CSS Nevada

One Reason to Plan Ahead

admin — Tue, 11 Jan 2011 19:35:58 +0000

The horrendous events which transpired in Tucson, Arizona this past weekend should make all of us pause and take stock in our lives. Along with five other people, a nine year old girl was shot and killed because she was in the wrong place at the wrong time. The killings were the act of an obviously crazy man. Unfortunately, that is the type of society we are living in. No matter how much we try to live a good, decent life, fate occasionally plays a big part of it. Our lives can be ended at the snap of the fingers. So, the question must be asked: Have you done everything that is necessary if tomorrow the hand of fate knocks on your door? Have you done what is necessary to give your family the best chance of survival if you are suddenly taken from this earth? If not, contact CSS Nevada and we will help you get your financial life in order.

112th Congress in Session – What Now?

admin — Thu, 06 Jan 2011 22:54:34 +0000

The 112th Congress was sworn in today and they will begin their work tomorrow. But, what does this mean for those of us who own assets? Will this Congress be better than the last one? Will they do their jobs and pass legislation which is both constitutional and begin to solve the problems our nation faces? Or will partisan gridlock continue on unabated?
The 111th Congress passed, in December, legislation to keep the “Bush tax cuts” in place. So, for the next 2 years there will be no income tax increases and payroll taxes will actually be reduced for one year. But, President Obama has made it clear that he still will be pushing for the expiration of the tax cuts for upper income Americans (those making over $200,000 per year for a single person or $250,000 per year for a married couple). Obviously, the battle is not over, but is merely beginning. If you are one of the Americans earning that amount now, or hope to be earning it in a couple of years, you should still be concerned that your taxes will increase within a couple of years.
Remember the adage: “He who fails to plan, plans to fail.” Don’t let that happen to you. Use the next couple of years wisely, and plan to protect your financial future. Then, when the inevitable happens and your taxes are set to go up, you may be able to avoid those increases, because you have taken steps to keep your personal reported income below the level where the tax increases will take effect.
How is the best way to plan for this future? The proper use of business entities will give you many ways to help you reduce your income levels while still giving you total control over your income and other assets. The proper use of these entities will give you not only the tax benefits you seek, but also liability protection for your assets, so that if you are sued, your assets are beyond the reach of your creditors. Here are some of the steps you should take in these uncertain times:
First, thoroughly analyze your income sources. Separate your direct income (salary) from your indirect income sources. If you have stocks and bonds which pay dividends, this income is indirect, or passive, income and should be treated differently from your salary. Each source of income should come from a different legal business entity. If you have a job that pays a salary, stocks and bonds paying dividends and real estate paying rental income, you might want to consider forming at least 2 business entities to handle the flow of income. Use of the proper business entity will reduce your personal tax rate substantially.
Second, after you have separated your income sources, determine what the best business entity should be for each income stream. Your choices are several. You may decide to use a C corporation, an S corporation, an LLC, a Limited Partnership and/or a land trust. Each business entity has its own characteristics and will provide both asset protection and some tax benefits. You may find that a combination of business entities will provide you with the best asset protection and the greatest tax benefits. You may want to discuss the various options with an expert in asset protection.
Third, discuss the prospective business structure with your financial and legal experts. A word of caution is helpful here. You may find that your accountant or your attorney has no specific knowledge in the field of asset protection. Neither CPAs nor attorneys are trained in the field of asset protection, and the number of people in these fields with this specific area of knowledge is extremely small. Your attorney or CPA may simply say, for instance, “you don’t want to use a C corporation, it has double taxation.” In that case, you should take the advice given by Robert Kiyosaki, author of Rich Dad, Poor Dad, when he said, “Get another attorney.” You may find that people working for asset protection companies, such as CSS Nevada, have the specific knowledge you are looking for in this field.
Fourth, after you have mentally formed your asset protection structure, contract with an individual or business which has expertise in the field of entity formation in order to form your structure. Choose a company with whom you can work and make certain that they are as concerned about protecting your assets and getting you the best tax benefits as you are. Make certain the company you work with will provide consultation in the future because as you implement your business structure, you will have many questions concerning the use of the structure. Without the ongoing consultation, you will have done nothing other than form a few business entities. You must understand how the entities work together to provide you with the best asset protection and greatest tax benefits.
Finally, you will want to maintain the entities so that they retain their asset protection and tax benefits and will permit you to obtain your personal goals. This is extremely important, for a business entity which is in default because you failed to file the annual fees will not give you any protection, for the courts may very well disregard the entity if it is not in current status with the state of formation.
The use of the various business entities can help you reduce your personal tax to a level that will not be subject to future tax increases. Also, the proper use of these entities will protect the assets from a lawsuit against you or against one of your business entities. As a result, if you are the defendant in a lawsuit where you may otherwise lose everything you have, the use of these business entities will protect them from the reach of these creditors and may very well save all that you have worked for over the years.

