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Top Tax Deductions for Small Businesses

Small businesses provide a critical pillar within the United States economy. According to the JP Morgan Chase Institute, small businesses comprise 99.9% of all U.S. businesses, accounting for 45% of the national GDP. However, many small business owners actually pay more tax than they need to; while large corporations tend to retain accountants, working full-time to find tax savings, many small businesses do not have this privilege. As a result, small businesses will often miss out on a plethora of potential tax savings that fly under the radar.

This article covers the most commonly missed deductions for small business owners — and how you can determine if your business is eligible.

The Home Office Deduction

Many small businesses conduct business from a home office. A home office can be located within a room within your residence or an outbuilding unattached to your home. Working from a home office comes with several benefits such as flexibility, ease of access, and of course, inherent tax deductions.

However, the IRS can be a stickler for eligibility; to ensure that your home office is eligible for deductions, it must pass two tests.

1. The Regularity Test: You must use the room regularly.
2. The Exclusivity Test: The room must be exclusive to business activities.

In addition, your home office has to be your “principal place of business.” As your principal place of business, you must use your home office as the primary location for meeting with clients or conducting business activities. If you perform administrative or management duties elsewhere — or have a secondary office — the IRS will reject your home office deduction.

The Mileage Deduction

Business travel can make up a significant expense, especially for small business owners. Luckily, there is a deduction for that; currently, the IRS permits a deduction of 56 cents per qualifying mile. This rate is subject to change each year but should remain within the same ballpark. You can easily track your business miles with QuickBooks Online or a service such as Mile IQ.

Unfortunately, you cannot deduct your commute. However, there is a workaround within the tax code language; the difference lies in how ‘commute’ is defined.

Commuting travel is defined as travel to and from your home to your business. Traveling from your business to another business site, such as a branch or a meeting place with a client or prospect, is considered travel eligible for a mileage deduction. This is where a home office can come in handy; when you have a qualifying home office, business travel from your home to another place of business can be deductible because it doesn’t meet the definition of a commute.

For the sake of example, let’s say you own a restaurant 30 miles from your residence. Suppose your restaurant doesn’t have any office space, and you can do business in a qualifying home office. In that case, the 30-mile trip can count as deductible mileage instead of a non-deductible commute.

S-Corp Tax Benefits

While the S-Corporation designation is not for every business, it may open the door to some next-level tax savings. Unlike standard corporations, S-Corps are considered “pass-through” entities because income, losses, and deductions “pass through” directly to shareholders, circumventing corporate income tax. After being passed through to shareholders, income, losses, and deductions are taxed at each shareholder’s income tax rate.

The S-Corp designation can be a popular choice for certain business owners because they avoid double taxation, but it is not suitable for everyone. In fact, many businesses are not even eligible — companies with more than 100 shareholders or foreign shareholders, ownership by a separate corporation or partnership, or multiple classes of stock are disqualified.  If you are unsure whether the designation is right for you, find a good small business lawyer to help you evaluate the option.

Even if you are eligible for an S-Corp designation, several downsides must be weighed. For example, S-Corps must run payroll and withhold taxes. In addition, the IRS closely watches S-Corps to dissuade those taking advantage of the designation. Also, outside investors tend to prefer investing in C-Corps over S-Corps because C-Corps are more conducive to growth. S-Corp profits are subject to taxation, whereas C-Corp gains are only taxed once distributed, encouraging C-Corps to keep money in the business to fund growth.

Designated your business as an S-Corp is not optimal for every business, but for highly profitable small businesses with shareholders, it can save a lot of money by circumventing double taxation.

Business Meal Deductions

Business meal deduction goalposts are constantly shifting, but 2021–22 is shaping up to be an optimal period for meal-related tax savings. The recent COVID-19 Relief Bill permits businesses to write off 100% of the cost of business-related restaurant meals, food, and beverages in 2021 and 2022.

By definition, deductible food and beverage items include all food and beverages, including snacks, alcohol, and other non-traditional “meals”; delivery charges, sales tax, and tips included. Notably, entertainment expenses are not deductible — but meals at entertainment venues can be. While it may seem like an inconvenience at the time, always ask for an itemized receipt at entertainment venues that separate the meal from the entertainment expense.

It’s always good practice to document every business-related expense, and business meals are no different. After each business meal, remember to put the receipt somewhere safe like in Hubdoc of QuickBooks Online; doing so is crucial to protect your finances in the event of an audit.

Miscellaneous — But Useful — Deductions

Giving gifts to your clients is more than a fast-track to their hearts; it can save your business money on its tax return. The IRS allows a business deduction of up to $25 per client per year.

Business clothes can also be deductible, but with many strings attached — you cannot deduct street-appropriate work clothes, for example. To qualify for the business clothes deduction, the clothes in question must be “mandatory for your job and unsuitable for everyday wear.” Unfortunately, this means you cannot deduct a brand-new, custom-tailored Italian suit — even if it is required for your job — but a bariatric welding contractor could deduct the cost of wetsuits, for example. However, there is a workaround to deducting street-appropriate wear: if the clothing contains a visible business logo, it can be considered advertising — which is deductible.

