If you own a rental property, chances are good that you have invested plenty of time and money into making the property more appealing to renters. The good news is that the money you spend to repair and update your rental is tax deductible. The bad news is that your repairs may be classified as improvements causing the deduction to be spread over 27.5 or even 39 years!

So, when is a fix-up considered a repair and when is it an improvement? A repair is work done to restore property to its working condition. A repair does not add value to the property or prolong its life. On the other hand, an improvement makes the property better in some way. You have improved property when you increase its value, extend its useful life, or alter the property so that it has a different use.

In general, you want your rental fix-ups to be classified as repairs, because you can deduct the entire expense now verses a small fraction of the cost. Here are some tips to make certain you achieve the desired classification.

1. Separate repairs from improvements – A complete overhaul of a rental property is generally considered an improvement. Let’s assume that your rental needs a new roof, new counter tops, repairs to cracks in the walls, and a deep cleaning. If you hire a contractor to perform all of this work, the amount of the combined bill will be considered an improvement. However, if you can get a separate bill for each project, only the roof and the counter tops will be classified as improvements and the rest as repairs.

2. Use similar materials – The quality of materials used in a repair demonstrates your intention. For example, several of your cabinet doors are looking shabby. If you restore them with the same wood and paint as the other cabinets, you have a repair. However, if you decide to update them with more fancy or higher-quality materials, this is an improvement.

3. Fix only what is broken –The words “new” and “replace” often indicate that an improvement was made. Replacing an entire roof because of a leak is an improvement. But if you simply patch the roof using similar materials as the rest of the roof, this is a repair. You have restored the roof to its previous, working condition. Anything beyond this point would be an improvement.

4. Repair after an incident – Improvements are typically planned, but repairs usually won’t happen unless you notice a problem. Fixing a broken pipe or a hole in the wall would be a repair. Something occurred to make the work necessary. Keep track of tenant requests for repairs for extra support of your deduction.

5. Repair property while occupied by tenants – Repairs made while a building is unoccupied are most often classified as improvements by the IRS, because they can easily argue that you are renovating the property between tenants. You will have a stronger argument for repairs if you have tenants in place when the work is done.

6. Classify repairs correctly on your books – It would be hard to convince the IRS that your repairs are actually repairs if you classify them as improvements on your financial statements.

A combination of good planning and good records are very important to getting the repair deductions you desire. You should always consult your tax advisor before beginning repair projects to ensure the best outcome for your tax situation.

This post was written by John Huddleston of Huddleston Tax Consulting.  Here’s how John describes himself and his business: I have a small tax accounting firm called Huddleston Tax Consulting. My focus is small business taxes & accounting. Myself and four CPAs  provide tax preparation, consulting, payroll, business valuation, bookkeeping/quickbooks service to businesses in Seattle, Bellevue, Redmond, Kent, Federal Way, Renton, Bothell, Everett and Marysville. These are all cities in Washington State. There is more information about my firm at my website Seattle Bellevue Tax Accountants/Certified Public Accountants.

My firm consist of myself and four CPAs that work for me. Prior to starting my firm (about 7 years ago), I worked for a Seattle CPA firm for about three years. I am a Certified Public Accountant and I have a law degree and a masters in tax law (I don’t practice law however), both from the University of Washington School of Law. Two of the CPAs that work in my firm were previously employed at “big four” CPA firms and they both have Masters in Tax Accounting degrees.

What about those who are just starting to think about starting a business, though?  There are plenty of resources for you, as well as for small business owners who need help - from free classes to one-on-one business counseling and information on how to get small business loans. Without further ado, a few links to help Washington State and Seattle business owners answer a whole host of questions:

• Washington State offers a great primer website called Doing Business in Washington.  Many of the questions you were asking about starting a business (or never thought to ask) are answered in one place.
• The University of Washington’s Business Development Center is located at the UW’s Bothell campus, and offers business students the opportunity to assist King and Snohomish County business owners problem-solving and strategic planning assistance, including one-on-one business counseling and more.
• The Washington State Small Business Development Centers “promote economic vitality by providing advice, training and research to entrepreneurs and existing businesses statewide.”  Whether you’re just starting your business or are already established, the SBDC has something to offer that will help you build and grow your business.
• Last but not least, the Washington division of the Small Business Administration offers business owners and entrepreneurs free classes and resources on how to obtain small business loans, business taxes, and more.