One Entity May Not Be Enough

admin — Tue, 21 Dec 2010 22:58:56 +0000

We are frequently asked: “What type of entity shall I utilize?” The answer to that is a lot more complicated than it first appears. And, the question really doesn’t get to the main issue. The correct question should be: “Will one entity fulfill all my requirements for asset protection and tax reduction?” The answer to that question is: “Probably not, for one entity will not give you all the benefits you desire. In order to determine what, and how many entities you need for asset protection, you must look at the problem through both an asset protection perspective and a tax perspective.

For instance, a corporation will provide asset protection for the officers, directors and stockholders. But, the courts permit the “piercing of the corporate veil.” This occurs when the trier of fact determines that the corporation is a “sham and a farce” and is acting as the “alter ego” of the stockholder. When that occurs, the judgment creditor is permitted to collect a judgment entered against a corporation directly from the stockholders of the corporation.

The limited liability company (LLC) statutes state that neither the members (the “stockholders” of the LLC) nor the manager (the “officers” of the LLC) are liable for the debts of the LLC. So, a judgment against an LLC may not be collected from either the managers or the members of the LLC. Compare this with the limited partnership where the limited partners are not liable for the debts of the limited partnership, but the general partner is liable for those debts. So, if the entity is holding high risk assets (those assets which are likely to generate a lawsuit) an LLC will be preferable over a limited partnership.

As mentioned above, you must also take into consideration the tax issues that each entity will face. A C corporation pays its own taxes. The corporate tax rate is generally lower that the personal tax rate on the same amount of income. But, a C corporation also has the dreaded “double taxation” issue as well as the problem of taking money from the C corporation. In order to take money from the C corporation, it must be either direct income or salary which is subject to social security tax withholding, a loan which must be repaid with taxable interest upon which taxes have already been paid, stock dividends which result in “double taxation” or by pretax business expenses. However, in both the LLC and the limited partnership, the members or limited partners take their profits from the entity as ‘passive income.” Passive income requires the payment of income taxes, but not social security taxes, which total 15.3% when paid by both the employer and the employee. So, obviously, an LLC or a limited partnership would be the better entity to use in order to personally take the profits from the business.

However, a C corporation provides the most pretax business expenses of any entity. So, you will be able to deduct more expenses from a C corporation than an LLC or a limited partnership. A quandary arises here. Do you want the pretax business expenses, or do you want “passive income” as opposed to “direct income?” The correct answer is: “Both.” For that to occur, you must use more than one entity.

Form an LLC and have it managed by a C corporation. The profits will be earned in the LLC and will flow to you as the member of the LLC. This income will be passive income, and not subjected to social security tax withholdings. However, prior to taking all the profit from the LLC, pay the C corporation a management fee. The amount paid to the corporation will be earned income to the C corporation and a business deduction to the LLC. So, for every dollar paid to the corporation as management fees, you personally will pay taxes on one dollar less. A management fee of $2,000 per month will permit you to reduce your personal taxable income by $24,000. This will become taxable income to the C corporation. Now, the C corporation will utilize this income and turn it into pretax business expenses, such as an insurance policy, medical reimbursement, travel expenses, etc. The total amount of expenses incurred during the fiscal year may well equal $20,000. The C corporation will now pay taxes on the balance remaining ($4,000) and you will have received, tax free, the use of $20,000 as business expenses.

If you decide that a limited partnership is the entity which will hold the income producing assets, it is recommended that you use a C corporation as the general partner of the limited partnership. This will both give you the tax breaks mentioned above, but will also increase the liability protection of the limited partnership. The general partner is now a C corporation. A judgment against the limited partnership may also be enforced upon the general partner. But, since it is a C corporation without any assets, you will not be personally affected, because you are not the general partner, the C corporation is. Therefore, the judgment creditor cannot attempt to collect the judgment from you personally.

The discussions above are merely scratching the surface of the issues to be reviewed in order to properly form an asset protection structure. Each structure formed by CSS Nevada will achieve the individual goals of our client and will permit him to protect those assets as his estate grows in the future.

http://www.CSSNevada.com

Nevada Series LLC

admin — Tue, 10 Aug 2010 17:33:02 +0000

The State of Nevada has joined a growing number of states which permits the formation of a Series LLC. A Series LLC is authorized by NRS 86.296. The use of a Series LLC can be of great financial benefit to those of us who have multiple assets, particularly multiple pieces of real estate.

