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HOT TOPIC Incorporating.

Antonio.

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I had a question about incorporating. I plan launching my company in Jan and i wanted to incorporate in Nevada do they allow this if your prime residence isn't in Nevada;if thats the case is it anyway around this? I was going to set it up as a S Corporation. Any word of advice would be appreciated thank you.
 

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Russ H

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Antonio, what state are you in?

What state will your business be conducted in? (will your clients/customers be mostly from that state, or all over?).

Will you have employees in that state? And if yes, will that be the only statw where you have employees?

Have you discussed this with a corporate atty?

-Russ H.
 
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A

Antonio.

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I will be doing business in all 50 states. At the moment i live in St.louis Missouri and the only employee will be myself. I haven't yet talk to a corp att but I will soon. Thank you for your reply Russ.
 

FT1

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Aug 15, 2007
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Antonio,

I'd recommend picking up a copy of "Own Your Own Corporation" by Garrett Sutton, Esq. I have the CD version and it gives you an overview of the various entities, including incorporating in Nevada. Even if you plan on working with an attorney, it wouldn't hurt to go in with a basic understanding.

Fred
 

bflbob

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I had a question about incorporating. I plan launching my company in Jan and i wanted to incorporate in Nevada do they allow this if your prime residence isn't in Nevada;if thats the case is it anyway around this? I was going to set it up as a S Corporation. Any word of advice would be appreciated thank you.
I'm 95% certain that you can incorporate in Nevada, even if you don't have a residence there. You'll likely need to appoint a Resident Agent (Google "CT Corporation System") to act on your behalf in the state. The State needs someone to serve legal papers on, and they ain't gonna drive to Hoboken to do it:smxE:.

I'll agree with most posters that you need to talk to a corporate attorney that understands multi-state companies. If you are only wanting a Nevada corp to avoid taxes, it might be the wrong decision. Asset protection might be better in another state. A lot needs to go into that decision.
 

Allthingznew

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Aug 26, 2007
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If I recall correctly, Delaware is a state many incorporate in. I think because it has corporation friendly laws, but as mentioned, ask an attorney.
 

Diane Kennedy

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Aug 31, 2007
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Let's go back to the fundamental question that Russ was asking: Where is business conducted? What type of business is it?

Russ is asking to determine something called "nexus." You'll be taxed where your nexus is, regardless of where the entity is formed.

It's all moot anyway, for tax purposes, because an S Corp is a flow through entity which means all income/loss flows through on a K-1 to be reported on your personal tax return.

So, then the question, is why Nevada? If you live in California, for example, and form a NV corporation with nexus in California, California law is going to prevail...or at least a lot of expensive lawyers will try to make it happen that way.

Delaware has great corporate law if you plan to take a company public. It's the best, to be honest.

Some of the questions I'd ask you if you were my client:

What is the nature of the business?

What's your best, most like and worst case financial projections for this next year?

Who are the owners of the corp?

What's your exit strategy?

Will you take in partners later?

How are you raising money for the venture? (or do you need to)

Then to make sure it shouldn't be a C Corp, instead of an S, I'd look at your projected business income along with your other income and whether the C Corp benefits are important. (better C Corp benefits than S Corp benefits)

The answer, when you ask a CPA, is always "it depends". That's because everyone's circumstances are different.

Diane
 

EasyMoney_in_NC

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Sep 9, 2007
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Wilmington NC
Is not the reason for an NV corp. for anonymity? As I understand things, NV allows for corporate structure with no requirement to file personal information of the owners. I was looking into it for that purpose, more of an asset protection move than anything else. I have a high liability business and am looking not to be an easy target should something happen. Paying taxes where I do business etc isn't an issue for me, just the protection.

thoughts?
 

Diane Kennedy

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Aug 31, 2007
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Is not the reason for an NV corp. for anonymity? As I understand things, NV allows for corporate structure with no requirement to file personal information of the owners. I was looking into it for that purpose, more of an asset protection move than anything else.

thoughts?
There are a couple of other things you need to do to ensure keeping it anonymous. One is making sure you have a "nominee" officer. The offficers of the corporation are public record, so typically what you do is get someone else to be your officer (make sure you get their undated resignation up front).

