Our son called us yesterday and wanted to discuss how he should structure a business for an apartment building he is thinking of buying. He described his business plan and then wanted to discuss which type of entity he should use. He mentioned that he thought of layering using an LLC (Limited Liability Company) with an S Corp for the partner. At that point we explained to him that he wanted to structure using the LLC for both layers. When he asked why, we had to explain.
Asset protection is a double swinging door. Many people tend to plan their asset protection from only the business side, to protect their personal assets if their business fails. This is a mistake. Of course it works just fine when your business gets in trouble. It blocks creditors coming through the door after you and your home and savings account and other personal assets. But what about when you get in trouble personally? Say you are in an accident or suffer an illness and you can’t pay your bills.
When starting a business, everyone wants to structure it to protect, their house, summer cabin, bank accounts and retirement nest egg. But if they thought about it they would realize that their business is their most valuable asset. It is basically the source of all their assets. When you consider asset protection you should see the value of both your personal and business assets. Even though business owners do tons of “asset protection” trying to protect their personal assets, they need to protect their businesses too. Many businesses are lost when a personal disaster strikes.
Business structuring using an LLC has double asset protection. Like a corporation, an LLC has all the aspects of the corporate shield, but it also has partnership charging order protection. This gives an LLC a distinct advantage. The LLC protects from both sides of the door. You may be wondering, “If LLCs are so good why are corporations still the most common business entity? It is because LLCs plus charging order protection are “relatively” new. Corporations have always been the “standard business entity.” People have heard of them and so they use them. Still when you do the research you will probably find that an LLC is the best small business entity.
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09
Nov
2011
Estate Planning and Your Obituary
Estate planning must involve every aspect of your estate. As a result, I recommend that you prepare your obituary in advance. It will make things easier on your family later. As you prepare the obituary, keep in mind identity thieves. Identity thieves regularly scan the obituaries. They note all the personal information and use it to their advantage.
Some thieves will use the deceased information to get duplicate driver’s licenses and birth certificates. They take these documents and use them to get credit. Others target grieving family members with all kinds of scams. Nobody needs that during an already tragic time. This is so prevalent that I always council my clients to make no financial decisions for six months after the funeral. Another problem is securing your home. In our neighborhood some of the men actually stay at the deceased’s home during the funeral because we have had robberies occur during funerals.
As you prepare your obituary, here is some information to leave out. Never give your exact birth date or address. This makes it harder for identity thieves to track down your information. It also keeps robbers away from your house. Don’t give out the full names of other living relatives; thieves will sometimes access and use their information.
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07
Nov
2011
The Cost to the Economy of Federal Regulations
The United States Congress and Senate, in the past, have been very concerned about the health of small businesses in the U.S. They seemed to recognize that it is small business that builds our economy. Perhaps our Congressmen and Senators are not now aware that their regulations may be paralyzing small businesses. According to Nicole Crain and Mark Crain in a recent study, “Small firms, which are considered less than 20 employees, spend 36 percent more per employee than larger firms to comply with federal regulations.” The disparity is greatest in two areas: very small firms spend four and a half times as much per employee to comply with environmental regulations and three times more per employee on tax compliance than their larger counterparts. As healthcare costs for the Obamacare changes begin to kick in, this will really hamper our small businesses at a time when we desperately need their job creation power. If you are also concerned, be sure and take an active voice in the upcoming elections.
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01
Nov
2011
At What Rates are the Self-Employed Taxed?
According to the U.S. Dept. of Commerce, Census Bureau, Current Population Survey, March Supplement, of the 15.5 million individuals whose primary occupation was self-employment (incorporated and unincorporated), the median personal marginal federal tax rate was 10 percent in 2008. Only 4.1 percent of the self-employed were in the marginal tax bracket of 33 percent or more.
The question I ask is “Does this mean these self employed are barely making it or are they making more than the rest of us because they are getting really great tax benefits?” I would like to think it is the later. I have always said that your own small business is your best tax deduction. It looks as though these figures bare that out.
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21
Oct
2011
Durable Power for Healthcare
Too Bad Liliane Bettencourt didn’t have one of these!
You may have read that
Mrs Bettencourt’s lawyer plans to appeal the decision, but for now Liliane Bettencourt wealth and property is being controlled by her daughter Francoise Bettencourt-Meyers.
Mrs. Bettencourt and her daughter have been involved in a very public feud over the fate of the L’Oreal fortune, France’s third-largest estate, for many years with her daughter arguing that her mother is mentally unfit to manage her wealth.
This is the very type of case that can be prevented if you have signed a Durable Power for Healthcare. Under the terms of this document you can define how you will be determined incompetent and who will take over managing your estate. You do not need to have someone who you hate take over your affairs.
The important thing is to make certain that you sign this document before you get in trouble.
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14
Oct
2011
Finding Your Way Through the Maze
Mazes are designed to challenge and entertain their patrons. They are not designed to be so scary that they become life-threatening. Yet a family in Massachusetts became so disoriented they called 911 for help to be retrieved by police just 25 feet from the exit.
The parents who had a six week old infant and a small child aren’t getting much sympathy. They have become a target for late-night jabs from television hosts like Jay Leno and Chelsea Handler.
Laugh if you will but the family can act as a symbol if you will of the importance of being prepared, before you enter a maze.
In the maze of business start-ups many get trapped. More than 50% of small businesses fail with in five years of formation. The correct legal foundation could make all the difference in your business. What if your have the proper liability shield so that you can deflect a lawsuit? What if you have structured your business for the most favorable tax climate? These questions can be answered to your benefit and could save your business. In the LLC Wizard, it is all there for you.
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In which state is it best to open a LLC Holding company?
Usually it is easiest and least expensive to form your LLC in your own state. You can act as your own agent and most states have made their LLC law competitive. Florida recently had a case where a single member LLC was disallowed
by the court to satisfy a claim. If you can’t form a multi member LLC in Florida you may wish to consider another state.
Does an LLC need a registered agent?
Yes you need a registered agent for Your LLC. If you live in the state where you formed your LLC you can act as your own registered agent. It is a good idea to be your own agent, because you do not have to pay someone to do it. If you are acting as your own agent be certain to answer all legal correspondence by the required date or you could have serious problems.
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In which state is it best to open a LLC Holding company?
Usually it is easiest and least expensive to form your LLC in your own state. You can act as your own agent and most states have made their LLC law competitive. Florida recently had a case where a single member LLC was disallowed by the court to satisfy a claim. If you can’t form a multi member LLC in Florida you may wish to consider another state.
Does an LLC need a registered agent?
Yes you need a registered agent for Your LLC. If you live in the state where you formed your LLC you can act as your own registered agent. It is a good idea to be your own agent, because you do not have to pay someone to do it. If you are acting as your own agent be certain to answer all legal correspondence by the required date or you could have serious problems.
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14
Sep
2011
What is an LLC Tax Election?
An LLC tax election is how you tell the IRS how your LLC will be taxed. The federal government does not recognize an LLC as a classification for federal tax purposes, so you have to make an election on how your LLC will be taxed, i.e. a sole proprietorship, a partnership an S corporation etc. The LLC election is made by filing Form 8832. Your election is entered on line 8. If the LLC does not enter a date, the election will be in effect as of the form’s filing date. Your election cannot take place more than 75 days prior to the date that you file the LLC. The LLC cannot make the election effective for a date that is more than 12 months after it files Form 8832. However, if the election is the “initial classification election,” and not a request to change the entity classification, there is a possibility for a late election.
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