Limited Liability Companies (LLC)
Limited liability companies (LLC) have, in a few short years, become the favorite choice by new entrepreneurs for their business entity. Wealth Support Services forms LLCs in all 50 states and can design the structure of the LLC to meet your needs.
Nevada LLC Formation or limited liability company (LLC) is the new kid on the block. It was first authorized in Wyoming in the mid 1970s. It wasn’t until the mid 1990s that all 50 states recognized the LLC as a valid legal business entity. However, in a few short years it has become one of the favorites used by new entrepreneurs as their entity of choice. There are several reasons for this.
The LLC provides the client with the greatest tax planning flexibility of all business entities. It may be taxed as a C corporation, an S corporation, a partnership, a sole proprietorship or be a disregarded entity and not be required to file a tax return at all. When used in conjunction with a C corporation, and it will provide you with the greatest tax flexibility as well as the most pretax business expenses.
Additionally, the Nevada LLC Formation may be done in several ways. It may be a “member managed” LLC, in which the owners or “members” are also the officers and directors, and every member has managerial responsibilities. It may also be formed as a “manager-managed” LLC. In this case, one or more persons or entities act as the officer and director. A member may also be a manager, but it is not required. Nor is it required that the manager also have an ownership interest. When one or more managers have been designated, the members merely become passive investors. They’ll have no managerial rights or responsibilities at all.
Like the limited partnership an LLC provides tremendous asset protection too. In fact, the it provides greater asset protection than the limited partnership. Neither the members nor manager is liable for the debts and obligations. So, if the it is sued and you are a member you may lose your investment, but you are not liable for anything above that investment. The judgment creditor cannot attempt to collect the judgment against from the member. The same is true of the manager in that, statutorily, the manager is not liable for the debts and obligations.
Members are protected by the “charging order” protection. In the event of a judgment against a member, the ownership interest is protected. A court may not order the member (the judgment debtor) to give his/her ownership interest to the creditor. The Court can order the LLC to pay the judgment creditor the profits which are due to the member (the judgment debtor). But, the ownership interest is never at risk. And, if the manager determines not to pay any profits to the members, the judgment creditor receives nothing, but still must pay taxes on the profits that he/she is otherwise legally entitled to receive under the terms of the “charging order.” So, the judgment creditor does not receive any ownership interest, nor does he/she receive any profits. But, he/she must still pay the taxes on the money he/she did not receive.
The use of the LLC to hold your assets not only gives you asset protection, but it will also provide you with anonymity of ownership. The LLC is not formed in your name even though you will control it. But, because your name is not on the formation documents, your ownership identity will be shielded from prying eyes.
Contact Wealth Support Services for additional information to determine if an LLC is the best business entity for you.
Low-Profit Limited Liability Companies (L3C)
A Low-Profit Limited Liability Company (L3C) is similar to a limited liability company (LLC), in which owners actively manage the company but are not personally liable for the organization’s debts. However, an L3C is a hybrid of an LLC and a non-profit business model. In a non-profit, an organization’s goal is to serve the general public and it operates without a profit motive.
The L3C has become a combination of a for-profit and non-profit business. While the company technically earns profit, it conducts business with the goal of aiding a certain cause or charitable focus. The L3C enables socially conscious businesses to operate, while also attracting funding from foundations and private investors. Additionally, L3Cs can benefit from branding and marketing that highlights them as socially responsible and will attract like-minded customers, employees, and donors who wish to work or spend money with a mission-driven company.
Company’s forming an L3C must also consider the legal requirements of this business formation. When a for-profit L3C receives investments from a foundation, the L3C is responsible for meeting the requirements of a program-related investment (PRI). The PRI makes it legal for a foundation to support a for-profit organization that conducts philanthropic activities, while also allowing the foundation to meet its annual tax obligations to give a portion of their assets to charitable causes.
Above all, the L3C provides all the tax benefits, flexibility of ownership, ease of management, and shared or sole decision making power that has long been associated with an LLC. And while benefiting from this formation business model and asset protection, L3Cs also enable for-profit companies to focus on their philanthropic or educational mission.
Wealth Support Services proudly forms L3Cs for socially-conscious companies across the United States. Contact us today to take the first step toward proper entity formation for your business.
