Why Your Assets May Not Be Protected…..

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As you know, there are over 80 million lawsuits filed every year in the United States. Frivolous lawsuits alone are said to cost the United States over $200 BILLION annually. Even in this current ecomony, things could turn and go back down.  If money gets tighter will more get desperate? How many entrepreneurs abandon their business, which was there vehicle for financial success, and now look to a much easier approach…like suing you and your business. Does someone look at you as their retirement plan? For many Americans, their only option for retirement is to win the lottery or sue someone. I know, not very uplifting, but conceivably reality. This may be the last wake up call to button up your asset protection plan, tax and bookkeeping, and business credit so you and your family are protected. Unfortunately, one entity is not a catch-all for results. Let me ask you these important questions to show where you may be very vulnerable:

1. Do you still operate a side business as a sole proprietorship? That is like playing Russian Roulette with your financial future.

2. Do you own real estate in your own name (separate from your residence)? Even if do not have any equity, to others you must be rich and a target. That is like walking around with a big sign on your forehead that says, “I own real estate in my own name, check it out online…go ahead and sue me.”

3. Are you relying upon your living trust to protect your assets? They do not protect from liability! Do you have family members or parents that are doing the same? That is an open invitation for someone to take their net worth.

4. Do you own safe assets in your own name (like gold and silver)? Is it enough to protect with a separate legal entity from your operating business? Maybe it is a “small” amount in general. The question you have to ask yourself is how would you feel if you woke up tomorrow and your “small” investment was gone? Now…that maybe a different feeling. Losing 100% of your investments no matter how “small” may be a very big deal to you. It is time to protect them before it is too late!

5. Are you operating a business with a partner as a general partnership on the side? That is a double danger because now your partner could cause you to lose all your assets. Are you waiting to make more money first…remember, you cannot buy homeowners insurance when your house is on fire…and you cannot protect yourself (very well) after you have been sued. If you have $100K in assets and are sued for $100K you cannot form an entity and transfer them to protect them (well you can do anything you want but…) the judge will call that fraudulent conveyance and undo your transaction if your goal was to protect your $100K because of the $100K lawsuit. If you had $200K and you did not mind leaving $100K on the table to be taken, that is different…but why be in that position when there is a better way? This is only one threat your business is up against. The other is the IRS (and they are hurting big time when it comes to collecting tax revenues). Are your records up to date? Do you have any records other than an online checking account balance? That is not a business, but a hobby according to the IRS. Finally, is your business financially naked?

How much revenue are you losing on a daily, weekly, or monthly basis? Read the article on how to position your business so you are not financially naked and have an opportunity for success!

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Attention: Sole Proprietorships – Discover Why You Have the Wrong Business Structure to Grow.

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Have you updated your goals going into the fall for this year? If the outcomes you’re looking forward to this year include making more money, gaining more clients, boosting your profits, cutting your taxes or attracting lucrative joint venture partnerships…

the FIRST STEP is to STOP operating as a sole proprietorship! This is the time to make the shift, not waiting another 5 months until January. You want to escape the sole proprietorship trap for many important reasons:

1. Highest Audit Rate. Filing a schedule C means you are 300% more likely to be audited by the IRS . Why? The IRS is has a $300 BILLION tax collection gap each year, and a large percentage comes from small business owners who file a schedule C – not large corporations. In the eyes of the IRS, small business owners are more likely to under report income and exaggerate expenses. Now, I’m not saying that you’re making these big mistakes yourself, but the IRS will ASSUME that you are, simply because so many other sole proprietors do. That makes you an easy audit target!

2. Highest Taxes. Sole proprietorships pay the highest business tax rates. Not only will you pay the 15.3% employment taxes up to $118,500 in 2015, plus 2.9% for Medicare, you may also be required to pay a number of other state and federal taxes. Of course, as a business you may be able to offset some of that with business expenses or home office deductions (assuming they’re all properly set up and documented), but referring back to point #1, you’re setting yourself up for a potential audit.

3. Highest Liability. Here’s the bottom line for sole proprietorships – when you do business in or own name or under a DBA, you have UNLIMITED PERSONAL LIABILITY for ANY legal issues that come up . Without the protection of a properly structured separate legal entity you may lose most of your personal assets, including the equity in your home. Maybe you’ve been operating as a sole proprietorship because you don’t have many assets to protect right now. If you hope to change that in the future and accumulate more wealth, it’s worth considering that you could be sued later for something you’re doing now. If someone gets a judgment against you, they could chase you for years waiting until you DO have assets to go after. Sole proprietorships offer no protection – even against frivolous lawsuits which run into hundreds of billions in the U.S. each year. Our research turned up a woman who filed over 700 lawsuits. Her “business” strategy was targeting people with money who were unprotected and a person like that will go after anyone!

