More young Americans have been creating an estate plan due to recent world events. After all, you never know what’s going to happen.
Estate planning is the official process of arranging and anticipating what will happen in a person’s life if they are incapacitated or after their death. This involves passing down assets to heirs and planning for uncertainties to reduce taxes and other expenses.
Are you interested in estate planning, but don’t know where to start?
Here is everything you need to know about what is estate planning and how to maximize the value of your estate.
What Is Estate Planning?
Estate planning is the act of writing down everything you want to happen to all your assets and belongings after you die. You are legally documenting who you want to make all your financial and medical decisions during your lifetime, especially if you are too ill or incapacitated to make them by yourself.
What Is Involved in Estate Planning?
Your estate planning checklist may contain wills, trusts, durable power of attorneys for financial care, advance health care directives, beneficiary designations, as well as instructions on how to tie all of your assets to this estate plan.
These vary for each person. For example, a person living alone without dependents may have a simple estate plan compared to someone with multiple homes and children from different marriages.
By creating a formal plan, you can enforce valid documents and legally bind them to determine what happens to all your assets.
This is helpful for your family by not putting all the burden on them to make these decisions. They can grieve your loss instead of quarreling over who gets what without your instructions.
This is a process to protect and care for your loved ones. By creating these documents, you ensure that they will always be supported even after you are gone. If you do not make these decisions, a system of laws will make them for you.
State intestacy law can decide who gets to have your assets. Then a court can appoint a conservator of their choice to control and manage your finances if you are incapacitated.
The state law can then let your spouse have all the authority to make medical decisions on your behalf if you are hospitalized after an accident. Although these laws seem fair, they do not take your personal wishes into consideration.
The decisions made by the court may not adhere to your beliefs and family’s needs the way you want. Therefore, it is necessary to get in touch with an estate planning attorney to start the process before it is too late.
Some aspects of estate planning are quite straightforward. For instance, if you own a checking account, you have a right to decide who should inherit your bank balance after your passing.
You will need to state this in your estate plan. However, you can also fill out a form at your bank. This is known as a pay on death or transfer on death designation, depending on the type of account.
On this form, you will need to write down your full name, birth date, and your relationship with the person you want your money transferred to. You should also name a beneficiary or even a backup to inherit your account if the person you stated first dies before you.
If you want the money transferred to multiple people, you can name more beneficiaries by choosing how much percentage each person should inherit. Your other accounts can also go through the same process of beneficiary designations.
Your retirement accounts and life insurance policies will also need a beneficiary. Your retirement account company and/or insurance company should have already asked you to name primary and contingent beneficiaries.
However, if a lot of time has passed, your choices may have changed. Estate planning gives another chance to name different beneficiaries.
Writing a Will
Writing a will can initially be an inexpensive process, but requires more work to be complete upon your passing. You will need to check the requirements for each state to go through the guidelines. It is always best to work with an estate planning lawyer.
After your death, your estate’s executor can proceed to take your will to court where it will enter probate. This is a court-supervised act to declare your will’s validity. Your creditors and taxes will be repaid, and the remaining assets and funds will be given to your heirs.
Depending on the state, if the estate exceeds a certain amount, it will enter probate. This is a court-supervised act to declare your will’s validity. Your creditors and taxes will be repaid, and the remaining assets and funds will be given to your heirs.
Without probate, it would take a long time before your loved ones get their inheritance. If electing to use a Will, your Executor will also face all fees associated with the probate process, which vary from state to state.
If you choose to place your assets in a trust, they become legally owned by the trust. Then there is no need for probate proceedings. Your trustee will then distribute all your assets as instructed by you.
This is the quickest and most inexpensive process that also grants a lot of privacy.
Durable Powers of Attorney
Wills do not let people automatically make medical and financial decisions for you. You will need another power of attorney for each of these factors.
Your financial power of attorney will let someone make money-related decisions on your behalf if you are in hospital. They can pay your property taxes, mortgages, and bills with your money.
Always delegate this responsibility with care because many people can make unethical decisions regarding money. Pick someone you trust to carry out these duties truthfully.
Advance Health Care Directives
An advance health care directive is needed to state your wishes regarding life-sustaining medical treatments, especially if you wish to receive them or not.
