Haft Law Group FindLaw IM Template 2026-10-21T08:58:50Z https://www.haftlawgroup.com/feed/atom/ WordPress /wp-content/uploads/sites/1204496/2020/11/cropped-favicon-haft-law-firm-1-32x32.jpg by Haft Law Group <![CDATA[When Florida LLC Members Deadlock]]> https://www.haftlawgroup.com/?p=48030 2026-10-13T09:00:55Z 2026-10-21T08:58:50Z Two members, equal votes, and a decision the company cannot avoid. Florida’s LLC statute supplies three exits: judicial dissolution, a court-supervised buyout, and the deadlock provision in the operating agreement. Grounds for Dissolution A member or manager may ask the circuit court to dissolve the company if it is established that:
  1. the conduct of all or substantially all of the company’s activities and affairs is unlawful;
  2. it is not reasonably practicable to carry on the company’s activities and affairs in conformity with the articles of organization and the operating agreement;
  3. the managers or members in control have acted, are acting, or are reasonably expected to act in a manner that is illegal or fraudulent;
  4. company assets are being misappropriated or wasted, causing injury to the company or, in a proceeding by a member, to one or more members; or
  5. the managers or members are deadlocked, the members are unable to break the deadlock, and irreparable injury to the company is threatened or being suffered.
Section 605.0702(1)(b), Florida Statutes. An operating agreement cannot vary these grounds, but a deadlock resolution mechanism does not count as varying them. Section 605.0105(3)(i). The Buyout Election When a member petitions under section 605.0702(1)(b), the company, or failing that one or more other members, may elect to buy the petitioner’s entire interest at fair value. Section 605.0706(1). The election may be filed within 90 days after the petition, or later if the court allows, and it is irrevocable unless the court finds it equitable to set aside or modify it. Section 605.0706(1) and (2). Once an election is filed, the case may not be discontinued or settled, and the petitioner may not sell the interest, without court approval, unless the sale is under a deadlock sale provision. Section 605.0706(2). If the parties do not agree on value and terms within 60 days after the first election, the court determines fair value as of the day before the petition was filed, or as of another date the court finds appropriate. Section 605.0706(3) and (4). The court may order installment payments when equity requires, with security, and may award the petitioner reasonable counsel and expert fees if the petitioner had probable grounds for relief. Section 605.0706(5). The Operating Agreement Comes First A deadlock sale provision in the operating agreement resolves the deadlock instead of dissolution or a court-ordered buyout if it is initiated before the court determines that grounds for dissolution based on deadlock exist, and it is then carried out under its terms or the members’ agreement. Section 605.0702(2)(a). The statute defines the term broadly to include a redemption or purchase and sale of interests, a governance change, a sale of the company or substantially all of its assets, or a similar mechanism that breaks the deadlock. Section 605.0702(2)(b). What Members Should Do Now Read the operating agreement before a dispute, not after. A workable deadlock clause names the trigger, allows a short negotiation or mediation period, and sets a buyout price or valuation method the members can actually fund. Without one, the outcome is left to a judge. Haft Law Group represents members and companies in Florida business disputes and drafts operating agreements built to avoid them. Attorney Scott Haft is also a Florida Supreme Court certified circuit civil mediator.]]> by Haft Law Group <![CDATA[Florida Noncompetes Now Run on Two Tracks]]> https://www.haftlawgroup.com/?p=48029 2026-10-13T08:58:48Z 2026-10-19T08:57:27Z Since July 1, 2025, Florida employers have had two statutory paths for noncompetes. Section 542.335, Florida Statutes, still governs most restrictive covenants. The Florida CHOICE Act, sections 542.41 through 542.45, adds a second path for higher earners, with restraints of up to four years and a preliminary injunction the court must enter when the Act’s requirements are met. Who Qualifies The Act reaches a covered employee: an employee or individual contractor who earns, or is reasonably expected to earn, a salary greater than twice the annual mean wage of the Florida county where the employer has its principal place of business. If the employer’s principal place of business is outside Florida, the employee’s county of residence is used. Section 542.43(3). Salary means base compensation; it excludes discretionary incentives and awards and anticipated but indeterminable pay such as tips, bonuses, and commissions. Section 542.43(10). Health care practitioners are excluded. These rules apply to an agreement with an employee whose primary place of work is in Florida, regardless of any choice of law clause, and to an agreement with an employer whose principal place of business is in Florida when the agreement is expressly governed by Florida law. Section 542.45(1). What the Agreement Must Do A covered noncompete may last up to four years within a geographic area the agreement defines. Section 542.43(6). It is fully enforceable according to its terms only if:
