Posts by: jarombergeson

GOP Delivers Tax Reform for Christmas – Joy to the World for Individuals?

December 28, 2017 Tax Planning Comments Off on GOP Delivers Tax Reform for Christmas – Joy to the World for Individuals?

Well, folks – it’s finally here.  Congressional Republicans spent most of the fall crafting, arguing over, and adding and deleting provisions from a sweeping tax reform bill, and President Trump just signed it into law (and held up his huge signature to the cameras).  It’s the first significant legislative achievement of The Donald’s presidency and the first major overhaul of the tax code since 1986.  Also, just like Obamacare in 2010, the new tax law passed without a single vote from the minority party.  In contrast, the 1986 tax law passed with a simple “voice vote” in the House, and by a 97-3 majority in the Senate – results that can only be attributed to a long-forgotten and apparently outdated concept called “bipartisanship.”  I had to Google it – 21st Century lawmakers may want to think about doing the same.

Immediately after signing it, the President had the new law shipped to the North Pole to be loaded onto Santa’s sleigh and delivered to all Americans (both naughty and nice) just in time for Christmas.  He had to send it FedEx because the U.S. Postal Service couldn’t guarantee on-time delivery (#Sad).  Anyway, whether waking up to find the revised tax code in your stocking on Christmas morning made you feel like you got a brand new iPhone X or just a gigantic lump of government-issued coal will depend on several factors.  My job is to go through how those factors will affect individual taxpayers, so you can decide whether to drink a little more egg nog to celebrate your tax windfall, or to spend New Year’s Day plotting how to tell President Trump and Congressional Republicans: “You’re fired!!!” as soon as possible.

Tax Brackets

First, tax rates go down for all taxpayers.

Income Tax Rate Filing Type
2017 2018 Single Married-Joint
10% 10% $0-$9,525 $0-$19,050
15% 12% $9,525-$38,700 $19,050-$77,400
25% 22% $38,700-$82,500 $77,400-$165,000
28% 24% $82,500-$157,500 $165,000-$315,000
33% 32% $157,500-$200,000 $315,000-$400,000
33%-35% 35% $200,000-$500,000 $400,000-$600,000
39.6% 37% $500,000+ $600,000+


So, what are the big picture takeaways here?

1)   Generally speaking, the rates themselves are lower pretty much across the board.  The progression is 10%-12%-22%-24%-32%-35%-37%, instead of 10%-15%-25%-28%-33%-35%-39.6%.

2)   The dollar amounts subject to lower rates are generally higher.  Let’s take taxpayers who are married filing jointly – they get an additional $400 of income taxed at the lowest 10% rate, then the next bracket up caps at $77,400 instead of $75,900, the next one up caps at $165,000 instead of $153,100, then at $315,000 instead of $233,350, and so forth.  At the top, only income above $600,000 is taxed at the highest rate, instead of everything above $470,700.  The results are similar for single taxpayers.


While the tax brackets and rates are certainly important, anyone who’s done their own taxes knows that before those numbers apply, you have to determine how much of your income is actually subject to taxation.  This is where the ever-popular “tax deduction” comes in.  Tax deductions come in two primary flavors: 1) “Above the line” deductions; and 2) “Below the line” deductions.

Above the Line Deductions

Above the line deductions are those you enter on the first page of your tax return.  They are technically “adjustments to income” because they are subtracted from your gross income to determine your Adjusted Gross Income (“AGI”).  Generally speaking, above the line deductions are more valuable than their below the line brethren.  This is for two main reasons: 1) You can take above the line deductions even if you don’t itemize your below the line deductions – they are taken in addition to (not instead of) the standard deduction (if you go that route) below the line; and 2) As alluded to above, they reduce your AGI – and the lower your AGI, the more below the line deductions and tax credits you may qualify for.  Let’s go through some of the most common above the line deductions to see what, if anything, has changed under the new law

1)   Traditional IRA Contributions – No change.  Still an above the line deduction, and contribution limits remain $5,500 for people under 50, and $6,500 for folks 50 or older.

2)   Contributions to Other Qualified Retirement Plans – Here, we’re talking about 401(k)’s, 403(b)’s, and other types of retirement plans.  Contributions to these remain above the line deductions as well.  In fact, if your employer withholds your contributions from your paycheck, these contributions are already deducted for you and are not even reported as income on your W-2.  The new law doesn’t make any significant changes here.

3)   Health Savings Account Contributions – There had been talk that the GOP would “supercharge” this deduction by greatly increasing the annual HSA contribution limits.  No such luck.  HSA contributions for 2018 are capped at $3,450 for individuals and $6,900 for families (which represents a small inflation-related increase over 2017, which had already been announced).  These contributions remain an above the line deduction.

4)   Student Loan Interest Payments – This is a big one for those of us who went to graduate school and have what one of my former law school classmates likes to call a “soul-crushing” student loan debt burden.  The current law provides some minor relief from that soul-crushing burden by allowing an above the line deduction for up to $2,500 of student loan interest paid during the year, as long as your income doesn’t exceed certain AGI limits.  The House bill eliminated this deduction completely, and prompted thousands of sad-face emojis from grad school alumni across the country.  Luckily, the Senate swooped in, and in the final law, the student loan interest deduction survived without change.

Below the Line Deductions

When it comes to below the line deductions, we all have two choices, take the Standard Deduction offered by the government, or, if they add up to being more than the Standard Deduction, list and report the various types of expenses the government has decided that you may deduct from your taxable income (i.e. “itemize” your deductions).  Let’s see what happened to some of the most popular below the line deductions:

1)   The Standard Deduction – Before we get into the individual itemized deductions, we have to talk about the Standard Deduction because the changes here will likely lead to a lot less people itemizing.  The amount of the Standard Deduction has increased from $6,350 to $12,000 for individuals, and from $12,700 to $24,000 for folks who are married and filing jointly.  So, cue the confetti and champagne, right?  Not so fast.

While it expands the Standard Deduction, the new law also repeals the “Personal Exemption” which was $4,050 per family member in 2017, subject to being phased out at certain AGI levels.  So, in 2017, a married couple with three children under the age of 18 taking the Standard Deduction could deduct a total of $32,950 below the line: $20,250 ($4,050 x 5 family members) worth of Personal Exemptions, and an additional $12,700 for the Standard Deduction.  In 2018, by taking the Standard Deduction again, that same family of five will only be able to deduct $24,000 below the line because there are no Personal Exemptions available.

2)   Mortgage Interest Deduction – The current law allows you to deduct interest paid on up to $1 million of qualified home acquisition indebtedness with respect to your principal residence and one other residence, as well as interest paid on up to $100,000 of qualifying home equity indebtedness.

The new law does not change anything when it comes to deducting interest on loans used to purchase such residences prior to December 15, 2017.  However, it does place a new cap of $750,000 of acquisition indebtedness used to acquire, build, or substantially improve such residences after December 15, 2017.  It also eliminates any deduction for home equity indebtedness, effective January 1, 2018, without any grandfathering for existing home equity indebtedness. This means that once you kiss your significant other at midnight on New Year’s Eve, you can also kiss goodbye any deduction for home equity indebtedness.

