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Ask Megan C Your Own Question
Megan C
Megan C, Certified Public Accountant (CPA)
Category: Tax
Satisfied Customers: 16579
Experience:  Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level
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I am expecting to start selling items in my possession and

Customer Question

I am expecting to start selling items in my possession and would like to know if setting up a LLC is the best way to contract sale(s) to have buyer write check to the LLC or otherwise first as a method of asset protection, and secondly for tax purposes. I was thinking possibly a LLC that is a parent organization to another LLC. The later LLC is the recipient of the proceeds on sale. Would a trust help at all also? How would I set these up?
Submitted: 10 months ago.
Category: Tax
Expert:  PDtax replied 10 months ago.

Hi from Just Answer. I'm PDtax, and can assist.

Expert:  PDtax replied 10 months ago.

Your question has several open ended issues, that will take some additional time to investigate with you and address.

I will post an Offer for the additional time I think your question warrants.

Customer: replied 10 months ago.

can we break this into two or three questions rather than the nuclear option. This way you would be paid for each question?

Tell me how you'd like to break up the question?

Expert:  PDtax replied 10 months ago.

got it. start with the business structure.

Then, add to that the type of assets you are selling.

Then, the reasons for nonrecognition of income.

Please ask for me, PDtax, in the subject line for all three. I will be prompted to respond. Since the questions are related, I suggest allowing one expert to respond to all.


Customer: replied 10 months ago.

Asking for PDTAX

Please talk to business structure:

1) I am attempting to protect assets from future money judgments which may occur

2) I am attempting to do what I hear people say I should do:

a) never have anything in your name,

b) move them into safe havens for

*asset protection,

*lowering taxes, and

*to lower your personal net worth (e.g. moving house out of your name in case you have to go to nursing home..., or other illness that could cause you to lose your property)

Expert:  PDtax replied 10 months ago.

Asset planning services typically cost much more than this forum allows for. I believe you want specific personal asset protection advice, and will opt out so that other experts can consider your request.

Expert:  Megan C replied 10 months ago.

Thanks for your question.

You seem to be making a small business endeavor much more complicated than it needs to be. Sure, you can create an LLC. Then, the tax on the profit on the sale of the items in your possession would typically be paid by the owners of the LLC.

You only need one. It doesn't make sense to use another LLC just to get funds.

In the end, if it's a rather small and hobby-like adventure, the LLC isn't necessary at all. Trusts are fairly restrictive and aren't typically used for simple businesses like this.

I also think people misconceive the protection an LLC gives. The LLC CAN protect the ASSETS of the LLC - but the second the owner takes a draw from the LLC, (the LLC gives money to the owner) then those funds could be taken for a judgement. One solution many people think is to just keep the money in the LLC; not so - if someone is determined enough, they can get a "charging order" and order the LLC to pay the distribution to the owner as provided in the LLC organization documents. If the owner just uses the LLC as their own piggy bank, meaning they are paying their living expenses out of the LLC directly, then the courts could (and often do) view the LLC simply as an extension of the owner, negating all the asset protections.

In this particular circumstance, you WOULD need a sophisticated consult to determine the best steps for your condition. It's not as easy as it seems.

Customer: replied 10 months ago.

The llc could hire a person as manager and give him a draw as employee and that person could be one of the owners?