The Probate Court Is Closed, But We Can Still Prepare & File Petitions

Whether you’re dealing with opening an estate, filing for guardianship or any other family law related proceeding, we can help. The probate court is now only holding proceedings on an emergency basis – and by electronic means for the most part – but our office can still prepare and file proceedings. The Court (as of now) will still accept these filings on a limited basis throughout the State’s quarantining efforts. While these efforts may expand, the State still understands work must continue.

In Person Meetings Are Risky – So We’re Leaning on Teleconferencing and Video Conferencing

While our attorneys will always prefer face-to-face meetings in safer times, video conferencing and screen sharing apps are plentiful and easy to use in 2020. Most of our clients, (if they haven’t already used these apps), learn within minutes how to use these tools, with little more than 2 or 3 clicks of the mouse to update their preferred internet browser. Using these apps enables the participants to share a document or screen with many parties, and talk simultaneously right through their computers. Our office is happy to help clients understand these new tools.

Employees are Working from Home

We’d already begun using secure cloud document management services years ago. This enabled us to work virtually anywhere with an internet connection, including of course our homes. Phone calls can now be forwarded to our cell phones or home phones, meaning clients can call the office no matter where we happen to be at that time.

The post 3 Ways Our Law Firm Is Operating To Overcome COVID-19 appeared first on Cape Law.

In a recent case argued before the U.S. Supreme Court, a New York-based trust challenged the North Carolina Department of Revenue’s ability to collect of state income taxes from the trust’s earnings. The State of North Carolina justified these taxes, collected even in years that a beneficiary living in the state did not receive any payments, based solely on the beneficiary’s home residence. The Court unanimously affirmed the lower court’s decision – holding that a beneficiary’s in-state residency alone, without actual receipt of income or the right to demand income from an out-of-state trust, did not establish sufficient contact to justify income tax liability from that state.

What does this mean for Massachusetts beneficiaries? That depends on your lawyer first, and your accountant second. As the Court noted, a beneficiary residing in a different state from his or her trust could be taxed if sufficient contacts were established. Their analysis seemed to center upon that beneficiary’s right or expectation of income from the trust, on whether the beneficiary’s home state had any reason to charge income tax. This appears to echo principles of basic common sense. Why would anyone believe that a trust, which was already paying taxes for income in its home state, would have any annual income tax liability in a state that it hadn’t paid income in?

Non-specialist lawyers might be forgiven for not having known these types of tax-related details. But for many Massachusetts accountants that work with clients in estate planning, this simply confirms what was already well known to those having experience in this field. In fact, that the U.S. Supreme Court even had to take up this question is an indication that expertise in the field of taxation may not be as common as it should be for many practitioners.

This reinforces the need for locating specific expertise when choosing professionals to advise on estate planning in Massachusetts. Understanding not only how to transfer, protect and assets, but also how to generally manage and prepare for related tax consequences that come from that, should be a basic requirement for anyone practicing in this field. Continuing education, and working on these issues in a regular basis, is the only guaranteed way to obtain the aggregated knowledge necessary for proper estate planning in Massachusetts. Consider calling our office soon to learn your family’s options with this, and other strategies we offer for estate & tax planning. Together we can discuss the most appropriate plan for your family to reduce legal exposure and potential tax liability. While there are several estate planning attorneys on Cape Cod, our office is definitely unique in using a tailored approach that we feel every family deserves from our combined decades of experience in the law, as well as a close relationship with trusted Cape-based advisors in tax planning.

The post Avoiding Massachusetts Income Tax with an Out-of-State Trust – SCOTUS Update appeared first on Cape Law.

“Pop up” is a general description here, and could refer to any form of non-traditional lease with shorter, more informal terms. Some pop-up shops might simply be single day or weekend-long merchandise installations in an existing store, while others could refer to something more like a short-term commercial lease.

Pop-Up Shops Benefit Retail Owners

The pop-up model is great for a business owner in this way, because the storefront can open on a trial or short-term basis. Whether traffic or general demand will be adequate in any given area is a major decision for businesses that need to commit to a long term lease. This flexibility can make or break an entrepreneur’s decision to take the leap to a full shop. Aspiring retailers will likely more often be requesting pop-up arrangements rather than a full leases, as this type of business model grows.

Pop-up Friendly Landlords Will Reap the Rewards

When consumer sentiment changes, business owners too will want better options – and successful commercial landlords will need be flexible to this evolution. Most building and plaza owners want reliable income, which might have once meant large or established national stores. But those owners who can dedicate at least some temporary or shared space will encourage newer and more vibrant businesses into their properties.

