Mark Briggs Lawyer: Filing Taxes for a Small Business

 Mark Briggs LaMark Briggs Lawyerwyer: Filing Taxes for a Small Business

For small business owners, few tasks are as critical as the timely and accurate filing of federal and state taxes. Using the following best practices for properly tracking and reporting income and expenses, working with the right professionals, and following all tax-related laws and regulations will help keep your business out of hot water and on the path to success.

 Keep accurate records

Staying on top of taxes begins with appropriately tracking business activities, including income from all sources and expenses — including equipment purchases and personnel costs. Small businesses often find themselves in trouble over improperly categorizing employees as independent contractors and failing to pay appropriate employment taxes; so keeping accurate records can help avoid this mistake. Keep track of where your business may have a legal presence to ensure payment of state sales taxes and other fees. Make sure records about equipment are accurate — including amounts paid and dates any equipment or vehicles went into service. This will help you accurately calculate depreciation expense.

 Work with knowledgeable professionals

If you choose to handle filing your business taxes yourself, invest in tax preparation software. I think for most business owners it is smarter to hire a tax accountant with experience in your industry and/or with your size of business. If you end up owing money to your state tax agency or the IRS, work with your tax professional to mediate the situation and work out payment plans. For managing benefits such as your company’s retirement plan or health insurance, I also recommend hiring the right financial and insurance industry professionals, because these areas are complicated and can cost you dearly if you make a mistake. Spend your time focusing on what you know how to do best: running your business.

 Understand and abide by state and federal rules

A common mistake by small business owners is using withheld payroll taxes as short-term capital during lean times. Your tax professional will tell you that this is a dangerous practice. Correctly calculating and paying estimated taxes on time also seems to trip up many small businesses. Calculating incorrectly or underpaying either of these items can cause major headaches down the road. Some business owners also incorrectly believe that in the event of an audit, the IRS will need to prove wrongdoing; in fact, the burden of proof is on the taxpayer. So, investing in good systems and working with qualified professionals is a smart move.

Always consult with your tax adviser about your business’s unique tax situation. For forms and general tax information, visit the IRS Small Business and Self-Employed Tax Center.

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Does my business need a shareholders agreement?

Mark Briggs: Shareholder AgreementThe only time your business should not have a shareholders agreement is when there is only one shareholder. Granted, there is no law that requires a company to have a shareholders’ agreement in place, but it is a really good idea. Shareholders’ agreements help the company run properly, keep the shares in friendly hands, and clarifies each shareholder’s rights and responsibilities. Unfortunately, most companies are formed quickly and on the cheap, which means they usually lack key documents like bylaws and shareholders’ agreements. So, if you are in that boat, do yourself a favor and get a shareholders’ agreement in place ASAP before a problem arises. Read on to learn about the key benefits of having a shareholders’ agreement for your business.

  1. Shareholders’ agreements protect the rights of the shareholders, such as getting access to the company’s books and records on a timely basis, being notified of important activities, and having the right to vote on big company decisions.
  2. Nobody wants to be in business with another person by accident. That is why a good shareholders’ agreement should prevent shares from being sold or transferred to a new shareholder without the existing shareholders’ permission. This often comes up in cases of death and divorce, but could also arise if a shareholder just wants to sell off their shares for some extra cash.
  3. If the shareholders have a dispute among themselves or with the company, there should be a quick, relatively easy process to resolve that dispute short of an expensive, public and time-consuming lawsuit. A good shareholders’ agreement can create such a process, starting with an in-person meeting, followed by a mediation, and then possibly an arbitration or buyout process. This is far better than letting a judge decide everyone’s fate.
  4. If a shareholder wants to exit a privately held company, it is often impossible to find a buyer for their shares, because no public trading market for those shares exists. A shareholders’ agreement can provide a process for allowing a shareholder to sell their shares to the company or other shareholders, including how those shares are valued and the payment terms.
  5. A shareholders’ agreement can also give some certainty as to how and when the company will determine and pay distributions of profits to the shareholders. This is particularly important in “pass through” entities like S-corporations, partnerships and certain LLCs, where shareholders are responsible for paying taxes on their share of the company’s profits, regardless of whether the shareholders ever received any cash from the company.

Although drafting a shareholders’ agreement at the outset of your business venture may seem time consuming, in the long run the benefits of having such an agreement legally in place can save your company much time and money.

