Wednesday, November 7, 2018

How to Close a Business

How to Close a Business

While not as complex as starting a business, closing a business presents its own unique set of challenges. As a Business Lawyer in Utah, I’ve seen several business owners who close their business hastily or incorrectly typically create new problems, including liability issues that may not surface until much later. So I’m providing some information about how to close a business, how to manage a financially distressed business prior to closure, what to consider when being sued after closing a business, links to related forms, and more. Remember, you can call or email us for a free consultation if you’re thinking about closing a business to make sure its done correctly.

Steps to Close Down a Business

There are certain key events and an order in which they take place in order to properly close a business. State-specific regulations and procedures for more complicated business structures such as corporations, LLCs, and written partnerships are found elsewhere in this section. The following are steps that must generally be taken in the order they normally occur:

  1. Vote to dissolve.
  2. Put a dissolution team together.
  3. List assets and take inventory.
  4. Set a timetable.
  5. Make the announcement.
  6. Work out contracts and obligations that extend beyond your closing date.
  7. Close the business.
  8. Dispose of the assets.
  9. Pay off the business debts.
  10. Prepare the final tax returns.
  11. File dissolution papers with the state.
  12. Prepare final forms for federal, state, and local governments.
  13. Close the business bank account.
  14. Keep all business records and other business documents for five years.

Necessary Steps to Dissolve Your Corporation, LLC, or Partnership

There are a number of situations in which the structure of your company or state or local requirements may impact your process for closing a business. Sole proprietors will have fewer issues closing a company, but when partners or board members are involved it can become significantly more complicated. When you are part of a general partnership with no written partnership agreement all you need to do is give your partner(s) notice of your express desire to withdraw from the partnership.

As with many communications in a legal context it is wise to provide this notice in writing and retain both a copy and proof of delivery of the same. If you are part of a partnership with a written partnership agreement, an LLC or a corporation you will need to follow the rules of the dissolution clause in your partnership agreement, articles of incorporation, or the relevant state laws. Agreements of this sort generally require a two-thirds or majority vote in order to dissolve the business.

After following the relevant organization rules for dissolution you may need to file you dissolution with the state. Even when you are not required to do (as with most sole proprietorships) it can still be wise to file papers of this sort since it places creditors on notice that the business cannot incur further business debt and relieving the company of future tax burdens. Similarly, notifying the IRS, state, and local tax agencies of the dissolution of your business helps ensure that any tax issues are properly resolved when the company closes.

Finally, you should cancel any relevant business licenses to prevent their misuse and notify your creditors, lenders, insurers, suppliers, vendors, and service providers to close accounts for the business.

Free Consultation with a Business Lawyer

If you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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What’s the Difference Between a Divorce Trial and a Hearing?

What’s the Difference Between a Divorce Trial and a Hearing

If you’re like most people, you might think that a divorce hearing and a divorce trial are one in the same. In reality, they are similar, but there are a few differences between the two. The following is a quick overview of each:

Divorce Hearing

Divorce hearings are typically used to obtain temporary orders from the court to provide some stability to each spouse’s living situation. Some of the issues most commonly discussed at a divorce hearing include:

  • Temporary child custody and visitation orders
  • Temporary child and spousal support arrangements
  • Which spouse will pay for insurance coverage and the amount of minimum coverage that must be maintained during the course of the divorce
  • Who will be responsible for making mortgage payments and repairs to the family home during a divorce
  • Whether one spouse will be responsible for paying the legal fees of the other spouse
  • Who will take each vehicle and who will make the payments on those vehicles

In general, all decisions made at divorce hearings are temporary in nature.

Divorce Trial

Divorce trials result in permanent decisions for all of the above issues, along with any other issues that come up during the course of the divorce that cannot be settled out of court. Most of the time, spouses and attorneys will try to avoid trial as much as possible, as it is expensive and time-consuming.

If the parties are unable to come to a settlement on all issues before trial, they can at least agree on some beforehand to avoid an overly lengthy process.

Issues to Consider After a Divorce Later in Life

The divorce rate among people over 50 has risen sharply in recent years as more Baby Boomers, the generation with the highest frequency of divorces, have begun to reach retirement age.

Between 1990 and 2014, the divorce rate for adults over 50 doubled, while the rate for adults over age 65 tripled. These divorcees later in life come with a unique set of challenges individuals must navigate.

