Mark Briggs Arizona Attorney: Should I file bankruptcy for my small business?

Mark Briggs Arizona Attorney on BankruptcyShould you file bankruptcy for your small business? Mark Briggs Arizona Attorney helps answer the important and dreaded question.

No small business owner likes to admit that they are considering bankruptcy as an option for a struggling company they’ve built and nurtured. But, the sad fact is that about half of all startups will be closed within five years. Before you file bankruptcy, here are a few questions to ask yourself in hopes of salvaging your business.

Have you cut expenses as much as possible?                                                                               Draft a cash flow analysis and a new budget based on your current financial situation. Look at office space and utilities to see where you can reduce overhead. Discuss extended terms with your creditors, including landlords, vendors and suppliers – they almost always would prefer to be paid more slowly or at a discount than not at all.

Can you free up fast cash?                                                                                                                     Do you have slow-to-pay customers dragging you down? Step up your collections efforts. Also, sell off equipment you are not using.

 Have you prioritized your debt payments?                                                                                        As much as possible, pay down your highest cost debt first, so you minimize interest expenses. This could create some “preferential payment” issues in a future bankruptcy, but so long as you are making a good faith effort to keep your company afloat, you should have no big problem if you eventually have to file for bankruptcy.

Can you negotiate with creditors?
Be honest with your creditors about the tough financial situation your business is in. Inquire about a hardship plan or a reduced settlement option.

Can you consolidate your loans?
Try to consolidate several short-term loans into one long-term package to reduce your monthly nut and save on interest charges over the long term.

What if none of the above can keep the business afloat?                                                               If you have tried your best and it just does not work, you then have to consider how to best shut down your company. If it is an LLP, LLC or corporation, usually the best thing to do is just shut things down as quickly and reasonably as possible. Because your personal assets are probably not at risk, a bankruptcy is not needed as long as you have kept a clear distinction between personal and business finances and have not secured any of your debts with personal collateral, such as your car or house.

If you’ve been operating as a sole proprietorships or a limited or general partnership, your personal assets are probably at risk when you shut down the business. In this case, it is probably a good idea to considering a Chapter 7 total liquidation bankruptcy, or a Chapter 13 bankruptcy under which you remain in business with a structured repayment plan. If you are merely reorganizing the business debts and not your personal debts, which can be the case in partnerships, you can also consider a Chapter 11 bankruptcy.

Chapter 7 is the more likely option if your income and assets are low or nonexistent and/or your debts are large. Chapter 13 or Chapter 11 may be a better route if your debt is low and your income and assets have higher value, or if the business would be profitable when its debt payments are reduced.

Regardless of which path you decide to take out of your challenging financial situation, seek advice and support from a knowledgeable bankruptcy attorney to ensure you choose the best path.

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Mark Briggs Phoenix Attorney on Moving Your Business Overseas

Mark Briggs Phoenix Attorney: Relocating a Business or Operations Overseas

Your company has been developed over the years through a variety of business forms, perhaps morphing from a sole proprietorship to a partnership to corporation. In each phase, your company’s operations have been regulated by familiar state and federal laws, and your lawyers have helped you avoid any fines or regulatory problems. Now your management team is considering a move of the production line overseas, likely to take advantage of lower operational costs in labor, equipment, resources and taxes. These are all good reasons from a business perspective, but entering a different country’s legal environment can be a big mistake if done blindly.

American business operates under a very distinct set of rules and laws, as well as protections. These address both how businesses operation as well as their rights under the U.S. government system, including both federal and state. While many countries have similar rules to foster and enhance business environments in their own territories, the specifics of the rules and whom they benefit the most can be very different. Particularly in the area of rights and protections from government abuse, a number of countries can be very lax compared to American rules.

Labor-related laws and regulations are perhaps the biggest minefield for American companies with operations abroad. For example, although many foreign labor rules are far more lax than those in the U.S., a company can get beaten down in the public relations area for how they treat their workers, even if technically in compliance with local laws. Nike found this out the hard way with one of its factories in Vietnam. At the other end of the spectrum, some countries make it very difficult to terminate the employment of certain employees, and require companies to make payments and file forms not usually required in the U.S.

Another problematic legal area has to do with copyright and patent protection. A number of companies who have chosen to work with Chinese manufacturing suppliers have found their designs and products being counterfeited for cheap sooner after by, no surprise, Chinese companies. The aggressive enforcement of anti-counterfeiting in the U.S. is usually not mirrored by other countries.

Another historically worrisome problem for American countries with foreign operations involves political changes or instability. More than one big company that thought its operations were safe suddenly found themselves divested of assets due to a political change at the top in a foreign country. Hugo Chavez’s seizure of private oil refining interests in Venezuela was a prime example of how entire production systems can be lost in short order.

