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Having A Corporation Or LLC

Is Only Beneficial If Using It

Correctly -by Scott Arden

Making the right choice when it comes to setting up a Corporation or LLC is crucial. What’s even more
critical is giving these entities substance. I hear from a lot of people that I talk to, that they were told to
setup an LLC but aren’t really sure why, or what benefits they are supposed to receive. Setting up the
right entity is imperative because the last thing you want to find out is that you are in the wrong entity
and have to go back and cleanup/restructure the business, or even worse, lose everything they have
worked hard for.

With the litigation explosion in For example, my firm had a client the revenue agent’s desk. The first
today’s society at an all-time high, who came to us after a very bad question the revenue agent asked
it is important to have the proper situation arose within his business. concerned seeing the company’s
entity setup for liability protection We’ll just call this client “Jim”. Jim documentation. Jim pushed the
of both personal and business has a large construction company, financials across the desk to the
assets. Having a Corporation or one who built a custom home revenue agent, the agent pushed
LLC is great, as long as you are for one of our ex-vice presidents them back and asked for his
using it correctly. When I speak to in Wyoming. Jim’s company was Corporate Records. Jim, having a
business owners & entrepreneurs setup as a Corporation, he had nice fancy corporate book, pushed
throughout the nation about one of the most prestigious it across the table. The revenue
their entity structures, there is CPA firms in the nation, and has agent opened the book only to
one common thing that most the most pristine financials. He find that Jim had only completed
people overlook, the Minutes & received a notice of an audit from the initial Minutes & Resolutions,
Resolutions. They either don’t the IRS. Jim, knowing that he had issued himself ownership, and
know how to do it, or they are a Corporation structured and his closed up his book. He never kept
told that they should form an financials were in order, was very any documentation (i.e. Minutes
LLC and are advised that they are confident that he would prevail in & Resolutions) past the initial
easier to use and don’t have the this audit. meeting. The revenue agent
same compliance requirements closed the book, pushed it back
as a Corporation. These people On the day of the audit, he walked across the table and said, “I now
have been misinformed by their into the IRS building with his CPA know what I am dealing with, a
professionals or friends, and are in tow. Feeling very confident Sole Proprietorship”.
led down a path that can cause that he was going to overcome,
serious havoc on their business’ he walked in very proudly and
and personal assets. placed all of his documents on

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