3)   State and Local Tax (“SALT”) Deduction – Currently, you can take a deduction for the amount you pay in state and local property and real estate taxes, plus either the amount you pay in state and local income taxes or state and local sales taxes.  After nearly being eliminated completely, the final law preserves the SALT deduction, but caps it at $10,000 (in the aggregate between property taxes and either income or sales taxes) per year.  In addition, to prevent folks from attempting to maximize their state and local tax deductions in 2017 (before the cap takes effect in 2018), the new rules explicitly state that any 2018 state income taxes paid before the end of 2017 are not deductible in 2017 (and instead will be treated as having been paid at the end of 2018). However, this restriction applies only to the prepayment of income taxes (not property taxes), and applies only to actual 2018 tax liabilities.

4)   Charitable Deduction – No major changes here.  However, while the limit for this deduction is currently 50% of AGI, it will be increasing to 60% of AGI starting in 2018.

5)   Medical Expense Deduction – The current law permits a deduction for medical expenses in excess of 10% of AGI (7.5% of AGI for people 65 and older).  The House bill eliminated this deduction entirely.  However, the Senate stepped in again, and the new law not only retains the deduction, but allows the deduction to begin at 7.5% of AGI for all taxpayers in 2017 (yes, retroactively) and 2018.  After that, the deduction is only available to the extent that expenses exceed 10% of AGI for all taxpayers (so, there’s no 7.5% AGI carve out for those 65 and older).

Tax Credits

Tax credits are awesome because, unlike both above and below the line deductions, they are subtracted from your actual tax liability, instead of from your taxable income.  So, while a $100 tax deduction might save you as much as $37 in taxes in 2018 (if you are in the highest 37% tax bracket), a $100 tax credit will save you $100 in taxes.  Put another way, tax credits reduce the amount of tax you owe dollar for dollar.

There are tax credits out there that apply to premiums for health insurance purchased on the Health Insurance marketplace, certain education expenditures, folks living abroad, and other situations, but I am going to focus on two credits that apply to families and parents:

1)   The Child Tax Credit – Currently, parents get a $1,000 tax credit for each qualifying child under the age of 17, but that credit phases out starting at $75,000 of AGI for individuals, and $110,000 of AGI for those of us who are married filing jointly.  Under the new law, the credit is increased to $2,000 per qualifying child, and the phase out wouldn’t kick in until $200,000 of AGI for individuals and $400,000 of AGI for married couples filing jointly.  In many cases, this will help to offset the loss of the personal exemptions described above.  Of the $2,000 credit per child, $1,400 is “refundable.”  This means that if the application of the credit brings your total federal income tax liability below $0, up to $1,400 of the credit, per child, will still be added to the refund check the government will send you.

2)   The Child and Dependent Care Credit – This provision allows you to claim a tax credit equal to somewhere between 20% and 35% (depending on your AGI) of actual child and dependent care expenses up to $3,000 for one person, and up to $6,000 for two or more people.  This credit was not changed (or seriously threatened to be changed) during the tax overhaul process.

One more thing, Republicans also used the opportunity of crafting a new tax law to strike a serious blow to the crowning legislative achievement of President Trump’s predecessor – namely, Obamacare.  Starting in 2019, the penalty for failing to purchase qualifying healthcare will be reduced to $0.  This is what they mean when they say the new tax law repeals the ‘individual mandate.”

At the end of the day, at least in the short term (the law expires in 2025, unless it is subsequently renewed), most Americans will see at least a small increase in their paychecks because of the new law.  So, who are some of the biggest winners and losers under the new system?

Winners: People with Multiple Children under Age 17.  Most Americans will qualify for the full $2,000 credit, per child.  So, if you’ve got five kids under 17, that’s a $10,000 tax credit and $7,000 of it is refundable.

Losers: High Income Taxpayers in High Tax States.  For some people in places like New York, New Jersey and California, the $10,000 limitation on the SALT deduction will increase their taxable income by $50,000 or more.  Yikes – I guess Republicans figure they weren’t winning these states anyway!

Winners: People with High Medical Expenses.  The Medical Expense Deduction survived and was even expanded for 2017 and 2018.

Losers: Empty Nesters and People without Children.  The Child Tax Credit serves to at least partially offset the loss of the Personal Exemption (and in some cases the math even comes out better for parents).  No such luck if you don’t have any kids under 17.

Winners: Charitable Donors.  Republicans retained this deduction, and increased the percentage of donations that can be deducted.

What Is a Health Care Sharing Ministry – And Is Joining One a Good Idea?

November 20, 2017 Uncategorized Comments Off on What Is a Health Care Sharing Ministry – And Is Joining One a Good Idea?

It’s that most wonderful time of the year. It’s the Obamacare Open Enrollment Period to purchase health insurance coverage for 2018 on the Individual Marketplace.  Take note though, The Open Enrollment Period has been shortened this year and expires after December 15, 2017. Health insurance premiums are rising drastically for many Americans who buy insurance on the individual market. These rising costs have caused millions of Americans to look for alternatives to Obamacare health insurance plans, which for many families are over $2,000 a month. The fastest growing option to sidestep these rising costs is known as a Health Care Cost Sharing Ministry. Those who participate in these cost sharing ministries are exempt from Obamacare insurance requirements and penalties and can see big savings.

Obamacare plans come in three flavors, Bronze (the most basic coverage with the lowest premiums and highest deductibles), Silver (middle-of-the-road plans with higher premiums and lower deductibles that Bronze plans), and Gold (the best coverage with the highest premiums and lowest deductibles).  According to a recent analysis of plans on by the consulting firm Avalere, 2018 premiums for Bronze and Gold plans are increasing by an average of 18% and 16%, respectively, while premiums for the benchmark Silver plans are set to surge by an average of 34%.  Premium increases vary from state-to-state, and Avalere found the biggest jump for Silver plans in Iowa, where they will rise by an average of 69% (sorry Hawkeye and Cyclone fans).  Anecdotally, the deductibles and out-of-pocket maximum for the Silver plan I had in 2017 will be increasing slightly for 2018, and the premium is set to skyrocket by 62%!

Such rising costs are sending many of us scrambling for cost-saving alternatives.  One such alternative that is gaining huge traction across the country is something called a “Health Care Sharing Ministry.”  These ministries are organizations that facilitate the sharing of health care costs among individual members who have common ethical or religious beliefs.  They are not health insurance.  They don’t use actuaries, accept risk or make guarantees, and do not purchase reinsurance policies on behalf of their members.  But, those who are part of a cost sharing ministry are exempt from Obamacare penalties.

So, how does a Health Care Sharing Ministry work?

