Business Entity Choices

Business Entity Choices

In order to carry on a trade or business, a type of business entity must be chosen.  For all practical purposes, the four major business entities for the current year are:  sole proprietorship, partnership, corporation, and limited liability company.  For the purposes of this discourse, all references will be made to the active conduct of a business, rather than passive or limited-activity types.

The most efficient way of selecting a business entity revolves around trying to match the needs(present and future) of the business and its owners in legal, financial, and tax-related areas.  In other words, this selection process becomes a form of a needs analysis study.  In some cases, it is relatively easy; in fact the choice may be practically automatic.  In other cases, it can be quite complex to coordinate the current and future needs of both the business and its owners.

There are a number of variables that should be addressed in this process to help delineate it.  Further, the advantages and disadvantages of each type of entity from a legal and tax perspective play important roles in the overall planning process.

Definitions Of The Four Major Types Of Business Entities

A good starting point is to first know what each of the entity choices represents:

SOLE PROPRIETORSHIP:

This is a self-employed individual who operates a trade or business where all the tax consequences fall to that proprietor, including all liabilities, debts, profits, and losses.

PARTNERSHIP:          

An organization or association of two or more participants who carry on a trade or business together, and allocate the ownership and profit/loss aspects according to their contractual terms.  This Partnership is a separate entity for tax filing purposes, but not tax paying.  Rather it is a form of a conduit where income, losses, credits, and certain deductions are passed along to the partners' tax situation instead.  There is no liability protection for the partners.

CORPORATION:     

A separate, legal entity formed through a state charter using articles of incorporation.  It is authorized to perform primarily all the business activities an individual can, including such things as filing and paying taxes, signing contracts, and making loans. It is formed through the issuance of stock or securities. There are two main types:  Regular("C") or Subchapter S ("S").

LIMITED LIABILITY COMPANY(LLC):    

This is a hybrid, or  combination, with some of the features of a partnership and the limited liability aspect of a corporation.  To qualify as an LLC, it can't have at least two of the main components of a corporation:  continuity, centralized management, transferability of ownership.  Thus, the two most significant features of an LLC are that it affords the partners some degree of limited liability protection, yet it still acts as a conduit like a regular partnership. This choice is not available in all states, but the majority allow it.

While the list of determining factors for making the best choice for the type of business entity can be quite long, an overview of the more common ones that tend to affect the vast majority of businesses is in order.  In effect, the business owner selects the features or attributes of the entity that best suit the current and future combined needs of business and owner.  This is not always easy since many factors are not always so "black and white," but, rather, fall into the "shades of gray" category.  Nevertheless, the following represents a list of the more common significant factors to compare the business entity types:

LIABILITY OF OWNERS

Sole Proprietorship:	Unlimited liability for business actions
Partnership:	Unlimited liability for business actions
Corporation:	Possibly limited to assets in corporation
LLC:	Possibly limited to assets in company

  

TREATMENT OF INCOME/LOSSES

Sole Proprietorship:	Taxable to individual proprietor
Partnership:	Taxable to partners
Corporation:	Taxable to regular "C" corporation; Taxable to shareholders for "Sub S" corp on federal(and most states) level
LLC:	Taxable to partners

CONTINUITY OF EXISTENCE OF BUSINESS

Sole Proprietorship:	Ends with death of proprietor
Partnership:	Ends with death, bankruptcy of partner or more than 50% change of ownership
Corporation:	Continues indefinitely
LLC:	May end with death, bankruptcy of partner, or change of ownership

TRANSFERABILITY OF INTEREST

Sole Proprietorship:	Relatively easy transferability
Partnership:	May require partner's approval
Corporation:	Easy unless restricted by agreements
LLC:	May require partner's approval

CHOICE OF TAX YEAR

Sole Proprietorship:	Proprietor's tax year which is usually on a calendar year basis
Partnership:	Usually calendar year unless business purpose is met
Corporation:	Can be calendar or fiscal for most "C" types. Must be calendar for "Sub S" types unless business purpose and special permission is granted
LLC:	Usually calendar unless business purpose is met

