Impact of the Global Credit Crisis

The GCC economies had been impervious to the global credit crisis for the better part of 12 months. While many people believed that the Middle East's oil wealth would protect their economies from the crisis, these expectations have proved baseless. The falling equity values impaired sovereign wealth funds and lack of access to credit derailed numerous grandiose property development plans leaving some skylines littered with idle cranes. Economists predict the current conditions will stable and persist for the most of the remainder of the year. The end of this year (2009) through 2010, capital market conditions are expected to stabilize and improve. In this crisis no country is an island, as even Australia recognized its economy was in recession.

Virtually every market of the world has experienced sharp declines save for the one uncorrelated market that posted positive returns, the Tehran Stock Exchange. Enough said. The current situation finds the world economy trying to establish a base from which to grow supported by the most massive, concerted global government economic intervention in the history of the world. The bailouts and stimulus packages to date have targeted banks and countries and the auto industry. Yet as the unemployment percentage surges into double digit numbers, the consumer who was footing the tax bill will move from being a tax payer to recipient of tax benefits; credit card payments will laps, mortgages lost. The cascade downward will continue as more business will contract, more foreclosed houses in the market and higher credit hurdles and terms for new homeowners. The impact of a global shutdown due to swine flu could well trigger a cataclysmic economic freefall that even threatens the stability of longstanding democracies.

Given this backdrop, the question is, 'what's the best strategy to employ to capitalize on this economic imbroglio?' The answer, my friend, is that 'cash is king or queen if you prefer.' Even with that, knowing which currencies to hold is also a critical analytical exercise. Several countries have individual private banks with outstanding notional debt that exceeds their country's GDP! We recommend a basket of currencies that overweight natural resource backed economies such as Canada and Australia. Sometime next year, those patient investors holding cash will be plundering egregiously underpriced assets boasting global brands and predictable cash flows.

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Get the Secret Offshore Account You Always Wanted

Banking privacy is over - at least that's what the headlines say. The criminals who move money around at will, big fat cats with wealth concealed in ultra-secret harbours like Monaco, and shady characters laundering narco-cash through offshore casinos are living on borrowed time.

But as money bleeds out of the worldwide economy, many ordinary people are asking themselves why they are bank-rolling a system that doesn't work , and whether or not there is a way out. What these people are looking for is a safe and private haven for their money..

Does it exist?

Banking in Switzerland or the Cayman Islands may not offer the privacy is once did, but as attempts are made to water down their bank secrecy laws other alternative and 100% legal routes are springing up to offer world citizens the guarantee of safety and privacy which they deserve.

Now some of the best offshore accounts can be found in low-profile jurisdictions which are not signed up to any international tax or information-sharing agreements.

Another popular method is to use a professional nominee to open an offshore bank account for you. These can be pricey and may only be available in certain countries, but they can effectively shield your financial identity.

A similar but more economical method is to open an account in the name of an offshore company. While this will provide a a first line of defence in that the company name rather than your own appears on financial transactions, in 99% of cases banks will also need to know who you are and keep a record of it.

An alternative route being considered seriously by many investors is a treasury account. This involves depositing with a registered financial company which can hold your funds in their name, even though your funds are legally separate from those of the company. An account like this will offer the same benefits as any bank account, and sometimes many more. You can get multiple currency accounts, trade stocks anonymously and send almost unlimited transfers without burdensome red tape.

But surely the greatest advantage of this type of account is that is protects your privacy to the maximum extent possible in this day and age - and at less than the price of a standard offshore account it's unbeatable value.

Although it's getting harder to use offshore banking directly, there's still ways to set up the secret safe haven you deserve.

The author is a staff writer for Capital Conservator Offshore Banking. With group components over 10 years in business offshore, Capital Conservator has proven experience in meticulously guarding the financial privacy of its clients. Manage your offshore accounts in multiple currencies entirely online, no visit required.

