Archives
now browsing by author
What to know before you buy a book of business from a financial advisor
Disclaimer: This article discusses purchasing a book of business. It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
If you’re a newer financial advisor, you might consider purchasing a retiring advisor’s business. This can be a strategic way to grow your business, but before you buy a financial advisor book of business, there are some factors to consider.
For example, you want to ensure that you can handle new clients without sacrificing your current client base. You’ll also want to ensure that it’s the right fit for you and that you have the cash flow to afford the purchase price.
Most importantly, you’ll want to make sure that the transaction is set up properly and that you do your due diligence first. In this article, we will discuss what factors you need to consider. However, each transaction is unique, which is why you’ll want to contact our team and discuss the details specific to your purchase.
Why a book of business acquisition is unique
If you’re a financial advisor and find a book of business for sale, you should know that it is significantly different than other business purchases. For example, let’s say you were buying a cafe. That business has tangible assets, such as equipment and merchandise, which can be easily valued and assessed.
Buying another advisor’s financial practice does not have that. It is primarily composed of intangible assets, such as client relationships and revenue streams.
This raises many questions, including:
- How do you assign value to intangible assets like client relationships and revenue streams?
- How will you transition into this business? Will there be a succession plan?
- What will the role of the selling advisor be after the transaction?
Many transactions we see lack the legal structure that should be in place. These deals are too large and worth too much to your future to leave to chance. Understanding these differences is crucial not only to acquiring the business but also to successfully integrating it into your current practice.
Is it a share purchase or an asset purchase (or both)?
This is one of the most important questions you’ll need to answer, and you’ll want to make sure that what you purchase matches what you expect to get.
First, what’s the difference? Share purchases involve acquiring ownership of the seller’s company, including all assets and liabilities. On the other hand, asset purchases entail acquiring specific business assets, such as client lists and contracts, while leaving liabilities behind.
Many believe that a corporation owns a book of business and that a share purchase will entitle them to it. In many cases, this is not true, at least not without careful planning.
CIRO (the Canadian Investment Regulatory Organization) does not currently allow corporations to receive the income stream generated by investment portfolios. It must be paid to a person, the licensee, who owns those revenue rights. Therefore, a purchase of the shares of a corporation would not entitle the buyer to receive that income stream.
There are some strategies that can be implemented, but the vast majority of sellers have not done the years of foundational work and planning needed to make them possible.
Should you require a valuation on the book of business?
Short answer: yes. Let’s explain why.
A comprehensive valuation provides insights into what you’re purchasing. These transactions involve a lot of money – you are buying a business! – and you want to make sure that the book is worth it.
This can also impact your tax bill at the end of the year. Your taxes will be based on the value of the transaction. If you have overpaid for another financial advisor’s book of business, you are still on the hook for that tax bill.
At Beeksma Law, we are connected with experienced business valuation professionals who can help you determine what this business is worth.
Is there a transition plan after you buy a book of business?
The deal is not over once the transaction closes.
You must consider a transition plan to integrate new clients into your existing business seamlessly. A well-thought-out plan will outline the steps and timelines for integrating the acquired business. It will also lay out client communications, integrating staff and technology and how the seller will support the buyer during the handover period.
Communication is crucial; spelling out these plans within your agreement will prevent many headaches.
Beeksma Law: Specialized legal advice for financial advisors
Many clients I speak to about this type of transaction are unaware of the legal complexities involved in purchasing a book of business. However, at Beeksma Law, we have handled these transactions for many professionals in the financial services industry. We are happy to offer comprehensive legal services tailored to your unique needs.
From structuring the transaction, negotiating and drafting the agreements and navigating regulatory requirements, we can help you start the next chapter of your business on the right foot.
Reach out to our team today to learn more.
Do I need a lawyer to incorporate a business in Ontario? Can I set up a corporation without a lawyer?
Disclaimer: This article discusses incorporating a business in Ontario. It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
So you’re growing your business, and it’s time to consider incorporation. (If you’re unsure if it’s time to incorporate, we have an article on the pros and cons of incorporating your business.)
Now, you’re likely deciding whether or not you need a business lawyer. After all, that is an expense in your business and every dollar counts. The question arises: do I really need a lawyer to incorporate my business? Instead, can I use my accountant or an online service like Ownr?
As with most legal matters, there’s no one-size-fits-all answer. It depends on various factors unique to your situation and business goals. This article explores some guiding principles and scenarios to help you make an informed decision.
