Business Structure Part 2: Which Business Entity Structure Is Right For You?

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

Business Structure Part 2
“Which Business Entity Structure Is Right For You?”

    Today, I’ll cover the ‘Sub Chapter S’
 Corporation structure. Let’s dive in.
Sub Chapter S Corporation
     The  most simple corporation structure is the Sub Chapter S Corporation.

       Like all corporations, the Sub S gives you :

TAX ADVANTAGES
and
LIMITED LIABILITY.

Pros of Sub Chapter S :
==organizing business activity separately

==provides limited liability. Protects your business   
losses and liabilities from your personal assets.

==significant business deductions allowable

== no tax at the corporation level

==income and deductions are ‘passed through’  to the
individual

Cons of SP:
==limited number of shareholders allowed
(100)==shareholders must be individuals (and certain
types of trusts)

==must hold annual meetings and keep corporate   
formalities like minutes, resolutions, notice for   
meetings etc.

==annual cost to state for annual report filings

Take Home Message For Sub Chapter S
A Sub Chapter S corporation is the easiest
of the entity structures to use.  You get to ‘pass through net income ( your gross income subtract business expenses including reasonable salary and what’s left over is what’s taxed…not at a corporate level but at your individual level.

    This ‘pass through’ characteristic gives you MUCH greater control over what amount of income is ultimately taxed and in what deductions you have available to offset income.

     As opposed to W-2 employee income where you get taxed IMMEDIATELY and you keep what’s left…with a Sub S you deduct off of the gross income and you get taxed on what’s left…huge difference!!!!More money in your pocket !!!

Real Estate Investors and Sub Chapter S
    If you own INVESTMENT real estate  that you
buy, fix and flip, a Sub Chapter S Corporation is the preferred structure. 

    For example,  the short term gains you make in a ‘fix and flip’ (gains earned in less than 12 months) which are taxed at the highest rate: ordinary income, can be greatly offset by the costs and other business related expenses allowed in a Sub Chapter S
corporation.  
  
     Since there is no corporate tax in a Sub S this net income is passed through to your individual tax situation and you pay less tax over all than you would if you earned that same income as a sole proprietor or in another type of corporation that had a tax at the corporate level…make sense?

     Next time, I’ll go over Limited Liability Companies

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957  
 ironkop@gmail.com
www.KevinPLaw.com

GUARANTEED INCOME FOR LIFE…

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Just south of Saw Mill Creek…

Hey Kevin Pritchett here:

Recent stock market gyrations got you worried? 
Don’t lie…you KNOW you’re worried…and you SHOULD BE!!

Can you...
–afford to lose 10%…20% or more of your retirement portfolio?

–devote the time it would take to recover
   any losses (aka postpone retirement…aka WORK LONGER????

I KNOW you can’t…NOBODY can!!

Profit From Market Upsides And Eliminate Losses From Downturns

     Rather than wring your hands, continue to do
nothing and/or live in constant fear…you can
implement simple, safe, proven strategies that
can give you access to all market upsides and
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What if you could:

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==LOCK IN YOUR GAINS when the market
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     Over the last 20 years I’ve helped HUNDREDS
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sleep worry free when the markets gyrate.

For all the details WATCH THE VIDEO ABOVE OR
CLICK HERE

Remember…….
“Things don’t get better with neglect….”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett
312-505-1957
P.S.
You KNOW you need growth but you’re scared
to death of losses…find out how you can grow your
money and eliminate the losses when the
market turns…CLICK HERE

“Survivor Social Security Benefits…How Much Can I Get?”

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

“Social Security Survivor Benefits:
        How Much Do I Get?”

As I’ve shared with you previously Social Security is a convoluted and complicated benefit maze.  You CANnavigate it but you’ll need to know the lay of the land.   

   Today I’ll go over SURVIVOR BENEFITS.

