Costly Mistakes to Avoid as an Officer of a Corporation or Manager of an LLC!

Apr 10, 2019 by

Forming a separate legal entity is a huge step in separating your personal and business liability. You obtain liability protection with a separate legal entity the day you file the LLC or Corporation.

What most people do not realize is that after day 1 and beyond you are not protected unless you operate the entity as a separate legal entity.

That involves avoiding commingling of funds, proper capitalization and proper minutes and resolutions as your role as the director, officer, shareholder or manager, member or member of an entity.

Typically as a director of a corporation or a manager of an LLC, your liability is limited personally. As long as you operate within your role as the manager of an LLC or director of a corporation. Nevada will protect you as long as you do not commit fraud. Other states have a minimum fiduciary duty or duty of care.

Let me cover for you the biggest mistakes we have seen over the years that have caused unnecessary liability to directors, officers and managers:

Not using your corporate or LLC title
when signing contracts, checks, documents, licenses…followed by the name of the entity. Signing your name without any title or reference to your company may mean that you are representing yourself personally and that brings personal liability to you. You presented yourself as an individual vs. the manager of an LLC. That is a huge mistake.

Continuing to operate as a sole proprietorship even though you have formed a separate legal entity.
This is a big one. This means you are operating a business in your own name, for a month or several months before you formed the LLC or Corporation. Perhaps you filed a DBA name (doing business as) like Marketing Solutions
and the new LLC is Marketing Solutions, LLC and you are still doing business under Marketing Solutions with the bank account in that name under your SSN. That is a huge mistake! Reconnect that DBA name to the new LLC or Corporation. You do that by dissolving the DBA linked to you as the applicant and re-file that same day a new application with the LLC as the applicant. Now the DBA name is connected to the LLC or Corporation for liability and tax purposes.

read more

82 Costly Sales Tax Registration Mistakes to Avoid

Mar 29, 2019 by

Your Steps to Simplify Your Sales Tax Compliance.

We created this new report recently for new e-commerce sellers looking to get into compliance with sales tax and are at the stage to get registered for sales tax in many states. This content is covered in various parts inside your Sales Tax System membership.

We wanted to share this report for you also as it is a great reference guide as you get into compliance with more states where you have physical or economic nexus.

read more

Patterns that Create Business Failure and Business Success—An NLP Prospective

Mar 29, 2019 by

Business and life do have patterns of success and failure. NLP (neuro-linguistic programming) is the study of the connection between the neurological processes (“neuro”), language (“linguistic”) and behaviour patterns that have been learned through experience (“programming”) and can be organized to achieve specific goals in life and business. I like to use this simple definition: it is a study of patterns or recipes. If you have a great recipe for your favorite meatloaf there are certain ingredients that if are added in the correct amounts and sequence will create a specific result. This is similar to an NLP pattern.

For example, good spellers do one thing differently (or have one more ingredient) than bad spellers. Good spellers will first see a word visually in their mind, sound it out, and then spell it. Bad spellers will skip the step of visually seeing the word and jump right to sounding out a word, then attempting to spell it out. Good spellers have a different “recipe” than bad spellers. They have one ingredient different.

In business, there are patterns of success and failure. One core pattern for business success is the Disney pattern. This was molded after the famous Walt Disney. Walt and his team of Imagineers were able to accomplish amazing results with their meetings. Walt did not run a meeting like most business meetings. He would separate meetings into different meetings. In the first meeting, called “the dreaming room,” you are allowed to come up with ideas and that is it. There is no evaluation or organization of ideas. That is a separate meeting! Why? If you start
allowing your staff or yourself to evaluate ideas in the meeting many times that will stifle the new ideas. People will start to think, “Maybe my idea is not such a good idea”. That is NOT how Walt Disney conducted meetings.

I would recommend you adopt this pattern for your business meetings. Here are the four meetings Walt would run: First is the “in the dreaming room” – all brainstorming. Second is organizing the ideas. The third is to evaluate the ideas. Fourth would be to implement the ideas.

This was his brilliant pattern for business success. This is especially important if you are a solo business owner. You may be sabotaging your own success by coming up with great ideas and immediately thinking how can this NOT work. That will stifle even your own ideas.

Another pattern that seems to prevent a lot of success is lack of time management skills. Most people think they are very good at managing their time and they are really not. You can calibrate in a minute to how well you are doing and perhaps consider a different pattern for success.

The poor time management pattern looks like this:

read more

Related Posts

Share This

Steps to Schedule a Call with Scott Letourneau

Mar 27, 2019 by

Thanks for coming to my website today. If you need support with your important questions about entity formation, sales tax compliance, funding, or other business resources, here are my options below.