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Mark Briggs: Corporate Contracts to Always Keep On-Hand

Mark Briggs: Corporate Contracts







Mark Briggs: Corporate Contracts to Always Keep On-Hand

No matter what type of business you may own, there will be many occasions when you should to put an agreement in writing. Even good people trying their best can have misunderstandings over key terms of an oral agreement, so it is a good idea to get any important agreements in writing. Below are a few of the most commonly used business contracts.

Nondisclosure / Confidentiality Agreement

This type of contract is often used to protect sensitive or confidential information during a business transaction. For example, if your business handles clients’ confidential information on a daily basis, then you’ll want to have all of your employees who have access to this information sign a non-disclosure agreement before hiring them.

This way, in the event that any confidential information is leaked, you have the legal grounds to prevent further disclosures and be paid for any damages those disclosures caused. Nondisclosure agreements can also be used with clients and vendors who have access to confidential information, such as financial statements and business plans.

Promissory Note

A promissory note is a legally binding and corporate version of an “IOU” and is used frequently in the business. Any time a business lends or borrows money, a promissory note should be used. Promissory notes should at least include the amount owed, interest rate, payment amounts and dates, penalties for late payments, what constitutes a default under the note, and what happens if a default occurs.

Bill of Sale
A bill of sale is written proof of the purchase of one or more assets. It will list the buyer, seller, date of sale and assets purchased. Bills of sale are useful in transactions where one company buys all or a large part of another company’s assets. Those agreements are pretty long and have a lot of details in them that third parties don’t need to see. So, a bill of sale is sometimes used as a supplement to the main contract as a document to show third parties to transfer title to the purchased assets.

These are just a few of the most important business contracts you’ll likely encounter as a business owner. By being familiar with them, you’ll be in a better position to scrutinize contracts before you sign them.

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What are the differences between partnerships and joint ventures?

Mark Briggs Phoenix

Succeeding in business is all about taking advantage of opportunities. To do so, however, requires having access to the necessary talent, tools, and finances. Very often this means joining forces with others who have similar interests.

There are several forms such an alliance can take. Two of these are partnerships and joint ventures. While often thought of interchangeably, they are crucial differences between each type of organization. These include:

  • Partnerships are usually long-term associations. They are intended to share the burdens associated with most or all aspects of running a business; as such, their focus can be quite broad. Joint ventures, on the other hand, are typically formed to take advantage of a particular opportunity; as such, their focus is generally quite specific and their life span is shorter than a partnership.
  • A partnership is regarded as a “pass through” structure, meaning that the profits and losses of the partnership are attributable directly to the partners. Joint ventures can be formed in various ways, from a simple contract laying out each party’s rights and obligations, to a formal entity like a corporation being formed and its shares being issued to the parties involved in the joint venture. If a corporate form is chosen, this could lead to some tax advantages and disadvantages, depending on the situation. You should always consult with a tax accountant before deciding how to structure a joint venture.
  • Typically, the partners are personally responsible for the liabilities of the partnership. On the other hand, a joint venture can offer some greater degree of liability protection to its participants, particularly if the joint venture is formed as a corporation or limited liability company.
  • Fiduciary responsibilities. In most cases, the each partner has fiduciary duties to the partnership and their fellow partners. With joint ventures, however, these responsibilities are usually limited to the venture itself.

Partnerships vs. Joint Ventures: Which is the Right Way to Go?

The answer to this question varies from one situation to the next, depending on factors such as these:

  • The risk tolerance of each party in the organization.
  • The resources each party brings to the table.
  • The overall goals of the parties; i.e. do they intend to work together over the long-term or for a limited period of time only?

Both partnerships and joint ventures offer their share of benefits and shortcomings. Which of the two is best for your situation is a question to discuss with an attorney, accountant, or other professional. With sound guidance, both your interests and those of your associates can be well represented.

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5 Things to Know Before Starting a Franchise

Starting a Franchise

Investing in a franchise makes a lot of sense for many people. The good ones are almost turn-key ready businesses with processes, products/services, logos and business plans. But, before you invest in a franchise, it’s important to be realistic with your expectations and understand the complex rules that often accompany this type of business. Although there are thousands of successful franchisees around the country, many of them also fail. Sometimes the brand is not managed well, its products/services are inferior, or its costs are just too high. So, it’s a mistake to assume your franchise will be an overnight success simply because it has a big name attached to it. As you research an opportunity, there are five factors you should consider before starting a franchise:

