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Our Corporate Services Attorney Discusses Buyout Agreements for Nevada LLC Formations

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Many Nevada LLC formation owners neglect to create buyout agreements, but they can be critical to harmonious LLC co-ownership. A buyout or buy/sell agreement states what must happen when after a Nevada LLC formation, an owner wants to leave the company, or, worse, departs after death, bankruptcy, or divorce.

Function of a Buyout or Buy/Sell Agreement

Contrary to widespread belief, buy/sell agreements are not about just buying and selling companies. They are binding contracts among co-owners of a business governing procedure when an owner wants a buyout or a new owner wants to buy in. To avoid misunderstanding over terminology, the phrase “buyout agreement” will refer to the document under discussion in this article.

A buyout agreement governs the following business decisions:

  • Whether the remaining LLC owners can be required to buy the departing owner out,
  • Whether anyone else can buy the departing owner’s share of the business,
  • Whether there is a constant value for an LLC owner’s interest,
  • Whether other events can trigger a buyout.

A buyout agreement among LLC owners is like a prenuptial agreement between spouses. If the union created by the Nevada LLC formation does not endure, the buyout agreement specifies in advance what happens to the business.

Events Governed

Typical events that trigger the buyout of an owner’s interest under a buyout agreement:

  • An owner’s retirement or resignation,
  • An outside offer to purchase an owner’s interest in the company,
  • A divorce settlement by which an owner’s ex-spouse receives an ownership interest in the company,
  • Enforcement a debt secured by an ownership interest,
  • Personal bankruptcy of an owner, or
  • Disability or incapacity of an owner.

The Need for Buyout Agreements

It’s a mistake to ignore the fact that sooner or later personal circumstances change. When they do, buyout agreements can help in several situations. Two general examples:

  • An owner leaves. The odds are good that an owner will want to leave the LLC before others are ready to sell or close it. Without a buyout agreement, the LLC might dissolve automatically by operation of law when an owner leaves, forcing a sale and division of the business assets. Without a buyout agreement, if the remaining owners wish to continue the business there will be no rules governing whether and how to buy out departing owners. This shortcoming could cause serious personal and business discord, perhaps even court battles and the total loss of the Nevada LLC formation.
  • An outsider wants to become a new owner. A buyout agreement governs who can buy an interest in the Nevada LLC formation and how. Without this provision, an owner could sell an interest to someone unacceptable to other owners.

Besides prevention of potential future problems, buyout agreements have the immediate benefit of motivating the LLC owners to talk about hopes and expectations for the business and put it on a sound planning track from the start.

Buyout Agreement Form

A buyout agreement can be part of the initial Nevada LLC formation or a separate standalone agreement. Once the business is underway, a corporate services attorney can work with the owners throughout the year to advise them on important decisions and to represent them in commercial transactions and in legal proceedings. From conducting shareholder meetings to preparing regulatory state or federal filings, corporate services attorneys make sure all LLC activities comply fully with federal, state, and local laws.

Contact a Corporate Services Attorney

As a business matures and grows, a corporate services attorney anticipates conflicts and proposes and negotiates solutions with vendors, customers, employees, and government bureaucrats. While in a perfect world a business can avoid conflicts completely, in the real world a skilled, experienced corporate services attorney finds effective solutions that save money, time, and aggravation. The Sutton Law Center PC assists businesses in every way important to their prosperity and success. To schedule an appointment with a knowledgeable corporate services attorney, call 775–824–0300 today.

Tips from an Asset Protection Attorney

gavel book Asset Protection Attorney

An asset protection attorney can offer clients tips on ways to protect their assets from divorce, failed businesses and creditors. In particular, he or she may discuss asset protection trusts and the advantages that they offer. Nevada asset protection trusts are particularly pursued due to their shorter statute of limitations for those states that permit spendthrift trusts. Specifically, a grantor who contributes assets to such a trust in Nevada will have these assets protected from creditors two years after the contribution. Another advantage that an asset protection attorney may highlight about Nevada’s trust is that it does not have any exception creditors, including spouses.

