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When the calendar flips, it’s time for business owners to consider their resolutions for the new year. As the business landscape is constantly changing, every year brings a new round of challenges. That’s true for 2024, as well, so here are some tips from a Houston business attorney on a few important New Year’s resolutions for business owners to consider to ensure your company is in good shape heading into the new year.

Resolution 1: Prepare for the Corporate Transparency Act

The Corporate Transparency Act (CTA) will go into effect on January 1, 2024. Once in place, the CTA requires business owners to file a Beneficial Ownership Information (BOI) report to the Department of the Treasury’s Financial Crimes Enforcement Network (FinCEN). Each BOI must include personal information about the company’s “beneficial owners” – people who have a direct or indirect ownership stake in the company. Anyone who owns at least 25 percent equity in the business or has a say in major operational decisions is considered a beneficial owner. The definition is broad and open to interpretation.

Resolution 1.1: CTA Reporting Requirements for Small Businesses

All limited partnerships, LLCs and incorporated business entities formed in the U.S. must file a BOI, with few exceptions. Banks and tax-exempt entities are exempt. Large companies with more than 20 employees and at least $5 million in gross receipts are also exempt.

If your business is not exempt, it must file a BOI that includes the name(s), address(es), birthday(s) and ID number(s) of all beneficial owners. This information is also needed for the company’s “applicants.” These are the people inside your business responsible for filing the BOI. This includes the person directly filing the BOI, as well as anyone directing the filing.

Reporting companies may request a unique FinCEN ID number from the department and use this in lieu of a beneficial owner’s or company applicant’s information. This can expedite filing time and any changes to the BOI once it’s filed.

Companies formed prior to January 1, 2024 will have all of 2024 to file their BOI. That gives qualifying business owners time to sort out their information. Unfortunately, there is still some uncertainty regarding the filing process. Guidance in this area remains limited.

As of now, consider reaching out to a reputable business attorney to start planning and taking the right steps toward CTA compliance.

Resolution 2: Verify That the Business Insurance Still Provides Adequate Protection

The beginning of the year is a good time for small business owners  to review their insurance. Many policies expire at the start of the year and many businesses plan their fiscal year in January, so it’s a natural opportunity to identify and resolve any insurance needs.

If your company experienced significant growth in 2023 and acquired new employees, real estate or equipment, your current insurance coverage may not be sufficient. Put together an inventory of the company’s assets, determine their value, and verify that the items in question are covered by your current policies. If your coverage is insufficient, expanding your policy will protect from potential liability.

This extends to the type of insurance coverage your business currently has in place. For example, if your company has a vehicle titled by the business, you’ll need a business auto policy – not a personal policy – to easily file a claim.

Cyber liability policies are also growing in popularity. Cyberattacks can halt a company’s operations and expose sensitive customer information. Small businesses are particularly at risk according to a study by the Ponemon Institute. The study found that nearly 60 percent of small businesses have experienced a data breach after being targeted for a cyberattack. A cyber liability policy would provide some financial protection in this case.

Resolution 3: Assess the Company’s 2023 Performance and 2024 Goals

Did your organization hit its business goals in 2023? If so, what did it do right to meet those goals? If not, what changes can be made to ensure success in 2024?

These are easy questions to ask, but you’ll need an in-depth performance review to answer them. Did your sales meet your company’s goals? Did excessive overhead undercut your revenue? Where can costs be trimmed to balance out your budget? Are there products or services your business could add to its portfolio? Are there products or services that could be eliminated for cost efficiency reasons?

Look at your customers and determine which ones were the most (and least) profitable to deal with. This can help your business identify what an “ideal” customer looks like, giving your team an idea of where the best opportunities are.

In short, determine what your organization should do and should stop doing to improve its profitability.

Resolution 4: Update Your Business Plan

Business plans are a living part of your organizational strategy. Business plans are essential for business preparation and formation, but they remain relevant even after your company opens its doors.

If it’s been a while since your business plan was updated, it’s time to give it another look, especially if you’re expecting to take on additional investors, pursue a business loan, or add to your ownership group. Your business plan is essential in determining the company’s value to outside parties.

Business plan analysis and evaluation is still recommended, even if major financing or ownership decisions aren’t imminent. Updating your plan with current financial information, competitor analysis, and productivity goals can set the right course for companies going into 2024.

