lien on personal property. Our client sold a business and took back a lien on the personal property of the business. The lien was to secure the payment of a note. The new business owner was going to pay our client over time for purchasing the business. In addition to the lien by the seller on the buyer’s property, the buyer also obtained an Small Business Administration (SBA) loan to purchase the business. Our client originally thought that he held a first mortgage as a result of his purchase money lien on the sale. In fact, the statutory procedures for the creation of a purchase money security interest were not followed, and as a result, the client holds a second mortgage on the personal property second to the SBA.

A purchase money security interest is defined as a lien or mortgage that is given by the seller of personal property to the buyer to secure payment of the purchase price. Florida Law, prior to changes in 2001, allowed a seller of personal property to perfect a security interest in the personal property being sold as long as a Uniform Commercial Code Financing Statement (UCC1) was filed with the Secretary of State within fifteen (15) days of creation of the debt. Florida Law now states that the interest is perfected as long as the recordation of the UCC1 occurs within twenty (20) days of the creation of the debt. This of course applies only to personal property. If inventory is involved, proper notices must be sent to any other secured creditors who have a claim on the inventory once the product is shipped.

Sellers and lenders must understand these priority issues. If you are selling property and merely put the words “Purchase Money” on the top of your document, you are not protected. You must also file the UCC-1 with the Secretary of State within fifteen (15) days. Lenders must also be careful to ensure that purchase money lien rights do not put the lender in a second lien position.

On other Uniform Commercial Code cases, our firm has successfully prosecuted a reclamation claim in a Chapter 11 Bankruptcy. A reclamation claim is allowable under the Uniform Commercial Code in certain specified circumstances where product is shipped to an insolvent corporation. In such a case, the seller upon discovering that the buyer has received goods on credit while insolvent may reclaim the goods upon demand made within a certain time. The reclamation rights can often be superior to the rights of unsecured creditors in insolvency situations.

For further information on reclamation or purchase money liens please contact our firm.

Purchasing a Business

April 23, 2013/in Articles, General/by Ted Hamilton

Have you ever pondered leaving your present employer and purchasing a business? Have you ever thought about expanding your existing business through the acquisition of another company? If so, read on.

There are numerous companies that act as business brokers in the Tampa Bay and Florida areas. These companies provide the contact information necessary to determine the types and availability of businesses for sale in your area. These businesses range in size as well as type. The business broker however, does not provide advice in reference to the viability of the business. For such advice, the purchaser of a business might consider contacting either a business valuator or a business consultant of some kind. In addition, in obtaining financing, a business consultant can be a valuable tool in assisting and drafting a plan for your business after review of the financial statements. Of course all of these consultants as well as your business law attorney will charge for their services. Such charges may seem expensive at the outset, however, the assurance of having professionals review the acquisition at the outset will save much heartache in the future.

When purchasing any business, the acquiring entity must make a number of determinations. First, will the purchaser purchase the stock of the existing business or the assets. This is a determination based primarily upon the existing liabilities of the present company. Most of the time, purchasing the assets is recommended. When stock is purchased, liabilities go with the purchase. When assets are purchased, as long as secured creditors are paid at the closing, the unsecured debt of the existing corporation does not go with the assets as long as market value is paid for the assets. It is up to the seller to ensure that unsecured debt is paid at the closing.

Next, the purchaser needs to determine the type and value of the assets. This determination requires a review of financial statements and inventory lists of the existing corporation. This review should be part of the contractual agreement that is reached prior to the purchase of the business. Such a review will include but not be limited to a total review of the inventory, balance sheets, accounts receivable listing, income statements as well as all other financial documents including tax returns. The tax returns for a corporation are often valuable tools to determine the accuracy of the internal financial statements. Tax returns are often prepared by an independent auditor, which are easily compared to the internal books of the company. Of course, this presumes that the tax returns are prepared by an independent accountant separate and distinct from the corporation. If a principal of the corporation prepares the returns, they should be reviewed very closely for their accuracy and compared to the actual financial statements of the company. A review of the corporate checkbooks might also be recommended to compare the checkbooks with the balance sheets and the payable ledger for the corporation. In any event, a thorough review of the financial background of the corporation should occur prior to closing. If any discrepancy exists, it needs to be addressed clearly with the seller prior to purchasing the business.

In addition to this financial review, an interview with employees might also be recommended. If any of the employees are going to continue to work with the corporation after closing, they need to be interviewed and reviewed very closely prior to closing. Their salaries need to be reviewed as well.

In addition, the income and profit loss statements for the corporation should be reviewed for at least the last three years. These statements will clearly show how the company has done. The balance sheet and income statement should be reviewed for payments to the principals. If the principals received no salary from the corporation for the last three years, then a small profit at the end of the year may not accurately reflect how the business is actually doing. There are other ways that a business can show profitability when in actuality a profit does not exist. Each and every line item in the balance sheet and income statement should be reviewed very closely for a determination of whether or not all amounts are reflected on the statements. If a principal of the corporation has substantial outstanding notes due, this could also be a red flag. Such notes could show the existence of ongoing debt of the corporation.

After a thorough review of the financial’s and the profit of the corporation, the closing can take place. At the closing, the seller should sign warranties that warrant the accuracy of the documents signed at the closing and reviewed prior to the closing. Specific documents such as the tax returns could be attached to affidavits which would guarantee the accuracy of the statements. One way that a buyer can protect itself in a purchase is to have the seller finance part of the transaction. If the buyer is paying back the seller from the closing, if the business fails, the seller fails as well. Such an insurance policy does give the buyer some reassurance that the seller is being truthful.

Financing of the acquisition is also a paramount of importance at the closing. The buyer must ensure that the financing arranged at the closing will allow the buyer to operate in the black. If the financing terms are too onerous, the principals of the corporation may not be able to take a salary. This is not the purpose of starting a corporation. The purpose is to make a profit not to operate in the red. Keeping expenses low and income high is the goal.

Finally, the buyer should carefully review the closing documentation. The closing statement will show how the money is coming in and going out at the closing. Fees which are being paid from the closing should be reviewed by counsel prior to closing. In addition, all of the affidavits and closing documents should be reviewed by counsel prior to closing. Once further point, do not assume that the attorney conducting the closing represents your interests. Oftentimes, a business broker uses an independent attorney to prepare the documents who specifically does not represent either the buyer or the seller. In such a case, as the buyer or the seller, you need your own attorney representing your interest at the closing.

Please be aware, this list is by no means exhaustive. Each and every type of business has its own issues to resolve prior to purchase. Should you wish to further discuss any matter raised by this article, please do not hesitate to contact our firm.