Usage of Trusts

Individuals who own businesses and those in industries where litigation is more common such as doctors, lawyers and engineers are likely to use such asset protection trusts. However, other people can benefit from using such trusts, such as individuals who are concerned about the potential havoc a divorce could cause. Individuals who own a Nevada LLC or LP who are sued personally do not have to worry about the creditor obtaining control or ownership of the business or its assets.

Nevada Residence

An asset protection attorney can explain that for a trust to be a Nevada asset protection trust, one trustee must usually be a Nevada resident, whether an individual or entity such as a bank or trust company in Nevada. However, the owner of the trust can reside in any other state in the United States and still benefit from the benefits provided by a Nevada asset protection.

Discretionary Disbursements

In order for a trust to be considered an asset protection trust, the disbursements must be discretionary by the trustee and not provided at planned intervals. This type of trust provides additional protection for the owner of the trust and his or her future creditors. However, in some circumstances an asset protection attorney may be able to protect the client from current creditors. However, in either event, there must be a two-year gap between the establishment of the asset protection trust. There is a tolling period of six months from thee date on which the current creditor learns about a transfer. An asset protection attorney can explain how the different statute of limitations works and differs between the rights and obligations of current potential creditors and future potential creditors. He or she can also discuss the effect of disbursements and any creditors’ rights to these funds.

Legal Assistance from Our Asset Protection Attorney

Individuals who are interested in an asset protection trust must also be aware of its uses and limitations. For example, Nevada has the shortest statutes of limitations. However, even there, a debtor cannot set up an asset protection trust once he or she learns about a pending lawsuit because a transfer would likely be considered fraudulent. Instead, the asset protection trust should be established before any legal troubles are on the horizon. For more information on what you need to know about asset protection, contact an asset protection attorney from Sutton Law Center at (775) 824-0300.

Should I Create an LLC or Corporation? Our Incorporation Lawyers Can Tell You

business handshake Incorporation LawyersIf you are starting a new business enterprise, you face a number of significant decisions, according to our incorporation lawyers. High on the list is deciding what type of legal business entity to establish. For example, you may be debating over whether or not to set up a corporation of a limited liability company (LLC). Before you can make a decision on which type of legal entity best meets the needs of your start-up or other business enterprise, you need to have a basic understanding of a corporation and LLC. You must understand what these legal entities have in common and how they differ.

What a Corporation and LLC Have in Common

Taxes: The reality is that a corporation and an LLC do have a variety of features in common with one another. Keep in mind that when discussing a corporate structure for a small business enterprise, the type of entity usually is what is called a Subchapter S corporation. A Subchapter S corporation is not “double taxed.” A Subchapter C corporation is taxed both at the corporate level and then again when the shareholders (owners) earn money through dividends or some other type of distribution. With a Subchapter S corporation, pass through taxation occurs. In other words, there is no tax imposed on the business enterprise itself and the tax liability passes through to the owner or owners of the enterprise. The same type of pass through taxation exists for an LLC as well. As a result, profits and losses of both this type of corporation and an LLC are dealt with at the level of the owner or owners.

What a Corporation and LLC Have in Common

Liability: Liability limitations represent another area a corporation and an LLC have in common. As a general rule, an owner will not be responsible for the debts or liabilities of the business. In addition, if the business is sued for some reason, the owner will not usually be held responsible for any judgment that might be entered against the business, whether a corporation or LLC. This is the general rule in all types of lawsuits, including those for personal injury. Incorporation lawyers can explain the limited situations in which this would not be the case.

Differences Between a Corporation and an LLC

Incorporation lawyers will explain that an LLC can have an unlimited number of owners. A Subchapter S corporation is limited to not more than 100 shareholders or owners. Only citizens or legal residents of the United States can participate in a Subchapter S corporation as a shareholder or owner. This limitation does not exist in regard to an LLC. Only individuals can be shareholders of a Subchapter S corporation. On the other hand, an LLC can be owned by any type of legal entity, including an individual. In addition, there are no limitations on the types of subsidiaries that can be owned by an LLC.