However, we understand that each business is different, and generic advice may not fully address your needs. We encourage you to book a complimentary consultation with our team. By discussing your specific circumstances, we can provide personalized guidance tailored to your business.
What are the drawbacks of incorporating online?
While online incorporation services are simple to complete, their simplicity can actually be their downfall. They often provide basic, one-size-fits-all solutions, overlooking the nuanced intricacies of your business objectives.
Without a nuanced, strategic look at your business and future goals, your company may struggle to adapt and thrive in an evolving landscape. This can limit your future growth and long-term success.
As with many of our clients, your business will change over time. As it evolves, you’ll likely encounter situations requiring adjustments to your initial incorporation documents. These changes could include updating shareholder agreements or modifying corporate structures. In such cases, you’ll need legal advice to make these amendments correctly. Therefore, while online incorporating services offer convenience, they may not provide the comprehensive support required to navigate the complexities of business growth and legal compliance over time.
When do I need a lawyer to incorporate a business in Ontario?
Complexity and Growth
Incorporating with a lawyer becomes essential when anticipating business growth or encountering complexity in the business structure. As your business expands, you may require different classes of shareholders or undergo corporate restructuring to maximize tax benefits and accommodate evolving needs.
Strategic Planning:
Lawyers provide invaluable strategic planning that online services lack. They delve into your long-term business goals, ensuring that your incorporation aligns with your aspirations. By asking critical questions about your business’s trajectory, they help tailor the incorporation process to your specific needs and objectives.
Coordination with Accountant
Accountants often recommend incorporation to optimize tax planning. Involving a business lawyer allows for seamless coordination between legal and financial strategies, making sure you get the most out of your incorporation.
When might you not need a lawyer for your incorporation?
It’s not to say that every single incorporation requires that you hire a lawyer; nor is it a legal requirement under the Business Corporations Act. There are a few instances where you wouldn’t need to speak to a lawyer or law firm specializing in corporate law.
For some new businesses that are simple and have no plans for growth, you may be able to get away with legal services provided by an online provider (such as Ownr). In other instances, experienced entrepreneurs may have a history of successful business ventures. They may have already worked with a business law firm and are well-versed in the incorporation process. They may not require the personalized assistance of a lawyer for each specific business venture.
How will a business lawyer help you after you’ve filed your articles of incorporation?
Think of a business lawyer as a trusted ally, not just during the initial incorporation phase but throughout your business journey. They’re there to help with all your legal needs, from drafting contracts to ensuring compliance and even guiding you through expansion plans. Plus, they’ll make sure your minute book is always up to date, keeping all your critical corporate documents in order.
As your business grows and evolves, you’ll encounter many legal situations. That’s where your lawyer steps in, offering expert advice on everything from business operations to contract negotiations. Whether you’re sealing deals or resolving disputes, their legal expertise ensures you’re always on the right track. With their help, you can navigate the complexities of business and contracts with confidence.
More Resources for Ontario Business Owners
At Beeksma Law, we have prepared several blogs designed to help business owners. Perhaps you are deciding between a sole proprietorship and a federal or provincial corporation. You might need answers to common questions, like how to register my business name. Or you may be wondering what resolutions and other legal documents you need to keep in your minute book. If so, please look at our previous blog articles for more information.
Beeksma Law: Strategic legal advice for small business owners
In conclusion, when considering whether you need a lawyer to incorporate your business in Ontario, it’s essential to weigh the benefits of legal assistance against the potential drawbacks of going it alone. While it may be possible to incorporate a business without a lawyer, especially for simple structures or experienced entrepreneurs, Ontario’s business regulations and the advantages of strategic planning underscore the value of hiring a law firm specializing in business law.
A lawyer specializing in business law can provide invaluable guidance throughout the incorporation process, ensuring compliance with the Ontario Business Corporations Act and other regulatory requirements. From drafting resolutions to navigating legal considerations such as tax planning and shareholder agreements, a lawyer can offer expert advice tailored to your business needs.
To explore how Beekma Law can assist you in incorporating your business in Ontario and provide ongoing legal support, we invite you to book a call with our team. Our experienced lawyers are here to help you establish the proper legal structure and entity for your business, providing peace of mind and strategic legal guidance every step of the way. Don’t hesitate to contact us for personalized assistance with your business incorporation needs.
What is a Dependant Support Claim? What support obligations should you consider in your estate planning?
Disclaimer: This article discusses estate planning. It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
It is well-established in common law that you have the right to leave your estate to whomever you would like. This is referred to as “testamentary freedom.”