Survivor Eligibility
     You are eligible to receive Social Security benefits as a survivor spouse if the following conditions are me:

==your spouse worked enough to collect Social
     Security benefits     Eligibility=10 work credits. 
     Every $1360 of wages or self employment income= 1
work credit
  workers can earn up to 4 work credits/year

==check your spouse’s Social Security statement    to
determine eligibility and work credits earned

==you must apply in person for survivor benefits   and
must bring proof of your spouse’s death

Survivor Benefits And Other Social Security Benefits
    You can be eligible for survivor benefits and also receive your own Social Security benefits.    

    Survivors benefits are completely different
from spousal benefits.

     Spousal benefits can be claimed
 if one spouse made significantly less
than the other. They are designed to equal
as much as 50% of the higher-earning
spouse’s Social Security benefit, while
survivors benefits can equal up to 100%
of your spouse’s Social Security benefit.

     If you are already receiving spousal benefits,
the SSA will automatically convert you to
survivors benefits once they receive the death record.

When Survivor Benefits Start
    Survivor benefits begin based on
your work record and your age
    The payout rules are SO complicated and convoluted I’ll quote from a recent article that lays it all out clearly:

_________________________________

” If you are a widow(er), you can receive
survivors  benefits if you are 60 or older,
although the amount  is reduced if you take
them before your full retirement  age (FRA).

   You can also receive them if you are 50 or
older and disabled. If you are caring for a
child who is under the age of 16 or who is
disabled, you can receive survivors benefits
at any age.

 

   FRA is 66 for people born between 1943
and 1954. It rises a bit for birth years after that,
and hits 67 for people born after 1960.

   If you’re a widow(er) and take survivors benefits
at your FRA, you will receive 100% of your
spouse’s benefits.

    If you take benefits between
the age of 60 and your FRA, you will receive
between 71.5% and 99% of your spouse’s
benefits. (The percentage climbs for every
year you get closer to your FRA.)

   If you are a widow(er) and disabled and take
survivors benefits between the ages of 50
and 59, you will receive 71.5% of your
spouse’s benefits.

    If you are a widow(er)
and raising a child under the age of 16 or
a disabled child, you will receive 75% of
your spouse’s Social Security benefits.

    If you are an ex-spouse, you are eligible for
survivors benefits as long as you were
married to the deceased person for at
least 10 years. The percentages and
relationship to FRA are the same as for
a spouse.

  That changes, though, if you’re a
divorced ex-spouse who is raising a
child of the deceased who is under 16
or disabled. You can receive survivors
benefits even if the marriage was less than
10 years in duration.

   Note that there is an exception to the benefits
percentages if you are a widow(er) and raising
multiple children under the age of 16 or disabled.
Benefits are usually capped, somewhere
between 150% and 180% of the deceased
person’s benefit.

    If total survivors benefits paid
to family members would exceed that amount,
the benefits are proportionately reduced.

    Survivors benefits will remain at the same
percentage of the deceased spouse’s benefits
you are initially eligible for throughout the time
that you receive them. In other words, if you are
a widow(er) and your survivors benefits are 75%
of your spouse’s benefit because you took them
before your FRA, they remain at 75% throughout
the time you receive them.

    Surviving spouses are entitled to a one-time
payment of $255 if they live with the deceased
person at the time of death.

   Finally, for all survivors benefits, note that
remarriage will make you ineligible for widow(er)
benefits if it occurs before the age of 60.

If you remarry at 60 or later, though, you remain
eligible. 

Combining Survivors Benefits and Social Security Benefits On Your Own Record

     If you are entitled to both survivors benefits and
Social Security benefits on your own record, you
can take them at the same time or manage the
amounts you’ll receive strategically.

     Let’s say you are 62 and your spouse recently
passed away. You’d like to retire now. You are due to
receive $2,000 if you wait until FRA on your survivors
benefit, and $1,500 on your own work record if you
retire at FRA.

     You can elect to take your survivors benefit now
and wait to receive your own Social Security
benefits until your FRA. Your survivors benefits
will be reduced if you take them at 62, but will
still provide income until you claim your own benefits.”

