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partnership handshake

Navigating Tax Season for Your Business Partnership

The year 2020 was unlike any other, the effects of which are reflecting in the 2021 tax season. Many who experienced layoffs, furloughs, or opened their own business now face some challenges in tax preparation. Suppose you are one of those who have entered into a business partnership. In that case, you may need some assistance to navigate through this new territory. A Business Law attorney can guide you through the wilderness of this process and help you make the best strategic decisions for your new business.

If you have entered into a business agreement with one or more partners, developing a Partnership Agreement is crucial to its formation. Think of it as your roadmap. Your Partnership Agreement should set terms for the nature of your partnership, define contributions from each partner, and specify how profits and losses are allocated. If you have not drawn up a Partnership Agreement, consider consulting with a Business Law attorney to help you cover all the details.

Understand Tax Reporting for Partnerships

A Business Partnership must obtain a Tax ID number. This number is called an “employer identification number,” or EIN. Since partners aren’t considered employees, don’t expect to receive W-2 forms for them or for your business to report income. A partnership, as an entity, doesn’t pay tax on the income received by the business. Instead, that income “passes through” its profits or losses to the partners. 

One partner is responsible for obtaining and completing IRS Form 1065. This form is a report of earnings or losses only; it is not a return to calculate what individuals may owe. Think of it as a template for gathering information from each of your partners. Subsequently, each member of your partnership must complete and return a Schedule K-1 form to report their individual share of income – gains or losses, deductions, and credits. Due to the financial details required for each partner to report, your Partnership Agreement is crucial in defining how each partner takes ownership and responsibility for your earnings and/or losses.

Lead Your Business Partners

The partner responsible for completing Form 1065 should distribute Schedule K-1 to all partners no later than March 15 so that they may include this in their annual personal returns. When you complete your Schedule K-1, it’s essential that you include:

  • Your employer identification number (EIN)
  • What type of partner you are
  • Your share of profit (or losses) at the beginning and end of the tax year
  • Your share of liabilities at the beginning and end of the tax year 

Schedule K-1 also requires each partner’s input for distributions, deductions, credits, tax-exempt income, and nondeductible expenses. 

Engage with a Business Attorney

Filing taxes for a new business, especially a partnership, can be a daunting journey. Consider engaging with a Business Lawyer to help you navigate tax preparation and find the best solutions for your partnership. The Boutty Law Firm, P.A. has the ability and experience to help your business succeed. Call The Boutty Law Firm, P.A. today at 407-622-1395 or contact us online to schedule your initial consultation.

IRS Tax Information for Partnerships

https://www.irs.gov/businesses/partnerships

Schedule K-1

https://www.irs.gov/pub/irs-pdf/f1065sk1.pdf

Partner’s Instructions for Schedule K-1

https://www.irs.gov/pub/irs-pdf/i1065sk1.pdf

Form 1065: U.S. Return of Partnership Income

https://www.irs.gov/pub/irs-pdf/f1065.pdf

Partner’s Instructions for Form 1065:

https://www.irs.gov/pub/irs-pdf/i1065.pdf

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liability waiver

Liability Waivers During Covid-19

  Florida’s economy has been slowly rebuilding since Governor DeSantis lifted the State of Florida’s stay-at-home order on 4/30/2020. Non-essential businesses continue to struggle financially from the shutdown and the newly emerged issue of pandemic-related liability risks. Although several states have passed COVID-19 laws to limit businesses’ liability, currently, there is no legal immunity in the Sunshine State for pandemic-related claims. Business owners run the risk of lawsuits from employees and consumers who claim to contract COVID-19 on their premises.

   A liability waiver is an agreement in which one party gives up the right to file a civil lawsuit against another party for damages that have occurred on the premises. Gross negligence, recklessness, and intentionally harmful conduct invalidate a waiver. Liability waivers are becoming commonplace at recreational facilities, schools, salons, summer camps, and construction sites. These waivers gain popularity to shield business owners from claims; however, there are questions regarding their enforceability, as waivers regarding the pandemic are uncharted territory in the legal arena.

Guidelines for Waivers

   Covid-19 Liability waivers should acknowledge the inherent risks that a person assumes from exposure to infectious diseases, including COVID-19. These contracts should be drafted with specific language about the coronavirus’s contagious nature, even with heightened sanitary precautions. Vague or ambiguous wording in a waiver can invalidate its terms. The simple posting of a sign at the place of business is not enforceable. A waiver may not be valid if an individual feels they have signed the document under duress, or if they fear retaliation from their employer. Adverse employer actions can include termination, demotion, suspension, or other negative consequences. An argument can be made to invalidate the waiver if a person signs but does not fully understand the contents’ language.

