You now have access to important details about how to protect your safe assets in order to help you make an informed strategic decision. There are several points to keep in mind which will help us determine the best plan for you as we help you form an entity (or entities) to protect your safe assets.

1. C corporations are usually inappropriate for safe assets. Double taxation is an expensive lesson you don’t want to learn first-hand. Worse, if you are sued personally and you own the stock of the C-corporation, disaster could result. (This assumes that you already know that bearer shares really do not work.)

2. May a safe asset holding entity be based from Nevada, or must it also register (qualify) to do business in another state? (This is where you need to really understand multi-state taxation rules.) This is the same pattern in Delaware and Wyoming.

3. How do you transfer safe assets into an entity? (And if you don’t transfer them, what’s the point of setting up the entity?) Do you know the tax consequences? You will find out why a C corporation, from a tax perspective, is usually the wrong choice!

Zeroing in on your unique situation will help us determine together your best approach from both a tax and asset protection standpoint. There are several more issues that will come into play as well as you develop your safe assets, all of which we can expand upon when we talk again. NCP’s ultimate goal is to help you avoid the costly mistakes we see made time and time again by sadly misinformed people.

Armed with this information, the next step is simple! Call us today at 1-888-627-7007, and together we can tailor-fit the perfect solutions for your situation and continue your incorporating process, moving you toward the future of your new business/entity.

Being the start of the year did you decide it was easier to operate as a sole proprietorship?  Did you get too busy to incorporate and perhaps you are  entrenched in day-to-day business life.  I do encourage you, however, to protect yourself by moving your incorporation strategic planning up in priority on your “to-do” list.

Here’s a sobering thought: Considering that right now there are more than one million practicing attorneys, and more than one million law students slated to graduate in a few years… I see a blizzard of lawsuits in our business future. I’d say the odds are against us! When you further consider the additional taxes your business may be paying by operating as a sole proprietorship, and the increase IRS audit risk you take on, you’re putting your business in a challenging situation.

On the other hand, if you have already incorporated with another company, I hope that process went smoothly for you and that everything is working well in your business.  I also hope that you’ve avoided the costly mistakes common in the following areas that will leave your assets exposed:

• Did you issue stock?
• Who owns that stock? (Hopefully it’s not issued to your living trust if it has any value.)
• Did your Nevada entity register to do business in your home state? (Even an Internet business typically must register.)
• If you have an LLC, do you know how it is taxed? (Hint: there are four options, all with different operating agreements.)
• Do you have a plan to separate your business and personal credit? Even if you incorporate or form an LLC, if you are using your personal credit to operate your company, you’re tempting fate.  The key is to minimize personal guarantees especially with vendor credit.  Still using your personal credit card for your business? That means you’re risking your personal credit and preventing your business from securing more credit in the future!

NCP has a program to prevent this from happening to you! I encourage you to call us , even if you have incorporated elsewhere, to see how we may help you.

Call us today at 1-888-627-7007, and you’ll learn how we can help you separate your business and personal credit, and at the same time, get your business the respect it deserves from the financial industry!

I wanted to give you more detail to help you make an informed strategic decision about how to protect your business. There are several points to keep in mind which will help us determine the best plan for you as we help you form an entity (or entities*) to protect your business:

1. If you want to form a separate legal entity for your business to avoid as much personal liability as possible, incorporate in Nevada and foreign register.
2. If you’re concerned about losing control of the stock ownership of your business due to an unrelated, personal lawsuit, operate with an LLC. (Just make sure it’s taxed correctly for your situation.)
3. Be sure to form your entity before:
   1. Signing a contract or lease;
   2. Hiring employees;
   3. Advertising your business;
   4. Opening a bank account;
   5. Obtaining your business license.
4. Avoid as many personal guarantees to your vendors as possible. The less you tie up your personal assets in your business, the better!

Zeroing in on your unique situation will help us determine your best approach together, from both a tax and an asset protection standpoint.  There are several more issues that will come into play as well as you develop your business, all of which we can expand upon when we talk again.  NCP’s ultimate goal is to help you avoid the costly mistakes we see made time and time again by sadly misinformed people.

Armed with this information, the next step is simple! Call us today at 1-888-627-7007, and together we can tailor-fit the perfect solutions for your situation and continue your incorporating process, moving you toward the future of your new business/entity and help your business get off to a fast start to profits!

