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Estate PlanningEstate planning can be challenging in some circumstances, there may be disagreement between those forming and setting up the plan and the family members, friends, and other beneficiaries involved. Often, these misunderstandings can be cleared up through communication. One particular issue, however, has a way of creating problems for those expecting to be named as beneficiaries in a loved one’s estate plan: undue influence.

Undue influence takes place when a person in a position of power manipulates an elderly or ill person into forming or modifying an estate plan in a way that benefits him or her. Typically, this individual will be a caretaker or someone who has some control over the grantor’s finances or living situation. Whether a health care worker, an accountant or a relative, such individuals likely wouldn’t have been named as a beneficiary had he or she not been in the position to influence the estate planning process.

This is why such an individual is said to have “undue influence,” as his or her role in the grantor’s life normally would not eclipse the role of the deceased’s spouse, children, and/or other family members.

Continue Reading What Constitutes ‘Undue Influence’ in Estate Planning?

One of the crucial elements of starting a new corporation is drafting its bylaws. Bylaws are the rules by which the corporation will be governed on a day-to-day basis and typically cover such matters as what is required of shareholders, directors, and officers.

Bylaws should typically be drafted as early as possible, typically prior to the first meeting of the corporation’s board of directors. Generally, the corporation’s attorney will either draft the bylaws or make sure it’s one of the first actions undertaken by the board of directors.

A key distinction should be made between bylaws and articles of incorporation. The articles of incorporation will cover information related to the organization of the corporation, which are required by state or territorial law and include basic information, such as names and addresses, but not the structure or operations of the corporation. Another key point is that bylaws private to corporation whereas the articles of incorporation must be filed with the Office of the Lt. Governor, Division of Corporations and Trademarks and are available for public inspection.

Some of the information covered in the articles of incorporation is likely to be covered in the bylaws as well. As a general rule of thumb, here are some items that should be addressed in corporate bylaws:

  • Basic information such as the name of the corporation, its address and where it will operate.
  • Information related to the board of directors, generally covering the composition of the board, election of directors, and how vacancies will be filled.
  • A list of officers of the corporation and their respective responsibilities and powers.
  • Information about stocks, including stock types and classes of shares.
  • Rules and procedures related to meetings of shareholders and directors, including when and where such meetings will occur and what will happen when they do.
  • Rules establishing the corporation’s record-keeping procedures.
  • Information guiding the process of amending both the bylaws and the articles of incorporation.

Just like with the initial document, any changes to the articles of incorporation must be filed with the Lt. Governor’s Office whereas changes to bylaws do not require that the public be informed Nevertheless, a corporation’s bylaws should establish a very clear procedure for amending their amendment, including who is responsible for proposing and approving the changes.

As corporations grow and change, making amendments to the bylaws will likely become necessary. It’s a good rule of thumb to plan on revisiting your corporation’s bylaws on a regular basis, perhaps at the annual meeting. Whether you’re in the process of establishing a corporation and need assistance with writing the bylaws, or you’ve come to a stage where the bylaws need to be amended, consulting an experienced and knowledgeable corporate attorney is in your company’s best interests.

Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full-service business law firm based on St. Thomas, U.S. Virgin Islands.


Residential real estate buyers and sellers often wonder what a real estate closing attorney does other than conduct the actual closing. There is much more than you may think. There may be as many as three or four attorneys at the closing representing the buyer, the seller, the lender and the title company.

Usually, the attorney’s office receives a copy of the contact of sale and a “title order” from the lender which provides additional information concerning the loan including the lender contact and the proposed closing date. The attorney then opens a file, enters into an engagement agreement with the client and conducts a title examination on the subject property.

A title examination involves examining the records at the Recorder of Deeds for forty to sixty years or more and is performed to determine the status of title and any encumbrances and liens on the property so that the attorney can arrive at a “title opinion.” The title opinion is used as the bases for the issuance of a title insurance commitment to the lender. Receipt of the title insurance commitment allows the lender to move forward with processing its closing documents. If there are title issues that result in an exception to title insurance in the commitment, those must be resolved before closing and the closing attorney will take appropriate steps.

