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To maximize your business benefits and tax advantages, it is important to choose the right method to use in forming your business. Two of the more popular ways to organize your business are as an S Corporation or as a Limited Liability Company (LLC). This article will provide you with a brief overview of both, including the pros and cons of each one.
What is an LLC?
LLC is short for Limited Liability Company. An LLC is organized much like a sole proprietorship or general partnership. For tax purposes, it is referred to as a “pass through entity”, meaning that profits and losses pass through the business and onto the owner(s) of the business. The members of the business then report the profit or loss on their personal tax returns. What sets an LLC apart from other formations is that the owner’s risk or exposure is “limited” to the amount of his or her initial investment which they put into the business. This type of formation appeals to many business owners because the red tape is greatly reduced when compared to a C Corporation or other options. The members of an LLC also have flexibility when it comes to determining which employees contributed in which ways. This helps with profit sharing. There are limitations, however. An LLC owner is required to contribute a self-employment tax to Medicare and Social Security, and an LLC generally dissolves when a member passes away.
What’s an S Corp?
A Subchapter S Corporation is named after the Subchapter S section of the IRS tax code. An S Corp can have some tax benefits. For example, rather than being responsible for the self-employment tax (which happens in an LLC), a shareholder in an S Corp is only responsible for his or her wages as it relates to the self-employment tax. Unlike an LLC, an S Corp is more prepared to continue on with business if one of the members passes away. The downside, however, is that there are more documents to prepare and file. These forms are due throughout the course of the year.
Ultimately, your unique business situation will dictate which option is the best choice for you. Depending on your size, desired flexibility, anticipated profits, and concern for liability exposure, one of these business entities may be more suitable for you. A good business law attorney can help you make the right choice and prepare the proper forms.
As if divorce wasn’t difficult enough, if you have children, you bear the additional burden of sharing the decision with your kids. There are some best practices about how to broach and discuss the issue.
Choose Your Words
Even if you’re on bad terms with your spouse, try to come up with similar statements to introduce the issue. If you’re struggling to come up with the right words, consider scheduling an appointment with a therapists or even a religious advisor. Your words mean a lot, and you want both of you on the same page to limit confusion and hurt for the children. Although you and your spouse may be unable to agree on little else, for the sake of your children, try to find some common ground.
Keep It Neutral
Children will definitely ask questions, and in the initial shock they will push you on your decision. Limit any cutting comments about the other parent, or details they don’t need to know. For example, it’s best to avoid discussions of any indiscretions or what you view as “failings” by the other spouse. With your own heightened emotions, it can be difficult to remain emotionally in check, but a brief slip could make things worse for your kids. If you think both you and your spouse can manage to present this to kids together, this is a wise decision. Witnessing animosity between parents will only amplify the children’s upset feelings. Working together, even if it’s only for thirty minutes or so to present them with the news, might help set the tone for your interactions. If you are able to cooperate with your former spouse appropriately, you’ll limit the amount of disturbances in the lives of the children.
Be Honest- But Gently So
When you get pushback from the kids, be honest that it’s very unlikely things will change. The more calm and understanding you are about answering their questions appropriately, the less tension will exist between you and your kids, and also between you and your soon-to-be former spouse. Give them a heads up about some of the ways life will be different now. Beware that these are very difficult conversations and many kids will break down at this point. Don’t give them a laundry list of the overhaul that’s about to happen – just introduce a few changes. They’ll feel more in the loop and you won’t overwhelm them by taking a ride on an emotional rollercoaster.
Reiterate Love
Realizing that parents are splitting up can be difficult words for any child to hear. Something to reiterate and maintain as a theme throughout the divorce is that you love your children. There will be behavioral problems and possibly even acting out (or other problems that might be noticed by the kid’s school or other adults). It can be a tremendous challenge to help children adjust to this life, but your ability to connect with them and reinforce how much you care about them is critical.
Divorce is a difficult decision, especially if children are involved. Some couples may feel it not in their best interest to continue residing together but they are not yet ready to terminate the marriage.
A legal separation allows spouses’ many of the same benefits as divorce without actually ending the marriage. Upon filing for legal separation, a court may issue an order regarding child custody, support and division of assets. A legal separation allows parties time to live separate from one another and determine if they want to end the marriage permanently.
Some reasons couples may seek a legal separation instead of divorce include:
- Religious beliefs.
- Need time apart to see if they want to give the marriage another chance.
- The children.
- To protect their finances.
- So the spouses can continue to receive benefits, such as health insurance, Medicare or Social Security.