  1. the employee was advised in writing of the right to seek counsel before signing;
  2. the employer provided the proposed agreement at least seven days before the offer expired;
  3. the employee acknowledged in writing that he or she will receive confidential information or customer relationships; and
  4. the agreement reduces the noncompete period day for day by any nonworking portion of a garden leave notice period, if applicable.
Section 542.45(2) and (3). What the Employer Gets On the employer’s application, the court must preliminarily enjoin the employee from providing services to anyone else during the noncompete period, and must enjoin any new employer from engaging the employee. Section 542.45(5)(a) and (b). The court may modify or dissolve the injunction only if the employee or new employer proves one of a few narrow defenses by clear and convincing evidence based on nonconfidential information. The prevailing party recovers reasonable attorney fees and costs. Section 542.45(5)(d). Compare section 542.335. There, the employer must plead and prove a legitimate business interest and that the restraint is reasonably necessary to protect it. Section 542.335(1)(b) and (c). A restraint on a former employee longer than two years is presumed unreasonable unless it is associated with the sale of a business or an ownership interest, or is predicated on the protection of trade secrets. Section 542.335(1)(d)1. and (e). What Did Not Change A restrictive covenant that does not meet the Act’s definitions remains governed by section 542.335. Section 542.45. The FTC’s nationwide noncompete rule is also gone. A federal court set it aside, the FTC voted in September 2025 to dismiss its appeals, and the FTC removed the rule from the Code of Federal Regulations effective February 12, 2026. 91 Fed. Reg. 6507 (Feb. 12, 2026). What Employers Should Do Now Identify which employees clear the wage threshold on salary as the Act defines it, build the four requirements above into the offer process, and keep agreements drafted under section 542.335 for everyone else. Haft Law Group advises Florida employers on drafting and enforcing restrictive covenants. Contact the firm to review your agreements under both statutes.]]> by Haft Law Group <![CDATA[Understanding the 501(c)(7) Social Club: A Guide for Florida Clubs]]> https://www.haftlawgroup.com/?p=48027 2026-10-13T08:56:01Z 2026-10-15T08:54:29Z Clubs organized for pleasure and recreation can qualify for federal exemption under section 501(c)(7) of the Internal Revenue Code. The exemption works very differently from charitable status. What Qualifies Section 501(c)(7) covers clubs organized for pleasure, recreation, and other nonprofitable purposes, substantially all of whose activities serve those purposes, with no part of the net earnings inuring to any private shareholder. The IRS also requires an opportunity for personal contact among members, limited membership, and support from membership fees, dues, and assessments. The 35 and 15 Percent Guidelines IRS guidance allows a club to receive up to 35 percent of its gross receipts from nonmember sources, including investment income. Within that 35 percent, no more than 15 percent of gross receipts may come from nonmember use of club facilities and services. These are safe harbors, not absolute limits. If a club exceeds them, the IRS considers all the facts and circumstances in deciding whether it still qualifies. Exempt, but Taxed on Outside Income A social club’s unrelated business taxable income is its gross income other than exempt function income, less directly connected deductions. Section 512(a)(3)(A). Exempt function income is essentially what members pay, in dues, fees, and charges, for goods, facilities, and services provided to them, their dependents, or their guests. Section 512(a)(3)(B). As a result, the IRS generally taxes a club’s investment income and its income from nonmembers who are not bona fide guests of members, even when the club spends that money on its facilities. A club with $1,000 or more of gross income from an unrelated business must file Form 990-T in addition to its annual return. One rule helps clubs that relocate or rebuild. If a club sells property used directly in its exempt function and, within one year before or three years after the sale, buys other property that it uses the same way, gain is recognized only to the extent the sales price exceeds the cost of the replacement property. Section 512(a)(3)(D). Keep the Records A club that lets nonmembers use its facilities must record, for each event, the date, the size of the party, the number of nonmembers, the total charges, and the charges attributable to and paid by nonmembers. If a member pays for nonmembers, the record should include the member’s signed statement about any reimbursement. A club whose records do not separate income and expenses by type and source faces a presumption that all of its income is unrelated and taxable. Discrimination Costs the Exemption A club is not exempt for any year in which its charter, bylaws, other governing instrument, or written policy statement provides for discrimination against any person on the basis of race, color, or religion. Section 501(i). The statute makes narrow religious exceptions for certain fraternal society auxiliaries and for clubs that in good faith limit membership to members of a particular religion to further its teachings or principles. Haft Law Group advises Florida clubs and other nonprofit organizations on exemption, governance, and compliance.]]> by Haft Law Group <![CDATA[After the IRS Letter: What a Florida Charity Must Do to Accept Donations]]> https://www.haftlawgroup.com/?p=48025 2026-10-13T08:54:08Z 2026-10-13T08:54:08Z An IRS determination letter recognizes a charity’s federal tax exemption. It does not register the charity to solicit in Florida, and it does not give donors the paperwork they need to deduct a gift. Five steps close the gap.