EASE OF SETTING UP

Sole Proprietorship:	Very easy, no state charter, or legal agreements usually required, few administrative, filing headaches
Partnership:	Reasonably easy, but agreements are generally recommended, state and federal tax identification numbers needed
Corporation:	More difficult and costly, often requiring state applications, legal paperwork, fees, state and federal tax identification numbers to be filed
LLC:	Somewhat more difficult than a regular partnership to qualify for LLC status;  agreements generally recommended, state and federal tax ID numbers required

OWNERSHIP LIMITATIONS

Sole Proprietorship:	Only the individual proprietor can own
Partnership:	No limit
Corporation:	No limit for "C" types; maximum of 75 qualified shareholders for "Sub S" types
LLC:	No limitations

EASE OF SHIFTING OF FUNDS IN AND OUT OF BUSINESS

Sole Proprietorship:	Very easy; draw account is used
Partnership:	Easy; partner's draw or capital account used, but must be tracked
Corporation:	More complicated for deductibility purposes, liability protection, etc.
LLC:	Easy; partner's draw or capital account used, but must be tracked

MINIMUM RECORDKEEPING REQUIREMENTS

Sole Proprietorship:	Easiest of the four entities; no balance sheet requirements, no accounting to other owners, partners
Partnership:	Fairly complicated, especially if partners' capital accounts are tracked
Corporation:	Complicated; balance sheet requirements,  minutes of meetings, resolutions, other "arms length" requirements to be met
LLC:	Fairly complicated, more so than regular partnership to keep qualifications as LLC intact

MANAGEMENT TYPE

Sole Proprietorship:	A centralized system with sole owner
Partnership:	Not centralized; partners' agreements usually required
Corporation:	Centralized with appointment by board of directors
LLC:	Not centralized; partners' agreements usually required

AVAILABILITY OF QUALIFIED RETIREMENT PLANS

Sole Proprietorship:	Deductible retirement plan available
Partnership:	Deductible retirement plan available
Corporation:	Deductible retirement plan available
LLC:	Deductible retirement plan available

PASSIVE LOSS DEDUCTIBILITY

Sole Proprietorship:	Can't offset ordinary business income
Partnership:	Can't offset ordinary business income
Corporation:	May be able to offset ordinary income for "C" types; not for "Sub S" types
LLC:	Can't offset ordinary business income

POSSIBLE DOUBLE TAXATION ISSUE

Sole Proprietorship:	No double taxation problems
Partnership:	No double taxation problems
Corporation:	Double taxation possibility for "C" type; no double taxation for "Sub S"
LLC:	No double taxation problems

POSSIBILITY OF TAX-SAVING FAMILY INCOME SPLITTING TECHNIQUES

Sole Proprietorship:	Very possible, if owner is employing offspring, especially those under 18
Partnership:	Definite possibilities to shift income to family members in lower tax brackets
Corporation:	Limited possibilities for "C" type;more possibilities for "Sub S" type
LLC:	Definite possibilities to shift income to family members in lower tax brackets

DEDUCTIBILITY OF VARIOUS FRINGE BENEFITS

Sole Proprietorship:	Limited, especially in health, accident, life insurance, medical reimbursement,  death benefits
Partnership:	Limited similar to sole proprietorship
Corporation:	Much more fringe benefit possibilities,  especially for "C" types; some restrictions on "Sub S" types
LLC:	Limited similar to partnership or sole proprietorship

ABILITY TO RETAIN EARNINGS TO DEFER INCOME TO OWNERS

Sole Proprietorship:	Cannot retain earnings; taxable to owner in year posted
Partnership:	Cannot retain earnings; taxable to partners in year posted whether or not they are distributed
Corporation:	"C" types can retain earnings up to  certain limits; "Sub S" types cannot retain; they are taxable to the shareholders whether distributed or not
LLC:	Cannot retain earnings; taxable to partners in year posted,  whether they are distributed or not

LEGALITY ISSUES FROM A STATE PERSPECTIVE

Sole Proprietorship:	Legal form of business in all states
Partnership:	Legal form of business in all states
Corporation:	"C" types recognized in all states; "Sub S" types not recognized for income tax purposes in all states, but recognized as a legal entity in all states
LLC:	Not recognized similarly in all states,  so formation, filings, and limited liability protection may be questionable especially if operations of business extend to multi-states