How to Negotiate a Pop-Up Lease

The goal of a pop-up lease is to simplify payments and obligations between the landlord and tenant. In most instances, this takes the form of a “pop-up license,” where the landlord becomes the “licensor” and the tenant a “licensee.” Unlike a tenant though, the licensee doesn’t always pay for the associated insurance or utility costs for water or heat, perhaps even electricity. In exchange, the licensor can evict or “relocate” a licensee with little notice or formality, which should avoid drawn out landlord-tenant conflicts.

Just as many business owners may not be ready for these types of agreements, older Massachusetts attorneys might be similarly uncomfortable with the newer, more flexible commitment model. Any interested business and/or building owner should obviously hire legal counsel familiar with pop-up and temporary retail tenancies, in order to ensure the right balance between benefits and obligations is struck. The concepts in these arrangements are not complex, but people generally ar

Where to Find Pop-Up Opportunities on Cape Cod

The Cape, a region with a strong seasonal economy, is actually an area somewhat familiar with the temporary and short-term use of commercial real estate. Storefronts of this kind, whether ice cream parlors or gift shops, have long operated only in the warmer months. So many landlords are familiar with the concept, though perhaps not under a “pop-up” model. Still many are using this phrase to attract would-be tenants who are looking for space & opportunities.

While there can never be a complete listing of pop-up opportunities, a simple browser search for “pop-up stores” in any given town would reveal some of the more frequent locations and regions. Consulting local chambers like the Cape Cod Chamber of Commerce, or organizations like Live.Love.Local would also probably yield a lot of promising leads. One of the more exciting and dynamic opportunities we’ve heard of recently, for example, concerns an “E for All Alumni” (“Entrepreneurship for All”) store, right around the corner from this law firm’s office in Mashpee Commons.

Where to Start

Different businesses require different considerations when it comes to legal needs, and a risk/liability analysis, as well as a business plan overview is usually where the conversation begins. But wherever entrepreneurs and building owners are in their plans, all are encouraged to write or call any time to set up an appointment with a business attorney to create a pop-up store.

The post How to Open a Pop-Up Shop on Cape Cod appeared first on Cape Law.

What Are the Beneficiary’s Rights in an Estate or Trust?

While a PR and trustee owe an absolute fiduciary duty to their beneficiaries, they generally also have very broad discretion on how to carry out this duty. In most instances, this means that the beneficiary cannot simply make a demand and expect that the fiduciary take a particular action. Instead, a beneficiary is only entitled to request very specific items from the personal representative or trustee. Language in the trust will identify these items in detail, but initial requests are ordinarily made for: a copy of the trust itself, an “inventory” of assets, and an “account” of all trust activity.

How Does the Beneficiary Obtain This Information?

When requesting items of the Trustee or PR, a beneficiary’s best strategy is to communicate the request in writing. The form may be in traditional mail or e-mail, but it’s important that the beneficiary has a record of the timing of the request. Asking the fiduciary to respond within a certain period of time is fairly typical also, which should correspond to the complexity of the request; for example a copy of the trust should be a very easy response whereas generating an account would require some time, e.g. to calculate expenses and reconcile accounts. While fiduciary duty does not require that a PR or trustee act in any fixed period of time, the beneficiary should expect a response to information requests within a reasonable timeframe.

What Happens if the Trustee or Personal Representative Ignores All Requests?

The next course of action will greatly depend on the circumstances, but a beneficiary who experiences difficulty with a trustee or PR would likely benefit from hiring an experienced estate and trust attorney specialist as soon as possible. General practitioners may be familiar with negotiation tactics, but a specialist in Massachusetts estate and trust law can leverage his or her knowledge with the laws – which are actually fairly new. The attorney can then weigh all options, and choose the best and fastest path forward to achieve the beneficiary’s goals. Most times this representation will begin with a letter from the attorney to the Massachusetts trustee or PR, or his or her attorney, with specific references to the duties of that fiduciary’s position, and of course specific requests made by the beneficiary. More often than not, this letter will lead to some communication and movement by the fiduciary.

Next Steps for the Beneficiary – After the Fiduciary’s Response

If the PR or trustee responds, the beneficiary together with the trust and estate attorney decides whether the response was adequate, and request additional information if needed. Then, if progress is made there may be an exchange between the parties, to craft a meaningful path forward that meets both the needs of the beneficiary and the obligations of the trustee. If instead the fiduciary did not respond, or is not meeting his or her obligations to the beneficiary, the next step may require Court intervention.

How Can the Court Address Problems with a Massachusetts Trustee or PR?

