Proper business structure is critical in maximizing asset protection as well as minimizing state and federal taxes. However, small and medium sized closely-held businesses have too often outgrown their original structures or have not adapted to the changing tax laws. As a result, the business or the business owner is risking business or personal assets and incurring unnecessary taxes.
To assist business owners in selecting the best legal entity to conduct a business , several factors are analyzed, such as:
Current ownership of the business(es)
Future ownership plans of the ownership
Laws pertaining to Federal Income Tax
Federal employment/payroll tax
Assets held within the business
States in which business operates
Duration of business operations
Current business structure
Our Tax Attorneys will review your current structure and recommend a change of entity type and/or additional entity types to maximize asset protection and tax savings.
TAX MINIMIZATION STRATEGIES
The federal tax code and federal tax regulations have grown to over 10 million words in length. Tax complexity creates real costs for American taxpayers and the U.S. economy. Americans spend a significant amount of time and money complying with the tax code.
Our Tax Attorneys work with the business owner to create a comprehensive Strategic Tax Plan that uncovers deductions, credits and strategies not currently being utilized.
In addition to uncovering tax strategies, our tax attorneys work hand in hand with the business owner(s), key management, and/or CPA to implement and provide all necessary documentation to substantiate all deductions, credits and strategies.
Although small businesses are frequent targets for litigation, many business owners have not taken steps to protect their personal and business assets from potential litigants and judgment creditors. Although insurance is a tool for protecting assets from unforeseen events and catastrophes, maintaining adequate insurance to completely cover a catastrophic event such as an accident with a company vehicle may render the business financially insolvent. The premiums to maintain such insurance would impair the business from long-term sustainability.
To assist business owners in shielding their personal and business assets in the event of a tragedy, a strategic tax plan can save the day.
From selecting the optimal legal structure to alternative risk management tools, the Strategic Tax Planning process examines the business owner’s unique set of circumstances to construct the tailor-made plan including optimal asset protection.
Some of the client’s circumstances considered when examining the area of Asset Protection within a Strategic Tax Plan may include the following:
Types of assets held within the company
Amounts of assets owned by the company
Assets held individually by the business owner
Volume of the business
Number of customers annually
Location of the company
Location of the business owner's customers
Asset protection is an integral part of comprehensive Strategic Tax Planning. Protecting a business owner’s personal wealth and the business assets results in protecting not only the owner’s livelihood or ability to provide for his/her loved ones, but also protects the livelihood of all the company’s employees.
SALES/USE TAX & INCOME TAX NEXUS STUDIES
One of the most confusing and dangerous areas for any company conducting business in multiple states is failing to comply with the myriad of requirements concerning the collection of sales and use taxes on the sales of goods and services and complying with each state’s income tax filing requirements. For multi-state businesses, some of the most frequently asked questions are “Do I have to collect sales/use tax on my sales?” and “Do I need to file an income tax return in that state?”. The answers to these questions are critically important as failure to properly comply with each state’s sales/use tax and income tax requirements can lead to crippling penalties.
In multi-state tax law, whether a business is required to collect sales and use taxes on the sale of goods or services or whether a business is required to file an income tax return in a state is dependent on whether a business has “nexus” with the state. Nexus can be defined as a seller’s minimum level of contact to a state that permits a state taxing authority to require a seller to collect and remit sales and use taxes and pay income taxes to the state. Whether nexus exists in a particular state is determined by a combination of the U.S. Constitution, federal laws, and state laws and is complicated even further as different rules are applicable in determining whether nexus exists for sales tax purposes and for income tax purposes.
Our Tax Attorneys can review your multistate operation in order to determine which jurisdictions in which you are required to file tax returns. By proactively identifying these filing responsibilities, potential penalties can be avoided.
Owners frequently want the business to carry on after their retirement or death. Many owners do not come to a firm decision regarding what will become of the business after their exit. Instead, many believe they are “leaving their options open” as to whether they plan to transition the business to the next generation, sell to employees, or sell to a third party.
A comprehensive succession plan is not an event, but rather a process. As such, one of the biggest assets in a succession plan is time. Succession planning steps must be thought as parts of a complete progression rather than separate actions.
Estate Planning for Small Business Owners and Entrepreneurs
Most small business owners and entrepreneurs who do not have an estate plan find it a very difficult subject matter to discuss and think about. No one wants to imagine being gone or not taking an active role in their business.
Business estate planning helps ensure that your business matters are handled according to your wishes when you die or if you become disabled. This is not a subject most people want to think about, but good planning will protect the business that you’ve worked so hard on and poured so many resources into. This is true for all businesses but especially for family owned businesses that you want to pass down to the next generation.
