Stewart Law, P.A., a boutique corporate, trusts, and estates firm in Charlotte, North Carolina is proud to announce that Founding Partner, Todd A. Stewart has been recognized as Best Lawyers in America® 2020 in Charlotte, NC. The Best Lawyers in America® program is the oldest and among the most respected attorney ranking services in the world. Todd was selected in the trusts and estates category. Attorneys named to Best Lawyers lists are recognized by their peers in the legal industry for their professional excellence in specific practice areas. To read their recently released press release click here.
Category: Business Formation
High-Level Negotiation
By Todd A. Stewart, Founding Partner
Recently, Joe Hernandez talked with our Vistage group about “High Level Negotiation.” One key takeaway for me runs counter to something that you hear a lot. His point is that you should use anchoring (i.e., the idea that people rely heavily on an idea or number they’ve heard recently) to your benefit and be the person who makes the first offer. Our informal class exercise supported this and the final negotiated value for most groups clustered around the first offer, whether it was near $20,000 or three times this amount.
For more information: https://www.lionsharenegotiations.com/.
*Intended as general guidance only and not as legal advice.
Align Your Three Bottom Lines
By Todd A. Stewart, Founding Partner
On May 20, 2019, I was in a program with author Kevin W. McCarthy where he talked about his book, Chief Leadership Officer: Increasing Wealth So Everyone Profits. Many good takeaways and I particularly like the idea of aligning your three bottom lines: Financial, People and Purpose. If you want more information, the website is: http://chiefleadershipofficer.com/.
*Intended as general guidance only and not as legal advice.
Avoiding Self-Employment (SE) Tax With LLC
Saving self-employment (SE) tax on the business earnings of a partner or sole proprietor can be significant, with rates from 2.9% to 15.3%. Partners in some cases have avoided this SE tax on their distributive share for an interest as a limited partner in a limited partnership (LP).
Today, however, LLCs are in much more common use than LPs for business and investment purposes. This makes it unfortunate that it’s still not clear that a passive member of an LLC can avoid the SE tax. Recently though, the Tax Court allowed limited partner treatment to a passive member of an LLC (the case was Hardy v. Commissioner.)
There are some steps you can take to help secure this treatment for your passive interest in an LLC and, depending on the circumstances, you may still want to go with an LP structure if this type of tax savings is particularly important.
If you’d like to further discuss your business structure or any other tax savings ideas, please contact us to speak with one of our attorneys.
** The information contained in this communication is not intended to constitute legal, accounting or tax advice.
Small Business End-Of-Year Checklist
The end of year is a busy time for many reasons. Travel plans, holiday hosting, and family visits tend to keep your calendar packed. But as a small business owner you have additional obligations that need to be addressed. The end of year is a perfect time to assess your current business, make some decisions, and set some overall goals to ensure you start the New Year off right. When 2019 rolls around be sure you took the time to self-assess with this Checklist:
( ) December is not too late to make a number of moves that can lower your income tax bill. Consult with your advisor team about important income and deduction items as well as new structures that you may want in place for 2019.
( ) Take the time to express gratitude to the folks who made positive differences for you this past year.
( ) As you review your financial results for 2018, it’s a great time to set goals for 2019 and make an actionable plan that will help you start achieving these objectives right away.
* Intended as general guidance only and not as legal advice.
Family Limited Partnership: F.A.Q.
A Family Limited Partnership (“FLP”) is a structure that is known for two main purposes: asset protection and tax minimization. Its ability to handle both of these important wealth generators puts it in the running as one of estate planning’s most valuable tools, if implemented and maintained properly.
Below, you will find some frequently asked questions that we receive from our clients regarding FLPs.
(1) What is an FLP?
An FLP is a limited partnership in which all the partners are family members or entities created by or owned by family members. A limited partnership is a business entity that consists of at least one general partner and at least one limited partner. Today, limited liability companies (LLCs) are commonly used in place of limited partnerships to accomplish all of these same purposes, even though the acronym “FLP” has stuck.
(2) Who is in charge of the FLP?
It varies, but often parents or grandparents. Children or grandchildren are more often limited partners (or Members) with less control.
(3) What type of asset goes into an FLP?
A common asset to fund an FLP is an investment account that isn’t normally touched on a day-to-day basis. Other assets that are great to fund an FLP are investment real estate and, potentially, stock of a closely held company. However, it is important to remember that stock in an S-Corporation should not be transferred to an FLP, as partnerships are not permissible shareholders of S-Corporations.
(4) How does an FLP protect my assets?
In the event you are sued or attacked by creditors, assets in an FLP will be protected against any liability you may face individually. An FLP is a great way to protect assets with large values for those whose professional careers are prone to lawsuits. Since you technically don’t own the asset transferred to the FLP, creditors generally cannot reach that asset.
(5) How can an FLP help me reduce my tax obligations?
By transferring assets to an FLP, you no longer own the asset individually. The only asset included in your gross estate upon your death is your ownership interest in the FLP. The interests in the FLP can be attractive for tax reasons because of certain discounts they receive, such as discounts for transferring minority interests in the FLP as well as for the lack of marketability the FLP interests have. These discounts are favorable for transferring interests in the FLP to children or grandchildren at a reduced value, thus saving on gift taxes.
If you are interested in forming an FLP to protect your assets or potentially reduce taxes, please contact us to speak with one of our attorneys.
** The information contained in this communication is not intended to constitute legal, accounting or tax advice.