TAX RETURNS TO BE FILED

Sole Proprietorship:	Certain business schedules get included on individual 1040 form, but no  independent, stand-alone return is filed
Partnership:	Federal Partnership Tax Return, Form 1065 must be filed
Corporation:	Federal Corporation Tax Return, Form 1120 for "C" type; Federal Form 1120S for "Sub S" type
LLC:	File similar to partnerships, Form 1065

Summary:  General Advantages/Disadvantages Of The Four Entity Types

As can be seen, while the four main entity types have some common denominators, they are mostly intended to fulfill different business and individual needs.  There are advantages and disadvantages within each of these entities:

SOLE PROPRIETORSHIP:  This is usually the easiest type of entity to set up or terminate.  Losses from the business can offset income from other sources.  Management is totally centralized since there is only one legal owner.  Recordkeeping may be a bit easier.  Taking money out of the business is very easy.

However, there are some notable disadvantages, also:  There is no way to "retain" earnings like other business forms; the owner has no limited liability protection; continuity and transferability of interest is limited; and certain deductible fringe benefits are not available as with other forms of business.

CORPORATION:  Advantages include limited liability protection to owners, easy transferability of ownership, continuity even if original owners no longer exist, easier estate tax planning opportunities, more possible tax-free fringe benefit plans, and more flexible pension plans.  In addition, it allows for a number of owners to participate.  Obviously there can be numerous advantages.

The disadvantages can be equally as numerous.   A corporation is usually more difficult and costly to set up or terminate.  Much more planning is required to avoid double taxation issues.  Recordkeeping can be quite complicated to preserve the limited liability feature. Taking money out of the corporation can also get tricky.  Finally, tax return filings tend to be more involved.

GENERAL PARTNERSHIP:  If there is more than one owner, it is the easier of the entity types to set up.  Active losses can be used to offset other income for the owners.  Some degree of income tax and estate tax planning is possible since ownership percentages can be transferred fairly easily.

The disadvantages are similar in scope to a sole proprietorship:  No limited liability protection exists; the partnership usually ends upon the termination of a majority partnership interest, so continuity is limited; earnings cannot be retained, and tax-free fringe benefits are limited.   

LIMITED LIABILITY COMPANY:  This entity has some of the better aspects of a partnership coupled with that of a corporation.  It has limited liability protection, yet allows for the "flow through" of income and losses to the partners so there is less chance for double taxation.  Unlike the "Sub S" corporation with its limitations on the number of shareholders, and the type and status of these shareholders, there is much more flexibility here.  Income and losses can be allocated more easily as well.

However, the disadvantages center around the fact that these LLC's are still relatively new, and the states have varying rules and regulations concerning their operation, legal status, and degree of limited liability protection available.  In addition, like a general partnership, tax-free fringe benefits are restricted. From a qualifying perspective on the federal level, there is always the possibility that the LLC will be challenged on its qualification. This could lead to a disastrous situation where it is re-classified as a corporation, and a double taxation event could occur.

Conclusion

Selecting the best type of business entity is as much an art as a science.  This should match the type of business,  and the individual needs and wishes of the owners.  In addition, it should anticipate the developmental aspects of a changing business so a look into the future is often necessary.  To try to make this selection process as efficient and effective as possible, two actions are in order. First, make out your own "wish list" of what you want and need in a business organization.  Second, consider getting professional advice from a legal and accounting perspective as early in the selection process as you can.  It can be some of the most important advice your business will ever receive.

Reference:  Practice Enhancers, Able & Co.

Recordkeeping Issues in Case of Audit or Review-Bookkeeping Recommendations

Recordkeeping Issues in Case of Audit or Review
There are some sensitive areas where care must be taken in reporting your business income and expenses.  The following list will give an overview of entries which have the potential of being mishandled and which could create problems, especially in review or audit-type situations.

Bookkeeping Recommendations
1) Gross income.  Must be verifiable from bank statements.  Any deposit not income,  i.e.  a loan or refund, must be clearly identified and documented.  The gross should reconcile with any appropriate sales tax returns. Discrepancies with deposits should be explained and proven.

2) Insurance.  Some insurance policies are deductible and others are not.  It is possible for some insurance to be partially deductible. Identify policy payments by coverage as well as dollar amount.

3) Shareholder loans.  Loans to shareholders, especially majority stockholders are red flags for the IRS.  In order to be proper, each loan must be carefully documented as to term, rate of interest, and the ability of the shareholder to repay.  These are three prime considerations(but not the only ones).

