A recent article in the Arizona Republic by Robert Anglen shed some light on obscure taxes that can affect owners of LLCs. LLCs are often created for asset protection purposes as part of an advanced estate planning portfolio. Investors or small business owners can acquire property in the name of their LLC. When properly established, this can shield the asset in question or potentially shield other assets from liability occurring within the LLC.
However, there are potential problems. For example, using an LLC can trigger a city sales tax. A small business owner purchases a building through an LLC for asset protection. He then leases the building to himself. He never actually pays rent, never generates any additional profits from the ownership of the building, nevertheless a sales tax is charged to the owner of the LLC. When the tax is not paid, penalties and interest charges can significantly increase the amount owed.
The Arizona State Legislature attempted to address the issue but the solution they crafted did not include LLCs. While future amendments and clarifications to the law could eliminate the loophole, it certainly illustrates the need for small business owners to know and understand how different planning tools are used and how they may or may not be taxed. The article by Robert Anglen is quite good and is available at azcentral.com or you can use this link http://www.azcentral.com/business/call12foraction/articles/20121205call-12-obscure-tax-hits-owners-llcs.html.
Contributed by MH Cave Creek Estate Planning Attorney West Hunsaker
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At Morris Hall, we have focused our legal practice on estate planning for over 40 years. Along with estate planning, our attorneys help clients and their families with matters of probate, trust administration, wills, power of attorneys, business planning, succession planning, legacy planning, charitable gifting and other important legal aspects. We also have divisions in financial, real estate and accounting to help you incorporate all of your planning together, ensuring that everything works perfectly for your needs and situation. Our Arizona offices are located in Phoenix, Mesa, Scottsdale, Cave Creek, Tucson, Prescott, Flagstaff and Arrowhead. Contact us today at 888.222.1328 to schedule an appointment!
This blog should be used for informational purposes only. It does not create an attorney-client relationship with any reader and should not be construed as legal advice. If you need legal advice, please contact an attorney in your community who can assess the specifics of your situation.
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