Asset Protection

How to Protect Your Assets with the Wealth Preservation Fortress®

An excerpt from “Building Your Wealth Preservation Fortress®” by Alexander John Hay:

Although many people do not like to think about asset protection planning any more than they want to think about estate planning, the two are both very important and are related. Estate planning generally deals with how best to distribute your assets after death, asset protection planning has more to do with making sure you and your family get to keep what you have acquired now. This sounds simple enough, and often does not involve a great deal of effort to insure that your assets are safe and sound. However, in most cases people do not want to think about all the possible things that could cause them to lose everything they have worked so hard to create, and thus they often do not think about taking simple measures to preserve their assets from obvious and clear threats until it is too late.

The Reasons You Should Worry About Asset Protection

We live in a dangerous world, and our lives are punctuated by situations where we become liable to others for damages that may be beyond our ability to pay or otherwise resolve. A brief and non-exhaustive list of situations which often result in liabilities that destroy assets and wealth:

* Simple business transactions that have been entered into time and time again without problem can become typhoons of financial destruction due to changed conditions outside our control.
* Errors in judgment regarding simple matters that seem unimportant at the time.
* Mistakes committed by family and/or friends (or perhaps even by us).
* Family problems.
* Driving an automobile (even when we are insured and “protected”).
* Business transactions with trusted friends executed with a handshake.
* Bad luck.

It is very important that you review the possible risks you face in your personal and business life. Once this is done it is possible to determine what actions you need to take in order to protect your assets and insure that you and your family are protected. Not everyone is the same. Not everyone needs the same level of protection. It is for this reason that I have designed the Wealth Preservation Fortress®

[If you would like to read more, please click on the button to receive your Free ebook “Building Your Wealth Preservation Fortress®]

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How to Operate a US Based E-Commerce Business from Outside the USA and Save a Lot of Money!

For the past 15 years I have been promoting the USA as the ultimate banking solution for non-residents (or as some might say a “Tax Haven”). My traditional proposal was to set up a US LLC, take the default election of ‘disregarded entity’ (a “disregarded entity” is an LLC that is treated by the Internal Revenue Service as a complete pass through entity. For tax purposes it does not exist. For all other purposes it does.), open a bank account, and as long as you are not earning any US Source/Effectively Connected Income, you are fine. No need to file tax returns let alone pay any taxes.

That is no longer universally appropriate. FATCA has not changed the tax treatment issues, but has changed the reporting requirements for US payors such as PayPal, Amazon, Shopify, Stripe, etc. The issue of the W-9 (reporting form for US resident payees receiving funds) and W-8Ben (reporting form(s) for non-US residents receiving funds) was always a little murky but now it is downright impossible. Non-residents receiving payments from US payors, even if the funds are “not effectively connected” to US income, are now facing serious problems. No one really understands how the new W-8Ben system works since they have replaced the one form with 4 or 5 related forms that no one really knows how to use. The payors face serious penalties if they get it wrong. So most payors have decided to refuse to open accounts for anyone who cannot execute a W-9. Again, only taxable individuals and entities can issue a W-9.

Because of this it has become very difficult for non-residents to use their US bank accounts to receive funds from US payors. That means setting up accounts with PayPal, Stripe, Amazon, Shopify, etc. will be impossible with a US LLC treated as a ‘disregarded entity’.

Our solutions:

For those non-residents who do not need to receive funds from US payors, the Disregarded LLC is still fine. Nothing to worry about.

For those receiving money from US payors, we need a more sophisticated structure. We will establish a US LLC which then elects to be a ‘taxable association’ (that is an entity that will be taxed separately like a C Corporation). This Taxable US LLC will act as a Payment Agent for a non-resident business with a written agency agreement to resell non-resident goods and services in the USA. 90% percent of the gross income goes to the foreign provider (with appropriate W-8Ben — that will be very easy), and all operating expenses will come out of the 10% agency fee — there should be little or no taxes. A second US LLC can be established to act as a ‘disregarded entity’, and the funds can go from the Taxable US LLC to this Non-Taxable US LLC.

This solution is simple and easy to implement. In fact old Disregarded LLCs can be converted to “Taxable Association” LLCs with little effort. Another alternative is to set up a second US LLC to be the Payment Agent that then transfers the 90% to the original company.

The only downside is that there is now a requirement to file an annual tax return for the Taxable US LLC which means there is a requirement to maintain a good set of books so that the tax preparer can accurately file the tax return. There may be little or no taxes due, but failure to file a tax return can cause a lot of problems. I have always advised my clients to maintain a set of books for professional reasons, but they were not required for US tax purposes. Now they are.

So although it is not as easy as it used to be, it is still very easy.

For new clients this is the solution:

Company 1 is a US LLC electing to be a ‘taxable association’; a Taxable US LLC.

Company 2 is a US LLC electing to be a ‘disregarded entity’; a Non-Taxable US LLC.

Company 1 accepts payments on behalf of Company 2 for goods or services through Paypal, Amazon, Shopify, Stripe, etc., receives a modest commission which is used to pay transactions costs and company fees, and then pays a modest corporate tax that will probably never go above 15% of the net income.

There are of course other more complicated options that might be useful for some clients, but for most this is all that will ever be needed to setup and operate your e-commerce business in the United States of America.

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