Under current Ohio law, the answer generally depends on the language of the agreement, the circumstances surrounding the employment relationship, and the nature of the restriction. Ohio generally permits non-compete agreements, but employers cannot automatically enforce every restriction simply because it bears a signature. Courts evaluate whether the restriction is reasonable and necessary to protect legitimate business interest, rather than merely preventing an employee from competing or earning a living.

Meanwhile, Ohio lawmakers continue to consider legislation that could limit the use of non-compete agreements, including Senate Bill 11 and Senate Bill 301. These proposals reflect growing concerns about the effect restrictive covenants can have on employees’ economic mobility, professional opportunities, and competition in the marketplace.

Since an estimated one in five Americans are subject to noncompete agreements,[1] understanding the current law and the limits of an employer’s ability to enforce a non-compete is essential before making career decisions.

What is a Non-Compete Agreement?

A non-compete agreement is a contractual provision that restricts an employee’s ability to work for a competing business, establish a competing business, or otherwise engage in competitive activity after the employment relationship ends. These provisions may appear in employment agreements, executive compensation arrangements, separation agreements, or other workplace documents. They can apply generally in any industry but are most commonly seen with employees in the sales, healthcare, and technology sectors and for management-level employees broadly.

A non-compete agreement may restrict an employee based on one or more factors, including:

• Time: How long the employee must refrain from competing after leaving the employer.
• Geography: The locations where the employee cannot work or compete.
• Scope of restricted activity: The types of jobs, services, or business covered by the restriction.

The specific language of an agreement is highly relevant. An agreement that prohibits employment with any business that is a “competitor,” for example, may raise different questions from one that narrowly defines the prohibited activities and the relevant competitive market.  Broad or ambiguous language can make it difficult for an employee to determine which opportunities are off-limits and may raise questions about whether the restriction is reasonable and enforceable.

Employees should also understand that a non-compete is not the same as a non-solicitation or confidentiality agreement.  A non-solicitation provision may restrict an employee from soliciting certain clients or co-workers after departure.  A confidentiality agreement generally restricts the use or disclosure of protected information.  These provisions raise distinct legal issues, and challenging a non-compete does not necessarily eliminate other contractual obligations.

Can an Unreasonable Non-Compete be Enforced?

An employer cannot simply establish enforceability by pointing to the employee’s signature. Under Ohio law, reasonableness and an employer’s legitimate business interests remain central to this analysis and proposed legislation may have significant impact on these covenants in the future.

Depending on the circumstances, an employee may have grounds to challenge the agreement, dispute the employer’s interpretation, or argue that the restriction should be narrowed.  However, employees should be cautious about assuming that an overbroad provision will be disregarded automatically.  Ohio courts may modify or “blue pencil” restrictions or find them unenforceable altogether depending on the specific language and other surrounding circumstances. 

Significant Changes May Be Coming

Ohio’s legal framework governing noncompete agreements is among the more employer-friendly in the country. By contrast, some states prohibit non-compete agreements for lower-wage workers, while others, such as California, have largely banned them altogether. Recent legislation introduced by Ohio lawmakers, however, could significantly alter the state’s approach to these agreements. 

Senate Bill 11, for example, was introduced last year and, as currently proposed, would prohibit employers from entering into non-compete agreements with current or prospective employees and prevent employers from enforcing existing agreements.[2] If enacted, the legislation would represent a substantial departure from existing Ohio law and significantly expand employees’ ability to pursue employment opportunities without the restrictions imposed by non-compete agreements.

Similarly, Senate Bill 301 focuses exclusively on the healthcare sector. As proposed, it would prohibit hospitals from enforcing non-compete agreements against physicians, physician assistants, and advanced practice registered nurses that extend beyond six months after the termination of employment or impose geographic restrictions exceeding fifteen miles from where the individual was employed.[3]

The Bottom Line for Ohio Employees

Non-compete agreements can have lasting consequences for an employee’s career, income, and professional independence.  Under current Ohio law, these agreements may be enforceable when they reasonably protect legitimate business interests, but an employer’s ability to restrict future employment is not unlimited.

A signed agreement is not necessarily an enforceable agreement in every respect.  Its language, the interests it protects, the hardship it creates, and the circumstances surrounding the employment relationship can all matter.  At the same time, employees should not assume that an overbroad restriction will be disregarded automatically or that pending legislation has already changed the law.

Before accepting a new position, starting a competing business, or leaving an employer, employees should carefully review their contractual obligations and consider obtaining legal advice.  Understanding the scope and enforceability of a restrictive covenant can help employees protect their rights, avoid unnecessary disputes, and make career decisions with greater confidence.

For more information, or to seek counsel from our Employment practice group, please reach out to request a consultation or call us at 216-696-1422.

