Sutton Law Center

Our Asset Protection Attorney Discuss Business Structures and Taxes

gavel Asset Protection AttorneyEntrepreneurs pursue marketplace opportunities serially and simultaneously. They create multiple business forms and entities for their varied endeavors to limit their legal liabilities. Such business entities may be limited liability companies (LLCs), C or S corporations, or partnerships. Each in its own way protects personal assets from risks of lawsuits and claims against the business. In recent years, the formation of layered business entities has become increasingly attractive to entrepreneurs starting new businesses.

Multiple Business Entity Structures

Big business websites display multiple business entity structures in fine print. Large businesses have followed for decades the practice of layering a business entity form beside or with an operating business.

The layered, multiple-entity structure strategy establishes one entity as the operating business holding very few assets and another, related business to hold valuable patent, trade secret, software, website, and other intellectual property assets as a holding company. Similarly, a separate entity may hold real estate for business operations.

The enterprise assets are apart from its potential liabilities in two or more separate business entities. Such entity layering requires careful drafting of leasing, licensing, and management agreements among the business entities.

Tax Consequences

With multiple business entities, the entrepreneur can limit exposure of personal and business assets to liability and realize certain tax consequences. LLCs, partnerships, and S corporations feature pass-through taxation. Taxation of a C corporation is at both the corporate and the personal levels when it pays dividends to shareholders. Regardless of the number of entities formed, the entrepreneur should consider carefully all of their tax consequences. Multiple layered-entity structures may include any of the following combinations:

  • An LLC owning multiple LLCs
  • A limited partnership owned by a general partner entity and individual limited partners
  • An S corporation owned by a single-member LLC
  • An S corporation owned by a limited partnership of all individual partners
  • An S corporation owned by another S corporation with one individual shareholder
  • A C corporation owned by a trust, an LLC, or another C corporation

Each business entity has its own taxation treatment at federal and state levels. As to entity structure, whether multiple entities operating in tandem or layered multiple entities, it is wise to consult both legal counsel and a tax adviser familiar with state corporate and tax laws. Decisions on how to title and record assets on accounting records require considerable care. Asset title or ownership issues may be important in any sale of one or more of the businesses.

Talk to an Asset Protection Attorney

S corporations, C corporations, LLCs, and limited partnerships are business entities for asset protection purposes. These very affordable structures shield personal assets from business risks and business and real estate assets from personal judgments

Use of several business entities can protect assets. If one LLC owns five rental real estate properties, a tenant injured at one property with a claim against the LLC, which owns five rentals, could reach all five properties. A better way is to segregate the assets into five separate LLCs. A key asset protection strategy separates assets to lower the exposure of each to claims.

The right mix of entities can be important for asset protection. A combination of both Nevada and Wyoming LLCs, limited partnerships, and corporations can implement an effective asset protection strategy. An asset protection attorney consultation can be very informative and ultimately very rewarding. Contact the Sutton Law Center at (775) 824-0300 today to schedule an appointment.


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