Forming a C corporation to take advantage of fringe benefits when your business doesn’t fit the C corporation model. (Can you spell nightmare?)

Asset Protection and Business I.Q.

Question # 6: Which are reasons NOT to form a C corporation?

A) C corporations have lower tax brackets than individuals
B) Double taxation
C) Too much profit to reinvest
D) When a flow through entity may make more sense
E) Focusing on business expenses may be more important than fringe benefits
F) All the above
G) A and B
H) B, C, D and E

Costly Mistake Number 7:

Forming an entity in Nevada and NOT knowing when to foreign register, and for what reasons. (“Can’t you just get a mailbox?”)

Asset Protection and Business I.Q. Question # 7: Which are common reason(s) that would cause an entity to need to foreign register (or qualify) to do business in another state?
A) An employee in another state
B) An office located in another state
C) Equipment located in another state
D) An independent contract in another state
E) All of the above
F) A, B, and C

Costly Mistake Number 8:

Forming an entity and hiring independent contactors and employees WITHOUT knowing the rules. (It makes a difference as to which states you’ll need to foreign register.)

Asset Protection and Business I.Q. Question # 8: Which statement is false concerning employees?

A) They create less liability than independent contractors for your business
B) Employees create nexus for your company in the state they are doing the work
C) Your company will pay half of the 15.3% payroll taxes on each employee
D) The IRS is mostly attempting to convert employees to independent contractors

Costly Mistake Number 9:
Forming an LLC taxed as a partnership WITHOUT having an”official” partner. (Maybe the IRS won’t notice.)

Asset Protection and Business I.Q. Question # 9: What entity or person (assuming you are one of the partners) will qualify as a partner for an LLC taxed as a partnership?

A) A single member LLC owned by you
B) An S corporation owned by you
C) A C corporation owned by you
D) A foreigner
E) All of the above
F) B, C and D

Costly Mistake Number 10:

Selecting an inexperienced or disreputable company to help you form your entity. (There’s no excuse for not checking references with the BBB, local professional organizations and testimonials.)

Asset Protection and Business I.Q.
Question # 10: Which characteristics should be considered when choosing an entity formation company?

A) A company that has been in business for at least five years
B) A company that has a national known attorney
C) A company that has research and invests in internal training
D) A company that provides other business development services
E) A company that is recommended by top local organizations
F) All of the above

www.nvinc.com For more information call 1- 877- 515 – 0505 (local 702-367-7373) today!

Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc. Over the past 13 years NCP has assisted more than 5,000 business owners form LLCs and corporations to get their business off to a fast start to profits™! Questions? Call NCP at 1-888-627-7007. www.nvinc.com

Costly Mistake Number 1:

Forming an LLC and NOT knowing how it’s taxed (Are you a single or multi-member LLC? Will you be disregarded for tax purposes, taxed as a partnership, a C-, or an S-corporation?)
Asset Protection and Business I.Q.

Question # 1: If you have two members in an LLC*, how will the LLC be taxed?

A) A limited partnership
B) An S corporation if you file Form 8832 and 2553
C) A disregarded entity
D) Federally only
E) All of the above
F) A and B
G) A, B and D * “Members in an LLC” is defined as the owner of the LLC. Costly Mistake Number 2: Forming an LLC for real estate and NOT knowing how it should be taxed when you have dealer and/or investor property? (Make the wrong choice, and be doomed to a life of unnecessary taxes.) Asset Protection and Business I.Q.

Question # 2: What is a “real estate dealer”?

A) Someone who goes to real estate auctions
B) Someone who holds onto real estate for more than 12 months
C) Someone that will be subject to SE taxes on the sale of the property
D) Someone that will be subject to short term capital gains
E) Someone that flips properties in less than 12 months
F) B, D and E

www.nvinc.com For more information call 1- 877- 515 – 0505 (local 702-367-7373) today!

Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc. Over the past 13 years NCP

has assisted more than 5,000 business owners form LLCs and corporations to get their business off to a fast start to profits™! Questions? Call NCP at 1-888-627-7007. www.nvinc.com

Fast Business Start up

“The Top 20 Mistakes Before And After” is designed not as a static report, but as an interactive tool for you to use to understand your options, analyze your strategic business design and spot areas of vulnerability, building as you go to create a comprehensive “map” to use in your corporate formation planning. So close your office door for a short time, pour yourself your favorite beverage, and settle back with pencil in hand. You’re about to spend perhaps the most valuable 20 minutes of your business career.

There are three steps in using this material:

Step 1: Read each Costly Mistake (divided into 10 “Befores” and 10 “Afters”) and answer the question that applies to each issue.

Step 2: Tally up your results, then assess your Asset Protection and Business I.Q. Knowledge. Take a moment to fully absorb the insight you’ve gained, and the advantages of having an experienced, “birds-eye view” of your business strategies.

Step 3: Build your strategic plan, and enjoy the confidence of knowing you’re protecting your business and assets.

www.nvinc.com For more information call 1- 877- 515 – 0505 (local 702-367-7373) today!

Scott Letourneau is the founder and CEO of Nevada Corporate Planners, Inc. Over the past 13 years NCP has assisted more than 5,000 business owners form LLCs and corporations to get their business off to a fast start to profits™! Questions? Call NCP at 1-888-627-7007. www.nvinc.com

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.