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[1] https://www.ftc.gov/news-events/news/press-releases/2024/04/ftc-announces-rule-banning-noncompetes
[2] https://search-prod.lis.state.oh.us/api/v2/general_assembly_136/legislation/sb11/00_IN/pdf/
[3] https://search-prod.lis.state.oh.us/api/v2/general_assembly_136/legislation/sb301/00_IN/pdf/

This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Non-Compete Agreements in Ohio: What Employees Should Know Before Changing Jobs appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

This overview examines four types of business entities:

1. Limited Liability Companies
2. Corporations
3. General Partnerships
4. Limited Partnerships

Limited Liability Companies (LLCs)

Limited Liability Companies (LLCs) are one of the most common entities due to their ease of administration. LLCs are owned by “members,” who may choose to manage the company themselves or appoint one or more managers to handle day-to-day operations. An LLC can have just one owner (a single-member LLC) or multiple members, which makes it a flexible choice even for a first-time owner going into business alone.

To form a limited liability company in Ohio, you must file Articles of Organization with the Ohio Secretary of State and appoint a statutory agent with an Ohio address who can accept legal documents on the company’s behalf. Managerial rights are often laid out in the LLC’s operating agreement, which is an internal governance document that Ohio does not legally require, but is strongly recommended. If an LLC does not have an operating agreement, then it is subject to Ohio’s default rules that may not align with how you truly want your LLC to operate.

The biggest benefit to forming an LLC is that the LLC is treated as an entity distinct from its members, meaning that members are generally not personally liable for the debts and obligations of the LLC. This large shield from personal liability creates a great incentive for individuals to choose an LLC as their business structure because their personal assets will be protected in the event the company is sued.

However, it is worth noting that the LLC structure does not create an impenetrable shield from personal liability. Members can still be subject to personal liability for violating fiduciary duties owed to other members or if the LLC is not treated as separate from its members. The latter example is called “veil piercing,” and it typically happens when members commingle their personal funds with the funds of the LLC.

An important factor in forming an LLC is having a well-written operating agreement. This is crucial to the proper functioning of a multi-member LLC and can be more costly than forming a general or limited partnership (discussed below). However, the LLC is a great option for a small to mid-size business, whether you are going into business on your own or with one or more partners.

Corporations 

In Ohio, a corporation is formed by filing Articles of Incorporation with the Ohio Secretary of State. Corporations are managed by a board of directors and owned by shareholders. A corporation’s day-to-day governance is set out in an internal document called a Code of Regulations, which is Ohio’s version of corporate bylaws. Like LLCs, corporations are considered distinct from their shareholders and directors, meaning that both shareholders and directors are generally not personally liable for acts and obligations of the corporation.

There are two main types of corporations: C-corporations and S-corporations. Once formed, a corporation is considered a C-corporation by default. An S-corporation is not a separate kind of corporation you form under Ohio law; it is a federal tax status that a qualifying corporation elects with the IRS. C-corporations are often larger companies, while the S-corporation election is commonly used by smaller, closely held businesses that meet the IRS’s eligibility requirements. The biggest difference between the two is taxation.

C-Corporations

C-corporations pay tax on their income before distributing profits to shareholders. Shareholders must then pay income tax on the profits they receive. This is often referred to as “double taxation.”

S-Corporations

S-corporations are treated as pass-through tax entities, meaning the income and losses of an S-corporation are passed through the business to the shareholders, who then report the losses and profits on their tax returns.

General partnerships, limited partnerships, and LLCs are also generally treated as pass-through tax entities by default, although an LLC may elect to be taxed differently.

Along with limited liability, the biggest benefit of forming a corporation is that the structure generally provides for an unlimited number of shareholders, which encourages more investment and rapid business growth. That is why this model is typically best for bigger companies. However, this benefit is also a major drawback because shareholders who own a majority of the corporation’s stock could gain control over management decisions.

The double-taxation requirement for C-corporations can also be burdensome for business owners, and although S-corporations allow for pass-through taxation, there is typically a cap on the number of shareholders and a requirement to meet other stringent IRS requirements.

General Partnerships

General partnerships are the default classification for co-owners of a business. A general partnership is formed when two or more people, intentionally or unintentionally, join forces to carry on as co-owners of a business for profit. The owners of the business personally share the profits and losses and are equally responsible for the debts and liabilities of the company. Each partner is jointly and severally responsible for the acts of the other partners and the business as a whole, which means a creditor can pursue any single partner for the full amount owed, not just that partner’s share.

A formal agreement or a filing with the Ohio Secretary of State is not necessary to form a general partnership. However, partners who operate under a name other than their own surnames should register that trade or fictitious “doing business as” name with the Ohio Secretary of State, and a partnership that sells taxable goods will also need an Ohio vendor’s license.

The biggest drawback is that each partner faces unlimited, personal, and joint-and-several liability, meaning your personal assets can be reached to satisfy the partnership’s debts.

If you currently operate as a general partnership, please reach out to discuss alternative entities that could provide stronger protection and long-term advantages.

Limited Partnerships

Unlike general partnerships, limited partnerships must be registered with the Ohio Secretary of State and are often formed to raise capital for the business. Limited partnerships require limited partners to cede control of one or more general partners, who are solely responsible for managing the company. The general partners have unlimited liability, as in a general partnership, while the limited partners generally risk only the money they have invested in the business, so long as they do not take part in managing the company.

