Member Managed LLC

A limited liability company (LLC) can be managed by a manger or managers, or the LLC can be managed by the members of the LLC.  There are advantages to both depending upon the circumstances of the business, the knowledge of the members, the involvement of the members and other issues.  For example, the members of a certain LLC may all be passive investors of the LLC and have little knowledge regarding the operations of the LLC.  Thus, it may be best to hire a professional manager or individual that has better know how regarding the subject matter or area in which the LLC is operating.  Furthermore, the members of an LLC may have no interest and not want to manage the LLC and thus hiring a manager or managers maybe more prudent.  On the flip side, the LLC may have a small number of members and the members are well versed and experienced in terms of operating a business and the area in which the LLC is operating.  Under such circumstances, it is likely the members themselves would want to manage the LLC.

In Colorado, you state whether the LLC is member managed or manager managed within the Articles of Organization.  The operating agreement of the LLC will state and control the powers of the manager or managers, or the members as they manage the LLC.  It is recommended that the managers responsibilities and powers be well defined in the LLC operating agreement.

The video below has been prepared by a Denver business attorney to provide more information regarding the management structure and options of an LLC.  Please remember this article and video are for informational purposes.  It is recommended that you speak with your business attorney regarding the management structure of your business.

Contact The McGuire Law Firm to discuss your business questions and issues with a Denver business attorney.  A free consultation is offered to all potential clients!

 

 

Brady D. Denver, CO

The simple truth is, I can sleep at night again thanks to John McGuire. Thanks to some poor decisions and a great deal of procrastination, I found myself in a huge hole and the IRS was starting to throw shovelfuls of dirt on me. Thanks to fees and penalties, the relatively small amount I owed to the IRS for back taxes ballooned to nearly $50,000.

I had just had money from bank account seized and was close to having my wages garnished when I walked into John’s office. With his work and expertise, we eventually settled with the IRS for less than $1,000.

I still have a hard time believing John’s efforts worked out so well for me – it’s truly incredible.

Thank you, John! Your professionalism and knowledge saved the day for me!

Signed, Brady D

Coy P., Fort Morgan, CO

I have used John McGuire as my business attorney and tax attorney for over four years.  John has assisted me with the sale of a partnership and the related tax issues, business contracts, tax planning and other business issues.  I can always get a hold of John for his advice and counsel, and I value his opinion more than any other professional I work with.  Most importantly, John is able to describe tax laws in a manner that make sense, as I am not a tax person! I strongly recommend John to any business owner or individual looking for legal assistance with their business or tax issues.

Coy P, Fort Morgan, CO

Leonard S. Denver, Co

I hired John McGuire as my tax attorney to help me with my IRS tax debts.  I had been paid as a 1099 independent contractor and did not know about self employment taxes and estimated payments.  John helped me understand my tax requirements and got me back on track.  Thereafter, John was able to settle my tax debt with the IRS through an offer in compromise.  The fees charged were very reasonable, and I was allowed to make payments.  I continue to use John regarding my tax and business questions, and would recommend John to any friend or family member.

Leonard S, Denver, Colorado

Cash for Assets Business Acquisition

In previous articles a business attorney from The McGuire Law Firm has discussed certain acquisitions between corporations.  The article below will discuss an acquisition known as a cash for assets acquisition.

The first step of a cash for assets acquisition, Corporation 1 would pay Corporation 2 cash consideration of the assets of Corporation 2.  Corporation 1 could decide to accept the liabilities of Corporation 2, and such acceptance would lower the purchase price.  Please note, Corporation 1 does not have to accept the liabilities of Corporation 2 in this type of asset acquisition though. No change would be necessary in the corporation documents of Corporation 1 or Corporation 2 and no change would need to occur in the outstanding shares of either corporation as well.  After the purchase, and as may be commonly seen, Corporation 2 could dissolve after the sale of the corporate assets.  If Corporation 2 did dissolve, the corporate charter would be cancelled and the shares extinguished.  After Corporation 2 satisfied all remaining liabilities, the remaining cash would be distributed to the shareholders of Corporation 2 in a liquidating distribution.  The dissolution and liquidation of Corporation 2 would not impact the shareholders of Corporation 1.

