Miscellaneous

Loan Can’t be Called if Land Is Transferred to an LLC

Question:  Can my lender call my loan that encumbers my land if I transfer the land to an LLC I own?

Answer:  Probably not.  The Federal National Mortgage Association, aka Fannie Mae, has something called Servicing Freddie Mac Mortgages Series 8000.  Section 8406.4(b) Additional permitted Transfers of Ownership Effective 10/20/2021 states:

“Permitted Transfers of Ownership subject to conditions.  In situations where all of the following conditions are met, Freddie Mac will permit a Transfer of Ownership of the Mortgaged Premises:

  • At least 12 months have passed since the Origination Date and
  • The transfer is to a limited liability company (LLC) or limited partnership (LP), provided that:

The managing member/general partner of the LLC/LP is the original Borrower. If there are multiple Borrowers, all of them must be members/partners of the LLC/LP, and at least one of them must be a managing member/general partner. If the transfer results in a permitted change of occupancy type to an investment property, such change must not violate the Security Instrument (e.g., the 12-month occupancy requirement for a Primary Residence), and

The Servicer notifies the original owner or natural person that the Mortgaged Premises transferred to an LLC/LP must be transferred back to the original owner or natural person prior to any subsequent refinance or modification application to meet Freddie Mac’s underwriting requirements

Fannie Mae ruling D1-4.1-02: Allowable Exemptions Due to the Type of Transfer (04/13/2022) says due on sale clauses cannot be enforced if the borrower transfers the encumbered land to a limited liability company.  The rule states:

“the servicer must process the following exempt transactions without reviewing or approving the terms of the transfer: . . . A transfer of the property (or, if the borrower is an inter vivos revocable trust, a transfer of a beneficial interest in the trust) to a limited liability company (LLC), provided that

  • the mortgage loan was purchased or securitized by Fannie Mae on or after June 1, 2016, and
  • the LLC is controlled by the original borrower or the original borrower owns a majority interest in the LLC, and if the transfer results in a permitted change of occupancy type to an investment property, such change does not violate the security instrument (for example, the 12 month occupancy requirement for a principal residence).”

Bottom line is Fannie Mae approves transfers of encumbered land without the lender being able to enforce a due on sale clause.

Idiot Banker Won’t Open a Bank Account for an LLC Owned by a Trust

Question:  You setup an LLC for me that is owned by a revocable living trust you created.  I gave the bank a copy of the Articles of Organization, the Operating Agreement, the Trust Agreement and the Certification of Trust, but the bank won’t open an account for the LLC unless you send the bank a letter that says that I am the trustee of the trust that is the member of the LLC?

Answer:  You are dealing with an idiot banker because he/she wants somebody who is not an owner of the LLC or affiliated with the LLC, i.e., me, to sign a letter that states who owns the trust.  Ask the idiot banker if another bank employee can sign the letter because that person has the same connections to the LLC and the trust as I have.

Your Certification of Trust and your Trust Agreement show that you are the trustee, aka the “owner” of the trust.  Why doesn’t the banker know that?  It’s because he or she is an idiot.

I’ve formed 8,700+ LLCs and only one other time has a bank idiot asked me to sign a letter before opening an account.  The other time the idiot banker wanted me to sign a letter as the LLC’s statutory agent stating that the LLC’s address was the address displayed on the Arizona Corporation Commission website.  Why wouldn’t the idiot ask the owner of the LLC to sign that letter?

Go to another bank or a different branch.  I don’t recommend that LLC owners open accounts with Chase, Wells Fargo or Bank of America.

My 50th Wedding Anniversary

On January 29, 1972, 50 years ago I married the love of my life.  Finding and marrying Carol was the best thing that ever happened to me.  I first saw Carol at a Phi Gamma Delta fraternity party at Penn State in the winter of 1967.  I was a pledge and she had been invited to the frat party because her sister Ellen was pinned to one of my frat brothers.  It wasn’t love at first sight, but I do remember I thought she was the prettiest girl I had ever seen.

