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The December 2009 Founder's Summit!
Friday/December/18 16:16 Filed in: multimedia | credit & funding
In December's episode, Derek & Cort talk about the latest news in small business funding. This hour-long show features Mark Kern, founder and director of Commercial Finance Help, Inc., a company that helps businesses navigate the world of obtaining financing.
The November 2009 The Founder's Summit!
Friday/December/18 14:04 Filed in: multimedia
In November's episode, Derek and Cort talk about the economic recovery and a recent study on the background traits of entrepreneurs. Also in this episode is an interview with Dave Hall, CPA on year-end tax planning, and an extended interview with one of our clients, Chingho Lu, about “land banking” opportunities for real estate investors.
Business Credit Update
Friday/December/18 14:03 Filed in: credit & funding
by Derek G. Rowley, © 2009, All Rights Reserved
One of our most popular services is our BizCredit™ Accelerator program, that helps new businesses build and develop a business credit profile that is separate from the individual. The last 18 months has seen many dramatic changes to the way credit providers handle all aspects of credit, including eligibility, reporting, and more. Here are a number of items that we’ve seen pop up in the past month that reflect some of the most recent changes:
Stay away from Capital One. Capital One, a credit card company that aggressively markets small business credit cards (“what’s in your wallet?” ), has changed their credit reporting policy in a way that is having a huge negative impact on small business cardholders. Traditionally, small business credit cards don’t appear on the personal credit report of the business owner unless the card goes into default. This separation between business and personal credit works to the advantage of the business owner, especially if the business is carrying credit significant balances, or uses a business credit card heavily in order to maximize rewards. Now, Capital One is reporting small business credit cards on the owner’s personal credit report. This has resulted in plummeting credit scores, due to the fact that balances on Capital One small business cards are hurting the owners “utilization ration” - the amount of debt carried in relation to available credit.
Chase gets into business credit. While many credit companies are abandoning the business credit market entirely, Chase announced this month the introduction of four new business credit cards:
One of our most popular services is our BizCredit™ Accelerator program, that helps new businesses build and develop a business credit profile that is separate from the individual. The last 18 months has seen many dramatic changes to the way credit providers handle all aspects of credit, including eligibility, reporting, and more. Here are a number of items that we’ve seen pop up in the past month that reflect some of the most recent changes:
Stay away from Capital One. Capital One, a credit card company that aggressively markets small business credit cards (“what’s in your wallet?” ), has changed their credit reporting policy in a way that is having a huge negative impact on small business cardholders. Traditionally, small business credit cards don’t appear on the personal credit report of the business owner unless the card goes into default. This separation between business and personal credit works to the advantage of the business owner, especially if the business is carrying credit significant balances, or uses a business credit card heavily in order to maximize rewards. Now, Capital One is reporting small business credit cards on the owner’s personal credit report. This has resulted in plummeting credit scores, due to the fact that balances on Capital One small business cards are hurting the owners “utilization ration” - the amount of debt carried in relation to available credit.
Chase gets into business credit. While many credit companies are abandoning the business credit market entirely, Chase announced this month the introduction of four new business credit cards:
- Chase Ink - is their standard small business credit card that features “Blueprint”, which allows businesses to choose which purchases they want to pay in full, and which they want to spread over time.
- Chase Ink Bold - is a pay-in-full charge card, similar to American Express. This card comes with the Chase Ultimate Rewards program, with no expiration dates, no blackout dates, and no limits on how many rewards you can earn.
- Chase Ink Cash - is a small business credit card that offers a cash-back program.
- Chase Ink Plus - is a premium credit card with “Blueprint”, Ultimate Rewards, and bonus rewards and travel perks.
Personal Guarantees: Should You?
Friday/December/18 14:02 Filed in: finance
by Derek G. Rowley © 2009, All Rights Reserved
As the credit market struggles to rebound from it’s year-long collapse, more small business owners are being asked to provide personal guarantees on business loans and notes. The personal guarantee often becomes the critical do-or-die tipping point that can make all the difference in getting the loan or not.
For lenders, getting the personal guarantee gives an extra level of protection and assurance that the loan will be paid. For the business owner, it is an emotional and psychological test that challenges their commitment and belief in the business model. It takes a lot of courage for a business owner to put it all on the line for the business.
The practice of asking for a personal guarantee on small business lending is so common that many accept is as standard practice. For example, SBA loans requires every 20% or more owner to provide one in order to close the deal. But, the problem that this creates is obvious. The personal guarantee operates outside the corporate veil. If the business fails, the owners are pledging to pay back the loan anyway - even if the company has been dissolved. In practice, this means that the business owner is risking not only his/her livelihood in the form of the business, but also his/her lifestyle, including home, savings, vehicles, properties and every other asset of the business owner.
If you need the loan, what are your alternatives? Well, you actually do have a few. You could:
As the credit market struggles to rebound from it’s year-long collapse, more small business owners are being asked to provide personal guarantees on business loans and notes. The personal guarantee often becomes the critical do-or-die tipping point that can make all the difference in getting the loan or not.
For lenders, getting the personal guarantee gives an extra level of protection and assurance that the loan will be paid. For the business owner, it is an emotional and psychological test that challenges their commitment and belief in the business model. It takes a lot of courage for a business owner to put it all on the line for the business.
The practice of asking for a personal guarantee on small business lending is so common that many accept is as standard practice. For example, SBA loans requires every 20% or more owner to provide one in order to close the deal. But, the problem that this creates is obvious. The personal guarantee operates outside the corporate veil. If the business fails, the owners are pledging to pay back the loan anyway - even if the company has been dissolved. In practice, this means that the business owner is risking not only his/her livelihood in the form of the business, but also his/her lifestyle, including home, savings, vehicles, properties and every other asset of the business owner.
If you need the loan, what are your alternatives? Well, you actually do have a few. You could:
- put up enough collateral to secure the loan without a personal guarantee;
- negotiate to pay a higher interest rate, or additional points on the loan in exchange for the lender taking a greater risk without a personal guarantee;
- pass the buck to somebody else, such as a business partner;
- negotiate to guarantee only a portion of the loan, instead of the total balance;
- negotiate to guarantee the loan only for a limited period of time;
- negotiate to drop the guarantee when the business meets certain cash-flow levels;
- offer the guarantee only under circumstances involving gross negligence or fraud;
- make sure your spouse does not sign the personal guarantee, and execute an asset protection strategy to focuses on building the separate property of the spouse.
The Problem with Series LLC
Friday/December/18 14:01 Filed in: llc
by Derek G. Rowley, © 2009, All Rights Reserved
The Series LLC is an exciting new development in business entity law that is currently getting a lot of attention by promoters. It is a business entity that makes a lot of promises about cost savings, asset protection and flexibility. The question is: Can it keep it’s promises? In this article, I will explain the benefits and risks of using the Series LLC, and why - for now - it should only be used in limited circumstances.
Limited liability companies have become the most popular type of new business entity in use today. The reasons for this popularity have to do with the flexibility of the LLC structure for ownership, management, and tax purposes. Organizationally, the LLC only has “members” (or owners), and “managers”, making it much simpler to administer than a corporation with it’s internal structure consisting of shareholders, directors, and officers. Additionally, the LLC doesn’t have the same statutory requirements governing formalities such as company meetings, resolutions, minutes, etc.
Traditional asset protection planning is built on the concept that business owners can separate themselves from business risk (and separate various business assets and risks from each other) by placing different assets into separately organized business entities that provide the benefit of “legal separation”. Depending upon the type of asset, the time-frame, the owner’s goals and other criteria, business entities such as corporations, limited liability companies, limited partnerships, and various types of trusts have been used to accomplish this legal separation.
This type of asset protection, when done properly, can be rock-solid. This is because the statutes, state case law, and federal bankruptcy law provide a relatively clearly defined path. In other words, attorneys and business owners can have confidence that a properly executed asset protection plan will hold up if tested under fire.
The new, Series LLC abandons the comforts of asset protection precedent, and introduces a new, completely untried and untested concept into which uninformed promoters and unwary business owners are stumbling.
This is how the Series LLC works: A single limited liability company is given the power to create multiple internal series. In other words, the LLC can essentially replicate itself without limitation. Each internal series can have separate or uniquely comprised ownership, assets, and (in many cases) management. The few states that offer Series LLC statutes provide for a separation of risks between the various series. This, theoretically, allows a single business entity to own and manage many different assets for many different owners - with only the expense of a single filing fee!
But, as far as it’s ability to protect assets, the Series LLC has a couple of serious problems. Actually, more than a couple:
Only 8 states have Series LLC statutes. Those states are: Delaware, Nevada, Utah, Illinois, Iowa, Oklahoma, Tennessee, and to a limited degree, Wisconsin. In other words, 42 states don’t. That’s a huge problem for businesses with assets or operations in the 42 non-series-LLC states. If a Series LLC, formed in Nevada, has property in a non-series-LLC state such as California, will California recognize the separateness of the internal series for asset protection purposes, or will the state apply it’s own, non-series-LLC laws and interpretation? The best answer to that question is that no one really knows. The second-best answer is that each state has the power and authority to act in it’s own best interest, and is not obligated to recognize legal separation for assets within it’s borders that is owned by an entity for which it has not adopted governing laws. Given that, who wants to volunteer to be the first test case with serious money on the line?
No Series LLC has been tested in U.S. Bankruptcy Court. The ultimate test of the strength of any asset protection strategy or vehicle is bankruptcy. The federal court has power to set aside, modify, or create qualifications for state statutes that provide any level of asset protection. This power was recently used to set aside “charging order” protection for a single-member Colorado LLC, even though state statute provided for it. Can a single series file for bankruptcy without forcing the entire entity into the process? If an entire Series LLC files for bankruptcy, will each of the series be considered separately, or will they be thrown into the same legal pot? The answers to these questions are unknown. Because the bankruptcy court exists to balance the rights of debtors and creditors, it doesn’t take too much imagination to foresee that series protection could easily be set aside under circumstances that are yet to be defined.
Series LLCs are much more complicated to operate because they demand new levels of compliance requirements for formalities. As I discussed above, one reason the LLC has become so attractive to business owners is the fact that they require less maintenance and attention to corporate-style formalities. As a result, I suspect that a great many managers and members of Series LLCs will be unfamiliar with the fact that even when all the assets and operations within the entity is located in a state that recognizes Series LLCs, the asset protection across the various series is subject to whether or not each series has separate, complete and accurate records, including accounting records. Combining the accounts of the various series into a single “master” bank account, will constitute commingling of funds that will open the door for veil-piercing of the series. To ensure the separateness of the series, each series should have:
• Separate bank account
• Transactional documentation such as contracts, deeds, trusts, notes, etc., must be not only in the name of the Series LLC, but also in the name of the specific series.
• Transactions between series must be arm’s-length, conducted at Fair Market Value, using supporting appraisals.
• Each series should file for a “DBA” in each county where it owns property, which should reflect the series ownership in order to properly notify creditors of the series status.
• The Operating Agreement, and Articles of Organization must reflect series status.
Other Series LLC Problems
Other states are not likely to add Series LLC provisions.
The National Conference of Commissioners of Uniform State Law (NCCUSL), have not included, and do not support series LLC statutes in the Uniform LLC Act that is adopted by various state legislatures. This omission makes it highly unlikely that other states will move to adopt series LLC statutes in the future. Proponents of the original Delaware Series LLC Act have testified that the Series LLC was originally intended strictly as a vehicle for Delaware-based investment fund manager to maintain and operate separate regulated investment funds such as hedge funds, venture capital funds and fractional share arrangements.. It was never their intention that the Series LLC concept be utilized in unregulated environments or for use by the general business community. Significant push-back to the series LLC has come from within many sectors of the legal community.
Foreign Filing.
Again, because so many states do not have Series LLC statutes, there is going to be confusion about how to properly qualify a series to transact business within those states. Expect states to follow the example of California, which requires each series of a Series LLC that operates or has assets located within its borders to register separately with the California Franchise Tax Board. Each series, therefore, is subject to the minimum $800 filing fee.
Federal Tax Issues.
The Series LLC allows for a single entity to have separate series, each with different ownership. This creates a potential problem under the Federal Tax Code. The IRS has issued a Private Letter Ruling (200803004) which concludes that each series of an LLC is a separate entity for tax purposes, and each series can elect its own tax status.
Securities Issues.
There are significant legal question surrounding the use of series in soliciting investment and raising capital through offerings. Existing securities law does not address such questions as whether each series mush separately meet the Reg. 504D registration exemption, whether each series can conduct its own offering, or whether regulators would collapse all the series together.
The Series LLC is an exciting new development in business entity law that is currently getting a lot of attention by promoters. It is a business entity that makes a lot of promises about cost savings, asset protection and flexibility. The question is: Can it keep it’s promises? In this article, I will explain the benefits and risks of using the Series LLC, and why - for now - it should only be used in limited circumstances.
Limited liability companies have become the most popular type of new business entity in use today. The reasons for this popularity have to do with the flexibility of the LLC structure for ownership, management, and tax purposes. Organizationally, the LLC only has “members” (or owners), and “managers”, making it much simpler to administer than a corporation with it’s internal structure consisting of shareholders, directors, and officers. Additionally, the LLC doesn’t have the same statutory requirements governing formalities such as company meetings, resolutions, minutes, etc.
