Updated December 15, 2020
Question: “Can a C corp registered in Nevada have 100% ownership in a Virginia S corp?”
Toby: Ooh, that’s an interesting question. The answer is no, but not because of the reason you’re thinking. It’s because it’s an S corp, and an S corp has to be owned by a natural person. There’s a few exceptions, but a C corp is not one of them. So a C corporation could own 100% of a Virginia LLC that was disregarded, or a Virginia C corporation could own 100% of [it].
So literally it was passed just a few years ago to bolster the statutes, and the other thing we did is we made sure, and we have a lobbying group here in Nevada, of course, that we are always trying to make the laws stronger; we’re always trying to make it a more attractive state to do business in because, well, we have a main office here; we want you to do business here, and we want to benefit our clients, and we’re trying to always add value to the clients that are already here. We have tens of thousands of clients using this jurisdiction, so it’s in our best interests to make sure.
If you are reading this article now, please be aware that all Corps need to be in compliance with the US Corporate Transparency Act
So yeah, this was very recent, but this also is what statutorily made sure that… There were basically three cases. Let me see if I can find the three cases. There were three cases that came out that lawyers like to throw around. One was the Albright case in Colorado, AZ Electronics in Idaho, and Mandalano [SP] in Maryland, and the Olmstead case in Florida, where there was piercings of single-owner LLCs, and they said, “Uh-huh, these single-owner LLCs don’t work.” That is not true. Those statutes gave a charging order as a remedy, but they never specified that it was the exclusive remedy. So they gave these judges the opportunity to apply equitable remedies, which means basically whatever they see fit.
It’s kind of like going to divorce court. If there’s a way that they can figure a way to get what they want, they’ll justify it. So the statute has to be very specific. So we bolstered the statute that’s set for single owners, as well. We made sure of that also.
Question: Compare and contrast Delaware, Wyoming, Nevada.
Toby: All right. Here we go. So Delaware, Wyoming, Nevada. There’s no corporate income tax or franchise tax. Delaware does have a franchise tax. Wyoming and Nevada do not. In theory, Wyoming has one on assets in Wyoming.
There’s no reporting of shares. So we don’t have to report having shares we have outstanding, how many we have issued. Wyoming and Nevada do not have to do that. Delaware does.
Nominee officers and directors are allowed. Delaware does not. Delaware and Nevada do allow that. What that means is that you don’t have your name listed on the company, which means, if somebody is doing a search to see what you own, they do not see that you own a corporation.
The other big one, specialized business courts. One of the main reasons that people go to Delaware is the Court of Chancery, and this is a court that handles just disputes for corporations, for shareholders, derivative actions, business actions, and the reason this is important is because you don’t want that divorce lawyer that ran for judge, and all of a sudden they’re the judge that’s hearing a complex commercial case, and they have no clue. I’ve lived it. I was in Washington. I’ve been license there for 17 years. I clerked for three judges, and I can just tell you that the business savvy up there, of the judges, is not very good.
That’s because they elect judges. Quite often the person that is hearing a matter has no practical experience. They’ve never owned a business. They’ve never made a payroll. I know that politicians like to use that, but until you’ve actually been doing that for many years and you understand the stress, etc., you just don’t have a clue. So Nevada has a business court. Delaware has a business court. Wyoming does not. So you could be in front of whoever, whoever managed to get in as a judge, and use your imagination: the popular lawyer. I always think it’s the one that jumps above the bar and dances. I’m just kidding. Lawyers out there will start sending me hate mail.
All right. Officers and directors are indemnified by statute, which means that they don’t have to come out of pocket. They’re protected. So as long as they’re not doing intentional misconduct. Delaware is kind of the opposite. In Delaware, the reason it’s so valuable to Shares there is because you can taze the heck out of the officers and directors. That’s not the case in Wyoming and Nevada. So if you’re going to invest in a company and you’re going to buy shares of somebody else who’s running a company and it’s in Wyoming or Nevada, you might want to think twice. You can undo what the statute says in your bylaws. So you can fix it, and this is how people screw it up all the time, is because they use bylaws that do allow for actions against the officers and directors, even when the statutes say you don’t, but in Wyoming and Nevada, by statute, they’re protected.
