Category: Asset Protection

PROPOSED NEW IRC SECTION 2704 REGS

By , October 14, 2016 9:41 am

The proposed new Treasury regulations under IRC Section 2704 are important not only for estate planners but also for LLC lawyers concerned about asset valuation issues.  See new blog post under the following link:

http://www.lexology.com/library/detail.aspx?g=e040eb25-8473-4330-aefe-3d411736a05c&l=7S4SLE8

DELAWARE CASE ABOUT THE RELATIONSHIP BETWEEN PARENT AND SUBSIDIARY

By , October 6, 2016 9:24 am

It is often useful for LLCs—including even single-member LLCs—to hold their assets in a holding company and to conduct their operations through a single-member LLC.  The relationship between the holding company and the subsidiary should be covered in one or more intercompany agreements.  The Delaware case discussed in the post under the link below provides an excellent discussion of the right and wrong way to draft these agreements.

What’s in a Name? Officer Titles Matter in Corporations

OFF-SHORE TAX HAVENS

By , April 25, 2016 12:00 pm

I always feel hesitant to recommend to LLC asset protection clients the use of off-short LLCs (e.g., Nevis LLCs) and other off-shore entities.  The new Minnesota legislative described under the following link is one reason why:

Minnesota Joins Trend of States Proposing Tax Haven Legislation

By Maria Koklanaris

Minnesota will become the latest state this legislative season to consider tax haven legislation to address the taxation of foreign-source income and will do so with a bill that includes a list of tax haven countries that must be accounted for when companies file combined reports.

State Sen. John Marty (DFL) on March 29 introduced SF 3318 , which lists the U.S. Virgin Islands and 45 foreign countries as tax havens. The bill would apply to any U.S. corporation that “is incorporated in a tax haven; that reports 20 percent or more of its gross income derived from sources in one or more tax havens; or that has the average of its property, payroll, and sales factors . . . within the 50 states of the United States and the District of Columbia of 20 percent or more.”

The bill also provides that a country would no longer be on the tax haven list after the first tax year in which it either enters into a tax treaty with the United States or imposes a tax rate of at least 10 percent on a tax base equal to at least 90 percent of the tax base that applies to corporations under the Internal Revenue Code.

With SF 3318, Minnesota’s first tax haven bill since 2013, the state becomes part of a trend of states not only introducing tax haven bills but increasingly doing so in the most controversial way — by specifying what opponents call a “blacklist” of tax haven countries.

 

WYOMING AND NEVADA

By , April 5, 2016 10:08 am

I’m an asset protection lawyer, but I avoid forming entities in jurisdictions known as tax havens, because I think this will make my clients look bad to judges and juries if they ever get sued by creditors.  In today’s Tax Analysts Federal Tax Notes, see the article whose title and first paragraph are below.

‘Panama Papers’ Include Nevada and Wyoming Among Offshore Tax Havens

By Amy Hamilton 

Nevada and Wyoming are among the 21 jurisdictions identified as offshore tax havens in the so-called Panama Papers exposé that’s based on 11.5 million files leaked from the internal database of Mossack Fonseca & Co. in Panama, the fourth largest offshore law firm in the world.

Nevada was listed as the eighth most popular tax haven used by the firm for incorporating entities, ranking above Hong Kong and the United Kingdom, according to initial charts released by the International Consortium of Investigative Journalists (ICIJ).

THE ULTIMATE GUIDE TO LLCS AS ASSET PROTECTION TOOLS

By , January 4, 2016 3:29 pm

As some of you may know, I taught a six-hour webinar on the above subject for NBI in November, and this link is about another webinar on that subject by another law firm.  It looks like a good seminar, and I hope to attend it myself.

POST RE NEVADA LLCS AND APTS

By , November 18, 2015 10:31 am

http://www.lexology.com/library/detail.aspx?g=b5d33ad4-bae8-4a0b-af80-543578c3e52f&l=7PQ00YA is a link to a recent post in a blog for corporate counsel called “Lexology.”  The post touts the merits of Nevada LLCs and Nevada asset protection trusts (Nevada “APTs”).  For many purposes, Delaware LLCs are much better than Nevada LLCs; and at least in my view, using Nevada APTs (or, for that matter, any APTs, whether foreign or domestic) can create significant risks for asset protection clients in non-APT states (and sometimes even within APT states).

Furthermore, in creditor challenges to asset protection plans involving Nevada LLCs or Nevada APTs of debtors with no real roots in Nevada, some non-Nevada judges and juries may view these plans with heightened suspicion and hostility precisely because the relevant LLCs or APTs were formed in Nevada.

In asset protection litigation, atmospherics are everything.