4. Fewer Funding Options. Operating as a sole proprietorship means you’re self financing your business – most likely on your personal credit cards! That drives your revolving debt up and your personal credit score down – which can hurt your chances for business credit later on. Even though it’s vital to keep business and personal credit separated, your personal credit history does affect your ability to qualify for certain kinds of cash funding options – including the amount of money you get and the interest rates you’ll pay. The key is to STOP using personal credit to finance your business and form a separate legal entity ASAP. This critical step paves the way for financial credibility – which means more and better opportunities to use other people’s money to grow!

5. A Lousy Marketing Message. If your first year profit projection is under $50,000, a CPA or tax professional might advise you to “keep it simple” and start out as a sole proprietor. In rare individual cases that might be good tax advice, but it doesn’t position you for long term success – there are other essentials to consider if you want a complete business foundation. When potential customers or important suppliers or partners are evaluating your business, what MARKETING MESSAGE does your sole proprietorship send? Sharp business people may take it as a sign that your profit (and longevity) expectations are LOW and take their business elsewhere. Sadly, they may never tell you the real reason why they chose not to do business with you – would you risk your own money, reputation or relationships on a company that might not be around tomorrow? You may have already lost revenue and growth opportunities if you’ve been operating as a sole proprietorship. If so, it’s time to position your company as a winner with the right foundation for success.

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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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Is Your Business Screaming For An IRS Audit?

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As tax time nears you should be aware of the trends that are clear – the IRS is targeting more small businesses for audits and they’re denying deductions left and right.  Sole proprietorships are especially at risk. I have confirmed with my CPA networks that there is a huge risk to continue to operate as a sole proprietorship. Our CPA contacts are also recommending that you should get off schedule C in 2014 ASAP.

Here are just a few of the audit trigger red flags that IRS agents are watching for:

  • claiming 100% business use for your vehicle (this will almost certainly invite an audit)
  • large deductions that seem out of proportion for the business (this is what their computer systems look for)
  • any schedule C deductions for business travel, meals or entertainment (you are able to take these deductions but if excessive and if audited not documented properly you are toast)
  • hobby losses claimed as business expenses (you best be able to prove you were a real business)
  • regular wage income combined with large schedule C losses (you must prove you had a real business, which we teach you those requirements on the training below)
  • any documentation that doesn’t meet their strict substantiation requirements (this is NOT your CPAs responsibility, it is yours)

 The vehicle deduction is a very common slipup. The IRS knows that 100% business use is extremely rare, especially when there’s no other vehicle for personal use. Activities like photography, dog breeding, car racing or other sports or outdoor activities are tough to substantiate as business expenses because they look like hobbies to the IRS.

Could your business be sending an “audit me!” message to the IRS? The surest way to protect yourself is to establish a complete foundation for your business, starting with a properly formed separate legal entity. Do you know the 5 essential elements of a complete business foundation? Take advantage of this brief, free training to find out where you may be vulnerable to the IRS!

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NEW TrainingThe 5 Essential Components for a Complete Business Foundation: 
http://budurl.com/LaunchWithConfidence

Pick your time and date to be part of this special training.

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Operating as a Sole Proprietorship?

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It’s a safe bet that you started your business to succeed and make money, not to add stress to your life and lose money.

To cut to the chase, operating as a sole proprietorship is NOT the fast track to success – in fact, it’s the shortest path to join the 95% of businesses that fail in the first 5 years.

To be fair, you probably made this choice for one of three logical reasons; (1) you were looking for the easiest and cheapest way to get started, (2) you wanted to test the waters to see if your idea would make money, or (3) your tax advisor told you to keep it simple and go the sole proprietorship route until you earn more than $40K to $50K in profits.

Risk taking

Unfortunately, that decision sends a different message to the rest of the business world:

“I don’t believe in myself, my product or my service or I don’t expect
to make $40K in profits.”

For going on two decades now, I’ve helped over 6,000 entrepreneurs reverse that message, escape the sole proprietorship trap and make a fast start to profits. Here are just a few of the strategic insights that woke my clients up to the money they were leaving on the table:

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