Haik Chilingaryan | TaxConnections

27 Nov 2018

5 Fundamentals Of Limited Liability Corporations

Haik Chilingaryan - Anatomy of Limited Liability Corporation

A Limited Liability Company (“LLC”) is a hybrid business entity which contains elements of a partnership and a corporation. LLCs consist of members and managers. An LLC may provide tremendous benefits for its members, which include asset protection, intergenerational transfers, tax saving strategies, wealth preservation, flexible management structures, and clarity on the roles of all essential parties involved in the company as set out in the Operating Agreement.

The following five concepts are fundamental for establishing an LLC: Asset Protection, Intergenerational Transfers, Tax Saving Strategies, Management, and Funding.

Asset Protection

Generally, the more assets a person owns in one’s name, the more likely it is that he or she will be a target mark for creditors. This is why it’s good practice to own as little as possible in your own name. In order to accomplish this goal, it’s important to evaluate the types of asset protections tools that are available to you. An LLC is one such tool that is effective for asset protection purposes.

For creditors of the LLC itself, a member’s personal liability will generally be limited to the amount of the member’s investment in the LLC unless the member personally guarantees the transaction in question.

Written by Haik Chilingaryan | Posted in Anatomy Of Limited Liability Corporation

06 Nov 2018

Estate Planning – Here Is What Can Happen Without An Estate Plan

Haik Chilingaryan - Pass-Through Entities

Let’s begin by debunking an age-old myth that somehow estate planning is only pertinent to those people who have a significant amount of wealth. There are many compelling reasons for anyone to have an estate plan. One such reason is to prevent the courts from making decisions on your behalf, especially in such a manner that you would probably not want to be made in the first place. In addition to overriding your wishes, the court proceedings may come with a heavy price tag and take a very long time before all the dust settles.

In essence, effective estate planning solves matters of life and death. It allows you to decide who will make health care and financial decisions in the event a mental or physical condition renders you disabled or incapacitated. It also allows you to determine who will inherit your assets and when those assets will be inherited. Similarly, estate planning allows you to determine who will inherit your business in the event you are disabled, incapacitated or dead. It also provides you with the tools you need to protect your children and any family members with special needs.

Written by Haik Chilingaryan | Posted in Haik Chilingaryan

01 Nov 2018

New Tax Laws: New Deduction For Pass-Through Entities

Under the new tax laws (“TCJA”), there is a new deduction available to owners of pass-through entities. Section 199A of the Internal Revenue Code allows owners of pass-through entities to deduct up to 20% of their business income from their income taxes. The first portion of this article provides an overview on the various types of pass-through entities that are included under Section 199A. The second portion of the article provides an analysis on the conditions that the owners of pass-through entities must satisfy in order to qualify for the 199A deduction.

PASS-THROUGH ENTITIES

For purposes of Section 199A, the following entities are entitled to the deduction: sole proprietorships, partnerships, limited liability companies, S corporations, trusts, and estates. The most distinguishing characteristic of pass-through entities is that the entities themselves generally do not pay tax. Instead, all of the earnings and expenses are passed through to the owners who pay the taxes on their individual tax returns. The sections below provide an overview on the general characteristics of each type of pass-through entity.

Written by Haik Chilingaryan | Posted in Passthrough Entities • Tax Reform

02 Oct 2018

New Deduction For Pass-Through Entities

Haik Chilingaryan- Tax Deductions For Passthroughs

PASS-THROUGH ENTITIES

Written by Haik Chilingaryan | Posted in Passthrough Entities • Tax Cuts and Jobs Act

04 Sep 2018

Taxation Of Corporations (Part 2)

(Continuation of Taxation Of Corporations, Click Here For Part 1)

WHAT STANDARDS APPLY TO S CORPORATIONS?