However, this concept has a few exceptions – one of which is found in Section V of the Succession Law Reform Act. There, the law obligates you to ensure that you have adequately supported your dependants.
Of course, this raises questions. Who are your dependants? If your relative has not provided adequately for you, do you have any recourse? What do you need to keep in mind?
These are questions that this article will answer. Of course, each situation is unique, and this article aims to provide a broad overview. If you would like to discuss your estate or that of your loved one, we encourage you to book a call with our team. We would be more than happy to discuss this further during your complimentary consultation.
What is a dependant support claim?
A dependant support claim is an application brought against a deceased person’s estate to ensure continued support is provided.
In Ontario, the law ensures that specific people dependent on someone who has passed away have the right to seek support from that person’s estate, regardless of any inheritance they might receive through a will or intestacy laws. This means that dependants, such as spouses or children, can bring a claim for support separate from whatever they may inherit. If successful, the estate must prioritize fulfilling this support payment before distributing any remaining assets to other beneficiaries.
Who would qualify as a dependant?
Section 57 of the Succession Law Reform Act sets out a two-part test to determine who qualifies as a dependant.
Are you a dependant under section 57 of the Succession Law Reform Act?
For the purpose of a dependant support claim, a dependant must be a spouse, parent, child or sibling. While that sounds simple enough, the law has some nuances that you should know.
Additionally, in this scenario, spouses are not limited to married people. They also include common-law spouses, meaning two individuals who have cohabited for at least three years or are a child’s natural or adoptive parents. The court may consider a grandparent or grandchild equal to a child or a parent if the deceased demonstrated that they intended to treat that person as a child or parent of their family.
Was the deceased providing (or legally obligated to provide) support immediately before their death?
Secondly, the deceased must have been providing support (or should have been providing that support) immediately before their death. It may be that the deceased had a legal obligation to provide support, whether by an order for support or a domestic agreement. There may also be a moral obligation – meaning that a reasonable person would provide adequate provision and support in similar circumstances.
For example, in the case of a minor child, a parent would have either been supporting their child or legally obligated to provide some level of support. Another example may be an ex-spouse who was receiving spousal support when the deceased passed away. The estate is responsible for providing that support as it would if the deceased were still alive. The case law shows that the courts consider “support” to include financial, physical and moral support.
How long do I have to bring a claim for support?
While we noted that the statute of limitations in other litigation matters is generally two years, Section 61 notes that an application must be brought within six months from the grant of letters probate of the will or letters of administration.
Plainly speaking, this means you have six months from when the Certificate of Appointment of Estate Trustee is issued to bring an application forward.
How does this impact your estate planning?
Understanding the potential for dependant support claims is crucial when crafting a solid will.
Let’s use a hypothetical scenario: Joel is a divorced father of two children, Grayson and Rhys, who live in Ontario. Following his divorce, Joel and his ex-wife established a court-ordered child support agreement to ensure financial support for their children.
In preparing his will, we aim to draft it to minimize the likelihood of a dependant support claim being filed. It would be an understatement to say that no one wants Joel’s estate mired in litigation. Therefore, we would work to prevent such outcomes as much as possible while drafting his will.
That may include thoroughly reviewing Joel’s existing legal agreements, particularly the court-ordered child support arrangements, to fully grasp his current financial commitments towards his children.
By gaining clarity on these obligations, we can tailor Joel’s will to align with his familial responsibilities and minimize the potential for disputes or dependant support claims in the future.
Beeksma Law: Strategic advice for all of your estate litigation needs
At Beeksma Law, we specialize in handling various estate litigation matters, including dependant support claims. With our extensive experience and expertise in estate law, we can assist you in navigating complex legal processes and ensuring your estate plan reflects your wishes while minimizing the potential for disputes. For strategic legal advice, book a complimentary consultation with our team today!
Understanding Certificates of Pending Litigation & Ontario Estate Law
Disclaimer: This article discusses a certificate of pending litigation and its role in estate law. It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
One of the largest assets in many people’s estates is their real property – whether that’s their primary residence, a vacation home or something else.
What happens if there is a dispute about the property? Perhaps you believe you’re entitled to the entire property, while another beneficiary argues that it should be sold and the proceeds divided among the heirs.
How can you protect your rights to the property? A certificate of pending litigation can help.
This article will review what it is (we talked about it in more detail here), as well as some of the risks of seeking this remedy.
What is a Certificate of Pending Litigation?