Finally, a “non-official” but wonderfully helpful resource is Biznik.  This small business networking site allows members to host events, start discussions, and post articles in a wide variety of topic areas.  If you’re looking to connect with other small biz owners, this is a great website to check out.  And a tip?  Their search engine optimization is amazing; if you pay the $26/month for their highest level of membership, you won’t regret it.

After recently helping a client successfully register a trademark that had been denied three times, I realized that many of you might be doing the DIY approach to trademarks.  While I’ll always recommend using an attorney with lots of trademark experience over doing it yourself, I know many of you won’t take that advice!

John Grant and Mona Ibrahim have put together a Trademark Law Basics for Small Business seminar that would be a great place for you to start when thinking about naming your business/product and contemplating the trademark process.  It’s hosted through Biznik; if you’re not a member already, you can join for free (though I highly recommend upgrading to a paid membership - the benefits are worth it!).  The seminar is on Thursday, March 4, 2010 at 2:00 p.m. and the location details and RSVP information is on the event page.

You owe it to your business to know as much as you can about choosing a name and understanding the trademark process.  Plus, this seminar will help you make an informed decision on whether to use an attorney to register your trademark or whether to take the DIY approach.

If you go, tell John I sent you!

In the meantime, I wanted to share some cool news with you all - I was interviewed recently by Lance Godard of The Godard Group on Twitter. For those of you unfamiliar with Twitter, it’s a form of micro-blogging that limits users to 140 characters per “Tweet.”

To check out my Twitterview, go to the Twitterviews page here.

I’d love your comments and feedback on my recent radio & Twitter interviews!

Rachel is a therapist and healer, and you can visit her website at http://www.fogtofire.com - thanks, Rachel!

ABCs of LLCs - An Introduction

Many of you have been asking for more information on LLCs.  What are they?  How do they work?  What do *you* need to do if you have an LLC?  Over the next few weeks we’ll cover all these topics.  Today, though, we’ll start with a quick overview and some resources for LLC owners.

What is an LLC?

LLC stands for Limited Liability Company.  It’s a business entity created at the state level (you can apply for yours at the Washington State Secretary of State website).  The main purpose of an LLC is to limit liability that is created by your company to your company’s assets.  Put another way, if someone sues your company, having an LLC allows you to say, “You can sue my company and reach company assets if you win, but you can’t take my personal assets, too.”

*There are several significant exceptions to the liability protection of an LLC.  We’ll discuss those exceptions in depth at another time; for now, don’t make any assumptions about this, and be sure to talk to your lawyer about when your LLC does and does not protect you from personal liability.

What do you need to do to make your LLC “work” for you?

One requirement that you must fulfill in order to benefit from an LLC’s limitation on liability is to “observe the corporate formalities.”  That’s lawyer-speak for dotting your i’s and crossing your t’s; run your LLC like a company, for Pete’s sake!  Don’t mix company finances with your personal finances; don’t sign contracts in your own name, sign them on behalf of the LLC.  Make sure that everyone you do business with knows that you’re an LLC - if they are on notice that they’re dealing with a limited liability company, it makes it harder for them to later argue that they should be able to sue you personally.

Some Resources for LLC Members

And LLC has “memebers” like a corporation has “shareholders.”  In everyday usage, you’ll hear people talk about owning an LLC - that means they are a member (maybe the only member) of that LLC.  Anyways, today’s post is a drive-by overview of some important stuff to keep in mind when you have an LLC.  Here are some online resources for LLC owners/members:

IRS explanation of the Limited Liability Company

Secretary of State definitions of business structures

Secretary of State FAQs

Doing Business in Washington Index

Wikipedia article on LLCs

Leave Your Questions & Comments for Future Discussion

What would you like to know about LLCs?  Do you have one and feel a little lost?  Please leave your comments and questions here, and I’ll cover your questions in future blog posts.  Stay tuned for my next post on when an LLC will NOT protect you from personal liability.

In the meantime, I wanted to let you all know that on Wednesday, February 25, 2009 between 8:00 a.m. and 9:00 a.m., I will be making my first official radio appearance since launching the firm!  The Seattle-based radio show Chat With Women is doing a series of features on female CEOs in the greater Seattle area, and they’ve done me the honor of highlighting me in this upcoming show!

