BUSINESS AND BUSINESS OWNER YEAR-END TAX-PLANNING STRATEGIES SHOULD BE REVIEWED IN NOVEMBER FOR 2015

November 5, 2015

BUSINESS AND BUSINESS OWNER YEAR-END TAX-PLANNING STRATEGIES SHOULD BE REVIEWED IN NOVEMBER FOR 2015

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by: Jeffrey M. Fetter



Although there is still no guidance from Congress on when or whether there is going to be Extender Legislation this year, you may want to be prepared in case Congress does bless us again with another round of temporary tax legislation that has been beneficial to the business community over the past few years. “Extenders” included 50% bonus depreciation for machinery, equipment, software, and other specified assets as well as a renewal of higher Section 179 limits for the same types of assets – – presently the Section 170 deduction is at $25,000 for the 2015 tax year (the same as it was in 2014 before being extended in the closing weeks of the year). Some of the Extenders may be enacted retroactively, but no guarantees exist as to whether there will be any Extender Legislation at all, whether it will be the same as 2014 or whether legislation will be a piece-meal basis.


Regardless of what, if any, new legislation we see, there are a few 2015 tax-saving strategies that may be of benefit to your businesses and possibly yourself as well. Conversations should take place early with your tax advisors. On the New York State front, ensure that you have your plan in place to take advantage of the Manufacturer’s Real Property Tax Credit of credits for applicable R&D. If you have started a new business here in New York State this year, check out the Start-Up New York website to see if there are any benefits available to you or your business operations at www.startup.ny.gov.


On the Federal side, any equipment or machinery purchased before year end still qualifies for the half-year convention for depreciation purposes and, if placed in service, may be eligible for any benefits that may come along from Bonus Depreciation or increased Section 170 deductions. Looking at whether income should be accelerated into 2015 or deferred into 2016 is always important. With many businesses this year, it may still be beneficial to pre-pay certain expenses in 2015 as well. But, with any planning that involves prepayments, keep in mind that deductions taken in 2015 are not available in 2016 – you need to determine the planning option that is more beneficial to you which may require using the Crystal Ball approach to planning (e.g., are you carrying NOLs that could be used against income this year if income was accelerated). 


Corporate AMT presents different challenges for those businesses that qualify for the small corporation AMT exemption. Although there is no benefit to accelerating income into 2015 for the small corporation AMT exemption, it may be worthwhile to review whether the deferral of income into 2016 could secure the exemption for 2015. Are purchase or sale of interest transactions warranted within an LLC or partnership business that could result in “new basis” for depreciation going forward? There are other benefits that may be applicable to your particular industry and the time to get the attention of your tax advisor may be in November, rather than December, so that proper planning strategies can be reviewed.


If you have any questions, or if we may be of any assistance in your year-end planning, please let us know. 

Important Notice for New York State LLCs

August 8, 2024
By: Nicholas J. Graham, Esq. Limited Liability Companies ("LLC") have been authorized in New York since 1994. When the law was first enacted, an LLC could not have perpetual existence like corporations. This limitation was removed in 1997. If your LLC was established under the old New York State law that imposed a 30-year lifespan, it's crucial to be aware of the approaching expiration of your company's duration. Originally, LLCs in New York were required to specify a limited duration, commonly set at 30 years. Many of these companies are now reaching the end of this period and must take action to continue operating. Special attention should be given to LLC's formed between 1994 and 1997, as they were likely established with a 30-year lifespan. What Has Changed? The law in New York has evolved, and LLCs are no longer bound by the 30-year limit. Pursuant to NY LLC law §701(1), businesses now have the option to exist perpetually, providing greater flexibility and stability for long-term planning. However, this change is not automatic for existing LLCs that were originally set up with a 30-year term. What You Need to Do To ensure your LLC can continue its operations beyond the original 30-year term, you need to file an amended Articles of Organization with the New York Department of State. This amendment should update the duration of your LLC to perpetual, or to another term if desired. Steps to Amend Your Articles of Organization: Prepare the Amendment: Draft an amendment to your LLC's Articles of Organization. This document should clearly state the new duration of the LLC, typically set to "perpetual." File the Amendment: Submit the amended Articles of Organization to the New York Department of State. This can usually be done online or by mail. Ensure that you include the necessary filing fee. Update Internal Documents: Reflect the change in your LLC's operating agreement and any other internal documents to ensure consistency and compliance. Notify Members and Stakeholders: Inform all members and relevant stakeholders of the change to ensure everyone is aware of the updated status of the LLC. Why It Matters Failing to update your LLC’s duration could result in the automatic dissolution of the company once the original 30-year term expires. This could lead to significant disruptions in business operations and potential legal complications. By taking proactive steps to amend your Articles of Organization, you can ensure the continuity of your LLC and take advantage of the flexibility offered by the current laws. Need Assistance? The Scolaro Law Firm specializes in helping businesses navigate changes in regulatory requirements. If you need assistance with amending your Articles of Organization or have any questions regarding your LLC's status, please contact us. Our experienced team is here to provide the guidance and support you need to keep your business running smoothly. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.

