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Hey all-

I'm sure this has been discussed before.... but

I've been thinking a alot about incorporating to protect my assets. So here are my questions:

1- What is the best way to learn how to incorporate and about all the differences between corporations, LLCs and LPs?

2- I don't have a business, only my investing. Can incorporate that to protect my home and financial assets?

3- What have some of you done out there to protect your wealth?

Thanks,
Danny
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Corporations and other limited liability entities are fairly good at protecting the owners' assets from business liability. But the liabilities you most often face as an individual are personal and not well protected by those entities.

For example, if you have an auto accident, that's going to be a personal problem. A corporation will provide little to no protection for you.

Corporations cost money to set up and maintain. I think that money would be better spent on insurance to protect you from liability claims.

A corporation really does nothing to protect you from ordinary creditors. No one in their right mind will lend money to a small corporation without a personal guarantee from the owner.

This might be a question to ask over at the lawyer's board. It really a legal question rather than a tax one.

--Peter <== believes in using the right tool for the job
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Thanks for your reply but I have to disagree with a few things. One, I think this is a tax question because of the great tax savings available to corporations, i.e., pretax spending. Two, if my assets are tied up in a corporation, then I, personally, have no assets, so I am protected from personal liability because I have no personal assets.

I will ask this question on the lawyer's board.
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One, I think this is a tax question because of the great tax savings available to corporations, i.e., pretax spending.

There is nothing - absolutely NOTHING! - that a corporation can deduct than an individual can't also deduct. (see footnote) There is no "magic" in a corporation that makes things deductible. This is a blatant lie propogated by scam artists that want to set up Nevada corporations for you and collect a fee from you for doing so.

Two, if my assets are tied up in a corporation, then I, personally, have no assets, so I am protected from personal liability because I have no personal assets.

You'd still own the shares of the corporation, wouldn't you? It would be a minor extra step, but someone with a claim against you could get control of those shares, and therefore your assets.

I will ask this question on the lawyer's board.

Please do. They can probably do a better job of explaining it than I can.

--Peter

footnote: OK - there are a couple of minor things where a corporation may have a slight advantage in taking a deduction over an individual. But those are for business expenses, which I don't think we're talking about here.
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Peter hit all the high points in his replies. Corporations shelter your personal assets from the consequences of business mistakes made by your employees. They do not protect you from personal liability. A creditor will just take the corporation from you and then get at the assets. In the few cases that I can think of where someone has successfully used a corporation to "shield" personal assets, it has been accomplished by vesting ownership of the corporation in someone other than the taxpayer. That requires a great deal of trust because there can't be any legal restriction on the ability of the corporate owner to dispose of the corporation or its assets.

Take Peter's advice, buy yourself a good insurance policy and save yourself the money and aggravation you'll have to spend on setting up a corporation and filing its annual tax returns and corporate reports.

Ira
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Nydegger: "Thanks for your reply but I have to disagree with a few things. One, I think this is a tax question because of the great tax savings available to corporations, i.e., pretax spending."

I doubt that it is as large as you think, espescially because you will be an owner.

"Two, if my assets are tied up in a corporation, then I, personally, have no assets, so I am protected from personal liability because I have no personal assets."

Q: Who owns the shares of stock of the corporation? (or the partnership interest or member's interest in the LLC)?

A: You do. If you are liable, the PI lawyer will happily claim the shares of the corporation that owns all "other" (former) assets.

Regards, JAFO

ADD THE USUAL DISCLAIMER - I AM A LAWYER BUT THIS IS NOT LEGAL ADVICE AND NOT CLIENT RELATIONSHIP IS INTENDED. IF YOU NEED LEGAL ADVICE, YOU SHOULD ENGAGE A COUNSEL IN YOUR JURISDICTION.



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ptheland: "There is nothing - absolutely NOTHING! - that a corporation can deduct than an individual can't also deduct. (see footnote) There is no "magic" in a corporation that makes things deductible. This is a blatant lie propogated by scam artists that want to set up Nevada corporations for you and collect a fee from you for doing so.

You'd still own the shares of the corporation, wouldn't you? It would be a minor extra step, but someone with a claim against you could get control of those shares, and therefore your assets."


<<<<I will ask this question on the lawyer's board.>>>>

"Please do. They can probably do a better job of explaining it than I can."

You are doing jsut fine.

You sure you have not attended law school in your spare time? <grin>

Regards, JAFO


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Two, if my assets are tied up in a corporation, then I, personally, have no assets,

One more thing. If you're thinking of giving the shares of stock away to someone else (thus really leaving you with no assets), you'll need to file a gift tax return. I doubt that your net assets would be worth less than the $11k annual gift limit.

So don't forget to factor that in to your planning.

--Peter
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