If you want to bring outside investors into your business while keeping day-to-day management in the hands of a general partner, a limited partnership may be a good fit. Keep in mind, however, that whoever serves as the general partner remains personally responsible for the business’s debts, while the limited partners keep their liability shield only so long as they stay out of managing the company.

Choosing the right business structure is a decision that should not be taken lightly. This is a consequential decision and is best approached with experienced legal and tax guidance. For those starting a business and unsure which entity best fits their needs, consulting with qualified corporate and tax counsel can help clarify the trade-offs and inform decisions about entity selection and other business formation matters. The next steps include preparing and filing formation documents, opening business bank accounts, registering for applicable taxes, and establishing day-to-day operations.

For more information or to seek counsel from our Business & Corporate or Taxation practice groups, please reach out to request a consultation or call us at 216-696-1422. McCarthy Lebit would like to thank law clerk Logan B. Kijewski for his work in assisting with the preparation of this legal blog post for The More Report.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Starting a Business in Ohio: Choosing the Right Business Entity appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

When a River Becomes the Property Line

Some rural parcels defy exact measurement by even the most experienced and diligent surveyors, because they use rivers or streams as their boundaries. Those rivers and streams are in constant motion; every rainstorm and ice melt affects their speed and depth, and they routinely shift the sand and soil around them. Nonetheless, river boundaries were commonly used in the eighteenth and nineteenth centuries, and Ohio itself has used a river as its southern boundary since 1792, before its statehood.

Even after the advent of modern surveying equipment, river boundaries remain common in rural Ohio; they are especially prevalent in describing agricultural land, where plainly stated water rights can be critical to market value, irrigation potential, and crop selection. Thankfully, Ohio’s legal rules governing water boundaries have remained stable despite the threat of technological ‘disruption’ from satellite imagery, drone photography, or GPS measurement. In the words of the Ohio Supreme Court, “natural and permanent monuments are the most satisfactory evidence” among all methods of describing real property, because “monuments are considered more reliable evidence than courses and distances.”

How Ohio Law Treats Changing Waterway Boundaries

Although natural monuments such as rivers and streams are extremely reliable indicators of location and are less vulnerable to tampering and concealment than many man-made indicators, they can move over time. Under most circumstances, this movement has little legal significance, as Ohio law is clear that “where the bank of the stream is called for and the bank is added to by slow and gradual accretion, the boundary is the new bank….” However, sudden and drastic changes in the course of a waterway are treated differently under Ohio law: in contrast to “the usual and ordinary case of the shifting of earth by the action of the waters,” rapid earth movement “of a somewhat extraordinary nature” that involves “the transfer of a considerable quantity of earth beyond or over the channel of the stream” does not change the property boundary. In fact, the United States Supreme Court reaffirmed this common law as recently as 1998, stating that “We have long recognized that a sudden shoreline change known as avulsion (as distinct from accretion, or gradual change in configuration) has no effect on boundary.” Thus, a waterway that moves gradually could add acres of land to one side of its course over time, and Ohio’s legal system would acknowledge that, but a waterway that moves suddenly or extraordinarily does not change the property boundary at all.

We use rural surveyors, once again, to measure and track the changes in a waterway’s course, and the speed of such changes. Surveyors use “meander lines” to describe the exact location of a waterway at a specific moment in time; these lines can then be compared across years and decades to measure the average pace of accretion at any particular point or stretch of the waterway. In addition to their historical value, meander lines also allow a surveyor to calculate the exact acreage of a parcel bounded by a waterway, data which is often critical to a sale of land, while acknowledging that the boundary of the parcel changes over time.

Climate Change & Evolving Waterway Boundaries

As climate change continues to impact Ohio and severe weather events become more frequent, determining whether a change in the course of a waterway was “routine” or “extraordinary” may be increasingly difficult. Flooding, tornadoes, and other significant events can alter waterways in ways that complicate efforts to establish their historical patterns of movement. As a result, determining a waterway’s typical rate of accretion and persuading a court or jury that a particular change was ordinary or extraordinary may require careful analysis of historical records, survey data, and other evidence. These disputes often benefit from collaboration among legal counsel, land surveyors, and other professionals with knowledge of the property and the waterway’s history.

Protecting Waterfront Property Value

If your property is bounded by water, its marketability and value may depend heavily on documenting the shifts and changes in the waterway’s location over time. Retaining legal counsel experienced in real property and boundary matters can help you evaluate that history, protect your property interests, maximize sale value, and avoid boundary disputes.

For more information, or to seek counsel from our Real Estate & Construction practice group, please reach out to request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post When Property Boundaries Shift Over Time: Natural Watercourses & Bodies of Water appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Patents: Protecting Inventions

Patents generally protect inventions and certain improvements to existing inventions. A utility patent can protect a new and useful process, machine, article of manufacture, composition of matter, or improvement of one of these. A patent gives its owner the right to exclude others from making, using, offering for sale, selling, or importing the patented invention in the United States. This right lasts for a limited period of time in exchange for public disclosure of the invention and is a right to exclude others, not necessarily a guarantee that the patent owner can practice the invention.

