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Small Business

Sunday, December 29, 2013

Proactive Small Business Planning

Protect Your New Business with Preventative Legal Planning

Most Legal Issues Can Be Resolved Before They Even Arise. Here’s How.

Most people are familiar with the idea of “preventative” legal action. The term refers to anticipating legal issues and conflicts and working to prevent them, rather than solving them or “winning” them once they occur. Companies can benefit from implementing preventative legal strategies as this approach is often less expensive than litigation, mediation, arbitration, and local, state and federal fines.

By working with an attorney early on in the creation of your new business, you can build a sound foundation for your company while likely saving money down the road. The following steps can serve as a great starting point for sound legal planning:

  1. Establish a relationship with an attorney who can assist you with the legal issues your new business will face early on in the start-up process. When an attorney is familiar with your firm from the onset, he or she can more effectively anticipate and address legal challenges and provide solutions. Also, many business law attorneys will allow for a flat-fee relationship that enables you to address legal issues as they arise without incurring any additional expenses.

  2. Determine what you want, negotiate it and memorialize it in proper legal documents. Businesses encounter disagreements with vendors, landlords, employees, partners and others. To minimize the number of conflicts, it’s important to establish written contracts for all important agreements, arrangements and accommodations.

    A business law attorney can help you identify all key concerns regarding employee compensation and benefits, property usage and maintenance, relationships with suppliers and responsibility and profit sharing with partners. An attorney can ensure that, when a question, disagreement or conflict arises, your interests are written down, clearly stated and legally protected by a mutual agreement with the party in question.

  3. There are many exciting steps in starting a new business venture; selecting the type of legal entity the business will be is rarely one of them. Yet, it’s important to select a business structure early. Corporations offer numerous advantages but also require officers, boards, articles of incorporation and other formalities. Partnerships and sole proprietorships are simpler than most other business structures but open owners to potentially costly liability. Limited liability companies offer a middle ground for many, providing a liability shield and comparative simplicity. A business attorney can help you determine which business structure will work best for you by taking into account tax planning, location and other key considerations.

Even with preventative legal planning, a lawsuit may arise. If it does, it’s important to approach it from a business, not a personal standpoint. This strategy can help you make decisions that are best for your company’s future, keep your focus on the day-to-day needs of your business and avoid unnecessarily disclosing information. For legal advice and hands-on assistance during the formation and continued operation of your business, contact a qualified business attorney.


Monday, January 14, 2013

What the New Tax Law Means to You

As you probably know, Congress avoided the so-called “fiscal cliff” by passing - at the 11th  hour - the American Taxpayer Relief Act of 2012 (the 2012 Tax Act), signed into law by the President  on January 2, 2013. The 2012 Tax Act makes several important revisions to the tax code that will  affect estate planning for the foreseeable future. What follows is a brief description of some of  these revisions - and their impact:

  • The federal gift, estate and generation-skipping transfer tax provisions were made permanent as of December 31, 2012. This is great news for all Americans; for more than ten years, we have been planning with uncertainty under legislation that contained built- in expiration dates. And while permanent in Washington only means that this is the law until Congress decides to change it, at least we now have more certainty with which to plan.
     
  • The federal gift and estate tax exemptions will remain at $5 million per person, adjusted annually for inflation. In 2012, the exemption (with the adjustment) was $5,120,000. The amount for 2013 is expected to be $5,250,000. This means that the opportunity to transfer large amounts during lifetime or at death remains. So if you did not take advantage of this in 2011 or 2012, you can still do so - and there are advantages to doing so sooner rather than later. Also, with the amount tied to inflation, you can expect to be able to transfer even more each year in the future.
  • The generation-skipping transfer (GST) tax exemption also remains at the same level as the gift and estate tax exemption ($5 million, adjusted for inflation). This tax, which is in addition to the federal estate tax, is imposed on amounts that are transferred (by gift or at your death) to grandchildren and others who are more than 37.5 years younger than you;  in other words, transfers that “skip” a generation. Having this exemption allows you to take advantage of planning that will greatly benefit future generations.
  • Married couples can take advantage of these higher exemptions and, with proper planning, transfer up to $10+ million through lifetime gifting and at death.
  • The tax rate on estates larger than the exempt amounts increased from 35% to 40%.
  • The “portability” provision was also made permanent. This allows the unused exemption of the first spouse to die to transfer to the surviving spouse, without having to set up a trust specifically for this purpose. However, there are still many benefits to using trusts, especially for those who want to ensure that their estate tax exemption will be fully utilized by the surviving spouse.
     
  • Separate from the new tax law, the amount for annual tax-free gifts has increased from  $13,000 to $14,000, meaning you can give up to $14,000 per beneficiary, per year free of federal gift, estate and GST tax ± in addition to the $5 million gift and estate tax  exemption. By making annual tax-free transfers while you are alive, you can transfer significant wealth to your children, grandchildren and other beneficiaries, thereby reducing your taxable estate and removing future appreciation on assets you transfer.  And, you can significantly enhance this lifetime giving strategy by transferring interests in a limited liability company or similar entity because these assets have a reduced value  for transfer tax purposes, allowing you to transfer more free of tax.    

For most Americans, the 2012 Tax Act has removed the emphasis on estate tax planning and put  it back on the real reasons we need to do estate planning: taking care of ourselves and our  families the way we want. This includes:  

  • Protecting you, your family, and your assets in the event of incapacity;
  • Ensuring your assets are distributed the way you want;
  • Protecting your legacy from irresponsible spending, a child’s creditors, and from being  part of a child’s divorce  proceedings;
  • Providing for a loved one with special needs without losing valuable government  benefits; and
  • Helping protect assets from creditors and frivolous lawsuits.   