1. Free Evaluation and Recommendation Call:

Our first option is a scheduled free call. This is best to for us to understand your situation and make the best recommendation for you.

read more

Sales Tax Permit Registration Mistakes to Avoid

Mar 21, 2019 by

As an e-commerce seller, you want to avoid sales tax permit mistakes. This is the key part of the process when you are collecting and remitting sales tax.  Yes, some states like Washington and Pennsylvania will collect sales tax, but you still need to get registered and file sales tax returns.

Sales Tax Registration Mistakes to Avoid

Avoid these Costly Sales Tax Registration Mistakes

The process to get registered means obtaining a sales tax license or permit to collect and remit sales tax in the states where you have sales tax nexus. Since the June Wayfair vs South Dakota case, you now have to worry about the economic nexus states in many cases when you sell only 200 transactions in a state.

We have applied for thousands of sales tax permits for clients over the last several years and we wanted to share some key costly mistakes to avoid.

1. Are You Applying for a Sales Tax or Use Tax Number?

 Are you an out-of-state seller applying for a sales tax number or an in-state seller applying for a sales tax number? Each state is different. In some states, it is very clear, if you are an out-of-state seller, you are applying for a use tax permit, some states they combine sales/use tax as one option. Every checkbox takes you down a pathway and may come back to haunt you when audited; just make sure you get it right from the start.

2. Not Taking into Account Time Frames.
read more

How to Transition from One Company to Two; Effectively and Without Pain!

Mar 17, 2019 by

When starting a business you formed a separate legal entity to separate your personal and business assets, lower your audit of risk, improve your chances for more business credit and convey a more important marketing message. As time goes on and your business succeeds you will want to examine when the time is right to form a separate legal entity to now reduce the liability exposure to your current business.

You may have a successful online internet business and now you are going to introduce a new product to your list that may have more liability associated to it. An obvious one would be if you were looking to invest in real estate. That would definitely be in a separate legal entity from your operating business. Many times I talk to business owners who have been in business for 10, 15 or 20 years and still operating EVERYTHING through one legal entity! That can be very dangerous. That means one lawsuit where the insurance company comes up with an excuse (also known as loophole) where they do NOT have to provide coverage. That means potentially, 10, 15 or 20 years of hard work down the tubes!

Let’s assume you are going to add a second legal entity for part of your business to separate out liability (or maybe you have a different partner on that one). Let’s cover the steps to make this a smooth transition! The easiest way to look at this as if you are starting over with the same steps you used to form your first company. The mistakes come in when you are tempted to take short cuts to save money (like not getting separate business cards, a separate business license)

Here are the steps (for a separate business)

  1. Form a separate legal entity
  2. Obtain a separate LLC/Corp record book.
  3. Obtain a separate EIN number. Each entity has its own EIN number.
  4. Open a new bank account for the new entity
  5.  Apply for a business credit card in the name of the new LLC/Corp.
  6. Separate the expenses related to this new entity.
  7. Apply for a home based business license http://www.businesslicenses.com/
  8. Check with a local professional for other requirements which may include, other state filing requirements with the department of taxation or franchise tax board.
  9. Establish a DBA name to this separate legal entity is required.
  10. Establish a separate set up books. If you are using QuickBooks® create a new company file for the new company.
  11. Obtain separate insurance if required by the company
  12. Establish a separate payroll account if payroll is required.
  13. If the Entity is in Nevada and you are operating in another state, take the steps to foreign register in that state you are doing business.
  14. Establish a 5 year business plan (so the entity is not considered a hobby plus a good idea to keep you on track anyway).
  15. Establish new accounts with vendors for the new business. Even if your first company does similar services, it should be separated.
  16. Establish a separate merchant account and the new entity.

The big key is to be organized. I know it would be easier to just keep things simple, but simple and asset protection are inversely related. Donald Trump does not have all his real estate in one LLC. The key is to separate your assets and diversify your risk, just like you would diversify your investments for success.

read more

12 Questions to Ask BEFORE Forming a U.S. Entity

Feb 26, 2019 by

These 12 questions below are not only important to ask, but are necessary to get the best answer and support. They apply to all foreign e-commerce sellers looking to establish a U.S. entity. Forming a U.S. company is not as simple as forming a single member LLC with a mail address. There is much more involved. These questions will help keep you on track when working with a U.S. entity provider.

US Company Formation

Ask these 12 questions before forming a U.S. company

  1. Do I Even Need to Form a U.S. Entity as a Foreign Seller?

    This leads to your options to sell in the U.S. as a foreign entity vs the advantages of using a U.S. entity.