4) Vehicle use/personal use.  When a car's use is divided between personal and business use, extra care is required to keep a detailed record of mileage for each.  Expenses and depreciation can then be pro-rated properly for the allowable business use deduction.

5) 1099's, W-4's, W-9's, I-9's.  The 1099-MISC form is given to sub- contractors and other individuals who have been paid over $600 during the year.  There are stiff penalties for paying an individual as a subcontractor, who is really an employee.

• The W-4 is required to be filled out by all employees detailing their  allowances.  It is kept on file by the employer.

• The W-9 is a request by the payor of the payee for the social security number or other tax identification number and whether or not that payee is subject to backup withholding provisions.

• The I-9 is a form required to be filled out by the employee and employer in order to verify employee eligibility status.

6) Travel & Entertainment.  Federal Rules allow for the deductibility of only 50% of your food, and entertainment costs; they must be detailed by date, place, with whom, and business purpose. Travel expense may be fully deductible, but it must be substantiated as to cost and business purpose.

7) Minutes of Meetings.  All domestic corporations are required to have at least one meeting a year and the minutes of that meeting formally recorded.

8) Personal expenditures paid by your corporation.  In a closely held corporation, it is often times easy to have the corporation pay the tab for some personal bills.  Generally speaking these expenditures become constructive dividends to you, thereby not deductible to the corporation.

9) Bills of sale for all equipment.  The purchase and sale of equipment requires documentation detailing description, date, and amount of the transaction.

10) Inventory. Whether you are on an annual or fiscal year, a detailed inventory is required at the end of the year.  List your inventory by item number, description, quantity, and cost method you are using.

The above-mentioned items must be reconciled to your business tax return. This may seem like a lot of extra effort, but failure to have this documentation can lead to possible loss of the tax deduction and extra taxes, penalties and interest charged to you.

Reference:  Practice Enhancers, Able & Co.

How a Business Pays Income Taxes

How a Business Pays Income Taxes

Having a business of your own creates new responsibilities for paying income taxes on the profits.  Unlike working for someone else as an employee, where the income taxes are supposed to be withheld from your pay, as a business owner you must pay income(and self-employment) taxes a different way.
This is done through paying Estimated Taxes on a periodic basis directly to the appropriate Federal and/or State government.  If you fail to make the proper amount of timely estimated taxes, you may be subject to some significant, nondeductible penalties once your total tax liability exceeds certain amounts for the year.  Obviously, the government not only wants these taxes from you, it wants them before the appropriate tax year is over.  In effect, it wants the use of this money in advance instead of you having it.

The second important reason to make estimated tax payments is to avoid falling behind in your tax obligations.  If you wait, then you end up paying the tax bill for the previous year in the current one in which you presumably will have current year tax obligations.  This can play havoc with your cash flow, and budget.  You end up always "behind the 8 ball" trying to find money to pay for this tax bill.

How And When Estimated Taxes Are Paid
The actual procedure for paying these taxes involves the use of a voucher or coupon to make payments.  The payments are either mailed directly to the taxing authority or given to an authorized bank which then forwards the money on your behalf.  This depends upon the type of business entity involved.

A taxpayer who is either a Sole proprietor, or a  Partner, or a Shareholder of a Subchapter S Corporation must generally pay these estimated income taxes with an Estimated Tax Payment Voucher, Form 1040ES.  These vouchers are sent in on a so-called "quarterly" basis although the due dates for federal purposes are not exactly every three months.  Rather, they fall on the following dates: April 17; June 15; September 15; and January 15.

This means the business owner is supposed to estimate the taxes that will be owed, then make timely payments on these dates to cover the taxes due.  These tax payments are then credited on the proper tax return that will be filed including the business tax liability.

Do you have to estimate and pay 100% of the expected taxes due like this to avoid government penalties?  Not necessarily.  There are a few exceptions to this penalty.  One, as long as you have paid in 90% of the overall tax liability through timely filing of these vouchers, you may be able to avoid these associated penalties for underpayment of estimated taxes.

Two, if you can prove that you paid in an amount exceeding 100% to 105% (depending on your income level) of the previous year's tax obligations on a timely basis, then the estimated tax payments may not have to be as high during the year. Of course, you may be avoiding penalties with these two main exceptions, but you still have to come up with the balance of the tax due when you file!

