Coming up with a solid concept for a new business and working to get your operation off the ground can be an expensive undertaking. But the good news is that you can write off a number of the expenses involved with the startup process.

That said, the rules for deducting startup expenses are a bit different from those for writing off general business expenses incurred by an existing company. For example, most start-up expenses are considered capital investments and cannot be written off in the same year they are incurred, but instead need to be “amortized” (meaning stretched out and deducted over a longer period) over 15 years. Let’s say, for example, that you have $15,000 in qualified startup expenses. Instead of deducting all of those expenses against your first-year income, you would receive a deduction of $1,000 per year for 15 years. However, there are some exceptions to this as you’ll read below.

To confirm what you can write off and when, you should consult with me, your Family Business Lawyer™ and your certified public accountant (CPA) to understand exactly how to record your  startup expenses in a way that most benefits your business. Meanwhile, here we’ll take a look at some of the basic rules for writing off startup expenses and how you might use them to reduce your new company’s income tax liability.

What Startup Costs Can Be Deducted?

According to the IRS, there are three categories of startup expenses that are eligible for deductions: expenses for creating your business, expenses for launching your business, and expenses for organizing your business. Each category consists of a number of different types of costs, including the following:

Creating your business: These expenses include activities associated with researching your business concept and finding a proper location for your business. Expenses in this category might include consumer surveys, feasibility studies, market research, and travel expenses to potential business sites.

Launching your business: These are costs incurred while getting your business up and running and include things like recruitment and training your team, selecting vendors, advertising, and professional fees, such as our legal fees. However, you cannot include equipment purchases in your startup expense deductions, as they are depreciated under non-startup business deduction rules.

Organizing your business: You can also write off costs associated with creating your business entity, which might include filing fees, legal fees, accounting fees, and expenses for holding organizational meetings.

How To Take Startup Deductions

Now that you understand what kind of expenses can be written off, let’s look at how to include those deductions on your federal income tax return. Although the IRS allows you to deduct certain startup expenses, there are several restrictions and limits that may apply.

The IRS does allow you to write off up to $5,000 in startup costs and another $5,000 in organizational costs in your first year of business (as opposed to amortizing the deductions over a 15-year period), but only if your total startup costs are $50,000 or less.

If your startup or organizational costs exceed $50,000, the first-year deduction cap will be reduced by the amount over $50,000. For example, if your startup expenses total $54,000, your first-year eligible deduction is reduced to just $1,000, and the rest of your expenses would need to be amortized over 15 years.

However, if your total startup costs are more than $55,000, the first-year deduction is eliminated entirely, and all of your start-up costs will be amortized.

Timing Matters
It’s often best to take the startup deductions for your business in the same year your business opens, but not always. If you will not generate profits in your first year, it could be better to amortize your deductions over time.

Speak with me, your Family Business Lawyer™ and CPA to determine when taking these deductions makes the most financial sense for your company.

Finally, if your business never gets off the ground and fails before you actually open your doors, your startup costs could be considered personal costs and would not be eligible for these deductions. In certain cases, however, these costs could be regarded as capital losses, so always consult with your CPA to ensure you are taking advantage of every available tax break.

Maximize Your Startup Deductions

As you can see, writing off your startup costs isn’t quite as straightforward as deducting regular operating business expenses. That said, helping you identify and allocate your startup expenses properly is where we come in. Sit down with me, as your Family Business Lawyer™, to help you navigate the process and maximize the tax savings available to your new business. Contact me today to schedule your appointment.  

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you. 

Estate planning is an obvious concern for all parents, but if you have a child with special needs, it’s crucial that you are aware of the unique considerations that go into planning for a child who may be dependent on you at some level for their lifetime. If your child has special needs, you must understand exactly what’s necessary to provide for the emotional, physical, and financial needs of your child, in the event of your own eventual death or potential incapacity.

When creating your estate plan, there are two major considerations for you to focus on: 1) Who would care for your child if and when you cannot (also known as guardianship), and 2) How will your child’s financial needs be met when you are not there to meet them.  

Naming Legal Guardians for a Lifetime of Care
The first and most critical step in ensuring the future well-being of your child with special needs is to name both short and long-term legal guardians to take custody of and care for your child in the event of your death or incapacity. And as you well know, if your child will never become fully capable of independently caring for him or herself, your parenting responsibilities will continue on long after your child reaches adulthood.

Although this lifetime responsibility likely feels overwhelming, we’ve been told repeatedly by our clients who have a child with special needs that naming legal guardians and knowing their child will be cared for in the way they want, by the people they want, creates an immense sense of relief. Not only that, but we often build in unique plans through which the named guardians are carefully instructed—and even incentivized—to give your child the same level of attention and care you provide.

For example, we’ve created plans in which the named guardian is compensated for taking your child to dinner and the movies every week or participating in some similar activity if this is something your child enjoys doing with you. However, without written instructions (and perhaps compensation) built into your estate plan, fun activities like this are often neglected once you are no longer there.

For guidance on selecting the individual(s) best suited to serve as legal guardians and creating the proper instructions for them to provide your special needs child with the same level of care as you, consult with us as your Personal Family Lawyer®.

Providing For Your Child’s Financial Future: Special Needs Trusts

Beyond naming legal guardians for your child with special needs, you’ll also need to provide financial resources to allow your child to live out his or her life in the manner you desire. And this is where things can get tricky for children with special needs.

In fact, it may seem like a “Catch-22” situation—you want to leave your child enough money to afford the care and support he or she needs to live a comfortable life, yet if you leave money directly to a person with special needs, you risk disqualifying that individual for much-needed government benefits like Medicaid and Supplemental Social Security Income (SSI).

