Frequently Asked Questions

Church & Ministry

Who qualifies for the tax benefit of the tax free housing allowance for ministers?
The housing allowance is only available to "ministers," which is defined by the Internal Revenue Code as "persons who are ordained, commissioned, or licensed by a religious organization constituting a church or church denomination, and who are authorized to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the tenets and practices of that church or denomination." Part time ministers can be treated as ministers for tax purposes if they satisfy these requirements. A housing allowance designated by a church cannot exceed certain limits. Contact Us for specific guidance on your church's tax compliance.

Do we still need to file for tax-exempt recognition if we are a church?
Churches that meet the requirements of the Internal Revenue Code section 501(c)(3) are automatically considered tax-exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS. Although there is not currently a requirement to do so, many churches seek tax-exempt recognition because it assures church leaders, members and contributors that the funds received will receive related tax benefits. Contact Us to apply for your tax-exempt recognition.

Can our church trademark its name?
The preferred and most extensive protection for the name churches, religious organizations and other non-profit organizations is protection under federal trademark law. Trademark protection is thus available when any organization has put the use of the symbol, mark, name etc... to us in commerce. Contact Us to file your trademark application.

Do churches have to pay employment taxes?
Churches, if considered tax-exempt under the Internal Revenue Code section 501(c)(3), do not have to pay income taxes, but churches are responsible for employment taxes. Churches or church-controlled organizations are subject to normal payroll taxes and withholding certain taxes from their employees. Contact Us regarding any questions about employer tax laws and compliance on local, state and federal regulations.

Nonprofits & Foundations

Can a non-profit organization make a profit?
Yes, but unlike a for-profit business, a non-profit organization must reinvest the money made (surpluses) back into the organization for its tax-exempt purpose. Excess revenue cannot be distributed to individuals affiliated with the organization. Contact Us for any questions regarding the management of your non-profit organization and our legal audit services.

Who owns a non-profit organization?
The public owns a non-profit organization which is why any surpluses have to be reinvested into the organization or into a similar tax-exempt organization with a similar mission and purpose. Non-profit organizations are governed by a board of directors (sometimes referred to as a board of trustees) which consist of a group of individuals that are legally responsible for making sure the organization remains true to its mission, safeguards the assets and operates in the public interest. The board is the first line of defense against fraud and abuse. Contact Us for more information or questions regarding establishing a non-profit organization and the available training courses we offer for board members.

What is the difference between a "non-profit" or a "not-for-profit" organization?
The term "not-for-profit" is a broader term that encompasses all organizations that are referred to as charities. "Not-for-profit" is used in preference by some in the "non-profit" community in order to emphasize that the intention of the organization to make a profit, but to distribute that profit towards its mission and purpose. Contact Us for more information or questions regarding establishing a non-profit organization.

What are the general requirements concerning public disclosure applying to tax-exempt non-profit organizations?
Non-profit organizations that have received tax-exempt recognition from the IRS must make available for inspection certain annual returns, their application(s) for exemption and must provide copies of such returns and application(s) to individuals upon request. Contact Us if you are in need of any tax or legal compliance assistance.

Entrepreneurship & Business

I want to start a business. What type of business is right for me?
Every situation is different, which is why strategic advice from a good business attorney is essential. A corporation is a formal business structure, and is a “person” in the eyes of the law. There are a few important issues to address when selecting a business form. These include liability limitations, tax treatment of earnings, management structures and types of ownership interest.
In most cases, the owners are not personally liable for the acts of the company. There are exceptions. First, a licensed professional, such as a physician, accountant, engineer or attorney is not shielded from liability for professional negligence. Second, if the owners of the company co-mingle business assets with personal assets and do not respect business formalities, a creditor can “pierce the veil” and obtain judgments against the individual owners.

The most common types of business entities are listed below, along with the pros and cons for each one.

