'Gene Legal' HQ

Maybe, perhaps...

2010-09-14T09:01:00.000-07:00

House Minority leader Boehner stated recently that Democrats should repeal the draconian provision in the new health-care law requiring small business owners to file 1099s on virtually every transaction.
If they won't do it, maybe, perhaps Boehner will call for it if he's the new House MAJORITY leader after the November elections.

More Healthcare Fun - Part II

2010-05-13T09:09:00.000-07:00

Another - gee what does this have to do with healthcare reform? Obamacare included a 3.8% Federal sales tax if you sell your home. Nice.

Let's see how the law's supporters try to spin it Fact Check makes it sound like it will only affect a small portion of homeowners.

But run the math. In Santa Clara County, California the median home price (that means the average home) is currently $550,000.

In San Mateo County it's $700,000. If you live there in a 3 bdrm, 2 bath that you've paid down free and clear your extra tax will be $7,600. And if you've worked hard and bought a more expensive house - ouch.

Bottom line - if you live in California and sell your home get ready for Obamacare.

More Healthcare Fun

2010-05-10T17:25:00.001-07:00

Hey all you small business owners out there, I have another surprise for you. In 2012 be ready for some new fun and games. A mandate in the healthcare bill will require you to give 1099s to virtually EVERYONE, not just individual contracts who do work for your business. By everyone that pretty much means -- EVERYONE.

Currently you don't have to give 1099s to corporations. In 2012 you'll have to. So get your TINs ready to collect all those FEIN numbers. And they didn't just stop there. Now you will have to give 1099s to, tada --> companies you buy stuff from and restaurants where you have your annual Christmas party. Sounds fun, eh? Apparently the government believes it will generate all kinds of tax money for the healthcare bill by forcing all these new 1099s. More healthcare fun to come I can assure you.

Health Care Tips For Small Businesses

2010-03-31T10:13:00.000-07:00

Actually, there are no tips. Since Congress didn't really read the massive bill, and no one really knows what's in it I'm really amused at all the pundits and experts who are are expounding on what you should and shouldn't do.

My advice tho is to be a sponge and suck up as much information as you can. Look to legitimate sources. The large brokerage and accounting firms will continue to analyze the new law to see how it impacts you, your business and your taxes. Their websites should have a lot of resources. It won't be pretty and we'll all be taken down a few notches and the economy most likely will flounder for years to come.

In the short term there are no experts on this thing. One thing I can predict is that the healthcare law will be trumped by the law of unintended consequences. Hold on to your hat, it's gonna be a rough ride.

Little Things Mean A Lot (especially to the Secretary of State)

2010-02-18T15:05:00.000-08:00

California law requires that corporations and LLCs file a Statement of Information. For corporations its an annual affair, for LLCs every other year. It asks basic, very basic questions- names, addresses, contact information. A simple task. And, for a government requirement an inexpensive task. The filing fee is $25 for corporations and $20 for LLCs.

Of course there is no rhyme or reason to how government comes up with laws. For instance, same form basically, different fee for corporations and LLCs. And corps. every year please. LLCs, hey skip a year. And want to file online, no problem if your an inc., have to do it manually for an LLC. Geeze.

But the Secretary of State is consistent about one thing - miss the due date and you get hit with a penalty. $250. Procrastinate longer and your business will get suspended. Ouch. A little thing, a one page form once a year, or less for LLCs and bang your business could be on the short path to losing it charter. Little things mean a lot. This one is a good one to calendar.

Take A Deep Breath

2010-02-04T11:31:00.000-08:00

We've gotten through the first month of 2010. How do feel? Optimistic? Cautious? I think most people have come out of 2009 shell-shocked. So much uncertainty, so much bad news. The housing market is flooded with foreclosures, property values are falling and commercial property is now getting both barrels. The stock market had a surprisingly good show, but is correcting now. Taxes are going up, up, up. The Federal government is flooding the economy with money, but with no rhyme or reason. The deficit is out of control and they're trying to push through a massive take-over of the health industry. And suicide bombers are now wearing explosive underwear. Wow!

