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Wednesday, February 24, 2010


Using Corporations and LLCs

Corporations have been used for a long time to protect assets. More recently LLCs have been the legal vehicle of choice, because they are simple to set up and inexpensive to maintain. We had our tax preparer set one up for us for $130, and it costs juts $10 annually to file the annual report online (which is just answering a few questions). You can also get the do-it-yourself kits at bookstores for about $30, and the filing fee in many states is $75 or less.

For asset protection, the idea with either an LLC or a corporation is that your liabilities are limited to the assets in that legal structure. So if you have an apartment building, you would have it alone in an LLC. That way if you are sued for something related to it and lose the case, the plaintiff can't come after any other assets, like your home, personal bank accounts or other LLCs. In other words, if you have many and varied assets they should be in several different corporations or LLCs to limit the damage.

By the way, an LLC can be the owner of another LLC. This and other techniques can be used to keep your ownership more private, if that is your goal. Ask an attorney who is familiar with this area of law.

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