LLC Wizard Maximizing Your LLC’s Money Making and Asset Protection Potential LegaLees Corporation © Copyright 2012 556 East 1400 South Orem, UT 84097 (801) 802-9020 PhillipsAssetProtection.com THIS BOOK AND THE ACCOMPANYING MATERIALS ARE SOLD TO YOU, THE BUYER, WITH THE AGREEMENT THAT YOUR PURCHASE ENTITLES YOU TO A NON-EXCLUSIVE RIGHT TO USE THE BOOK AND MATERIALS FOR YOUR PERSONAL EDUCATIONAL USE. YOUR RIGHT TO USE THE MATERIALS IS NON- TRANSFERABLE. YOU AGREE THAT YOU WILL NOT COPY OR REPRODUCE THE MATERIALS IN ANY FORM, AND THAT YOU WILL NOT SELL, LEASE, LOAN, OR OTHERWISE MAKE THEM AVAILABLE TO THIRD PARTIES OR PERMIT ANYONE ELSE TO DO THE SAME. THIS BOOK AND THE ACCOMPANYING MATERIALS ARE SOLD WITH THE UNDERSTANDING THAT THE AUTHOR IS NOT ENGAGED IN RENDERING LEGAL, ACCOUNTING, OR OTHER PROFESSIONAL ADVICE. IF LEGAL ADVICE, ACCOUNTING ADVICE, TAX ADVICE, OR OTHER EXPERT PROFESSIONAL ASSISTANCE IS REQUIRED, THE SERVICES OF A COMPETENT PROFESSIONAL WITH EXPERTISE IN THE REQUIRED AREA SHOULD BE SOUGHT. THESE MATERIALS HAVE BEEN DEVELOPED USING IDEAS AND INFORMATION FROM PUBLICATIONS, LECTURES, AND GENERAL RESEARCH. THE INFORMATION CONTAINED IN THESE MATERIALS IS BELIEVED TO BE RELIABLE BUT IT CANNOT BE GUARANTEED INSOFAR AS IT IS APPLIED TO ANY PARTICULAR INDIVIDUAL OR SITUATION. THESE MATERIALS CONTAIN INFORMATION WHICH IS VERY TECHNICAL IN NATURE AND WHICH IS BASED ON LAWS WHICH OFTEN CHANGE QUICKLY AND COMPLETELY. WHEN YOU IMPLEMENT YOUR TAX, ESTATE, OR BUSINESS PLANS, A QUALIFIED PROFESSIONAL MUST HELP YOU IN IMPLEMENTING YOUR PLAN. THE AUTHOR SPECIFICALLY DISCLAIMS ANY LIABILITY, LOSS OR RISK, PERSONAL OR OTHERWISE, INCURRED AS A CONSEQUENCE DIRECTLY OR INDIRECTLY OF THE USE AND APPLICATION OF ANY OF THE INFORMATION CONTAINED IN THESE MATERIALS OR THE LIVE LECTURES GIVEN IN CONNECTION WITH THESE MATERIALS. IN NO EVENT WILL THE AUTHOR OR SPONSOR BE LIABLE TO THE PURCHASER FOR ANY AMOUNT GREATER THAN THE PURCHASE PRICE OF THESE MATERIALS. From the Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers and Associates. READ ME NOW LLC Wizard UPDATE Page April 2012 Thanks for getting the LLC Wizard course. It is the most comprehensive Do-It- Yourself LLC course available. Would you believe Congress has changed a couple of things since the LLC Wizard was produced? No surprise there! We pay Congress to change our laws. There are two important update issues that need to be addressed. 1. The change in IRS filings to tax your LLC as a Subchapter S corporation. 2. Attacks on single member LLCs. 1. IRS filing requirements to have your LLC taxed under the rules of Subchapter S of the IRS Code have changed. (It will be taxed like an S corporation.) You will note in the LLC Wizard that the process is described as first filing IRS Form 8832, which told the IRS you wanted them to recognize your LLC as a corporation for tax purposes. You first filled out 8832 and sent it in. Then a little later you sent in IRS Form 2553, which told the IRS that you wanted your LLC taxed as an S corporation. A thinking person would say, why not just file the 2553, and it should be obvious that the IRS would consider your LLC as a company that you wanted taxed as a corporation plus you wanted to use Subchapter S of the IRS Code and have your LLC taxed like a Subchapter S corporation. Well, the IRS has finally simplified the process. Now you just need to file the 2253 and your LLC will be taxed under the corporation Subchapter S provisions. So, when you listen to the instructions, just know you don’t need to file the 8832 if you want a Subchapter S corporation taxing status. Note that you will still file 8832 if you want your LLC taxed like a C corporation. 2. Single Member LLCs Are Under Attack When you listen to the audio CDs and get a little of the history associated with LLCs, you will understand the attack on single member LLCs a little better. The attack only affects the charging order protection afforded the LLC when one of the members gets in personal trouble. It is not an attack on the “corporate shield” protection an LLC gives the members of the LLC against liabilities which occur in the LLC itself. The Olmstead case (Supreme Court of Florida, No. SC08-1009 Olmstead vs. Federal Trade Commission, June 24, 2010) removed charging order protection for single member LLCs in Florida. The charging order protection for single member LLCs has been eliminated by state law in Utah, and the courts in Colorado have placed single member LLC charging order protection in question for people in Colorado. It appears that the trend is to remove charging order protection (not corporate shield protection) for single member