  1. Register Before Soliciting
Unless an exemption in section 496.406 applies, a charity that intends to solicit contributions in or from Florida must file an initial registration statement with the Department of Agriculture and Consumer Services before soliciting, and a renewal statement annually. Section 496.405(1), Florida Statutes. It may not solicit until the department approves its statement. Section 496.405(1)(c). A charity that registered before its IRS letter arrived must file a copy of the letter with the department within 30 days after receiving it. Section 496.405(2)(h).
  1. Put the State Disclosure on Every Request and Receipt
A charity required to register must conspicuously display the following statement on every solicitation, confirmation, receipt, or reminder of a contribution, together with a toll-free number and website for the Division of Consumer Services: “A COPY OF THE OFFICIAL REGISTRATION AND FINANCIAL INFORMATION MAY BE OBTAINED FROM THE DIVISION OF CONSUMER SERVICES BY CALLING TOLL-FREE WITHIN THE STATE. REGISTRATION DOES NOT IMPLY ENDORSEMENT, APPROVAL, OR RECOMMENDATION BY THE STATE.” Section 496.411(3). On a website, the statement must appear on any page that gives a mailing address or telephone number for contributions or processes contributions online. Printed solicitations, written confirmations, receipts, and reminders must also show the charity’s registration number. Section 496.411(6).
  1. Acknowledge Gifts the Way the IRS Requires
A donor may not deduct a contribution of $250 or more without a contemporaneous written acknowledgment from the charity. Section 170(f)(8)(A) of the Internal Revenue Code. The acknowledgment must state the amount of cash and describe, but not value, any other property; state whether the charity provided goods or services in return; and, if it did, describe them and give a good faith estimate of their value. Section 170(f)(8)(B). It is contemporaneous if the donor obtains it on or before the earlier of the date the donor files the return for that year or the return’s due date, including extensions. Section 170(f)(8)(C). When a payment of more than $75 is partly a gift and partly for goods or services, such as a gala ticket, the charity must give the donor a written statement, in connection with the solicitation or receipt, that the deductible amount is limited to the excess of the payment over the value of the goods or services, along with a good faith estimate of that value. Section 6115.
  1. Keep Key Documents Open to the Public
A charity must make its exemption application materials and its annual returns available for public inspection at its principal office during regular business hours, and must provide copies on request for no more than a reasonable fee for reproduction and mailing, unless it has made the documents widely available under IRS regulations. Section 6104(d)(1) and (4). Each annual return must remain available for three years beginning on its due date, including extensions. Section 6104(d)(2). The IRS Tax Exempt Organization Search also lets anyone check whether an organization is eligible to receive tax-deductible contributions, so confirm the listing is accurate.
  1. Keep the Exemption Current
File the required Form 990 series return or notice every year. An organization that fails to file a required return or notice for three consecutive years loses its exemption automatically, as of the due date of the third one. Section 6033(j). A Florida nonprofit corporation must also file its annual report with the Department of State between January 1 and May 1 each year. Section 617.1622(4). Our post “The Florida Nonprofit’s Annual Legal Calendar” covers the remaining deadlines. Haft Law Group helps Florida charities obtain exemption and stay compliant afterward. Contact the firm before the first fundraising appeal goes out.]]> On Behalf of Haft Law Group <![CDATA[What if a business owner dies without a succession plan?]]> https://www.haftlawgroup.com/?p=47985 2026-10-05T08:50:24Z 2026-10-08T06:27:19Z What your successor receives Florida calls someone who receives your transferable financial rights a transferee. That person generally has the right to receive distributions connected to your former interest. Receiving those rights alone does not make the person an LLC member or give that person a vote in company decisions. Your personal representative handles your LLC interest while settling your estate. That person can exercise certain rights that Florida law gives your estate during this process. If you had the power to let a transferee become a member, your personal representative may use that authority while handling your estate.

