You have an 87% Chance of Forming the WRONG ENTITY…

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Which entity type gives you the BEST protection for your business and personal assets? Which one helps you pay the lowest legal taxes now and later? Here are the most common options:

1. Sole Proprietorship

2. C Corporation

3. S Corporation

4. Limited Partnership

5. LLC Taxed as a disregarded entity

6. LLC Taxed as an S corporation

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Incorporate Your Independence from Lawsuits, Taxes and Death

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July is a special time of the year. It is a time for family trips, vacation time, seeing relatives and friends, barbecues, swimming, summer concerts and fun at the cabin!

It’s also the month we celebrate our independence and freedom as a country. So this month of July my goal is to help you maximize your independence in your business from:

  • Lawsuits (Separate your personal and business assets and form an LLC or corporation to protect you and your family from devastating unpredictable lawsuits). Avoid the $99 corporations -which is like buying a car without brakes!
  • Taxes (Operate your business as a business, not a hobby, maximize your meals, travel and entertainment expenses and bullet proof your records from an IRS audit).
  • Death (Will you’re loved ones be protected when you pass on? Will all your assets and all you worked for be tied up in the probate courts? Proper estate planning is a must to protect your family’s future).

I’m going to be sharing with you high level strategies, ideas, tools and concepts that will allow your business to achieve its independence and freedom that you deserve.

Also, if you need support during the month of July with forming a complete foundation for your current business or a new business, you will be able to take advance of our July Independence Special Incorporating Offer that will help you and your business celebrate it’s true independence in the month of July and on.

Remember, to put you and your family in the best position to be independent. Even if you are already financially independent, are all your assets protected from attack? If you are building your financial independence every dollar counts in taxes saved, which may be reinvested to help you grow and expand.

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Watch this FIRST, Before Forming an LLC or Corporation

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If you’re looking to form an LLC or corporation you must watch my BRAND NEW training to help you learn the 5 Essential Components of a Complete Business Foundation.

Why is this so important? Here’s what my friend, Attorney Lee Philips, said about businesses that rely on online articles of incorporation as their only form of legal protection:

“We slice through those in 15 minutes in court and go after the individual every time. That piece of paper provides NO protection!”

This is a direct quote from a legal expert, a counselor to the U.S. Supreme Court who has tried many cases representing plaintiffs. His courtroom experience has shown him that most business owners have no clue what complete formation entails.

Over the last 17 years my company, NCP, has helped thousands of entrepreneurs launch with confidence. Our COMPLETE FORMATION PROCESS ensured that they were starting out with more than just a flimsy piece of paper that provided no protection.

Lee’s comments inspired me to take our training to the next level – we want every NCP client to be CLEAR beyond all doubt what it takes to form a complete and secure business foundation. The result is my  BRAND NEW training called, the 5 Essential Components for a Complete Business Foundationand now you get access to it for FREE (for a limited time).

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Click here to register or get more information: http://budurl.com/LaunchWithConfidence

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Entity Structuring Fundamentals

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Anytime you form a separate legal entity for a business or to protect safe assets, it is very important to complete the entity structuring fundamentals.

When an entity is formed you should be very clear on the structure that is best to support your goals, both short- and long-term. For example, a C corporation may have lower tax brackets than you or I do personally AND you may pay fewer taxes in year one, but it may be the WRONG structure for your results in year 2, 3, 4 and so forth. If you are not looking to retain earnings in the company and grow and expand with infrastructure and overhead, it may likely be the wrong entity for your business. If you are forming an LLC, you should know how the LLC is taxed and if it is managed by managers or by members. There is a big difference, especially with how the LLC is taxed. In order to select the best entity, keep in mind that you must approach it from two main points of view: what is the best entity from a tax point of view and what is the best one from a legal point of view.

