My business is saving people taxes. To do that, we start with a strategy, develop the plan for implementation, find people to set up structures or legal agreements if needed and prepare your tax returns for you.
We work exclusively with business owners (and their businesses) and real estate investors (and the business entities they use to hold them.)
Although we’re all about the tax, we also talk a lot about wealth building and cash flow creation. The fact is simple. I want you to make more money. I want you to have a lot of wealth. That way you’ll need me even more to help you save on taxes.
That’s also why I’ve been talking a lot in my blogs the last few days about asset protection. You’re working hard to build assets; it only makes sense that you need to protect them as well.
I work with some of the best when it comes to setting up smart asset protection plans. One of my friends and colleagues was recently telling me a story about what can go wrong when it comes to implementation.
In this case, the owner needed an LLC to hold a business. He made a decent income, not huge. But there was a lot of potential liability associated with the business, just due to the nature of the business. And before you jump to the conclusion that it was something sketchy, I want to clear that up. In the US, ANY business or owner can have liability if you have people who show up at your place of business. If they use your equipment or even set foot inside your building, there is risk. And it’s much more so if you are wealthy and others know it.
That was really this client’s main issue. He had quite a few assets but he lived a low key life and he wanted to keep it low profile. In his case, a C Corporation didn’t make sense for this particular business so he had a flow through LLC. He didn’t worry about the tax implications, he just wanted his name off of it. There wasn’t risk from him personally, where someone who subpoena his tax returns. Instead the risk was from the business. So he made sure he wasn’t a signer on the bank account and his name didn’t appear anywhere in advertising or marketing. It wasn’t well known that he owned this particular business.
But he drew the line at paying for a registered agent. This is the person who accepts legal service and subpoenas on behalf of a company. If someone sues a company, the registered agent (also known as a statutory agent in some states) is the person who accepts service.
He lived in the same state, so he reasoned he’d save $100 or so and serve as his own registered agent.
Well, sure enough, the company was sued. The lawyer thought it odd that this man, known to be very wealthy, was acting as a registered agent for this little company. So he got a subpoena for his testimony. And that opened it all up to the fact he was actually the owner.
EVERYTHING was in place to keep it private, but he blew it to save $100. His assets were safe, but now they had a hook into a wealthy man and the litigation got a lot more heated, and expensive.
For $100 savings, he spent over $10,000 more.
Don’t take the world’s greatest strategy and blow it by not getting the implementation right, too.