The post Business Tax Compliance in Worcester: How Corporate Attorneys Assist Clients appeared first on Seder & Chandler, LLP.
]]>Businesses are required to comply with a number of tax laws and regulations. For instance, they have to report certain information to the IRS and DOR, including details about their employees. They must also notify the taxing authorities about the amount of money they pay their employees and how much money was withheld from worker paychecks, as well as pay the withholdings to the taxing entity. The company itself must file and report its income to tax agencies as well.
Failure to comply with tax laws is a serious issue that could risk the financial and legal health of a business. For starters, the company may find itself the subject of IRS and/or DOR audits and investigations. The business might be fined if it is determined to have violated the law, including by filing documents late or not at all. In some cases, businesses must defend themselves from employee lawsuits over their failure to follow tax laws. These and other consequences could cost the business enormous sums in legal fees, court costs, judgments, and diverted company resources. Ultimately, the business may take a hit to its reputation and market strength.
SederLaw’s attorneys practice across a multitude of relevant areas, such as corporate, tax, and employment law. Our experienced lawyers can help advise on matters such as:
If you would like to learn more about how our attorneys can serve your business tax compliance needs, reach out to us today.
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]]>The post James A. Vevone II Successful in Defense in Rights of First Refusal Case appeared first on Seder & Chandler, LLP.
]]>The court, presided over by Judge Kenneth W. Salinger, concluded that such contradictions did not detract from the enforceability of the right of first refusal. The judgment was informed by the application of the doctrine of judicial estoppel and was further influenced by the opposing party’s failure to maintain equitable conduct, described legally as “unclean hands.”
The successful representation by Mr. Vevone underscored the critical role of comprehensive legal expertise in resolving complex contractual disputes. His strategic approach and thorough understanding of the nuances of business law were key to securing this outcome, demonstrating the value of adept legal counsel in business transactions.
For an in-depth review of the case and its broader legal implications, we encourage you to consult the detailed article available on Mass Lawyers Weekly.
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]]>The post Corporate Transparency Act – What to Know appeared first on Seder & Chandler, LLP.
]]>With certain limited exceptions, business entities (corporations, limited liability companies, partnerships, and similarly formed entities) must provide business ownership information to the U.S. Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Failure to report the required information to FinCEN will result in financial penalties.
“Reporting Companies,” which are, with limited exceptions:
“Beneficial Owners,” which are:
There are special rules for determining Beneficial Owners when corporate entities or trusts own 25% or more of a Reporting Company or exert substantial control over a Reporting Company. Beneficial Owners are always individuals and may include trustees and trust beneficiaries, as well as officers and directors of companies.
“Company Applicants” which are:
A Beneficial Ownership Information Report must be filed, which includes sensitive identifying information.
Beneficial Owners each must report the following information: name, residential address, birth date, and a scan of a government-issued ID (such as a driver’s license or passport).
All Reporting Companies will need to provide their full legal name, any trade names, and a current U.S. address. Domestic companies will also need to provide (i) a TIN or EIN issued by the IRS, and (ii) the jurisdiction where the company was created. Foreign companies will also need to provide (i) a TIN or EIN issued by the IRS (if they have one; otherwise, they must provide a foreign tax identification number), (ii) country of formation, and (iii) jurisdiction where the company was first registered in the United States.
Beneficial Ownership Information Reports are not public information. For authorized activities related to national security, intelligence, and law enforcement, FinCEN will send Beneficial Ownership Information to Federal, State, local, and Tribal officials, or certain foreign officials.
After the first report is made to FinCEN, you are required to update FinCEN within 30 days whenever any of the following information contained in the Beneficial Ownership Information Report changes:
The timeframe for filing the first report depends on when the Reporting Company was created or first registered in the United States.
Creation or Registration Date | Filing Timeline |
Before January 1, 2024 | File before January 1, 2025 |
Between January 1, 2024, and January 1, 2025 | File within 90 days of creation |
On or after January 1, 2025 | File within 30 days of creation |
Make plans to file required Beneficial Ownership Information Reports for each Reporting Company in your control or that you are planning to create. You may choose to report to FinCEN yourself or direct someone else to report to FinCEN for you.
Timely planning and action are the best ways to ensure compliance with the Corporate Transparency Act.