There are about 100 of these ministries out there, and three of them account for about 85% of the the participants.  Each ministry works in a slightly different way.  However, the guiding principal is that the members “share” each other’s medical expenses (as well as prayers and expressions of encouragement and well wishes).  In Medi-Share, the largest of the Health Care Sharing Ministries, a member’s monthly share is matched with another member’s eligible medical bills.  Through a secure online portal, Medi-Share publishes the bills eligible for sharing and coordinates the direct sharing of medical costs between members. Members know month whose bills they are paying each month (so they can pray for them), and when they have eligible bills, other members share those and the assumption is they are praying for you as well.

What are the (potential) advantages of participating in one of these?

First, members of these ministries are exempt from the individual mandate under the Affordable Care Act.  This means they don’t have to purchase qualifying health insurance (on the Marketplace or anywhere else) to avoid the penalty for failing to buy health insurance.  While the penalty amounts for 2018 have yet to be announced (and could be eliminated entirely if Congressional Republicans have their way), the 2017 penalties were either $695 per adult and $347.50 per child under 18, with a maximum of $2,085, or 2.5% of your household income – whichever is greater.

Beyond avoiding the “Obamacare Penalty” these ministries are often attractive because the monthly fees – known as a “Monthly Share” (not a premium – remember, this isn’t insurance) can be much cheaper than premiums for Marketplace plans.  In running the numbers for my family, the cost of participating in a ministry where my family’s Annual Household Portion (analogous to a health insurance deductible) is $2,500, will be roughly $2,000 per month cheaper than any Marketplace plan I can buy where the annual deductible is in that same ball park.  Numbers like this are a huge part of what has pushed membership in these ministries to more than one million Americans, according to the Alliance of Health Care Sharing Ministries.

From a non-monetary standpoint, many folks also enjoy the idea of partnering with and praying for like-minded people with similar values to take care of each other as a “community of believers.”  They also like the idea that their dollars are not going to pay for care for which they have a moral or religious objection.

Ok, those savings are ridiculous. What’s the catch?

Well, there definitely are some.  Here are some things to think about:

1)   Are you eligible?  These ministries typically require members to agree to some sort of “Statement of Faith.”  Medi-Share’s Statement requires adherence to certain ideas about the nature of God, the divinity of the Bible, and the life, atonement and resurrection of Jesus Christ.  They also require members to agree to abide by “Biblical standards” in how they live their lives – such as abstaining from the use of tobacco and illegal drugs, the abuse of legal drugs (including alcohol), and sex outside of marriage.  So, this isn’t for everyone.  However, I agreed to live by similar standards even during my college years (at Brigham Young University), so agreeing to live by them as a 39 year-old father of three living in Cedar City, Utah (a town where it’s hard to get into all that much trouble) isn’t much of a problem for me J.

2)   They likely won’t cover certain “lifestyle-related” care that a Marketplace plan would.  Don’t plan on having your fellow believers share in your medical costs in situations such as the following:

  1. You get pregnant out of wedlock.
  2. You drive drunk and get in a car accident.
  3. You get in a car accident while participating in a race or stunt, or in the commission of a crime.
  4. You get in a car accident and you’re not wearing a seat belt when it’s legally required to do so (you may get some help here, but not as much as you’d get if you would have worn your seat belt).
  5. You have an injury or illness that is the result of any illegal activity – so, if your meth lab explodes and you end up with second and third degree burns over 70% of your body, you’re out of luck.
  6. You want to have an abortion.
  7. You need treatment for alcohol or drug-related injuries and illnesses.
  8. You get an STD – unless you can show you got it via transfusion, rape, work-related needle stick, or sex within marriage.
  9. You attempt or succeed at committing suicide.

3)   You’ll have to think about pre-existing conditions again.  Terms vary among the different ministries, but you can at least count on restrictions, waiting periods, and/or caps on coverage if you get treatment for a pre-exiting condition.

4)   Your prescriptions may not be covered in the same way.  If you take (or have to start taking) a preventative or maintenance-type medication on a regular basis, this type of prescription may not be covered, or may only be covered for a while.

5)   You may lose same tax advantages.  Your Monthly Share is not a health insurance premium, so it is not deductible as a medical expense.  Also, even though these ministries are registered non-profits, your Monthly Share is not tax deductible as a charitable donation because you are getting something in return for your payment.  All these ministries allow you to make additional contributions, so anything you donate above your required Monthly Share would be tax deductible.  Finally, because these ministries are not health insurance, none of them will qualify you to have and make contributions to a Health Savings Account (“HSA”).

6)   There are no guarantees.  If you have huge medical bills and the ministry doesn’t have the funds to cover them, you are simply out of luck.  The ministries are not agreeing to take on any risk.  Unlike with health insurance, there are no state-guaranteed funds available if the ministry becomes insolvent or files for bankruptcy.  Also, state insurance departments and federal agencies like the Department of Labor have no oversight or regulatory authority over these ministries.  So, don’t expect them to help you resolve any complaints.

At the end of the day, participating in a Health Care Sharing Ministry may make sense for you.  However, they don’t make sense for everyone – especially those with pre-existing conditions that require (or have the potential to require) high-cost types of care.  Do your homework, and seek advice from a tax and/or legal professional before jumping in.

The New “Centralized Partnership Audit Regime” – A Seismic Shift or Much Ado about Nothing?

October 31, 2017 Business planning, IRS, Tax Planning Comments Off on The New “Centralized Partnership Audit Regime” – A Seismic Shift or Much Ado about Nothing?

An article on IRS audits…just what you needed to read before going to bed tonight, and I’m not kidding. Now, don’t be embarrassed if you haven’t heard of the Centralized Partnership Audit Regime (“CPAR”). If you think it sounds like something out of a George Orwell novel that only CPA’s and Tax Attorneys care about – well then, you’re half right. It’s not from Nineteen Eighty-Four. It is a real thing; the sort of thing people in my profession like to bring up when they’re trying to sound smart at cocktail parties – the most boring cocktail parties EVER.

Anyway, despite the sleep-inducing name, the CPAR is something many of our clients need to be aware of – namely clients who file (or should be filing) an annual Form 1065 Partnership Tax Return. So, if you are involved in a partnership, try to stay awake – this is for you.

A little background: The CPAR was enacted into law by the Bipartisan Budget Act of 2015 (“BBA”). As with most federal laws, the statute itself is nice and all, but the real meat comes in the form of the administrative rules implementing the law. The Proposed Rules for the BBA were introduced earlier this year, and barring something really crazy (which can’t be ruled out in the Washington D.C. of 2017) they will go into effect for all tax years beginning on or after January 1, 2018.

In a nutshell, the CPAR will replace the rules that currently govern partnership audits (which come from the Tax Equity and Fiscal Responsibility Act of 1982 (“TEFRA”). The intent of the CPAR is to make it simpler and easier for the examine partnerships, particularly large partnerships with multiple tiers or levels of ownership.

So, What’s New in the CPAR?

1) “Partnership Representative” Replaces “Tax Matters Partner”: Currently, a partnership is required to designate a “Tax Matters Partner.” This is typically done in an Operating or Limited Partnership Agreement. While the Tax Matters Partner can bind the partnership in connection with an audit, it cannot bind the individual partners. In addition, a partner who is not the Tax Matters Partner has certain rights during an audit, including notification rights and the right to participate in the proceedings.