For a Corporation other than a Subchapter S, these income taxes due should be paid using a different procedure.  A coupon called Form 8109 is generally used to make these payments.  This coupon is given to an authorized financial institution (most commercial banks qualify) or a Federal Reserve Bank on a periodic basis.

The dates this deposit is due fall on the 15th day of the following months for the year in question:  4th month; 6th month; 9th month; and 12th month.  The actual months depend on the tax year the corporation is using for tax filing purposes. Unlike a Sole proprietor who must use a calendar year basis (year ending December 31), regular corporations may select other tax year ending filing dates.   However, for a calendar year corporate filer, these dates for the tax year are: April 17; June 15; September 15; and December 15.

Does a corporation also qualify for certain exceptions to making 100% of the estimated taxes due?  Yes, there are two main ways to do this.  The payments that must be made on a timely basis should be the lessor of either:

1)  97% of the actual tax owed,
or
2)  100% of the tax from the preceding year, if that year was a 12 month tax year and a return filed for that year showed a tax liability.

Conclusion
Paying income and self-employment taxes for a business involves some educated guess work since you are generally paying in advance of the filing of the tax return.  It's very difficult for anyone to be 100% accurate in predicting both the income and allowable expenses a business will have for the year--a year in advance.

That's where good recordkeeping comes into play during the year.  If you know on a contemporaneous basis your income and expenses, then you can make adjustments during the year if unplanned for changes occur in the business revenues or expenses you had originally projected.

The important thing is to try your best so you don't find out at tax filing time that you owe a relatively large amount of taxes.  It's hard enough making a business successful; getting behind in your tax liabilities always makes it even harder.

Reference:  Practice Enhancers, Able & Co.

Subcontractor vs. Employee

Subcontractor vs. Employee
Employee Status vs, Independent Contractor
For the current year, one of the hottest issues in the eyes of the IRS revolves around determining a true independent contractor from a "disguised employee."

Why is this such a tricky subject, and why do so many businesses try to use independent contractors instead of employees?  One main reason is the tax and money savings differences.

A business that uses an independent contractor instead of an employee saves on payroll taxes.  There is no required FICA tax, FUTA (federal unemployment), or State Unemployment Tax.  Since these taxes can amount to upwards of 15% combined for the business, one can see a decided advantage shaping up.

In addition, no worker's compensation coverage is generally required. For certain occupations (especially construction, tree work, or other more "dangerous" work) the cost of worker's compensation can exceed 33% of overall payroll!

An independent contractor does not have to be covered under any retirement or fringe benefit plans (such as medical, or insurance) either.  The savings here can be equally substantial.

Finally, from an administrative and tax form reporting basis, independent contractors are far easier for businesses to deal with than employees.  No quarterly payroll tax returns, no worker's compensation audits, and no yearly W-2 forms are required to be filed- -to name a few.

So one can see where the inducement lies in using independent contractors instead of employees.  There's nothing wrong with properly using an independent contractor--that's good business practice.  However, the temptation--and danger--exists if a business owner tries to claim independent contractor status for a worker when that worker is really a true employee.  This is because if the relationship is challenged down the road, and it turns out the business owner cannot properly prove true independent contractor status existed, the penalties can be enormous in a number of ways.

If the business loses on the challenge, all back payroll taxes must be paid as if the worker were an employee.  Additionally, a portion of taxes that should have been withheld for income and FICA from the employee's portion must now be paid by the business employer instead.   Then various penalties are added in, and they can amount to over 150% of the recalculated taxes!  Finally, interest is charged on the total amount due, dating back to the original liability date, not when it was challenged. Also, workers' compensation insurance can then be back-billed to the original date of hire.

Taking it a step further, if the person being used as an independent contractor were to get hurt on the job, and the business owner were to be challenged as to independent contractor status(perhaps even by the worker who was hurt) the risk of being responsible for all medical expenses, workers compensation payments, and legal damages becomes a frightening reality.

From a retirement plan standpoint, if the business were to lose an independent contractor status challenge, the existing retirement plan for all employees could face disqualification for tax purposes on the basis of failure to cover all required employees.  This could be a financial and administrative nightmare.

