The Entrepreneurs Advocate

Archive for the ‘Tax Issues’ Category

In these tough economic times, it is more important than ever to plan ahead.

That is why it gives me great pleasure to invite you and your clients to a seminar on Planning Your Exit from Business Ownership. This seminar is presented by the Stetson University Family Enterprise Center in partnership with Holland & Knight, LarsonAllen and my company, Bankers Advocate.

It will be held at the Stetson University Center at Celebration, Florida on Thursday, November 5, 2009.

Whether the exit from ownership is in six months or six years, this factual and hard-hitting seven hours will provide you with the information that you or your clients need for a successful Ownership Exit and/or Transfer.

Learn from Seasoned Professionals how to:

• STRUCTURE YOUR BUSINESS for a Successful Exit
• IMPROVE THE BOTTOM LINE Profits until you Sell
• DEAL with CONFIDENTIALITY ISSUES
• RECEIVE MAXIMUM VALUE for your Business
• KNOW the Types of Buyers and their Value Drivers
• HOW to Sell or Transfer to FAMILY/KEY EMPLOYEES
• AVOID TAX & LEGAL PITFALLS in the Process

This is an opportunity to participate in a valuable interactive seminar and a great networking event.

Can you afford not to attend?

You can view the brochure and register online by clicking on the links below.

To view a detailed seminar brochure : CLICK HERE

To register for the conference on line: CLICK HERE

We hope that you will join us. Please pass this on to anyone who you think would benefit.

Sincerely,

Chris Curtin
COO, Bankers Advocate
(561) 882-1331

PS: Reply to this blog and receive a special friends of Bankers Advocate deep discount.

(This is a great article by the legal editor of www.nolo.com, Chris)

The economic stimulus package (Recovery and Reinvestment Act) includes tax, loan, and investment provisions for businesses.

The American Recovery and Reinvestment Act of 2009 (commonly called the “stimulus package”) was signed into law by President Obama on February 17, 2009. The stimulus package contains several provisions aimed at helping small businesses, including certain tax cuts and Small Business Administration (SBA) loan provisions.

Stimulus Package Tax Provisions

Section 179 expensing. Section 179 of the Internal Revenue Code allows you to deduct a certain amount of new equipment or other assets in the first year they are owned, subject to a phase-out if you place a large amount of equipment in service in a year. Most depreciable business assets (like machinery, vehicles, and computers) qualify for the Section 179 deduction, though real estate, inventory bought for resale, and property bought from a close relative do not.

Higher limits for the Section 179 deduction ($250,000) and a higher phase-out ($800,000) were enacted as a temporary one-year measure, for 2008, under the Economic Stimulus Act of 2008. To encourage capital expenditures, the Recovery Act of 2009 extends the $250,000 deduction limit and the phaseout threshold of $800,000 for one more year.

Bonus depreciation. The Economic Stimulus Act of 2008 also put in place a one-year-only bonus depreciation for property placed in service in 2008.This special deduction allows taxpayers to depreciate 50% of the cost of new equipment or other assets during the first year the property is placed in service. The stimulus package extends 50% first-year bonus depreciation through 2009.

Carryback of net operating losses (NOLs). Under the stimulus package, eligible small businesses with net operating losses in 2008 can carry those losses back for the prior five years. This is instead of the current two-year carryback period for net operating losses. This will effectively give businesses a rebate on taxes paid in prior, profitable years. Businesses with gross receipts of $15 million or more cannot take advantage of this provision.

Reduced estimated tax payments. Small business owners often pay estimated taxes based on 100-110%% of their prior year’s taxes. The stimulus package lowers the amount of estimated taxes due to 90% of the previous year’s taxes.

Work opportunity tax credit. To encourage hiring, the stimulus package creates two new categories of eligible workers for the work opportunity tax credit — disconnected youth and unemployed veterans. Unemployed veterans are defined as military personnel who have been discharged or released from active duty during the five-year period before being hired and who have received unemployment compensation for four or more weeks during the one-year period before being hired. A “disconnected youth” is defined as someone between the ages of 16 and 25 who is not regularly attending school or employed during the six-month period before being hired, and is not “readily employable by reason of lacking a sufficient number of basic skills.” Businesses who hire these workers in 2009 and 2010 may be able to take advantage of this tax credit.

Stimulus Package Loan and Investment Provisions

Increase in SBA loan guarantees. To stimulate lending, the Recovery Act allows the Small Business Administration to raise its loan guarantees to up to 90% for loans under its 7(a) loan program. Currently, the maximum guarantees allowed are 85% for loans of up to $150,000 and 75% for larger loans. The 7(a) loan program provides government guarantees for loans made to certain eligible small business borrowers who can’t get credit elsewhere. The higher loan guarantees are in effect until the end of 2009, or until the funds are exhausted.

Elimination of SBA loan fees. The stimulus package also eliminates the up-front fee on SBA 7(a) loans that lenders pass on to borrowers. In addition, it eliminates the fees charged borrowers and lenders on 504 Certified Development Company loans. The 504 loans are long-term, fixed-rate loans for small businesses that need to purchase major fixed assets, such as land, buildings, machinery, and equipment. The fees on both these types of loans are eliminated until the end of 2009, or until available funds under the loan programs are exhausted.