Traditional asset protection planning is built on the concept that business owners can separate themselves from business risk (and separate various business assets and risks from each other) by placing different assets into separately organized business entities that provide the benefit of “legal separation”. Depending upon the type of asset, the time-frame, the owner’s goals and other criteria, business entities such as corporations, limited liability companies, limited partnerships, and various types of trusts have been used to accomplish this legal separation.
This type of asset protection, when done properly, can be rock-solid. This is because the statutes, state case law, and federal bankruptcy law provide a relatively clearly defined path. In other words, attorneys and business owners can have confidence that a properly executed asset protection plan will hold up if tested under fire.
The new, Series LLC abandons the comforts of asset protection precedent, and introduces a new, completely untried and untested concept into which uninformed promoters and unwary business owners are stumbling.
This is how the Series LLC works: A single limited liability company is given the power to create multiple internal series. In other words, the LLC can essentially replicate itself without limitation. Each internal series can have separate or uniquely comprised ownership, assets, and (in many cases) management. The few states that offer Series LLC statutes provide for a separation of risks between the various series. This, theoretically, allows a single business entity to own and manage many different assets for many different owners - with only the expense of a single filing fee!
But, as far as it’s ability to protect assets, the Series LLC has a couple of serious problems. Actually, more than a couple:
Only 8 states have Series LLC statutes. Those states are: Delaware, Nevada, Utah, Illinois, Iowa, Oklahoma, Tennessee, and to a limited degree, Wisconsin. In other words, 42 states don’t. That’s a huge problem for businesses with assets or operations in the 42 non-series-LLC states. If a Series LLC, formed in Nevada, has property in a non-series-LLC state such as California, will California recognize the separateness of the internal series for asset protection purposes, or will the state apply it’s own, non-series-LLC laws and interpretation? The best answer to that question is that no one really knows. The second-best answer is that each state has the power and authority to act in it’s own best interest, and is not obligated to recognize legal separation for assets within it’s borders that is owned by an entity for which it has not adopted governing laws. Given that, who wants to volunteer to be the first test case with serious money on the line?
No Series LLC has been tested in U.S. Bankruptcy Court. The ultimate test of the strength of any asset protection strategy or vehicle is bankruptcy. The federal court has power to set aside, modify, or create qualifications for state statutes that provide any level of asset protection. This power was recently used to set aside “charging order” protection for a single-member Colorado LLC, even though state statute provided for it. Can a single series file for bankruptcy without forcing the entire entity into the process? If an entire Series LLC files for bankruptcy, will each of the series be considered separately, or will they be thrown into the same legal pot? The answers to these questions are unknown. Because the bankruptcy court exists to balance the rights of debtors and creditors, it doesn’t take too much imagination to foresee that series protection could easily be set aside under circumstances that are yet to be defined.
Series LLCs are much more complicated to operate because they demand new levels of compliance requirements for formalities. As I discussed above, one reason the LLC has become so attractive to business owners is the fact that they require less maintenance and attention to corporate-style formalities. As a result, I suspect that a great many managers and members of Series LLCs will be unfamiliar with the fact that even when all the assets and operations within the entity is located in a state that recognizes Series LLCs, the asset protection across the various series is subject to whether or not each series has separate, complete and accurate records, including accounting records. Combining the accounts of the various series into a single “master” bank account, will constitute commingling of funds that will open the door for veil-piercing of the series. To ensure the separateness of the series, each series should have:
• Separate bank account
• Transactional documentation such as contracts, deeds, trusts, notes, etc., must be not only in the name of the Series LLC, but also in the name of the specific series.
• Transactions between series must be arm’s-length, conducted at Fair Market Value, using supporting appraisals.
• Each series should file for a “DBA” in each county where it owns property, which should reflect the series ownership in order to properly notify creditors of the series status.
• The Operating Agreement, and Articles of Organization must reflect series status.
Other Series LLC Problems
Other states are not likely to add Series LLC provisions.
The National Conference of Commissioners of Uniform State Law (NCCUSL), have not included, and do not support series LLC statutes in the Uniform LLC Act that is adopted by various state legislatures. This omission makes it highly unlikely that other states will move to adopt series LLC statutes in the future. Proponents of the original Delaware Series LLC Act have testified that the Series LLC was originally intended strictly as a vehicle for Delaware-based investment fund manager to maintain and operate separate regulated investment funds such as hedge funds, venture capital funds and fractional share arrangements.. It was never their intention that the Series LLC concept be utilized in unregulated environments or for use by the general business community. Significant push-back to the series LLC has come from within many sectors of the legal community.
Foreign Filing.
Again, because so many states do not have Series LLC statutes, there is going to be confusion about how to properly qualify a series to transact business within those states. Expect states to follow the example of California, which requires each series of a Series LLC that operates or has assets located within its borders to register separately with the California Franchise Tax Board. Each series, therefore, is subject to the minimum $800 filing fee.
Federal Tax Issues.
The Series LLC allows for a single entity to have separate series, each with different ownership. This creates a potential problem under the Federal Tax Code. The IRS has issued a Private Letter Ruling (200803004) which concludes that each series of an LLC is a separate entity for tax purposes, and each series can elect its own tax status.
Securities Issues.
There are significant legal question surrounding the use of series in soliciting investment and raising capital through offerings. Existing securities law does not address such questions as whether each series mush separately meet the Reg. 504D registration exemption, whether each series can conduct its own offering, or whether regulators would collapse all the series together.
Conclusion
Perhaps the day will come when the Series LLC is broadly adopted by all states, and the questions and concerns about how non-Series-LLC states will interpret the separateness of internal series will be resolved. Undoubtedly, in coming years we will see a Series LLC go through federal bankruptcy, at which time we will have a much more reliable indicator as to the conditions the court will look at in order to recognize the separation of series. Unfortunately, that day is not today.My recommendation, for what it's worth, is as follows: If all of your properties, assets, employees and operations are located within a state that provides Series LLC statutes - AND you recognize and are willing to accept the risk that the asset protection value of a Series LLC is merely theoretical for now, go ahead and use it. If you don't meet that criteria, I would avoid it until the questions are answered and the issues resolved.
Tax Audit? Here's what the IRS is looking for
Friday/December/18 13:58 Filed in: tax
by Derek G. Rowley © 2009, All Rights Reserved
If the IRS tags your business for an audit, it is important to remember that IRS auditors are trained to identify the “economic reality” of the business. This means that they will look not only at your tax return, but at you and your economic circumstances. As a result, there are a number of issues are likely to get their attention:
If the IRS tags your business for an audit, it is important to remember that IRS auditors are trained to identify the “economic reality” of the business. This means that they will look not only at your tax return, but at you and your economic circumstances. As a result, there are a number of issues are likely to get their attention:
- Does your business handle a lot of cash? If so, auditors will be looking closely to see if cash has been diverted to personal use without declaring it as income.
- Do you write off auto expenses for your only car? Auditors will expect to see some business deductions for auto use. Don’t expect them to believe that your only vehicle is being used 100% of the time for business. They want to see complete records.
- Are vacation costs and personal entertainment being deducted as business expenses? The IRS knows that there can be a lot of questionable deductions stored in the travel and entertainment expense category. Document all your travel and entertainment deductions.
- Are your payroll tax payments being made timely? If not, it can be a red flag that many other tax inconsistencies may also exist. Also, the IRS routinely audits businesses that hire independent contractors to make sure they are not really employees.
2009 Year End Tax Planning
Friday/December/18 13:57 Filed in: tax
by Derek G. Rowley © 2009 All Rights Reserved
As we close in on the end of 2009, the thoughts of most entrepreneurs turn to the holidays, family traditions, wonderful meals - and tax planning. In addition to all of the year-end planning issues that require your attention, it is also time to start looking at the coming year. There are several changes in the tax law that can open up opportunities to save money. Here is a quick overview of what to expect:
As we close in on the end of 2009, the thoughts of most entrepreneurs turn to the holidays, family traditions, wonderful meals - and tax planning. In addition to all of the year-end planning issues that require your attention, it is also time to start looking at the coming year. There are several changes in the tax law that can open up opportunities to save money. Here is a quick overview of what to expect:
- Equipment Write-Offs. Originally, the amount of Section 179 deductions that could be taken was scheduled to drop from $250,000 to $133,000. But, the higher cap has been extended in 2009, so the maximum amount that can be written off under Section 179 of the tax code is still $250,000.
- Bonus Depreciation. Property that is placed in service before January 1, 2010 has been given a 50% bonus depreciation deduction. This deduction is available for new property that has a MACRS recover period of 20 years or less. Luxury car depreciation has been increased by $8,000, up to a new cap of $10,960. Trucks and vans are limited to $11,060.
- Payroll Tax Changes. The wage limit on Social Security tax withholding has been increased from $102,000 to 106,800. The tax rate remains at 7.65%.
- Estimated Tax Relief. A small business owner with fewer than 500 employees, whose Adjusted Gross Income was less than $500,000, is able to base estimated tax payments on the lesser of 90% of the tax liability for either 2008 or 2009. This is an improvement over the previous 100% or 110% estimated tax requirements.
- Withholding Changes. Because of the Making Work Pay provision of the American Recovery and Reinvestment Act, there is now a refundable tax credit of up to $400 for working individuals ($800 for married taxpayers filing jointly). As a result, there are new withholding tables that impact individuals with Adjusted Gross Income less than $75,000.
- Retirement Plan Contributions. 401(k) contribution limits have been raised from $15,500 to $16,000 - plus another $5,500 for those age 50 or older. Simplified Employee Pension and Profit Sharing plan limits go up from $46,000 to $49,000. If you have a defined benefit pension plan, the limit increases from $185,000 to $195,000.
- Health Savings Account Deductions. The deduction limit has been increased to $5,950 for a family, and $3,000 for an individual.
- Mileage Rates. The IRS lowered the standard mileage rate for business use of vehicles to $.55 per mile for business miles; $.24 per mile for medical reasons or moving; $.14 for charitable purposes.
- Commuting & Parking. Business can pay $230 per month in tax-free parking or transit passes for employees. Also, businesses can offer employees a tax-free benefit of $20 per month to cover the cost of purchasing, maintaining and storing a bicycle for commuting.
This Month in Lawsuit Abuse
Friday/December/18 13:55 Filed in: litigation
by Derek G. Rowley © 2009, All Rights Reserved
Abusive, absurd and frivolous lawsuits continue to clog our courts and cost us all millions of dollars. Here are the low-lights:
Abusive, absurd and frivolous lawsuits continue to clog our courts and cost us all millions of dollars. Here are the low-lights:
- The Dallas Morning News reported on a lawsuit filed by a Dallas woman, Chris Daniel, “seeking six figures from a former neighbor and landlord for damage she says was caused by cigarette smoke wafting through adjoining walls of her high-end townhome.” According to the attorney for Estancia Townhomes, there is a solid, two-hour fire wall from foundation to roof between each of the homes. In addition to the lawsuit, Ms. Daniel has evidently filed a complaint under the Texas Fair Housing Act, claiming that her sensitivity to cigarette smoke qualifies her for a disability.
- The Chicago Sun Times reported on a workers compensation claim filed by a Cook County custodian, who claims she twice injured her back by “reaching around to pick up a piece of toilet paper”. Taxpayers are writing a check in the amount of $14,022.
- The San Mateo County Times reports that 60-year old Stanley Hilton has filed a $15 million lawsuit against San Francisco International Airport, claiming that his wife divorced him because of the constant airport noise. The lawsuit alleges the airport is guilty of being a public nuisance, negligence, assault, battery, fraud and breach of contract. Hilton, according the report is a former civil litigation attorney who also recently sued the property manager and owner of an office building for $20 million in August after being stuck between floors for an hour, arguing that it result in a fear of riding elevators.
- Staten Island Live reported that after 12 years, a free-speech lawsuit against former College of Staten Island president Dr. Marlene Springer was finally settled. The lawsuit claimed that Springer had violated the First Amendment by nullifying a student election in 1997. In a settlement in which Springer admitted no wrongdoing, the judge accepted Springer’s offer of $9 - which calculates to seventy-five cents for each year of the lawsuit. Claims for compensatory and punitive damages were evidently dropped.
- And finally, in a case of attorneys eating their own, the Seattle Times has a story about a Seattle civil-rights attorney, Bradley Marshall, who was disbarred after the Washington Supreme Court found he had gouged clients and bullied others into unwanted settlements. Marshall claims the Supreme Court, which is the highest court in the State, and oversees attorney conduct and discipline, exceeded it’s authority in making the move. The amount of the lawsuit was not disclosed.
Five Leadership Traits for Tough Times
Wednesday/November/18 15:58 Filed in: leadership
by Derek Rowley © 2009 All Rights Reserved
I don’t have to tell you how turbulent the last couple of years have been. We’ve seen the impact of the economic environment on entrepreneurism in a big way over the last 18 months. On the bright side, I am seeing that businesses startups today – and those existing businesses that are surviving and flourishing in the current economic conditions – are much better companies than they were before the economic meltdown occurred.
We are learning. It’s an essential part of the entrepreneurial process.