The Court may take any action requested by the beneficiary. There are a number of different strategies available for an experienced estate attorney to petition the Court in a probate matter, but they must correspond to the problem at hand to be successful: demanding sureties, requesting supervised administration, removal of the fiduciary and more. The upside of entering a probate case is that there are no court fees. There are similar options available for petitioning against the trust or trustee, but a filing fee to the Court must be paid to introduce the matter.

In summation, fiduciary duties are very simple and commonplace in everyday life, but where few are familiar with them, they are also frequently abused. Beneficiaries nevertheless have valid rights under trusts and estates, and a good fiduciary should honor them with diligence and regular communication. Contacting an experienced Massachusetts trust and estate attorney can be a critical source of support for those with concerns about their beneficial interests, or the behavior of a trustee or personal representative.

The post When a Massachusetts Personal Representative or Trustee Disregards the Beneficiaries appeared first on Cape Law.

Enter the Massachusetts “Social Consumption Establishment” for Marijuana

Prefaced by headlines in the on-again-off-again Denver regulations regarding so-called “Cannabis Clubs,” the Massachusetts Cannabis Control Commission draft regulations created a third type of retail license for operators to sell “single servings” of marijuana to consumers on the premises. While the size of such a serving has yet to be defined, our understanding is that these businesses will not be able to serve more than an ordinary dose of THC, e.g. 10mg. These licenses are distinguished as Primary Use or Mixed Use social consumption establishments, which designation depends on whether 51% of the average gross revenue is derived from the sale of marijuana products to be consumed on the premises.

It is ostensibly possible for either “primary” or “mixed use” to exist in the presence of other business types, the only difference between these licenses being revenues. The license requires very strict controls for storage and security, and also that the sales be “closely integrated with the shared business product or service.” Importantly, and probably very disappointing to many restaurateurs, these regulations explicitly forbid the use or consumption of alcohol in any of these social consumption establishments – at least at the same time marijuana is offered. Suggested businesses tailored to social consumption have included:

• Cafes, Bakeries & other food establishments not serving alcohol.
• Massage parlors and spas, clinics etc.
• Movie theaters (not arcades due to other restrictions)
• Yoga Studios, gyms and fitness clubs
• Bud & Breakfast Inns/Hotels

While prospective businesses of this kind can be exciting in concept, from a legal perspective they are not at the top of our recommended models. The reason for this, if it isn’t apparent, is that an owner of the social consumption business — and/or the real estate it occupies — incurs a risk of liability if the consumer causes or is a participant in an accident or other damaging event. And while marijuana advocates may protest that the effects of marijuana are not nearly so detrimental to e.g. hand-eye coordination as alcohol, the reality is that law enforcement and the Courts have not adopted this distinction. Until suitable intoxication testing standards are in place, and until there is more widespread understanding on the effects of marijuana, the same warning will till apply from this office.

The Marijuana Transporter – A Third Party Secure Solution for the Industry

Not to be confused with consumer delivery services, these transporters will be authorized to ship marijuana between licensed establishments (think cultivator to retailer or processor, cultivator or processor to retailer etc.) Many existing operations will operate their own inter-facility shipment, but these third party licensed services will be essential for any of the smaller operators with limited resources, of which the Massachusetts licensing scheme stands to launch quite a few. Where most banks use a “Brinks” or “Loomis” shipper for their cash, it follows that a company that develops an efficient infrastructure for bulk marijuana transport in Massachusetts will be able to enjoy similar success (A little inside knowledge here, but one of our clients that reached out to Brinks learned that they would nearly give away their used vehicle inventory).

Enforcing the Standards for Massachusetts Marijuana – The Independent Testing Lab

On a trip one early September day in 2012 to the west coast, I visited an old friend in Seattle who happened to be working at a testing lab for the medical marijuana industry (Washington passed its own recreational law shortly thereafter). The office itself was a mere two room unit comprising little more than 6-800 square feet. One room acted simply as a reception area, while the other contained a pair of equipment stacks barely larger than component stereo systems.

These units were High Pressure Liquid Chromatography units, or (“HPLCs”), and apart from the desktop computers connected to them, accounted for the entire testing lab operation. That month too, the magazine “High Times” was hosting a Cannabis Cup celebration in the city, and this lab was responsible for all of the entrants to the competition.

Since that day, I’ve long been interested in this particular Cannabis business model from a legal perspective. The office itself, with as many test samples as it had from around the city, probably held less than the legal possession limit for any medical patient. Because of this, the relatively low cost barriers to entry, and because such business requires no interaction with patients or consumers of any kind, the marijuana testing lab in Massachusetts remains a recommendation for our clients to enter.

Massachusetts Marijuana Research Facility Licensure

Another interesting yet obscure license available on the recreational marijuana market is similarly science based, but a lot more focused. While federal law has largely precluded the creation of any such entities in the U.S., they are somewhat common in Israel, where a lot of marijuana studies originate.