No minimum capital required. That’s all three jurisdictions, which means we don’t have kind of this under capitalization argument that’s so prevalent out there, and what it is is somebody sues a company and says, “We should ignore the company and go after the owners,” because it didn’t have enough money. It was undercapitalized for what it was doing. So we want to make sure that there’s not a statutory requirement to put money in.
The exclusive remedy, this is [inaudible 00:40:32] protections for corporations. Sorry, doesn’t exist in Delaware or Wyoming. I don’t care what you’ve been told. It does not exist. So Nevada is the only one.
Self-dealing allowed, it’s where it says, “Hey, just by virtue of the fact that you have an interest in the transactions, it’s not void.” Nevada again allows it. Wyoming has a statute that can, like you can do it in your bylaws, but it’s not by statute.
Question: “Do you have to register your Nevada LLC in California, if you only have a sales person in that state?”
Toby: There’s actually a, I forget which public law it is; it’s a federal law that says you do not, if you have salespeople zipping around in a state, it’s because it would interfere with interstate commerce, and so, I forget the actual public law, but that’s one of the exclusions. If you have salespeople, you can actually have a sales office in the state. You just can’t advertise. You can’t put the name of the company on the outside of it, but you can have salespeople.
Question: “What if a Nevada corporation that manages property in several states, and I live in California, do I have to register in California if in all states I manage property?”
Toby: It really depends. So I’m trying to understand the question. So say we have six different states, and you have a Nevada corporation that’s managing them all, I would register them in those home states, absolutely, unless… What I would do is I would have a Nevada entity manage a holding LLC and hire managers, or do it myself, and have LLCs in each of those other states, and the way I would get money into their corporation is having it manage the holding. I wouldn’t actually have it manage the actual properties that are located in those states. I keep my Nevada corporation completely outside of it.
Question: “Does filing in Nevada affect you if you’re creating series LLCs?”
Toby: Yes. Because series LLCs don’t exist in in all states, I tend to shy away from them. I know that my partners or even starting to warm up to them. They’re not accepted in all jurisdictions. So if you doing business, which means that you are engaged in intrastate commerce in a state that has a series LLCs statute, go for it, but you’re not really going to be able to use Nevada and then bring it into California, for example. California will treat each of those series as a separate LLC in charge you $800 per series, each of the little pods under there. So if you had 10 of them, you’re talking about $8000 minimum tax every year.
Question: “If you have a C corp set up and wish to own, rent, flip properties in another state, is the best… “
Toby: Hey, we’re going to into some of this. “So is the best course of action to set up an LLC in those states in which you on properties?” I’ve done that. I’ve actually done that well have the Nevada corporation own the LLC that’s doing it, and since it flows up into the corporation, then that’s the taxpayer, and that’s the flipper. We’ve absolutely done that.
I actually had a case in Washington where people kept burning down my client’s properties, and they were freaked out. So we had four LLCs underneath the corporation because any time they would firebomb a property, we wanted to make sure that the liability didn’t go up into the main construction company. So that’s kind of an interesting… I’m going to get into some examples here as we go, but I do appreciate the questions. I’m going to answer a few more in a second, but let’s carry on.
All right. So why is any of this important? It’s important because we have 50 flavors of state law, and we want to make sure that we’re picking state laws that are good for us. We don’t want to just blindly go in, set something up, and then find out later that, “Hey, I can’t self-deal,” and the IRS comes after and says, “Oh, you’re a single-owner corporation. We’re just going to ignore it, and we’re just going to treat it as you, and you’re going to have all these adverse tax consequences.” So we want to make sure that if its internal dealings that we’re worried about, that we have a state that allows us to do what we need to do.