So, I thought I would share the six characteristics and traits that organizations need today in order to be positioned to make solid decisions and be positioned to make the best out of challenging times:
I don’t have to tell you how turbulent the last couple of years have been. We’ve seen the impact of the economic environment on entrepreneurism in a big way over the last 18 months. On the bright side, I am seeing that businesses startups today – and those existing businesses that are surviving and flourishing in the current economic conditions – are much better companies than they were before the economic meltdown occurred.
We are learning. It’s an essential part of the entrepreneurial process.
So, I thought I would share the six characteristics and traits that organizations need today in order to be positioned to make solid decisions and be positioned to make the best out of challenging times:
- Credibility. This is harder than it sounds. How can you be credible – or even feel credible – when there is so much uncertainty all around you? There really isn’t any way to fake it or force it, is there? There may be many people who are looking to you right now to measure how credible you are right now – from your spouse, your business partners, your vendors, your customers, and your banker. Credibility in the storm around you comes from your ability to level with others with complete honesty and humility.
- Inspiration. People around you are probably fearful. Many have lost their savings, jobs, investments, and businesses. But never forget: Hope overcomes Fear! You can give hope to your team by giving them a realistic, but optimistic vision of exactly how you are going to succeed from here. No matter how dark, difficult and dreary things can appear to those who are in fear, you can open them up to a whole new world of possibilities that they are not thinking of, yet. Remember The Shawshank Redemption? That was the message of the entire movie: Hope overcomes Fear. Be realistic – but optimistic!
- Be Connected to Real-Time Realities. You simply can’t keep working with outdated assumptions that are based on what your model/market looked like a couple of years ago. Things have changed. Unless you continuously monitor those changes and stay on the pulse of the reality of your changing circumstances, you can find yourself quickly in the buggy-whip making business.
- Be Personally Involved. There has perhaps never been a time when it has been more important to have an accurate, ground-level assessment of your situation than right now. It can be easy for a business owner to become distant – and disconnected – from your team, your operations, and your customers. Now is the time they those around you need to see your intense, hands-on participation in working through challenges and finding solutions. You might be surprised at how much comfort that gives those around you.
- Be Bold. The economy runs in cycles. Your responsibility to your business is not only just to survive the current cycle, but also to build for what is to come. By creatively planning and executing right now, you can take advantage of the weaknesses, fears, and disconnection that your competitors are feeling right now. After all, entrepreneurs are – first and foremost – problem solvers! Find the problem your customers have, and solve it for them. That has always been the key to entrepreneurial success.
Special Sales Tax Deduction for Car Purchases Available through End of 2009
Wednesday/November/18 15:57 Filed in: tax
WASHINGTON — With 2010 models arriving in dealer showrooms, the Internal Revenue Service reminds taxpayers that purchasing a new car, light truck, motor home or motorcycle could qualify them for a special deduction for the state and local sales and excise taxes on their 2009 tax returns.
Purchases made before Jan. 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).
The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.
Taxpayers who make qualifying new vehicle purchases this year can estimate the deduction with the help of Worksheet 10 in IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k of the worksheet show how to take into account purchases above the $49,500 limit, as well as the reduced deductions for taxpayers at higher income levels.
The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
For those that have questions about the deduction for sales tax and other fees, these questions and answers might help. A video on the IRS Youtube.com channel and audio podcasts in English and Spanish are also available to help taxpayers take full advantage of the deduction.
Purchases made before Jan. 1, 2010, will qualify for this deduction under the American Recovery & Reinvestment Act of 2009 (ARRA).
The deduction is limited to the sales and excise taxes and similar fees paid on up to $49,500 of the purchase price of a new vehicle. The deduction is reduced for joint filers with modified adjusted gross incomes (MAGI) between $250,000 and $260,000 and other taxpayers with MAGI between $125,000 and $135,000. Taxpayers with higher incomes do not qualify.
Taxpayers who make qualifying new vehicle purchases this year can estimate the deduction with the help of Worksheet 10 in IRS Publication 919, How Do I Adjust My Withholding? Lines 10a to 10k of the worksheet show how to take into account purchases above the $49,500 limit, as well as the reduced deductions for taxpayers at higher income levels.
The special deduction is available regardless of whether taxpayers itemize deductions on their returns. Taxpayers who do not itemize will add this additional amount to the standard deduction on their 2009 tax return.
For those that have questions about the deduction for sales tax and other fees, these questions and answers might help. A video on the IRS Youtube.com channel and audio podcasts in English and Spanish are also available to help taxpayers take full advantage of the deduction.
Setting Up Your Chart of Accounts
Wednesday/November/18 15:56 Filed in: accounting
by Derek Rowley © 2009 All Rights Reserved
I don’t think I’ve ever met an entrepreneur who actually likes the accounting aspect of running a business. But it can’t be ignored. Even if you don’t love it, you have to do it – or at least somebody in your organization has to do it for you.
But even if you don’t do your own bookkeeping yourself, you have an important responsibility to understand it. If you don’t at least understand your accounting, you don’t have a prayer at understanding your company financials. What’s worse, you are then at tremendous risk of becoming victimized by that somebody else because they know they can play with the numbers and you won’t catch it. How many times have you read a news story about a long-time bookkeeper being arrested for embezzlement? By taking responsibility to understand your own accounting practices and systems, you can eliminate the temptation and potential for crimes of opportunity. It just makes sense.
Having said that, I spoke with new entrepreneur a few days ago who was confused and concerned about dealing with a new limited liability company that he had recently formed. “How do I get money into it?” “How do I get money out of it?” “How do I pay my son?” “How do I…?”
I had to back him up a few steps before we could get to many of his questions. I wanted him to focus for a minute on his accounting systems. The systems (or lack thereof) that he uses to account for every financial transaction touch every question that he had. And, as it turns out, he hadn’t really thought about it yet.
Personally, I can’t imagine the “dark ages” of business, when all the accounting had to be manually recorded in “double-entry” ledgers. I am, gladly, a child of the computer age. And, what better job is there for a computer in all of business than keeping the books? There are several software packages available designed for small business accounting – some are stand-alone-installations, and others are hosted web services. Almost any of them will get you started, but I generally recommend going with a platform that most accountants and bookkeepers will be familiar with – like QuickBooks, for example.
Among the first things that you need to do when using QuickBooks – or any other system, for that matter – is to set up your “Chart of Accounts”.
What is a Chart of Accounts?
A chart of accounts is a list of all the categories of income, expense, assets and liabilities of the company. Every company transaction, whether it is coming in or going out, needs to have a category assigned to it. That is how you know the difference between your marketing costs, and your advertising expenses, for example – and how to track your online advertising expenses separately from your radio advertising.
This chart can be as simple or as complicated as you need. And, you can always modify your chart of accounts to reflect changes in your business.
Here are some sample accounts that you might want on your chart of accounts:
Liability Accounts
Operating Income Accounts
Operating Expense Accounts
This list should help you get started setting up you chart of accounts, but it is possible – even likely – that you will need other accounts that will require additional assistance. For example, there are several different accounts that could require different types of depreciation for tax purposes.
Call 800-508-1726 and ask about how NCH Tax Solutions can help you get your books ready for next year’s tax season.
I don’t think I’ve ever met an entrepreneur who actually likes the accounting aspect of running a business. But it can’t be ignored. Even if you don’t love it, you have to do it – or at least somebody in your organization has to do it for you.
But even if you don’t do your own bookkeeping yourself, you have an important responsibility to understand it. If you don’t at least understand your accounting, you don’t have a prayer at understanding your company financials. What’s worse, you are then at tremendous risk of becoming victimized by that somebody else because they know they can play with the numbers and you won’t catch it. How many times have you read a news story about a long-time bookkeeper being arrested for embezzlement? By taking responsibility to understand your own accounting practices and systems, you can eliminate the temptation and potential for crimes of opportunity. It just makes sense.
Having said that, I spoke with new entrepreneur a few days ago who was confused and concerned about dealing with a new limited liability company that he had recently formed. “How do I get money into it?” “How do I get money out of it?” “How do I pay my son?” “How do I…?”
I had to back him up a few steps before we could get to many of his questions. I wanted him to focus for a minute on his accounting systems. The systems (or lack thereof) that he uses to account for every financial transaction touch every question that he had. And, as it turns out, he hadn’t really thought about it yet.
Personally, I can’t imagine the “dark ages” of business, when all the accounting had to be manually recorded in “double-entry” ledgers. I am, gladly, a child of the computer age. And, what better job is there for a computer in all of business than keeping the books? There are several software packages available designed for small business accounting – some are stand-alone-installations, and others are hosted web services. Almost any of them will get you started, but I generally recommend going with a platform that most accountants and bookkeepers will be familiar with – like QuickBooks, for example.
Among the first things that you need to do when using QuickBooks – or any other system, for that matter – is to set up your “Chart of Accounts”.
What is a Chart of Accounts?
A chart of accounts is a list of all the categories of income, expense, assets and liabilities of the company. Every company transaction, whether it is coming in or going out, needs to have a category assigned to it. That is how you know the difference between your marketing costs, and your advertising expenses, for example – and how to track your online advertising expenses separately from your radio advertising.
This chart can be as simple or as complicated as you need. And, you can always modify your chart of accounts to reflect changes in your business.
Here are some sample accounts that you might want on your chart of accounts:
Asset Accounts
- Cash: You want a separate account for each bank account you have, including payroll accounts, certificates of deposit, etc.
- Inventory: This should reflect the cost of goods that you have on hand, but are not yet sold.
- Accounts Receivable: This account is used to record amount owed to the company for goods that have already been sold, or services already performed.
- Land: The cost to purchase and improve land for company use.
- Buildings: The cost to purchase or build buildings used by the company.
- Equipment: The cost to purchase equipment used by the company.
Liability Accounts
- Accounts Payable: Amounts owed for goods and services purchased by the company under terms.
- Loans Payable: Any principal paid on loans.
- Interest Payable: Any interest paid on loans
Operating Income Accounts
- Sales – Products: Usually, this account has a number of sub-accounts to reflect the various products or product lines offered by the company.
- Sales – Services: This account might have a number of sub-accounts to reflect the various services or service lines offered by the company.
- Rental Income: Any payment received for rental of company properties.
- Interest Income: Any interest received on deposit accounts or accounts payable.
Operating Expense Accounts
- Salaries: Salaried employees receive a fixed amount on a regular basis. Salaried employees are typically – but not always – involved in some level of management.
- Wages: Wages are paid to non-salary employees, These are usually based on hourly-wages.
- Supplies: Any amount spent on office supplies.
- Rent: Any amount payed for use of facilities.
- Utilities: Any amount paid for power, water, heat, and sewer, etc.
- Insurance: Any amount paid for business insurance, including; indemnification, liability, errors & omissions, etc.
- Telephone: Any amount paid for telephone use. This account might have additional sub-accounts to reflect local, long-distance, and toll-free service, etc.
- Marketing: Any amount paid for marketing materials, brochures, website, search engine optimization, branding, etc.
- Advertising: Any amount paid to place advertisements. This account might have sub-accounts for various advertising media, such as radio, televisions, direct mail, pay-per-click, etc.
- Employee Benefits: Any amount paid for employee health insurance, education reimbursement, life insurance, etc.
- Automobile: Any automobile-related expenses.
- Travel: Any expenses related to hotels, taxi fares, airline flights, etc.
- Meals & Entertainment: Any amount spent on food, beverages and entertainment – which is work-related.
- Postage & Shipping: This could include sub accounts for various shipping carriers, or shipping services, such Next-Day, 2nd Day, Ground, bulk mail, etc.
- Taxes: This account may have sub-accounts including property taxes paid, sales tax paid, and federal, state or local income taxes, etc.
- Repairs & Maintenance: Any amounts spent of repairing or maintaining company assets.
- Bad Debt: This account would reflect any amounts owed for goods or services sold, for which payments have not be received, and which the company will not longer pursue.
- Credit Card Processing: Expenses related to merchant account processing of credit cards, debit cards or ACH payments.
- Contract Services: Amount paid to non-employee contractors, including many out-sourced services.
This list should help you get started setting up you chart of accounts, but it is possible – even likely – that you will need other accounts that will require additional assistance. For example, there are several different accounts that could require different types of depreciation for tax purposes.
Call 800-508-1726 and ask about how NCH Tax Solutions can help you get your books ready for next year’s tax season.
Entrepreneurship & Well-Being
Wednesday/November/18 15:54 Filed in: entrepreneurship
by Derek Rowley © All Rights Reserved
by Derek G. Rowley
If you are not familiar with it, the Gallup-Healthways Well-Being Index tracks and measures the emotional, psychological and physical health of Americans across all sectors. Their website is a fascinating current and historical snapshot of our country. From their data, many important lessons can be learned about us – individually and collectively.
Recently, Gallup-Healthways published a report that demonstrated that entrepreneurs have the highest overall well-being of any occupational group – despite the fact that business owners work longer hours than any other category. The research shows that working long hours doesn’t actually diminish one’s well-being with the exception of those who are not really engaged in their work.
The Gallup-Healthways report further breaks down the well-being ranking into six sub categories:
by Derek G. Rowley
If you are not familiar with it, the Gallup-Healthways Well-Being Index tracks and measures the emotional, psychological and physical health of Americans across all sectors. Their website is a fascinating current and historical snapshot of our country. From their data, many important lessons can be learned about us – individually and collectively.
