Keep your creditors from grabbing your hard earned assets with an asset protected Limited Liability Company.
What is it?
The first Limited Liability Companies (LLCs) were set up in Wyoming in the 1970s. The goal was to set up a business structure that combined the pass-through taxation of a partnership with the limited liability of a corporation.
Why use a Limited Liability Company?
A Limited Liability Company is used because it is a highly effective way to move assets out of your name and into a tax neutral, asset protected entity. A judgment against you is not valid against a Limited Liability Company and the assets it holds. Properly set up with our asset-protected LLC and operating agreement, a creditor will have a very difficult time trying to break through to the underlying assets.
Where are they used?
Limited Liability Companies are now used in every state and can provide extensive asset protection benefits. Most asset protection attorneys and accountants now recommend them. Some foreign countries now use them also, such as the Cook Islands, Nevis and Samoa.
How is an LLC taxed?
From a tax standpoint, they have distinct advantages. An LLC can be used as a pass-through entity so that you do not have any double taxation. A single-member LLC can be a disregarded entity and no tax return need be filed at all. A husband and wife in a community property state can also set the LLC up as a single member entity. The LLC can also elect corporate tax status if so desired.
Can an LLC own real estate?
Yes. In fact, only a disregarded entity LLC should be used to own your home. A big mistake made by many unknowledgeable web-based asset protection sites is that they recommend that you put your primary residence into a Family Limited Partnership (FLP). Big mistake. You could lose your $250,000 per person exemption at time of sale and you could lose the ability to write off your mortgage interest!
What is a charging order?
In a “sole remedy” state, a charging order is the only remedy a creditor has against the Limited Liability Company.
What does this mean? It means that the creditor cannot take your ownership or your place in the LLC. It means that they are only entitled to any distributions you make to yourself. If your Limited Liability Company makes a profit but does not distribute, then a creditor that has obtained a charging order, inherits your tax position. They must pay taxes on the money they never received!!
What is a “sole remedy “state?
It is a state that says that a charging order is the only remedy a creditor has. Some of these states are Nevada, Arizona, Delaware, and Wyoming. Other states such as California allow a creditor to foreclose on your ownership interest.
Do I need an operating agreement?
This is one of the most important considerations in forming a Limited Liability Company. It is second only to the state it is formed in. A properly structured and designed operating agreement is ESSENTIAL. Without one, a creditor will slide right through your veil like a hot knife through butter. One of the biggest mistakes we see is customers forming Limited Liability Companies with discount internet sites, which not only give no structuring or estate planning advice, but provide 7 to 10 page operating agreements that are worthless. Be careful; you get what you pay for.
Click here for our 21 items that must be included in a properly structured operating agreement.
Will a Limited Liability Company keep the wolves at bay?
Yes. It separates your assets from each other and from business assets. It limits — if not outright prevents — the ability of a creditor to attack or attach assets.
Can a Limited Liability Company have only one member?
Yes. This is one of the advantages of an LLC over an FLP. You can have just one member. That member can be a person, corporation, another LLC, trust, FLP. The choices are almost limitless.
Friendly Liens. Click here to see how our unique friendly lien method can help preserve your assets.
