Pivotal Law Group

Toll Free 866-884-2417

The Pivotal Law Blog

City of Seattle Wins Case to Tax Imports

Posted Friday, April 6, 2012 by Michael A. Larson

alt text On April 2, 2012, Division I of the Court of Appeals in Washington found against American Honda Motor Company (Honda) that the Seattle B&O tax was properly applied to imports delivered to Seattle customers. Despite having a rule that appeared to allow an import exemption similar to that allowed by the State of Washington, the City of Seattle begin denying the use of the import exemption around 2002. Honda challenged an assessment by the City of Seattle on imports that it sold to Seattle customers.

The court examined more recent current cases under the Import-Export Clause of the Constitution and held that there was no constitutional prohibition preventing the City of Seattle from imposing its B&O tax on imports delivered to Seattle customers. Apparently, the court also accepted the City’s argument that its own rule, 5-44-193C, did not provide relief because delivery of the goods took them out of the “import stream,” despite years of interpretation by both the City of Seattle and the State of Washington to the contrary.

It should be noted that this case has absolutely no effect on the availability of the import exemption at the state level. Washington adopted a statutory exemption at RCW 82.04.610 in 2007 shortly after the Appeals Division of the Washington Department of Revenue had questioned the continuing viability of the state’s import exemption based solely on constitutional law principles. The Washington legislature saw the importance of protecting the ports’ activities in Washington, which could have been significantly harmed by any change to Washington’s long-standing exemption of imports from B&O taxation.

For more information, please contact Ronald Bueing at RBueing@PivotalLawGroup.com.

Permalink to this entry

Changes to the Washington Limited Liability Act Clarifies the Chadwick Farms Holding

Posted Friday, March 23, 2012 by Pivotal Law Group

alt text Recent changes to the Washington Limited Liability Act (“Act”) addressed the confusion introduced by the 2009 Supreme Court Ruling in Chadwick Farms Owners Ass’n v. FHC LLC, 166 Wash.2d 178, 207 P.3d 1251 (2009). In Chadwick Farms, the court held that by filing a certificate of cancellation, the LLC no longer has the ability to sue or be sued. However, the person winding up the corporation may be liable for improperly winding up the company.

The recent amendments to the Act (effective June 10, 2010) substantially changed all this. The amended Act took away the requirement of filing a certificate of cancellation upon completion of the winding up process. It removed the ability of an LLC to bar all further actions against it by filing a certificate of cancellation. Instead, a dissolved LLC may elect to file a certificate of dissolution, which would commence a 3 year statute of limitations for claims against the LLC. If no certificate of dissolution is filed, claims by or against the LLC or its managers or members are not time-limited, except by any applicable statutes of limitations. The new amendments also allow the LLC to revoke the certificate of dissolution within 120 days of the filing of the certificate of dissolution.

For more information, please contact Pivotal Law Group at 206-240-2008.

Permalink to this entry

Company Structures for Small Businesses in Washington State

Posted Wednesday, March 21, 2012 by Pivotal Law Group

alt text Partnership, sole proprietorship, limited liability company, and corporation are the four most common forms of business entity people use when starting a small business in Washington State. Although there are more structures to choose from, these four are the most popular ones, either because they are easy to form, or they offer limited liability protection. In deciding which business entity is best for you, it is always important to keep in mind the purpose, nature, and projected growth of your company (amongst many other factors). This may seem like a daunting process, but it really isn’t. With the right amount of research, consideration, and guidance, this can be done in a relatively easy and inexpensive manner.

Our experienced and award winning attorneys can help you do just that. With more than 25 years of experience under our belts working with both small and large businesses in Washington State, we have what it takes to assist you in not only choosing the right business structure, but also completing the necessary filings with the State, and drafting documents for the company. Starting a business is a challenging but rewarding experience and we look forward to being a part of it. Contact our office today for a free initial meeting.

Partnership. In Washington, a partnership generally means an association of two or more persons carrying on as co-owners a business for profit. There may or may not be a formal partnership agreement between the partners that defines the obligations and duties. If no agreement exists, then the partnership will divide the profits equally amongst the partners, and losses in the same way. The upside to a partnership is that no official filings need to be made with the Secretary of State. However, the biggest downside is that the partners do not enjoy limited liability and may be personally liable for the debts and obligations of the partnership.

