Posted June 7, 2024 by James Billings
Are you a self-employed contractor, a day trader, or a professional using conventional business organizations to get the S corporation tax benefit? My name is James, and I want to talk to you about an important alternative to traditional business structures.
The Burden of Traditional Business Organizations
Many of you have been using standard business organizations, such as corporations and LLCs, for years. What does this entail?
- Secretary of State Filing
- Directors and Managers
- Corporate Minutes and Annual Filings
- Corporate Veil
- Meeting Minutes
Sometimes, people think it’s not a big deal to handle all these requirements, but it can be overwhelming, like a Pac-Man chomping at you little by little.
Disclosure Issues with Traditional Business Organizations
Everything you submit to the Secretary of State goes into a public database. Companies like Open Corporates slice and dice all your business information, making everything available online. Some people are okay with this, but it’s crucial to consider the workload and potential privacy issues.
The Secret of Business Trust Companies
There’s a better way that’s been around for hundreds of years: Business Trust Companies. With a Business Trust Company, you can get limited liability and still file those 1120S forms with the IRS.
Understanding S Corporations
People often talk about S corporations as if they are one entity, but it’s actually two components:
- Business Organization: Corporations, LLCs, and Business Trusts.
- Income Tax Classifications: Subchapter C and Subchapter S of the Internal Revenue Code.
Any corporation, LLC, or business trust can take advantage of Subchapter C or S.
Misleading Anonymity Claims
A few states claim to offer anonymity, but it’s misleading. You still need to register in states like Wyoming or Nevada if you want to keep your name off the records. This involves hiring a manager to stand in and dealing with resident agent issues and the corporate veil.
The Corporate Transparency Act
The FinCEN (Department of Treasury) now requires beneficial owner information for corporations and LLCs, tying this into your bank accounts. This adds another layer of obligation for conventional business organizations.
Why Haven’t You Heard About Business Trust Companies?
Most attorneys and accountants are unaware of business trusts because they are not taught about them. To find an attorney knowledgeable in business trusts, you need one who graduated before 1976. The legal community typically only deals with corporations and LLCs because that’s what they know.
Conclusion: The Advantages of Business Trust Companies
Business Trust Companies eliminate many of the hassles of traditional business organizations:
- No Business Identity Theft
- No Secretary of State Filings
- 1120S Forms and Subchapter S Tax Benefits
- Enhanced Privacy
In today’s world, privacy is a major concern, and business privacy is no exception. Your business assets are nobody’s business unless you choose to share them.
Learn More
For more information, check out our YouTube channel for educational content about business trusts and how to use them. We also offer an e-seminar with step-by-step instructions on setting up a business trust.
Thank you for reading!
Get your free copy of the LLC versus Business Trust comparison chart here.
If you have any questions, please contact James Billings, founder and owner of TrustArte, at james@trustarte.com or 619-537-8625. Visit my YouTube channel for video content.