The Basics of Creating a Series LLC

When it comes to creating your own business or even forming one that already exists and putting it under your name, there are a few things you need to know.

You may want to form your business under an LLC or a Series LLC. An LLC stands for Limited Liability Corporation and it is slightly different from a Series LLC. The only difference between the two LLCs is that a Series LLC is protection for multiple LLCs. (Note: A Series LLC is sometimes called an SLLC.)

When forming a series LLC, the first thing you need to do in most states is to register with the Secretary of the State you are in. This filing will cost you a fee. However, there is much more to it than that. Read on!

Things You Need to Get Your Series LLC Started

Although not all states accept Series LLCs, those that do accept them require a few things before you get started:

You need a name for your LLC
You need the address of the LLC you are creating
You need the resident name and address of the agent who is creating the Series LLC
You need to designate the member or manager who is managing the LLC
You need the name or names of the manager or managers of the Series LLC
You need to know how long the LLC will be in operation. If you don't know the exact date of the Series LLC ending, or if it will go on as long as possible, state that it will be ongoing or in most states, you can use the term 'perpetual'
You need to know what the business is that is going to operate under the LLC. In many states, a general business can say something along the lines of "all legal business activities"
You will need to file separate forms for each cell associated with the Series LLC and each manager who you are using. This is a requirement in Illinois.

One other thing you must do when forming a Series LLC is to make it clear that you are creating a Series LLC. However, it does differ from each state when registering and whether or not you have to notify them that you are filing for a Series LLC. In certain states like Utah, Texas, Delaware, Tennessee, and Oklahoma, it is a requirement that you notify officials that you are creating a Series LLC with seperate rights on each one. However, how much detail you do have to provide for it will depend on the state you are filing for one in.

Once all of your documents are filed on your LLC, you are officially in business.

Series LLC Record Keeping Rules

Everything should be kept on record when doing business. It is always a smart idea to have everything in writing to ensure it is all done right.

The same goes for a series LLC and a regular LLC business. Whether you have a one owner business or multiple owners in your business, you need to keep records. Here are a few different record-keeping rules to remember.

Keep Everything Separate

This means you need to keep records of each LLC within the series. A series LLC is several, individual LLCs. Each one needs to be separated and each one needs to have their own records kept. This is because each LLC in a series is distinct from the other one. The reason for a series LLC structure is to be able to manage different businesses. It keeps the management process straightforward and simple.

One thing you need to always remember about a series LLC business is to keep everything separated when record keeping. You don't want to combine them all into one. The reason is because it can leave you unprotected in the business.

Name a Registered Agent

Naming a registered agent for your series LLC is a requirement in most states. A registered agent is a physical address within the state you are located in. If this is a requirement in your state, failing to do so could leave your series LLC business without protection.

Make Sure to be Licensed to Run a Series LLC Business

Many states require business owners to have a license to run properties if they are owned by other people too or if you are managing a property management company. Not only can not being licensed to run a series LLC business put your business at risk, but you can run the risk of a lawsuit too.

Have Separate Bank Accounts

This should be something that everyone already knows since a series LLC is several, individual LLC businesses. Since you are already keeping the records separate for each cell in a series LLC, you should probably also have a separate bank account for each individual LLC in the series. By doing this, you will ensure you are being as careful as possible with everything in each LLC that is under a series.

Make sure you understand each of these series LLC record keeping rules for your series LLC. Also, make sure to abide by all of them and other rules there may be beside these main ones above.

How to Close Down Your Business Yourself

For many small business owners, closing down a business can be a daunting task. This is especially true if your business has incurred a large amount of debt. For most businesses, having some portion of your debts forgiven or filing for bankruptcy are the first thoughts. Bankruptcy is a serious, expensive and time-consuming court option that can significantly affect your credit. For those who opt to liquidate their assets and negotiate their own debt settlements, however, the process can appear overwhelming. Referred to as an out-of-court work out, or work out for short, this option is often cheaper and faster.

Work Out Process Overview

The work out process is actually much easier than you realize. At least the idea of it is. You, or a hired professional working on your behalf, contacts each creditor with a request for them to release you from debt. Often, a percentage of the balance owed is offered to the creditor to help facilitate negotiations. From a creditor’s perspective, filing a lawsuit against you will take time and money. When a fraction of the balance is offered, creditors may be willing to agree or at least enter into negotiations to avoid a court process. This is the most recommended approach for business owners who may be personally liable for business debts, such as sole-proprietors, partner or those who have personally guaranteed a business loan.

For corporations and limited liability companies (LLCs), it is likely that you are not personally liable for any business debt. If this is the case, you can close your business, liquidate its assets, and continue to pay creditors until your business funds are exhausted. While you will not need to personally owe on debts associated with these businesses, you will likely be hounded for years by creditors and their representative collection agencies. In the event of a lawsuit, you will need to file a response, which will cost you legal fees.

Advantages

Filing for bankruptcy should be a last resort. Not only will it cost you in court and lawyer fees, but also it will stretch out the timeline as it drags through a lengthy court process. Instead, liquidating assets and negotiating your business debt yourself provides you with more control over your debt. This is particularly important if you are personally liable for any part of your business debt, like:

Taxes related to trust funds,
Personally guaranteed credit lines or loans, or
Any contracts or leases that you personally signed.

Disadvantages

Liquidating assets and negotiating settlements can be much more work than you realize. Depending on the amount of money owed and the number of creditors banging on your door, doing it yourself can lead to more trouble than it is worth. Additionally, in some cases, once you enter into negotiations, you will be unable to file for bankruptcy later.

Your Professional Advocate

Hiring a professional, like those at Royal Legal Solutions, can save you time and money. Not only do we understand the negotiation process, we have the experience to get you the best settlement amount possible. Contact us today if you would like to know more about closing a business or debt negotiations.

Going Out of Business: Liquidate Assets Yourself or File Bankruptcy?

If you are going out of business, owe a significant amount of money to one or many parties, trying to figure out how you will pay your bills and get out of debt can be incredibly stressful. At Royal Legal Solutions, we often field many frustrated questions about how to pay off debt when closing a business. Below are the most common paths owners take to address these financial obligations.

The Options

For most businesses, financial obligations are fulfilled when the decision has been made to close in one of three ways.

Sell and negotiate. If you prefer to do it yourself, most individuals opt for selling off all assets (liquidating) and negotiating with creditors on their own. Negotiating with a creditor may result in a settlement agreement. A settlement agreement is a deal made between you and a creditor that will release you from any further liabilities. For the most part, this option, also known as a work out, will cost you the least in legal or outside fees. However, as a novice, you may not be able to work the same deals a professional would or have the same connections.
Hire a professional. Some business owners opt for hiring a professional, such as a company or a law firm, which specializes in helping a financially devastated business that is going out of business. These professionals will typically handle the majority of your closing details. Professionals typically charge a specific fee or take a percentage of the total asset value.
Let the courts handle it. For those who decide to file for bankruptcy, the courts will sell off any assets and remove all remaining debt. There are two main types of bankruptcy claims business make: Chapter 7 or Chapter 13. Chapter 7 bankruptcy claims can wipe out all unsecured or supplier debt as well as lawsuit judgments. Chapter 13 bankruptcy claims, on the other hand, allow owners to repay some or all of the debt over a specified amount of time. Whichever type of bankruptcy occurs, it is typically the most expensive, time-consuming option available.