We were both freshmen that winter.  Carol dated a number of my fraternity brothers over the next two and a half years.  At the beginning of my junior year I asked Ellen if she would fix me up with Carol and she did.  Unfortunately for some reason I stood Carol up.  I was a no show.  Ellen was understandably mad and said she would never fix me up with Carol again.

The beginning of our senior year I got the courage to call Carol and ask for a date.  Getting dates at PSU in 1966 – 1970, the years we attended PSU, was very hard for guys because there were five guys for every woman.  My freshman year I called a girl for a date and she booked me six weeks later because that was her first opening.

Lucky for me Carol agreed to go out with me.  We hit it off immediately and dated exclusively our senior year.  After graduation I went to USAF Officer Training School at Lackland AFB, Texas, and Carol returned to her home town to take a job teaching in elementary school.  We tried long distance dating, but it was hard in the days before the smart phone, facetime, email and texting.

In the fall of 1971 I was just beginning the six month program in which I learned how to fly the F-4 Phantom supersonic fighter-bomber at Luke AFB, Arizona.

F-4Es returning to Korat Royal Thai Air Base, Thailand, from missions over North Vietnam

I called Carol and asked her to marry me.  She said yes.  We didn’t have time to plan a wedding.  On Friday, January 29, 1972, Carol and I were married in the Methodist Church at Central Avenue and Missouri Avenue in central Phoenix.  Six people attended – my parents and brother, two of my parents’ friends and my best friend from college who happened to be passing through Phoenix.  Unfortunately nobody from Carol’s side of the family was able to attend the wedding.

We drove to San Diego that afternoon for our short honeymoon.  I had to be back to work on Monday so we drove back to Phoenix Sunday afternoon.  We lived at Oakwood Garden apartments on 40th Street just north of Camelback Road, in Phoenix.  I drove to Luke AFB everyday to fly the F-4, attend academic classes and fly the F-4 simulator.  The traffic was much lighter back then, but it still took 45 minutes to drive one way.

In May of 1972, four months after we were married the Air Force sent me to the Vietnam war and Korea for 13 months.  Carol stayed behind in our apartment and worked at American Express at 32nd Street and Lincoln in Phoenix.  Carol lived with me in my one room barracks bedroom at Kunsan Air Base, Korea, for three weeks in 1973.   During the 13 months I was overseas we wrote a lot of letters to each other.  When I returned to the States we decided to destroy all our letters because we didn’t want our future children to read what we thought was too much “mushy” language.  I now regret destroying those letters.

Carol and I have three children and four grandchildren.  For the last 21 years Carol and I have worked closely in my law practice.  She is the office manager and the bookkeeper.  She is one of the reasons I’ve been able to have a very successful law practice.

I love my wife very much and thank God everyday for letting her be the love of my life.

2022-05-30T07:36:19-07:00January 29th, 2022|Miscellaneous|0 Comments

New Arizona Laws Effective 1/1/22

On January 1, 2022, the following new Arizona laws became effective:

  • The minimum wage is $12.80 per hour, which is an increase from $12.15 per hour.
  • Instead of having four state income tax brackets, Arizona income tax changed to two tax brackets.  The tax rates are 2.55 percent and 2.98 percent.  Single people and married people filing separately pay the lower rate if their taxable income is $27,272 or less or the higher rate if their taxable income exceeds $27,272.  Married people filing jointly pay the lower rate if their income is less than $54,544 or the higher rate if their taxable income exceeds that amount.
  • The Arizona Homestead exemption increased from $150,000 to $250,000, but this equity amount is no longer protected from liens that arise from a civil judgment.  In general this exemption protects the first $250,000 of equity a single person or a married couple have in the Arizona home in which they reside from the home owner(s) involuntary creditor(s).  Under the new law, however, if a creditor gets a judgment against the home owner issued by a court the homestead exemption no longer prevents the creditor from getting the homestead exemption amount.
2022-01-09T15:20:50-07:00January 9th, 2022|Miscellaneous|0 Comments

Your Company Must File a Report with FinCen or Be Fined $500/Day

A federal law called the Corporate Transparency Act effective January 1, 2024, requires almost all U.S. companies to file a FinCEN Beneficial Owner Information report with the Financial Crimes Enforcement Network of the U.S. Treasury (“FinCEN“) or the company can be fined $500 a day for a late report.  Companies formed before 2024 must file no later than December 31, 2024.  Companies formed in 2024 must file within 90 days of their formation date.