Other types of patents include design patents, which protect new, original, and ornamental designs, and plant patents, which protect certain distinct and new plant varieties that are asexually reproduced. Choosing the appropriate type of patent is an important part of protecting an innovation.

Not every idea or invention is eligible for patent protection. Mere ideas, laws of nature, naturally occurring substances, and mathematical formulas generally cannot be patented, and an invention must meet legal requirements such as novelty and non-obviousness.

Trademarks: Protecting Your Brand

While patents protect inventions, trademarks protect the words, phrases, symbols, designs, and other identifiers that distinguish a business and its goods or services in the marketplace. They help consumers recognize the source of goods or services and allow businesses to distinguish themselves from competitors.

Trademark rights can arise through their use in commerce, even without registration. These common law trademark rights are geographically limited. Federal trademark registration provides broader protection and can establish rights throughout the United States and its territories.

Protection is not limited to traditional names and logos. In some circumstances, sounds, colors, and other nontraditional identifiers can also function as trademarks. For example, the distinctive MGM lion’s roar, the Pillsbury Doughboy, and Tiffany blue have all received trademark protection.

Trademark infringement is a form of unfair competition. Federal trademark law generally protects against unauthorized use of the same or a confusingly similar mark in connection with the same or related goods or services when that use is likely to cause confusion about their source.

Copyrights: Protecting Creative Works

Copyright protects original works of authorship, including artistic, literary, and creative works such as:

• Literary, musical, and dramatic works
• Pantomimes and choreographic works
• Pictorial, graphic, and sculptural works
• Motion pictures and other audiovisual works
• Sound recordings
• Computer programs
• Certain architectural works
• Compilations and derivative works

Unlike patents, copyright protection generally arises automatically when an original work is created and fixed in a tangible form. For example, a songwriter generally obtains copyright protection when an original song is recorded, while an author obtains protection when an original work is written down.

That means registration is not required for copyright protection to exist. However, registering a work with the U.S. Copyright Office provides important advantages and, in general, is required before the copyright owner can bring an infringement action involving a U.S. work. Registration can also provide access to certain statutory damages and attorneys’ fees when applicable requirements are met.

Copyright protects the expression of an idea, not the idea itself, and a work must contain sufficient originality to qualify for copyright protection. A basic shape, common phrase, or other work lacking the necessary originality may not qualify.

Which Type of Intellectual Property Protection Do I Need?

There is no one-size-fits-all form of intellectual property protection. A business may have a logo protected by trademark, proprietary technology protected by a patent, and original website content protected by copyright. In some cases, the same asset may qualify for more than one form of protection.

Different forms of intellectual property can protect different aspects of the same product or property. For example, an iPhone’s design may be protected by design patents, while the Apple name and logo are protected as trademarks. Similarly, Toy Story demonstrates how trademarks and copyrights serve different purposes: the name and associated branding can function as trademarks, while the films, artwork, and other creative works may be protected by copyright.

For that reason, intellectual property protection should be considered as part of a broader business strategy rather than as a single decision about if something can be “trademarked.” Identifying the intellectual property your business owns, understanding available protections, and taking the steps to preserve those rights can help protect some of your business’s most valuable assets.

For more information, or to seek counsel from our Intellectual Property practice group, please reach out to request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Intellectual Property Protection: Patent, Trademark, or Copyright? appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

What Is a Restraining Order?

When most people hear the phrase “restraining order,” they think of a court order that prohibits someone from contacting another person following domestic violence or another harmful act. In Ohio, however, restraining orders can apply to many different situations. For example, in divorce proceedings, courts may issue restraining orders during litigation to freeze financial accounts, prevent asset transfers, or restrict certain actions involving a business while the case is pending. These orders are generally intended to keep things as they are while the court case is ongoing.

If someone violates a restraining order, the other party can ask the court to take action. The court may require the person to follow the order, impose a fine, or, in serious cases, order the person to serve time in jail until they comply.

What Is a Protection Order?

In Ohio, what many people call a “restraining order” is actually a protection order. In an effort to protect parties from future harm, a judge or magistrate can issue a protection order to help protect someone from future harm. The order may require a person to stay away from or have no contact with the protected person and may include other requirements.

Violating a protection order can have serious consequences. Police may arrest the person who violates the order, and prosecutors may file criminal charges.

Ohio protection orders generally fall into two categories: civil protection orders and criminal protection orders. The type of protection order available depends on the relationship between the people involved, the conduct at issue, and whether criminal charges have been filed.

Civil Protection Orders

An individual can seek a Civil Protection Order (CPO) by filing a petition directly with the appropriate civil court. The person requesting the order is called a petitioner, and the person the petition is filed against is called the respondent. Criminal charges do not need to be filed for someone to seek a CPO.

In Ohio, CPOs include several different types of protection orders. Domestic Violence Civil Protection Orders are intended to protect family or household members from domestic violence. Civil Stalking Protection Orders and Civil Sexually Oriented Offense Protection Orders are intended to protect victims of stalking or sexually oriented offenses.