Where can I find further information? Follow this link to access FinCEN’s official page for information, guidance, and resources on Beneficial Ownership Information reporting: https://www.fincen.gov/boi
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]]>The post Giving Early Employees Equity in Your Business: What All Founders Should Know appeared first on Seder & Chandler, LLP.
]]>At the same time, there are legal issues involved with equity compensation, which can make it a double-edged sword. Our attorneys protect the best interests of your business by offering practical advice and sound counsel concerning the benefits and risks of equity compensation.
If the equity compensation model fits best with your new startup, there are a few basic steps you should take to effectuate it:
Begin by setting aside approximately 10-15% of your company’s equity for your Employee Stock Option Pool, or ESOP, for your future employees. As you distribute the equity and the pool decreases, you can increase the percentage of equity that is designated for the pool. This will allow enough equity for employees who later join the company. You can do so by diluting the shares of existing shareholders.
There are three main kinds of equity that startups typically grant to their new employees:
Where vesting is relevant, your next step is to decide the time period during which an employee must earn (vest) their equity by working for the business. Four-year vesting periods, in which an employee earns ownership of 25% of their stock each year, are common. It’s also standard to have a one-year cliff period, which is the minimum time the worker must stay with the company before vesting begins.
Various factors can affect how much equity each startup employee will receive. One business may grant equity based on the employee’s seniority, while another might offer equal amounts to all workers. The first employees usually receive more equity than those who join later.
A capitalization or cap table is a written record of everyone who is a shareholder of your company, including employees, advisers, and investors. The cap table should detail the total number of stock options already exercised along with the total number of shares that are still available in the option pool. It is imperative that you regularly update this document to ensure it accurately reflects the company’s current ownership.
Offering equity may sound fairly simple, but it can quickly get complicated if the founders don’t do it properly. Here are some potential issues you need to know about:
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]]>The post Guardianship Proceedings in Massachusetts: A Step-by-Step Guide appeared first on Seder & Chandler, LLP.
]]>In general, there are two categories of guardianship proceedings: one for children and another for adults. If you are seeking guardianship of any kind, meaning you wish to be given the legal authority to make decisions for someone else, you must be at least 18 years of age. The court must also determine you are competent to serve as a guardian.
To become the guardian of a child:
To become the guardian of an adult:
All of the following documents must be filed and properly served on all interested parties:
For guardianship of a child:
Of an adult:
Notices of the action and copies of the paperwork must be properly served on all interested parties, including the child’s parents, the child who is the subject of the guardianship or the incapacitated adult. A child over the age of 14 may be able to nominate a guardian or agree to a guardianship. The proposed guardian(s) will also need to complete a CARI form, which enables the court to complete a background check on the proposed guardian(s).
Your lawyer will assist in completing all forms and affidavits, acquiring the evidence needed to support the request for a guardianship, serving the interested parties as required by civil procedure rules, and conducting a hearing before the judge. The purpose of the hearing is to determine whether:
The interested parties may contest either the need for the guardianship, the scope of the guardianship or the appropriateness of the individual nominated as guardian. The attorney’s job is therefore to present evidence and arguments in your favor and against the positions taken by opposing counsel.
If the judge grants the guardianship, they must determine how narrow or broad this arrangement will be. In the case of adults it is fairly common for individuals to retain some decision-making ability, such as choosing their own meals or roommates in a group setting, even if they are not able to make medical or important life decisions independently.
Lastly, your lawyer will help you understand your need to comply with state law and the judge’s order concerning the guardianship. For example, the judge may require periodic reporting concerning the incapacitated person’s condition. There are also situations in which you must notify the court, for instance if you change your address or the incapacitated person regains the ability to care for themselves.
Guardianships exist to ensure that people who don’t have the capacity to make their own care decisions have someone who can make decisions on their behalf. Guardians play a very important role, and it’s important to have appropriate legal advice if you have a loved one in need of guardianship. Call our Family and Probate Team at 508.501.9132 for experienced attorneys who are ready to help.
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]]>The post Paying Yourself from Your Massachusetts LLC: Best Practices and Tips appeared first on Seder & Chandler, LLP.
]]>An LLC owner can be paid by way of a profit distribution. This is a method in which profits from the business are distributed to its owners instead of being reinvested in the business. Another name for a profit distribution is an owner’s draw, since the owner withdraws money from the business for personal use.
