Uncategorized Business and Charitable Entities

Business and Charitable Entities

Here is an idea of the different type of business and charitable entities that you can setup.  Typically, we suggest that you get a Revocable Living Trust which will hold your assets now, and after you pass away, your assets will be held in trust by the trustee and given to your family, friends or charities as you wish.

Revocable Living Trust
This includes a Trust, Will, Durable Power of Attorney for Assets, a Health Care Directive and a deed for your property.  As long as your estate is under $13,610,000 upon your death you do not have to worry about an estate tax problem.  Anything above that amount will be taxed at 40%.

Charitable Remainder Trust
This type of trust is created to give a majority of your estate to charity and in return the law allows you to legally avoid paying estate tax because money given to charity is not subject to estate tax.  This type of trust must be filed with the IRS.  Lawyers charge considerably more for this type of trust because it requires more paperwork filed with the IRS.

A body formed and authorized by law to act as a single person although constituted by one or more persons and legally endowed with various rights and duties including the capacity of succession.

A legal relation existing between two or more persons contractually associated as joint principals in a business.

Limited Liability Companies (LLCs)
An LLC is a mix of a corporation and partnership because it provides the limited liability features of a corporation and the operational flexibility and tax efficiencies of a partnership. LLCs are not taxed as a separate business entity like the shareholders in a corporation. Instead, all profits and losses are passed through the business to each of the members of the LLC. LLC members report profits and losses on their personal federal tax returns.

Limited Liability Partnerships (LLPs)
An LLP is a partnership in which the partnership is liable as an entity for debts and obligations and the partners are not liable personally.

S corporations are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. The corporation makes an election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code.

Benefit corporation or B-corporation
legislated in 28 U.S. states, that includes positive impact on society and the environment in addition to profit as its legally defined goals. B corps differ from traditional corporations in purpose, accountability, and transparency, but not in taxation.

Charitable Foundations (nonprofits)
A nonprofit organization is one that uses its surplus revenue to further its mission statement rather than distributing income to its directors and shareholders. Designation as a nonprofit means that the organization does not have owners and that the funds raised by the operation will not be used to benefit the owners, but there may actually be a profit.

Memorial Fund, memorial scholarships and charitable gifts
Honor a loved one by starting a Memorial fund in their honor to support a cause. A memorial fund a a way to remember a lost one by doing something positive in his or her honor. Setting up a memorial fund is doesn’t require the extensive paperwork of a non-profit. We will handle the administration and accounting.

Private Foundation
A private foundation can be set up by an individual, a family or a group of individuals, for a purpose such as philanthropy or an object legal in the economic operation. A private foundation does not solicit funds from the general public but derives its funds from those that setup the foundation.   This allows you to donate money to causes that you care about but a Private foundation must make grants worth at least 5% of the foundation’s investment assets each year to other non-profits and it must pay a 1 to 2% excise tax on the organization’s investment assets.  This is not a good option for you because you may have your estate only in property and not be able to pay 5% to the foundation.  A Trust allows you to donate however much you want, when you want.

Public Charity
A public Charity is another option that allows you to continue your legacy after you pass away but you are required to raise money with a public charity from outside sources.  This is really not a great long-term estate plan.

Supporting Organization
A supporting organization supports other charities without being a charity itself.  A supporting organization makes grants to a public charity similar to a private foundation.  The only problem with this is that you have to designate charities to support and you cannot change those charities.

These other options are more expensive and require an annual tax filing with the IRS.  Also a trust will allow your trustee to manage your properties and assets after you die providing an income for the beneficiaries and can allow the estate to grow.  For this reason we believe a Revocable Living Trust is the best option for you.  If your estate exceeds $13,610,000 (2024) at that time we can use different tools to help you avoid the estate tax.

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