The following are some actions to take if you are going through a divorce later in life:

  • Carefully analyze your financial situation: Will you be able to live on the savings you have available after your marriage ends? If not, there’s a chance you may need to seek out at least a part-time job to be able to stay afloat or push off your retirement longer than you had planned.
  • Consider selling your house: Will you be able to afford property taxes, upkeep and the mortgage (if you’re still making payments) by yourself? And even if you can afford it, will it place too many limitations on your finances in other areas of your life? Selling your home could help free up some assets to be able to more realistically enjoy your retirement years.
  • Revise your estate plans: As soon as you finalize the divorce, go through all your estate planning documents and make any necessary changes. You should, for example, make sure you have changed your beneficiaries on retirement accounts and insurance policies, while also updating your will so that your former spouse is not included.

Free Consultation with Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will fight for you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Tuesday, November 6, 2018

Using Gifts to Reduce Estate Tax

Using Gifts to Reduce Estate Tax

The idea of giving away your property before your death rather than in a will is appealing. Not only does it feel good to take care of your loved ones while you’re alive, doing so could also avoid or reduce your estate tax which, as of 2017, applied to estates valued at over $5.49 million. If the value of your estate could trigger the estate tax at your death, then waiting to make gifts through your will could actually end up reducing those gifts by as much as 55% or more.

If the estate tax could apply to you, as part of your estate planning, the information below will show you how to use lifetime gifting to reduce your estate tax liability.

Annual Gift Exclusion

The U.S. tax code contains a tax exemption rule called the annual gift exclusion which is surprisingly straightforward. As of 2017, you’re allowed to make an unlimited number of gifts of up to $14,000 per recipient per year. These gifts are tax-free and the recipient isn’t required to provide you with any compensation. Gifts exceeding $14,000 per year are subject to the gift tax. This amount can be changed by Congress, but is likely to increase with inflation in the future.

Doubling Your Gifts

If you’re married, your gift tax exclusion amount doubles as you can each give up to $14,000 per recipient per year. So, if you were married in 2017, you and your spouse could jointly give up to $28,000 per recipient per year tax free. In fact, even if a wife or a husband gives a gift without the consent of their spouse, the gift is still assumed to be made by both spouses jointly.

As an example, suppose that Henry and Wilma are well into their retirement and are looking to help their granddaughter buy a house with her spouse. Under the annual gift exclusion, Henry and Wilma can give a total of $56,000 tax-free — $28,000 to their granddaughter and $28,000 to her spouse.

Spousal Gifts

If you’re married and your spouse is a U.S. citizen, there’s no limit on the value of gifts you can exchange together as any gift to a citizen spouse is tax free. However, if your spouse is not a U.S. citizen, there’s an annual limit on how much can be gifted ($149,000 as of 2017). Any amount beyond that is subject to the gift tax.

Timing of Gifts

The timing of your gifts can make a difference in how quickly you can reduce the size of your estate. The annual gift exemption is based off of the calendar year, meaning that you cannot retroactively date a gift even if you meant to give it the year before.

However, there are ways to use the timing rules to your advantage. For example, if your son needs $25,000 for a down payment on his new home, you can give $14,000 in December and the remaining $11,000 in January. Because the gifts took place in separate calendar years, even if only a few weeks apart, there will be no gift tax imposed and you will have quickly reduced your estate by $25,000.

Gifts of Non-Cash Property

The annual gift tax exemption rules also apply to stocks, bonds and other pieces of personal and real property. For example, if you and your spouse elect to give your entire stock portfolio (worth $40,000) to your friend, you may jointly give $28,000 worth of stocks and bonds the first year and the remaining $12,000 the following year without triggering the gift tax.

There are also ways to gift portions of property over time to avoid the gift tax. For example, suppose that Frank and Jill, a married couple, want to give their fully-paid luxury car to their grandson Jimmy. The car is held jointly and has a fair market value of $50,000. If the couple first transfers Frank’s interest in the car to Jimmy, then this would constitute a gift of $25,000, (under their joint annual gift tax exemption of $28,000). The following year, Jill can transfer her $25,000 interest so that Jimmy owns the car outright and no gift taxes are triggered.

Gifts to Minor Children

If you plan on gifting a substantial amount of assets to a minor child, this raises questions regarding management. Most of the time, you’ll want an adult to manage the money until the child is old enough to take responsibility. Generally gifts to minors are made through either an irrevocable trust, or a custodianship/guardianship.

When gifting to a minor child, either through an irrevocable trust or a custodianship, the gift must meet the following conditions to qualify under the annual gift tax exclusion:

  1. The minor must receive outright ownership by age 21; and
  2. If the minor dies before age 21, any remaining property must go into the minor’s estate or, if there is a will, to the minor’s beneficiary(ies).