Fortunately, the government allows assets to be held in what’s known as a “special needs trust” to provide supplemental financial resources for a physically, mentally, or developmentally disabled child, without affecting his or her eligibility for public healthcare and income assistance benefits. However, the rules for such trusts are complicated and can vary greatly between states, so you should always work with us, your Personal Family Lawyer® in order to create a comprehensive special needs trust that’s properly structured and appropriate for your child’s specific situation.

Setting Up The Trust

Funds from a special needs trust cannot be distributed directly to your child, and instead must be disbursed to a third party who’s responsible for managing the trust. Given this, when you initially set up the trust, you will likely be both the Grantor (trust creator) and Trustee (the person responsible for managing the trust), and your child with special needs is the trust’s Beneficiary.

You’ll then name the person you want responsible for administering the trust’s funds upon your death or incapacity as the Successor Trustee. To avoid conflicts of interest, overburdening the legal guardian with too much responsibility, and providing a system of checks and balances, it may be a wise decision to name someone other than your child’s legal guardian as a Trustee.

As the parent, you serve as the Trustee until you die or become incapacitated, at which time the Successor Trustee takes over. Each person who serves as Trustee is legally required to follow the trust’s terms and use its funds and property for the benefit of your special needs child.

Additionally, you should name multiple Successor Trustees—which can even be a trust company, bank, or another professional fiduciary—as backups in case something happens to prevent the individual you’ve named as primary Trustee from serving.

There are two ways to set up a special needs trust. In the first option, we build it into your revocable living trust, and it will arise, or spring up, upon your death. From there, assets that are held in your living trust will be used to fund your child’s special needs trust.

In the other option, we can set up a special needs trust that acts as a vehicle for receiving and holding assets for your child right now. This option makes sense if you have grandparents or other relatives who want to give your special needs child gifts sooner rather than later.

Finally, it is important to ensure that the trust will have sufficient funds to last throughout the life of your child. One common method to provide funding is for you (or another loved one) to name the special needs trust as the beneficiary of your life insurance policy. Another way is for family members and friends to make donations or gifts to the trust and/or include it as a beneficiary in their will.

Meet with us, as your Personal Family Lawyer®, to discuss all of your available options for ensuring your child’s special needs trust has sufficient funds to last for his or her lifetime and for guidance on the estate planning vehicles best suited for passing money to the trust.

The Trustee’s Role

Once the trust is funded, it’s the Trustee’s job to use the trust funds to support your child without jeopardizing eligibility for government benefits. To ensure this is handled properly, the Trustee must have a thorough understanding of how eligibility for such benefits works and stay current with the ever-changing laws. The Trustee is also required to pay the beneficiary’s taxes, keep detailed records, invest trust property, and stay current with the beneficiary’s needs.

Given this immense responsibility, it’s often best that you name a legal or financial professional who’s familiar with the complexities of the law as Trustee or Co-Trustee, so they can properly handle the duties and not jeopardize your child’s eligibility for government benefits. Alternatively, we can advise your named personal Trustee on how to manage the Trust.

Your Trusted Source For Special Need Planning
If you have a child with special needs, meet with us, as your Personal Family Lawyer®, for trusted guidance and support in creating a special needs trust and other estate planning vehicles for your child. We offer an array of estate planning strategies that are designed to accommodate the unique needs presented by a child with special needs and their families. 

We will assist you in passing on the financial assets needed for your child to have a rich quality of life, without jeopardizing his or her eligibility for government benefits. We’ll also support you in finding and appointing a legal guardian and/or Trustee to ensure your child is protected and provided for in the exact manner you wish when you die or if you become incapacitated. Contact us, your Personal Family Lawyer® today to get started.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

If you are like most business owners, you’ve likely been presented with legal documents that contained terms you didn’t fully understand. You may have even signed documents that you didn’t completely read because you were intimidated by the confusing legalese. There have surely been times when a client or team member has signed a legal document you presented to them, even though they didn’t fully read or understand what they were signing.

Unfortunately, such scenarios are far too common. But it doesn’t have to be, rather than creating confusion and anxiety, the agreement process should do the exact opposite.

Indeed, the agreement process is your opportunity for creating clarity on your relationships, policies, and procedures, and delivery of your product or service. Take it from us, as your Family Business Lawyer ™, if you avoid reviewing, rethinking, and revamping your agreement process, you are not only putting your assets and business at risk, you are short-changing yourself, your work, and your relationships.

In addition to creating clarity, when done right, the agreement process is ultimately about creating connection, consistency, setting boundaries, and establishing expectations. If your current agreement process isn’t providing you with these outcomes, then this article is for you.

Contracts vs Agreements: What’s the Difference?

As we mentioned in a previous blog article, in some cases, you do not need to put an agreement in writing to create a legally enforceable agreement. As long as the proper elements exist, a valid contract can be created verbally.

But putting semantics aside for a moment, in that case, do you really have an agreement? If you don’t put it in writing, you may have a contract, but a contract and an agreement are actually two different things. A great agreement that is often overlooked in writing requires these elements of agreement as well:

• Connection,
• Being on the same page,
• Alignment,
• Clarity,
• Coherence 

This is how many business owners end up in unnecessary, expensive and messy conflicts. They have contracts, but not true agreements. To help ensure you don’t end up in the same situation, we recommend you rethink your relationship to legal agreements by implementing the following best practices.

What Do You Want From the Relationship?

First of all, before you ever sign a contract or enter into any business agreement or arrangement, get clear on what you actually want from the relationship. In doing so, it’s vital that you are completely honest with yourself—and be willing to be completely honest with the other person as well. 

When it’s unclear what you want from the relationship, be willing to seek support in order to become clear. This might mean finding a safe space to talk through what you think you want from the relationship. Or it could mean speaking out loud about your unsurfaced assumptions and receiving reflective feedback. It may also look like asking questions you may not have initially thought about.