It's no wonder we all pulled back last year. But at least in my practice I noticed something interesting in January. My phone start ringing and I got busy. My take – at some point the bad news can't get any worse. And we still have bills to pay and kids to send through school and work to do.

So I'm reminded of a song from the 1930s when the country was in the throes of the great depression. One of the verses goes like this:

"So take a deep breath,
Pick yourself up,
Dust yourself off,
Start all over again."

I think we're ready to get back to work. I know I am. How about you?

Tax Holiday? Well Technically No.

2009-12-10T10:44:00.001-08:00

This time of year we're all online ordering gifts for the holidays. A go-to is Amazon.com. They have free shipping after you spend $20 and, unless you live in Washington State, they don't collect sales tax.

Where I live the sales tax is a whopping 9.25%. Buy $100 worth of books on Amazon pay just $100. If I run down to the Barnes and Noble and buy the same books, I fork out $109.25. Think that doesn't make sites like Amazon very popular? So how does it work?

Well for starters, at least here in California, make most any purchase and pay sales tax. If you run over the state line and buy a new washer/dryer in Oregon – you save real money, there's no sales tax in Oregon. Too good to be true? Well, it's not true, technically. Sales tax is collected and remitted to the state by the seller of the merchandise. California has no control over Amazon because Amazon has no storefront in California. In other words state laws do not extend to a company that doesn't conduct business in that state. That's why you see "residents of New York add sales tax" or the like. That means that seller conducts business in New York.

But that doesn't mean you don't owe the tax. It's just called something different, a 'use tax' and you are suppose to report and pay tax on all these Amazon purchases. Don't you do that? Don't you file a Use Tax Return? Here's what California says if you're interested ‡ http://www.boe.ca.gov/sutax/faqusetax.htm

When it comes to taxes there is never, never a free lunch. Happy holidays!

Tax-Free Nevada Nada

2009-11-24T14:13:00.000-08:00

You live and work in California. You decide you need to incorporate to effectively run your business, compete and protect your family from personal liability. Good.

So how about incorporating in tax-free Nevada? You've heard the ads, low cost set-up, no corporate taxes, no personal income taxes. And you beat California out of the $800 annual franchise tax they assess on all corporations. How could that be bad?

This is how it could be bad. If you make money in California you pay income tax. It doesn't matter if the company that is paying you is a Nevada corporation or in Canada for that matter. A California resident receives income – he/she pays taxes. Strike one.

If your Nevada corporation does business in California it is required to qualify to do business in California AND pay the same $800 annual franchise tax. Strike two.

And, if you don't bother qualifying your business and you get caught California retroactively gets to assess the $800 per-year tax AND tag on late fees and penalties. Strike three.

If you live and work in tax-free Nevada, - great. If your stuck here in California ignore radio and internet come-ons. After all this is the golden state.

Depositing Checks

2009-11-17T12:06:00.000-08:00

A question came up recently about depositing checks. The question was simple; “how do I properly endorse my check?"

There are three main ways to endorse a check. The first is called a Blank Endorsement where you simply sign the check on the back as it appears on the front. Once you endorse the check anyone can deposit it as it is now negotiable. Don’t do this unless the check is going right into your account.

Another way is a Transfer Endorsement where you sign the check and underneath your signature you write PAY TO THE ORDER OF... This allows a third person to cash the check.

A third way is a Restrictive Endorsement. Again you sign the check and then write “For Deposit Only” underneath the signature. This is the safest way to get a check into your account as it restricts the use of the check. It must be placed into your account by the bank. If you just want to cash the check though, don’t use this endorsement.

Let's Give California A Free Loan!

