The following is a listing of the outstanding tax obligations which qualify for this general tax amnesty program:
• Individual income;
• Individual School District Income;
• Commercial Activity Tax;
• Sales and Seller’s Use;
• Employer Withholding;
• School District Employer Withholding;
• Corporation Franchise;
• Pass Through Entity;
• Estate;
• Cigarette or Other Tobacco Products; and
• Dealers In Intangibles.

For an outstanding tax obligation to qualify for this amnesty program, the tax must have been due and payable as of May 1, 2011. A tax obligation does not qualify for this amnesty program if the Department of Taxation has already issued a notice of delinquency, bill or assessment. Also, if the Department of Taxation is conducting an audit then that tax obligation does not qualify for this amnesty program.

A taxpayer must fill out an application and submit it to the Ohio Department of Taxation to apply for this General Tax Amnesty Program. Along with the application, the taxpayer also needs to include completed and signed tax return(s) and full payment for the total amount of tax due as noted on the application. The taxpayer will not receive confirmation that the application was received. However, the Department of Taxation will respond within thirty days after the application is received if the application was approved or denied.

This amnesty program does not apply to unreported, underreported and/or unpaid Consumer’s Use Tax obligations. However, the Ohio Department of Taxation is also offering taxpayers a Consumer’s Use Tax Amnesty program.

This article is not providing legal advice or creating an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Christopher A. Corpus, Esq. at cacorpus@wegmanlaw.com.

Most businesses employ a key employee and it is typical for the sole owner of a company to want to reward this employee for his/her loyalty and/or hard work. This owner may consider offering this key employee a minority ownership interest in the business. However, it must be remembered that with ever decision there may be unintended consequences. Over time this minority owner may go from just being happy to being a minority owner of the business to questioning why certain decisions are or are not made. This minority owner may also have the right to inspect the business’ books, obtain an annual report and possibly have a say in certain decisions.

The sole owner must ask himself/herself if he/she wants to be answerable to a minority owner. If this answer is no but the sole owner still wants to reward the key employee, the key employee may be granted phantom stock. The key employee will not obtain an equity ownership interest in the company but instead will obtain compensation in addition to his/her wages. This compensation is paid out in the form of a dividend or a distribution. If the key employee obtains say a ten percent phantom stock interest and the sole owner pays out a $1,000 dividend or distribution, then the key employee will receive $100. So, the key employee is financially rewarded for the successes of the business but the owner of the business still retains sole equity ownership and decision making control. In the right circumstances, this may provide the best possible result – a financial incentive for the key employee while allowing the owner to retain sole decision making authority.

A business owner also makes decisions every day. These decisions range from buying office supplies, paying for cellular telephone plans, executing a lease for office space for a period of years, employment compensation, etc. The owner has to consider how bringing on a minority business partner will impact his/her ability to make such decisions. And, will the minority owner have the authority to make decisions to bind the company without the input and/or approval of you, the majority owner? Such matters should be considered upfront in an effort to minimize disputes. Once the decision making authority has been established, the business owner should sit down and discuss decision making parameters with the minority owner prior to an equity interest being obtained. The minority owner should know upfront what role he/she will play in the management and decision making of the business. Again, it is important to manage the minority owner’s expectations and this is best obtained through open communication.

This article is not providing legal advice or creating an attorney-client relationship. If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Christopher A. Corpus, Esq. at cacorpus@wegmanlaw.com.

It must be noted that start-up businesses have a relatively high failure rate.  An Internet search will reveal statistics that after two years between twenty-five to thirty-five percent of start-up businesses are no longer in business.  After five years approximately fifty-five percent of start-ups are no longer in business.  So, an entrepreneur must use extreme caution in using assets from his/her 401(k) as business start-up funds.

If the entrepreneur ultimately feels comfortable withdrawing assets from his/her retirement account as a source of start-up funding then the following steps will need to be followed to minimize the risk of early withdrawal taxes or penalties.  The steps are:

1. Research your current retirement plan documents;
2. Incorporate NEWCO as a C corporation;
3. NEWCO then establishes a qualified retirement plan;
4. The value of NEWCO’s stock is established; and
5. NEWCO’s retirement plan purchases NEWCO’s stock and NEWCO is now funded with the entrepreneur’s investment.