My son and I own a company called FinCEN Filer, LLC, that files FinCEN BOI reports.  To learn more about the Corporate Transparency Act read How to Avoid the $500/Day Fine and articles and blog posts on FinCEN Filer’s website. Watch these FinCEN Filer videos: 1. What Info Must be Reported, 2. Definition of Beneficial Owner, 3. What Beneficial Owner Information is in a FinCEN BOI Report, 4. Alert: Legal Consequences of Filing a False FinCEN Report, and 5. Our FinCEN BOI Report Services.

How to Hire FinCEN Filer to File a FinCEN BOI Report

Go to https://fincenfiler.com/services

Warning: If you are an owner of a U.S. company you need to be aware of the due date of your company’s FinCEN BOI report.  Reports are due:

  • December 31, 2024, for companies created before 2024,
  • 90 days after the company was formed if it is formed in 2024, or
  • 30 days after the company was formed if it was formed after 2024.

How the CTA Affects Your Entity

Here is a brief summary of the CTA:

  • Almost ALL existing companies and companies formed in the future are or will be reporting companies that must report the required information to FinCEN.  See the definition of required information.
  • A beneficial owner is an individual who, directly or indirectly, through any contract, arrangement, understanding, relationship, or otherwise (i) exercises substantial control over the entity, or (ii) owns or controls not less than 25 percent of the ownership interests of the entity.  See the definition of beneficial owner.
  • The following is the required information about each beneficial owner and applicant that the reporting company must report to FinCEN: (i) full legal name, (ii) date of birth, (iii) current, as of the date on which the report is delivered to FinCEN, residential address, and (iv) the unique identifying number from the beneficial owner’s or applicant’s acceptable identification document or the beneficial owner’s or applicant’s FinCEN identifier number.  See the definition of required information.
  • A reporting company that violates the CTA shall be liable to the United States for a civil penalty of up to $500 for each day that the violation continues or has not been remedied; and may be fined not more than $10,000, imprisoned for not more than 2 years, or both.

Subscribe to Our Free CTA Newsletter

To stay up to date on the CTA, its regulations, and how to file a CTA FinCEN report get a free subscription to our CTA newsletter.

We Got Another Nice Review

I don’t usually insert reviews I get into a blog post, but yesterday I got a very nice review I want to share with you.  Here is the review:

If you are ready to start your LLC, this is the office you need to call. The process is so streamlined, the people are so knowledgeable & kind, & they work INCREDIBLY fast. I was absolutely shocked at how quickly things were done & could not be more pleased. The reasonable fees up front are well worth the potential liability avoided in the future. The items completed for my business by this office would have taken days or weeks for me to research & execute myself, & even then I could not be sure they were done properly without an attorney reviewing them. The follow up support is also wonderful & the informational emails the office sends out on a regular basis have been very valuable. If you are on the fence, don’t think twice. Spend a little now for excellent service & LLC setup done properly, save a lot later by avoiding mistakes that can cost dearly in the future. Your business is important, do it right. Cannot recommend enough!

People love my LLC formation services, which is why I have 349 five star reviews on Google, Facebook and Birdeye.

2021-02-13T09:02:48-07:00February 13th, 2021|Miscellaneous|0 Comments

We Formed 65 LLCs in July 2020, a Firm Monthly Record

July of 2020 was a record-setting month for our LLC formations.  We formed 65 new Arizona LLCs and PLLCs that month.  Thanks to all of our new clients.  People love our low priced LLC formation services, which is why we have 349 five star reviews on Google, Facebook and Birdeye.  See the contents and prices of our three LLC packages.  Complete our online questionnaire to hire us to form an LLC or call Arizona LLC attorney Richard Keyt at 480-664-7478.