New loan program for existing debt. The stimulus package creates a new SBA loan program that provides loans of up to $35,000 for small businesses who need to make payments on existing loans. It is a deferred payment loan, and no repayment is due until 12 months after the loan has been fully disbursed.

Expansion of SBA’s microloan program. The stimulus package provides increased funding to expand SBA’s microloan program. This program provides small loans of up to $35,000 to small businesses.

More surety bond coverage. The stimulus package expands SBA’s surety bond program by raising the maximum contract amount that can be covered by an SBA surety bond from $2 million to $5 million (and sometimes higher). SBA surety bonds help small businesses bid on contracts that they might not otherwise get.

Investor incentive provisions. The stimulus package includes a provision that excludes from taxation 75% of any capital gains an investor earns on small business investments that are held for five years.

by: Attorney Diana Fitzpatrick

I was talking to a friend at a Private Equity Group today who found out that a company they own a portion of is behind on federal withholding taxes. He does not know how big the problem is, but he his worried because as an officer and board member he might be PERSONALLY responsible (gulp).

How can investors, part owners, lenders (seller back note holders) and other affected parties stay informed and protect themselves from tax problems in companies that they are involved with? By using IRS Form 8821 (Tax Information Authorization).

Form 8821 can make sure you are notified of any notice (negative or otherwise) from the IRS. When I was in Asset Based Lending, form 8821 was always included in the loan documents to be executed by new clients. If as a seller you take back a note from the buyer make sure this form is executed. If you invest in or buy a percentage of a company you need to know.

Tax issues are usually a symptom of greater problems. This simple tool can act as an early warning system.

You can utilizing a Versatile Entrepreneur Retirement Savings Account Plan (VERSA).

The VERSA Plan structure allows you to rollover your 401(k), or other qualified plan, into the equity of a new or existing business without the burden of taxes or penalties. Frequently we are asked if the VERSA Plan is a loan. No, it is not a loan. It is equity.  In addition, it meets all of the equity requirements of commercial lenders and the SBA alike.  The capital that is rolled into the VERSA Plan is used to buy the equity of the company just as you would buy a mutual fund or a stock in your qualified plan.  That stock is then held in the plan for the benefit of the business owner. 

One caveat, your new company needs set up as a “C” corporation by the lawyer who sets up the VERSA for you. We have used the VERSA numerous times for Entering clients or Entering Buyers to access their retirement funds with no tax penalty.

The Structured Sale is a unique type of installment sale whereby specific installment payments are secured by an annuity   issued by a major, well-known life insurance company. 

The Structured Sale is established pursuant to Internal Revenue Code 453, Installment Sales. By separate agreement with the Buyer, a third party assignment company becomes the substituted obligor for the Buyer and receives the cash not taken by the Seller at closing.  Upon receipt of the funds, the assignment company purchases and becomes the owner of the annuity that secures the specified installment sale payment obligation.

Available in all fifty states, the Structured Sale can also be used in a large down payment and a Seller’s Carry Back Note sale.

Andrew Hull,

www.deferthetax.com

Topic: “Planning Your Exit from Business Ownership”
Presenters: Frank Mock, Lowndes, Drosdick & Chris Curtin, Bankers Advocate 

Sponsor: The Law firm of Lowndes, Drosdick, Doster, Kantor & Reed, P.A.
Location: Lowndes, Drosdick, Doster, Kantor & Reed, P.A., Orlando
Date: December 4, 2008 8:30-12:00 AM

This was recently posted on the IRS website. Of course every little bit helps, Chris.

IR-2008-82, June 23, 2008

WASHINGTON  The Internal Revenue Service today announced an increase in the optional standard mileage rates for the final six months of 2008. Taxpayers may use the optional standard rates to calculate the deductible costs of operating an automobile for business, charitable, medical or moving purposes.

The rate will increase to 58.5 cents a mile for all business miles driven from July 1, 2008, through Dec. 31, 2008. This is an increase of eight (8) cents from the 50.5 cent rate in effect for the first six months of 2008, as set forth in Rev. Proc. 2007-70.

In recognition of recent gasoline price increases, the IRS made this special adjustment for the final months of 2008. The IRS normally updates the mileage rates once a year in the fall for the next calendar year.

“Rising gas prices are having a major impact on individual Americans. Given the increase in prices, the IRS is adjusting the standard mileage rates to better reflect the real cost of operating an automobile,” said IRS Commissioner Doug Shulman. “We want the reimbursement rate to be fair to taxpayers.”

While gasoline is a significant factor in the mileage figure, other items enter into the calculation of mileage rates, such as depreciation and insurance and other fixed and variable costs.

The optional business standard mileage rate is used to compute the deductible costs of operating an automobile for business use in lieu of tracking actual costs. This rate is also used as a benchmark by the federal government and many businesses to reimburse their employees for mileage.

The new six-month rate for computing deductible medical or moving expenses will also increase by eight (8) cents to 27 cents a mile, up from 19 cents for the first six months of 2008. The rate for providing services for charitable organizations is set by statute, not the IRS, and remains at 14 cents a mile.

The new rates are contained in Announcement 2008-63 on the optional standard mileage rates.

Taxpayers always have the option of calculating the actual costs of using their vehicle rather than using the standard mileage rates.

Mileage Rate Changes