Such a research facility is naturally going to materialize in the form of a non-profit, or else will likely be associated with a university, both of which Massachusetts has many —
especially in the medical sciences. So while the federal school funding conflict that currently prevents meaningful research will remain an impediment to the large scale R&D in this field, if the U.S. Congress can find the votes to pass even moderate reforms, we expect Massachusetts will fast become a leader in marijuana research for the foreseeable future.

Whether we see some, most or all of these different marijuana business types open in Massachusetts is a guessing game, but it is certain the Cannabis Control Commission is ready for business. Federal law as of the time of this article remains the most significant obstacle to the industry without a doubt – for banking, insurance and even prosecution from the Department of Justice. The state’s own security, tracking and community engagement requirements are certainly a burden too, but a Massachusetts attorney with marijuana industry experience will be able to successfully guide his or her clients without much issue.

The post Adult Use in Massachusetts – Recreational Marijuana Licenses Part 2 appeared first on Cape Law.

More than any other state, Massachusetts clearly aimed to establish a regime that accounted for the many different activities related to marijuana, while at the same time attempting to ensure the survival of small businesses over medium to large enterprises. Every applicant must be a registered entity with the Massachusetts secretary of state, whether a corporation, LLC or otherwise. This article details some of the more popular licenses that our clients have shown an interest in over the past few months. A second article covers the remaining adult use marijuana licenses.

Starting a Marijuana Cultivation Operation in Massachusetts

For those hoping to cultivate adult use or “recreational” marijuana beyond mere personal use, there are essentially three different tracks available:

The most widely available license will likely be the standard cultivation license. Per the regulations, a cultivation license allows for cultivation, processing and packaging marijuana for distribution to licensed retailers only – not directly to consumers. Successful applicants will be able to apply for a license based on canopy square footage, as the table below indicates:

These regulations also allow for the much-awaited “craft marijuana cultivator cooperative” license, essentially allowing for Massachusetts residents to form a limited liability company in their application for the cultivation license tiers detailed above, with a few differences. Primarily, where an ordinary cultivation license would only allow for one location, the craft cooperative license permits up to 6 locations for cultivation, and 3 locations for processing/packaging. It was initially thought that these licenses would be limited as to overall canopy size, and would restrict simultaneous ownership of a retail license, but the draft regulations contain no such limitation at this time.

A final cultivator license type is identified by the regulations as a “Marijuana micro-business.” In this business type, an applicant enjoys licensing fee discounts of 50% and can operate as a Tier I or II cultivator only, still with processing and manufacturing capabilities, and additionally may sell its product directly to consumers under the same license. Like the craft cooperative license, the micro-business is strictly available for ownership by Massachusetts residents, and the regulations prohibit a licensee from having any ownership interest in another type of marijuana license.

The Marijuana Niche Market – Becoming a Third Party Marijuana Processor in Massachusetts

For clients calling our firm with an interest in starting a Massachusetts marijuana operation, we have long been recommending that an extraction/processor/manufacturer license is one of the best options available. The reasons for this are many, most importantly that as the marijuana market develops, manufacturing methods and products will almost surely be the most important tool for product differentiation among competitors. A couple of other factors contributing to this recommendation:

• Entry and operational costs to processing and manufacturing are much lower than for cultivation.
• IRS Chapter 280E, an impediment to marijuana sales profit margins allows for “Cost of Goods Sold” ordinary business deductions, and manufacturing is entirely deductible under said regulations.
• Processing and manufacturing operations require little relative space
• Processors do not need to interact directly with the public and enjoy little relative risk

Again, for those interested in the unique cannabinoid compounds within the marijuana plant for its many therapeutic applications, there are a number of different substances that lead to varied desirable extraction outcomes: (alcohol, butane hash oil “BHO,” water, CO2 are among the most popular). Furthermore, based on the wide variety of available delivery methods for marijuana (smoking, vaping, ingestion, sub-lingual, transdermal, topical), the number of potential products in this industry is virtually limitless. It therefore follows that the number of processors and manufacturers that participate in this market should also be limitless.

Opening a Retail Adult Use Massachusetts Marijuana Establishment

Apart from the Micro-business detailed above, an applicant can only sell marijuana to the 21+ public, up to one ounce of marijuana (or 5 grams of extract) with a traditional marijuana retailer license. This type of license allows for any retailer to obtain its products from any of the cultivation licensees, or any third party processor/manufacturers. There are two primary types of a license to sell marijuana to consumers within these guidelines:

1. Brick and Mortar Establishments – Licensed only in a specific location, these entities can sell to other entities, general consumers over the age of 21, and licensed Massachusetts medical marijuana patients.
2. Delivery-Only Retailer – These licensees do not provide a retail location open to the public, but are authorized to deliver directly from a marijuana cultivator facility, craft marijuana cultivator cooperative, marijuana product manufacturer or micro-business.