Motley Fool March 20, 2019

 

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :
ironkop@gmailcom
or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
ironkop@gmail.com
www.KevinPLaw.com
312-505-1957

Business Structure Part 1: ‘What Business Entity Structure Should You Use?’

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
Business Structure Part I”Which Business Entity Structure Is Right For You?”
     As you can see from the chart above the answer to the “which entity structure’ should I use?” question is REALLY about…..

TAXES
     More specifically, saving taxes.  Also

PERSONAL LIABILITY

  Starting with this newsletter, I will explain each of the business structure types revealing the pros and cons of each focusing on taxes and personal liability.

    Today, I’ll begin with ‘Sole Proprietor’ structure. Don’t worry…you won’t have to be a CPA or Tax Geek like me to understand…I’ll keep it super simple and common sense…fair enough? Let’s dive in.

Sole Proprietorship (SP)
     SP is the most basic way to conduct
business.  You conduct business in your own name (even though you can and should register your sole proprietor business with a dba or ‘Doing Business As’ registration with the County Clerk where you conduct business.

  Pros of SP:
==organizing business activity separately
==inexpensive and simple to start==no annual meetings
or other corporate formalities
==limited business tax write offs

Cons of SP:
==not able to claim totality of available business   
deductions
==no personal asset protection…i.e. someone   can sue
your SP and ALL your personal assets   not just the SP
assets are at risk

Take Home Message For SP
A SP is how many people begin operating
business because of its simplicity and low cost. 

     However, in my opinion (and in my over 30 years of legal practice) the cons of personal liability and limited tax deductions clearly outweigh the cons.

     Next time, I’ll go over the different types
of corporations and other entity options.

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

What Is A ‘Roth IRA’?

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
“What Is A Roth IRA?”
   There are two basic types of IRA retirement accounts. 
  ==The Regular IRA 
  ==The Roth IRA

   A Regular IRA:
   ==$6,000 annual deposit limit ($1,000 catch up if over age 50)
   ==money grows tax deferred during your working years 
==at retirement you get taxed on withdrawals  ==withdrawals prior to age 59 1/2 incur tax penalty

A Roth IRA:
 ==$6,000 annual deposit limit($1,000 catch up if over age 50)
==  money grows tax deferred
==  NO TAX on withdrawals!!!
== INCOME LIMITS:
      If you are single, you must have
    a modified adjusted gross income
    under $135,000 to contribute to a
    Roth IRA for the 2018 tax year, but
    contributions are reduced starting at
$120,000. If you are married filing jointly,
    your MAGI must be less than $199,000,
    with reductions beginning at $189,000.

True TAX FREE Income
    If you meet the income guidelines the Roth IRA is one of only two strategies that allow you to achieve truly TAX FREE GROWTH AND TAX FREE INCOME.

Converting A Regular IRA To A Roth IRA
   A question I get all the time is

“Kevin,  can I convert my regular IRA into a Tax Free Roth IRA?”  
    The answer is YES!!!  There is of course a catch…..Every dollar you convert from a Regular IRA to a Roth IRA is taxed as ordinary income. Even with this conversion tax, it almost ALWAYS makes sense to convert…..the real barrier is the psychological impact of paying the tax.

     In future newsletters I’ll discuss this topic of Roth Conversion in more detail.

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957 
ironkop@gmail.com
www.KevinPLaw.com

What Is A ‘Power of Attorney For Health Care’ And Why You Need One?

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here:

“What Is A Power of Attorney For Health Care?”  
   A Power of Attorney For Heath Care is a document you sign that gives the person you designate the power to make medical decisions for you in the event you are unable to make decisions for yourself.

     A Power of Attorney For Health Care is”Durable” if it stays in effect even after you become incapacitated.

“Ok..But Why Do I Need A Power of Attorney For Heath Care?”
    Glad you asked!! 
   
Let’s assume you suffer a stroke or massive heart attack and you are incapacitated.  You’re on life support, a machine to help you breath and your medical prognosis is uncertain.