All about Size

Often, the path you take to get out of business-related debt is dictated by the type and size of your company. For sole-proprietors, you may be able to utilize the work out method and settle debts yourself after liquidating all assets. However, if you cannot offer creditors enough or a settlement is improbable, bankruptcy is likely the best solution. Sole-proprietors are personally liable for any business debt, which means their homes, vehicles, and personal finances can be garnished in a lawsuit from a creditor. By filing either a Chapter 7 or Chapter 13 bankruptcy claim, sole-proprietors can prevent this. Partnerships are also personally liable for business debts. For these, a personal Chapter 7 bankruptcy claim or hiring a professional is the most advisable option. For most corporations or limited liability companies (LLCs), owners typically are not personally liable for business debt. If your business cannot afford to pay or settle with creditors, a business Chapter 7 bankruptcy or professional may be the right choice. However, if you personally assured a business debt and cannot pay it, you may need to file for a personal Chapter 7 bankruptcy claim as well.

Royal Legal Solutions

The professionals at Royal Legal Solutions are here for you. If you would like to set up a consultation, whether it is to just go over options for a work out solution or you want to discuss bankruptcy claims, we are standing by.

How To Properly Liquidate a Closing Business's Assets

There is more to liquidating your business assets than just posting a yard sale sign. Below, Royal Legal Solutions help you better understand the scope of liquidation and how to best order the chaos a closing business may be going through.

Identify Your Business Assets

Before you start selling off your business assets, you should thoroughly inventory all property physically owned by your company. Your inventory list should include both tangible and intangible items.

Tangible Items:

Business equipment, which includes items like computers, cash registers, and phones;
Office furniture, such chairs, desks, art, fixtures, and desk supplies;
Vehicles;
Properties;
Security deposits, such as those paid to landlords and utility companies; and
Insurance premiums you prepaid that may be refundable.

Intangible Items:

Commercial leases;
Supplier contracts that are below-market rates;
Customer contracts at rates that generate profits;
Potentially valuable works in progress;
Customer lists;
Company name, which is essentially your company’s reputation;
Intellectual properties, which can include copyrights, patents, trademarks and more; and
Remaining invoice balances.

When inventorying these items, make sure you include a category designator, description and condition of the item, and who legally owns it. (Ownership may seem obvious, but it is important. If you bought a chair with your personal funds, you own it. If the business account paid for that chair, the company owns it. If your partner used their funds to pay for it, the chair belongs to them.)

Identify Buyers

You should keep detailed records of the ways you tried to sell each piece of your tangible and intangible assets. These records, which should include copies of your ads or website links, are an important means of protecting yourself from creditor inquiries. You need them for tax return purposes as well.

You should first liquidate any assets that are fully paid for and not promised to someone else, such as a vehicle that was used as collateral on a business loan. Industry contacts, like suppliers or competitors, are always potential buyers. Websites, like eBay, craigslist or industry-specific auction sites, are great ways to attempt to sell off equipment and furniture. (At most, you should not expect to receive more than 80% of the value of your assets.) Donating used items to charity for a tax deduction can also be helpful.

If you have pledged an asset to someone as collateral, you cannot legally sell or donate it without the express permission of that creditor. This fraudulent activity makes you personally and legally responsible in a court of law. For property you lease, you need to talk to the lessor before selling it off as well.

Identify Helpful Entities

When it comes to liquidating your assets, you may find it helpful to hire a professional. Royal Legal Solutions, for example, has the experience to help you navigate the liquidation process, as well as any debt negotiations or bankruptcy claims you may need to file.

How to Distribute Assets to Remaining Owners When You Close Your Business

When you decide to close your business, it is not as easy as simply pinning a “Closed for Business” sign on the front door. From settling debts to distributing assets, there are many things you will need to do before moving on. Royal Business Solutions understands how turbulent this time can be for you. Selling business assets, in particular, can seem like a way to make back some of the losses you may have had. However, you should know more about distributing assets before you do so. Let’s take a look below.

Before Issuing Distributions

It is important that you take the time to address any of your business incurred liabilities before you distribute any remaining assets.

Liquidate physical assets. It is very important for you to sell off any physical assets your business as accrued. Referred to as “liquidating”, this act turns your property into much needed cash that can help you pay off all of the items listed below. If you are lucky, you may even get to pocket some of the proceeds should the value go beyond your total balance owed.
Pay your bills. Request all outstanding invoices from any creditors. You will need to pay off any bills owed to these creditors prior to divvying up the remainder of your business assets. In fact, state laws typically prevent corporations, limited liability companies (LLCs), and partnerships from distributing assets to owners if debts are still unresolved and owed.
Pay your employees. You must pay your employees for the time they have worked. Some states may even require you pay for any unused leave they have accrued during their time working for your business. If you had hired independent contractors instead of or in addition to hiring regular employees, you will need to pay them as well.
Pay for services, cancel leases, and settle contracts. If you rent an office, have outstanding contracts, or utilize any other services, like electric or cable, you will need to take care of them before distributing the remaining assets to owners. Any deficiencies or penalties incurred by your company’s closure will also need to be paid.
Pay your final taxes. You need to make sure you pay all of your taxes before you distribute assets to owners. This includes, but is not limited to, sales, payroll, income and unemployment taxes that you may owe.

Making Distributions

For many, addressing liabilities may deplete you of excess proceeds and, therefore, prevent you from having to worry about asset distributions. However, should you be able to pay for all of the items listed above and still have leftover money or assets, you are in luck. How you distribute your assets depends on the type of business you are closing.

Sole-Proprietors: If you are the sole-proprietor of your business, the only person you need to distribute remaining money or assets to is yourself. As long as your debts are taken care of, the remainder is yours to keep.
Partnerships and LLCs: Partners and members typically have their own capital account. These accounts were opened with the initial investment balance each made to the business. As the business profited, these accounts grew. As it lost or when distributions were made, the accounts decreased. In the event of a closure, it is likely that the investment thresholds in each of these accounts is not able to be met. In this case, the remaining assets would be divvied up in proportion to each investor’s percentage. (For example, if Partner A invested 80% of the startup cost and Partner B invested 20%, the partners would receive that same percentage of the remaining asset value.)
Corporations: All remaining assets should be totaled and divided up amongst all shareholders. As with the partnerships and LLCs, the amount given to each shareholder is directly proportionate to the investment or share amount each held.