Both types of retail license will require similar but particular requirements inherent with each operation regarding tracking and compliance. And while security will most certainly represent some of the greatest concerns for delivery retailers, we anticipate many operators in this field given the increasing use of delivery by consumers in general. A third type of retail license, the “social consumption” establishment is a very particular business type that we profile in our next article on the Massachusetts adult use law.

Overall, the Cannabis Control Commission appears to have developed a very far-reaching set of regulations that were clearly informed by a wide variety of experiences throughout the world marijuana market. However robust and accessible this market may appear, like the medical marijuana law, these adult-use regulations still require a very detailed and intensive process for marijuana business applicants in Massachusetts. Naturally then, applicants are better off to consult experienced attorneys in the Massachusetts marijuana industry early, rather than late in the game.

The post Adult Use Massachusetts Marijuana Business Startup Licenses – Part 1 appeared first on Cape Law.

Massachusetts Businesses Disrupted by Blockchain – The Legal Field

Law is easily one of the most obvious industries subject to change first under blockchain technologies. One need only look at the examples that are often used to explain the blockchain’s utility to understand why. Below are two diagrams featured in the guide “Blockchain for Dummies” offered by IBM:

The first diagram indicates the way we presently manage automobiles, from their creation to their financing and finally their destruction. The parties to these transactions need to coordinate and exchange several aspects of the automobile throughout its lifetime, and all of these parties keep their own individual transfer records. A great deal of time and money goes into these records, the titling and registration of an automobile, especially where financing is involved. Additionally, each party in these processes must add the extra step of reconciling its own recordkeeping system with the records of every other party.

The second diagram explains why blockchain technology will eliminate much of this so-called “friction” in the transfer process. Through the shared or distributed ledger, every party holds the same instantaneous record when each transfer occurs. And rather than the necessity for each party to create its own contracts detailing the transfer process, the necessary conditions for fulfilment, and the infrastructure to communicate and execute these conditions and processes (i.e., legal work), the blockchain handles all of this.

How Blockchain Will Revolutionize the Massachusetts Insurance Industry

This new useful tool in the transmission, receipt and storage of information looms large over all aspects of the insurance industry; from insurance brokerage, to underwriting, to assessment and the claims process. So much of this information-based industry, that requires trust on the one hand, and an exchange of private data on the other, stands to see massive changes in the next 5-10 years. The creator of Ethereum himself, Vitalik Buterin, used crop insurance as an example in his whitepaper:

One can easily make a financial derivatives contract but using a data feed of the weather instead of any price index. If a farmer in Iowa purchases a derivative that pays out inversely based on the precipitation in Iowa, then if there is a drought, the farmer will automatically receive money and if there is enough rain the farmer will be happy because their crops would do well.

Vitalik’s example is a type of “parametric insurance” that can payout automatically based on independent and objective measures, rather than through the process around and interpretation of, a claims adjuster. It is easy to see the time and money saved here. To take the example one step further, the smart contract we’re imagining could even scale payouts based on the severity of the measure, for example ranging a 20% policy payout for minimal drought through 100% payout for a major one.

Another development in the industry is peer to peer insurance, much in the way that crowdfunding recharacterized mass investment models, that may drastically change the structure of the entire industry. As its name implies, the P2P insurance model uses a secure blockchain medium to link with a group of mutual “peer” policyholders as underwriters directly, thereby reducing the present layered profitmaking model with administrative and commission fees. A group of peers can theoretically come together to arrive at a consensus of the conditions on the blockchain that would trigger a payout, and determine how much such a payout would be.

Technology Efficiencies Carry Their Own Risks

For all of its promise, and as much as consumers may be ready to turn their demand for professional services to more technological solutions, the benefits of block chain also create their own risks. In today’s very hackable world, it isn’t extraordinary to imagine for example the hacking of a weather data feed to trigger policy payouts. Protections, checks and balances can be put in place to significantly protect against these risks, but the threat is still real. Regulations too, will slow the growth of smart contracts until a reliable model is proven.
Professionals and consumers alike should nevertheless continue to learn about the potential effects of blockchain on our businesses and lives in general, as these applications are being developed exponentially. The practice of law and insurance may be the first industries, to feel blockchain’s effects, but startups are using the technology in hundreds of fields ranging from energy to music. To learn more about how the blockchain and cryptocurrency business can benefit your life, call our office to contact a Massachusetts blockchain attorney. McNamara & Yates is an enterprise level cryptocurrency exchange service provider.