This decision is too difficult for family members to make, so it is always beneficial to have an official document with your choice. This notarized document can guarantee that your final wishes will be honored.
Contact an Estate Planning Attorney
Having all these documents can be a daunting experience, which is why you should get in touch with an estate planning lawyer.
Contact us for more information about what is estate planning, and we can help accomplish all your goals.
In a recent article written by nwitimes.com, this question was asked in regard to estate planning. “My father passed away recently, how do we remove his name from the title to the home? Can we record a death certificate or have mom sign a new deed?”
This is a normal estate planning question, and the answer is simple. The first thing you need to determine however is how the homeowners held title to the home. There are two options here, did your parents own the home as husband and wife, legally known as tenants by entirety? Or did they own the home as Joint tenancy with rights of survivorship?
If they owned the home as husband and wife through tenants by entirety, it creates ownership interest in which the spouses own the property jointly as a couple and not as individuals. This creates the rights of survivorship so that the survivor owns the property as a matter of law at the death of the first spouse.
If they owned the home through joint tenancy with rights of survivorship, then some of the legalities will differ as long as both the spouses are still alive, but it doesn’t affect the end result of this question.
Assuming that the parents owned the home as tenants by entireties or as joint tenants with rights of survivorship, the surviving spouse owns the house as a matter of law at the time of death. We would notify the recorder’s office of the death by preparing a surviving spouse affidavit or surviving joint tenant affidavit. That puts the recorder and the public on notice that one of the homeowners has died and the survivor of them now owns the home.
Since we submit the affidavit, there’s no reason to record a death certificate because the affidavit makes important recitals that can prove the change of title. There also won’t be a deed since the surviving spouse owns the property at the moment of death. The affidavit will demonstrate proof of transfer of title in place of a deed.
If you’re unsure what kind of title you hold on your home as a married couple, or you have additional questions regarding ownership of your home, contact the estate planning lawyers at Rhodes Law Firm. At Rhodes Law Firm, we assist you and give the peace of mind you deserve.
You know you aren’t going to live forever, so it’s important to make preparations for the inevitable. The terms will and trust get thrown around a lot when it comes to planning for the future, but is there a difference between a will and a trust? Do you need one or the other? Do you need to have both?
Continue reading to learn everything that you may need to know about estate planning, including wills and trusts.
What Is a Will?
A will is a legal document that enforces the wishes of an individual after their death in writing. Having a will is an important component of estate planning. They’re used to name the guardian(s) of any minor children of the deceased person. It also transfers the rights to objects and assets to the friends, relatives, and charities handpicked by the individual before their passing.
The contents of a will may involve:
- A list of assets and debts (including valuable family heirlooms)
- Contents of a safe deposit box
The most common type of will is a testamentary will. Other types of wills might include holographic wills, oral wills, and pour-over wills.
Advantages of a Will
Having a will allows the smooth transfer of estate and other legal proceedings because it has such a clear message from the deceased individual. Wills are not very expensive to draw up and then maintain as long as they are legally declared.
A will helps surviving family members to figure out what their loved one wanted to happen he/she was gone. A will gives more of a personal touch to the living friends and relatives. It can depict funeral wishes and who inherits the fine china after their passing.
Having a will allows the grantor to disinherit a child or other family member. In certain situations, a grantor may disinherit their spouse from getting anything by naming it in their will. It is, though, difficult to completely cut a spouse out of your will unless there was a prenuptial or postnuptial agreement.
Disadvantages of a Will
A will must go through probate before the assets get released to the beneficiaries. Probate is the process in which the will is thoroughly examined to make sure that it is, in fact, authentic.
Probate can get drawn out for long periods of time before the assets may be released. This is especially common when the will is contested. Hiring a probate attorney can be expensive, and the probate process pretty much unavoidable in most states.
When you don’t have a will in place (intestate), the state oversees the distribution of all assets, regardless of what the deceased person may have wanted for their family.
What Is a Trust?
A trust is made up of three parts: the grantor who will create the trust, the trustee who will oversee the trust, and the beneficiary who will receive the trust. While a will becomes active after the passing of an individual, a trust becomes active when it is created. This means that a trust helps the grantor decide who controls his or her assets during and after life.