A certificate of pending litigation is an official document issued by a court and recorded on title. It signals that there’s a claim tied to the property in question. We would apply for a certificate of pending litigation if we wanted to stop any transactions involving the land, like selling or mortgaging it.
Why seek a CPL?
There are a few reasons why someone may want to register a CPL against a piece of property.
However, in estate law, they are most commonly used to protect estate assets from being sold when there is a disagreement over the estate. For example, let’s say there’s a dispute among the heirs of an estate over who should inherit a valuable piece of property, like a family home. One heir believes they’re entitled to the entire property, while another heir argues they should sell the property and split the proceeds.
To prevent the property from being sold off before the dispute is settled, the heir who wants to keep the property intact can apply for a CPL. Once granted, the CPL would be registered against the property’s title, effectively preventing it from being sold or transferred until the dispute is resolved in court.
In this way, the CPL serves to safeguard the estate’s assets, ensuring they remain intact until a fair resolution is reached among the disputing parties or by the court.
Can I apply for a CPL?
In order to obtain a CPL, you do need to successfully answer these questions.
Do you have a triable interest in the land?
If you are the party seeking the CPL, you must prove that you have a triable interest in the property. What does “an interest in the property” mean? It is a low threshold. Basically, it’s just showing that you have some connection to the property or a claim to it and that you have a triable issue. The court has no interest in determining whether your claim is likely to succeed, just that a triable issue exists.
Could you be adequately protected by another form of recourse or remedy?
When deciding whether to grant a CPL, the courts will then consider if an equitable form of security would be more appropriate. For example, if putting a lien on the property or using some other type of legal protection could work just as effectively, they might prefer that option.
There are a number of factors that the court will look at, such as whether the land is unique, whether damages could be calculated, or if there are any alternative remedies.
The potential risks of registering a CPL
The courts have consistently viewed Certificates of Pending litigation as a tool for estate litigation. However, if you make a motion to have one registered on title, it is not guaranteed that the courts will grant it.
The Courts of Justice Act notes that if someone registers a CPL without a reasonable claim to the property, they can be held responsible for any resulting damages.
For example, registering a CPL could hinder the sale of a property because potential buyers are unlikely to want a property tied up in legal disputes. In such a case, the owner of the property may seek compensation for the lost sale proceeds.
It’s crucial to use the CPL as a tool to safeguard your legitimate rights rather than as a tactic to unfairly disrupt transactions.
Obtaining a Certificate of Pending Litigation without giving notice
Justice Kurz’s recent ruling in McNeil v. Kaloustian highlights the risks of obtaining a Certificate of Pending Litigation (CPL) without informing the other party. Some CPL applications are urgent or involve fraud, so they’re pursued without notifying the other party.
Rule 39.01(6) requires the party seeking a CPL without notice to fully and fairly disclose all relevant facts. Failing to meet this requirement can lead to the order being overturned, regardless of the CPL request’s merits. In McNeil, Justice Kurz stressed the importance of transparency and adherence to legal duties.
Despite the plaintiff’s right to seek the CPL without notice, their failure to fulfill their duty of candor resulted in the CPL’s cancellation. This ruling emphasizes that parties seeking CPLs without notice must meet high standards, as preserving fairness in legal proceedings is crucial.
The point? Just because you can do something does not mean you should.
Contact Us to Protect Your Rights
If you need legal assistance with CPLs or any estate-related matters, Beeksma Law is here to help.
Our experienced team of lawyers can guide you through the complexities of CPL applications, ensuring your rights are protected and the legal process is fair. Contact us today for expert advice and representation.
Estate planning and artificial intelligence (AI): Can I use ChatGPT to Write My Will and other legal documents?
Disclaimer: This article discusses estate planning. It is intended for the purposes of providing information only and is to be used only for the purposes of guidance. This article is not intended to be relied upon as the giving of legal advice and does not purport to be exhaustive.
It seems that you cannot go anywhere without hearing about ChatGPT. From news articles to social media discussions, this groundbreaking artificial intelligence (AI) tool has captured the attention of individuals across various industries.
Developed by OpenAI, ChatGPT advances natural language processing, allowing users to interact with AI-generated text in a remarkably human-like manner.
With its widespread popularity, many have considered its potential applications, including its use in drafting legal documents such as wills. This article will examine the limitations and legal considerations associated with using ChatGPT to write your will.
Can I use artificial intelligence to draft my will?
Yes. Technically, it will spit out a valid last will and testament.
Should I use ChatGPT to write my will?
Now, there’s a better question.
