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On average there are 50,000 new lawsuits filed every business day. Many of these lawsuits are frivolous and filed by those looking to make a quick buck off someone else’s hard work and success. You’ve read the headlines and heard the stories; “Woman spills hot coffee – Awarded millions!” You don’t have to be worth millions to be a target. In fact, most lawsuits are for much less. Let’s face it, these days if you have anything of value there are those willing to do anything to take it from you. Predators use public databases to access information to determine your net worth. Those with judgments can be required to list their assets the courts to satisfy a creditor. Court records of debtors examinations are a matter of public record and can be easily accessed. Another simple way is to search county records for filed wills. Wills have been known to not only to disclose someone’s assets but where those assets are located. A properly structured and implemented asset protection strategy will reduce the size of your target for lawsuits. Don’t wait until it’s too late. Call our strategy consultants today at 800-344-1294 for your free asset protection evaluation.

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Asset Protection

Asset protection comes in many forms and where there’s no “one size fits all” strategy for everyone’s needs, most strategies contain common elements. The first thing to consider when protecting yourself from a lawsuit is determining where a lawsuit is likeliest to come from. Like building a medieval castle, we want to erect our strongest and tallest walls toward our enemies. Generally our first layer of defense is to separate ourselves from our high liability assets, such as rental properties, heavy equipment, etc. By isolating these “dangerous” assets inside business entities we separate ourselves from the liability they can create. In turn, should you be the target for a lawsuit, your business assets are protected from your personal liabilities. Properly structured corporations and LLCs are the foundation of any legitimate asset protection strategy. Once your foundations are in place you can begin building your castle fortress by implemented strategies that provide you privacy, tax minimization, asset diversification, encumbrances, estate planning and so much more.

Why should I incorporate?

• Asset Protection—Limit your liabilities—Reduce your profile to predatory lawsuits
• Separation of personal and business assets
• Anonymity—Power of Privacy
• Greater profits through tax minimization
• Ownership options—ownership easily transferred
• Fantastic estate planning component

When should I incorporate?

• If you operate a business (including home-based or part-time business) or if you’re in the process of starting a new business.
• Entering into a business partnership or purchase of a high risk asset (boat, plane, etc.)
• For the purchase or holding of investment real estate (LLC recommended).
• Prior to an event that could lead to a lawsuit… Better a year too early than a day too late.

Where should I incorporate? Nevada of course!

• It is not required that you incorporate your business in the state in which it operates (Foreign qualification may be required)
• A state with the greatest level of corporate “veil” protection
• A state with minimal amount of reporting requirements
• A state well known for its “pro-business environment”

How to “bullet-proof” your entity

• Properly forming the right entity for your needs in a preferred jurisdiction
• Sufficient capitalization of your entity
• Ensuring your entity meets or exceeds the “business nexus” requirements
• Maintaining all necessary internal corporate formalities
• Following the By-Laws / Operating Agreement of your entity
• Keeping your business transactions at “arms length”
• Planning two steps ahead
• Practicing the power of privacy

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Basic Business Structures

Sole Proprietor

• A sole proprietorship is considered the simplest form of doing business but not the safest or best tax advantage way of doing business. In most cases, you simply obtain your business license and you are in business.
• Income is taxed at your individual level. Sole proprietors are also subject to a 15.3% self-employment tax on all income earned from the business.
• Zero asset protection. As a sole proprietor there is no separation, you are the business. This means if your business gets sued, your personal assets are at risk. If you get sued, your business assets are at risk.

Partnership

• A Partnership is considered the riskiest form of doing business. Typically, two or more people get together to conduct business or purchase an asset.
• Gains or losses of the Partnership are passed through to the individual partners and are included on their individual tax returns.
• In a Partnership all parties are liable for the company’s actions, and personal assets can be at risk to satisfy a judgment. In some cases, an individual partner’s personal liability could “flow through” the partnership to the other partner(s).