These orders, which can be issued for up to five years, can require the respondent to stay away from the protected person, have no contact with them, or follow other restrictions designed to prevent future harm.

Domestic Violence Civil Protection Orders

R.C. 3113.31 permits Ohio courts to issue Domestic Violence Civil Protection Orders (DVCPOs) to protect individuals who are victims of domestic violence or are at risk of domestic violence from a family or household member.

Family or household members include spouses, former spouses, parents, children, relatives by blood or marriage who live or who have lived with the respondent, and people who have a child together.

A DVCPO may prevent the respondent from contacting the protected person or require the respondent to stay away from the protected person’s residence, workplace, or school. The order may also require the respondent to leave a shared home or address temporary custody or parenting-time arrangements when children are involved.

Civil Stalking Protection Orders & Civil Sexually Oriented Offense Protection Orders

R.C. 2903.214 permits Ohio courts to issue a Civil Stalking Protection Order (CSPO) or Civil Sexually Oriented Offense Protection Order (SSOOPO). These orders are intended to protect victims of stalking or sexually oriented offenses when the parties are not family or household members.

R.C. 2903.211 defines menacing by stalking as engaging in a pattern of conduct (two or more incidents closely related in time) that knowingly causes another person to believe the offender will cause physical harm to them or a family or household member, or that causes mental distress to the person or a family or household member.

When issued, a CSPO or SSOOPO may require the respondent to stop the stalking or sexually oriented conduct and stay away from the protected person. The court may also include other restrictions it considers necessary to protect the petitioner.

Criminal Protection Orders

Ohio courts may issue a Criminal Protection Order when prosecutors have filed qualifying criminal charges. There are two main types. A Domestic Violence Temporary Protection Order (DVTPO) may be issued when the case involves a family or household member. A Criminal Protection Order (CRPO) may be issued in other qualifying criminal cases.

Unlike a Civil Protection Order, a Criminal Protection Order arises directly from the criminal case. The victim does not need to file a separate civil petition to request the order. The court may address the Criminal Protection Order at an arraignment or protection order hearing. The victim may need to appear and explain what happened and why protection is needed.

A Domestic Violence Temporary Protection Order or Criminal Protection Order lasts only while the related criminal charge is pending. When the criminal case concludes, the order expires.

A Civil Protection Order may remain in effect longer than a Domestic Violence Temporary Protection Order or a Criminal Protection Order. For that reason, a victim may choose to file a separate Civil Protection Order petition while a criminal case is pending or near its conclusion to seek continued protection after the criminal case ends.

If the defendant violates a Criminal Protection Order or Domestic Violence Temporary Protection Order, the violation can constitute a separate criminal offense under R.C. 2919.27. Police may arrest the defendant, prosecutors may file additional charges, and the criminal court may revoke or modify bond, impose stricter release conditions, or order the defendant to be held in custody.

Protection orders and restraining orders can serve different purposes in Ohio family law and domestic relations matters. The type of order that may be available depends on the circumstances, the relationship between the parties, and whether a criminal case is involved. Knowing the terms of any order issued by the court is important to ensure you comply with its requirements and take appropriate steps to protect yourself, your family, and your legal rights.

For more information, or to seek counsel from our Family Law practice group, please reach out to request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Understanding Protection Orders & Restraining Orders Under Ohio Law appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Markets naturally ebb and flow, and investment losses are not always the result of wrongdoing. On certain occasions, however, losses may be the result of misconduct, negligence, or violations of applicable laws and regulations. When that occurs, you may have a legal claim against the financial firm, the advisor, or both.

Governing Authority

The financial services industry is subject to extensive laws, regulations, and professional standards designed to protect investors. Understanding the rules that govern financial professionals can help identify when conduct may have fallen short of those standards and whether an investor may have a legal claim for resulting losses.

Understanding the Rules That Govern Financial Professionals

Broker-dealer firms are firms that engage in the buying or selling of securities on behalf of their clients. The term “security” is purposely broad and covers a variety of financial instruments, including stocks, bonds, exchange-traded funds (ETFs), and options.

Broker-dealer firms operate within a highly regulated industry and are subject to oversight by the Securities and Exchange Commission (SEC), the Financial Industry Regulatory Authority (FINRA), and applicable federal and state laws and regulations. Violations of applicable federal or state laws, regulations, or FINRA rules may, depending on the circumstances, constitute evidence of misconduct and support a claim for investment losses.

When Financial Misconduct May Give Rise to a Claim

Investment losses can occur for many reasons, and not every loss is actionable. However, when a financial professional or firm fails to meet its legal or regulatory obligations, the resulting losses may provide grounds for a claim. Understanding what happened, whether applicable rules were followed, and who may be responsible are important first steps in evaluating your options.

Arbitration

When an investment dispute arises, the process for resolving it may look different from a traditional lawsuit. For many investors, arbitration is the required forum for pursuing a claim against a broker-dealer or financial professional. Understanding how arbitration works, why it may apply to your dispute, and what to expect throughout the process can help you make informed decisions about your legal options.