How your operating agreement can guide succession

Your operating agreement can set rules for your LLC, including what happens to your role after you die. It might name a successor or explain what approval that person must receive to become a member. If the agreement does not address succession, Florida’s default rules apply. A new person can become a member in the way your operating agreement allows. If the agreement does not explain how, all existing members generally must agree. A different issue arises if your death leaves the company with no members. Florida gives the LLC 90 consecutive days to admit a new member through the process set by law. If that does not happen, the LLC dissolves.

Plan for future ownership changes

A succession plan can address who receives the financial value of your LLC interest and who may take part in running the company. As part of the planning process, you may want to compare your operating agreement with your will or trust. Keeping those documents consistent can help your estate and the LLC follow the same succession plan.]]> On Behalf of Haft Law Group <![CDATA[Paying a Subcontractor Late Is Now a License Problem in Florida]]> https://www.haftlawgroup.com/?p=47983 2026-09-22T07:30:30Z 2026-09-22T07:28:58Z What the Statute Says Section 489.1295, Florida Statutes, created by chapter 2026-3, section 19, Laws of Florida, is titled “Prohibition against nonpayment.” Subsection (1) provides:
  • A licensed contractor must compensate a subcontractor or supplier, unless there is a bona fide dispute regarding the amount due, if any, for services, labor, or materials: (a) Within 45 days after receiving payment for the services performed or materials supplied by the subcontractor or supplier; or (b) In accordance with the terms of the contract for such services, labor, or materials.
Subsection (2) supplies the consequence. A licensed contractor who knowingly or willfully violates the section “is subject to disciplinary proceedings as provided in s. 489.129.” The section sits in part I of chapter 489, so it reaches construction contractors licensed under that part. The same act amended section 489.105 to define who is protected, adopting the definitions in section 558.002. A subcontractor is a contractor who performs labor and supplies material on behalf of another contractor. A supplier is a person who provides only materials, equipment, or other supplies. The lumber yard and the truss plant are inside this statute alongside the framing crew.

What Is Actually at Stake

Section 489.129(1) gives the board a wide range of remedies: probation, reprimand, an administrative fine of up to $10,000 per violation, required continuing education, assessment of the costs of investigation and prosecution, and suspension, revocation, or denial of issuance or renewal of the license. Section 489.129(2) reaches past the license itself. Where the disciplined licensee is a qualifying agent or financially responsible officer and the violation occurred on a project undertaken by the business organization, the board may impose an additional fine of up to $5,000 per violation against the business organization, or against any partner, officer, director, trustee, or member who participated in the violation or who “knew or should have known of the violation and failed to take reasonable corrective action.” Owners who have never been named in a licensing proceeding should read that clause twice. This is not foreign territory for chapter 489. Section 489.129(1)(g)1. already treats it as financial mismanagement when valid liens are recorded against a customer's property for supplies the contractor ordered, the contractor has been paid, and the liens are not cleared within 75 days. Section 489.1295 moves the trigger upstream. The question is no longer whether a lien was recorded and left standing. It is whether the contractor got paid and did not pass the money along.

The Subcontract Just Became a Compliance Document

Look again at the structure of subsection (1). A contractor complies by paying within 45 days of receiving payment, or in accordance with the terms of the contract. The subcontract payment article is therefore doing work it was never drafted to do, and that cuts in both directions. A form that says nothing useful defaults the company into the 45-day clock on every job. A form with a clear and workable schedule defines compliance on the company's own terms. This is where many Florida subcontracts are weaker than the people using them believe. Under Peacock Construction Co. v. Modern Air Conditioning, Inc., a clause tying the general contractor's payment obligation to receipt of funds from the owner is read as a timing mechanism, not as a transfer of the owner's credit risk to the subcontractor, unless the contract is unmistakable about it. The Florida Supreme Court placed the burden where it remains today: “in order to make such a shift the contract must unambiguously express that intention. And the burden of clear expression is on the general contractor.” 353 So. 2d 840, 842-43 (Fla. 1977). A pay-when-paid clause that a contractor has always managed as though it were a pay-if-paid clause used to be a litigation exposure. It is now also a licensing exposure, because the contract the contractor intends to rely on under paragraph (1)(b) may not say what the contractor believes it says. One honest caveat. Nothing has yet tested how far paragraph (1)(b) goes. A contract term that operates to defeat the statute rather than to schedule payment under it may not be read as generously as its drafter hoped. The safer posture is a payment schedule the company can actually meet, not the longest one it can write.

A Bona Fide Dispute Is a Record, Not a Position

The statute excuses payment where there is a bona fide dispute regarding the amount due. That carveout is real and sensible, and it is also the provision most likely to be tested, because someone will evaluate it after the fact by reading a file. A dispute raised for the first time in response to a complaint reads very differently from one documented when it arose. The backcharge calculated and sent. The deficiency identified in writing. The retainage held for a stated reason. The undisputed portion of the draw paid on time while the rest is worked out. A contractor who pays what is not in dispute and papers what is has a defense. A contractor who holds the entire draw and explains months later has an argument. The qualifier “knowingly or willfully” means an isolated administrative slip is not the target of this statute. It is worth remembering that a pattern is a different thing than a slip, and that a pattern is visible in exactly the same records.

