The Benefits of Forming an Entity if You Own a Rental Property

LLCs are special kinds of legal entities that offer a more professional business structure and a safeguard for your personal assets in the event of a lawsuit, which are recognized by state governments. Every rental property owner has his or her own unique situation to consider, and may benefit from this legal structure in different ways. There are numerous potential advantages of forming this type of entity if you own rental property, such as the following:

• Flexible Tax Structure Choices
• Inexpensive Business Operation
• Personal Asset Protection
• Single Tax Layer

When you form an LLC with a corporate lawyer like Janathan L. Allen, APC, you and your business associates are able to choose how you prefer to be taxed, although there are certain restrictions for resident aliens here. One of the biggest advantages of this legal entity is how inexpensive and easy it is to operate, with few differences between how this business is structured and how it would be structured with no entity. And in addition to it being beneficial for business purposes, it is also beneficial for estate planning purposes.    

The Background of the LLC (Limited Liability Company)

The LLC, which is short for limited liability company, is a fairly new type of entity that emerged from lawyers on the West Coast of the United States nearly two decades ago. Corporations, on the other hand, have been around for two centuries. Corporations were originally created as a way to protect business owners if they are sued. LLCs have a similar purpose – protecting members of the business entity from lawsuits. Even when lawsuits are filed against the owners, partners or members of an LLC, their personal property won’t be affected by the court decision. Since landlords are particularly susceptible to lawsuits, this type of entity is especially advantageous for rental property owners who want to protect themselves and remove a layer of risk.       

For more information on the benefits of forming an entity if you own rental property, please contact us at (866) 493-5400 to schedule a complimentary initial consultation with one of our legal professionals.

The History of Proposition 13

The road leading to the passage of Proposition 13 emerged in the late 1960s as sort of a “taxpayer revolt” to protect individuals from unfair taxation. An assessor’s scandal influenced the legislature to pass a reform bill in 1966, which maintained that all assessments would be kept at a uniform level based on a specific percentage of a property’s market value. When real estate values went through a rapid and unexpected escalation during the 1970s, however, home assessments went through the roof. As a result, many people risked losing their homes. Proposition 13 was passed in 1978 to maintain that all properties would be assessed for taxes based on the value at time of acquisition, either through new construction or change of ownership. According to the legislation, taxable property values could not increase by more than 2 percent per year, or by the rate of inflation – whichever was smaller. The amendment also included a requirement for a two-thirds vote before any new taxes could be passed in the state of California.     

The Current Controversy over Proposition 13

In recent years, this legislation has become a source of controversy, and various parties have sought to reform Proposition 13 to make sure everyone is paying their fair share. Opponents say the amendment has reduced tax liabilities for property owners to such a point that it is difficult to provide services such as higher education, public schools, assistance for needy families, freeways, state parks and prisons. With the cost of public higher education increasing exponentially each year, public parks shutting down and public schools losing billions, these opponents have some valid points. The issue of what exactly should be done about it, however, is another matter entirely.   

For more information on how Proposition 13 can affect your property taxes, please give us a call at (866) 493-5400 to schedule a free consultation with one of our tax professionals.

Getting Started with Parental Estate Planning

There is no denying that estate planning is complicated, but it’s important to have a financial plan in place just in case the worst happens, which is why it helps to have assistance. Estate planning firms such as the San Diego-based Janathan L. Allen, APC can help tremendously in the process. For parents, there are many special considerations, which single individuals and couples without children may not have. While all living trusts are basically variations of the same basic trust, there are some differences that parents need to consider along with their estate planning professionals.

However the trust is set up, it will have a beneficiary, a grantor, a trustee and funds or other types of assets that will be protected and structured according to the specifications of the trust. You can structure the funds so that your children have income while they are minors and a lump sum of inheritance once they reach a certain age. By customizing a trust for your children, you can ensure that the trust funds grow over time and create the most beneficial financial foundation, so that you have control over the funds during your life and even after you’ve passed on.

Different Types of Special Needs Trusts for Children

There are a number of special needs trusts that can help children in certain situations. Children who have drug or alcohol problems, for example, may benefit from an estate plan that protects the assets from their potentially poor decisions. Children who have a disability for which they receive government payments may also benefit from a living trust if their parents don’t want them to receive additional payments or a lump sum, so the money can be set aside for later.  These are just two examples of special needs trusts; there are many other situations that may require specialized estate planning.    