Have you incorporated your business yet? My concern for you, however, is that you have instead decided to start your business as a sole proprietorship.  I feel a great responsibility to share the possible consequences if you chose this route.

Here is a sad, but true story that happened to an individual in Florida. This example serves as a great reminder of why you must not operate as a sole proprietorship — and risk becoming another statistic.

A woman in Florida with multiple millions in safe assets started selling dolls at a local flea market as a sort of hobby/occupation. She was retired and didn’t need to work, but loved dolls — however, she neglected to incorporate her “little” doll business.  A parent brought home one of her dolls for their three-year-old child.  Unfortunately, one arm broke off of the doll, and the metal support inside of the arm poked the girl’s eye, causing permanent damage. This poor woman is now being sued for product liability to the tune of $5 million. Most of her assets are now at risk!

A sobering story, I’m sure you’ll agree.  Here’s yet another major reason NOT to operate as a sole proprietorship: A Marketing Benefit

We live and do business in a competitive world. You probably already know that 95% of businesses fail in the first five years. When starting off in a new business, the first impression you make on new prospects is critical. In fact, many “could have been great” companies were only three to five new customers short of reaching the next level of success. One mistake could cost such a company — or you — your entire business.

From a marketing prospective, what message are you sending to your new prospects about you and your business? What message do you send as a sole proprietor?

The typical CPA recommends that if you don’t make over $40,000 in net profit, incorporating may not make sense for you and may not reduce your taxes. That’s no secret.

Knowing this, what message are you sending when your business card bills you as “Owner/Operator”? New prospects know that you didn’t incorporate, and they probably assume that they know the reason why – that you probably don’t earn $40,000 in profits, and your CPA recommended for tax reasons that you remain a sole proprietorship. Worse, you didn’t believe in yourself enough to invest the money to incorporate.

Are those the messages you want to convey when trying to attract new business?

When you incorporate, you send a very different message: “This is John Smith, CEO of ABC, Inc.” That “foot in the door” strategy is far superior to “This is John Smith, Owner/Operator of ABC.”

Bottom line? From a purely marketing point of view, incorporating makes 100% sense!

DBAs: A Costly Mistake!

The designation of “d.b.a.” (doing business as) has become as common as dirt among sole proprietors.  Many seem to believe that a business name such as “X, d.b.a. Y” somehow relieves them of personal liability. This is not so: The designation “d.b.a” is merely descriptive of the person or corporation who does business under some other name, but doing business under another name does not create a protective entity distinct from the person operating the business.

Started Out as a Sole Proprietorship and Now Incorporated —

Are you Safe? Think again!

Although the sole proprietor who incorporates later gets a “B” for effort, he or she still faces a sticky problem.  Many of these business owners falsely believe that because they have incorporated, they have eliminated their liability issues. That is not the case. The rule of liability applies even if a business begins as a sole proprietorship, then converts to a corporation. For the period of time the sole proprietorship existed, personally liability attaches to the owner.  The new business entity is merely a continuation of the previous one.  That is, the new business has the same ownership but merely “wears different clothes.”

It’s therefore quite dangerous for someone to begin their business as a sole proprietorship, with the thought of converting the business into a corporation at a later time.  If a liability issue arises at any time from the initial sole proprietorship period, the owner will be personally liable. The only way to avoid personal liability is to incorporate at the outset.

The Odds Are Against You!

Here are some shocking statistics:  The odds that you will be sued are bigger than you think!

• The average jury award for a wrongful termination suit is
  now a staggering $532,000.
• Awards for work-related gender discrimination
  average $502,000.
• Racial discrimination awards average $198,000.
• Handicap discrimination awards average $159,000.
• Sexual harassment awards are now averaging $120,000.
• The State Farm Insurance Company paid an incredible $239 million for failing to use female insurance agents.
• A dishwasher at The Olive Garden was awarded $125,000 for suffering physical and verbal abuse.
• The average cost of defending yourself in litigation has gone through the roof.  Just a few short years ago, the average defense cost was $40,000.  Today that has increased by a whopping 33.3% to $60,000.
• If, on the other hand, you are liable, you should be prepared to pay as much as 35-50% of the total claim, plus interest, court costs, attorney fees and penalties.  So for example, if you are sued for $200,000, you could wind up paying as much as $300,000 by the time all is said and done.

Now, let’s address an important question:
Will insurance help you?