Sole Proprietorship - The simplest business form is a sole proprietorship. The owner is the individual. There are no documents to file, and the owner can report the profits or losses on their personal tax return. The owner is personally liable for the business. It provides no liability protection and you file a schedule C on your tax return; historically, the most highly audited form of tax return. It also provides less tax advantages than other entities.
C-Corporation – A regular or “C” Corporation is a separate legal entity made up of its shareholders and requires more formalities for its operation than any other business structure. A C-Corporation provides liability protection to its shareholders. Shareholder liability is generally limited to their personal investment in the corporation. The C-Corporation pays its own taxes at the corporate level and is not a pass-through entity. C-corporations are taxable entities and distributions to its shareholders are also taxable. This is known as the “double tax” problem. But many benefits payable to shareholders in a C-Corporation are tax deductible by the C-Corporation, and they are not in an S-Corporation or an LLC.
S-Corporation – A Subchapter “S” Corporation is a C-Corporation that elects a special tax status granted by the IRS. The S-Corporation provides all the liability protection of a C Corporation but does not pay corporate income taxes. The S Corporation is a pass-through entity, which means the profits and losses of the company pass through to the owners based on their ownership interests.
LLC – A Limited Liability Company (“LLC”) is the newest form of business entity. The LLC is a flexible entity form and provides both tax and non-tax benefits. It combines the concept of partnership for tax purposes and corporations for liability purposes. The owners, called “members”, have personal liability protection. Liability of members is limited to their personal investment subject only to piercing the “corporate veil.” The members and managers of an LLC may make decisions and take actions without the statutory formalities to which shareholders of a corporation are subject. Overall, LLCs can be an excellent choice for many different types of businesses, holding real estate and for estate planning combined with discounted valuations.
Limited Partnership – A Limited Partnership is a business owned by two or more individuals or other business entities where at least one of the partners has limited liability protection. The limited partner’s risk is limited to their financial investment in the business. General partners do not have liability protection. The limited partners may not work in the business or participate in the management without losing their limited liability status.

Contact Us for a consultation on what is best for your business and the possible tax concerns to consider at the formation stage.

What is a Tax ID or Employer Identification Number (EIN)?
An EIN is the identification number applied for and issued by the IRS. It is the number by which a business entity is identified for many purposes, but primarily for tax reporting and financial accounts set-up. It is effectively the “social security number” of the business. Contact Us if you have any questions regarding your business' legal tax requirements.

How do I determine how much my business is worth?
A business valuation is the process where a certified professional determines the value of a company. This is done in many ways, but always includes a review of historical and current financial records and usually includes interviews of the management team, as well as a review of the economy, the goods and services sold, the competition and a study of risk factors.

Business valuations are simple for publicly traded companies, as the stock price determines its value. For private companies, which are the majority of businesses, valuations are critical components of the succession planning and estate-planning processes for the owners. Valuations are almost always required when there are disputes among the owners or an owner is in a divorce proceeding.

Succession planning requires that the owners understand the value of what they have. Whether determining the life insurance necessary to fund a buy-sell agreement, enter into an employee stock ownership plan (“ESOP”) or sell the business to another person or entity, the business’s value is the number one issue. Additionally, a business valuation helps you answer the following critical questions: Is your business adequately insured? Is the umbrella coverage sufficient? Do you have business interruption coverage? Do you have the right key-man insurance coverage in place?

Since many private businesses are illiquid and often represent a significant percent of an owner’s assets, business valuations greatly impact how an estate plan is structured. All private company owners need to understand what they own for many reasons, and they need to periodically review and update the valuation.

Contact Us to set up a meeting to review your business and which method of valuation is preferred and any possible tax benefits or burdens associated.

Can I be my own registered agent?
Yes. But the registered agent is the person to whom the state sends all official documents required each year for tax and legal purposes, including being able to receive service of process regarding any legal action such as a lawsuit or summons. These notifications are typically entrusted to an attorney because of the importance of report due dates and managing multiple jurisdictions given the disparate laws of different states. The penalties for failing to maintain a registered agent include: possible forced dissolution of your business and in some cases penalty fees. Lentz & Associates, PLC has the current availability to be your registered agent. Contact Us.

Why should I use an attorney to form my business instead of an online legal service?
The online legal service websites may help you form what is a correct legal business entity, but often does not take into account state and local laws which makes it not completely right. A good portion of attorney's work is fixing and amending the organizing documents created on an online legal service website. There can be serious future consequences and costs. What may seem like a good deal can cost you in the long run. Contact Us to establish your business the right way, the first time.