Please give us a call at (866) 493-5400 to schedule a complimentary consultation with one of our legal professionals to discuss your estate planning needs. 

(This blog may be deemed an advertisement for Janathan L. Allen, APC, a law firm whose attorneys are licensed to practice law in the State of California.  Your use of this website and blog does not create an attorney-client relationship between you and Janathan L. Allen, APC.  Information on this website should not be relied upon or used as a substitute for consultation with legal, accounting, tax, and/or other professional advisors.) 

Reasons why a will is not enough estate planning:

1. Probate:  A will must be filed with the court and puts the distribution of your assets into the hands of the probate court.  Further, probate fees are set by statute in California as a percentage of the gross value of the estate.  An estate worth $500,000, which is not a large estate given California home values, would have to pay attorneys’ fees of $13,000.  If the executor does not wave his or her fee, the estate would pay another $13,000.  This would mean that the beneficiaries would lose $26,000 that could have been part of their distribution.  The cost of paying an attorney to create a trust and a basic yet comprehensive estate plan (usually under $3,000 at most law firms) is a bargain compared to paying $26,000 in the future.
2. Privacy:  Another downside to probate is that your will is filed with the court and becomes public; however, a trust is a document that remains private.
3. Incapacity:  A will only takes effect upon your death.  It cannot appoint a person to take care of your financial matters should you become incapacitated.    Even if you have a small estate, a will does not provide for incapacity.
4. Health Care: A will cannot make your health care and end of life decisions known, nor does it appoint an agent to make health care decisions for you.  If you do not have a power of attorney for health care or an advance directive and are unable to make medical decisions for yourself, a court may have to appoint a conservator of person at further legal cost and could delay or prevent your beliefs from being followed with regard to your medical treatment.
5. Tax Savings:  Trusts can be structured in ways to avoid some estate taxes in ways that wills cannot provide.

A basic estate plan should consist of the following documents: revocable living trust, pour-over will, springing durable power of attorney for assets, and advance health care directive.  If you are concerned about your basic will or if you would like assistance with estate planning, please contact Janathan L. Allen, APC at 866-493-5400 today for a free consultation.

(This blog may be deemed an advertisement for Janathan L. Allen, APC, a law firm whose attorneys are licensed to practice law in the State of California.  Your use of this website and blog does not create an attorney-client relationship between you and Janathan L. Allen, APC.  Information on this website should not be relied upon or used as a substitute for consultation with legal, accounting, tax, and/or other professional advisors.) 

One of the main benefits of working with a Certified Public Accountant is the prevention or reduction of audits, which is a fact that should speak for itself to any small business owner. Hiring a CPA is much more affordable than dealing with an expensive and time-consuming audit, once you factor in the past due amounts you may owe in addition to interest and penalty fees. A CPA can do so much more for your business, though, as you will see below.

Benefits of San Diego Small Business Accounting Services

Small businesses can really get their money’s worth when they invest in Certified Public Accounting services. These are just a few of the services a qualified CPA can provide:

• Accurate, up-to-date business info and legal news
• Better information to help understand where you stand financially
• Current financial statements ready to be viewed and worked with at all times
• Information on leases, lines of credit and loans always at your fingertips
• Educated business decisions in a shorter period of time
• Electronic record keeping to save space, get organized and prevent human error
• Full tax compliance and end-of-year tax preparation 
• Payroll services to keep it simple

 With a San Diego accountant, like those at Allen Baron, Inc., by your side, you’ll make better decisions about your business. Whether you are interested in adding new employees, buying new office furniture, moving to a new location or doing any other sort of growth and/or restructuring, you will be able to assess whether it’s a good plan for your business right away. Your CPA will be able to advise you on the best course of action, warn you against imprudent business decisions and prevent inadvisable moves that could leave you in big trouble down the line. Remember – investing in San Diego small business accounting services right now is much more affordable than paying for an audit and all the related repercussions later on. So as you plan, grow, move or restructure your business, never forget to take your accounting into account.

Please give us a call at (866) 493-5400 for more information on our accounting services for your business.  Our accounting professionals will be happy to meet with you for a complimentary initial consultation to discuss your accounting needs.