Chat With Women broadcasts live Monday through Friday from 8:00 a.m. to 9:00 a.m. on KKNW 1150 AM in King County, Washington.  Please listen on the 25th and call in with your small business law questions!  And many thanks to Pam & Rochelle of the Chat With Women show for the opportunity to talk with their listeners about practicing small business law in Seattle!

On to today’s topic. In the last two blog posts, I shared some thoughts on how to know when, as an individual or small businessperson, you need a lawyer. The bottom line is this: get one when you don’t need one, so you have one you like when you do. The next logical question, then, is “How do I choose the right lawyer for me or my business?”

Well, in my last post I promised that I would give you some tools to help you choose a lawyer, so lean in as I tell a little secret…The key to finding the right lawyer is to use your common sense!

I am fond of saying that common sense isn’t, unfortunately, as common as we’d all like to think. But the truth is, you all have it in you to choose a lawyer with whom you can work amiably, and who you trust. Choosing a lawyer, in many ways, is just like choosing a babysitter or banker. You ask for a resume; you check references; perhaps you do a background check. Then, considering all the information you’ve gathered, you trust your gut.

I can hear some of you now, thinking, “Gut?!? I’m reading her blog for advice and she tells me to trust my gut?!?” Yep, that’s right. Now, don’t worry – I’m going to give you some practical resources to help you in the information gathering phase of this process. But in the end, the reality is that there are thousands of intelligent, competent attorneys in the Seattle area.

“But I am looking for a lawyer who practices small business law,” you might think. Even that doesn’t narrow the field as much as you think. Even if you were to limit your search to lawyers located in West Seattle who practice small business law, you’d be surprised at how many of us you might find. So once you’ve got your pool of a few lawyers to choose from, the decision will boil down to the answers to these questions:

1. Do I like this person enough to work closely with her?
2. Do I like how he or she does business?
3. Are there any “red flags” that make me hesitate to work with this lawyer?
4. Is this person familiar with my industry?
5. Do I trust him/her to represent me and look out for my best interests?

There are a whole host of other questions to ask earlier in the process. Many people feel that years of experience is an important qualifier for their lawyer. Be sure to ask those you interview how long they’ve been in practice. Perhaps even more pertinent, though, is how much directly applicable experience they have doing the type of work you need done. For instance, a newer lawyer who has filed 100 trademark applications might be far more experienced, as far as your needs are concerned, than a seasoned 20-year attorney who’s never dealt with trademark law.

Some practical resources as you investigate your potential picks:

• Be sure to check your prospect’s profile at the Washington State Bar Association website’s Lawyer Directory. If that lawyer has been the subject of any bar discipline, from a reprimand or suspension to being disbarred, you’ll find that information there.
• For client reviews, you might check out Avvo, a website that allows peers and clients to review lawyers who claim their profiles. You can also view client comments on my lawyers’ own websites.
• Many attorneys offer a free or reduced-fee consultation. Take advantage of that opportunity to meet with your prospects before you choose an attorney.

I can’t stress enough how important it is to work with someone you can get along with reasonably well. Once you’ve done all the information gathering you can about your attorney, his/her firm, their years of practice, focus areas, etc., the decision will come down to a choice between people. Choose the person with whom you can see yourself working for hours at a time, perhaps years into the future. Establishing a positive, productive relationship with a lawyer now will stand you in good stead for years to come.

Good luck! If you have specific questions about this topic, or stories to share, please leave a comment or contact me directly.

****From Bridetiquette, January 6, 2009****

Expert Spotlight : Farris Law PLLC

Valerie Farris isn’t some ‘Made for TV’ attorney. She’s personable, gregarious, funny & well-versed. She creates an environment of comfort – whether over a cocktail or drafting a will – by sharing her knowledge with confidence + clarity.

Oh, and did I mention…She speaks four languages, and is a Seattle University graduate?

Bridetiquette recently caught up with Valerie, to get the inside scoop on how to prepare for the legal institution of Marriage.

Tell us a little bit about yourself…….

I was born in Detroit, and moved to Washington State when I was 10. Seattle really is home for me – I’ve  lived here for the better part of 14 years, with over half of that time in West Seattle.  My family is very close, so I was raised to value people + relationships above everything else. As a result, one of my strengths, personally + professionally, is to cultivate and build strong relationships.