    What should your family do? 
==Keep you on all life support indefinitely?

==Take you off life support?  If so, when?

I Personally Had To Live This Nightmare
    I can tell you from personal experience(having had to make this agonizing decision for my mother, my father and my sister,its a living Hell not knowing.

     With a Power of Attorney For Heath Care you literally tell your designated representative what YOU want them to do.    Typically the form you complete states YOUR wishes and desires.  

Eliminates The Agony of Not Knowing What To Do
       A properly drafted Power of Attorney For Health Care gives your designated person your EXACT wishes and eliminates the agonizing guess work a family member would otherwise have to go through trying to decide what to do.

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
ironkop@gmail.com
www.KevinPLaw.com
312-505-1957

Your Qualified Business Income Deduction

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
Qualified Business Income Deduction    
The new tax bill, The Tax Cut And Jobs Act Bill contains a brand new business deduction:the Qualified Business Income Deduction.

    Eligible taxpayers may be entitled to a deduction
of up to 20 percent of qualified business income
(QBI) from a domestic business operated as a
sole proprietorship or through a partnership, S
corporation, trust or estate.

   There are TONS of eddys and currents ,exclusions and exceptions to  this deduction and rather than list all of them here, I’ve posted a link to the IRS website on my Facebook Business Page which gives ALL the details.
CLICK HERE TO GET ALL THE DETAILS

Reach Out To Me If You Have Questions. 
If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.


Remember…..”Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957 
ironkop@gmail.com
www.KevinPLaw.com

“Do I Pay Tax On My Social Security Benefits?”

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here
“Are My Social Security Benefits Taxed?”    
There’s good news and bad news….

     The good news:  If you don’t have any other income other than your Social Security, chances are you won’t pay much tax.

The bad news:  If you’re like MOST people
and you’re receiving other income other than just your Social Security, your Social Security benefits WILL be taxed..and in some cases up to 85%!!

Social Security Benefit Tax Rates    
To determine the percentage of your Social Security benefits that are taxable , calculate your “provisional income,” which is your adjusted gross  income (not counting Social Security benefits), plus any nontaxable
interest and half of your Social Security
benefits.

     If that total is less than $25,000 if you’re
single  or $32,000 if married filing jointly, your
Social Security benefits are not taxable. 

     If your provisional income is more than $34,000
on a single return or $44,000  on a joint return,
85% of your benefits may be taxable.

Social Security Taxes Are Different
An entirely different issue, and one that infuriates many people, is the amount of Social Security tax you pay on your regular income.

    The issue of course is

  “If I pay tax on  my income initially to fund my
Social Security, why should I pay tax on it again?“

     This is an entirely different tax and issue…more on this in a later newsletter.

Reach Out To Me If You Have Questions.  
If you have comments or questions about any of this…send me an email :ironkop@gmailcomor if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.  
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

2019 Qualified Retirement Plan Contribution Limits

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just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

2019 Qualified Retirement Plan Contribution Limits
A ‘Qualified’ Retirement Plan is a plan==savings program just for retirement==money placed in grows tax deferred==special tax rules apply to each type  of qualified plan

2019 Qualified Plan Contribution Limits
The saying ‘there’s no free lunch ‘applies equally to Qualified Retirement Plans.

    While Uncle Sam allow your money to grow tax deferred, they at the same time place limits on the amount of money you can put into each type of Qualified Plan in any given year. 

      In 2019 here are the maximum amounts you can contribute per year per person in each type of Qualified Plan:

Traditional and Roth IRA
IRA:  $6,000 per person per year;
        $7,000 over 50
Roth IRA:  $6,000 per person per year;
                 $7,000 over 50

401k /403b/457 Plans401k/403b/457: 
$19,000 per person; age 50 catch up:  $6,000

   Employer match or profit sharing contributions
aren’t included in these limits. 401k and 403b
share the same limit.

