LLC Law Blog

May 13, 2019, Change in IRS EIN Application Process

On May 13, 2019, the IRS will change its Employer ID number (EIN) application procedure by eliminating the ability of an entity to be the “responsible party” that applies for the EIN.  The responsible party that can apply for an EIN must have either a social security number (SSAN) or an international tax identification number (ITIN).  An ITIN is a number the IRS issues to non-U.S. residents.  Only people can have a SSAN or an ITIN so all applicants must be a person.

2019-05-11T08:14:20-07:00May 11th, 2019|Tax Issues|0 Comments

Arizona Corporation Commission’s eCorp Website Is Broken

On March 28, 2019, and again on April 1, 2019, I filed Articles of Organization on the Arizona Corporation Commission’s website using its online filing system.  All the data that I entered was displayed correctly on the ACC’s review screen so I paid the $85 expedited filing fee and saved the invoice.  So far so good.  I went to my dashboard and accepted the nomination to be the statutory agent of each LLC.

What should have happened next was the ACC’s system should have approved the Articles of Organization and given me links to the actual Articles of Organization and the ACC’s approval letter so I could download and save the documents.  I got a link to each each document, but when I opened a document it did not contain any information about the newly formed LLC.  Nor could I find the LLC in the ACC’s system when I searched for the LLC by its name.

The Articles of Organization for each of the LLCs looked like this:

AOO 190327P Filed no data

When this happened on March 28, 2019, I contacted the ACC and reported the problem.  It notified its website vendor of the problem and the vendor fixed it the following day.

When I got the blank Articles of Organization on April 1, 2019, I notified the ACC of the problem, but as of writing this article the ACC has not approved the Articles of Organization and the LLC is pending.  We’ve sent several email messages to the ACC without any response.  Calling the ACC is a waste of time because we are on hold for 45 – 60 minutes and then get a person who cannot solve the problem.

Bottom line:  The ACC’s online LLC formation system is broken.  Do not use it because you risk having your data lost in cyber-space and not being able to get any help from the Arizona Corporation Commission.

We Now Offer Same Day LLC Formation & Arizona Corporation Commission Approval

We will form your new Arizona LLC or PLLC and get its Articles of Organization approved by the Arizona Corporation Commission the same day you hire us (including Saturdays and Sundays) if you:

  • Pay the entire fee for your LLC or PLLC plus an additional $97 for same day approval service, and
  • Confirm that the information you submit to us in our LLC Formation Questionnaire is correct.

If you satisfy both of the above requirements before 4 pm Arizona time any day of the week we will form your company and get the ACC approval the same day otherwise we may form the company the next day.  We will also email to your company’s contact person a copy of the ACC approved Articles of Organization the same day we get its approval.

Bottom line:  With same day service it is possible to open a bank account for your new LLC or PLLC the same day you hire us to form your company.

Arizona LLC attorney Richard Keyt who has formed 6,300+ LLCs now offers same day LLC formation and state approval. Click To Tweet

 

The 50 Post LLC Formation Emails We Send to People Who Buy Our Silver or Gold LLC Packages

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.

  1. List of LLC formation services Richard Keyt will provide
  2. How We Get an Employer ID Number (EIN) from the IRS for Your LLC
  3. Warning: Arizona Corporation Commission Problems & How the Problems Affect Your Company
  4. How to Open a Bank Account Before the Articles of Organization are Approved
  5. When Will the Arizona Corporation Commission Review Your LLC’s Articles of Organization?
  6. The Arizona Corporation Commission’s Formation Process
  7. More Information about Opening the LLC’s Bank Account
  8. How to Check the Status of Your LLC with the Arizona Corporation Commission
  9. How to Learn More about Operating Your LLC
  10. Checklist of 34 Post Formation Tasks in Chapter 3 of the LLC Operations Manual
  11. Arizona’s LLC Law Newspaper Publication Requirement
  12. How Do I Get Money into My LLC?
  13. Taxes: The Four Ways an LLC Can Be Taxed
  14. Taxes: S Corporation Election to Save Employment Taxes
  15. Taxes: How Internal Revenue Code Section 199A Allows You to Deduct 20% of Business Income
  16. Taxes: Top 40 2019 Federal Income Tax Saving Opportunities
  17. When Must You Amend Your LLC’s Articles of Organization?
  18. Your LLC May Need Arizona State & City Transaction Privilege Tax Licenses
  19. How to Document Loans to an LLC
  20. What is a Springing Member & How to Name a Springing Member
  21. How to Modify Your LLC’s Operating Agreement
  22. Importance of Setting Up Your LLC’s Bookkeeping System
  23. Commercial Real Estate Leases
  24. Warning: How to Convey Arizona Real Estate to Your LLC
  25. Why a Sole Member of an Arizona LLC Needs an Operating Agreement?
  26. Reminder: Have All Members Signed the Operating Agreement?
  27. Does Your LLC Need a Real Estate Lease?
  28. Have You Protected Your Most Valuable Assets?
  29. About Real Estate Contracts & Leases
  30. Warning: Owners of Arizona Residential Rental Real Estate Must Collect & Pay Rent Tax
  31. Ask a Tax Accountant Which of the 4 Tax Methods is Best for Your LLC
  32. Employment Agreements & Independent Contractor Agreements
  33. Find Out Who Will Inherit Your LLC if You Die
  34. How to Get a Trade Name aka DBA for an Arizona LLC
  35. Should Your LLC Elect to be Taxed as an S Corporation?
  36. Importance of Knowing & Following Arizona LLC Law
  37. Warning:  Don’t Commingle Your LLC’s Bank Account with Your Bank Account
  38. How to Register a Federal Trademark
  39. Importance of Documenting Actions Approved by Members & Managers
  40. How to Get a Certificate of Good Standing for an Arizona LLC
  41. Examples What LLC Signatures Look Like on Contracts
  42. When Must an LLC Change Its Address with the Arizona Corporation Commission?
  43. Does Arizona LLC Law Require My LLC to Hold Annual Meetings?
  44. Does Arizona LLC Law Require My Arizona LLC to File an Annual Report with the Arizona Corporation Commission?
  45. Warning: A Multi-member LLC’s Most Important Document
  46. Take the Do-It-Yourself LLC Legal Audit
  47. Warning: Arizona Employment Law for LLCs that Have an Employee
  48. Warning: Improper Signature on a Contract Can Make You Personally Liable
  49. How to Add or Remove a a Member of an Arizona LLC
  50. Warning: Workplace Employee Notice Posters Required by Arizona Law
2019-03-02T09:20:12-07:00March 2nd, 2019|Why People Need an LLC|0 Comments

Top 40 2019 Federal Income Tax Saving Opportunities

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.

Learn 40 federal income tax savings actions you can use in 2019 to reduce your federal income taxes. Click To Tweet

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

2019-02-25T20:49:05-07:00February 25th, 2019|Why People Need an LLC|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.”

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. Click To Tweet
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

Current Arizona Corporation Commission’s LLC Services

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.

2019-01-20T09:36:01-07:00January 20th, 2019|Why People Need an LLC|0 Comments

People Love Our 170 Page LLC Operations Manual eBook

When people purchase my Silver or Gold LLC package one of the features they get is access to the 170+ page ebook I wrote called the “Arizona LLC Operations Manual.”  In forming 6,500+ Arizona LLCs I learned a long time ago that people have the same post formation questions.  I realized I could save myself a lot of time on the phone and answering emails if I wrote a book that answers all of people’s post LLC formation questions.  See the Table of Contents to see the many LLC topics that are explained in the Operations Manual.

Here are four recent emails I got from happy LLC clients who wrote about the Operations Manual:

“The operations manual well written and easy to follow. A great tool to have as a guide and reference. I would recommend an LLC keep this guide for its existence.  On a separate note thanks for the regular communication … wish all law firms were as easy to work with.”

“The LLC Operations Manual has been a great resource.  Its is well organized and provides clear instructions on what tod (and what not to do).”

“The online book is very helpful, as well as the email alerts.  I appreciate having the information that, for most the part, is easy to understand.”

“So, far I have not ended up with questions not covered by the book.”

2018-11-12T13:59:31-07:00November 13th, 2018|Forming LLCs, Operating LLCs|0 Comments

The Importance of a Well Drafted Buy Sell Agreement

Last month I attended a four  hour seminar on Buy Sell Agreements.  I’ve been drafting Buy Sell Agreements for LLCs since 1992, but the seminar gave me a lot of new information.  I especially enjoyed the presentations by two very experienced business appraisers.  The seminar caused me to review and revise my Buy Sell Agreement and to write several new articles about Buy Sell Agreements to help people learn about and understand why all multi-member LLCs (other than a married couple LLC) should have a comprehensive Buy Sell Agreement.

I also revised my online Buy Sell Agreement questionnaire to give my clients a lot of new options to select for their very custom drafted agreement.  Scroll through my Buy Sell Agreement questionnaire and you will be amazed at the number of options and their depth.  I doubt you could find anybody else that will give you as many options with respect to provisions to include or exclude from your Buy Sell Agreement.

Here is the list my articles about Buy Sell Agreements and why your multi-member LLC needs one drafted by somebody that knows what he or she is doing.

To learn more about Buy Sell Agreements and why your LLC needs one or needs to update its existing agreement sign up for my article called “Why Members of a Multi-Member LLC are Crazy if They Don’t Sign a Buy Sell Agreement.”  To get this free article click on the link then give us your contact info and opt in.  You will get the article and several follow up email messages that have more information about Buy Sell Agreements and how it can save you money and stress if the members of your LLC ever need to go their separate ways.

If you have any questions about Buy Sell Agreements call me at 480-664-7478 or my son Arizona LLC attorney and former CPA Richard C. Keyt at 480-664-7472.  We don’t charge to answer questions over the phone.

 

 

 

2018-11-12T08:38:40-07:00November 12th, 2018|Buy Sell Agreements, Operating LLCs|0 Comments

How to Open a Bank Account for an Arizona LLC Before the ACC Approves Its Articles of Organization

Because the Arizona Corporation Commission’s new database is broken and apparently can’t be fixed the time the ACC takes to review and approve the Articles of Organization filed to create a new Arizona LLC or PLLC has sky-rocketed through the roof.  To see how long it will take for the Arizona Corporation Commission to review and approve your company’s Articles of Organization go to the ACC’s processing times web page.  See also my article called “Arizona Corporation Commission’s New Database System Sucks.”

This delay is preventing people from opening a bank account in the name of the newly formed company.  Most of the large national banks and some smaller banks in Arizona will not open a bank account for a newly formed LLC or PLLC until after the Arizona Corporation Commission approves the company’s Articles of Organization.  If you cannot wait until the ACC approves the Articles of Organization of your newly formed Arizona LLC or PLLC you can open a bank account before the Articles are approved if you go to one of the banks listed below.

1. First Western Trust. Call Anna Popova, Assistant Vice President, at 602-224-7616 or email her at Anna.Popova@myfw.com. Her office is at 2425 E Camelback Road, Suite 100, Phoenix, AZ 85016. To open an account this bank needs the company’s EIN, Articles of Organization with the ACC stamp on it and the company’s Operating agreement. LLC owners can open a new business account as early as the day they file the Articles of Organization with Arizona Corporation Commission. They bank also has an office at 7025 North Scottsdale Road, Suite 100, Scottsdale, AZ 8525.

2. Trust Bank. Call Angela M. Chavira, Arizona Banking Manager, at 480-883-6819 or email her at Angela.Chavira@tbaz.com. Her office is at 2375 E. Camelback Road, Suite 155, Phoenix, AZ 85016. Trust Bank has four offices in Arizona. See its list of locations.

Arizona Corporation Terminates Its Email Address for Problems

We got the following message in an email we received from the Arizona Corporation Commission today, October 1, 2018:

“THE DOCUMENT INTAKE MAILBOX IS BEING DISCONTINUED, EFFECTIVE AT 5:00 P.M. MST, OCTOBER 5, 2018.  We will continue to accept documents emailed to DOCUMENTINTAKE@AZCC.GOV through October 5, 2018 at 5 pm MST.  After that point, the mailbox will be closed and will not accept any additional emails.  We strongly encourage you to use online filing available at http://ecorp.azcc.gov.  We will continue to accept paper documents mailed or walked in to 1300 W. Washington St, Phoenix, AZ  85007.  If you have any questions, please call Customer Service at 602-542-3026.”

This is very troubling.  We have sent problems that needed fixing for LLCs and corporations to this email address for a very long time.  Now instead of continuing a reliable method of communication the Arizona Corporation Commission wants people to use its broken online ecorp system.

2018-10-01T16:37:06-07:00October 1st, 2018|AZ Corporation Commission|0 Comments

How to Get a Certificate of Good Standing for an Arizona LLC

Question:  How can I get a Certificate of Good standing for my Arizona LLC from the Arizona Corporation Commission?

Answer:  The first thing you need to know is you should not follow the instructions on the Arizona Corporation Commission’s website because those instructions are wrong.  Second, the process is complicated, which is why I created an instructional video that shows you what you must do to purchase the COGS for $45 and immediately download a Certificate of Good Standing.

Watch my video below called “How to Get a Certificate of Good Standing from the ACC” then you will be able to get the COGS in 5 – 10 minutes using the Arizona Corporation Commission’s online ecorp system.

Arizona Corporation Commission Responds to My ACC Sucks Article

Last month I wrote a blog post called “Arizona Corporation Commission’s New Database System Sucks.”  The article alerts the public to some of the many problems created by the ACC switching to a new software system on May 20, 2018.  Here is the Arizona Corporation Commission’s response to my blog post:

“Commissioner Olson forwarded your e-mail to me and asked me to investigate the progress that the Corporations Division has made so far on their new database system. Here are some of the updates:

1. They are familiar with Rick Keyt’s complaints which have mostly been resolved, but they will be following up. Some of the customers who made filings during the first 3 months of rolling out the new program still have some minor issues which are being resolved.

2. They do have a system in place to accommodate urgent requests from customers who reach out to the Commission Offices, so as soon as Commissioner Olson’s office hears about a specific issue, we inform the Corporations Division and they are able to resolve the issues pretty quickly on an individual basis.

3. Overall, the early issues they experienced with the new system during the first two months are much, much better. The little things, like the search date/time that Mr. Keyt pointed out, are resolved. The bigger things, like dates, have seen substantial improvements, but they are still working out a few bugs. They just entered the warranty phase of the contract with the vendor, and the remaining bugs should be fixed over the next 90 days, per the contract.

4. Unfortunately, they are still struggling with processing times right now. Some of that was due to a back-log that built up during the initial phase of the transition, but they have now gotten through all the documents that migrated from the old system, and are now examining documents filed during the first 2 months in the new system. These documents require a lot of corrections, and that takes time. The Corporations Division is working with the Executive Director, Matt Neubert, on potential solutions to improve the processing times, since it usually boils down to additional resources.

That is the update so far, we are hopeful that more information and progress will be forthcoming and we will continue to update the interested parties as we are given new information.

Thank-you for reaching out to Commissioner Olson, we are keeping a close eye on this issue. Also thank-you for the article you shared, if you know of anyone else having similar issues, please send them our way!

Thank-you,

Jacqueline Parker, Esq.
Deputy Policy Advisor to Commissioner Olson
Arizona Corporation Commission
1200 W. Washington Street
Phoenix, Arizona 85007
(602) 542-0745 (office)
(602) 542-4144 (direct line)
JParker@azcc.gov
www.azcc.gov

We have noticed that the ACC is making fewer errors.  Hopefully it will be able to work out all of the kinks and get the new software system working smoothly.

2018-09-07T08:48:03-07:00September 7th, 2018|AZ Corporation Commission|0 Comments

We Updated Our Buy Sell Agreement Triggering Events that Can Cause a Buy Out

Most multi-member LLCs other than a two member LLC owned by a married couple should have an exit strategy because like marriages, more than fifty percent of multi-member LLCs have one or more members who want a company divorce.  If members of a multi-member company do not sign a contract that provides for the buy out of one or more members on the happening of an event described in the contract they are stuck together forever unless a member convinces a court in an expensive lawsuit to judicially dissolve the company.  See my article on this important topic called “A Multi-Member LLC’s Most Important Document” aka a “Buy Sell Agreement.”

My Buy Sell Agreement is very comprehensive because it is the product of my 38 years of being a business lawyer who has seen far too many LLC divorces.  I updated my Buy Sell Agreement to add more “triggering events.”  A triggering event is an event that gives the company an option to buy the entire membership interest of the member who is involved in the event.  Members can also provide in their Buy Sell Agreement that certain triggering events such as the death of a member require the company to buy the entire membership interest from the estate of a deceased member.

To hire me to prepare a Buy Sell Agreement one of the members must complete and submit my online Buy Sell Agreement questionnaire.  The questionnaire asks the LLC member who completes the questionnaire to pick and chose the provisions and triggering events that will be included in their company’s Buy Sell Agreement.  Look at the Buy Sell Agreement questionnaire to see the many triggering events that you can select or deselect for your company’s custom drafted Buy Sell Agreement.  FYI:  We can also arrange for all members to digitally sign their Buy Sell Agreement using DocuSign.

Here is a list of the triggering events from which my clients can select for their Buy Sell Agreement.

Triggering Event
Purpose
1. Any event the members desireA Buy Sell Agreement can include any triggering events that are important to the members. For example, the members could agree that if the New York Yankees win the World Series, member 1 must sell to member 2 for $100.
2. Operating Agreement defaultIf a member defaults under the Operating Agreement signed by all of the members the LLC has an option to buy out the defaulting member.
3. Member fails to contribute money or propertyThis provision encourages a member to satisfy the member's obligation in a written document to pay money or assign property to the company because if the member fails to satisfy that obligation the LLC will have an option to buy out the defaulting member.
4. Death of a memberThe LLC or surviving members have an option to purchase the interest of a deceased member. The Buy Sell Agreement can also require the LLC to buy-out a deceased member. These types of buy outs can be funded with life insure on the lives of members.
5. Member is convicted of a felonyMany LLC members do not want to have another member who has been convicted of a felony.
6. Divorce of a memberPrevents the wrong spouse from acquiring an interest in the LLC if two members own their interest as community property and they get divorced and the wrong spouse becomes the sole owner of all or a portion of the membership interest.
7. Member files for bankruptcyIf a member loses the member's interest in the LLC because of filing for bankruptcy, the company and other members should be able to buy the interest from the creditor who acquires it out of the bankruptcy.
8. Member transfers all or part of the member's membership interest without the approval of the other membersThe Buy Sell Agreement provides that a member may not transfer or encumber all or any interest in the member's interest in the company without the approval of the members and compliance with the terms and conditions of the Operating Agreement and/or the Buy Sell Agreement. If a member violates the no transfer/encumbrance provisions, the LLC should have an option to acquire the interest of the defaulting member, perhaps at an amount less than the fair market value of the interest.
9. Termination of employment of a memberApplies only to a member who is employed full time by the LLC. Especially important when the employee is a minority member and should only own an interest while employed.
10. Member loses his or her professional licenseCommonly used for LLC's that are owned by members who must be licensed in a particular area. For example, the Buy Sell Agreement of an LLC owned by physicians might give the LLC and other members an option to acquire the interest of a physician/member who loses his or her license to practice medicine.
11. Majority member sells membership interest"Drag Along" provision: Majority member has the option to require minority members to sell their interests in the LLC if the majority member sells. The sale of the minority members' interests are on the same terms and conditions as the sale of the majority member's interest.
12. Majority member sells membership interest"Tag Along" provision: Minority members have the option to require the majority member to include the sale of the minority members' interests in the LLC if the majority member intends to sell. The sale of the minority members' interests must be on the same terms and conditions as the sale of the majority member's interest.
13. Member is disabledUsed to acquire the interest of a member who become permanently disabled and unable to provide needed services for the LLC.
14. Member retiresMembers sometimes want to retire, but without a Buy Sell Agreement that provides for a retirement purchase, it probably will not happen.
15. Member is incompetentApplies if a member loses his or her mental capacity and a court appoints a conservator to manage the members financial affair.
16. Member files a false document with the ACCIf a member causes a false document to be filed with the Arizona Corporation Commission it is a triggering event that can cause a buy out,
17. Member causes somebody to be added or removed from the LLC's bank accountIf a member causes a signer to be added or removed on the company's bank account without the approval of the members per the operating agreement it is a triggering event that can cause a buy out.

Other Important Provisions in My Buy Sell Agreement

My Buy Sell Agreement also contains the following provisions:

  • Restrictions on Transferring Membership Interests:  Members may not transfer all or any part of their membership interest without the consent of the members.  Transfers to family members or trusts are allowed unless your Buy Sell Agreement also prohibits these transfers.
  • Right of First Refusal:  If a member desires to sell or transfer the member’s membership interest the company first and then the other members have the option to match to proposed sale and acquire the membership interest.
  • Life Insurance:  Members may purchase life insurance on the life of other members and use the life insurance proceeds to pay the purchase price to buy the membership interest of a deceased member.
  • Non-Compete:  This provision prohibits a member and/or ex-member from competing with the company’s business and hiring the company’s employees.
  • Dispute Resolution:  This provision obligates the members to settle disputes without resorting to litigation.

Questions?

If you have any questions about Buy Sell Agreements, call me, Richard Keyt, at 480-884-7478 or send an email message to me at rk@keytlaw.com.  I don’t charge to answer questions about Buy Sell Agreements.

How to Purchase an LLC Buy Sell Agreement

To hire me to prepare your Buy Sell Agreement complete and submit my Buy Sell Agreement questionnaire.

2018-09-02T11:54:53-07:00September 2nd, 2018|Buy Sell Agreements, Operating LLCs|0 Comments

How Do I Protect My Company’s Name in All 50 States?

Question:  I want to form a new limited liability company and protect its name in all fifty states.  How do I do that?

Answer:  Each of the fifty states regulates and authorizes the names of companies formed in the state.  Company names are protected only in the state in which the company is formed.  There is no way to protect a company name in all fifty states other than forming a company with the same name in every state in every state, but that would not be practical or prudent.  Bottom line:  There is no practical way to protect a company name in all fifty states unless you can register the name as a trademark or service mark with the U.S. Patent & Trademark office.

Federally Registered Trademarks & Service Marks

The U.S. allows people and companies to register a trademark or service mark with the U.S. Patent & Trademark office. A federally registered trademark or service mark is protected in all fifty states. A trademark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of the goods of one party from those of others. A service mark is a word, phrase, symbol, and/or design that identifies and distinguishes the source of a service rather than goods.

Examples of trademarks and service marks include: brand names, slogans, and logos. The term “trademark” is often used in a general sense to refer to both trademarks and service marks. Use of a business name does not necessarily qualify as trademark use, though other use of a business name as the source of goods or services may qualify it as both a business name and a trademark or service mark.

Trademarks are territorial and must be filed in each country where protection is sought. A U.S. trademark does not afford protection in another country. For more information on how to apply for trademarks in a foreign country, contact the intellectual property office in that country directly.

2018-09-01T17:12:36-07:00September 1st, 2018|FAQs, How Do I|0 Comments

Title Insurance for an LLC that Acquires Real Estate from a Member

Question:  I own Arizona rental real estate.  I want to form a limited liability company to own the real estate for asset protection.  If I transfer title to the real estate to my one hundred percent owned Arizona LLC will the LLC be covered by the title insurance policy issued to me when I bought the land?

Answer:  No unless you take action that causes the title insurance company to add the LLC to your title insurance policy.  As a real estate attorney I recommend that the owner(s) of the LLC always do what is necessary to cause the LLC to be covered by the title insurance when the LLC acquires real estate from the owner(s) of the LLC.

A nationally recognized title insurance expert named John C. Murray wrote an excellent article called “Title Insurance For Limited Liability Company Transactions” in which he says:

“The best solution may be for the grantee LLC to request an ‘additional insured’ endorsement from the title insurer (in those jurisdictions where it is available), which would be effective as of the date of the conveyance. This endorsement specifically amends the existing owner’s policy to add the LLC as a named insured. The cost of the endorsement is usually nominal ($100 to $300) and many title insurers will routinely issue the endorsement for successor LLCs”

See also the Adobe pdf file that contains an article called “Do I still have Coverage if I transfer my property to.”  The author states the following with respect to a property owner who transfers land to the owner’s LLC:

“To ensure that title insurance coverage continues on the property, [the owner] should contact [the title insurance company] to discuss obtaining an additional insured endorsement to the current policy and/or discuss obtaining a new policy depending on the facts and circumstances supporting the transfer. Without doing that, they risk terminating title insurance coverage on the property.”

2018-08-04T09:03:03-07:00August 4th, 2018|FAQs, Real Estate Issues|0 Comments

Arizona Corporation Commission’s New Database System Sucks

This article explains a very serious problem that affects most Arizona LLCs and PLLCs that have filed paper (not online filed) Articles of Organization or amendments to Articles of Organization after May 19, 2018.  If you have a company that filed paper articles or amended articles with the Arizona Corporation Commission after that date you need to read this article so you will understand the problems the ACC probably created for you and your company.

ACC Adopts New Software System that Is Crap

On May 20, 2018, the Arizona Corporation Commission stopped using the database and related software that served the public well for many years and switched to a new database system that is broken and may not be fixable.  Before the new software went live the ACC was reviewing expedited filings in 3 – 5 business days and non-expedited filings in 20 – 25 business days.  According to the ACC’s processing time report dated July 30, 2018, the new and improved software system enables the ACC to review expedited filings in 15 -20 business days and non-expedited filings in 54 – 59 business days.

Here’s an example of the broken software system.  I did a search for an Arizona LLC.  Note the date and time of the search, which was 1/1/0001.  My search did not occur in the year after Jesus was born.  How is it possible the software programmers were unable to program the software to display the date and time of a search?  Very troubling.

The Biggest Problem is the ACC Cannot Put Correct Information on Approved Filings

The new software system prevents the Arizona Corporation Commission from compiling and disseminating accurate and correct information.  Between May 24, 2018, and July 13, 2018, we filed Articles of Organization for SIXTY-FIVE LLCs that the ACC has approved, but whose approval documents contain ACC created errors that the ACC is unable to fix.  Despite our many requests to fix incorrect dates and text the ACC put on approved documents the ACC has been unable to correct a single item  of bad information it stamped on the companies’ approval documents.  Update 8/14/18:  On this date we got the first entirely correct approved Articles of Organization, ACC approval letter and ACC website information of the 110 Articles we filed after May 20, 2018.

When the ACC approves new Articles of Organization there are three ACC created sources of information about the new company.  Information about the new company is found in the following locations:

  1. the top of the first page of the filed Articles of Organization returned to the company
  2. the ACC’s approval letter given to the company
  3. the ACC’s website

Not one of the 65 companies we formed between May 20, 2018, and July 13, 2018, that have been approved by the ACC has the correct filing date and correct information on all three of the above sources.  Despite repeated requests given to ACC personnel asking them to correct the ACC errors it has not corrected a single company’s incorrect data.

Illustrations of ACC Created Problems

The images below contain numbers in circles that refer to areas of Articles and approval letters and the website that have un-fixable errors.  The numbers in circles will be explained below.

Top of the Filed Articles of Organization

 

Articles of Organization Problems

The information next to numbers in a circle above is imprinted on the Articles of Organization by the ACC and then given to the company after it approves the filing of the Articles of Organization or amendment to the Articles of Organization.  The significance of each type of information shown above that has a number in a circle:

Circle 1:  The “received” date.  This is supposed to be the date the ACC received the Articles of Organization or the amendment.  This line may or may not be the actual date the ACC received the document.

Circle 2:  The “pending” or “filed” date.  Some times this line says “pending” followed by a date.  Some times it says “filed” followed by a date.  The filed date should always be the date the ACC received the Articles of Organization or the amendment.  Note:  If the ACC approved the document this line should say “filed” (not “pending”) followed by the date the ACC received the Articles of Organization or the amendment.    This line may or may not be the actual date the ACC received the document, which date is the actual date the document was filed.

Circle 3: I don’t have a clue what this long number is, but the ACC stamps it on the top right of each page of the approved document.

Circle 4: The approved document may or may not have this stamp under the first two lines the ACC puts on the top left of the first page.  In the good old days when the ACC was doing its job it always stamped its “Filed” stamp on the top of the first page of the document.  The stamp include the ACC’s file number given to the company.  Now the ACC never stamps its “Filed” stamp or the company’s file number on the approved document.  Sometimes the document may display the “Received” stamp, which is a good thing because the Received stamp always displays the correct date the document was received and filed.

ACC Approval Letter Problem

 

Circle 5:  This image is the top of the ACC’s letter given to companies when it approves the filed Articles or Organization or amendment to the Articles of Organization.  The document received date should be the date the ACC received the document.  This date may not be the actual date the ACC received the document.

ACC’s Company Web Page

 

Circle 6:  The formation date should be the date the ACC received the Articles of Organization or the amendment to the Articles of Organization.  This date is frequently wrong.

Circle 7: The Original Incorporation Date is the Formation Date.  These two dates should be the same and should be the date the ACC received the Articles of Organization or the amendment to the Articles of Organization.  This date is frequently wrong.

Circle 8: The Entity Status should say “Active,” which means the company exists.

Circle 9: The Reason for Status should say “In Good Standing.”

Important Note: If a third party asks for proof that your company exists show the ACC’s web page for the company and point out that the Entity Status is “Active” and the company is “In Good Standing.”

Bottom Line

When your company’s paper filed (not filed online) Articles of Organization have been approved by the ACC the date the ACC received the document should be the same as the filed date.  The received/filed date should be the same on each of the following locations:

  • Circle 1
  • Circle 2: This should say filed, not pending.
  • Circle 4: If this stamp is on your document it should show the date the document was received by the ACC
  • Circle 5
  • Circle 6
  • Circle 7

If your approved Articles of Organization, ACC approval letter or ACC website listing contain errors and you want to fix the errors call the Arizona Corporation Commission at 602-542-3026.

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.  On June 1, 2018, I formed Arizona LLC number 6,000.

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 $597 (Silver LLC) and $997 (Gold LLC that includes a revocable living trust).  Read some of the 163 five star Google & Facebook reviews our clients have given me.

2018-06-03T08:32:29-07:00June 3rd, 2018|Forming LLCs, Miscellaneous|0 Comments

Arizona Corporation Commission Way Behind on LLC Reviews

Just a few weeks ago the Arizona Corporation Commission was reviewing Articles of Organization filed with the $85 expedited filing fee in 3 – 9 business days.  We had many Articles reviewed and approved in three business days.

That was the good old days.  Since the ACC’s new online filing system went live on May 20, 2018, the ACC is taking 20 – 26 business days to review Articles of Organization filed with the expedited filing fee and 60 – 66 business days to review Articles filed with the regular $50 filing fee.  When the Articles are approved the effective date (birth date) of the LLC is the date the Articles of Organization was received by the ACC unless the Articles provide for a later date.

This delay in approvals creates the following problems:

  • Some banks will not open a bank account for the LLC until its Articles of Organization are approved.  If you can’t wait to open a bank account go to a bank that doesn’t require that the Articles be approved by the ACC before opening a bank account.
  • Real estate closings.  A title insurance company will not issue title insurance when the buyer is an LLC until the ACC approves its Articles of Organization.  Several years ago when the ACC had a 60+ day delay, it had a proceed that enabled a pending LLC to move to the front of the review line and get approved so that a real estate transaction could close.  I don’t know if this procedure is still available, but call me if you need to expedite for a closing.

Moral of this story:  Always pay the additional $35 and file using the $85 expedited filing fee when you form a new LLC or PLLC.