The correct way to do a profit distribution will depend primarily on whether the company is a single- or multi-member LLC. Because an LLC is a pass-through entity, the process is relatively simple for a single-member LLC. The owner can simply draw the money out, provided he or she reports the LLC’s profits and losses on Schedule C of the individual’s personal tax return.
Multi-member LLCs complicate profit distributions. Simply moving the money from the business account to a personal one could raise eyebrows among the other members. A better practice is for the members to agree to a process that dictates how much, how often, and in what manner profit distributions may be taken by each owner. This should be laid out in your LLC’s operating agreement. If you do not have one, or an adequate operating agreement that determines at a minimum, how profits are allocated and the frequency of such distributions.
It should be noted that owner draws have tax consequences. The owner will need to pay self-employment taxes on the money, which ultimately decreases his or her profits.
Setting yourself up as a W-2 employee of your LLC is arguably the most advantageous way to get paid. You will receive a regular paycheck just like a typical employee of any business would. Doing this provides you with not only a reliable, predictable income, it will save you on taxes. That’s because, unlike a profit distribution, the W-2 employee only has to pay self-employment taxes on the salary that has been designated for him- or herself. This will save approximately 15% on taxes.
The IRS considers employee wages to be business expenses. These are deductible from the business income, but the owner will need to pay him- or herself according to IRS rules. One such rule is that the compensation must be reasonable, which generally means within industry standards. Also, the owner must file an IRS form W-4. This document helps determine how much in taxes will get withheld from each paycheck so you don’t run afoul of IRS rules. Finally, the member who takes this approach will have to pay income tax on any wages he or she receives.
Again, whether the LLC is single- or multi-member is also relevant. The owner of a single-member LLC must actively work in the business to pay him- or herself a salary as an employee. With a multi-member LLC, and with each owner responsible for daily business operations, all members must be paid a wage.
If your goal is to rapidly grow your business, you may want to consider reinvesting the profits back into it. However, even though you aren’t taking a paycheck, you will need to claim any company profits on your personal income tax return if your LLC is set up as an S corp. This is true even if you don’t take any wages or distributions from the business. That’s because any profit the LLC makes will pass through and become your tax liability.
SederLaw takes a multidisciplinary approach to representing our clients. We practice in numerous areas that affect LLCs, such as Tax Law and Business & Corporate Law. For that reason, you can depend on skilled, comprehensive legal service when you retain our firm. Find out more by connecting with our team today.
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]]>The post Seder & Chandler Associate Janelle A. Tanenbaum Accepted Into the New England Fellows Institute of the American College of Trust and Estate Counsel appeared first on Seder & Chandler, LLP.
]]>As an attendee, Tanenbaum will participate in a series of in-depth educational presentations, which are led by subject matter experts in each field from across the U.S., and designed to develop the profession’s future leaders in trust and estate law. The program begins in February 2024 and concludes in September 2024.
Tanenbaum practices in the areas of Family Law and Probate, Trusts and Estates, Litigation & ADR, and Business Law. Her practice focuses on matrimonial and family disputes involving the division of assets, guardianship and conservatorship, and business, trust, tax and inheritance issues. Her trusts and estates work spans estate planning, as well as probate and estate litigation and administration. She also regularly handles issues arising out of the day-to-day operations of closely held businesses and nonprofits, including employment policies, procedures and legal compliance, and corporate governance.
The American College of Trust and Estate Counsel is a national organization of lawyers elected to membership by demonstrating the highest level of integrity, commitment to the profession, competence and experience as trust and estate counselors.
The New England Fellows Institute was created by Fellows of the American College of Trust and Estate Counsel (ACTEC) located in Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island and Vermont to develop the profession’s future leaders through a series of in-depth educational presentations led by outstanding subject matter experts in each field.
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]]>The post How Bank Accounts Pass on to Beneficiaries When Your Loved One Passes appeared first on Seder & Chandler, LLP.
]]>The first matter to determine is whether the decedent account holder named a beneficiary by establishing a payable on death (POD) or transferable on death (TOD) account. If the account holder did so and named someone as a beneficiary, the bank will release the funds to the beneficiary after it learns of the account holder’s death. Following this, the bank usually closes the account.
POD or TOD beneficiaries usually override beneficiary designations in wills because they are created by a contract. But they generally will not override joint account holders, meaning the surviving co-owner will simply take over the account. This raises the next question.