2020-09-01T18:29:30-07:00August 1st, 2020|Forming LLCs, Miscellaneous|0 Comments

Remembering Our Fallen Heroes on Memorial Day

Memorial Day originated in the nineteenth century as a day to remember the U.S. soldiers who gave their lives in the American Civil War by decorating their graves with flowers. It is the day Americans remember the military men and women who died while serving our country. It is a day when people decorate the graves of our fallen military heroes.  Memorial Day this year is May 29, 2023.

From World War I to today more than 40 million Americans have served in the U.S. military.  Over 1,136,000 people were wounded in combat and 660,000 gave their lives for our country.

Hymn to the Fallen

John Williams’ beautiful song “Hymn to the Fallen” plays as the video visits cemeteries around the world were Americans who made the ultimate sacrifice fighting for freedom are buried.  The video also tells how many Americans are buried at each cemetery.

Duty, Honor Country

by Five Star General Douglas MacArthur

The motto of the United States Military Academy at West Point is “Duty, Honor, Country.” On May 12, 1962, retired 82 year old U.S. Army General Douglas MacArthur, holder of the Medal of Honor and the leader of the Army in the Pacific theater during World War II, gave his now famous 34 minute “Duty, Honor, Country” speech without notes to the entire corps of 2,100+ West Point cadets. This speech is my favorite speech of all time on any topic. I re-read it several times a year because: (i) what the General says about military service and sacrifice and Duty, Honor, Country moves and inspires me, and (ii) what he said then is as true now as it has always been throughout the history of the U.S. military. I recommend you read the entire text of the speech and listen to an audio of the General’s speech. (more…)

2023-06-03T08:13:23-07:00May 30th, 2020|Miscellaneous|0 Comments

We Set a New Record for Number of LLCs Formed in 2019

During 2019 we formed 535 Arizona LLCs and PLLCs, which is a firm record for the most companies formed in one year.  Our previous record for forming LLCs was 530 in 2012.  Since I started counting in 2002 I have formed 9,000+ LLCs and PLLCs.  People love our low prices and LLC services.  See the contents of our three LLC packages, the ($497 Bronze, $797 Silver & $1,297 Gold.  Our Gold LLC is the confidential LLC for people who do not want their name and address on the Arizona Corporation Commission’s public records.

We also set a firm record in 2019 for non-profit corporation formations of 34.  Our previous record for forming non-profit corporations in one year was 32 in 2018.

We now have 1,328 subscribers to our Arizona LLC law blog posts.  If you want to subscribe for free, enter your email address in the field in the right side bar under the text that reads:

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Our Youtube channel has 1,190 subscribers and 73 videos.  We are always adding new videos so if you want to learn more about Arizona LLCs or wills, trusts and estate planning subscribe to our Youtube channel and click on the bell to get notices when we add a new video.

2023-02-18T10:14:57-07:00January 20th, 2020|Miscellaneous|0 Comments

House of Representatives Wants to Create a New Small Business Burden

To crack down on terrorists, drug dealers and human traffickers the House Financial Services Committee in June of 2019 passed the Corporate Transparency Act.  The bill would require all limited liability companies and corporations that have less than $5 million of revenue or twenty employees to disclose to the Treasury Department’s Financial Crimes Enforcement Network (FinCEN) personal information about the entity’s owners.

Each entity subject to this law must report to FinCEN the social security number, drivers license information, address, birth date and name of all owners of the entity.  The penalty for not complying is a $10,000 fine and up to three years in jail.

The Wall St. Journal said “The reality is that the law would hit small businesses with another compliance burden, their confidential information would become less secure, and real criminals are unlikely to be deterred.”

The National Federation of Independent Business (NFIB) said the law is a “threat to more than 5 million small businesses in America.”

2019-07-19T07:13:04-07:00July 19th, 2019|Miscellaneous|0 Comments

Arizona Sues California Over California’s $800/Year LLC Rip Off Tax

Arizona Attorney General Mark Brnovich announced today [March 11, 2019] that his office recently filed suit in the U.S. Supreme Court against the State of California seeking to invalidate California’s extraterritorial tax assessments and seizures, which result from an unconstitutional “doing business” tax against businesses and individuals that don’t actually conduct any business in California.

