Small Business Taxes & Legal Entities - What Are You Going to Do If Someone Decides to Sue You?

Your heart pounds and you stop breathing for a second.

You're mad. You're afraid. And you're asking one question, "Why me?"

After that moment passes, you've got to act quick. And that's when you realize you're in one of two spots:

(1) You're ready, or (2) You're a target.

I'm going to talk about the growing trend of lawsuits and what you must do TODAY to protect yourself.

A friend of mine who runs a charity just got a notice that she's being sued. What? Are people crazy these days? Suing a charity!

And not just that, she's getting personally sued as well.

Some people are sue-happy. You have to be ready so you don't lose everything if the worst happens.

There are three things you must do now to get prepared:

• Protect your assets w/ the right structure
• Follow corporate formalities from the start
• Keep records up to date

Remember: In the US today, there are more lawyers per capita than any other country. And anybody can sue anyone at anytime for anything. Protect yourself!

Step One: The RIGHT Structure for 2010 & Beyond

Set up the right business structure and you'll get three things:

• Optimum Asset Protection
• Less Tax
• Maximum Flexibility

Twenty years ago, I'd have told that you need a corporation for your business. Today, I have a different answer. There's a better solution.

Use a layered structure for optimum asset protection.

A corporation protects your personal assets against a business judgment. But a corporation does NOT protect your business against a personal judgment.

Layered structures like the Trust Sandwich and LLC Elected Entity will give you asset protection that protects BOTH your personal assets and your business assets.

It's not how much you make. It's how much you keep. And that means keeping your assets safe.

It's never been more important.

Before I move on to the next two strategy, one more comment on protection. The number of IRS auditors doubled last year. And there are four times as many this year. They are going to be asking you for exactly the same things that the court would if you're sued.

Having the right business structure, with the right supporting paperwork, isn't just something that would be nice to have. In today's world, it's absolutely essential.

Step Two: Set the Structures Up Right!

You can do it yourself when it comes to your structures or use one of those cheap, online services (which basically means setting it up yourself).

At a minimum, make sure your LLC has:

• Articles of Organization
• Operating Agreement
• Organizational Resolutions
• Issued Member Interests
• Tax Election

These are the things you'll be asked for if you are sued or the IRS conducts an audit.

Step Three: Keep the Structures Legal and Safe!

Once you've got your structures set up, that's not the end. In fact, if you stop there, you might as well not even have gone through the trouble of setting up the companies.

LLCs and corporations need ongoing maintenance. Miss the annual requirements and everything you own is back at risk.

Here are a few of the things you need to do on an annual basis for your corporation:

· Annual meetings · Proper notice of annual meeting · Renewing resident/statutory agent service · Annual notice · State tax filing · IRS tax filing · Preparing annual minutes · Gifting ownership (if part of an estate plan)

Choosing, setting up and running the right business structure is critical for a smart and successful business. Face it, if your business works out, you're going to have tax issues. That means you need to have good solid protection to prove it's really a business with business deduction.

If your business doesn't work out, you need good solid protection even more so you get the tax benefit from the loss.

A business turns a loss into cash, but only if there is a provable business behind it.

Protect your business and your investments with the right business structure at the right time. That time is now.