Again, companies should research overseas legal environments beforehand as much as they do cost control. Doing otherwise can be extremely risky for the bottom line.



Mark Briggs Phoenix Attorney on Deducting Expenses

Mark Briggs Phoenix Attorney on deducting expensesMark Briggs Phoenix Attorney Gets Savvy on Startups: Which Business Expenses Can I Deduct?

Startups are the biggest key to job growth, so if we lower their tax burden, the quicker our economy will add new jobs. Thankfully, the government has taken some major steps in this direction, by allowing the following tax deductions for expenses that startups normally would incur:

Initial Investigation

Creating a new business takes more than an idea – you have to do some investigation to make sure it is viable. This usually means spending months doing research and investigating: researching the market, comparing suppliers, assessing competitors, interviewing prospective employees and partners, finding space, and meeting with potential investors. All of this investigation can get expensive, and most businesses spend thousands of dollars before they open their doors. The good news is that you can deduct at least some of these investigative expenses “business startup costs” on your tax return.

Opening Operations

Once you’ve done your research and confirmed that your business will work, you’ll face a new set of costs setting up shop. These include the cost of training employees, consultant fees, paying wages to workers who begin their jobs before the business has revenue, and traveling to visit distributors and suppliers. Like investigative costs, these early operation costs fall into the category of “business startup costs,” and are also deductible, within limits.

Bureaucratic Burdens

Creating the legal structure of your business is another set of costs. These include professional services (i.e. legal and accounting) fees, licensing fees, franchise fees, and wages paid to temporary managers. These costs are also deductible, falling into a separate category of “organizational costs.”

Restrictions on Tax Relief

As a startup owner, you’re allowed to deduct up to $5,000 in organizational costs and another $5,000 in startup costs, but only if you pay $50,000 or less in total startup costs. Every dollar you pay over that amount is taken out of your deductions. If your startup costs are $51,500, for example, you are eligible to deduct only $3,500. If your startup costs exceed $55,000, you cannot claim a deduction at all.

If you qualify for a tax deduction, it may not be wise to accept it immediately. Instead, you can amortize the deduction, receiving a small portion of it every year for the next few years. Most businesses operate at a loss for their first few years before they generate profits, but amortization can balance out the difference, making your business profitable throughout the startup phase. As you can probably guess, this tax dance can get a bit tricky and I am not trying to give you a full explanation of the US tax code in this post. So, do yourself a big favor and hire a good accountant who can give you the advice you need to minimize your tax bill and stay out of the IRS’s cross-hairs.

Photo Credit: Chris Potter

Startup To-Do List by Mark Briggs Arizona Lawyer

Startup to-do list: Agreements, best practices and spending as told by Mark Briggs Arizona Lawyer

Mark Briggs Arizona Attorney on StartupsNow that you have made the decision about how your business will be structured it is time to get down to the nitty-gritty of preparing to open the doors. You probably have a lot of ideas but before you get started, it is important to take care of the basics of getting your business started off on the best possible foot. Let’s talk about some of the important items that should be on your startup to-do list.

  • Agreements– yes, contracts. While they may not be exciting, they are an important tool for your business. Business agreements for vendors, employees and even for those whom you plan to bring on as partners or key members of your management team. Your attorney can help you determine what agreements will help you ensure your interests are protected.
  • Best practices– hopefully you have taken the time to review what your competition is doing in the marketplace and you have learned some lessons. Exceptional customer service may be one of the most important services you can offer your potential clients, but in addition, you will want to make sure that you are following some of the best practices of the smartest people in your field. The plans you lay today will help determine how successful you will be in the future.
  • The spending crunch– you will have to deal with a number of issues regarding money when starting your business including paying invoices for services and products you purchase for others, meeting payroll and for everyday expenses. However, if your spending habits are not keeping up with your income, you could find your business venture is very short-lived. Initially, you may have to minimize your output, even if that means hiring fewer people, renting a smaller office or using other cost-cutting measures to keep your expenses lower until your income keeps up.

Starting a business is exciting and with the right amount of planning, can be very rewarding. Unfortunately, if you overlook what seem like small details like developing a spending plan, having the right contracts available for all aspects of your business and ensuring that you are competitive with those in a similar profession, you could be getting off to a bad start. Keep in mind; the attorney who helped you decide how to structure your business and helped prepare a plan for financing can be a great source of assistance in the early days and throughout the life of your business.

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Mark Briggs Phoenix Lawyer Answers: Should I form an LLC or LLP?

Mark Briggs Phoenix Lawyer Answers: Should I form an LLC or LLP?