Closing Your Accounts

As your does close, your remaining accounts should too. This includes your business bank account and any business credit cards you may have held. Royal Legal Solutions can help you with every step in the lifecycle of business ownership. Set up a consultation today if you would like to know more about asset distribution and how to close your business without violating any laws or regulations.

How to Notify Creditors of Business Closure to Limit Liability

Closing your business can be a very stressful time. Not only are you shutting down a chapter of your life, but you also must notify those you have done business with, such as supplies, customers, and banks. The experts at Royal Legal Solutions truly understand how hard the final days of business ownership can be. State laws, federals regulations, and ethical business practices all play a role in when you should notify creditors of your closing. For the most part, however, when and how you notify a creditor depends on one of three factors: if you need to continue receiving services, if you have any of their property, and if you own them money.

How to Notify a Creditor

When you send a certified closing notification letter to your creditors, which is an important legal move, you should include the state-regulated timeline with which they have to file any claims with you. This deadline, any important information they may need, like the address to which the claim should be sent, should provide clear, concise directions. Typically, if a creditor receives this notification and does not submit a claim by the deadline, a corporation or LLC can ignore it. In the case of a corporation or LLC, states typically regulate the claim period to be between 90 and 120 days. (For sole-proprietors and partnerships, however, this timeline works differently.) To help cover your bases, publishing your closing information, creditor claims request information, and other such details to a local newspaper and your website can ensure you do not miss any of your creditors.

Notifying Creditors of Continuing Services

In some cases, you may need to continue receiving materials, or inventory, right up until your doors close. In this case, you should only purchase supplies that you know you will be able to sell. For these types of “supplier” creditors, you can wait until the last shipment to notify them. Depending on how often you order supplies, this may occur months, weeks, or days before your close your business. Experts recommend you send a certified letter notifying these types of creditors of your business closing and request any outstanding invoices be issued.
For service providers, like utility companies, you will need to notify them of your closing date at least a few days before shutting your doors. Many of these companies will prorate your fees. This means, if you close your business on the third of the month, you likely will not need to pay for the entire month of service. If you have a long-term contract, however, you will want to notify them in timely manner, as dictated in your agreement. This will help you to avoid early termination fees that may pop up if you pre-maturely end the contract without notice.

Notifying Creditors Whose Property Is In Your Possession

In some cases, you may have a creditor’s property, such as a van you used as collateral to take out a loan, in your possession. If this is the case, the creditor may allow you to return the property to them voluntarily as a surrender. Alternatively, they may allow you to sell the property and use the proceeds to repay the loan. If there is a lien on the property, some lenders will agree to remove it to allow you to sell it. Others will require you and the buyer to include them in the deal before removing the lien.

Notifying Creditors to Whom You Owe Money

If you have taken out a loan or line of credit with a bank, you will need to examine your loan agreement before notifying them of your closing. (In fact, you may want to pay off any other debt you have incurred prior to notifying a bank. Some agreements allow the bank to immediately deduct the remaining balance from your business account. Depending on how much you owe, this could financially devastate you even more.) Bank creditors typically have one of two reactions. They may call for the entire loan balance to be paid in full immediately. Alternatively, they may inquire about how you plan to fulfill your obligations to them.

Negotiating with Creditors

Once your notices have been issued and have received any outstanding bills, you will need to settle your debts. Royal Legal Solutions can help make this process easier on you. With years of experience, our professionals can negotiate on your behalf and assist you in reducing your overall balance. We know the laws and regulations that govern these debts. Whether you are considering closing your doors and just want to talk to a professional about your options or you have already issued your notices, our experts are ready to help.

When Does a Sole Proprietor Need an EIN?

First things first: An EIN is your business’s federal employer identification number.

It’s a nine-digit number assigned to you by the IRS for the purpose of filing taxes. For obvious reasons, corporations, LLCs, and other business entities must use EINs. Sole proprietors, on the other hand, can simply use their social security number.

There are, however, certain instances in which a sole proprietor may need to obtain an EIN. Even failing that, there may be instances in which obtaining an EIN would provide significant benefits to a proprietor that didn’t technically require one.

When is an EIN Required for a Sole Proprietor?

Basically, getting an EIN allows you, as a sole proprietor, to do make more business moves. Without an EIN, a sole proprietor would not be able to:

Hire employees
Have a Keogh or 401(k)
Buy an existing business
Inherit a business
Incorporate
Form a partnership
Form an LLC
File for bankruptcy

In addition, there’s going to be some banks that refuse to set up a business account for you unless you have an EIN.

Even if those are things you don’t think you’re ever going to need, there are still a number of reasons why having an EIN is a good idea.

EINs can help you avoid identity theft. Identity thieves can steal social security numbers to file fraudulent tax returns.
EINs can help you establish independent contractor status. Independent contractor status is distinct from employee status. Using an EIN can make you more attractive to potential clients.

How Can I Obtain an EIN if I’m a Sole Proprietor?

Unlike many dealings with the IRS, the process of obtaining an EIN is simple and free of charge. The IRS provides an EIN assistant that allows you to fill out an online application. Alternatively, you can simply fill out Form SS-4. As a last resort, you might consider actually calling the IRS at their toll-free number: 800-829-4933.

To EIN or Not to EIN

That is the question. Ultimately, the decision is up to you. The key advantage is that possessing an EIN will open up your options whereas not having an EIN will significantly reduce them. Be sure and check out our article, Does Your Real Estate Business Need An Employer Identification Number (EIN)?

If for example, you want to open up a credit card in your business’s name, it will be much easier to do so with your EIN rather than your SSN. It also offers a layer of protection between you and others. EINs are not nearly as ripe for the plucking as SSNs are when it comes to identity theft.

Setting up your business for success requires availing yourself to growing possibilities. Ultimately, the process is painless and does not come with any cons. That makes it well worth the effort.

Fraudulent Conveyance: How a Land Trust Protects You

A fraudulent conveyance happens when someone illegally transfers assets or property into someone else's name, such as spouse, friend or family member, or even a business partner, in an attempt to avoid creditors. If they are selling your property or other assets to someone they know for an insignificant amount of money, they are either trying to evade creditors or trying to keep the property or assets out of the reach of a creditor.

Let's look at how to make sense of fraudulent conveyance and the land trust.

Are You Going to be Sued?

If you are going to be taken to court soon, there are ways to protect yourself and your property and assets legally:

Have your car, house and property properly insured.
Create a land trust to hold your property and assets.
Form an LLC or a regular corporation to keep your business assets safe.
Open and contribute to a retirement account.
Take advantage of the real estate protection laws that are in place for something like this.