Under the CPAR, the Tax Matters Partner is replaced by the concept of a “Partnership Representative” who is the sole point of contact between the partnership and the IRS. Unlike with the Tax Matters Partner, all partners and the partnership itself are bound by the actions of the Partnership Representative and no one other than the Partnership Representative is vested with a statutory right to participate in a partnership-level audit proceeding. Neither state law nor the partnership agreement itself may limit the authority of the Partnership Representative when it comes to an audit.

Under the CPAR, a partnership must designate its Partnership Representative in the partnership’s annual tax return. Unlike with the Tax Matters Partner, the Partnership Representative may or may not be a partner. The only hard and fast requirement is that the Partnership Representative have a “substantial presence” in the United States. The Partnership Representative designation must be made separately for each tax year and is effective only for that year. One Orwellian tidbit here is that if you fail to designate a Partnership Representative, the IRS is allowed to pick one for you!!! This is a little scary. Again, the Partnership Representative does not have to be a partner in the partnership – so it is at least conceivable that the IRS could appoint as Partnership Representative a non-partner third-party who then becomes the sole point of contact for the IRS regarding the audit and is vested with full authority to bind the partnership in an audit.

Given the above, under the CPAR it becomes more important than ever that you don’t blow off your annual 1065 Partnership Return. File the return on time and name a Partnership Representative! A pretty simply recipe to avoid IRS trouble. I have seen some chatter online about amending operating or partnership agreements to make this designation. However, while this is certainly a good place for the partners agree in writing as to who will be designated the Partnership Representative (or how the Partnership will choose the Partnership Representative), the actual designation must be made on the filed partnership return.

2) “Imputed Underpayment” and the “Push Out Election”: These will become important if you are ever in an audit, but we will not be going into detail here. They are technical changes regarding how the IRS notifies the partnership of an amount owed after audit, and how and when a partnership can decides to pay what is owed at the partnership level, or “push out” that liability to the individual partners.

Am I Stuck with the CPAR?

The short answer is “not necessarily.” Partnerships with 100 or fewer partners – all of whom are considered “Eligible Partners” by the IRS can opt out of the CPAR. Eligible Partners are defined as:

  1. Individuals
  2. C-Corporations
  3. S-Corporations
  4. The Estates of Deceased Partners

So, if any partner is a trust, a disregarded entity (such as a single-member LLC), or another partnership, opting out is simply not an option. Just like naming a Partnership Representative, opting out of CPAR is done annually, when you file your 1065 partnership return. In order to successfully opt out, you will need to provide the IRS with the name, tax ID number, and federal tax classifications of all partners. Also, the election to opt out only applies to the year to which your tax return applies, so it will need to be done each year going forward.

If you opt out, the IRS will be required to initiate deficiency proceedings at the partner level (instead of the partnership level) to adjust items associated with the partnership and thereby assess and collect any tax that may result from those adjustments. This makes life harder for the IRS, and for this reason, it will likely make sense for eligible partnerships to opt out of CPAR – if they can. The decision to opt out can be made in an operating or partnership agreement, but will need to be submitted to the IRS each year as part of filing the 1065 partnership return.

Because opting out makes a partnership audit more difficult for them, the IRS has stated its intention to closely scutinize any partnership’s decision to opt out. This will include analyzing whether the partnership correctly identified all of its partners. For example, the IRS could conduct a review of a partnership’s partners to confirm that none are acting as nominees or as agents for a beneficial owner.

At the end of the day, for most of our clients, the shift to CPAR will not be noticed. Most partnerships don’t get audited, and if they do, the partners work together to get through it. However, by taking the steps to opt out of CPAR (if eligible), or to make sure a Partnership Representative is named (if opting out isn’t a possibility), you can avoid running into a CPAR problem that could have otherwise been avoided.

Getting Married? You’ll Need a Caterer, a Photographer, a DJ … and a Lawyer!

September 12, 2017 Asset Protection, Law Comments Off on Getting Married? You’ll Need a Caterer, a Photographer, a DJ … and a Lawyer!

The process of getting married can be one of the most wonderful, exciting … and stressful periods in a person’s life.  There’s so much to plan for and do (and so many people to impress) that it can be hard to focus on what’s really important – the fact that you are making a commitment to love, honor and cherish the person who is (hopefully) the love of your life.

In the midst of deciding what flavor of cake to have and who will make the cut in terms of getting an invitation, please don’t overlook the fact that marriage is a change in legal status for both of you.  While certainly not the most romantic of wedding preparations, you may want to think about meeting with your attorney well in advance of the blessed day, to make sure your legal ducks are in a row before you say “I do.”  If you ask nicely, your lawyer might even agree to spread rose petals on the floor of his or her office to mark the occasion (for a small fee of course)!

Anyway, here are five legal questions you will want to consider before you take the plunge:

1) What are your assets? 

In most states, assets acquired prior to marriage are considered the separate property of the spouse who acquired them.  However, under certain circumstances, separate property can become marital or community property.  What are your shared (or unshared) expectations regarding such assets?  Do you have a plan for how assets acquired after the wedding will be handled?  Also, make sure you discuss your business as part of this conversation.  Even if the business doesn’t have many assets, the business itself is an asset that needs to be dealt with.

2) How are you going to handle finances?

Are your separate checking accounts going away and everything will be in one joint account?  Are you going to continue living separate financial lives?  Maybe you’ll play it down the middle and have “his, hers and ours” type accounts.  Regardless of what you decide, I suggest that you make a decision – any decision – before the wedding.  I render no advice about which approach is best, but I know plenty of marital spats could be avoided if folks would make these decisions before the wedding day (instead of trying to make them when one of the newlyweds wants to spend $1,000 to go diving in a shark cage on the honeymoon).

3) What are your debts and obligations? 

Now, I’m not suggesting that you run a credit report or have a minimum credit score requirement for your spouse.  However, I know someone who decided to get married primarily because she liked her new husband’s choice in shoes – so you could use worse criteria.  My bride-to-be and I had this very discussion, and I had to disclose that in addition to my student loans, I had racked up quite a bit of credit card debt during law school.  She still made the mistake of marrying me, but at least she couldn’t say I didn’t warn her about the credit card debt.  Also, like the joint vs. separate checking account conversation, I think it’s better to have this discussion before the wedding day.  You need to know going in how much of the family income will be going to cover debt payments, and whether your spouse will be a help or a hindrance when it comes time to apply for mortgages and other loans.

4) Are we going to bite the bullet and get a prenup? 