COVID-19 Liability Waivers at Construction Sites

   The enforceability of liability waivers for COVID-19 at construction sites for contractors and subcontractors is regulated by the Occupational Safety and Health Act (OSHA). The risk of coronavirus differs from physical injuries, which are easily identified and investigated. Physical harm is the consequence of an unsafe condition or hazard. It would be difficult to identify and prove the contact that caused an infection and link it to the business owner’s negligence. Workers’ Compensation grants employees the right to file a claim, and that right cannot be waived. OSHA requires employers to keep the workplace free of safety hazards. 

Asking or requiring an employee or other person to sign a liability waiver may imply that a business owner does not provide a safe environment.

   While waivers may limit or prevent liability in some cases, they do not provide immunity from lawsuits. The profound impact of COVID-19 is creating a host of legal issues for the courts to consider. Significant legal and policy concerns have emerged, and these challenges will likely be the focus for many years to come.

    The best defense against a claim is to ensure that construction sites are in full compliance with the Center for Disease Control, OSHA, state, and local government regulations regarding the pandemic. Some of these interventions include actively encouraging sick employees or those exposed to the virus to stay home. Wearing cloth face coverings, providing personal protective equipment, practicing social distancing, taking daily temperature checks, and frequent disinfection of the workplace can mitigate the risk for pandemic-related lawsuits.

The Boutty Law Firm P.A. Offers Effective Legal Services.

  A COVID-19 liability waiver for your business should be tailored specifically to your industry. The Boutty Law Firm P.A. is a knowledgeable multi-service law firm with extensive construction industry experience. We understand the construction industry’s nuances with over twenty years representing contractors, subcontractors, and property owners. We counsel and represent clients in risk management and disputes through contract development, negotiations, and courtroom litigation. Our strategies are designed to meet the objectives of your company goals.

For a free, initial consultation with a business law attorney to discuss risk management concerns during the pandemic, contact The Boutty Law Firm P.A. at 407-622-1395. Our office is in Maitland, Florida, and we represent clients in Orange, Seminole, Osceola, and Volusia, Florida.   

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Lump Sum Contracts

Lump Sum Contracts for Construction Projects

   A construction contract is a legally binding agreement between two or more parties that includes the scope of a project, the pricing structure, and the time schedule to complete the work.  It details the terms and conditions by which each party shall abide from the start of a project to its completion. A traditional agreement for a construction project is a lump sum contract, which provides a global price to complete a project, instead of bidding on individual items. This all-inclusive pricing arrangement includes labor costs, material costs, subcontractor fees, and also covers a contractor’s overhead and profit margin.  It should have a provision for risk contingencies in the event of unforeseen circumstances that may impact on the cost of a project. A lump sum contract has multiple components and can be complicated.  It is best to have an experienced contract attorney to negotiate and draft the agreement. The Boutty Law Firm, P.A., handles construction law matters of all complexities, using strategies and concepts designed to minimize risks to our clients. We can negotiate and draft contracts or resolve disputes, representing any of the parties involved in the construction process.

 Pros and Cons of Lump Sum Contracts

There are advantages and disadvantages for a contractor or property owner to engage in a lump sum contract. For a contractor, there is a greater margin for profit, especially if the project is finished ahead of time and a built-in risk contingency is not utilized. A lump sum contract requires minimal accounting documentation for the property owner, which saves time and reduces overhead costs.  For a property owner, it is easier to obtain financing for a lump sum contract, as there is a high degree of certainty regarding the total cost of the project.  The property owner is not liable for excess expenditures, unless it is addressed in the initial contract or unless the property owner requests a change order. A lump sum contract is considered low risk for a property owner.

There are some disadvantages to having a lump sum contract, especially for a contractor, as there is a high risk for cost overruns, such as increased material costs that were not accounted for in the contract.  The contractor may see the need for a change order during the construction phase, and the owner may reject payment on the change order, causing the contractor to be liable for the cost.  For the property owner, there can be lien waiver issues. If the contractor withholds payment from a subcontractor, there can be a mechanic’s lien file against the property.

The Boutty Law Firm, P.A. Offers Insightful Representation

The Boutty Law Firm, P.A. works diligently to achieve favorable contract terms for their clients. We take into consideration project inflation costs, the economic impact of change orders, and allowances for unforeseen conditions that affect the progress of the project.   We represent clients in residential and commercial disputes and claims through negotiation, mediation, or litigation. Attorney Shane Boutty is well versed in the application of construction law, as he is a state certified contractor and has owned several construction companies. The Boutty Law Firm, P.A. is located in Maitland, Florida and serves clients in Orange and Seminole Counties.  We can be contacted at 407-537-0543.  Call for an initial consultation to discuss your construction law matter.   

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Contract Documentation

The Importance of Documentation Retention for Construction Projects

   There are many contracts drafted and signed for every major construction project and these documents can provide legal protection in the event of future disputes.  Construction projects generate a vast amount of paperwork and safeguarding these records can be a daunting task.  Implementing a document retention policy can shield a company from liability claims, as a contract, report, log, or record can provide supporting evidence for arbitration or litigation. Retention of documents is an essential practice for the success of a construction business.

