Getting a divorce is never easy.  There may be specific Tax consequences you need to consider before reaching an Agreement.  A recent question was asked of me involving Child Support versus Alimony: 

"So my question is...  is Undifferentiated Family Support fully deductible for me, or would the IRS infer from the above arrangement that $$$$ is maintenance
and $$$$ is child support, the latter not being deductible?  And
would the IRS therefore seek to recover taxes and penalties from me?

Here's my response:

(In Washington) The Family Law Court will require a Child Support Order with any Parenting Plan.  If they are filing these, any reasonable amount can be designated as Child Support.  Any separate amount designated as Alimony would be deductible from income. 

One important note to point out: You may deduct from income the amount of alimony or separate maintenance you paid, and you must include in income the amount of alimony or separate maintenance you received. So what one spouse deducts from income, the other must include in income.

Please see IRS Tax Topic 452 - Alimony Paid for complete details.  

If they do not file a Parenting Plan or Child Support Agreement, it seems they bear the risk with of enforcing back child support if this caveat isn't clearly spelled out.  I have seen this language:  This is a binding settlement agreement pursuant to Court Rule 2A.  This agreement resolves completely all existing child support disputes between the parties.

However, the rules around this I defer to a qualified Divorce Attorney. In summary, whatever is filed with the court becomes the supporting documentation should the IRS ever question what is reported on a tax return.

I recommend retaining a Collaborative Divorce Attorney, Karin Quirk.  She is a seasoned professional practicing a Respectful and Cooperative Divorce.  Her fee is set and very reasonable. 

And no matter what, PUT YOUR KIDS FIRST!

This post originally appeared on the American Express OPEN Forum, where Accounting Resources and OlsonCFO regularly contribute in small business.

Over the past six months, mobile payments skyrocketed from an industry conversation to mainstream news, fueled by myriad new entrants to the market. Historically, the majority of technological innovations were easily accessible to only mid- and large-sized businesses, but mobile payments level the playing field, providing businesses of all shapes and sizes with new payment acceptance solutions that capitalize on mobile commerce to attract new business, cultivate loyalty with existing customers and grow revenues.

For small businesses, the challenge today is selecting a mobile payment solution that solves for today’s needs, supports
future growth, provides security and remains relevant in the future.  Unfortunately, with so many players in the marketplace, mobile payment uncertainty is stalling the decision making process. Examining the most popular options to demystify mobile payments and help formulate a plan to obtain value from this exciting emerging technology.

Companies like Google, PayPal, ISIS (a joint venture of AT&T, T-Mobile and Verizon), Sprint, Apple, Visa,LevelUp and hundreds of others are vying for business acceptance and consumer adoption of their mobile wallet and mobile payment products. Meanwhile, others including Square, Intuit, VeriFone and PayPal continue to attract small businesses with their convenience-based mobile payment acceptance solutions. Add in a deluge of additional noise from loyalty, gift and other mobile commerce specialists, and you’re left with a sea of confusion, especially for small business owners.

Leading providers such as Google, ISIS, Visa and Sprint are relying on promotion of NFC from the mobile network operators (smartphones and tablets) and merchants (countertop payment device) as well as consumer adoption of their individual ‘branded’ wallet. Much debate remains about the availability and implementation timeline of payment types, including NFC, and that will impact the adoption success for this group of mobile payment providers. As we wait and see what plays out with NFC, other companies are taking advantage of innovative technologies, such as QR codes, to expedite their entry into mobile payments and mobile commerce.

LevelUp is one company that uses QR codes to complete mobile transactions and loyalty campaigns. LevelUp offers small businesses an innovative solution that accepts payment through a personalized QR code and provides integrated customer acquisition and retention opportunities as well as peer-to-peer (P2P) mobile gifts. Consumers download a free app, connect it to their preferred credit or debit card and start buying. Businesses pay no interchange fees and drive new customer engagement through LevelUp’s traditional or co-marketingcampaigns. Businesses are charged based on campaign success. And, LevelUp is easily accessible for businesses, as the only requirements are an account and a dedicated mobile device (smartphone or tablet).

Another growing space is mobile payment acceptance, which provides small businesses with a convenient solution to accept payments either off-premises or without a formal credit card terminal. Businesses use a card reader that attaches to a smartphone or tablet and is connected to their merchant account. These providers rely on an Internet connection to accept and process traditional magnetic stripe (mag stripe) credit and debit cards.