“Darling, I love you more than anything.  I can’t imagine my life without you … Whaddya say we each get our own an attorney and hash out how our assets will be divided if we ever get a divorce?!”  Yes, that is what you’re doing when you decide to get a pre-nuptial agreement.  I absolutely understand why people don’t want to do them.  They can be painful and a bit awkward (and, I mean, you probably won’t ever get a divorce).  I also understand why people don’t want to get the vaccination for diphtheria, tetanus and acellular pertussis (DTaP).  The DTaP vaccination can be painful and a bit awkward (and, I mean, you probably won’t ever get diphtheria).  However, in return for the small amount of pain and awkwardness caused by the DTaP vaccine, you get the peace of mind of knowing you have almost no chance of contracting diphtheria.  Similarly, in return for the small amount of pain and awkwardness caused by a prenup, you get the peace of mind of knowing how your assets are going to be divided if you ever get a divorce (and that you won’t have to pay a divorce attorney thousands to fight about it).  At the end of the day, I think both the DTaP vaccine and the prenup are almost certainly worth it.

5) What about our estate plan? 

If neither of you have a will, a trust, a medical or financial power of attorney or a living will, then your impending nuptials are a perfect time to get this work done.  Opt for the cash bar instead of the open bar at the reception, and use the savings to pay for a comprehensive estate plan (I promise your guests won’t mind).  If one or both of you do have these documents, then your marriage likely means they need to be amended.  You want to make sure you don’t unwittingly disinherit your spouse, or allow your mom (instead of your spouse) to have the authority to make decisions regarding your medical care if/when you become incapacitated.

Be aware that asking these questions before marriage may necessitate speaking with an attorney (either separately or jointly with your spouse-to-be).  The thought of visiting an attorney may be frightening to you.  However, just think, if you take that step and consult with an attorney prior to getting married, you may just conquer that fear of lawyers (and your fear of commitment) at the same time!

Pokémon No! How Pikachu Ended Up Getting Served with a Class Action Lawsuit

August 10, 2017 Law, Litigation Comments Off on Pokémon No! How Pikachu Ended Up Getting Served with a Class Action Lawsuit

Remember Pokémon Go? About this time last year, the “augmented reality” game in which players use their smartphones to capture and train various species of Pokémon was a global phenomenon, with nearly seven million daily downloads. It was sort of the “thing to do” of Summer 2016.

While Pokémon Fever has certainly subsided a bit, the game still has plenty of rabid fans. In fact, last month’s Pokémon Go Fest in Chicago drew 20,000 Pokémon Go die-hards to the city’s Grant Park. The Fest was billed as a chance for Pokémon Go “trainers” to compete against each other and bag rare Pokémon characters. Instead, as it turned out, attendees encountered hours’ worth of lines, a lack of data connectivity, problems with the game’s software, and malfunctions of the game’s servers. The Fest has been almost unanimously derided as a disaster.

In an attempt to quell the uproar regarding the fiasco, Pokémon’s parent company, Niantic, Inc., has offered to refund attendees’ the price of admission ($20) and give them $100 of in-app purchase credit. While definitely a nice gesture, that compensation isn’t cutting it for many Pokémon trainers who traveled from across the country, and the world, to attend.

One disgruntled Pokémon Go fan from California has gone so far as to file a class action lawsuit against Niantic on behalf of all who attended Pokémon Go Fest, seeking damages for, among other things, violation of the Illinois Consumer Fraud Act, which broadly prohibits unfair or deceptive business practices. The suit seeks to have Niantic reimburse Fest-goers for their travel and accommodation costs. It also goes after punitive damages to teach Niantic a lesson.

Virtually every state in the Union has a similar “consumer fraud” or “deceptive trade practices” statute. These statutes are designed to protect the public from business activities by that are meant to mislead consumers into purchasing a given product or service.

While each state varies in how offenses are dealt with (i.e. whether a private lawsuit can be filed or a class action is available), the acts that are illegal are at least fairly uniform across state lines. They usually include:

1) False representation of the source, sponsorship, approval, certification, accessories, characteristics, benefits, or quantities of a good or service (Niantic could have a problem here);
2) Representing goods as original or new when, in fact, they are deteriorated, altered, reconditioned, reclaimed, or used;
3) Falsely stating that certain services, replacements, or repairs are needed;
4) Advertising goods or services with the intent of not selling them as advertised, or with the intent of not having enough in stock to meet reasonably expected demand (another possible problem area for Niantic);
5) Disconnecting, turning back, or resetting the odometer of a vehicle to reduce the number of miles indicated;
6) Passing off goods or services as those of another (i.e. selling counterfeit goods); and
7) Representing goods or services as having a sponsorship, approval, sponsorship, or certification of goods or services.

Many of these seem like no-brainers, but as a consumer, it is important to know your rights, and if you are aggrieved to know that you may very well have the weight of a state statute behind you, in addition to common law claims for fraudulent misrepresentation and unjust enrichment.

As a business owner, it is crucial that you know when the conduct of your business may put you at odds with the consumer protection statute(s) in your state – so that you can do your best to make sure that you (as well as your employees and other representatives) DO NOT cross that line.

A little homework can go a long way in helping you protect yourself – both as a consumer and a business owner.

Ask Your Attorney if a “Covfefe” Trademark Is Right for You

July 11, 2017 Business planning, Corporations, Law, Litigation Comments Off on Ask Your Attorney if a “Covfefe” Trademark Is Right for You

On May 31st, 2017, at 12:06 a.m. Eastern Time, President Donald Trump unleashed the following tweet: “Despite the constant negative press covfefe.” No one has been able to definitively crack the code (if there is one) as to what “covfefe” actually means. The President took down the tweet six hours later and replaced it with a tweet saying: “Who can figure out the true meaning of ‘covfefe’??? Enjoy!”

Predictably, the word “covfefe” immediately went viral on social media, with several twitter users encouraging their followers to “ask your doctor if Covfefe is right for you” and others thinking it’s what you’re supposed to say when someone sneezes. In the following days and weeks, covfefe has taken on a life of its own and become a bit of a cultural phenomenon. Late night hosts have debated whether President Trump had some sort of minor stroke or simply fell asleep when he typed covfefe, and Hillary Clinton was asked about what she thought it meant in a recent public appearance.

However, it’s not only comedians and 24-hour news channels that are making hay with covfefe. A Google search of “covfefe” reveals dozens of businesses ready to sell you apparel with hundreds of variations on the covfefe theme. To date, my personal favorites are “Make America Covfefe Again” and “What Part of Covfefe Don’t You Understand?”

A check of the U.S. Patent and Trademark Office (“USPTO”) databases shows that in the forty days since the covfefe phenomenon began, 34 trademark applications have been filed using the term. The products and services being tied to covfefe run the gamut from “advice relating to investments” to fragrances, toys, coloring books, and even sandwiches. As you might expect, four different companies have filed applications to use covfefe for beer.

However, easily the most popular application (there are about twenty of them) is to get protection for using covfefe on t-shirts, hats, and other apparel. One applicant for a covfefe apparel trademark even appears to have access to the inner circle of Trump advisors and confidants who know what covfefe really means – after all, its application is for: “COVFEFE – Carry On Vigilantly Fighting Evil For Ever.”