The grantor creates a trust so that their assets get protection without having to deal with the day-to-day of managing the trust. A certification of trust will name the basic terms of a trust.
Beneficiaries cannot contest a trust. Trusts also do not require the probate process. This allows property and other assets to get passed on to the beneficiaries immediately after the trust is written.
Types of Trusts
There are two different types of trusts: a a Living (Revocable) Trust and an Irrevocable Trust.
An irrevocable trust is a type of trust that is usually created for tax purposes. It’s thought that an irrevocable trust cannot be changed once it is in writing. This isn’t entirely accurate. A grantors access to the trust may be restricted or limited in some ways. These standards are set forth by the grantor.
A grantor may alter a revocable trust as they wish. A living trust is an example of a revocable trust. The assets listed in a trust are still owned by the Grantor and can be taken back out if necessary.
Advantages of a Trust
The estate stays private in a trust whereas a will becomes a public record. This may be ideal for those wanting to stay out of the public eye. Because a trust avoids the entire probate process, there are no hefty fees from hiring a probate attorney and the assets are given directly to the beneficiaries.
Know the Difference Between a Will and a Trust
Now that you know the difference between a Will and a Trust, you will be able to better prepare for the future. Most people should have, at the very least, a Last Will and Testament, especially those with children under the age of 18 who must be appointed a legal guardian if probate were to occur.
Contact Rhodes Law Firm, PC today with any questions you may have regarding estate planning for the future. We’re standing by with the answers that you are searching for.
With Democrats taking control of both houses of Congress and President Biden’s new administration in the White House, many folks may be concerned about their estate plans and changes that may come with a new tax reform. This Forbes article suggests that while there is a possibility that tax reform could pass later on in 2021 and be retroactive to January 1, tax advisors feel that this is unlikely to happen. Most advisors believe that tax reform would come into effect in 2022, after most of the population has been vaccinated against the Coronavirus. The article lists five possible ways that tax reform could affect your estate plan and how you can prepare now.
- Estate tax exemption – This could be lowered to $3.5M as estimated by the Tax Policy Center
- Estate tax rate change – Currently at 40 percent, it could increase.
- Lowering the gift tax – It is possible that the gift tax exemption could be lowered to $1M.
- Elimination of the step-up in basis at death – This would mean heirs would be required to pay capital gains tax on inherited property
- Potential increase in capital gains rate – For those making more than $1M annually, Biden’s proposed tax plan suggests increasing the long-term capital gains tax rate
It’s never too early or too late to start making adjustments and considerations for your estate plan. If you would like to review your plan with our team and have peace of mind, contact Rhodes Law Firm today!
The market for long-term care services is currently underserved. It’s estimated that 12 million Americans need long-term care. Yet, only around 8 million people receive these services in the US each year.
One of the most significant barriers to people who need long-term care services but don’t utilize them is cost. Luckily, long-term care insurance can help reduce the price of these services in the long run.
Nearly 45% of people receiving long-term care services have Medicaid or Medicare coverage. But only 18% have long-term care insurance from a provider. This is most likely due to a lack of understanding, and that’s why we created this guide.
Are you curious about long-term care insurance and how to save on your policy? Then keep reading because this one’s for you.
What is Long-Term Care Insurance?
Traditional insurance plans like Medicare and Medicaid don’t cover all the services you need as you age. Whether you’re at home or in a retirement facility, you’ll have to cover the costs if you need help with eating, dressing, or bathing.
That’s why many elderly individuals choose to purchase a long-term care insurance policy.
Long-term care insurance reimburses policyholders for personal and custodial care. You’ll get reimbursed for a limited amount of services. But you can customize your policy to include the benefits you need.
Plus, long-term care insurance is applicable to a wide variety of settings. That means you’ll be covered whether you’re in a nursing home, at an assisted living facility, or receiving care from the comfort of your own home.
Here’s what else you need to know about long-term care insurance.
Who Qualifies for Long-Term Care Insurance?
Unfortunately, individuals already living in a long-term care facility are ineligible for insurance. Individuals in significantly poor health may also bar you from insurance or it could mean you have a higher policy rate.