So, how does a business protect itself from losing these challenges? The answer lies in being able to meet the various legal "tests" the government and insurance companies use to compare an employee with an independent contractor.  Note that just because the business owner and the worker both voluntarily agree it will be an independent contractor situation  does not make it so.

What makes it so?  Unfortunately, there are a number of these so- called tests that are used by the authorities to make a determination so it is not always such a "cut and dry" matter. Overall, the factors used center around the issues of Control, Integration, and a Continuing Relationship.

Control and Continuing Relationship
The more control the business has over the worker in the day to day activities, and the longer the continuing relationship between the business and the worker (especially if it is an exclusive one), the more the stage is set for it being considered an employee relationship.

Integration
This refers to how important the services being rendered are towards the overall day to day survival of the business in question.  The more important this service, the more it slants towards an employee relationship.

Listed on the next page are the majority of the issues used in deciding these three main factors to determine if the person is an independent contractor instead of an employee of your business.

♦ Their services are available to the general public, not just your organization.  
They work for other businesses, too.

♦ All required licenses and registrations for the services being performed
should be in the name  of the independent contractor, not your business.

♦ Hours for the job are primarily set by the contractor, not by you.

♦ Tools, vehicles and equipment are provided by the contractor, not you.  
All repairs on such are borne by contractor.

♦ Contractor provides for his/her own work facilities outside of your    workplace.

♦ Business expenses--especially travel--are paid by contractor.

♦ Contractor has no significant involvement in company fringe benefit 
programs such as insurances, and retirement plans.

♦ Separate liability insurance is maintained.

♦ Payments should be based on a job basis, not an hourly, weekly, or 
monthly basis.

♦ The work shouldn't require extra specialized training the contractor 
must receive by the business owner.

♦ The contractor should not wear any business uniform or company 
insignia from your business.

♦ Any assistants or workers helping contractor should be under 
contractor's employ, training,  and direction.

♦ There should be no regular, mandatory meetings between contractor 
and business owner similar to ones regular employees attend.

♦ Assignments should be in the form of a written contract with a formal 
method of termination. Contractor should also have other assignments 
from other businesses along the way.

♦ Record keeping, advertising, and other normal business activities for 
the contractor should be handled by the contractor, not by the 
business using the services.

♦ The more the work is done solely on business premises, the less 
likely it is an independent contractor status.

♦ Work patterns and work schedules should be set primarily by 
contractor, not business owner. Too many detailed, written instructions 
by the business can jeopardize independent contractor status.

♦ It should be a profit/loss arrangement, meaning the contractor could 
conceivably lose on the deal just like any other business--unlike an 
employee.

♦ The allowable customary method within the field in question carries 
some weight as well.  As an example, in the real estate field, agents 
are treated as independent contractors, not employees.

As you can see, the list for interpretation purposes is lengthy and quite subjective.  The more a business can prove that it did not have control, integration, and continuing, exclusive relationships with the worker, the better the case for independent contractor status.

Special note
If a business uses an independent contractor, it is imperative that proper reporting of these payments be made to the government.  If the payments to this individual exceed $600. for the calendar year, a form 1099 (usually 1099-Misc) should be filed with the IRS.

This form lists the name, address, and tax identification number of the individual, and how much was paid for the year.  Failure to file this can result in penalties, and a possible weakening of the case for independent contractor status.  So businesses should always get the pertinent tax information from any independent contractors before paying them.

Independent Contractor Agreement

This agreement is made between the client and the independent contractor according to the terms and conditions set forth:

Independent Contractor:
Name: ______________________________________                            
Address: ____________________________________
City, State,Zip: _______________________________ 
    Social Security Number (Tax ID #): _______________

Client:  
    Name: ______________________________________
Address: ____________________________________
City, State Zip: _______________________________