Transfer of Ownership

In most cases, it is easier to transfer an ownership interest in a Subchapter S corporation than it is with an LLC. Typically, an LLC will have more restrictions on how an ownership interest can be conveyed of transferred. Keep in mind that the owners of an LLC do have the ability to make transfers of ownership more restrictive, if they so desire. For example, the organizational instruments can contain a clause requiring the agreement of a certain percentage of owners to approve the conveyance of an interest in the LLC to another individual or legal entity. Incorporation lawyers assist in determining what will be required when it comes to transferring an interest in a specific enterprise to a third party, should the need or desire for such a conveyance ever come to exist.

Paperwork, Reports and Record Keeping

Overall, the amount of time spent maintaining records and dealing with reports and record keeping is more significant with a corporation than is the case with an LLC. For example, a corporation needs to maintain minutes of board meetings and similar types of documentation which are not required with an LLC. On a related note, the paperwork and documentation involved in setting up a corporation in the first instance is usually more substantial than that associated with an LLC. Incorporation lawyers are able to lay out these differences with specificity to a person interested in launching a new business.

Term of Existence

A corporation typically can exists indefinitely. On the other hand, an LLC typically has a specific period of time during which it will be in existence. Extending that period of time requires an affirmative act by the owners of the entity.

Contact Experienced Incorporation Lawyers

Once you make the decision to move forward with starting a business venture, contact the experienced incorporation lawyers at Sutton Law Center by calling 775-824-0300 for an initial consultation.

Asset Protection Attorney Discusses Asset Protection Strategies to Shield You

gavel and money Asset Protection Attorney

If you are looking to protect your assets, then scheduling a consultation with your asset protection attorney should be the first thing that you do. An asset protection attorney will be able to help you make the best decisions when it comes to doing what is best for your assets. Those who come into wealth unexpectedly often do not know what to do with their new found wealth. An asset protection attorney will help you to protect those assets, as well as yourself, in case you later face a lawsuit. The following are six strategic tips to help you protect any assets that you may have come into. Contact your asset protection lawyer with any further questions that you may have.

Look into Increasing Your Liability Insurance

Your insurance broker will be able to help you increase your liability insurance if you choose to do so. Your asset protection lawyer will recommend that you increase your liability coverage to match the amount of your new net worth; however, you can opt for more if you choose to. Liability insurance is the first step in protecting yourself should you face litigation at some point. If you know that you will be receiving a large sum of money, it is best that you contact your insurance agent before you receive it to discuss your coverage options.

You May Want to Keep Your Assets Separate

In some states whatever funds are in a joint account belongs to both parties on the account. This may not be an issue for your situation. However, this can become a problem if you plan on giving the money away to your children as an inheritance later or if you are divorcing your spouse. An attorney will be able to help you keep your assets separate for your spouse’s if that it what you chose to do.

Be protected If You Decide to Rent Out Properties

If you decide to become a landlord with your new wealth, your asset protection lawyer will recommend that you protect your assets from the renters. You can protect yourself by creating a business entity such as a corporation that will help to shield your personal assets. If your renter decides to sue you for whatever reason, then they will be able to go after your corporation but your personal assets will still be protected. If you have more than one rental property, then you may want to consider creating more than one business to handle each property.

Make a Point to Go Over Any Joint Accounts You Have

Any funds that you place into joint account you have with your spouse, children, business partner, or whomever could be a risk. Any money that you deposit into that account could be at risk if the other person on the joint account goes through a divorce or a lawsuit. Your funds could be used to pay for these. It is recommended that if you do keep a joint account that you keep the balance as low as possible.

Make Informal Partnerships Formal

What you may not realize is that you are responsible for the actions of your business partner. If your business partner is facing a lawsuit, then your funds are at risk of being lost. If you have an informal partnership with someone and they are responsible for an accident while on the job, your funds could be used to settle the lawsuit. The best thing to do in this situation is to form a corporation and eliminate the partnership. A corporation will protect you legally.