  1. Local Demand and Competition: Is there a demand for the services or products offered by the franchise? If so, what is the level of competition from similar businesses in your local area? Find out how your products or services compare to those of local competing businesses.
  2. Rules and Restrictions: Your franchisor will place restrictions on how you run your business. Have a clear understanding of the rules and restrictions regarding things like operating hours, prices and discounts, suppliers, marketing, décor and employee uniforms.
  3. Fees and Royalties: The upfront cost of the franchise is only the beginning because you will incur additional franchise costs, like advertising/marketing fees, royalty payments and products. Get a clear understanding of those additional costs, and ask about which costs could be increased by the franchisor without your permission.
  4. Territory: Depending on your type of business, the franchisor may restrict you to a specific geographical territory. If you are going to have boundaries, make sure they are large enough for you to have a good customer base. Also, find out if the franchisor can change your territory or let another franchisee in your territory.
  5. Support: Once the initial training is out of the way, does the franchisor offer ongoing support, if needed? If so, what will that support cost you? Make sure you have the support you need to be successful. Most people need help in areas where they lack experience or education, so be sure to know what you don’t know and get the help you need.

When you research the pros and cons of owning a particular franchise, make sure you also know the rules regarding the sale of your franchise if you need to pull out of the business for some reason. As long as you do your homework, you can open a successful franchise with confidence.

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How Bloggers Get Sued

Rosie the Blogger

Blogger Roni Loren shared a story on her blog of being sued for misusing photographs that she pulled from another site. She thought that by giving credit to the original source she was covering herself from liability. She was wrong.

In today’s digital world bloggers are everywhere. They write about anything from sugar-free cooking to fashion to automotive technologies. Behind many of these blogs are writers who have made this their livelihood. What used to be “online diaries” and “scrapbooks” for these bloggers, have become sources of income — but along with the proliferation of bloggers comes legal responsibilities for intellectual property.

How bloggers get sued and how to avoid it:

  1. Cite your sources. This should be an obvious one. We’ve learned our entire lives to cite sources in school, and writing on paper versus typing a blog is no different. When you are stating facts and/or quotes that are not general knowledge and were created by someone else, you should give them credit.  Be aware though, linking to a source is not the same as citing it — links can be broken, so citations should come in the form of in-copy attributions even if a link is also used, like so: “One thing to bear in mind when quoting text from someone else’s website, however, is that many companies carry content usage guidelines that will let you know if they do or do not want you using their content,” Corey Eridon, Hubspot.
  2. Give photo credit to images that you don’t own. I’ve mentioned this before in a previous post. If you want to use images in your blog posts, there is a safe, easy way to go about it. There’s a great website called Creative Commons that I use to find blog pictures in a safe, responsible manner. Just go to its search page, check the boxes for images that you can “use for commercial purposes” and “modify, adapt, or build upon,” and then search one of the five image-related options. Personally, I am a big fan of Flickr—its users tend to be very clear about how, and when, you can use individual pictures. Each image comes with an accompanying description of its copyright status, so you can be sure of whether or not (or how) you may use it legally. Just because a photo shows up in Creative Commons does not mean you may use it without attributing it to the original owner.
  3. Disclose your paid endorsements. Many people in the blogging world are unaware that they should tell their audience when something they write is actually a paid advertisement. This is especially true wow that the Federal Trade Commission recognizes blogging as more than a hobby. For more information check out the FTC FAQ Page. You can still provide useful information while getting paid, so there is no reason to not level with your audience about it. Hiding the truth usually hurts you in the long run, so be transparent about advertising.
  4. Defamation and freedom of speech – there’s a difference. The proliferation of gossip blogs is at an all-time high. Kids in high school, college students, adult socialites and celebrity gossipers are a dime a dozen. Regardless, you need to be cautious of the things you say about others (regardless of their public figure status) to avoid getting hit with a lawsuit. Anything you write that harms a person’s reputation and is untrue can expose you to scary amounts of liability. Even if you write something true, which by definition would not be libelous, if it harms a person who gets mad enough to sue you over it, you could spend a fortune defending yourself. Lawyers are expensive! You can disagree with people in a professional manner, and you can share your opinions about other people’s actions, but try to avoid mean-spirited personal attacks and gossip.

Whether you getting paid for your blogging expertise or just posting your thoughts for fun online, you need to make sure that you are following the rules of the web. Protect yourself by (1) citing your sources, including giving proper credit for images you don’t own, (2) disclosing when you are being paid to write something, and (3) staying away from badmouthing others.

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Briggs Law on Records & Tax Forms: What the IRS Requires of My Small Business- Part 1

US Federal Tax Day

You might think from the title of this blog that the IRS has an easy-to-find list of the financial records that small businesses are required to keep. Ha! Nothing is that easy with IRS.

The answer to the question in the title is: “It depends on the type of small business you own.”  So, you first need to examine your business’s tax filing requirements and then consider which records the business needs to be keeping.

