Blog 2

14 Sep 2011

LLC Members and Avoiding Liability Problems-Two Questions

Tags: forming an llc, liability protection, llc, llc members, llc operating agreement
Posted in LLC Formation | Leave a comment

What if I want to add a new member to my LLC? Can I?

You probably can. First look at your LLC Operating Agreement. This document will govern whether or not you can add new members and the procedure to do it. Usually, a vote of the Members will be required to admit a new Member and the document will require that a certain percentage of the current LLC members must approve. Make sure all requirements set forth in the LLC Operating Agreement are met and documented.

If the new member is investing a substantial amount of money or other property you should check with an attorney to determine if there are any securities related obligations.

Can I start an LLC and get rid of some liability problems?

The answer is “No.” It seems that I get this question regularly from people who are dealing with financial or legal problems. Unfortunately, the liability protection from an LLC begins at the moment it is created. Forming an LLC for your business activity is always a good idea and don’t wait until a lawsuit is pending. If a properly maintained LLC is in place it can minimize future liability.

30 Aug 2011

Why Does Each Attorney Give Me A Different Answer?

Posted in LLC Basics, LLC Formation, LLC Maintanence | Leave a comment

Attorneys are doing to give you a lot of different answers to your questions, leaving you more confused than when you went into the office. The reason being is they each have different areas of law, or specialties. Check out some of the most common tools and how to use one tool to get three very important things done.

29 Aug 2011

How Do I Protect Homes, Cash & Rentals?

Posted in LLC Formation | Leave a comment

What paperwork do I need to protect my assets such as houses cash and some rentals? Dan, Connecticut

It is difficult to protect your home with an entity, because as soon as you take it out of your name you loose many homestead and tax advantages. If you are married you can get some protection by putting your home in your spouses name, however, often a good insurance policy is the best protection. An LLC is a great way to protect rentals from liability. They are great liability shields for rental properties. If you manage your own properties, it is a good idea to form a management LLC.

16 Aug 2011

Who is the Best Registered Agent?

Tags: legal and tax documents, registered agent, state of incorporation
Posted in LLC Formation | Leave a comment

Who should be the registered agent for my LLC?

The person you choose to be your registered agent is responsible for all the legal and tax documents that come to your company. These include but are not limited to the following:

Service of Process—which is the paperwork that notifies you of a lawsuit
State mail — annual reports or statements
Tax documents

The registered agent is required to have a physical address (not a post office box) in the state of incorporation and be available at the address to receive communication and give it to you. You can act as your own agent and that is often the best choice. Too often when you choose someone else there is a significant delay in receiving legal notices. If you get your own notices you can act on them immediately.

16 Aug 2011

What’s the advantage of a Roth IRA and a Standard IRA?

Tags: financial planning, ira, LLC Financial, roth ira
Posted in LLC and Taxes | Leave a comment

Should you get an IRA? OF COURSE! But which one should you get is the question? The never ending debate has always been between a standard IRA and a Roth IRA. With a Roth IRA, the money you put in gets taxed when you put it in. When you put money in a standard IRA, it gets taxed when you take it out. So you should get the same amount of money right? Forgetting one little detail… Check out the video for details on which one is actually better.

04 Aug 2011

Single or Multi Member LLC?

Tags: disregarded entity, featured, liability shield, llc, multi member llc, single member llc
Posted in LLC Basics, LLC Formation | Leave a comment

Should I make my LLC single or multi member? Candy J Utah

It is almost always best to be a multi member LLC . In some states it is essential. If there is more than one member in your LLC, then for legal and tax reasons the property held in the LLC is considered owned by the business. If you are the sole member then the property can be interpreted to be your asset. The Courts and the IRS can come after those assets when you get in trouble. If there are multiple members then those assets are considered property of the business and there will be no claim against them.

There is one slight advantage to a single member LLC. If you are the sole owner of the entity (single member LLC) you can choose to be taxed as a sole proprietor or corporation (C or S). If you are willing to be taxed as a “sole proprietorship,” then you don’t need to get an EIN (Employee Identification Number). You will still operate as an LLC, but it will be a “disregarded entity” in the eyes of the IRS. For tax purposes you will file a Schedule C on your 1040 return, just as if you were a sole proprietor. Yet, you will still have the liability shield of the LLC. The form of taxation has nothing to do with the liability shielding. So for a single member LLC, the taxes are easy and you get the liability shield.

