The door is locked, the ATM isn’t working and nobody is answering the phone. Banks don’t just close, right?

Yes, they do. But by taking the right steps to safeguard your business assets, a bank failure won’t cost you the value of those deposits.

Many Americans are alarmed by the failure of at least fifteen U.S. banks this year and panicked at not knowing if their money could be saved. In the midst of the nation’s banking crisis, it’s wise to re-examine how you structured your business bank accounts. That’s why we’ve gathered the latest banking rules to help you understand how to protect your money without having to stash it in banks all over town.

Experts in and out of government predict the banking crisis will continue. The markets have priced the odds of banking giant Morgan Stanley defaulting in the next five years at 45 percent and Citigroup failing at 21 percent.

To reassure depositors, the FDIC has made a few policy changes. It simplified rules for revocable trusts, increased the level of insurance coverage per depositor from $100,000 to $250,000 for interest bearing accounts and agreed to insure the full value of non-interest-bearing accounts until Dec. 31, 2009.

Some Good News

It’s worth noting that since the Federal Deposit Insurance Corporation (FDIC) began insuring banks in January 1934 no depositor has lost a single cent of insured funds as a result of a bank failure.

To reassure depositors in today’s financial climate, the FDIC has made a few policy changes. It simplified rules for revocable trusts, increased the level of insurance coverage per depositor from $100,000 to $250,000 for interest bearing accounts and agreed to insure the full value of non-interest-bearing accounts until Dec. 31, 2009.

Something you might not realize is that FDIC coverage on interest-bearing accounts can be increased – if the accounts are held in different ownership categories. These include single accounts, certain retirement accounts, joint accounts and revocable trust accounts.

Separate Personal and Business Accounts

It’s important to understand that when calculating insurance coverage the FDIC adds together the deposits in all “single” accounts owned by the same person.

Let’s assume coffee shop owner Jane Jones, the sole proprietor of Jane’s Java, has opened several accounts at the same bank.

1. Account A ($15,000) is Jane’s personal checking account.
2. Account B ($20,000) is Jane’s savings account.
3. Account C ($190,000) is Jane’s CD account.
4. Account D ($25,000) is a business checking account for Jane’s Java.

So far, Jane’s deposits area securely covered because the total of her deposits does not exceed $250,000

But what if Jane put an additional $10,000 into her savings account? The additional deposit would not be covered because it exceeds the FDIC’s $250,000 limit.

To keep her deposits fully covered, Jane can transfer the business account for Jane’s Java to another bank so that the her deposits at the original bank do not exceed $250,000 or place her personal accounts into a living trust.

You can deposit more than $250,000 into a revocable trust account and it can still be fully insured. You just need to name more than one beneficiary. Each beneficiary’s share would be insured for up to $250,000.

You can learn more about the FDIC and how it protects your deposits by visiting www.fdic.gov.

If you’ve got further questions, don’t hesitate to contact us. We’re here to help.

Business owners try their best to avoid having any problems with tax authorities. They usually try to solve the problem right away so that they do not encounter any more problems later. But what happens when there is a tax authority with a vendetta against you? I recently read an article where this happened. A 70-year-old inventor claimed California tax authorities hounded him for the past 15 years for income tax and fraud penalties. He argued that he owed nothing and this was a personal vendetta.

Through his persistence and motivation, he was able to win a lawsuit against a government for $388 million for compensatory damages and punitive damages. This jury found the tax agency acted with oppression, fraud and malice. Those of you who like David vs. Goliath type stories will enjoy it. I have attached the article below if you would like to read the whole story.

http://www.thestrategiccounsel.net/downloads/2008_california_scheming_nets_388_million.pdf

This is a fantastic editorial from Andy Kessler in September 25th Wall Street Journal. Mr. Kessler is a former hedge-fund manager who wrote a great book called “Running Money”.