2009-11-05T11:12:00.000-08:00

I was excited when I heard the news out of Sacramento. Starting on Sunday if you work in California you get to, (actually required to) make a FREE LOAN to the California state government. Whoopee. Without any fanfare or even any public debate California decided that, since they are broke, we should all pay an extra 10% in withholdings out of our paycheck.

Withholding taxes was a clever overreach to begin with. To help you budget and plan and to avoid any nastiness in April, the States and the Feds started requiring employers to withhold employee taxes from paychecks. The theory went that, if you estimated what your taxes would be in the upcoming year, and you had that amount withheld from your paycheck, you'd be pretty close to breakeven at tax time. But, it never quite worked out that way. Most taxpayers have TOO MUCH taxes taken out and get a refund.

This new scheme does it one better. It takes more of your money KNOWING that you are going to overpay, gets the use of your money until April and then will owe you a refund. In effect an interest-free loan. IF, they can pay it back. Maybe you want a State voucher instead.

Going Social

2009-10-26T16:57:00.000-07:00

Use of social networks like Facebook, and business networks like LinkedIn has exploded in recent years. I use Facebook to stay in touch with friends and family, share photos or videos, and leave updates or comments. I use LinkedIn daily. It’s my online business card. I have access to my clients, my peers and my associates. I’ve been playing with another network, Geni, which lets you set up a pretty slick family tree that you can share and grow with your extended family. Neat stuff.

The strength of these social networks is their ability to match and pair your information with the information of other users and then push suggestions for more networking and linking. To take full advantage of what they have to offer you end up providing a pretty detailed profile of personal information. It’s a win-win. You get enhanced networking. They get to deliver targeted ads and offers.

But here’s the big caveat. By providing all that wonderful personal information you expose yourself to privacy risks, hacking risks and even the risk of misuse of your information by other users. To minimize your risks, or at least be aware of the risks you should ALWAYS (1) read the network’s policies, privacy policy and terms of use; (2) consider what information you really want or need to share; (3) consider your preferences carefully. Finally stick with the larger, more established networks that may have a stronger interest in safeguarding their data.

Some Scary Statistics

2009-10-20T13:19:00.000-07:00

Number of lawyers in the United States as of Dec. 31, 2008 = 1,180,386

Number of lawyers in California as of Dec. 31, 2008 = 149,982

Percentage of Senators who are lawyers = 54%

Percentage in Congress who are lawyers = 36%

Be afraid, be very, very afraid.

I Hate To Nag - But Change Your Passwords

2009-10-12T17:53:00.000-07:00

This is like the nag to back up your hard drive. I'm sure you all do that regularly. But this one is more serious. If you don't come up with strong passwords, different passwords for different websites, and change them often you are opening yourself up to a much bigger problem than losing your computer data.

A day doesn't go by when I don't hear a story about 'identity theft'. If someone steals your identity they can potentially get into your bank account and empty it. They can take out loans in your name, or buy things and stick you with the bill. And rehabilitating your identity takes real work and a long, long time. Don't count on the law to help. Sure, the law is on your side, but the amount of time, money and inconvenience it can take will have you pulling out your hair.

But - you complain - you have so many online passwords to remember. Here's one suggestion.

Make a list of your bank, brokerage and important 'money' sites. Give them top priority and give each a different password. Calendar at least once a month to change the passwords for these sites. Other sites, to read a blog or play a crossword or the like should also be changed but not as often.

An ounce of prevention truly is worth a pound of cure when it comes to online passwords.

Just Sign Here

2009-10-05T19:50:00.000-07:00

Say you did the right thing and incorporated your business. You've created a firewall between your business and your personal assets. Smart thing to do. So stay smart. Don't be so quick to sign away your protection.

Banks , landlords, auto and equipment leasing companies, among others are eager to have you sign on the dotted line as the guarantor for your business. When you personally guarantee a contract you are promising to make good if your company can't or won't. And, in most cases they can go after you FIRST without even going after your company.