The other issue is that you'll need to make sure it's a C Corporation (not an S). The S flows through and reports on your tax return, so again that's all available as public record.

My first practice was in Nevada, so I pretty much cut my teeth on these type of strategies. In some cases, people moved real estate into NV C Corp with nominee officers. Typically you don't want real estate inside of a C Corp, but if you have a major issue with liability, you might pay extra tax just to get that anonymity. For example, I remember we once had a client who had amusement parks. HIGH liability there.
 

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EasyMoney_in_NC

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Sep 9, 2007
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I have found companies that setup and assist in the continued upkeep of the "company", do they not provide nominee officer? I haven't made any calls to any of them yet, just beginning to look into it. Is that site link I posted a true source for info as you understand the system to work? I am in the propane services business (could blow things up amongst other nasty outcomes) and would really like to shield my assets from the business.

Interested in your comments as to a safe structure.
 

Wolfgang5150

New Contributor
Aug 15, 2007
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Easy - is your propane business registered under an LLC? I have my properties in under an LLC, purely for protection purposes.
Interesting question you have brought up.
Thanks.
Kevin
 

EasyMoney_in_NC

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Sep 9, 2007
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No propane is "S" and props are personal as H&W (tenants in common). Here LLC's don' offer full protection. You need to have everything in LP's with LLC's managing the LP's. And as its been laid out for me by an asset attorney. I either give up ownership (to my wife irrevocably) and manage everything (LP) via the LLC, or to own it, I would have to turn everything over to a PM (i won't do that!), or I insure and over insure the hell out of everything and play nasty hardball if I get sued.......tough call.
 

Diane Kennedy

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Aug 31, 2007
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Easy Money:

I don't really know the guys in the link, so can't say one way or the other.

Yes, you can get companies to serve as nominee officers. I've seen fees for that as high as $17,000 per year...

I'm definitely defering to your asset protection attorney on this. But, just so I understand the choices:

- turn over ownership to your wife. Just curious if the reason that works because you're in a non-community property state? I don't think that strategy would work out west (where most of the states are community property).

- Form a LP with an LLC general partner. I think that's what you meant. Or maybe the general partner is a corporation (if LLC's don't have the full protection in NC, then that's probably what the plan is). I'd be inclined to go with that one. But, that's because that's the type of structure I'm used to operating for asset protection. Absolutely need to make sure you follow all of the formalities (notice of the LP, signing docs correctly so that the business is liable, not you individually, no commingling, etc)

- Insure and play hardball. Depending on your personality and ability to handle the stress of that, that may work as well. Personally, it would mean too many sleepless nights for me. That's why I like business structures. High "Z-factor". (ie...zzzzzzz)
 

EasyMoney_in_NC

Contributor
Sep 9, 2007
399
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Wilmington NC
Easy Money:

I don't really know the guys in the link, so can't say one way or the other.

Yes, you can get companies to serve as nominee officers. I've seen fees for that as high as $17,000 per year...

I'm definitely defering to your asset protection attorney on this. But, just so I understand the choices:

- turn over ownership to your wife. Just curious if the reason that works because you're in a non-community property state? I don't think that strategy would work out west (where most of the states are community property).

- Form a LP with an LLC general partner. I think that's what you meant. Or maybe the general partner is a corporation (if LLC's don't have the full protection in NC, then that's probably what the plan is). I'd be inclined to go with that one. But, that's because that's the type of structure I'm used to operating for asset protection. Absolutely need to make sure you follow all of the formalities (notice of the LP, signing docs correctly so that the business is liable, not you individually, no commingling, etc)

- Insure and play hardball. Depending on your personality and ability to handle the stress of that, that may work as well. Personally, it would mean too many sleepless nights for me. That's why I like business structures. High "Z-factor". (ie...zzzzzzz)
Let me say, I am very much enjoying this discussion. I need all the info I can before I blow money on something that may not work.
The structure would be LP owns the assets with my wife being a majority owner and me with as little as 1% (if I so choose). The assets would be managed via the LLC which my wife would own as a member and I would hold as the GP/manager. The assets as they have been laid out thus far in the attorney's plan would limit exposer to 300K per LP. But if that much is still at risk, I'm almost inclined to take the hardball approach. Having said that, I'd have a half dozen LP, with what could be (to really "do it right" another half dozen LLC's and then there is the all inclusive, cars, junk and bank account LP. I'm looking at a logistical nightmare to set it up like this. I'm to small an investor (# of units) to afford having it managed for me, let alone the fact that I wouldn't trust anyone to have as much passion or even wherewithal to keep my properties occupied and cash flowing. And I'm big enough to have something to take if someone really came after me.