Use Business Entities to Help Shield Your Assets

If you are the sole proprietor of a business, then you do not have to worry about the actions of a partner putting you at risk. However, your assets could still be at risk if you are sued for any reason. The best thing to do in this situation is to create a formal business. A formal business will help protect any of your personal assets if you are sued.

Consult an Asset Attorney for Assistance

A sudden monetary windfall can be a life-changer. It can vastly improve your life, as long as you have your assets protected. Protecting your assets will assure that you will get to keep them to use for yourself, rather than to pay out lawsuits. Remember that the more assets you have, the greater risk you are at to lose it. Contact an attorney to help protect your new assets. For a professional who will help you with your assets, contact your local asset protection attorney today from Sutton Law Center at (775) 824-0300. Sutton Law Center has the asset protection attorney who will help you safely invest your assets and protect you.

Simple Asset Protection Steps from an Asset Protection Attorney

Asset Protection Attorney law books

While asset protection has traditionally been viewed as a strategy that only the rich have had to employ, an asset protection attorney can explain that this is not the case. People of all walks of life can benefit from using asset protection strategies, including individuals who want to protect their businesses or individuals who want to protect their assets from exposure in case of divorce.

Types of Exposure

An asset protection attorney can explain that there are a number of reasons why individuals must use asset protection strategies. For example, a simple lawsuit can expose a person or business to financial risk, potentially even bankrupting the individual or business. Even individuals who merely have insurance can be targets if litigious individuals believe that the insurance company will quickly settle the case.

Attention to Asset Protection

There has been little to curb frivolous lawsuits in recent times. Additionally, individuals are confronted with stricter bankruptcy laws that would help them out of financial distress. Therefore, there is little drawback to a person suing on the drop of a hat for any perceived wrong that has been done to him or her. Doctors, business owners, real estate investors, business owners, or anyone with even a small amount of assets has reacted to the changing times in increasing numbers by using asset protection strategies. Some investment firms have entire divisions that are focused solely on asset protection trusts and other protective tools. Researchers have invested time and effort into finding low-cost asset protection strategies that individuals can use to ward off threats to their assets.

Asset Protection Strategies

An asset protection lawyer can describe the various ways that individuals can protect their assets. He or she may discuss whether any of the following options may be available in a particular client’s case.

Retirement Accounts

Congress has made retirement accounts off-limits to the majority of creditors and lawsuits.

Special Trusts

An asset protection attorney can explain that there are certain trusts that provide asset protection. These may include offshore accounts, but they can also include on-shore accounts. Some states have attractive asset protection trusts, which typically cost only a fraction of the amount that an offshore account costs to set up, including South Dakota, Delaware, Rhode Island, and Alaska. Individuals generally do not have to be a resident of the state to set up a trust there.

Safe Deposit Boxes

There are certain drawbacks to putting diamonds, gold, and cash in a personal safe deposit box. For example, when the box’s owner dies, the box is automatically sealed. The contents cannot be retrieved because it is reviewed for probate and tax liability purposes. An alternative is to use a corporate safe deposit box. Although humans die, a corporation can usually outlast the natural life of one key holder. Other key holders may still be alive and be able to access the items in the safe deposit box.

Insurance

Insurance products exist to protect individuals and businesses from personal injury claims and other types of lawsuits. These are commonly called “umbrella” insurance policies because they extend past the scope of other types of insurance products. These types of insurance programs only apply if the other policies have already been exhausted.

Homestead

In many areas, creditors or plaintiffs in personal injury cases are not able to go after a person’s home. Therefore, one common sense asset protection strategy is to use available assets to pay off a home’s mortgage or make improvements to it.

Increase Debt Load

In order to make an asset appear less attractive to a legal predator, an individual may increase the debt against that asset.

Legal Assistance from an Asset Protection Attorney

If you would like more information about steps that you can take to protect your assets, contact an asset protection lawyer from the Sutton Law Center by calling (775) 824-0300.

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