Consider these insurance statistics:

• In 1999, 40 insurance companies defaulted and are now out of business.
• By the year 2000, 56 more companies defaulted.
• In fact, according to Standard & Poor’s, 456 insurers are now considered “at risk.”  Could one of them be yours?

Even those insurance companies that have stayed in business…

• Have been forced to raise their rates dramatically.
• Other industries such as the construction industry are seeing liability increases from a low of 15% to a high of 100% in a single year. (Source: McGraw Hill)
• In one case, a group home saw their insurance increase from $3,500 to an incredible $35,000 in a single year.
• What would that kind of rate hike do to your company?

Do you see why I encourage you to call NCP today to get the process started to protect yourself and your hard-earned assets? Call us at 1-888-627-7007, and together we can tailor-fit the perfect solutions for your situation, moving you toward the future of protecting your business.

By Scott Letourneau, CEO of Nevada Corporate Planners, Inc.

As the economy continues to crumble all around us…I like most hope it gets better but with the credit card industry likely to become the next full scale foreclosure crisis, hurting banks even more, and limiting the consumers ability to purchase…I see us in for a long road ahead before any recover happens. Consumer credit card losses alone are expected to be over $100 Billion in 2009 (it was $25 Billion in 2008).

With that is a lot of opportunity for those to accumulate net worth or for many of you to keep what you have left.

One of the big problems I foresee if the massive increase of lawsuits at ever level. Most people in the time of stress will find someone to blame for their lack of financial success vs taking accountability and finding solutions to move forward. As more and more people, stay unemployed, anticipate more layoffs coming, as financial stress continues to rise, …one solution is to sue those who have money or the perception of money! That may be you!

With that being said, it is the best time to take an inventory of your levels (not level) of protection do you have in your business today. Even if things are slow in your business, never put all your financial eggs, in one basket!

Here is my concern, if you have more assets to protect, but you wait 6 months or one year, it may be too late. One lawsuit, even if you are incorporated or form an LLC, at the entity level if that is responsible for all your revenue to support both your business and family, could destroy your entire financial operation!

What Happens if Your Business is Sued Directly? The first step of course is to form an LLC taxed as an S corporation for your network marketing business.  It makes more sense to do that as you start your business to also help separate your business and personal credit. Most inadvertently negatively affect their ability for their business to maximize business credit (cash in this case) because as a sole proprietorship as you self finance your business more than likely you are driving up your revolving debt levels. That is the wrong approach! The key is to keep your personal revolving debt low and get a business credit card in the name of your LLC and use that.

Most forget that because they form an LLC or a corporation they have separated their personal and business liability and therefore they are protected. That is the first step. You still have the problem if your business gets sued and you lose the assets in your business (assuming your insurance does not kick in to cover everything, hopefully you have some type of insurance coverage at your business level).

If you have an operating business outside of network marketing business you may want to consider separating both streams of revenue. It is not required, but for many it may be a great option.

It is also important to separate safe from risk assets. Any assets out side your retirement plan can be set up in a separate LLC. Remember, your living trust will not protect your assets from liability!

As you may know having an LLC over a corporation provides a layer of protection called the “charging order”, which basically makes it more difficult for any plaintiffs to get to your ownership interest in your LLC. The important points to consider are the following:

1. If you have an LLC that has substantial gross revenue and profits with a partner (I know that definition will be different for everyone) but let’s say you have $1.5 million in gross sales with $600K in net profits. Especially with a partner you may want to consider each partner to have their own individual LLC to provide an extra layer of protection in case the owners get sued for something unrelated to the operating business. Even though the charging order will provide a road block, it can be very disruptive to the operating business if your partner is sued or goes through a divorce personally.
2. If you have other C corporations and there is value in the company consider forming an LLC to own the stock, a safe asset.
3. Hopefully, you do not have S corporations with value in them. If so, a single member LLC is your only option to help. Or form another entity with more protection to take over future business which would be an LLC taxed as an S corporation. Of course, speak with your professionals on all the other tax and legal issues that may come up.

Call for a free consultation when you call Nevada Corporate Planners, Inc. at 1-888-627-7007 and we will walk you through all the fees and services. You will have the option of either having us form the LLC in your home state or Nevada and foreign register. When you call we will explain the difference both in strategy and fees that will best fit your situation. Ask us how we can help your business gain access to business credit also!