Posted by Eric C on December 01, 2000 at 11:23:17:
Hi John -
Thanks for the kudos. I’ve actually located said article in this mess, I mean, in my study and should have it faxed to you sometime this afternoon.
Let me know if it doesn’t make the trip in satisfactory condition.
Yours,
Eric C
LLC - Posted by Chuck
Posted by Chuck on November 30, 2000 at 14:46:33:
The questions are really starting to come now! How / Who / how much does it cost to set up a LLC.
Thanks Again!!!
Re: LLC - Posted by Ernest Tew
Posted by Ernest Tew on December 01, 2000 at 06:38:15:
Chuck:
It doesn’t cost much to set up a limited-liability company–unless you hire the wrong attorney. The relatively small fee to register with the state will depend upon where you register it. For maximum privacy, protection, and no state taxes, Nevada is the best place.
After a great deal of research, my associates and I ended up with an excellent LLC operating agreement that we use. The attorney we hired to check it over later later called back and asked if he could use our form.
If you would like for me to e-mail you a copy, please call (352) 475-1280 or send me an e-mail.
Depends… - Posted by JHyre in Ohio
Posted by JHyre in Ohio on December 01, 2000 at 06:27:37:
on nature of the business, dollars involved and extent of negotiations and drafting necessary. Different attorneys/consultants in different states also charge differently. Typically, I charge $500 for simple set-up, including choice of entity analysis, filing papers, explaining how to hold meetings/fulfill formalities and drafting agreements- this assumues a new or small husband/wife business. If other parties are involved the drafting gets more complex and the price goes up. Simple set-up ranges from $500 to $1500 around here…explaining what you do and your goals takes time and gets the clock runnning for people unfamiliar with your business, so be sure that you find someone already up to speed. Large firms and urban lawyers tend to charge more (the former are very often worth it on very large, very complex transactions), efficient boutique (usually highly specialized) shops charge less. The idea is to find a sole practitioner/small-firm lawyer with big-firm or other specialized experience, minus the big firm overhead.
John Hyre
Respectfully disagree… - Posted by JHyre in Ohio
Posted by JHyre in Ohio on December 01, 2000 at 08:52:27:
that Nevada is the way to go. If you are doing business in another state, you will have to register in that state including:
Depending on your home state’s rules, using a NV entity to hold notes or other intangibles MAY be a good idea.
With respect to using templates for operating agreements and the like: That’s OK IF a professional has checked the template out AND it is put to an IDENTICAL use each time…I have clients who do this. However, if the use changes, the risk of something being inadequate rises…doesn’t mean not to use templates, but weigh the risk vs. the cost. For example, the template used for a husband/wife LLC is VERY unlikely to be suitable for use with outside investors. And a template for one investor may not suit another, PARTICULARLY if the capital accounts required by the Internal Revenue Code are relevant- and in large transactions, they are invariably required.
For small entities you can save money by using Nolo publications, Bronchick’s materials, or the like…just be sure that you know what you are doing and understand the balance between dollars saved vs. risk undertaken. If the entity is large or you are not interested in or good at learning this sort of thing, get an attorney. If the entity is small and you have a proclivity for these things, judicious use of templates is often helpful.
John Hyre
Re: Respectfully disagree… - Posted by Ernest Tew
Posted by Ernest Tew on December 01, 2000 at 13:03:05:
It was not my intention to suggest that a person blindly use the LLC form without tayloring it to meet his or her needs. Like most forms, it is intended to save the user time and serve as a checklist to avoid overlooking important provisions. After completing the form it would, of course, be prudent to have a qualified attorney check it over and take into account any local laws or circumstances involving the individual.
For many years, people around the country have chosen Nevada as the state to register their corporation, limited partnership, or limited-liability company. For three generations, one company, Laughlin and Associates, has made a full-time business out of forming and servicing corporations and other entities for out of state residents.
Among other reasons, Nevada doesn’t have a state income tax, has stronger secrecy laws, limits the liability of corporate officers, and is the only state that doesn’t share its information with the IRS.
During the several years we have been using Nevada corporations and LLCs, we have had no difficulty. But, of course, asset protection involves much more than just filling out a form, choosing an entity, and deciding where it should be registered.
