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  • Writer's pictureTanya S Osensky

Red Flags for Startup Planning

I recently met with new clients, a couple, who spent over $5,000 on an elaborate tax and legal entity plan that included a LLC, C Corporation, limited partnership and an irrevocable trust. They both had W2 jobs and a few rental properties.

On its own, each entity was set up correctly. However, the plan as a whole was a lot more than they needed, and the cost to maintain it outweighs any benefits.

Here are some red flags to watch out for:

1. A nonlawyer giving advice, such as an “incorporation service” which has only one lawyer on staff

2. Multiple entities when you don’t have the assets or businesses to justify them

3. Advice to set up an entity in a state other than where you live or where the business/properties are located

If your friend is considering a new business and mentions any of these red flags, suggest that she get a second opinion.

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