How many of us have thought about having a Plan B for our business if something unexpected happens?
I brought up this issue and several other related questions in my interview with Lisa Landry, a Massachusetts and Rhode Island estate planning and business attorney. She had some helpful tips for milspouse entrepreneurs for business and life. Here is Part II of our discussion!
Dawn: What about military spouses and their residence versus where their business is located? What if it’s not the same place?
Lisa: It gets much more complicated for people in the military because for business purposes generally if you're operating in a state, that's the state where the business is. That's why you have to update it, even though your personal domicile has not changed. If a person has a single-member LLC, that will be taxed in their estate in some cases. But if you have a multi-member LLC, it is considered personal property and not taxable for Massachusetts purposes. So there are ways to plan around it. But if you don't plan, it can end up being very expensive.
Dawn: In the last few years, they've changed the law to where it's not just the service member who can hold on to their home of record but the spouse, too. But it sounds like you can't just leave your business in the home of record. Do you have to register wherever you live?
Lisa: Yes, and that's where it grows confusing for people. It makes sense to think for example, ‘Oh, I'm a resident of New York; therefore, my business is a resident of New York.’ But it's just not how it works. In the military, you have more moves to consider.
Also, people have very different risk tolerance. I've had people who have said, ‘Somebody could sue me tomorrow, but I don't care,’ while others look at something with an objectively low risk of being sued who say, ‘I don't care if it's a low risk, I want to be protected.’
Dawn: When I went to set up my own small business, the standard was you not only protected yourself entity-wise, but you purchased liability insurance as well. I would think for military spouses that move, the insurance would be portable. Is there anything else that's specific to military spouse business owners that is important to know about? For example, they may start out as an active-duty spouse but later become retired spouse.
Lisa: So having general liability insurance and having an entity is kind of a two-prong way to approach it, which is what I recommend to most people. They cover different things in some ways and by having them both, you're fully protected. But I've seen situations where somebody only had insurance and basically had to pay for a lot themselves.
Again and again, this is about risk tolerance. But for military spouses in particular, I think what's really important is to have a long-term plan. If you start now and you're moving around, make sure that you're registering as is appropriate in each location. Even if you don't have an entity, a lot of locations require that you register as doing business there.
Where do I want this to bring me? Do I want it so that when my spouse is no longer active-duty, this supports us like a full time job? What is the plan? That is something that your attorney or tax advisor can't decide for you.
But if you know that going into it, the structure that we can make for you is so much better and less expensive because you don't have to update things constantly.
The other thing with moving around a lot is the importance of involving people that know about your business, which gets tricky. During moving or if something happens to you (like an extended illness or hospital stay), you need people who can handle your business operations.
It's a good business practice to have SOPs or something like an operations manual. I tell people that having an actual practical game plan in place helps tremendously. Seeing people who have it versus people who don't-it's such a big difference.
Dawn: The liability is a huge thing because if you didn't have ‘the veil’ separating your business from your personal self, it’s my understanding that a person could go after all your personal assets and possibly your spouse’s. I wonder, could they go after the military pension?
Lisa: I know the military does have some particular protections in place, so I'm not positive about how exactly it would go against it. But it is not worth the risk.
That's one of the things where having that operating agreement, really good books and records, not combining funds, etc. is so important. If you do those things, like an LLC or a Corporation, they will then try to pierce the corporate veil. A court could say that this business entity is really a sham, and then your personal assets are all at risk.
The corporate structure that you form with your tax and legal personnel is the foundation. The operating agreement and your books and records are like the support of the house. All of the ongoing maintenance - filing your annual reports, paying your taxes, how you keep your bookkeeping - that's like building the rest of the house and filling it in. And that's why it's so important to maintain it.
Lisa Ann established Landry Law, PLLC with a goal of utilizing proactive planning in a comprehensive, comfortable manner in which clients can confidently make decisions in individualized plans based upon their unique situation and goals. She wanted to offer an alternative to the often intimidating manner of traditional legal practice, designed around a “standard” client and goal, and establish a practice where all are welcome and supported.
Lisa Ann grew up around business owners and tax and thought she might be interested in working with businesses in a different way. Attending Bentley University, her love of working with businesses grew, as did her interest in working with people around the world. During her time at Boston University School of Law, Lisa Ann studied at Bucerius Law School in Hamburg, Germany in a program focused on international business law. From her first job out of law school, she has focused on her selected practice areas and the overlap between them.
Licensed in Massachusetts and Rhode Island, Lisa Ann works with clients worldwide on trusts and estates, tax, and business law, which includes estate planning, trusts, probate administration, trust administration, tax planning, business establishment, business succession planning, ongoing business and tax advice, and more. Removing as many overwhelming, frightening, and daunting aspects of the client experience as she can, Lisa Ann enjoys the complexities that come in truly individualized legal work and in making the planning and administration accessible to all, including nontraditional clients. By focusing on often underserved communities with complex yet often misunderstood legal needs, Lisa Ann is able to use her skills to work with a variety of clients in areas including multijurisdictional work, special needs planning, childfree planning, nontraditional households, high net worth planning, nontraditional families, minors planning, business owner planning, charitable planning, people who move often, and more.
Dawn Torres-Gale is an Accredited Financial Counselor® and the Single Owner-Member of Our Money Goals, LLC. Our Money Goals mission is to help individuals and couples build their household assets through the identification of specific financial goals and the creation of detailed action plans in support of those goals.
In 2008 Ms. Torres-Gale was chosen by the Financial Industry Regulatory Authority (FINRA) Foundation to be part of a select group of military spouses who received FINRA sponsored training from the Association of Financial Counseling, Planning and Education to become an Accredited Financial Counselor®. Ms. Torres-Gale received her certification as an Accredited Financial Counselor® in February 2012.
Since becoming an AFC®, Ms. Torres-Gale has worked as a Personal Financial Counselor with the Massachusetts National Guard and the Naval Operational Support Center in Portland, Oregon. In 2018 she spent three months providing financial education and counseling services to soldiers stationed at US Army Garrison Wiesbaden in Germany.
Ms. Torres-Gale has a Bachelor of Arts degree in Political Science from San Francisco State University and a Master of Public Administration degree from the University of Hawaii, Manoa. Ms. Torres-Gale has served as a district court mediator in Honolulu, Hawaii from 2003-2005 and as an elected member of the Wachusett Regional School Committee representing the Town of Holden, Massachusetts from 2009-2012. She is the spouse of LCDR Christopher A. Gale, USCG (Ret.) and the mother of three daughters, ages 28, 18 and 15 yrs. old.