Recently, Gallup-Healthways published a report that demonstrated that entrepreneurs have the highest overall well-being of any occupational group – despite the fact that business owners work longer hours than any other category. The research shows that working long hours doesn’t actually diminish one’s well-being with the exception of those who are not really engaged in their work.
The Gallup-Healthways report further breaks down the well-being ranking into six sub categories:
- Work Environment. Entrepreneurs score 16 percentage points higher than the next highest occupation. The ranking is based on job satisfaction, the ability to use strengths at work, and the level of trust and openness in the work environment.
- Basic Access. This metric is based on access to basic needs, such as food, shelter, healthcare, and a safe, satisfying place to live. Entrepreneurs placed fourth in this category, trailing Manager/Executives, Professionals, and Clerical.
- Emotional Health. Interestingly – but perhaps no surprise – those working in the Farming/Forestry sectors lead this category, followed by Professionals, Manager/Executives, and Entrepreneurs.
- Healthy Behavior. This sub-index measures four behaviors strongly linked to physical health: eating healthy, smoking, regular consumption of fruit & veggies, and frequency of exercise. Again, Farming/Forestry workers lead this, followed closely by Entrepreneurs.
- Physical Health. This measures nine items that indicate chronic or daily illness. Construction workers rate in a statistical tie with Manager/Executives, then Professionals, Sales, Installation, Farming/Forestry, followed by Entrepreneurs. This is the category where Entrepreneurs rank lowest in the survey.
- Life Evaluation. This measures where people evaluate their present and future lives on a scale of 1 to 10. Entrepreneurs rank fourth in this category, trailing Professionals, Manager/Executives, and Sales workers.
New IRS Retirement Plan Navigator Aims to Help Small Business
Wednesday/November/18 15:54 Filed in: retirement
WASHINGTON — The Internal Revenue Service has created a new Web-based tool to help small business owners determine which tax-favored pension plan best suits their needs and how to keep their plans in compliance.
The IRS Retirement Plan Navigator is intended to provide employers with an easy-to-use guide that focuses on three areas: choosing a plan, maintaining a plan and correcting a plan.
By using the navigator, employers may find that choosing and maintaining a pension plan is not as daunting as they thought. Some plan types are less costly and easier to establish than others.
The navigator does not suggest which plan may be best for a specific employer but it does lay out the options to allow them to choose one that best fits their situations. The navigator includes a side-by-side comparison of pension plans and their requirements.
The navigator provides a checklist and suggested resources for maintaining compliance. Pension laws change frequently. Employers can minimize problems by doing a once-a-year review to ensure they maintain compliance.
The IRS also recognizes that mistakes can be made unintentionally, and many errors can be corrected without notifying the agency. The navigator offers suggested options to employers seeking to correct errors and bring their plans back into compliance. Although the Retirement Plan Navigator is aimed at small business owners, it also can help mid-size businesses review their options as well. Individuals who want to better understand their employer’s plan may also find it of use.
The Web-based guide will be kept up to date as pension laws and regulations change.
The IRS Retirement Plan Navigator is intended to provide employers with an easy-to-use guide that focuses on three areas: choosing a plan, maintaining a plan and correcting a plan.
By using the navigator, employers may find that choosing and maintaining a pension plan is not as daunting as they thought. Some plan types are less costly and easier to establish than others.
The navigator does not suggest which plan may be best for a specific employer but it does lay out the options to allow them to choose one that best fits their situations. The navigator includes a side-by-side comparison of pension plans and their requirements.
The navigator provides a checklist and suggested resources for maintaining compliance. Pension laws change frequently. Employers can minimize problems by doing a once-a-year review to ensure they maintain compliance.
The IRS also recognizes that mistakes can be made unintentionally, and many errors can be corrected without notifying the agency. The navigator offers suggested options to employers seeking to correct errors and bring their plans back into compliance. Although the Retirement Plan Navigator is aimed at small business owners, it also can help mid-size businesses review their options as well. Individuals who want to better understand their employer’s plan may also find it of use.
The Web-based guide will be kept up to date as pension laws and regulations change.
This Month in Lawsuit Abuse
Wednesday/November/18 15:52 Filed in: litigation
When a man suddenly turned in front of seven-year-old Scott Swimm on the ski mountain, Scott reacted and prevented a collision. Instead, he passed over the man’s skis, and both Scott and the man lost their balance. As Scott stood up and tried to apologize, the man grabbed Scott and threatened to sue him and his whole family.
Understanding Tax Nexus
Wednesday/November/18 15:50 Filed in: tax strategy
by Derek Rowley © 2009 All Rights Reserved
Nexus is a Latin work for a common tie or connection, and it is a key term in business today in determining the tax jurisdiction that applies to state business taxes. Because of the interconnected nature of our economy today, the discussion of tax nexus has clear implications for many small businesses. They often find themselves operating in multi-state environments, but typically lack the expertise and means to limit their tax liability and audit risk.
In 2006, for example, an independent survey of over 500 small and mid-sized companies found that companies average more than $325,000 per year in annual costs to manage just sales tax compliance alone. Even so, those companies still paid an average of $32,000 each year in penalties and interest due to errors and omissions.
This illustrates that nexus is a very complicated and fluid issue these days, as the various states are aggressively pushing the boundaries of the legal limits on their power to impose tax on businesses operating across state lines. What’s worse, the penalties for underreporting, underpaying, and under-collecting can be devastating - especially given the fact that there is no statute of limitations on state tax issues. That means that if your business is snared in a tax nexus dispute, states can go back years to collect additional revenue.
There are generally two separate tax issues that involve nexus:
If an auditor determines that you failed to collect sales tax from your customer, the result is that you just decreased your profit margin by the percentage of the sales tax. (What is your profit margin - 7%?, 9%?) Imagine what would happen if a state tax auditor determined that you failed to collect state sales tax - and that sales tax rate is 9% - there goes your entire profit margin! And that is before penalties and interest. Then, you repeat the process using the state corporate income tax calculations.
Today, states are desperately revenue hungry. So, they respond by aggressively closing tax loopholes, and assertively chasing perceived transgressors to increase revenue collections. Many state and local governments have outsourced this tax collection process to private companies that collect a bounty on any tax revenues they identify. These revenue department commando units roam trade shows, business centers, telephone directories and websites looking for evidence of non-compliance.
States also send out mass mailings of nexus questionnaires to companies suspected of underreporting or underpaying taxes. While some companies choose to ignore these questionnaires, doing so can be dangerous because failing to respond usually eliminates any option for settlement. These questionnaires are designed to catch you - so use extreme care and professional tax help when filling them out. Some tax experts recommend responding with a letter rather than with a survey when your answers are complex or not clear-cut. These nexus questionnaires can catch you even if the questionnaire wasn’t sent to your company. An answer to a survey question by one of your vendors (or a state tax audit of one your vendors) could target your company for an audit appointment.
Your best protection against exposure to unforeseen tax nexus is to be aware of of the basic activities that create nexus. This requires that you conduct a thorough evaluation of how you conduct business in every jurisdiction you do business. Ask yourself questions such as:
Where do you maintain a permanent place of business? Include all your locations, warehouses, and properties, including leased property at customer locations.
If, after assessing your operations, you find that you have established tax nexus, the law requires you to register in those jurisdictions and begin paying taxes. If there are back taxes, talk to a tax professional about your options. There may be voluntary disclosure, amnesty or exemption programs that you can utilize to resolve your tax requirements.
However, if you are starting a business, make sure you register in any jurisdiction where you will be collecting taxes BEFORE you start collecting. Otherwise, you may find yourself in violation of fraud statutes, which can get ugly quickly.
What should you do now?
Nexus is a Latin work for a common tie or connection, and it is a key term in business today in determining the tax jurisdiction that applies to state business taxes. Because of the interconnected nature of our economy today, the discussion of tax nexus has clear implications for many small businesses. They often find themselves operating in multi-state environments, but typically lack the expertise and means to limit their tax liability and audit risk.
In 2006, for example, an independent survey of over 500 small and mid-sized companies found that companies average more than $325,000 per year in annual costs to manage just sales tax compliance alone. Even so, those companies still paid an average of $32,000 each year in penalties and interest due to errors and omissions.
This illustrates that nexus is a very complicated and fluid issue these days, as the various states are aggressively pushing the boundaries of the legal limits on their power to impose tax on businesses operating across state lines. What’s worse, the penalties for underreporting, underpaying, and under-collecting can be devastating - especially given the fact that there is no statute of limitations on state tax issues. That means that if your business is snared in a tax nexus dispute, states can go back years to collect additional revenue.
There are generally two separate tax issues that involve nexus:
- Sales & Use Tax
- Corporate Tax.
If an auditor determines that you failed to collect sales tax from your customer, the result is that you just decreased your profit margin by the percentage of the sales tax. (What is your profit margin - 7%?, 9%?) Imagine what would happen if a state tax auditor determined that you failed to collect state sales tax - and that sales tax rate is 9% - there goes your entire profit margin! And that is before penalties and interest. Then, you repeat the process using the state corporate income tax calculations.
Today, states are desperately revenue hungry. So, they respond by aggressively closing tax loopholes, and assertively chasing perceived transgressors to increase revenue collections. Many state and local governments have outsourced this tax collection process to private companies that collect a bounty on any tax revenues they identify. These revenue department commando units roam trade shows, business centers, telephone directories and websites looking for evidence of non-compliance.
States also send out mass mailings of nexus questionnaires to companies suspected of underreporting or underpaying taxes. While some companies choose to ignore these questionnaires, doing so can be dangerous because failing to respond usually eliminates any option for settlement. These questionnaires are designed to catch you - so use extreme care and professional tax help when filling them out. Some tax experts recommend responding with a letter rather than with a survey when your answers are complex or not clear-cut. These nexus questionnaires can catch you even if the questionnaire wasn’t sent to your company. An answer to a survey question by one of your vendors (or a state tax audit of one your vendors) could target your company for an audit appointment.
Your best protection against exposure to unforeseen tax nexus is to be aware of of the basic activities that create nexus. This requires that you conduct a thorough evaluation of how you conduct business in every jurisdiction you do business. Ask yourself questions such as:
Where do you maintain a permanent place of business? Include all your locations, warehouses, and properties, including leased property at customer locations.
- Have you operated a temporary place of business? If so, where - and for how long? This includes trade show booths, sales meetings, off-site training, and movable equipment at job sites.
- Where you do have individuals operating permanently? This includes administrative personnel, sales representatives, customer service personnel, and agent.
- Where do you have individuals operating temporarily? And how long are/have they working there?
- Did you sign a contract in another state? That could significantly alter your nexus status for any transactions or revenue generated under that contract.
- Did you send anyone out to perform installation or training? That almost always creates nexus.
- How do you ship products into another state? If it is a company owned or leased truck, you’ve got nexus problems.
If, after assessing your operations, you find that you have established tax nexus, the law requires you to register in those jurisdictions and begin paying taxes. If there are back taxes, talk to a tax professional about your options. There may be voluntary disclosure, amnesty or exemption programs that you can utilize to resolve your tax requirements.
However, if you are starting a business, make sure you register in any jurisdiction where you will be collecting taxes BEFORE you start collecting. Otherwise, you may find yourself in violation of fraud statutes, which can get ugly quickly.
What should you do now?
- Be proactive. Don’t wait until you get a nexus survey in the mail. Contact a tax professional, such as one of our tax team at NCH Tax Solutions, to discuss your nexus activities and help manage your nexus exposure.
- Be smart. Many nexus-creating activities can be managed by changing your processes to accommodate nexus laws. Our Office Package service is one solution that works for many business models. Call our office and talk to one of our consultants for more information.
Small Business Lending Has Not Bounced Back
Wednesday/November/18 15:50 Filed in: credit & funding
by Derek Rowley © 2009 All Rights Reserved
Although many of the nation’s banks are reporting an increase in small business lending, there is a growing sense of apprehension about the commercial lending markets that are keeping many lenders on the sidelines - and many small businesses without capital.
According the Wall Street Journal, JPMorgan Chase claims to have issued $1.5 billion in loans to over 4,000 small businesses during the second quarter of 2009 - an increase of 32% over the first quarter. The country’s top 22 banks that received capital injections from the U.S. government have all reported similar increases.
One of the factors in this increase in small business lending has been the Small Business Administration’s increase in it’s 7(a) loan guarantee from 75% to 90%. Unfortunately, the SBA also reports that it is running out of funds for the program that has been so successful.
Still, small business lending is not currently as vibrant as it once was, and may not return to previous levels soon. The Wall Street Journal quotes Bob Coleman, a small business banking analyst as saying, “We’re still in a recession. We’re not talking Armageddeon here, but it will likely remain tough for businesses to get loans.”
The problem appears to be rooted in a lack of solid private backing for small business loans - especially loans for commercial real estate and equipment. And, lending terms are still very tight. As many business owners have seen their credit scores slide, they have lost the ability to qualify for loans individually. This underscores the need for companies to establish, build and preserve an independent business credit profile and score for when the lending market returns.
The thing to remember is that we are seeing a business cycle. The lending market will return. The question is will small business owners be ready?
Although many of the nation’s banks are reporting an increase in small business lending, there is a growing sense of apprehension about the commercial lending markets that are keeping many lenders on the sidelines - and many small businesses without capital.
