July 18

So you’ve decided to open your own business. Making the decision is the first step. Now you need to figure out how to form your business.

You’ll have to address everything from your business name to how your operation will be set up, i.e., sole proprietorship, limited liability company or corporation. Your choice will have differing legal and tax ramifications.

That’s why it’s important to contact a qualified business and tax attorney who can explain the legal and tax differences for each business type.

  1. Naming Your Business
    When choosing a business name, the first step is to go to the Secretary of State business records in the state where the business will operate to find out if the name is available. Next, do some research with the federal patent and trademark office to confirm the name is not registered. Finally, search a domain name registry to see if the URL name you want to use for your website is available.
  2. Forming Your Business
    There are several options for forming your business. For the purposes of this blog, we will only discuss the following:
    • Sole Proprietorship: If you form your business by simply registering a tradename or fictitious name then you are operating as a sole proprietorship. This means that your business is not legally separated from you. Thus, your company’s creditors can make claims against your personal assets.

      The income and expenses from your business must be included on your personal tax return using a Schedule C and you’ll have to pay income tax and self-employment tax on all your annual business earnings.

    • Limited Liability Company or LLC: An LLC is a legal entity separate from its owner. The owners of an LLC are called members. Unlike sole proprietors, creditors of the business, in most cases, can’t make claims against a member’s personal assets.

      If the LLC has one member, it is taxed the same as a sole proprietorship. If there are two or more members, it will be taxed as a partnership and an annual partnership tax return must be filed. Members of an LLC can choose to have the business taxed as a corporation or S Corporation. Like sole proprietors, the members of an LLC that is taxed as a partnership are considered to be self-employed; therefore they don’t get W-2 wages.

    • Corporation: Like the LLC, a corporation is a legal entity separate from its owners. Its owners are called shareholders. The creditors of the corporation, in most cases, cannot make claims against the shareholder’s personal assets.

      A corporation, no matter its size, must follow the corporate recordkeeping formalities set forth in the statute of the state where incorporated. These include holding annual shareholder meetings, electing a board of directors and corporate officers, keeping detailed records of meetings and providing annual financial reports to shareholders.

      A corporation files its own tax return and pays the taxes imposed on its income. The shareholders can be employees and receive W-2 wages or they can be paid dividends.

    • S Corporation: The S Corporation is an election that is filed with the Internal Revenue Service. The S Corp election is only available to small businesses. The election can be made by an LLC or a corporation. There are both advantages and disadvantages to making this election.

How you choose to organize your business will vary based on individual needs, goals and tax implications. It’s possible to begin your business as an LLC and later legally reorganize the business into a corporation and/or elect a different type of tax treatment. Your attorney can assist you in deciding what works best for you.

Note: The above is not intended to be legal or tax advice. You should always contact an attorney and tax professional before making decisions that affect your business,

June 1

Simply put, a contract is any written or spoken agreement between two or more parties designed to produce a legally enforceable outcome. If you own a business, you should use a written contract for anyone you are doing business with, such as vendors, employees and consultants.

While a contract sounds simple, that’s not the case. Drafting a contract on your own is a sure fire way to guarantee legal problems in the future. Not convinced? Consider the following:

  1. The Laws In Every State Are Different

    The rules governing contracts vary from state to state. If you draw up a contract that does not comply with the laws of the state where you are doing business, you may find that the contract will not be enforced as you expected.

  2. Essential Elements Can Easily Be Omitted

    Every contract must have an “offer,” an “acceptance” and some form of “consideration.” That’s just the tip of the iceberg. There should also be clauses for selecting the state laws that govern enforcement of the contract and for indemnifying a party for certain acts of the other party. The clauses drafted into the contract are key components that need to be determined with the advice of an attorney.

  3. Termination

    Every contract should include a plan for terminating the relationship. For example, will it be terminated by agreement of the parties or does it terminate automatically? Should renewal terms be included in the contract? What happens if it terminates due to breach of the contract terms? Will compensation be due? Those are just a few of the many questions you will need to discuss with your attorney when drawing up a contract.

  4. Breach of Contract

    If a breach of the contract should occur, you may want to include terms that allow the breaching party to “cure” the breach before taking legal action. If the breach is such that it becomes necessary to take legal action, it will likely be expensive to litigate. Thus, it may be important to talk to your attorney about perhaps including a mediation or arbitration clause.