So, the question becomes: which of these applicants will win the coveted “covfefe” trademark for t-shirts? The answer from this trademark attorney is: very possibly none of them! Why? Because the USPTO will generally refuse an application as “ornamental” if what is submitted to the USPTO shows that the use of the mark is only decorative or ornamental. That is, if the use of the mark does not clearly identify the source of the goods and distinguish them from the goods of others – which is required for proper trademark use.

The USPTO’s number one example of “ornamental” use is when a quote is prominently displayed across the front of a t-shirt, such as “The Pen is Mightier than the Sword.” The USPTO’s position is that most purchasers would perceive the quote as a decoration, and would not think that it identifies the manufacturer of the t-shirts (the source of the t-shirts could be Hanes® or Champion®, for example, as shown by the neck-tag).

Other examples of “ornamental use” put out by the USPTO are:

  1. A logo on the front of a hat. When the logo is associated with an organization, like a sports team, which did not manufacture the hat.
  2. Stitching designs on the back pocket of a pair of jeans. Purchasers are accustomed to seeing embellishments on jean pockets and would not think this embroidery design identifies the source of the jeans.
  3. A floral pattern on tableware or silverware. A purchaser would likely see this pattern as merely decorative and would not think it identifies the source of the tableware or silverware.
  4. The phrase “Have a Nice Day” or a smiley face logo. Everyday expressions and symbols that commonly adorn products are normally not perceived as identifying the source of the goods.

While there is no definitive place to affix a mark to goods to avoid an ornamental refusal, the location, size and dominance of a mark have a big impact on how the public perceives it. The USPTO has offered the following examples of proper non-ornamental trademark use:

  1. Discrete wording or design on the pocket or breast portion of a shirt. A purchaser would typically associate the small logo on a shirt pocket or breast area with the manufacturer or the source of the shirt.
  2. A tag on the inside of a hat or garment. A purchaser would associate a logo on the tag with the maker of the garment.
  3. Logo on a tag above the back pocket of a pair of jeans. A purchaser would typically associate this mark with the manufacturer of the jeans.
  4. A small logo stamped on the back of a dinner plate or bottom of a coffee mug. Purchasers are accustomed to seeing a mark used in this location to identify the source of the tableware.

Another way to get around an “ornamental use” refusal from the USPTO is to show that the mark has “acquired distinctiveness.” Long-term use in commerce, advertising and sales figures, dealer and consumer statements, and other evidence can be used to show that consumers directly associate a mark with the source of those goods. While this probably won’t work for the covfefe applicants (since the term has only existed for about six weeks), it could be an option in your situation.

The final option for the covfefe trademark applicants would be to move their applications to the “Supplemental Register.” Registration on the Supplemental Register doesn’t provide all the same legal advantages as registration on the Principal Register, but it does provide protection if and when someone applies for a conflicting mark later. Also, after five years of continual use, you can apply for (and in most cases will be awarded) registration on the Principal Register.

If you feel like you have captured “covfefe-like” lightning in a bottle, and want to talk about how to protect your name and/or logo, please give me a call at 435-596-9366 or shoot me an email at

How to Donate to Charity and Beat the Tax Man

June 20, 2017 Estate Planning, Real Estate, Tax Planning Comments Off on How to Donate to Charity and Beat the Tax Man

I have a close relative who works in fund-raising for a fairly large university.  While he loves receiving large charitable donations in the form of immediately available cash or other marketable assets (such as real estate and publicly-traded stock), he knows that such donations are often simply not possible or practical for the average person.  This is why a huge buzzword in the world of fund-raising for non-profits is “Planned Giving.”

What Is “Planned Giving”?

Planned Giving is the present day legal commitment by a donor to give some assets or property to a charitable organization or institution at a future date. The future date is usually the death of the donor.

There are several types of planned gifts. Some people make outright gifts of assets such as appreciated securities or real estate.  Some planned gifts are payable upon the donor’s death such as a life insurance policy where the beneficiary is a charitable organization.  Still other planned gifts provide a financial benefit, as well as a tax deduction, for the donor.  Examples of this are: 1) Charitable Remainder Trusts, which provide an income stream for the donor, and at the death of the donor, the charity receives what is left in the trust; and 2) Charitable Lead Trusts, which essentially do the opposite and produce a stream of income for a charity, and the donor’s heirs receive what remains in the trust when the donor passes away.

What Is a Charitable Remainder Trust (“CRT”)?

A CRT is a tax-exempt irrevocable trust designed to reduce the taxable income of individuals by first dispersing income to the beneficiaries of the trust for a specified period of time and then donating the remainder of the trust to a designated charity. If you have a highly appreciated asset (e.g. real estate), the CRT will avoid capital gains taxes that would otherwise be due if you or your company sold the asset.

Who Should Be Thinking About a CRT?

People who:

  • Have a highly appreciated marketable asset (usually real estate or stock);
  • Want to save on taxes (i.e. they don’t want to take the capital gains tax hit);
  • Want an income stream over the rest of their life or over a certain number of years;
  • Want to make a donation to charity; and
  • Want to totally or partially disinherit their children. This isn’t the case if you structure it correctly!

How Does a CRT Work?

The diagram below goes through the steps involved in a CRT.  However, in a nutshell:

1)   A tax-exempt trust is created with the help of a professional.

2)   The donor places the asset in the CRT.  Are taxes due here?  No – and the donor gets a charitable deduction for making the donation that he/she can carry forward for up to five years!

3)   The property is sold to a third party and the proceeds are deposited into a CRT-owned account.  Are taxes due here?  Not if the property is owned free and clear!  These proceeds are then invested, and no taxes are owned when those investments appreciate in value!

4)   Payments in a set amount or set percentage are made from the CRT account to the donor on a regular basis (quarterly, annually, etc.).  Payments are either made for the life of the grantor or for a term of years.  Are taxes due on this income?  Yes, but the charitable deduction gained when the donation is made can be used to offset at least some of this income!

5)   The donor can use some of the income from the trust to buy a life insurance policy in order to make sure their heirs aren’t left out in the cold.  Do beneficiaries owe tax when they receive life insurance proceeds?  No!

6)   In some cases, the life insurance proceeds may be in the multiple millions of dollars, and could cause an estate tax problem for the heirs.  This issue can be taken care of by the proper use of an Irrevocable Life Insurance Trust (“ILIT”) – which is another subject for another day.

7)   At the death of the donor, or at the end of the term of years, whatever remains in the CRT is donated to the charity.  Does anyone owe taxes here?  No!



Who Are the Winners and Losers in a Properly-Structured CRT?

1)   The Donor – Winner!  Because he or she gets to avoid the capital gains hit on selling a highly appreciated asset, gets a tax advantaged stream of income, and gets to make a charitable donation that gives them warm fuzzies – and may end up helping to get their name on a building at their favorite university!

2)   The Charity – Winner!  The charity gets an irrevocable promise from the donor to donate assets at some point in the future.  With good investment of the funds in the CRT, the final donation to the CRT can end up being significant.