The post The Cryptocurrency Post – What Will Blockchain Mean to Massachusetts Businesses? appeared first on Cape Law.

In exchange for such benefits, non-profits and charities naturally must abide by certain guidelines under United States and Massachusetts law. Unfortunately, however, there is little enforcement in the non-profit sector, oversight and compliance is left to the Attorney General offices in each state, offices that already enforce a broad range of other state laws and regulations. This lack of oversight predictably results in a wide range of inappropriate and illegal behavior among non-profits. This article explains some common red flags in non-profit governance.

The Inverted Board of Directors

The structure of many organizations naturally tends towards a reliance on the executive of the entity. We see this trend in our own U.S. government as an example, where powers have increasingly collected in the office of the President. But it happens throughout organizations in the public and private sectors; city councils find convenience in deferring to the acts of mayors, select boards defer to instructions from town managers, and boards of directors often defer to presidents or chief executive officers.

While such deference is not itself a violation, any organization that leaves all of its decision-making authority to one individual is obviously at a higher risk of abuse. It should traditionally be the board, council, or legislature that is charged with setting the direction of the organization, while an executive or manager simply determines how to carry out those directions. Whenever a problem arises in a Massachusetts non-profit, it will very often be accompanied by an imbalance of these powers.

Conflicts of Interest Not Identified

A non-profit, like any company, will often favor convenience when seeking to purchase a product or service. Its members, employees and at times beneficiaries will likely be considered in this process. As a relatively benign example, a CEO might employ a relative who owns a cleaning business to service the non-profit’s offices. In a more sensitive scenario, a board member might charge the non-profit for his or her “consulting” services if she considers herself a professional of some kind.

Whether benign or not, however, any non-profit should have clearly written conflict procedures whenever such circumstances arise. The procedures for engaging in this transaction not only should be written out, they should be practiced in each and every transaction where an officer, employee or board member stands to benefit from that transaction. The policies are quite easy to follow, and merely require a vote of the disinterested directors on the board, i.e. those who do not stand to benefit from the transaction. Because these processes are so simple, there really isn’t any reason for a Massachusetts non-profit to forego them, and failing to have or honor conflict policies most certainly creates a serious risk at minimum, if not outright suspicion of wrongdoing.

Absence of Fiduciary Behavior

Fiduciary relationships are very common, and can be found in trustees, or executors (personal representative) in Massachusetts estates, and even broker dealers of stocks. In a non-profit, all of the management and board of directors owe a fiduciary duty to the corporation itself, as well as to the beneficiaries of that corporation according to its mission. A fiduciary duty is simply a legal obligation for one party to act in the best interest of another, over and above that party’s own interest. In the earlier “board member consultant” example, her status as a fiduciary means she should not have charged for her services if those services could have been obtained for free, or e.g. if the non-profit didn’t need the services at all for its mission.

An individual who enjoys this type of authority, and yet breaches her fiduciary duty, is often easy to identify in these circumstances. The reason for this is that people rarely behave out-of-character, and if they act outside of a fiduciary capacity in one instance, it is a good bet they do so quite often. In non-profits, when we discover a board member breaches her fiduciary duty in one instance, we usually discover a pattern of behavior consistent with that breach.

Transactions Inconsistent with Contract Law

This may sound obvious, but a hard rule on transactions within the company is that if it’s illegal outside of the company, it’s illegal inside the company. In other words, no transaction in Massachusetts is legal if it fails to adhere to Massachusetts contract law. Sometimes officers may want to waive certain legal requirements in favor of being expedient or ensuring smooth operations. Again using the board member consultant as an example, this board member might attempt to bill for her consulting services a decade ago, when the statute of limitations on contracts in Massachusetts is only 6 years.

Attempting to collect on a debt this old would be illegal between any two parties in Massachusetts, so that it too should not be practiced within the organization. Board members should be cognizant of this requirement, and should raise this issue of illegality if they see it anywhere within their non-profit.

Inaccurate Tax Filings

We are all aware that non-profits, especially charitable ones, require very rigid and detailed tax filings on a quarterly basis. In such filings, every service provided to that organization should be detailed and expensed in the year such service was provided. It most certainly would not make sense if a non-profit or any officer could simply siphon off its earnings with expenses that were not reported in any given year. Using our errant board member in yet another example, her attempt to charge the non-profit for services not expensed in the tax filings from a decade ago would essentially amount to tax fraud.

Board members, employees, officers or even members of the public who are suspicious of inaccurate tax filings from a non-profit can actually research what is going on from a great resource, http://foundationcenter.org/find-funding/990-finder. While some might hesitate to report this behavior for fear of hurting the mission of the non-profit, fixing the problem (or problem board member) early is a much safer strategy than allowing the problem to continue indefinitely.