His book argues that all the paradigms for evaluating the economy don’t work anymore. I have given out copies of “Running Money” and encourage everyone I know to read it. Mr. Kessler’s editorial was so wonderfully contrarian and insightful, I had to share this article.

http://online.wsj.com/article/SB122230704116773989.html#printMode
 

I watched Paulson testify in front of Congress yesterday. He has a lot of patience and courage. I personally think I would have politely told some of the self righteous grandstanding Senators to politely take the job if they thought they could do it better.
Paulson’s plan is less than perfect, but he is right. As tax payers, we are the hook anyhow. I am attaching an editorial from the Wall Street Journal that provides interesting criticism. Let me know your thoughts.
http://www.thestrategiccounsel.net/downloads/2008September24_The%20Paulson%20Sale.pdf

One of my fiscal beliefs is that you can’t be taxed into prosperity. The U.S. dollar, our interest rate, legal system, and entrepreneurial attitude make us a wonderful country to attract global companies.

However, our corporate tax rates are second highest in the world. If you want to stimulate the U.S. economy, provide tax credits for research and development, clean energy ventures, and investment in infrastructure. Apply the credit to our corporate tax rates and stand back. (This of course is just my humble opinion.)

As further evidence, I am attaching an editorial called “America the Uncompetitive” from the Wall Street Journal. By the way, read about the Irish tax rate of 12.5% that actually collects more than the U.S.!!! If you find this interesting, pass it on.

http://online.wsj.com/article/SB121875570585042551.html

One of the maxims in journalism is “never bury the lead,” which means, put the most important point of your article at the beginning. This is always a challenge for us for a variety of reasons, but based on the questions and feedback we received for the
blog called Tax Proposals of the Presidential Candidates, we buried the lead. We humbly apologize. We will try again; here is the lead:

The Estate Tax Is Here To Stay!
Both presidential candidates are behind keeping the estate tax; neither supports its repeal.

Senator Obama
Senator Obama is proposing a $3.5 Million Exemption and a 45% Estate Tax Rate. His position is basically the Democratic Party’s position on this issue.

Senator McCain
Senator McCain is proposing a $5 Million Exemption and a 15% Estate Tax Rate. This is more generous than his opponent’s plan, but it’s obviously not a repeal.

What Does This Mean?
Like everything involving politics, this is only conjecture until it becomes law. For the sake of discussion, let’s make some assumptions. First, one of these two presidential candidates wins (safe assumption). Second, the first item on the new President’s agenda is the repeal of the Estate Tax (not so safe of an assumption, as it will probably not be an issue until 2010). Third, Congress passes the new President’s tax position. Now all of these
assumptions may get us in trouble, so the only conclusion we can truly reach is that there will be an Estate Tax.

What does this mean to us?
Certainty. Well, maybe not certainty, but at the very least it means some direction. We need to be educating our clients that the Estate Tax repeal is probably not going to happen. If they are waiting to see what the law will look like, both candidates have
provided their direction. The question is what can be done now to take advantage of the current law.

It’s Not Law (We Know)
We realize that it’s not law, but it is a prediction of what may become law. This is the reason we “accidentally” buried the lead. The candidates are clear, but the future is not. Therefore, the only conclusion we can reach is that if either becomes President, the Estate Tax in some form will be with us beyond 2010. Both candidates are already telling
us their positions; the only question is how do we help our clients to act now?

Fall will be here before you know it, and in 2008 that can only mean one thing (besides the return of a promising football season) - the Presidential Election. There are an amazing number of issues for the candidates to wrestle with. One of the issues we’ll be
watching is taxation. Both candidates have a plan as to how the United States would run under his term. While each one of us and our respective clients will be impacted differently, we wanted to provide you with a short summary of each candidate’s position.
The key tax issues on which we are focusing are Estate, Capital Gains, and Income Taxes. I have tried to dissect these categories so that you may gain a better understanding of what each candidate is proposing.
 