Tax Filing Depends on Corporate Structure

Solo business: Do you own a sole proprietorship? If you do, you must file a personal income tax return. The tax forms you might need include Form 1040, Schedule C and Schedule SE for self-employment income, and Form 941 or Form 944 for Social Security taxes, Medicare taxes, and income tax withholding.

Partnership: If your company is a partnership, then the partnership must file an information return annually that includes the partnership’s revenues, expenses and income. The partnership itself does not pay taxes because each of the partners pay taxes on the income they gained via their ownership of the partnership. The partnership must file Form 1065, while the individuals in the partnership are obliged to file the same individual tax forms that sole proprietors file.

C-Corporation: Is your small business a C-corporation? If it is, your corporation must pay corporate taxes on its profits.  The shareholders pay taxes only on the dividends that the corporation makes to them. If you are an employee of the corporation, you also have to pay income taxes on whatever wages the corporation pays you. The corporation must use Form 1120 for income tax and Form 1120-W for estimated taxes. Shareholders are required to use the same personal income tax forms that sole proprietorships use.

S-Corporation: S-corporations are taxed much like partnerships, in that they generally do not pay taxes directly on their income, but they do file informational returns with the IRS.  The shareholders of the corporation each pay income taxes on their pro rata share of the corporation’s profits. The S corporation must use Form 1120S to report the taxes it owes.

Briggs Law: Where Can I Get More Info on Corporate Taxes?

Publication 583, “Starting a Business and Keeping Records,” is the best source for information on what tax forms the IRS requires for small businesses. Other beneficial publications are Publication 334 for sole proprietorships, Publication 541 for partnerships, Publication 542 for corporations, and Form 2553 and Form 1120S for S corporations.

Because different kinds of small businesses need to file different tax forms, the financial records they need to keep is also different. However, the IRS clearly states in Publication 583 that all small businesses must keep the supporting documents used to compile the information listed on the tax forms.

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What is Bankruptcy?


If your business is struggling under increasing debt you might find yourself considering bankruptcy. There are three types of bankruptcy for you and your business – Chapter 7, Chapter 13 and Chapter 11. Your attorney can help you choose the right type, based on your circumstances and your long-term goals.

Bankruptcy should never be entered into lightly. It leaves a deep scar on your credit history and damages your reputation as a small business owner. This is a means of last resort to get out of debt.

Chapter 7 Bankruptcy in Arizona

Chapter 7, also known as “liquidation bankruptcy,” allows you to discharge your personal debts. The court will appoint a trustee who will oversee selling your assets and paying creditors. Individuals, partnerships, sole proprietorships, LLCs and corporations might be eligible to file Chapter 7 bankruptcy, depending on how much they owe and how much revenue they generate.  They would choose this type of bankruptcy if they want to cease business operations.

If your business is a sole proprietorship, bankruptcy will eliminate debts owed to suppliers, accountants, consultants and other creditors. It will also discharge leases taken out by a sole proprietor, including your commercial lease and equipment leases.

This is certainly a drastic step for a business to take. Chapter 7 will result in you handing over the finalization of your company to the state of Arizona. You will cease operations, and the state bankruptcy court will liquidate your company and pay off creditors.


Chapter 13 Bankruptcy

Chapter 13 is an option for individuals who have regular income and sole proprietorships. Small businesses cannot file under Chapter 13 if they are run through corporations, partnerships or some other operating agreement. Chapter 13 allows you to restructure your business and continue operations – as long as you do not owe more than $1,149,525 in unsecured debt and $383,175 in secured debt (adjusted periodically to reflect changes in the consumer price index). The court will appoint a trustee, who will collect and disburse your payments to creditors. If you fail to make payments, the trustee can advise the court to force you into Chapter 7, which liquidates your assets and closes your doors.

Chapter 13 gives you the ability to pay back your debts in a time frame and at a rate that you can manage and to keep property as necessary. You business, your house and your car can all remain in your possession as long as you make your payments on time.


Chapter 11 Bankruptcy

Chapter 11 is not a favorite of small businesses because it involves a great deal of work and expense, but it might be preferred because it requires no time limit for debt settlement, which Chapter 13 requires.

If you can show that your company has a future and that restructuring and reorganization of debts is a viable option, Chapter 11 could give you the opportunity to rebuild and recover. You should understand, however, that Chapter 11 will take a significant investment in time and effort from you, your management and your attorney. It is a more expensive option than Chapter 7 or Chapter 13, but it may be worth it if you can come out on the other side with a healthy company.