Proving You Are Not Doing a Fraudulent Conveyance

There are certain things the courts will look at when deciding whether or not you are potentially commiting the illegal act of a fraudulent conveyance:

Did the person doing the transfer become unable to pay their debts because of the transfer?
Did the transferor receive enough money in exchange during the transfer?
Was the transfer made to a really close friend or family member?
Does the transferor still have the rights to the property or the benefits from it?
Did they get threatened to be sued?
What was going on with their financial situation before, during, and after the transfer?
Were a lot of transactions made after the person who owes money to creditors money problems started?
When did any of these events take place?
Was the transfer private or secretive?
Was the transfer different from the usual business actions?

The solution to the problem of fraudulent conveyance is to act before one of these "warning signs" happens. A land trust with an LLC as beneficiary can help you protect yourself before you are taken to court. You want to ensure everything is done legally, however, because if they can prove a fraudulent transfer was made, you will be in some major trouble, legally speaking.

Real Estate Investors Can't Just Rely On Insurance

[00:08] Insurance companies are basically a criminal business. Their whole business model is built around collecting premiums from you and denying coverage whenever it is that you asked for something that they should otherwise cup, and the reality of the situation is if you have a big claim, you end up having to sue the insurance company just to get them to pay out. I don't think as an investor, that is something I want to rely on when it comes to the big ticket items. Sure, they're going to cover the $5,000 slip and fall case that happened on your front porch because it was a little icy outside, but what they're not going to cover as grandma falling to this staircase, breaking your hip and now being permanently disabled for the rest of her life. Well, what then that case where they're going to say this, you should have known about the staircase. This is a case of gross negligence that's outside of your policy limits. You can sue us and spend thousands of dollars against our millions of dollars hoping that we'll actually end up paying anything out too.

[01:15] Okay.

[01:16] What you need to protect yourself to protect your assets as a proper asset protection strategy, incorporating and not a truss and LLCs to keep people from coming after your hard earned dollars. My name is Scott Royal Smith. I'm an asset protection attorney. I'm an a real estate investor myself and I'd like to help you

[01:43] if you thought this content was good, you have to go see the bigger pockets podcast that I did. It was the top 10 things every real estate investor has to know about asset protection, and you can go listen to it right here.

Series LLCs and S Corporations: Which Is Best For Your Business?

Limiting your liability is an important factor when you start a business. Because of this, many entrepreneurs start with a limited liability company (LLC) or an S corporation. But which one is right for you?

Similarities Between A Series LLC and an S Corporation

There are many similarities between an LLC and an S Corp.

Pass-Through. Both the LLC and S corporation are typically used because they are pass-through tax entities. For pass-through entities, income taxes are not typically filed at a business level. Any profits or losses felt by the company, however, are “passed-through” and filed with their owners’ personal returns. In other words, if taxes are owed, they are paid by the individual, not the business. (Note, however, that S corporations are required to file business tax returns. LLCs only need to do so if they are owned by multiple individuals.)
Protection. Both types of businesses protect their owners. Through their limited liability protection, both types render their owners not personally responsible for any debts or liabilities related to the businesses.
Separate Entities. LLCs and S corporations establish separate entities for their owners. This is what creates the legal barrier that prevents owners from being personally responsible for debts and liabilities. Once the business is filed with the state, the inherent laws and regulations become viable. For LLCs, this same separation of entities applies to series LLC versions as well. Series LLCs enable a company to divide its assets between different, sub-companies. Legally, under a series LLC, each sub-company’s assets are protected as if they were the only entity.
State Requirements. Both a LLC and an S corporation are subject to state requirements. This can include filing requirements, related fees, and other state-mandated regulations.

Differences Between A Series LLC and an S Corporation

There are some significant differences between LLCs and S corporations.

Formalities. S corporations have several internal formalities that must be fulfilled in order to maintain their limited liability. Bylaws, stock issuance, meetings and meeting minutes are all required on the part of an S corporation. This is not so for a LLC or any of its series. (The Internal Revenue Service (IRS), however, does recommend that LLCs have an operating agreement, member shares, and annual meetings. They also recommend LLCs document all major decisions.)
Management. An S corporation is required to have a board of directors and officers. For an LLC, however, owners can choose to manage their business or they can elect to hire an outside person to act as manager.
Ownership. The IRS has several restrictions for S corporation ownership. For example, an S corporation cannot have more than 100 owners or shareholders. In addition to this, all shareholders or owners must be US citizens or residents. None of this is true for LLCs. In fact, not only can LLCs have an unlimited number of owners, they are also allowed to have unlimited subsidiaries or series.

What's The Right Business Structure For Multiunit Real Estate Investors?

Real estate investors love multiunit properties. These rental properties are in high demand, with renters scrambling to find duplexes, fourplexes, and of course, traditional apartment complexes in the parts of town close to work and play.

Multiunit investments are also surging in popularity in part because they are more resistant to inflation than traditional single-family homes.

While many of the same principles of business entities for real estate investors carry over to this topic, there are certainly special considerations that multi-unit investors must take into account. Below, we'll talk about the types of business structures that favor these investors, how they work, and what to keep in mind if you're considering adding a multi-unit to your real estate empire

Joint Venture Arrangements

Joint Ventures (JVs) are a popular choice for beginner investors, as well as those who prefer quick, one-and-done deals. They allow investors to pool money and equitably share risks and profits alike. Multi-unit residences and industrial properties make for a logical application of a JV agreement, as they easily divided for practical purposes.

JVs are a great option because they are clearly defined from the beginning. If your investment or partner(s) don't work out, you aren't locked in for life. But if you're successful, the JV leaves the door open for future collaboration.

Limited Partnerships

Limited Partnerships are most useful for investors operating their property with one partner. The terms of LPs are flexible, so your partner can be a fellow investor, property manager, angel investor, or anyone you see fit.

LPs are agreements that offer investors a high level of control over their terms. If you're considering this option, ensure you share your needs with a qualified attorney. Strong contracts will ensure you're getting the deal you want and will beef up your asset protection system.

The Series LLC

The Series LLC is among the strongest structures for any investor, and multi-unit real estate investors are no exception. This structure is extremely versatile. It's easy to form a multi-member Series LLC, but it works just as well if you're investing on your own.

Common reasons multi-unit investors love the Series LLC include the following:

Scalability. The Series LLC lets you easily add new units or properties to your portfolio. There are no limits to how many Series you can have, meaning you can grow your business as quickly as you like.
Asset Protection. Real estate investors are at particular risk for lawsuits, but the Series LLC can keep you from ever setting foot in a courtroom. Multi-unit investors are especially in need of asset protection for lawsuit prevention, and the Series LLC delivers. Some states may even allow you to place each unit within its own series, adding an additional layer of both liability and asset protection.
Pass-through Taxation. 90% of investors take advantage of this treatment for a reason. Not only are the savings tremendous, but filing is simplified when Uncle Sam comes knocking.
Streamlined Business Operations. Your Series LLC is structured beneath an operating company, which simplifies everyday transactions, management, and even banking.

