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 3:

Forming an LLC and having it managed by members instead of managers* (A sure way to lose flexibility and control)

Asset Protection and Business I.Q.

Question # 3: What is/are the benefit(s) of having your LLC managed by managers?

A) Many times you do not need to disclose the owners (members) in annual state reports
B) Managers have more authority than members
C) Members added in the future will not necessarily have a say in management
D) It looks more like a limited partnership
E) An operating agreement is not required
F) There are more tax advantages
G) All the above
H) A and B
I) A, C and D
J) C and E

* “Managers of an LLC” is defined as the person or entity that manages the day to day operations of the LLC.

Costly Mistake Number 4:
Forming an S corporation and NOT knowing the shareholder rules (Imagine discovering years later that you’ve violated an S corporation shareholder rule — and that you now owe years of expensive C corporation back taxes.) Asset Protection and Business I.Q.
Question # 4: Who can be a shareholder of an S corporation?

A) A U.S. citizen

B) Another S corporation
C) C corporations
D) All LLCs
E) A living trust
F) All of the above
G) A, B and D
H) A, B and E

Costly Mistake Number 5:
Forming an S corporation when your company anticipates future value (There must be a better approach, and indeed, there is!)

Asset Protection and Business I.Q.

Question # 5: When is an S corporation NOT your best choice?

A) When you are considering investors for your business
B) When you are considering foreign partners
C) When the company will develop a great asset value
D) When you are going public
E) When you live in California
F) All of the above
G) A, B and C
H) A, B, C and D

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

The KEY QUESTION: “ARE THESE PROFITS SUBJECT TO SELF EMPLOYMENT TAXES?”

According to an IRS official and a national issue specialist in its Examination Specialization Program, until the Service issues further guidance, it will not challenge limited liability company (LLC) members on self-employment (SE) tax if the member and the LLC conform to the most recent (1997) proposed regulations (REG-209824-96). These regulations, however, need clarification now on the definition of limited partner (LP).

General Rules

Under Prop. Regs. Sec. 1.1402(a. 2(h)(5), if substantially all of a partnership’s trade or business activities involving the performance of services (i.e., consulting), any individual who provide such services as part of that trade C business will be a general partner (gross income for self employment tax purposes).

In a “non-service” partnership, Prop Regs. Sec. 1.1402(a)-2(h)(2) treats partner as a Limited Partner for self employment tax purposes unless he or she:

1. Has personal liability for the partnership’s debts by reason of being a partner;

2. Has the authority to contract on the partnership’s behalf-, or

3. Participates in the partnership’s business for more than 500 hours during the entity’s tax year.

Even if a member does not meet the hours test or is not personally liable for a partnership’s debts, an individual serving as a manager in a member-managed LLC would be subject to self employment (SE) tax. If the LLC agreement does not precisely give the managing rights to a specific individual, all members would be subject to SE tax.

Exceptions and Clarifications

In general, under Sec. 1402(a),”net earnings from” self employment include the gross income derived from any trade or business carried on by an individual, less any allowable deductions attributable to such trade or business, plus his or her distributive share of income or loss from any trade or business carried on by a partnership of which he or she is a member.

Under Regs. Sec. 1.1402(a)-2(f), a “partnership” includes a syndicate, group, pool, joint venture or other unincorporated organization that carries on a trade or business, but is not a trust, estate or corporation.

For this purpose, gross income includes payments received by a partner from the partnership for services rendered to the partnership or for the use of capital by the partnership.

www.nvinc.com Call within 72 hours of downloading this free guide at 1-877-515-0505 and

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The finance world has changed, perhaps more dramatically in the last 1-2 years than any time in our modern history.

This has affected the results to be expected in the area of business credit and what results are likely.

The length of time you had to be in business has grown longer. It used to be from day one you couple apply for a business line of credit, then 3-6 months, then 6-9 months and now many times you may need to be in business for 1-2 years. This of course is in direct relation to the amount of credit you are asking for!

For example, if your company was in business for over 2 years, you’d get $50,000.  If you were at one year, you could get $30,000.  They’d do $15,000 or so for startups under 6 months.

But those all have gone back up 2 years solid, and sometimes 3.  Again, if you make it past that magic 2-year mark and you’re still in business, then they’re saying, “Okay, let’s take a look at what you’ve got.”

The banks have also gotten away from a stated income.  I shouldn’t even call it stated income, because it’s not.  It’s a no documentation application.  And now, most of those applications are “And by the way, let me see your last 2 years of taxes on your personal and business.”

The Role of Profitability in Bank Financing!

If You’re Paying Taxes, You’re Making Money.
If You’re Making Money, You can Borrow Money!

That ties into that profitability piece.  You got to make sure your accountant pays taxes.  But if you’re paying taxes, you’re making money.  If you’re making money, you can borrow money.

Banks do not like to hear about hope; “Hey, if this guy would just give me a chance at this deal, it’d work.”  But you’ve got to understand that the banks are in the business of loaning money to profitable businesses so they can expand and make even more money. Your job is to make your business profitable, or at least appear profitable on your financial statements, to the point that a lender’s going to say, “Okay, you have enough extra income to pay me back when I give you this money.”