So we have all these different state statutes. We have the IRS, and by the way guys, the IRS has a requirement that all entities, whether you’re a sole proprietor, LLC, LP or corporation, maintain books and records. So you hear a lot folks talk about state statutes and how, “Ha ha, this LLC doesn’t have to keep minutes or records or whatever,” and I say, “That’s great for the state, but you have IRS; you have judges; you have third parties. They may want to see a paper trail.” So books and records is always a legal requirement and you also have, with the IRS, the self-dealing issue.
I want to make sure that I can enter into transactions that benefit me personally. The IRS has not been attacking on this issue yet, but I’m just thinking it’s a matter of time. If they were smart, what I would do is I’d go to a state that had statutes that says that you can’t self-deal, and I would say, “Hey, that’s great that you do these wonderful resolutions that allow you to reimburse yourself a bunch of stuff, but they were void because you didn’t have the authority to do it.” So that’s why you use professionals. Professionals will make sure that you don’t step on those [inaudible 00:46:01].
How about judges? I used to joke, “What you call an attorney with an IQ over 70? Your Honor.” So here come these judges, and they’re bound by statutes, but if you don’t tie them down, these are very creative people; these are doctorates, and so they’ll find a way around it, unless it’s very explicit. So if you’re going to a state, and your lawyer says, “Oh man, we have charging order statutes,” and it does not specifically say that the sole remedy, the exclusive remedy, is the charging order, then they can use equitable remedies, and equitable remedies means, “Hey, I can do what’s fair,” and gosh knows that’s pretty subjective.
Third parties. This is a big one. The rule of thumb when dealing with third parties is that the amount of respect you show your entity is the amount of respect that they will show your entity. So I like having statutes that say I don’t have to do stuff, and I still do it, and I say, “Man, not only am I in compliance, but I’m going above and beyond.”
So it kind of goes hand-in-hand with the next line there, the interpretation of presentation. Depending on who’s looking at my entity, I want to kind of be able to control what they see. So if it’s a plaintiff, if I use a state like Nevada, I can make sure that they cannot seize what I own, but if I’m going to lender, I can present and show them that I own it because I have the documentation to prove it, and I’m going to give them a different presentation.
Same thing with the IRS, in the same thing with judges, is I give myself a lot of flexibility if I pick a state that gives me that, and obviously were a little bit biased because there’s only one state that gives us flexibility and charging order statutes, period, and that’s Nevada.
Question: “If your company only does Internet sales, is it best to be an LLC in Nevada, and does it need to be registered anywhere else?”
Toby: If all you’re doing is Internet sales, you could probably get away with just doing a Nevada corporation or LLC, depending on the type of sales you doing. If it’s true sales, it’s probably a corporation, but it could be an LLC, as well.
Question: “Can you transfer an existing Delaware LLC to Nevada?”
Toby: That is a great question. I’m going to be covering it with one of the slides. So you’re going to have to hold on because that one I’m actually going to talk about how you fix broken entities.
All right. “Why Nevada?” NRS 78.138, officers and directors. This is a huge one. They are presumed to act in good faith. You know how there’s always this presumption of stuff: “Hey, you’re presumed to be doing some bad stuff, and you have to prove you didn’t.” It’s like when the IRS comes in, they like to make you prove stuff. Well, here you are presumed to be acting in good faith, and there’s no liability unless both of the following are proven. In other words, it’s the duty of the other party to show that you breached the duty and you engaged in intentional misconduct, fraud or knowing violation of the law, and of course, your word is, “No, I didn’t.” So they’re going to have to prove that you did, and how they do that, I don’t know. I’ve never seen it. It’s like Sasquatch. I suppose it could exist out there, but you just don’t see it because most lawyers know, “Man, that’s a tough one.”
All right. How about the charging orders? And this is the exact language out of NRS 78.746: “No other remedy may be afforded by the court.” They can’t get more specific than that. You have no choice. This is our statute. You don’t get to play around. There are no equitable remedies. However, it only applies to corporations with fewer than 100 shareholders. This does not apply to publicly-traded companies, nor does it apply to professional corporations. So in other words, if you’re a doctor and you are engaged in a medical practice in Nevada, don’t think that they’re not going to be able to go through your [inaudible 00:50:27] and get to you. And this is the only state, sorry Ken. I repeated this 100 times, and I’m going to say it probably 100 more. It’s the only state with this statute. There’s nobody else.