According the Wall Street Journal, JPMorgan Chase claims to have issued $1.5 billion in loans to over 4,000 small businesses during the second quarter of 2009 - an increase of 32% over the first quarter. The country’s top 22 banks that received capital injections from the U.S. government have all reported similar increases.
One of the factors in this increase in small business lending has been the Small Business Administration’s increase in it’s 7(a) loan guarantee from 75% to 90%. Unfortunately, the SBA also reports that it is running out of funds for the program that has been so successful.
Still, small business lending is not currently as vibrant as it once was, and may not return to previous levels soon. The Wall Street Journal quotes Bob Coleman, a small business banking analyst as saying, “We’re still in a recession. We’re not talking Armageddeon here, but it will likely remain tough for businesses to get loans.”
The problem appears to be rooted in a lack of solid private backing for small business loans - especially loans for commercial real estate and equipment. And, lending terms are still very tight. As many business owners have seen their credit scores slide, they have lost the ability to qualify for loans individually. This underscores the need for companies to establish, build and preserve an independent business credit profile and score for when the lending market returns.
The thing to remember is that we are seeing a business cycle. The lending market will return. The question is will small business owners be ready?
Fourth Quarter Tax Planning
Wednesday/November/18 15:47 Filed in: tax
by Derek Rowley © 2009 All Rights Reserved
Now that we have entered the fourth quarter of 2009, it is time to start looking at tax planning issues while there is still time to make adjustments and decisions that can favorably impact your taxes this year. Taking action early enough can mean tax savings for the year and for years to come.
Now that we have entered the fourth quarter of 2009, it is time to start looking at tax planning issues while there is still time to make adjustments and decisions that can favorably impact your taxes this year. Taking action early enough can mean tax savings for the year and for years to come.
- Review the form of business organization. It is always a good idea to periodically review the form of business that you are currently using. Depending upon your strategic needs, there can be advantages to using different entities for different tax outcomes. If you are using a “C” corporation, you should consider whether you should be preparing to file “S” corporation status for the coming year - or not.
- Plan equipment purchases. Take advantage of the increased dollar limit for first-year expensing ($250,000 in 2009).
- Review inventory. Consider writing down obsolete or damaged goods to their probably selling price. Generally, taxpayers must offer the goods for sale at a reduced price in order to take a loss on the decline in the value of the inventory.
- Manage expenses. Review your supplies and reorder now to increase deductions for the current year. Also, you can schedule company meetings this year that are slated for next year in order to increase deductions.
- Review estimated taxes to avoid penalties. Generally, for a corporation to avoid paying penalties for underpayment of taxes, it’s estimated tax payments must be at least the lesser of the following:
- 100% of the tax shown on the current return, or
- 100% of the tax shown on the prior year’s return.
10 Keys to Surviving the Recession
by Derek G. Rowley (c) 2009, All Rights Reserved
It seems to be the consensus among business and political leaders that our economy is worse than it has been in generations. Statistics, for what they are worth, prove it. In other words, most of us have never seen anything like today’s economic crisis, and there isn’t much in our own experience that gives us guidance in our business decisions. A recession such as this requires a shift in our thinking, our planning, and our decision-making in order for our business to see the light of day at the other end of this economic cycle.
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It seems to be the consensus among business and political leaders that our economy is worse than it has been in generations. Statistics, for what they are worth, prove it. In other words, most of us have never seen anything like today’s economic crisis, and there isn’t much in our own experience that gives us guidance in our business decisions. A recession such as this requires a shift in our thinking, our planning, and our decision-making in order for our business to see the light of day at the other end of this economic cycle.
Read More...
The Continued Death of Privacy
Day One of President Obama’s administration saw a dramatic shift in the government’s general approach to privacy-related issues in a number of statements issued by President Obama himself. His statements specifically address transparency of government, but for those who are interested in privacy in their personal, financial, and business affairs, they will make your neck hairs stand on end. Read More...
Man awarded $76.6 million for taking foolish dare
Wednesday/February/04 13:24 Filed in: lawsuit
Tim Hoffman is a 26-year old former construction worker who is essentially paralyzed from the neck down as a result of injuries he sustained when, on a dare, he jumped off a dock in Florida and broke his neck. A jury awarded him $1.5 million for past medical expenses, $89,000 for lost earnings, $21.7 million for future medical expenses, $583,000 for future lost earnings - and an incredible $52.8 million in pain and suffering. But there is more to the story. Hoffman was a temporary worker sent by an employment agency to work for C&D Dock Works, the general contractor working on repairing the dock in question. Evidently, Hoffman was goaded by fellow workers into jumping into the water on a dare for $20. So, taking a running start, he cleared the railing at the edge of the dock and landed 10 feet below on his head in a foot of water, breaking his neck between the fifth and sixth vertebrae. This foolish tragedy was the consequence of a willful decision made by an adult to do something dangerous. As for C&D Dock Works, they have filed for Chapter 7 bankruptcy as a result of the incident.
How Money Works
Tuesday/February/03 13:27 Filed in: economy
With all the news about the economic situation dominating the headlines these days, I have found in my conversations that many people don’t feel that they understand the way money works in our economy. I found a very informative website that offers a good background and explanation about how money works. It covers the money supply, the Federal Reserve System, banking, payment systems, financial markets, the role of government and policy issues - all in easy to understand, bite-sized pieces. Check it out at www.wfhummel.cnchost.com
Newspaper sues customer
Monday/February/02 13:31 Filed in: lawsuit
In the era of the Internet, many newspapers must be feeling like they are going the way of buggy-whip manufacturers. Some papers are going out of business, and others are reducing the number of days per week that they actually print the paper. Generally, newspaper advertising comes from advertising and subscriptions. But, the Financial Times has discovered a new revenue source: Suing their customers! It seems that one of their business customers had paid to access subscription-only content on the website maintained by the Financial Times, (FT.com), and had been sharing a single username and password among its employees. As a result, FT claims that it is entitled to damages based on “infringement”, in addition to “increased statutory damages” due to the “willful nature” of the infringement.
IRS targets roll-over business startup financing
Sunday/February/01 13:29 Filed in: IRS
The IRS has issued a memorandum containing audit guidelines for schemes that are marketed as a means of giving prospective business owners access to accumulated tax-deferred retirement funds without paying distribution taxes in order to fund new business start-up costs. According to the memo, “an attribute common to this design is the assignment of newly created enterprise stock into a qualified plan as consideration for these transferred funds, the valuation of which may be questionable.”
Legal Upstreaming
Friday/January/30 13:22 Filed in: tax nexus | tax strategy
by Derek G. Rowley (c) 2009. All Rights Reserved
Blogger Diane Kennedy, a CPA who graduated from the University of Nevada, Reno wrote a recent post on her website, TaxLoopholes.com, about legally upstreaming income. Diane points out several legitimate strategic uses of upstreaming strategies. I will use her four stated uses, and add my own commentary:
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Blogger Diane Kennedy, a CPA who graduated from the University of Nevada, Reno wrote a recent post on her website, TaxLoopholes.com, about legally upstreaming income. Diane points out several legitimate strategic uses of upstreaming strategies. I will use her four stated uses, and add my own commentary:
Read More...
The California Train Wreck
Monday/January/26 13:01 Filed in: economy
A Reuters article written by Dan Whitcomb outlines the challenges faced by California in the current economic downturn. It is staggering to consider the following facts: Read More...
Ten Trillion Dollars Ain't What it Used to Be
Every business owner that I know is concerned about the long-term consequences of the government bailouts of banks, automakers, and who-knows-what-else. Nobody really knows how we are ever going to payoff the current national debt - at least in today’s dollars. An example of how it could play out is seen in Zimbabwe, which recently re-monetized it’s economy after a run of 231,000,000% inflation that has reduced the value of currency to virtually nothing. The government had to re-monetize in August - at the rate of $10 Trillion to $1 - because they had run out of room to print zeros on their currency: they even issued a $100 Billion dollar bill last July! After the re-monetization, the largest currency (for a while) was a $50,000 bill. Toilet paper cost $100,000. So, if you exchanged $100,000 Zimbabwe dollars for $5 bills, you’ll get 20,000 notes. Or you can buy toilet paper for the same price, which has only 72 pieces. You can see where this little tidbit is going...
Why asset protection? Because of stories like this...
Saturday/January/17 12:57 Filed in: lawsuit | asset protection
Bad Economy = Great Estate Planning Opportunities!
Thursday/January/15 13:19 Filed in: economy | estate planning
by Derek G. Rowley (c) 2009, All Rights Reserved
There is no better time to transfer wealth to the next generation than when everything is worth a lot less. Now, for example, would be a good time. Stocks, bonds, and real estate values have plummeted - and interest rates are at all-time lows. On second thought, I correct myself: Now is a great time for estate planning!
Read More...
There is no better time to transfer wealth to the next generation than when everything is worth a lot less. Now, for example, would be a good time. Stocks, bonds, and real estate values have plummeted - and interest rates are at all-time lows. On second thought, I correct myself: Now is a great time for estate planning!
Read More...
Frivolous Lawsuits are so ridiculous - they are actually funny!
Wednesday/January/14 14:32 Filed in: frivolous lawsuit
Small Business Survival Index ranks Nevada 2nd for business friendliness
Monday/January/12 15:41 Filed in: Nevada corporation benefits
The 13th annual "Small Business Survival Index," compiled by the Oakton, Virginia-based Small Business & Entrepreneurship Council, ranks Nevada second nationally for its friendliness to small businesses -- second only to South Dakota -- primarily because of the Silver State's favorable tax structure, the nonprofit small business advocacy group recently announced.
5 Steps to Obtaining Business Credit in Tough Times
Tuesday/January/06 15:23 Filed in: credit & funding
By Peyman Aleagha, RISMEDIA, Inc.
Despite all the doom and gloom talk surrounding economy, bailouts, foreclosures, soft real estate markets and the like, attaining a line of credit is still a viable option. According to Itamar Chalif, president of Atlantic Capital Solutions (ACS), the “score” on getting a line of credit for your business still may come down to one thing: your credit score.
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Despite all the doom and gloom talk surrounding economy, bailouts, foreclosures, soft real estate markets and the like, attaining a line of credit is still a viable option. According to Itamar Chalif, president of Atlantic Capital Solutions (ACS), the “score” on getting a line of credit for your business still may come down to one thing: your credit score.
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Lend-ability: Your Business Practices Can Impact Loan Qualification
Tuesday/January/06 15:20 Filed in: credit & funding
by Derek G. Rowley (c) 2009. All Rights Reserved
Disraeli once said that “there are three kinds of lies: lies, damned lies, and statistics.”
In business, some of the “statistics” that can tell such damning lies are the numbers found on company balance sheets and income statements. Too often, the reality is not accurately reflected in the numbers. Accounting is not intended to be a creative art, but in the hands of the right practitioner or aggressive entrepreneur, the accounting numbers can paint almost any type of picture.
Read More...
Disraeli once said that “there are three kinds of lies: lies, damned lies, and statistics.”
In business, some of the “statistics” that can tell such damning lies are the numbers found on company balance sheets and income statements. Too often, the reality is not accurately reflected in the numbers. Accounting is not intended to be a creative art, but in the hands of the right practitioner or aggressive entrepreneur, the accounting numbers can paint almost any type of picture.
Read More...
IRS Commissioner Discusses Corporate Taxes with International Conference
Tuesday/January/06 15:19 Filed in: IRS
IRS Commissioner Discusses Corporate Taxes with International Tax Conference
by Derek G. Rowley (c) 2009. All Rights Reserved
The Commissioner of the IRS recently spoke out on a number of issues related to corporate taxation. While his remarks were specific to address international corporate tax challenges, they also serve to provide an insight into the approach and philosophy of the IRS toward corporations and corporate taxes in general. This is not a Nevada incorporation specific issue, because his remarks address the IRS approach to a number of common business strategies in the international business arena. However, it is not a real stretch to see how the Service might also address similar domestic business strategies in the future.
Douglas H. Shulman, Commissioner of Internal Revenue addressed the 21st Annual George Washington University International Tax Conference last month in Washington, D.C., and made some interesting remarks about the enforcement priorities of the IRS. He framed his remarks in the context of the present economic challenges, saying that “taxpayers’ attitudes and perceptions about the taxes they pay reflect the changing world around them.”
Read More...
by Derek G. Rowley (c) 2009. All Rights Reserved
The Commissioner of the IRS recently spoke out on a number of issues related to corporate taxation. While his remarks were specific to address international corporate tax challenges, they also serve to provide an insight into the approach and philosophy of the IRS toward corporations and corporate taxes in general. This is not a Nevada incorporation specific issue, because his remarks address the IRS approach to a number of common business strategies in the international business arena. However, it is not a real stretch to see how the Service might also address similar domestic business strategies in the future.
Douglas H. Shulman, Commissioner of Internal Revenue addressed the 21st Annual George Washington University International Tax Conference last month in Washington, D.C., and made some interesting remarks about the enforcement priorities of the IRS. He framed his remarks in the context of the present economic challenges, saying that “taxpayers’ attitudes and perceptions about the taxes they pay reflect the changing world around them.”
Read More...