Achieving this kind of clarity is one of the major differences between using generic template agreements you find online versus working with us, your Family Business Lawyer™, who serves as your trusted advisor. As your trusted advisor, we will support you to get clear, test your assumptions, and surface what you cannot see. This allows you to get out of your head and achieve a truly objective perspective from a position that you may not be fully aware of you can if you are solely relying on a generic online agreement.

If you are resistant to receiving counseling to create high-quality legal agreements or working with a lawyer who is not a great counselor and they are only providing you with templates full of confusing blanket terms, you are missing out on one of the most significant opportunities a business owner can have. The counseling process of a Family Business Lawyer ™ allows you to work through all aspects of a business relationship that may bring up uncomfortable feelings ahead of time, rather than having those uncomfortable feelings surface down the road, resulting in expensive conflicts that could have easily been avoided with the proper planning.

Start With The Ideal Outcome In Mind
Once you are clear, putting in place the legal agreement is easy. Follow these steps below to gain clarity on the foundation of the agreement:

Start by identifying your desired outcome of the business agreement. If you could see into the future and achieve the ideal result the relationship is to provide, what would be true for it to be successful? To understand the ideal outcome, first, imagine yourself celebrating a future in which the relationship met all expectations. Suppose you worked together in all the best ways, and you accomplished all of your goals together. What would need to happen for everything to go that well? That’s what you want to document in your agreements.

If you are hiring a team member, for example, how will they know they are succeeding? Based on what that success looks like, you should establish clear, measurable outcomes for the role, with specific metrics for success, along with time frames for specific goals and objectives to be achieved. Then, include that information in the employment agreement, so it’s abundantly clear what the expectations for the position are for the team member and for you.

On the other hand, you also need to think about how you would work with the team member if things didn’t work out as expected. What would happen if the team member needs to leave, can’t perform, or isn’t performing for some reason? Are you agreeing to any payment beyond just payment for performance? If so, that needs to be documented, and if not, that also needs to be documented.

Next, what are the reasons you can terminate the relationship? On what basis can the team member walk away? What is each of you entitled to in the event the relationship needs to end? All of these scenarios need to be thought through and planned for during the agreement process.

Along these same lines, whenever you bring on a new client, you should establish similar metrics of success for that relationship and document them in your client service agreement. What would need to happen for the engagement to be fully complete? How will you know when it’s time for the relationship to transition to the next level? What happens if the agreement is not followed or the scope of work changes? 

Lastly, and perhaps most importantly, you should similarly outline your payment terms in your agreement: how much you get paid, how and when you expect to be paid, along with how late payments and non-payment will be handled. The more clarity you can achieve around these outcomes and document what the ideal outcomes would look like, the better things will be for both you and your client.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you. 

Whether you are married or not, if you are involved in a committed partnership with another individual, estate planning is about so much more than planning for death—it’s about planning for life and ensuring your beloved will be protected and provided for no matter what happens to you. And if you are a member of the LGBTQ+ community, estate planning is even more critical, especially if you have complex family relationships.

Although same-gender marriage is legally recognized in all 50 states, long-held prejudice at both the political and family level continues to create complications for both married and unmarried same-gender couples. Indeed, while the federal government recognizes same-gender marriage, there are plenty of cities, businesses, and people who still refuse to recognize these unions. Moreover, a recent survey found that roughly four of every 10 LGBTQ adults say they have been rejected by a family member because of their sexual orientation or gender identity.

As we discussed last week in part one, such discrimination can create unique estate planning challenges, and regardless of your marriage status, if you are an LGTBQ adult in a committed partnership, you should be aware of several issues that can affect your planning strategies. Specifically, we discussed how relying on a will alone may not provide sufficient protection for your partner/spouse, and we explained why incapacity planning is particularly crucial if you want your partner/spouse to have a say in your medical treatment and the ability to access and manage your assets in the event you are hit with a debilitating illness or injury. 

Here we’ll address the final issue you should be aware of when creating your estate plan—securing parental rights for the non-biological parent of minor children.

3. Estate Planning Offers Alternative to Adoption
Although married same-gender couples now enjoy nearly all of the same rights as opposite-gender couples, there is one key right that’s still up in the air—the automatic right to be legal parents. While parental rights are of course automatically bestowed upon the biological parent of a child, the non-biological spouse/parent still faces a number of challenges when it comes to obtaining full parental rights.

Since the Supreme Court has yet to rule on the specific issue of the parental rights of the non-biological parent in a same-gender marriage, there is a tangled, often contradictory, web of state laws governing such rights. If you are a married same-gender couple, for example, some states consider the non-biological partner a legal parent based solely on your marriage, while other states do not.

Given the conflicting nature of state laws, many same-gender couples have turned to second-parent adoption to gain parental rights for the non-biological parent, since the Supreme Court has ruled that the adoptive parental rights granted in one state must be respected in all states. However, it can be extremely difficult for same-gender couples to adopt. In fact, 11 states currently permit state-licensed adoption agencies to refuse to grant an adoption, if doing so violates the agency’s religious beliefs. In other states, the law specifically forbids such discrimination, but given the Supreme Court’s ruling last week in Fulton v. City of Philadelphia, even those laws are susceptible to legal challenge.

In that case, the city canceled a contract with Catholic Social Services (CSS), a taxpayer-funded, faith-based foster care and adoption agency, after it refused child placement with LGBTQ families in violation of a city law prohibiting anti-LGBTQ discrimination. CSS sued the city, arguing that requiring it to follow the nondiscrimination policy violated its free exercise of religion since working with same-sex couples would go against its religious opposition to homosexuality.