3)   The Donor’s Heirs – Winners!  Instead of inheriting a piece of appreciated real estate that they need to market and sell, they get tax-free life insurance proceeds, and will avoid possible estate tax issues if an ILIT is used.

4)   The IRS – Loser (for once)!  When properly structured, the only taxes paid in all of these transactions are those owed by the donor when they receive payments from the trust.  However, the charitable deduction will offset at least some of this income.

Now, there are plenty of details to sort through, but please give me a call if you’d like to discuss the CRT further and find out if it is something that might make sense for you.

Feds Make Change to Help Entrepreneurs Raise More Money

May 9, 2017 Business planning, Real Estate, Small Business Comments Off on Feds Make Change to Help Entrepreneurs Raise More Money

Your federal government has modified rules making it easier to raise more money from so-called “unaccredited investors”. Under the updated rule, known as Rule 504, you can raise up to $5 million from unaccredited investors in a 12-month period. Prior to the 2017 update, you could only raise $1 million from unaccredited investors. The updated $5 million cap is available under Rule 504 offerings and should only be used when the offering is a private placement memorandum offering (“PPM”), where you aren’t marketing the offering to the general public but privately to know persons and contacts. The new $5 million cap will make it easier to raise larger amounts of money from unaccredited persons and we expect to see an increase in persons using Rule 504 to raise money for operating businesses and real estate investments.

Background to Securities Offering Exemptions

At some point in its lifespan, just about every business needs an infusion of capital, whether to buy equipment or inventory, hire more employees, make additional investments or something else.  Obtaining that capital can be accomplished in several ways – maxing out credit cards, getting a business line of credit, tracking down private money loans, bringing on partners who invest money but also participate in the decision-making process of the business, or maybe even having a bake sale!

However, sometimes it makes sense to raise cash by bringing on investors – silent partners who have funds to contribute, but who would rather not (and maybe who you would rather not) participate in the business.  These are the type of folks who want to invest their money, step away, and then have you make the hard decisions and put in the blood, sweat and tears to produce a return on their investment.  When you bring on an investor of this type, whether you know it or not, you have sold that investor a “security” and you are now under the purview of the Securities and Exchange Commission (the “SEC”) – perhaps the only federal agency with a less developed sense of humor than the IRS.

Created by FDR and Congress while the country was in the throes of the Great Depression in 1934, the SEC exists to make sure the excesses and outright frauds that created the 1929 Stock Market Crash do not repeat themselves.  The intervening decades have seen the number and complexity of SEC regulations wax and wane, but in 2017 we are left with a multi-layered, multi-faceted system that those seeking to raise capital should not attempt to navigate without expert guidance.

Regulation D and the 2017 Federal Securities Exemption Options

One of the most popular tools for small businesses looking to raise money is something called “Regulation D.”  In a nutshell, under Regulation D, the SEC allows businesses to raise capital through the sale of securities without requiring those businesses to register said securities with the Commission (an extremely expensive and time-consuming process).  For the past 35 years or so, there have been three separate and distinct sets of hoops to jump through to comply with Regulation D, called Rule 504, Rule 505 and Rule 506.

Rule 506 has been the most popular of the three.  For all intents and purposes, Rule 506 only allows businesses to offer and sell securities to “Accredited Investors” – people with a net worth over $1 million, or whose annual income exceeds $200,000 (individually) or $300,000 (jointly with a spouse).  In exchange for only dealing with Accredited Investors, issuers of Rule 506 offerings get to raise an unlimited amount of money from an unlimited amount of investors over an unlimited amount of time.  In some situations, they may also be eligible to solicit their offerings to the general public (think email blasts and radio and TV ads).  Rule 506 offerings are also simple at the state level – where only the same short document filed with the SEC (the “Form D”) has to be filed (and a fee paid) in each state where Rule 506 securities are sold.

2017 Update

The recent SEC change that will help entrepreneurs raise money comes in Rule 504 of Regulation D.  The nice part about Rule 504 has always been that it allows the company raising the funds to accept money from both accredited and non-accredited investors – a huge advantage if you don’t have contact info for a bunch of super-rich folks in your phone.

The main problem with Rule 504 has always been that you can’t raise more than $1 million in any 12-month period, and $1 million doesn’t go quite as far today as it did in 1988 (which is when the $1 million cap was instituted).  Well, apparently late last year the powers that be at the SEC woke up one morning and realized that 1988 was almost 30 years ago, so they decided to increase the cap from $1 million to $5 million in any 12 month period.  This increase became effective January 20, 2017.  The increase is a potentially significant change, so let’s recap the parameters of the new Rule 504 Offering:

1)   You may offer up to $5 million in securities in any 12 month period.

2)   You may offer securities to an unlimited number of both accredited and non-accredited investors.

3)   Unless you jump through some pretty onerous hoops, you may not “generally solicit” your offering.  You will still need to rely on “word of mouth” marketing.

4)   You can’t play in the Rule 504 sandbox if you have run afoul of the SEC previously and have been branded a “Bad Actor” under their rules.

5)   You still have to comply with state-by-state “Blue Sky” laws.  This can be tricky.  Unlike with a Rule 506 offering, state law compliance is not always as simple as filing the SEC Form D and paying a fee.  In some blessed states (let’s give a shout out to Colorado and South Dakota) the process is exactly the same as a Rule 506 offering.  In others (I’m looking at you California and Texas) the rules are restrictive and complex, and you will be very limited on the number of folks you can accept money from (or even solicit) without “qualifying” the offering in that state.

The bottom line is that if you want to bring on investors and raise up to $5 million in capital, but you are worried about only being able to take money from “accredited investors” then the Rule 504 Offering absolutely needs to be on your radar.  It’s going to take a bit of heavy lifting on the state compliance side of the coin, but depending on the states involved, it could be a very attractive option.  Please speak with an experienced securities attorney to see if a Rule 504 Offering could make sense in your specific situation.

What Being Dragged Off a United can Flight Teach Us about Contract Law?

April 18, 2017 Business planning, Law, Litigation, Small Business Comments Off on What Being Dragged Off a United can Flight Teach Us about Contract Law?

Unless you’ve been in a coma for the past week or so, you’ve probably seen the cell phone camera footage of airport police dragging a kicking and screaming Dr. David Dao off a United Airlines flight at Chicago’s O’Hare Airport last week.

At this point, the story is well known.  United needed to get four additional flight crew employees on Dr. Dao’s flight, so they asked paying customers to give up their seats voluntarily, for increasing levels of compensation.  When there were no takers, United selected four passengers “at random” for involuntary removal from the flight.  Dr. Dao was one of the “lucky” four selected.  However, when the time came to make the walk of shame down the aisle and off the plane, Dr. Dao refused to get up.  That’s when airport security was called in to physically remove him and cell phone cameras started to roll.