Otherwise, eligibility for long-term care insurance hinges on two criteria. The first is the Benefit Trigger. The second is the Elimination Period.
The company providing your long-term care insurance will require a nurse or social worker to determine if you qualify for benefits. While the criteria vary by company, you’ll likely be evaluated based on the level of cognitive impairment and ADLs.
ADLs are also known as Activities of Daily Living, which includes bathing, dressing, eating, toileting, and more. Most companies require you to need help with at least two of the nine ADLs or have a significant cognitive impairment to qualify for benefits.
The second requirement — the Elimination Period — refers to the time that passes between when the Benefit Trigger occurs and when you start receiving reimbursements for long-term care services. Think of it as a deductible.
Most companies allow policyholders to choose the duration of their Elimination Period. Often, it will be a period of 30 to 90 days. You’ll have to pay all your long-term care services out of pocket until the Elimination Period is up.
How Long Will Long-Term Care Insurance Cover You?
Few long-term insurance providers offer unlimited benefits for policyholders. More commonly, providers put limits on how many services they’ll cover. Some companies limit the amount they’ll pay while others limit how long they’ll pay.
In rare cases, you can find companies that do offer unlimited benefits. These providers will pay for an unlimited amount of benefits for as long as you live. Again, though, these policies are few and far between.
Why Timing Matters for the Cost of Long-Term Care Insurance
Of course, the cost of long-term care insurance is directly related to which benefits you choose. Some companies will raise your benefit premiums based on inflation or other reasons. That’s why it’s always best to ask the insurance provider for its rate history before you apply.
Yet, often more important to the total cost of your long-term care insurance is how old you are when you buy it. If you buy insurance too late in the game, you’ll have to pay much higher premiums. But buying insurance too early may mean you pay a higher total cost over time.
For example, imagine if you waited to buy insurance until age 70. Your monthly premium would have to be $516 to hit a total of $55,768 worth of covered benefits by age 79. But if you purchase your premium at age 50, you can pay only $205 per month to hit a total of $71,285 worth of covered benefits by age 79.
When is the Right Time to Buy Long-Term Care Insurance?
According to experts, the best time to buy long-term care insurance is between the ages of 60 and 65. That way, you can optimize your savings on monthly premiums while also saving enough to cover your needs.
Using the above example, let’s analyze how your premiums and total covered benefits would look if you buy your plan at ages 60 and 65.
65-year-olds paying $338 per month in premiums would save a total of $56,821 by age 79. 60-year-olds would see even lower monthly premiums of $261. Yet, you’d save a total of $59,607 by age 79.
Of course, you have to weigh these cost savings against the possibility that your health may decline before age 60. As we’ve mentioned, many long-term care insurance providers won’t cover applicants with significantly poor health.
So, how do you know for sure when to buy long-term care insurance? A long-term care planning legal advisor at Rhodes Law Firm can look at your unique situation and help you decide when is the best time to make the purchase.
Let Rhodes Law Firm Help You With Long Term Care Planning
Finding the right long-term care insurance policy is critical for those who don’t want to pay out of pocket for post-retirement services. And buying your policy at the right time will determine the total cost you pay for coverage.
Do you need help with long-term care planning tasks like deciding on a long-term care insurance policy? You’ve come to the right place. Get in touch with Rhodes Law Firm today to find out how we can lend you a hand.
2020 was a very unusual year, and if it taught us anything it is that we should always be prepared for the worst. The best way to start the new year off right is by resolving to create an estate plan! It may sound grim, but it truly is a great way to gain peace of mind by knowing your loved ones will need not worry about resolving your estate after you pass or if you suffer an injury that leaves you unable to make decisions on your own behalf. This article encourages
everyone to consider this not-so-traditional New Year’s resolution.
By doing this now, while you are alive and well, you are able to plan and consider the total picture and have full control of how your assets are distributed. Begin by first itemizing your assets and listing any liabilities. Gather any important documents, such as tax returns, real estate records, and insurance policies, and place them in a secure location.
There are some more difficult things you may need to consider while planning your estate, such as who will provide for your children and/or spouse, who would take care of your business, and more. While these may be uncomfortable topics of discussion, it’s important to address these issues now while you may still make your wishes known rather than leaving it to the state.