What to Do Before the First Complaint

Four steps, none of them expensive:
  1. Read the payment article in the subcontract form the company is actually issuing today, not the one saved in a folder six years ago, and confirm it states a schedule the company can meet on a slow job.
  2. Decide whether the form is meant to shift the owner's credit risk downstream. If it is, it has to say so unambiguously. If it is not, stop running jobs as though it does.
  3. Create a written record for every withholding at the time it is made, not when it is questioned.
  4. Pay the undisputed portion. A disagreement over part of an invoice is not a reason to hold all of it, and holding all of it is what turns a commercial dispute into a licensing file.

Fix the Form Before It Becomes Evidence

Haft Law Group represents contractors, suppliers, and owners in construction and commercial disputes in Florida. We handle this work from both sides of the invoice, which is precisely what makes the drafting useful: we have seen how these claims get built. A review of your subcontract payment terms and your withholding documentation is a short, defined engagement, and it costs a great deal less than a disciplinary file. If nobody has read your form since section 489.1295 took effect, that is the place to start.]]> On Behalf of Haft Law Group <![CDATA[The business owner’s checklist for hiring in-house counsel services]]> https://www.haftlawgroup.com/?p=47970 2026-09-03T10:58:59Z 2026-09-08T10:57:27Z the right outside counsel to provide in-house counsel services is about more than just legal experience. The best external attorneys function as seamless extensions of your team, understanding your business as intimately as any in-house advisor. The following practical checklist can help you to identify legal partners who are more likely to integrate with your organization.

Responsiveness matters more than you think

In business, timing is everything. Your counsel should treat your urgent matters with the same priority as an in-house attorney would. Look for attorneys who commit to specific response timeframes and honor them. Ask potential counsel about their communication protocols and how they handle time-sensitive issues outside regular business hours.

Industry familiarity is non-negotiable

Generic legal advice rarely serves growing businesses well. Your counsel should demonstrate deep familiarity with your industry's regulatory landscape, competitive pressures and operational realities. During initial conversations, assess whether they speak your language or require constant education about basic industry concepts.

Establish clear communication cadence expectations

Before engaging outside counsel to provide in-house services, discuss and document how often you will connect and through which channels. Consider these communication elements:
  • Scheduled check-ins at regular intervals, even when no active matters are pending
  • Preferred methods of contact for different urgency levels
  • Expectations for progress updates on ongoing matters
  • Protocols for copying relevant team members on correspondence
Setting these parameters upfront prevents frustration and helps to better ensure alignment between your operational tempo and their service delivery.

Proactive issue-spotting separates good from great

Reactive attorneys wait for you to identify problems. Counsel that set out to help you succeed anticipate issues before they materialize. During the vetting process, evaluate whether candidates ask probing questions about your business model, growth plans and potential risk areas. The right attorney will offer insights you have not considered rather than simply responding to your stated concerns.

Integration with your team is the ultimate test

Ideally, counsel will work well with your internal team. Integration factors to watch for can include:
  • Willingness to attend team meetings and strategy sessions
  • Ability to build relationships across your organization
  • Flexibility in billing arrangements that align with your budget cycles
  • Investment in understanding your company culture and values
This shift from simply providing to supporting your business’ culture is often the key to finding the right legal team to provide in-house counsel services. True integration means your counsel thinks like an owner, not just a service provider.

Making the right choice

Hiring a legal team to provide in-house counsel services requires looking beyond credentials and hourly rates. Prioritize responsiveness, industry knowledge, clear communication, proactive thinking and genuine team integration. The right legal partner will not just solve problems but will help you avoid them altogether while supporting your long-term business objectives.]]> by Haft Law Group <![CDATA[The Section 508 Church Exemption: A Filing Exception Sold as a Tax Status]]> https://www.haftlawgroup.com/?p=47979 2026-08-31T04:06:55Z 2026-08-30T04:03:01Z The package looks convincing. A certificate of church status, a set of bylaws, an EIN letter from the IRS, and an assurance that the organization is now exempt and owes the government nothing further. Founders who buy these packages usually discover the problem during an examination, at the point where unwinding is no longer an option. Section 508(c)(1)(A) of the Internal Revenue Code is real. It simply does not do what it is sold to do.