Estate Taxes – Not Repealed!
This first one is intriguing. We all know that the estate tax is scheduled to be repealed in 2010. However, neither candidate is supporting its repeal. Adjustments yes, but repeal no. As of January 1, 2009, the current Federal Estate Tax exclusion is scheduled to jump from $2 million to $3.5 million, thus affecting about 0.3% of households. Senator Obama has adopted the Democratic Party’s platform to “defer” or freeze the exemption by proposing a $3.5 million exclusion in 2009 and thereafter, with a top rate at 45%. He would like to make these tax parameters permanent in an attempt to “restore fairness” to the tax system. Senator McCain’s plan proposes raising the exclusion to $5 million per
person and cutting the top federal estate tax rate to 15%.
Also, both Senators support retaining the current system for valuing inherited property that has increased in value over the years, referred to as the “stepped-up basis.” This is good news for our CPA colleagues, who are concerned about the repeal of the “stepped-up basis” under current law.

Capital Gains
Senator McCain would like to keep the current structure of tax rates on capital gains and dividends.Senator Obama, on the other hand, would like to raise the long-term capital gains rate to 20% if your income is over $250,000.

Income Taxes
Last but not least is a comparison of how each candidate would handle your income taxes. Senator McCain would not change much from the current system. He favors giving us a 35% income tax rate and keeping Social Security taxes at the current level. On the other hand, Senator Obama wants to increase the income tax rate to 39.6%. He also proposes
higher Social Security taxes for those with incomes over $250,000.

Election 2008
We don’t know which candidate will be our next President. However, their tax policies are influential with many voters. None of these proposals will be signed into law without debate, and of course, Congressional approval. Make your vote count.

I have blogged and written about this disgusting trend in the past.  Now, I want to point out that the Tampa Bay Business Journal has picked up on a disturbing trend among some of the big personal injury Plaintiffs’ firms.  In short, these firms are advertising for former employees of businesses, who believe they were not paid appropriately under the Federal Wage and Hour Act.  The Federal Fair Labor Standard Act has a tremendous amount of nuances that create a mine field of issues for a business owner to step-on.  Because of this, quite a few plaintiffs’ firms are looking for more of this type of work and attacking small business owners for real or perceived violations of the Act with the hope they would generate tremendous amount of money in legal fees through quick settlements.  I have attached the article from the Tampa Bay Business Journal for review.

http://tampabay.bizjournals.com/tampabay/stories/2008/07/14/story2.html

If you own a business that employees are on an hourly basis, you may want to review your policies to make sure they comply with the Act. If you are not sure what to do, feel free to give us a call or send us an e-mail.

A case out of the Federal Middle District of Florida is raising an interesting issue.  The case, FTC v Olmstead 11th Circuit Court Case #06-13254 has been sent to the Florida Supreme Court for an interpretation of Florida Law. The issue is whether under Florida Statute 608.433(4) a court may order the sole owner of a single member Limited Liability Company (LLC) to surrender all “right, title, and interest” in their LLC to satisfy a judgment.

Why is this an issue?

When set up properly and used effectively the LLC is powerful asset protection tool.  Usually, the LLC or the traditional Corporation (regardless of whether taxed as a C corporation or S-Corporation) is the first line of defense protecting its owners from the potential claims of creditors.  Generally speaking, both entities are about equal in terms of protecting the owners from claims of business creditors. As long as set up and maintained properly, a creditor cannot pierce the entity legal shield to get at the owners personal assets.

The LLC and the Charging Order

The LLC provides a greater level of protection dealing with claim’s against its owners, not necessarily claims against the LLC.  For example, two owners, Kim and Lisa create an LLC called “The House of Fashion, LLC.”  Kim is sued for a car accident and loses. A judgment is entered against her.  If she owned a traditional corporation, Judgment creditor could seize Kim’s shares and own her interest of the Corporation.  But, since Kim owns her interest through LLC units, the Judgment creditor can only receive a charging order providing that if Kim receives any distributions or other benefits, those must flow to the creditor and not to Kim. The creditor cannot seize her units, but it somewhat stand in her shoes financially.  While we are over simplifying this example, it is important to note, that if Kim owned shares in a regular corporation, they would be seized.
In an LLC her units would be protected and the creditor would only receive a charging order.