We hope this has given you a starting point on the best business structures for multi-unit investments. Of course, everyone's situation is unique. Ideally, you want your structure in place before making any investment.

Interested in learning more? Check out our article, When It Comes to Taxes, Is Managing Rental Properties a Business or an Investment?

How the 'Three Company' Structure Protects Real Estate Investors

A typical real estate investor should be looking at a three-company structure.

The first of these companies should be a buy and hold LLC. The buy and hold LLC is going to be for long-term rentals. It's going to hold a number of different properties that you will be holding for longer than a year.

The next company that you're gonna have is your fix and flip LLC. Those are properties that you're gonna be holding for less than a year.

The reason that we need two of these is because they have different tax treatment. Your buy and hold is going to be a long-term capital gains taxation, your fix and flip is gonna be short-term capital gains.

Your third company will be your operating company (corporation or operating LLC). Typically we use corporations for some instances and LLCs for other instances. The corporation shields you from any personal liability in conducting your business. If you run your business personally, you're collecting the rent, you're negotiating with contractors, entering the contract, etc. This all can mean a lawsuit against you personally.

Even if you were smart and protected all of your assets inside of the LLC, what will happen is that a judgement against you gets recorded onto your credit report, impacting your credit score. The lower the credit score you have, your less ability to have financing. And that means real dollars out of your pocket.

Maintain Your LLC Corporate Structure to Avoid Lawsuits

Why file an LLC and manage a company if it's going to get invalidated anyway? Can't a good litigation attorney just "pierce the corporate veil" of an LLC?

That advice is just wrong. LLCs are incredibly hard to pierce if they are maintained correctly. The problem is that most business owners fail to do the things that are necessary to maintain the adequate corporate structure.

So what are the things that you need to keep in mind?

First, you must maintain records and accounting of your company. How much money is coming in? What is the money that's being spent? You need to run everything through a bank account for your company to maintain the appearance of being a legitimate separate entity from yourself.

You can not treat the money of the company as it were your own piggy bank. This means if you ever need to take money out, you must keep an accounting of it as a dividend from the company.

If you fail to follow these steps, a corporation can get pierced. If the corporation is pierced it provides no protection.

However, if you are diligent in maintaining adequate records of the company you will be protected.

Investment Structures That Avoid California Tax Requirements (Video)

You're from California. You know that your state loves to tax, especially when it comes to LLCs. Knowing how to avoid California's franchise tax is an important part of your asset protection strategy.

You have to pay $800 per year and franchise tax per LLC. This is true even if you live in California and you have a Texas LLC that only owns Texas property. You could still be subject to the franchise taxes.

One solution to this may be the Delaware Statutory Trust.The Delaware statutory trust is a trust structure and assets is not subject to the franchise taxes as the rules currently are defined by the franchise tax board. The Delaware Statutory Trust or DST is an entity that is formed in the state of Delaware and can have a series structure just like a series LLC.

Keep more of your money with a Royal Tax Review

Find out about the tax savings strategies that you can implement as a real estate investor or entrepreneur by taking our Tax Discovery quiz. We'll use this information to prepare to have a productive conversation. At the end of the quiz, you'll have an opportunity to schedule your consultation. TAKE THE TAX DISCOVERY QUIZ

Why You Need a Real Estate Corporation

Real estate is usually a sound investment. I would remiss if I didn’t use the word “usually” considering the little hiccup we experienced in 2008. Investing in real estate is sound, but you need to know pay attention to what way the wind is blowing.
Still, real estate is a good investment 99.9% of the time. Just make sure you consider the following:
You’re liable for your property. You need protection. You will most likely use an umbrella insurance policy or an LLC to protect yourself.

Insurance vs. LLC: Which is Better?

An umbrella policy adds additional coverage to the insurance you already have.
Now, if Demi Moore has 100k worth of liability coverage and business general liability is 500k, than a $1M umbrella policy is going to give you 1.1 M in pool liability coverage and 1.5M of general business liability coverage.
So, an umbrella policy doesn’t insure anything that isn’t insured. It’s more like a top up on a half full tank.
Let’s say you provide home appliance repair services and somebody sues you for a failed repair. If your general liability doesn’t cover those repairs, you’re umbrella policy is about as useful as that appliance you failed to repair. So, in short, don’t get an umbrella unless you’ve already got your rubber boots: You’re umbrella won’t keep your feet dry when the flood of litigation comes.
LLCs are 100% necessary if you want to keep your feet dry. Your business assets are at risk in a lawsuit, but if you don’t have an LLC, you could lose your home. Don’t get caught barefoot in a flood. Make sure you have your coverage.
The cost of an LLC is a few hundred dollars. You’ll pay yearly fees as well. $50.00 to $200.00 a year is the average, but it’s different in every state. You are going to pay monthly for an umbrella policy. About $1200.00 a year will get you a million in coverage. Umbrella policies have benefits such as attorneys that will be appointed to defend you, but they also have exclusions. You have to know what they are. An umbrella won’t save you from the storm if it’s full of holes.
Now for the million dollar question:

What Type of Company Structure is Best For You?

Well, it depends on what you own. If you have multiple units or commercial property, you want a lot of coverage because you have a lot of tenants. Tenants are people, and people can be very stupid. On the other hand, if you only have a single family, one policy might be enough.
You’re going to have to do some homework here and consider the risks. Bottom line, if you own property, you are going to face catastrophes. Be prepared. When the storm passes, you’ll be dry as a bone.
If you need specific advice on the best method for forming your real estate corporation, schedule your personal consultation today.

LLC or Corporation Vs. Umbrella Policy: Which Is Better For Real Estate Investors?

Are you a real estate investor? Chances are you either use an umbrella insurance policy or an LLC to protect yourself from liabilities concerning your property. There are, however, certain situations one can be more beneficial than the other.

To understand fully, you need to understand the different protection that each one provides. Many real estate investors don't fully understand the implications of using an LLC/Corporation, but this is especially true when it comes to umbrella policies.

What Is An Umbrella Policy And What Can It Do For You?

Umbrella insurance is a policy that adds extra protection beyond the existing limits of current in-force policies. Umbrella policies usually provide extra coverage for things like injuries, property damage, and certain lawsuits. Depending on the type of umbrella, it may cover different types of liability situations.

Let's say you have pool insurance under your homeowners or landlord policy with $100,000 of liability coverage and business general liability insurance of $500,000. Then, you also have a $1 million umbrella policy that could give you $1.1M of pool liability coverage and $1.5 million of general business liability coverage.

An umbrella policy doesn't cover any additional areas of liability or risk. It only adds more coverage to your existing coverage. The umbrella policy isn't as great of an asset protection tool as its name implies after all.