If Corporation 2 did not dissolve and distribute the cash to the corporate shareholders, Corporation 2 would reinvest the cash in operating assets or for corporate operations.  If Corporation 2 reinvested this cash in passive assets such as stocks or bonds, it is important to know that the Internal Revenue Code could deem Corporation 2 a Personal Holding Company and such designation may not have the most favorable tax treatment.  Thus, from a practical point of view, a corporation in Corporation 2’s shoes, is likely to reinvest in business assets to produce income, or dissolve and distribute the monies to the shareholders.

The cash for assets acquisition differs from a stock swap merger in a couple of ways.  First, the shareholders of Corporation 1 shareholders do not vote in the asset acquisition.  Second, the post transaction of the Corporation 2 shareholders is different as in the cash acquisition the shareholders will be cashed out as opposed to holding shares in the survivor corporation.  Third, Corporation 2’s pre-transaction liabilities may remain with Corporation 2 depending upon the terms of the transaction.  Additionally, a stock swap merger, also known as an A Reorganization is typically a tax free transaction, whereas the cash for assets acquisition is likely to be a taxable transaction.

You can speak with a Denver business attorney at The McGuire Law Firm if you have questions regarding a business transaction and/or the tax implications of a business transaction.

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How Can I Release an IRS Bank Levy?

Receiving a notice from your bank or the Internal Revenue Service that your bank account has been levied can be scary, confusing and frustrating.  Moreover, in addition to the money levied by the IRS from your bank account, the bank levy can cost you considerable money in bank fees and/or overdraft fees if the bank levy cause checks and payment to bounce.  The article and video below have been prepared by a Denver tax attorney to provide you with information regarding a bank levy and maybe more importantly, how a bank levy can be released.

When you owe money to the IRS, the IRS can levy your bank account after providing you with certain due process.  A levy is a taking of property, and when the IRS levies your bank account, they are in fact taking your money.  The IRS levy will attach to the monies in your bank account as of the date of the levy up and to the amount of the levy.  For example, if the IRS issued a levy to your bank in the amount of $5,000 and you only had $1,000 in the account as of the date of the levy, the levy would attach to the $1,000.  On the other hand, if the IRS issued that same bank levy and you had $6,000 in the account, the levy would attach to all $5,000 of which the levy was issued on.  Upon receipt of the bank levy, the bank is to hold the funds that attach to the levy for a 21 day period.  Thus, you have 21 days from the date of the levy in an attempt to have the levy released or partially released.  Therefore, the million dollar question is, how can I release my IRS bank levy?  There are multiple ways to have the IRS bank levy released which are discussed further below.

First, if you formalize an agreement, the IRS is likely to fully release the bank levy.  Please note, to formalize an agreement you will need to have all tax returns filed and be in compliance with current payments.  Second, if you can show the levy is creating an economic hardship, the IRS will generally release the levy.  An economic hardship could be that will be evicted or foreclosed upon because you cannot pay rent or the mortgage due to the bank levy, or you are unable to provide the other daily necessities due to the IRS bank levy.  Third, full payment of the tax debt should release the bank levy.  This seems obvious, and may not be attainable, but it can be an option.  Additionally, if you can show that the IRS bank levy is improper because the IRS has not afforded you your rights as a taxpayer and due process, the bank levy should be released.

Thus, there are multiple ways to have the IRS release a bank levy that is attaching to money in your bank account.  The best action in my opinion is to be proactive and never be in a position of which the IRS can levy your bank account.  For example, by formalizing an agreement or having a pending installment agreement or other proposal, a hold should be placed on the tax debts and thus you should not receive a bank levy.  You can discuss your tax matters and issues with a tax attorney in Denver by contacting The McGuire Law Firm and scheduling a free consultation.