What Section 508 Actually Says

The section is titled “Special rules with respect to section 501(c)(3) organizations.” Subsection (a) provides that an organization formed after October 9, 1969 shall not be treated as an organization described in section 501(c)(3) unless it gives notice to the Secretary that it is applying for recognition of that status. That notice is Form 1023. Subsection (c) supplies the exception: “Subsections (a) and (b) shall not apply to … (1)(A) churches, their integrated auxiliaries, and conventions or associations of churches.” That is the entire provision. It excuses a church from filing an application. The exemption itself comes from section 501(a), and it reaches only an organization “described in” section 501(c)(3). Section 508(c)(1)(A) removes the front door. It does not lower the standard behind it, and it does not create a category of organization that plays by different rules. The IRS says the same thing in its own guide for churches. Publication 1828 states that “Churches that meet the requirements of IRC Section 501(c)(3) are automatically considered tax exempt and are not required to apply for and obtain recognition of tax-exempt status from the IRS.” Everything turns on the qualifier. Publication 1828 does not mention section 508 anywhere in the document.

The Missing Determination Letter Is the Risk

An organization that files Form 1023 and receives a determination letter holds a written answer from the IRS. A self-declared church holds nothing. If the arrangement is later questioned, the organization has to establish, from the ground up and years after the fact, that it is a church and that it satisfies every requirement of section 501(c)(3). That is the trade the promoters leave out. Declining to apply does not remove the test. It moves the test from a review the organization controls at the outset, with a document at the end of it, to an examination that begins after the money has moved and the records are whatever they happen to be.

“Church” Is a Legal Test, Not a Label

Neither the Code nor the regulations define “church.” The IRS weighs fourteen criteria, among them a distinct legal existence, a recognized creed and form of worship, a definite ecclesiastical government, ordained ministers, established places of worship, regular congregations, and regular religious services, applied together with the surrounding facts and circumstances. The courts have added the associational test. In Foundation of Human Understanding v. United States, the Federal Circuit explained that “whether applying the associational test or the 14 criteria test, courts have held that in order to be considered a church under section 170, a religious organization must create, as part of its religious activities, the opportunity for members to develop a fellowship by worshipping together.” 614 F.3d 1383, 1389 (Fed. Cir. 2010). At a minimum, as an earlier court put it, “a church includes a body of believers or communicants that assembles regularly in order to worship.” American Guidance Foundation, Inc. v. United States, 490 F. Supp. 304, 306 (D.D.C. 1980). An entity with no congregation, no place of worship, no services, and a board consisting of one family satisfies neither test. Labeling an operating business an “auxiliary” of a larger ministry does not rescue it either. A parent organization’s exemption does not flow down to a chapter.

Every Other Requirement Still Applies

Section 508(c)(1)(A) softens nothing in section 501(c)(3). The organization must be “organized and operated exclusively” for exempt purposes, with “no part of the net earnings of which inures to the benefit of any private shareholder or individual.” Publication 1828 states the rule without qualification: “The prohibition against inurement to insiders is absolute; therefore, any amount of inurement is, potentially, grounds for loss of tax-exempt status.” Paying a founder’s personal living expenses out of the organization is the textbook violation. In McGahen v. Commissioner, the Tax Court taxed the income to the individual and described the arrangement as “an attempt at creating an ‘incorporated pocketbook.’” 76 T.C. 468, 487 (1981). Where the organization is in fact exempt, insider transactions also carry the excise tax under section 4958: 25 percent of the excess benefit on the insider, 200 percent if it is not corrected within the taxable period, and 10 percent on a manager who knowingly participates. The filing relief that does exist is narrow. Section 6033(a)(3)(A)(i) excuses a church from the annual information return. It does not excuse Form 990-T on unrelated business income, employment tax returns, Forms W-2, withholding, or any state or local obligation.

The Argument Has Been Litigated Before

In Revenue Ruling 2004-27, the IRS addressed the corporation sole version of the same idea, held that a taxpayer cannot use one to exclude income from taxation, called the position frivolous, and warned that promoters may be enjoined under section 7408. A federal court did exactly that in United States v. Harkins, finding the promoter’s representations false and fraudulent because such entities receive no special tax-exempt status under federal law and must independently qualify under section 501(c)(3). 355 F. Supp. 2d 1175 (D. Or. 2004). The promoter’s exposure is not the buyer’s defense. The taxpayer signs the return, and reliance on the person who sold the arrangement is generally not reasonable cause.

The Florida Consequences Arrive Sooner

If the plan includes deeding a residence into the entity, Florida imposes costs that do not wait for an audit. Article X, section 4(a) of the Florida Constitution exempts from forced sale “property owned by a natural person.” A church, an unincorporated association, and a corporation are not natural persons, so the transfer gives up the strongest creditor protection the state offers. The ad valorem homestead exemption goes with it, and section 193.155(3)(a), Florida Statutes, reassesses the property at just value as of January 1 of the year following a change of ownership, which erases accumulated Save Our Homes savings permanently unless one of the statute’s narrow exceptions applies. The religious property exemption does not fill the gap. Property used as a parsonage is used for a religious purpose only where it “is owned by an exempt organization that owns a house of public worship.” Section 196.196(6), Florida Statutes. State licensing follows the same pattern. Florida’s health care clinic licensure exemption reaches “[a]n entity that is exempt from federal taxation under 26 U.S.C. s. 501(c)(3) or (4).” Section 400.9905(4)(e), Florida Statutes. That exemption is only as good as the federal exemption behind it, and a self-issued certificate does not create one.