Continue Reading Exactly What Do Those Real Estate Attorneys Do at a Closing?


Among the many challenges of owning a business of any size is the need to keep track of your organization’s activities. This isn’t just important for helping your business operate efficiently—it’s also a legal requirement. Depending on the type of business entity you operate, federal and Virgin Islands laws may apply to your business in different ways, and it’s your responsibility to understand such laws or have a skilled attorney ready to assist you.

For corporations, state or territorial law determines the recordkeeping requirements by which businesses must abide. Among the records a corporation is required to keep on a permanent basis are meeting minutes, corporate bylaws, shareholders’ records/stock ledger and various records related to the corporation’s accounts. To keep these valuable and critical records safe from fire, flood or other disasters, copies should be stored in fireproof safes, electronically, and/or in a secure offsite location.

Partnerships and limited liability companies (LLCs), meanwhile, are expected to retain records of contributions, copies of the certificate/articles of partnership/organization (if applicable) and any amendments. A list of current partners/members should be readily available. As with corporations, partnerships/LLCs must keep these records on a permanent basis and store copies in a safe and secure location. In addition, financial records should be kept for the amount of time required by any applicable laws.

Corporations, partnerships, and LLCs alike should also keep copies of their tax returns, along with sets of books for various tax-related purposes, for varying numbers of years.

In any discussion of corporate recordkeeping, it’s also important to note that internal policy plays a role in determining how long certain records are kept. In addition, regular destruction of non-essential records should be scheduled and carried out accordingly. The reason why keeping to a regular schedule is so important is twofold. First, given the amount of records generated by many businesses, storing non-essential records can be burdensome for reasons of physical and/or digital storage space alone. Second, in the event of a lawsuit, adhering to a regular document destruction schedule can protect a business against charges that documents were destroyed in response to the suit. Always remember, however, that all records/information relevant to pending or reasonably anticipated litigation must be preserved.

In addition to abiding by the specific legal recordkeeping requirements for your type of business as well as your internal policy, it’s generally a good idea to err on the side of caution when it comes to keeping records of your business’s activities. If you have questions or concerns about your recordkeeping and whether you’re protecting your company’s best interests, speak with an experienced and knowledgeable business law attorney. 

Steven K. Hardy is Chair of the Corporate, Tax and Estate Planning Practice Group at BoltNagi PC, a full-service business law firm based on St. Thomas, U.S. Virgin Islands.


Business LoansIf you own or operate a business, it will likely be necessary to, at some point, apply for a business loan to cover short-term costs and resolve any cash flow challenges you may have.  In fact, borrowing effectively can represent the difference between a business’s success or failure, especially if your company is young.

The U.S. Small Business Administration (SBA) operates an often-used loan program that essentially covers much of the risk for lenders issuing loans to small businesses. This program aims to help businesses continue to grow when other funding options are not available. Whether or not you go through the SBA, you may seek a loan from a bank, a savings and loan or a credit union.

When it comes to interest, there are laws in place to prevent lenders from charging excessive rates to business owners—something known as a usury law.  Most lenders will avoid charging more than 10% interest to remain safely under this amount. Right now, interest rates are quite low, at just one over prime, but are expected to climb upward soon.

Another issue to consider, especially if a shareholder of your corporation is issuing a loan to the business entity, is to ensure that the interest rate is not too low. If it is, the Internal Revenue Service could consider it not commercially reasonable, instead viewing it as a capital investment from the shareholder. If this happens, the IRS could tax the loan repayments as dividends to the shareholder, something that would likely take both your organization and the lender by surprise.

 Collateral and Co-signers

In addition, most lenders will require that you offer some sort of collateral, known as “security interests,” that they would be able to sell off in the event you are unable to pay back the loan in the future. If this does happen and you cannot make good on the loan, the bank may choose to sue the business or you personally. By suing you as an individual, the lender could possibly take your personal property and assets to make up for the missed payments.

