Issue #2060
- WEALTHY: Arm yourself against money-hungry lawyers (Darius Barazandeh)
- HEALTHY: Protect your largest organ and your immune system in one fell swoop (Dr. Al Sears)
- WISE: Jean de la Bruyere on lawsuits
ALSO IN THIS ISSUE:
- What would Jesus wear? (Michael Masterson)
- 3 ways to be a fearless public speaker (Peter Fogel)
- It’s Fun to Know… about sleeping in Tokyo’s cybercafes
- Add "bellicose" to your vocabulary
Confidential Report: Disillusioned Trader Opens ‘Money-Floodgates’ to YOU…
Rob Banks Legally… With an Inside Job!”
Are You Ready for a “Smash and Grab” on The World’s “Hidden” Money-Mountain?
Great! The getaway car’s leaving…
"Avoid lawsuits beyond all things; they pervert your conscience, impair your health, and dissipate your property."
Jean de la Bruyere
How an LLC Can Stop Lawsuits and Creditors Dead in Their Tracks
By Darius M. Barazandeh
As I explained last week, you may want to consider establishing a business entity like a corporation or a limited liability company (LLC) if you’re a real estate investor, an independent contractor, or a small-business owner. These entities can help make your business less risky and more financially rewarding.
Corporations (S Corps. and C Corps.) typically provide good protection against "traditional liabilities." In other words, if your business is sued for something related to its business activities, a properly set up and maintained corporation should protect the owners from personal liability.
Yet most attorneys will tell you that a multi-member LLC will usually provide enhanced benefits – for two important reasons:
1. Fewer opportunities for error.
A corporation is more complicated than the LLC. For one thing, it must hold annual meetings. State law also requires it to abide by a number of rules that create a "forced" three-level management structure. This means all operations must be channeled through directors, officers, and shareholders. In a small- to mid-sized business, the same person or handful of people must occupy all of these positions – which can create confusion and increased opportunities for error.
On the other hand, state law does not force such a complex management structure upon the LLC. And, though it’s a good idea to hold an annual LLC meeting, it’s not a legal requirement. You probably won’t lose your protection if you forget to have one. This means fewer technicalities to deal with, less confusion, and fewer potential mistakes for an attorney to use against you when trying to "pierce" your business entity to hold you personally liable.
2. Greater protection against creditors.
Perhaps the main reason an LLC is favored in most situations is that it will not only protect you from your business’s liabilities… it can also protect your business from your personal liabilities.
Let’s say you are driving your family to the park on a Sunday afternoon. Along the way, your car "taps" someone who is crossing the street and he is slightly injured. The injured person finds a personal injury attorney who tries to milk the case for every penny. They sue you for $1,000,000… and win. Your insurance only pays out $500,000, so you still owe $500,000.
What happens next? The answer depends on whether you have a corporation or an LLC.
What usually happens in a case like this is that the attorney passes the case on to a collections specialist – an aggressive attorney who really knows the ropes. He can, for example, go to the judge and request a Writ of Execution. With this writ, a creditor may visit your residence or office (with the local sheriff) and begin seizing your personal assets.
If you have a corporation, he may also be able to seize up to 100 percent of your corporate stock shares… because your corporate stock shares are considered personal property. If the creditor gains control of your company by seizing enough of your shares, he can then vote to dissolve the corporation. Assets in the corporation would then be distributed to you (and your co-owners) personally. And then the creditor could grab those assets up to the $500,000 you still owe him.
But this can’t happen if you have an LLC – because the laws of all states (except Pennsylvania and Nebraska) have included special rules that allow LLCs to be protected in a situation such as this.
The creditor would generally not be able to gain control of your LLC. He also could not vote to end it, nor force a distribution of assets. He would be limited to a "charging order."
A charging order is an order granted by a judge that says any money passed on to a business owner by the business must first go to the creditor… until the debt is paid off. BUT, the creditor does not have the right to force an LLC to make this payment. So he could wait a very long time for any such payment – especially if the people running the LLC are sympathetic to your situation. They could choose to stop distributions made to you altogether.