This fiasco, and the seemingly incessant media coverage thereof, has been a PR nightmare for United Airlines.  It has also brought an unprecedented amount of attention to the legal term “contract of carriage.”  Simply put, a contract of carriage is an agreement between a carrier of goods or passengers (such as an airline) and the consignor, consignee or passenger. These agreements define the rights, duties and liabilities of both the airline and the passenger.

You agree to your chosen airline’s contract of carriage when you buy your ticket.  The very broad framework for these agreements is established by federal law and the FAA (for domestic airlines), but the contracts can, and do, vary considerably from airline to airline.  Among other things, in your contract of carriage, you agree that you can be bumped from your seat due to overbooking, or because the airline needs to move employees.  You also agree (at least in the contracts of carriage for the four largest U.S. carriers) that you can be removed from or denied boarding to the plane for the following reasons (among many others):

  1. You decided shoes are overrated – boarding can be denied to those who are barefoot or not properly clothed.
  2. You decided showering is overrated – airlines can refuse to board individuals who have or cause a malodorous condition.
  3. You spent your entire long layover in the airport bar – airlines don’t have to board folks who appear to be intoxicated or under the influence of drugs to the degree that they could endanger other passengers or crew members.
  4. You spent your entire long layover in the airport’s all-you-can-eat buffet – if you are unable to sit in a single seat with the seat belt properly secured or are unable to put down armrests between seats for an entire flight, the airline isn’t obligated to give you a seat (or two).

What can we learn from all of this (other than to make sure to wear shoes to the airport)?  I think the takeaway is that even if we don’t know we’re doing so, most of us enter into legal agreements (i.e. contracts) multiple times each day, and it behooves us to know (and when we can do so, also to control) what is in those contracts.

This is especially important in your business.  Do you have a written contract with your vendors/suppliers/customers?  If not, then what happens if there is a dispute?  What is the basis of your agreement?  An email chain?  A phone call?  A face-to-face meeting that ended with a handshake?  If you do have a written contract, when was the last time you looked at it?  Do you understand the language in the contract and your rights and responsibilities under that language?  Have you had a trusted, experienced attorney review the contract to make sure it is in your best interest?

As Dr. Dao’s experience has taught us, the consequences of a contract can be serious, and can even put us in the national spotlight.  Taking the time to review and, if necessary, to change the contracts that you rely on to run your business is absolutely worth the time and effort.  The few hundred bucks you might spend could save you thousands in defending or pursuing a lawsuit regarding a poorly drafted or non-existent contract.

Eight Spring Cleaning Ideas for Your Business

March 14, 2017 Asset Protection, Business planning Comments Off on Eight Spring Cleaning Ideas for Your Business

Don’t ask me why, but my seven year-old daughter is obsessed with the cheesy early 1990’s goodness that is Full House.  Nick at Nite has scheduled a two-hour block of Danny Tanner, Uncle Jesse, Joey and the Tanner girls from 7-9 p.m. most weeknights, and my daughter begs to watch at least one episode every night before she goes to bed.

Because there are much worse things she could be asking to watch, we typically oblige.  As such, over the past year or two I’ve endured more than my fair share of Full House catchphrases (think: “Have mercy!” “How rude!” and “You got it dude!”).  Let’s just say that when Nick at Nite (or my daughter) moves on from Full House I won’t exactly be sad.  Anyway, in a recent episode that I’m sure probably originally aired in March 1990, the notoriously tidy and meticulously organized Danny Tanner exclaims: “I love this time of year!  First, spring cleaning – and now tax season!”

This got me thinking, while most of us do participate in spring cleaning for our homes, garages, and backyards, the concept of spring cleaning, with the feeling of renewal that it brings, is probably also a good idea in our businesses.  With that thought in mind, here are eight spring cleaning ideas to give your business a bit of a fresh start:

1)         Revisit your Business Plan.  If you’re like most small business owners, you’ve probably changed and adapted your business plan over the years to adjust to unexpected challenges and market changes – maybe to the point that you don’t feel like your original plan is even all that useful.  Instead of discarding it, you should think about taking some time to revisit it – maybe each spring – to update it based on what’s changed, and to evaluate if some changes may not have been necessary.  Going back to the basic foundation you built your business on will always be beneficial.

2)         Clean-Up Your Company Records and Documents.  Have you been maintaining your entities (LLCs, S-corps, IRA/LLCs) by completing minutes annually? Have you had any changes to the entities? Make sure your company documents are up to date. Also, what about the state? Are your state renewals up to date? If the legal foundation of the company is a mess it only gets more difficult to clean-up and address later.

3)         Think about your Long-Term Goals.  While you’re taking a look at your business plan, think about your long-term goals, both for the company and for your own professional life. You might find that what you really want is different than what it once was.  Maybe your concept of how your business should look five years down the road has completely changed.  It’s absolutely fine for your goals to change – but you have to be aware of what has changed and what you will have to do differently to get there.  If you determine that your aspirations are the same, then check in on your progress towards achieving them.  What could you be doing more or less of?  Are you gearing as many parts of your day – and your business practices – into moving in that direction, into attaining those goals?

4)         Take a Look at Staffing.  Spring is a great time to do employee evaluations and reward those who deserve it for their hard work – and trim what doesn’t seem to fit.  It’s most effective to sit down with your management team first and discuss your employees’ objectives, strengths and weaknesses.  Then, take the time with each individual employee to go over their measurable results.  Always remember to ask for employee feedback about your management style, as well as those of your managers.

5)         Spruce up your Web Presence.  In most lines of business, an up-to-date and useful website is necessary for attracting and retaining customers.  Potential customers and clients expect a smooth user experience that incorporates the latest Internet trends and styles.  If your website looks like something cobbled together in the era when we were all waiting for the dial up to connect so the AOL voice could tell us “You’ve got mail!” then customers probably won’t stick around long enough to find out how great you are.  Consider including marketing content on your website such as blog articles, white papers and videos.  In addition, everyday it becomes more important for your business to be active and engaged on social media.  Your website should include links to your social media channels, and those channels should be updated frequently with useful and (if at all possible) entertaining information.  In many cases, your online presence is the only tool new customers and clients will use learn about you, and it’s important that you make a good first impression.

6)         Lock Down your Intellectual Property.  Has your business progressed to the point where the name of your business or of a particular product or service has enough value that you want to make sure no one else can use it?  If so, you should think seriously about filing for a registered trademark.  Similarly, if you want to keep copycats from stealing online, recorded or printed content, filing for registered copyright protection may also make sense.  Finally, you should examine your policies and procedures to make sure trade secrets (like customer lists, manuals, databases, etc.) remain, you know, secret.

7)         Actually Deep Clean the Office.  Seriously, when is the last time anyone vacuumed behind that filing cabinet?!

8)         Dissolve and Shut-Down Entities You No Longer Use.  Do you have entities that no longer have business activity or assets in them? Are you paying fees to keep them open? Consider shutting them down if you have no future plans for their use. Keep in mind, that the liability protection of an entity still protects you for acts that occurred when the entity was in existence and in good standing.

Hopefully, these ideas can serve as a jumping off point for how to renew and refresh your business and take it to the next level!