FAQ OF THE MONTH

Q. Al, Should I use Nevada, Wyoming or

    Delaware entities for my properties for

    better asset protection? 

A. Delaware especially does have very favorable

statutes for entities such as LLC’s. If your

properties are located in these states then you

should use these states for your LLC. Otherwise,

you generally should use the state where the

property is located. Reasons: The courts of the

state’s property physical location  will most likely

govern in the event of a legal action, not

Delaware, Wyoming or Nevada. You still have to

file a foreign entity registration with the state

where the property is located including giving at

least some disclosure of your LLC in that state.

Moreover, you will mostly likely have some type of

filings for two states instead of one. Furthermore,

using an out of state LLC for property located in

another state will entail additional costs of

maintaining a base of operations in the state of

the LLC, such as Delaware (which is better than

Nevada).  Here, you must set up some type of

office base, including personnel taking care of

your business and answering the phone. You will

also need a business license and bank account

in that state. There are service companies that

will do this for you, but it will entail annual

additional costs that are not going to be worth it

because of the above reasons.

AL’S TIP OF THE MONTH

S-Corps Remain On the IRS Hit List.

With S-corps, paying little or no salaries is a way

for the shareholders to avoid paying employment

taxes. But the IRS wants the S-corporation to pay

more taxable salaries to its shareholders. For

their properties, investors should use LLC-

partnerships which are not required to pay

taxable salaries, are audited less than S-corps,

and have many other advantages.