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Jim Bache was the "glaring" moderator today. The
topic...Formation of Entities.
The three big areas of concern
- State Law
- Taxes
- Management Issues
A little history...In the beginning there were sole
proprietors. And it was good. But these owners
needed help. Partnerships were formed. Limits
were needed so limited partnerships evolved. After a
while, because of problems and the need for capital,
corporations were started. Things have evolved even more since then.
LLC's formed because many of the smaller corporations
didn't like disclosing their information in the annual
report.
Your corporation status does not shield you from
negligence. Mark Dreher told a true story of a former
colleague that had a great deal of personal wealth from an
inheritance and his job. He lost 100% of it due to the
negligence of another partner in the large firm that he work
with.
An LLC allows you to have the partnership structure with
the shield of a corporation.
When should you consider changing your corporate
structure? Some things to consider...
- What is your exit strategy?
- What are the tax advantages?
As an LLC your should really try to identify yourself
appropriately.
An ESOP is only as good as the company is. An ESOP
comes under the ARISA law.
It has been said that in the next 20 years, the biggest
area of litigation will involve retirement plans. If
your company offers a retirement plan you will become a
target. To help defend against this, make sure to
maintain minutes of meetings. As a fiduciary you have
to be active.
Chris Curran offered some simple advise. We spent
the last 45 minutes talking about protecting assets. If
you have assets, call Roman and get insurance.
90% of the structure decision is based on the tax
consequences. Where do you start? Mark Dreher
starts with an S-Corp for tax reasons. An LLC is a
partnership by default. Partnerships are extremely
complicated from a tax standpoint. People don't like C
corporations because of the tax rates.
Many people don't like all that corporate compliance
stuff. But it can save you. It is a good idea to
keep minutes that prove why you did what you did.
LLCs are good if you are in real estate.
If you are an operating business, there are distinct
advantages to being an S-Corp. In an S-Corp you would
draw a salary.
As a business owner you need to have a good team - a good
attorney, the right CPA and a good investment person.
HANDOUTS