LLCs. Therefore, you should probably establish your LLC with two or more members. If that isn’t convenient and you’re not in one of the three mentioned states, a single member LLC will still give you maximum protection, both corporate shield and charging order protection. Note that if you live in a community property state, your spouse can’t be the “other member.” You and your spouse are considered one “entity” under the law. Your membership interest should be owned by your revocable living trust, so your family won’t have to probate the company after you die. You and the revocable living trust are considered one entity, so don’t try and have your trust be one member and you be the other member. Whoever your “other member” is, their interest should be owned in their revocable living trust, so that you don’t have to probate their interest after they die. The Future Your LLC will be your most important tax shelter. As taxes go up, the best way to control your “adjusted gross income” is to know how to use your LLC as a well oiled tax planning tool. For more information, get my “Ten Tax Tips” for free at legalees.com/taxtips. With the entitlement attitude that is being promoted in the United States today, the asset protection and tax planning capabilities of your LLC may mean the difference between success and failure, between survival and destruction. It is important. Use it well. If you have any questions, give me a call me. To Your Success, Lee R. Phillips Lee R. Phillips, JD LLC Wizard Maximizing Your LLC’s Money Making and Asset Protection Potential Course 1—LLC Introduction LegaLees Corporation © 2012 DOCUMENTS Flexible Asset Protection LLC Business Matrix Legal Structure Questionnaire What Happens in Nevada Probably Shouldn’t Series LLC States Preview of Upcoming Courses AUDIO TRACKS Track 1 Introduction to LLCs Partnerships Entities Limited Partnerships Corporations C or S Advantages of Entities Business Considerations Business Cards Management Continuation of Life Liability Shields Employees Respondeat Superior (Let the Master Answer) Tax Introduction Track 2 Picking Your Entity Structure—Advantages and Disadvantages Sole proprietorships Partnerships C Corporations S Corporations Track 3 LLC--Choice of Corporate Elements 1. Central Management 2. Limited Liability 1-1 3. Continuity of Life 4. Transferability Track 4 Changing an Existing Company to an LLC Which State to LLC in Series LLC Introduction Registered Agents Using Nevada LLCs Track 5 Nevada LLC Corporations Nevada Privacy Laws Bearer Stock Track 6 Costs – Do It Yourself Understanding Liability Shielding The Wall Concept of Liability Shielding Summary 1-2 The Flexible Asset Protection LLC Limited Liability Companies (LLCs) are probably the most flexible asset protection entity we have today. They actually give you a lot better asset protection than a corporation. They give you accounting options a corporation doesn’t even approach. The LLC is a lot easier to maintain than a corporation. Why use a corporation? Well, there are reasons, but your first thought when you think business entity should be “LLC.” This course will concentrate on the LLC and all of the neat things it can do for you. Yes, we’ll discuss the disadvantages, as well as the advantages, because you need to know the whole truth about any legal structure you use. Unfortunately, the LLC is being used just like almost every other legal structure your attorney sets you up with. The key words in the sentence are “sets you up,” because that is usually exactly what your attorney does for you. He “sets you up.” One of the associates in our firm was with us for about 4 years and did such good work that the big high flying firm in town made him an offer he couldn’t refuse. He was with them for three years and had an impeccable record with them. They “let him go” a couple of weeks ago, and he is back. We wanted him back. Seems he had done more work, billed more hours and won more cases than any other associate had ever done in the over 100 year history of the firm. He got in trouble, because the principal partner had transferred the firm’s “plumb” case to this associate. The handoff was done with great care, and the plan was to pay the associate his normal wage and bill him out at the $300 per hour rate the firm had been billing at for years. The case had been going forward for ten years. The firm had consistently billed between $10,000 and $20,000 per month. The associate was told that the case would go on for at least another ten years, because it was an impossible case to ever prove. The associate waded into the case and within two months had totally won the case for his client.