Every year, California assesses an $800 “doing business” taxes against Arizona businesses that conduct no actual business in California. Instead, their only connection to California is a mere passive, non-managing investment in a California limited liability company. California continues to assess these “doing business” taxes even though both its state courts and tax appeals agency have held that the taxes are illegal under California law.

The lawsuit filed by Arizona alleges that these taxes are plainly unconstitutional under the Due Process and Commerce Clauses of the U.S. Constitution. The Supreme Court has held that passive investment in a company located in another state is not sufficient “minimum contacts” to impose taxation under the Due Process Clause (Shaffer v. Heitner, 433 U.S. 186 (1977)). The Supreme Court has also recognized four requirements for states to impose taxes on out-of-state businesses under the Commerce Clause.  California’s “doing business” assessments brazenly violate all four.

The amounts collected by these “doing business” assessments are substantial. Arizona estimates that its citizens pay over $10 million in these unconstitutional taxes to the State of California every year.

These taxes also impact Arizona’s tax collections. Since the “doing business” taxes are deductible expenses, Arizona loses an estimated $484,000 in tax revenue each year due to California’s illegal taxation.

These figures are further compounded since the tax applies to all individuals in other states who invest in California businesses.

Extraterritorial Seizures

Making matters worse, if California’s tax assessments are not paid voluntarily, California frequently further tramples on the sovereignty of other states by issuing orders to interstate banks, demanding that they transfer funds in Arizona-based accounts for back payment. Those seizure orders threaten the banks that, if they do not transfer the funds, California will take the taxes and penalties owed from the banks instead. Not surprisingly, the banks almost uniformly consent to California’s strong-arm tactics.

Exhibit G in the filing provides an example where California demanded that Wells Fargo not only transfer the $800 tax, but also a $200 “demand penalty,” a $432 “late filing penalty,” a $79 “filing enforcement fee,” and $63.40 in interest, for a “Total Tax, Penalties, Interest and Fees” of $1574.40.

The lawsuit alleges that these seizure orders violate both the Due Process Clause (by exercising jurisdiction over out-of-state funds without the requisite “minimum contacts”); and, the Fourth Amendment (by effectuating seizures without a warrant, probable cause, or involvement of any court). Those seizure orders further preclude the banks from filing any court challenge.

Arizona’s suit seeks to end California’s unconstitutional tax encroachments.

2019-07-15T11:57:42-07:00March 11th, 2019|Lawsuits, Miscellaneous, Tax Issues|0 Comments

IRS Increases Penalty for Late Filing of Form 5472 to $25,000

If you are a non-U.S. citizen who is the sole member/owner of a U.S. limited liability company treated by the IRS as a disregarded entity (a “DE”) you must file an IRS form 5472 with the IRS on or before the due date of the Form 5472 or become liable to pay the IRS a penalty of $25,000.  If you must file Form 5472 and fail to file it before the due date and then fail to file the Form 5472 within 90 days after the due date you will become liable for an additional $25,000 penalty.

The U.S. DE LLC must file Form 5472 if it had a reportable transaction with a foreign or domestic related party.  To learn what are reportable transactions, who are related parties and more about this topic read my article called “LLCs 100% Owned by Foreign Persons Must File IRS Form 5472 or be Liable for $25,000 Penalty.”

[bctt tweet=”Learn about the $25,000 penalty when a foreign person who owns a U.S. LLC that is a disregarded entity fails to file IRS form 5472.” username=”azattorney”]

2019-02-23T14:16:15-07:00February 23rd, 2019|Miscellaneous, Tax Issues|0 Comments

Get Richard Keyt’s Weekly LLC Email Newsletters

Complete the form below to get a free subscription to Arizona LLC attorney Richard Keyt’s weekly LLC email newsletter.  We don’t share your information and you can cancel at any time by clicking on the unsubscribe link at the bottom of each email newsletter.  After you submit your data we will send you an email message that asks you to confirm your email address unless you previously opted in to our system.  If you don’t see our confirmation email in  your inbox check your spam folder.