Even though the spouses may live separately, they are still legally married and are not free to remarry. However, a legal separation does not keep either of them from filing for a divorce or dissolution of marriage at any time in the future.
Estate taxes may be one of the most confusing issues known to mankind because the amount of estate taxes you may have to pay can change from year to year.
Federal Estate Taxes
Currently, Federal estate taxes are applicable only to gross estates above the 5.12 million dollar exclusion, with a top estate tax rate of 40%. The exemption amount will adjust with inflation. There is also a “portability” feature, which enables the deceased spouse’s unused lifetime exclusion to be transferred to a surviving spouse. Essentially, this allows a married couple to exempt up to $10,240,000 in assets from the estate tax.
How to Minimize Federal Estate Taxes
The most important thing you can do is assemble a team of professionals to assist in developing an estate plan that can help minimize Federal estate taxes for you and your family. This team should include a qualified estate planning attorney, certified public accountant and your financial advisor.
Arrange for your estate planning team to all be in the same place so everyone is on the same page and can create a plan that’s right for your individual situation. There are many estate planning and financial tools available to minimize estate taxes, but not all of them are going to be right for you.
You should arrange to meet with your estate planning team after the initial plan is in place if your life situation changes, such as in the form of a marriage, divorce, death, remarriage, separation, birth of a child or job change.
Even if you feel you don’t have any major life changes for a particular year, it’s still a good idea to get your team together to review any changes or modifications that may have to be made due to changing estate tax laws or other factors.
The attorneys of Godbey & Associates can help you and your family optimize your estate tax position through strategic estate planning. Contact us to talk to an experienced probate and estate lawyer who can evaluate your situation and help make important choices about your future.
I recently read about the Sixth Circuit Court of Appeals of the United States decision giving consumers a victory on January 14th, 2013 in Glazer v. Chase Home Finance LLC, No. 10-3416, 2013 WL 141699. The court ruled that the FDCPA (Fair Debt Collection Practices Act) applies to the activity of mortgage foreclosures. The Court further ruled that lawyers whose principal or regular business practices involves mortgage foreclosure activity are by definition “debt collectors” and therefore must follow the FDCPA.
The key to the Glazer decision is that the Court held the mortgage foreclosure itself is not merely an action to enforce a security interest, but also involves an action to collect the underlying debt. In other words, the filing of a foreclosure law suit is both an effort to collect on the security interest (the mortgage) and also a simultaneous attempt to collect on the debt (the note). Since a foreclosure law suit is also an attempt to collect money, is similar to collection efforts by a credit card company, and falls under what the FDCPA was intended to regulate.
Glazer will force mortgage servicers and law firms to reevaluate their collection procedures. As a homeowner who may be involved in a foreclosure, you should know your rights under the FDCPA. A knowledgeable attorney can assist you in knowing your rights are and how to enforce them.
Comments and conversation welcome.
Brian D. Flick, Esq with Godbey & Associates
Attorney Brian Flick will be part of a team of trainers conducting the Advanced Foreclosure Defense seminar on March 8th. This seminar is sponsored by The Ohio Poverty Law Center and The Legal Aid Society of Southwest Ohio. This training is designed for attorneys doing significant work in foreclosure defense.
Brian focuses his practice on foreclosure defense, loan modification and bankruptcy. Brian is a tireless advocate for consumer rights both in the local community and nationwide through his work as a legislative liason for the National Association of Consumer Bankruptcy Attorneys and as a member of the C.A.R.E. program through the Cincinnati Bar Association’s Bankruptcy Committee. In addition, Brian is a proud graduate and active alumni of Max Gardner’s famed Bankruptcy Bootcamp and is always looking for new ways to champion the rights of consumers especially in the areas of consumer bankruptcy and foreclosure law.
Brian can be reached at brian@godbeylaw.com or 513-241-6650. The law firm of Godbey Law offers free consultations and has 5 office locations serving Greater Cincinnati.
Now that holiday festivities have died down, but your resolve to meet your New Year’s resolutions is still high, why not take out your Last Will & Testament and review it? Or, if you don’t have a Will, make a belated resolution to make one.
A Will sets forth how you want your property distributed after your death. And it’s important to have one, because if you don’t, the law decides for you who will inherit your property. A Will allows you to give your property to whomever you want, including friends, charities, and non-immediate family. If you have children under the age of 18, a Will is an important tool to name the person who will care for them in the event of your death.
