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Important IRS Update: Significant Interest Penalty Increase for Tax Underpayments

The Internal Revenue Service (IRS) has recently announced a critical change that could significantly impact taxpayers who underpay their taxes. This update is particularly relevant as we approach the next tax filing season. Previously, the IRS charged a 3% interest penalty on estimated tax underpayments. However, this rate has now been increased to a substantial

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Will Inflation Hurt Stock Returns? Not Necessarily

Investors may wonder whether stock returns will suffer if inflation keeps rising. Here’s some good news: Inflation isn’t necessarily bad news for stocks. A look at equity performance in the past three decades does not show any reliable connection between periods of high (or low) inflation and US stock returns. Since 1993, one-year returns on

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Maximize Your Charitable Impact with These Four Strategies

As the year draws to a close, it’s a perfect opportunity to rethink how you give to charity. This is important for managing how much tax you pay and how much help reaches those in need. Here are four effective strategies: Need Guidance? Reach Out to Us! These strategies are just a starting point. There

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Small Business Qualified Stock’s Tax Benefits

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Category: Small Business Owner

Certain tax benefits are available to those who start or invest in startups. It can be challenging to determine, however, if you’re eligible to do so, since not every founder or investor can take advantage of the same benefits.

One avenue for potential tax advantages is known as qualified small business stock. These apples to shares of a C corporation with less than $50 million in total assets at the time the investment was originally made. This means that other forms of businesses, such as partnerships, S corporations, and LLCs, do not qualify.

Eligible sectors for business include manufacturing and technology, but typically not professional services, finances, agriculture, and hospitality. In order to reap the possible tax-free benefits of the sale of this stock, the shares must have been held for at least five years from the date they were originally acquired. If these shares were gifted to you by someone else, the period that the other person owned them also counts towards the five-year plan.

A few other requirements applicable to the sale of stock under these rules, such as:

  • The shares must have been acquired directly from the company rather than the secondary market
  • The gross assets of the. Business cannot exceed $50 million
  • The company in question must be legitimately involved in a qualified business or active trade, which means that 80% of the assets must be used in the active conduct of a business not meeting the terms of exclusions

Several business activities/industries are excluded, and these are:

  • Companies involves in performance arts, consulting, actuarial science, engineering, law, health, architecture, accounting, brokerage/financial
  • Farming
  • Oil or gas production or extraction
  • Banking, financing, leasing, and insurance
  • Hotels, restaurants, and similar companies
  • Any company in which the principal asset is the skill or reputation of at least one employee

Do you own shares in a C corp where you could potentially sell them tax free? Set up a time to speak with our financial team to learn more.

Do you feel lucky? What is a Quick Draw Buy-Sell Agreement?

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Category: Finances Income Tax Planning Inheritance Taxes Insurance Life Insurance Small Business Owner Taxes

Many business owners have a buy-sell arrangement set up for the future. It’s helpful to draw out these directions in advance, especially when there is the potential that future owners or part-owners might get gridlocked with one another. In these situations, buy-sell directions can help disputing parties move forward.

Do you feel lucky What is a Quick Draw Buy-Sell Agreement

It’s possible that you’ve already heard about a shotgun buy-sell arrangement, but a quick draw agreement is a bit different. Under a shotgun, the offering individual stipulates a price. The offerree then has the option to buy those shares or to sell their own shares to the offeror. The exact timing isn’t a major issue in this situation, since the offeree retains the option to either buy or sell. In some ways, this can even be seen as a disincentive to pull the trigger.

All that changes under a quick draw arrangement. Under a quick draw, either side can provide a notice to purchase the other’s shares at a price that is determined through an appraisal process. This can happen after a contractually defined “trigger event”, but the timing of the trigger pull is essential in quick draw. Simply put, timing is everything.

Under quick draw, buyer and seller designation is determined simply by who submits their notice to purchase the other’s shares first. A difference of even just minutes can determine who gets to buy and who gets to sell. This complex process was recently held up in Mintz v Pazer, in which the judge supported this out of the box buy-sell arrangement.

If you’d like to learn more about your buy-sell options and put a plan for the future in motion today, reach out to us at 732-521-9455 or email us at info@lawesq.net

Now What?: Dealing With Remorse After Selling A Company

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Category: Business Succession Planning Entrepreneurs Small Business Owner

Most entrepreneurs have the same idea; build their company and then sell it for big bucks.

But most owners who do that usually end up staying with the firm for a few years after the sale is consummated. What they don’t necessarily expect are the mixed feelings they have, according to an article in the New York Times.

Family Business Awards 2011-68
(Photo credit: Fuller Landau Montreal)

First, they may feel uncomfortable as a “soldier” rather than as a “general.”

Second, their strengths are often in starting up the company – making something from nothing.

Third, even if they are ready and willing to be a good soldier and carry on the work they started, they may feel uncomfortable in the new culture of the new bosses.

Fourth, they may not like the changes that are being made to their “baby.”

In many cases, the sellers find they cannot stay on as planned. Some are able to make the adjustment.

The article says owners who plan to sell their businesses but stay on should give some thought to whether that is likely to be a good idea. Basically, let the seller beware.

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One Family’s Quest to Pass on the Business

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Category: Estate Planning Estate Planning For Business Owners Family Business Small Business Owner

For families that own small businesses, one vital part of estate planning is succession planning. Through succession planning, a business owner plans for the future of his or her business. A recent article discusses how Charlie Luck IV is planning to keep family-owned firm, Luck Stone, in the family.

English: gravel being unshiped
(Photo credit: Wikipedia)

At only 53, Luck is in no hurry to pass the business on to his heirs. However, in planning ahead, Luck shows the forethought that all small business owners should have when it comes to succession planning. Luck is already considering which, if any, of his three children display the responsibility and interest necessary to run the business.

Although Luck’s biggest goal is to keep the business in the family, he knows that it will only work if he selects the right successor. As Luck explained, “One of the worst things in the world you can do is put any person in a company role, family or non-family, that does not align with who they are, with their skill set and their capacity…that is unethical.”

Statistics are not on the side of family businesses. Only three percent of family businesses in the same position as Luck Stone – moving from generation three to generation four – survive the transition.

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