Profits Interest – Info You Need to Know

You’ve probably heard of “stock options” that enable an individual to buy into a company at a future time. However, if you work for a limited liability company (LLC), you also have the option of utilizing a unique form of equity compensation known as “profits interest” which represents an actual current ownership interest in the LLC. Tax Free Equity Compensation A profits interest, when structured to be in compliance with relevant IRS “safe harbors,” is effectively tax free for the recipient, according to a great article published by Hutchison PLLC. This is because a profits interest basically represents an ownership interest in the future growth of the company but not an interest in the current value of the company. Example of How a Profits Interest Works Let’s say an LLC has three owners. Each owns one third of the company. Then, the company grants a 10 percent profits interest to an employee at a time...

02 May

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Essential Small Business Advice – Follow Formalities

Posted by Bobby Feisee

in Bobby's Blog

Many small business owners think that if they set up an LLC or corporation, they are fully protected from individual liability. Not true. While setting up the company structure is a critical first step, it is imperative that you perform certain formalities throughout the year to maintain your liability protections. Annual Meetings Corporations are required to hold an annual meeting every year and maintain a record book of the meeting minutes. While LLC’s are often not required to hold an Annual Meeting, we recommend that the members and managers of the LLC still hold a formal meeting on a yearly basis. The meetings are an opportunity to discuss and document important business decisions made throughout the year. Including your CPA, attorney, and other business advisors in the meeting will make the meeting even more productive. You can review tax planning for the year and make sure your legal documents are up...

15 March

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Wine Collector? Protect Your Investment

Posted by Bobby Feisee

in Bobby's Blog

If you purchase fine wine as an investment, here is a red alert - your homeowners' policy probably does not cover your wine collection. In fact, the vast majority of homeowners' policies exclude coverage for perishable goods like wine. Ensuring you have adequate insurance coverage on your wine collection is absolutely critical. Some individuals have spent thousands of dollars to accrue an impressive wine collection or wine cellar. Getting the Right Insurance Policy for Your Collection When shopping for an insurance policy to protect your investment, consider an agreed upon insurance value and to keep records of the collection purchases, sales, and consumption to avoid insurance disputes in the event of a loss. Setting a reasonable deductible with your insurance agent is a good way to manage the cost of insurance keeping it reasonable and coordinated with your risk aversion. Getting a quality insurance policy should not be terrible difficult since the value of wine...

17 December

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Should You Adopt the Zuckerberg Strategy and “Donate” to an LLC?

Posted by Bobby Feisee

in Current Events

Facebook founder and CEO Mark Zuckerberg made headlines after announcing that he would be “donating” the bulk of his $45 billion fortune to charity. In some corners, Zuckerberg was derided since his “donation” was to a Limited Liability Company, as opposed to a charitable trust or actual charity, according to the Washington Post. The Zuckerberg-Chan Initiative (the LLC) will receive $45 billion worth of Facebook shares that Mr. Zuckerberg owns. So, in reality, no real charitable donation was made. Though, Zuckerberg has publicly stated that his LLC will focus on important charitable and public causes such as curing disease, advancing education reform, and so forth. Important question – is “donating” money to an LLC a wise estate and/or business strategy for you to consider? Answer: possibly. An LLC is a pass-through entity offering few tax benefits for Mr. Zuckerberg or his charitable endeavors. He may benefit from the timing of making estimated tax...

18 February

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Limiting Exposure to Liability Critical for Small Business Owners

Posted by Bobby Feisee

in Bobby's Blog

If you’re a business owner, one of the most important legal concepts you need to be familiar with is limited liability. You’re probably somewhat familiar with limited liability if your business is structured as an “LLC” (which stands for Limited Liability Company) or “PLLC” (which stands for Professional Limited Liability Company). Additionally, if you’re a shareholder, you enjoy limited liability for the actions of the corporation. However, courts across the country have recognized certain circumstances where a court can “pierce” the proverbial “corporate veil” and hold shareholders liable for the actions and/or negligence of a company. The standard used to pierce the corporate veil is murky at best. Many courts utilize different standards. Even courts in the same state apply different tests. Nevertheless, the fundamental idea behind disregarding limited liability is when the shareholder does not treat the corporation as a separate legal person. Courts reason that if you...

06 November

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Benefits of an LLC for Real Estate Investments

Posted by Bobby Feisee

in Bobby's Blog

Investing in real estate can be a very good strategy for creating a sustainable income stream for your estate plan. Though, real estate investments also creates inherent liabilities. Whether you invest in homes or apartments, areas such as laundry rooms or staircases, they all carry great risk of exposure. Even tenants themselves carry the risk of exposing you, the owner, to liability from potential environmental-contamination claims, fire-related claims, slip-and-fall claims and other injury claims. This is why steps should be taken to protect yourself, such as forming a Limited Liability Company (i.e. LLC). An LLC can be a great form of asset protection. An LLC is known for combining the best attributes of a corporation and a partnership. How? Well, an LLC allows you to protect your personal assets (including your primary residence) from claims by creditors against the LLC. So basically, you get personal liability protection. Generally, the...

25 April

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Alternative Investment Option to Consider – The “Self-Directed” IRA

Posted by KarenLewis

in Bobby's Blog

Many Americans invest retirement funds into publicly-traded assets such as stocks, bonds, mutual funds and so forth. This isn’t a surprise since the large investment institutions encourage people to invest in these types of assets and don’t do much advertising about unconventional ways in which you can use your retirement funds. You may not realize that the laws governing IRAs (i.e. Independent Retirement Accounts) allows virtually unlimited investment flexibility. This is where "self-directed IRAs" come in. Using “self-directed” IRAs has become extremely popular in recent years. The purpose of these self-directed accounts is allowing an investor to invest some (or all) of an IRAs assets into “alternative” investments, which means pretty much anything other than stock market-based investments. Some alternative investments include real estate, loans, tax liens, and privately-held companies. But keep in mind that there are restrictions with self-directed IRAs. For example, you cannot engage in self-dealing. Therefore, if you invest...