Business and Tax Planning
Today, maybe like never before, the benefits of analysis and planning are felt in all facets of life. Most businesses have known that as axiomatic. Planning is essential. When our clients are facing highly complex or unusual issues, they often engage us to bring our unique blend of knowledge and experience to bear upon the matter. For example, when clients are weighing whether or not to sell their business, they have to prepare months if not years in advance in order to optimize the value they will receive both before and after taxes are considered. If a client holds substantial real estate and yet wants to sell one parcel and purchase another in a simultaneous or non-simultaneous like-kind exchange that qualifies under Section 1031 of the Internal Revenue Code, we can help guide their steps. Raising additional capital for a business, planning for successive generations of business owners and its relational problems, how to enhance compensation to valued employees, negotiating employee exit documents, and the like are just a sampling of the types of transactions where our clients benefit from our involvement.
“Our lawyers help clients navigate the complex aspects of the Internal Revenue Code, and the myriad of other state and federal business regulations.”
Included in our analysis are the myriad of tax and non-tax factors that need to be properly considered to make effective decisions. Corporate and individual income taxes often have to be considered because they can be more than one-third of the entity or person’s taxable income. In addition, entities in Texas pay franchise tax which can be one percent of their gross margin – a very significant tax whether a company makes net income or not. Capital gain taxes at the corporate or personal level are often a focus when substantial transactions are being considered. Whether the tax on a particular transaction will be as ordinary income or as a capital gain can frequently affect the tax by fifty percent or more. Periodically whether the income resulting from a particular investment is considered passive and whether gains and losses would also be considered passive, can mean thousands of dollars in additional or saved taxes.
When a client is planning on investing in a new business venture, tax issues often drive which of the myriad types of entities is the best choice. Understanding the tax characteristics and options of each entity and being able to guide a client through that selection process can be key to the long term success of the venture.
Taxes are also not the same state to state. Our clients live in many states and they have children in even more states. They invest with others from other jurisdictions that are subject to varying tax laws. While we do not have income tax in Texas, clients and their children living in New York pay many levels of income tax from federal to state and local taxes. Trusts created by an individual living in Texas might be subject to income tax in California if the trustee happened to be a California resident. Limited partnerships created in Texas to do work throughout the nation may pay a different franchise tax if it were formed in Nevada or Delaware where no franchise tax is imposed.
Work and families are no longer the same either. The 1950’s vision of work and the family is no longer the norm. Individuals rarely work for the same company for their entire lives, or live in the same state. Planning has to take this mobility into account not only professionally but personally as well. In addition, the nuclear family is more rare now than ever before. We now see blended families with its many variations as the common situation with our clients. That brings with it the need to plan for the current spouse at the same time as providing for children from one or more prior marriages. Being able to provide substantial proven options to attempt to keep children and spouse from discord is a tremendous benefit to clients during the planning process.
“If we can assist you with your business and tax planning needs, please contact us today.”
It is our unique ability to consider these and many other tax and non-tax factors that cause our clients to seek our advice on many matters. As a result we advise and represent business owners, executives, professionals, couples and individuals in countless planning areas, structuring our advice and strategies in a custom fashion for our client.