Corporation

• A Corporation is a separate legal entity that is created by statute and regulated under the laws of the state in which it was formed.
• A Corporation is owned by shareholder(s). Shareholders can be individuals or other entities such as another Corporation, Limited Liability Company, (Family) Limited Partnership or a Trust.
• Shareholders of a Corporation cannot be held personally liable for the actions of the business except in the case of outright fraud. If the Corporation is properly established and maintained, the individual shareholders are not personally liable for the losses of the business and creditors may only look to the Corporation and the business assets for payment.
• A Corporation may choose to have multiple classes of stock.
• A Corporation is taxed separately from its owners on its profits.
• Profits of the Corporation may be distributed to its shareholders (issue dividends) where the income would be taxed again as passive income. This would result in what’s commonly called “double taxation.”
• A Corporation is required to observe corporate formalities to ensure the integrity of the “corporate veil.” Corporate formalities consist of the holding and documentation of all company meetings, the formal approval of major corporate decisions through resolution and the approval of the board of directors, officers and shareholders.

“S” Corporation

• All “S” Corporations start out as a regular Corporation. By filing form 2553 with the IRS, you are electing that the Corporation be treated like a partnership for tax purposes. Profits and losses are “passed through” to the shareholders in proportion to their percentage ownership
• “S” Corporations have all the limited liability protection of a regular Corporation. However, they are not allowed many of the same fringe benefits that regular Corporations do
• “S” Corporations are restricted to no more than 75 shareholders; Shareholders must be U.S. citizens and natural persons (or certain types of Trusts)
• Allowed only one class of stock
• Like the Corporation, the “S” Corporation is required to maintain formalities to ensure the integrity of the “corporate veil”

Limited Partnership

• Controlled (managed) exclusively by the general partners who are elected by the limited partners
• General Partners have complete control in regards to the management of the LP but have no liability protection from judgments against the LP or lawsuits from the Limited Partners (owners)
• Limited Partners have no control of the LP and therefore have limited liability from judgments against the LP
• Partners in a LP have charging order protection against their interest from personal judgments

Limited Liability Company

• Limited Liability Company (LLC) are a hybrid between a Corporation and a Limited Partnership and combine the best of both. LLCs provide the liability protection of a Corporation with the pass-through taxation of a Partnership
• LLCs are very popular due to their flexibility in management, and the personal liability protection offered to its managers and members
• LLCs don’t have the restrictions on membership that an S-Corporation has on shareholders. LLCs also allow members to participate in the management of the LLC without losing their liability protection (unlike the General Partner of a limited partnership, which has unlimited liability)
• LLCs have the greatest flexibility in regard tax classification with the IRS and to the distribution of profits and losses. Unlike the “S” Corporation, distribution is not necessarily based on percentage of ownership
• Members of LLCs have charging order protection against their membership interest from personal lawsuits

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Benefits Of a Limited Liability Company

Many Attorneys and CPAs view the Limited Liability Company (LLC) as the business form of choice for those business owners desiring 1) protection from individual liability for company debts, negligence, and breaches of contract with personal liability limited to the contribution and any personally guaranteed loans; 2) charging order protection and 3) flow through taxation, unless taxed as a Corporation.

In addition, the IRS is now allowing an LLC election to be taxed as a Subchapter S. This makes LLCs very flexible as they can now be taxed as Disregarded Entities, Partnerships, Corporations and Sub Chapter S while maintaining limited liability, charging order protection and privacy.

The LLC is a hybrid between the corporation and the limited partnership. The LLC protects all members (owners) from individual liability for company debts and misdeeds, much like the corporation. What’s more, while a creditor of the corporation can attach corporate stock and gain control of the corporation, a creditor of a LLC cannot become a member and control the company, a creditor of a LLC can only receive an income interest in the company.

In the event a Member is sued and a judgment rendered, the creditor only has an income interest of that Member. This is known as Charging Order Protection for the LLC and other Members. It is possible for the creditor to end up with no control in the company, no money if the “losing” member does not take a distribution and be liable for the Members tax liability. No control, no money and an additional tax liability is not a good position for the creditor. Therefore, Attorneys for the creditor are typically anxious to settle as it is in the best interest of their client.

