Some benefits of limited liability company are asset protection, real estate investments to form REIT, estate tax planning, assist with eliminating probate, charitable gift giving, 1040 tax flow through benefits, multistate operations and professional practice operations.
There are many advantages to the limited liability company (LLC) including the financial and tax advantages. Herein we discuss the other specialized uses and benefits to you for possibly implementing the limited liability company in your estate planning and business strategies.
The LLC in Asset Protection
First-time business owners were first unincorporated proprietorships. As they began to realize the possible loss of their personal assets or as they started to get in trouble only then did they consider other types of ownerships. The limited liability company is the most efficient way to do business. No assets or business should ever be in their personal name.
In other words, you should “own nothing yet control everything-else.” Personal creditors cannot step in your shoes to take control of your LLC and your creditor is precluded by law and with unwanted tax consequences. Under the LLC, members cannot be held personally liable.
See section what’s an LLC?
Another good asset protection technique to shield your personal and other valuable assets is allowing the limited liability company own a “blanket mortgage” on all your assets – that is, in a sense, you owe money to your LLC. Alternatively, don’t put all you eggs in one basket and have multiple limited liability companies for multiple types of risks or multiple layers of legal entities, depending on your risk.
The Limited Liability Company in Real Estate Investments
LLC’s flexibility allow unlimited number of members. LLCs may register their shares with the Securities and Exchange Commission as publicly traded securities. In other words, Real Estate Investment Trusts (REITS) under the LLC umbrella are at far less cost and with less administrative complications.
The United States is the “offshore” for foreign entrepreneurs. Foreign investors consider the United States as their “offshore” tax-free, tax-haven jurisdiction due to favorite treatment of their investments and tax-free status afforded to them. For example, there are no capital gains taxes on securities purchased in the United States and sold by foreign investors.
The LLC in Estate Tax Planning and Eliminating Probate
The LLC is an ideal way to transfer wealth amongst family members. The older generation (i.e. parents or grand parents) can retain control of the assets or business by eliminating third-party interests and restricting membership while eliminating estate and gift tax consequences. The LLC is a much more practical device for this purpose with no mandatory distributions to the younger generation (children).
Creditor Transactional Benefits
Limited liability companies have a distinct advantage when it comes to borrowing money from traditional institutions such as a bank or doing business.
Charitable Gifting with the Limited Liability Company
Charitable giving and fund-raising is better facilitated through an LLC. Member gifting is passed through to their individual income tax returns on the federal form 1040.
1040 Flow Through Tax Benefits
You can avoid paying both corporate taxes and personal taxes on your profits and expenses with the LLC otherwise known as double taxation. This can be a tax advantage in many cases as the business profits, losses and expenses flow through to your 1040 federal form as a personal tax.
Profit Distribtuions are Completely Flexible
The profit distributions can vary with any percentage profit sharing under the LLC umbrella unlike a common partnership at 50/50 split.
MultiState Operations and the Professional Practice Protection with the LLC
Operations in multiple states and professional practices are enhanced by the use of an LLC. LLCs have long been recognized as traditional legal business entities. A trust is not afforded such luxury because no one knows what’s the nature of its business purpose. Essentially, a trust is a private business contract between the grantor, the trustee, and the beneficiaries.
From a business perspective you should consider the LLC in estate planning and in your business strategy. The limited liability company has many advantages that aggregate features of a corporation and a partnership. In America we have the option to set up a business as a sole-proprietorship (one I strongly do not recommend), partnership and corporation. In addition, it’s only in the United States where we have the added privilege of benefiting from the formation of a limited liability company.