Give, But Be Careful

Although you may feel the need to decrease the value of your estate before you die, you should always carefully plan out any gifts. After all, you don’t want to give away so much of your estate that you’re no longer able to take care of yourself. However, if you’re in a strong financial position to care for yourself and are sitting on a large estate, gift-giving before your death may make sense.

Free Consultation with an Estate Planning Lawyer

If you are here, you probably have an estate issue you need help with, call Ascent Law for your free estate law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Stand Up for Your Custody Rights

Stand Up for Your Custody Rights

You always serve your interests best in a divorce or custody case by arriving at a mutually agreeable settlement for important issues like child custody. But, as the leading family law firm in Nassau, Queens and Suffolk Counties, we know that mutually agreeable may be a foreign concept to some contentious couples and that the case could end up in court.

Utah family courts seek to focus on the best interests of the child. But in reality your fitness as a parent is evaluated by people who really don’t know you, your ex or your children. You’ve never needed an experienced and aggressive lawyer more.

Beyond the obvious red-flag issues such as mental illness, domestic violence or substance abuse, the court will evaluate a myriad of gray areas, including:

  • Each parent’s ability to provide financially for the child’s basic needs
  • The availability of a safe and stable home environment
  • The flexible time each parent has to care for the children

To ferret out those seeking custody solely to avoid paying child support, the court will document who has been the children’s primary caregiver, who they’re living with now and for how long. The current custodian will have an edge, since judges tend to shy away from disrupting a child’s life.

The judge may seek input from an independent attorney for the child, also known as a law guardian, as well as from mental health and/or social work professionals. And older children will likely be asked about their own preferences for a custodial parent.

Mothers’ Rights in Utah

Fathers’ rights are a hot topic in the media and in the courtroom. Fathers trying to gain custody can download books and join websites to learn techniques to help win custody and visitation or find out 140 violations a father can use against his challenger.

This call to arms is a response to the historic tendency of courts to award primary custody to mothers and allot visitation and payment of child support to fathers. But this combative attitude toward mothers who are primary caregivers—combined with changes in family law—can devastate women dedicated to the well-being of their children.

Even with easy availability of information about the divorce process[H1], women going through divorce are often stunned by the ferocity of the attack on their parenting. This is oftentimes fueled by the anger of their former partner, or his desire to reduce or avoid paying spousal and child support.

Over 80 percent of the divorce cases our family law firm handles each year involve child custody disputes. Therefore, it is not enough to file divorce papers and assume a custody decision will be made in your favor. Make sure your divorce attorney is an aggressive advocate for you—and your children—and is willing to do the following:

  • Understand the legal strategies behind fathers’ rights claims
  • Champion your place in providing for the best interests of your children
  • Deliver a convincing point-by-point argument that proves your case to the court

Your children are counting on you. Retain the best legal help you can to get the outcome you need.

Free Consultation with Child Custody Lawyer

If you have a question about child custody question or if you need to collect back child support, please call Ascent Law at (801) 676-5506. We will help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Monday, November 5, 2018

Financing a Small Business

Financing a Small Business

You are ready to start your own business, but don’t know where to look for financing. You are curious about loans and heard something concerning equity, but this isn’t your area of expertise. You are not alone. One of the hardest decisions facing small business owners is how to obtain financing for their business. We’ll talk about the basic two options here, but make sure that you speak with a business lawyer to make sure you don’t get taken advantage of and to ensure proper compliance with the law. You really don’t want to get in trouble with the law.

Choosing between Loans and Equity

While there are no hard and fast rules, if you are in the formation stage of setting up your business, it makes sense to strongly consider selling an equity stake in your business in order to secure financing to get it off the ground. Equity sales are advantageous because they don’t require any repayment, and most businesses don’t turn a profit for a significant time period, which makes paying back loans extremely difficult.

If you are an established business and have ongoing financing needs, then loans may make a lot more sense. Loans are easier to deal with when a company has enough cash flow to make repayment realistic, and an established company likely has more collateral to offer to secure the loans. Finally, it’s worth noting that loans and equity are treated differently for tax purposes, so consult with a business tax advisor to see if one course of action makes more sense than the other.

What you Need to Know about Loans

Whether you should choose loans or not depends largely on the maturity of your business, cash flow and whether you’re simply unwilling to give up any more control in your company.