 Common construction disputes include breach of contract claims including:

  • Non-compliance with payment, delays, scope of work disputes, defective work due to errors or omissions, and latent defects that can be discovered long after a project is completed. Workplace injuries and accidents, mechanic’s liens, property damage, negligent supervision, and copyright infringements are other types of claims.

    The length of time that construction records should be retained depends on the statute of limitations and the statute of repose. In the State of Florida, a lawsuit for construction defects must be filed within four years from the issuance of a certificate of occupancy or when the owner takes possession of the property.  The statute of repose, for latent defects, is ten years from the date that the owner takes possession. According to Florida and Federal recordkeeping requirements, payroll records are to be kept for a minimum of four years.  The Internal Revenue Service can audit your company as far back as six years, therefore it is recommended that tax records be kept for at least seven years.   

What Types of Documents Should Be Preserved?

   Be diligent about safeguarding your contracts and records, as documentation is the framework of a plaintiff or defendant’s legal dispute. The vast amount of paperwork for  major construction projects can include the initial contracts, insurance certificates, drawings and specs, design and engineering work, change orders, purchase orders, photographs of the construction process, bid documents, invoices, field reports, safety reports, payroll records, and business correspondence. The use of scanning for electronic storage may be a better option for document management than keeping manual records and it allows accessibility to the documents wherever they are needed. Another aspect of a business document retention policy is instituting detailed procedures that are used to destroy contracts and documentation that are no longer needed. However, intentionally destroying documents that are relevant to a pending litigation may suggest that the document contained information that is not favorable to your case.

The Boutty Law Firm, P.A. is a Multi-Service Business and Construction Law Firm

The Boutty Law Firm can provide counsel on all matters regarding construction and commercial law, from the bidding on a construction project to its completion.  We handle all levels of complexity for our clients, in both state and federal courts. Attorney Shane Boutty is a state certified contractor and his experience and knowledge is invaluable in minimizing risks and finding effective and affordable solutions for his clients.  We represent general contractors, subcontractors, developers, construction companies, homeowners, property owners, material suppliers, architects, and homeowner’s associations. Our law firm is adept at negotiations, arbitration, and court room litigation. Our goal is to protect your interests.  We are located in Maitland and serve clients in Orange, Seminole, and Volusia counties in Central Florida. Call our office at 407-537-0543 for legal advice and quality representation.

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Force majeure contract clause

Protect against Liability for Unforeseen Contract Delays with a Force Majeure Clause

   The language in a business contract is of paramount importance to a contractor’s profitability and success.  The current coronavirus pandemic has the potential to cause significant delays in construction projects and other economic factors, affecting productivity and completion. There may be a question of a contractor’s culpability and damages even though the current events are major unforeseeable circumstances, subsequently causing the noncompliance of contractual obligations.  Limited travel, large gathering restrictions, quarantine regulations, material shortages due to supply chain problems, and delays are just some of the reasons for the construction industry to be experiencing contractual difficulties and potential legal disputes at this time.

  Construction contracts are legally binding agreements between two parties that formalizes all the terms and conditions of a project, including construction start and end dates, labor costs, materials, and many other items.  A force majeur is a contract liability clause that is designed to address non-performance such as delays or economic damages due to extraordinary and unforeseen events.  It is a proactive measure to have a clearly written force majeur clause in every contract, to protect a construction company from a lawsuit that could result in financial disaster.

A force majeure is applicable for dire circumstances such as:

  • Severe disruptions in nature such as floods, fires, earthquakes, hurricanes, or shortages of energy supplies.
  • Acts of the government such as changes in laws and regulations that prohibit the work from being completed.
  • Labor issues such as strikes and protests.
  • War, terrorism, or epidemics.

   There are specific requirements that must be met to successfully invoke a force majeur clause.  The event must be beyond the control of the contractor and have a causal link to the performance non-compliance.  The party that invokes the clause must have evidence that they acted to mitigate the damages, perhaps through searching for other suppliers or other avenues to complete the project.  The content of a force majeur in a contract must include the type of event that is covered under the clause. It should include notification procedures and update obligations during an event, for all parties. There should be a provision for the delay or termination rights of both parties following the event.

The Boutty Law Firm, P.A. can Provide Legal Counsel for all Construction Needs

   The current coronavirus pandemic is gripping the construction industry and there is no indication as to its long-term impact on the economy. The Boutty Law Firm, P.A., is a multi-service law office that can review, revise, or draft your contracts with the protection of a well written force majeur clause. In the event of a contract dispute, The Boutty Law Firm, P.A. is an experienced construction law office that can protect your interests through negotiations, alternative dispute resolution, or court room litigation in the State of Florida. During these unprecedented times, we will work diligently to find solutions to your legal challenges. Our law firm serves Central Florida and all the surrounding communities. Call our office for an initial consultation at 407-537-0543.

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