How much do you charge?
At The Rutherford Law Firm we recognize that every case is unique and as such how we structures fees for cases is unique. While some cases are best served by billable hours, others may require us to take the case on a contingency fee. We will present you with all of the options after discussing the case with you. We believe in transparency when it comes to legal fees and we will be up front with you about them.
Why should I incorporate?
The primary reason people incorporate their business or form an LLC is to protect their personal assets from the claims of the business’ creditors. A corporation or an LLC by their very nature, have “limited liability”. As a sole proprietor or partner, you have “unlimited liability” to your creditors and, therefore, all of your personal assets are at risk if the business fails, is sued or is unable to pay its debts.
The owners of a corporation, called the shareholders, or owners of a limited liability company, called members, are protected from creditor claims by the “limited liability” nature of the corporation or LLC. Shareholders and members are not liable for the company’s debts unless either they agree to assume the debts in writing or the company has not been managed properly or is guilty of fraud. In that case creditors are permitted to “pierce the corporate veil”and hold the owners liable for the company’s debts. A corporation has the most enduring legal business structure. If a sole proprietor or partner dies the business ends or it may become involved in various legal entanglements. Since a corporation has a life of its own, it may continue on regardless of what may happen to its individual officers, managers or shareholders. Also, ownership of the business may be transferred without disrupting operations through the sale of stock.
Capital can be more easily raised with a corporation. This may be accomplished through the sale of stock or other equity interests. With sole proprietorships and partnerships, investors are much harder to attract because of the personal liability issue. For example, if the investor in a sole proprietorship (or some forms or partnerships) wants a share of the business for his capital contribution, he could become subject to a demand on his personal assets from creditors if the business becomes insolvent.
With partnerships each individual general partner may bind the business to arrangements that may result in serious financial difficulty. A corporation’s shareholders cannot commit the company by their acts simply because they have invested in it.
Corporations can offer anonymity to its owners. For example, if a business person wants to open an independent small business of any kind and does not want their involvement to be public knowledge, their best choice is to incorporate. If they open as a sole proprietorship they will clearly be identified as the owner. Also, if they are involved in a partnership this will most likely become a matter of record.
Corporations offer the advantage of allowing tax-deductible benefits such as health and life insurance, travel and entertainment deductions as well as providing an increased tax shelter for retirement plans. These so called “employee benefits” may be available to your company. Even though you may be the only shareholder or owner and only employee of your business, your company may still be able to deduct the full cost of health insurance, life insurance, medical insurance and other traditional employee benefits. Your company may even be able to adopt a pension and profit sharing plan. You should discuss these matters with your tax advisor to determine whether your company may take advantage of these benefits.
What is a Sole Proprietorship?
The sole proprietorship is a popular and frequently used form of business organization. When your business is organized as a single proprietorship, the business entity and your other affairs (personal and business) are merged together. As the proprietor, you own and control the business. From the standpoint of nearly all legal rights and responsibilities, your sole proprietorship business and you, as the proprietor, are considered to be one and the same.
When a business is owned and operated by a wife and husband, it often is not clear whether the operation is a sole proprietorship or a partnership. Under some conditions, the distinction between a sole proprietorship and a partnership can be very important. If you have a sole proprietorship owned and operated by you and your spouse, ask your attorney to clearly identify the legal implications of the linkage between your personal and business affairs. Your attorney also can describe actions you can take to ensure that you have whatever liability protection is possible in your circumstances.
In a business organized as a sole proprietorship, the owner directs business activities and may supply all management and labor utilized by the business. However, employees can supply either or both without altering the nature of the sole proprietorship. All proprietorship debt is payable by the proprietor (proprietor’s family unit), and lenders customarily require signatures on debt agreements by both the proprietor and spouse (if any). All profits accrue to, and all losses are borne by, the proprietor (the family).
For business and financial management purposes, it is best to maintain completely separate records for the business unit and the family or household. To ensure you have documentation needed for income tax reporting purposes, it’s best to use separate bank accounts and separate credit arrangements for your business and your family affairs.
If credit is used in your business operations, it’s particularly important to maintain the separation of finances and records for your business unit and your household. Interest payments on personal debt are not a deductible expense for federal and state income tax purposes while interest payments on business borrowing are fully deductible. When business and household costs are incurred jointly (for example: utility costs when you have a home-based business that’s not separately metered, telephone bills when the telephone is used for personal and business calls, and travel using a personal auto for business purposes), allocate the respective portions to the business unit and the household. Then pay the business and personal amounts from the respective bank accounts. A relatively small investment of effort in bill paying and record keeping can ensure you have the data needed for filing and substantiating your income tax returns.
What is an LLC?
The limited liability company (LLC) is a legal entity separate and distinct from the personal affairs and other business involvements of its owners (called “members “). A LLC has some characteristics similar to those of a limited partnership, some corporation-like characteristics, and still other characteristics unique to the LLC form of business organization.