  • Advantages: The biggest advantage for choosing loans is that you maintain control over your business. Unlike equity investors, lenders have no say in your business and are not entitled to your business profits. The only obligation you owe to your lender is to repay the loan as agreed upon. Finally, one last advantage that can be very helpful is that loan payments that go towards paying off the interest on the loan can be deducted as a business expense for tax purposes.
  • Disadvantages: The biggest disadvantage of loans is that you have to pay back a steady amount on a consistent schedule, and, as anyone who runs a business knows, profits can be anything but steady. You may have to make a large loan payment precisely when you need the cash for your business the most. Another disadvantage is that many small business owners have to use personal property as collateral to secure the loan, which puts them personally at risk if business goes bad. Finally, if you are unable to pay the loan back, you may be personally sued by the bank, regardless of whether the loan is secured or unsecured.

Think Twice About Giving Equity

Equity is a mixed bag of benefit and cost, and the factors that influence whether you choose to use equity sales to fund your business include whether your business is still young or expanding and your willingness to give control over the business to people other than yourself.

  • Advantages: Although many may see giving other people an interest in their business as losing control, this doesn’t have to be the case. If you choose the right investors, they can be extremely helpful in terms of running the business, establishing business connections and offering valuable advice and assistance. Another advantage of equity investments over loans is that they tend to be far more creative and flexible, which many businesses may prefer. The single biggest advantage of selling equity stakes to investors is that if your business loses money or goes broke, you likely won’t have to pay investors a dime.
  • Disadvantages: The loss of control in your business is probably the biggest disadvantage involved in selling equity stakes to fund your business. There are many instances where the founders of a business, who put years of their life into the company, are voted out of the company by investors. Be very careful to really consider whether the financing gain is worth the loss of control. The other main disadvantage is that equity investors will want to receive a portion of the business profits, taking away valuable company profits that could otherwise be reinvested into the company. Finally, because equity investors are now co-owners, you have a duty to inform them of all significant business events, and they can now sue you if they feel their rights are being infringed upon.

Free Consultation with a Utah Business Lawyer

If you are here, you probably have a business law issue you need help with, call Ascent Law for your free business law consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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How Can I Avoid a Contested Divorce?

How Can I Avoid a Contested Divorce

A contested divorce can cause stress, frustration, and emotional pain for everyone involved. As a result, you should do everything in your power to avoid going through a contested divorce.

Below is some advice on how to avoid a contested divorce.

  • Discuss the cost. First, you may be able to avoid a contested divorce by discussing with your spouse how expensive it can be. Contested divorces can last weeks or even months and cost both spouses a lot of time, money, and stress. In many cases, avoiding the cost of a contested divorce is enough motivation for a couple to end their marriage amicably.
  • Discuss the effect on your children. If you have children, your primary concern should be their welfare, not obtaining custody. Talk to your spouse about how your divorce will affect the mental and emotional health of your children. It is possible for a couple to divorce and significantly reduce the impact the separation has on their children.
  • Discuss how long it will take. For most couples, once discussion about divorce begins, the marriage has already ended. As a result, you and your spouse probably want to move on with your lives as soon as possible. Explain to your spouse that a contested divorce can become drawn out and prevent either of you from living your lives.

Sometimes no amount of talking can resolve the issues that lead to divorce. When this happens, you must retain aggressive legal counsel as quickly as possible.

How Long Will My Divorce Take?

One of the most frequently asked questions by those approaching divorce is, “how long will the process take?” Of course, each case is unique. It is very difficult to pinpoint the exact length of time your divorce might take to finalize, as there are many factors at play. Some of those factors include the following:

  • The approach you’re taking to your divorce (mediation/negotiation, collaborative, formal litigation)
  • Whether you meet residency requirements for divorce in Utah
  • Your marital estate and the assets that must be divided
  • Whether the divorce is contested or uncontested
  • The grounds for your divorce (no-fault? Fault-based? Divorcing following legal separation?)
  • Contentious issues and the willingness of you and your spouse to cooperate
  • The existence of a prenuptial agreement
  • Whether or not children are involved

In general, an uncontested divorce takes less time than a contested divorce, mediation and collaboration take less time than formal litigation and willingness to cooperate makes a huge difference. A prenuptial agreement can make a divorce go more quickly or take even longer, depending on whether there is a challenge to its validity or a dispute over its terms.

In a worst-case scenario, a contested divorce with many complicated legal and emotional issues could take anywhere from several months to several years if it goes to trial in Long Island or elsewhere in Utah.

In a best case scenario, a mediated divorce with very few issues over marital property division and no children to arrange care and financial support for could take as little as one session to settle.