So, the first thing the entrepreneur needs to do is research his/her 401(k) plan documents to determine the type and amount of withdrawals that are permitted.

The entrepreneur’s second task is to incorporate NEWCO as a corporation.  NEWCO must be taxed as a C corporation.  The reason that NEWCO is not able to be taxed as an S corporation is that the tax regulations require that the shareholders of an S corporation be individuals, estates, certain tax exempt organizations and certain trusts.

Third, NEWCO establishes a qualified retirement account.  This account must be created to comply with the applicable IRS guidelines.  Additionally, the rollover of qualified retirement funds into this account must be performed pursuant to IRS requirements to ensure that no taxes or penalties are paid on this withdrawal.  There are a number of companies that specialize in performing these services.  The initial qualified retirement plan set-up fees could be as high as $5,000.00 with monthly fees around $100.00.

Fourth, a value must be placed on NEWCO’s stock.  The valuation will typically be the amount of assets being rolled over from the entrepreneurs 401(k) to NEWCO’s newly created qualified retirement account.

Fifth, NEWCO’s qualified retirement account will purchase NEWCO’s stock.  This purchase is made possible due to the fact that when NEWCO’s qualified retirement plan is established one of the investment choices is NEWCO’s stock.  With this purchase NEWCO is now funded with the entrepreneur’s investment.  This results in the entrepreneur satisfying the bank’s investment requirement.  Along with this purchase of stock it is now common for NEWCO’s qualified retirement plan to be amended to no longer allow employees to invest in NEWCO’s stock.

The IRS has issued determination letters validating qualified retirement plans as referenced above.  And, many of the companies that market and establish these business funding scenarios will obtain a determination letter from the IRS indicating that NEWCO’s qualified retirement account is approved by the IRS.  However, the IRS has never issued a determination letter validating this entire funding process.  One reason for this is that amending the plan documents to prohibit any other employees from investing in NEWCO’s stock could be considered discrimination.

The IRS will also view the following as red flags: if Form 1099-R is not filed at the time of the rollover to NEWCO’s qualified retirement plan, if a company fails to file Form 5500 or 5500EZ, if the company amends its plan documents to prevent employees from investing in the company stock after the initial purchase has taken place and if third-party fees in establishing NEWCO’s qualified retirement plan are paid out of the funds rolled over from the 401(k).

An entrepreneur must use caution in considering the use of one’s retirement assets to fund a start-up business.  The risks and benefits have to be considered as they relate to the present and the future.  Further, as noted, the IRS has yet to issue a determination letter as to the entire process involved in establishing and running such a qualified retirement plan.

This article is not providing legal advice or creating an attorney-client relationship.  If you have any questions or would like to learn more about this topic or if you have other legal questions, do not hesitate to contact Chris Corpus, Esq. at cacorpus@wegmanlaw.com.

issans@wegmanlaw.com

Wegman, Hessler & Vanderburg
6055 Rockside Woods Boulevard, Suite 200
Cleveland, Ohio 44131
T: (216) 642-3342
F: (216) 642-8826

Ms. Sans practices intellectual property law, focusing on patent and trademark preparation and prosecution in the United States and other countries. Ms. Sans has solicited patents in a variety of technical areas, including organic and polymer chemistry, water treatment and petroleum processing additives, and cathodic sputtering equipment. She has also rendered opinions concerning the patentability of inventions.

Prior to becoming an attorney, Ms. Sans worked for more than 10 years as a process engineer in the coatings and electronic glass industries. During her engineering career, she held a variety of responsibilities, including quality review and root cause analysis, new product scale-up, process improvement, and manufacturing plant start-ups.

Ms. Sans lives in Fairview Park where she and her family enjoy biking in the Cleveland Metroparks. A former contrabassist in the Cleveland Orchestra Youth Orchestra, Ms. Sans retains an interest in all types of music and dance, particularly folk dance. Ms. Sans is also conversant in Italian and German.

