The Brick In Your Garage

Hello, All! This is Joseph Michael Dickerson from The J.M. Dickerson Law Firm. I wanted to share with you all a new program that we launched recently, and if we have set up your LLC corporation or partnership, somebody from my office will be reaching out to you to let you know about our new program.

But first, let me ask you something.

If you have a Ferrari and you never change the oil and you never put air in the tires, never washed it and drove it until it gave you it’s all every day, how long do you think it will take for that luxury car to be a brick in your garage that’s not very useful, let alone drivable?

The same thing goes for your business entity formation. You need to make sure you maintain the records and annual minutes of your entity in order to provide you the maximum protection the law allows. Together, we spent time to make sure your business was set up the right way. This phase is also important to me as your legal professional. The continued protection of your business is my personal priority, and my team is ready to help you maintain the optimal health of your business by conducting a risk audit assessment, completely complimentary to you. The results of your entity’s health will be shared with you almost immediately, so you have the power to act and recover the full protection your entity provides, keeping you from unnecessary pitfalls and damaging lawsuits.

As I mentioned, if we have set up your LLC corporation or partnership, somebody from my office will be reaching out to you to let you know we are offering you a complimentary Three Bucket Method Risk Audit.

So, what does that mean? Our risk audit is based on my strategy, outlined in the book I wrote, Three Bucket Method for Asset Protection. I want to make sure that it is not just once we created your entity, that you’re protected, but that I help you maintain that protection. In order to do that and have that protection continue to be effective, we need to see what is missing through the risk audit interview.

Maybe you’re asking, “Why go through the trouble of having a risk audit anyway?” I can tell you from experience, when you don’t know what business documents and agreements you are missing, it’s like ignoring a major health issue and your business can become a ticking time-bomb. Not knowing what is truly putting your business at risk does not make the risk go away and neither does leaving your head in the sand.

So, what does what does that mean? Our risk audit is based on my strategy, outlined in my book I wrote, Three Bucket Method for Asset Protection. We want to make sure that it is not just once you’ve created your entity, that you’re protected, but that we help you maintain that protection. In order to do that and to have that protection continue to be effective, it your entity formation has to be maintained.

Here is the breakdown…

This complimentary risk audit for our clients with business entities will make sure their documentation for those entities is up to date and is effectuated appropriately. There will be an interview with one of my paralegals who will be ask what’s gone on since the last time you did your entity minutes. That could be several years, or it could be just one year. Either way, we will take care of get all the basic information of what your company has done and what should be reflected in your entity minutes.

Once we have the entity minutes completed, we will confirm any real estate leases. For example, if you rented a location for your business, whether you rented it from a third party or you rented it from yourself. We do this to make sure that there is a copy of the document showing the lease being in place. This is especially important when the owners of the operating company are the same as the owners of the real estate. Everything should be very well documented and arm’s length transaction. This will help avoid any disallowance of any deductions taken for rental expense.

Next, we want to make sure that any kind of intercompany funds that were exchanged are properly documented. We want to make sure that your intercompany loans are actually documented as loans. Hey! Life happens. Sometimes the operating company may have cash available to pay for the note of the real estate company and then sometimes that money just goes straight to the bank. The appropriate way would be for the money to come out to you personally, then you contributed to the real estate company and finally, to the real estate company that pays for the mortgage. On those occasions when money needs to move a little faster and takes a more direct line, we need to make sure we document those items as loans, especially when we’re talking about intercompany loans.

One of the things that I always ask to bring this point home when I give talks is I ask, “How many people would give me $10,000.00 without me signing any documents saying that I’m going to pay you back?” Guess what? No hands have ever gone up. So, it’s important to realize that if you’re transferring money and you’re making a loan for your other business when it’s presented to a jury in the case of a lawsuit, that example is going to make it seem like this is really one big company and that everyone should be responsible for whatever the lawsuit is. That is why we are careful to keep those things documented as loans and that interest is going to be charged.

Now, while we’re on the topic of loans, all loans should be included in in making sure we have these documents and that they’re included in the minutes. So more recently, we’ve done some minutes for clients that got an IDL loan. They needed a corporate resolution to document that they did request those funds. If you received an IDL loan, that’s something you want to have in your in your books. If you get a loan from a bank, you want to make sure you document that in your internal records as well.

Some of you may have companies that rent equipment to each other. So, you want to make sure you have those equipment leases up to date. If you’ve added or deducted equipment, you want to make sure those extra appendixes that had those schedules of equipment are also up-to-date and have information that is that is accurate up to the point that that the contract is pending.

Lastly, there may be one or two companies that are providing management services to the other. Businesses are handling the management decisions, and we need to make sure that those contracts are actually written and in place. There’s certain documentation and certain language that we need to have in those contracts to make sure that they’re not going to get disallowed by the IRS. There are specific services that need to be identified when we’re talking about the transfer of those of those services as management services and management fees being paid.

In general, those are the main things that are covered in this complimentary risk audit and that will be needed to make sure that we’ve covered everything to get you up to speed for this year. Then every year you’ll be hearing back from us so that we can work on keeping you up-to-date and out of the “risk zone” with your entities.

Remember, in the event of an IRS audit, you want to make sure that you’ve got a thick stack of paperwork that you’re going to make the IRS dig through if they want to find something! Chances are, they’re not going to be bothered with auditing your big stack of up-to-date documentation with a fine-toothed comb. If you’re in a lawsuit, you want to make sure that you’ve got documentation very clearly separating one company from the other to provide you with that reinforcement in those walls, separating one entity from the other.

For our business entity clients who take advantage of this complementary service, we will provide them with a blueprint outlining the results of the audit interview. This blueprint is explained by our paralegal and will provide a plan of action to help get your business entity to “optimal health” and tell you what documentation is necessary to be fully protected.

After the interview and the results of the blueprint have been explained and delivered, those entity clients who act promptly will get a healthy discount for engaging us in doing the necessary updates the risk audit revealed.

So, you’ll have three choices. One, do nothing, which I don’t recommend. Two, that you do it yourself, which I don’t recommend either, unless you went to law school and studied all of this. It’s not really worth the effort of getting it wrong. Or three, you can have us get your risk audit done and prepare those documents for you.

By not taking advantage of this opportunity, not updating your entity records and burying your head in the sand, you certainly run the risk of a lawsuit possibly wiping out your multi-entity structure and the means you provide for your employees and family.

Contact me today to find out if you are a candidate for our complimentary risk audit.