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LLC, Is it a Good Choice? The What, When, and Why

LLCs have been heavily advertised over the last decade, "The new, best, structure to protect you, your business, and your assets," promoting the golden triad of: liability protection, tax savings, and privacy. 'What' is the truth about LLCs? 'When' would it be appropriate in your business plan? Also, 'Why' is it being so heavily "sold". Limited Liability Companies have joined the ranks of chartered business organizations, such as the venerable C-Corporation, the one-time popular Limited Partnership, and the waning Sub-S corporation. Also in our list of contestants is the ever popular sole-proprietorship, and the always dangerous Partnership or General Partnership.

The LLC is the proverbial "New Kid". Let's make an in depth review of the relative strengths and weaknesses of an LLC. For this article we are going to limit our scope to three specific areas, Tax Treatment, Limitation of Liability, and Privacy. These seem to be the most common reasons that people consider LLCs.

Tax Treatment: The LLC may not pay its own taxes, (That is the intent, however, unless specific protocols are followed, the LLC may be required to pay taxes as a corporation.) It does file a tax return, which is merely a profit or loss statement, and then distributes the proceeds to the members in proportion to their percentage ownership. The members then pay taxes on this 'passive' income on their personal tax return. This is similar to how a sub-S corporation's stockholders receive dividends. A C-Corporation on the other hand actually pays its own taxes, and at a much more favorable rate than an individual. As an example let us assume that you are the sole owner of your business. You are advised to take a minimal amount of money out of your business as regular payroll (lets say that ideal amount is $30,000). This will allow you to have enough income to satisfy the IRS requirements, maximize your personal 15% tax rate, and to cover all of your personal deductions. The rest of the profit, will be handled as a function of the type of business. In all of the "Pass-through" entities (Partnership, LP, Sub-S Corp., and Limited Liability Company), all of the money is passed to you at the end of the calendar year. You then pay taxes immediately at your personal tax rates, At least 25%, or 28%, or even 35% federally, and State taxes may be a concern. However, if your business were a C-Corporation, it would be paying its own taxes, Federally, 15% on the first $50,000 of profit. That's 80,000 total dollars at 15% or less. Even above $50,000 the taxes for corporations are better than personal. The federal tax on the first $100,000 is only 22¼%, on the first $200,000; less than 31%, and the maximum effective tax rate is 34%. Yes, you can transfer all of the profit from an LLC directly to your bottom line. . . but why? Why would you want to pay taxes at your higher personal tax rate? Double taxation? In our research we have only found one area that would be subject to "Double Taxation", that is "Dividends". Double taxation occurs when the corporation, at its year-end, declares a profit, (Pays its taxes on that profit) then distributes the profit to the stockholders in proportion to their ownership (And they pay their taxes).

In theory an owner of a corporation could stupidly pay dividends to himself. However, "The normal method of operating a controlled corporation is to distribute earnings in a deductible way. Compensation, retirement benefits, automobile allowances, employee fringe benefits-all are consistently employed to use up the earnings of a corporation. The double tax in most corporations is a hypothetical specter. In addition here are a couple other tax ramifications of Limited Liability Companies: The IRS has determined that a Limited Liability Company can possess enough corporate characteristics to be classified as a corporation for federal tax purposes. It is unclear whether membership interests are "securities" for purposes of the federal securities laws.

In this article we have examined the Tax Effect of the Limited Liability Company. From a tax standpoint clearly either: the LLC will have no taxable benefit, or will have a yet undetermined effect on taxes. This will depend on the specific determination of your LLC by the IRS (When was the last time they made a determination that was good for you?) We are testing the hypothesis that the Limited Liability Company is a good business entity; To reduce taxes, to shield the owner from liability, and to provide privacy. We found, regarding taxes, the Limited Liability Company is either not a tax benefit or an "Unknown". The general determination of the IRS is that it will be taxed as a Partnership. We know that a partnership is not a tax advantage. We also have learned that some exceptions can be applied that would cause the LLC to be taxed as a Corporation.