I have, ultimately a last resort plan already in my head should something rather nasty come down the pike, but I think its better left unspoken here.......you understand I'm sure :)

Having said all that, you would.........?
 

Diane Kennedy

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Aug 31, 2007
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The structure would be LP owns the assets with my wife being a majority owner and me with as little as 1% (if I so choose). The assets would be managed via the LLC which my wife would own as a member and I would hold as the GP/manager.
Easy Money - I know it gets complicated.... But I think I'm about to make it more complicated. The hole in this that I see (if I'm reading this right) is who owns the general partnership share. The GP has full liability. There is no asset protection for the GP. That's why I thought you'd have a corp in that spot. But if it's you personally, than you have all the risk.

This is important stuff and I want to make sure that anyone else reading this can follow what we're talking about.

Limited Partnership - comprised of two or more partners, with one or more limited partners (their risk is limited to their investment amount) and with one or more general partners (risk is not limited at all - there is personal liability here)

LLC - Limited liability company. You need to check how effective these are in the state you're in. They rock in Arizona and Nevada, the two states I'm personally most familiar with. LLC owners are called members and all have limited liability, even if only one of the members acts as the manager. (In which case, it's called manager-managed.) LLC can also elect how it is taxed for income tax purposes.
 
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Wolfgang5150

New Contributor
Aug 15, 2007
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Orchard Park, NY
'...Let me say, I am very much enjoying this discussion..'
I couldn't agree more. I'm learning more from this thread than in four years of college. (and just like college - I'm having a beer while reading this)
Kevin S.
 

EasyMoney_in_NC

Contributor
Sep 9, 2007
399
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Wilmington NC
Easy Money - I know it gets complicated.... But I think I'm about to make it more complicated. The hole in this that I see (if I'm reading this right) is who owns the general partnership share. The GP has full liability. There is no asset protection for the GP. That's why I thought you'd have a corp in that spot. But if it's you personally, than you have all the risk.
You pretty much have it nailed :) The LP is owned by the wife and I as stated above. The LLC is member owned by us both as well, but is set up as a shell with just a bank account to funnel money in and out of and for me to receive "income" not profit for my "management" services. Under NC law (apparently) income can not be attached, and as the manager, I get to elect what gets paid as "income" and whether or not there would be any profit left over. The LLC is a GP, I can also stick a "C" or "S" in the mix to if I wanted but...........holy cow, how much crap is that to have to go through :D Getting back to structure, the point would be to ward of "charging orders" filed against the business and me. My wife as it relates to the activities of the business is clean which is why she gets the ownership. But that ownership structure ends up being irrevocable, and although there are no intentions other that to stay together for ever, at my ripe age of 37........well I guess there's no guarantees other than death and taxes and neither of us are ready to turn over ownership and control to one another.
This is important stuff and I want to make sure that anyone else reading this can follow what we're talking about.

Limited Partnership - comprised of two or more partners, with one or more limited partners (their risk is limited to their investment amount) and with one or more general partners (risk is not limited at all - there is personal liability here)

LLC - Limited liability company. You need to check how effective these are in the state you're in. They rock in Arizona and Nevada, the two states I'm personally most familiar with. LLC owners are called members and all have limited liability, even if only one of the members acts as the manager. (In which case, it's called manager-managed.) LLC can also elect how it is taxed for income tax purposes.
 

Wolfgang5150

New Contributor
Aug 15, 2007
70
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Orchard Park, NY
LLC - I am amazed at how much variation there is from state to state, in regards to risk, taxes etc. I guess I need to get one of Diane's books the next time I go to Border's instead of F1 Racing...........
Kevin
 

Diane Kennedy

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Aug 31, 2007
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Wolfgang, are you a Phoenician? Just recognized the F1 Raceway reference. My son is down there every week.
 