2019-02-20T08:39:04-07:00February 20th, 2019|Miscellaneous|0 Comments

Richard Keyt Formed Arizona LLC Number 6,000

I formed my first Arizona LLC the day Arizona’s LLC law became effective in October of 1992.  I did not start counting the number of LLCs I formed until 2002 so I don’t know how many LLCs I formed the ten years after Arizona adopted LLCs.  I’ve formed 9,000+ Arizona LLCs.

The reason I’ve formed so many Arizona LLCs is because my LLC services are second to none.  Nobody offers as many LLC services as I provide for the low prices of $897 (Silver LLC) and $1,397 (Gold LLC that includes a revocable living trust).  Read some of the 349 five star Google & Facebook reviews our clients have given me.

2024-02-02T08:14:04-07:00June 3rd, 2018|Forming LLCs, Miscellaneous|0 Comments

Arizona Corporation Commission’s New Online e-Filing System Goes Live 5/21/18

The Arizona Corporation Commission announced today that its franken-monster, i.e., its online e-document filing and document retention system is almost alive!  That’s what the email I got today from the Arizona Corporation Commission tells me.  Here’s the text of the message

We are pleased to inform you that we are going live with our upgraded E-filing/database system!  Some details to note:

  • E-filing will NOT be available from Wednesday, May 16 at 5:00 pm until Monday, May 21 at 8:00 am.
  • The website is otherwise available for searching and viewing entity records up until Friday, May 18 at noon.
  • We will accept paper documents at our physical locations in Phoenix and Tucson up until Friday, May 18 at noon.
  • The new system/site will be available on Monday, May 21, at 8:00 am.
  • During implementation, penalties for late-filed corporation annual reports will be waived, and corporations will not be administratively dissolved for failing to file the annual report.

If you previously responded to a request to provide your email address (for some statutory agents and MOD account holders), beginning May 21 you can register in the new system using that email address. As a reminder, MOD accounts will be handled solely online.

We will send a separate email explaining how the statutory agent process works in the new system.

Online filing is not mandatory, but is strongly recommended.  When the new system is up and running (as of May 21), we will continue to accept documents by mail, in person, by fax, and through the email address of [email protected].  The EMAIL document intake will be discontinued approximately 2-3 weeks after the go-live date.  We will change the bounce-back auto message on that email to give a date certain for termination of that service.

Bottom line:  A new Arizona Corporation Commission electronic world is about to begin.  I’m sure there will be growing pains, but from the demo I saw last November it looks like the new digital / online filing and record-keeping system is going to be great.  I anticipate that we will soon be filing all LLC and corporation documents with the Arizona Corporation Commission using its online e-filing system.

Watch the Arizona Corporation Commission’s short explanation video.

2023-10-24T10:08:37-07:00May 14th, 2018|Miscellaneous|0 Comments

Buying a Home With an LLC: A Primer

Wall St. Journal:  “In the age of the internet, privacy is an especially valuable commodity.  To that end, many home buyers and real-estate investors form limited-liability companies with cryptic names when purchasing property. This appeals to the publicity shy, but LLCs also help homeowners avoid scams, identity theft and frivolous lawsuits.”

Arizona LLC law requires that the Articles of Organization of an Arizona LLC contain the name(s) and address(es) of all members of member managed LLCs and the name(s) and address(es) of all managers and members who own 20% or more of the capital or profits of the LLC.

The Confidential Arizona LLC

If you want to form an Arizona LLC without having your name and address stated in the Articles of Organization then you need to purchase my Gold LLC package for $1,297.  Our Gold LLC package provides confidentiality for the ultimate owner because we prepare a confidential trust to be the member of the LLC.

To learn more about the confidential LLC read my article called “How to Form an Arizona LLC without Disclosing Its Ultimate Owner(s).”

2023-07-01T15:36:31-07:00March 11th, 2018|Forming LLCs, Miscellaneous|0 Comments
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