Sole Proprietorship. Sole proprietorship is essentially a partnership that has only one owner. There is no legal distinction between the owner and the business. The owner receives all the profits and has unlimited responsibility for all losses and debts (no limited liability). Although there is no limited liability for the sole proprietor, we can still assist you in limiting your liability in different ways (i.e. through leases, insurance, etc.).

Corporation. A corporation is a business entity that has privileges and liabilities that are distinct and separate from its members (shareholders). One of the most important features of a corporation is the limited liability of its shareholders. A corporation is taxed as an entity, which means taxation at both the level of the corporation and shareholders.

Documents must be filed with the Secretary of State to start a corporation. The Corporate bylaws govern the operations of a corporation, and sets forth important information such as the rights and powers of shareholders, directors, and officers. Although the corporate bylaws must be formally adopted, it does not need to be filed with the Secretary of State. We can set up a corporation for you by doing the necessary filings with the State and also drafting corporate documents. Also, we can help you figure out the different tax liabilities that come with running a corporation, and if appropriate, we can help your corporation elect for S-Corp status.

LLC. A limited liability company (“LLC”) is a business entity that possesses both corporate and partnership characteristics. Like a corporation, it offers its members the protection of limited liability. However, it is taxed like a partnership, which means there is no separate entity-level tax.

Similar to a corporation, documents must be filed with the Secretary of State. Generally, the principal organizational document for Washington LLCs is referred to as an LLC Agreement, which covers formation, governance, economic, operational, and liquidation issues. This document does not need to be filed with the Secretary of State. Note that the statutes governing LLCs in Washington are more flexible than that of a corporation. If an LLC is the right structure for you, we can set up the LLC for you and draft an LLC agreement that meets all the needs of your company.

Permalink to this entry

Washington Deadline to True up Service Apportionment is October 31

Posted Thursday, October 27, 2011 by Michael A. Larson

alt text A late reminder to anyone involved in the service business in the state of Washington. With the passage of the market-based service apportionment rules in 2010, Washington formalized its procedures for businesses required to apportion their revenues. The rules allow businesses to estimate their apportionable income, but require that these businesses correct these estimates of apportionable income no later than October 31 of the following taxable year. Any businesses that reported estimates of their apportionable income for 2010 should use the Annual Reconciliation of Apportionable Income form that is available on the Washington Department of Revenue’s website, dor.wa.gov, to report the change in apportionable income by October 31, 2011.

Permalink to this entry

Protecting Portability Exclusion - Recent IRS Notice

Posted Tuesday, October 4, 2011 by Michael A. Larson

On September 29, 2011 the IRS issued Notice 2011-82 alerting executors of the estates of decedents dying after Dec. 31, 2010 to the requirement for filing a timely Form 706 (Estate Tax Return) to preserve a decedent spouse’s unused exclusion amount. A portability election can be made only on a Form 706 timely filed by the estate of a decedent dying after Dec. 31, 2010. Thus, a Form 706 must be timely filed (including valid extensions) even if the form is not otherwise required. Further, if the Form 706 is not timely filed, the ability to make a portability election is lost.

It should be noted that the filing of a timely return by itself will constitute the making of a portability election by the estate of a decedent dying after Dec. 31, 2010. Persons that do not wish make a portability election may do so by failing to file a timely Form 706 or by following the instructions for the Form 706 that will describe the necessary steps to avoid making the election.

Permalink to this entry

DISCLAIMER: This blog is not legal advice. This site and any information contained herein are intended for informational purposes only and should not be construed as legal advice under any circumstances, nor should it be construed as creating an attorney-client relationship. The information on this blog is a general statement of the law and may not be up to date, accurate or applicable to your specific circumstances. Prior success in litigation is not an indication of future results; each case is unique and past results cannot predict future outcomes.

Pivotal Law Group, PLLC Pivotal Law Group, PLLC
47.6084840 -122.3330190
of vital or central importance; crucial