Selecting the Right Structure for Your Business

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 other types of entities. In a nutshell, there is no one entity that will solve all your problems or cure all your ills. Simply put, you must have an overall plan put into place.

The process of implementing an overall plan is what is oftentimes referred to as “entity structuring”. Entity structuring is about reviewing the current situation of a client in order to identify their needs, concerns, and overall objectives and implementing a plan to address these areas. As you can imagine, each individual will have a different situation when you factor in all of these issues. As such, each person will need a customized plan. This is accomplished through the process of entity structuring.

In implementing an entity structure, there are always three key areas that must be focused upon. These three areas are as follows:

  1. asset protection;
  2. estate planning; and
  3. tax reduction

Regardless of what type of activities that you’re involved in (real estate or otherwise), you must always focus on these three areas. The reason for this is that each of these three areas poses a significant threat to your ability to create, accumulate, and preserve wealth. Actually each of these is so important that we need to take a look at them one by one.

Regarding asset protection, it’s no secret that we live in an increasingly litigious society. Studies have shown that there is a new lawsuit filed on average every 30 seconds in this country. With statistics like these, it’s no wonder that there’s such an intense demand for entity structuring. In order to protect your assets, you must implement an entity structuring plan.

With respect to the area of estate planning, it’s a fact of life that we will all eventually pass away. When that time comes, it’s crucial that we have a plan in place for the orderly distribution of assets to our heirs and beneficiaries upon death. Far too often, this area tends to go overlooked. For many investors, one of their primary objectives in building up a real estate portfolio is to provide opportunities for family members that they may not have had. Unless you implement a solidly structured wealth preservation plan, all that work may be for naught.

Last but certainly not least is the area of income taxes. The biggest threat to the creation, accumulation, and preservation of wealth is the financial destroyer of taxes. Because of this, it becomes increasingly important to focus on strategies for effectively handling our tax obligation. I look forward to sharing with you specific strategies for reducing and even eliminating certain taxes through the implementation of a well-designed entity structure.

In summary, the realization of a well-designed asset protection plan requires the consideration of all three of the areas that we’ve discussed. Simply relying upon one single entity will not enable you to meet your objectives. Instead, you must formulate an overall plan to consist of various entities performing various functions. You must begin the process of entity structuring. If you would like assistance in putting your plan together, feel free to contact us at to learn how to put your plan into action.

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