An S corporation is a pass-through entity. Even though both partnerships and S corporations are pass-through entities – unlike partnerships – shareholders of S corporations do not have the ability to form advance agreements in order to allocate the entity’s profits and losses. Instead, all of the earnings and expenses pass through to the shareholders based on their percentage of ownership in the corporation.

Requirements For Qualification And Compliance

In order to qualify as an S corporation, the entity must meet the following requirements: (1) it must be a domestic corporation; (2) it generally cannot have more than 100 shareholders; (3) it must have only one class of stock; (4) the business must satisfy the definition of a small business corporation under Section 1361 of the Internal Revenue Code; and (5) shareholders that are individuals must generally be U.S. citizens or residents (shareholders that are corporations or partnerships are generally excluded).

Written by Haik Chilingaryan | Posted in Taxation Of Corporations

31 Aug 2018

Taxation Of Corporations – C Corporation And S Corporation (Part 1)

Haik Chiningaryan - Taxation Of Corporations Part 1

There are generally two ways corporations may be taxed under the federal rules. By default, a corporation is taxed under Subchapter C of the Internal Revenue Code. However, a corporation may instead elect to be taxed under Subchapter S of the Internal Revenue Code.

The selection of a certain type of entity structure or election of a particular tax status is an individualized decision that will depend on the characteristics of the business itself and the business owner’s surrounding circumstances. In one aspect, there may be certain advantages in choosing one type of entity or tax structure over another, while there may be disadvantages in another aspect. For example, in the context of investment real estate, it is sometimes preferable for the property to be held by an LLC rather than a corporation. Whether a corporation should refrain from making the ‘S’ election and continue to be treated as a C corporation or in fact make the ‘S’ election and become subject to the rules that govern S corporations is a decision that should be guided by a qualified advisor.

WHAT STANDARDS APPLY TO C CORPORATIONS?

Written by Haik Chilingaryan | Posted in C-Corp

08 Aug 2018

Estate Planning In A Nutshell

Haik Chilingaryan, Estate Planning Tax Lawyer, Los Angeles, CA

What Is Estate Planning?

An estate plan includes trusts, wills, health care directives, financial directives, guardian designations, and living wills. However, proper estate planning does not merely include the delivery of these documents, but the process of identifying the objectives sought by our clients and putting in place the strategies that help them achieve their goals. Thus, estate planning primarily consists of the advice and guidance that you get from a professional who can be a steward in the preservation of your wealth.

In a nutshell, our firm takes the comprehensive approach to estate planning, which includes not only the methods in which a person’s assets are distributed upon death, but also the implementation of strategies that preserve the most amount of wealth during one’s life. It follows that the most amount of wealth that can be preserved during one’s life can increase the overall value of the estate, which the beneficiaries will receive upon one’s death. Our firm also uses the various tools available in the legal realm in order to protect the assets of our clients from creditors and predators.

Written by Haik Chilingaryan | Posted in Estate Planning • Haik Chilingaryan

31 Jul 2018

Strategic Planning For Business Owners

What Is Included In Business Succession Planning?

A business owner needs to consider various strategies in order to prepare for the expected and unexpected legal challenges. To do so, the business owner should generally form a separate entity, such as a corporation. Next, whether the business is owned by one person or multiple partners, every business owner must consider planning for an exit strategy. Moreover, the business owner must understand the effect of certain provisions in the contracts he has entered into or those that were entered into on his behalf, including by agents. Furthermore, the business owner must ensure that the scope of an agency relationship, if any, is specifically defined.

Why Does A Business Owner Need Advance Planning?

1. The Status of the Business

If a business owner does not form and operate under a valid legal entity, a number of issues may arise. For tax purposes, the business owner may end up paying significantly higher taxes if certain types of entities are not properly formed. For example, it’s sometimes more advantageous to pay taxes as a shareholder of a corporation rather than as an individual operating under a sole proprietorship.

