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Frequently Asked Questions

Estate Planning

Do I need a Trust, or is a Will sufficient?

In California, if the assets titled in your name at your death are valued at $150,000 or more, your estate will be subject to probate, unless those assets are held in a trust or will be transferred otherwise outside of probate (i.e. through beneficiary designation). A revocable living trust, if properly funded, can help your heirs to avoid a probate proceeding, which usually results in a faster and easier administration of your estate. A Will should be enough if you do not own any real property and your other assets are valued at less than $150,000.

What is a Durable Power of Attorney used for?

A Durable Power of Attorney for Assets is used during a person’s life, typically springing into effect upon that person’s (the “principal’s”) incapacity. In it, an agent is appointed by the principal to make financial decisions during his or her incapacity. A Power of Attorney is of no effect once the principal is deceased.

What is an Advance Health Care Directive used for?

An Advance Health Care Directive is used during a person’s life, typically springing into effect upon that person’s (the “principal’s”) incapacity. In it, an agent is appointed by the principal to make health care and/or end of life decisions during his or her incapacity. An Advance Health Care Directive is of no effect once the principal is deceased.

I am recently divorced; what do I do with my joint estate plan with my former spouse?

It is important to revoke the joint revocable trust and establish a new estate plan, including a new trust, will, power of attorney, and advance health care directive.  Typically, each spouse is named as the other’s trustee, executor, and agent in estate plan documents, so those documents should all be updated upon divorce.

My spouse recently passed away; do I need to do anything with our estate plan?

It depends. If you are parties to a revocable living trust that continues upon the death of the first spouse, and if you have successor trustees, executors, and agents already named in your estate plan documents, you may not have to take any action. However, if your trust is intended to divide into two or more subtrusts upon the death of the first spouse, then the estate of the deceased spouse must be administered.

How often should I have my estate plan reviewed?

It is recommended that you have your estate plan reviewed every five (5) years or upon any major life change (i.e. marriage, birth of children, large inheritance, divorce, or death of a spouse or child), whichever is sooner.

Small and Disadvantaged Business Enterprise

I want to apply to be a WBE/MBE; can I just transfer a majority of my shares to my wife/minority spouse?

No, it is not enough to just transfer majority interest. The person who is the qualifier for the certification, whether the business is claiming to be woman-owned, minority-owned, or owned by some other socially or economically-disadvantaged individual, must not only hold the majority of interest in the business, but must also hold the highest office and have control over, and be closely involved in, the day-to-day operations of the business.

What are the current requirements to qualify as a Small Business Enterprise (SBE)?

For a small business to be eligible for certification as a SBE by the California Department of General Services, the small business must meet the following requirements: independently owned and operated; not dominant in field of operation; principal office located in California; owners (and officers, if a corporation) domiciled in California; and, including affiliates, be either a business (i) with 100 or fewer employees or (ii) an average annual gross receipts of $15 million or less, over the last three tax years.

Nonprofits

Is there a difference between being nonprofit and being tax-exempt?

Yes, while it is common for the terms “nonprofit” and “tax-exempt” to be used interchangeably, there is an important distinction. A designation as nonprofit comes from the state in which it is formed and/or does business and means indicates that any surplus cannot be distributed to or for the benefit of any individuals. All profits must be held within the organization, to be used to further its purpose or mission. Tax-exempt status comes from the federal government (IRS) and state government (FTB), and it means that the organization does not have to pay income taxes on its revenue.

What is the California Attorney General’s Registry of Charitable Trusts, and is my organization required to register?

The Attorney General has primary supervisory jurisdiction over charitable organizations to ensure that their assets are used for charitable purposes. The Registry of Charitable Trusts administers the statutory registration and reporting program for all organizations and individuals that control and/or solicit charitable funds or assets in California. If your organization holds money or property for charitable purposes, whether you are tax-exempt as a 501(c)(3), under other subsections of 501(c), not tax exempt, or for-profit, you will have to register.

Can my officers and directors be the same people?

Generally, yes, the persons serving on the board of directors may also be elected as officers of a nonprofit corporation. However, the California Corporations Code provides that no person serving as the secretary, treasurer, or CFO may serve concurrently as the president or chair of the board of a public benefit or religious corporation.

What does it mean to be a 501(c)(3)?

A nonprofit organization that has been granted tax exemption by the IRS pursuant to section 501(c)(3) of the Internal Revenue Code is commonly referred to as a charitable organization. A person who donates money to the organization can take a tax deduction for such donation. The organization must be organized and operated exclusively for exempt purposes set forth in section 501(c)(3) (for example, charitable, religious, educational, scientific, or literary), none of its earnings may inure to any private individual, and it may not attempt to influence legislation as a substantial part of its activities nor participate in any campaign activity for or against political candidates.

My organization is IRS tax-exempt; why is the California Franchise Tax Board requiring us to pay income tax?

Although most California laws deal with tax exemption patterned after the Internal Revenue Code (IRC), obtaining state tax-exempt status is a separate process from obtaining federal tax exemption. If you do not obtain state tax-exempt status for your organization, it remains subject to the California Revenue and Taxation Code (R&TC) as a taxable entity.

Trademark Registration

What is the difference between a trademark and a service mark?

A trademark is generally a word, phrase, symbol, or design, or a combination of these elements, that identifies a party’s goods and distinguishes those goods from the goods of others. A service mark is the same as a trademark except that it identifies and distinguishes a party’s services rather than goods. The terms “trademark” or “mark” are commonly used to refer to both trademarks and service marks.

When can I use the ® symbol and when can I use the ™ symbol with regard to my mark?

The ® symbol can only be used in association with a mark that has been officially registered by the USPTO. The ™ symbol can be used at any time to put others on notice that you are claiming common-law rights in the mark.

Is there a separate trademark registry in California?

Yes, California Business and Professions Code sections 14200 et seq governs the registration of trademarks and service marks used within the state of California. The California Secretary of State’s office maintains a registry of California state trademarks and service marks.

General Business

Why do I need to bother with corporate minutes?

What is the difference between a C corporation and an S corporation? What about an LLC?

What is a Benefit Corporation?

Is legal boilerplate language really necessary in a contract?