  5. Protecting Your Assets

    If your company deals with proprietary information or is developing a new product, it is important to include non-compete and confidentiality clauses. If these clauses are not present, an employee or contractor could use your hard work to assist another company to develop a similar product or start a competing business.

These are just a few of the considerations involved when drawing up a contract. While it may initially seem cheaper to go it alone, legal disputes are costly and can easily exceed any upfront costs you will pay by seeking the advice of an attorney licensed in your state.

For more information on writing a business contract contact us today for a free consultation!

May 4

If you’ve been putting off creating a will, you’re not alone. While many people find it uncomfortable to think about creating a will, doing so is necessary to ensure your wishes are carried out and loved ones are cared for after you’re gone.

Before visiting an attorney to draw up a will, here are a few things you should consider.

1. What are your estate planning goals?

Estate planning is the procedure by which you arrange for the disposal of your assets after death. It can eliminate uncertainties, streamline the probate process and ensure your assets go to the heirs of your choosing.

Estate planning may include the use of a will or a will with a trust. If you don’t own a business or real estate outside of your home state or have minor children, then a will may suffice. An estate planning attorney can help you figure out what you need.

2. List Your Assets

Before meeting with an estate planning attorney, list your assets and debts.

Do you own a home and is there a mortgage on the home?
Whose name(s) are on the deed to the home?
Do you have retirement accounts or brokerage accounts?
Are there beneficiaries on the accounts or are the accounts held jointly with your spouse?

Be sure to gather all relevant paperwork from bank and brokerage accounts, life insurance policies, real estate, cars, stocks, jewelry, paintings and anything else of value.

3. Choose someone to carry out your wishes

You will need to name an executor of your will. Your executor is the person who will carry out your wishes and see that your assets are disposed of in the manner you have requested. If you’re married, your executor is often your spouse. But be ready to name an alternative person in case your first choice is unable to serve.

It’s very important to talk to the person you want to be your executor about taking on the responsibility beforehand. If you have minor children, decide if your executor will also be their guardian or if you need to name someone else. Don’t forget to consider how pets will be cared for and if you want to set aside money for their care.

4. Specific Bequests

If you have items like a wedding ring or other keepsakes you want to go to specific people, make a list to include in your will. This holds true for charitable gifts and any college funds you might want to set up for loved ones.

5. Don’t Go It Alone

You may think writing a will is easy and can be done using an online company or computer software. But if a mistake is made, your estate may be tied up in probate court and can end up costing more than was saved by not seeing an attorney. Attorneys know the specific laws of your state and the right questions to ask to make sure your goals are achieved.

For more information on writing a will contact us today!

April 22

Wills, trusts, powers of attorney and advanced healthcare directives—all are components of what is known as estate planning.

While estate planning may not be something you want to think about, having a solid estate plan in place ensures that your loved ones will be taken care of after you are gone. It also helps to minimize probate costs and estate taxes.

Because every person’s estate planning needs will be different, it’s important to seek the advice of a lawyer. An attorney can let you know if a will is all you will need or if a multi-pronged approach is necessary.

If you’re ready to embark on estate planning, here are five important considerations.

1. What Is Your Ultimate Goal?

Your estate planning goals will vary depending on whether you are married, have children and own a home and/or a business. A more elaborate estate plan will also be necessary if you have extensive assets. If you have minor children, a business or estate tax concerns, a trust may be the best bet; in other cases a will may suffice.

2. Assign & Review Beneficiaries

Make sure you have assigned beneficiaries for all financial assets including Life Insurance and Tax-deferred Retirement Accounts. You can also designate your bank or stock accounts as transfer or payable on death. Exercise additional care if a trust is the designated beneficiary of a retirement plan to allow the beneficiary to continue deferring tax recognition. Review your beneficiaries any time you change jobs or experience life-changing events such as a divorce or death in the family.

3. Identify Special Bequests of Non-monetary Assets

Be sure to assign beneficiaries for things such as your car and/or jewelry.

4. Appoint a Person to Carry Out Your Wishes

Carefully select the person you would like to serve as executor of your will or your trustee. If you have minor children, you may need to appoint a guardian. Then draw up an advanced healthcare directive and financial power of attorney. Both are key in the event you become incapacitated.

5. Address Potential Tax Issues

If estate taxes are a concern, implement annual gifting to your beneficiaries. If the goal is to make charitable contributions, consider using taxable assets such as IRAs.

For more information on estate planning contact us today!

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