In this Episode, Steve and tax attorney Chris Housh come together to discuss how Moskowitz LLP can help businesses with Corporate Formation and Formalites by creating an annual plan and meeting throughout the year to stay ahead of the game. An annual plan with Moskowitz LLP is talior-made to help save you time and money, and more importantly, give you peace of mind so you can focus on growing your business.

Listen to the full episode to learn more!

Episode Transcript

Intro:

You're listening to the Practical Tax podcast with tax attorney Steve Moskowitz. The Practical Tax podcast is brought to you by Moskowitz LLP, a tax law firm.

Steve Moskowitz:

Welcome everyone and thank you for listening to our podcast, and this is part two. So if you haven't heard part one, that's okay 'cause you could really do either one of these parts, first or second. But if you like what you're hearing here, do go ahead and listen to the other part 'cause we have a lot of good information in there.

And just basically as a real quick summary, on the other one we talk about the asset protection of a corporation or other entity. Where if you get sued or something bad happens or you can't pay the bills, how the entity protects you from the other side going after your personal assets or other corporate assets? We've talked about how there's tax advantages. We've talked about how there's a special workaround for certain corporations to get around the limitation on deducting state taxes on the federal returns, for those of you that are in states that charge state taxes. And some of the states charge a lot of state taxes.

We've also talked about potential pension benefits of a corporation and a lot of other things. And an awful lot of people are in business as a sole proprietor and that's sometimes fine, but a lot of times it's not. And a lot of times that person would be much better off if they were in an entity like a corporation. And we explained the differences between a C-Corp and an S-Corp. Where C-Corp has a double taxation, whereas an S-Corp doesn't. And a partnership, and LLC. And sometimes one entity is better for something than something else. But the bottom line is, go ahead and listen to the other podcast for this. Today, on this podcast, we're gonna work on the formalities and the formation. And one of the things that I hear when I recommend this to people is, "Well, what about, oh, there's all of these technicalities. Now I'm busy doing business, I can't be bothered with all this formal stuff." And to answer that, I'd like to introduce my friend and colleague of over 20 years, Attorney and EA, Chris Housh.

Chris Housh:

Thanks Steve. Yes, we understand. If you did the time for every crazy formal thing that is requested for you, you'd have no time to actually do the business that you actually are out there doing, the thing that you're best at. So as the attorneys that are working with you on this, we let you know what the formalities are, and also help you take care of them.

Steve Moskowitz:

So do you help 'em take care or do you just do it for 'em?

Chris Housh:

I look at it as that we are a team. And so I will do the actual writing up of the elements. I'll do the hard work, but I need their input. I need their help on things. I also schedule times to make it easier. Make it where you can say, okay I'm gonna set aside this time because I understand time is very valuable for everybody especially a business owner. And I try to make it where it's as easy as possible for you to go and be able to do these things.

So I narrow down at the beginning, when I'm setting up for a business, I send out a eight question questionnaire so that it's not a overwhelming burden. I've seen some places that will send you a 20 page questionnaire. If you had time to do that, you know, you're not really going in needings that situation. I can narrow it down, get you started, and then ask you a couple of key questions to make it where I can get the properly formed entity, LLC, corporation or partnership and have it cover your needs. Because I know what's out there. I know what the rules are, and therefore I can tailor everything to what you need. So similar to going to a tailor, you go in, the tailor knows how to make the suit right but he still needs you there to at least make sure that it fits your body.

Steve Moskowitz:

So I like that. Just like with that tailor, it's I don't need to know anything about tailoring or how to sew or anything else. Basically, I just stand there and the tailor literally tailors the suit to me.

Chris Housh:

Right, but the tailor will ask you certain questions, also to make it where it meets what you want. He'll ask you, how much of a lapel you want? How do you like to wear this or that? What do you feel comfortable with? We do the same thing. We go and say for your business what's gonna be comfortable, but also give you what you need?

Steve Moskowitz:

And like that suit close, can you make adjustments as the business changes?

Chris Housh:

Yes, that actually becomes part of the ongoing elements. Which is, you are required under, I'm gonna say California law, but most state corporate laws are the same, that you have to have a board meeting every 12 to 13 months. California law is 13 months. And during that board meeting, what that is, is that you're supposed to have a recorded meeting of the officers. And if you have any board members, sitting around and talking about here are the reports of how the business is doing. Cover old business. What did you talk about last year, and is there any follow up about that?

And then new business, what are you looking for as being your next stage for next year? If you have a change, bringing in new officers, hiring a new important person that you're gonna give authority to go and sign a contract, entering into a new lease, changing where your office is. You wanna have that in your board minutes. And there have actually been some recent decisions coming out of Delaware, saying, how people not properly reporting what they were putting in there, into their board minutes, actually left them exposed in a lawsuit.

So it is important to go and do that. And you can make the changes. You have a vote. And I do this for a lot of businesses that are one or two members. Sometimes husband and wife. During the day to day, you're just so busy running the business and you're naturally doing things. Setting aside a board meeting gives you that chance to think about, how was the last year? How did we do and what are we dreaming about? What are we think about doing for the next step? And it would feel weird to sit in a room by yourself and go, I would like to do this, all in favor? Yes, me. Right? But by having someone like me, help guide you through that and record it and then write it up for you, makes it, well, it feels better. You have that opportunity to reflect, look forward and go and make your changes recorded.

Steve Moskowitz:

So Chris suppose somebody comes in and they say, they're unmarried, they own the business 100% themselves. They ask the question, "You mean I have to have a meeting with myself?"

Chris Housh:

And the answer is, yeah. That's what you're supposed to do. And again, actually, it's even more important for that person to be having those board meetings, because, someone down the road says, your business did something wrong. You need proof that you were treating the business as being, not just you. So whether it's an employee that gets mad, a customer that gets mad, some regulatory agency that says, "Hey we're coming after you." To keep your personal separate from the corporation, you wanna keep your assets protected, right? Don't want them coming after your home. You have to go and show that you treated everything as being different. And that especially becomes the element of going, hey, let's go and have somebody else guide your meeting, show you where you need to be saying these things and make it efficient. By going and telling you ahead of time, here's the things we need to cover. And being able to guide you through that and record it and then write it up for you. I can make it where it's efficient and is effective.

Steve Moskowitz:

And I think what I've heard in there that's so important is that if something goes, 'cause a lot of people ignore that. And I also know as a practicing attorney, they just don't bother. And they're usually the ones that go to those popup, just sign here and do it. And they don't have a real attorney do it for 'em. They don't even realize this is needed. And then they get sued, and they think, oh, well they're a corporation, they're protected. They haven't met these corporate formalities. And now the enemy lawyer says, "Judge, he wasn't acting like a corporation. Don't give him the protection of the corporation." That's why that's such a big deal, what you just said.

Chris Housh:

Exactly, and I have been the attorney standing there representing my client, and the paperwork comes out. And they go, "Okay, where's your board meeting minutes that is going to show that you approved this? Oh, you didn't have that? Oh, well, when was the last time you had one? The day you founded your company? Well, congratulations, you're not actually a corporation. We can go after your personal assets." It's more than just filing that tax return every year and remembering the statement of information to the Secretary of State every one to two years. And frankly, we run into a lot of people that walk into the door not knowing that we were even supposed to do that. And that's the problem with the popups. All they did do is say, oh you're interested in something? Mmh, type in a few items that may, and will give you a boilerplate that doesn't match what you need and not advise you on how to take care of it yourself.

Steve Moskowitz:

And, and that's what I've seen so much in practice too.