Know Your Business

Suttons Bay - April 2008

Even though your intent with respect to domicile is important, your actions are equally as important. To demonstrate that you intend a particular place to be your domicile, you should consider the following:

• Use the address for correspondence, particularly with respect to the IRS or estate tax authorities with whom you may have to argue your position;
• Register to vote there;
• Register and insure your vehicles there;
• Have your driver’s license and, if relevant, other licenses issued there; and
• License or register your pets there.

If you change your domicile, be sure to update your estate plan to reflect your new state as your state of domicile and, as appropriate, as the controlling law.

Determine where you want your domicile to be and take as many steps as necessary to strengthen your argument. After all, just because you have a home in a state, it doesn’t necessarily mean that that state is your “home state.”

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis. For questions, please contact us at (231) 271-4500 or at dpenning@wrightpenning.com.
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Know Your Business

Suttons Bay - April 2008

With the onset of global natural disasters, and a tight economy which has strained private charities, there is an increasing demand for charitable giving. There are several ways to provide benefits to charities. Depending on the alternative you choose, helping your favorite charity may help you maximize your tax savings.

Options for charitable giving as part of your estate plan include:

• Cash. The simplest way to contribute both from your perspective and that of the recipient charity is a cash gift. Cash gifts (bequests), like any other contributions you make at the time of your death, are fully deductible for estate tax purposes.

• Marketable Securities. Most charitable organizations are well organized to receive stock and mutual funds that are traded on established markets. In providing a gift of securities, you could also benefit by avoiding any potential capital gain that you would realize if you sold the shares to generate the cash needed to make the contribution. If you wish to get a charitable deduction for the entire value transferred, you must donate securities you have held for more than one year.

• Other Assets. As long as an item can be readily valued, it will generally qualify for a charitable deduction in the same fashion as marketable securities. You should bear in mind that the IRS recently refined the rules for contributing vehicles. So, before contributing a vehicle to an organization, make sure it meets the eligibility requirements.

• Beneficiary Designation. You can make a contribution at death by naming a charitable organization as the beneficiary of your 401(k) or IRA. There is no immediate income tax benefit for designating the charity as a beneficiary; the deduction for the contribution is allowed at death. The contribution, therefore, reduces your taxable estate if the value of your estate is otherwise subject to the estate tax.

• If not given to charity, a retirement fund will increase the taxable value of your estate; it will also be treated as taxable income to a non-charitable beneficiary. Because of this double taxation, many view retirement funds as the perfect asset for charitable giving.

• Private Foundation. A private foundation is a charitable entity that you create to further your charitable intent. The charitable gift must be significant for this option to be cost effective.

• Donor Advised Funds. The establishment of a private foundation is very expensive and also requires a significant initial gift. The “light” version of a private foundation is a donor advised fund, which is created by making a donation to a public charity that segregates your funds and gives you discretion in making contributions to other charities.

• Charitable Trust. There are two basic types of charitable trusts: a charitable remainder trust (CRT) and a charitable lead trust (CLT). With a CRT, you as the grantor reserve the right to receive payments either for your life (yours and others) or for a specified period, limited to no more than 20 years. At your (or the last beneficiary’s) death, or when the term ends, any assets that remain in the trust revert to the charity. Thus, there is an element of risk by creating a trust based on your life. (Note that you may reduce that risk by opting for a CRT for a term instead of your lifetime.) A CLT, on the other hand, flips the timing of the charitable and non-charitable beneficiaries, so the charity receives the right to payment of income during your lifetime and the remainder goes to you or your specified beneficiary or beneficiaries at the end of the term.

• Charitable Gift Annuity. A charitable gift annuity is a strategy which combines the outright gift with an annuity feature, and is similar to a CRT. You make a gift to the charity and, in turn, the charitable organization guaranties a certain return from the asset for a specified period.

SUMMARY: The charitable giving option that fits your needs depends on your goals and financial circumstances. Thankfully, there are many options to consider that will assist you in your estate and income tax planning, while also providing much needed assistance to worthy charitable organizations.