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Wolfgang5150

New Contributor
Aug 15, 2007
70
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Orchard Park, NY
Diane:
Phoenician - no; about as opposite from Phoenix as you get. Orchard Park, NY (suburb of Buffalo, which I'm sure you have heard of).
Unless you factor in our annual trip to Phoenix/Scottsdale for Barrett-Jackson.
I love the sport of F1 Racing; in addition to real estate/investing.
Thanks for your advice and posts.
Kevin
 

RE Taipan

Contributor
Aug 28, 2007
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Balboa Island, CA
I offer this for the purpose of corp structure example of what I did for a very high liability exposure business which worked out quite well.

Was formerly in the logistics business as an asset based operation operating out of a major US seaport area. A necessary component of that was operation of a significant number of large over the road 18 wheel trucks hauling pretty much anything you can think of, hence the significant liability exposure. It was daunting exposure despite the $1M liability policy we had on each vehicle, the $500K cargo policy and the $10M umbrella policy. Before we started ops, the exposure was a major concern and it took approx 3mos longer to start than it could have but for my need to limit exposure. I did not want to bust my butt building this business to have it all taken away by one single act or omission to act that was largely out of my control.

Here is how I finally structured the business:

1 CA Corp whose stock was 100% owned by a NV LLC.
1 NV Corp with 3 divisions. All stock in NV Corp was held by a trust.
1 NV LLC

NV was chosen as it does not swap info with the IRS (I believe that WY is now the same way also) whereas DE does swap with the IRS.

Each corp was a C corp.

CA corp did business in CA and received income in CA from all operations it conducted.

NV Corp Div 1 owned all of the rolling equipment that produced income for CA Corp. It leased the equipment to a CA Corp under a standard commercial vehicle lease agreement. NV Corp Div 1 secured these leases with a UCC-1 interest in the rolling stock and the receivables of CA corp. CA Corp was billed monthly by NV Corp Div 1.

As a startup CA Corp had no credit history when the lease was entered into. With 18 wheeler tractors (power units) ranged in value from $40K to $60K per power unit, the credit risk to NV Corp Div 1 was understandably, quite high. This risk to NV Corp Div 1 justified higher than normal lease rates paid to it by CA Corp. This was in fact legit as CA Corp had previously applied for, and been declined, by 3 other commercial leasing companies (which decline letters were kept on file with CA Corp) before turning to NV Corp Div 1 for its leasing needs.

NV Corp Div 2, owned the non-income producing equip such as pick-up trucks, computers, desks, printers, etc of CA Corp. You name it, if CA Corp needed it, NV Corp Div 2 owned it. It leased all of this to CA Corp. NV Corp Div 2 also secured these leases with a UCC -1 interest in the equipment and the receivables of CA Corp. CA Corp was billed monthly by NV Corp Div 2. This too was legit for the same reasons as with the vehicle leases above.

NV Corp Div 3 was a management and staffing agency who contracted with CA Corp to staff the business. Under its management agreement with CA Corp, NV Corp Div 3 managed the day to day affairs of the logistics business. CA Corp was billed monthly by NV Corp Div 3. NV Corp Div 3 also secured this agreement with a lien on the receivables of CA Corp.

The lease arrangements allowed income (profit) received by CA Corp to be turned into expenses which were paid to the NV Corps' address in Las Vegas, NV (a mail business box (not a PO BOX) which provided an actual address (eg 123 Main St, Suite 600, Las Vegas, NV), and ultimately deposited into NV Corp's Div 1, 2 or 3 bank account in NV as appropriate. NV Corps Divs each also instituted an EFT option providing for a 1% payment discount for using the EFT for payments. CA Corp, being a good steward of its money, always took advantage of this "feature" to help reduce expenses.

This lawfully got the income earned in CA moved to NV causing otherwise taxable profit in CA to be minimal taxed as it was legitimately moved to NV where there was no state corp taxation.