Consequently, the LLC combines the best of corporations and partnerships because the LLC offers its members protection from individual liability and, like a limited partnership, allows others to become a member only if the other members unanimously agree.

The LLC natural tax default is that of a partnership or a disregarded entity in the event of only one Member. In other words, it is a flow through entity. The LLC does not pay income tax, rather income is distributed to the members according to their ownership interests and the members report the income on their individual income tax returns.

The LLC may also be taxed as a corporation so the members can enjoy certain corporate tax benefits, like retained earnings. In addition, with the proper strategy the LLC taxed as a corporation with the proper structure can offer maximum privacy.

The LLC is governed by its regulations called an operating agreement. LLC regulations are a hybrid between corporate bylaws and a partnership agreement. The LLC is further distinguished from the corporation in that it is not generally required to have annual meetings unless otherwise stated in the operating agreement. However, it is considered prudent and advisable to have at least an annual meeting to establish and maintain good records and accountability. In addition some states require a meeting at some interval. In order to maintain protection from individual liability, the LLC must still keep its accounting separate from its individual owners, must have good and accountable essential records, and must have and abide by company regulations in the Operating Agreement. The following list shows some essentials.

• Initial Manager’s Filing
• Create and Accept Operating Agreement
• Manager’s Initial & Annual Meetings
• Initial & Annual Election of Officers
• Necessary Company Resolutions
• Necessary Certificates of Authority
• Initial & Annual State Filings
• Initial & Annual Penalty of Perjury Declaration
• Company Asset Encumbrance
• Membership Interest Ledger
• Selling, Merging or Dissolution
• Changes or Consolidation of Assets, Business, etc.
• Annual Notices & Proxies
• Banking Documentation and Authority

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Corporation

A corporation is formed by filing articles of incorporation in the state where the corporation has its business Headquarters. A corporation is distinguished from a sole-proprietorship or general partnership primarily because the corporation offers its owners (shareholders) protection from individual liability. In other words, the owners of the corporation will not be personally liable for corporate debts, negligence, or breaches of contract provided the corporation has been properly maintained. This is particularly true in the State of California.

Further, a corporation is different from other forms of business entities in that it is taxed as a separate entity. The corporation has its own tax ID number and files its own income tax return. Many small business owners find it useful to allow income to build up within a corporation or reinvest corporate income because, often times, the corporate income tax rate is lower than the business owner’s individual income tax rate.

In order to maintain the asset protection advantages associated with operating a business as a corporation, it is important to observe the formalities of operating a corporation. Specifically, the corporation must have a comprehensive set of bylaws setting out the rules of the corporation. Additionally, the corporation must have at least an annual meeting of the board of directors to elect officers and conduct other necessary business.

Further, the owners must keep separate financial records for the corporation. For example, if the owners use the corporation’s checking account like a personal checking account, the courts will look past the corporate veil and find the individual was operating as a sole proprietorship and not a corporation.

The corporation allows individual owners to divide the corporation into shares. These shares are memorialized using stock certificates. Allowing the ownership of the corporation to be divided among more than one individual is useful for many reasons. First, it allows the corporation to raise capital by selling its shares. Second, it allows for the democratic management of the corporation when there are multiple owners.

In addition, if the majority of stock certificates are issued to minorities (including women) it will allow the corporation to be classified as a minority owned business. Consequently, the corporation may often be given preferential treatment by government entities.

The corporation is not just a one-time set up operation. To keep and protect its status it must keep good records, comply with state filing statutes and have an appropriate headquarters base.

The Required Corporate Operations

The Operations of a Corporation require that the different levels of management (Directors, Stockholders, Officers, Employees, etc.) fulfill their respective obligatory responsibilities in a cohesive and appropriate manner that will be performed in best interest of the Corporation.

In addition, there are certain essential functions that must be performed and records that must be kept for maintaining the structural integrity of the legal veil and the viability of the company.