Conclusion

The above examples are just a handful of potential problems that indicate a Massachusetts non-profit might be non-compliant. If you or someone you know suspects malfeasance at a non-profit or charity that is of concern, reach out to our offices today for a consultation with a business attorney.

The post 5 Red Flags in Massachusetts Non-Profit Governance appeared first on Cape Law.

Massachusetts RMD Application Phase One – Application of Intent

The initial phase of the RMD application requires the creation of a non-profit entity. For this the applicant will need to show the corporate by-laws, a list of all officers, and evidence of its state registration. In addition, “character and competency” forms will need to be submitted for each officer and director of the corporation, forms that ask for general education and character qualifications from each individual, including the owner of any investors. A major requirement too is that the applicant must demonstrate where its funds are held and by whom, a minimum of $500,000 per application must be shown in a current bank account statement.

In practice, part of the $500,000 can be used to pay the $1500.00 fee for the Application of Intent, and the applicant may wait up to 8 weeks for an invitation to the next phase of the process, but the DPH can usually turn it around in half the time. If an additional site is applied for by the same applicant at any time in the process, the DPH requires a showing of an additional $400,000 in available funds. It should be noted that these capital requirements are far below what would ordinarily be required for starting a full scale Massachusetts medical marijuana operation, and should not in any way be considered a sufficient investment for this kind of business. The DPH is simply trying to establish a minimal threshold for serious applicants.

Massachusetts RMD Application Phase Two – Management and Operations Profile

The MOP is similarly another basic threshold for the DPH to filter out casual applicants from those who will go the distance. Instead of capital requirements, however, in this instance the State is looking to make sure the group and its members have done their homework. Details on how the company intends to manage the intense security requirements, and how it will conduct its growing operations are among the most important aspects that the applicant should be able to describe. A RMD should include individuals with these types of backgrounds, to help not only with the MOP, but build-out and operations. The MOP document itself must be submitted within 45 days of the applicant’s invitation, so we recommend having it completed prior to submitting the AI.

Along with the MOP, the applicant must submit background check authorization forms for all of the individuals listed in the AI, along with fees for each, and another $30,000 for the Phase 2 application itself.

Massachusetts RMD Application Phase Three – Siting Profile

The siting profile is usually by far the most labor-intensive, and time consuming aspect for most applicants. RMDs still have a lot of work in future phases, but it is at phase 3 of the application that the applicant must explore the communities that it can work with. The group needs to compile a list of desired or potential locations based on location, population and other factors it may deem important, and then run through a checklist of items to complete for investigating options in each municipality. Some of the highlights include:

1. Complete zoning analysis on municipality.
2. Find lease/purchase option for cultivation & processing.
3. Find lease/purchase option for dispensary.
4. Initiate process with town for obtaining letter of support or non-opposition.

This “letter of support or non-opposition” is the primary goal in phase 3 of the application. Many municipalities will require this letter be issued after reaching a “host agreement” from the applicant that details ways in which the RMD will contribute to the community. Understanding how host agreements work, the revenue a RMD can expect, and the funds available for such a contribution are key aspects that may determine the success or failure of a medical marijuana operation. And an applicant will not be able to open its doors without a letter of non-opposition, so this is a particularly sensitive time for any RMD.

Massachusetts RMD Application Phase Four – Provisional Certificate of Registration

If the applicant has submitted another $50,000 with completed phase 3 materials, and the DPH has deemed the RMD’s site to be compliant, the applicant moves on to the PCR. This stage is not simple by any means, but varies highly with the facilities the applicant intends to use. In this stage the RMD will begin its build-out, with an architectural review from the DPH and ongoing inspections as build-out of the facility proceeds. While earlier applicants ran into severe setbacks with HVAC and other climate control systems, much of those details have been ironed out as vendors in Massachusetts become more acquainted with requirements for marijuana cultivation.

Massachusetts RMD Application Phase Five – Final Certificate of Registration

After buildout is completed, the DPH has inspected all of the facilities for compliance with its regulations, and the operation has established itself equipped to cultivate, process and dispense marijuana, the company can begin its business. The RMD will commence its cultivation and processing operations, and submit its initial samples to the DPH for testing THC & cannabinoid levels, as well as for impurities like molds and heavy metals.