Now let’s talk about how to ruin a Nevada Corporation, and before I go to this slide, I’m going to ask any of you if you ever met my partner Clint Coons because I want you to see whether you can find him in this next slide. Okay. Don’t look too closely, but this is how you ruin a Nevada corporation, is you do a one-size-fits-all. It’s just not good. I’m going to have to get off that slide because it’s making me grossed out.
So one-size-fits-all is not good for corporations. We do not want to use generic bylaws. If you go to an online provider kits, Legal Doom, all those guys, they have these wonderful kits that are written just like Delaware where they say all the bad things about directors and officers and all these legal duties they have to the shareholders. I have no idea why because probably 99% of the people that use them are small, closely-held companies, but they do it, and you can absolutely undo the benefits of the statute by putting that into your bylaws.
For example, it prohibits self-dealing. Ninety-nine percent of the bylaws that I read out there say, “You cannot engage in self-dealing. You have to abstain from voting.” Well, if it’s a small mom-and-pop company where you getting the benefit, you’re not allowed to vote, which makes no sense. So all of a sudden you have a corporation, but it’s been neutered.
All right. Your bylaws could also create additional standards of care, and I’ve seen this, and I’ve seen this in form documents. I’ve seen this in kit documents where they say, “Not only do you have a duty not to self-deal, but you have a duty to disclose. You have a duty to spell it out and then even offer it to the company without you,” which is just kind of weird. You are your company. Why are you being forced to do this? These are things that are in place for big companies that may have somebody who’s doing intellectual property, who’s inventing things, and they want to make sure that the company has the ability to choose.
Then we have things like choice of law provisions, and you see bylaws that are written by some lawyer in Arizona, and the choice of law provision is Arizona. So even though you set up a Nevada entity, they say, “But we’re going to use Arizona law.” Can you do that? Yes. You absolutely can. In fact, as an aside, you can do that in any contract. I could enter into a contract with anybody. I could go to Florida and enter into a contract and decide that I’m going to use the laws of the state of Illinois. The presumption is that that’s valid unless Florida can show that it has a compelling, fundamental interest at stake in a different outcome. So the only areas where we see that consistently upheld is in consumer protection, especially in elder law where you have these companies that are just finding and taking advantage of elder folks through the use of phones.
So in that case, hey, I don’t care what your choice of law provision says; that state has a fundamental interest to protect its citizens. Well, if you’re putting something in place in your corporation and you’re thinking, “Oh, I’m going to set up a Nevada entity,” and then your lawyer, who happens to be licensed in Nebraska, says, “I’m going to have Nebraska law apply because I know Nebraska law,” you just undid it, and you ruined your Nevada corporation.
How about going out there and listing your personal address on it? I know this happens all the time because we pull the list every month, and we sent out letters to people that have their personal address saying, “Hey, you shouldn’t of done that. You don’t have to do that.” Use the address of your company. You need a company address, by the way. If you’re going to use Nevada, it’s just like a person; it has to have a residence here, and how do we know if you reside in a particular state? We look at things like, “Hey, do you have an address? Where do you sleep? Where are your utilities and things like that? How about your cars, where they registered? How about you kids, where are they registered to go to school?”
In business, it’s not quite that easy. We look and say, “Hey, where your phones and where you maintain your records? Do you have a physical address? If I walked into that physical address, does it look like a business?” and I kid you not, this is what the courts actually use. They say, “If I walk into that place of business, does it look like a place of business?”
The other things they do, so they’ll list their personal address and just undo it. You may, as well be filed in your home state, and you might subject yourself to penalties.