26 Jul 2011

How To Protect High Income, Bonuses & Dividends

Tags: boot camp, family limited partnership, featured, How to Make it and How to Keep It, Limited Liability Company, llc
Posted in LLC and Taxes, LLC Formation | Leave a comment

I am an executive of a start-up company that made me part of the executive management. My income from my position with my salary, bonuses and dividend income from my stock will afford me a mid to high seven figure income per year. I want to protect these assets and any future acquired assets. How can I best achieve this? George M., Florida

You are smart to plan your asset protection ahead of time. There are certain questions you need to consider first. How risky is your business? Are you a detail person? Do you have a family? You are living in a great state to protect your home because Florida has an unlimited homestead provision. It is always a good idea to hold your home in your own name for tax reasons and Florida makes this easy. I recommend that you form a living revocable trust. Depending on your other assets and your family situation you could consider forming a Family Limited Partnership FLP, or a Limited Liability Company (LLC) to hold those assets you want to protect. Planning should include not just liability but also tax considerations and ease of management. I have a “How to Make It and How to Keep It Boot Camp” to help people like you on a personal level.

29 Jun 2011

Can I Sign a Business Interest to My Living Trust?

Tags: featured, Living Trust, Membership Certificate, Probate, Stock Ledger, Subchapter S Qualified Trust
Posted in LLC Formation, uncategorized | Leave a comment

Absolutely! Your business may be your most valuable asset. Many advisors kind of forget about the business when they are putting a living trust in place for a client. If the business isn’t “owned” by the living trust it will be in the probate estate after you die.

Probating a business is really bad. The probate court gets involved in the business decisions of the company. The business interest can add substantial time to the probate process.

I very seldom see a business and living trust linked together. In order to make the living trust own the business, you have to turn in your stock certificate, cancel it on the corporate stock ledger, and have a new certificate reissued in the name of the trustee who holds the stock in the name of the trust for the benefit of the beneficiaries.

Oh, you didn’t ever issue stock. Your company is a sham any way, because you probably aren’t doing any thing else you are supposed to be doing to “maintain” your company.

Of course, the same process will be followed for ownership of an LLC. In an LLC, you don’t have stock; you have memberships represented by membership certificates and a membership certificate log. Read the other blogs on this site to learn more about LLCs. Don’t forget to take the free LLC Mini-Course. It’s great.

Companies (either corporations or LLCs) taxed under Subchapter S of the IRS Code need to be handled with extra care. The living revocable trust has to be specifically written to own an interest in a Subchapter S entity. The living trust has to be written as a Subchapter S qualified trust. That means special provisions have to be put into the trust to have it qualified with the IRS. My trusts are qualified Subchapter S trusts.

If the trust is not qualified, the subchapter S status of the entity will be lost, and the IRS will treat it as a C corporation. Be sure and signup for the free LLC Mini-Course.

13 Jun 2011

Which State and Entity for a Bullet Proof Asset Protection Plan?

Tags: asset protection, bullet proof entity, featured, Limited Liability Company, llc
Posted in LLC Formation, uncategorized | Leave a comment

In building a bullet-proof asset protection plan, which state is the best to file a limited liability entity, Wyoming or Nevada? and which entity would be the most effective, an LLC, LP, “S” Corp or a “C” Corp, and what would your fee be for such? MHM

There is not a “best” state to file a Limited Liability Company (LLC) in any more. It used to be that Nevada and Delaware had more favorable laws. However, all states have now made changes in their laws so that they work just as well. No state wants to lose this revenue. In fact if you file in a foreign state (a state other than your own), most states tax you anyway. Now it is best to file in your own state. It is often more costly to file in a foreign state, because of additional fees and double taxes.

Which entity would be most effective depends on what you are trying to accomplish. For instance, if you are holding a piece of rental property an LLC is usually a good choice. If you plan to grow a huge company and go public you will need a corporation. Fees for legal entities depend on hours involved. I go through this discussion in detail in my LLC Wizard Course.

31 May 2011

What is an LLC Entity Classification?

Tags: disregarded entity, Entity Classification, featured, LLC Entity, llc taxes, sole proprietorship
Posted in LLC and Taxes, LLC Basics, LLC Formation, uncategorized | Leave a comment

I don’t understand what an LLC entity classification is and how to get it? NS

When you file an LLC you can choose to elect how your new business will be classified for tax purposes. If your LLC has two or more members you can choose to be classified as either a corporation or a partnership. If you are the only member of your LLC you can choose to be classified as a corporation or sole proprietorship. You must file Form 8832 to elect your LLC’s classification. If you do not file the form, your LLC will be classified, under the IRS default rules. The default rules provide that if your LLC has two or more members it will automatically default to a partnership. If you are the only member of your LLC it will automatically default to the classification of disregarded entity. The disregarded entity files as a sole proprietorship tax form.

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