Practice Areas

• Intellectual Property

Education

• J.D., The University of Akron School of Law, 2011
• B.Ch.E., Cleveland State University, 1998

Bar Admissions

• State of Ohio, 2011
• U.S. Patent and Trademark Office, 2010

Memberships / Honors / Awards

• Ohio State Bar Association
• Cleveland Metropolitan Bar Association
• Cleveland Intellectual Property Law Association
• American Intellectual Property Law Association
• CALI Awards in Art Law and PCT Prosecution
• Six Sigma Green Belt

adplasco@wegmanlaw.com

Wegman, Hessler & Vanderburg
6055 Rockside Woods Boulevard, Suite 200
Cleveland, Ohio 44131
T: (216) 642-3342
F: (216) 642-8826

Mr. Plasco represents individuals and businesses in a variety of commercial, transactional and operational matters such as entity structure and formation, commercial contracts, and employment matters.

In addition, Mr. Plasco has extensive experience in most aspects of real estate law including:

• Representing landlords and tenants in commercial lease agreements;
• Obtaining zoning variances and change of use approval;
• Negotiating and drafting seller-financed mortgages;
• Purchasing real property at Sheriff’s Sales and other non-traditional means; and
• Defending title to property.

Practice Areas

• Corporate and Business Services
• Real Estate

Education

• J.D., Cleveland-Marshall College of Law, 2007
• B.B.A., Tiffin University, 2004

Bar Admissions

• State of Ohio, 2007
• U.S. District Court, Northern District of Ohio, 2008

Memberships / Honors / Awards

• Ohio State Bar Association
• Cleveland Metropolitan Bar Association

The AIA changed the U.S. patent system from a first-to-invent to a first-to-file system. This change brings the U.S. in line with the majority of jurisdictions worldwide which are already on a first-to-file system. Inventors with the earliest-filed application are now entitled to the patent. As part of this change, the AIA replaces interference proceedings with derivation proceedings which are a safe-harbor provision for inventors claiming misappropriation of their invention by the first-to-file party.

The first-to-file system will have little effect on large U.S. businesses already operating under a first-to-file patenting strategy. These businesses typically file in multiple jurisdictions including first-to-file jurisdictions. First-to-file will have the most impact on smaller businesses and sole inventors that typically only file in the U.S. Such businesses and inventors often do not have the resources to develop their inventions and file applications quickly. Small businesses and individual inventors may obtain relief by claiming small entity status and taking advantage of provisional patent application filing.

Post-Grant Review (PGR) is similar to the European Union’s Opposition in that PGR allows third parties to challenge the validity of one or more claims of a patent. The AIA allows third parties to submit patents and printed publications regarding issued patents for consideration during examination of a patent application. While PGR and third-party submission are targeted to improve patent quality, these procedures place additional burdens on an already under-funded PTO.
In July 2011 the PTO had a backlog of almost 700,000 patent applications, and the average application pendency was over 33 months. Most businesses and experts agree that delays in the PTO are stifling innovation and job growth. Even small and start-up businesses are affected by patenting delays as these businesses often use their patents to secure financing. Earlier this year, Judge Paul Michel, former Chief Justice of the Federal Circuit, told the Congressional Subcommittee on Intellectual Property the most important step to patent reform was adequate funding of the PTO so it can examine applications quickly and carefully. Judge Michel stated, the PTO desperately needs thousands of additional examiners, dozens of additional board members, and modernized IT systems.

Ironically, the PTO generates more revenue than the money it receives from Congress. The PTO has lost over $800 million in revenue since 1992 as a result of fee diversion. Fee diversion is a process where congressional appropriators can spend taxpayer revenues elsewhere in the government by withholding fees paid to the PTO. The AIA contains provisions aimed at ending fee diversion by creating an account, or “reserve fund” for the PTO to receive its fees. This provision will also provide for a 15% surcharge in fees and allow the PTO to set its own fees. The PTO, however, must petition Congress to receive money from the reserve fund. Thus it is unlikely that this reserve fund will stop fee diversion.

In short, the AIA’s provisions for improving the patent system may well fail unless the PTO can be adequately funded to implement these much needed reforms.

Iken S. Sans is a patent agent in WHV’s Intellectual Property group. Iken may be reached at (216) 642-3342 or by e-mail at issans@wegmanlaw.com.