Final Considerations – Hire an Attorney! (You’re reading a law firm website)

This article encompasses much of what the Massachusetts medical marijuana application process will entail for each applicant, but each phase requires a very detail oriented set of tasks within it. While the process is indeed straightforward, it is highly abnormal that any person or group could complete each phase without any setbacks. And while any operation built correctly should be able to survive long into the future, eliminating as many setbacks as possible will naturally allow for that business to become profitable much sooner, which eliminates the uncertainty that continues to exist in this explosive industry. Contact Tim McNamara today, a skilled marijuana business attorney, to learn about how we can assist your organization in each phase of the application. In an industry full of untested vendors, our experience pays for itself on day 1, and can plausibly save a new organization hundreds of thousands of dollars in unnecessary expenses over the course of the entire application.

The post Starting a Marijuana Dispensary in Massachusetts – A Medical Marijuana Attorney’s Notes appeared first on Cape Law.

So the risk for excess and abuse of free market participants, to be a burden rather than a benefit on society, is both real and enticing for many corporate boards. And while typical non-profits are an option for those seeking to serve a purely beneficial purpose, Massachusetts now has a hybrid that can incorporate the best of both worlds – a goal to make a profit through serving a public benefit.

Old Assumptions Find a New School in the Benefit Corporation

This hybrid takes a more holistic corporate model that many business schools acknowledge can result in a stronger, more stable and ultimately valuable enterprise. These schools teach that to be successful, a business must please not just its shareholders, but a great number of additional stakeholders.

To be sure profits are one indicator of success, but no business would even exist without suppliers, communities, governments, employees and customers. And a business can still be profitable, possibly more than a traditional corporation, by incorporating the interests of these other stakeholders into its corporate by-laws. This is accomplished by writing a beneficial purpose into the by-laws under what is called a Massachusetts “benefit corporation.”

Including a beneficial purpose as part of the company’s foundation in this way means that a benefit corporation not only guarantees it will provide a benefit, but also often reinforces its relationships with the lifeblood of its operations: its employees, customers, host communities, suppliers etc. This creates a more integrated and symbiotic business model, one with stronger and more regular ties to the surrounding world, than those of its traditional corporate model competitors.

The Benefit Corporation’s 21st Century Communications Style

Most medium to large sized businesses devote tremendous energy into the development of, and spending on, the promotion and placement of their goods and services. The focus for these businesses is frequently on creating a unique brand with a lasting impression, again, for the goal of increased sales and therefore greater profits. We’ve seen this marketing style result in all kinds of otherwise useless phenomena: catchy jingles, viral hashtags, easy to remember snack names ending in “os.” But what if instead businesses were remembered for their inextricable work to provide a public benefit? What if, for example, Frito Lay focused part of its model on creating snack foods that help curb malnutrition?

In a benefit corporation, the business brand and promotion strategy can largely be tied to its purpose. The business simply expresses to the world the public benefit is trying to serve, and word of mouth assists in spreading those expressions. From a public relations perspective too, the company doesn’t need to find outside charitable partnerships or civic sponsorships to demonstrate its benevolence to society. The brand, marketing strategy and civic engagement opportunities can all be identical to the purpose of the corporation itself. This is all the more crucial in an age of social media, when a business can experience unprecedented backlash from the public at the slightest controversy. A corporation that could explain its actions as part of some beneficial purpose, beyond maximizing shareholder value, would be at a natural advantage under these circumstances.

How the Massachusetts Benefit Corporation is Different

As stated earlier, the benefit corporation still has shareholders, and still operates for a profit. Likewise, it still pays taxes like an ordinary corporation. The primary difference is that at a minimum, the corporation must state at least one “general public benefit” that it will provide, and may also include a “specific public benefit.” Some specific requirements of any Massachusetts benefit corporation include:

1. The board of directors must consider the effects of the company’s actions on:
   • Shareholders of the corporation;
   • Employees and workforce of the corporation, its subsidiaries and suppliers
   • Interests of Customers or clients
   • Community & societal factors
   • Local, regional and global environment;
   • Short term and long term interests of corporation
   • Ability of the benefit corporation to accomplish its beneficial purposes;
   • And further may consider such actions on the effects on the state, regional or country economy, or other pertinent factors or group interests.
2. The corporation must appoint an independent “benefits director” who sees to & reports on the company’s progress in providing its stated benefit.
3. The corporation must file an annual “benefits report” with the state describing the company’s progress in providing its stated benefit.

A Change in Business Philosophy is Not a Change in Business Success

Again, in a benefit corporation the officers are in no way sacrificing profit for the public benefit. The idea is simply to change the focus, from “profit first” to “profit through benevolence.” This model may not be attractive to some, but at a time when corporate profits and motives are constantly being scrutinized, questioned and even vilified by a skeptical public, this form of business in Massachusetts should not be overlooked by forward looking entrepreneurs. Set up a consultation today with a Massachusetts benefit corporation attorney at our office on Cape Cod.

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