A Denver tax attorney at The McGuire Law Firm can help you if the IRS has levied your bank account!  Call for a free consultation with a tax attorney!

Schedule E

What is a Schedule E?  A Schedule E is where a taxpayer will state supplemental income from rental properties and income from pass through entities such as a Limited Liability Company (LLC), S Corporation or other partnership.

In terms of income from a rental property, a taxpayer will use Schedule E to report each property they have rented during the tax year, the gross amount in rents and then rental related expenses such as advertising, mortgage interest, property taxes, depreciation and other expenses.  In terms of income or losses from a partnership or S Corporation, Schedule E will list the entity, entity type and then passive and non-passive income and/or losses of the taxpayer.  These items are initially reported on the taxpayer’s K-1 from the partnership or the S Corporation.

Thus, if you have a rental property, you will file a Schedule E with your 1040 individual income tax return.  If you have an interest in an LLC or S Corporation, you will report certain items on a Schedule E.  The vide below has been prepared by a tax attorney at The McGuire Law Firm to provide additional information regarding a Schedule E.  Please remember this article and the video below are for informational purposes.  You should always consult with your tax attorney, business attorney and/or other advisors regarding your tax and business and business issues.

Call The McGuire Law Firm to schedule a free consultation with a tax attorney in Denver.  The McGuire Law Firm offers a free consultation to all potential clients and would welcome the opportunity to meet with you to discuss you tax questions & needs.

Denver Tax Attorney Discusses Refiling of an IRS Tax Lien

Can an IRS tax lien be re-filed?  Can the IRS re-file the Notice of Federal Tax Lien?  How does the IRS renew a tax lien?  As a tax attorney I have been asked the above questions and therefore have prepared the article below to provide general information regarding such issue.  Please remember, that the article below is for informational purposes only.  Please contact your tax attorney or tax professional directly to discuss the current tax laws and your specific issues and circumstances.

To retain priority as of the initial date the tax lien was filed, a Notice of Federal Tax Lien filed by the Internal Revenue Service must be re-filed within the required re-filing period.  If a re-filing of the IRS tax lien does not occur, most notices of federal tax lien will self release 30 days after the date that is ten years from the assessment date. This self release of the IRS tax lien can occur regardless of an extension of the IRS collection statute or suspension or tolling of the IRS collection statute.  Under Internal Revenue Code Section 6323(g)(3)(A) the IRS’ notice of federal tax lien can be re-filed during the one year period that ends 30 days after the expiration of the ten years from the date of assessment date.

For example, assume Jeff was assessed a tax liability on April 1, 1995 and the Internal Revenue Service filed a tax lien on August 1, 1995.  The self releasing date of the IRS tax lien would be May 1, 2005.  Even if Jeff tolled the collection statute by filing bankruptcy or by submitting an offer in compromise, the period for re-filing the IRS tax lien would begin May 1, 2004 and continue until May 1, 2005.

Where will the IRS re-file the tax lien?  Again, this is a common question and will be discussed briefly below.  Typically, the IRS will file a tax lien in multiple locations, and thus the question a to where they will re-file or must re-file the tax lien is a legitimate question.  Because the IRS files tax liens in multiple offices, when re-filing the tax lien, the IRS must re-file in each of the initial offices whereby the initial liens were filed.  See Internal Revenue Code Section 6326(g)(3)(A).  When the IRS files the initial notices of federal tax liens (self releasing tax liens) in multiple offices regarding a particular tax assessment, if the IRS fails to timely file the re-filing notices in each of the offices, the assessment lien will release and the re-filing of the other tax liens is considered ineffective.  See Treasury Regulations Section 301.6323(g)-1(a)(1).  Thus, if the IRS fails to properly re-file the tax lien in one office, the underlying assessment lien is invalid and the re-filed tax liens would be ineffective.

You can discuss your tax lien questions and issues with a tax attorney at The McGuire Law Firm.  The McGuire Law Firm has offices in Denver, Colorado and Golden, Colorado.

