One of the most common reasons persons establish a limited liability company, or LLC, is to create a level of protection and separation from the business owner and the business itself.  In other words, an LLC is established to protect an individual’s personal assets and risk-management.

As people today are willing to file a lawsuit over the most ridiculous things at the drop of a hat, it is even more important than ever to protect real estate assets with an LLC.

Real estate is a magnet for lawsuits.  First, real estate is an asset that can be used to satisfy any judgment a prospective Plaintiff may win. Second, as the property owner, the law looks to you to ensure that the property is safe for everyone that comes on the property; and if someone gets injured, regardless of fault, the property owner is going to be a target to compensate for the injured party’s damages.

Despite these risks, real estate continues, and will continue, to be a hotbed of investing.  Many of these investors make more than $75,000/year and most investors plan on buying new property in the upcoming year.  It is essential to understand how to protect your investment and plan accordingly.

Usually, however, most investors in real estate resist forming for an LLC for a variety of reasons: accounting, lawyer fees, hassle or creating certain inefficiencies in running the investment with one of more LLCs holding real estate.  But despite this resistance, a real estate investor need to weigh the desire to limit liability in investment risk taking v. the investor’s responsibility of potentially having to make whole an injured person.

The question each investor needs to ask:  Have I protected adequately my hard earn investment and potential returns?

Asset protection is just as important, if not more important, than good tax planning.  You need to protect yourself from bad things that happen to all good, honest hard-working people, and when bad things happen, are you going to be able to retain your assets.

Moreover, merely because you have an LLC does not make you safe. To begin with, if you do not respect the “corporate form” of the LLC a good plaintiff’s attorney can “pierce the corporate veil” and set aside the entity to potentially gain access to your personal assets.

The most common veil piercing factors are:

• Failure to use separate bank accounts;
• Mixing of personal and company funds;
• Lack of annual reports/Operating Agreements/Resolutions

All fine and dandy, but you say, “I don’t want an LLC.”  Fine.  But remember as one person stated:

“Of the 18 million businesses in the U.S. over 70% of them are unincorporated proprietorships. Many small business owners make the mistake of putting real estate property in joint ownership and elect not to form an LLC due to the cost, effort, and time associated. But, as with anything that’s worth the time and money, it’s wise to do this upfront work if you want the ability to accumulate greater wealth. Getting the best start, right from the start, avoids the inevitable consequences of short-sighted thinking that you don’t need real estate asset protection.”

Finally, no matter what, if you have an LLC or nor, protect your property with proper insurance coverage. Moreover, if you do have an LLC make sure that the insurance policy names the LLC as the insured and the coverage is appropriate for the type of real estate. 

Under Ohio law, if you own real estate in your name, rather than through an entity such as a limited liability company, all of your assets are at risk and could be lost if a problem arises as to the property.

Owning real estate for investment, especially residential and commercial real estate is inherently risky. Life happens, accidents happen, and people can and do get hurt on the property. When injury or death occurs on property that they do not own, that person or their heirs look inevitably to the owner of the property to recover damages.

There are several steps that can and should be taken to protect you, your family and your assets against any potential liability and damage.

First and foremost, make sure your property is insured.  But remember, however, damages can exceed the amount of insurance coverage you have in place. For instance, if you have a $1,000,000 policy in place and an injured person suffers damages in the amount of $2,000,000 you have a problem.  You may be personally liable for the $1,000,000 above the insurance policy in place thus putting your personal assets in jeopardy.

To avoid risking your personal assets should a damage claim exceed your insurance policy limits, the second line of defense is putting your property in a limited liability company (“LLC”). 

Thus, in the scenario above, if a court awarded damages in excess of the insurance coverage and the property was in an LLC and correctly operated, the injured person most likely should only be able to collect against the LLC’s assets and your personal assets outside the LLC should be protected.

The cost to form and hold property in an LLC in Ohio is insignificant to the potential damages you could suffer by failing to take basic steps to minimize your risk and protect your assets.

Contact the attorneys at Painter & Associates, LLC to begin the process of protecting your investment and hard work.

Although highly-debated, controversial and sometime without a policy justification the new Tax Cuts and Jobs Act signed into law by President Trump lets owners of certain passthrough entities deduct 20% of specific types of income earned by those businesses.  In doing so, Congress was attempting to mollify concern that only big corporation, "C-corps," would benefit from tax cuts. 