Business Law Advice – Be Careful about what’s on Your Website

There are many reasons why entrepreneurs and business owners in the San Diego area regularly seek out the services of San Diego business lawyers. One of the most important reasons to have an attorney just a phone call away is to get sound business law advice when making critical decisions. With an experienced attorney on hand, it’s much less likely that business owners will share information or make decisions that may get them into hot water later on. Businesses might never know, for example, how important it is to be careful about what they put on their websites, if they don’t have legal counsel. This is one piece of information you don’t want coming as a surprise after the tax authorities have contacted you for an audit.

Even Your Website Can be used in an Audit

There are many areas where business owners and website designers can easily go astray, putting their organizations at risk during an audit. They may overstate how many employees they have, exaggerate their sales and income figures or list contractors as employees, for example, and find themselves being audited for that later on. Although websites are a marketing tool, they are also just as easily accessible to the IRS as to potential customers, and it’s important to be consistent with the facts and figures.

Get Help before an Audit

Clients often contact business lawyers in emergencies, such as after discovering that the IRS or other legal agencies are using information that they posted on their websites in an audit. This situation could have been avoided if the business owner sought counsel before posting the information in the first place. Once it gets to this point, the business may contact someone like Janathan L. Allen, APC, for legal counsel and advice as they move forward with their audit. According to the experts, however, it is much more sensible to have an attorney on hand before things get to this point.

It’s always preferable to find business lawyers before reaching the point of being audited, but if it’s too late for that, it’s vital to get help as soon as possible so the audit goes smoothly. With help from knowledgeable IRS and state tax experts, it’s possible to resolve conflicts such as these with local, state or federal tax agencies much more quickly and painlessly than you might imagine.

For assistance with your legal needs, please give us a call at (866) 493-5400 to schedule a complimentary initial consultation with one of our legal professionals.

Why Employee Handbooks are a Must

Your employee handbook can serve as a guide to which members of your staff can turn whenever they have a question about a company policy or concern about a specific rule. It helps establish the mission and goals of the company, as well as the rules of the office, for all new employees. It also provides a space to explain all the state-mandated and company-specific benefits your business offers. All legal disclosures can be included in the employee handbook, as well. It is especially important to include at-will employment language, which should explain in clear and simple terms that the employer has the right to terminate any employer at will, and that the employee has the right to leave at any time, as well.  

Common Employee Handbook Mistakes to Avoid

There are several common mistakes that you will want to avoid as you plan and structure your employee handbook. Putting the wrong words in print can actually get you and your business in quite a bit of legal trouble, which could potentially cost a lot of money or even lead to a lawsuit. It is important to include specific legal language concerning equal opportunity employment, in compliance with the Equal Employment Opportunities guidelines. Your handbook must also comply with all Americans with Disabilities Act regulations, including appropriate disclosures. Current and/or potential employees must be able to clearly understand the physical requirements of the job, as well as all other aspects of the job description. There shouldn’t be any huge surprises later on.

With help from corporate lawyers, San Diego businesses can avoid these common mistakes and prevent costly, potentially disastrous litigation. Expert corporate law firms such as Allen Barron, Inc. can make sure your employee handbook clarifies all employer and employee rights and responsibilities, and includes all legally required disclosures and descriptions. This is the best way to prevent misunderstandings and comply with employment laws.

Please call us today at (866) 493-5400 for a complimentary initial consultation to discuss your business needs and for assistance with your employee handbooks.

How Taxpayers can Realize Savings in 2012

A trust is one way to protect money, even as tax reforms expire and new tax laws go into effect. Regardless of what state an individual or joint taxpayer lives in, he or she can establish a trust to protect money for future generations as estate taxes go up. Since both members of couples can open trusts individually with as much as $5.12 million tax-free, there are particular benefits for financial partners. Business owners are encouraged to act this year, as well, since their employees and families may be out of luck if they fail to consult with tax experts. 

Families and individuals with a considerable amount of wealth can also protect the value of their assets for future generations by making personal gifts instead of leaving their entire estate in an inheritance that will be heavily taxed under new tax reforms. The current law still holds that individuals can give gifts of as much as $13,000 without filing a gift tax return, and even if they give a gift equaling as much as $5.12 million, they still won’t owe any gift tax on it after filing. There are indications that this will soon change, though, so 2012 is a time to take advantage of the current system.   

It’s particularly important for taxpayers with investments to get accurate tax information as new reforms go into place. Taxpayers with investments can currently claim as much as $3,000 of losses that they’ve been carrying since the market’s plunge a few years back against current income or net capital gains. Any other net capital gains will be taxed at a higher rate next year. There are many ways for taxpayers to realize savings in 2012 with expiring tax reforms and new tax reforms waiting around the corner, which is why it’s so important to get expert advice.  