In some states, limited liability companies have been authorized for several decades. Texas’s LLC authorization was first enacted in 1993 and amended in 1994 to authorize formation of family farm limited liability companies. Further changes in the authorizing statutes were enacted in 1997 in LB 44 and LB 361. With the LB 361 modifications, the formation of a LLC has been simplified, LLC taxation has been made consistent with the IRS regulations released in late 1996, and the legal standing of a LLC in Texas was made comparable to that of LLCs in other states. Under LB 44, the Secretary of State upon request is authorized to reserve and protect a business name for a limited liability company.
One or more persons may organize a LLC by preparing and filing duplicate copies of articles of organization with the Texas Secretary of State. The articles must provide a comprehensive description of the LLC’s name, the purpose for which it is organized, its principal place of business and registered agent, the cash and property to be invested in it, rights and requirements for admitting additional members, and the identity and addresses of managers. The articles also may identify (a) the LLC’s life span unless a shorter period is specified, the life span is perpetual; and (b) any other provisions not inconsistent with the statutes and desired by the members. Upon issuance of a certificate of organization by the Secretary of State, the LLC can commence business activities unless a delayed effective date is specified in the articles of organization.
A LLC may be dissolved when: (a) a life span specified in the articles of organization expires, (b) the members unanimously agree in writing that it should be dissolved, (c) any other dissolution cause specified in the articles of organization becomes a reality, or (d) a court rules that the LLC should be dissolved. Operating procedures for the LLC are set forth in its articles of organization, or in its regulations (similar to the bylaws of a corporation), or in its operating agreement (similar to a partnership agreement). LLC management can be vested in a member or members, or in a manager or managing entity with no ownership interest. With the exception of liabilities for unpaid taxes, members and managers of a LLC are not liable for LLC debt, liabilities, or other obligation including a judgment or decree. Thus, they are protected from general liability though their investments in the LLC, if any, are at risk. This limitation of liability can be nullified if members give personal guarantees for the LLC.
An ownership interest in a LLC is part of a member’s personal estate and can be transferred or assigned according to procedures specified in the articles of organization or in the operating agreement. If neither the articles of organization nor the operating agreement specifies the procedures for an ownership interest transfer, a transfer to a non-member of the LLC must be approved in writing by members other than the transferor who hold a majority in interest. If written consent by a majority in interest is not forthcoming, but a transfer of ownership interest occurs, the ownership interest can be held by a person who is not a member. When this happens, the recipient of the ownership interest has no right to participate in management, but does have the right to share in profits or other compensation and in the return of capital.
As a separate legal entity, LLC finances and records are established and maintained independently of the members’ personal financial arrangements and other business involvements. As is typical of similar legal entities, this separation of finances and records makes it easier to prepare reliable financial analyses of the business unit.
If you are considering organizing a LLC that will own and operate part or all of your business activities, you should secure both legal and tax advice specific to your circumstances, the outcomes you want to attain, and the actions you are considering. Do not make decisions without receiving skilled professional advice.
Do I need a will?
In almost all cases, the short answer to this question is ‘Yes.” It’s not something we like to think about, but the old saying that “Nothing is certain but death and taxes” contains a grain of truth. Death is certain for all of us; what’s uncertain is when that day will come.
When we die, most of us leave an estate, which consists of property owned at the time of death. A will is a document containing instructions by the testator (the person making the will) concerning how the estate will be divided. Preparing a will is something people tend to put off like a visit to the dentist. We know we really should do it, but dread the process.
In fact, preparing a will is not as painful as you might think. And in the long run, having a will makes things easier for your family, friends, the court system – pretty much everyone.
The information in this article is not a substitute for legal advice, but is intended to provide some basic information about wills and why they are important.
While most wills are not complicated, they must be prepared carefully in order to be valid and completely carry out your wishes. You should seriously consider having your will drafted by an attorney to ensure that it is done correctly.
What is a trust?
A trust is that relationship formed when one person (the “trustee”) receives legal title to certain assets and has the duty to use or keep those assets for the benefit of another person (the “beneficiary”). The property owner (the “settlor ” or “trustor”) transfers the assets to the trustee, usually through a trust agreement or a will.
What is Small Claims Court?
Small claims court is the real “People’s Court.” Small claims court provides a place where you can go to get back money that someone owes you. In small claims court, trials are informal. Most people who appear in small claims court do not have a lawyer. The purpose of small claims court is to provide an informal, uncomplicated proceeding to resolve small disputes which do not involve enough money to warrant the expense of formal litigation. There is only one major restriction in small claims court, the amount involved cannot exceed $5,000.
If someone owes you money, and you cannot get them to pay you, do not try to take the law into your own hands. Do not start a fight. If you cannot resolve the problem any other way, you may settle your differences by taking them to court.