I’m also a huge Seattle sports fan, love to salsa dance, bake killer brownies + chocolate chip cookies, and simply adore my niece and nephews.

What inspired you to start your business?

I grew up in a small business, always surrounding with the example of ‘sweat equity’ and hard work. I started my law career with a small firm in Seattle, and then began to build my own practice under the umbrella of another. This allowed my own launch to happen with much less stress, as I already had a small client base in place. I started my firm on October 1, 2008, so I’ve been in business for a few months now.

That’s the practical side of things, though. The less concrete stuff includes my love for learning new things, and helping clients achieve their goals with a minimum of expense and headache. Having the freedom to get creative and try different things, thinking outside the box, and looking for the best client solutions were big motivating factors in my decision to strike out on my own.

The best part is that I’m able to focus my law practice where my passion is: small business owners and their families!

What special services do you offer to newlyweds?

Estate Planning is the main legal service I offer newlyweds.Most Americans don’t even have a will, but Estate Planning is about much more than that. It covers all sorts of contingencies: what happens if you disappear while traveling, if you become incapacitated or end up in a persistent vegetative state, or if you should pass away.

For newlyweds, getting this taken care from the start clears up the ‘what ifs’ from the beginning. Your wishes are spelled out in black + white, so your spouse and family won’t have to deal with more pressure and stress if the worst does happen.

What legal tips can you share with all the brides + grooms getting married in 2009?

Here are some tips for those getting married in 2009:

• Talk about your individual financial lives, so you’re well equipped to blend financial + legal lives once you’re married.
• Change the beneficiary names on any insurance policies or retirement plans once married.

What do you bring to your law practice that sets you apart?

My background and absolute commitment to customer service, as well as the small business environment in which I was raised, sets my practice and approach apart. When I decided to start my own firm, I realized that I am my brand. I don’t do anything magical in terms of the nuts + bolts of practicing law.

What sets me apart is how I practice. I don’t bill clients unless I’m actually working directly on your behalf, and I pride myself on keeping clients informed of changing cost projections every step of the way. Most of my work is on a flat-fee basis, which provides clients predictability, and a certain level of control over what their legal needs will cost.

My clients know that an email message or voicemail will nearly always be returned the same day.  I inform clients with active cases when I’ll be unavailable for longer than 1 business day, and always have a colleague that clients may contact about urgent matters when I’m out of town.

The bottom line is this…..I communicate with my clients. They walk away from the experience of working with me knowing that they had a GREAT lawyer who cared & was responsive to their legal needs.

It’s not completely altruistic on my part either – happy clients are the best advertising!  I receive 80% of my business via word-of-mouth. Superior customer service really does pay for itself.

What price ranges do your services fall into?

This is a tough question, as I customize pricing to fit the needs of each client. My hourly rate is $200, though most of my work is done on a flat-fee basis.

Estate planning for couples ranges from $1400 - $2250, depending on the complexity involved in crafting all the legal documents.

I offer a 30 minute initial consultation, where clients have a chance to meet me, learn about my work style, and discuss fees + payment arrangements.

I encourage people to take advantage of this offer!

Where can we contact you + learn more about your services?

Please visit my website, http://www.farrislawpllc.com.

My direct email is: valerie {at} farrislawpllc.com, and my direct phone #206.588.2930

Please visit my Biznik profile, http://www.biznik.com/members/valerie-farris, to learn more about me.

I also have a profile on Linked In + I Twitter under the name seattlelawgirl.

Where are you located?

I’m located in West Seattle. I have clients from Edmonds to Federal Way, and will travel to meet clients if there’s an urgent need. We can meet in a formal office, or even a coffeehouse. My clients tend to prefer more casual, laid-back meeting places!

What inspires you?

I love this question!  The answer isn’t simple – so many things inspire me in life and in my work!  The beauty of nature is a huge inspiration to me.  Hearing peoples’ stories is something that fills me with the desire to do better in my own life.  Spending time with my niece and nephews, and the rest of my loved ones.  A challenge – I love to take on a serious challenge, so setting lofty goals (like the one I have to run a half marathon in 2009) is a huge motivation for me.

Faith, hope, love, joy – I could keep going, but I’ll leave it at that.

]]> http://blog.farrislawpllc.com/?feed=rss2&p=158