  2. How Long will it Take to Form my U.S. Company Correctly?

    You will need to know the factors that will determine the length of time to form your entity, apply for the EIN, establish a bank account, as well as get into compliance with sales tax. Don’t get fooled by “incorporate in 24 hours or less” headlines; these usually lead to costly mistakes.

read more

Productive or Busy. Which One Are You?

Feb 2, 2019 by

If you are looking for more results in your business there is a real important piece of self-evaluation that must be considered in order to get better results.

That is, asking and reflecting upon this question; are you productive or just busy? Perhaps your goal for better results from your business may mean more income, perhaps it is the same amount of income with more time off, more time with your family.

Increase your productivity and your profits!

Increase your productivity and your profits!

Most entrepreneurs are simply busy, with no clear cut goals and they are hoping the busy activity will somehow lead to results. I know, because I have been there! I used to pride myself in working 14-16 hours days, 6 days a week at least, doing a lot of stuff, mostly just being busy. I know I was jumping from one priority to the next, creating new projects while 10 others were left unfinished.

Did I produce results in my business, yes most certainty but it was not a very effective approach. The mere fact that I worked 14-16 hour days was not what determined that I was busy, there are many, many successful entrepreneurs who work 14-16 hour days and are very productive, Donald Trump is one of them.

Perhaps your goal is not to be like Donald Trump, but you may have to agree, he has succeeded in his business. Dan Kennedy is another entrepreneur who is like productivity on steroids. When he works, he works, no interruptions!

First, let’s address some characteristics of someone who is busy and not getting any results in their business. You can calibrate to see if you fall more into this category (hopefully not) vs. the productive category.

read more

Are ALL Your Assets Protected Properly?

Nov 17, 2018 by

As the end of another year comes to a close soon and you are getting ready for your plans for the new year, you may be evaluating are all your assets properly protected?

Protect Your Assets from Risk

Here are many of the common strategies that often turn into costly mistakes (that you may not have considered):
  • All your business ventures in one business. Yes, if you are just starting and testing 3-4 different revenue streams that may be ok in one entity but if two or three are really taking off, why put all of that in one business entity (other than it is easier). Would you put all your investments in one stock? Probably not. Why? Too much risk. The same strategy applies to a business (don’t put all your eggs in one basket).
  • Real estate in your own name (outside your principal residence) even without equity may be a lightning rod for lawsuits, best in a separate entity.

  • Too much equity from real estate in one LLC. Especially if the equity is a high percentage of your net worth. If you have three properties free and clear worth $400K each and that is 80% of your net worth, that makes no sense to have in one LLC. Remember, your living trust does not protect assets from liability.
  • Business with a partner that is in the same entity as your operating business that you own 100%. At the end of the day, you make your partner owner of your main company which may not be what you intended.
  • Holding safe assets or investments (crypto also) outside your retirement plan in your own name/brokerage account or your living trust (remember your living trust provides ZERO liability protection but protection from probate taxes).
  • Doing business in the U.S. with your home country entity not knowing that maybe bringing undo liability to your home country business.

It is a great time to form a new complete entity formation (which we do in all 50 states) as you get ready for the New Year.

REMINDER: In January the Secretary of State’s new business filing process slows greatly, so give your business enough time to get up and running for as early in the year as possible.

If you need help to form another entity to protect another business or other assets see our packages below that include a video overview and pricing. Questions? Email support@launchwithconfidence.com. Here are our steps for a Complete Formation for a 50 State Formation. Here are our steps for a Complete U.S. Company Formation.

read more

U.S. Entity Complete Formation Video and Mistakes to Avoid

Oct 27, 2018 by

If you or someone you know is looking to form a U.S. entity for your global e-commerce business, this video will be a big help.

You will want to watch our new video on our process, tools, support, and packages because you will learn what is really involved in the process. The biggest costly mistakes to avoid will be very clear.

If are still selling on Amazon.com FBA or on any e-commerce platform in the U.S., or looking to protect your assets from your home country with a U.S. entity, our U.S. entity formation video will be very helpful.

U.S. Entity Video

Before forming a U.S. entity watch the video on this page.

Here are some of the big reasons you may want to form a U.S. entity:

Perhaps you have been selling in the U.S. and have never collected or remitted sales tax. Although you are hoping it will go away, that is not likely to happen. This is largely due to the June 2018, U.S. Supreme Court Case, Wayfair vs South Dakota. This case has opened the floodgates for other states to require sales tax to be collected even if you have no physical presence.

read more

The Ultimate Asset Protection Structure to Protect Your Net Worth

Oct 3, 2018 by

Lawsuits are at an all-time high; there are over 80 million per year!  The more people struggle, the more they are concocting ways to extract your wealth from you. Perhaps you may not feel you have a lot of wealth, but to others, you may appear rich. Your insurance policies are like blood in the water that the sharks can smell from a mile away!