If you are ready to start the new year on the right foot, let Rhodes Law Firm help you today.
Did you know that the number of middle-aged Americans with estate plans dropped by 25 percent since 2019?
Did you drop the same estate planning ball your peers did?
You cannot be sure what happens to your possessions after you die unless you have an estate plan that gives you confidence.
Don’t put this off another day. Read these estate planning tips and take steps to protect your property.
You may not believe that you have enough assets for estate planning, but you should know with certainty. Take the time to inventory everything you own. You’re going to be surprised.
It’s essential to note that this remains one of the most critical parts of an estate plan.
Separate your inventory list into two different categories: tangible and intangible assets.
Tangible assets include anything physical, for example:
- Personal valuables
- Collectibles from a hobby
- Cars, boats, or motorcycles
- Your home or investment properties
Intangible assets for your estate will include:
- Life insurance policies
- Individual retirement accounts
- Savings accounts
- Business ownership
- Stocks, mutual funds, or bonds
- Checking accounts
After you have a comprehensive list of your assets, you need to find the value.
Consider hiring a professional for an evaluation of your tangible and intangible assets. If you don’t take this step, be confident that you have planned a fair distribution of your possessions to loved ones.
Take Care of Your Family’s Needs
Do you have enough life insurance coverage? You may get annoyed when insurance salespeople ask you this question, but it’s a relevant point to consider nonetheless. If your current lifestyle requires two incomes or a child with special needs, you need to be confident in your policy.
Don’t name one guardian for your children. Adding a backup guardian can avoid court fights after your death that will eat away at your assets.
Talk with your lawyer about establishing a trust. Avoid the risk of a court distributing your assets instead of your property going to your designated beneficiaries. If you set up a living trust, you will have the opportunity to use parts of your trust fund for what you need while you’re alive.
Establish your medical care directive or living will. People around you must understand your wishes if you’re no longer able to make decisions for yourself. Don’t forget to name the medical power of attorney for a loved one if you’re incapacitated.
Decide between a limited or durable power of attorney for your financial affairs. Limited powers give a named representative decision-making limits. Durable powers turn everything over to a named individual.
Only you can decide what’s best for your current situation.
You want to ensure the right people take ownership of your assets. It’s easy to forget what you set up years ago for yourself. Take the time to review your documents with a lawyer, if you’re able to do so.
First, review your insurance and retirement accounts. You may need to update the beneficiaries to match what’s in your will. Don’t leave any beneficiary sections blank, or the state will decide through probate who receives your property.
If you haven’t, name your contingent beneficiaries. If your primary beneficiary dies before yourself, this could lead to a nasty court battle.
Research Estate Tax Law in Your State
The primary motivation for estate planning revolves around minimizing the inheritance taxes. If you don’t know your state’s laws, you may have a hole in your plan.
The federal government doesn’t tax estates unless they’re substantial. Starting in 2021, up to $11.7 million won’t incur federal inheritance taxes.
Does your state have an estate tax? Find out today and make plans with your lawyer to lessen their effects.
Consider Hiring an Attorney or CPA
For small estates with simple wishes, using an online service or will-writing program should work well. The right software will ask you interview questions and walk you through state and IRS requirements. You should have the ability to update this as you see fit, whenever you wish.
If you have any doubts, consider calling a CPA or probate lawyer. No one will know the state and local laws better than these professionals.
If you have a large estate or complex issues to resolve, don’t hesitate to hire professionals to ensure that you’re covered.
Don’t Forget About Capital Gains Tax
Earnings or income for your beneficiaries from your bequeathment can be subject to capital gains taxes. For any gift that involves profit for your beneficiary, it’s advisable to introduce them to your lawyer or CPA. You can only lower the tax for loved ones if you plan early with a professional who knows the state law.
Plan for Change
“No battle plan survives contact with the enemy,” a famous military strategist from Germany named Helmuth von Moltke once said.
You can say the same about life’s plans. During good times or bad, don’t forget to review your estate plan. If you’ve experienced job loss, the birth of a child, marriage, or divorce, sit down with your papers when you’re ready.
Laws and people change every day. Don’t allow your estate plan to fall behind the times.