Why Many Investment Disputes Are Resolved Through Arbitration

When a client opens an account with a broker-dealer firm, the terms of the contract govern how disputes will be resolved. In many instances, these broker-dealer firms include an arbitration clause requiring disputes to be resolved through arbitration rather than in court. They also may identify the applicable arbitration forum. FINRA operates an arbitration forum to litigate these financial disputes, although some firms may require arbitration through other forums.

How FINRA Arbitration Works

Arbitration shares many similarities with traditional litigation. In FINRA Arbitration, for example, both parties file their pleadings, exchange relevant documents, conduct discovery, and may file motions to resolve different issues before the hearing.

The parties also have an opportunity to participate in selecting the arbitrators who will decide their case. Depending on the amount and circumstances of the claim, the matter may be heard by one or three arbitrators. FINRA provides both parties with a list of potential arbitrators, from which the parties rank preferred candidates and strike others.

Discovery, Settlement, & the Hearing

Once the arbitration panel is set, the parties then engage in discovery practice where both sides produce documents necessary for their respective cases. As in litigation, the parties may also engage in settlement discussions at any time. If the parties cannot reach an agreement on the settlement, the arbitrator or panel will hear the evidence and make a final decision at a hearing.

A More Streamlined Path to Resolution

Arbitration can offer a more efficient, cost-effective, and straightforward process for resolving financial disputes than traditional litigation. While every case is different, arbitration may allow parties to reach a final resolution without the potentially lengthy process associated with court proceedings. These specific procedures, costs, and timeline will depend on the applicable arbitration forum and the circumstances of the dispute.

If you or anyone you know has suffered significant investment losses while working with a financial professional, those losses may be more than the result of ordinary market fluctuations. Consulting with an experienced attorney can help you understand what happened, whether misconduct or other wrongdoing may have contributed to your losses, and whether you may have options for recovery.

For more information, or to seek counsel from our Investor Claims practice group, please reach out to request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post What To Do If You’ve Been Harmed by Your Financial Professional appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Dear Future-Minded Father: Unfortunately, it is a common misconception that creating a will allows your estate to avoid probate under Ohio law. Your will can appoint an executor, the person that will administer your estate, name guardians for your minor children, and determine to whom your assets will be distributed. Creating a will can speed up the probate process, but the will still needs to be submitted to the probate court for administration.

Two examples of how a will expedites the probate process are authorizing the sale of real estate without needing consent from next of kin and dispensing with a fiduciary’s bond. In the probate context, a bond is a financial guarantee that an executor or other fiduciary will obey Ohio law and administer the estate responsibly.

If you and your wife would like to avoid the probate process, I would recommend considering a few options first.

Joint Titling of Property

Certain types of property can be jointly titled. Banks accounts are one example. If two individuals open a joint bank account, the survivor would become the sole legal owner of the account upon the death of the first owner. This is true even for bank accounts held by two people that are not married.

Real estate can be titled in a way that allows for joint ownership as well. If two people purchase a home and accept title on the deed joint with right of survivorship, the survivor would take title to the property at the death of the other owner after recording of an affidavit with the county of record. Owning property jointly is one option to avoid probate that works particularly well for married couples.

Transfer on Death Designations for Property

Transfer on death designations, also called payable on death designations, are an alternative option to joint property ownership to avoid probate. Ohioans can add beneficiary designations to bank accounts, investment accounts, real estate, and vehicles. Banks and account administrators can assist account holders with adding payable on death designations. For real estate and vehicles, Ohioans would file documents with the county recorder where the real estate is located and the bureau of motor vehicles respectively. Any property that has been tagged with a transfer on death designation will not require probate. Transfer on death designations linked to individual personal property items or accounts, so separate designations must be made for each piece of property. A forgotten account or personal property item without a designation would still require probate.

Creating a Revocable Trust

Creating a revocable trust is a third option for avoiding probate. “Revocable” refers to the fact that the creator of the trust, often called the “grantor” or “settlor,” can revoke or modify the trust at any time during his or her life. Typically, the grantor is also the trustee, meaning he or she would manage the trust assets. Assets transferred to a revocable trust before the grantor’s death avoid the probate process entirely. A trust can also be combined with transfer on death designations to move property to the trust at the grantor’s death.

Revocable trusts have other advantages as well. First, administration of a revocable trust is private whereas probate estate proceedings are public record. Second, revocable trusts provide more control over how the assets are distributed. For example, distributions from a trust can be restricted based on the purpose of the distribution or the age of the beneficiary. Finally, a revocable trust can assist in planning for incapacity. A successor trustee you name can step in almost immediately to manage your assets in the event you are unable to do so.

Administering a probate estate is a costly and time-consuming process that can delay the decedent’s family accessing assets, but working with an estate planning and probate attorney to implement an estate plan could make probate wholly unnecessary.