In a unanimous judgment, the Supreme Court ruled in favor of CSS and found Philadelphia’s contract with CSS to be unenforceable. However, the ruling was narrowly focused on specific contractual language, and it does not create a broad free-exercise exemption from nondiscrimination laws, as many in the LGBTQ+ community feared.

That said, the Fulton case and others like it that are sure to follow, demonstrate that when it comes to same-gender couples seeking parental rights, second-parent adoption is not a panacea. Fortunately, same-gender couples do have an alternative to adoption—estate planning. Indeed, using a variety of estate planning strategies, as your Personal Family Lawyer®, we can provide a non-biological, same-gender parent with nearly all parental rights, even without formal adoption.

Starting with our Kids Protection Plan®,  LGBTQ couples can name the non-biological parent as the child’s legal guardian, both for the short-term and the long-term, while confidentially excluding anyone the biological parent thinks may challenge their wishes. In this way, if the biological parent becomes incapacitated or dies, their wishes are clearly stated, so the court can do what the parent would’ve wanted and keep the child in the non-biological parent’s care.

Beyond that, there are several other estate planning vehicles—living trusts, power of attorney, and health care directives—we can use to grant the non-biological parent additional rights. We can also create “co-parenting agreements,” which are legal agreements that stipulate exactly how the child will be raised, what responsibility each partner has toward the child, and what kind of rights would exist if the couple splits or gets divorced.

Experience You Can Rely On
In light of these issues, it’s vital for LGBTQ+ couples, especially those with children, to always work with experienced estate planning lawyers, and avoid using generic online documents at all costs. As your Personal Family Lawyer®, we have the experience of creating plans specifically designed to prevent your plan from being challenged in court by family members who disagree with your relationship.Indeed, with the proper planning, we can ensure that no matter what happens to you, your partner and family will be protected and provided for in the exact manner you wish, rather than being stuck in a financial and legal nightmare. What’s more, our specialized planning services can help ensure that non-biological parents in LBGT partnerships have as many parental rights as possible, without resorting to second-parent adoption. Contact us, your Personal Family Lawyer® today to get started with a Family Wealth Planning Session.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

If you are like most business owners, you’ve likely been presented with legal documents that contained terms you didn’t fully understand. You may have even signed documents that you didn’t completely read because you were intimidated by the confusing legalese. There have surely been times when a client or team member has signed a legal document you presented to them, even though they didn’t fully read or understand what they were signing.

Unfortunately, such scenarios are far too common. But it doesn’t have to be, rather than creating confusion and anxiety, the agreement process should do the exact opposite.

Indeed, the agreement process is your opportunity for creating clarity on your relationships, policies, and procedures, and delivery of your product or service. Take it from us, as your Family Business Lawyer ™, if you avoid reviewing, rethinking, and revamping your agreement process, you are not only putting your assets and business at risk, you are short-changing yourself, your work, and your relationships.

In addition to creating clarity, when done right, the agreement process is ultimately about creating connection, consistency, setting boundaries, and establishing expectations. If your current agreement process isn’t providing you with these outcomes, then this article is for you.

Contracts vs Agreements: What’s the Difference?

As we mentioned in a previous blog article, in some cases, you do not need to put an agreement in writing to create a legally enforceable agreement. As long as the proper elements exist, a valid contract can be created verbally.

But putting semantics aside for a moment, in that case, do you really have an agreement? If you don’t put it in writing, you may have a contract, but a contract and an agreement are actually two different things.

A great agreement that is often overlooked in writing requires these elements of agreement as well:

• Connection,
• Being on the same page,
• Alignment,
• Clarity,
• Coherence 

This is how many business owners end up in unnecessary expensive and messy conflicts. They have contracts, but not true agreement. To help ensure you don’t end up in the same situation, we recommend you rethink your relationship to legal agreements by implementing the following best practices.

What Do You Want From the Relationship?

First of all, before you ever sign a contract or enter into any business agreement or arrangement, get clear on what you actually want from the relationship. In doing so, it’s vital that you are completely honest with yourself—and be willing to be completely honest with the other person as well. 

When it’s unclear what you want from the relationship, be willing to seek support in order to become clear. This might mean finding a safe space to talk through what you think you want from the relationship. Or it could mean speaking out loud about your unsurfaced assumptions and receiving reflective feedback. It may also look like asking questions you may not have initially thought about.

Achieving this kind of clarity is one of the major differences between using generic template agreements you find online versus working with us, your Family Business Lawyer™, who serves as your trusted advisor. As your trusted advisor, we will support you to get clear, test your assumptions, and surface what you cannot see. This allows you to get out of your head and achieve a truly objective perspective from a position that you may not be fully aware of you can if you are solely relying on a generic online agreement.

If you are resistant to receiving counseling to create high-quality legal agreements or working with a lawyer who is not a great counselor and they are only providing you with templates full of confusing blanket terms, you are missing out on one of the most significant opportunities a business owner can have. The counseling process of a Family Business Lawyer ™ allows you to work through all aspects of a business relationship that may bring up uncomfortable feelings ahead of time, rather than having those uncomfortable feelings surface down the road, resulting in expensive conflicts that could have easily been avoided with the proper planning.

Start With The Ideal Outcome In Mind

Once you are clear, putting in place the legal agreement is easy. Follow these steps below to gain clarity on the foundation of the agreement:

Start by identifying your desired outcome of the business agreement. If you could see into the future and achieve the ideal result the relationship is to provide, what be true for it to be successful? To understand the ideal outcome, first, imagine yourself celebrating a future in which the relationship met all expectations. Suppose you worked together in all the best ways, and you accomplished all of your goals together. 

What would need to happen for everything to go that well? That’s what you want to document in your agreements.