You own an intrastate business and you do not file in your home state. So somebody will set up a Nevada corporation, and they own a Mini Mart, and they say, “Ha ha. I’m going to put it in that Nevada Corp.” Uh-uh. Doesn’t work that way. If you’re an intrastate business, you have to have a local business. That’s why if you’re flipping properties, if you own a tangible business that has to be in your state somehow. Now, it could be a Nevada entity that filed there, and I’m going to go over that in a second, or it could be an entity that’s in that state that is owned by the Nevada entity, or they just fail at basic compliance. You don’t keep minutes. You don’t keep records. You don’t even have a separate bank account. You don’t have any resolutions that you do. You just manage basically to ignore the fact that you actually set up a business.
Question: “On intellectual property, can it be put into a corporation and living trust at the same time?”
Toby: No. What you would do is, if you have intellectual property, I’d put it in a passive. So if I have intellectual property where I’m getting royalties, I am not subject to old age and disability and Medicare; so I’ll probably put that in a LLC and license it to an entity.
In fact, I just dealt with that earlier today, where we just take it and we license it to the active business. The reason we do that is so the intellectual property is not in the business that’s doing business with third parties. So if I have a liability occurrence, they can’t take away my intellectual property. I may license it to 20 other people, 20 other companies.
All right. How to fix a screwed up corporation. If I mess it up and I did it wrong, and now you’re saying, “Oh nuts. I really do want to have the same benefits that this Nevada offers. Nobody explained it to me, or they didn’t know, or they just were kind of lazy and didn’t read the statutes. What do I do?” So here’s the choices in no particular order. Hey, you could dissolve your entity and start over. So it depends on how early you started it or how much you’ve done. This may not be an option for you, but you could dissolve it and just start over.
Do a statutory conversion. A lot of states allow you to convert from one state to another. So you can just convert your entity into Nevada, and you get to keep your same start date, your same E.I.N. with the Feds. You get the same protection, from the day that you started.
We’re just changing states. I actually did this. I was talking about how we got funded in the VegasTechFund. That’s what we did. We just converted it to Delaware, and everybody’s happy. Not a hard thing to do. Fairly simple.
How about merge the corporation into a Nevada corporation? You could do that too. You could set up a Nevada corporation, transfer the shares and liquidate, transfer the shares to your in-state company and liquidated, depending on whether or not you need to be in that state. Maybe do that.
Or kind of an offshoot of that is the form a Nevada holding entity, transfer the shares into that. As far as the holding company, a lot of times we’re using LLC’s. The reason being is that we may have a whole bunch of different shares or interests and other LLCs, and we don’t want to have the corporate tax rate, or maybe we have another C corp floating around out there that’s managing that holding company.
And the reason that we do that is, remember, we have inside liability and outside liability. So let’s say you have a bunch of real estate and… Well, let me just go to this next slide. So maybe you have a bunch of real estate in different states. So we have state A; we have state B; we have state C, and we have real estate these puppies, so we have to have that in-state entity, and then we just transfer those entities into the Nevada holding company.
What that means, let me get my pen, is that if we have a guy out here who says, “Hey, you did something to me. You ran into my car”, that’s a really bad picture; I’ll give him a little smile because he thinks he’s going to be a millionaire, and he says, “I want what you have,” he can’t go after the state entities. He has to go after this one. If we did not have the Nevada holding entity, then he could go after each of these, and then you could foreclose on those interests. So just by taking and doing the simple step of adding the Nevada entity, we’ve eliminated the ability, let’s see if I can actually get an eraser here. Where’s my eraser? Okay. I don’t have a [inaudible 01:00:09].
So go back. Boom. So just by having the Nevada, oops, entity… Let me get back to my slide. Going back… Yeah, I want to go back. Hold on just for second. Technical difficulties by the lawyer. So here we go. Just by having my guy over here, and just by having set up the Nevada entity, he is now, I’m going to give him a frown, he’s not restricted to just trying to go after my Nevada holding entity.