Another deduction opportunity lies in charitable contributions. However, deducting these contributions is not as straightforward as one might expect. The only businesses that can directly deduct charitable donations are C-Corps — and most small businesses are not C-Corps. Fortunately, there is a workaround: classifying the charitable contribution as an advertising expense. This isn’t a simple “misclassify the deduction and hope the IRS doesn’t notice” type job — which, by the way, is illegal. To successfully classify your donation as advertising spend, you must be able to show how you leveraged the donation into an advertisement. A business can accomplish this by, for example, donating money to a local high school sports or arts program, which will, in turn, list the business as a sponsor, such as in a printed program or on a scoreboard panel. In turn, the donation becomes classified as a “necessary business expense” and is now deductible as advertising spend — while still supporting a cause you care about.

The Big Picture

Tax benefits for small businesses exist for a reason. Unfortunately, many small business owners who aren’t financially savvy — or don’t employ specialized small business accountants — miss out on what is, basically, free money. Familiarity with top tax deductions is highly beneficial for any business’s bottom line and may even help business owners scope out opportunities for further tax write-offs. Because the business tax landscape is prone to rapid, yearly change, it is crucial for business owners to keep their ears on the ground for more upcoming opportunities to save.

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ANNOUNCING FREE WEBINAR

Want more great tax and legal tips for your business? If so, we invite you to join us for a complimentary webinar co-hosted by JUSTLAW and FinancePal, where we’ll take up such critical topics as:

• Most commonly missed deductions
• Selecting the right corporate structure for your company
• Understanding the difference between employees and independent contractors

Wednesday July 14, 2021 at 2:00 pm ET

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What you must know about conformed signatures

Electronic signatures facilitate rapid and efficient signing of documents, more commerce, and a great deal of flexibility to tailor tools and protocols across an organization. In recent years, the practice of and market for electronic signatures has exploded, and many technology analysts predict this trend will continue into the future. 

person signing document
A person prepares to sign a document with a “wet” signature.

The transition, however, has not been easy for some, and many business technologies have yet to be phased out. Signatures, faxing, scanners, and landlines are all antiquated business technologies that have yet to become fully phased out. There are plenty of new technological solutions that effectively eliminate the need to keep up with these methods but the adoption rate has been relatively slow, which comes to the detriment of business speed and efficiency. 

When looking at the concept of signatures, it is easy to understand the reasoning as to why e-signatures have yet to have full adoption across the board. 

Everyone has a unique signature, and signatures are an integral part of validating that an individual actually signed and agreed to the terms of the document. The s-signature has become a standard way of electronically signing documents that has become accepted in some use cases. 

Below is a discussion of what the characters /s/ means in a signature line and why it is utilized.

What is a Conformed Signature?

“Conformed signature” almost sounds like an oxymoron. A conformed signature is a typewritten signature indicating that the original version of the document has been signed by the appropriate party, and it should be maintained with the records of the company. A conformed signature replaces the traditional “wet” signature line with a typed name preceded with a “/s/” designation. A conformed signature usually looks similar to this example:

/s/ Ronald McDonald

Ronald McDonald

There are a multitude of  ways that a conformed signature can be written, and the United States Patent and Trademark Office provides resources to what formatting an electronic signature should follow. 

As you will see below under “When is it legal?”, governing bodies have different regulations regarding acceptable formatting for conformed signatures. 

Because of these differences, it is important to have a competent and tech savvy legal team. As a business owner, your signatures are constantly needed, and the ability to utilize a conformed signature whenever possible will save time and effort. 

Having a legal resource that acknowledges the importance of your time and providing e-signatures whenever possible is a must. 

Why Is It Used?

A conformed signature is utilized mainly as a way of making signing contracts and documents easier. Convenience of a conformed signature is what has drawn many to utilize it, and some government agencies now accept it in lieu of a traditional signature. 

The conformed signature eliminates the need for an individual to print, sign, and scan a document to submit it electronically. To save paper and reduce the number of intermediary steps, conformed signatures offer a perfect efficient solution to a signature. 

Conformed signatures allow for a seamless process of viewing, signing, and submitting a document all without having to print or scan. Conformed signatures are utilized in a number of ways and gives a signer the option of how they are able to digitally sign a document. 

Conformed signatures can be easily done from a smartphone, tablet, laptop, or other mobile device, drastically increasing the speed at which individuals can certify a document. 

Additionally, a conformed signature is a great tool for attorneys to quickly and efficiently certify batches of documents. Many courts in the United State permit attorneys to use conformed signatures, including New York and CaliforniaThis process saves countless hours for attorneys, allowing them to focus on the highest value add activities for clients. And when value is prioritized, a lawyer is better able to advance a client’s interests.