For more information on steps you can take to avoid probate, or to seek counsel from our Trusts & Estates practice group, please request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Estate Planning Puzzle: Avoiding Probate appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Dear Future-Focused Family: First, let me assure you that you’re not alone. Many people delay estate planning because they associate it with aging or difficult conversations about death, when in reality, estate planning is about protecting the people you love and preparing for life’s uncertainties. This process is designed to help you think through important decisions and prepare for the future with confidence. Working with an experienced estate planning attorney can help you navigate these decisions thoughtfully and create a plan tailored to your family’s unique goals, values, and future needs.

To answer the question, let’s take a closer look at what clients can expect when they begin the estate planning process when they work with me as their trusted attorney.

While every estate planning attorney may approach the process differently, I follow a structured approach with each new client. I strive to make estate planning as straightforward and comfortable as possible, helping clients feel informed and confident every step of the way.

First Step of the Estate Planning Process

The first step of the estate planning process is information gathering. I begin by providing new clients with an Estate Planning Questionnaire (EPQ) which collects important background information, including basic details such as names, dates of birth, family relationships, and information about any children. It also includes questions about your assets, financial accounts, insurance policies, and other key aspects of your financial picture. Completing the EPQ in advance allows me to gain a better understanding of your unique circumstances and goals before our first meeting. This preparation helps ensure that our initial discussion is focused, productive, and tailored to your family’s specific needs. If this is not your first time through the process, I will also request copies of your prior estate planning documents.

What to Expect from an Introductory Estate Planning Meeting as a New Client

Once I have reviewed your completed EPQ (and prior estate planning documents, if applicable), we will schedule an introductory estate planning meeting to discuss your goals and begin building a tailored plan. During this meeting, I will walk you through my recommendations for your estate plan and explain the reasoning behind each one.

While all my clients have the similar goals of creating a plan that protects their loved ones, the journey for each differs. Some of the decisions estate planning clients can expect to make in this process include:

• Who would be best suited to serve as trustee and manage assets held in trust for your beneficiaries?
• Who would you want to make healthcare decisions on your behalf if you are unable to do so yourself?
• Who would you choose to care for your minor children or dependents in the event of your untimely death?
• How and when would you like your assets distributed to your beneficiaries?
• Are there any special circumstances or concerns that should be addressed in your plan, such as blended families, beneficiaries with special needs, or family-owned businesses?

Drawing from the information you provided in your EPQ and our conversation, I can offer guidance to help you make informed and confident decisions. My ultimate goal is to ensure your wishes and goals are carried out after your death. But I also strive to minimize taxes at your death, protect the assets against outsiders, and confirm that your family and loved ones avoid the costly process of probate.

Following our introductory meeting, I will provide you with a detailed follow-up letter summarizing our discussion, my recommendations, and any decisions that still need to be made. This gives you and your family an opportunity to reflect on the information at your own pace and ensures you have a clear roadmap for the next steps in the estate planning process.

Estate Plan Document Drafting

Once we finalize your decisions, my team and I will begin the drafting phase of the estate planning process. This involves carefully translating the choices you have made, along with your broader goals and personal wishes, into a comprehensive estate plan. After your documents have been drafted, you will receive copies of the plan along with an easy-to-understand summary that highlights the key provisions and explains how your plan works in practice.

Finalizing Your Estate Plan

After we send you drafts of your documents, we will schedule a meeting to review your plan together in detail. During this meeting, we will walk through each document, address any questions you may have, and discuss any revisions you would like to make. This collaborative review ensures that your final documents accurately reflect your wishes and provide you with full confidence in your plan.

Once your estate planning documents are finalized and executed, you will take comfort in knowing this important step is complete. While the process can sometimes feel overwhelming or emotional, finalizing your plan provides lasting peace of mind knowing your wishes are documented and your loved ones are protected.

Revisit Your Estate Plan Regularly

Estate planning is not a one-time event; rather, it is an ongoing process that should evolve alongside your life. As your circumstances change, your estate plan should be updated to reflect your goals, protect your loved ones, and align with your current wishes. I recommend reviewing your plan periodically, as well as after major life events such as marriage, divorce, the birth or adoption of a child, changes in financial circumstances, or the passing of a loved one. By working together to create and maintain your plan, we can help ensure your wishes are clearly documented and carried out, while providing your loved ones with clarity, stability, and peace of mind for the future.

For more information or to seek counsel from our Trusts & Estates practice group, please reach out to request a consultation or call us at 216-696-1422.

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This information is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post What to Expect From the Estate Planning Process appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Dear Purposeful Planner: Estate planning is an ongoing process that continues after the initial documents are executed. This remains true even if frequent modifications to your plan are not needed. Many estate planning instruments, like revocable trusts, wills, and powers of attorney can be updated at any point as long as the creator has the capacity to do so. Having capacity generally means that the signer of the document understands what they’re signing, the extent of their assets, their familial relationships, and the effects of the instruments in question. As an estate planning and probate attorney, I recommend reviewing your estate plan, including how your assets are titled and who are beneficiaries on your accounts, every 3 to 5 years. Major changes in your family dynamic and financial picture often provide guidance as to when you should update your estate plan.