Now why is this cool? Because if this guy is in the state of California and he says, “Hey, I want to go take your stuff,” where does he have to get his lawsuit filed? You got it. He’s going to have to come to Nevada to go argue about that if he wants to try to collect against there, and they’re going to say, “Hey, you’re so remedy is a charging order. Good luck, brother. It’s going to take you years to get your judgment, and even if you get your judgment, you’re going to spend tens of thousands of dollars trying to get your charging order, and by the way, I don’t even have to give you a dime. You’re going to have to hope that someday I decide to issue of profits.” So what happens in reality? In reality people just don’t go after charging orders. The case is settled. 99% of cases settle anyway. This is just giving them an extra incentive to do so, for the least amount as humanly possible.
Question: “If I own five houses in different states, should each one have its own LLC?”
Toby: Yes, and then you can have the LLCs owned by a Nevada entity. So let me draw that one up because that’s actually a really good question. I’m going to go on a blank screen. So let’s say that I have… I’m going to go yellow. So let’s say that I have houses. Oops. That does not work. It’s not going to let me use the pen, so I’m just going to have to do this a little different. So I’m just going to grab a pen. So let’s say that I have a house in each state. So there’s three houses in three different states. I just put an LLC around each one, and pardon my handwriting. So I put a little LLC around each one, and then I can just transfer it into my Nevada holding company.
Now, before you think that there’s a ton of tax returns, this whole thing can be set up towards tax neutral. So if I’m the sole owner, it goes under my 1040, and that’s all of these entities. So even if I have one here in state C; I have state B; I have state A; I have state D; I have state capital E, and I have state capital F, all of them end up on my 1040.
Now, what happens if there’s a fire, and we have a fire that goes in state B? It burns the house down, and unfortunately there’s loss of life. It’s horrible. We lose this entity only. That’s the only one that’s at risk. It isolates the liability.
Now, let’s say you’re out here, and you have a teenage son who decides he’s going to be speed racer, and runs into somebody and hurts them. So there’s a liability and they come after you and they say, “Well, we want to see what you own,” they can’t see this, Nevada holding company, first off. They just don’t see it. They can’t find it in a public record. But let’s say they really come after you, and they’re just being really mean, and they get a judgment against you for $1 million, and they start supplemental proceedings and they find out that you have a Nevada holding company, after they’ve deposed you in what’s called “a debtors exam,” and they say, “What else do you own?” and they see your tax returns and they see that there some money there.
Even after all that, here’s this guy who’s just upset, he’s mad, and he want something, so he’s just going to come after you. The most he can get, the most he can get, is a charging order, and that’s a charging order, and a charging order says, “You have no management rights.” You don’t have the right to sell the interest in the LLC or the corporation. You don’t get to manage the company. You have no rights to salary. You have no rights to anything other than if there’s ever a profits distribution, then you do, but since they have no management control, that’s you, are you ever going to give this person any money? No. So as a matter of course, they just don’t do it.
Question: “So if I have a Delaware LLC that owns LLCs in other states that hold real estate, it’s possible to convert that Delaware LLC to a Nevada LLC without disrupting the ownership of the disregarded LLC’s it currently owns?”
Toby: Yes.
Question: “If you own three houses in each state entity as shown, and you bought them this year, could you avoid dealer status by the… ?”
Toby: Yes. Owning the entity does not create dealer status. If you own them to sell them, it could, and so what you would end up doing is saying, “Hey, I have a dealer, maybe I have a corporation that’s set up,” and this is kind of beyond our webinar, but we could have a Nevada Corporation set up to be the dealer that that owns LLCs in those states. So say we have three houses in each state. You could have an LLC in that state that’s owned by the Nevada corporation and all of the taxes fall into that 1120, that corporate return, and you avoid dealer status. Absolutely. We could map that out for you, too.
Question: “Can family foundations that are registered 501(c)(3)s in Delaware also be converted to a Nevada 501(c)(3)?”
Toby: I don’t really see there’s a huge amount of reason to do that. I think that in that case, with foundations, rarely are you dealing with the public, where they’re trying to pierce through them, and it’s kind of a faux pas. It’s one of those things where I’ve just never seen it.