As life events occur, such as the birth of a child, the death of a parent, or a divorce from a spouse, it is especially important to take out your Will, review it, and make any necessary changes. You can amend your Will as many times as you’d like, and the process is easy and relatively inexpensive. But you want to be sure to have a lawyer assist you, as the amendment must meet formal requirements to be considered valid. If an amendment isn’t executed properly, the law says that your Will as previously written controls.
The estate planning attorneys at Godbey & Associates are here to help. We offer a free initial consultation to plan your Will, or review your old one. To make an appointment to speak to one of our attorneys, contact us at (513) 241-6650. Or check out our estate planning website: www.probateandestateplanningattorney.com
Written by: Elizabeth L. Bach, Esq.
The goal behind filing a Chapter 7 bankruptcy is to receive a fresh start and discharge your debts. Discharge means the debtor is no longer liable for, and no longer has to pay, certain debts.
Dischargeable debts in general include: unsecured debts such as credit cards, medical bills, deficiency balances owed on a repossessed car, and secured debts linked to assets which a debtor is letting go, or surrendering. If a Chapter 7 bankruptcy is not an option due to any number of reasons, a Chapter 13 bankruptcy is another alternative.
A Chapter 7 bankruptcy may be filed once every eight (8) years. The 8 year period begins to run from the filing date of the prior Chapter 7 bankruptcy. If you have filed a bankruptcy in the past, you may be eligible to file again. Consult with a good bankruptcy attorney to determine your eligibility.
Written by Stefanie N. Brunemann, Esq Bankruptcy and Divorce attorney with Godbey & Associates
Now that Congress has brought resolution to the decade-long question of what will happen to the Federal Estate Tax, everyone should make a New Year’s Resolution to meet with their advisors and update their estate plan. In the wee hours of the morning, in an effort to avoid going over a “fiscal cliff”, the Senate voted 89-8 to keep the 5.12 million estate and gift tax exclusion, and to raise the top estate tax rate from 35% to 40%. The House passed the Bill late last night, making the changes permanent, and ending the guessing game that estate planners have been playing since the Bush tax cuts introduced in 2001.
Americans, wealthy or not, can now effectively plan for how they want their assets distributed upon their death. The act leaves in place the “portability” feature of the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010, enabling a deceased spouse’s unused lifetime exclusion to be transferred to a surviving spouse. Essentially, this allows a married couple to exempt up to $10,240,000 in assets, without having to create a trust.
With the Federal Estate Tax finally resolved, individuals should now feel more confident in planning for providing for their loved ones, businesses, and charities after their deaths. And their attorneys, insurance agents, and financial advisors should be able to provide more sound advice on these matters.
Elizabeth Bach, Esq. with Godbey & Associates
Attorney Brian Flick, with Godbey and Associates, was instrumental in getting legislation passed that increases Ohio’s homestead exemption for the second time in four years. Brian serves as an advocate leader for the National Association of Consumer Bankruptcy Attorneys and uses his knowledge of bankruptcy law to guide state and federal level efforts.
The main objective of House Bill 479, commonly known as the Ohio Asset Management Modernization Act (OAMMA), is to create legacy trusts in Ohio (also known as asset protection trusts).
In today’s challenging political environment, it can seem futile to even try and get positive changes in the bankruptcy laws at the state and federal levels. The National Association Of Consumer Bankruptcy Attorneys (NACBA) field staff hears that view expressed at NACBA roundtables across the country. We constantly have to remind ourselves to “stay in the game” and to seize opportunities that may present themselves.
That is what Ohio’s NACBA State Chairs Richard Nemeth and Wayne Novick did and they were successful in increasing Ohio’s homestead exemption for the second time in four years. On December 20th, the Governor of Ohio signed into law House Bill 479, which contains a provision that increases Ohio’s homestead exemption from $21,625 (current) to $125,000. The legislation, which takes effect in March, was championed by Republican lawmakers who supported the legislation as instrumental to creating a favorable small business climate in the state. The legislation, which takes effect in March, was championed by Republican lawmakers who supported the legislation as instrumental to creating a favorable small business climate in the state. The legislation passed unanimously in a Republican controlled legislature, and Republican Governor John Kasich signed it into law.
A hearty congratulations to NACBA’s Ohio state chairs, Richard Nemeth and Wayne Novick, and to Brian Flick, NACBA Advocate Leader, for their involvement in this successful effort. We are fortunate to have them involved at the state level and in NACBA’s federal advocacy efforts. Their efforts have proven that you can seize opportunities and make them work to your advantage. They are an inspiration to all of us who seek to make the bankruptcy system more fair and effective for our clients.
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