Example: A Typical Umbrella Policy Situation

Hypothetically speaking, let's say you own a business that provides home appliance services to residential customers. One day a claim is made against you by a customer against your LLC for damages from a failed, and expensive, appliance repair.

Now, this customer is going to file a lawsuit against your LLC. But that doesn't matter, because you're covered! You don't just have liability insurance, you also have an umbrella insurance policy, that's two layers of protection! But when you go to the insurance company with the claim, you get denied on both policies.

Why? Because your general liability policy didn't provide coverage for failed repairs. But it gets worse … Because your primary General Liability policy denied the claim your umbrella policy is also not going to pay out. This is why it is imperative to have a thorough understanding of your insurance coverages and to make sure that you take the necessary steps to protect yourself and your assets.

The good news is, you are here. You have learned the fundamentals of asset protection that we teach through Royal Legal Solutions. After identifying your vulnerabilities, you may even have gotten an LLC set up. Because of that action, your personal assets are not at risk, but your business could still end up having to pay a large settlement.

An umbrella policy is a great tool when you have your defense wall set up properly. However, keep in mind, that umbrella policies only cover above existing levels of the underlying policies. They are not a catch-all. That said, if you have them set up properly, they are a cost-effective way to achieve the extra security you may want and need.

LLCs & Corporations: Always Reliable

Think of the LLC or corporate structure as Old Faithful. Insurance can and will drop you the minute you actually need it. An LLC (or other corporation), on the other hand, protects you from liabilities that arise in the LLC and prevents a plaintiff from being able to go after you personally.

What is at risk in a lawsuit against the business entity (LLC or corporation) however, is the assets of that business itself. A creditor could collect against the assets of that business. So, for example, if you have an LLC with multiple rental properties with equity, then those properties and their equity would be at risk in a lawsuit.

Next, let's go over the cost of both LLCs & Umbrella policies.

The Cost of an LLC

The cost of an LLC, depending on how you go about getting one, will cost you a few hundred dollars. You can also expect about $50-$200 in fees per year to keep your LLC active with the state (each state is different, Arizona is $0 and California is about $900 annually, for example).

If you have a partnership LLC or a corporation then you also have the cost of an LLC partnership tax return or a corporate partnership tax return.

The Cost Of An Umbrella Policy

Umbrella policies typically cost between $150 and $300 dollars for the first $1,000,000, and then on average, another $100 dollars per additional million dollars per year.

Umbrella policy benefits include access to attorneys who your insurance company will appoint and pay to defend you in order to get the lowest possible settlement payout. There may be certain exclusions to your coverage that leave you without coverage for your risk. (You might have some costly holes in your umbrella). This is why it is critical to work with a knowledgeable insurance agent who is going to do everything in their power to ensure that you have the appropriate coverage you need to protect yourself.

Now we can finally get to the part you've been waiting for!

Which Is Best For You, An LLC Or An Umbrella Policy?

What it comes down to is what kind of property you own. If you own a multi-unit property or commercial property you should consider having both an LLC and an umbrella policy because you have more liability exposure when you have more tenants.

On the other hand, if you have a single-family rental in an otherwise good neighborhood where you feel you are less likely to be sued, then you could consider having just one, an LLC or an umbrella policy.

You should always consider both an LLC and an umbrella policy. But most of all get all the information you need to make an informed decision. That way you are protecting your assets in the most efficient and cost-effective way possible. Royal Legal Solutions can assist you in forming the best structure for your situation. Schedule your asset protection consultation today and let the professionals worry about your liability instead.

Top 10 Features Of The Solo 401k Plan: Empower Your Business

Are you an independent contractor or the only employee of a business you own? If so, you may want to learn about the Solo 401k.

A Solo 401k is a dream come true for small businesses, independent contractors and sole proprietors, such as consultants or freelance writers. A Solo 401k Plan can be adopted by any business with no employees other than the owner(s).

The business can be a sole proprietorship, LLC, corporation, or partnership. The Solo 401k is a tax efficient and cost effective plan offering all the benefits of a Self-Directed IRA, plus additional features.

Solo 401k Features and Benefits

1. Easy to maintain.

There is no annual filing requirement unless your solo 401k plan exceeds $250,000 in assets. If it does you will need to file a short information return with the IRS (Form 5500-EZ).

2. Freedom of choice and tax-free investing.

With a Solo 401K Plan, you will be able to invest in almost any type of investment opportunity, including:

Real estate
Private businesses
Precious metals
Hard money & peer to peer lending
Stock and mutual funds

Your only limit is your imagination.
Note: The income and gains from these investments will flow back into your Solo 401K Plan tax-free.

3.You can get a loan.

The Solo 401k allows you to borrow up to $50,000 or 50% of your account value, whichever is less. The interest rate will be the current prime rate. You can use the money for anything you want.

4. No Custodian fees.

A Solo 401k plan allows you to eliminate the expense and delays that come with an IRA custodian. This enables you to act quickly when the right investment opportunity presents itself.

Also, because you can open a Solo 401k at any local bank or credit union you won't have to pay custodian fees for the account as you would in the case of an IRA.

Another benefit of the Solo 401k plan is that it doesn't require you to hire a bank or trust company to serve as trustee. This flexibility allows you to serve in the trustee role. This means all assets of the 401k trust are under your direct control.

5. High contribution limits.

While an IRA only allows a $5,500 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), the solo 401(k) contribution limits are $54,000. (With an additional $6,000 catch up contribution if you're over age 50.)

Under the 2017 Solo 401k contribution rules, if you're under the age of 50 you can make a maximum employee deferral contribution in the amount of $18,000. That amount can be made in pre-tax or after tax. The after-tax method is known as the Roth account.

On the profit sharing side, your business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including your employee deferral, of $54,000.

If you're over the age of 50, you can make a maximum employee deferral contribution in the amount of $24,000. That amount can be made in pre tax or after tax (Roth). (Up to a combined maximum of $60,000.)

6. Contribution options.

You always have the option to contribute as much as legally possible, as well as the option of reducing or even suspending plan contributions if necessary.

7. Roth contributions.

The Solo 401k plan contains a built-in Roth sub-account you can contribute to without any income restrictions. With a Roth sub-account, you can make Roth type contributions while having the ability to make significantly greater contributions than with an IRA.

8. Tax deductions can offset the cost of your plan.

By paying for your Solo 401k with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees.

9. Exemption from UDFI tax.

When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (UDFI). This means you're going to be paying a lot of money in taxes!

How much is a lot you ask? The UBTI tax is approximately 40% for 2017-2018! Learn more details about this whopping tax penalty from our previous UBTI breakdown.

But, with a Solo 401k plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exemption provides significant tax advantages for using a Solo 401k Plan over an IRA for real estate purchases.