What Actually Works

A genuine congregation can operate as a church and still file Form 1023. Nothing prohibits it, and the determination letter is what donors, banks, grantmakers, insurers, and state agencies rely on in practice. Keep the founders’ finances entirely separate from the organization’s, seat directors who are not family, and set any compensation through independent persons using comparability data. If the real objective was operating a business with a lower tax bill, the structure does not accomplish it, and every additional month of use converts a planning question into an enforcement question.

Before the Examination, Not After

Haft Law Group advises businesses and nonprofit organizations in Florida, Colorado, and Washington, D.C. If you have been offered a “508” package, or you are already operating under one, the time to have the structure reviewed is while options remain.]]> by Haft Law Group <![CDATA[Six Things on a Client’s Balance Sheet That Should Prompt a Call to a Lawyer]]> https://www.haftlawgroup.com/?p=47971 2026-08-27T16:56:34Z 2026-08-29T13:17:43Z Accountants and wealth advisors see problems before lawyers do. You are in the records every quarter. You see the aging receivable, the missed filing, the entity that never quite got cleaned up, the transfer that happened without documentation. By the time the matter reaches a litigator, the window to fix it cheaply has usually closed. This is written for the professionals who sit closest to those records. None of the items below requires you to give legal advice. Each is a pattern that warrants a call.
  1. A Nonprofit Client That Has Missed Two Annual Filings
Under section 6033(j) of the Internal Revenue Code, an exempt organization that fails to file its required annual return or notice for three consecutive years loses its exemption automatically. The revocation happens by operation of law rather than by IRS determination, it takes effect on the original due date of the third missed return, and there is no appeal. Reinstatement requires a new application for exemption. The second consecutive miss is the moment to raise it. After the third, the conversation is about reinstatement and retroactivity rather than prevention.
  1. A Florida Nonprofit Whose Bylaws Predate July 2026
Chapter 617 of the Florida Statutes was comprehensively revised effective July 1, 2026 and renamed the Florida Nonprofit Corporation Act. Section 617.0206 permits bylaws to contain any provision not inconsistent with law. When the statute moves and the bylaws do not, previously valid provisions can become inconsistent while the document sits untouched in a binder. If you prepare Form 990 for a Florida organization, its governance answers are being given under a statute that was rewritten this summer.
  1. An Entity That Exists Only on the Return
Administrative dissolution is quiet. The Department of State may administratively dissolve a corporation for failing to file its annual report, for lacking a registered agent or registered office, or for failing to update that information. The corporation receives notice and a period to correct the problem, and organizations that are not watching the registered agent’s mail routinely miss it. If you are filing returns for an entity whose registered agent is a former officer, a resigned professional, or an address nobody checks, the entity’s status is worth confirming before the next filing.
  1. A Construction Receivable Aging Past Ninety Days
For contractors, subcontractors, and material suppliers, an aging receivable is not merely a collection problem. It is a clock. Florida construction lien and payment bond rights are conditioned on notices and deadlines that are measured from the first and last dates of furnishing labor or materials, and they are unforgiving. On public projects there is no lien on the property at all, and the remedy is a claim against the contractor’s payment bond under its own notice regime. When a construction client’s receivable crosses ninety days, the question is not only whether it will be collected. It is whether the security for collecting it still exists.
  1. Assets Held in a Single-Member LLC
Clients frequently hold real estate or investment accounts in a single-member LLC on the assumption that a personal judgment cannot reach inside the entity. For multi-member companies that assumption is close to correct. For single-member companies Florida law is materially different, and the protection many clients believe they purchased may not be there. This one surfaces in your work whenever a client consolidates holdings, buys out a partner, or restructures for tax reasons and drops from two members to one. The tax result may be clean. The creditor exposure may have changed.
  1. A Significant Agreement That Nobody Can Produce
If a client describes a material arrangement and cannot produce a signed document, treat that as a finding. Certain categories of agreement are unenforceable in Florida unless they are in a signed writing. Beyond the enforceability question, an undocumented arrangement between business partners is the single most common origin of the disputes that later consume years and six figures.