Need More Estate Planning Tips?
Do you have another question that wasn’t in this post?
Do you have a complicated estate planning issue the requires a professional? Contact us today or give us a call at 706-724-0405. We’re happy to discuss more estate planning tips over the phone.
Don’t want to talk at this moment? Bookmark our blog for more great information about all things estate planning. We’ll be here when you need us.
Did you know that in 2018 about 63 million Americans participated in some kind of volunteer work?
Yes, the spirit of giving is still alive despite more difficult world conditions. Charities in the USA are supporting disaster relief work, rehabilitation work, and in many cases providing free education to those that need it.
Have you thought about how you could help a charity meet people’s needs? One way is by sharing your wealth via charitable planning.
What does charitable planning mean and how can you get involved? Did you know it could give you significant tax benefits? Why not read on to find out.
What Is Charitable Planning?
For many people, charitable planning is a basic part of financial planning for the future. As progress through life, we start to consider how we will use the money and assets that we have accrued up to that point.
A person may choose to share their wealth by means of scheduled periodic gifts, such as annual gifts. However, for many, charitable planning means that they create a plan regarding how their wealth will be distributed to charities that they select after their death.
If you want to make such a plan, where should you start?
How Do I Start?
The first step in making these arrangements is to select the charities that will benefit from your assets in the future. You may want to choose a charity that you have been supporting for some time. In other cases, you may see a need within society and want to address that need by donating financially to a charity that works in that field.
However, after you have selected the charity that you want to give to, the next step is deciding how much you will give. If you are choosing to give a financial gift posthumously, you will need to decide how much or which assets you will give to family members as an inheritance. Following this, you can assign assets or funds to your chosen charities.
There are generally two types of gifts that you can give as part of charitable planning. Lifetime gifts and Planned gifts. Each has its own implications regarding tax. What are the differences between these?
When a person gives a Lifetime gift, they stand to benefit from significant tax savings during the year that they give the gift. This may include an income tax deduction and perhaps other savings.
Among the types of gifts that you can give include real estate or appreciated assets such as stocks and shares. Should you give this type of gift you may be able to avoid paying tax on the appreciation of the asset.
As the name suggests this is part of charitable planning that involves a person giving before they have passed away.
Many incorporate planned gifts as part of their financial planning for old age. Generally, a person plans to give these types of gifts after they have passed away.
When making a planned gift a person decides to give assets or finances to a trustee. The trustee or person that will ensure that the funds reach the person or charity at that time.
In other cases, a person may personally assign part of their wealth to a charity as a term of their personal will. For example, may choose to assign a charity as a beneficiary of their life insurance.
Many favor the latter as it ensures that they can still benefit from their assets for the duration of their life. However, after the person passes away, they are delivered to the owner’s preferred destination.
Despite the fact that the assets will transfer to the charity after death, the owner may well still be able to benefit from income tax deductions during their lifetime when making these arrangements.
What Kinds of Giving Is Possible?
What vehicles can a person use to ensure that their assets and finances are transferred to their preferred charity? Here are a few examples:
- Charitable Remainder Trusts
- Charitable Gift Annuities
- Private Foundations
- Donor-Advised Funds
As mentioned, a person may also choose to make a charity the beneficiary of a Life Insurance policy or IRA and retirement plan.
As you can see there are many different routes that a person can take when planning to provide long-term support to a charity. Each person will need to analyze their own desires and financial situation before selecting the one that meets their needs the best.
However, each person needs to remember that charitable planning involved planning. This means that unless the correct documentation and agreements are put in place ahead of time, the gift may not be transferred as the owner wishes.
How to Benefit from Charitable Planning Now
If you are currently in a higher tax bracket than expected, you likely want to ease your tax burden without receiving less money. In this case, you could consider using charitable planning to accomplish this.
By giving in advance to your selected charity, you lower your eligibility for tax. Should you choose to select a charity with a donor advised program, the money may stay with the charity until you direct, to a reasonable degree, how they will use it. Perhaps this will be for a cause that is particularly close to your heart.
In this way, you continue to earn the money, enjoy giving it to a worthy cause, and then can direct who it helps.