Free Consultation with Divorce Lawyer in Utah

If you have a question about divorce law or if you need to start or defend against a divorce case in Utah call Ascent Law at (801) 676-5506. We will fight for you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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Sunday, November 4, 2018

How to Keep Your Nonprofit Tax Exempt Status

How to Keep Your Nonprofit Tax Exempt Status

When it comes to keeping your nonprofit’s tax exempt status, knowing how to incorporate and operate your organization is crucial. While similar to the processes involved in creating and running a regular corporation, there are key differences which, if not maintained, can strip your organization of its non-profit status. Here you’ll find information about the special rules and requirements that apply to nonprofit corporations.

Make Sure You Comply with All Corporate Formalities

Just like a regular corporation, a nonprofit corporation must have a board of directors in charge of important policy decisions. In addition, there are officers responsible for making decisions regarding the day-to-day running of the corporation. Lastly, depending on the size of the nonprofit corporation, there will be employees that carry out the work.

However, unlike regular corporations, nonprofit corporations do not have shareholders or owners. Because no one person or group owns a nonprofit, it cannot be “sold.” Instead, if the directors of a nonprofit corporation decide that the corporation must be dissolved, they must make arrangements for all of the nonprofit’s assets to be distributed.

Nonprofit corporations can choose to have members with voting rights, although many decide against a membership structure and instead allow their boards to make all decisions. If a nonprofit does have a membership structure, then all of the members participate in major decision making and can, among other things, choose who sits on the board, amend the corporate bylaws, and vote on decisions regarding mergers or dissolutions.

Maintain Corporate Records

Like other corporations, nonprofit corporations must keep detailed and accurate corporate records. If these records are not kept, the limited personal liability status of the directors may be in jeopardy and the organization could lose its tax-exempt status. By definition, good corporate record keeping means maintaining accurate minutes of the meetings of the directors and documenting any important decisions.

After you have all of these records, you should make sure to organize them in an easy-to-manage corporate records book. This book should also contain a copy or the articles of incorporation, bylaws, and tax-exempt status documentation from the Internal Revenue Service (IRS) as well as your state’s tax agency.

Know Your Nonprofit’s Limitations and Restrictions

Equally as important as maintaining detailed and accurate corporate records, your nonprofit corporation must abide by other rules in order to keep and maintain its tax exempt status, some of which are described below.

  • Your Nonprofit Corporation Cannot Make Monetary Contributions to any Political Campaign — Unlike regular corporations, nonprofit corporations that are tax exempt under 501(c)(3) cannot make contributions to, or participate in political campaigns. If so, the IRS can revoke the corporation’s tax exempt status and asses a special excise tax against the corporation as well as its managers.
  • Your Nonprofit Corporation Can Only Engage in Political Lobbying in Limited Amounts — If your nonprofit is shown to have influenced legislation to a “substantial degree,” it could face the loss of its tax exempt status. However, nonprofits can participate in the legislative process in a limited way as the IRS sets limits on the money that can be spent on political activities.
  • Your Nonprofit Cannot Distribute Its Profits to Directors, Officers, or Members — Nonprofit corporations are not allowed to financially benefit their directors, officers, or members. However these individuals are entitled to a reasonable salary and to have their expenses covered.
  • Your Nonprofit Corporation Must Pay Income Taxes on Profits Unrelated to Its State Purpose or Activities — Nonprofit corporations are only exempt from income taxes on profits that are related to the nonprofit corporation’s charitable activities. However, if the corporation receives profits from unrelated activity, it must pay income taxes on that profit. The IRS requires that a nonprofit corporation pay corporate taxes on any unrelated profits in excess of $1,000.
  • Your Nonprofit Cannot Receive “Substantial” Profits from Unrelated Activities — If your nonprofit corporation realizes substantial profits from activities unrelated to its purpose, its status could be revoked. Special attention should be paid to unrelated activities that involve a lot of the corporation’s time or which generate substantial income.
  • Your Nonprofit Corporation Must Distribute All of Its Assets to Another Tax-Exempt Group on Dissolution — Unlike regular corporations, a nonprofit corporation cannot simply be sold. Instead, when the directors decide to dissolve a nonprofit corporation, all of the assets of the corporation must be donated to another tax-exempt group.

Free Consultation with a Utah Non-Profit Lawyer

If you are here, you probably have a business or nonprofit law issue you need help with, call Ascent Law for your free consultation (801) 676-5506. We want to help you.

Michael R. Anderson, JD

Ascent Law LLC
8833 S. Redwood Road, Suite C
West Jordan, Utah
84088 United States
Telephone: (801) 676-5506
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