Estate planning for small business owners involves a thought provoking and detailed conversations with a lawyer and financial advisor who are experienced in estate and succession planning. Proper business estate planning ensures that someone you trust takes over your business when you are no longer present and it also guides your loved ones if you pass away or become disabled.
To get peace of mind around your business succession and estate plan needs, schedule a free consult to discuss.
Starting a new business can be an overwhelming task. And because not all LLCs (for Tax Purposes) are created equal, you need to understand how your business will be treated when it is time to file your taxes!
Allow us to form your business entity and discuss the different tax benefits/consequences and compliance requirements of your entity selection.
As an added benefit and included in your business formation fee, the Firm attorneys will also be available to you & your business for one-year to answer questions and offer guidance at no additional cost.
We have experience in Business Formation in the following industries:
1. Online Retail (Amazon, Ebay, etc.)
5. Real Estate
6. International product distribution
8. Social Networking
9. Software Design
Tax Opinion Letter:
Has your investment advisor ever recommended that you speak with your tax professional before entering into a certain transaction or withdrawing qualified funds?
Have you wanted to take a certain tax position but needed a tax opinion to ease your comfort level?
We are here to assist. Out Attorneys are able to provide tax opinions letters for individuals and businesses.
The purpose of a tax opinion letter is to justify your tax position, should it be called into question by the IRS. A tax opinion letter can help in reducing the likelihood of an audit and provide a strong rationale for a tax position or a strategy to minimize your tax exposure by referring to specific IRS codes and rulings. Since business transactions and deductions can be structured in different of ways with different tax consequences, contacting an experienced and independent tax professional early on can be of great benefit. You can get advice, input, and a tax opinion letter in advance of your final transaction or investment.
A recent Tax Court decision, Canal Corp. v. Commissioner , 135 T.C. No. 9 (2010), affirmed the importance for taxpayers to hire independent tax professionals when seeking a tax opinion. The court held that a tax opinion can be disregarded if the tax advisor writing the opinion being too closely involved with the structuring of the transaction – resulting in a conflict of interest. Specifically the Court stated:
“Considering all the facts and circumstances, [the firm’s] opinion looks more like a quid pro quo arrangement than a true tax advisory opinion. If we were to bless the closeness of the relationship, we would be providing carte blanche to promoters to provide a tax opinion as part and parcel of a promotion. Independence of advisers is sacrosanct to good faith reliance. We find that [the firm] lacked the independence necessary for [the taxpayer] to establish good faith reliance.”
A Tax Opinion Letter, Points to Consider:
The letter should present the information in a straight-forward manner, clearly, concisely and completely. There is no room for ambiguity and the letter must address each of the elements of the transaction concerned.
An effective tax opinion letter will discuss factual details as well as technical concerns. It should include a thoughtful tax analysis. Citing examples to uphold the position from authorities and Tax Court can strengthen the letter as well. The best letters discuss the reasons in support of and against the position, to illustrate the reasoning behind the position. All supporting documentation should accompany the opinion letter to support it.
Generally, the letter needs to meet the threshold of “more-likely-than-not,” to effectively protect a taxpayer from any future penalty liabilities.
The best protection an opinion letter offers is when you get one in advance of making your decision and ultimately taking a tax deduction or investing. However, that may not always be possible. You can, and should, contact one of our Tax Attorneys to aide you in having your tax position upheld through the use of an opinion letter as soon as it becomes obvious that one is needed.
Chae Dobson, JD, LL.M (Taxation)
Chae Dobson is a tax attorney, licensed in Alabama, with over a decade of experience advising individuals and business owners. She graduated with her Juris Doctorate from Cumberland School of Law in Birmingham, AL in 2008. After graduating from Cumberland, Chae moved to beautiful Miami to attend the very competitive University of Miami Graduate Law program in Taxation. She received her LL.M with a specialization in International Taxation in 2009.
Chae moved back to Birmingham, AL and started her legal career as a litigator as well as legal counsel for County Government where she advised on tax controversy issues. Following this, Chae went on to work for an International Tax Firm traveling throughout the United States consulting hundreds of businesses in diverse industries, such as Manufacturing, Oil & Gas, Construction, Healthcare, Agriculture, Architecture & Engineering on tax strategies in the areas of entity structuring, asset protection, retirement, estate planning and business succession. While traveling, Chae became an expert in teaching these strategies to shareholders and key management.
Chae is a God-fearing mother of 3 amazing children, a member of Delta Sigma Theta Sorority, and a mama's girl!