Your State Tax Bill is Likely to Go Up - Maybe WAY Up
Tuesday/January/06 15:10 Filed in: State tax
by Derek G. Rowley (c) 2009. All Rights Reserved
The economic climate that individuals, corporations and businesses have been feeling has also hit state and local governments in a big way. Most states will be addressing huge budget deficits during the 2009 legislative cycle with limited options.
Although Nevada is one of the states with a budget deficit that must be resolved in coming months, Governor Jim Gibbons will introduce his budget this month without any new tax increases: No corporate taxes, no personal income taxes, and no new property taxes. Nevada’s Governor is, apparently, alone in his approach to dealing with budget problems. He insists on cutting state spending until they meet the existing revenues.
Other states, however, are not so lucky.
Read More...
The economic climate that individuals, corporations and businesses have been feeling has also hit state and local governments in a big way. Most states will be addressing huge budget deficits during the 2009 legislative cycle with limited options.
Although Nevada is one of the states with a budget deficit that must be resolved in coming months, Governor Jim Gibbons will introduce his budget this month without any new tax increases: No corporate taxes, no personal income taxes, and no new property taxes. Nevada’s Governor is, apparently, alone in his approach to dealing with budget problems. He insists on cutting state spending until they meet the existing revenues.
Other states, however, are not so lucky.
Read More...
Top 10 Tax Stories for 2008
by Derek G. Rowley
A discussion group at the TaxProf Blog has identified their annual Top Ten Tax Stories of 2008, covering a range of tax-related issues. You can read the whole story at their site, but for our purposes we will count them down, Letterman-style:
Read More...
A discussion group at the TaxProf Blog has identified their annual Top Ten Tax Stories of 2008, covering a range of tax-related issues. You can read the whole story at their site, but for our purposes we will count them down, Letterman-style:
Read More...
Estate Planning & the Pittsburgh Steelers
Thursday/October/23 11:24 Filed in: estate planning
The devastating impact of estate taxes and on family-owned businesses is being illustrated by the Pittsburgh Steelers organization. Art Rooney, Sr., founder of the team, left the team ownership to his five sons when he died in 1988. Since then, the value of the NFL team has ballooned, estimated to be worth between $717 million and $1.2 billion as estimated by Forbes Magazine and Goldman Sachs, respectively. At least four of the five brothers want to sell their equal shares in the team in order to avoid costly estate taxes for their children and grandchildren. But, the NFL wants the family to retain ownership and requires the approval of 24 of the NFL’s 32 owners to approve any sale. The brothers rejected an offer of $550 million from billionaire Stanley Druckenmiller, seeking something closer to what they believe is the fair market value of the organization. Estate taxes on a $1.2 billion estate could run in excess of $539 million dollars.
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State Tax Collectors Bill Online Braggers
Thursday/October/23 11:22 Filed in: State tax
State tax collectors are everywhere, leaving no stone unturned in their relentless pursuit of tax revenue. A pair of Oklahoma college students discovered that state tax collectors, responding to braggadocio on their MySpace page, sent a tax bill of $320,000. It turns out that the students were running a company called Keghead, a college party business, and in order to attract more partiers had exaggerated their success with online hype - which included the claim of “over 1 billion served”. Tax officials estimated the business to have hosted over 100 large events over five years, when the company had actually only hosted 20 small parties over 18 months, netting less than $2,000 in gross revenue. Naturally, the Tax Commission spokeswoman could not comment on the case. But, be careful when you boast and when you post: The Tax Man is watching!
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Lawyer Defrauds Client Estate
Thursday/October/23 11:20 Filed in: estate planning
John Karoly, a prominent member of the Bar in Allentown, Pennsylvania, was indicted in September on charges of conspiring to defraud the estates of his brother and sister-in-law by creating fraudulent wills. Peter Karoly and his wife Lauren Angstadt died in a plane crash in 2007 without children - but with estates worth several million dollars. John, upset that he was left out of his brother’s 1985 will, remedied the situation by creating fake wills that intended to supercede the authentic wills.
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Strip Club Sued
Thursday/October/23 11:18 Filed in: litigation
A Florida man is suing a Pompano Beach strip club, alleging that an exotic dancer “negligently performed her pole dance routine when one of her high heeled shoes flew up in the air and struck the mirrored glass ceiling, causing it to shatter and fall” on him. Charles Privette claims that he “was unable to avoid being hit by pieces of the shattered mirror and high-heeled shoe,” and that the strip club “breached its duty” when the dancer “failed to perform her pole dance routine in a reasonably safe manner.” Privette is seeking more than $15,000 in damages, charging that his injuries include pain & suffering, disability, disfigurement, mental anguish, “loss of capacity for the enjoyment of life”, as well as medical expenses and nursing care.
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33 Year Old Lawsuit Resolved
Thursday/October/23 11:17 Filed in: litigation
The Salt Lake Tribune reported the resolution of 33 year old lawsuit last month when the state Supreme court reversed a judgment of $134 that had been awarded to Richard and Nancy Madsen. The Madsens bought a home in 1964 by borrowing from Prudential, which required them to make monthly payments for taxes and insurance into a non-interest bearing account. The Madsen’s filed a lawsuit in 1975 for damages of lost interest on their advance payments. One reason the lawsuit crawled through the courts for over 30 years is because attorneys used it as the basis for $1 million class action lawsuit on behalf of over 9,500 class members who claimed they were owed an average of $105 each. In a cruel irony, Prudential had been purchased by Washington Mutual Bank, which we all know closed its doors last month in the largest bank failure in history. Wouldn’t you like to know the hourly billings by the attorneys over 33 years of litigation over $134? Read More...
Warren Buffet's 10 Rules to Success
Thursday/October/23 11:10 Filed in: Success
by Derek Rowley, (c) 2008, All Rights Reserved
Warren Buffet was recently interviewed in Parade magazine, the Sunday insert in Gannet newspapers. Parade can be a good source for a lot of light reading, suduko puzzles, and “celebrity watch” fluff pieces. I did not expect to read about America’s most respected investor giving sound business advice. Much of what Buffet recommends falls into the category of common sense. But, perhaps it is a bit refreshing that success and wealth can be attributed to following common-sense principles.
Here are Buffets 10 rules:
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Warren Buffet was recently interviewed in Parade magazine, the Sunday insert in Gannet newspapers. Parade can be a good source for a lot of light reading, suduko puzzles, and “celebrity watch” fluff pieces. I did not expect to read about America’s most respected investor giving sound business advice. Much of what Buffet recommends falls into the category of common sense. But, perhaps it is a bit refreshing that success and wealth can be attributed to following common-sense principles.
Here are Buffets 10 rules:
Read More...
11 Ways to Protect Yourself from Business Risk
Thursday/October/23 11:04 Filed in: asset protection
by Derek Rowley, (c) 2008, All Rights Reserved
Business is riskier than ever these days. The economy is a mess, credit markets are tight, taxes are high - and likely to go higher, the courts are clogged with frivolous lawsuits, and attorneys seem to rule the world. What can you and I do about it? Fortunately, we can do quite a bit to protect ourselves in this business environment. Here are 11 ways:
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Business is riskier than ever these days. The economy is a mess, credit markets are tight, taxes are high - and likely to go higher, the courts are clogged with frivolous lawsuits, and attorneys seem to rule the world. What can you and I do about it? Fortunately, we can do quite a bit to protect ourselves in this business environment. Here are 11 ways:
Read More...
Business Litigation to Increase in 2009
Thursday/October/23 10:59 Filed in: litigation
by Derek G. Rowley (c) 2008, All Rights Reserved
The fifth annual survey of litigation attorneys on corporate litigation issues conducted by the law firm of Fulbright & Jaworski was released last month, showing an increase in the expectations that litigation disputes will increase in 2009. According to the study, an astonishing 17% of all privately-held companies, and 9% of all small companies have “at least one lawsuit with more than $20 million at issue” - accounting for one in approximately every 5.5 privately-held companies, and one in approximately every 10 small companies. The issue showing the largest expected increases in litigation in the U.S. are employee wage & hour disputes, privacy and discrimination issues.
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The fifth annual survey of litigation attorneys on corporate litigation issues conducted by the law firm of Fulbright & Jaworski was released last month, showing an increase in the expectations that litigation disputes will increase in 2009. According to the study, an astonishing 17% of all privately-held companies, and 9% of all small companies have “at least one lawsuit with more than $20 million at issue” - accounting for one in approximately every 5.5 privately-held companies, and one in approximately every 10 small companies. The issue showing the largest expected increases in litigation in the U.S. are employee wage & hour disputes, privacy and discrimination issues.
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Nevada v. Wyoming
For many years, there has been an attempt by some in the state of Wyoming to promote Wyoming as a viable competitor to Nevada as a favorable incorporation jurisdiction for closely-held companies. In fact, Corporate Service Center opened a subsidiary in Cheyenne, Wyoming in 1993, and became the first incorporation company to promote and specialize in Wyoming company formation.
We learned from our many experiences in Wyoming that Wyoming simply does not - and, in our opinion, will not in the future - offer incorporation benefits that meet or exceed those that Nevada already provides. The current Wyoming Secretary of State does not favor promoting Wyoming as an incorporation center, and the Wyoming Bar Association is opposed to an in-state incorporation industry. As a result of our experiences in Wyoming, Corporate Service Center of Wyoming was closed after 11 years of operation, and many of the Wyoming clients were re-domesticated into Nevada.
Nevertheless, one Wyoming incorporation firm (www.wyomingcompany.com) actively promotes a comparison of Wyoming and Nevada, listing the following advantages in favor of Wyoming incorporation (quoting from their website):
1. No state income taxes
2. No information collected to be shared with the IRS
3. Privacy allowed
4. Shareholders are not listed with the State
5. Best asset protection laws
6. Nominee officers are legal
7. Citizenship not required
8. State tax not being considered
9. Wyoming draws little attention
10. No Nevada “stigma”
11. Lower startup costs
The purpose of this paper is to analyze these claims and compare the actual strengths and benefits of Nevada versus Wyoming incorporation.
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We learned from our many experiences in Wyoming that Wyoming simply does not - and, in our opinion, will not in the future - offer incorporation benefits that meet or exceed those that Nevada already provides. The current Wyoming Secretary of State does not favor promoting Wyoming as an incorporation center, and the Wyoming Bar Association is opposed to an in-state incorporation industry. As a result of our experiences in Wyoming, Corporate Service Center of Wyoming was closed after 11 years of operation, and many of the Wyoming clients were re-domesticated into Nevada.
Nevertheless, one Wyoming incorporation firm (www.wyomingcompany.com) actively promotes a comparison of Wyoming and Nevada, listing the following advantages in favor of Wyoming incorporation (quoting from their website):
1. No state income taxes
2. No information collected to be shared with the IRS
3. Privacy allowed
4. Shareholders are not listed with the State
5. Best asset protection laws
6. Nominee officers are legal
7. Citizenship not required
8. State tax not being considered
9. Wyoming draws little attention
10. No Nevada “stigma”
11. Lower startup costs
The purpose of this paper is to analyze these claims and compare the actual strengths and benefits of Nevada versus Wyoming incorporation.
Read More...
Most Downloaded: Social Security
Wednesday/October/01 12:10 Filed in: web
As our population continues to age, with the Baby Boomer generation starting into retirement, businesses need to identify how to tap into that growing market. A recent email I received reported the “most downloaded” legal reports accessed by lawyers over a 60 day period. The winner? A Guide to starting Social Security benefits.
Rhode Island nightclub fire settlement
Monday/September/22 12:11 Filed in: litigation
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - You will recall the tragic 2003 nightclub fire in Rhode Island that occurred when the rock band Great White set off fireworks in the club that ignited soundproofing foam, killing 96 and injuring over 200. I saw a news report that Clear Channel Communications, which owns a local radio station that helped promote the concert, recently settled for $22 million, even though they had nothing to do with the fire. Apparently Rhode Island’s “joint and several liability” laws allow for the liability to extend to anyone with the remotest connection to the event. Thus, JBL Speakers settled for $815,000 because their speakers contained flammable foam; Anheuser-Busch settled for $5 million and their local distributor for $16 million because their beer was sold at the nightclub; the manufacturer of the foam paid $16 million - even though their foam was not designed for the way it was being used; WPRI-TV paid $30 million because their cameraman’s equipment allegedly blocked an exit. WPRI was there to do a story on the fire dangers of nightclubs when the fire broke out.
LAS VEGAS - You will recall the tragic 2003 nightclub fire in Rhode Island that occurred when the rock band Great White set off fireworks in the club that ignited soundproofing foam, killing 96 and injuring over 200. I saw a news report that Clear Channel Communications, which owns a local radio station that helped promote the concert, recently settled for $22 million, even though they had nothing to do with the fire. Apparently Rhode Island’s “joint and several liability” laws allow for the liability to extend to anyone with the remotest connection to the event. Thus, JBL Speakers settled for $815,000 because their speakers contained flammable foam; Anheuser-Busch settled for $5 million and their local distributor for $16 million because their beer was sold at the nightclub; the manufacturer of the foam paid $16 million - even though their foam was not designed for the way it was being used; WPRI-TV paid $30 million because their cameraman’s equipment allegedly blocked an exit. WPRI was there to do a story on the fire dangers of nightclubs when the fire broke out.
