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partnership handshake

Navigating Tax Season for Your Business Partnership

The year 2020 was unlike any other, the effects of which are reflecting in the 2021 tax season. Many who experienced layoffs, furloughs, or opened their own business now face some challenges in tax preparation. Suppose you are one of those who have entered into a business partnership. In that case, you may need some assistance to navigate through this new territory. A Business Law attorney can guide you through the wilderness of this process and help you make the best strategic decisions for your new business.

If you have entered into a business agreement with one or more partners, developing a Partnership Agreement is crucial to its formation. Think of it as your roadmap. Your Partnership Agreement should set terms for the nature of your partnership, define contributions from each partner, and specify how profits and losses are allocated. If you have not drawn up a Partnership Agreement, consider consulting with a Business Law attorney to help you cover all the details.

Understand Tax Reporting for Partnerships

A Business Partnership must obtain a Tax ID number. This number is called an “employer identification number,” or EIN. Since partners aren’t considered employees, don’t expect to receive W-2 forms for them or for your business to report income. A partnership, as an entity, doesn’t pay tax on the income received by the business. Instead, that income “passes through” its profits or losses to the partners. 

One partner is responsible for obtaining and completing IRS Form 1065. This form is a report of earnings or losses only; it is not a return to calculate what individuals may owe. Think of it as a template for gathering information from each of your partners. Subsequently, each member of your partnership must complete and return a Schedule K-1 form to report their individual share of income – gains or losses, deductions, and credits. Due to the financial details required for each partner to report, your Partnership Agreement is crucial in defining how each partner takes ownership and responsibility for your earnings and/or losses.

Lead Your Business Partners

The partner responsible for completing Form 1065 should distribute Schedule K-1 to all partners no later than March 15 so that they may include this in their annual personal returns. When you complete your Schedule K-1, it’s essential that you include:

  • Your employer identification number (EIN)
  • What type of partner you are
  • Your share of profit (or losses) at the beginning and end of the tax year
  • Your share of liabilities at the beginning and end of the tax year 

Schedule K-1 also requires each partner’s input for distributions, deductions, credits, tax-exempt income, and nondeductible expenses. 

Engage with a Business Attorney

Filing taxes for a new business, especially a partnership, can be a daunting journey. Consider engaging with a Business Lawyer to help you navigate tax preparation and find the best solutions for your partnership. The Boutty Law Firm, P.A. has the ability and experience to help your business succeed. Call The Boutty Law Firm, P.A. today at 407-883-1024 or contact us online to schedule your initial consultation.

IRS Tax Information for Partnerships

https://www.irs.gov/businesses/partnerships

Schedule K-1

https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

Partner’s Instructions for Schedule K-1

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

Form 1065: U.S. Return of Partnership Income

https://www.irs.gov/pub/irs-pdf/f1065.pdf

Partner’s Instructions for Form 1065:

https://www.irs.gov/pub/irs-pdf/i1065.pdf

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Power of Attorney

Four Types of Power of Attorney in Florida and What They Mean

Familiarizing yourself with the functions of a power of attorney can help you prepare for the future. An individual who has power of attorney over another can make decisions about that person’s finances, estate, and healthcare. Power of attorney and healthcare power of attorney is used when an individual is incapacitated and unable to make decisions independently. Below, we will discuss the different types of power of attorneys (POA) and when would be the best circumstances to use them.

1.          Durable Power of Attorney

This type of power of attorney is the most common. An individual will be assigned as an agent to oversee various financial and medical decisions for the incapacitated person. This decision can be of any person they choose. It will remain in effect until the person holding the POA revokes it(executing a revocation of power of attorney) or it reaches the expiration date included upon signing the document. The person choosing their POA agent must do so with utmost trust, as they have signed over their rights to legal and medical decisions. 

2. Special or Limited Power of Attorney

If you need an agent to act as your POA, but only for a limited time or for specific purposes, then you will need a special or limited power of attorney. In the agreement for power of attorney, you will want to specify what powers you want to grant your agent and what decisions they should make on your behalf. If you’re unsure of what to include, contact your estate planning attorney for a consultation. 