Finally, it might be necessary for you to find a co-signer to your loan if your credit history prevents you from taking it out on your own. In this situation, the bank is looking for another individual from which it could potentially collect money or assets if the loan goes into default. If you need to ask a friend or family member to serve as a co-signer, be sure that person knows the risks involved.

To learn more about your options when it comes to business loans, consider speaking with a skilled corporate law attorney based in the U.S. Virgin Islands.

Nash Davis is Chair of the Real Estate & Financial Services Practice Group at BoltNagi PC, a full service business law firm on St. Thomas, U.S. Virgin Islands.

IRS Form 1023For nonprofit organizations, navigating the process of establishing tax-exempt status can be a challenging experience, but the benefits are more than worth the effort. Contributors being able to deduct donations from your taxes, being exempt from income and property taxes and having access to funding through grants, for example, are just a few of the many benefits of being granted tax-exempt status.

Filing for tax-exempt status involves the completion of IRS Form 1023, which covers section 501(c)(3) of the tax code. It may be helpful to have the assistance of an attorney or tax professional when completing this form, as it likely demands a greater understanding of the law than most people are likely to have. Some of the key aspects of the application include outlining the structure of your organization, along with descriptions of your organization’s history, activities and accurate and thorough financial records.

Receiving a successful approval for tax-exempt status may seem like an event worth celebrating, and it is. But there are also steps you need to take to protect your nonprofit status. One of these is establishing and maintaining a clear corporate structure. For nonprofits, there are two basic options: leaving decision-making to the board of directors, or allowing members to play a role in the process. Regardless of which option your nonprofit corporation chooses to adopt, roles must be clearly indicated and followed.

Another key element of maintaining tax-exempt status is keeping accurate records of your nonprofit organization’s activities. This helps protect the limited personal liability of the directors, and is simply a good business practice in general. Some of the records you will want to keep organized and well maintained include meeting minutes and records pertaining to major decisions the corporation makes. Accurate and thorough financial and tax records should also be maintained.

There are also a number of rules nonprofit organizations need to follow to preserve their tax-exempt status. Many of these relate to political activities, the distribution of profits and the distribution of assets in the event of the corporation’s dissolution. For instance, nonprofits are barred from making political campaign contributions, and their ability to lobby for legislation is severely limited.

As far as profits are concerned, no nonprofit can be set up to operate for its members’ personal financial benefit. And because the structure of tax-exempt organizations prevents them from owning their assets, those assets cannot simply be distributed to its members if the corporation dissolves. Nor can they be sold. Instead, they must be donated to another tax-exempt organization.

Not surprisingly, it can be easy for any nonprofit organization to find itself in legal trouble due to poor recordkeeping, engaging in inappropriate activity or failing to abide by the rules of its structure. To ensure you understand these issues and remain compliant with the law, consult an experienced attorney.

Tom Bolt serves as Managing Attorney of BoltNagi PC and advises many U.S. Virgin Islands nonprofits.  He serves on several local and national nonprofit boards.

Net LossesOne of the unfortunate realities of operating a business is that you might not always make the money you anticipated. Whether you’ve only recently started your business and have not earned back your initial investment, or you’re dealing with problems related to the larger economy, earning a profit isn’t always possible. In fact, for businesses in these situations, it’s fairly common to be operating at a loss.

Because this situation is so common, there is a provision in the tax code that allows business owners, especially sole proprietors, to receive a quick tax refund by claiming a net operating loss. In short, this is what you have when your losses are greater than your combined income from all sources, and while it sounds bad—and certainly isn’t pleasant to experience, given the fact that your business is losing money—claiming a net operating loss actually provides some relief by lessening your tax burden.

Claiming a net operating loss allows business owners to receive a partial or even full refund of taxes from previous years. Even better, this refund may often be made relatively quickly, which means business owners benefit from receiving much-needed funds when they can actually use them.

