Archive for April, 2011

Many people form corporations because they heard that it’s important.  It will protect you from liability…  It will make your tax situation better…  There are a lot of reasons your lawyer, your accountant, or even your friends might recommend that you incorporate or form an LLC.  Liability protection is one of the main reasons I encourage my clients to formalize their business entity structure.

But having an LLC, a C-corp, or an S-corp is not a magic cloak that protects you from liability.  If you don’t follow corporate formalities as the owner, someone suing you could potentially attack your personal assets as well.  There are many reasons a court might decide to “pierce the corporate veil” to allow someone to sue the owner individually.  Maybe you didn’t keep minutes, maybe you used the company assets like they were your own, or maybe your business was bankrupt from the start.

If you haven’t already done so, consider consulting a lawyer to ensure that you are following proper corporate formalities.  It would be a shame to go to all the work and expense of creating and maintaining a corporation, only to be personally liable because you failed to follow some important step of keeping your corporation and personal lives separate.  A good attorney can help you analyze your own circumstances and help to limit your liability.

SHAWN VOGT SWEEN SELECTED AS ONE OF MINNESOTA’S “UP & COMING ATTORNEYS”

MINNEAPOLIS, MN – April 22, 2011. It has been announced that Shawn Vogt Sween has been recognized by Minnesota Lawyer as a 2011 “Up and Coming Attorney.” In its eleventh year, this award identifies those Minnesota attorneys who have distinguished themselves during their first ten years of practice. Criteria for selection include leadership, professional accomplishment and service to the legal community. The 25 honorees were chosen by Minnesota Lawyer‘s editorial staff based on nominations from law firms, legal associations, previous award recipients and other members of the state bar.

This year’s Up & Coming Attorneys will be featured in a special section in Minnesota Lawyer in May and during an awards luncheon on May 11, 2011, in downtown Minneapolis.

Shawn brings her unique experiences and expertise to her one of a kind Minnesota law firm. She has spent time at both the USDA and SBA offices in Washington D.C., where she worked with the national rural development partnership. She now works with clients ranging from farmers to rural business owners.

She’s actively involved in her community and with her local school district. She’s currently serving as an advisor to the local Family, Career & Community Leaders of America (FCCLA) student organization and is also actively involved with the elementary school where she volunteers in classrooms and her community’s upcoming sesquicentennial event planning committee. She lives in Grand Meadow, Minnesota with her husband and four children.

She received her J.D. from Harvard Law School and her B.A. from Hamline University.

ABOUT THE LAW OFFICE OF SHAWN VOGT SWEEN, LLC

The Law Office of Shawn Vogt Sween, LLC, serves farmers, rural businesses, community banks, and rural citizens.  Its main fields of practice involve real estate, estate planning and probate, and business law with an emphasis on agricultural and rural law.  The Law Office of Shawn Vogt Sween, LLC, offers the best of both worlds to Minnesota residents: a Harvard-educated lawyer with a small-town upbringing and a background in agricultural and rural development. For more information, visit www.svslawoffice.com

At a time when many farm families are struggling, it’s encouraging to hear good news about farm profits.  The Star Tribune recently reported that “Agriculture rebounded sharply in Minnesota, but gains weren’t evenly spread.”  Although not all farmers reported higher earnings, a number of farmers saw their earnings increase in 2010 thanks to a good growing year compared to 2009′s difficult growing conditions.

As you begin the 2011 planting season and hope for another good year, consider protecting your family by putting together a good estate plan or farm transition plan.  You’ll never be sorry to have done some advance business and estate planning.  I see far too many people in my practice who own land – extremely valuable land – and have failed to plan for what will happen with that farm as the years go by.  Consider consulting an attorney if you haven’t taken this important step yet.

If you sell land at today’s high land prices, you might face some large capital gains taxes.  If you know that you want to purchase more land though, the US government has provided a way to help you defer those taxes.

The IRS outlines its 1031 Deferred Like-Kind Exchange in this fact sheet.  The rules are complex, and I’m not going to get into them in this post.  Instead, I want to talk about advance planning, because if you miss this one important step, you may not ever get the chance to even attempt a 1031 transfer.

