Where to form your LLC for virtual or foreign business activities September 17, 2008
Posted by Jeff Nabers in Self Directed IRA/401k, real estate.Tags: 401k, invest, investment, ira, limited liability company, llc, nevada, nexus, NV, OR, oregon, ownership, real estate, self directed, solo, Solo 401k, strategy, tax, tennesee, TN, WY, wyoming
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When you form an LLC (or Corporation), it is registered and created at the state level. You can choose to form an LLC in any state, regardless of your state of residency.
Nexus
When you have business activity that clearly occurs in a specific state, you are said to have “nexus” in that state. If your LLC has nexus in a state, it will probably need to register itself in that state and pay any applicable taxes for doing business there. An LLC is a pass-through entity, meaning it is designed to have zero taxation because income taxes are paid by the LLC owner(s) on their tax return. Unfortunately, some states have created franchise and/or excise taxes that can be costly.
Virtual Businesses
If you are starting an internet business (or any other business that doesn’t create nexus in a specific state) you can choose to form your LLC in a state (more…)
Entity (LLC) Maintenance - Keeping your Corporation or LLC Legitimate July 10, 2008
Posted by Dan Marsh in Self Directed IRA/401k, real estate.Tags: self directed, ira, 401k, invest, investing, llc, ira llc, limited liability company, liability, asset protection, protect, corporation, pierce, veil, entity, maintenance, documents, meetings
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****** A note from Jeff Nabers ******
I asked attorney Dan Marsh to shed a bit of light on entity maintenance and its importance. With a general purpose LLC, failing to properly maintain the entity can result in “piercing the veil” which means subjecting creditors to assets of the LLC owner(s). With a special purpose IRA LLC, “piercing the veil” could mean a prohibited transaction resulting in hefty taxes, penalties, and interest.
Entity maintenance is important and it shouldn’t take too much time or money… yet it could save you a lot of time and money in the long run. I suggested Dan keep this post brief, but instead he did what attorneys are supposed to do: he was thorough. Rather than ask him to dumb it down and shorten it, here’s the article in its entirety…
*************
Asset Protection: Multiple LLCs July 1, 2008
Posted by Jeff Nabers in Self Directed IRA/401k, real estate.Tags: self directed, ira, 401k, real estate, invest, investing, llc, assets, limited liability company, liability, limited liability corporation, asset protection, protect, safeguard, corporation, estate planning, apartments
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LLC stands for limited liability company, and that is the primary purpose for forming such a legal entity. When you enter into a business transaction as an individual (aka sole proprietor), if somebody decides to sue you, all of your personal assets can be subjected to satisfying the law suit. The idea behind an LLC or Corporation is that people are doing business with that entity (the LLC, for example). When a true separation is maintained between the LLC and its members/owners, the LLC can only lose its assets… but not the unrelated assets of its owners.
The cross-liability of one LLC with multiple assets or businesses
Jeremy forms JAH LLC to buy and hold apartment buildings. He buys Apartment Building A as well as Apartment Building B & Apartment Building C.
An accident occurs and somebody gets hurt in the common area of Apartment Building A. This person sues the owner of the buildings, JAH LLC.
Personal assets - Jeremy’s personal assets are protected from exposure to this law suit (except for what he contributed into JAH LLC).
Apartment Building A - All of the assets of JAH LLC can be exposed to satisfying the law suit. This includes bank accounts relating to Apartment Building A and even the real estate itself.
Apartment Building B - All of the assets of JAH LLC can be exposed to satisfying the law suit. This includes bank accounts relating to Apartment Building B and even the real estate itself.
Apartment Building C - All of the assets of JAH LLC can be exposed to satisfying the law suit. This includes bank accounts relating to Apartment Building C and even the real estate itself.
The additional protection of multiple LLCs
Jeremy forms (more…)
What’s so special about the IRA LLC? June 9, 2008
Posted by Jeff Nabers in Self Directed IRA/401k.Tags: self directed, ira, custodian, prohibited transaction, llc, ira llc, irs, compliance, limited liability company, minutes, operating agreement, special purpose, compliant, facilitator
4 comments
Ahhh… the single most mis-answered question in the self directed IRA world:
Customer: I’ve noticed it costs more to setup an IRA LLC than it does a general purpose LLC. What’s so special about the IRA LLC?
LLC Facilitator: The Operating Agreement has special language. Putting together an IRA LLC without this magical language will result in a prohibited transaction and hefty taxes.
This is untrue. While it’s advisable to include special language in a special purpose LLC (one that is intended to be owned by an IRA and managed by the IRA accountholder), the absence of such language will not create a prohibited transaction in itself. Believe it or not…
Any newly created LLC can be used with an IRA!
…without necessarily creating a prohibited transaction. The sales pitch that you need the special purpose operating agreement is bogus.
That said, it is still advisable to have an IRA LLC established for you by a company experienced and competent in such facilitation. Not because you have to, but because you should want to. Why?
You want things to look good in the event of an IRS audit
This is probably the main reason why you should have an IRA LLC formed for you by a specialist instead of doing it yourself. If you get audited, the IRS is going to have a first impression about your IRA LLC structure. If it looks like you did everything compliantly and your documents pro-actively address most compliance issues, the IRS’s first impression may be friendly. If it looks like you just threw the LLC together with little regard for compliance, this may negatively affect the IRS decision of how long and excruciating the whole ordeal will turn out to be. This is an important issue. Notice I said “looks like”. Regardless of how compliant you are, (more…)
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