Calculating your net operating loss

Determining whether your business has a net operating loss, and in what amount, may be more complicated than you’d expect. For sole proprietorships, if your listed expenses are greater than your income, you have a net operating loss. For other types of businesses, such as partnerships, LLCs and S corporations, business losses are deducted from your income along with any other deductions. In other words, they are factored in when determining your adjusted gross income. If your adjusted gross income is a negative number after all of your deductions have been factored in, your business can claim a net operating loss.

You have two options when it comes to applying your net operating loss to your taxes. You may either apply it to previous tax years or to future tax years—carrying the loss back or forward, in IRS parlance. In general, carrying the loss back allows you to benefit from a quick refund, while carrying the loss forward allows you to reduce your tax liability in future years. The best option depends on a number of factors, including how much tax you’ve paid in the past.

Because the process of claiming and benefiting from a net operating loss can be complex, it’s best to seek the input of an experienced and knowledgeable business attorney as soon as possible if you’re interested in proceeding. By leveraging the provisions for claiming net operating losses, you can help your business find stronger footing sooner, and hopefully begin earning a profit in the months to come.

Adam N. Marinelli is an attorney in the Civil Litigation Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.

Does your company have confidential information? What about trade secrets? The concept of owning and protecting confidential information or trade secrets may not have occurred to most businesses. Yet, if you have a client list, pricing formula, particular device or pattern of installation, you have intellectual property worth protecting. This information is no less important to your business than your star employee or your brand name, and it deserves the same diligent protection.

In the U.S. Virgin Islands, a trade secret is considered to be information used in a business that is secret and gives a competitive advantage. It may be a formula, pattern or device, a compound, a manufacturing process, a pattern for a machine or a customer list.

Continue Reading Protecting Your “Trade Secrets” in the U.S. Virgin Islands

IRS PhotoFor an S corporation — a small corporation that is structured and taxed similarly to a partnership—one of the biggest advantages of this structure is its ability to avoid payment of Social Security and Medicare taxes. However, while this benefit has become very popular among S corporations, it has become decidedly less so for the U.S. Internal Revenue Service.

The key provision at issue is that earnings and profits taken in by an S corporation and distributed to its shareholders are not subject to Social Security and Medicare taxes. Because the owners of an S corporation act as both shareholders and employees, they control not just the distribution of profits, but also the amount of their salaries. By taking low salaries and claiming larger profits as corporate distributions, owners are able to avoid significant taxation. Some S corps, in fact, have taken the approach of paying shareholders nothing at all—or at least nothing they classify as employee salary.

The IRS frowns upon these practices, as they deprive the federal government of significant tax revenue. A 2000 study by the IRS determined that nearly half a million S corporations with single shareholders—in other words, owners beholden to no one when it comes to their salaries—paid no salaries to their owners. This revelation has resulted in the IRS taking a more aggressive approach to identifying and penalizing S corps that fail to pay their shareholders a reasonable salary.

But what constitutes a reasonable salary for an S corporation employee, at least as far as the IRS is concerned? Unfortunately, there is no set dollar amount that will free you from scrutiny. Instead, the agency looks at a variety of factors when determining whether a salary is reasonable or not. Among these factors are the following:

  • The specific duties and the level of responsibility shouldered by the employee;
  • The time, energy and effort the business demands of its employees;
  • Whether salaries were determined using a formula;
  • The cost of living in the area in which the business is located; and
  • Patterns of payment for employees over time.

After examining these and numerous other factors, the IRS develops a range of salaries it considers reasonable for the job, and whether the employee’s salary is considered reasonable determines if any of the corporate distributions are reclassified as salary and thus subject to taxation.

Naturally, this process can be extremely complicated, particularly as the IRS takes so many factors into consideration. If you’re wondering whether your S corporation is approaching employee salaries in a reasonable and responsible manner, it’s best to seek the guidance of an experienced business law attorney.

Adam N. Marinelli is an attorney in the Civil Litigation Practice Group at BoltNagi PC, a full service business law firm serving the U.S. Virgin Islands.