January 2012

AFR Rates and Beneficiary Business Purchases

The Applicable Federal Rate (AFR) is a rate published monthly by the IRS for federal income tax purposes.

The IRS will treat any “loan” with a below market interest rate (below the AFR) as a gift of the foregone interest from the lender to the borrower.  The amount of the foregone interest will be treated as though it was transferred from the lender to the borrower as a gift and retransferred from the borrower to lender as income on the last day of the calendar year.

How may this apply to the purchase of your Humboldt County business by your beneficiaries?

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California Law Now Permits Benefit Corporations

At the turn of the new year, many laws approved by the California legislature during 2011 went into effect.  One such law is AB 361, which created the benefit corporation, a business entity new to California.  Beginning January 1, 2012, new entities may adopt this form, and existing corporations may convert to benefit corporations with a two-thirds shareholder approval vote.

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DLSE Increased Enforcement Mechanisms for 2012

AB 469, signed by Governor Brown and effective January 1, 2012, adds some expensive teeth to the enforcement of the Labor Code by the Division of Labor Standards Enforcement (DLSE).  Among the many changes harkened by AB 469, the Labor Code has now been amended to make the willful violation of specified wage statutes or orders a misdemeanor.   Additionally, the law is amended to expand from one year to three years the time in which the DLSE may collect statutory penalties or fees.

 

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