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Many people believe that as long as they are outside the state of California for six months and a day they are not residents of California. And thus don’t have to pay California’s high income taxes. But the state of California is both broke and arrogant. And they make the rules the way they want.
You design a lot of things in your life. The layout of your house, the flow of your business, the requirements on your children, and many more scenarios are all elements of conscious design. Asset protection is no different. There is an architecture, a cohesive...
Does the Rule Apply to Real Estate? If you invest in and/or syndicate real estate what are the duties to your investors? You owe them a duty of loyalty. But how far does that go? The issue of corporate opportunities is important. I wrote a whole chapter on it (from...
There are many advantages to incorporating your business and assets by using the proper business entity. In fact, without it, you’ll have difficulty building business credit, which is often necessary for growth and stability. You’ll also be vulnerable to losing your wealth and assets in the event of lawsuit, divorce and legal judgements.
Corporations, limited liability companies (LLCs) and limited partnerships (LPs) are business entities that allow you to:
This can protect personal assets such as your home and bank account from claims against the business. This is far superior to using a sole proprietorship or general partnership, which again offer no asset protection.
Some business owners create more than one corporate entity and segregate assets among different business entities for asset protection. This can lower each asset’s exposure to claims.
You won’t get far using a sole proprietorship for business credit-building purposes. You need a separately chartered and active (meaning all state fees are paid) business entity for this purpose. Read more about building business credit fast. It’s also worth knowing if you are likely to need business credit, as some industries will have a greater need for it. To see if you’re likely to need a business loan read this article.
Sole proprietorships are audited at a rate five times higher than corporations!
There are also many tax benefits to using a corporation, LLC or LP. Many business expenses are easily written off and pre-tax dollars can be used for valuable benefits packages.
An Experian study found that incorporated business owners had incomes 35% higher than the overall population. Comparatively, unincorporated owners’ incomes are 24% higher. Additionally, the Experian study cited that Incorporated business owners are 94% more likely to exhibit “work hard, play hard” attitudes than unincorporated owners and the overall population.
My book, Start Your Own Corporation, discusses choosing the right entity in great detail.
Many people believe that as long as they are outside the state of California for six months and a day they are not residents of California. And thus don’t have to pay California’s high income taxes. But the state of California is both broke and arrogant. And they make the rules the way they want.
You design a lot of things in your life. The layout of your house, the flow of your business, the requirements on your children, and many more scenarios are all elements of conscious design. Asset protection is no different. There is an architecture, a cohesive...