Resolution 5: Update Your Marketing Plan

Your company’s marketing plan may be part of its business plan or placed in a separate document. In either case, marketing plans deserve their own review and update. The goal here is the same – identify and reinforce what works and pull back on what does not work.

Research shows that businesses weather economic ups and downs better if they remain invested in their marketing. Whether your current marketing strategies are providing ROI, that is another question. You won’t know for sure unless your marketing plan is given a close look. Determine which of your marketing initiatives provided the best return and allocate more of your resources in that direction. Cut back on the marketing processes that didn’t work out.

A Reputable Houston Business Attorney Can Help Business Owners Prepare for the New Year

2024 is almost here, which means it is time to assess your company’s direction. The above tips are a good start but be sure to keep your timelines in mind. It can take weeks to update a business plan, establish reporting procedures, or review insurance options.

Your Houston business attorney can help your business with all of the above. That includes providing important insight, pushing processes forward, communicating with outside parties and ensuring reporting accuracy. In this way, a trusted Houston attorney can keep your business on track with its New Year’s resolutions.

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The best gift an Houston attorney can give is good, free legal advice. In the spirit of the Holiday season, we’ve put together some important estate planning, business ownership tips from a Houston business attorney , and general legal advice that can help with common legal questions.

Free Legal Advice 1: How to Set Up an Advance Directive to your Physician on Your Own

“Who will make my medical decisions if I’m incapacitated?”

We all have preferences regarding medical treatment, including what treatments to administer and when to administer them. These preferences can be communicated in an advance directive, also referred to as a directive to physician.

If you have a physician’s directive in place, your medical team will be required to follow your wishes regarding administration and withdrawal of life-sustaining treatment. If you become incapacitated or otherwise unable to make your own medical decisions without a directive in place, family members will have to make these decisions instead.

Advance directives are recommended for people with terminal health issues, where life-saving procedures may only delay death for a short time and cause excessive discomfort.

The attorneys at the Hap May Firm include physician directives in the estate planning package, but directives can be set up without an attorney’s guidance. In Texas, the relevant form is available on the state’s health and human services website. You’ll need a couple of witnesses present when you fill out the directive and a notary public to complete the process.

Once the physician directive is filled out, give a copy to loved ones, your primary care physician, and any individuals involved in medical treatment. Keep a copy for your own records, ideally in a secure place like a safe.

Free Legal Advice 2: How to Name a Beneficiary for a Vehicle in Harris County Texas

“Who will get my car when I pass away?”

Estate planning isn’t just for people with considerable assets and numerous beneficiaries. For example, most people own a vehicle, and that vehicle must be passed to another person if the original owner dies. In most cases, this is a spouse or adult children – the people you’d probably name first as beneficiaries.

However, the legal process involved in property transfers like these, known as probate, is expensive and time consuming. It may cost more than the vehicle itself is worth.

To prevent a vehicle from getting tied up in probate, Texas now allows vehicle owners to specify a beneficiary and update their vehicle title to include the beneficiary. In effect, any named beneficiary may continue using the vehicle after the original owner dies.

There are two documents needed to complete this process. They include:

• Beneficiary Designation for a Motor Vehicle –

This form is available through the Texas Department of Motor Vehicles website and is quick to fill out. You’ll need the vehicle identification number (VIN) and the beneficiary’s full legal name. When filling out this form, you may name a new beneficiary, change the beneficiary, or revoke all beneficiaries, meaning no one receives the vehicle when you die.

• Application for Texas Title or Registration Form –

You’ll also need the VIN and an ID to update the vehicle title. When sending in the form, make sure to apply for a title only and to state your reason for correcting the title and registration. In this case, you’ll state “beneficiary designation” as your reason.This form tells the DMV to include your beneficiary’s name on the title so they can continue using the vehicle should you pass away.

Once these forms are filled out, send the forms (along with a title application fee) to a county tax assessor-collector. They will eventually send a copy of the new title back with the beneficiary’s name included.

Free Legal Advice 3: How to Maintain Best Communication Practices

“How do I avoid accidentally saying something that could cause potential legal damage to myself or my company?”