The above plus the following allowed for me to sleep a lot better at night [My personal nitemare was one of my 18-wheelers hauling a container of borax flipping over on a school bus loaded with kids…(thank god it never did, but the idea is instructive). If that had happened, CA Corp would have immediately defaulted on their leases. CA Corp had nothing in terms of assets (recall everythnig was leased) and only couple of $$ in its acct. All corp forms and rules (meetings, docs, resolutions, etc, were STRICTLY followed to prevent any piercing of the corporate veil. NV Corp Divs would have served a notice of default and perfected their security interest in the leased equipment, repossessed everything and perfected their lien on the receivables as contractually permitted. Then NV Corp Divs 1 and 2 would have re-leased the same to another CA Corp and business would have continued unabated.

No corps had my name or any name of anyone else on it, only the nominee directors. The actual principals were completely hidden. Taxation was reduced by legitimately taking CA profits and legitimately turning them into expenses paid to NV. We also had a neat little legit tool for turning NV taxable profits into non-taxable expenses, but that is for a different conversation as this thread only deals with incorporating.

I don't say this is the best, but it did work for our situation. Consult an atty or other licensed professional before attempting this or any other action. Your results may differ. Professional driver on a closed course. Remember Pearl Harbor!
 

Diane Kennedy

Bronze Contributor
Aug 31, 2007
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Whew! Thank you RETaipan. I think I need to draw a picture to full grasp it.

I want to throw another thing out, as long as we're in the asset protection vein - Series LLCs.

I LOVE these. Not every state is doing them yet. THe way it works is that you set up ONE LLC (a series LLC) that segregates assets into their own little LLC to protect each seprately - but you only have one EIN, one tax return, one filing fee, etc.... DEFINITELY do this with a good lawyer who knows this fairly new kid on the block.
 

Russ H

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RE Taipan

-If I could give out double rep speed for this post, I would.

Outstanding.

I truly appreciate the detail.

-Russ H.
 

BeingChewsie

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I don't say this is the best, but it did work for our situation. Consult an atty or other licensed professional before attempting this or any other action. Your results may differ. Professional driver on a closed course.

You have patiently explained this to me many times but seeing it in writing connected all the dots. Nice explanation!

Sue
 

AroundTheWorld

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Whew! Thank you RETaipan. I think I need to draw a picture to full grasp it.

I want to throw another thing out, as long as we're in the asset protection vein - Series LLCs.

I LOVE these. Not every state is doing them yet. THe way it works is that you set up ONE LLC (a series LLC) that segregates assets into their own little LLC to protect each seprately - but you only have one EIN, one tax return, one filing fee, etc.... DEFINITELY do this with a good lawyer who knows this fairly new kid on the block.
Hey Diane,

Would you mind explaining this in a little more detail?

I have a gazillion LLC's and the administration/bookkeeping/tax filing etc. is getting cumbersome... yeck. Maybe this is could work...

Russ... I'm interested in hearing about your general structure as well. You made mention of it in a different thread but I didn't pick up on what you are doing.
 

Diane Kennedy

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Aug 31, 2007
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AroundTheWorld:

I haven't personally used the Series LLC, only had a few clients make use of this new structure.

The Series LLC is an LLC hybrid that actually functions like more than one LLC. Let's say you have 4 apartment buildings and want to keep them all separate for asset protection purposes. You could have 4 different LLCs, with four different tax returns, four different filing fees (an issue in California, for example). The Series LLC would allow you to set up one Series and have each apartment building separate. But, it only counts as one LLC for filing.

I'm not sure if they have passed legislation in MT for the Series LLC. This is something you'll need to check with a local attorney.

We've used them in California, Alaska and Nevada.
 

RE Taipan

Contributor
Aug 28, 2007
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Balboa Island, CA
Thank you everyone and especially for the "speed" rating, I feel like one of the "gang" now. I'm glad to contribute and help others on this board.


Easy $ in NC....I was fortunate enough to have some prior experience in setting up corporations. I looked at the problem, developed a set of potential solutions then picked the one that worked the best. So I set this up myself -- the only other assist I had was the legally required resident agent in NV.

I don't know if providing the resident agent's name/contact info is allowed on here (so as to appear as an "ad" for them) so if you need it, please feel free to PM me and I'd be glad to give you the resource/contact info.
 

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