Frequently Asked Questions
Why use Protect Me LLC?
Protect Me LLC combines professionalism with affordability to provide you with peace of mind asset protection.
What is an entity?
An entity is a business organization authorized by state law to limit the liability of the owners. Entities can be corporations, limited liability companies (LLC’s) and limited partnerships (LP’s).
Are sole proprietorships or general partnerships protected entities?
Sole proprietorships and general partnerships offer zero asset protection. One claim against your business and you can lose all of your personal assets.
What is a corporation?
A corporation is separate legal entity formed by individuals and/or other business entities for the benefit of limited liability, asset protection, tax savings and ease of ownership. The owners of a corporation are shareholders, the managers are known as officers and directors.
What is a limited liability company?
A LLC is also a separate legal entity formed for limited liability and asset protection purposes. The owners of an LLC are called members and the management is referred to as either managers or member managers. LLC’s are frequently used for holding real estate and other personal assets.
What is a limited partnership?
An LP is a separate legal entity formed for limited liability and asset protection purposes. The owners of an LP are known as general and limited partners. The management resides exclusively with the general partner. While the limited partners are limited in their liability, the general partners are personally liable for the LP’s activities. This unlimited liability can be resolved by forming a corporation or LLC to be the general partner.
Am I personally liable for the corporation’s, LLC’s or LP’s obligations?
If structured properly, the liability of the owner is limited to the amount of their investment in the entity. Thus, the personal assets of the owner will be protected against any business claimants. (If you sign a personal guarantee with one party [i.e. a mortgage with a bank lender] you will be personally responsible to that one party.)
What are the tax benefits?
There are many tax benefits to using a corporation, LLC or LP. Many business expenses are easily written off and in the right structure pre-tax dollars can be used for valuable benefits packages. As well, the risk of IRS audit is lower with business entities. A CD entitled "How To Save $10,000.00 by Incorporating" is available for $29.00 from Protect Me LLC. This CD is given as a free gift to all new entity formations.
What is a C corporation?
A C corporation is a corporation that is taxed at two levels. First, the corporation pays corporation taxes on corporate profits. Then, with any money left over, the corporation may distribute profits to the shareholders. These profits, or dividends, are taxed to the shareholders. Thus, the imposition of "double taxation". The "C" refers to an IRS code section.
What is an S corporation?
An S corporation is a corporation that has elected to be taxed as a flow though entity (similar to a LLC or LP). The "S" also refers to the IRS code section. The S election allows the shareholders to be taxed only at the individual level instead of at both the corporate and individual level, thus avoiding the double taxation like the C corporation. The S corporation still provides limited liability protection.
How can an LLC be taxed?
However you choose. You can select taxation as a disregarded (single member) entity, an S corporation, a C corporation or as a partnership. You have great flexibility with LLC taxation.
What is an Employer Identification Number (EIN)?
An EIN is like a Social Security Number for a business. The IRS assigns such a number to each newly formed entity. It is used as an identifier when opening back accounts, hiring employees and the like.
What are Corporate Formalities?
In order to maintain the limited liability protection afforded entities certain minimum formalities must be met. These include filing annual fees, maintaining a resident agent and keeping corporate minutes. Failure to follow these formalities can result in personal liability (known as ‘piercing the corporate veil’) to officers, directors and shareholders. Protect Me LLC actively helps you to follow the corporate formalities.
What is a Resident Agent?
Each state requires that a resident (or registered) agent be identified and located in the state of incorporation and any states where business is done to accept service of process and other official notices. Protect Me LLC provides resident agent services for a modest fee.
What are Corporate Minutes?
Most every state requires that the owners and managers of an entity meet once a year to discuss the affairs of the business. To prove that this required meeting took place, minutes of what took place at the meeting are written and kept with the corporate, LLC or LP records. Protect Me LLC provides minute preparation services for a modest fee.
What is Corporate Notice?
An important element in using a corporation is providing the public with notice that they are doing business with a corporation. To that end, you will use Inc., LLC or LP, for example, on all of your brochures, contracts, checks, cards, and the like.
What is involved with naming an entity?
First, you cannot use the name of a corporation, LLC or LP that is already in use, and registered with the state. While Protect Me LLC will perform an initial name search to minimize this issue it is helpful to have several names in mind for possible use. Second, if you are going to organize in one state and qualify in another state the name should be available in both states. Third, a corporate name should not be confused with a trade name or trademark. While you may be able to incorporate under one name you will not automatically, without filing for trademark protection, be protected in using your corporate name as a trade name. For example, while you might be able to incorporate in your home state under the name Coca Cola, Inc., there is a big company in Atlanta which owns that trademark and would stop you in your tracks from operating under that name.
Why would a person form an entity in one state and then qualify in another state?
Many people will form an entity in Wyoming or Nevada for the privacy and asset protection benefits and then qualify to do business in their home state, California for example. The qualification process involves having our Nevada office, for example, provide a certificate of good standing for the Nevada Corporation and then file with California for permission for the Nevada Corporation to do business in California. It is not an overly complicated process.
What is a charging order?
A charging order is a court order giving a judgment creditor (the person who sued you and won) the right to receive distributions from an LLC, LP or Nevada corporation. Instead of allowing the judgment creditor to force a sale of the entity’s assets (as is the case in California, New York, Georgia and other weak states) it forces the attacker to wait to get paid, and is an excellent asset protection tool. Wyoming and Nevada have the strongest LLC charging order protections.
How can I structure my real estate for maximum protection?
We like having real estate held in a home state LLC which is then held by a Wyoming or Nevada LLC. Assume you have a property in Illinois and Texas. Your chart would look as follows:
The title to each property is held in the home state LLC. Those two LLCs are held by a Wyoming LLC, which is owned by you or your living trust. If someone is suing you personally (i.e. after a car wreck) they will have to fight through Wyoming to get at the Illinois and Texas properties. With Wyoming’s charging order protections this is a very difficult task. (Please know that California strategies involve greater planning and may require a consultation.) The combination of home state LLCs and Nevada and/or Wyoming holding LLCs provide excellent protection.
How do foreign investors protect themselves in the U.S.?
Foreign investors are welcome to invest and do business in the U.S. Still, they must realize that the U.S. is a litigious society and they must protect themselves with asset protection strategies as any American would. Depending on their country’s tax system and double tax treaty with the U.S., LLCs and C corporations can be used to protect foreign investors.
How expensive is it to form and maintain a corporation, LLC or LP?
Protect Me LLC provides affordable entity formation and maintenance services.(See our fees) Given the risks associated with doing business and the possible loss of personal assets, the benefits of limiting liability and protecting assets for a very affordable price are quite substantial.
What do I do next?
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