If you are hiring a team member, for example, how will they know they are succeeding? Based on what that success looks like, you should establish clear, measurable outcomes for the role, with specific metrics for success, along with time frames for specific goals and objectives to be achieved. Then, include that information in the employment agreement, so it’s abundantly clear what the expectations for the position are for the team member and for you.

On the other hand, you also need to think about how you would work with the team member if things didn’t work out as expected. What would happen if the team member needs to leave, can’t perform, or isn’t performing for some reason? Are you agreeing to any payment beyond just payment for performance? If so, that needs to be documented, and if not, that also needs to be documented.

Next, what are the reasons you can terminate the relationship? On what basis can the team member walk away? What is each of you entitled to in the event the relationship needs to end? All of these scenarios need to be thought through and planned for during the agreement process.

Along these same lines, whenever you bring on a new client, you should establish similar metrics of success for that relationship and document them in your client service agreement. What would need to happen for the engagement to be fully complete? How will you know when it’s time for the relationship to transition to the next level? What happens if the agreement is not followed or the scope of work changes? 

Lastly, and perhaps most importantly, you should similarly outline your payment terms in your agreement: how much you get paid, how and when you expect to be paid, along with how late payments and non-payment will be handled. The more clarity you can achieve around these outcomes and document what the ideal outcomes would look like, the better things will be for both you and your client.

Next week, in part two, we’ll discuss how you can use the agreement process to more effectively deal with the inevitable changes that take place as your business relationships evolve and your original agreements need to be renegotiated.

For now, make the commitment to never sign or send another legal agreement again before it’s been reviewed by us, your Family Business Lawyer ™. This is a foundation of great business practice, and it’s one we support every client with. If you have current agreements that are either in place or ones that need to be signed, contact us. We can review what you do have and support you with wise counsel on your entire agreement process. It could be the make-it-or-break-it difference for your business.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you. 

Whether you are married or in a committed partnership, estate planning is about much more than planning for death—it’s about planning for life. It’s the way to ensure your beloved will be protected and provided for in the event of your death or incapacity. Especially if you are a member of the LGBTQ+ community, estate planning is even more critical.

Although same-gender marriage is legally recognized in all 50 states, long-held prejudice at both the political and family level continues to create complications for both married and unmarried same-gender couples. For example, suppose you have family members who are opposed to your marriage. In that case, your estate plan may be more likely to be disputed or even sabotaged by unsupportive relatives. This could mean that family members are more likely to contest your wishes, or it might result in custody battles over non-biological children in the event of the biological parent’s death.

Unsupportive family members may even try to block the ability of your partner to make medical decisions on your behalf should you become incapacitated by accident or illness. Even worse, your family members could try to kick your partner out of a shared home, if you are in an accident or fall ill, or they may even block your partner from seeing you if you require hospitalization.

Additionally, if you and your partner are unmarried, your partner would have no rights or protections should you become incapacitated or die without any planning in place, which leaves your partner vulnerable to several potentially dire risks (this is true in both same-sex and opposing sex relationships).

Given these issues, if you are in a committed partnership, you should be aware of several unique considerations regarding your estate plan. While you should meet with us, your Personal Family Lawyer®, to address your specific circumstances, here are three of the most pressing concerns to keep in mind. 

1. A Will Alone Might Not Be Enough

Suppose you’re unmarried and die without any estate plan. In that case, your property will be shared with your surviving family members according to your state’s laws through intestate succession. The state’s laws would not protect your unmarried partner, so if you want your partner to receive any of your assets upon your death, you need to—at the very least—create a will.

However, having an estate plan that consists solely of a will often doesn’t provide sufficient protection for your spouse/partner, and we often recommend that same-gender couples—even those who are married—create both a will and a trust. Although a will is a foundational part of nearly every estate plan, for a variety of reasons, having just a will could leave your partner/spouse at risk.

Most importantly, a will does not work in the event of your incapacity, which could happen at any time before your death. Should you become incapacitated with only a will in place, your partner/spouse may not have access to needed funds to pay bills, or they might even be kicked out of your home by a family member appointed as your guardian during your incapacity. 

Furthermore, upon your death, a will is required to go through the often long, costly, and potentially conflict-ridden court process known as probate. In contrast, assets that are properly titled in the name of your trust would pass directly to your partner/spouse upon your death, without the need for probate or any court intervention. 

If your will is successfully contested, this could prevent your surviving partner/spouse from receiving assets you left in your will. The process of contesting is extremely time-consuming, costly, and emotionally draining for your surviving partner/spouse.

Typically, when an attorney drafts your will, it is not set up to protect your assets after they are passed to your partner/spouse from creditors or lawsuits. However, leaving your assets in a trust that your partner/spouse can control would ensure the assets are protected from creditors, future relationships, and/or unexpected lawsuits.

2. Incapacity Planning is Especially Vital

As we touched on earlier, estate planning is not just about planning for your eventual death; it’s also about planning for your potential incapacity due to injury or illness. Proactive estate planning allows you to name the person (or persons) you would want to make your healthcare, legal, and financial decisions for you if you are incapacitated and unable to make such decisions yourself through a medical power of attorney.

If you haven’t planned for incapacity, the choice is then left to the court to appoint the person(s) to make these decisions on your behalf. If you’re unmarried and the court appoints one of your relatives as your guardian, your family could leave your partner totally out of the medical decision-making process and even deny them the right to visit you in the hospital. And even if you are married, it’s not guaranteed that your spouse would have the ultimate legal authority to make such decisions.

Though the court typically gives spouses priority as guardians, this isn’t always the case, especially if unsupportive family members challenge the issue in court. To ensure your partner/spouse has the ability to make these decisions for you, you must grant them the legal authority to do so using medical power of attorney and durable financial power of attorney.