Financial turmoil impacts living trusts
Wednesday/September/17 11:57 Filed in: estate planning
Time to Review Your Estate Plan
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - For years, legal practitioners and estate planners have advised clients to carefully think through the appointment of successor trustees named in living trusts. That advice has never been more relevant than now, as financial titans on Wall Street and elsewhere reel from the impact of our latest financial crisis. In light of the financial meltdown, now is a good time for you to review your trust and estate planning documents to look for potential problems.
In the typical living trust, the individual creating the trust becomes the trustee and the beneficiary. Then, in the event of death or disability, successor trustees are typically named, frequently the spouse or other family member. However, the traditional “catch-all” has been to name an additional successor trustee that is thought to be guaranteed to outlive any individual by naming a prominent national or regional bank as a corporate trustee. The reason for this is that the existence of a corporate trustee will ensure that the provisions of the trust will be carried out by someone with professional fiduciary responsibility.
Today, however, that strategy may need to be re-evaluated as some of the biggest names on Wall Street and other regional and local banks are shut down, seized by regulators and their assets sold. This can result in an unanticipated change in the actual corporate trustee, often resulting in long-distance frustration for future beneficiaries.
It is important to note that the trust assets held by a corporate trustee are not counted as property of the trustee, so they will not be directly impacted by the failure or bankruptcy of a corporate trustee. Nevertheless, the trust assets can be seriously impacted my market conditions, without any clear path for how trust assets should be invested to weather financial storms.
While there may be no clear solution to these challenges, those who are aware of these potential problems may avoid serious future problems by reviewing how their living trust addresses these issues, if they are addressed at all. That, and a bit of common-sense can go a long way towards avoiding problems. Fortunately, the beauty of the living trust is that it is revocable, allowing the individual who created the trust to make any necessary changes in the trust as long as they live. So, if you find a potential problem, you still have time to fix it.
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - For years, legal practitioners and estate planners have advised clients to carefully think through the appointment of successor trustees named in living trusts. That advice has never been more relevant than now, as financial titans on Wall Street and elsewhere reel from the impact of our latest financial crisis. In light of the financial meltdown, now is a good time for you to review your trust and estate planning documents to look for potential problems.
In the typical living trust, the individual creating the trust becomes the trustee and the beneficiary. Then, in the event of death or disability, successor trustees are typically named, frequently the spouse or other family member. However, the traditional “catch-all” has been to name an additional successor trustee that is thought to be guaranteed to outlive any individual by naming a prominent national or regional bank as a corporate trustee. The reason for this is that the existence of a corporate trustee will ensure that the provisions of the trust will be carried out by someone with professional fiduciary responsibility.
Today, however, that strategy may need to be re-evaluated as some of the biggest names on Wall Street and other regional and local banks are shut down, seized by regulators and their assets sold. This can result in an unanticipated change in the actual corporate trustee, often resulting in long-distance frustration for future beneficiaries.
It is important to note that the trust assets held by a corporate trustee are not counted as property of the trustee, so they will not be directly impacted by the failure or bankruptcy of a corporate trustee. Nevertheless, the trust assets can be seriously impacted my market conditions, without any clear path for how trust assets should be invested to weather financial storms.
While there may be no clear solution to these challenges, those who are aware of these potential problems may avoid serious future problems by reviewing how their living trust addresses these issues, if they are addressed at all. That, and a bit of common-sense can go a long way towards avoiding problems. Fortunately, the beauty of the living trust is that it is revocable, allowing the individual who created the trust to make any necessary changes in the trust as long as they live. So, if you find a potential problem, you still have time to fix it.
Writings of UCLA law professor can highlight Nevada corporate advantages
Monday/September/15 11:54 Filed in: corporate veil
by Derek G. Rowley (c) 2008. All rights reserved.
LOS ANGELES - Stephen M. Bainbridge is arguably the brightest mind in the field of corporate law in California. He is the William D. Warren Professor of Law at the UCLA School of Law, and has written extensively about all aspects corporate law. Not to be stereotyped as a high-brow elitist intellectual, Professor Bainbridge maintains a family of blogs at www.professorbainbridge.com that offer a broad range of commentary “on law, politics, religion, culture & food” that is definitely worth reading.
In 2007, Professor Bainbridge published an article, “Piercing the Corporate Veil in California” which exposes the alarming breadth of activity that can be used to pierce the corporate veil in California - and allow creditors to hold individual shareholders personally liable for corporate debt or obligations. In the article, Bainbridge provides detailed legal analysis supporting the perception that public policy in California favors piercing the corporate veil. As he points out, “among the eight states with the largest number of reported veil piercing decisions, California courts have the highest rate (45%) of piercing the corporate veil.”
So, successful veil piercing in California appears to be almost a statistical coin-flip. Bainbridge, in his article, discusses many significant reasons why California treats veil piercing so liberally.
Historically, California has been slow to recognize the legal doctrine of limited liability. Until 1931, California’s constitution provided no limited liability for corporate shareholders, and actually imposed personal liability on shareholders for their portion of corporate debts. This history creates the backdrop for the legal culture in which California’s corporate law has been since percolated.
Even today, California does not recognize limited liability doctrine by statute. Bainbridge calls this “unusual,” compared with other states. Instead, it relies on California case law to provide limited liability; and that case law - as all case law does - is constantly evolving and subject to interpretation of an increasingly liberal and anti-business judiciary.
Bainbridge writes that the case law of California courts provides for “an astonishingly large number of factors to be considered” in order to pierce the corporate veil, all with little guidance as to how the factors should be weighted, balanced or considered.
The primary legal precedent in California veil piercing law is found in the case of Associated Vendors, Inc. v. Oakland Meat Co., a 1962 case that establishes twenty-seven separate factors that can be considered. Not only is the sheer number of possible factors that can pierce the corporate veil astonishing, as Bainbridge put it, but when some of these factors are considered individually, they are all the more astounding. For example, here are a few of more unbelievable factors:
California recognizes something called “Enterprise Liability”, which holds the entire business enterprise liable - including all divisions, subsidiaries and shareholders - for a debt incurred by one part of the business.
All of these issues stand in stark contrast to Nevada, where the number of successful veil piercing cases can be counted on the fingers of one hand - and where in every instance the court found the presence of fraud.
In Nevada, the corporate veil is not subject to the interpretation of a body of developing case law. It is provided in the Nevada Revised Statutes (NRS), and can only be applied according to statute. NRS 78.747 provides Nevada’s standard for veil piercing which reads as follows:
“Except as otherwise provided by specific statute, no stockholder, director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the stockholder, director or officer acts as the alter ego of the corporation. A stockholder, director or officer acts as the alter ego of a corporation if: the corporation is influenced and governed by the stockholder, director or officer; there is such unity of interest and ownership that the corporation and the stockholder, director or officer are inseparable from each other; and adherence to the corporate fiction of a separate entity would sanction fraud or promote a manifest injustice. The question of whether a stockholder, director or officer acts as the alter ego of a corporation must be determined by the court as a matter of law.”
So, in contrast to California’s liberal application of the corporate veil piercing, Nevada has strict standards. Those standards include the requirement that preserving the corporate veil would sanction fraud or manifest injustice as a matter of law. Nevada provides no opportunity for analysis as to whether the stock is owned by members of a family, or if there is a shared attorney or business address, etc.
Verdict: Nevada wins, in a knockout.
LOS ANGELES - Stephen M. Bainbridge is arguably the brightest mind in the field of corporate law in California. He is the William D. Warren Professor of Law at the UCLA School of Law, and has written extensively about all aspects corporate law. Not to be stereotyped as a high-brow elitist intellectual, Professor Bainbridge maintains a family of blogs at www.professorbainbridge.com that offer a broad range of commentary “on law, politics, religion, culture & food” that is definitely worth reading.
In 2007, Professor Bainbridge published an article, “Piercing the Corporate Veil in California” which exposes the alarming breadth of activity that can be used to pierce the corporate veil in California - and allow creditors to hold individual shareholders personally liable for corporate debt or obligations. In the article, Bainbridge provides detailed legal analysis supporting the perception that public policy in California favors piercing the corporate veil. As he points out, “among the eight states with the largest number of reported veil piercing decisions, California courts have the highest rate (45%) of piercing the corporate veil.”
So, successful veil piercing in California appears to be almost a statistical coin-flip. Bainbridge, in his article, discusses many significant reasons why California treats veil piercing so liberally.
Historically, California has been slow to recognize the legal doctrine of limited liability. Until 1931, California’s constitution provided no limited liability for corporate shareholders, and actually imposed personal liability on shareholders for their portion of corporate debts. This history creates the backdrop for the legal culture in which California’s corporate law has been since percolated.
Even today, California does not recognize limited liability doctrine by statute. Bainbridge calls this “unusual,” compared with other states. Instead, it relies on California case law to provide limited liability; and that case law - as all case law does - is constantly evolving and subject to interpretation of an increasingly liberal and anti-business judiciary.
Bainbridge writes that the case law of California courts provides for “an astonishingly large number of factors to be considered” in order to pierce the corporate veil, all with little guidance as to how the factors should be weighted, balanced or considered.
The primary legal precedent in California veil piercing law is found in the case of Associated Vendors, Inc. v. Oakland Meat Co., a 1962 case that establishes twenty-seven separate factors that can be considered. Not only is the sheer number of possible factors that can pierce the corporate veil astonishing, as Bainbridge put it, but when some of these factors are considered individually, they are all the more astounding. For example, here are a few of more unbelievable factors:
- Two different corporations have identical ownership
- Two different corporations have the same officers and directors
- Two different corporations have the same employees
- Two different corporations have the same attorney
- Two different corporations have the same business address
- The use of a corporation to procure labor, services or merchandise for another person or entity.
- Sole ownership of all the stock in a corporation by one individual
- Sole ownership of all the stock in a corporation by members of a family
California recognizes something called “Enterprise Liability”, which holds the entire business enterprise liable - including all divisions, subsidiaries and shareholders - for a debt incurred by one part of the business.
All of these issues stand in stark contrast to Nevada, where the number of successful veil piercing cases can be counted on the fingers of one hand - and where in every instance the court found the presence of fraud.
In Nevada, the corporate veil is not subject to the interpretation of a body of developing case law. It is provided in the Nevada Revised Statutes (NRS), and can only be applied according to statute. NRS 78.747 provides Nevada’s standard for veil piercing which reads as follows:
“Except as otherwise provided by specific statute, no stockholder, director or officer of a corporation is individually liable for a debt or liability of the corporation, unless the stockholder, director or officer acts as the alter ego of the corporation. A stockholder, director or officer acts as the alter ego of a corporation if: the corporation is influenced and governed by the stockholder, director or officer; there is such unity of interest and ownership that the corporation and the stockholder, director or officer are inseparable from each other; and adherence to the corporate fiction of a separate entity would sanction fraud or promote a manifest injustice. The question of whether a stockholder, director or officer acts as the alter ego of a corporation must be determined by the court as a matter of law.”
So, in contrast to California’s liberal application of the corporate veil piercing, Nevada has strict standards. Those standards include the requirement that preserving the corporate veil would sanction fraud or manifest injustice as a matter of law. Nevada provides no opportunity for analysis as to whether the stock is owned by members of a family, or if there is a shared attorney or business address, etc.
Verdict: Nevada wins, in a knockout.
Top Ten Things millionaires don't want to reveal
Monday/September/08 12:03 Filed in: Top Ten
Smartmoney.com surveyed millionaires and compiled the top ten things that millionaires don’t want to reveal:
- “You may think I’m rich, but I don’t.” A millionaire in 1945 would need $12 million today to be in the same position.
- “I shop at Wal-Mart.” They hunt for bargains and clip coupons.
- “I didn’t get rich by skimping on lattes.” The most common path to wealth is entrepreneurism - starting a business.
- “I have a concierge for everything.” Many of the wealthy consider the value of their time to be worth more than to spend it doing menial tasks.
- “You don’t get rich by being nice.”
- “Taxes are for little people.” They can afford high-level tax planning.
- “I was a B student.” The median college GPA of millionaires is 2.9. Most credit their success to hard work and determination, rather than “smarts”.
- “Like my Ferrari? It’s a rental.” It makes sense for many high-ticket items.
- “Turns out money can buy happiness.” Statistics show that the wealthy are happier.
- “You worry about the Joneses - I worry about the Trumps.” There is a growing disparity between the middle-class rich and billionaires
Dog sued
Friday/September/05 12:00 Filed in: litigation
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - The Macomb Daily reported on August 31 that a woman who claims the city police dog, named “Liberty” bit her on the buttocks has named the dog as an additional defendant in the lawsuit against the city. Attorney Charlie Langton is quoted as saying “I’ve never heard of that. A dog can’t be a party to a lawsuit.” He added, “It raises a lot of legal questions. How do they serve the dog, put it in his mouth? Is the dog going to have court-appointed counsel? Will the dog be able to sit in on the proceedings? This is a case you can really sink your teeth into.”
LAS VEGAS - The Macomb Daily reported on August 31 that a woman who claims the city police dog, named “Liberty” bit her on the buttocks has named the dog as an additional defendant in the lawsuit against the city. Attorney Charlie Langton is quoted as saying “I’ve never heard of that. A dog can’t be a party to a lawsuit.” He added, “It raises a lot of legal questions. How do they serve the dog, put it in his mouth? Is the dog going to have court-appointed counsel? Will the dog be able to sit in on the proceedings? This is a case you can really sink your teeth into.”