SMB M&A SERIES: Financing Business Acquisitions

July 23, 2024
By: Nicholas J. Graham, Esq. The SMB M&A series provides insights into buying and selling a small business. For business buyers looking to acquire a small business, securing the right financing is often a critical step. The U.S. Small Business Administration (SBA) offers two popular loan programs that can be invaluable in this process: the 7(a) loan and the 504 loan. These loans are available through local lenders and are partially guaranteed by the SBA, reducing the risk for lenders and making it easier for small businesses and entrepreneurs to obtain financing. Both programs provide favorable terms that can make acquiring a business more achievable. Here’s a closer look at how each can be used, with a particular focus on the flexibility of the 7(a) loan, as it is more commonly used for business acquisitions. The SBA 7(a) Loan Program The 7(a) loan program is the SBA’s most popular and flexible loan option. It is designed to help small businesses and entrepreneurs obtain financing when they might not be eligible for traditional financing options. Here are the key advantages and uses of the 7(a) loan for business acquisitions: 1. Broad Eligibility and Use of Funds: The 7(a) loan can be used for a variety of purposes, including purchasing a business which can include goodwill, buying out partners, acquiring real estate, and refinancing existing debt. This flexibility makes it an ideal choice for business acquisitions where the buyer may need to cover multiple types of expenses. 2. Favorable Terms and Conditions: 7(a) loans offer competitive interest rates, long repayment terms (up to 10 years for business acquisitions), and lower down payment requirements compared to conventional loans. These favorable terms can ease the financial burden on buyers and improve cash flow during the critical early stages of ownership. 3. Working Capital Inclusion: One significant advantage of the 7(a) loan is the ability to include working capital in the loan amount. This can provide new business owners with the necessary liquidity to manage day-to-day operations, especially important during the transition period post-acquisition. 4. Collateral Flexibility: While the SBA prefers loans to be fully collateralized, a 7(a) loan can still be approved even if sufficient collateral is not available. This can be a major benefit for buyers who have limited assets to pledge. The SBA 504 Loan Program The 504 loan program is another powerful financing tool, primarily focused on fixed assets such as real estate and equipment. It involves a partnership between the SBA, a Certified Development Company (“CDC”), and a private lender. Here’s how it works for business acquisitions: 1. Structured Financing: A 504 loan typically consists of three parts: a loan from a private sector lender covering 50% of the project cost, a loan from a CDC covering up to 40%, and a 10% down payment from the borrower. This structure can reduce the amount of equity the buyer needs to provide upfront. 2. Long-Term Fixed Rates: The 504 loan offers long-term fixed interest rates, which can provide stability and predictability for business owners. This is particularly beneficial when acquiring property as part of the business purchase. 3. Real Estate and Equipment Focus: While the 504 loan is less flexible than the 7(a) loan in terms of eligible uses, it is ideal for acquisitions that involve significant real estate or heavy equipment investments. The ability to finance these assets over a long term with a fixed rate can be a strategic advantage. Conclusion Navigating the complexities of financing a business acquisition can be challenging, but SBA loans offer valuable tools to help buyers achieve their goals. The 7(a) loan’s flexibility and broad eligibility make it a particularly attractive option, while the 504 loan’s fixed-rate, long-term structure provides stability for significant asset purchases. However, to truly capitalize on these advantages, it's essential to structure the transaction properly and adhere to all eligibility criteria and regulatory requirements. With careful planning and compliance, SBA loans can provide the financial support needed to successfully acquire and grow a business. If you’re considering buying a business and exploring SBA loan options, our experienced M&A team at Scolaro Fetter Grizanti & McGough, P.C. is here to help. Our team handles small business M&A transactions throughout New York State, Vermont, Pennsylvania and Florida. This article is intended to be for informational and discussion purposes only and is not to be construed as legal advice or as a legal opinion on which certain actions should or should not be taken.