It says, “Hey, I’m the trustee of a trust that is now an irrevocable trust. Grantor died that owns different property, brokerage [inaudible 01:07:17] multiple LP interest. How would we structure it?” Maybe it owns that all, since it’s already owned by the trust. It’s something that we can certainly look at, but it sounds like it’s already structured. So then the question is, “What state is it in?” If you have an LP that’s in a state that does not have great protections, or you want to have a Nevada entity that’s the general partner to avoid liability, you could actually convert that.
Question: “How do you establish Nevada residence for your company?”
Toby: That is through the use of a company like Anderson Business Advisors. We have a Company Assistance program where we actually answer the phones, do the minutes and resolutions, maintain the business license, the stock ledger and all that good stuff, right here in Nevada, making sure that we have lots of contact here.
“I live in California, but have investments in Carolina and Texas.” Oh, this is the big one because California tries to tax all those if you just have them through California. So, “How could we organize the states, including California, since I live here but hold no property here?” What I would do is I would keep the LLCs out of the state of California. There is a way to avoid the franchise tax for out-of-state LLCs in California. I’m not going to get into it on this webinar because there’s probably professionals out there who want to steal the way we do it, but we actually have a way that’s been approved by the professional section of the Franchise Tax Board to avoid the $800.
All right. “If you want to run the stock market training business through a Nevada C corp and you don’t live in California, can you trade to the C Corp., or do you need to set up an LLC?” Actually, you could do both. The reason that you may not want to trade inside the corporation is because if your trading, it’s passive income; it’s capital gains. So depending on how much you’re making, you could actually take something that would’ve been long-term capital gains, or short-term capital gains, not subject to self-employment tax and made a new situation where you have to pay yourself a salary or otherwise get it out.
Question: “If you have a charging order against your C Corp., can you borrow money out of it, rather than take a distribution?”
Toby: That’s a good one. Technically, yes you can. Again, it’s late Sasquatch and the Loch Ness monster. You hear about charging orders, but I’ve never actually seen one. There is a guy who tried to get one, when I went to the Supreme Court because he kept wanting it foreclosed. There’s all these ideas of, “Who pays the tax if there’s a charging order?” Frankly, it’s too expensive to get a charging order. You just don’t see them, but in theory, there’s lots of things you could still do, including setting up sister corporations or finding fun, clever ways to get the money out. Loans typically are not a distribution, so you probably could loan some money out.
Question: “A Nevada LLC has three partners and one has an auto accident. How can you hide the LLC when each has records on their partnership?”
Toby: You don’t. If you have three partners and one has an auto accident, if you were a general partner, they could take the whole thing, but because you’re a Nevada LLC, they’re limited to a charging order. They cannot even answer the Nevada corporation. They are an outside assigning interest, which means you don’t have to talk to them. It’s just if you ever decide to issue out profits, that partner who was a one third, you would issue his one third to the individual that has obtained the charging order against the company, but they have no voting rights or anything like that.
“Are there any advantages of using a C corp or LLC for stock, futures, Forex, mutual fund trading?” That’s a big question, and I would encourage you to look at some of our old webinars on trading. We teach three-day classes on that, but the answer is yes because as an individual you don’t get to have any business deductions. It’s specifically excluded by the IRS for some reason, even if there’s cases where the people even made $15 million plus, and they still call them an investor and don’t allow them to take any business deductions. A C corp, on the other hand, just by being in existence, is a trader business, and it can write everything off.
So we can always just say, “Hey, I have a question,” or, “I want a structure review,” or, “I want you to take a look at my existing situation and tell me whether or not I’m doing this correctly, or if I’m taking advantage of the laws.”
So that’s about it. I hope you enjoyed this webinar. I know we went through a lot of information. Always stay tuned. We’ll probably do a few more on the nuances. Especially given all the comments about the real estate will probably go down that route in a future webinar, but we will be sending you out a link that allows you to get this as a recording. Share with your friends. Share with your lawyers. I don’t care. The idea is that, hey, we have statutory protections; take advantage of them.