What’s more, once the creditor gets the charging order, he may even have to pay taxes on money the LLC made but which was not distributed to you.
Let’s say you’re a 50 percent owner of an LLC that makes $1 million in profits and the managers decide not to distribute any of those profits to you. The creditor can’t seize your $500,000 share of the profits, because it wasn’t distributed… but he could be forced by the IRS to recognize it as "phantom income" and find himself with a tax bill in the neighborhood of $150,000 or more.
Establishing your business as an LLC can almost act as a "poison pill" against questionable lawsuits, and it can put you in a much better negotiating position if you’re ever sued. The prospect of getting a big tax bill without any cash could spur the other party to settle the judgment debt or just drop his collection efforts. At the very least, it will help keep your business intact.
[Ed. Note: Darius Barazandeh is a licensed attorney and real estate investor who holds an MBA. At 7:00 p.m. Eastern Time tonight and Thursday, Main Street Millionaire editor Justin Ford will interview Darius during a teleseminar titled "Attorney's Secrets of the Wealth-Building LLC." Be among the first 150 people to register for the call, and you can listen in absolutely free. Click here to reserve your place now.]
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Notes From Michael Masterson’s Blog: Would You Buy Christian Blue Jeans?
CP a born-again, gospel-preaching professional I work with, stops by my office to ask me what I think of his new wife’s idea for a business: Christian-themed blue jeans. "She’s very excited about the idea," he says. "Can you spend an hour next week meeting with her?"
"Before I do that," I say, "tell me what you guys know about selling jeans."
He admits they know nothing. But they have ideas about having them made in China, "where you can have them made dirt cheap," and selling them to the big chains.
What do I say to this man? There are about 50 good reasons why he and his spouse should abandon this idea. I tell him a few of those reasons, but he resists.
"Try to have an open mind about this," he says, possibly thinking either that I don’t know anything about selling Christian products or that I am not a big fan of things Christian.
Actually, I do know something about selling to the Christian market. I was involved in several such product launches in the publishing area. But he is right in thinking that I am not a fan of some things Christian. I don’t like hypocritical, money-grubbing ministers or their bible-banging acolytes, for example. These kinds of Christians aren’t interested in Jesus Christ or what he actually said and did. They are much more interested in the very bizarre, fundamentalist culture that has grown up around him.
"I have an open mind on this subject," I tell CP. "And my open mind is telling me that you and your wife don’t know enough about this business to be good at it. You also don’t have enough money to make it work. Cutting a deal to sell jeans at Barneys or Marshalls isn’t something you can do with an inventory of 20,000 or even 200,000 pieces. Plus, those big chains wouldn’t take that kind of risk. Plus, I don’t think there’s a big enough market for what you want to sell."
He isn’t listening. He still thinks my mind is closed on the issue.
"Okay," I say. "Here’s what you do. Make 100 pairs of jeans and try to sell them at a local flea market. If they sell well, you’ll have several things you don’t have now: a better understanding of how to sell them and to whom (very important information for selling the idea later on), a bit of a sales track record that you can bring to backers, and a bit of positive cash flow."
He likes that idea a little bit better. I agree to speak to his spouse when we can find the time. What I want to say to him but don’t is this: "Do you think Jesus Christ would approve of your idea? Do you think he was really about accessorizing clothes with icons?"
- Michael Masterson
[Ed. Note: To read more of Michael's unedited, uncensored (and sometimes unexpected) ruminations, check out his blog here.
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How Not to Be a "Cowardly Lion" When It Comes to Public Speaking
Peter "The Humorator" Fogel
No one was more scared of being in front of an audience than I was. But, then again, I was barely 17 years old and doing stand-up comedy for the first time at New York’s prestigious comedy showcase club, Catch a Rising Star. I could hear audience members murmuring to themselves, "God, he’s so young."
I’d written notes on the palm of my hand for the jokes I planned to tell. But, a nervous wreck and sweating big-time, the ink smeared and I couldn’t read a thing.