Making the Best Charitable Planning Arrangements Possible
If you are planning the future of your estate, small decisions can make a great difference. Starting early when considering who can benefit from your material wealth is vital. It can help you to make charitable planning arrangements that have the maximum effect on the beneficiary.
If you would like to learn more about this, we would be happy to help. We leverage our years in the financial and legal sectors to help our readership to make wise decisions. Why not contact us or check out our blog to find out more.
Choosing to start a small business is both exciting and challenging, but there are many legal aspects that arise when you start. Once you determine what your small business services and target market are, as well as constructive a business plan, you will want to ensure that you follow all the necessary legal steps to launch a compliant, profitable and successful small business.
Rhodes Law Firm in Augusta offers business law services to our clients in Augusta and across the CSRA. Rhodes Law Firm is devoted to the practice of planning and protecting the assets of your business. Below, Rhodes Law Firm provides helpful tips and requirements to ensure that you’re legally starting your small business the right way.
1. Do your own small business research
The first step to starting your own business is to research the process and ask yourself very important questions before jumping right in.
- What are my small businesses goals?
- Am I providing goods or services?
- Do I want to hire employees or be a solo entrepreneur?
- What financial requirements are present and what capital do I have available?
While you’re answering these questions, you’ll gather information and learn more about the legal processes of starting a small business. Each individual has different needs for their small business and there is not a specific one-size-fits-all legal solution to starting a business. For the best results and to ensure that you are starting your small business legally and on the right foot, contact the business lawyers at Rhodes Law Firm in Augusta and let us assist you in your small business legal matters.
2. Determine the structure of your small business
As an independent professional starting a small business, you need to be aware of federal tax obligations from income, self-employment, estimated, employer and excise taxes. Once you establish your specific business structure, that will determine your federal tax obligations as well as the forms you use to report these taxes. The U.S. Small Business Administration (SBA) provides more information regarding these taxes and forms.
When creating your small business, these are some options to consider when determining your businesses structure.
Many independents begin their small business creation journey as sole proprietors. For tax purposes, you generally operate under your personal social security number, but you can apply for a Taxpayer Identification Number (TIN) for your business by filing an IRS SS-4 and asking for an Employer Identification Number (EIN) as your TIN instead of using your personal social security number. The business is generally run under your legal name. If you want to give the business an alternate name, you’ll register a Doing Business As (DBA) to state the name you intend to give your business. This process lets your state or local government know the name you are operating your business under. Specific DBA registration rules vary from state to state. You may also apply for a Federally registered business trademark or trade name.
Limited Liability Company (LLC):
Originally designed to protect owners of a business from certain business-related liabilities, the LLC structure has since become popular for independents due to its simplicity yet strong legal protections of a corporation shielding your personal assets. LLC is the next step above a sole proprietorship.
S Corporations are also referred to as an S-Corp and this is a business structure that has received the Subchapter S designation from the IRS. According to the IRS, S-Corps are considered by law to be a unique entity, separate and apart from those who own it. With this structure, subject to similar exceptions as described above for LLCs, you have the limited legal liability (separation of personal assets from your business) of a separate legal corporate entity as well as the separate tax entity. Provided the owners are eligible to make and make a timely election with the IRS, the profit from your business is reported under a separate tax return filing for 1120s but the taxable profit passes through to your personal tax return on form 1120 K-1. Thus, there is generally just a single level of tax.
An attractive option for the savvy independent professional, C-Corps make owners shareholders. A C-Corp has the same status that Fortune 500 businesses hold—they are corporate entities separate from their owners. In the case of an individually owned C-Corp, you are not just the owner of your company, but the majority shareholder. Because the corporation is a separate legal entity, it is an individual taxpayer in the eyes of the IRS. While this structure is one of the most complex business arrangements available, it is also the most sophisticated, making it an attractive option for independents.
Making sure that you choose the right structure for your small business is very important and you want to make sure that you’re creating your business the right way from the foundation and up. To ensure the best results when starting a small business, consider contacting the business lawyers at Rhodes Law Firm in Augusta.
