The limited liability company (aka L.L.C. or LLC) is the strongest
asset protection devise for your business replacing the sub chapter "S"
corporation. The LLC offers limited liability to the owners of a
business and, additionally, the limited liability company is approved
in all 50 states.
The LLC is similar to a corporation and sometimes has been mistakenly
referred as the limited liability corporation. In the LLC, the
individuals are called members and the LLC is most advantageous to
smaller companies with a smaller number of members. In cases where the
LLC has only one member the LLC may be regarded as a disregarded entity
whereby the sole member is viewed as the entity performing the
operations of the LLC. This contrasts a corporation owned by a single
individual whereby the corporation is viewed as the entity performing
the operations.
The limited liability company with multiple members avoids double
taxation because the members are partners for taxation purposes. The
IRS Form 1065 and Schedule SE (i.e. Self-Employment Tax) are used with
the LLC entity. For tax purposes, the LLC in a partnership formation
reports its income and deductions via each members' income tax return.
WHY CHOOSE THE LLC FOR ASSET PROTECTION?
Courts and clever predators with their contingent-fee lawyers have
significantly eroded the benefits and protection of corporate entities,
allowing for little or no asset protection against employees,
shareholders, officers, or directors. The limited liability company has
become the "entity of choice" for all new business structures. The sub
chapter "S" corporation has now become the white elephant.
LIMITED LIABILITY COMPANY'S FINANCIAL BENEFIT
There is a significant financial benefit to establishing a limited
liability company for your business. Your predatory creditor's sole
remedy is the "charging order." Similar to partnerships, the charging
order can only be against LLC member(s) and not the LLC. The charging
order is obtained subsequent to your creditor obtaining a judgment
against you for monetary damages and other frivolous charges. Your
creditor cannot, and is precluded by law, to step into your shoes as an
LLC member and take over the financial affairs of your LLC. This is, in
and by itself, the limited liability company's most significant
financial benefit.
In all cases, after you plead with your creditor, "Please, please,
please, do NOT place a charging order against me because it'll have the
most detrimental affect on how I deal with my existing clients, banks
and other businesses," your creditor will turn around and slap you with
a charging order. What you creditor does not realize is that he just
gave you a major gift. Thanks in largely due to the drafters of the
Uniform Limited Partnership Act.
The charging order means that your creditor has a right to "all your
capital distributions." So when will you have a capital distribution to
pay your creditor? The answer is never. You are allowed to take a
salary, to joint venture, to borrow money from the limited liability
company but you will never take a capital distribution wherein you will
pay your creditor. You have just become your creditor's and their
contingent-fee, gold-digging lawyer's worst nightmare.
LIMITED LIABILITY COMPANY TAX ADVANTAGE
The LLC has a significant tax advantage. Someone must pay the taxes so
the IRS declares. According to the IRS, in revenue ruling (77-137) it
states that someone must pay the taxes. Since the person holding the
charging order will receive the "K-1", he must pay the taxes on the
income generated by the LLC even though your creditor never receives
any actual cash from the business.
The creditor saddled by the charging order is treated as a substituted
limited partner for tax purposes, thanks to the IRS, and will suffer
the tax consequences without capacity to force payment, dissolution or
distribution. Do you think that your creditor will want to settle?
Please note the "K-1" is the yearly income tax statement to be included
in recipient's taxable income for the year similar to your mutual
fund's form 1099.
The shocking news is that your creditor will be obligated to pay the
taxes for you. Every 6 months, send your creditor a letter on how well
your business is doing and that you want to make sure that he prepares
himself to pay the taxes. At the end of the taxable year, you send your
creditor a copy of an additional letter along with the K-1, addressed
to the IRS, requesting an audit of your creditor because you want to be
tax compliant and that you want to make sure that all taxes have been
timely paid and are up-to-date. Do you still have doubts that your
creditor will want to settle?
When you combine the limited liability company's tax benefit and the
protection of the charging order with a surefire asset protection
system of an irrevocable trust such as the Ultra Trust you will receive
a financial asset protection fortress against your creditors and other
contingent-fee based lawyers. So the next time there are any pending
frivolous lawsuits you can relax and sleep soundly at night knowing
your business assets are well protected.
Rocco and his team of bonded professional attorneys, CPAs and
accountants help affluent individuals and companies retain control of
their domestic and foreign/offshore assets, protect their assets, build
& preserve their wealth and financially structure their money to
reduce capital gains taxes, estate taxes, inheritance taxes, avoid the
probate process and decrease income taxes.
--------------------------------------------------------------------------------
Rocco Beatrice, CPA, MST, MBA, Award-winning trust & estate-planning expert
71 Commercial Street #150 Boston, MA 02109 tel: 508.429.0011 fax: 508.429.3034
Click here for more info: http://www.UltraTrust.com, http://ultratrust.com/llc-advantages.html
Disclaimer: All information on this site is provided for informational purposes only! By no means is any
information presented herein intended to substitute for the advice provided to you by any health care or other professional
or organization.
