One family-owned business was recently hit with more than $12,000 in IRS penalties because they didn’t know how to navigate the complicated world of business law and corporate law.
Attorney Christopher B. Slusser wants northeastern Pennsylvania residents to get the legal help they need to operate their businesses smoothly.
Did you know that if more than 50% of the interests in a partnership or LLC are transferred within a 12-month period, the business technically ceases to exist under federal tax law? This is true even if the business continues to operate as normal for all other intents and purposes.
This “technical termination rule” requires business owners to submit a special tax return within a few months after the “termination” occurs or they will face IRS penalties.
The partnership or LLC must also make new federal tax elections and start over with new depreciation periods – which can significantly reduce tax write-offs. And if the business operates on a fiscal year, the owners might end up having to report more than 12 months’ worth of taxable income in the year the termination occurs.
A technical termination can happen even if partial sales occur in different calendar years. So if 25% of a business’s interests are transferred in September 2015 and another 25% are transferred in July 2016, that still counts as a sale of 50% of the business in a year.
Residents of Luzerne, Lackawanna, Schuylkill, Carbon and Columbia County should have all the facts. Whether you have been in business for generations or are an entrepreneur planning a new venture, the business law experts at the Slusser Law Firm can guide you through the challenging processes so you can focus on running your business.