When is it legal?

E-signatures, and more specifically, conformed signatures, are not a full substitute for legal handwritten signatures. The signature itself is not more reliable than a standard signature, and as such, makes the acceptance of e-signatures vary greatly, especially when it comes to geographic location.

sign here
Sign Here

The following states allow conformed signatures, with some exceptions:

  • Connecticut
  • Delaware
  • Florida
  • Kansas
  • Massachusetts
  • Nevada
  • New York
  • Texas
  • Utah
  • Virginia

In some of these states, a conformed signature may be allowed for certain filings and not others. In Florida, for example, an LLC document can have a conformed signature, but a filing for a non-profit corporation cannot.

While a lot of states allow conformed signatures in contracts, the Internal Revenue Service (IRS) doesn’t allow such signatures; therefore, SS4 forms and other tax documents must have an original signature.

The two regulations regarding e-signatures are the Electronic Signatures in Global and National Commerce Act and the Uniform Electronic Transaction Act, which give a basis for the inability to deny a document’s validity only on the basis that it has an electronic signature. 

Ultimately, it is the states’ decision in whether or not to accept conformed and electronic signatures.

Because these laws vary from state to state and agency to agency, it is important to ensure that a business has legal representation that is well-versed in the process of online signing and document submission. Documents signed inappropriately can lead to costly and time-consuming missteps. In the world of legal filings, this could mean the difference between the closure of a successful business deal or a costly mistake. 

Conclusion

Essentially, the “/s/” in a signature line signifies that a conformed signature is being utilized in lieu of a traditional handwritten signature. 

There are many forms of e-signatures and each have specific utilizations and formatting requirements. The s-signature is a great e signature method that can be utilized by many people. 

The ease of use and convenience of the signature type allows for businesses and attorneys to waste less precious time and energy printing, signing, and scanning documents, and more time to focus on their clients. 

If you need legal assistance, we suggest you look for lawyers that readily utilize new technology to eliminate inefficiencies. Traditionally, you pay lawyers by the hour and benefit from time-consuming, antiquated technology. 

JUSTLAW has over 300  highly trained and licensed attorneys that can ensure that your legal documents are as they should be. JUSTLAW saves you time, effort, and money. Leave the guesswork out of your legal needs and allow a JUSTLAW attorney to help you through complex paperwork. A good lawyer will navigate the different signature requirements for different documents and ensure that they are done correctly to reduce inefficiencies in having to refile for something that was done incorrectly the first time. 

The utilization of e-signatures is just one way in which a lawyer is able to save time and facilitate a smoother experience for their clients.  With a smart legal team on your side, you can avoid the legal headaches surrounding what type of signature to use and focus your precious time on business.  

 

 

 

Can Same Sex Couples Adopt Children?

The right to family life and family unity is a fundamental right guaranteed to all human beings across the globe. This right has been enshrined in the International Covenant on Civil and Political Rights (ICCPR). This multifaceted treaty was adopted by the U.N General Assembly in 1966 and came into force in the year 1976. This treaty put an obligation upon its 173 signatory ratifying member states, including the United States of America, to preserve and honor the enlisted civil and political rights of individuals. Article 23 of the Covenant states that “[t]he right of men and women of marriageable age to marry and to found a family shall be recognized” and “[t]he family is the natural and fundamental group unit of society and is entitled to protection by society and the State.”[1]

 

That being said, adoption for same sex couples has always been a peculiar and idiosyncratic affair. A couple often ends up in grey waters when they decide to start and raise a family of their own. The legal system of the United States shared a skeptical approach towards the growing trend of same sex couple. Thus, the constitutional recognition of same sex marriages by the Supreme court ruling in Obergefell v. Hodges[2] proved to be a landmark judgment in favor and recognition of support of the LGBTQ+ community. This very judgment created a positive impact on the adoption laws for same sex couples, however several legal hurdles remain yet to be tackled nationwide.

 

The history of same sex parenting before the Obergefell case has its roots dating from around the time of World War II, most notably in the context of prevention or explicit denial of adoption rights to LGBTQ community or the absence of any specific laws in this regard. Several countries have laws against gay or lesbian couples adopting children, for instance, Hungary in December 2020 has expressly banned same sex couples from adoption. Other countries including Belarus, Armenia, Georgia, Azerbaijan, Romania, etc. adopted the same negative approach towards same sex couples.

 

Opponents of same sex adoptions, which often includes private religion-based organizations, preach the moral objections to same sex adoptions and relations. Furthermore, there is also a shared opinion that children raised in gay or lesbian households are most likely to suffer from gender related disorders. However, these blatant opinions were rejected by a study conducted by the University of Oregon, where it was found that there was no difference between children raised by same sex couples and those raised by heterosexual couples. [3]

 

In the United States, adoption is governed by the adoption laws which varies from state to state. In addition, various federal laws (Adoption assistance act, Family and Medical leave act, Omnibus act, etc.) and additional laws (interstate compact etc.) operate in the area of adoption.