In professional settings, a fundamental but often breached rule of communication is to say only what you need to say. This is especially true for anything put in writing, including texts and e-mails. In fact, this is a good practice to extend in all areas of your life where you are interacting with those outside your circle of trust. What you say through texts or e-mails is not private and may be used against you or your company. That information can be subpoenaed by a court, and if your signature line is present, it has the same power as writing your physical signature on paper. In other words, and especially relevant to business owners and professionals, anything you state in an e-mail is potentially legally binding if your signature line is present.

When professional communications cause legal blowback, it’s almost always because someone said more than they needed to. If you’re a business owner or represent the business through communication, maintain a neutral tone and do not say more than is necessary. Do not make accusations, resist being humorous and say exactly what you mean with a neutral tone.

Is the other party pressuring you for a quick response? Allow yourself the time to craft an appropriate response. Our free legal advice is if you’re drafting an important e-mail, or even brainstorming what needs to be said in an email that requires precise language, send a brief e-mail first to the recipient stating that you’re working on a follow-up communication with greater detail. This will give you time to get those details right before committing to anything in writing. The same advice goes to those dealing with extended family, ex-spouses, or anyone you may be dealing with in the community who expects some kind of commitment from you in writing. Don’t worry, we are not telling you to mince words or delay responses to your current spouse or children. Claims against household and nuclear family are limited in Texas. So, your daughter can’t sue you for promising to give her your car via text. But getting into the habit of practicing thinking before communicating, not making promises you can’t keep, and managing expectations is just general good advice no matter the parties involved or the circumstances.

Free Legal Advice 4: The Risks of a DIY Legal Approach: Working without an Attorney 

There are some legal processes a knowledgeable individual can handle on their own. However, there are advantages to hiring an attorney even when one isn’t strictly required. For example:

• An attorney will ensure the legal work is correct

Estate planning and probate lawyers, as well as tax and business attorneys spend much of their time reviewing and developing legal documentation for their clients. They can be trusted to do the job reliably. If you’re intimidated by managing the process yourself, a trusted attorney can oversee the process.

• An attorney can save their client time

It may not be a question of competence, but of time. Researching your legal options, tracking down the right forms, filling them out accurately, sending them in to the right agencies and tracking the process until it’s resolved takes time you may not have. If your schedule is a major consideration, it may be cost effective to hire an attorney even if you could DIY the process.

• Houston attorney can provide long-term legal plan –

Attorneys know how to formulate a long-term plan for their clients. If you know additional legal decisions and questions will need answering in the future, an attorney can help answer them. In this way, your attorney will ensure your future goals are aligned with the steps you’re taking in the present.

 Need More Than Advice? Schedule a Free Consultation with a Trustworthy Attorney in Houston

If you’re facing important legal decisions or need ongoing attorney services, consider scheduling a consultation with a reputable attorney. During this consultation, the attorney will identify what legal services your situation will require, and whether the firm is equipped to provide those services. Whether you require an extensive estate plan, are looking to form a business, require tax planning services or have other legal needs, they can be properly assessed during a consultation and help you determine the next steps

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It’s the giving season, and for most of us, gift giving doesn’t come with notable tax ramifications. However, for those planning on handing out particularly generous gifts, additional planning may be necessary to account for taxes – gift taxes, specifically.

Here, Hap May our tax attorney,  will address what to expect with gift taxes, whether your gift is taxable, and what people can do to reduce any tax liabilities associated with gift giving.

The Legal Definition of a Gift 

 To be considered a gift for taxation purposes, the transaction in question must include the following three elements:

• Intention – To meet the legal definition of a gift, whatever you give must be given freely, without expectation of a return. To put it in holiday terms, if you’ve gone to the store to buy a new pair of earrings (or necktie) for your spouse, you’ve satisfied the intention prong of the definition. 
• Delivery – Delivery means you’ve given over possession of the gift to the receiver. This could be physical possession, as in you’ve wrapped up the gift and put it under the tree. It could also mean constructive possession, as in you’ve given control of the gift to the other person, even if they don’t currently possess it physically. 
• Acceptance – Acceptance means the other person claims possession of the gift, without obligation of any return. When your spouse opens their new pair of earrings (or necktie) and shows delight, they have expressed acceptance.