Limited Liability Partnerships (LLP)
The limited liability partnership (LLP) is an entity of Historical Stability, and it is recognized in all 50 states. Similar to an LLC, the LLP is a pass-through entity, meaning the partners receive untaxed profits from the partnership, and they must pay taxes on their earnings.
Yet LLPs have become the more popular business formation option for groups of licensed professionals. Law firms, medical practices, architecture and engineering firms, accountants, dentists, and others benefit from the limited liability protection they receive under the LLP.
An LLP allows each member of a firm or practice to take an active role in running the partnership—without being personally liable for the actions of other partners. Unlike a general partnership, each partner in an LLP is only liable for their own debts, negligence, and/or wrongdoing. The limited liability partners do not have to worry about being held responsible for their business partner’s potential mistakes. This is especially important for all professions where partners can be targets of malpractice claims.
An additional advantage of forming an LLP is that it allows partners to join and leave the partnership. Since many professional firms are run by a group of partners, an LLP formation allows partners to join and retire, as outlined in the original partnership agreement. Often the decision to add new partners requires the approval of each current partner, but it enables the LLP to grow as new partners bring existing businesses with them.
LLPs also offer a large amount of flexibility to partners when it comes to running the partnership. Partners have the option to delegate business operations to a managing partner or a committee of partners. Conversely, partners may assign duties to one another based on interest, experience, or specialization.
The specific details of an LLP formation depend on the state in which you create it. In general, a partner’s personal assets will be protected from legal action. The partnership becomes the main target for a lawsuit, but each partner’s personal assets will be protected from creditors.
LLPs are critical business formations for professional firms. Wealth Support Services has the experience and knowledge to form these important asset protection entities for you nationwide.
Corporations
Corporations have long been the business entity of choice. They have been around for well over one hundred years. Every court in the country, both state and federal, has ruled on corporations. What are they? What protection do they provide for stockholders, officers and directors? What business expenses can they deduct? What property can they own? Every question concerning corporations has been raised and answered by the courts.
Wealth Support Services has formed thousands of corporations since its formation in 1998. We consult with clients to determine if a corporation is the best entity for their goals, and we help determine the most advantageous state in which to file the entity. Wealth Support Services is experienced in filing all types of corporations in all 50 states: C corporations, S corporations, professional corporations, as well as nonprofit corporations.
If a client desires to file a charitable tax exempt corporation, Wealth Support Services has worked closely with clients’ CPAs to assure that the Articles of Incorporation for that corporation will comply with the requirements from the IRS.
After the corporation is filed, Wealth Support Services will obtain its EIN from the IRS. Additionally, Wealth Support Services will also provide clients with a completed Corporate Records Book. In addition to detailed By-laws, the corporate record book will contain the completed organizational meeting and resolutions relating to the issuance of stock, appointment of Board Members and Officers, authorization to open bank and other financial accounts, as well as many other necessary resolutions. When clients receive their book, all they need to do is sign it in 4 or 5 places, and the entity is ready to operate!
Corporations also provide some asset protection. If the corporation is sued, generally the client is not liable for the debts and obligations of the corporation. If the client is sued, generally the assets of the corporation are not at risk.
The State of Nevada provides the greatest asset protection for domestic corporations. Nevada is the only state in the country which provides “charging order” protection for the stockholders of domestically formed privately held corporations. (A domestic corporation is a corporation formed in Nevada.) This means that if a stockholder is sued, the judgment creditor cannot take the stock held in the corporation as satisfaction of the judgment. Every other state permits this to happen. So, in Nevada, your ownership interest in the corporation is safe from the financial vultures.
Additionally, Nevada provides anonymity of ownership of a corporation. The only public information relating to corporations is limited to the names and business addresses of the members of the board of directors and the officers. Stockholders are not listed publicly and, therefore, cannot be revealed to a member of the public who merely wants to know the stockholders of a particular corporation.
Utilizing a corporation will give you asset protection and reduce your taxes. Money earned by a C corporation is taxed at the corporate level. It is not taxed as income on your return. And, the federal tax rate for a corporation is generally lower than the personal tax rate for the same level of income. The splitting of income between yourself and your corporation can result in tremendous tax savings.
Wealth Support Services can form all types of corporations, including C Corporations, S Corporations and Non-Profit corporations in all 50 states of the Union. You will receive a ready to use corporation, with all filings and Federal Tax registration completed.