3. Healthcare or Medical Power of Attorney

Healthcare or medical POA is a type of power of attorney where you authorize a trusted agent the ability to make medical treatment decisions (specifically) on your behalf. There might be a situation where you cannot communicate your wishes. You will want a trusted agent to carry out your predetermined decisions. This type of POA can be set up while building your estate plan and drafting your Advanced Directives. Having your medical wishes in writing can reduce the worry and stress on your family during an already stressful event. 

4. Florida Real Estate Power of Attorney

A Florida real estate power of attorney is a limited POA. It can grant an agent authorization to handle your affairs regarding entering real estate contracts or buying or selling real estate. The best time to explore your medical, legal, and financial estate planning options is when you are healthy. Contact a trusted estate planning attorney at The Boutty Law firm to assist you with your estate planning journey. 

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liability waiver

Liability Waivers During Covid-19

  Florida’s economy has been slowly rebuilding since Governor DeSantis lifted the State of Florida’s stay-at-home order on 4/30/2020. Non-essential businesses continue to struggle financially from the shutdown and the newly emerged issue of pandemic-related liability risks. Although several states have passed COVID-19 laws to limit businesses’ liability, currently, there is no legal immunity in the Sunshine State for pandemic-related claims. Business owners run the risk of lawsuits from employees and consumers who claim to contract COVID-19 on their premises.

   A liability waiver is an agreement in which one party gives up the right to file a civil lawsuit against another party for damages that have occurred on the premises. Gross negligence, recklessness, and intentionally harmful conduct invalidate a waiver. Liability waivers are becoming commonplace at recreational facilities, schools, salons, summer camps, and construction sites. These waivers gain popularity to shield business owners from claims; however, there are questions regarding their enforceability, as waivers regarding the pandemic are uncharted territory in the legal arena.

Guidelines for Waivers

   Covid-19 Liability waivers should acknowledge the inherent risks that a person assumes from exposure to infectious diseases, including COVID-19. These contracts should be drafted with specific language about the coronavirus’s contagious nature, even with heightened sanitary precautions. Vague or ambiguous wording in a waiver can invalidate its terms. The simple posting of a sign at the place of business is not enforceable. A waiver may not be valid if an individual feels they have signed the document under duress, or if they fear retaliation from their employer. Adverse employer actions can include termination, demotion, suspension, or other negative consequences. An argument can be made to invalidate the waiver if a person signs but does not fully understand the contents’ language.

COVID-19 Liability Waivers at Construction Sites

   The enforceability of liability waivers for COVID-19 at construction sites for contractors and subcontractors is regulated by the Occupational Safety and Health Act (OSHA). The risk of coronavirus differs from physical injuries, which are easily identified and investigated. Physical harm is the consequence of an unsafe condition or hazard. It would be difficult to identify and prove the contact that caused an infection and link it to the business owner’s negligence. Workers’ Compensation grants employees the right to file a claim, and that right cannot be waived. OSHA requires employers to keep the workplace free of safety hazards. 

Asking or requiring an employee or other person to sign a liability waiver may imply that a business owner does not provide a safe environment.

   While waivers may limit or prevent liability in some cases, they do not provide immunity from lawsuits. The profound impact of COVID-19 is creating a host of legal issues for the courts to consider. Significant legal and policy concerns have emerged, and these challenges will likely be the focus for many years to come.

    The best defense against a claim is to ensure that construction sites are in full compliance with the Center for Disease Control, OSHA, state, and local government regulations regarding the pandemic. Some of these interventions include actively encouraging sick employees or those exposed to the virus to stay home. Wearing cloth face coverings, providing personal protective equipment, practicing social distancing, taking daily temperature checks, and frequent disinfection of the workplace can mitigate the risk for pandemic-related lawsuits.

The Boutty Law Firm P.A. Offers Effective Legal Services.

  A COVID-19 liability waiver for your business should be tailored specifically to your industry. The Boutty Law Firm P.A. is a knowledgeable multi-service law firm with extensive construction industry experience. We understand the construction industry’s nuances with over twenty years representing contractors, subcontractors, and property owners. We counsel and represent clients in risk management and disputes through contract development, negotiations, and courtroom litigation. Our strategies are designed to meet the objectives of your company goals.

For a free, initial consultation with a business law attorney to discuss risk management concerns during the pandemic, contact The Boutty Law Firm P.A. at 407-622-1395. Our office is in Winter Park, Florida, and we represent clients in Orange, Seminole, Osceola, and Volusia, Florida.   

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