However, not all income is deductible for passthrough entities.  For example, "reasonable compensation" paid to owners is not eligible for deduction. Rather, only earnings from capital is meant to get relief.  Further, passive income is also ineligible for the deduction to stop passthroughs from being used as a tax-shelter. 

Moreover, if an owner's taxable income is too high, the deduction becomes subject to several limitations.  For instance, the deduction phases out for joint filers with taxable income between $315,000 and $475,000; for individuals $157,500 and $207,500.  Additionally, taxable income above these limits coming from firms providing services such as law, accounting, medicine and other professional activities is not eligible for the deduction.  

New to the bill, however, is a 20% deduction for qualified dividends paid by real estate investment trusts, qualified publicly traded partnership income and cooperative dividends.  Additionally, special rules apply to agricultural or horticultural cooperatives. 

Experts are interested into how the IRS will police and define these new laws and rule.  Several have already commented that tax planning may include setting up numerous companies to shift profits and income to the more tax-favored business.  One way is to have the operations split from the physical location and have the operations side of the business pay above average market-price in rents to a newly formed real estate investment trust.

As businesses, accountants and lawyers delve into and work with the new law, many new tax planning strategies will develop.  Work with an attorney at Painter & Associates to develop the best tax planning strategy for your business.

The new tax law scraps a 75-year old provision that allows a deduction for alimony payments.  Currently, the spouse paying alimony is allowed to deduct such payments from taxes and the spouse receiving such payments must include monies received through alimony as taxable income. This deduction allowed for strategic financial planning for those persons going through divorce to attempt to cope with the expenses in running two separate households.   

Under President Trump's new tax reform bill, beginning with separation agreement signed on or after January 1, 2019 the deduction for alimony payments will no longer be allowed.   

Thus, if you are thinking about divorce and spousal support may be an issue and you want to take advantage of the spousal support deduction, you have until December 31, 2018 to enter into a separation agreement to take advantage of the deduction.   

Of course, if you are the spouse that may be receiving alimony payments, there is incentive to wait until after January 1, 2019 to enter into a separation agreement.

Note, however, that spousal support may effect child support payments as calculated under Ohio law.   

Once again, Nathan Painter has been named a Rising Star by Super Lawyers, an honor reserved for those lawyers who exhibit excellence in practice. He has earned this designation every year since 2014 and also earned it in 2011 & 2012. 

Super Lawyers selects attorneys using a patented multiphase selection process. Peer nominations and evaluations are combined with third party research. Each candidate is evaluated on 12 indicators of peer recognition and professional achievement. Selections are made on an annual, state-by-state basis.

With debate continuing over current plans for tax reform, an old nemesis for farmers is also being debated:  The Estate Tax.  

Farmers operate under a unique and challenging set of circumstances unlike those of any other industry.  The Estate Tax is one of those factors that makes operating a farm, and passing it on to younger generations, such a challenge.  Under the current tax code, and as farmers are land rich and cash poor, the Estate Tax may force a family to sell certain assets (land and equipment) to have cash in order to pay the Estate Tax bill so the next generation can continue the farm.  Over time, this unfairly penalizes farmers for their hard work and puts unnecessary pressure on future generations.

In order to avoid the Estate Tax and other taxes, farmers should look into estate planning devices to prevent or lessen the burden that a death of a loved one or business partner may have on a farming operation.  Such estate planning devices include trusts, life insurance, and gifting of assets to others.

In addition, farmers should consult an attorney and an accountant about using pass-through business entities, such as a Limited Liability Company, so that operations can continue uninterrupted and assets protected from liability and, potentially, Estate Taxes.  

Painter & Associates, with attorneys that come from an agricultural background, understand the unique needs of farmers and their families.  We can assist your family or business to preserve and pass on your farm, and all your hard work, to succeeding generations or business partners.

Also, Painter & Associates urges Congress to reduce the individual tax rate for those farmers, continue to allow farmers to use cash-accounting, keep step-up in basis on assets after death, immediate expensing, business interest expense deduction and decreases to the capital gains tax.

November is National Adoption Month and Painter & Associates is dedicated to increasing awareness about the need for permanent families for children and youth in the foster care system.  This year’s theme, “Teens Need Families, No Matter What,” focuses on the adoption of teenagers in foster care and the importance of building a strong support system for the teenagers and prospective adoptive families.

All children, not just infants, need a home and teenagers are no different.  And YOU CAN make a difference in a teenager’s life. By adopting a teenager, you can help a child move on in life; provide a stable, structured and loving home; and help prepare a member of society for adulthood.  And most importantly, to give and receive love.

