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THE VALLEY BUSINESS JOURNAL 10 www.TheValleyBusinessJournal.com December 2020 Estate Planning: The Perfect Gift for the Holiday Season? As families gather for the holidays, it is traditional to offer gifts and celebrate the season together. If you are trying to think of the perfect gift for your family this year, you might consider making an estate plan or taking other generous steps. When you make a simple estate plan you ensure your family’s future and well-being, and that is a gift that will keep giving for many years. Create a Trust: A Current Gift that Has a Future Benefit If you make a trust today, that is a current gift that is stewarded for the future by the trustee. The trust can name one or more beneficiaries and can contain any type of asset. If you have minor children, the trust can provide for support and name a guardian, giving everyone peace of mind. Set Up a Family Foundation to Support Charity Another step to take that your family can be a part of is a family foundation, that manages funds for your favorite charities. This is something the whole family can be a part of, by selecting charities and deciding how to make gifts. Family Discussion About Personal Effects, Valuables and Heirlooms Depending on the age of your family members, the holidays can be the perfect time to talk about unique or sentimental property, and what preferences there might be. Then when you make your estate plan, you can designate those items for each heir, or you could even give them as gifts now for the holiday. Encourage Adult Children to Make Their Own Estate Plan Another gift that you can make is to offer to help your adult children to make their own estate plan, and even to fund the cost. Sometimes younger adults don’t think about estate planning, but at a minimum they should have an advance health care directive, which is essential for unexpected illness or injury. Cash Gifts You may also want to take advantage of the annual gift tax exclusion of $15,000 per family member, which is free from any gift tax. So, instead of leaving all of your resources in your estate, you can start to distribute it while you are alive. This can also help your estate tax planning also by lowering the overall value of your estate. If you have questions about giving the gift of estate planning this holiday season, please contact the attorneys at Shoup Legal, A Professional Law Corporation, at 951-445-4114 or www. ShoupLegal.com. SHOUPLEGAL.COM LEGAL by by Andrea Steve Fillingim Shoup “ If you are trying to think of the perfect gift for your family this year, you might consider making an estate plan or taking other generous steps. When you make a simple estate plan you ensure your family’s future and well-being, and that is a gift that will keep giving for many years.
December 2020 THE VALLEY BUSINESS JOURNAL www.TheValleyBusinessJournal.com 11 Do You Own an Inactive Business? Is it Time to Close it Before the End of the Year? Esther Phahla, CPA, CTS, MST With the end of the year fast approaching, it’s time to dissolve any inactive business to avoid having to pay extra fees and paperwork for 2021. When a business entity is no longer needed, has completed its business dealings, has completed its job in a foreign State, or even if it was never used for anything, it is very important that it follows the legal steps in “winding itself up” as a legal entity through dissolution or cancellation or if it is a foreign entity through withdrawal. All corporations, limited-liability companies, limited partnerships, limited-liability partnerships and other business entities are legal entities which can only be dissolved through formal action, not by a letter or phone call. You remain liable for all taxes, assessments, fines, penalties and interest until you receive a certificate of dissolution from the Secretary of State. Here are some of the requirements to legally dissolve a business with the IRS, State and Local authorities: 1. Hold a vote to dissolve the business: If the business was operating as a corporation or limited liability company (LLC), the shareholders or members need to approve the formal dissolution of the business. The first step is to hold a meeting to vote on shutting down the business; the final vote needs to be recorded in the meeting minutes. • For corporations: Two-thirds of the voting shares need to agree to close the business. If shares were never issued, then the corporation’s board of directors need to agree. • For LLCs: Specific rules vary by state and can be found in the state’s Limited Liability Company Act. Or, if you specified a dissolution procedure in your operating agreement, you’ll need to follow that procedure. 2. File Articles of Dissolution paperwork with the state: After the members, shareholders or board of directors vote to dissolve the business, the LLC or corporation will need to file the Articles of Dissolution or Certificate of Termination with the Secretary of State’s office wherever the LLC or corporation was formed. In addition, if you filed a foreign qualification to operate in another state, you’ll also need to close these foreign qualifications. To do so, you’ll need to file paperwork, such as, Certificate of Surrender of Right to Transact Intrastate Business, with that state’s secretary of state office. 3. Settle all debts: Before you can distribute assets among members or shareholders and put money in your own pocket, you need to settle any outstanding business debts. If your business owes any vendors, those accounts need to be settled and paid. 4. Collect accounts receivable: You should work to collect on any past due invoices before announcing you’ll be shutting down the business. It will be difficult to collect after it’s known the business will close. If necessary, an effective strategy is to offer a discount on any outstanding bills in order to collect as much as possible. 5. File Final Payroll Tax Returns: If you had employees, submit the payroll tax returns after you have paid them their final wages and salaries. 6. Submit Final State Sales Tax Forms: If you collected sales tax from your customers, find out what your state tax agency requirements are in order to close your tax account. Submit your final state sales tax forms with the tax that you have collected from your customers. 7. File the final tax return: When a business closes, it needs to notify the IRS. For LLCs and corporations, this is typically done by checking “final return” on the final tax return. In addition, the business will need to report shareholder allocations and losses for members on Schedule K-1. 8. Close all business permits and licenses: Another important step toward dissolving a business is to notify the local business authorities and cancel any business permits. If you don’t cancel these licenses, they’ll still be expected to be paid any associated fees. 9. Distribute the remaining assets: After taxes, debts and final payrolls have been paid, the business distributes the remaining money and assets among the business owners. LLCs distribute money and assets to members according to everyone’s proportional ownership share. Corporations distribute money and assets to shareholders based on the number of shares owned. By following these steps, you can properly dissolve a business with the state and IRS. If you have already moved on from the business, you should close it out before the end of the year to avoid having to pay unnecessary fees in 2021. Esther Phahla is a Certified Public Accountant and Certified Tax Strategist in Temecula. She is the Author of tax planning books: “ Why Didn’t My CPA Tell Me That” and “10 Most Expensive Tax Mistakes That Cost Business Owners THOUSANDS”. She also holds a Master’s of Science in Taxation. She can be reached at (951) 514-2652 or visit www. estherphahlacpa.com
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