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Welcome to 2018! This should be a great year for the LLC.

At the suggestion of a friend, I decided that 2018 would be a great time to start a blog emphasizing Limited Liability Companies, or LLCs, as well as addressing any number of issues effecting small and medium size business owners.

I have a little experience in this area: I’ve been a business owner for over 25 years.  The first LLC I formed was in 1995, and I converted my family’s construction company to an LLC in 1997. I’ve formed around 80 LLCs over the years.

In addition to personal experience, I’ve done a good deal of research and speaking in this area. This past November I was invited to speak on the topic of LLCs in Alabama: Issuing, Dividing and Transferring Member Interests by M. Lee Smith Publishers, a division of BLR. I understand the webinar is available through the company online.

A lot of people now use the LLC format to conduct their business. Whether single member or multi-member, member-managed or manager-managed, the goal is the same: to conduct business and limit potential risk to personal assets.  Taxes play a role in this decision as well.

One commentator has estimated that over 21 million LLCs have been formed since the introduction of the first LLC statute in 1977 in Wyoming, although my sense is that at least half of those have been abandoned or dissolved.

Alabama’s first LLC statute was enacted in 1993, and the laws governing the entity have gone through three or four major revisions since then. I hope we are through with significant changes for the time being.

Hopefully, this format will allow me to post from time to time some topics relevant to your business. If you have specific questions, I may be reached at rec@CorriganLawFirm.com or (251) 476-2292.

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Tax Cut and Jobs Act of 2017

 

Prior to the end of 2017, Congress passed the Tax Cuts and Jobs Act (“TCJA”). It has a potentially far-reaching effect on American businesses, especially small businesses formed as LLCs.

Elements of the TCJA include reducing tax rates for businesses and individuals; increasing the standard deduction and family tax credits, but eliminating personal exemptions and reducing itemize deductions; limiting deductions for state and local income taxes and property taxes; limiting the mortgage interest deduction; reducing the alternative minimum tax for individuals and eliminating it for corporations; reducing the number of estates impacted by the estate tax and repealing the individual mandate of the Affordable Care Act.

The threshold for estate taxes will be increased under the TCJA. Under current law, estates over $5.6 million are subject to a 40% tax. The TCJA increases the taxable threshold to $11.2 million and $22 million if married filing jointly.

For pass-through entities such as LLCs and S-corporations, TCJA reduces tax by virtue of a 20% deduction, after which a lower rate of 29.6% will be applied. This benefit phases out starting at $315,000.

The corporate tax rate is reduced from 35% to 21%, with some deductions and credits either reduced or eliminated. The alternative minimum tax for corporations is eliminated.

The TCJA changes calculation of American corporate income tax on overseas earnings from a global to a territorial method. Rather than a corporation paying the U.S. tax rate (35%) for income earned in any country (less a credit for taxes paid to that country), each subsidiary would pay the tax rate of the country in which it is legally established. In other words, under a territorial tax system, the corporation saves the difference between the generally higher U.S. tax rate and the lower rate of the country in which the subsidiary is legally established.

There is a one time repatriation tax of profits in overseas subsidiaries of 7.5%, 14.5% for cash. This is an attempt to have U.S. multinationals bring nearly $3 trillion that has been accumulated offshore, much of it in tax haven countries.

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Devil left the porch light on

We have some remarkable artists, authors and songwriters in our area. One recently asked me to help her through the process of copyrighting her work.

It is a very simple process, really. A visit to the United States Copyright Office website, http://www.copyright.gov and it’s a pretty straightforward process.

Same goes for protecting other intellectual property. Copyrights, trademarks, service marks, trade names. All have value.  They have even more value to the people that work hard to establish a brand or a mark. Don’t let someone come along and take what you’ve earned.

Likewise, you can’t just toss a registration on someone else’s intellectual property. Trademarks aren’t just registered, they have to be used and earned to establish your ownership of the mark. I know some folks from Illinois that wish they hadn’t tried that little trick.  Cost them $525,000.  Juries don’t like people that steal someone’s hard earned brand.

Nevertheless, if you need assistance, I will be more than happy to help. You may contact me at rec@corriganlawfirm.com, or simply call the office at 251-476-2292 for further information.