Mark Briggs AttorneyAs a business owner, you have options available to you to legally protect your business and your personal assets depending on the type of structure you select. A Limited Liability Company, or LLC, is one of the most common options. You can also select a Limited Liability Partnership, or LLP. Both forms create legal entities for your business, separating your personal and business assets and debts. There are a few important differences to consider.

Business Liabilities Caused by an Action of an Owner

One of the main reasons to select an LLC or LLP is to provide personal asset protection from your business liabilities. However, LLC owners are sometimes not protected from liability that arises from the actions of another owner of the LLC. If there is more than one owner of the business, utilizing an LLP can be a better solution in some situations. For example, if your business partner makes a mistake on a project that creates liability for the company, other owners of the company could be at risk in an LLC, but probably not under an LLP.

Tax Differences

LLPs and LLCs are “pass-through” entities for tax purposes, meaning that the entity itself does not have profits or losses for tax purposes, and therefore does not pay income taxes directly. The entity passes through its profits and losses to its owners, who in turn are responsible for any income taxes related to those. An LLC can be taxed as a S or C corporation, sole proprietorship or partnership, depending on the circumstances and your preferences. An LLP can usually be taxed only as a partnership.

If you own your business by yourself, your business will typically not qualify to be any kind of partnership, such as an LLP. However, you can be the sole owner of an LLC. You should note that if you are the sole owner of a LLC, the IRS will classify the LLC as a sole proprietorship or as a “disregarded entity”. As such, you will be taxed as a self-employed person when it comes to the income from your business. So, some people make a friend or family member a small owner of their business to qualify as a LLP or be taxed as a partnership.

Other Differences

There are other differences to consider as well. State laws can differ between LLC and LLP rights and rules. And, the formation process for either type is slightly different. Percentage of control and voting rights may differ in these instances.

Which one is right for you? There is no single correct answer to this question. It will depend on a variety of factors such as the amount of income/losses the business will likely have, the number of owners, and the laws of the state in which your company does business. So, you should definitely discuss this issue with your lawyer and accountant before you make a decision. It can be quite costly if you make a bad choice and have to fix it later.

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Mark Briggs Attorney in Phoenix on Crowdfunding

Mark Briggs Attorney in Phoenix on Crowdfunding: Is it a gift or is it income?

Mark Briggs Attorney on CrowdfundingCrowdfunding can be a boon to startups, but it isn’t without its complications. Startups that receive crowdfunding money often have trouble determining their tax liabilities on crowdfunding dollars. To get the most out of your crowdfunding campaign, think through these issues.

Gifts or Gains?

The IRS has not yet explained whether money raised through crowdfunding qualifies as income or gifts, and startups are often unclear on how to report the money. This makes it hard for them to develop tax reduction strategies. In the absence of clear rules, most experts classify crowdfunding according to how closely it resembles regular transactions. Such funds are income if:

  • There is a tangible reward for contributing to the campaign
  • The reward has a concrete price on the market
  • The reward is proportional to the amount of money given
  • The amount of money received exceeds the cost of producing the reward

If It’s Income

If you classify your crowdfunding money as income, you must report it to the IRS and pay appropriate taxes on it. You can offset or even eliminate those taxes, however, if you spend the funds on viable business expenses. To get the most out of your deductions, make sure to:

  • Create a Spending Plan– Draw up a detailed explanation for what you plan to purchase with that money and how those purchases will contribute to your business. The more details you can provide for how a certain purchase helped your business, the easier it is to deduct it.
  • Time Your Campaign– Begin crowdfunding at the start of the tax year. The more months you have between receiving the income and paying taxes, the easier it is to spend all of the income on business costs.
  • Register an LLC– Don’t collect crowdfunding money in your own name. You’ll be defined as a sole proprietor and subject to self-employment taxes and other burdens. If you haven’t already registered your company as an LLC, do so before you begin crowdfunding and campaign in the company’s name.

If It’s a Gift

Recipients of gifts generally don’t have to pay taxes on them, but there are exceptions. If the people who donated to your crowdfunding campaign refuse to pay taxes on their donation, the IRS may try to collect the difference from your business. Consult a tax accountant or lawyer to make sure that your company’s crowdfunding gifts don’t come wrapped with a tax liabilities ribbon. I am not a tax accountant or a lawyer, so don’t rely on this short post as some kind of advice about how to classify your company’s crowdfunding dollars.

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Mark Briggs Phoenix Lawyer Answers: How do I get a trademark?

Mark Briggs Phoenix Lawyer Answers: How do I get a trademark?

Mark Briggs Phoenix Lawyer on trademarks

In today’s business environment, a trademark is one of the most important tools for organization to distinguish itself from the competition. A trademark is more than just a legally registered name, logo or phrase. It’s a feeling. It’s an emotion. It’s a brand. A good logo, name or phrase immediately calls to mind images of your company every time someone sees it. Creating this powerful symbol of your company is one thing, and protecting it is another. That is where the trademark legal process comes into play, and needs to be handled correctly. Although there is no requirement that you use a lawyer to help you acquire a registered trademark for your company’s logo, name or motto, I recommend you do so.