Payment Terms:	Client will pay according to the following terms:  _______________________________ _______________________________
Work Description:	The independent contractor will perform the following work: _______________________________ _______________________________
Term of agreement:	This agreement will terminate on:  _______________________________
Termination without cause:	Either party may terminate this agreement after a period of 30 days from which written notice has been issued.  No cause is required.
Termination with cause:	Either party may terminate this agreement immediately if reasonable cause occurs, and said cause is identified in writing.
Notices:	All notices relating to this agreement must be given in writing.  They may be hand delivered or sent to the party at the party's stated address.
No Representation:	Neither party is authorized to enter into any agreements or contracts with others on behalf of the other party.
Expense Reimbursements:	Unless otherwise agreed to in writing, client is not liable for any expenses incurred by the independent contractor
Tools, equipment, transportation:	Independent contractor will supply his/her own tools, equipment, transportation for the stated work purpose.
Taxes:	No form of any taxes will be paid by client on behalf of independent contractor.  It is agreed that this is not an employer/employee status.  Independent contractor acknowledges that all required tax payments, and tax filings are solely the responsibility of the independent contractor, including any possible social security taxes.
Fringe benefits:	Independent contractor will not be eligible for any type of fringe benefit plan the client may have available to the client's employees.
Worker's Compensation:	Client is not responsible for providing any form of worker's compensation to independent contractor, or employees of said independent contractor.   Further, independent contractor states that all required worker's compensation insurance that must be carried for this assignment is current at this time.
Licenses, permits:	Independent contractor states that all required licenses and permits needed to carry out stated assignment have been obtained.
Assignability:	Independent contractor may assign this agreement provided written notice is given, and client agrees.
Severability:	If a portion of this agreement is held to be unenforceable, the rest of the agreement will still remain in force.
Amendments:	Amendments, and revisions may be made to this agreement only if in writing, and only by joint consent of both parties.

Client Name: _________________________________________ 
Signature of Client: ____________________________________
Date: _______________________________________________

Independent Contractor Name: _____________________________
Signature of Independent Contractor: ________________________
Date: __________________________________________________

Reference:  Practice Enhancers, Able & Co.

Credit Card Law and the 5 Rules You Need to Know

Credit Card Law and the 5 Rules You Need to Know
The Federal Reserve’s new rules for credit card companies mean new credit card protections for you.  Here are some key changes you should expect from your credit card company beginning on February 22, 2010.
New Credit Card Rules - Board of Governors of the Federal Reserve ...
You may have noticed a few changes on your credit card statements recently, including lower late fees. That's because the final round of new regulations from last year's sweeping credit card legislation just went into effect in August 2010.

These most recent credit card regulations protect consumers from unreasonable penalty fees and require credit card companies to re-evaluate interest rate increases at least once every six months.  Here's a summary of new rules, and what they mean for you:

1.  New Caps on Penalty Fees
In general, card issuers can't charge more than $25 for late or returned payments or over-the-limit transactions unless:
· A cardholder shows a pattern of repeated violations, such as making more than one late payment within six months.
· The card issuer determines that a higher fee reasonably offsets its cost of dealing with the violation that caused the penalty. The card issuer has to review this determination every 12 months. Alternatively, rather than making a fee decision every 12 months, card issuers can simply charge a penalty fee up to $25 for the first violation and up to $35 for each repeated violation that occurs during six billing cycles.
· In any case, a penalty fee can't exceed the dollar amount associated with the violation that caused the fee. For example, if you're late making a $20 minimum payment, the late fee can't exceed $20. Or, if you exceed your credit card limit by $10, you can't be charged an over-the-limit fee of more than $10.

2.  Prohibited Fees
A card issuer can't charge a fee for a transaction it declines, a fee if you don't use your card or a fee if you close your account.

3.  One-fee Limit
A credit card company can only charge one fee for the same conduct during a billing period, whether it results in a single violation or multiple violations of your credit card terms. For example, a card issuer can't charge two late fees for a single late payment, or both a late and returned payment fee based on a check that is received after the due date and then bounces.

4.  Re-evaluation of Rate Increase
Previously, your credit card annual percentage rate could be raised permanently. Now, whenever a card issuer raises your rate, it is required to review its decision every six months to determine if your rate should be decreased. If so, the company must reduce your rate within 45 days of its decision. This requirement doesn't apply to any rate increases made before Jan. 1, 2009, or to rate increases due to the operation of a variable rate or the expiration of a promotional rate. The first review must be made by Feb. 22, 2011.

5.  Explanation of Rate Increase on Future Balances
Any time your credit card company increases your APR after Aug. 22, 2010, it must tell you why in a written notice sent at least 45 days prior to the rate increase.

This information should make it easier for you to do battle with your credit card company.  If you do notice something that doesn’t feel right, give the credit card company a call to inquire.

Reference:  CFS Tax Corresponder