By: Michael Ioane
There would be occasions when your protection requirements go beyond estate planning and the holding of properties and assets. If you run your own business, you should consider how you can defend the properties, assets and profits of that business. In general, you can form one of three business entities: a C corporation, a Limited Partnership (LP) or a Limited Liability Company (LLC).
There are reasons for and against each type of business entity. A C corporation is a good idea if you want to be capable of easily transferring its ownership. It’s a way to quickly raise capital by offering shares of stocks. A Limited Partnership offers less tax liability. If there is no intention to transfer ownership or decrease tax obligations, an LLC should be the best option.
Once you have decided on the business entity you wish form, you should next choose whether you should form this entity onshore or offshore. Review the current laws in your state and approach a professional for information. If the laws provide adequate protection and privacy for your needs then there is no reason to form an offshore entity. If an offshore body is better, check registration requirements, costs and jurisdiction issues.
If an LLC looks like the way to go, you should also decide how you wish to be taxed. You can have your LLC considered as a C corporation, an S corporation, a partnership or a disregarded entity multi-member LLC (DEMMLLC).
This single layer of defense is often not enough. You must decide on the structure of your affairs. It is often desirable and necessary to weave multiple layers of protection around your assets and properties. This is more apt when you are in a high-risk field. Professional services like those offered by accountants, attorneys and physicians are prone to problems. Having plenty of assets also makes you more likely to become a target of lawsuits.
Should you decide to create a micro-business (MBO) for privacy reasons, there are still more hoops to jump through. To open a bank account, for example, you would need to create an LLC and a Privacy Trust. This is how you can keep your privacy by avoiding the need to provide information about yourself to the bank. Make the Privacy Trust a member of the LLC and open a bank account using the LLC. The trustee can then sign all the paperwork.
After all these preparations, you must file and pay for what is required from the entity you created. You would not want to earn the ire of the Internal Revenue Service (IRS) because that puts your entity at risk. Remember that you formed the entity to protect assets, not to endanger them by non-fulfillment of obligations.
Defending an earning business is not an easy task as there are many details to consider. To find out more about how all these are done, get a copy of “Asset Protection Manual” by Michael S. Ioane and figure out what entity you need to form and how you should go about creating it.