Second Case in the Country

In 2003, A US Bankruptcy Judge ruled that the sole owner of a Single Member LLC could have the ownership units seized by a bankruptcy trustee and the LLC liquidated to pay claims of creditors.  In re Albright, No. 01-11367, (Colo. Bkrpt. April 4, 2004).  The logic was that if there is no other owner of the LLC, the charging order protection is not relevant. If you have one owner in a single member LLC and that owner has a creditor, then the creditor can seize their ownership interest to satisfy their claim. Its important to remember, we are not saying that the LLC will not work as a first line of defense against a creditor of the LLC, but whether the single member LLC will be worthless to protect the owner from claims not related to the LLC.   We will keep you in the loop once the Florida Supreme Court rules.

One of our Attorneys found this article in theLifetimes section of the St. Petersburg Times Newspaper and thought that it may be helpful for some people to read. This article were written by Jan Warner and Jan Collins. Jan Warner is a member if the National Academy of Elder Law Attorneys and Jan Collins is editor of the Business and Economic review, published by the University of South Carolina.

Q: I am a 75-year old woman who is in quite a pickle: My second husband and I were married six years ago. We owned a condominium together – or at least I thought we did. We each paid half of the down payment, and each month, I paid half of the mortgage. I trusted him to look after all of the business, and he told me he had been to a lawyer and that I should not worry about anything.
When he died in 2007m he willed what I thought was his half to me. But I have now learned that he left me a “life interest” and gave the rest to his daughter, with whom I have never gotten along.
Not long after he died, she had her lawyer write to tell me that I am responsible for the mortgage payment, the taxes and insurance, not to mention the upkeep and appliances – or she will charge me rent.
I would like to know the rights of the person who lives under “life interest.” Does my stepdaughter have any responsibility to pay half of major upkeep on the property and the mortgage? Can she charge me rent? If I want to sell the property, can I do it?
A: First of all, while it may be too late for you to recover from taking in on the chin, dilemma should raise major red flags to all of our reads who choose to accept what partners, spouses and advisers tell them about their financial situations and refuse to become involved.
Second, based on the facts as you state them, the lawyer who created this Frankenstein plan for your husband did a disservice to both you and your stepdaughter. Why would anyone put two people who don’t get along in business with each other?
Here is where you appear to stand: A “life interest” and “life estate” are interchangeable terms describing the ownership of real estate during your natural life. This interest automatically ends at your death, meaning that you have no property to pass on at your death to your heirs.
As the life tenant, you have the right to live in the property. During this time, you are prohibited from committing “waste,” that is from damaging or devaluing the condominium because, in effect, your ownership interest is not permanent.
Therefore, you are generally responsible for taxes, insurance, repairs and upkeep to te property from your pocket.
At your death, what was your “life interest” will merge with your stepdaughter’s “remainder interest,” thereby vesting full and fee simple title in your stepdaughter.
About the mortgage: it appears from your e-mail that you and your husband both signed the note and mortgage. Therefore, you and your husband have financial obligations to the mortgage company.
At his death, it would appear that you and your stepdaughter would each be responsible for half the mortgage payment. Since your husband left you a life interest, your stepdaughter cannot charge you rent.
If you decide to move out, you can rent the property and collect the proceeds - from which you will still be responsible for half the note payment and all of the upkeep and repairs.
Can you sell all your interest and move? While yuour life interest can be valued, the first question to ask yourself is, whom could you find to get into business with your stepdaughter? No one, we suspect.
You could try to sell your interest to your stepdaughter, but the value would be substantially discounted. And if you did sell to your stepdaughter or anyone else, you would remain responsible for the mortgage until the condo was refinanced.
Taking the Next Step: You have a mess on your hands and need to see a lawyer, who may come up with a strategy to reduce your exposure and stress.

Hopefully, this article was helpful and if you have an issue that may be similar to this, please do not hesitate to contact our firm at 813-286-1700.