Here are a few important distinctions to be aware of:
2. Using a “private” LLC usually won’t provide a tax benefit
Another common marketing ploy is the general statement that using a Nevada (or similar) state LLC will reduce your tax liability. While this may be true for those who actually live and operate in one of these LLC friendly states that have tax benefits, it is often not the case for those living in one state and registering their LLC in a different state.
EXAMPLE: California resident Dr. Jones created a Nevada LLC that owns her California rental homes, but still pays all applicable California taxes and fees, and in some cases additional fees to register as a “foreign corporation” doing business in her state. Add to that questions about conflicts of law and the recurring annual costs of having a registered agent for service of process in the state where the LLC was registered and the benefits promised start to erode quickly.
3. A word on divorce
Among the most egregious promises I’ve seen made by scam artists is a blanket statement that LLCs “help in divorce.” Putting assets that are already community property or marital property, including income earned during the marriage or an investment made with marital assets, into an LLC your spouse does not have an interest in will not help you in a divorce, in fact it may adversely affect you if it seen to be fraudulent, theft, conversion, or concealment. Using a properly drafted LLC may however be one good device for keeping what is legitimately separate property legally distinct.
This article was originally published in a different form at www.PhysiciansPractice.com, The Nation’s Leading Medical Practice Management Resource. The author, Ike Devji is an Asset Protection attorney with over a decade of experience in helping to protect thousands of HNW clients from a variety of risks and has written over 200 articles on related issues.