After you are clear on your goals both short- and long-term, it is time to form the entity. You want to be clear on who is the initial director if a corporation or manager/member, if an LLC. After formation of the articles of organization or articles of incorporation (for a corporation), your next step is to open a bank account and capitalize the new entity. This seems simple, but there are so many people that open an LLC bank account with a check with revenue and never properly have the owners capitalize, put money into the account, in exchange of ownership in the company. If you are the owner of the entity, you should be the one putting money (or service or equipment) into the company in exchange for ownership interest. If you have another entity that is the owner, that entity would put money into the operating company in exchange for an ownership interest. If you have a partner and you are not each going to put in capital to match your ownership percentage and one is going to contribute services, that may be a taxable event (check with your CPA). In other words, if you get a 50% ownership in a business with no money in exchange for your labor (sweat equity) and your partner puts in $50K for their 50% ownership, the IRS looks at this as if you obtained $50K in value and would owe taxes on the $50K. In that situation, are you able to say of the $50K, $45K was a loan and therefore if your partner put in $5K also, then there is no tax issue. That is correct, but now you have a totally new situation where the business will need to pay back the $45K loan out of profits before either partner is paid any profits.

Next you have to make sure that if you were operating as a sole proprietorship before or a general partnership now, that when you form the entity you actually make a complete transition to that new entity. Over the years I have seen too many people that are still operating as a sole proprietorship, even though they have formed an LLC. How is this possible? Several mistakes are when you don’t open a new bank account in the name of the LLC or corporation and keep operating under the bank account in your name as a sole proprietorship. The other big issue is if you have a DBA or fictitious firm name linked to you personally and you form the separate legal entity and forget to reconnect the DBA name to the NEW entity – that is a big mistake.

Corporate and LLC formalities are a must (even if you incorporate in Nevada). A corporation and an LLC are separate legal entities from you and I personally. They can do everything you can do except act and think. They do that through minutes, meetings and resolutions. This is the documentation for major decisions made by an entity such as adding a shareholder, changing the officers or managers, leasing real estate…Some falsely believe that LLCs are “easier” because they do NOT require the same formalities as corporations. When we did our research years ago with looking at what judges actually do, we found they expect to see the same corporate formalities that apply to corporations. That means an LLC will need an operating agreement, minutes, meetings and resolutions for major decisions, membership certificates and a membership ledger to track the owners. This is all part of protecting both the LLC and corporate veil. If someone is going to sue your entity and you do not operate it as such a legal entity, then you MAY be personally liable. Managemyminutes.com is a great resource for online software to help walk you through the minutes and meetings required.

The final big step to make sure your entity is structured properly is to make sure your taxes are being paid properly. That starts with knowing how your entity is taxed and the responsibilities with that. If the entity is an LLC taxed as an S corporation, at some point in the year you will probably have some type of payroll required, even if just to pay yourself. If you have an LLC taxed as a partnership you will realize if you are one of the members of the LLC, you will not be paid a salary. You may be paid what is called a “guaranteed payment,” which is similar to, but not a W-2. It is very important to make sure that you work with a good tax team to keep you on track with your business entity.

Making sure your entity is in compliance is a very important step in the process to build and protect your wealth! Take the time to create an action step or two so you keep moving forward in your business and towards success!

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7 Important Reasons to Form a Corporation or LLC for Your Business.

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Are you operating your business as a real business or as a hobby? It’s time to make your business OFFICIAL before the summer push for business!

Let me ask you two important questions:

  1. Are you operating your business under your own name, a DBA or fictitious firm name, basically as a sole proprietorship or maybe as a general partnership? AND/OR
  2. Are you or your family at risk because of business or personal assets that are unprotected from unexpected losses or legal issues?

If you answered YES to either question please read on for important news about why NOW is the time to form an corporation or LLC for your business.