Well said… - Posted by Eric C
Posted by Eric C on December 01, 2000 at 09:21:53:
Hi John -
As always, a little knowledge can be a dangerous thing; and knowing the local (your home state) rules is crucial.
Now, about those rules… do I, or do I not recall you posting something (last year) regarding Texas LLC’s?
The Fort Worth Star Telegram ran an article (about a month ago) about a Seguin (Texas) firm that has been very successful at converting many Texas firms to LLPs and thus avoid Texas franchise taxes. Clients included Dell, TI, and some other “big names” as well as smaller family firms.
Although the article made it clear that the State was not happy about this, it also made it clear that the State has no plans to do anything about it either.
Yours,
Eric C
PS - I always appreciate your posts.
Re: Still Respectfully disagree… - Posted by JHyre in Ohio
Posted by JHyre in Ohio on December 01, 2000 at 15:46:00:
We agree on use of templates. We agree that asset protection does involve more than mere filings, choice of entities and the like. We agree that in some situations, an attorney is not necessary to create an entity. We do not agree on Nevada.
Alot of people in Nevada make their living off of pushing Nevada entities for almost every conceivable situation…I would be wary of relying on such people’s advice when asking “Is Nevada where I should incorporate?”. To a guy with a hammer, everything looks like a nail. The benefits touted by the people who make their living off of creating NV entities include:
“No income tax”. True, unless you are doing business in one of the other 49 states, in which case you ARE taxable there on business (as opposed to non-business) income. If you have lots of non-business income (dividends, royalties, etc) NV MAY be a good place to form your entity- DEPENDING on the rules of your home state (i.e.- “throwback” rules designed to get around NV entities.) For example, I pointed out that TX has a big loophole via use of DE or NV LP’s…but try that in OH and you WILL lose. Point: NV’s zero income tax is a benefit to out of state businesses in very specific situations and the availability of such situations depends heavily on home situs. Recommending NV entities as a general practice (you seem to do this, PLEASE correct me if I’m wrong!) is not good advice. Florida, your home state, should lend itself to certain kinds of tax planning because it (like few other states) has no personal income tax.
“Secrecy Laws”- mean very little if you are doing business in another state because THAT state CAN and WILL require disclosures. Most small real estate investors are in fact “doing business” in their home state.
“Limited liability of corporate officers”- matters if your shareholders sue you. Most small investors ARE the shareholders AND officers, so this isn’t relevant to most of our audience. All other liability (e.g.- MH burns down) is governed by the state where liability is incurred AS determined by THAT state (i.e.- choice of law doctrines). Nevada will NOT save me from liablility for a fire in Ohio.
“NV doesn’t share info with the IRS” and the IRS knows it. Guess which corporations get more scrutiny as a result? Those that are in states that attract people with something to hide. NV is such a state. NOTE: I am NOT implying that YOU or any other specific indivdual has something to hide- but NV DOES attract alot of that- and the IRS doesn’t know that you are not of those people!
Ernest, I have enjoyed your materials and speaking with you at the 99’ CREOL convention in Dallas. I respect your opinion and expertise- but must strongly disagree with what I perceive your opinion to be on NV entities. Surely, you will correct any misperception on my part.
Sincerely,
John Hyre
Re: Well said… - Posted by JHyre in Ohio
Posted by JHyre in Ohio on December 01, 2000 at 09:31:24:
TX LLP concept still works…I know of several Fortune 500 companies that have used it to avoid TX franchise tax…and am preparing to help a much smaller client do the same. I LOVE loopholes. By the way, would you please fax that article to (419) 429-0899? I can always use good propaganda, err, promotional materials!
John Hyre
PS: Mutual admiration society now taking apps- I like your posts (and Ernest’s) too!
Re: been there, done that… - Posted by Eric C
Posted by Eric C on December 01, 2000 at 20:12:25:
Hi John -
Hope the article came through to you in good shape. I had to rearrange it slightly.
If you need me to re-send it, don’t hesitate to say so.
I apologize for the quality, but since my computer was on the fritz ( I hate laptops!), I trotted around the corner and used the tenant’s fax machine.
Yours,
Eric C