  1. Visit the United States Patent and Trademark Office Online

To begin the process of registering your trademark, start by visiting the official website of the US Patent and Trademark Office (“USPTO”). To help make sure that another organization hasn’t applied for a trademark that is very similar to yours, use the “Electronic Search System” feature to search for the competition. Remember that a trademark will always be granted to the first company who applies in a particular area. If there is already a company with your name in your area that has been granted a trademark, your application will be denied. This is a large part of why the research is so important. Sometimes the database at the USPTO is not completely up to date, or you cannot refine your search enough to be certain that you have looked at everything relevant to your search – especially when it comes to logos. Lawyers who practice in the trademarks area usually have subscribed to powerful databases that are more easily searched and come up with more complete results than you can do on your own. Also, interpreting those results and determining whether your mark is distinct enough to warrant a trademark registration is difficult to do on your own.

  1. Fill Out the Online Application

Once you’re sure that you’re applying for a trademark that nobody else has, fill out the online registration form on the USPTO’s website. You will be asked to provide detailed information about the trademark that you’re applying for, the type of business that you run and more. This is a relatively simple process on its face, but how you choose to describe your area of business and the use of your mark can dramatically impact the registration process. Again, this is something an experienced attorney could be helpful in doing for you.

  1. Pay the Appropriate Fees

Once you finish the online application form, you will need to pay the appropriate registration fees before you can continue. This will cost between $275 and $325 depending on the type of business you’re running, when you plan on using your trademark for work and the complexity of the application that you’re filing. Once the fee is paid, you can submit the application.

Once you’ve registered for your trademark, you have the legal protection necessary to help make sure that nobody can infringe on your brand in the future. That logo, name, phrase or other identifying information is now yours and yours alone. Thanks to your trademark, you can now get to work building the brand that you’ve always dreamed of and experiencing the soaring heights in the world of business that you truly deserve. It’s an opportunity waiting to be seized in every sense of the word. However, because this can be a critical element to building your brand, I recommend hiring a trademark lawyer to help you out. This is too important to fumble because you want to save a few bucks.

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Mark Briggs Phoenix Attorney on Crowdfunding

Mark Briggs Phoenix Attorney on Understanding Recent Crowdfunding Laws  

Mark Briggs Phoenix Attorney on Crowdfunding


Crowdfunding regulations must walk a difficult line. If they are too stringent, they’ll kill crowdfunding opportunities and associated jobs and wealth, but if they are too lax, they’ll leave millions of small investors vulnerable to risky ventures. Recent regulatory changes seek to capture the best of both worlds, offering increased opportunities without exposing investors to excessive risk.

Widening the Investment Pool

Regulation A+ of the Jumpstart Our Business Startups (JOBS) Act will let more investors take part in crowdfunding. Originally, only accredited investors, or investors with an annual income of at least $200,000 or a net worth of at least $1 million, could take part in crowdfunding ventures, but this law allows non-accredited investors to invest up to 10% of their annual income. Businesses are allowed to raise up to $20 million in crowdfunding investments from both accredited and non-accredited investors, and if a business submits to annual audits, it can raise as much as $50 million.

Platform Provisions

Besides attracting more investors, the JOBS Act will also regulate the platforms on which crowdfunding transactions occur. Title III of the law requires brokers to receive SEC registration before they can open up crowdfunding platforms. Brokers will not be allowed to handle investors’ funds or encourage investments in specific securities. They will also have to guard against fraud, offer channels for investors to discuss the available offerings, and provide the necessary educational materials for prospective investors to make informed decisions.

Altering Advertising Rules

The SEC has recently eliminated the prohibition on private offering advertising, allowing startups to promote their crowdfunding investment products over the radio, television, and social media. The SEC now requires businesses to register their offerings no less than 15 days before they begin to raise capital, and it applies more stringent regulations to the claims that companies make on Facebook, Twitter, and other sites. This makes it easier for startups to raise awareness of their ventures and attract new investors, but it also forces them to be more careful about their social media posts, as any misleading investment claims are now cause for legal action.

As a major source of capital for cash-strapped startups, which generate almost all of the economy’s net job growth, crowdfunding is essential for promoting long-term employment. If implemented as intended, these legal changes should expand crowdfunding opportunities while keeping investors safe, strengthening the economy and providing millions of new jobs. If your company is interested in using crowdfunding as a source of capital, I encourage you to find a good corporate finance lawyer in your area who can help you with the details of doing it right.

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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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