A durable financial power of attorney gives your spouse the authority to manage your financial, legal, and business affairs, including paying your bills and taxes, running your business, selling your home, as well as managing your banking and investment accounts.

In addition to creating a will and trust, be sure to also create a living will, so that your spouse will know exactly how you want your medical care managed in the event of your incapacity, particularly at the end of life. Finally, don’t forget to provide your partner/spouse with HIPAA authorization within the medical power of attorney, so they will have access to your medical records to make educated decisions about your care. 

As your Personal Family Lawyer®, we can support you in putting in place a robust estate plan that will ensure that your partner/spouse has the maximum rights possible if you are ever struck by a debilitating accident or illness.
Next week, in part two, we’ll discuss the final estate planning consideration for LGBTQ couples—securing parental rights for the non-biological parent of minor children.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

When starting a business, you have to make a ton of different decisions. From deciding what to name your company to hire employees, getting your business off the ground comes with a nearly endless number of decisions.

Of all these decisions, perhaps none is more important or has a more significant impact on your success (or failure) than your choice of business entity structure. The entity you choose for your business will affect everything contracted by your company. Your business entity will determine the amount of taxes you pay, what kind of records you keep, and how vulnerable your assets are to lawsuits.

Among the different business entities, all companies should be one of the following legal structures: a sole proprietorship, partnership, corporation, or limited liability company (LLC). Last week in part one, we discussed the first two of four leading factors to consider when selecting your entity, and here, we cover the final two.

Before making final decisions, consult with us, your Family Business Lawyer™. We will look at the factors below and help you find the entity that’s best suited for your particular operation.

3. Taxation

Similar to your liability exposure, your entity selection also dictates how your business will be taxed. Suppose your business entity is a sole proprietorship or a partnership. In that case, you and the other owners are legally the same as your business, so your share of the company’s profits or losses are reported on your income tax return and taxed at your personal income tax rate.

In contrast, as a C corporation, your business is considered a separate legal entity from you and the other owners for both liability and taxation purposes. As a result, the corporation pays taxes at the new flat corporate tax rate of 21% established by the Tax Cuts and Jobs Act (TCJA). Then, after-tax profits are distributed to the shareholders. Those profits are taxed at the personal rate of each of the shareholders. This rate, “double taxation,” means the corporation pays tax at its rate, and then the shareholders pay tax at their rates.

However, due to the expense and complexity of creating and maintaining a traditional corporation, very few small or mid-sized businesses are set up as C corporations. Yet you can still obtain the liability protection and tax advantages offered by a corporation by setting your business up as an LLC.

As an LLC, you have flexibility in choosing how you’ll be taxed. Unless you choose to be taxed as a corporation, single-member LLCs are automatically taxed as sole proprietorships. In contrast, multi-member LLCs are taxed as partnerships. In such cases, your company doesn’t pay any taxes on its profits itself. Instead, your share of the net business income is taxed on your personal tax return, and you’ll pay taxes based on your personal income tax rate. 

Alternatively, you can also elect for your LLC to be taxed as an S corporation. In this case, you will be responsible for paying payroll, plus payroll taxes, and filing a tax return on behalf of the corporation. 

The main advantage of choosing to be taxed as an S corporation is that you only pay payroll taxes on your payroll, not on your profit distributions from the company. In addition, there is some indication that the audit risk for S corporations is less than the audit risk for companies taxed as sole proprietors, where income and expenses are reported on your personal Schedule C.

Suppose your business is taxed as an S corporation. In that case, you will pay income taxes on your profit distributions. Still, you would save roughly 15% in payroll taxes on distributions taken as profits rather than as payroll. When using an LLC taxed as a partnership or sole proprietorship, you will pay payroll taxes on all distributions to you from the LLC up to the payroll tax limits.

However, for an S corporation election to make sense, you’ll want to have at least $75,000 of net income per year. To help you choose the entity that’s most advantageous in terms of taxation, meet with us, your Family Business Lawyer™ or Certified Public Accountant (CPA).

4. Administration & Operation

While sole proprietorships and partnerships don’t offer any liability protection from the liabilities or activities of the business, both entities are simple to set up and maintain. Suppose you start a new business and are the only owner. In that case, you are automatically a sole proprietorship in the eyes of the law, or a partnership, if you have more than one owner. There is no need to register your business with the state in either case, file any paperwork, pay any fees, and there are no special rules to follow. 

While LLCs and corporations offer liability protection and tax advantages, those benefits come with specific administrative requirements known as corporate formalities. These formalities dictate how the entity must be structured, maintained, and managed. And suppose you fail to adhere to these formalities. In that case, a court could remove the protective barrier shielding your personal assets, known as “piercing the veil,” leaving you personally liable to creditors in the event of a judgment.  

Corporations come with the most strict and complex administrative formalities. For example, you must file articles of incorporation with the state, hold a regular board of directors and shareholder meetings, create and enact corporate bylaws, and maintain detailed record-keeping requirements, such as keeping detailed meeting minutes. Additionally, you must also file annual reports with the state and pay yearly fees to maintain your corporate status.

LLCs also comes with administrative formalities, but they aren’t nearly as burdensome as those for corporations. For example, as the owner of an LLC, you must file articles of organization with the state and create an operating agreement, which governs how your LLC is structured and run. In addition, all states require LLCs to file either an annual or semi-annual report with the state agency responsible for registering business organizations.

Although there’s no statutory requirement for LLCs to hold owner meetings or keep minutes, doing so provides strong evidence that you’re abiding by corporate formalities. Combining diligent record-keeping and clear separation of personal and business finances, you can offer your LLC extra protection from creditors.

Should you choose to set up as an LLC or corporation, as a Family Business Lawyer™, we can offer support with maintaining your business records and the corporate formalities required. We offer exceptional maintenance packages to help ensure your entity meets these requirements and maintains the maximum level of protection for your assets.