What do I do with my business when I want to close it?
This question is one often neglected when opening a business. Whatever the reasons are for closing your business you should put together a strategic plan. There may be in the company's Bylaws how you originally agreed to close down the business. Your plan should address tax requirements, rentals, leases and closing accounts with suppliers and customers. Contact Us to discuss with us your business, options regarding potential sale of your business and how we can assist in creating a dissolution plan.

Trusts & Estates

What happens if I die without a will?
Dying without a will ensures that the State determines how your property passes and who provides care and oversight for any minor children that you may have. Your estate becomes entangled in the process of probate. Those who do not take the time to properly plan and settle their estate needs early in life should not expect their loved ones to walk through the probate process quickly or easily. A lack of planning often causes family disputes, lawsuits and petitions that can ultimately hold up the probate process for an indefinite period of time. In short, you lose control of the most important decisions and that affect the most important people in your life. Contact Us to begin your estate planning process.

How do l leave my business to my children?
Business and estate law are closely connected. A well planned and properly formed business entity can serve as an effective vehicle for accomplishing goals for generations to come. Contact Us about solutions to your unique estate planning needs.

What is a trust?
A trust is essentially a private contract. It is established to provide instructions on asset distribution and protection for a third party, usually heirs and other beneficiaries.

What are the benefits of establishing a trust over just having a will?
Wills are the anchor of most estate plans. A will is only effective upon death, and is not fully effective until a judicial proceeding (probate) determines the will to be the "Valid" Last Will. A living trust does not require a judicial proceeding to be effective and can be used to manage your assets while you are living, possibly during a disability. Contact Us to review or establish your estate plan.

What does an Estate Plan include?
An estate plan is a comprehensive and preventative type of law. It involves proper planning to give instructions for any foreseeable problems a typical family may experience which prevents any unnecessary delay, loss of control, expense, frustration, judicial proceedings and taxes. An estate plan will typically include a Will, Living Trust, Power of Attorney, and an Advance Medical Directive. Contact Us to begin your estate plan.

Trademark & Copyright

What is the difference between the symbols "TM" and "®"?
The "TM" usually signifies that a party is claiming the rights in the mark but it has not been federally registered. The letter R enclosed in a circle, ®, should only be used on goods or services that are subject to the federal trademark registration. The benefits of federal trademark registration enables the enforcement of preventing someone else from using the mark, provides proof that you have put the nation on constructive notice of your ownership and the registration can be used as a basis for obtaining registration in foreign countries. Contact Us to secure your trademark and apply for federal registration.

Does a federally registered trademark expire?
Yes. Generally the trademark will remain in effect for ten years. Although, for it to remain valid, an Affidavit of Use must be filed between the fifth and sixth year, and within the year before the end of the tenth year after the date of registration. There is an additional application for renewing a trademark. Contact Us to help maintain and file any necessary paperwork needed to ensure your trademark remains valid.

How is a copyright different from a patent or a trademark?
A copyright protects original works of authorship. A patent protects inventions or discoveries. A trademark protects words, phrases, symbols or designs identifying the source of the goods or services of one party and distinguishing them from those of others. Contact Us to help you with any of your intellectual property questions or needs.

Do I have to register my copyright for it to be protected?
No. In general, registration is voluntary. Copyright exists from the moment the work is created and fixed in a tangible form. However, if you wish to bring a lawsuit for infringement in the United States it does need to be registered. Registration establishes proof and if made prior to a lawsuit allows the courts to grant statutory damages and attorney's fees to the copyright owner. Contact Us to register your original work.

What is considered "fair use" of a copyrighted work?
The doctrine of "fair use" allows the reproduction of a particular work that may be considered fair, such as criticism, comment, news reporting, teaching, scholarship and research. The distinction between fair use and infringement may be unclear and is not easily defined. There is no specific number of words, lines or notes that may safely be taken without permission. Acknowledging the source of the copyrighted material does not substitute for obtaining permission. Contact Us if you have concerns in using a non-original work for your church, ministry or business.