How to Avoid the Nightmare of Giving Up Business Ownership

Business Attorney in Los AngelesContinuing from our last post, Pitfalls of Giving Up Equity in a Business Venture, Ownership of your business is key. It is the symbol of your own hard work and passion, and security for the success of your future decisions. The more ownership you give up, the more you assume the responsibilities to other parties who can hold up your progress, especially if they have selfish or malicious intentions.

Don’t make life more complicated. It at all possible, avoid giving away ownership. To help you in this key strategy, here are some basic tips:

  1. Work with you attorney to develop a rock solid Buy-Sell Agreement that protects your interests and decision making capabilities.
  2. Include stock option plans, profit participation programs, bonuses, and incentive-based programs to mitigate equity grants.
  3. Evaluate key man insurance, disability policies, and other strategies that emphasize employee benefits without giving away ownership.


Business Disputes and Succession Planning

Event: ProVisors Panel on Negotiation
Venue: Calabasas Country Club
Location: Calabasas, Los Angeles, Ca
Speaker: Attorney Douglas Schreiber of Anker, Hymes & Schreiber, LLP


I come into the negotiation process typically in a slightly different situation. Mark is looking to build a relationship. By the time I usually get involved, I’m looking to get rid of a relationship, quite honestly:

San Fernando Valley’s Most Trusted Advisors Nomination

Los Angeles Attorney Rob Cohen

Attorney Rob Cohen, nominated as Most Trusted Advisor by San Fernando Valley Business Journal

Los Angeles Attorney Robert A. Cohen of Anker, Reed, Hymes, Schreiber and Cohen (Anker Reed HSC) has been nominated by the San Fernando Valley Business Journal as one of the Valley’s Most Trusted Advisors in the practice of law.

This event held by the San Fernando Valley Business Journal on October 12, 2011 recognizes 10 CPAs, 10 attorneys, 10 business bankers and 10 insurance professionals in the Los Angeles area for being the most trusted advisors to their clients.

Four specialty awards will be presented in the following categories:

Client services award
Trailblazer award
Community leadership award
Best managing partner (or equivalent top executive for financial services, banks, credit unions or insurance firm)

Attorney Rob Cohen specializes in many areas of the law including:

Probate and Trust Litigation
Business Formation
Corporate Formation
Business Transactions
Civil Litigation

About Anker, Reed, Hymes, Schreiber and Cohen, A Law Corporation:

Since 1974, Anker, Reed, Hymes, Schreiber, and Cohen, A Law Corporation is a full service business, real estate, employment, civil litigation, intellectual property and estate planning law firm based in Woodland Hills, Los Angeles, CA.

Contact Anker Reed HSC today to speak with a:

Estate Planning Attorney in Los Angeles
Business Attorney in Los Angeles
Real Estate Lawyer in Los Angeles
Intellectual Property Attorney in Los Angeles
Civil Litigation Law Firm in Los Angeles

Alternative Minimum Tax: The Effect on Itemized Deductions


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This is also part of third section of  Anker Reed HSC’s blog series entitled “To Incorporate or Not to Incorporate? That is the Question” regarding the alternative minimum tax and its effect on medical and miscellaneous itemized deductions.

An additional issue with regard to the deductibility of both medical and miscellaneous itemized deductions is the imposition of the Alternative Minimum Tax. “Congress enacted the alternative minimum tax (AMT) in 1969 to make wealthy taxpayers pay their fair share instead of using tax shelters and other means to reduce, or even eliminate, their federal tax liability.” (Kern, 1999). “The alternative minimum tax generally can be described as a flat tax rate which is imposed on a broader income base than the taxable income yardstick used for the regular corporate tax.” (Lind, supra note 11 at 15).  “The tax is designed to ensure that all taxpayers pay at least a minimum amount of taxes.” (Blacks Law Dictionary, 1990). “Without the alternative minimum tax, some of these taxpayers might be able to escape income taxation entirely. In essence, the AMT functions as a recapture mechanism, reclaiming some of the tax breaks primarily available to high-income taxpayers, and represents an attempt to maintain tax equity.” (Commerce Clearing House, 1999).

The AMT is paid in addition to any other income tax imposed and calculated as the excess of the tentative minimum tax for the taxable year over the regular tax for the taxable year. The definition for tentative minimum tax, though, depends on the status of the taxpayer, whether noncorporate or corporate. The tentative minimum tax for the noncorporate taxpayer is the sum of 26% of so much of the taxable excess as does not exceed $175,000 plus 28% of so much of the taxable excess as exceeds $175,000. The Internal Revenue Code also provides for tax exemption status, evidencing the congressional intent of taxing the high-income taxpayers. If the taxpayer’s taxable income does not exceed $45,000 for taxpayers filing a joint return, $33,750 for the individual taxpayer, or $22,500 for the married taxpayer filing separately, the taxpayer is exempt from alternative minimum tax treatment. This means that, depending on the individual taxpayer, there could be an exemption from AMT for the lower income brackets. After the $33,750 exemption, the next $175,000 will be taxed at a rate of 26%. Taxable income exceeding this will be taxed at 28%. At the corporate level, the first $40,000 of taxable income is exempt from AMT treatment.

As previously discussed, the PSC will have little or no taxable income as a result of “zeroing-out.” Therefore, no discussion of corporate AMT is necessary.

When analyzing the application of AMT to the noncorporate taxpayer, the focus of the discussion turns to the medical and miscellaneous itemized deductions. For Regular Income Tax (“RIT”) purposes, medical expenses are deductible when they exceed 7.5% of adjusted gross income (“AGI“). For AMT purposes, medical expenses are deductible only when they exceed 10% of AGI. With regard to miscellaneous deductions, the difference between RIT and AMT is even more conspicuous. For RIT purposes, miscellaneous itemized deductions (specifically unreimbursed employee business expenses) are deductible to the extent they exceed 2% of AGI. Under AMT, however, miscellaneous itemized deductions are not allowed. This is significant since an employee working in a noncorporate structure will be considered an employee for whom she provides services.

Therefore, any business expenses she incurs will be considered unreimbursed employee business expenses, shown as miscellaneous itemized deductions subject to the 2% of AGI limitation and rendered non-deductible for AMT purposes. Under the PSC, these business expenses escape both the RIT limitation and the AMT exclusion.

* For specific inquiries regarding a business legal matter that you may have, you are welcome to visit our Tax Attorney in Los Angeles.

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