The following list shows some essentials:

• Initial Directors Filing
• Create & Accept Bylaws
• Directors Initial & Annual Meetings
• Stockholders Initial & Annual Meetings
• Initial & Annual Election of Directors
• Initial & Annual election of Officers
• Necessary Corporate Resolutions
• Necessary Certificates of Authority
• Initial & Annual State Filings
• Initial & Annual Penalty of Perjury Declaration
• Corporate Asset Encumbrance
• Stock Distribution & ledger
• Selling, Merging or Dissolution
• Changes or Consolidation of Assets, Business, etc.
• Annual Notices & Proxies
• Banking Documentation and Authority

The essentials cannot be ignored if a Company is to remain active and effective in protecting its Directors, Officers and Stockholders. Corporate California will assist in performing many of these functions on behalf of the Corporation and will continuously be available as consultants to assist the respective parties in their duties. This is the main reason for having Corporate California form and maintain their companies.

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Here’s a headline you’ll never read: ”Homeless are being sued in record numbers!”
I’m guessing you probably don’t want to be poor and destitute just to avoid being a target for a lawsuit. A key component to any strategy is privacy. Maintaining a low profile by keeping your name off the title of an asset such as your vehicles, investment real estate, etc. can greatly reduce your exposure to predators. John D. Rockefeller summed it up in these prophetic words: “Own Nothing, but Control Everything”. Controlling an asset has all the benefits of ownership without the liability or risk of ownership.

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Nevada Corporations can provide of tremendous benefit for those operating their business in another state. With a Nevada Corporation, liability stops with the corporation. As an officer, director or shareholder, you cannot be held responsible for lawsuits against your corporation except in the case of outright fraud. Nevada statutes have made it nearly impossible to pierce the veil of a Nevada corporation regardless of where it conducts business. Depending on your state laws, you will most likely be required to qualify it as a foreign entity and be subject to taxes on income earned in that state.

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That’s because you did lose! You lost valuable time from your business, your family and your friends. You lost money. Money that went to pay for your attorney (the other guy most likely got his attorney for free) and money that was lost due to your absence from your business. How about the sleep you lost? What about the stress you and your family suffered? What would happen to your reputation? How do you put a price on that? You can always counter-sue to recoup your costs, right? Usually, predators that engage in “Legal Extortion” have little or nothing of value to satisfy your losses. They are “Judgment-Proof”!

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Always separate your safe assets like cash, intellectual property and stock portfolios, from dangerous assets like autos, heavy equipment, rental real estate, etc. For example, it is better to place expensive equipment critical to operations in an LLC and lease it back to the operating company. If the operating company is sued, the income producing equipment is not at risk of being seized in a judgment. Isolating dangerous assets, such as rental property, from one another is also a wise strategy.

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Consider what it would be like trying to buy fire insurance while your house is in flames. Timing is critical for any asset protection strategy to be effective. Your asset protection strategy must be in place prior to any event that could result in a lawsuit.

Unfortunately, most people only begin to consider what they can do to protect their personal and business assets once they’ve been served with a lawsuit. By then it’s typically too late. Any action you take to hide, transfer, or liquidate assets for less than fair market value, could be considered fraudulent conveyance by the courts. This could result in those assets being seized by the courts and possible criminal charges against you.

It is far better to have your asset protection strategy in place a year too early, than one day too late!

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If you’re already operating your business as a sole proprietor, your daily activities will hardly change at all. What changes is your frame of mind and how you think for the business. Since the Corporation is a separate legal entity, the business decisions you make are on its behalf, not yours. It’s money is it’s, not yours. Remember, you are not the corporation… You control the corporation. By separating yourself from the business in this way, you’ll be separating yourself from the liability. Note: Major business decisions must be documented with proper formalities. As a client of Corporate California we are here to provide you assistance with your formalities.

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Self Directed IRA LLC: What Is It and Other Common Questions

A Self Directed IRA LLC is a LLC with a specific purpose operating agreement that allows its manager (you) to control the LLC assets and bank accounts, and to make investments for the benefit of its member(s) (your retirement accounts). The SDIRA LLC strategy has been legitimized by the IRS with the tax court case: Swanson v. Commissioner, 106 T.C. 76106 TC No 3 (1996).