    The 457 plan limit is separate.
You can contribute to both a 401k/403b plan
and a 457 plan.

Total Employer Contributions In
Defined Contribution Plans

Total Employer+ Employee Contribution:  $56,000

     The total employer plus employee contributions
to all defined contribution plans by the same
employer will increase by $1,000 from $55,000
in 2018 to $56,000 in 2019.

The age-50-or-over catch-up contribution is on top of this limit.

Income Limits  
Of course NOTHING from the government is easy.  There are income limits associated with each type of Qualified Plan.…something about there being ‘no free lunch!’

Reach Out To Me If You Have Questions.
   If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com

What Is A Will And Why Should You Have One

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Just south of ‘Sawmill Creek…..
Hi Attorney Kevin Pritchett here

Estate Plan Series:    
‘What Is A Will And Why Should You Have One’  
In previous newsletters I’ve shared that a proper Estate Plan has 5 components:  1. Last Will;
2. Power of Attorney For Healthcare; 3. Power of Attorney For Property and5. Revocable Living Trust.

   Today I’ll explain EXACTLY what a Willis and isn’t.

A Will Is A Roadmap Through The Probate
A ‘Last Will and Testament’ is a written declaration of how you wish your estate assets to be distributed.

    To start the estate distribution process, your heirs file your will with a Probate Court.
   Probate Court is the official, legal and binding court process that reviews your Will and declares that it is valid and that your assets may be distributed according to the provisions of the Will.

   A Will in effect, is the ‘roadmap’ a Probate Judge will use to determine how your estate will be distributed.

Heirs And Creditors Can Challenge
    Every possible heir gets a copy and notice of the Probate Court filing and has the opportunity to challenge any provision of the Will.
     Possible creditors (people you may owe money to) also get notice of the Probate filing through a required notice that gets posted in a local newspaper.  Any creditor who believes you owe them money can file a petition with the Probate court.
     As you can see, the entire Probate process can be quite lengthy and as a result can become enormously expensive if there are numerous challenges from heirs and creditors.

Objective Is To AVOID Probate With A Trust
    As a result of these possible delays and expense involved the planning objective is almost always to AVOID PROBATE.

   The simple and effective way to avoid Probate is to create A Revocable Living Trust and use it in conjunction with a ‘Pour Over Will. ‘

    A Trust is simply a legal entity that can own and distribute assets.  A Trust avoids probate  because:

==A Trust is a private document that    does NOT require filing.    All provisions made in a trust    remain absolutely private.

==Since there are no court filings    there are no delays and extensive    legal fees like those associated with    a Probate proceeding which is in essence  a trial if there are legal challenges.

 A ‘Pour Over Will’
     So if a Trust is the preferable way to transfer Estate assets why have a Will at all…?

    The problem with not having a will is if for some reason your heirs or creditors challenge or there is some other challenge that must be resolved in court.

     Without a Will, the Probate Judge will be required to apply the Law of ‘Intestate Succession’ ( the priority of persons who receive your assets ) with all the
delays and expense of Probate.As a result of this law,  your assets will be divided according to that
arbitrary law rather than by your wishes.

     So the solution is to create a special Will called a ‘Pour Over’ Will that states that your intention is that all your assets are distributed through your Revocable Living Trust and not the Will.

     As a result, if for some reason your estate is brought into court, a valid Pour Over Will must be upheld and honored by a Court and your Estate will be divided according to your Trust and not through Intestate Succession or by any heirs or creditors contrary desires.

   Stay tuned for upcoming installments of this Estate Plan Series where I’ll explain the components of a Trust in more detail. 

Reach Out To Me If You Have Questions.
   If you have comments or questions about any of this…send me an email :ironkop@gmailcom or if reading on my blog or Facebook page leave your questions or comments below.

Remember…..
“Things Don’t Get Better With Neglect…..”

Kevin Pritchett, Esq
Law Office of Kevin Pritchett, Inc.
312-505-1957
ironkop@gmail.com
www.KevinPLaw.com