But lets say that your business needs that bank line of credit, and the bank won't make the loan unless you sign a guarantee. What then? Well remember that everything is negotiable. Try offering to sign the guarantee for a limited time or for a lesser amount. Try other banks. Try a smaller line of credit. Best to avoid the personal guarantees completely, but if you can't - limit its scope.

Trust Yourself

2009-09-28T16:41:00.000-07:00

I put together a living trust years ago for me and my family. Unless you prepare your own, which is a bad idea if you're not a professional, it will cost you to set one up. So is it worth it?

Generally the advantages of a living trust are:

1. No need for probate. Probate is expensive, takes a lot of time and your estate proceedings become a public record.

2. Names someone to act for you if you become incapacitated.

3. Controls how and when your assets are distributed to your heirs. Especially useful if you have young heirs.

4. May, if you are married, both U.S. citizens and have a fairly large estate, and I mean may, reduce your overall Federal Estate taxes.

My usual caveat - you need to get competent advice from an attorney and/or a CPA for your own circumstances. But a living trust made sense for me. It may for you as well.

Let's Do ROTH

2009-09-21T18:09:00.001-07:00

Heads up. If you're saving for retirement the rules for ROTH IRSs are changing in 2010. I'm not giving tax advice here. You need to check with your CPA to see if you will benefit from the change.

But generally, the rule has been that you can convert a traditional IRA to a ROTH IRA only if your Adjusted Gross Income was under $100k. In 2010 Uncle Sam gets rid of this cap.

I like ROTH IRAs because, unlike traditional IRAs, retirement withdrawals are TAX FREE. You will still have to pay taxes when you convert to a ROTH. But once you do - no more taxes. No deduction going in, but everything that comes out is yours to keep.

What's In Your Credit Report?

2009-09-14T21:28:00.000-07:00

Client tells me that his credit report must be messed up because his credit score is dropping. He asks me what he can do. What I told him applies to you too.

First, get a free copy of your credit report from each of the three main credit reporting organizations. If you want you can use one of the online sites that advertise credit reports. But keep in mind that it's usually only the first one that is free. So contact the main credit reporting organizations directly.

If you review your credit reports and find inaccurate information in one or more you have the right to correct your credit report.

It's good to check your credit reports once a year, especially now that there is a lot of online fraud. Here's some further info.

A Corporation or an LLC?

2009-09-07T13:36:00.000-07:00

Corporations have been around for hundreds of years. LLCs, (limited liability companies) have been around for about 20 years. Both offer protection from personal liability of the principals (owners). So which one is right for you?

That boils down to three things. The first is whether it makes sense for tax and accounting purposes. That's a question for your CPA or tax attorney. The second is whether it makes sense from a law perspective. Is it more effective to run the business as an entity that protects the owners from personal liability? Can the business be effectively managed by the different owners, etc.

The third, which is the point of this post, is whether one is viewed more favorably by third parties. I already said that corporations are well established. LLCs grew out of a desire for partnerships to have the same liability protection as corporations. At the same time partnerships wanted to keep being able to allocate income, expenses, etc. differently. In a corporation your ownership percentage and your rights as a shareholder for dividends is one and the same. That is not necessarily true for an LLC.

But if the first two points are equal which is viewed in a better light? I'd have to say the corporation. They are familiar to anyone doing business. LLCs just haven't been around that long. So if your CPA and your attorney tell you either is fine by them, you might just consider going with the corporation.

An Ounce of Prevention

2009-08-31T15:32:00.000-07:00

I’ve read many contracts in my day. That goes with the turf. A gripe that many of my clients have is that most contracts are too long and too hard to understand. And they’re right, they are too long and too hard to understand. After all they were written by attorneys. And I know it’s tempting to give a contract a quick read and ink the signature page. But don’t do it. The devil is in the details. And those details can come back to haunt you big time.

Always consider whether you should have your own lawyer look at a contract BEFORE you sign it. But if you chose not to use a lawyer, make sure you read the contract. Because when it comes to contracts an ounce of prevention really is worth a pound of cure.