What types of retirement accounts can become members of a SDIRA LLC?

Traditional IRAs, Sep IRAs, Roth IRAs, 401(k)s, 403(b)s, Coverdell Education Savings (ESA) a.k.a. Educational IRAs,, Qualified Annuities, Profit Sharing Plans, Money Purchase Plans, Government Eligible Deferred Compensation Plans, Keoghs.

What can a SDIRA LLC invest in?

It is easier to understand what your SDIRA LLC cannot invest in. The IRS rules governing what an IRA can invest in are exclusive – not inclusive. There are only three types of investments that are excluded under the Employee Retirement Income Security Act (ERISA) and IRS codes 401 IRC 408(a) (3):

• Life Insurance Contracts
• Collectibles such as works of art, rugs, jewelry, automobiles, alcohol, etc.
• Capital stock in a “S” Corporation

Examples of non-traditional investments allowed with a Self-Directed IRA LLC:

• All forms of real estate, including: Raw land, rental properties, commercial properties, real estate-related private entities (such as limited liability companies that invest in real estate), international real estate
• U.S. backed precious metals such as gold, silver and platinum
• Golf courses, professional sports teams
• Tax liens
• Private loans

What are Prohibited Transactions?

As discussed previously, you cannot invest in collectibles, life insurance contracts or “S” Corporation stock. In addition, there are certain transactions in which you cannot participate when using SDIRA LLC funds. These are referred to as “prohibited transactions”. Prohibited Transactions are defined in IRC 4975(c)(1) and IRS Publication 590. They were established to maintain that everything the IRA engages in is for the exclusive benefit of the retirement plan. Violations are often referred to as “self-dealing” transactions. Self-dealing occurs when an IRA owner uses their individual retirement funds for their personal benefit rather than to benefit the IRA. As an IRA owner, if you violate these rules, your entire IRA could be considered distributed and hit with penalties and taxes. Keep in mind that you and your IRA are separate. The IRA is for your retirement and should remain separate until at least your age 59 ½. It is very important that you work with competent professionals to help avoid violating these rules. Some examples of prohibited transactions are the following:

• Your SDIRA LLC cannot buy a house that you or another disqualified person will live in. Even though buying a house may be a good investment, the fact that you live in the house means you are receiving a current benefit.
• Your SDIRA LLC cannot buy assets from you or disqualified person
• You may not use your IRA LLC as security for a loan made to you
• Your SDIRA LLC cannot loan you or any disqualified person money
• Your SDIRA LLC or any subsidiary of it cannot employ you or a disqualified person

Who are disqualified persons?

• The IRA Owner
• Your spouse
• Your children and grandchildren
• Your parents and grandparents
• Your spouse’s children and grandchildren
• Your spouse’s parents and grandparents
• Any fiduciaries working on this account such as the account custodian and sponsor
• Any corporation, partnership, trust or estate in which a disqualified person has a 50% or greater interest

Note: According to IRC 4975, siblings and their children are not included in the definition of disqualified persons. Thus, a loan to your brother would not be a prohibited transaction. Although some suggest that it was an error on the part of the IRS to omit siblings from the definition, they, nonetheless, were omitted and to the best of our knowledge, there has never been an IRS ruling to the contrary.

I don’t have enough money in my IRA to purchase a piece of property outright. Can my SDIRA LLC provide the down payment and get a loan for the balance?

Yes you can use your SDIRA LLC funds for the down payment and then have your SDIRA LLC get a loan for the balance. However, you are not allowed to personally guarantee the loan. It must be a non-recourse loan, which means that if your SDIRA LLC fails to make payments, the only recourse the lender has is against the property itself. Further, under UDFI (unrelated debt financed income) rules, there may be tax ramifications upon selling the property if the mortgage has not been paid off prior to the sale. For example, if you sold a property which was bought using 50% direct IRA funds and 50% mortgage monies, one half of the gain would be subject to UDFI at a maximum tax rate of 35%. We recommend you contact a tax professional familiar with the SDIRA LLC regarding what IRS forms need filing.