Teenagers are hard.  But Teenagers also: sleep through the night; are ready to move out sooner than infants; no formula or diapers necessary;  they can mow the lawn, take out the trash and clean the bathroom; keep you up to date new fashion and music trends; and drive down the street sooner to pick up milk.

The Ohio Adoption Photolisting Website (http://adoptionphotolistingohio.org/resources.php) provides a list of events and resources available to youth and prospective adoptive families throughout Ohio.  Additional resources are also available through the Children’s Bureau, a division within the U.S. Department of Health and Human Services (https://www.childwelfare.gov/topics/adoption/nam/families-youth/).  

We all need someone to share our life, dreams, achievements and special days with.  If you are interested in adoption, please consider adoption from the foster system.  In Ohio there are more than 12,500 children in foster care on any given day and more than 2,500 children are in the permanent custody of children services and awaiting adoption.

The Ohio Health Care Power of Attorney is a document that allows you to grant an agent (most often a family member or a close friend) full power and authority to make healthcare decisions for you in the event you become incapable of giving informed consent yourself.  Your agent is required to make decisions that are consistent with your wishes. However, there are five limitations to the decisions your agent can make.  Your agent cannot:

1. Withdrawal treatment that you previously consented to unless your condition has changed;
   
   
2. Withdrawal treatment intended to provide you with comfort care or to relieve pain;
   
   
3. Withdrawal life-sustaining treatment unless two physicians confirm that you are in a terminal condition or permanently unconscious, and there is no reasonable possibility that you will regain the ability to make decisions;
   
   
4. Withdrawal artificial or technological nutrition or hydration unless you are terminally ill or permanently unconscious and two physicians agreed that nutrition and/or hydration will no longer provide comfort or the relief of pain; and
   
   
5. Withdrawal or refuse informed consent to health care if you are pregnant, if the withdrawal or refusal would end your pregnancy, unless the pregnancy or health care would create a substantial risk to your life or two physicians determine that the fetus would not be born alive.  

At Painter & Associates, we can answer your questions, address your concerns, and work with you to complete a Health Care Power of Attorney document that meets your needs.  

Recently, Harvard Business Review published an article analyzing mismatches in offers of employment and the actual responsibilities and scope for which the person was hired^[1]  The authors found that one of the reasons mismatches occur and lead to disappointment for both the employer and new employee is that the actual job responsibilities do not match how the employer described the position.  The authors recommended that one of the means to improve results for both the employer and prospective employee is to make sure that the prospective employee and employer are truly on the same page as to the responsibilities and functions of the position for which the prospective employee is considering.

In order to avoid such misunderstanding, protect yourself or business, and avoid any potential legal liability is to have an employment offer letter issued by the business to the prospective employee.  Once a mutual understanding is reached by the parties and set forth in the employment offer letter, both parties should sign the letter.

A good employment offer letter covers the following points as outlined by Richard Harroch in Forbes Magazine:

• The particular job offer
• The responsibilities of the job
• The salary and the benefits
• That the employment is “at will," meaning the employee can quit or the employer can terminate him or her at any time
• That the employee is required to sign a Confidentiality and Invention Assignment Agreement
• That the letter constitutes the entire agreement of the parties, and can only be amended in the future in writing, signed by the employer and the employee
• That any disputes will be handled exclusively by confidential binding arbitration.
  

Painter & Associates has the experience to assist both businesses and prospective employees to develop an employment offer letter that will provide the best opportunity for a hiring decision to be successful.

^[1] Morgan, Neil and Whitler, Kimberly Why CMOs Never Last. Harvard Business Review July-August 2017.

Most clients that contact our office for estate planning services ask about a Last Will and Testament or a Trust.  But Advance Health Care Directives are just as important to your estate plan.  Who makes your health care decisions for you if you are unable to communicate your wishes?  How will your family and health care providers know what health care decisions you want made on your behalf?

In Ohio, there are four advance health care directives that should be considered with your estate plan.  They are:

1. Ohio Health Care Power of Attorney
2. Ohio Living Will Declaration
3. Ohio Donor Registry Enrollment
4. Ohio Do Not Resuscitate Order

It can be difficult to start thinking about decisions that will need to be made concerning your own health care issues.  It can be next to impossible to then share those decisions with your family.  At Painter & Associates, we have those difficult conversations with you, we work through various scenarios with you, and we assist you in drafting advance health care directives that are specific to your needs and wishes.