Planning for the Future While Protecting your Assets

Jeff Resnick, CPA, Managing Partner

The Resnick Druckman Group

Selecting a

Business Structure

Types of Entities

• Sole proprietorships• Partnerships

– General partnerships– Limited partnerships

• “S” corporations• “C” corporations• Limited liability companies (LLCs)• Limited liability partnerships (LLPs)

Sole Proprietorships

• Taxes paid by the individual• No corporate protection• All net income is subject to self

employment tax• All net income also subject to four percent

unincorporated income tax in New York City

Partnerships

• General partnerships– Taxed the same as sole proprietors– Unlimited liability

• Limited partnerships– General partners taxed like sole proprietors– Limited partners taxed like sole proprietors– Limited partners have limited liability

“S” Corporations

• No federal or New York state corporate tax• Individual shareholders are taxed on net

income of the business• New York City taxes net income at the

greater of 8.85% of income or other alternative method

• Limited liability

“C” Corporations

• Corporation is taxed on the corporation’s profits

• Individual owners are taxed again on dividends received (double taxation)

• Limited liability

Limited Liability Companies / Partnerships

• Taxed the same as a partnership or sole proprietorship

• Limited liability

Consider Tax Ramifications

• Three key elements are considered the rights of a partner/shareholder– Voting right (control)– Share of profits and losses– Equity (ownership ability and rights to sell)

Note: These rights are easier to separate in a partnership than a S corporation

Grantor Trusts

Having Your Cake!

Gra

nto

r

Gifts

Sales

Spouse Trustee

Independent Trustee

Corporate Administrative

Trustee

Spousal Limited Access Trust• Irrevocable• Independent trustee has discretion to make

distributions to grantor’s spouse for health, support and maintenance

• Generation skipping/perpetuities trust• Grantor trust status/invasion by trustee

permissible to pay income taxes/permissible S corporation shareholder

• Asset protection benefits• Grantor can act as investment advisor (DE/AK)• Remove and replace trustee language