Can I be the property manager of the real estate?

That depends. With just a self-directed IRA the answer is no. However, with the SDIRA LLC you have the ability to manage the property, collect the rent and pay the bills. Unlike a SD-IRA, that put restrictions on what you can do, the SDIRA LLC structure allows you to perform maintenance on the property, advertise for renters, collect and deposit rent checks, pay the real estate bills, etc. This saves your SDIRA LLC a lot of money by not having to outsource this and helps provide a more comfortable and prosperous retirement for you. Note: You or a disqualified person cannot be compensated for management services or provided residency.

Can my SDIRA LLC make private loans to other individuals who want to buy real estate?

Absolutely, as long as they are not disqualified persons. With the current trend of banks lending to fewer people, this can be a great investment opportunity for your IRA. Because you control the terms of the loan, you can set your own interest rate and the loan can be secured by the assets of the borrower.

Can my SDIRA LLC make loans to other businesses or companies?

Sure. Your SDIRA LLC can make a loan to any type of business. However, be aware that there are some restrictions on loans to any business that you or any other disqualified person has an ownership interest in. See: Disqualified persons.

Why brokers and accountants say you cannot do it

They typically respond with, either out of ignorance or self-interest, “you can’t do that,” or, “it’s illegal,” or, “we don’t handle those types of investments,” etc. In all fairness, some of these professionals have never been told that it is legal to buy real estate and other non-traditional investments in an IRA. They don’t know because the companies that employ them are not interested themselves. Brokers are compensated when they sell stocks, bonds and mutual funds. In short they are trained salesman.

In addition, many professionals, including CPAs, real estate attorneys, and financial planners, are not aware that buying alternative investments such as real estate with an IRA is perfectly legal. You might want to direct them to visit www.IRS.gov and search for Publication 590, which defines everything the IRS wants you to know about IRAs. On pages 40-41, you will see what you cannot do. As mentioned earlier, you cannot purchase collectibles, life insurance contracts or stock in “S” Corporations.

Why hasn’t the self-directed IRA business been publicized?

Traditional IRA providers control about 97% of industry. Their huge marketing budgets allow them to maintain a strong public presence, although recently the national media is now giving more exposure to the SDIRA LLC service industry.

How Can I determine if I’m making a prohibited transaction?

The Dept of Labor oversees interpretations of Prohibited Transactions. Under Presidential Reorganization Plan No. 4 of 1978, effective December 31, 1978, the authority of the Secretary of the Treasury (IRS) to issue interpretations regarding section 4975 of the Code (prohibited transactions) has been transferred to the Secretary of Labor (DoL) and the Secretary of the Treasury (IRS) is “bound by the interpretations of the Secretary of Labor pursuant to such authority.” You can contact the Dept. of Labor at www.dol.gov to read hundreds of interpretations they have already made.

What is UBIT and how does it affect my SDIRA LLC?

UBIT is an acronym for Unrelated Business Income Tax which occurs when a plan generates income from operating a business, acquiring or improving property through debt financing (This type of UBIT is specifically referred to as UDFI – Unrelated Debt Financed Income), or certain partnerships from which the plan owns an interest. It is income generated by a trust when engaging in business activity that is unrelated to its general purpose.

UBIT was implemented to keep tax exempt / deferred plans that open businesses and the typical small business owners on an even playing field. If a plan or self-directed IRA was able to purchase a business and did not have to pay any taxes, it would be able to deliver an identical product at a discount. UBIT erases that risk for the typical business owner. UBIT can be a very complicated form of taxation. It is imperative you seek a CPA tax professional help to make sure you do not incur any tax penalties.

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Sole Proprietorship or Partnership

When all things are considered the sole proprietorship or personal ownership may be the easiest but is not the wisest form of business or asset protection.