Why This Matters to Your Practice

None of these calls needs to become a litigation matter, and most do not. The value to you is in the timing. A problem identified at the second missed filing, the ninetieth day, or the moment of restructuring is a problem solved for a fraction of what it costs after it hardens. Haft Law Group works with accountants and advisors across Florida on business, real estate, and nonprofit matters for their clients. If something in a client’s records is prompting a second look, contact the firm.]]> by Haft Law Group <![CDATA[The Credit Manager’s Problem: Securing Payment Across a Portfolio of Florida Jobs]]> https://www.haftlawgroup.com/?p=47972 2026-08-27T16:54:09Z 2026-08-28T13:22:11Z Most writing about Florida construction liens addresses a contractor with one unpaid job. That is not the problem a credit manager at a building material supplier actually has. The problem is thirty or eighty open jobs, each with its own first furnishing date, its own last delivery, its own owner, its own general contractor, and its own clock. No single job justifies sustained legal attention. Collectively they represent the company’s receivable. Portfolio exposure is managed differently from a single dispute. Three points deserve more attention than they usually get.

Public Jobs Have No Lien

There is no construction lien against public property. When a supplier furnishes materials to a public building or public work, the security is not the land. It is the payment and performance bond the contractor is required to record under section 255.05, Florida Statutes, before commencing work. That substitution comes with an entirely separate notice regime, and the deadlines are not the ones a credit department learns for private jobs. A claimant not in privity with the contractor must serve the contractor with written notice of intent to look to the bond before commencing, or not later than 45 days after commencing to furnish. A claimant who has not been paid must then serve a notice of nonpayment, under oath and on the statutory form, on the contractor with a copy to the surety. That notice may not be served earlier than 45 days after first furnishing, and not later than 90 days after final furnishing. An action against the contractor or surety may not be instituted unless both notices were served when required. One detail deserves emphasis because it defeats otherwise good claims. The statute provides that these time periods are measured from the claimant’s last day of furnishing and may not be measured by other standards such as a certificate of occupancy or a certificate of substantial completion. A credit department tracking project milestones rather than its own delivery tickets is tracking the wrong date.

The Small Public Job With No Bond At All

Section 255.05 does not require a bond on every public job. When the work is done for the state and the contract is for $100,000 or less, no payment and performance bond is required. For work done for a county, city, political subdivision, or public authority, the awarding official may exempt a contract of $200,000 or less. On those jobs a supplier has no lien, because the property is public, and may have no bond either. The security is the credit of the customer and whatever the credit application secured. That is a credit decision, not a legal one, but it can only be made if someone asks the question before the first delivery rather than after the first missed payment.

Two Deadlines That Are Not on Your Calendar

A portfolio system that tracks only the standard notice deadlines will still lose claims, because the other side controls two clocks that appear without warning. The notice of contest. A contractor may record a notice of contest of claim against a payment bond, which limits the claimant to 60 days after service to file suit. A claim not sued upon within that window is extinguished automatically. A document that arrives in the mail can convert a year of runway into two months. The demand for a sworn statement of account. A contractor who has furnished a payment bond may serve a written demand on a claimant not in privity for a sworn statement of account. Failure to furnish the statement within 30 days, or furnishing a false or fraudulent one, deprives the claimant of its rights under the bond. Note where that demand goes: it must be served at the address and to the attention of the person designated to receive it in the claimant’s own notice to contractor. The name a credit clerk typed into a notice months earlier determines who receives the document that can extinguish the claim.

Accuracy Is a Condition, Not a Courtesy

The statute treats an inflated bond claim harshly. A notice of nonpayment is fraudulent, and service of it is a complete defense to the claim, if the claimant willfully exaggerated the amount unpaid, willfully included work or materials not furnished, or prepared the notice with willful and gross negligence amounting to willful exaggeration. A minor error or a good faith dispute over the amount does not have that effect, and a negligent inclusion or omission that does not prejudice the contractor or surety is not a default. The practical instruction for a credit department is to claim what the delivery records support and to specify retainage separately where it is included. Padding a number to leave negotiating room can forfeit the claim.

What a System Looks Like

Managing this well is mostly administrative. Capture the first furnishing date on every job at the time of first delivery rather than reconstructing it later. Determine at credit approval whether the job is public or private and whether a bond exists and has been recorded. Calendar the notice dates from the delivery records. Route contractor correspondence to a person who recognizes a notice of contest or a demand for statement of account on sight. Keep the notices accurate. Done consistently, this is inexpensive. Done inconsistently, the loss is not one claim but whichever claims happen to fall in the gaps, and those are rarely the small ones. Haft Law Group represents suppliers, subcontractors, and contractors in Florida construction lien and payment bond matters, and works with credit departments on the systems that preserve those rights before a dispute arises. Contact the firm to review how your open jobs are being tracked.]]>