So, we asked ChatGPT for its opinion.
It said: “While I can certainly assist you in drafting a will based on the information you provide, it’s important to consult with a legal professional or estate planning attorney to ensure that your will conforms to all legal requirements and reflects your specific wishes accurately. Writing a will is a serious legal matter, and it’s essential to have expert guidance to ensure that your wishes are carried out properly and that your will is legally valid in your jurisdiction. If you have any further questions or concerns about the will drafting process, please feel free to ask.”
We agree. While typing a prompt into a program like ChatGPT would be much easier, it cannot give legal advice or apply complex legal principles like an experienced legal professional can.
The problems with generative AI
While AI models like ChatGPT may potentially replace some aspects of legal work, they cannot fully replace human lawyers in all scenarios.
ChatGPT can be inaccurate.
One of the main concerns with using generative AI, such as ChatGPT and other chatbots, for legal documents is the potential for inaccuracies.
ChatGPT 3.5, for example, says that it has been trained on vast amounts of data, but only data up to January 2022. It does not reflect the latest legal updates and understandings of how the courts handle different legal matters.
In other instances, ChatGPT can also give completely wrong information. A lawyer in British Columbia found that out the hard way. She filed an application that referenced two cases found to be entirely fictitious. As it turned out, they were fabricated by ChatGPT.
The point is that any information produced by ChatGPT needs to be checked very carefully to ensure its accuracy.
ChatGPT does not ask you questions.
Part of our process when preparing your will is asking several questions to understand your final wishes. We want to understand your family dynamics, financial situation, and any specific concerns you may have.
However, ChatGPT is simply an AI language model. It cannot engage in meaningful dialogue, ask clarifying questions, or know what information to look for to get details about your unique circumstances. This means that using AI will give you a generic document. It may be legally binding but will not reflect your wishes.
Because of this, your final documents can have serious oversights or omissions, as important details may not be fully considered or addressed.
For example, when creating a will or trust, we typically ask probing questions to ensure that all aspects of your estate documents are adequately addressed, including beneficiary designations, potential conflicts among family members, and tax considerations.
ChatGPT does not consider tax implications.
Another significant part of our process is considering the tax implications for your estate. This can greatly impact how your assets are distributed and what you can leave behind for your beneficiaries.
A qualified solicitor, working in tandem with your financial planner or another financial professional, would carefully evaluate your financial situation and goals to develop strategies to lower your estate’s tax bill. By coordinating with these professionals, your attorney can create legally compliant documents that reflect your wishes and integrate seamlessly with your financial strategy.
The legal risks of AI-generated legal writing
As we can see, tools like ChatGPT leave you open to many legal risks.
A poorly written will that lacks clarity may be challenged by your beneficiaries. Because your wishes were unclear, they could tie up your estate in litigation for years. This delays the distribution of your assets and creates unnecessary stress and financial burden for your loved ones.
Your estate could face an unnecessarily high tax bill because those implications were not considered. Without careful planning and attention to tax implications, your estate may be subject to avoidable taxes, reducing the amount available for distribution to your beneficiaries. This oversight can significantly impact the financial well-being of your loved ones and undermine your intended legacy.
Finally, it could create documents that are not even valid. Legal documents generated by AI may lack the necessary legal language or fail to meet Ontario’s formal requirements for wills. If that is the only will available and deemed invalid, your assets may become subject to intestacy laws.
Although ChatGPT can help you streamline your estate planning process, it is a clear case of pennywise and pound foolish. The implications can have a serious negative impact on your estate and your loved ones.
Beeksma Law: Providing Strategic Estate Planning
While the possibilities of AI technology within the legal industry are interesting, we must recognize the value of personalized, strategic legal guidance from experienced professionals. When it comes to your wills and estates, nothing can replace human intelligence, and the risks are too great to leave to chance. You need a qualified legal professional to provide the expertise and support you need.
At Beekma Law, our law firm has a proven track record of excellence in estate planning. Our team of qualified attorneys focuses on estate law and can appreciate the nuances of this area of law. Notice how one of our clients felt after we prepared her family’s wills:
They made it really straightforward to know what decisions we needed to make, guidance on what to do and were always available and willing to answer any of our questions.
We feel so much better now, knowing that if anything happens, our son is protected. Hopefully we don’t have to use them anytime soon, but it’s nice to have that peace of mind that we have proper documents in place.
If you need to create your wills and powers of attorney, contact our team today! We are happy to use our legal expertise to help you and your family.