Showing posts from October, 2005

Can a Managing Member Remove other LLC Members?

===========Question: I am the managing member of an LLC in New Jersey and have a question concerning other members of the LLC. Currently I have two members other than myself of my LLC and would like to know if I would be able to remove them from the members list without any repercussion from the members. Do I need a written consent that they acknowledge that they are being taken off or can I just remove them and notify them of it at a later time? There has been no signed agreement between me and the other two members concerning the LLC's practices, division of clients or division of profits. The other members and myself are not seeing eye to eye and I would like to take on a new member and remove the other this possible?

===========Reply: Yours is a typical situation when people try to form businesses without the appropriate legal help. Unfortunately, you do not have a written Operating Agreement. This means that the terms of your LLC agreement are "oral." It doe…

Tax Protestor Irwin Schiff Jailed

Irwin Schiff, an antitax crusader, and an associate were found guilty on October 24, 2005 of multiple charges including conspiracy, tax evasion and tax fraud.

Mr. Schiff, 77, who argues that paying taxes is voluntary, was handcuffed and led from United States District Court after a jury found him guilty of all 13 charges. Schiff has written books and maintained a lucrative business convincing gullable people that his convoluted ramblings were valid legal research.

Should I Purchase a Franchise without an Exclusive Territory

===========Question: I am interested in a franchise for WSI (Internet Consultants) They only offer non-exclusive territories to their franchisees. My first reaction is that this is not a good thing, but I could be wrong. I realize that this is in the franchisor's favor, but is non-exclusive territorial rights something that I should deliberately avoid?

===========Reply: The exclusivity of a franchise territory depends on the business. Duncan Donuts can be located a mile or two apart without adverse impact. What you are buying in a francise is first a NAME. If you have not heard of the franchisor's name before, then all you are doing is building up their name. Secondly, you are purchasing a unique product or system. An example, once again is Duncan Donuts. If I go to a DD I know what doughnuts, coffee, etc. is available. It is an identifiable product. Finally, the training and business sytems, and ongoing support, can be valuable to the new business owner.

I have more information…

Cancellation of Indebtedness Income

===========Question: We have recently had our bankruptcy discharged. We are giving back the house, will the discharged debt be considered income? If so how are we supposed to be able to pay those taxes when we are broke?thanks,Josh
===========Reply: Normally, Cancellation of Indebtedness is considered Taxable Income. The exception is if the taxpayer is bankrupt or insolvent. Since you filed a Chapter 7 Bankruptcy Liquidation, you will not be taxed on the COD income. If you have any further tax questions, please check my website

IRS Audits Focus on Executive Fringe Benefits

IRS Audits are now focusing on Executive Fringe Benefits. The purpose is to deny the deduction for the business and to include the expenses as income for the Executive. Areas scrutinized in the audits include:
Athletic Skyboxes and Cultural Entertainment Suites Awards Bonuses Club Memberships Corporate Credit CardsEmployee Discounts Paid Vacations Employer-Paid Parking Loans Executive Dining RoomRelocation CostsFinancial PlanningOutplacement ServicesChauffeursTransportation/ Company CarsSpousal/ Dependent Travel Private Jet UseTransfer of Property (such as real estate, stock, computers, furniture and cell phones)Personal Use of "Listed" Property (such as computers, cell phones, and home office items)

Tax Extensions increase to 6 Months for 2005

Form 4868 will get you anautomatic 6-month extension and Form 2688 will become obsolete.Additionally, Form 7004 will also give you an automatic 6-month extension and will also be used for extensions for trusts and partnerships as well.Forms 2758, 8736 and 8800 will likewise become obsolete. All effective Jan1 2006.

New Bankruptcy Law Defeats Asset Protection Trusts

One issue with domestic asset protection trusts is that the Section 548(e) of the Bankruptcy Act of 2005 specifically allows a bankruptcy trustee to avoid transfers within 10 years of the transfer to the trust,"or other similar device"such as Family Limited Partnerships and LLC, for existing or new creditors within the 10 yearperiod. This may effectively defeat many "Asset Protection Trusts" and may promote the use of offshore trusts.

LLC's Need Operating Agreement

LLC's Need Operating Agreement

I have formed a LLC corporation. I am trying to open up a bank acct in my business name. but they require an artile of incorpation, which I do not have. How do I obtain this.

In New Jersey, a Limited Liability COMPANY (not corporation) is started by filing a Certificate of Formation. This can be done online. If you filed online, in about a week you will get a copy from the State.The Filing of the Certificate of Formation is a Notice. The Operating Agreement and Organizational Resolutions are used to actually formalize the LLC. You should file for a separate Employer Identification Number and a State of NJ Number. Frankly, you need expert legal assistance. As a preliminary step, my web site, has a Choice of Entity Determinator which can help.Good luck!Ronald J. Cappuccio, J.D., LL.M. (Tax)

Tax Compliance costs 2% of Economy

Complying with the current federal tax code costs American taxpayers at least $100 billion annually, and lost economic efficiency associated with the tax system may top half a trillion dollars, auditors for the Government Accountability Office told Congress.

In a new report likely to add fuel to campaign for an easy-to-administer national consumption tax, the GAO said that the "lowest available estimates" of the cost of complying with federal income, payroll and excise taxes is $107 billion -- 1 percent of the nation's total gross domestic product. Other studies suggest compliance costs may be 50 percent higher than these estimates, the GAO told Congress.

Citing U.S. Treasury Department estimates that individuals, businesses and exempt organizations spent a total of 6.4 billion hours completing federal tax forms last year, the agency concluded that even those estimates might be conservative.

"If this burden were monetized at rates between $15 and $30 per hour, the tota…

NJ Computer Error cause mistakes in Unemployment Tax Rates

NJ Computer Error cause mistakes in Unemployment Tax Rates

The state of New Jersey issuing Amended 2005/2006 Unemployment Tax Rate Notices.
The state of New Jersey is in the process of issuing Amended 2005/2006 Unemployment Tax Rate Notices.

Some of the originally mailed (August 22, 2005) notices contained erroneous duplicated contributions (taxes), thus assigning employers a higher reserve ratio than required by the tax table. As a result, the state of New Jersey has now corrected their figures and is issuing the amended notices.

Please take note, not all NJ employers were affected by the programming error, thus, only those employers whose data has changed will receive the Amended Notice.

Has your company been assigned the correct rate? This is another example of why the US Department of Labor states there is a 50% chance you are overpaying payroll taxes.