Same sex adoption rights have been strengthened every now and then by the judicial system. With the decision of the Arkansas Supreme court, adoption for same sex couple became legal in all 50 states of the USA.[4] It is an established ruling that marriage equality would amount to parents in a marriage whether both heterosexual or homosexual to be lawfully recognized as parents. This marriage equality has also allowed married same sex couples to adopt in several states where they were earlier, not allowed to do so.[5] A study conducted by the University of California’s Williams Institute has revealed that 21% of the U.S same sex couples had adopted children and around 3% had experienced fostering children, the rate, which in comparison to heterosexual sex couples was more than 7%.[6] There has been an increasing shift in the ideologies in the United States towards understanding the human rights of both parents and a child to have a family life with a keen understanding that adoption is a better option for children compared to orphanages along with the awareness that the sexual orientation of parents plays no role in raising a child. However, the fact remains that the process of same sex adoption is not an easy road to venture on. The difference in the laws relating to same sex adoption that vary from state to state often results in the procedure to become complicated, legal, and technical. Thus, it becomes imperative to hire the service of a legal professional with expertise in adoption and family laws to ensure a smooth experience.

[1] https://www.ohchr.org/en/professionalinterest/pages/ccpr.aspx ( last visited  12:45 ,dated 9/04/2021)

[2] Obergefell v. Hodge, (576 U.S 644)

[3]https://www.familyequality.org/2017/10/20/a-ver-brief-history-of-lgbtq-parenting/ (last visited 1:38 PM, dated 09/04/2021)

[4]https://www.acluarkansas.org/en/cases/arkansas-v-cole (last visited on 2:30 PM, dated 9/04/2021)

[5] Pavan v. smith, (582 U.S_2017)

[6] https://www.reuters.com/article/us-usa-lgbt-adoption-idUSKBN21D01I (vast visited 4:21, dated 10/04/2021)

Business Insurance: Is it Really Necessary?

Does anyone ever question insurance? Some people pay for insurance, never to actually reap a benefit from it, besides the comforting feeling of financial security. Others pay for insurance and reap all the benefits of the insurance because of a tragic loss, accident, etc. Most people do not question their car or home insurance. But is it common for businesses to have insurance? Do all of them have it? 

 

The answers to those questions are yes and no. It is very common for businesses to have insurance. In fact, most lawyers would strongly advise any business to have some form of insurance. However, some businesses ignore insurance and take on all different scary risks. Why do you ask? Well, maybe people think when they form a limited liability company, corporation, or other business entity that avoids personal liability, they insure their businesses as well. However, that is not the case. The creation of a limited liability company and a corporation do not also provide the business insurance this article refers to. 

 

Because it is often that business owners confuse this concept, JUSTLAW is providing you with a guide to Business Insurance.

 

How do I know if my Business Needs Business Insurance?

 

If you answer yes to any of the following questions, you should get Business Insurance: 

 

  1. Does your business have property (equipment, computers, laptops, inventory, trucks, etc.) that is not easily replaceable without expending a lot of money? 
  2. Do you have an office building? Factory? Land? 
  3. Could your business be sued as a result of an accident (i.e. use of dangerous equipment, slip and falls, regular use of transportation, etc.)

 

Types of Business Insurance:

 

If you answered yes to any of the above questions, you will then have to determine what type of business insurance your business needs. Here are a few types that are provided to businesses: 

 

  1. Liability Insurance 
  2. Property Insurance 
  3. Products Liability Insurance 
  4. Vehicle Insurance 
  5. Identity theft Insurance 
  6. Workers’ Compensation Insurance 
  7. Professional Liability Insurance 

 

Contact an attorney now to determine which of each listed above are right for your business. You may need all of them. You may need only one. However, no matter how many you need, insurance is the safest way to protect your business. 

 

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Utilize JUSTLAW attorneys to get the best advice on how to procure the most affordable and protective business insurance for your business. While you’re at it, check out our Business Membership to receive 24/7, 365 peace of mind for your business. Legal protection for your business and you is our #1 priority. 

 

To learn more about Business Insurance and to determine whether your business needs it, contact us at:

JUSTLAW Client Services, hello@127.0.0.1

This post is not legal advice. It is for general informational purposes only. No reader should rely on this information in any way whatsoever without first seeking legal advice from counsel in the relevant jurisdiction.

 

JUSTLAW’s 50-state survey of E-Notary laws

As more individuals and companies are forced to work remotely due to the COVID-19 pandemic, multiple federal and state governments are working to enable fully electronic processes to keep businesses operating. At JUSTLAW, our top attorneys we’ve been working hard to make sure our customers are fully operational, but also safe. 