If the account was jointly owned by the decedent and someone else, the other individual named on the account usually has automatic rights of survivorship. This means that the survivor can keep using the account and the money in it without problems. The account may need to be closed if the other user is a secondary account holder. Ask the bank for details on their joint account policies.
Having a joint bank account usually avoids transfer issues, but not always. There are cases in which the account doesn’t pass directly to the joint account holder. It must be determined whether the account belongs to the co-owner or becomes part of the decedent’s estate. In answering this question, a probate court may examine:
If the account holder died intestate (meaning, without a last will) but it was either jointly owned or had a POD/TOD beneficiary, then the absence of a will typically makes little difference. But if a sole account holder dies without an account beneficiary or a will, additional steps must be taken.
First, the probate court must appoint someone to serve as the personal representative of the estate. This will subject the bank account to the long and sometimes arduous probate process, which is needed for anyone to access the funds. An exception is if the account was part of a trust, in which case probate won’t be necessary. Next, the money that is accessed from the account will be used to pay estate debts. Finally, any money that is left over will go to heirs as provided in the intestacy laws.
If you haven’t named someone as a POD or TOD beneficiary on your sole bank accounts, it’s a good idea to do so. It avoids the probate issue and lets your named beneficiary take possession of account funds after your passing. But it’s important to remember that a POD or TOD designation will likely override one contained in a last will and testament.
On the other hand, a joint account owner will probably get the money before anyone else. So if you prefer your spouse or some other trusted person to keep using the account and its funds after you die, add them as a joint account holder. Again, make sure you ask the bank about its joint account policies so you understand what exactly happens after your passing.
The rules surrounding bank accounts can be confusing, which is why you need dedicated legal counsel to help you plan your estate and determine who inherits what. The Estates & Trusts team at SederLaw will help you get started with your personalized estate plan.
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]]>The post Transferring Your Business to Your Children appeared first on Seder & Chandler, LLP.
]]>Before jumping into the legal issues tied up with transferring a family business, give yourself time to deliberate this important decision. You’ve likely spent years or decades building up your company, forming and solidifying business relationships with suppliers or other third parties, and cementing your community reputation. As you decide what to do with the business, ask yourself a few questions:
These questions inevitably raise emotional issues. You may really want a particular child to take the business, but is he or she really qualified? On the other hand, you may not favor the child who wants to run the company, but that may be the best person. Another common scenario is where owners must select one child among two or more who are best suited for the job. Our firm will help you evaluate the needs of your business objectively so you can make a decision that respects both the company and your family.
What are some different ways to actually transfer the business once you have decided which child(ren) should assume it? These are a few options:
Gift it: You could transfer the business as a gift now, but you should be mindful of the potential gift tax you might have to pay. There is a gift tax exemption, however, which you can take advantage of to limit or even eliminate the tax you would owe. The 2023 federal exemption is $17,000, which increases to $18,000 in 2024.
Create a partnership: Another option is to create a partnership with the heirs of your business. This will allow your children to gradually work their way into the company and eventually take over completely, thereby facilitating a smooth transition. There may be probate and tax issues which we can assist you with.
Sell the business: By selling the business you can allow the children to either buy the company outright with a buy-sell agreement (if they have sufficient assets) or make payments via an installment plan. If you sell an interest in the business by way of a promissory note, your children would pay off the interest and principal over time using income from the business. You can structure the note to be self-canceling such that, if you die before it is paid off, further obligations to your estate are canceled.
Pass it on using a will: Transferring your interest in the business by way of a last will is simple and lets you continue to control the business during your lifetime. A potential downside is that the children won’t get to learn how to the company before your passing. The role of an executor is only to pass along the property as expressed in the will, not to train heirs how to use the property.
Create a living trust: The law allows you to transfer your family-owned business by using a living trust. Unlike an estate executor for a will, a trustee is the individual who manages a trust. In this case, the legal ownership of the business would remain in the trust, with you as the trustee. In the event of your passing, someone else would take over as trustee.
There are potentially other ways to pass the family business on to your children. Let us explore your options with you. Sederlaw is committed to understanding your unique aspirations and ensuring a legacy that extends far into the future.
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]]>The post How to Prepare for Upcoming Estate Tax Law Changes appeared first on Seder & Chandler, LLP.
]]>Your informed planning is our priority.
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