If intention, delivery, and acceptance are all expressed when you hand over the present, you’ve provided a gift from the IRS’s perspective. That’s when tax laws kick in.

What is and is not considered a taxable gift by the IRS? 

Even if a gift meets the above definition, that doesn’t automatically mean that the IRS will tax it. There are several exceptions to the IRS’s own rules, as the following gifts are not taxable:

• Gifts to a spouse
• Education expenses
• Medical expenses
• Gifts to a political organization

Broadly speaking, anything not covered by the above is a taxable gift. That includes cash, property, real estate, and securities.

Gift Taxes: Rates, Annual Exclusions and Lifetime Exclusions

Gift tax rates are governed by the gift’s value. The greater the value, the higher the rate. Assuming you have exceeded your exclusions (as explained below), gift taxes start at 18 percent and increment up to 40 percent. The very first dollar over your exclusions is taxed starting at 18 percent, and the rate increases as the value of the gift increases. The top bracket (40 percent) starts when a gift’s value exceeds $1 million.

For the majority of people, gift taxes are rarely a cause for concern due to the annual and lifetime exclusions. Until these exclusions are exceeded, you’ll owe zero tax on the gifts you give out. Here’s how each exclusion factors in:

• The annual exclusion – For 2023, the annual exclusion is $17,000 per recipient. In other words, you can give $17,000 to any one person before the annual exclusion is exceeded. Because this is an annual exclusion, it resets when the tax year rolls over. For 2024, the exclusion will increase to $18,000. So, you could give your best friend $17,000 in 2023 without reporting it to the IRS, and then give that same friend $18,000 in 2024 without reporting it to the IRS.And because this is a per person exclusion, you could give $17,000 each to multiple people without triggering the exclusion limit.

  For married couples, the annual exclusion limit is essentially doubled. For 2023, a married couple may gift a total of $34,000 between them to any single individual before exhausting both spouses’ annual exclusion limits.

  Any amount over the annual exclusion is then subtracted from the taxpayer’s lifetime exclusion.

   

• The lifetime exclusion – Just because a taxpayer exceeds their annual exclusion, that doesn’t necessarily mean they start paying gift taxes. First, the taxpayer’s lifetime exclusion must be exhausted. For 2023, this limit was set at $12.92 million. In 2024, it’s set to go up to $13.61 million.If your gift to an individual exceeds your annual exclusion, any excess is subtracted from your lifetime exclusion. Unlike the annual exclusion, your lifetime exclusion is not based on a per-individual basis. Put another way, if you give $20,000 to one friend and $20,000 to another, you’ve exceeded the per-individual annual exception by $3,000 with two people. As such, a total of $6,000 will be deducted from your lifetime exclusion.

As you can see, gift taxes are generally a concern for those with high-value assets or estates.

How to Reduce Taxes When Giving Large Gifts 

 The key to minimizing gift taxes is planning in advance. If you’re expecting to leave behind a large estate, or other considerable assets, planning early will allow more of your assets to pass to loved ones without the IRS getting involved. Specifically, most gift tax strategies involve the following:

• Gift splitting – Instead of waiting and handing over a large gift in the future – one that will easily exceed your annual exclusion – consider giving smaller gifts over many years. If you are married, ensuring gifts are made in both spouses’ names can double the value of your gifts, allowing people to transfer a lot of wealth tax-free, if the annual exclusion is fully leveraged year over year. 
• Special trust instruments – Individuals can provide gifts in excess of the annual exclusion without paying taxes by establishing a special kind of trust – the Crummey trust. Named after the attorney who first developed the instrument, the Crummey trust skirts around the IRS’s “present interest” requirement for a gift to be considered a gift. That’s because the funds placed in a Crummey trust may be accessed by the beneficiary for a short time, satisfying the intention and delivery prongs of the IRS’s definition of “gift.”There are also provisions in some 529 education savings plans that allow gift givers to spread the value of their 529 plan gift over multiple years. This can help taxpayers stay under the annual exclusion.

 If You’re Unsure of the Laws of Gift Giving, a Reputable Attorney Can Help Clear Up Questions 

The above tax strategies can be complicated without a precise estate planning vision in place. A trusted tax and estate planning attorney can provide valuable insight in this area, helping estate owners gift what they want to who they want, with minimal tax ramifications.