Frequently Asked Questions

1. What type of business entity should I use to operate my business?

The answer to this question depends on various factors: What type of business are you operating? How many owners are there? Do you require flexibility in distributing cash and profits to the owners? During our initial consultation I will explain each type of entity, the various legal and tax ramifications of each and assist you in choosing the entity that is right for you and your business.

2. Which is better, a will or trust?

The answer depends on your individual situation. A will is generally less complicated and costs less. A trust requires you to transfer and keep your assets in the name of the trust. A trust takes more time and costs more, but assets in a trust do not go through probate.

3. Does a Revocable Living Trust avoid inheritance taxes?

No. While a trust will avoid probate on the assets owned by the trust, it will not in itself reduce or eliminate any federal or state inheritance taxes that may be owed.

4. What is the difference between a Chapter 7 and Chapter 13 Bankruptcy?

In a Chapter 7 proceeding the bankruptcy trustee will take possession of your assets (except those specifically exempted by state or federal law) and liquidate them to satisfy your debts. After that most of your debts will be discharged and you will no longer be responsible for paying your creditors. In a Chapter 13, you get to keep most of your assets and you enter into a payment plan which is typically 3 to 5 years in length. After the plan obligations have been met, most of your debts will be discharged.

The Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 has significantly changed the bankruptcy law making it more difficult for petitioners to qualify for a Chapter 7 proceeding. Most of the provisions of this law take affect on October 17, 2005.

The best course of action for your situation will be discussed in our initial consultation.

5. What is the difference between a limited liability company and a corporation?

An LLC is a company owned by one or more members. By statute, members of an LLC are granted some liability protection from LLC debts and activities. An LLC can be taxed as a corporation, S Corporation, sole proprietorship or a partnership. A corporation is an entity owned by one or more shareholders who generally have liability protection from corporate activities and debts. A corporation is taxed either as a C corporation (taxable entity) or as an S Corporation (income taxed at the shareholder level.)