Protecting Assets With A Nevada LLC

The LLC in Nevada provides some of the strongest asset protection in the United States. Like most states, Nevada limits the creditor of a member (owner) to a charging order against the profits of the LLC. Pursuant to the terms of the charging order, the judgment creditor is permitted to attach only the profits of the LLC which will be distributed to the judgment debtor. The charging order prohibits the judgment creditor from taking any other action against the LLC or its assets. Once the judgment creditor has received full satisfaction of the judgment through the charging order, his/her remedies against the LLC terminate.

However, Nevada has declared that the charging order is the exclusive remedy available to a judgment creditor against a member’s interest. The exclusive remedy phrase has been used by only 4 states in the United States: Alaska, Arizona, Oklahoma and Nevada. All other states list the charging order as the remedy available to the judgment creditor. Some states, such as California, permit the judgment creditor to take additional actions against the LLC in the event the judgment creditor fails to receive any payments through the charging order.

What Makes A Series LLC Different?

Additionally, Nevada has declared that a Series LLC is a legal entity in the State of Nevada. The Series LLC differs from a regular LLC in that it provides additional asset protection for the assets of an LLC. Normally, all assets owned by an LLC are at risk in the event of a judgment against the LLC. That is not so in the case of a Series LLC. The best way to explain the Series LLC is to visualize a jellyfish swimming in the ocean with six tentacles hanging from its body. The body of the jellyfish is the main LLC. Each tentacle is a separate series of the LLC. Each tentacle may own assets. In the event one of the series of the LLC is sued and a judgment obtained, the judgment creditor may attach the assets of that series only. The assets held by the remaining series of the LLC may not be attached by that judgment creditor.

Additionally, the members of each series may be different members. A person can be the member of series “A” but not of the remaining series. And, the manager of the LLC may, but does not have to be, the manager of each series of the LLC. Each series can have a different manager.

Protection For Real Estate Investors

This permits a person who has multiple pieces of real estate to protect each property individually, but still have to pay only one state fee for the LLC. The LLC is the entity which must pay its filing fee. The individual series do not pay any additional fees. Consequently, the Nevada Series LLC is an entity which will protect a maximum number of assets for the lowest price possible.

The Basics of an LLC

admin — Mon, 19 Jul 2010 20:16:21 +0000

The limited liability company (LLC) is a relatively new business entity. It was first used in Wyoming around 1975. It wasn’t until twenty years later that the LLC was recognized as a distinct business entity in all fifty states.

The LLC is a versatile business entity. It may be formed in a number of ways. It may also be taxed in different ways.

Manager-Managed Multi-Member LLC

Most LLCs have one or more members [owners] and one or more managers. An LLC formed in this manner is called a manager-managed multi-member LLC. In this LLC, the manager is the individual or entity which manages the LLC. The manager has total operational rights and responsibilities. The members may be described as passive investors. The members may have invested money or other assets into the LLC, but they have absolutely no managerial rights and responsibilities. In this type of LLC one or more members may also serve as the manager[s] of the LLC. In such a case, the members appointed as managers have the total operational rights and responsibilities and the remaining members are the passive investors.

Member-Managed LLC

An LLC may also be formed as a member-managed LLC. In this case all the members are appointed as managers. All the members therefore, will have equal managerial rights and responsibilities.

Single Member LLC

An LLC may also be formed as a single member LLC. One person or entity acts as both the sole member and manager of the LLC. No other parties are involved in the LLC. In most states, a single member LLC has the same asset protection characteristics as a multi-member LLC. However, in California and Colorado, the single member LLC does not have the asset protection characteristics of multi member LLCs formed in those states.

LLC Taxation

As mentioned, an LLC may be taxed in a variety of ways. When a method of taxation is chosen, the tax forms and all the laws, rules, regulations and statues for that type of entity also apply to the LLC. For instance, the LLC may be taxed as a “C” corporation. In this case the LLC will file a Federal IRS form 1120 or 1120A [corporate tax return form] and all the pretax business expenses which are statutorily available to a “C” corporation are also available to the LLC. Other ways in which an LLC may be taxed are as follows: An “S” corporation, a partnership, a sole proprietorship, or be formed as a single member LLC in which case the IRS has ruled that this is a disregarded entity and does not have to file any tax return at all.

Asset Protection

The LLC provides excellent asset protection, both for the people involved in the LLC and the LLC itself. If the LLC is sued and a judgment obtained, the judgment creditor can collect the judgment from the LLC. All assets of the LLC are at risk. However, if there are not sufficient assets in the LLC to satisfy the judgment, neither the members nor the managers of the LLC are liable for these debts or judgments. The judgment creditor may not attempt to collect any unsatisfied part of the judgment from either of these parties.