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What Are By-Laws?


Mark Briggs Attorney on By-Laws:

Mark Briggs on By-laws

What are by-laws?

Every business larger than a sole proprietor needs written rules to ensure it operates efficiently, cost-effectively and predictably, while minimizing confusion and disputes. For a business that is organized as a corporation (as opposed to a partnership, LLC or other non-corporate structure), by-laws are the primary set of these written rules. By-laws tell you who is responsible for making certain decisions, how big decisions are made, and how the stockholders of the corporation are involved. By-laws are usually developed before or during the founding of the business, but many start-ups ignore corporate formalities like by-laws until they get beyond the self-funded stage. Generally, the earlier you get the by-laws in place, the better, because you never need them until you need them.


What is included in a corporation’s by-laws?


There is no universal standard list of what must be in a corporation’s by-laws, but they almost always address at least these questions:


  • Board of directors and officers: How many officers and directors will there be? How are they chosen? How long do they serve? What will their responsibilities be? These are all questions to address in your by-laws.
  • Corporate meetings: When, where and how are meetings of the directors and shareholders held? Who is in charge of the meeting? What kind of notice must be given of meetings? Can actions be taken by written consent instead of a meeting?
  • Voting procedures: How many people are needed for vote to be taken (the quorum)? How will a vote be counted? Can someone vote by written proxy? How are nominations made? Which issues can be voted upon?
  • Stock: Will there be only common stock, or will there be multiple classes of stock? How many shares of each class will there be? What are the rights and obligations of shareholders? If some classes of stock will be designated in the future, who will determine the features of those and how? Can shareholders re-sell their stock to anyone at any time, or are there restrictions on the resale of their stock?


How do I write by-laws?


Including this much information in the early days of your business’ operations may seem daunting, but remember: Just like any other governing document, the by-laws can be amended over time as your business grows and new needs are identified.


Having the right set of by-laws in place helps ensure your business operates the way you want it to, without confusion or error. I recommend getting your attorney to assist you, as by-laws are impacted by the laws of the state in which your corporation is created. So, what may work well in California might be a problem in Delaware. If your budget does not allow you to invest in legal services, you can also try using a self-help service like to get a generic template of by-laws that will comply with your state’s laws. When you can afford a lawyer, you should have the by-laws reviewed and revised, because they should be tailored to your company’s situation. Remember: If things get rough at your company, the by-laws can save it from disaster or be the match thrown into the powder room. Waiting until trouble happens is usually too late to fix problems in a shoddy set of by-laws.


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Mark Briggs Phoenix Attorney on Limited Partnerships and Their Specific Advantages

Limited Partnership

Limited partnerships definitely have advantages, but they are also so complex that starting a limited partnership requires a lot of paperwork that should be completed by an attorney. They can be unequal partnerships that give some partners far more responsibility and ownership than others. In fact, this disparity is what distinguishes limited partnerships from general partnerships.

Limited partnerships are more complicated than general partnerships. Owner-partners are classified in two ways:

  1. General partners manage the business and are personally responsible for its debts.
  2. Limited partners contribute capital, share profits, and do not participate in management of the business. They are not responsible for debts of the firm.

Limited partners are like shareholders of a corporation because they aren’t liable for debts, which make it easier for general partners to attract them to invest.

Limited Partnerships and Taxes

A limited partnership does not pay income taxes, but its partners do. Its income is instead imputed to its partners, who report their respective shares of the partnership’s income on their individual tax returns and are responsible for income taxes on that income.

Examples of Limited Partnerships

One derivation of limited partnerships is the limited liability partnership. Many professional services businesses, such as law firms and accounting firms, are formed as limited liability partnerships. One advantage of this entity is that the partners are not usually personally responsible for the liabilities of the business, even if they participate in management of the business like a general partner in a limited partnership.

Getting Started in Forming a Limited Partnership

Although you will need a partnership agreement and should get a lawyer to help you write that document, you can get started in forming the entity by completing and filing a Certificate of Limited Partnership. The Arizona Secretary of State’s office charges a filing fee of $10 plus $3 for each page. Other fees are listed on the office’s website.

The state accepts limited partnership forms at its office in person on weekdays from 8 a.m. to 5 p.m. The office is on the first floor of the Executive Tower of the State Capitol at 1700 W. Washington, between Jefferson and Adams. You can also mail the form to:

Secretary of State
Attention: Limited Partnerships
1700 W. Washington Street, 7th Floor
Phoenix, AZ 85007
The Secretary of State’s office also answers on its website’s FAQs.
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