Getting a Loan for Your Business  
IRS adds 'Innocent Spouse' Information to its internet site.  
1999 RI Legislative Real Estate Review (legrev.pdf, 131KB)
Barrington & Warren Must Pay Motor Vehicle Tax at Closings.
US Congress Looks At Independent Contractor Status.
1998 Workers Comp law changes affect employers and employees!
Bankruptcy: Debtor must choose
Protect up to $100,000 of equity in your home!

Getting a Loan for Your Business.
Bank financing is often key in helping any small business owner start their business, despite the anxiety it may cause. Starting your own business is probably one of the scariest things you can do. You may not doubt your abilities or your ability to generate business. But the difficulty is often hanging on, dangling by the roof's ledge until you get paid or are able to generate sufficient cash flow.

Unless you have perfect account receivables and cash flow (and frankly, I don't know who does), most solo and small business owners must finance their businesses at one time or another. And, let's face it, it's easy to become very nervous about the process of applying for a loan and being in debt.

However, borrowing does not have to be such a gut wrenching experience. With proper planning, solo and small business owners can learn to think of debt as a fiscally responsible business tool. The first and natural step is to calmly and seriously consider your ability to repay the loan before you sign on the dotted line. Try out this thought process: Write out three scenarios for projected revenues. The first scenario should be an expected scenario, the second should be one that is 25% less than your expectations, and the third should be a projection 25% greater than expected.

From these three scenarios develop a written business plan showing how you need the money and how it will be repaid. Be prepared to present to your lender clear and supportive documentation of your books and record keeping system, including your payment history. Further, your extended team of professional support, your accountant, your attorney, should be a part of your loan presentation.

Cash flow... it is critical to the function and survival of any business. Profitability on paper means nothing if you do not have the cash flow to repay the loan. Without the cash flow to repay the loan, think twice about getting it. You can't drive the car if the tank is empty.

By following these guidelines you will become engaged in a thoughtful process, built on a solid foundation, anticipating and prepared for unknown and unexpected challenges. Although your sheer confidence, your intangible gut instincts are certainly critical to the success of any business - can provide your distinctive style - it alone will not get you a good loan. Nor will sheer confidence produce a business built to last, a good night's sleep or a comfortable and secure business and personal life. That is only realized through thoughtful planning, constructive implementation, regular reassessment and adjustment; coupled with the perseverance, enthusiasm, confidence and the cash flow to sustain it.

Robert S. Goldman, Esq.

IRS adds 'Innocent Spouse' Information to its internet site.
Taxpayers and their lawyers can determine if they qualify for "innocent spouse" relief by using new information on the IRS's website.

The site provides a series of "yes" or "no" questions and then offers to download the appropriate application forms if the individual appears to qualify for relief.

Under the 1998 IRS reform law, if a taxpayer files a joint return but then divorces, legally separates or lives apart from a spouse for a year, one can "elect" separate liability and thereby escape tax debts if one can prove that they are allocable to the other spouse.

This "innocent spouse" election only protects the taxpayer from liability for deficiencies in a tax return. A separate provision of the law makes "equitable relief" available if the other spouse simply failed to pay taxes in the past. Another provision provides relief options for spouses who don't divorce, legally separate or live apart for a year.

You can use the new service by clicking on the Spousal Tax Relief Eligibility Explorer on the Tax Info For You page of the IRS Internet Site.

- From the Washington Report - Lawyers Weekly USA.

Barrington & Warren Must Pay Motor Vehicle Tax at Closings.
Recent legislation passed in our General Assembly requires that motor vehicle excise taxes be paid at the sale of all real estate situated in the Towns of Barrington and Warren. The provision requires the closing agent at closings, including foreclosures, to pay the motor vehicle tax upon transfer of properties in these towns.

US Congress Looks At Independent Contractor Status.
A number of lawsuits from throughout the country have arisen where workers are alledging that they are classified as independent contractors, when in fact they are employees. The reason? Employers want to avoid paying benefits and payroll taxes. Congress has proposed legislation that seeks to clarify the distinction between and independent contractor and employee. Currently, there is a 20 point test that the Courts and the IRS apply in order to make the determination. The proposed bill, if passed, would replace it with a 3 point test:

• 1. Worker is an employee unless the employer does not exercise control over the worker
• 2. The worker makes his or her services available to others
• 3. The worker assumes entrepreneurial risk.

 

1998 Workers Comp law changes affect employers and employees!
The Legislature used 1998 to revise the R.I. Workers' Compensation laws. Some of the measures relax the drastic changes made in the early 1990's. The changes include:

• Any employer required to secure workers' comp coverage that fails to do so is guilty of a misdemeanor. Upon conviction, the penalty was increased from $100 - $500 per day for each day of non-compliance to $500 and $1,000 per day. Furthermore, the Director was given a new power - to suspend the operation of the business.
• Overtime pay is now considered again in determining the average weekly wage of an injured employee. Until the changes in the early 1990's, all of an employee's income was used to determine the employee's average weekly wage, which is then utilized to set the weekly benefit rate for an injured employee. In the 1990's changes, the overtime earnings were no longer used to determine the benefits one received. With the new changes, overtime is again considered to determine the earnings and the benefits of an injured employee.
• Prior to the recent changes, an employer with 3 or more employees was covered by the Workers' Compensation Act and had to secure workers' compensation coverage. If there were less than 3 employees, an injured employee was unprotected. The 1998 changes require employers with one or more employees to have Workers' Compensation coverage as of January 1, 1999.

 

Bankruptcy: Debtor must choose
When a debtor files a Chapter 7 case, he cannot simply keep his car and continue to make payments. Debtors must either reaffirm the debt, pay off the loan or surrender the car says the First Circuit Court of Appeals. Other Circuit Courts that have reached this issue are split 4 - 4 on their decisions. In the past, debtors would keep the car and make payments, knowing that if they did not sign a reaffirmation agreement, they could stop paying at a later date without penalty other than turning in the car. Under this new rule, once a debtor signs a reaffirmation agreement, the entire debt is collectable. (In Re Burr)

Homestead Declaration:
Protect up to $100,000 of equity in your home!
Often, the equity in your house is one of the largest assets you own. Each monthly mortgage payment increases your equity. Now you can shield up to $100,000 of that equity from creditors.

As of January 1, 1999, Rhode Island homeowners can shield up to $100,000 of equity in their principal residence from most creditors by filing a Declaration of Homestead. In many cases the homestead exemption can remove your primary residence from the list of assets that creditors may lay claim to. Download the Homestead Exemption Form (6KB rtf file). When properly prepared and recorded in the town hall for $12.00, it becomes effective. Since we cannot see the future and financial perils, we recommend that the Declaration be filed before debts are incurred. Debts for taxes, water/sewer liens, for the purchase of the home, for child support/alimony and pre-existing debts are exempted from this broad protection.

The Homestead Exemption affords a Rhode Island homeowner a much greater protection for his/her home than the federal Bankruptcy Code, where each person may shield only $15,000 in the equity of real estate.

Call us at (401) 463-9800, and we'll make sure you receive the benefits of the Homestead Exemption.

The RI Supreme Court licenses all lawyers in the general practice of law.
The Court does not license or certify any lawyer as an expert or specialist in any field of practice.