Reib Law - May 2021

Reib Law - May 2021

SHATTERPROOF NEWSLETTER

MAY 2021

WWW.REIBLAW.COM | 940.591.0600

LIABILITY PROTECTION Unlike sole proprietorships and general partnerships, LLCs and S corps protect your personal assets if your business is ever sued or falls into serious debt. For example, if your LLC or S corp fails, creditors can’t seize personal assets like your retirement savings or home, unless you’ve signed a personal guarantee to secure any debts. LLCs and S corps effectively create a barrier between your personal assets and business assets. You can be held personally liable in certain cases, such as if the LLC or S corp isn’t maintained properly, but staying on top of the required corporate formalities is easy with trusted legal counsel. TAX SAVINGS LLCs can choose how to be taxed. Unless you choose to be taxed as an S corporation, single-member LLCs are automatically taxed as sole proprietorships, while multimember LLCs are taxed as partnerships. In such cases, your company doesn’t pay any taxes. Instead, your share of the net business income is taxed on your personal

WHY YOU SHOULD STRUCTURE YOUR NEW SMALL BUSINESS

AS AN LLC OR AN S CORP

One of the smartest moves you can make as an online entrepreneur is to structure your business as a limited liability company (LLC) or an S corporation. LLCs and S corps can protect your personal assets from debts and lawsuits incurred by your business, but they offer other key benefits as well. These entities blend certain positive aspects of a sole proprietorship, partnership, and corporation, without some of the drawbacks. Combined, these benefits make LLCs and S corps some of the most advantageous business entities, with the following three major benefits. ENHANCED CREDIBILITY When it comes to owning a business, your most valuable assets are your brand’s reputation and credibility. And if you’re a startup, structuring as an LLC or S corps adds instant legitimacy and credibility to your company’s image, attracting more potential customers, vendors, and employees. Even the IRS takes these entities more seriously: LLCs that are taxed as an S corp (and therefore file their own tax return) are nearly 10 times less likely to be audited than sole proprietorships.

"These entities blend certain positive aspects of a sole proprietorship, partnership, and corporation, without some of the drawbacks.”

tax return, and you’ll pay taxes based on your personal income tax rate. In doing so, however, you’ll be more likely to be audited by the IRS. Similarly, no income tax is applied to S corps at the corporate level. Corporations must file their own corporate tax returns and determine their taxable income, which is divided and distributed among the owners/shareholders for them to include on their personal tax returns. The IRS considers both LLCs and S corps “pass-through” entities, since the business profit passes through the company to the owners before being taxed.

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If you elect for your LLC to be taxed as an S corp, you’ll be responsible for paying payroll and payroll taxes as well as filing a tax return for the corporation. As long as you pay yourself a reasonable salary, you only pay payroll taxes on the amount of your payroll, not on your profit distributions from the company. You’ll still pay income tax on your profit distributions, but you’ll pay roughly 15% on payroll taxes. As an LLC, you should earn at least $75,000 of net income

annually for this option to make sense. If you’re close to that, contact us to discuss your options.

Thanks to the Tax Cuts and Jobs Act, LLCs and S corps come with a relatively new tax benefit. Since 2018, these entities have qualified for a 20% deduction on “qualified business income” (QBI). This means some LLCs and S corps are only taxed on 80% of their pass-through income. However, the deduction comes with several limitations, and not all companies qualify. Talk to us if you’re curious about what it takes to qualify for the QBI deduction. REAP THE BENEFITS Whether you’re about to launch a new company or are currently doing business as a sole proprietorship or partnership, consider becoming an LLC or S corporation. These business structures protect you from personal liability and also offer incredible advantages unavailable to other entities. If you are on the fence about restructuring your business or want to know more, I have created a special guide on the subject. Go to https://www.reiblaw.com/why-s- corp and get your FREE copy.

– Scott Reib

KEEPING THE TEAM TOGETHER WITH MICROSOFT TEAMS

Even though it emerged onto the remote workplace communication software scene in 2017, like many other similar apps, Microsoft Teams has proven itself to be instrumental in keeping workplaces connected in a world distanced by the pandemic. In the early months of the work-from-home era, Teams had 75 million users daily. Once you see what the app has to offer, you can see why. No one likes spending a solid portion of their workday communicating with coworkers via email, especially when circumstances make it the only way to communicate with them. It’s just not an efficient way to stay in touch. That’s why the instant messaging feature, whether between just you and one other coworker or between large groups of workers, is so helpful. Plus, since OneNote and Office are fully integrated, you’ll never have to switch between apps to continue the conversation. You can even attach documents in the chat, all while continuing with your daily workload.

convey long messages, while simultaneously

sharing notes and documents in the instant messaging part of the app. Additionally, one major plus for the Meeting function is that you can create a recording of the call for people who missed it. They can access it later for any useful information rather than asking their coworkers and taking them away from their responsibilities. For added convenience, use the integrated Planner feature to plan meetings with multiple people, forgoing the need for excess communication in the chats. Overall, the biggest benefit of Teams is just how user- friendly it is. No matter where you are, whether you’re using a PC, laptop, or smartphone, you’ll be able to access Microsoft Teams, even to view documents and jump into meetings. So, if you’re on the go, you’re not out of the loop. If you’re looking for a great app to boost communication and productivity among your employees, give Microsoft Teams a try today!