3. Choose and Register your small business name
If you are starting a small business and choose to file as a Sole Proprietor, then to register your business name you’ll register a “Doing Business As” (DBA) or “Fictitious Business Name” (FBN). This process lets your state or local government know the name you are operating your business under. This registration doesn’t provide trademark protection, but it does allow you to create and use the name you want for branding purposes without having to incorporate. It also does not constitute a legal entity or provide any legal protection to the Sole Proprietor.
If you don’t register a DBA as a Sole Proprietor, the name of the business will default to the name of the owner’s legal name. For those who are filing a legal entity, an application must be filed with your state for either Articles of Incorporation of Articles of Organization. Whether you choose an LLC, S-Corp or C-Corp, you will need to file a name for the company.
If you are planning on providing online services, then you may want to consider getting your business name trademarked. A DBA or incorporated business name will not offer brand protection in the 49 states where your business is not registered. While trademarking is not a requirement, it will provide stronger protection for your brand. This process involves applying for a trademark with the U.S. Patent and Trademark Office. If you do want to pursue a trademark, start by conducting a thorough and comprehensive search to make sure the name you want to use is available.
For the safest and most legal way to ensure your small business is registered, contact Rhodes Law Firm in Augusta and allow our business law experts to register your small business with the State of Georgia.
4. Secure your required business permits and licenses
No matter your small business and the products and services you offer, more than likely you will need to obtain the required business permits and licenses. Federal business licenses are required for any business involved in any sort of activity that is supervised and regulated by a federal agency while state licenses will vary.
5. Create a compliance plan
Even as a small business owner, you could be subject to the laws and regulations that apply to large corporations. These include advertising, marketing, finance, intellectual property and privacy laws. For companies that have employees, there are additional state and federal regulations that may need to be followed situationally.
Additionally, small businesses must ensure that they are free and clear of contractor misclassification concerns. Not only is this a threat to the small business itself, but also to its clients. Make sure that you’re taking the appropriate steps when creating your small business to mitigate your risk by consulting with business law experts at Rhodes Law Firm in Augusta.
6. Protect your small business with insurance
If you have decided to start your own small business as an independent professional, then you are responsible for ensuring the legal and financial wellbeing of your consultancy. Remember that you are your business and any legal or financial problem that arises will directly affect your company and you. It’s crucial to starting a small business that you protect your business against the risk of liability losses.
There are different types of insurance that you can protect you and your small business with. Depending on the industry, the size of your business and the types of prospective clients you expect to work with will all determine what’s the best insurance for your small business.
General Liability Insurance:
General liability insurance is often necessary for independents. This insurance covers a wide range of incidents, including accidental damage to a client’s property, claims of libel or slander and the cost of defending lawsuits.
Errors and Omissions Insurance:
Errors and omissions insurance, also known as professional liability insurance, provides protection in the instance that a client incurs financial harm due to an error or omission. In other terms, it’s a failure on your behalf to perform an integral part of your responsibility on a project.
Home-based Business Insurance:
While an insurance policy for a home-based business doesn’t apply to everyone, it’s relevant for independents who choose to work out of a home office. Most homeowners’ insurance policies do not cover losses sustained out of a home office, but an insurance policy for a home-based business can provide the protection you and your clients need.
Are you ready to start your small business legally and the right way?
Starting a small business can be one of the best decisions of your life. The exciting challenge of creating a small business and watching it become successful is one of the most rewarding moments for an entrepreneur. However, ensuring that your small business continues to grow and builds a strong clientele base is a realm of uncertainty that requires a leap of faith.
If you’re ready to start your own small business, then hopefully the tips and recommendations above help steer you in the right direction. If you want to discuss business law and creating your own small business, contact the lawyers at Rhodes Law Firm in Augusta and let us help you elevate your business ideas and expectations the legal way.
With the election coming up, it may be a good time to review and work to implement any changes necessary to your estate plan. This article by The National Law Review suggests that while no major changes would take place if Republicans are in control of the White House, Senate, or House of Representative. However, if Democrats take control of all three, there would likely be a reduction in the current federal gift and estate tax exemption of $11.58M.
These possible changes do not mean that everyone needs to do something now to prepare. Everyone’s own situation is different and you may not be affected at all. If you would like to find out more and review your estate plan with experienced advisors, contact Rhodes Law Firm today. You can expect a tailored plan for your unique situation.