Jury finds California tax board guilty of fraud
Thursday/September/04 11:51 Filed in: california franchise tax board
A $388 million verdict
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - Gilbert Hyatt is quite a remarkable man. In 1968, he advanced the concept of the integrated circuit when he developed the method for including all the pieces necessary to operate a computer - other than the memory and interface - in one place. In 1970, he applied for a patent for a computer microprocessor.
While Hyatt’s patent application worked its way through the bureaucracy of the patent office, three engineers from Intel Corporation created the first commercially viable microprocessor. So, Intel is usually credited with the invention of the first microprocessor. Gilbert Hyatt thought that was unfair, and fought the perception of Intel as the inventor of the microprocessor until 1990, when the U.S. Patent Office formally - and finally - recognized Hyatt as the rightful inventor.
Gilbert Hyatt, as you already know, is a very smart man. So in 1991, Hyatt, a multi-millionaire electrical engineer and inventor with more than 70 U.S. patents, moved from La Palma, California to Las Vegas. He wanted a better quality of life and a better business environment. He also wanted the added tax benefits that Nevada offered of having no corporate or personal income taxes.
The California Franchise Tax Board was not happy to see Hyatt - and the hundreds of millions of dollars in licensing from his patents - move from the state. So, they arbitrarily claimed that Hyatt was a California resident through 1992, and assessed millions of dollars in income taxes for those years, in addition to imposing harsh penalties alleging that Hyatt had committed fraud against the state by moving.
Unable to resolve the dispute with the California tax bureaucracy using facts, logic and reason, Hyatt filed a civil lawsuit in 1998 in the Clark County, Nevada District Court. In his lawsuit against the California Franchise Tax Board, Hyatt alleged fraud, intentional infliction of emotional distress, abuse of process, breach of confidential relationship and invasions of privacy.
California fought back, claiming that this lawsuit shouldn’t be heard in Nevada. They took this argument to the Nevada Supreme Court, and lost. So, they appealed to the U.S. Supreme Court, and lost again. In the actual trial, an eight-member civil jury ruled unanimously against the California Franchise Tax Board, finding the allegations of fraud, abuse, and privacy invasions to be true. On August 4th, 2008, the jury awarded Hyatt $138.1 million in compensatory damages, and an additional $250 million in punitive damages on August 14th.
Hyatt expects California to appeal the verdict. John Barrett, spokesman for the tax authority in Sacramento told the San Jose Mercury News that, “we’re reviewing the matter and hope to have a decision soon.”
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - Gilbert Hyatt is quite a remarkable man. In 1968, he advanced the concept of the integrated circuit when he developed the method for including all the pieces necessary to operate a computer - other than the memory and interface - in one place. In 1970, he applied for a patent for a computer microprocessor.
While Hyatt’s patent application worked its way through the bureaucracy of the patent office, three engineers from Intel Corporation created the first commercially viable microprocessor. So, Intel is usually credited with the invention of the first microprocessor. Gilbert Hyatt thought that was unfair, and fought the perception of Intel as the inventor of the microprocessor until 1990, when the U.S. Patent Office formally - and finally - recognized Hyatt as the rightful inventor.
Gilbert Hyatt, as you already know, is a very smart man. So in 1991, Hyatt, a multi-millionaire electrical engineer and inventor with more than 70 U.S. patents, moved from La Palma, California to Las Vegas. He wanted a better quality of life and a better business environment. He also wanted the added tax benefits that Nevada offered of having no corporate or personal income taxes.
The California Franchise Tax Board was not happy to see Hyatt - and the hundreds of millions of dollars in licensing from his patents - move from the state. So, they arbitrarily claimed that Hyatt was a California resident through 1992, and assessed millions of dollars in income taxes for those years, in addition to imposing harsh penalties alleging that Hyatt had committed fraud against the state by moving.
Unable to resolve the dispute with the California tax bureaucracy using facts, logic and reason, Hyatt filed a civil lawsuit in 1998 in the Clark County, Nevada District Court. In his lawsuit against the California Franchise Tax Board, Hyatt alleged fraud, intentional infliction of emotional distress, abuse of process, breach of confidential relationship and invasions of privacy.
California fought back, claiming that this lawsuit shouldn’t be heard in Nevada. They took this argument to the Nevada Supreme Court, and lost. So, they appealed to the U.S. Supreme Court, and lost again. In the actual trial, an eight-member civil jury ruled unanimously against the California Franchise Tax Board, finding the allegations of fraud, abuse, and privacy invasions to be true. On August 4th, 2008, the jury awarded Hyatt $138.1 million in compensatory damages, and an additional $250 million in punitive damages on August 14th.
Hyatt expects California to appeal the verdict. John Barrett, spokesman for the tax authority in Sacramento told the San Jose Mercury News that, “we’re reviewing the matter and hope to have a decision soon.”
IRS warns about outsourced payroll
Tuesday/September/02 12:02 Filed in: IRS
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - The IRS recently issued a warning to employers that outsource their payroll responsibilities to third-party service providers to be aware of certain potential problems. First, they remind employers that they are ultimately responsible if the provider fails to make payments. Second, they don’t recommend that you change the address of record on file with the IRS, so if there is problem you will know about it. Third, they recommend that you have the payroll provider post a fiduciary bond to protect you. And fourth, the IRS recommends that you ensure that your payroll provider uses Electronic Federal Tax Payment System (EFTPS) so you can confirm that payments are made on your behalf.
LAS VEGAS - The IRS recently issued a warning to employers that outsource their payroll responsibilities to third-party service providers to be aware of certain potential problems. First, they remind employers that they are ultimately responsible if the provider fails to make payments. Second, they don’t recommend that you change the address of record on file with the IRS, so if there is problem you will know about it. Third, they recommend that you have the payroll provider post a fiduciary bond to protect you. And fourth, the IRS recommends that you ensure that your payroll provider uses Electronic Federal Tax Payment System (EFTPS) so you can confirm that payments are made on your behalf.
Drunken lawsuit
Monday/August/25 12:06 Filed in: litigation
by Derek G. Rowley (c) 2008. All rights reserved.
LAS VEGAS - In May, 2005 a man in Connecticut drank 5 large margaritas at a restaurant and then walked to the New Haven train station. According to court documents, he claims that the ticket agent sold him a ticket and told him the train was waiting on track number eight, and he’d “better hurray”. So, he drunkenly stumbles onto the first train he finds - an out-of-service metro train. The doors close and the train travels to the train yard, about 10 minutes away. When the doors opened, the man saw that there was no train platform. He looks down and can’t see the ground. So he jumps from the train, spraining his ankle. And then he files a lawsuit. On July 11th, the Judge threw the case out.
LAS VEGAS - In May, 2005 a man in Connecticut drank 5 large margaritas at a restaurant and then walked to the New Haven train station. According to court documents, he claims that the ticket agent sold him a ticket and told him the train was waiting on track number eight, and he’d “better hurray”. So, he drunkenly stumbles onto the first train he finds - an out-of-service metro train. The doors close and the train travels to the train yard, about 10 minutes away. When the doors opened, the man saw that there was no train platform. He looks down and can’t see the ground. So he jumps from the train, spraining his ankle. And then he files a lawsuit. On July 11th, the Judge threw the case out.
Charging Order Protection for Nevada corporations
Wednesday/August/20 01:53 Filed in: charging order
The right of a judgment creditor to collect against the assets of a judgment debtor varies depending upon the nature of the assets. Some asset types – primarily liquid assets - can be directly attached, while other asset types have limitations on attachment by the judgment creditor. Assets that cannot generally be directly taken by a judgment creditor usually provide for other recourse, such as potential foreclosure and forced sale of assets, or the imposition of a “charging order” against future income of assets. Read More...
Cheat Sheet: Non Profit Companies
Wednesday/August/20 00:56 Filed in: Non profit
What is a Non-Profit Corporation?
A Nonprofit corporation has no shareholders and cannot pay dividends. Instead of stockholders, the nonprofit has “members”, who generally pay dues for membership. Essentially, the shareholder of a nonprofit company is the “public good”. Under IRS Code 501 (c)(3) a nonprofit corporation may be formed to operate for some religious, charitable, educational, literary, or scientific purpose. Read More...
Tax nexus principles for Trucking
Wednesday/August/20 00:50 Filed in: tax nexus
Here are the basic principles of tax nexus for the trucking industry:
- The state of Incorporation has automatic nexus
- Trucking businesses provide a service, which is not a generally protected activity under Public Law 86-272
Asset protection strategies for real estate investors
Tuesday/August/19 23:46 Filed in: corporate strategy
Are you like the majority of real estate investors who are focused on finding good deals, buying, selling, and turning a great profit? If so, do not forget to protect what you have accumulated. It takes only one lawsuit and your entire investment empire can come crashing down. Read More...
Ten facts that make Nevada's corporate shield ultra strong
Tuesday/August/19 23:40 Filed in: Nevada corporation benefits
Here are ten reasons why Nevada's corporate veil is the strongest available. Read More...
TRADERS: What is the best structure for tax savings?
Tuesday/August/19 23:27 Filed in: tax strategy | entity selection
The following is an explanation of the corporation - limited partnership strategy for active traders. This strategy can allow you to legally write-off your computers, home office equipment, all educational expenses, and a large percentage of meals, entertainment and travel. Read More...
LFC Marketing v. Loomis
Tuesday/August/19 22:43 Filed in: Nevada Supreme Court Cases
This case presents us with two issues: (1) whether a writ of attachment may be used to secure property after a judgment has already been obtained; and (2) whether a judgment creditor can pierce the corporate veil using a reverse alter ego analysis to reach the assets of a corporation that is allegedly controlled by the judgment debtor. Read More...
Why Everyone Needs a Living Trust
Tuesday/August/19 22:34 Filed in: estate planning
John and Mary owned a successful small business for 15 years until John suddenly died
of a heart attack. Mary did not want to run the business alone, so decided to sell it.
Read More...
of a heart attack. Mary did not want to run the business alone, so decided to sell it.
Read More...
Upstreaming Advertising
Tuesday/August/19 22:10 Filed in: corporate strategy
Chuck owns and operates a very successful mountain bike tire manufacturing
plant in Illinois that has been in business for the past ten years. Read More...
plant in Illinois that has been in business for the past ten years. Read More...
Upstreaming PR
Tuesday/August/19 22:09 Filed in: corporate strategy
John runs a busy executive recruiting firm in San Diego and uses two Public
Relations Firms extensively to get exposure around San Diego. Read More...
Relations Firms extensively to get exposure around San Diego. Read More...
Upstreaming royalties
Tuesday/August/19 22:08 Filed in: corporate strategy
Jill lives in California and has an active seminar business that teaches investors
strategies on investing in the current real estate foreclosure market. Read More...
strategies on investing in the current real estate foreclosure market. Read More...
Nevada dual corporation strategy
Tuesday/August/19 22:06 Filed in: corporate strategy
Sam runs a very successful pipe bending business in Los Angeles. Read More...
Web-based business
Tuesday/August/19 22:04 Filed in: corporate strategy | web-based business
Jane is a PHD Nutritionist who lives in Seattle, Washington and writes a very
successful e-newsletter on the latest trends in health and wellness. Read More...
successful e-newsletter on the latest trends in health and wellness. Read More...
Royalties
Tuesday/August/19 21:57 Filed in: corporate strategy
Bob is a prolific writer of business success books and has written over 20 books
in his 15 year writing career. Read More...
in his 15 year writing career. Read More...
Foreigners doing business in USA
Tuesday/August/19 21:52 Filed in: corporate strategy
Larry lives in Canada and wants to start selling his unique line of fly fishing poles
in the United States. Read More...
in the United States. Read More...
Nevada Single Entity Strategy
Tuesday/August/19 21:48 Filed in: corporate strategy
Sarah lives in New York City and acts as a manufacturer’s representative for
several products in the medical field. Read More...
several products in the medical field. Read More...
Litigation Facts
Tuesday/August/19 21:36 Filed in: litigation | lawsuit
WARNING: Reading this list may cause high-blood pressure, nausea, or uncontrollable tears
Read More...Wisconsin pierces the corporate veil over violation of consumer regulations
Wednesday/July/02 16:05 Filed in: corporate veil
Mark R. Hinkston, a Wisconsin attorney, wrote an article that appeared in the February 2006 edition of Wisconsin Lawyer titled "Piercing the Corporate Veil". In his article, Hinkston discusses a case where the Wisconsin Court of Appeals held that personal liability attaches when a shareholder or officer violates consumer regulations such as Wisconsin's Home Improvement Code. This ruling potentially impacts the officers, agents and employees of many businesses that sell goods and services to consumers. Read More...
California Gets Caught
The California Franchise Tax Board got caught overstepping the restrictions placed by the U.S. Constitution on the ability of states to tax and regulate interstate commerce. For years, California has imposed state taxes on the WORLD-WIDE income of limited liability companies that do business in California - in blatant disregard for the Constitution.
Well, they got sued, and lost. Now they have to refund a whole lot of money. Read More...
Well, they got sued, and lost. Now they have to refund a whole lot of money. Read More...