Enlist Our Guidance and Support

Properly selecting, setting up, and maintaining your business entity is far too important of a task for you to try to handle all on your own. We offer you trusted advice on the most advantageous entity for your particular business and then help ensure that your entity is properly set up. We can also provide you with sound business systems to make your business more efficient and establish a clear separation between your business and personal finances, which is a crucial part of maintaining your entity’s liability protection.

In addition, we will also ensure that you comply with the various state laws and administrative formalities required to maintain your entity and safeguard your assets, so you can remain focused on the most important task—growing your business. Contact us, your Family Business Lawyer™ today to get started.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you. 

When you are a kid, finding a suitable gift for Father’s Day can be a struggle. You want to get Dad something he’ll enjoy, but few young people can afford a new set of golf clubs or a shiny new grill, so you end up settling once again for the standard necktie and socks.

And even after you become an adult, that struggle for the perfect Father’s Day gift often continues, albeit in a slightly different way. When it comes to expressing your love and appreciation for everything Dad has done, more “stuff” doesn’t cut it.  

If your father is like most, he’d tell you that the greatest gift you could give him would be for you to abide by the values and principles he taught you and share them with your children. 

We may go to great lengths to protect and pass on our family’s financial wealth. Still, very few of us take the time to even document, much less preserve, our family’s legacy. The stories, values, insights, and life lessons of our parents, grandparents, and those who came before them— are typically lost forever when a beloved father figure passes away.

With this in mind, give your father a tribute to the role he has played in your life by preserving his legacy for generations to come with a Family Wealth Legacy Passage.

Family Wealth Legacy Passages: Sharing Your Family’s Story

As your Personal Family Lawyer®, we know that estate planning isn’t just about protecting and passing on your financial wealth and tangible assets when you die. When done right, estate planning supports you to pass down the most precious assets of all—your life stories, lessons, insights, and values, intentionally.  

We do this with a unique service we’ve developed known as Family Wealth Legacy Passages. We will personally guide your father to create a customized recording to share his most insightful memories and experiences. We will provide you with the recording digitally to rest assured it will survive long after he—and even after you—are gone. The Family Wealth Legacy Passage is at no additional cost to you since it is part of each estate plan.

Including Family Wealth Legacy Passages in your estate planning ensures the most valuable assets never get lost and the process of documenting them is as easy and convenient as possible. We use a series of helpful questions and prompts, which makes the process both easy and enjoyable. 

Many of our clients tell us that going through this process helps rekindle life moments they would otherwise not share with their loved ones during their lives. This unique process can enrich your family with something far more valuable than material wealth. After the interview, many of our clients have told us they feel as if they’ve become better, more conscious parents along the way. And the best part is, it takes less than an hour.

In the end, your family’s most precious wealth is not money, but the memories you make, the values you instill, and the insights and lessons you hand down. If left to chance, these assets are likely to be lost forever. 

Create A Lasting Legacy

During the month of celebrating Dad, take this opportunity to ensure that all of the wisdom and experience your father has gained during his life won’t be lost once he’s gone. You can do this now by scheduling a free consultation with us, your Personal Family Lawyer®.

Even if your father is no longer with us, perhaps you have a figure in your life that you can honor with this process. No matter the father figure in your life, meeting with us, your Personal Family Lawyer®, will benefit future generations. Contact us today to schedule your appointment.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.

When starting a business, you have to make a ton of decisions. Deciding what to name your company and hiring employees, what kind of products or services you should sell, and how to fund your operation, getting your business off the ground comes with a nearly endless number of decisions.

Of all these decisions, perhaps none is more important or has a more significant impact on your success (or failure) than your choice of business entity structure. Indeed, the entity you choose for your business will affect everything from the amount of taxes you pay and what kind of records you are required to keep to how vulnerable your assets are to lawsuits incurred by your company. 

Among the different business entities, all companies should be one of the following legal structures: a sole proprietorship, partnership, corporation, or limited liability company (LLC). While you should consult with us, your Family Business Lawyer™ before making your final decision, here are four of the leading factors to consider when selecting the entity that’s best suited for your particular business. 

1. Number of Owners

The number of owners your business has will factor into the entity forms that are available to you to choose from. For example, if you own the business yourself, you can operate as a sole proprietorship, an LLC, or a corporation without any other partners. If you choose an LLC, its owners are called “members,” so you would operate as a single-member LLC. If you choose a corporation, the owners are “shareholders,” and you can be the sole shareholder of your corporation.

If your business has more than one owner, your choices of an entity include a partnership, an LLC, or a corporation. If you have multiple owners as an LLC, your company would be considered a multi-member LLC. Note: if your business has multiple owners, you MUST have a lawyer prepare your operating agreement or bylaws. Do NOT use a document service. Navigating ownership terms, transfer rights, what happens when a partner or shareholder wants out, and what happens at death all require consideration and custom decisions that cannot be addressed with a one-size fits all solution. If you do not have your multi-person business agreements documented by a lawyer you risk massively expensive surprises down the road when you go to sell the business, or when one of your owners dies or wants to get out of the business. Or, when the business needs additional capital. So whatever entity type you choose, if you have a multi-owner structure, contact us to get your agreements in place. 

2. Asset Protection

The second factor in your entity choice is protecting yourself from legal liability. In today’s highly litigious society, all businesses should prepare for legal conflict at some point. At minimum, that conflict could be as simple as a refund request, or as complex as an employee or team member lawsuit, or worse. If  you don’t have the proper entity in place, you could lose your home, your vehicle, and even your life savings to satisfy a judgment. 