The determination of a guardianship is an extreme process, which essentially results in taking away a person’s right to make their own decisions regarding their finances (Guardian of the Estate) and/or their healthcare or living arrangements (Guardian of the Person). An adult person, known as the “ward” by the Court, is placed under a guardianship when the ward is found “legally incompetent” through a formal court proceeding in the Probate Court in the county in which the prospective ward resides.

The guardianship appointment process requires the filing of an Application for Guardianship by an interested party or on the Court’s own motion. An interested person may be someone who is not related to the prospective ward but the applicant must be willing to perform as guardian, and be able to secure a bond as required by law. If the prospective ward is incompetent, the application must include a Statement of Expert Evaluation, which is completed by the prospective ward’s attending physician, psychiatrist or licensed psychologist. A Court investigator is assigned to the case to file a formal report to be used by the Probate Court at the formal hearing. The potential ward, his or her next of kin, and the applicant must receive notice of the hearing. In addition, the potential ward has the right to attend the formal hearing and also contest the application for guardianship. The potential ward also has the right to have legal counsel present at the formal hearing conducted by a Judge or Magistrate.

The Probate Court determines whether a person requires a guardianship when it finds that an adult is so mentally impaired that he or she is incapable of taking properly care of himself or herself or his or her property and the impairment is the result of a mental or physical illness or disability or mental retardation or chronic substance abuse.

Once approved, the applicant is appointed as Guardian by the Court and the prospective ward becomes a Ward of the Court. Although a Guardian has been named, the Court remains the superior guardian, and all guardians must obey all orders of the Court. The Guardian is responsible for filing written accountings with the Court containing the income and expenses of the Ward’s estate and also for filing a written report as to the need for the guardianship. If a guardian fails to timely file these documents, the Court may cite the guardian and impose a fine, reduce the guardian’s fee, or remove the guardian from the case.
If you have a relative or loved one that you are concerned about, you should contact an attorney to determine whether pursuing a guardianship is appropriate for their unique situation.

Monica M. Newell is an associate in WHV’s Estate Planning, Probate and Elder Law practice groups. Monica may be reached at (216) 642-3342 or by e-mail at mmnewell@wegmanlaw.com.

Medicare will pay for the first 100 days in a nursing home, but only if the care rendered is “skilled care” and the confinement in the nursing home was preceded by a three day hospital stay.  “Skilled care” is defined as receiving rehabilitation for an illness or injury that results in increased improvement.  Coverage for the 100 days is not guaranteed.  If a person plateaus, or no longer shows signs of improvement, Medicare terminates payment.

Medicaid planning is a version of asset protection that will enable a person to shelter or save assets and still qualify for governmental assistance in order to pay for long term nursing care.  Medicaid planning is similar to estate planning in that it requires a detailed review of an applicant’s financial portfolio, existing legal documents, objectives and concerns for their assets and the tolerance for the change to those assets.  Medicaid planning goes beyond the realm of estate planning by using planning techniques to reduce the applicant’s assets for qualification purposes.  As with all things    involved with the Medicaid program, it is  a form of counter-intuitive thinking, and it’s only the beginning of the process.

In the initial assessment of a person’s assets, we first look to see what assets are considered “exempt” or non-countable toward their total amount allowed for qualification.  Exempt assets differ     depending upon whether a person is   single or married.  For both single and married persons, exempt assets include life insurance policies with a face value of $1,500, irrevocable funeral   arrangements, burial vaults or lots and headstones.   Additional exempt assets for married couples include one home, if owned by the married couple (and not owned by a trust) and one vehicle, regardless of value.  For a single person, the home is only exempt, or non-countable, for a  period of thirteen months.  After that time, the value of the home, as determined by the County Auditor, is included toward the total amount of assets one can own in order to qualify.

In order to qualify for Medicaid benefits, a single person’s non-exempt or countable assets are limited to $1,500.00 and married couples are subject to a minimum of $21,912.00, and a maximum of $109,560.00. These marital minimum and maximum limits are subject to an additional level of qualification; the community spouse (or spouse that is not institutionalized) is able to retain “the lesser of the designated amount or one half of the couple’s assets.”  For example, if a married couple has a total of $200,000 in countable assets, the community spouse can retain $100,000 and the institutionalized spouse $1,500, with $98,500.00 in assets that will be required to be reduced in order to obtain Medicaid qualification.