If a member of an LLC is sued and a judgment obtained, the judgment creditor is severely limited in his/her collection efforts against the LLC. The judgment creditor may not attempt to seize the assets of the LLC to satisfy the judgment. His/her judgment has been entered against a member of the LLC, and not the LLC itself. The LLC is a “person” under the law. It may hold assets in its own name, enter into contracts, sued and be sued and do all actions associated with conducting a business. Thus, its assets belong to the LLC and may not be directly used to satisfy the judgment against a member of the LLC. Nor may the judgment creditor obtain the ownership interests of the member as he/she can do in the case of a corporation. The judgment creditor is limited to a “charging order” against the LLC. This charging order requires the manager of the LLC to pay the share of the profits of the member who was sued to the judgment creditor instead of directly to the member. Once the judgment creditor has been paid off, he/she is out of the picture and the member has not had his/her ownership interest in the LLC affected. If the LLC is taxed as a partnership, there are additional negative consequences which may attach to the judgment creditor who obtains the charging order.

File your Nevada Corporation online

admin — Fri, 04 Jun 2010 21:00:41 +0000

File your Nevada Corporation online with us!!! These words, or words similar to these, appear online hundreds, if not thousands, of times. The owners of those sites make it sound so easy. All you have to do is spend 5 to 10 minutes of your time and they’ll do the rest. It sounds good. You’re thinking: I just opened my business and I need a business structure in which to conduct my business. It won’t take much time, it doesn’t cost very much and then I’ll have my asset protection. So you decide to take the plunge and you file online through one of the many incorporating services available. A couple of weeks later you receive your filed documents in the mail together with your letter of congratulations. You are now incorporated. Now what??

You are now experiencing the biggest problem arising from filing online. The articles have been filed. What do you do next? You didn’t realize when you used the services of the online incorporating company that you were buying from an a la carte menu and all you received were the barebones filing package. The corporation is not yet ready to operate. There are several steps you must still complete. How helpful will the online incorporating company be? It depends upon the incorporating company you use. With some companies, they will take you through all the other steps necessary to complete the filing and structuring of your entity. Other incorporating companies will not offer that level of service. Here are some of the following steps you will have to take to complete the filing:

Obtain an Employer’s Identification Number (EIN) from the IRS. Some of the online incorporators will obtain this number for you. You may have to pay an additional fee for them to obtain it for you. But, if you don’t know how to obtain such a number, you will have to pay additional for that service.
Complete the meetings necessary to organize the corporation. You will have to hold a Board of Directors meeting in order to organize the corporation. At this meeting, officers, directors and stockholders will be identified. A set of By-laws will have to be prepared and adopted. Minutes and resolutions for the meeting must be prepared and adopted by the Board of Directors. These documents are not a part of the original filing package that the incorporating companies provide. Some of the companies will have available for sale preprinted meetings, by-laws, resolutions. Etc. for your use. The cost will vary depending upon the company and the quality of the corporate record book.
Additional documents may have to be filed with your state, county or city in order to begin conducting business. For example, Nevada requires the filing of both a Business Registration Application [together with the payment of the applicable fees] and an Initial List of officers and Directors [again, with additional fees required]. Most of the time your online recording company will not prepare and file those documents for you. You will have to do it yourself.
Open bank accounts. You will have to go to your bank and open a corporate account. You will have to take various documents to the bank in order to accomplish this. Again, most online incorporating companies will not assist you in opening the bank account without the payment of additional fees.
Obtain trademarks and/or trade names for your business. Most incorporating companies will not obtain the trademarks or trade names for your business. You probably will have to retain the services of an attorney familiar with these procedures to assist.
On going consultation. Most clients will have questions to ask after their corporation is filed. Many online incorporating companies provide absolutely no consultation. Their job was to prepare and file the Articles of Incorporation for the client. Once that service is competed, their work is done and no additional services are provided. Other companies will sell you books, admissions to seminars, etc. so that you can educate yourself on the operation of your corporation. A very few online incorporating companies will provide ongoing consultation for your entities.
After filing communication. Many online incorporating companies conduct all, or the vast majority of, their business online. They do not work with clients over the telephone. But, if the only way you can communicate is through the use of email, you have left yourself totally at the mercy of the company you are trying to reach. If they do not want to communicate with you or answer your questions, you cannot reach them, for they do not respond.

The bottom line is that you must make certain that you are obtaining all the services you desire. If you have a background in business, an online company that merely files the articles for you will be sufficient. Most people do not fall into that category. They will need assistance after their entity is filed so that, first of all, the entity is properly formed and organized and, second, the client is aware of the benefits, and pitfalls, of using a business entity. Make certain you are getting what you want from this service. If there is no phone number to call, but rather just an email address, you may want to use an incorporating company with a better communication system.

You always get what you pay for. If you use an online incorporating company that charges very little, you will get very little. Normally, this will include the filing of the articles of incorporation and the appointment of a resident agent. And that is all. If you need assistance with your entity after filing, make certain the company you are working with is able to provide that assistance, even if it costs a little more.