By: Ted Sutton, Esq. There are some promoters out there who claim that they have a trust strategy whereby the trust avoids paying income taxes. But recent IRS rulings have started to crack down on this practice. The most recent ruling came from Chief Counsel...
The Difference Between Certificated And Uncertificated Securities
By: Ted Sutton, Esq. A security refers to an ownership interest in a business or a financial instrument. These ownership interests can be in a private LLC, or corporation, or in a publicly traded stock or bond. There are two choices for holding ownership interests in...
New York LLC Transparency Act
By: Ted Sutton, Esq. Marissa was an aspiring barista who lived in New York City. After she graduated high school, she started her own coffee shop in Brooklyn. She properly formed a New York LLC. However, she forgot to report her beneficial ownership information to...
The Crimes of a Nominee Officer
Nevada corporate law (at NRS § 78.150(3)(a)(2)) and LLC law (at NRS § 86.263(3)(a)(2)) requires the lists to include a declaration under penalty of perjury that the corporation or LLC “acknowledges that pursuant to NRS 239.330, it is a category C felony to knowingly offer any false or forged instrument for filing with the Office of the Secretary of State.”A category C felony requires a court to sentence a wrongdoer to state prison for not less than one year with a maximum term of five years. Monetary fines may also be imposed.
Nevada law further states in § 78.150 and § 86.263 that a person who files a list with the Secretary of State which identifies an officer, director, manager or managing member “with the fraudulent intent of concealing the identity of any person or persons exercising the power or authority…in furtherance of any unlawful conduct is subject to the penalty set forth in NRS 225.084.”The penalty for filing a false statement of material fact includes actual damages (involving a minimum of $10,000 for each violation), costs of suit and attorney’s fees and punitive damages as the facts may warrant. Jerry represented Matt as the government investigated both the untested supplement issues and the LLC filing issues. In the end, the government didn’t want to deal with all the experts and time required to prove the supplement case. Matt had clearly done all the LLC filings with the intent of improperly concealing his identity. The government’s case was so easy. Jerry did his best, but as it turned out, Matt was sent to prison for five years and owed millions in actual and punitive damages.
Be very cautious when using a nominee service.
Do not blindly accept the advice of those who don’t know the law. Leave your nominee on the annual list and work as an assistant manager or vice president. When the nominee is no longer used, file an amended list with the state. If you use the nominee’s name but you don’t pay for the service you can be charged with a felony and sent to prison. If you use a nominee to conceal your involvement in wrongful conduct the penalties are significant. It is easy to follow the law. It is also easy to avoid the advice of people who don’t know the law. Now that you know what not to do, here are some points to help you understand how and why you would use a Nominee Manager/Officer.- Nominee Manager / Officer can be used to provide privacy on state records. Each jurisdictions business statutes determine what information is made part of the public record, so this can vary depending on the state your entity is formed in.
- Once a Nominee Manager/Officer is in place, the Member/Shareholder retains all operational authority, signature rights over any financial accounts, the right to enter any sort of financial or lease arrangement with any other entity, etc.
- Agreement is signed between Member(s) and Nominee that outlines the parameters of the service.
- Members/Shareholders retain the ability to vote the nominee officer out of the corporation if you so choose. Any state records that name the Manager, etc., must then be updated to show who is the current Manager/Officer/Director.
The IRS is Cracking Down on Trust Promoters
By: Ted Sutton, Esq. There are some promoters out there who claim that they have a trust strategy whereby the trust avoids paying income taxes. But recent IRS rulings have started to crack down on this practice. The most recent ruling came from Chief Counsel...
The Difference Between Certificated And Uncertificated Securities
By: Ted Sutton, Esq. A security refers to an ownership interest in a business or a financial instrument. These ownership interests can be in a private LLC, or corporation, or in a publicly traded stock or bond. There are two choices for holding ownership interests in...