For those with larger estates, ample opportunities remain to transfer large amounts tax free to  future generations, but it is critical that professional planning begins as soon as possible. With  Congress looking for more ways to increase revenue, many reliable estate planning strategies  may soon be restricted or eliminated. Thus, it is best to put these strategies into place now so that  they are more likely to be grandfathered from future law changes.   

Further, as is well publicized, the 2012 Tax Act included several income tax rate increases on  those earning more than $400,000 ($450,000 for married couples filing jointly). Combined with  the two additional income tax rate increases resulting from the healthcare bill, income tax  planning is now more important than ever.   

If you have been sitting on the sidelines, waiting to see what Congress would do, the wait is  over. Now that we have increased certainty with relatively “permanent” laws, there is no excuse postpone your planning any longer.  If we can help, let us know.


Tuesday, November 27, 2012

Email @ Work: Is There Any Expectation of Privacy?

Email @ Work: Is There Any Expectation of Privacy?

The proliferation of high-speed communication devices have made us more productive and more vulnerable in terms of our privacy. Desk-bound workers may be tempted to use the office email account to engage in personal communications – however, they do so at some risk to their privacy. How much privacy can employees expect for their electronic communications at work? Practically speaking, it is safe to presume everything may be monitored by your employer.

The law generally favors employers’ interests over employees’ privacy. Employers clearly have a legitimate business interest in tracking employee time and productivity. Additionally, employers must ensure their workers are not engaging in any illegal activity or releasing trade secrets. The law permits employers to read employee email messages; if there is a company policy in place that assures employees that email messages will remain private, a worker may be able to argue that there was a reasonable expectation of privacy, but the effectiveness of that argument varies. The courts have generally upheld employers’ rights to monitor and read their employees’ email messages, particularly when there is a compelling, business-related reason for doing so.

There is, however, a law that affords employees some protection of their privacy when accessing personal email accounts, such as Gmail or Hotmail. Should the password to a personal email account fall into the wrong hands, the employer is prohibited from using that information to access the employee’s personal emails without the employee’s permission. Under the Stored Communications Act, such conduct is a crime and also creates a civil cause of action for damages. Keep in mind that accessing these accounts from a work computer can give the employer the right to read messages employees send or receive using company equipment. However, the employer is not permitted to log in and view other personal email communications.

The best practice, especially if you have concerns about the privacy of your personal email communications, is to avoid using your computer at work to send and receive personal email. An added bonus is that you'll probably be less distracted, more focused, and your quality of work will be higher!
 


Tuesday, February 7, 2012

Top 3 Real Estate Tips for Small Businesses

Top 3 Real Estate Tips for Small Businesses

For the vast majority of small businesses, the company’s first and only real estate transaction is entering into a lease for commercial space. Whether you are considering office, manufacturing or retail space, the following three tips will help you navigate the negotiation process so you can avoid any unpleasant surprises or costly mistakes.

“Base Rent” is Not the Only Rent You Will Pay
Most prospective tenants focus their negotiation efforts on the “base rent,” the fixed monthly amount you will pay under the lease agreement. You may have negotiated a terrific deal on the base rent, but the transaction may not be the best value once other charges are factored in. For example, the majority of commercial lease agreements are “triple net,” meaning that the tenant also must pay for insurance, taxes and other operating expenses. When negotiating “triple net,” ensure you aren’t being charged for expenses that do not benefit your space, and that you are paying an amount that is in proportion to the space you utilize in the building. Another provision to watch for is “percentage rent,” in which a tenant pays a percentage of revenue in excess of a specific amount. This may not be a bad thing, as it provides the landlord with an incentive to help ensure your company is successful.

There’s No Such Thing as a “Form Lease”
Most commercial property owners and managers offer prospective tenants a pre-printed lease containing your name and various terms. They often present these documents and adamantly explain that it is the landlord’s “typical form lease.” This, however, does not mean you cannot negotiate. Review every provision in the agreement, bearing in mind that all terms are open for discussion and negotiation. Pay particular attention to the specific needs of your business that are not addressed in the “form lease.”

Note the Notice Requirements
Your lease agreement may contain many provisions that require you to send notification to the landlord under various circumstances. For example, if you wish to renew or terminate your lease at the end of the term, you will likely owe a notice to the landlord to that effect, and it may be due much earlier than you think – sometimes up to a year or more. Prepare a summary of the key notice requirements contained in your lease agreement, along with the due dates, and add key dates to your calendar to ensure you comply with all notice requirements and do not forfeit any rights under your lease agreement.
 

 

 


Saturday, August 14, 2010

Bad Facts Make for Bad Law

The Florida Supreme Court recently issued an opinion in the Olmstead case that does not bode well for small business owners in Florida.  The result in the case was appropriate based on the circumstances – a couple of small business owners scammed thousands of consumers out of millions of dollars. But the rule of law that emerges means that single member owners of limited liability companies are now exposed to the claims of creditors, whereas they were not so exposed prior to this ruling.

Our firm has for years recommended the “single-member LLC” as a preferred vehicle for small business owners because of the many benefits afforded by this form of entity.  However, the Olmstead decision now casts a dark shadow on this choice of entity.  Fortunately, there are alternatives available with proper planning. If you or someone you know has a single member (or even a few member) Florida limited liability company, we recommend that you contact us for an appointment to discuss alternatives, or contact another experienced practitioner in this area of the law.

FURTHER READING ON THIS TOPIC:

The Olmstead opinion

Tampa Tribune article

 




Aman Law Firm assists clients in the greater Tampa Bay area, including Tampa, Lutz, Land O' Lakes, Wesley Chapel, Hillsborough, Pinellas, Pasco, and Polk Counties, and throughout the State of Florida.



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