Tuesday, February 28, 2012

Business Valuation in a Divorce Setting

In a high asset divorce the most valuable asset may be the "family" business.  Valuation of a "family" business is extremely complicated and requires the services of an expert accountant and business evaluator.  Due to my cross experience in representing owners of businesses in Chapter 11 matters as well as my over 20 years as a divorce attorney, I am well qualified to represent clients in this regard.

There are basically two (2) ways to value a business.  The first is the "sticks and bricks" approach, ie: figure out how much you can sell all tangible assets for in a public sale.   Obviously this would be a lowball approach in most divorce cases as a running business is worth more than just the machinery and receivables.  The second way is to have the business appraised, like real estate, by a licensed appraiser.   The appraiser will find comparable sales for similar businesses and create a multiplier to figure the fair market value based on gross revenues.   For example, if the appraiser found that a similar business that grossed $500,000.00 a year sold for $1,000,000.00, the multiplier would be 2.   In that case, a business that grossed $200,000.00 would be worth $400,000.00 under this analysis.

This a simplified explanation of how the appraisal process works.   However, the main consideration is whether the spouse is a "key employee", who, in fact, creates all the business.   If the business would fail if the spouse no longer ran the business, the business may not be worth more than the "sticks and bricks".   For example, a McDonald's franchise might be easily sold without losing its value whereas a well respected doctor's practice would not be as transferable, especially if the doctor does not sign a non-compete clause.

Visit my website at: tomtierneylaw.com

Thursday, February 16, 2012

What is a Chapter 11 Bankruptcy?

A Chapter 11 Bankruptcy is a legal option under bankruptcy law to reorganize your business while continuing to be in control of the business.   In Chapter 7 bankruptcy and in Chapter 13 Bankruptcy a Trustee employed by the Court system is responsible for managing the "bankruptcy estate" and, in essence, owns all property for the benefit of the creditors.

What is a "bankruptcy estate"?   In Chapter 7 it is any property that is not "exempt"; property that is to liquidated to pay creditors.  In Chapter 13 is includes the income of the Debtor.   In both Chapter 7 and Chapter 13 YOU ARE NOT IN CHARGE.

In Chapter 11 bankruptcy YOU ARE THE TRUSTEE, YOU ARE IN CHARGE.   With Court approval, you determine what to sell to pay debts and what income stream is available to pay creditors.  Your responsibilities include opening new bank accounts designating that you are a "Debtor in Possession" and filing monthly operating reports.   You have certain time limits to propose a "Plan" to reorganize your business,  get rid of unprofitable business decisions such as unprofitable leases or other contracts, and to negotiate a payment plan for past due debts.   Simply put, you get time to save a business in trouble but one that still could be profitable in a new form.

In small businesses the two major problems I see are businesses that are behind in payroll or sales taxes, hoping that an upturn will provide the needed capital, or businesses that have a balloon note that has come due or is behind.   Chapter 11 can be a good tool to resolve both of these issues.

Visit my website at: tomtierneylaw.com

Friday, February 10, 2012

Criminal Sentencing Reform

Chief Supreme Court Justice Carol Hunstein in her 2011 State of Judiciary Address wisely notes that our current criminal system is unaffordable.

She notes:

Keeping our citizens safe is one of government’s fundamental obligations. Indeed our Georgia Constitution requires the government to protect the public safety. The courts play a crucial role in doing so.

Today, Georgia stands on the brink of making significant reform in how it sentences criminal offenders. A national wave of sentencing reform is sweeping the country, and it holds bright promise for Georgia.

Last September, Rep. Wendall Willard and I attended a conference in Alabama called by the Chief Justice of that state to consider the prospect of sentencing reform. Alabama is currently at 120 percent of prison capacity. Georgia is not far behind, at 106 percent. The fact is, there are a lot of people in prison who are a greater threat to themselves than to society. Rather than lock up drug addicts and the mentally ill, we must reserve our prison beds for our most serious criminals – those who commit violent crimes; those who commit crimes against children.

Many states, including Texas and South Carolina, have discovered they can keep the public safer and spend less money by supervising some non-violent offenders outside of prison and treating the root causes of crime.

Georgia’s leaders in all three branches of government recognize that we can no longer afford the more than $1 billion it costs us annually to maintain the fourth-highest incarceration rate in the nation. Today, one of every 13 Georgians is behind bars or on probation or parole. That is the highest rate in the nation of people under some kind of criminal justice restraint. Ladies and gentlemen, Georgia has proven we can be tough on crime, with mandatory minimum sentences that allow no chance for parole. But are we any safer? And at what cost?

Unfortunately, there will always be those who commit crimes. But we cannot continue to build more prisons.

Local Judges are aware of the overcrowding and cost of incarceration, and are willing to consider alternatives if offered.   A good lawyer helps in presenting these options at the onset of non-violent criminal charges....

Please visit my website at tomtierneylaw.com

Please call if you need legal representation to Thomas F. Tierney at (770) 631-1100 or e-mail at tierneylawyer@yahoo.com

Monday, February 6, 2012

IRS and Georgia State Taxes

If you have been threatened with levy and garnishment by the IRS and the Georgia Department of Revenue, you need immediate professional help.    There are numerous options you have to work with the tax collectors, however, the worst response to do nothing.   Agents for the IRS and Georgia Department of Revenue are like all collection agencies; they just want to collect on a debt.   Like all collection agencies the IRS and Georgia Department of Revenue will NEGOTIATE as this is the best way for them to collect at least some of the money owed.

Beware of national businesses touting "PENNIES ON THE DOLLAR".   I am an attorney who has practiced in South Metro Atlanta for more than twenty (20) years, and will be responsive to your needs.   If you hire an out of state agency, beware.  TaxMasters and JK Harris, two national companies, are being investigated for unfair trade practices.

Both the IRS and the Georgia Department of Revenue have programs which are known as "OFFERS IN COMPROMISE".   Essentially, these programs consist of an assessment of your assets, your income, and your expenses to determine a reasonable amount you can afford to pay to settle a tax debt.  

The IRS and Georgia Department of Revenue will want to discover all of your assets.  If these can be liquidated, they will expect you to do so to to pay towards your debt.  Next, the IRS will want to know your income.   Oftentimes tax debt come about due to a failed business which failed to pay taxes to keep afloat, and now the individual has had to obtain a new job with less income, perhaps only sufficient to pay normal bills for the individual.  If you do not have assets to be liquidated and if you do not earn a great deal of money, the IRS and the Georgia Department of Revenue will accept an offer based on your new circumstances.


The best option often for tax resolution is often to file Chapter 7 Bankruptcy.   Under certain circumstances, if a personal income debt is more than three years old, you can discharge this debt in bankruptcy.   This will not discharge personal obligation for sales or payroll tax.

If your business is still profitable, you can reorganize your tax obligation through a Chapter 11 Filing.   If your business owes a great deal of payroll or sales tax, a Chapter 11 Bankruptcy can be filed to have these debts paid in a reasonable manner.

If the debt is the result of failing to file or disagreements regarding legitimate business deductions, you have the right to dispute the IRS findings.   Disputes often arise due to failing to provide the IRS with appropriate proof of legitimate deductions.

    If you have significant assets and income and do not qualify for bankruptcy or an Offer in Compromise, you can work out a payment plan with IRS and Georgia Department of Revenue to avoid levy and garnishment.

The worst reaction to collection activity is to do nothing.   We enjoy helping people get out the hole of tax debt.

Please visit my website at tomtierneylaw.com

Please call if you need legal representation to Thomas F. Tierney at (770) 631-1100 or e-mail at tierneylawyer@yahoo.com