Atlanta Business Lawyer Blog

In my Atlanta, Georgia Business Law firm, I have seen many instances of business owners that have suffered because of how their businesses were initially set up. When establishing a new business, or even when re-establishing an existing business entity, it is imperative to have legal counsel review the specific needs and circumstances of the business and draft the legal documents required by Georgia law. With a clear understanding of the structure and dynamics of the organization, a Georgia business attorney is able to determine the proper Georgia legal entity that the business should operate under and will file the appropriate documents with the Georgia Secretary of State to establish the entity. Per Georgia law, legal contracts and agreements will then be drafted that outline the relationships between business partners, and licensing and taxation issues will be reviewed. Addressing these matters up front is greatly beneficial in preventing or resolving any partnership disputes or litigation in Georgia courts.

In today’s tough economy, many people are starting their own businesses. But with the infiltration of online legal document services, it is easy for new business owners who may be strapped for cash to bypass using the services of a Georgia business attorney. Unfortunately, by their very nature, these online legal documents can cover only the most common legal issues and cannot begin to address the individual circumstances and requirements that ultimately face any business. These "e-documents" do not address specific Georgia business requirements and provisions. Relying solely on documents found through an online service may seem cost effective and quick at first glance, but the results can be disastrous. These documents are not legal advice and are not a substitute for an experienced Georgia business lawyer. A reading of the disclaimer from any of these "e-document" sites confirms that the provider of these "e-documents" has set forth these "e-documents" for information purposes only. Further, as you might guess, these "e-document" providers take no responsibility for the serious problems these "e-documents" cause or assist you when pressing concerns arise. As an Atlanta, Georgia business attorney, I have seen the countless problems these "e-documents" create. As a proprietor of a well-established Georgia business law firm, I find the sale of these documents untenable.

Continue reading "ATLANTA, GEORGIA BUSINESS LAWYERS – A NECESSITY WHEN ESTABLISHING A BUSINESS ENTITY IN GEORGIA" »

The Atlanta tax attorneys as well as the Atlanta Business Attorneys at The Adams Law Offices are always informing, educating, and assisting individuals and business owners about incurring taxable income (tax liability) without the liquidity to pay taxes on this income. This scenario can be a taxpayer’s worst nightmare and often generates significant internal struggles, infighting, and conflict between business owners. The Atlanta business lawyers and Atlanta tax lawyers at our Firm refer to the scenario of incurring tax liability without producing the liquidity to pay these taxes as “phantom income.” “Phantom income” means you have taxable income but no cash to pay taxes on this income.

“Phantom income” occurs most frequently in Subchapter S corporations and limited liability companies (LLCs), which are presently the most common and popular business entity forms for doing business in Georgia. This is especially true in small businesses owned by taxpayers who may not be aware how “phantom income” can be incurred or what “phantom income” is.

“Phantom income” occurs when Subchapter S corporations and LLCs are taxed. The income in these business entities is passed to the owners whether or not cash is actually distributed to the owners. Moreover, if a business makes a profit, at least for tax purposes, but the business owner(s) keeps most of the money in the business as so often is the case (especially in small businesses), then a “phantom income” scenario can result.

For example, suppose your business has a tax profit of $100,000, but you only distribute $10,000 because you need the rest of the money in the business to keep operating the business. However, you are taxed on $100,000 even though you only received $10,000. This is one instance where you have been the unknowing casualty of “phantom income.”

Thus, the question arises: How do you avoid phantom income? The answer is the proper drafting and prudent use of a well-crafted operating agreement.

Continue reading "TAX AND BUSINESS LAW FIRMS -- BEWARE OF “PHANTOM INCOME” IN YOUR CLIENT’S LIMITED LIABILITY COMPANY (“LLC”) OR “SUBCHAPTER S” CORPORATION" »

As an experienced Atlanta business lawyer, I find that one of the most rewarding parts of my business practice is helping clients set up a brand-new Georgia business or re-establish and existing one. In doing this, the basic issues which first need to be addressed, are choosing the correct legal entity under which the Georgia Business will operate and filing the necessary papers with the GA Secretary of State. In addition, the business must establish and confirm any necessary business relationships and memorialize these in legally binding contracts per GA law. Any business must also understand the legal requirements and ramifications of local, State of Georgia and federal tax requirements, and licensing.

In recent years, my colleagues and I have begun to notice “client perceived” competition from do-it-yourself companies, called legal document services or elawyering. Essentially, they offer legal forms and instructions for filling them out, claiming you will pay a much lower price for using their services than you might pay if you go to a licensed GA Business Attorney. Naturally, these services are only offered for common legal matters, which assume and lull you into a false sense of comfort that you have set up your business correctly. These elawyer and internet form companies maintain and make you believe your business is “cookie cutter” and without unusual circumstances. These services claim to offer such services as deed transfers, startup papers for a new business, etc. In the many years I have practiced business law, I have found that there is not a business without unusual circumstances, needs, and dynamics. This is a fact, not conjecture.

IN FACT, THESE ELAWYER INTERNET COMPANIES WHICH PURPORT TO PROVIDE LEGAL SERVICES EVEN STATE, THAT YOU NEED TO HAVE AN ATTORNEY AND THEIR INFORMATION IS NOT A SUBSTITUTE FOR LEGAL ADVICE AND IS LEGAL INFORMATION – IN FACT, WHAT THESE ELAWYER INTERNET COMPANIES ARE DOING TO CONSUMERS IS DISTURBING AND WORRISOME TO SAY THE LEAST.

Continue reading "DO YOU NEED A GEORGIA BUSINESS LAWYER? -- FORMING AND OPERATING A BUSINESS IN GEORGIA" »

The three letters “IRS” strike fear in a lot of people, and for good reason. Nobody likes to be audited by the IRS. An audit is time-consuming and nerve-racking. An audit can also be expensive, with not only professional fees, but potentially having to pay a deficiency in taxes (plus interest and maybe penalties).

A primary cause for drawing an IRS audit is business deductions that look out of the ordinary. Even if legitimate, you still have to provide documentation, etc. So why would you want to draw attention to yourself? Yet I see many taxpayers do exactly that when they form a single member limited liability company (“LLC”).

If you are starting a new business, and select an LLC as your business entity (which I frequently suggest is the best entity), then you need a multiple owner LLC. If you have a business partner, then the LLC will be a multiple member LLC. But if you are starting a business by yourself, then make a spouse or family member a 1% owner.

The advantage of a multiple member LLC versus a single member LLC is in how the business deductions are reported. In a multiple member LLC, the business deductions are reported on the LLC’s business tax return, and only the profit amount is reported on a single line your personal return (Form 1040). On the other hand, a single member LLC is treated as a sole proprietorship for tax purposes. This means the LLC does not file a business tax return. Rather, all the business deductions are reported on your personal Form 1040. At The Adams Law Offices our experts will review your business plan and assist in the formation of the entity that best suits your business needs.

Business deductions on a business tax return look normal. A lot of business deductions on a personal Form 1040 raise red flags. So find someone to be a 1% owner, and stay under the IRS radar.