We can help you with tax planning for your 2012 tax year.  Please call us at (866) 493-5400 for a complimentary initial consultation with one of our tax professionals.

You May Still be Eligible for a Refund if You Didn’t File a 2008 Tax Return

If you never filed a 2008 tax return, you may still be eligible for a tax refund, but it’s important to get professional tax return help before attempting to navigate the complex system of tax codes and laws. According to a recent article in the Sacramento Bee, having neglected to file a 2008 return shouldn’t disqualify you for the refund. Countless taxpayers in San Diego and throughout California may qualify. Although the Internal Revenue Service doesn’t go out of its way to advertise this fact, taxpayers technically have three years from the initial filing year to claim refunds on unfiled tax returns. As long as there is a refund and not a debt, the taxpayer isn’t even required to pay any fees to claim the old refund.

Find Out if you’re Eligible and Act Fast

If you think you may qualify for a 2008 refund, it would be in your best interest to work with a tax consultant who understands the latest developments in the federal, state and local tax codes and all the associated laws. You will have to file two returns, both for 2008 and 2011, so it will be doubly complicated this year. Having a professional by your side will help ensure that this somewhat messy process goes as smoothly as possible. It’s also important that you act fast to claim any 2008 refunds that you are eligible for. You only have until April 17, 2011, this year’s tax deadline, to file a 2008 return and claim the refund that was originally owed to you. The IRS gives taxpayers a maximum of three years to claim their refunds, after which the funds will go back to the United States Treasury.

The Internal Revenue Service is currently sitting on more than $1 billion in unclaimed tax refunds, some of which might be yours if you have unfiled returns. The Sacramento Bee estimates that as many as 122,500 Californians didn’t file their taxes in 2008, and that the median potential refund for these folks is approximately $595. This is in addition to earned income tax credits and/or recovery rebate credits, which many taxpayers were eligible for in 2008. If the government owes you money, a tax consultant can help you claim it without any problems, as long as you take action now.  Please give us a call today at (866) 493-5400 to schedule a complimentary initial consultation with one of our tax professionals.

The Importance of Buy-Sell Agreements

Business advisors and attorneys such as the legal experts at Janathan L. Allen, APC help to prepare a great number of documents for clients, but the buy-sell agreement might just be the most important. This is one of the most complex business documents, and it is far too easy to make mistakes while completing it, so business owners and partners would be foolish to attempt to prepare the agreement without legal counsel.

When business partners come together to form an entity, they become closely entwined with one another. In fact, they become so closely entwined that under certain circumstances, such as if a business partner passes away, the other partner(s) will suddenly be in business with that person’s heirs. This is one of the reasons why buy-sell agreements are so important, and why it is so necessary to get professional help while preparing them.

The Facts about Buy-Sell Agreements

There are several things that a buy-sell agreement accomplishes. If you’re not sure whether you need one for your business, consider the following functions and how they could serve you and your business partners:

• Acts as an estate planning tool for all business owners involved in an entity
• Gives business owners a set of protocols for valuing their ownership interests on which they all can agree
• Offers a means of allocating control of the entity among all the managers and owners
• Offers S-corporations an extra layer of protection against decisions that could end the S-election status of the corporation
• Provides closely held businesses with a market for the ownership of their interests 
• Provides Limited Liability Companies (LLCs) and S-corporations with a means of maintaining adequate annual distributions to owners for paying taxes associated with the business
• Restricts how the ownership interests, such as stocks, can be transferred to protect the close ownership

What This Means for Your Business Partnership

All of the above functions help provide a solid plan and protocol for dealing with situations that could get very messy. With one agreement serving so many functions, however, it’s easy for the document preparation to go awry, just like it’s easy for business partnerships to go awry without careful planning. Legal service providers, such as San Diego-based Janathan L. Allen, APC, are essential in this process. Bringing up mortality and other delicate issues is hard, but in order for business partnerships to go smoothly, it’s necessary to imagine the possibility of a partner’s death and prepare an agreement that will stand the test of time.

Please give our office a call today at (866) 493-5400 for assistance with your contract needs.  Our friendly staff will schedule a complimentary initial consultation for you to discuss your contract needs with one of our knowledgeable attorneys.