A vastly growing market was evidenced by Square’s recent partnership announcement with Starbucks. Over the past three years, options from Square, VeriFone, PayPal and Intuit offer an immediate solution for the nearly 15 million U.S. businesses that currently don’t accept credit cards, and a solution for businesses that need a secondary, ‘mobile’ payment gateway. Some would argue that these solutions are not truly mobile in terms of accepting payments from a customer’s mobile device, but regardless of the perspective, it’s a key growth area within payments and allows more small businesses to accept debit and credit transactions.

Now that you’re familiar with all of the existing options, the next step is deciding which system works best for you and your customers. To get started, begin with outlining your specific needs and goals. This will streamline the choice by pinpointing which mobile payment option supports your business plan. Once the list is compiled, investigate each offering thoroughly, whether it is an all-in-one payment solution or an individual solution, such as a mobile wallet or mobile payment acceptance device. Check rates, read reviews, and visit competitor businesses to see what is gaining traction in your local area.

Payment technology is being developed to help disparate systems work together. Until unified systems are available, the best option small business owners have is to research, compare offerings to their business goals, and then research again. The last thing a business needs is to buy a quick snake oil sell and wind up implementing a mobile payment option that is non-existent in a year. That said, waiting too long on mobile payments might leave your business behind. Get ahead of the competition and begin realizing the value of mobile to reduce costs, attract new business and retain existing customers. Use mobile today to grow your business and drive incremental revenues -– just make sure you do your research first.

Before making a decision regarding the form of  ownership that is right for your business, talk with a knowledgeable account or
tax attorney. There are a number of issues to consider in making a choice,   including:

-Your vision regarding ultimate size and nature  of the business
-The level of control you wish to have
-The business’s  vulnerability to lawsuits
-The amount of profit (or loss) the business will  generate
-The tax implications of the different ownership  structure

Types of Business Ownership  Structures:

Sole Proprietorship
Most small businesses are organized as sole  proprietorships. These firms are owned by a single individual who also manages
it. A sole proprietorship is not considered a separate organization, but is  inseparable from the person who owns it. 
 
Advantages: Easiest and least  expensive to organize, the owner is in complete control and receives all income
generated by the business to keep or reinvest, the profits from the business  flow directly into the owner’s personal tax return and the business is easy to dissolve.

Disadvantages: The owners of sole   proprietorships have unlimited liability and are legally responsible for all debts and legal judgments against the business. All of the owner’s assets are  at risk. Sole proprietorships may be at a disadvantage in raising funds, and   are often limited to using funds from personal savings or consumer loans.  High-caliber employees who would like to own a piece of the business may find a sole proprietorship unattractive, and some employee benefits (such as medical insurance premiums) are not deductible from business income.

Partnership
A partner is legal structure in which 2 or more people share ownership of a single business. For a partnership, like sole proprietorships, the law does not distinguish between the business and its owners. Partners determine up from how much time and money each will contribute to the business and in addition, they must agree on how decisions will be make, profits will be shared, disputes will be resolved and future partners will be admitted to the partnership. Experts strongly advise that partners have an attorney draw up a legal agreement that clearly sets out these and other important details.

Advantages: Partnerships are relatively easy to establish. Aside from drawing up a partnership agreement, they are as simple to set up as sole proprietorships. The business can benefit from partners who have complementary skills, and since there is more than one person involved, the ability to raise funds may be increased. The profits from business flows directly through to the partners’
personal income tax returns and prospective employees may be attracted to the business if given incentive to become partner.

Disadvantages: Partners are jointly and individually liable for the actions of other partners; profits must be shared with others; decisions are shared, hence disagreements may arise; some employee benefits are not legitimate deductions from business
income and a partnership has a limited life- it may end on withdrawal or death of a partner.


Limited Liability Company
A limited liability company (LLC) is a relatively new type of hybrid business structure that is now available in most stars. It is
designed to provide the limited liability feature of a corporation and that tax efficiency and operational flexibility of a partnership. Like a limited partnership, the formation of an LLC is more formal and complex than that of a general partnership.

Advantages: Combines the pass-through taxation of a sole proprietorship with the limited liability of a corporation. Therefore there are no federal taxes imposed on the LLC as an entity. LLC’s provide personal limited liability to members, and there is greater flexibility in management and responsibilities. Income to members can be distributed with more flexibility.

Disadvantages: Earning of most LLC’s are generally subject to self-employment tax. An LLC that is considered a partnership can’t take advantage of incentive stock options, businesses operating in more than one state may receive inconsistent treatment.