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The Secure Notarization Act

On March 18, 2020, Senate Bill 3533, the Securing and Enabling Commerce Using Remote and Electronic Notarization Act of 2020 (the “SECURE Notarization Act”), was introduced as bipartisan legislation to authorize and establish minimum standards for electronic and remote notarizations that occur in or affect interstate commerce. This legislation would authorize every notary in the US to perform remote online notarizations (RON). Unless and until it is adopted into law, some federal agencies and multiple states are enacting various independent measures. Eg, the IRS issued Notice 2020-42 allowing retirement plan participants or beneficiaries during the year 2020 to satisfy the witnessing requirements for certain participant elections through use of remote notarization, including the spousal consent required under § 417 of the Internal Revenue Code. 

At a state level, there are currently 29 states that have enacted some form of RON law: Alaska, Arizona, Colorado, Florida, Hawaii, Idaho, Indiana, Iowa, Kentucky, Louisiana, Maryland, Michigan, Minnesota, Missouri, Montana, Nebraska, Nevada, North Dakota, Ohio, Oklahoma, Pennsylvania, Tennessee, Texas, Utah, Vermont, Virginia, Washington, Wisconsin and Wyoming. [as of 2/11/21].

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The rudiments of each state’s RON law are to:

  • Allow notarial acts to be completed using audio-video communication, including acts where the signer is located outside the state in which the notary is authorized to operate;
  • Require that the notary authenticate the person signing; and
  • Require recording of the audio-video communication.

 

Each state’s laws may vary as to authentication, record-keeping and retention periods.

The chart set forth below reviews each state and any RON law and/or emergency order enacted in such state supporting any form of remote notarization:

RON & Emergency Order Status – 50 States

State Permanent RON Emergency Order Notes
Alabama Y  

 

Alaska Y  

 

Arizona Y  

 

Arkansas Y The notary and the signer are both physically located in Arkansas at the time of signing, among other conditions.

 

California X X Secretary of state advocates “mobile notaries”.

 

Colorado X X  

 

Connecticut Y Persons physically located in CT.

 

Delaware Through end of June 2021.

 

DC X Y Awaiting guidance from Mayor’s office.

 

Florida Y Florida enacted RON effective January 1, with the execution of wills and estate planning documents using RON effective July 1.

 

Georgia Y  

 

Hawaii Y  

 

Idaho Y  

 

Indiana Y  

 

Illinois Y  

 

Iowa Y Iowa notaries must register with the secretary of state and utilize one of a limited number of vendors in order to perform the act.

 

Kansas Y  

 

Kentucky Y  

 

Louisiana Y Terminates upon the earlier enactment of the federal SECURE Notarization Act or February 1, 2022.

 

Maine Y  

 

Maryland Y  

 

Massachusetts Y  

 

Michigan Y Through July 1, 2021.

 

Minnesota Y Automatically expires January 6, 2021.

 

Mississippi Y During the pandemic and for 14 days after.

 

Missouri Y  

 

Montana Y  

 

Nebraska Y  

 

Nevada Y  

 

New Hampshire Y Ends when the declaration of emergency ends.

 

New Jersey Y For the duration of the pandemic.

 

New Mexico Y  

 

New York Y  

 

North Carolina X X Emergency measures were set to expire 3/1/21.

 

North Dakota Y  

 

Ohio Y  

 

Oklahoma Y  

 

Oregon Y Through June 2021.

 

Pennsylvania Y  

 

Rhode Island Y  

 

South Carolina X X  

 

South Dakota Y Enables the use of communication technology only “if the notarial officer: … affixes the notarial officer’s signature to the original tangible document executed by the [principal]” and only if the notary personally knows the principal.

 

Tennessee Y Y  

 

Texas Y Y  

 

Utah Y  

 

Virginia Y  

 

Vermont Y RON adopted but not yet implemented by the secretary of state. Current measures enable the witnessing of a power of attorney and filed in land records and enacted SB316 the same day to enable execution of self-proving wills using remote notarization.

 

Washington Y  

 

West Virginia Y  

 

Wisconsin Y  

 

Wyoming Y Through July 1, 2021.

 

*Current as of March 1, 2021. Please contact your friends at JUSTLAW for the most current information.*

To learn more and keep current on the status of remote online notarization across the US, please contact:

JUSTLAW Client Services, hello@127.0.0.1

This post is not legal advice. It is for general informational purposes only. No reader should rely on this information in any way whatsoever without first seeking legal advice from counsel in the relevant jurisdiction.

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Tax Breaks for Home Based Businesses 

 

Home based businesses are starting to become the norm as a result of the COVID-19 pandemic. And as every business owner knows, their business is subject to taxes. Yet, most small businesses that qualify as home based businesses do not take advantage of a tax break offered by the IRS. Publication 587 permits such small businesses to take advantage of this deduction mentioned above. We explore and simplify this deduction in detail below. 

What is a Tax Deduction? 