The same thing could happen if your company ever suffers a significant financial loss or goes out of business. Your company’s creditors could seize your personal assets to satisfy your business debt. This risk arises because unless you have the correct entity in place, there’s no separation between your business and personal assets, so your personal assets would be up for grabs in the event your company ever gets sued or goes into serious debt.

For example, suppose your company is a sole proprietorship or a partnership. In that case, you and the other owners are legally inseparable from your business—your business and its owners are the same in the eyes of the law. Therefore, you and the other owners would be personally liable for any debt or court judgment incurred by your company.

However, if you set up our business as either an LLC or a corporation, you can shield your personal assets from your company’s legal liabilities, including lawsuits and debt. When correctly set up and maintained, these two structures establish your company as a separate legal entity that’s distinct from you and the other owners as individuals, preventing you from being held personally liable for the company’s debt or legal disputes.

As your Family Business Lawyer™, we can not only help you choose the correct entity for your business, but we can also support you in setting up and maintaining your entity to ensure you have maximum personal liability protection. Next week, in part two, we’ll discuss the final factors to consider when choosing your business entity.

This article is a service of Liz Smith, Family Business Lawyer™. We offer a complete spectrum of legal services for businesses and can help you make the wisest choices on how to deal with your business throughout life and in the event of your death. We also offer a LIFT Start-Up Session™ or a LIFT Audit for an ongoing business, which includes a review of all the legal, financial, and tax systems you need for your business. Call us today to schedule your appointment at 907-312-5436, or find a time for us to call you. 

With the arrival of summer, young people across the country are about to reach a key milestone: high school graduation. If you have a child claiming their diploma, now is the time to prepare them for life after leaving the nest.

Graduating high school is a significant accomplishment. However, it comes with serious responsibilities that your child probably isn’t thinking much about right now. Once your child turns 18, they become a legal adult, and specific areas of their lives that were once under your control will be solely their responsibility. 

While your child will now be a legal adult, you still have essential parental duties. Yet, if you don’t support your child to step into adulthood with legal documents to help both of you, it can be challenging and costly for you to help them in the event of an emergency. 

For instance, should your child get into a severe car accident and require hospitalization, you would no longer have the automatic authority to make decisions about his or her medical treatment or handle their financial matters. In fact, without legal documentation, you wouldn’t even be able to access his or her medical records or bank accounts without a court order.

To address this vulnerability and ensure your family never gets stuck in an unnecessary court process, before your kids move out or head off to college, have a conversation about estate planning and have them sign the following three documents. 

1. Medical Power of Attorney

The first document your child needs is a medical power of attorney. A medical power of attorney is an advance healthcare directive that allows your child to grant you (or someone else) the immediate legal authority to make healthcare decisions on their behalf if they become incapacitated and are unable to make decisions for themselves.

For example, the medical power of attorney would allow you to decide about your child’s medical treatment if he or she is knocked unconscious in a car accident or falls into a coma due to a debilitating illness. 

Without a medical power of attorney in place, if your child suffers a severe accident or illness that requires hospitalization and you need access to their medical records to make decisions about their treatment, you’d have to petition the court to become their legal guardian. While a parent is typically the court’s first choice for a guardian, the guardianship process can be slow and expensive.

And due to HIPAA laws, once your child becomes 18, no one—not even parents—is legally authorized to access his or her medical records without prior written permission. But an adequately drafted medical power of attorney will include a signed HIPAA authorization, so you can immediately access their medical records to make informed decisions about their treatment.

2. Living Will

While the medical power of attorney allows you to make healthcare decisions on your child’s behalf during their incapacity, a living will is an advance directive that provides specific guidance. These are specifications on how your child’s medical decisions should be made, particularly at the end of life.

For example, a living will allows your child to advise if and when they want life support removed should they ever require it. In addition to documenting how your child requests their medical care managed, a living will also include instructions about who should visit them in the hospital and even what kind of food they would want to have provided. For example, if your child is a vegan, vegetarian, gluten-free, or takes specific supplements. These are all things that should be considered and recorded in their living will.

Finally, speak with your child about the unique medical decisions related to the coronavirus, particularly in intubation, ventilators, and experimental medications. Your child’s quality of life decisions should also be outlined in their living will. You can find in our previous article, COVID-19 Highlights Critical Need for Advance Healthcare Directives.

3. Durable Financial Power of Attorney

Should your child become incapacitated, you may also need the ability to access and manage their finances, and this requires your child to grant you durable financial power of attorney.

Durable financial power of attorney gives you the authority to manage their financial and legal matters, such as paying their tuition, applying for student loans, paying their rent, negotiating (or re-negotiating) a lease, managing their bank accounts, and collecting government benefits if necessary. Without this document, you’ll have to petition the court for such authority.

Start Adulthood The Right Way

Before your kids head out into the world, make sure they’ve got the proper planning in place. By doing so, you are modeling good financial stewardship and setting them up right from the start. Financial and legal illiteracy is an epidemic that you can quickly address, starting with yourself and your own family. 

As your Personal Family Lawyer®, we can not only help you create these vital documents, but we can also facilitate a family meeting to discuss the importance of planning. We will begin what we hope will be a life-long relationship with your children as they take this crucial first step into adulthood. Contact us today to ensure that if your child ever does need your help, you’ll have the legal authority to provide it.

This article is a service of Liz Smith, Personal Family Lawyer® in Juneau, Alaska. We don’t just draft documents; we ensure you make informed and empowered decisions about life and death, for yourself and the people you love.  That’s why we offer a Life & Legacy Planning Session,™ during which you will get more financially organized than you’ve ever been before, and make all the best choices for the people you love. You can begin by calling our office today at 907-312-5436 to schedule a Life & Legacy Planning Session and mention this article to find out how to get this $750 session at no charge; or book a time for our team to call you at a time you choose.