Corporation
A corporation is considered by law to be unique entity, separate and apart from those who own it.  Like an individual, a corporation can be taxed; it may be sued; it can enter into contractual agreements with others.  A corporation has a life of its own, and will not dissolve when the owners change.  The owners of a corporation are its shareholders. These individuals have the right to elect a board of directors for the corporation to represent the interest of the shareholders in overseeing the major policies and decisions made by the company’s offers.  In small business, it is common for shareholders, directors and officers of the company to be the same individuals.

Advantages: Shareholders have limited liability for the corporation’s debts or judgments against the corporation.  Generally, the shareholders can only be held accountable for the amount they have invested in the stock of the company (although officers and others can be held personally liable for their actions, such as failure to withhold and pay employment taxes).  The corporation has the opportunity to raise additional funds, through the sales of stock. The corporation may deduct the costs of many of the benefits it offers to its officers and employees and it has an unlimited life – its operations will not cease with the death or absence of its founder or individual stockholders.

Disadvantages:  The process of incorporation takes more time and money than that involved in setting up a sole proprietorship or
partnership and usually requires the assistance of a paid professional.  Corporations are monitored by state and federal agencies and as a result, they may require more paperwork to comply with regulations. Incorporating may result in higher taxes overall. 
Most corporations (C corporations) are taxed as a separate entity;  they can deduct wages and benefits for officers and other employees.  However, dividends paid to a corporation can be taxed twice; first at the corporate level, then again at the individual level if it is paid out to shareholders as dividends.

S Corporation
S Corporations have a significant advantage for small business owners.  Unlike C Corporations, S Corporations are taxed similar to partnerships, with all business profits and other specified items passing through to the shareholders’ personal federal income tax returns.  A company must meet certain requirements to be accepted as an S Corporation.  If a company wishes to be an S Corporation it must make a specific request to the IRS during the incorporation process, otherwise the company will be assigned a C Corporation status.

Advantages: Corporate losses can be passed through to shareholders. The protection of limited personal liability is provided without having to pay corporate tax.  Self-employment & FICA taxes can be reduced since your profits, as a shareholder, aren’t   taxed in this manner.  It is easier to raise capital than a sole proprietorship or partnership.

Disadvantages:  Numerous regulations apply, including a limit on number of shareholders.  All shareholders must be US citizens.  Benefits such as health or accident insurance for employee shareholders are not deductible. An S Corporation must follow corporate formalities.  The IRS will closely scrutinize the shareholder employees to ensure that they have received reasonable compensation before any non-wage distributions are made.

Personal Service Corporations
A personal service corporation (PC) is one that provides personal services in certain occupational areas including health, law,   accounting, and engineering, when the employee-owners are the primary providers of the service.  The income of this type of corporation is taxed at a flat rate (the highest corporate rate) instead of the graduated tax rates applied to other corporations.

Nonprofit Corporation
A Nonprofit Corporation, otherwise known as the popular 501(c), is reference to the Internal Revenue Code § 501 (c).  This IRS Code provides that 28 types of nonprofit organizations are exempt from some federal  income taxes and often times state.  Although this entity is call “nonprofit”,they operate similar to any business with the intention to make a profit and stay in business.  "Tax  exempt" also does not excuse an organization from maintaining proper records, and filing any required annual or special-purpose tax returns. Previously, annual returns were not generally required from an exempt organization accruing less than $25,000 in gross income yearly. However, from 2008 onwards, many such organizations must file a yearly "e-Postcard" known as Form 990-N, or risk losing their exemption.

Review your Secretary of State website for more information.  Here’s a link to Washington Secretary of State FAQ.

In Summary
Choosing your business structure is a critical part of your success.  It will become the foundation for the objectives and mission you set out to achieve.  Take your time to do your research and most importantly, create a Business Plan before you begin.  Especially if you plan to have partners, having an agreement in writing will go a long way and provide directions to disagreements later.  

Avoid these Twelve Worse Start-Up Mistakes:

1.    Rushing to the market.
2.    Guessing instead of digging.
3.    Weak/wrong business plans.
4.    Targeting the wrong people.
5.    Falling in love with your idea.
6.    Ignoring the competition.
7.    Hiring someone to prepare your plan without your involvement.
8.    Undercapitalization
9.    Shortage of cash
10.  Incorrect sales forecasts.
11.  Failure to pay your taxes in a timely manner.
12.  Not working with the right Accounting Resources.