Written by Haik Chilingaryan | Posted in Business Succession Planning • Haik Chilingaryan

26 Jul 2018

Tax Planning Is More Than Just Tax Filing

Tax planning involves a wide range of strategic decisions and implementations which affect your overall estate plan. In fact, there is arguably no other area of law that is more complex and that contains as many guidelines as the U.S. tax law. In addition, there are also State and Local Tax laws (SALT). The impact of SALT has become even more significant ever since the passage of the Tax Cuts And Jobs Act, primarily because the legislation now limits the SALT deductions to only $10,000.

The understanding of such complicated set of rules is a fundamental key to tax planning. Proper tax planning is a proactive measure that one takes to arrange and rearrange their finances in order to limit his or her tax liability to the lowest amount allowed by law. The confusion often arises because people often make the mistake of thinking that by hiring somebody to file their taxes they are engaging in proactive tax planning. However, the filing of tax returns is usually a reactive activity, not a proactive one.

Written by Haik Chilingaryan | Posted in Haik Chilingaryan • Tax Planning

24 Jul 2018

Anatomy Of A Corporation

Corporations are treated as separate entities under the law. They generally have the capacity to perform the same types of functions that individuals perform including entering into contracts and promulgating or defending lawsuits. The primary incentive for forming a corporation is to grant limited liability to its owners.

One common misconception among the business community is that by merely filing proper documents with the state, the business owner has established a legally enforceable corporation. However, compliance with formalities is essential in order for the corporation to be granted with the status of limited liability and protect its owners from personal liability. Formalities are especially critical for corporations since they generally contain more rigorous standards than other business entities, such as LLCs.

WHAT STEPS ARE REQUIRED FOR ESTABLISHING A CORPORATION?

The first step required for establishing a corporation is filing an application for formation (e.g., Articles of Incorporation) with the state. It is generally recommended to establish the corporation in the state in which the business is going to operate. Of course, the corporation can do business in other states provided that the state allows the entity to operate in its state. However, a corporation will be required to file tax returns and pay taxes in any state that mandates state corporate income tax. In addition, different states have different requirements for other forms of compliance (e.g., Statement of Information).

Written by Haik Chilingaryan | Posted in Haik Chilingaryan

09 Jul 2018

Income Shifting Strategies To Help Business Owners Become More Tax Efficient

Haik Chilingaryan, Tax Lawyer, Tax Savings For business Owners

This segment discusses different strategies that can potentially help a business owner become more tax efficient. Some methods include the restructuring of a business and establishing tax-deductible retirement plans.

Synopsis

The concept of characterization of income (or shifting of income) may result in the preservation of significant wealth. One method of shifting of income is through retirement planning. Another method is the restructuring of a business entity.

Retirement Planning

If the taxpayer is working and participating in a 401K with his employer, or he has an IRA, meaning it’s funded entirely by the taxpayer, the money that goes into such accounts may save him on taxes.

When the taxpayer puts money in such plans, he decides that instead of paying taxes now, he will instead pay taxes when he take those funds out, preferably when his tax brackets are likely to be reduced at his retirement. That’s because his total taxable income is likely to be lowered since he is no longer working, thereby lessening his income tax obligations.

Written by Haik Chilingaryan | Posted in TaxConnections

06 Jul 2018

Tax Reform’s Impact On Individual’s Taxes

Haik Chilingaryan, Tax Reform And Individual Taxes

During this post, we discuss how the new changes in the tax laws may have an overall positive effect on individual rates and deductions. However, a crucial component of the Tax Cuts and Jobs Act is that the rates and other provisions of the new tax code have a sunset provision, which means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

Synopsis

The Tax Cuts and Jobs Act of 2017, otherwise known as GOP tax reform bill, largely went into effect on January 1, 2018. A crucial component of TCJA is that the rates and other provisions of the new tax code have a sunset provision. This means that on December 31, 2025, all of the rates are likely to be reinstated unless some legislation is introduced that will retain these rates or lower them even further.

The following are the list of major changes under the new tax code: