The IRS’ online EIN wizard that issues employer identification numbers after a 5 – 10 minute data entry session will be down for maintenance. This service will be unavailable from approximately 5 p.m. Eastern time on Wednesday, December 23, 2020, until approximately 7 a.m. Eastern time on Monday, January 4, 2021, due to planned maintenance.
There are two things I want you to take away from this blog post:
1. Effective March 24, 2020, the Arizona Corporation Commission closed its offices to the public. This means it is not possible to go the the ACC’s office and hand file a document or make a request.
2. We can electronically file Articles of Organization for a new Arizona LLC and get it approved by the Arizona Corporation Commission on the same day we are hired. See the contents and prices of our three LLC packages. To hire us to form your LLC today submit our online LLC Formation Questionnaire.
The text below is from a notice issued by the Arizona Corporation Commission on March 24, 2020.
Update Regarding In-Person Services & COVID-19 at the Arizona Corporation Commission
Phoenix – In response to the COVID-19 outbreak, the Arizona Corporation Commission will be suspending all in-person services. Our number one goal is to keep the public and our employees safe. We are committed to providing continuity of services and uphold our statutory duties, all while reducing exposure to the coronavirus by taking the following steps:
Effective Wednesday, March 25, 2020, we are temporarily closing the Docket Control window to the public. Docket will continue to accept e-filings and filings submitted by mail. If a member of the public arrives at the Commission with documents for Docket Control, they may leave them with the security guard. A member of the Docket team will come to the office daily to pick up any mail received and ensure that the filings are entered into the eDocket system. There will be a posting on the Docket window and on our website informing the public of these temporary procedures. For assistance, please call 602-542-3477 or email [email protected]
CORPORATIONS – PHOENIX OFFICE
Effective Thursday, March 26, 2020, we will temporarily close both the Corporations Division’s Filing and Records windows to the public. Corporations Division staff will continue to receive and process online filings and filings submitted by mail. If a member of the public arrives at the Commission to file business documents, they may drop off their documents with the security guard, but only if they are paying by check. The call center will continue to take calls from the public. There will be a posting on the entrance of the 1300 building and on our website informing the public of these temporary procedures.
CORPORATIONS – TUCSON OFFICE
Effective Thursday, March 26, 2020, we will temporarily close the Corporations Division’s filing windows in Tucson to the public. Staff will continue to process online filings. Members of the public may drop off their filings at the Tucson office, but only if they are paying by check. A drop box will be provided for this purpose. There will be a posting on the entrance of the building and on our website informing the public of these temporary procedures.
1200 and 1300 BUILDINGS – PHOENIX OFFICES
Effective Thursday, March 26, 2020, access to both buildings will be restricted to staff only. Badges will be required to enter the buildings. All meetings and interviews will be by appointment only.
For more information, please call 602-542-3026 or email [email protected]
Arizona LLC attorneys Richard Keyt and his son former CPA Richard C. Keyt give purchasers of their Silver and Gold LLC packages a subscription to their unique Arizona LLC Compliance Alert system. The Arizona LLC Compliance Alert System is a collection of email messages we send to all members of Silver and Gold LLCs we form.
The purpose of our Arizona LLC Compliance Alert System is to make sure the owners of LLCs we form know about important post formation tasks they need to accomplish.
Arizona LLC Email Alert System Table of Contents
The following is the subject list of the email alerts in our LLC Compliance Alert System that we send to people who purchase our Silver & Gold LLC packages. No other person who forms Arizona LLCs gives the LLC owners as much information as we give.
- List of LLC formation services Richard Keyt will provide
- How We Get an Employer ID Number (EIN) from the IRS for Your LLC
- Warning: Arizona Corporation Commission Problems & How the Problems Affect Your Company
- How to Open a Bank Account Before the Articles of Organization are Approved
- When Will the Arizona Corporation Commission Review Your LLC’s Articles of Organization?
- The Arizona Corporation Commission’s Formation Process
- More Information about Opening the LLC’s Bank Account
- How to Check the Status of Your LLC with the Arizona Corporation Commission
- How to Learn More about Operating Your LLC
- Checklist of 34 Post Formation Tasks in Chapter 3 of the LLC Operations Manual
- Arizona’s LLC Law Newspaper Publication Requirement
- How Do I Get Money into My LLC?
- Taxes: The Four Ways an LLC Can Be Taxed
- Taxes: S Corporation Election to Save Employment Taxes
- Taxes: How Internal Revenue Code Section 199A Allows You to Deduct 20% of Business Income
- Taxes: Top 40 2019 Federal Income Tax Saving Opportunities
- When Must You Amend Your LLC’s Articles of Organization?
- Your LLC May Need Arizona State & City Transaction Privilege Tax Licenses
- How to Document Loans to an LLC
- What is a Springing Member & How to Name a Springing Member
- How to Modify Your LLC’s Operating Agreement
- Importance of Setting Up Your LLC’s Bookkeeping System
- Commercial Real Estate Leases
- Warning: How to Convey Arizona Real Estate to Your LLC
- Why a Sole Member of an Arizona LLC Needs an Operating Agreement?
- Reminder: Have All Members Signed the Operating Agreement?
- Does Your LLC Need a Real Estate Lease?
- Have You Protected Your Most Valuable Assets?
- About Real Estate Contracts & Leases
- Warning: Owners of Arizona Residential Rental Real Estate Must Collect & Pay Rent Tax
- Ask a Tax Accountant Which of the 4 Tax Methods is Best for Your LLC
- Employment Agreements & Independent Contractor Agreements
- Find Out Who Will Inherit Your LLC if You Die
- How to Get a Trade Name aka DBA for an Arizona LLC
- Should Your LLC Elect to be Taxed as an S Corporation?
- Importance of Knowing & Following Arizona LLC Law
- Warning: Don’t Commingle Your LLC’s Bank Account with Your Bank Account
- How to Register a Federal Trademark
- Importance of Documenting Actions Approved by Members & Managers
- How to Get a Certificate of Good Standing for an Arizona LLC
- Examples What LLC Signatures Look Like on Contracts
- When Must an LLC Change Its Address with the Arizona Corporation Commission?
- Does Arizona LLC Law Require My LLC to Hold Annual Meetings?
- Does Arizona LLC Law Require My Arizona LLC to File an Annual Report with the Arizona Corporation Commission?
- Warning: A Multi-member LLC’s Most Important Document
- Take the Do-It-Yourself LLC Legal Audit
- Warning: Arizona Employment Law for LLCs that Have an Employee
- Warning: Improper Signature on a Contract Can Make You Personally Liable
- How to Add or Remove a a Member of an Arizona LLC
- Warning: Workplace Employee Notice Posters Required by Arizona Law
Below is a list of 40 tax savings actions you can use in 2019 to save federal income taxes. Some actions may require that you consult with an experienced tax accountant or tax advisor. To read detailed descriptions of these tax savings ideas you must subscribe to my free LLC newsletter by entering your information in my LLC newsletter subscription form.
[bctt tweet=”Learn 40 federal income tax savings actions you can use in 2019 to reduce your federal income taxes.” username=”azattorney”]
Table of Contents
Chapter 1: Bracket Management Strategies
#1: Bracket Management
#2: Capital Gain Harvesting
#3: Harvesting Capital Losses
#4: Trusts as S Corporation Shareholders: ESBT vs. QSST
Chapter 2: Income Smoothing Strategies
#5: Substantial Sale Charitable Remainder Trust (CRT)
#6: Retirement Charitable Remainder Trust
#7: Roth IRA Conversions
#8: Oil and Gas Investments
#9: Two-Year Installment Sale Strategy
#10: Nonqualified Tax Deferred Annuities
#11: Borrowing from Permanent Life Insurance Policies
Chapter 3: Income Shifting Strategies
#12: Income Shifting Charitable Remainder Trust
#13: Family Limited Partnership (FLP)
Chapter 4: Reducing Taxable Income Strategies
#14: Tax-Aware Investing
#15: Incomplete Gift, Non-Grantor (ING) Trusts
#16: Captive Insurance Companies
Chapter 5: Specific Net Investment Income Tax Strategies
#17: Inter Vivos Charitable Lead Annuity Trust (CLAT)
#18: Grouping Business Activities to Create Material Participation and Avoid the NIIT
#19: Choice of Filing Status to Avoid the 3.8% NIIT
Chapter 6: Wealth Transfer Strategies
#20: Intra-Family Loans
#21: Grantor Retained Annuity Trust (GRAT)
#22: Dynasty Trust
#23: IDGT Sale
#24: Domestic Asset Protection Trust (DAPT)
#25: Spousal Limited Access Trusts
Chapter 7: IRC Section 199A Planning
#26: IRC § 199A Overview
#27: Managing IRC § 199A Limitation Amounts
#28: Choice of Entity Decision After the TCJA–Converting a Pass-Through Entity to a C Corporation
#29: Using Multiple Trusts to Enhance the Benefits of IRC § 199A
#30: Aggregating Trades or Businesses to Increase the § 199A Deduction
Chapter 8: Ten More Must Know Strategies for 2019
#31: Trust Decanting
#32: S-Election to Save Employment Taxes
#34: Trusts Named as IRA Beneficiaries
#35: Sale to an Intentionally Defective Grantor Trust (IDGT) with a Self-Cancelling Installment Note (SCIN) Hedge
#36: Qualified Small Business Stock
#37: Opportunity Zones
#38: Puerto Rico Tax Incentives
#39: Timing the NQSO Exercise Decision
#40: Cost Segregation
The Arizona Corporation Commission’s LLC services are much better than after it adopted its new software system on May 20, 2018. See “Arizona Corporation Commission’s New Database System Sucks.” The ACC continues to make far too many errors when it reviews Articles of Organization and other LLC filings, but it is making fewer errors than in the past. The time to review new expedited filings has decreased significantly.
Last July the ACC was reviewing expedited filings in 15 -20 business days and non-expedited filings in 54 – 59 business days. The current review times are 9 – 11 business days for expedited filings of new LLCs and 20 – 22 business days for non-expedited filings. See current processing times.
I formed my first Arizona LLC the day Arizona’s LLC law became effective in October of 1992. I’ve been forming Arizona LLCs ever since. I didn’t start counting my LLC formations until 2002. Since I started counting in 2002 I have formed 7,600+ Arizona LLCs. I created number 5,000 sometime during April of 2016.
There are a lot of reasons why I’ve formed so many LLCs, but here are the main reasons:
- I offer three prices and three LLC packages. See the “Contents of the Bronze ($397), Silver ($597) & Gold ($997) LLC Packages.
- Cheaper than LegalZoom for similar services, but I am a lawyer with a masters degree in U.S. income tax law and LegalZoom is an unlicensed document preparer. See “Should Richard Keyt or LegalZoom Form My LLC?“
- Silver & Gold LLC purchasers get online access to my 170 page ebook called the “Arizona LLC Operations Manual.” Chapter 3 is checklist of 34 important tasks that must be performed within 75 days after the LLC is formed.
- 42+ post formation email messages reminding you to perform post formation tasks.
- We form LLCs on Wednesdays and Fridays (unless Friday is a holiday). Your LLC is born and can start doing business the day we hand file the Articles of Organization with the Arizona Corporation Commission.
- People love my LLC formation services. Watch and read some of our 241 five star reviews.
If you are the manager of an Arizona manager managed LLC or a member of an Arizona member managed LLC, do you know how to sign contracts on behalf of the LLC? If not, your ignorance could cost you big bucks. The recent Pennsylvania case of Hazer v. Zabala, 26 A.3d 1166, 2011 Pa. Super., found that the member of a PA LLC was liable for amounts owed on a lease because the member did not properly sign the lease on behalf of the LLC. This case is an important lesson for every LLC member and manager.
I have said many times that people who form Arizona limited liability companies mistakenly believe that once they file the LLC’s Articles of Organization they are automatically protected from the debts and obligations of the LLC. The primary reason people form an LLC is to shield themselves from the LLC’s activities and liabilities. Unfortunately, owner protection is not automatic. There are any number of ways that a member or manager of an LLC can become liable for the LLC’s debts. For members and managers of an Arizona LLC to obtain the protection from liabilities offered by Arizona’s LLC laws, they must operate the LLC in compliance with applicable LLC law. Most people who form an Arizona LLC do not know what Arizona LLC law is and therefore frequently cause the LLC to engage in activity that violates Arizona LLC and creates a risk that the members and managers could be found liable for the LLC’s debts.
It goes without saying that it is not likely your LLC will comply with Arizona LLC law if you do not know what the law is. The primary reason I wrote my 170 page book called the “Arizona LLC Operations Manual” is I want to inform Arizona LLC members and managers about Arizona LLC law so they can cause their LLC to comply with the law. One important and fundamental aspect of Arizona law is exactly how should a contract be worded so that the LLC rather than a member or manager is liable under the contract? My Quick Start Guide has sample signature blocks that illustrate exactly how the signature of the LLC should appear in a contract.
Facts in Hazer v. Zabala
The case involved a lease that was signed by a member of Zabala Broker, LLC. The member, Juan Zabala, signed his name on the lease and underneath is signature he printed “DBA/ZABALA BROKER, LLC.” The court ruled that Mr. Zabala was personally liable on the lease because he signed it in his name, not as the member or manager of his LLC.
For the signer to avoid personal liability and for the LLC to be the party liable on the lease the contract should have designated the LLC as follows:
The first paragraph of the lease (or any contract) should have read:
Zabala, Broker, LLC, a Pennsylvania limited liability company
The signature block as the end of the lease (or any contract) should have read:
Example 1: For a member managed LLC:
Zabala, Broker, LLC, a Pennsylvania limited liability company
Juan Zabala, member
Example 2: For a manager managed LLC:
Zabala, Broker, LLC, a Pennsylvania limited liability company
Juan Zabala, manager
Members and managers must know how to designate their LLC properly in contracts because they may become personally liable on the contract if it is not worded correctly.
How to Purchase the Ebook Version of the Arizona LLC Operations Manual
Click here to purchase the eBook version of our Arizona LLC Operations Manual from our internet store for the incredibly low price of $97.
Question: I formed my Arizona LLC so I don’t need your complete LLC Formation package. Can I purchase the parts of the complete LLC package I need at a reduced price in light of the fact I already filed the Articles of Organization, paid the Arizona Corporation Commission filing fee and published the Notice of Publication in a newspaper?
Answer: Yes. We offer an Arizona LLC touch up service for $497 that includes the following items:
- Operating Agreement: This is Richard Keyt’s state of the art 45 page Operating Agreement developed over 35 years as an Arizona business lawyer who has formed thousands of Arizona corporations, nonprofit corporations, limited partnerships, limited liability limited partnerships and limited liability companies.
- Arizona LLC Operations Manual: This is Richard Keyt’s “everything you wanted to know about operating Arizona LLC’s” 170 page book that is a must read for everybody that is a member of an Arizona LLC. The OM includes a sequence of events checklist in Chapter 3 that lists 34 tasks that should be performed in the first 75 days after the date the Articles of Organization was filed with the Arizona Corporation Commission. See the OM’s table of contents. The Operations Manual is an online ebook that requires a username and password to access it.
- Organizational Resolutions: This document is to be signed by all of the members and contains resolutions authorizing the issuance of the membership interests, opening a bank account in a bank selected by the manager (if manager managed) or a member (if member managed), filing of an IRS form 2553 to cause the LLC to be taxed as an S corporation at the option of the manager (if manager managed) or a member (if member managed), election of the manager(s) if the LLC is manager managed and authorizing the LLC to be a signer on the Operating Agreement.
- Membership Certificates: We prepare a Membership Certificate for each member to evidence the fact the person or entity is a member of the LLC and owns X% of the LLC as of the date the membership interest was acquired.
- Arizona LLC Portfolio: This is our red LLC book with tabs behind which we put all of the items above that you purchase.
To learn more about the contents of our LLC package, watch Kate Keyt, the KEYTLaw Girl, as she demonstrates the above items and our Arizona LLC portfolio.
How to Purchase Our LLC Touch Up Package
To hire us to provide our LLC Touch Up services click on the $497 Touch UP LLC Order Form to go to our secure online store and pay with your major credit card. After paying you will be taken to our Touch Up LLC Questionnaire.
Phoenix Business Journal: “The U.S. Equal Employment Opportunity Commission (EEOC) today filed its second lawsuit against Phoenix bar and restaurant Casey Jones Grill, on allegations of sexual harassment of female servers. The restaurant is operated by Los Muchachos LLC.“
Phoenix Business Journal: “A Maricopa County jury has awarded $5.9 million to a Valley man who suffered brain and severe back injuries after falling 10-feet off of a ladder while helping build a church roof in Rocky Point, Mexico.” The plaintiff was Ronald Day who sued the Central Christian Church and Amor Ministries. See “Valley church wants new trial after $5.9M verdict in volunteer fall case.”
This case is a perfect example of why people need to operate a business or own investment real estate in an entity that protects the owners of the entity from things that go wrong. If you are doing fix and flips without the protection of a limited liability company, you will be the defendant in the lawsuit if a worker gets hurt on the job and all of your life savings will be at risk.
This case is also a perfect example of why you should not rely solely on insurance, including an umbrella policy, as your only line of defense if something goes wrong. A lot of people acquire a $5 million dollar umbrella policy, but if the judgment is $5.9 million, you have a $900,000 problem. Insurance should be your first line of defense, but the LLC is the second line of defense.
Things happen so you need to form your LLC before the worker falls from the ladder or causes the car accident.
In September of 2011 the Phoenix office of the Equal Employment Opportunity Commission sued a Phoenix area Outback Steakhouse restaurant for allegedly firing a waiter because of his disability, a traumatic brain injury that has slowed his thinking, impaired his speech and causes him to wear prism glasses. The EEOC claims the employer violated the Americans with Disability Act.
A protected person who believes he or she has been the victim of an employer who violated the ADA may file a complaint with the EEOC. The EEOC then becomes the alleged victim’s knight in shining armor who spends federal time, money and resources to take action against the employer who allegedly violated the ADA. Even if the employer has the law and the facts on its side, the employer has to make a choice between negotiating the best settlement possible or spending $50,000 or more on attorneys fees defending a lawsuit.
The ADA is a trial lawyer’s dream and an employer’s nightmare. It is also a perfect example of the law of unintended consequences. This federal law was intended to protect employees who have disabilities from being fired. The law may accomplish that purpose in some cases, but it has also had the unintended consequence of making it much more difficult for handicapped people to obtain a job. Employers know that the risk of being sued by an employee is off the charts if they hire a handicapped person so they rarely hire the handicapped. Read “The Unintended Consequences of the Americans with Disabilities Act,” which states:
“The employment provisions of the Americans with Disabilities Act (ADA) exemplify the law of unintended consequences because those provisions have harmed the intended beneficiaries of the Act, not helped them. ada was enacted to remove barriers to employment of people with disabilities by banning discrimination and requiring employers to accommodate disabilities (e.g., by providing a magnified computer screen for a vision-impaired person). However, studies of the consequences of the employment provisions of ada show that the Act has led to less employment of disabled workers.
Why has ADA harmed its intended beneficiaries? The added cost of employing disabled workers to comply with the accommodation mandate of ada has made those workers relatively unattractive to firms. Moreover, the threats of prosecution by the Equal Employment Opportunity Commission (EEOC) and litigation by disabled workers, both of which were to have deterred firms from shedding their disabled workforce, have in fact led firms to avoid hiring some disabled workers in the first place.”
The ADA prohibits discrimination on the basis of disability in employment, State and local government, public accommodations, commercial facilities, transportation, and telecommunications. To be protected by the ADA, one must have a disability or have a relationship or association with an individual with a disability. An individual with a disability is defined by the ADA as a person who has a physical or mental impairment that substantially limits one or more major life activities, a person who has a history or record of such an impairment, or a person who is perceived by others as having such an impairment. The ADA does not specifically name all of the impairments that are covered.
Title I of the ADA requires employers with 15 or more employees to provide qualified individuals with disabilities an equal opportunity to benefit from the full range of employment-related opportunities available to others. For example, it prohibits discrimination in recruitment, hiring, promotions, training, pay, social activities, and other privileges of employment. It restricts questions that can be asked about an applicant’s disability before a job offer is made, and it requires that employers make reasonable accommodation to the known physical or mental limitations of otherwise qualified individuals with disabilities, unless it results in undue hardship.
The Obama administration’s EEOC recently filed a lawsuit that illustrates the absurdity of the ADA. The EEOC sued Old Dominion Freight Line, Inc. because it refused to allow a recovering alcoholic to drive any of its 18 wheeled commercial trucks. Consider the employer’s dilemma: does it take the risk and allow a recovering alcoholic to drive its vehicles and possibly drink and drive and cause an accident that kills or injures somebody or does it risk a lawsuit from the employee and the EEOC? What would you do? Do we really want federal law and the federal government putting drivers who drink on the road to kill and maim?
Read “Trucking Companies Told to Hire Alcoholics by Obama Administration.” It’s only a matter of time before the EEOC sues an airline because it won’t let a recovering alcoholic fly an airliner with 300 passengers.
The ADA and the EEOC are examples of why all businesses that have employees should operate through an entity like a limited liability company that protects the owner’s life savings against debts and liabilities of the business.
For more on the ADA, read the EEOC’s “A Guide to Disability Rights Law” and “A Primer for Small Business.”
See “John Woods, Brain-Injured Former Umpire, was Wrongfully Fired by Outback Steakhouse, Says EEOC Complaint; Claims by the Disabled on Rise” and “EEOC Sues Outback Steakhouse over Firing of Brain-injured Waiter.” For more about Mr. Woods and his injury read “Umpire making a comeback on and off the baseball field” and a lengthy story in the Arizona Republic called “Phoenix umpire perseveres after near-fatal crash.”
People form limited liability companies to limit their personal liability, but that goal will not be reached if a person signing legal documents for the LLC does not understand contracts facts of life. The general rule of LLC law is that if an LLC signs a contract only the LLC is legally bound and the members of the LLC are not liable. There are exceptions to this general rule and all members and managers who sign contracts for an LLC must understand the contract signature rules or they may find that by signing on the dotted line the signer becomes personally liable to satisfy the obligations of the LLC under the contract.
The case of Ubom v. Suntrust Bank, involved an attorney obtaining a line of credit for his law firm, a Maryland limited liability company. Mr. Ubom signed a loan agreement which contained a section for a personal guaranty. Ubom filled in the personal guaranty section with his own personal information including his social security number, personal address, employment information, and financial information. However, Ubom left the line blank which asked for the “Legal Name of the Guarantor.”
The loan agreement contained two lines for signatures. The agreement asked for the signature of the “applicant” and of the “guarantor.” Mr. Ubom signed in both places and after his name he wrote “Managing Attorney.” Unfortunately, Mr. Ubom’s law business went south and he failed to make the payments on the loan. The bank brought suit against both Mr. Ubom and his LLC.
The bank argued Mr. Ubom had personal liability, because the language of the loan agreement clearly provided Ubon personally guaranteed the loan. The language of the loan agreement stated:
To induce Bank to open the Account and extend credit to the applicant, or to renew or extend such other credit, each of the individuals signing this Application as a “Guarantor” (whether one or more, the “Guarantor”) hereby jointly and severally guarantee payment to Bank of all obligations and liabilities of the applicant of any nature whatsoever and whether currently existing or hereafter arising, including without limitation, all obligations and liabilities under this Application and/or the Account, and reasonable fees and expenses of Bank’s attorney(s) incurred in the collection of such obligations (collectively the “Obligations”).
Both the trial court and appellate court agreed with the bank, that this language clearly provided Ubom personally guaranteed the loan. The court found it insignificant that Ubom left blank the section asking for the “Legal Name of the Guarantor.” However, the court found it significant Ubom listed his personal financial information. The court, further, found it would be pointless to have Ubom sign a guaranty in his corporate capacity when the LLC was already obligated to repay the loan.
When signing any contract, the signer must read the contract to determine if the contract obligates the signer in addition to the LLC. If you are to sign a contract for your LLC and you are not sure if it will cause you to become personally obligated you should seek the advice of an attorney.
We can learn another important less from this case. According to Mr. Ubom, his banker told Ubom there was no personal guaranty on the loan. Ubom took the banker at his word. The court did not even take this conversation into account because of the personal guaranty found in the agreement and the clear language used to describe the guaranty. The moral of the story is “if it is not in writing, it never happened.”
Arizona Republic: “Sprinkles Cupcakes, filed a federal trademark-infringement lawsuit Friday in Connecticut against a store named Pink Sprinkles. The lawsuit claims the similarity in names is likely to cause confusion in the marketplace.
Arizona Republic: “The suit, filed Thursday [July 7, 2011] in U.S. District Court, names Arizona-based Revolver, LLC, as a defendant. Court documents say that Scottsdale’s Revolver Lounge is infringing on trademark rights of Revolver Saloon.”
The plaintiff is NP Opco, LLC, a Nevada limited liability company, holder of a federally registered service mark for the word mark “Revolver Saloon,” in the goods and services classes IC 041 and US 100, 101 and 107 for night clubs. The trademark registration 3862054 was granted on April 27, 2010. The mark was first used in commerce on February 5, 2010.
Business owners can learn several lessons from this trademark infringement lawsuit:
- Trademark law exists
- Ignorance of trademark law or failing to consider trademark law can be harmful to your company’s economic health
- Before adopting a trademark or a service mark, conduct a search to determine if somebody else holds trademark rights that your mark might infringe
- Consult with an experienced trademark lawyer. Trademark law is not an area of law for do-it-yourselfers.
- If your company has one or more trademarks or service marks that is uses in interstate commerce, it should register the mark(s) with the U.S. Patent & Trademark office.
Question: I understand that if I form a limited liability company to operate my business and I am the only person who provides services on behalf of the business that I can be sued and be liable for my acts or omissions that cause harm to third parties. Instead of forming an LLC, can’t I just load up on insurance and not form an LLC to operate my business?
Answer: You could, but I think that would be a costly mistake. When you operate a business, commercial insurance is always your first line of defense. Your business should never operate without appropriate insurance coverage. Consult with several experienced business insurance agents and get their advice as to the type of insurance and the coverage amounts that are appropriate for your particular business. Always buy as much insurance as you can afford of the type that is appropriate for your specific type of business.
You operate a business through a limited liability company because it is your second line of defense against things that can go wrong with the business. What if you have insurance and the insurance coverage is denied? What if a plaintiff gets a judgment that exceeds the amount of insurance coverage? If you don’t form an LLC to operate your business and a plaintiff gets a judgment that exceeds the amount of your insurance coverage against you as the owner/defendant, all of your personal assets are at risk.
Fundamental Fact of Business Life: Without an LLC to operate your business, you are 100% liable for every thing that goes wrong. Do you really want to be in that position and have all of your life savings at risk? It’s hard to predict how liability may arise, but if you operate the business through an LLC, the general rule is the owners are not liable for the debts or obligations of the LLC. Wouldn’t you rather start from the position that you are not liable for anything (except your own acts and omissions) instead of the position that you are liable for everything?
Bottom Line: I believe it is foolish to operate an Arizona business without adequate insurance coverage and without operating the business through a limited liability company or a corporation.
Yes, I form Arizona limited liability companies. I’ve formed 7,600+ AZ LLCs. For the reasons why so many people hire me to form LLCs, see “Contents of Arizona LLC Attorney Richard Keyt’s Bronze, Silver & Gold LLC Formation Packages.”
KEYTLaw Girl Shows What Is In Every LLC Portfolio
When we form an Arizona LLC for $597 we don’t just send our clients a stack of papers. We put all of your LLC documents in a beautiful red Arizona Limited Liability Company portfolio with the documents organized behind tabs. Every LLC gets our custom drafted Articles of Organization, Organizational Resolutions signed by the members, the 50 page Charging Order Enhanced Operating Agreement, the 170 page Arizona LLC Operations Manual customized for the LLC, and a numbered membership certificate for each member.
We Answer LLC Formation Questions for Free
If you have questions about forming an Arizona LLC, contact Arizona LLC lawyers Richard Keyt (480-664-7478) or Richard C. Keyt (480-664-7472). We do not charge for entity formation related questions.
Two Easy Ways to Hire Richard Keyt to Form Your Arizona LLC for $397 (Bronze), $597 (Silver) or $997 (Gold)
To learn about what is included in each of our three LLC formation packages see our Bronze ($397), Silver ($597) & Gold ($997) LLC Formation Packages Comparison page.
We’ve made it very easy to hire Richard Keyt (7,600+ LLCs formed) and KEYTLaw, LLC, to form your new Arizona LLC. It’s a simple 5 – 10 minute process. To hire Richard to form your new LLC select one of the following two options:
Option 1 – Telephone
Call any of the following KEYTLaw people and give your LLC and credit card information over the phone:
- Richard Keyt – 480-664-7478
- Richard’s son LLC attorney & former CPA Richard C. Keyt – 480-664-7472
- KEYTLaw legal assistant Rachel LeBeau - 480-664-7846
Option 2: Online – Available 24/7
Thousands of times I have said and written that if you own an Arizona business or have investment real estate in Arizona, you must protect your life savings from things that can go wrong with the business by having an Arizona limited liability company own the business or real estate. Here are the facts of life every business owner and investment property owner must understand:
- There are an infinite number of ways that something can go wrong and harm or damage people or property.
- If you are the owner of the business or the real estate, you are 100% liable for anything and everything that goes wrong and ALL of your LIFE SAVINGS is at risk!
- You must insert a shield called a limited liability company between things that can go wrong with the business or the real estate and you, your family and your life savings by creating an Arizona limited liability company to own the business or real estate. The general rule of Arizona law is that the owners (called members) of an Arizona LLC are not liable for the debts or obligations of the company. This means that when something goes wrong the defendant in the lawsuit will be the LLC, not you (unless you caused the harm).
Insurance is always your first line of defense. You should not operate a business or own investment real estate without adequate insurance coverage. However, the LLC is your second line of defense in case the plaintiff wins a judgement greater than your insurance coverage.
Here are two real life examples of how lawsuits can arise and why you want the defendant to be your LLC instead of you:
- Rental property owner sued by a tenant who lived in an older home the tenant claimed had lead paint.
- Older couple used savings to buy a duplex and rented it. An accident occurred and a person died. The estate of the victim sued the couple for millions, an amount that exceeded the couple’s insurance coverage. Some of the claims were not covered by the insurance policy.
- A man with a net worth of $2 million owned a piece of raw land worth $150,000, but he did not have it insured. A boy climbed a tree on the land and was injured when he fell. The boy’s parents sued asking for more than the man was worth.
In each of the above situations the people involved could have saved themselves a lot of worry, stress, time and money if they have placed the real estate in a limited liability company.
Don’t allow your life savings to be at risk. Protect yourself and your family now by hiring me, the Arizona llc attorney, to form your Arizona LLC.
Owners of residential and commercial buildings face potential liability for accidents which occur on the property’s premises. Two premises liability cases found their way into the top ten civil damage awards in Arizona during 2010. In LeClair v. Lumberman’s Building Center, the jury awarded $3,900,000 to a truck driver who slipped and fell on black ice. The accident occurred at the Lumberman’s Building Center and caused the truck driver to lose his leg. In Kerege v. Viscount Hotel Suite, an elderly woman fell down carpeted stairs in a hotel atrium, ultimately, caused her death. The jury awarded the plaintiff $3,000,000.
These two cases illustrate the need to form an Arizona Limited Liability Company (LLC) to protect the personal assets of the owner. Imagine you just purchased a small strip mall in Phoenix. You depend on this strip mall as one of the assets to help fund your retirement. However, when you purchased the strip mall, you did not have title to the strip mall held in an LLC. Rather, you personally held title to the mall believing an insurance policy covering the strip mall sufficiently fully protected you against any lawsuits and judgments arising from the real estate.
The insurance policy on the strip mall covered the first $2,000,000 of damages occurring to any person on the property. During a rainy monsoon day, a prospective plaintiff slips on the sidewalk of the strip mall and injures themselves badly. The upset plaintiff sues the owner of the real estate, i.e., YOU, and the jury awards the plaintiff $3,000,000 in damages. Your insurance company pays the policy limits of $2,000,000, but you now have a $1,000,000 problem, which is the unpaid amount of the judgment. Guess where the plaintiff will collect the additional $1,000,000. If you said from your life savings you are correct. Unfortunately, the plaintiff will be able to collect the unpaid amount of the judgment from your personal assets. The strip mall you depended on to help fund your retirement has caused you to expend other personal assets you depended on for retirement to satisfy a judgment on a lawsuit.
This disaster could have been avoided if the property owner had formed an Arizona LLC to hold title to the real estate. The general rule regarding property held or a business operated through an Arizona LLC is that the owner(s) of the LLC are not liable for the debts or obligations of the company. People form LLCs to protect their assets from things that go wrong with investment real estate and businesses. Thus, in the above example the property owner could have protected the owner’s life savings by forming an Arizona LLC and transferring title to the strip mall to the LLC.
Important Lesson for Business Owners & Investment Real Estate Owners: Insurance is always your first line of defense, but your second line of defense is the LLC.
Arizona Republic: “Fleming’s Prime Steakhouse & Wine Bar at DC Ranch in Scottsdale will pay nearly a quarter-million dollars and furnish other relief to settle a same-sex sexual-harassment lawsuit filed by the U.S. Equal Employment Opportunity Commission, the agency announced.”
If you operate your business as a sole proprietorship or a general partnership, this story illustrates why a person should always operate a business through an LLC, corporation or limited partnership. How would you like to owe the EEOC $750,000 for something your employee did?
Kenneth Davis was driving a truck for BCI Coca-Cola Bottling Company of Los Angeles. He stopped at a red light in Gilbert, Arizona. Davis looked both ways, but when he didn’t see anything he turned right. Unfortunately Davis did not see Henry Esparza, Jr., who was riding his bike on the right side of the truck in a bike path. Esparza collided with the truck and was severely injured, including permanent neurological damage. The jury found that Esparza suffered damages of $3,000,000 for which Davis and the Coke bottling company were liable for 40 percent.
The case is Henry Esparza Jr. v. BCI Coca-Cola Bottling Company of Los Angeles and Kenneth Davis, Maricopa County Superior Court Case Number 2007-091884.
Driver Liable for $5 Million after Being Rear-ended by Motorcyclist with Meth & Marijuana in His Blood
Two Arizona Superior Court cases tied for 9th place in the list of the top 10 largest Arizona court judgments of 2009. The other case is Herman Martinez and Romelia Martinez vs. Desert Sky Esplanade, LLC, and Michael Manzutto.
The $5 million case of Randolph Groom v. Roger Clyne and Susan Clyne arose from an accident between a vehicle with a cattle trailer driven by Roger Clyne and a motorcycle driven by Randolph Groom in 2005. Groom was behind the Roger Clyne’s trailer when it turned left and Groom ran into the side of the trailer. There was evidence that the trailer’s lights were not on and neither was the headlight of the motorcycle. Groom’s blood tested positive for the presence of marijuana and methamphetamine.
Randolph was not wearing a helmet. He suffered severe brain damage and multiple orthopedic injuries. The jury found that Groom sustained damages equal to $5 million, but Roger Clyne was liable only for 75% of that amount because Groom was responsible for 25% of the harm he suffered.
The plaintiff argued that Susan Clyne should be liable, but the jury found that she was not liable because her son Roger was operating the vehicle for his personal business. If Susan Clyne was named as a defendant because she was the owner of the vehicle she got lucky. When a car is owned by Person A and Person B is driving the car and causes and accident that kills or injures one or more people and/or destroys or damages property, most of the time Person A (the vehicle owner) is named as a defendant in the lawsuit along with Person B (the driver). This is why people who own vehicles that are driven by other people should form an Arizona LLC and transfer title to the vehicle to the LLC.
For more on using a vehicle LLC for asset protection, see my article called “When to Use a Vehicle LLC for Asset Protection.”
The case is Randolph Groom v. Roger Clyne and Susan Clyne, Santa Cruz County Superior Court Case Number 2006-0051.