A person is automatically a sole proprietorship or personal owner unless they have taken the necessary steps to properly incorporate. A Sole Proprietorship (or Partnership if more than one owner) is the simplest form of business.

With the exception of complying with any applicable licensing requirements, there are no formalities required of a sole proprietorship. The same situation and consequences exist for personal ownership of assets.

The owner has total personal management and control over the company and assets. However, the price for this control is that the owner is at risk for personal liability incurred by the owner, owner’s agents, employees, lawsuits, etc.

Fictitious Name (DBA)

A business conducted or asset owned under a name which does not show the owner’s surname or implies the existence of additional owners, a fictitious business name statement (dba) and notice may be required.

Contrary to popular belief, the fictitious business name does not offer any legal protection and the owner, spouse, family and partners have unlimited personal liability for loss.

A sole proprietor or owner, even with a fictitious name, is not a separate entity itself. Rather, a sole proprietor is directly responsible, along with other related parties for its debts.

Personal Liability

As a sole proprietor and/or asset holder the owner, spouse, family and partners are personally liable for the company or assets with unlimited personal liability for loss, thus placing all their personal assets and wealth at risk.

This means that if the owner of an asset or sole proprietor business doesn’t pay a supplier, defaults on a debt or loses a lawsuit, the creditor can legally come after all related parties’ assets and valued possessions.

Additionally, should a negative event happen personally for a sole proprietor or related parties it would have negative consequences against the business and assets.

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Strongest Corporate Protection

Nevada Revised Statutes are by far the strongest corporate protection in the Nation when it comes to protecting officers, directors and shareholders of corporation as well as members and managers of limited liability companies. Where there are literally hundreds of Nevada statutes effecting business entities, below are listed what we feel are the most important to the small business owner.

Important Nevada Statutes:

Nevada Indemnification

NRS 78.747 Liability of stockholder, director or officer for debt or liability of corporation.
NRS 86.371 Liability of member or manager for debts or liabilities of company.

Charging Order Protection (LLC)

NRS 86.401 Rights and remedies of creditor of member.

Charging Order Protection (Corporation) Exclusive to Nevada

NRS 78.746 Action against stockholder by judgment creditor; limitations.

Bearer Shares Not Allowed In Nevada

NRS 78.235 Stock certificates: Validation; facsimile signatures; un-certificated shares and informational statements; replacement.

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What Is The Best Entity To Hold My Real Estate In: Corporation Or LLC?

Both the corporation and the LLC will protect you with limited liability from lawsuits but the LLC is the entity of choice when it comes to holding real estate. This is due to the favorable tax advantages the LLC receives with regards to long term capital gain tax when it elects to be taxed as a partnership or disregarded entity. Corporations (“C” or “S”) or LLCs electing “C” or “S” do not receive the same tax benefit.

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What Is the Best Way to Pull Money Out of My Corporation?

The short answer is that ‘it depends.’ First ask yourself, ‘What do I need the money for?’ Could your need be considered a legitimate business expense? Is this money you plan to put back into the business at a future date? If so, you may consider borrowing the money from the business. Keep in mind that all business loans must be documented with a reasonable interest bearing note and repaid. Distribution of profits may be an option, but could trigger a taxable event. Taking a salary is also an option but triggers employment taxes and requires more bookkeeping. Always check with a tax professional before possibly creating an unnecessary taxable event.

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Will Nevada “Bearer Shares” Provide Me Greater Privacy Or Protection?

As of 2007, under NRS 78.235, Nevada laws forbid the use of Bearer shares. Quote, “A corporation has no power to issue a certificate in bearer form, and any such certificate that is issued is void and of no force or effect.” Bearer shares never offered the level of secrecy claimed by their promoters. First, creditors will ask at a debtor’s examination a question like “In the last three years, have you ever held shares in any corporation?” If you ever held bearer shares during this time, you would have to answer “Yes” or else you would subject yourself to perjury.

Also, if the bearer shares cannot be located, the court may be able to simply deem the corporation to be dissolved, possibly exposing those most closely associated with it liable for the Corporations debts.

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