Well, that was then and this is now. These days, I think nothing of jumping up on stage and speaking to hundreds of people.
Over the years, I’ve learned the following techniques to overcome my fear of public speaking:
- Accept that you have negative thoughts. Bring those thoughts out of your subconscious and turn them around. Say to yourself, "I’m a great speaker! My audience WANTS to hear what I have to say, and I am going to deliver real value to them."
- Prepare yourself physically. Avoid eating a heavy meal before giving your talk. Always warm up your body. Do neck rolls. Massage your chest, jaw, and face. If possible, do this while sitting and relaxed in a chair. Try stretching. Most important, warm up your voice, perhaps by singing your favorite song (in the privacy of your hotel room, of course).
- See it before it happens. See yourself standing in front of an audience and delivering a confident speech with great stories and compelling content, and getting laughs at just the right moment. Even visualize yourself getting a standing ovation! Then picture yourself meeting your audience afterward, where they give you their business cards and buy your products.
Will doing all these things completely get rid of the butterflies in your stomach? No. But that’s a good thing. A little anxiety is normal – and, in fact, will keep your senses sharp while you’re on stage.
[Ed. Note: Peter "The Humorator" Fogel is a National Speaker's Association speaker and corporate comedian. You can be a more effective speaker in just seven days. Learn how -- for FREE.]
Anti-Bacterial Soaps Do More Harm Than Good
By Al Sears, MD
If you think anti-bacterial soaps are somehow "better" because they kill bacteria, there’s something you should know: They don’t protect you from anything. In fact, they may increase your risk of allergies, including asthma.
What’s more, there’s no proof these soaps are more effective against germs than regular soap. Even the conservative American Medical Association agrees. Myron Genel, chairman of the AMA’s Council on Scientific Affairs, had this to say, "There’s no evidence that [anti-bacterial soaps] do any good and there’s reason to suspect that they could contribute to a problem by helping to create antibiotic-resistant bacteria."
You see, anti-bacterial soaps kill off only weak strains of bacteria, leaving the strong ones to multiply. So when you use these soaps, you’re actually contributing to the cultivation of new strains of super-strong bacteria.
What’s more, you don’t need to protect yourself from common bacteria. Your body has a natural relationship with the bacteria you encounter in your daily life – both the good and the bad. By fighting off the bad guys, your immune system gets stronger and more resilient.
Keep in mind that your skin is your body’s largest organ. It will absorb whatever you put on it – including the antibiotics in anti-bacterial soaps. So choose regular soaps instead – those made with natural ingredients and without the addition of dyes or other chemicals.
[Ed. Note: Dr. Sears, a practicing physician and the author of The Doctor's Heart Cure, is a leading authority on longevity, physical fitness, and heart health.]
It’s Fun to Know: Sleeping in Tokyo’s Cybercafes
Cybercafes offering private rooms with unlimited Internet access and comfy chairs – and sometimes even showers and microwaves – have become popular in Tokyo for overnight stays. Businessmen… the homeless and working poor who cannot afford the city’s high rents… nightclubbers who missed the last train home… are taking advantage of these affordable accommodations. They are lured by rates as low as $11 a night, cheaper even than the city’s well-known "capsule hotels."
(Source: Reuters)
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Word to the Wise: Bellicose
"Bellicose" (BEL-ih-kose) – from the Latin for "war" (Bellona was the Roman goddess of war) – means "aggressively hostile and eager to fight."
Example (as used by Alan Brinkley in a New York Times review of Brothers: The Hidden History of the Kennedy Years by David Talbot): "[John Kennedy's] inspiring American University speech in the spring of 1963, calling for peaceful cooperation with the Soviet Union, was followed weeks later by a bellicose denunciation of Soviet power in Berlin."
[Ed. Note: Become a more persuasive writer and speaker ... build your self-confidence and intellect ... increase your attractiveness to others ... just by spending 10 VERY enjoyable minutes a day with ETR's new Words to the Wise CD Library.]
Michael Masterson
Copyright ETR, LLC, 2007
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