Make sure your assets are properly protected.

Don’t fall prey to thinking; no one has sued me yet, so why do I need to take these extra steps? My question to you is simple. What is your current risk tolerance given your age and net worth? Can you afford to start over? I have known many have had to do that since 2008.

Keep in mind, simple vs. asset protection is inversely related. Meaning, those are successful, rarely have all their assets in one legal entity. Why? If that entity were to be sued you could lose all the assets in that one entity! Perhaps you will be protected personally, but your business may be gone.

Let’s assume, you are thinking, “Ok, Scott…I want to protect everything, how do I do that”?

Let’s take a look at what that structure would look like.

  1. A separate legal entity for your main operating business. That may be a corporation or LLC.
  2. Another separate legal entity to separate your business into two parts. If you are brand new this is not
    necessary. But if you have been in business for 20 years in one legal entity, that means one lawsuit could cause 20 years of business to go down the tubes. You may want to split up your product lines or services. If you do seminars that may be a different entity from your information product business.
  3. If you have a business with partners and operate through LLCs, each partner should own their
    membership interest in their own LLC, not individually. Why? The LLC has the charging order protection that makes it more difficult for someone to come after the owner of the LLC, which is great. When you have partners, even with the charging order, you do not want any disruptions if the owner is sued for something unrelated to the operating entity. A second layer LLC will prevent that from happening.
  4. A separate legal entity for each piece of real estate you own (your primary residence will be a different
    approach). If you own rentals in Wisconsin where you can buy a house for $40K, you may not need a separate LLC for each piece of real estate. In California, the same house may be $930K. In that case, a separate LLC may make sense. California has an $800 per year franchise tax fee so you may consolidate based upon that fee.
  5. A separate LLC for your safe assets. That includes investments in the market, gold, silver, ownership in other
    companies (like any C corporations). Any entity taxed as an S corporation, there are limits on who may be the
    shareholder, only a single member LLC can be a shareholder. NEVER have your safe asset LLC be the
    owner of a risk asset, like real estate or a business.
  6. A separate LLC for your domain names. Domain names are virtual real estate free and clear. They may become quite valuable over time. If owned by your main operating company and that is sued, you could lose control of your most valuable asset.
  7. A personal residence trust for your home. If you have equity that is not covered by your state homestead laws, this may be the best option to protect your equity and not have the negative consequence that placing your residence in an entity would entail. Attorney Rob Bolick is a great resource and referral partner with NCP and covers more details about the personal residence trust.
  8. A life insurance trust for your life insurance policies. This is part of the estate planning for your estate. Life insurance is not subject to income taxes but is subject to estate taxes and that is why the life insurance trust is a must. Attorney Rob Bolick, an attorney in Las Vegas would be a great resource for this as well. His number at his law firm is (702) 690-9090.
  9. A Nevada Asset Protection Trust. This is like having an offshore trust onshore. It would be the owner of your LLCs and the living trust would be the beneficiary of the Nevada Asset Protection Trust. Nevada has a two-year statute of limitations and when two years go by you are home free from almost all creditors. Attorney Rob Bolick is the resource for this also.
  10. A living trust. Estate planning is very important and most Americans do not have a living trust established. This will help pass your assets to your heirs and avoid probate when properly funded.
  11. An offshore entity. This is the top asset protection tool because the entity is in another country with different rules than the U.S. There are NO tax benefits to an offshore entity. The U.S. person would need to pay all taxes associated with it. The IRS is all over this type of entity, so again, just to be clear, you must pay all taxes as a U.S. citizen.
read more

South Dakota vs Wayfair Supreme Court Decision-What You Need to Know…

Jun 22, 2018 by

As we predicted sales tax compliance is not going away.

The U.S. Supreme Court voted 5-4 on June 21st, to overturn the 1992 Quill Case that required physical nexus (FBA inventory for example) before you had to collect and remit sales tax.

This Supreme Court decision allows the states to collect sales taxes from MOST (not all) online retailers, not just Amazon FBA sellers.

The big reason is that states are losing a fortune in sales tax revenues and both sellers and consumers (with use tax) have been avoiding them!

Amazon.com FBA Seller Use SalesTaxSystem.com

Here is a link to the U.S. Supreme Court Case:

http://www.scotusblog.com/case-files/cases/south-dakota-v-wayfair-inc/

What does this mean to you (if you sell on Amazon FBA)?

read more