Question:  What is a friendly lien?

  1. A friendly lien is a method whereby you use a company you control or a company someone else controls to place a lien on your assets.
  2. Liens are usually placed on real estate, or UCC filings are done against business assets.

Question: How does this work?

  1. There are many different ways to do it.  The standard way is for a company that you or someone else owns or controls will file a lien against the properties.

Question:  Is this how does it?

  1. No, we do it a little differently.  We form a new company and capitalize it with a promissory note.  In return, the new company gives you 100% of the shares for the capitalization note.  The company will then take collateral for the note.  
  2. This way there is a business reason for the lien on the property.  
  3. The lien is not controlled by some third party who you do not know, as is common with the liens that many others do.
  4. We also form the LLC in a state that does not publish the name of the manager or owners and allows us to use words such as “finance” or “loan” that most other states prohibit.
  5. Since you control the lien, you can release it at any time and do not need us to do it.

Question: Do we have to do anything about the lien?

  1. Yes, it is very important that you make payments on the note.  The payments are to the LLC that you own and control.  The note generally has some sort of negative amortization or deferred payment schedule. You must make the payments on at least an annual basis in order for the structure to hold. Since you are basically paying yourself, you can take the money out of the LLC after the payments are made or leave the money there to further the business interests of the entity.
  2. Remember if you do no honor the structure by making payments, then a judge is not likely to honor it either.

Question: Is it safe to let a third party hold the lien?

  1. If you actually borrow money against an asset and a third party loans you that money, then it makes sense for them to hold the lien.
  2. However, if some third party who forms a company for you tells you that they will file a lien against your property, you should be cautious.  If that third party disappears, then you will have a difficult time releasing the lien.
  3. If the third party is dishonest you may wake up one day and find out they foreclosed on your assets.
  4. Some years back there was a company in Nevada that filed liens on hundreds, if not thousands, of its customers. That company went out of business and many customers had no idea how to release those liens.  We helped several hundreds of them get their property back.  

Questions:  Are there tax ramifications with a friendly lien?

  1. Normally there are not.  If you own the LLC that places the lien, then you are basically paying yourself.  So, it is a deduction on one side and income on the other.  Check with your tax advisor or have them call us.

Question:  How long does it take to set this up?

  1. We can usually set the entire structure of a friendly lien up within 7 to 10 business days, sometimes faster.  It all depends on government filing times.

Question:  Can I do this with both business and personal assets?

  1. Yes, you can.  We can structure it according to your existing business set up.  We can have the ability to take trust deeds or UCC filings against all business assets in a way that makes sense and has a business purpose.

Question:  How do I release the liens if I no longer need them or want to sell the asset?

  1. You can contact us and we can prepare the paperwork for you or you can do it yourself.  
  2. If you want, we can even prepare the release paperwork at the same time we prepare the lien so that you can cancel the lien at any time of your choosing in the future.