  1. Make it Official. Operating as a sole proprietorship or general partnership sends a message that you are still “testing” your business, or that you’re not sure you’ll really make it. Perhaps your accountant told you that incorporating is an unnecessary expense or that it won’t help you save on taxes due to an expectation of low profits. This is the WORST marketing message you can send when you want to attract new clients and partners to your business, who want assurance that you’re about your business and here to stay.
  2. The Law of Attraction. You get what you focus on. Testing, hoping and “seeing if things work out or not” BEFORE you decide to step-up and make your business official by incorporating broadcasts a clear message to the universe that you’re not really serious about your business or committed to a positive outcome. The Law of Attraction states that the universe returns not what you wish for, but what you program into your deepest belief system through your dominant thoughts, actions and feelings. Making your business official and really stepping up says, “I am ready to receive!”. 
  3. Limited Personal Liability. You may be thinking “I already lost everything in the market collapse from 2008” and still recovering. If you’re one of the few that managed to survive and grow your assets since then, but are still holding them in your own name, you’re playing a VERY RISKY game (similar to those with assets in unstable European banks). Even if you don’t have any assets right now, a lawsuit or judgment will destroy any credit you are looking to build in the future PLUS you may be looking over your shoulder for years waiting for someone to come after you when you finally do start to turn things around. That’s no way to live your life. One lawsuit from an unprotected business can ruin your chances of getting a personal auto loan or refinancing your home. Good people who “play by the rules” can still be sued for the most unexpected reasons. You may be thinking “my business insurance will help me out” but are you really covered? Even if your business is never sued, what if you’re unable to pay a vendor and they come after you? Do you want to be personally liable? Put a halt to greedy people looking to take what you have worked for! This is the best time to form an LLC or corporation to limit your personal liability.
  4. Reduce Your Taxes. The bottom line is that operating as a sole proprietorship will cost you the most in employment taxes (up to 15.3% on earned income up to $113,700 in 2013). That means that your income will be taxed as the HIGHEST possible TAX RATE as a sole proprietorship. By the way, filing a Schedule C (the form filed for earned income from a sole proprietorship) also means that your business is among those MOST LIKELY TO BE AUDITED. Why? The IRS has a $300 BILLION tax gap and they believe the biggest tax cheats are the little business owner like you. Why? Their stats show them that sole proprietorship are MOST likely to UNDER report their income and OVER report their expenses (two big no-no’s with the IRS). Operating as an S corporation or LLC taxed as an S corporation in many situations is a much better approach for two reasons. You will have part of your profits as distributions which are NOT subject to the 15.3% employment taxes AND move that profit to schedule E, not schedule C which is more likely to be audited!
  5. Access More Funding Options. Operating as a sole proprietorship or general partnership limits you when it comes to funding options. You are also DAMAGING YOUR PERSONAL CREDIT SCORE by operating this way. How do you finance your business as a sole proprietorship? You use your PERSONAL CREDIT cards which will drive up your revolving debt which will in turn DRIVE DOWN your personal credit score! When you form a corporation or an LLC you will SEPARATE your PERSONAL and BUSINESS CREDIT. Yes, any type of cash funding with a personal guarantee will come into play, but that DEBT does NOT show up in the personal credit bureau which is HUGE for future funding! As you form a new LLC or corporation NCP will help (if you choose) to build your business credit scores quickly and get your business in a position to secure funding to grow. But the first step is to form a separate legal entity.
  6. Simply Your Life. Yes, in fact operating as a sole proprietorship will complicate your life, not the opposite. Separating your business and personal life will make it much easier for you to navigate both from a financial and legal point of view. Now you will have each in its own compartment where it belongs to protect your overall success.
  7. Asset Protection. Forming an LLC for your safe assets like investments (those outside a retirement plan) will help you sleep better at night knowing you don’t have all your “eggs” in one basket. If you are using a LIVING TRUST to protect your assets that will NOT work and everything in your trust may be vulnerable. Do you own other businesses that really should be operating through a separate bank account in a separate entity? Do you own real estate in your own name that may be sending a message that you are rich and have assets worth taking? Have you been in business for years or are you operating more than one business in one entity? Are you doing some business with a new partner and making the big mistake of running that revenue through your current business? Avoid these costly mistakes and form a separate company for that separate business.
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