 

Every business has tax liability. Generally, that tax liability comes from a person’s or business’s income. For purposes of this article, a home based business has the ability to claim a deduction if they can prove the elements of this deduction listed below. If the taxpayer successfully can prove they meet the requirements for this deduction, they will have the ability to lower their tax liability. In other words, the home based business taxpayer can offset expenses they incurred in running their business with income they earned from the business. This in effect reduces the business’s gross income and thereby lowers their income that is subject to tax liability. 

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For example, let’s say a taxpayer’s business generated revenue and thus has taxable income of $50,000. To set up the business in their home, the taxpayer had to spend $3,000 in expenses. If the taxpayer can meet an allowable deduction offered by the IRS, they can successfully deduct their taxable income to $47,000. Therefore instead of owing tax on $50,000, they now only owe tax on $47,000. While this may seem like a small difference, such tax savings go a long way in keeping money away from the IRS. However, it sounds like this taxpayer will have to prove the deduction offered in Publication 587 for home based businesses. Let’s find out how they can prove such a deduction. 

 

What Do I Need to Show in Order to Meet the Requirements for this Deduction? 

 

To prove this deduction, there are a variety of elements that need to be proved and are directly laid out in the link attached to Publication 587 above. For the purposes of this article, we are focusing on three of the more important elements to prove: 

1) Exclusive Use 

 

To show exclusive use, you must be able to prove that a room in your house is exclusively used for the purpose of your business. (NOTE: You can claim this deduction even if you are not working out of your house. The deduction also applies to apartments, condominiums, mobile homes, boats, or anything that provides living accommodations to you).

 

We must emphasize the exclusivity of this room. For example, if you work out of your living room where your child also plays video games and watches television, you will not be eligible for this deduction. You must exclusively work out of a room solely dedicated to your business. 

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2) Regular Use

 

Regular use of the room is also required. Occasional use of the room for your business will not suffice. 

3) Trade or Business Use

 

Finally, you must use it solely for your trade or business. Both this and regular use of the room should be easy to prove as long as the space is regularly used only for trade or business use.

 

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We understand that many small businesses have been started or moved to the owner’s home because of the pandemic. Thus, we urge you to take advantage of this publication. Contact a tax attorney today to determine if you meet this deduction. 

 

Do you need to create a PLLC for your business?

Are you forming a new business? If so, the first question you should ask yourself is the type of business entity you are looking to set up. The answer to that question will depend very much on the protections you will prioritize the most. Check out recent JUSTLAW articles for help with determining the right business entity for you. However, if you have already decided you would prefer an PLLC or if you have read our relevant dialogues on the Verdict and have ultimately decided to create a PLLC, this particular article will be extremely important for you to understand.

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When will you be required to form an PLLC?

A PLLC stands for a Professional Limited Liability Company. As you probably could guess, the difference between a PLLC and an LLC is that professionals file for a PLLC.

States differ on the requirement of professionals forming a PLLC. Some states opt to push professionals to create PLLCs. Other states permit PLLCs, but don’t necessarily require it. And other states favor professional corporations (e.g. P.C.) and limited liability partnerships (e.g., LLP) and ban PLLCs.

For straightforward purposes, this article focuses entirely on the states that require PLLCs. In other words, these states mandate that the term professionals, which is regularly defined in the particular state’s limited liability company act, form a PLLC.

In most states, the list of professionals almost always includes:

1) Accountants
2) Architects
3) Attorneys
4) Chiropractors
5) Clinical Social Workers
6) Dentists
7) Doctors
8) Engineers
9) Nurses
10) Physical, Marriage, & Family Therapists
11) Psychologists
12) Veterinarians

If you are not one of these professionals, you most likely do not have to create a PLLC. An LLC should suffice. To the contrary, if you are a licensed professional listed above, we urge you to contact our attorneys before you move forward with an LLC or PLLC. Our well-experienced, top of the line attorneys will quickly advise you as to which form is more suitable for your business. More importantly, our attorneys can also advise you as to whether your state requires PLLCs for professionals.

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What are the steps needed to take to form a PLLC?

If you have proceeded to this step, that either means you are a licensed professional listed above, you believe you may have to create a PLLC, or you just love reading JUSTLAW content. Or maybe it’s all three? Anyways, here are the steps you will take when forming a PLLC:

1. Check eligibility of PLLCs in your state.
As we said above, an attorney will be able to tell you whether your state requires, permits, or bans PLLCs. Check out your state’s “limited liability company act” if you would like to proceed without an attorney.

2. Create your Articles of Organization.
If you’re reading “Articles of Organization” and are scratching your head, don’t worry. The name of this document varies by state, and is sometimes called “Certificate of Organization”, “Articles of Incorporation”, etc. The bottom line is that every PLLC needs to include such a document. The main purpose of the document is to name a registered agent, along with their relevant contact information. Members can be registered agents. In addition, you will also need an Employer Identification Number (hereinafter referred to as “EIN”). To receive an EIN, you’ll simply just need to file for one with the IRS and they will appoint you one. Moreover, other details that should be included in the Articles of Organization consist of your principal place of business, the services your business will offer, and all of the members of the PLLC and their relevant contact information. (Note: All members should be of the same profession. Speak with a JUSTLAW attorney now to determine if your profession or professions are covered.)