10. Rollover options.

A Solo 401k plan can accept rollovers of funds from another retirement savings vehicle, such as an IRA, a SEP, or a previous employer's 401k plan. Which means you can directly rollover your IRA or qualified plan funds to your new 401k Plan for investment or loan purposes.
Note: Roth IRA funds can't be rolled into a Solo 401k Plan.

Still Using an IRA?

While the IRA is nice and all, it just can't compete. With a solo 401k plan, your business will pay less in tax, and you won't have to deal with the typical IRA restrictions.

Are you interested in learning more about Solo 401ks? Call Royal Legal Solutions at (512) 757–3994 to schedule your retirement consultation today.

How To Protect Your Series LLC: Doing Your Part

The Series LLC is an excellent legal structure. Assuming you're doing your part, you don't have anything to worry about. If you don't know about the Series LLC, read this Series LLC Primer now. Then come back for the rest.

Everyone else, keep reading.

Protecting the series structure of an LLC is much like protecting multiple LLCs. Each series of a Series LLC is treated just like an individual LLC.

This is something you need to remember when you're running your LLC business. Let's imagine you hae a Series LLC with five different series underneath it. You have to treat each series as if they were five different LLC's.

Keep Adequate Records To Protect Your Series LLC

There's a few things you need to do to protect your series LLC.

One is you must track the money for each different series separately. You must keep those records as if the series are their own LLC.

You should also consider having separate bank accounts for each series. While this isn't a requirement, having separate bank accounts will make the accounting process so much easier.

What Happens If You Fail To Keep Adequate Records?

What happens is that all your series will be merged together by the court as if they were all one company. This completely defeats the purpose of the series.

It's not that your LLC will completely go away and then you end up with no protection. It's just now all of your money is in one pool. This cripples your asset protection strategy. Remember, the reason you have a Series LLC is to minimize the amount of money anybody can come after at any one time.

Let's say you find yourself in a lawsuit and the court decides to treat all the series you've made as one company. If all of your series get treated as one company you better believe the attorney for the other side is going to do everything in his or her power to win that lawsuit.

After all, the more assets you have for the taking, the more money an attorney can earn from suing you. Then let's say you actually lose the lawsuit. That's the equivalent of someone winning the power-ball, with the prize pool being all of your assets!

On the other hand, if your series hadn't all been merged together, the majority of your wealth and assets would have been untouched.

So remember: keep separate bank accounts, keep adequate records, and make sure you're doing your part!

If you have any questions about what we just went over don't hesitate to ask me in the comments! I'd be glad to help you by answering any questions you have below. If you want to discuss your unique situation, schedule your personal consultation today.

The Three Company Structure For Real Estate Investors

Many real estate investors buy and sell property without a company or LLC. While this is okay for investors with 1 or 2 properties, someone with multiple properties would be better off knowing how to structure a real estate investment company. He or she would be better off using the 3 company structure for tax and asset protection purposes.

Just think, the more properties you own, the more risk you're facing, and the more taxes you're paying. That's why it makes sense to use the 3 company structure, which is made up of 2 LLCs and your operating company, a corporation. Note: if you haven't already, see our info on how to start an LLC.

Three Ways to Use an LLC

Buy & Hold LLC. This LLC is for your long-term rentals and other properties that you expect to hold for longer than a year. We can structure this LLC to make it friendly for long-term capital gains tax.
Fix & Flip LLC. This LLC is for properties you plan on holding for less than a year. We can also structure this LLC to make it tax-friendly for short-term capital gains tax.
Operating Company. The operating company will generally be a corporation. Having an operating company will shield you from personal liability.

By using the three company structure, your assets will be protected and your business will become more tax efficient. When you combine the Buy & Hold LLC and the Fix & Flip LLC, all your assets will be protected.

Now, all that's left are your personal assets. These will fall under the protection of your operating company, preventing liability and the risk of having to forfeit your assets in a lawsuit.

In essence, the three company structure protects you and your assets from lawsuits and allows you to get the most money out of your properties.

Why Should I Use Three LLCs?

If you're wondering why one LLC isn't enough, you're not the first investor to ask that question.

Remember the expression, "Don't put all your eggs in one basket?" Not to mix our poultry metaphors, but with one LLC, you're a sitting duck because all your assets can be found in one place. By separating them, not only will it make a lawsuit less likely in the first place, but you can also rake in more profits from these tax-efficient legal structures.

The name of the game (asset protection) is separation and anonymity. Your LLCs will hold everything that's valuable, and nobody except you will know they exist. Your operating company will exist only to sign contracts and negotiate with clients.

So if anything ever went wrong between you and a client business-wise, they wouldn't get anything if from suing you.

But let's say you don't flip homes. If that's the case, then you won't need a Fix & Flip LLC. The same applies to the Buy & Hold LLC if all you're doing is flipping homes. You could have two of each instead in these situations.

And sure, filing an LLC costs money, but unlike a lawsuit, you won't have to worry about bankruptcy. Get maximum asset protection and tax efficiency with the 3 company structure.

The Asset Protection Basics: Anonymous Structures & The Shell Company

Asset protection is the art of eliminating your liability and protecting your assets from potential lawsuits. I say potential because once you have a solid plan, nobody will bother suing you. Even if they think they can win. And before any internet ethicists jump down my throat, understand that this is all done legally.
Also, I realize you may already have an LLC. If you think that's all you need to protect yourself, check out our previous piece on why an LLC alone isn't an asset protection plan. Anyway, let's get down to business. Asset protection involves two main things.

Anonymous Structures and Separation of Assets

When it comes to the asset protection basics, anonymity is a cornerstone. We make you anonymous by separating your assets from your operations. This way if your operations become liable, your assets will still be safe.
So how do we separate your assets? By putting them all in one shell company. This particular company doesn't interact with anybody. It doesn't do anything and it has zero contact with the outside world. It's held using anonymous names inside of Anonymous Trusts and anonymous structures. Multiple layers of anonymity protects you and your property from litigation.
Nobody except you will know who owns these structures. Which means nobody will be able to come after those assets in a lawsuit. But of course, we can't talk about the asset protection basics without mentioning the shell company.

Operating Company As a Shell Company

The shell company owns no assets but it conducts all of the business. It's your face to the world. It's the face (company) we want people to sue if there's ever a legal dispute. Yes, you read that correctly. We actually want this to be the target. Think of it as a legal decoy.
In fact, we want to structure our contracts to say that "if we have a problem you can only sue this company." The company we'd list would be your shell company. It sounds simple, but doing it will eliminate virtually all of your liability.
When it comes time to set up your asset protection plan, always think: assets on one hand; complete anonymity, separation and operations on the other.

Asset Protection Kills Lawsuits Before They Happen

A formidable asset protection plan will always include anonymity and a shell company. Most of the time, this will be an LLC or a Series LLC. I hope you enjoyed my short blog post and video about the asset protection basics!
Are you interested in learning more about how these plans can protect you from lawsuits? Contact us today to take your first steps towards becoming litigation-proof.