The key to Medicaid planning is how to reduce the assets over the limitation while complying with the convoluted rules and regulations of this benefit.  An Elder Law attorney versed in this area is crucial to the planning process.

Monica M. Newell is an associate in WHV’s Estate Planning, Probate and Elder Law practice groups.  Monica may be reached at (216) 642-3342 or by  e-mail at mmnewell@wegmanlaw.com.

mmnewell@wegmanlaw.com

Wegman, Hessler & Vanderburg
6055 Rockside Woods Boulevard, Suite 200
Cleveland, Ohio 44131
T: (216) 642-3342
F: (216) 642-8826

Ms. Newell  has over nine years of experience in counseling  individuals and their families in the following areas:

• Elder Law
• Medicaid & Medicare Benefits
• Veteran’s Benefits
• Estate and Trust Administration
• Guardianships
• Real Estate Transactions

Ms. Newell has obtained Medicaid eligibility for individuals and families in various counties throughout Northeast Ohio.   Ms. Newell also provides representation to individuals and families for disputed  Medicaid matters at Agency State Hearings and Administrative Appeals, and has argued before the Court of Appeals for Cuyahoga County, Eighth Appellate District, regarding Medicaid eligibility.

In addition to Elder Law, probate and estate administrative matters, Ms. Newell is also experienced at developing customized client estate and tax plans, including:

• Wills and Trusts
• General Powers of Attorney
• Living Wills & Healthcare Powers of Attorney
• Gifting and Estate Tax Planning

Ms. Newell volunteers her time as  a member of the Board of Directors for the West Side Deutscher Frauen Verein dbf Altenheim, a non-profit corporation, and has served as Board President since 2009.

Practice Areas

• Estate Planning, Estate Administration and Elder Law

Education

• J.D., Cleveland-Marshall College of Law, 2000
• B.A., Cleveland State University, 1986

Bar Admissions

• State of Ohio, 2001
• U.S. District Court, Northern District of Ohio, 2001

Memberships / Honors / Awards

• Ohio State Bar Association (Elder Law Committee and Estate Planning, Trust & Probate Law Section)
• National Association of Elder Law Attorneys
• Board Member of the West Side Deutscher Frauen Verein dbf Altenheim, a not-for-profit corporation
• Member of the Stadtverband
• Accredited Attorney with the Department of Veterans Affairs
• Ohio Rising Star 2010-Ohio Super Lawyers
• Co-author of “Medicaid: The Application and Appeal Process – Elder Law Handbook, 3rd & 4th Edition”, published by the Ohio State Bar Association

mjzink@wegmanlaw.com

Wegman, Hessler & Vanderburg
6055 Rockside Woods Boulevard, Suite 200
Cleveland, Ohio 44131
T: (216) 642-3342
F: (216) 642-8826

Ms. Zink assists both domestic and global companies secure, protect and defend their intellectual property rights. She specializes in patent and trademark preparation and prosecution.

Ms. Zink has solicited chemical, software, mechanical and electro-mechanical patents in the following technological areas:

• Thermoplastics
• Rubber elastomers
• Polymeric coatings and films
• Nanofiber technologies
• Stem cells/growth hormones
• Software technologies
• Data communication
• Wireless technologies
• Computer hardware/software
• Intelligent peripheral configurations
• Office automation systems
• Business methods

She counsels clients on day to day business including patent and trademark validity, infringement, right to use opinions and licensing matters.

Practice Areas

• Intellectual Property

Education

• J.D., University of Akron School of Law, Cum Laude, 2001
• B.A., Case Western Reserve University, Chemistry, 1997

Bar Admissions

• State of Ohio, 2001
• U.S. Court of Appeals, Federal Circuit
• U.S. District Court, Northern District of Ohio
• U.S. Patent and Trademark Office

Memberships / Honors / Awards

• Ohio State Bar Association
• Cleveland Metropolitan Bar Association
• Cleveland Intellectual Property Law Association
• American Intellectual Property Law Association