3. Prepare an operating agreement.
An operating agreement will detail how your business will be run. Such details will include information such as: (1) Capital contributions; (2) Members and their ownership rights; (3) Voting requirements for business-related decisions (votes by unanimous decision or 2/3 vote); and much much more. This is required for all PLLCs.

4. Show proof of all member’s licenses to practice their profession.
Finally, and one of the more obvious components of forming a PLLC, includes providing proof of your license to practice your profession.

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JUSTLAW is on a mission to ensure legal insurance becomes a norm. Sign up for our JUSTLAW membership today and receive a free consultation on whether you need to create a PLLC for your business.

LEGAL IMPLICATIONS: SEPARATION VS. DIVORCE

An unsuccessful marriage is often disposed of by a divorce between the spouses. When the two parties in a marriage are unable to live together and are ultimately incompatible, the parties in such a situation, opt for a formal closure to the marriage called a divorce. According to the Concise Oxford Dictionary of Sociology (1994), ‘the formal legal dissolution of legally constituted marriage’ is termed as a divorce. But sometimes, parties in an impugned marriage do not directly resort to divorce, instead they avert the formal dissolution by a legal separation.

 

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The concept of legal separation holds a very significant position in the range of family law. It is the most effective alternative to settle disputes in a conflicting marriage. Legal separation means a process wherein a couple in a marriage lives in separation from each other following a court order. The couple lives apart from each other in a generally accepted first step towards a divorce. It provides the couple an opportunity to reflect upon their relationship and to think more clearly about their future. For some couples, legal separation is a prospect of reconciling the relationship while for some couples it is the track to a divorce. Legal separation could be classified into three types: trial separation, permanent separation and legal separation.

Both the concepts of divorce and legal separation share an important relationship. In divorce and legal separation, the court plays an important role in granting child custody, rights regarding visitation, division of the property based on the status of the couple and maintenance for the spouse and children etc. which is similar between both.

However, legal separation and divorce do share a significant variation in their legal implications. Unlike divorce which formally puts an end to a marriage, legal separation designates that the couple is still married, permitting them to be entitled to certain benefits.  A separated couple is allowed to retain the family health insurance, spousal retirement benefits, tax benefits etc. A separated spouse is allowed to make financial or medical decisions for the other whereas under a divorce, an ex- spouse is a stranger to the medical and financial decisions of the other.  

 

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During a divorce proceeding all debt and liabilities shared by the spouses are settled, thus after the granting of divorce there can be no debt or liability between the spouses which arose from the marriage. However, under legal separation there is no settlement of debts and liabilities. 

The property rights of the spouse are also affected differently. Under divorce, the person’s right to inherit the property of the spouse is completely annulled while under the counterpart, the right to inherit is retained. Moreover, one of the most important legal implications that differ between the two is the right to marry, i.e., determination of marital status. A separated spouse is legally married, they retain their marital status and cannot remarry without a formal divorce. Under a divorce, however, a person is free to remarry. Reconciliation between the spouses is easier for a legally separated couple whereas under a divorce, it is an ultimate end to a marriage affair. Reconciliation after divorce is possible only by marrying the former spouse again.

To understand the legal complexities and technicalities involved in a divorce and legal separation is an arduous task. Therefore, the role of a lawyer in such a fragile situation becomes highly imperative. A lawyer will provide a client with sound legal advice as to the intricacies of legal separation or divorce and thus permit the client to make a completely informed decision based on their best interests.

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 Sign up for a JUSTLAW Membership and you’ll have access to the best network of attorneys for free, when applied towards an uncontested divorce. And don’t worry, a JUSTLAW Membership offers a variety of more free perks beyond uncontested divorces. Find out more information, here

What’s worse? 2008 Market Crash or Renting during COVID-19

 

On September 29, 2008, the Dow Jones created history. On this day, the Dow Jones fell a record 777 points. This came on the heels of a failed bank bailout bill in Congress. 

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So why did the stock market crash? The answer is complicated, but the underlying cause can be simplified: too many people had taken out loans that they simply could not afford. Lenders had paper thin underwriting standards for providing loans, and essentially gave out loans to anyone who asked. Big banks were failing as a result, such as Bear Stearns and Lehman Brothers. 

 

The unemployment rate reached 10% as a result of this crash and a record 3.8 million people were forced to foreclose their homes. 

 

Let’s pause to compare these numbers to 2020. The unemployment rate in the US in April of 2020 was a breathtaking 15%. Moody’s Analytics, an economic-research firm, calculated that 12.8 million Americans could owe an average of $5,400 from missed payments of rent as a result of COVID-19. In addition, 30 to 40 million people could face potential eviction once moratoriums expire and homeowners and renters can be legally evicted from their homes. Currently as of March 2021, moratoriums vary by state. Seek out free consultations offered by legal services across America under their memberships to determine whether or not your state still has a moratorium in place and if so, when it is set to expire. 

