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Without a doubt, the single biggest question that I receive as I travel the country and meet with clients is this: which is the best entity?

While it is indeed the most common question I’m asked, it’s also the hardest to answer. The reason for that is that I don’t think that there is a “best” entity. You see, some entities will give you certain benefits that aren’t available through other entities from a tax standpoint. At the same time, these entities may not offer the same benefits as another type of entity from an asset protection standpoint. Additionally, they may not offer the estate planning benefits offered through Continue Reading

3 Simple IRS Audit-Reduction Tips… AVOID E-File! It was created to audit you better, more efficiently, cheaper. A former IRS commissioner called it, “State of the viagra auditing”. Using E-file is like putting your head in the mouth of an alligator, whose name is “IRS”! Instead file the computerized paper forms and mail them, making it more difficult for the IRS.

NOTE: Recent legislation states after December 31, 2010 (2011 on) returns are mandated to be filed electronically by most tax preparers.   Continue Reading

More and more investors and real estate agents are using attorneys and negotiators to get their deals done.

It’s the perfect answer to the “I don’t want to deal with banks and short sales” issue. OR IS IT?

If you are a homeowner trying to get a short sale approved on your home, whether you’re a homeowner or an investor, you might want to think twice about the hands-off negotiations. There are far too many people that over promise and under deliver. Continue Reading

POINT # 1: Many investors believe that they can create a limited liability company (LLC) or file a corporate charter with the state and always have liability protection. This is SIMPLY NOT TRUE. The truth is that each of these business entities (the LLC, the corporation and even the limited partnership) require certain key steps after the structure is created. I always like to compare business entities to a fancy Italian sports car or a new baby…they WILL DEMAND PROPER CARE AND FEEDING!

They are fun on the first day, but you had better know how to maintain Continue Reading

The best way to understand a corporation, limited liability company (or even a limited partnership) is to realize that each creates a special legal relationship or privilege between the business owner(s) and the government. These areas of government include:

1. State Government (including state taxing authorities and the state court system)
2. The Federal Government (specifically the IRS and the Bankruptcy court system)

You may be saying, alright Darius, I still don’t understand what you mean by a relationship or privilege. The best way that I can put it is this:

A business entity is a legal relationship which allows for certain privileges. Continue Reading

Real estate investing is exciting when you’re just getting started. Real estate is all you can think about and all you can talk about. Your enthusiasm rubs off on others and you instantly start attracting people that want to lend money on for deals, partner with you on properties, joint venture with you on aspects of your business, etc.

The problem is that when you’re so excited, it’s hard to imagine anything EVER going wrong. Why would you need anything more than a handshake and verbal agreement?

Sure, you may be laughing as you read this, but you’ll see… when it comes time to putting a joint venture together, you’ll be eager to get moving along and you just might make this critical real estate investing mistake… and it COULD wind up costing you tens of thousands of dollars, friendships, and worse. Continue Reading

A business entity can provide personal liability protection for its owners. The problem is that many people start business without proper instruction on how to run and manage agreements between parties, agreements with customers, internal paperwork, cash controls, voting rules, state and Federal reporting requirements and a host of other issues.

In fact, we have found between 20 to 25 actions, behaviors, or neglected tasks which commonly cause a business structure to be forfeited and can result in personal liability for the owner or owners.

Here are 5 of them:

#1. USING THE BUSINESS FOR FRAUDULENT ACTIVITIES: YOU CANNOT, SHOULD NOT, AND SHALL NOT USE YOUR BUSINESS TO CHEAT OR DEFRAUD: For example, John Smith gathers money from investors claiming that he will develop a new product for his company. Continue Reading

By Darius M. Barazandeh, Attorney at Law / M.B.A.

I see it several times per day, everyday: An LLC disaster waiting to happen! No matter where I travel or with whom I speak, it’s clear that small to mid-sized business owners are not getting proper instruction on how to create, run, and maintain a ‘rock solid’ LLC. Did you or your attorney form your LLC? Are you now left with a stack of papers and confusion?

One comment that I repeatedly hear is, “Well, my attorney set it up for me two years ago…so everything is rock solid.” Usually, without much probing, I soon learn that little else has been done since then. I will typically find that even the attorney may have missed a few steps along the way! In fact, we have uncovered 24 mistakes/traps that LLC owners face all the time! Many of these mistakes are even made by attorneys, experienced business owners, and very talented people. So if you want to avoid disasters and create a ‘rock solid’ LLC…let’s get started!

While I can’t cover all 24 mistakes and traps in this article, let’s talk about the first 5 mistakes in some detail:

1. The ‘Fatal Death’ Personal Liability Clause
   A handful of states have a strange option in their Continue Reading

I can remember back years ago when I was getting started in real estate with my first business partner and long time friend. We heard the warnings. We read all the horror stories of partnerships gone bad. And then… we decided that we were different and our situation was “different”!

You see, we’d been friends for years before, had started several different businesses together and had lived and worked closely for the past 5 years. So all those bad things that happen to other partnerships surely wouldn’t happen to us.

Plus, we were going to make sure we did things right! We were going to set up a business entity. After going back and forth from attorney to CPA; LLC to S corp, we eventually settled on the S Corp. It was cheaper and since we couldn’t find any conclusive reason not to, we dove in and were now 50/50 partners in our own business.

A few years later after our adventure began, we found ourselves in litigation and in an ugly battle! So, why did things take such a turn for the worse?
Continue Reading