entity selection

1. ENTITY SELECTION FOR ESTATE
PLANNING 101
Patrick B Dillon , Dillon Law, Sumner Iowa
Twitter: @dillonlaw
www.50674law.com

2. COMMON ELEMENTS
 All business entities are legalized lies
 Most require some sort of positive act to
create
 All have some sort of carrying cost
 What the boys at the coffee shop say their
neighbor did is really not controlling

3. C CORPORATION
1. Most formal of all types of
entities
2. Many fringe benefits
3. Problems getting rid of highly
appreciated assets and income
without double taxation
4. Liability protection and control
protection via who owns the
stock

4. S CORPORATION
1. Still Corporate Control
2. No Double Tax Issue
3. Less Fringe benefits
4. Watched closely for
under compensating
key employees
5. Limits on number of
share holders

5. PARTNERSHIPS
1. Each Partner Can bind
the other
2. No Double Tax Issue
3. May “back into” a
partnership
4. Each Partners personal
assets may stand for the
other’s issue
5. Easy to form
6. Can create limited
liability

6. LIMITED LIABILITY COMPANY
1. Relaxed Rules
2. Split up control based on
issue
3. Taxed as a partnership or
Corp or totally disregarded
4. Only what’s in the pot is at
stake
5. Still have to keep separate
accounts, but corporate
formality is watered out

7. SOLE PROPRIETOR
1. Unlimited Risk
2. Self employment Tax
3. Little carrying Cost
4. Dies when you die

8. PICKING A WINNER
 Goals of the Client
 How is it currently operating?
 Is it sustainable in the future?
 Costs of entity
 How much control can be given up pre
death?
 What does the bank, accountant and
financial advisor say?

9. FAMILY CONSIDERATION
 If I put my client’s children in a life boat
 Who gets reported missing
 Who makes it to shore
 Same question, add in laws..

10. WAYS TO SCREW IT UP
 Failure to follow
formalities
IRS, Sec of State
Intercompany
transactions
 Personal Guarantees,
Sloppy Signatures