Reducing Taxes and Liability with Corporate Entities

Jun 7, 2018

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Getting off of Wall Street and alternative investments are one of my favorite topics. Today, Scott Arden the COO and co-founder of Controller’s Ltd. a company that offers a wide range of financial services including bookkeeping, payroll, CFO/controller services, cash-flow management, and tax planning is here.

We talk about asset allocation, diversification, and making the most of alternative investments. Some of the things we discuss are choosing the right corporate structure or multiple structures to reduce taxes and liability issues. We also talk about the steps to begin building the best type of structure for your businesses.

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Show Notes

[01:20] Scott and his co-founder discovered a breakdown between the asset protection side of business and the tax planning side and decided to bridge that gap.
[02:03] They want everyone on the financial team to be on the same page and have the same plan in mind moving forward.
[02:26] The breakdown comes from a lack of integration and the lawyers not talking to the accountants unless the client knows how to facilitate those conversations.
[02:43] Most people abdicate their total financial control to a CPA, a lawyer, and maybe a financial planner.
[03:06] The first step in diversification of assets. Make sure that your current house is in order.
[03:47] True asset protection can only be achieved by using multiple entity structures.
[04:29] Once everything is in order, then it is time to take on that new business deal.
[05:02] Building full asset protection.
[05:25] The entity you should choose depends on the type of business that you are going into. A lot of businesses starting out use LLCs or S Corps.
[06:04] As you get more comfortable with different investments, it is time to bring on different companies.
[06:12] Creating an LLC structure can allow for passive investments, deductions, and liability protection.
[06:37] As things become more profitable, you will want to look at tax strategies and building a nest egg for funding additional deals.
[06:56] Depending on how diverse your assets are you could go into a multi-tiered structure.
[07:24] Dividing assets and liabilities into companies. Different businesses have different liability factors.
[08:35] Defining the effective liabilities in each business.You don't want to combine all of your different businesses into one entity and all businesses responsible for an accident in one of the businesses.
[08:52] You can put your equipment in a separate LLC and lease it back to the company to avoid liability issues.
[09:00] Scott's company does a comprehensive analysis of what the client has and how many entity structures should be put in place.
[09:42] Own nothing and control everything. Nevada offers an asset protection trust.
[10:16] Everyone with assets should have a living trust. An asset protection trust means you own nothing, but control everything. These can protect everything that you earn and pass it to beneficiaries.
[11:41] The wealthy live within corporate structures.
[11:56] Insurance can separate out some of the liability. Use of corporate structures can legally encumber assets using multiple entities creating friendly liens to protect the assets.
[13:27] Investment risk comes down to identifying your expectations and comfort level.
[14:34] Being the first lien position on a note. Flipping Wall Street is a robotic trader. Equity investing has always been on the playing field.
[15:44] Equity investing is more secure. Starting out in debt is more stressful and reduces the amount of risk that you can take.
[17:26] Step one: get your current house in order. Step two: identify expectations. Step three: Research.
[18:07] Speak with someone who has experience. Learn from people who know.
[18:48] You can't learn the variables of a deal in a textbook. A deal is when all parties feel that it works.
[19:26] Lowering taxes through multiple entities. Corporations and LLCs offer far more tax deduction options than individuals.
[21:06] Corporate write-offs can offer you more use of your money up front.

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