Litigation Proof? How the Right Business Structure Can Save Your Hide

Making your company litigation-proof is like trying to make a house tornado-proof. There's a lot you can do, but there's always going to be some vulnerability there.

Business owners and investors might as well think of lawsuits as a force of nature. You can't predict them, and you can barely protect yourself from one. This is even more true once the lawsuit has been filed. These life-ruining events pick up momentum from the beginning, just like a tornado.

The reality is you will be sued as long as the conditions are right. The only thing preventing a lawsuit is the correct set of circumstances.

Don’t assume probability will save you. One in four Americans are sued in their lifetimes. Business owners and investors are even more likely than a regular Joe to be sued. It could easily happen to you!

Remember, lawsuits are like nature: they're inevitable. It's a question of when, not if, they will happen or not.

Why Do Lawsuits Happen?

There are three conditions that make a lawsuit extremely likely. If all three are active at the same time, then a lawsuit is almost guaranteed to happen.

Legal Precedent. The first question someone who wants to sue you must answer is whether they have a reasonable position based on law. What is the likelihood that the courts will approve their reason for suing you? Is there a relevant precedent (prior reason to believe their lawsuit will succeed)? If there is, you can bet the plaintiff's legal team will be happy to consider bringing a case against you in court.
Factual Grounds. Over the years I've come to realize a lawsuit usually takes place because of some type of disagreement or unfortunate event. It is usually not malice or greed. Unfortunately, these things tend to happen randomly. It’s hard to foresee every potential risk. Once triggered, the only question is whether the plaintiff (the person suing you) has enough evidence to stand a chance of winning the case.
Recovery Value, The final element to consider is how much wealth is involved. Nobody sues homeless people because there is nothing to gain from them. The plaintiff's legal team will research you and your assets to determine the value of the case. As soon as the equation becomes net positive they'll be ready to sue you.

How To Make Your Company Litigation Proof

While there is no way to make your company immune to a lawsuit, you can definitely lower the probability of one taking place. A good asset protection plan addresses each of the conditions/steps I mentioned above. The goal is to stop, prevent, or make it extremely difficult for a plaintiff's legal team to go through each step.

So how do you make it difficult for them to go through each step? The solution is simple.

Spread out your company assets with a series LLC.

Limited Liability Companies (LLCs) prevent someone from suing you personally. You can learn how to start an LLC here. However, storing all your assets in one place is still a risky strategy. What you want to do is spread your holdings across multiple business entities. This will reduce your exposure and make it difficult for someone to determine your net worth.

Assumed Names Disguise Your Ownership

Public Interest in Disclosure

The public disclosure associated with the identity of the true party in interest and the location where the party may be served with process if suit is filed is called a DBA. This law was created in order to highlight the fact that it is in the public interest to be able to ascertain whom to sue and where exactly the service of process can be performed.
The potential plaintiffs will be able to benefit from the DBA filing requirements. Each and every day a particular number of suits are filed against assumed-name defendants. You need to think about a hypothetical real estate company, “Mary Joe’s Homes” (“homes”). A Homes`s attorney is able to dismiss a particular suit that is filed against Northside Chevrolet. The assumed name is usually associated with a corporation or LLC that has a liability barrier and it is conducting business under the name Homes. At this point, the plaintiff should perform a research and refile the case against the true party behind the DBA. It is not mandatory for the legal entity to have its business headquarters in that country, requesting an out-of-county service of process, another delay and expense. However, at this moment, a particular number of plaintiffs will certainly give up.

Law applicable to assumed names

An individual or company may possess as many DBAs as they desire, regardless if we are talking about a state or county level. A period of ten years can be covered with a single filing. A filing of a particular form may be used to terminate or abandon a DBA. You should verity the county clerk`s website within the county where you have your main headquarter on in which you are performing your services. You can also visit htt://www.sos.state.tx.us/corp/forms/503 and fill Form 503 if you want a state-level filing. The person or company must mention the counties where an assumed name will be used in this form. You need to check the box for “All” in case the entity will potentially use its assumed name in all counties in Texas.
A notarized DBA filing for people, companies and others is required by the Texas Business and Commerce Code chapter 71 under the next situations:
It is mandatory for the filer to state the psychical address of the location of his business. In case the county where the company has its main headquarter is different from the proposed county of business, than the person must file a DBA in both counties.
Let`s imagine that you have a California LLC and wish to conduct business under an assumed name in Miami, should you file an assumed name certificate in both counties? The answer is YES. Both the domestic and foreign entities within the scope of your business are included in the statute.

State vs. County Filing of DBAs

After you have formed an LLC, you need to get a DBA. However, where should the filing be performed, at the county clerk`s office or with the secretary of state? The DBA needs to be filed as at both levels, according to the Bus. & Com. Code section 71.103: "The corporation, limited partnership, limited liability partnership, limited liability Company, or foreign filing entity shall file the certificate in the office of the secretary of state and in the office or offices of each county clerk as specified by Subsection (b) or (c)." Even though filing with the Secretary of State is usually neglected by smaller entities who often file just in their local county, you need to consider that the statute says “and” when referring to state and county filings.
The county clerk needs to discover if a proposed DBA is available at the county level. The main thing to consider is that your proposed name should be different or deceptively similar to another entity`s filed assumed name that operates in that county. It is not mandatory to ascertain if a particular name is available, considering the fact that the DBA filing is essentially a notice filing. Simply file Form 503.
There are 254 counties in Texas. It is really important in which county you life in case you are obtaining a county-level assumed name for daily usage and banking purposes? Well, the answer is no. You can file for a DBA from El Paso Country and the bank will still accept it, regardless if your are operating in Houston. You should also consider the fact that there is no central data base connecting the assumed name records of Texas` 254 counties at the present moment. You might want to get your company`s DBA far from its true base of operations and in a county whose DBA database hasn`t entered the online world yet, if we are talking from an asset protection/anonymity point of view.

Trusts and DBAs

You need to file a DBA in case a trust is doing business.

A Series LLC Doing Business through One of Its Series

Considering the fact that series are viewed as sub-companies, they have all the rights to behave in this manner. An individual series has the power to sue and be sued; to contract; and to hold title to real and personal property, according to Business Organizations Code section 101.605.However, the series have to function or hold title under its own name so as to fulfill these functions at the series level. This in turn demands that the series obtain an assumed name certificate. Are there any causes for this situation? Yes there are! First of all, technically speaking, the series is not an independent legal entity; and since it is running under a name other than the name stated in the company`s COD, is should possess a DBA on file. Additionally, the file of the DBA should be conducted both at the state and county levels.
The name of the entity conducting business as an individual series will contain the basic assumed name for a series LLC. As an example: “ABC LLC conducting business as ABD LLC-Series A” section 71.103 will need an assumed name filing both at the office of the Secretary of State and the county where Series A does business.