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I currently live in MT. but will be retiring soon to AZ. The

company I work for would...
I currently live in MT. but will be retiring soon to AZ. The company I work for would like to retain me as a consultant for a couple of years. I'm advised to do this I should create an LLC so that I can provide my services and the company has a method for making payments to me. Is a LLC the best way to do this? Should I form in MT. or AZ.? Or as I look on the Web there are suggestions of forming a LLC in NV. as the best option. Is there a web site you would recommend for forming an LLC if you think this is the proper option. My thought is that I would be the only person in the LLC but I also see on the Web that this isn't a preferred LLC manner? As I'm going to be retired from the company my work for these services are going to be more of an out of my house type of consulting. I'm also concerned about how the taxes are paid and if different States are better choices. Also, if I have to form some sort of business for my services, are there any advantages to forming in a non tax State like MT?
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6/12/2013
MShore Law
MShore Law, Attorney
Category: Business Law
Satisfied Customers: 25,285
Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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Thank you for the post, I am happy to assist you by answering your questions. Are you concerned with anonymity of ownership in your LLC?
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Customer reply replied 4 years ago

I have no reason for anonymity unless you have a reason to consider it.

Sometimes those with a criminal record or history of civil judgments prefer to keep their name off a business so that there is no ill will imputed to the business. In your case, this appears not be to a consideration. An LLC would be a good vehicle for you to carry out your consulting role, as you would not have personal liability should there by any issue, and the LLC is very simple to own and operate. You should form it in your home state, otherwise you would have to register in two states: the LLC's home state and your state as a foreign entity operating in AZ. People in your situation commonly utilize sits such as legalzoom or rocketawyer to create an LLC. In truth though, it is very straightforward and you can bypass such entities by registering your LLC directly with the state of operation. For example, if you were to register in AZ, this is the link to register directly with the AZ Corporations Division: http://www.azcc.gov/Divisions/Corporations/forms/formsindex.asp#LLC_forms

I want to make sure your questions are answered. If you have any follow up questions or need additional guidance, please let me know. If I have answered your questions please positively rate my answer.
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Customer reply replied 4 years ago

If I understand you, I have no advantages of forming in MT. as a non taxed State. I was thinking I might be able to keep my car plates in MT. instead of having to redo them in AZ when I move there.

Will the business own the vehicle?
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Customer reply replied 4 years ago

OK, now you got me on that one. I didn't think a business ( being non tangible ) could own property? Seeing how I would be the only member ( unless I need more than that for tax purposes, something I read on some site ) I thought the vehicles would be in the LLC and my name as one and owed by the same.


I know that I'm going to have a monthly check and will have to pay some sort of taxes on it and would like to avoid as much of it as I can and if different States do so in different ways I want to be certain I pick the best State to do the LLC in. If the yearly registration fees are less in MT than in AZ it would seem to be a good idea to keep them in MT each year even if I live in AZ. I can see that email isn't perhaps the best way to address this. Do you think it would be best to just see a local attorney or do you think we can still get there this way?

Technically you and the LLC are separate entities. However the IRS disregards XXXXX XXXXX LLCs unless the owner of the LLC elects to be taxed as an S-corp. The yearly registration fees in either state are negligible, also, if the LLC is registered in two states, taxes would be due in both states. Therefore, your cost savings would be best realized by keeping your LLC in whichever state you reside in. Also, unless you own the vehicles outright, it would be difficult to tranfer to the LLC becuase of liens.
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Customer reply replied 4 years ago

As I'm certain you have figured out what I'm trying to do, it seems like there should be an easier way of receiving payments for the portion of the sale of my business that I'm going to carry back as a consultant. I have visited with the accountant and he said this is one creative way of selling the business in a more attractive manner to the buyer but perhaps a lawyer would have a better suggestion. It seems that by creating an LLC I'm going to be paying a fair amount of taxes in this manner. Can you suggest a better way to carry back a note that would be proper and that a buyer would be OK with as well? If the LLC is really the only reasonable vehicle I will just pursue that direction. As you can tell, my thought is that if this is the only way to go if there are other types of benefits from it that I might be able to take advantage of. If so, it might make the paying of the taxes a bit more comfortable.

Yes, I would advise that you sell your business and take back shares in the buying company. The taxes paid the sale of the shares is far less than the taxes you would pay from a cash out. Would this be a viable option?
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Customer reply replied 4 years ago

I'm not certain I understand what you are saying. If I understand your thought you are suggesting to hold on to my shares and sell them back monthly as the buyer makes the payment ( escrow ? ). This way I don't have to form an LLC? The selling price ( back to my partner ) I have agreed to is the same amount as the original purchase, so I'm not going to have a profit on the sale. I have agreed with a down payment amount with the balance to be monthly for three years with a personal guaranty. The only question is, how as the seller am I best represented?


Sorry to be a pain, I know my business but nothing about selling it and the accountant has only suggested the LLC direction.

I'm sorry, I was not clear. I was suggesting that you sell the company to the buyer, but rather than take back cash, take back shares in the buying company and the buyer agree to repurchase those shares on a regular schedule. This is completely separate from you rendering services to the company as a consultant. Essentially you have two issues: 1. How to be paid by the company for services rendered as a consultant ; and 2) how to sell the company and reduce your tax liability on the sale. The first issue is best resolved by the creation of a single member LLC and depending on the money you would earn from your consulting electing S-corp taxation. The second issue would be resolved by either taking shares in the buying company (if a public company) or having the buying company execute a promissory note personally guaranteed by the buyer, with a lien on company assets, including accounts receivable.
MShore Law
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Experience: Drafted Negotiated and/or Reviewed Thousands of Commercial Agreements
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