For longer conversations, there’s Teams’ Meeting function. You can easily add your entire workforce to a call to

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THE 3 COMPONENTS

THAT YOU’LL FIND IN EVERY CONTRACT

Writing up a legally binding contract that will hold up in court is harder than you might think. That’s why it’s best to get the help of an experienced business lawyer when you find yourself in a situation where you need to put one together. However, it helps to know the very basic components that every contract needs before you put one together with another party. So, make sure your contract has the following: MUTUAL ASSENT This is just the legal term for the offer (or promise) in exchange for some sort of act from the other party as well as the other party’s acceptance of the offer. The other party’s acceptance might entail a promise or some sort of performance in return. Only after both parties agree to the offer and the acceptance of that offer can they enter into a contract. CONSIDERATION Simply put, consideration refers to what each party gets in exchange for upholding their end of the agreement. It’s an agreement to refrain from something you have the legal right to do, or to do something you are not legally obligated to do. For example, if you were to go skydiving, the skydiving

company will have you sign a contract in which you waive your right to sue them if you get injured while skydiving.

REMEDIES These are the consequences for breaching the contract, which usually take the form of damages. There are a few different types of damages, including: • Compensatory damages: The party who breached the contract is obligated to compensate the other party for their financial losses, and nothing more. • General damages: While compensatory damages seek to cover actual losses, general damages seek to cover probable losses. • Punitive damages: These damages punish breaches of contract as a means to deter them, but they are rare except in cases of fraud. By understanding the basic components of a contract, you can better prepare yourself for entering into them with other parties. Just remember to have the expert legal team at REIBLAW look it over as well, to ensure it’s in your best interest. Schedule an appointment with us at www.reiblaw.com today!

SHAVED ASPARAGUS SALAD

We want your feedback!

In editions of this newsletter, we’ve covered everything from business contracts to how to handle the former spouse who wound up with everything because there was no business succession plan in place. But now we’re wondering: What would you like to see? You know those legal questions that Google can’t give you a satisfactory answer to? The ones that keep you up at night as you wonder whether it’s time to call a lawyer? We want to answer those. Send us your questions, and we’ll use them to address the topics you want to know more about. Text your questions and curiosities to 972.677.3002 .

Inspired by ACoupleCooks.com

INGREDIENTS

• 1 lb asparagus spears • 1 tbsp lemon juice • 1 tsp Dijon mustard • 3 tbsp extra-virgin olive oil

• 3/4 cup Parmesan cheese, grated • 1/2 tsp kosher salt • 1/8 tsp red pepper flakes • Freshly ground black pepper, to taste

DIRECTIONS

1. With a vegetable peeler, shave each asparagus spear from tip to base. This is easiest to do if the asparagus is on a flat surface. 2. Place shaved asparagus in a bowl and blot off excess moisture with a paper towel. 3. In a separate bowl, make a vinaigrette by whisking together lemon juice, Dijon mustard, and olive oil. 4. Pour vinaigrette over shaved asparagus and add Parmesan cheese, salt, red pepper flakes, and black pepper. Toss to combine. Taste and adjust seasonings.

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Biz Tool of the Month: Microsoft Teams INSIDE THIS ISSUE 1 2 3 3 4 Shaved Asparagus Salad Make Every Decision a Touchdown

3 Benefits of Structuring Your Business as an LLC or S Corp

Does Your Contract Have These 3 Basic Components?

CONFIDENCE IS KEY

WHEN YOU WANT EVERY DECISION TO BE A TOUCHDOWN

If you’re a business owner, you’ve no doubt faced hard decisions. And when we say “hard decisions,” we don’t mean the ones you make on a daily basis. We’re talking about make-or-break decisions that have serious long-term consequences. Choosing the right path forward could mean years of business growth, but choosing the wrong path could be the death knell. With stakes that high, decision-making may not feel that exciting. The prospect of making difficult choices leaves many business owners understandably in a state of paralysis. You may stop and ask yourself: Am I making the right call? What if this endangers the livelihood of my business and my employees? This paralysis is normal, but it can prevent you from making the moves your business needs to survive. Luckily, however, you can change this initial reaction. According to David Meltzer’s book, “Game-Time Decision Making: High-Scoring Business Strategies From the Biggest Names in Sports,” you can be ready to make hard decisions before the buzzer signals the end of the game. As Meltzer’s book title suggests, decision-making in sports parallels decision- making in business. Business leaders can learn lessons from the court, field, or rink, even if they’re just sitting courtside. The biggest lesson is that confidence is key. But having confidence in your decisions — especially ones with serious consequences — is easier said than done. According to Meltzer,

one way to boost your confidence is by surrounding yourself with people who support you and trust your judgment. Just like having an all-star team that trusts your judgment in the game, having friends and colleagues who affirm your decisions goes a long way toward building your confidence. It’s also important to have a positive mindset. It’s tempting to expect the worst from any decision you make, but according to Meltzer, the most confident decision-makers are those who have a positive outlook on the future. This makes sense, considering how challenging it is to move forward with a decision when negative thoughts are clouding your judgment. After all, no one ever made a game-winning touchdown after imagining all the ways they might fail to do so! While reading books like “Game-Time Decision Making” can certainly help you become a more confident decision-maker when everything is on the line, the fact is that confident decision-making comes with time and practice. So, if you want to be ready to beat the buzzer on your next tough decision as a business owner, surround yourself with a team that supports your call. Let their confidence in your leadership inspire your abilities, and remember: Don’t let thoughts about how your decision could go wrong stop you from making any decision at all. Maintain a positive outlook, put together an all-star team, and you’ll be making confident decisions in no time.

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