Interlocking Corporate Structure and Tax Structuring

• Corporation-the backbone of personal and family protection
  1. it is perpetual
  2. different classes of stock can be issued
  3. various kinds of voting rights can be applied to different classes of shares
  4. officers are protected from liability arising from activities of the corporation
  5. shareholders have no personal liability
  6. tax advantages
     • works with pension plan, see below
     • can have the fiscal year end differently than 31 December
     • can make a forgivable loan
     • can institute an asset freeze to keep creditors from seizing assets
     • can have deducible investments
     • can operate multiple businesses
     • can deduct travel for business
     • can be an "S" or "C" corporation(investigate advantages of both)
     • can be established in Nevada to take advantage of the laws there
       1. no personal or corporate income tax
       2. officers identity need not be divulged
       3. corporate records have maximum protection
  7. it protects assets
  8. it is an estate planning tool
  9. it can own stock in other corporations or units in a limited partnership
  10. used as a general partner in a Limited Partnership or a majority stockholder in other entities to manage them

• Limited Partnership-an entity used for various purposes
  1. good for persons or families with a large asset base
  2. the use of several at one time to control separate investments
  3. works nicely with the corporate structure
  4. allows maximun and effective use of the gift giving rules
  5. makes it difficult for creditors to get at assets
  6. integral part of an "Asset Protection Trust", an offshore entity providing fantastic protection
  7. offers superior methods for distributing income to children and grandchildren for tax savings as unearned income
  8. asset distribution is considered as unearned income and is not subject to Social Security taxes
  9. can own stock in a corporation(s) or units of other partnership(s)
  10. can be used in conjunction with a corporation for maximum tax benefits with the corporation as the managing general partner

• Business Trust-the best for leasing business equipment
  1. establishes a separate entity for security
  2. operates independently of other entities
  3. set up as a leasing company to lease or rent equipment to your other companies

• Pension Plan-work hard and retire rich, create a tax-free entity
  1. provides a tax haven
  2. like a forced savings plan
  3. donations are tax deductible
  4. income from investments grow tax-free until distribted when retired and you pay less in taxes
  5. safety is unsurpassed
  6. borrowing money from is allowed for certain items
  7. allows for a $30,000 maximum yearly contribution in a combination of defined plans

• Living Will or Trust-an umbrella entity
  1. helps avoid probate
  2. provides estate planning
  3. saves on estate taxes
  4. allows for stepped up basis to avoid capital gains taxes while one spouse is living
  5. provides for the smooth transition of business enterprise(s)
  6. allows for the provision of offspring, etc.

• Estate Planning-integrating all the above elements
  1. Personal residence assigned to living trust or family limited partnership and
  2. Equity should be encumbered or homestead your house to protect equity
  3. Assign any stocks to living trust; if dividends are taken, be sure to take advantage of the 70% exclusion rule
  4. Assign any personal items to Schedule A of the living trust
  5. Use Nevada management corporation as general partner for other entities
     • put lien on personal residence to encumber equity
     • manage other corporations, etc. by contract
     • give it a name like a bank, i.e., Capital Funding Corp.
     • put money into corporate pension plan
     • may own property but use for cash flow entity
  6. Big corporation
     • divvy up stock to family members or others
     • do an asset freeze on your preferred stock
     • pay the management company
     • pay the leasing company for equipment, do not own equipment
     • try to establish as many "independent contractors" as possible instead of employees(try to keep employees to three or less for withholding and reporting advantages)
     • pay money to pension plan
  7. Business Trust
     • buy, hold and lease equipment to
       corporation(s) and limited partnership(s)
     • pay money to children and grandchildren to avoid dividend(double taxation) treatment as "unearned income" gift units(see below)
  8. Limited Partnership
     • own existing rentals
     • let corporation be general partner and avoid personal liability
     • initially issue all assets to living trust Schedule A
     • gift units($10,000/year) to each child or grandchild, or hold in trust
     • own the land but lease building(s) from this limited partnership
  9. Pension Account
     • set up and contribute to as possible
     • include employer, consider a 401K:Corporation G account
     • fully deducible for tax savings