Now, let’s take a closer look at some of the circumstances that may indicate it is time to review and update your estate plan to ensure that it continues to reflect your wishes and meet your goals.

Age & Health of Family Members

Since family members are typically named as beneficiaries and often serve as trustees, executors, and agents under powers of attorney, their age and health should be considered when determining whether to update an estate plan. For example, a child reaching adulthood and living independently could mean that they are responsible enough to act as a trustee or receive a gift outright and without age restriction. In contrast, a parent or older family member may need to be removed from a trustee, executor, or agent position if they are in poor health. If any family member named in estate planning documents dies, a plan review would be appropriate.

Marriage & Divorce

Marriage and divorce are signals to update your estate plan. Newlyweds should consider how their spouse fits into their estate planning goals moving forward, particularly if it is a second marriage for either spouse. An estate plan should be updated after a divorce to ensure that a former spouse does not receive any unintended gifts and that someone you trust is filling an important role. If children or other family members named in your trust, will, or other estate planning documents are getting married or divorced, you should still consider updating your plan. Occasionally in-laws are named in estate planning documents as beneficiaries, trustees, or in another capacity. A review after a relative’s divorce is vital to protect against your assets flowing to someone that is no longer part of the family.

Significant Financial Changes

If your financial picture changes significantly, an estate planning audit is in order. Examples of major financial changes include buying a new home, starting a business, receiving a large inheritance, and anything else that materially changes your net worth or the makeup of your assets. Major financial changes call for an estate plan review for several reasons. First, newly acquired assets should be titled in a way that fits with your planning goals. Failing to title new assets properly could negate the intended effects of your trust or will. Second, changes in income or net worth may have tax consequences that necessitate modifications to your current estate plan or the drafting of supplementary planning documents to minimize your tax liability. Third, certain assets, like rental properties and closely-held business interests, tend to raise liability concerns. Becoming a landlord or business owner may raise additional planning considerations, including whether changes to your estate plan or asset ownership structure may be appropriate in light of those potential liabilities.

If it has been more than five years, your family structure has changed, or your financial picture looks different, it may be time to review your existing plan with experienced estate planning, tax, and, if necessary, business attorneys to determine if updates are necessary.

For more information on updating your estate plan, or to seek counsel from our Trusts & Estates practice group, please request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post When To Update Your Estate Plan appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.

Dear Thoughtful Giver: As a tax, business, and estate planning attorney, I view charitable planning as both a personal values exercise and a balance-sheet decision. Thoughtful charitable planning can create substantial tax benefits while helping ensure that philanthropic values endure for generations. Two of the most common vehicles for long-term giving are the private foundation and the donor-advised fund (DAF). Each can guide a meaningful legacy, but they operate very differently.

Now that we’ve framed the question, let’s explore how private foundations and donor-advised funds work, and what factors donors should weigh when deciding between the two.

Private Foundations: Control & Continuity

A private foundation can be the right fit when control, governance, and permanence are the priority. A foundation can be structured to reflect a family’s mission, involve family members in grantmaking, and create an enduring charitable endowment. It can also offer flexibility by allowing a donor to fund the foundation now while refining charitable priorities over time.

The tradeoffs are real. Foundations may be time-consuming to establish and include ongoing administering costs, with annual tax filings and detailed compliance rules. They are also subject to excise taxes on investment income and generally must meet an annual distribution requirement. Certain contributed assets, such as closely held business interests, may also raise increased complexity.

Donor-Advised Funds: Simplicity & Efficiency

A DAF is a separately identified account maintained by a sponsoring public charity. The donor contributes assets irrevocably, but the sponsor has legal control. While the donor retains advisory privileges to recommend investments and grants, those recommendations are not binding on the sponsor.

DAFs are often highly efficient from a tax perspective, particularly when contributing appreciated assets, and they eliminate many of the compliance and operational burdens associated with a private foundation. DAFs are popular because they are easy to establish, typically have lower administrative burdens and often provide more favorable charitable deduction limits. The principal downside is reduced control. You are trading convenience for governance.

Choosing the Right Fit

Simply put, choose a private foundation when you want a family institution and choose a DAF when you want streamlined giving with minimal administration. Ultimately, the “right” charitable vehicle depends on the donor’s objectives. Families seeking simplicity and tax efficiency may gravitate toward a donor-advised fund, while those focused on legacy-building, governance, and long-term family philanthropy may find a private foundation better suited for their goals.

Before establishing a charitable giving structure, individuals and families should consult with experienced tax, business, estate planning, and wealth advisory professionals to evaluate which vehicle best aligns with their overall financial and legacy goals.

For more information on this topic or to seek counsel from our Trusts & Estates practice group, please reach out to request a consultation or call us at 216-696-1422.

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The information contained in this blog post is provided for general informational purposes only and should not be construed as legal advice. Readers should consult with qualified legal counsel regarding their specific circumstances before taking any action based on the information presented.

The post Choosing the Right Vehicle for Your Charitable Legacy appeared first on McCarthy Lebit - A Cleveland/Ohio Law Firm.