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Mitigating Taxation through Incorporation

The principal rationale for incorporating your business and family affairs is to limit the liability of assets from potential attacks by creditors, litigators and taxation.

While all of these are separate issues, a mutually inclusive and beneficial arrangement is titled an Asset Protection Plan. A company is treated as a separate individual if it has been structured properly for tax purposes. Litigation follows the trail of profits and this of course leads to owners, shareholders and investors. These individuals need to protect their profits as they receive them and protect their existing assets from the liabilities that develop.

A person choosing an entity chooses a jurisdiction. This jurisdiction, whether offshore or domestic, must follow the laws and tax codes of that jurisdiction. The principles of the company must not only follow the jurisdictional laws, but also the laws of their citizenship and residency. This often results in very high taxation and sometimes-double taxation. The effectiveness of skillful structuring will create colossal gain for the principles.

When companies distribute profits or dividends from shareholders, the profits are generally taxable in the jurisdiction of the recipient. These benefits, dividends and profits do not have to be forwarded directly to the individual for the individual to control and benefit from the proceeds. The structure created to receive the proceeds and assets should ultimately be a structure of great protection, which provides the most advantageous taxation.

Considerations When Forming A Company

►General Liability Structure
►Local Taxation
►Taxation on the Principles by Citizenship and Residence
►Confidentiality
►The Legal System and Political Climate
►Economic Stability of the Jurisdiction
►Banking Policies
►Communication Relationships

There is a balance of taxation and liability when forming a company.  The exposed risk level and type of corporation are factors considered when selecting the company structure.  LLCs can choose the type of structure, such as being taxed as a sole proprietor, a partnership or S Corp, but still retain the liability protection from the LLC.  This means that your organizations documents need to be in proper order.  S Corps and C Corps are stricter with rules for taxation and demands for paperwork.  Your consideration for taxation should be based on your situation at the moment because you can convert to another structure, but you cannot change states or jurisdictions.  This is why your jurisdiction selection is important.

Expert planners will be able to analyze the pitfalls of residency and taxation and they should be able to create a favorable situation for your needs in business and in conducting Wealth Preservation.

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