1.  Talk to your accountant.  Your accountant should be able to help you understand what a like kind exchange is and how it may affect your tax situation.  Only your accountant knows your complete tax history, so your accountant is the best suited to help you determine whether it would be in your best interest to attempt to defer capital gains taxes or if the situation is ripe for you to pay the taxes in the current year.  Deferred taxes always sound good, right?  Well, there may be situations where it would be better to take the gain now.  For example, long-term capital gains tax rates are pretty low right now.  Or if you have capital losses, maybe you want to offset those with a gain on the land sale and get the cash in your pocket.  Only your accountant can help you decide.

2.  Talk to your lawyer.  1031 exchanges require you to follow specific steps in order to qualify, and these steps are very different from the normal land sale.  There are time windows, deadlines, requirements of what and when to purchase, closing requirements, and rules about constructive or actual receipt of proceeds from the sale (you and your attorney shouldn’t ever have access to the money, by the way).    Most closings do not involve 1031 exchanges, so your lawyer can’t help you with one if you don’t mention it.

3.  Talk to your real estate agent.  Specific language should be inserted in your purchase agreement.  Make sure your real estate agent knows that you’re looking to conduct a like-kind exchange.  If you already have a purchase agreement, you may consider amending it to add the 1031 language.  1031 exchanges are sophisticated business deals.  I’d recommend against trying to do-it-yourself on this transaction.

4.  Find a qualified 3rd party intermediary.  Remember when I said you and your lawyer shouldn’t ever have access to the money?  That’s why you need a third party intermediary.  One of the big companies in the industry is Starker Services.  I don’t have any relationship with them, but I know they will answer questions over the phone for landowners, investors, and anyone else looking for 1031 information.

5. Don’t close the sale until you have everything set up.  The closing is basically the end of your sale.  Closing agents are required to report sales to the IRS, and they will ask you to sign a form indicating that they have your correct social security number to report your sale price.  This is a clue for you…if you are advised that the sale will be reported for tax purposes and you don’t yet have the 1031 process underway, your closing agent likely doesn’t know that you are considering a 1031 exchange.  If you close (sign documents and exchange money) before you have your 1031 exchange set up, you could be disqualified from making the exchange.

6.  Act quickly.  There are tight deadlines written into the statute.  Make sure you understand them before you start the process.

My most important advice:  Set up a good team of people to help you with your exchange.  You’ll need an accountant, a realtor, a lawyer, and a third party intermediary.  Make sure each of these professionals are involved from the beginning so that you don’t miss any steps.  And most importantly, make sure that you tell your team members that you want to exchange like-kind property through a 1031 exchange.  While 1031 exchanges happen frequently, they are not the norm in many areas, so your team needs to know you’re planning one so they can best advise you.

Periodically we hear about a possible repeal of the estate tax.  The Farm Journal reports that several lawmakers have introduced a bill to repeal the estate tax, citing its disproportionate impact of farmers, ranchers, and business owners.  It’s true that the estate tax represents an enormous burden on America’s farmers, who work and pay taxes their whole life to purchase land and equipment that will be used in the agri-business, only to be taxed on those same assets at death.

Not only is the tax expensive, but the planning that goes into creating legal estate plans to avoid taxation is also costly and time-consuming.  All too often, farmers’ heirs, who may be farmers themselves, find themselves taking out loans, selling land, relying on insurance, or disposing of assets to pay estate taxes.

So what do you think?  How have you seen the estate tax affect your agricultural family?  Do you have any ideas that would help to solve the problem for farmers hoping to pass a working farm on to the next generation?  What do you think are the chances that proposed legislation will pass through Congress?

There is a growing demand for food produced in different ways…from raw foods, unpasteurized milk, and organic produce to grass-fed beef and free-ranging poultry products.   While consumers can certainly request–or demand–products raised in various ways, the farmers producing those products are required by state law to comply with the Minnesota Department of Agriculture regulations that monitor the safety of our food supply or face investigation and charges.

For the second time in the past year, a man from Freeport has been accused of selling farm products in violation of state laws.  The Star Tribune reports about the charges here.

Alvin Schlangen’s argument seems to be that he knows he’s breaking the law, but he thinks the law should be changed.  State officials counter that food safety regulations are necessary to protect Minnesota consumers.  Minnesotans might remember a similar case last year in which people purchased raw milk from an unlicensed farmer and were sicked with E. coli.  Apparently, the unlicensed farm was operating in unsanitary conditions, according to an article describing that case.

So what do you think?  What do these trends mean for traditional agricultural methods, responsible growers who want to comply with state law, the people of Minnesota, the state?  On which side do you fall?