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Series of Distributions to a Withdrawing Partner

When a partner in a partnership is having their interest terminated, often such termination may be through a series of distributions.  The series of distributions may be needed due to the cash flow of the buyer or purchaser. Thus, the question arises, are these liquidating distributions?  The article below has been drafted by a Denver tax attorney to provide information regarding a series of distributions to a partner in a partnership in liquidation of the partner’s interest.  Discuss your partnership tax matters and questions with a tax attorney in Denver by contacting The McGuire Law Firm.

When a withdrawing partner’s interest is terminated through multiple, or a series of distributions to the partner, each distribution can be considered a liquidating distribution as opposed to a current distribution.  This is so even if the partner is a tax partner until the final distribution is made (see IRC Section 761) and recognizes gain only after total, actual or the constructive money distributions would exceed the outside basis of the partner’s partnership basis.  Therefore, this is not necessarily installment sale treatment, but rather open transaction treatment.  It is also important to note that a withdrawing partner can only recognize a loss once the final liquidating distribution is received.

The partnership’s obligation to make the distribution is not treated as a cash equivalent for a cash method taxpayer nor is it treated as an obligation for an accrual method taxpayer.  Under IRC Section 736, the obligation to make these deferred payments is not a debt obligation.  Thus, the liquidating distributions can be made by the partnership to the partner as a debt obligation that liquidates the interest immediately and thus the withdrawing partner is considered more as a creditor than as a partner of the partnership.

For example, John is withdrawing from J Cubed, LLC and the partnership agreement satisfies the special allocation regulations.  John is entitled to receive $100k upon his withdrawal.  Half is payable upon withdrawal and the other half in the year after the withdrawal.  John’s outside partnership basis is $75,000.  Thus, assuming there is no 751 Exchange, John will not recognize gain on the initial distribution of $50,000 because of the $75,000 in outside basis and gain recognition rules.  All of the $25,000 gain John will recognize will be recognized upon the second distribution.  J Cubed’s obligation to make the second $50,000 distribution is not a debt obligation.  The gain of $25,000 may be capital gain, but one should always considerable the collapsible partnership rule.  Assuming John had an outside basis of $150,000 and received the same $100,000 total in distributions, the loss could not be recognized until the second payment was made.

If you have tax questions relating to the sale of a business or business interest, discuss these questions and issues with a Denver tax attorney at The McGuire Law Firm.  You can schedule a free consultation with a tax attorney in Denver who can assist you with your matters.

Denver Offer in Compromise

Many people know that an offer in compromise is a tax settlement with the Internal Revenue Service.  But, why does the Internal Revenue Service and our government allow for such a tax settlement?  In many respects, you could compare an offer in compromise to a bankruptcy.  Of course, in a bankruptcy you are likely discharging or resolving multiple debts whereas an offer in compromise only resolves your tax debt with the IRS.  Just as an individual or business can file bankruptcy in an attempt to get a “fresh start” an individual or business may be able to settle their taxes with the IRS, and wipe out past debt and thus obtain a “fresh start” with the IRS.  Our government realized that in certain situations and circumstances, it is in the best interests of the government (and the taxpayer) to settle the debt.  Why should the IRS spend time and money attempting to collect a tax debt from a taxpayer that will never be able to settle or satisfy the tax debt?  In many respects, the time and effort of IRS revenue agents (and thus government money) is better spent working to collect the tax liabilities from those individuals and businesses that can pay the debt.  Thus, in some respects, I feel it comes down to a practical matter and the general policy followed by our government in recovering past due tax dollars.

The video below has been prepared by a tax attorney at The McGuire Law Firm to discuss what he considers as some of the policy matters behind an offer in compromise.

To speak with a tax attorney in Denver contact The McGuire Law Firm.  The McGuire Law Firm allows a free consultation so that you can discuss your tax matters, issues and/or problems with an attorney who can represent you before the Internal Revenue Service to resolve such issues.  Further, a tax attorney can help you with tax planning matters and other tax issues.  Contact The McGuire Law Firm today!