 

Again, the comparisons are not even close. And that is especially scary, considering the 2008 stock market crash shook people to their core. 

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Other fallouts from the Covid-19 pandemic include the extreme negative effects on the economy and the ability of homeowners to purchase a home in the future. The economy is taking a big blow as a result of renter debt because many renters are being forced to put all their money into rent. As a result, they are not spending their money elsewhere, and thus the economy is negatively impacted. Furthermore, if renters are not meeting their rent or even their credit card bills, their credit will suffer. Therefore, they will have a tough time securing future loans, credit cards, or even a house if they have a bad credit score or were evicted as a result of COVID-19. 

 

Therefore, we here at JUSTLAW find it particularly relevant to present our JUSTLAW membership to you. The membership hosts a variety of perks that are geared towards providing our customers with the most efficient and affordable legal services. Among other things, we offer free consultations on a host of new matters that you are presented with over your lifetime. In addition, take advantage of our free annual legal checkup. The overall membership is an inexpensive peace of mind insurance that is useful in this COVID like world. One of the many specialities our attorneys have to offer includes debt reduction. So, do not let this opportunity slip. Take advantage of our services today!

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What Information Must be Put into Corporate Bylaws?

Bylaws display specific information about a corporation. They are one of the most important documents that a corporation must have. When you are creating a corporation, a partnership, or even an association, you will want experienced attorneys to aid you in drafting such a document to ensure that your business is legally sound and protected. Bylaws are different for each corporation. Thus, explore our recommended pieces of information that must go into such a document below:

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What are ByLaws?

Bylaws outline the operation of your business. In other words, if there are any rules you want for your corporation in particular, they must go in your bylaws.

Do you want to set rules for how your Board of Directors should operate? Put it in your bylaws. How many officers and executives do you want in your corporation? Put it in your bylaws. How do you want such positions to be elected? Put it in your bylaws. What about something as simple as the corporation’s name? Put it in your bylaws. You get the idea.

However, do not confuse this with a corporation’s Articles of Incorporation. This document is much different. Bylaws outline the rules of a corporation, whereas the Articles of Incorporation display the basic anatomy and inception of the company. Therefore, generally, Articles of Incorporation include names of the directors, the number of shares available, and even the location of the corporation. Accordingly, if you are looking to create a document to portray the operation of your business, and not the mere inception of the business, look no further than the corporate bylaws.

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In addition, a corporation’s Articles of Incorporation, otherwise known as a charter, differ from its bylaws based on how they can be amended. To amend the charter, you have to comply with the state law of where you filed your charter. In some states, for instance, you’ll be required to hold a shareholder meeting to make the changes. Unlike the charter, corporate directors have much more freedom to amend the bylaws. In fact, rarely is a formal shareholder vote required. Therefore, ordinarily, you will want to explicitly state your amendment process in the bylaws themselves.

Accordingly, some of the information we display below that should be included in the bylaws, could also be included in an Articles of Incorporation or even a Certificate of Insurance. However, based on key differences such as the one displayed above, it may make more sense for you to put certain information in your bylaws.

Various Pieces of Information in a Organization’s ByLaws: (not limited to these)

  1. Name of the business. This is one of the more obvious pieces of information that are vital for your bylaws. What is the name of your business and who is responsible for creating it? As a quick side note, while this does go in the bylaws, it more importantly should be in your Certificate of Insurance. This document actually determines the name of your business and is the mechanism for potentially changing your name.
  2. Location. Your location is another obvious piece of information that is placed in the bylaws. However, keep in mind, location is more important for your Articles of Incorporation because those are directly filed with the state of which you are operating in.
  3. Purpose. Here, you will want to answer the question, “what end goal am I serving with the creation of this business?” (This also appears in the Certification of Insurance as well)
  4. Board of Directors. Now comes the more dense parts of your Corporate ByLaws. In this section, you are referring to the group of people that govern your organization. Therefore, you will want to include information on how a Director is selected, how many directors your board will encompass, how empty board seats are filled, specific duties of directors, any relevant qualifications needed to be a director, payment of a director if any, and how long they may serve for.
  5. Board of Director Meetings. On top of the prior section, include the details of how you want the Board of Director’s meetings to operate. How many times should they meet annually? Furthermore, this section should also establish how many votes are needed when the Board votes on various decisions to be made. Generally, majority rules. However some corporations elect to increase the amount of votes needed in order to decide an issue, with utmost unison.
  6. Amendments. Finally, end your bylaws with a section on how an amendment of the bylaws will operate. Keep in mind, that bylaws should be amended every so often in order to keep them up to date.

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We hope this article helped you! JUSTLAW offers some of the best corporate law attorneys and can help any corporation, partnership, association, etc. effectively draft their corporate bylaws.