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis. For questions, please contact us at (231) 271-4500 or at dpenning@wrightpenning.com.
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Know Your Business

Suttons Bay - April 2008

If you are like most of our businesses, you probably have a company website. You may also have a specially-designed company logo that you use on your website and elsewhere to “brand” your business in the marketplace. What you may not have done, however, is take the necessary steps to protect your all-important logo from infringement by competitors.
If your business is set up as either a Michigan corporation or limited liability company, your company name itself is protected from infringement within the state of Michigan. Your logo, however, is not protected unless you have separately registered it with the state. (Your logo, incidentally, is called either a “trademark” or “service mark,” depending on whether you sell goods or services.) Further, your logo is not protected from infringement outside the state of Michigan unless you have registered it with the U.S. Patent and Trademark Office. This federal registration gives you country-wide protection for your logo and, in many cases, for your company name itself. (If your company name is distinctive enough, it can function as a trademark or service mark.)

Federal and state registration of your trademark or service mark prevents another business from using the same or a confusingly similar mark. As you can imagine, this is a protection that can be key to the preservation and growth of your business! If you would like to find out more about the process and cost of registering your mark, please give us a call.

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis. For questions, please contact us at (231) 271-4500 or at dpenning@wrightpenning.com.
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Know Your Business

Suttons Bay - April 2008

With the onset of technology and ever expanding markets for even the small business owner, many businesses are operating in multiple states. That being the case, it is incumbent on management to know the states in which the business must pay taxes. The process of determining tax liability can be quite complex.

Generally, a business will owe taxes in states where the business has a “nexus” or connection. The nexus would start in the state where the business is incorporated. In addition, any state where the business has a headquarters or owns property, employs employees or other company representatives, may trigger tax liability. There may also be a standard whereby a state looks to the “business presence” or level of commercial activity that a business has, which can result in taxes being due.

Once you have identified all of the states where your company may have a nexus leading to tax liability, it is important to look at the various tax rates and compliance procedures of each state. Calculating the potential taxes and related compliance expenses is important since these expenditures can impact your pricing strategies and profits with respect to doing business in a particular state.

It certainly can be daunting to keep abreast of the various types of state taxes and compliance issues in each state where your business has a presence. The important thing is to determine the states where your business has a nexus, and then focus on the particulars of those specific states’ tax rules and compliance measures.

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis. For questions, please contact us at (231) 271-4500 or at dpenning@wrightpenning.com.
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Know Your Business

Suttons Bay - April 2008

Okay, you’ve started your own business or purchased an existing business; worked nights and weekends to make it survive and grow; sacrificed time with your family; so what’s your exit plan?

With increasing pressures facing business owners, there seems to be little or no time to devote to the question of what happens to the business when the owner wants to, or has to because of death or illness, transfer ownership. Most closely held business owners have spent a lifetime building their businesses, resulting in the business being the most valuable asset to accommodate retirement or investment in new ventures.

While a lack of exit planning is understandable, the results can be disastrous. A sudden illness, disability or death, with no succession planning in place, can cause chaos within the business and, ultimately, lead to the failure of the business or significant decrease in value. Even for the business owner considering a voluntary transfer of the business to a family member or third party, there are still significant planning issues that need to be considered before the process starts.

In the event of an involuntary exit from the business because of an illness, disability or death, the closely held business owner should be asking if there are significant management operational systems in place to allow the business to survive in his or her absence. Where multiple owners are involved, a buy-sell agreement must be in place and funded by sufficient insurance proceeds to allow for the smooth transition of ownership to the surviving business owners. With respect to a proposed sale of the business, the business owner should be focused on what the business is really worth and how they should reinvest the proceeds after transferring ownership.

It is never too early to start making an exit plan or to review a former plan to make sure that it continues to meet the business owner’s needs. Remember the saying, “The best time to plant an oak tree was 20 years ago.” What’s your plan? We can help.

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The information contained in this publication is meant for informational purposes only and is not intended as legal advice. Laws and their application vary based upon a client’s unique facts and circumstances. Wright Penning & Beamer disclaims any responsibility for action taken in reliance on this publication without further consultation and analysis.
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