Let us consider the other reasons that people have been encouraged to create an LLC; Liability Protection and Privacy. Liability Protection: The LLC was intended to provide the pass-through tax treatment of a partnership while still allowing the liability protection of a corporation. While this idea of choosing options from a Chinese Menu for your business structure sounds appealing, it defies what we know to be true about the judicial process. This country's entire infrastructure is predicated on the idea that an independent third party shall define the terms of existence for you and your business. Each lawsuit has a loser. Every court case denies someone of something that they claimed to be rightfully theirs. Merely claiming the right to a tax benefit and denying the responsibility for liability does not make it so. The courts use "precedence" to determine the viability of claims. Regarding Limited Liability Companies, there really is no substantial precedence.

Thirty, forty, fifty years from now we may know how the courts will treat LLCs, but right now, we can only consider related rulings. Therefore, let us, as the courts do, draw upon rulings from related areas, and consider some potential arguments. The IRS has made a ruling: "The Limited Liability Company will initially be taxed as a general partnership." Now listen to the voice of the opposing attorney. "Your Honor, the defendant intentionally organized his business, not as a Corporation which has a long history, and much precedence, regarding protection from liability, but as an LLC." "Your honor, the IRS says that for their purposes, the LLC is synonymous with the General Partnership." "If the IRS classifies the LLC as a partnership, without any precedence to the contrary, then we must also." "Therefore, since this is a Partnership, all liability for all debt, rests on all of the members." Not a very comforting thought if you have a lot at stake. You may be able to argue the other way, and win, but it would probably be better to avoid the argument altogether, and let someone else test the waters.

"Since limited liability companies have only recently become popular, there are a number of unanswered questions. First, it is unclear whether states which do not recognize limited liability company status for their own businesses would nevertheless honor that status for companies organized under the limited liability company law of another state. Second, it is unclear whether membership interests are "securities" for purposes of the federal securities laws." Some other consideration about Liability Protection: Like a shareholder, a member is personally liable to the company for failing to make an agreed contribution. Though unlike a shareholder, a member may be personally liable for his or her contribution to creditors of the company who acted in reliance on the member's commitment. A limited liability company may be subject to a veil piercing theory. Even after an assignment of membership, the assignor is not released from the statutory liability to make a promised contribution or from liability arising from a wrongful distribution. It is unclear the extent to which states that do not provide for limited liability companies will recognize the limited liability status of the members of out-of-state limited liability companies.

Regardless all of the above, One of the first things that we learned on the playground of school: If you want to keep something all to yourself; Do not tell everyone. Privacy is the first shelter from the storm of liability.

Privacy: Of the three reasons that we are discussing here, Privacy, is the claim that has absolutely no basis in truth. The Articles of Organization that are filed with the State, set forth the names, address and percentage ownership of all of the members. Also in many States even the tax returns for as many as 3 previous years have to be available to the public. All of the contributions of individual members are noted in the company's articles of organization or other record available for public inspection. In some state, the articles of organization, (or an attached affidavit) must set forth the total amount of cash, value of property initially contributed, as well as the total additional contributions to be made by all members. Some States require the articles of association to be signed by all members named in the articles.

We have discussed three of the most common reasons that people sight as the reason to form an LLC. When comparing the effectiveness of the LLC and C-Corp for these reasons, it appears that the Corporation wins hands down. Can we safely say that all LLC's are bad and all Corporations are good? No. Many corporations will not provide these benefits for their owners (Much to their surprise). We can say that for; Tax savings, Asset Protection, and Privacy an LLC has no advantage, and that a properly organized Corporation can provide significant benefits. So when would a Limited Liability Company be a benefit? Due to its youth, the LLC has not been closely scrutinized by the Securities and Exchange Commission (SEC). The SEC has not yet placed some restriction on the LLC as it has on the Sub-S corporation. A Sub-S Corporation is limited to no more than 35 stockholders, not so the LLC. Stockholders in a Sub-S Corporation must be US citizen, and must be actual persons, not other corporations. Again, as yet the LLC does not carry these restrictions.

So, if you have no concerns about Taxes, Liability Protection, or Privacy, and your have either, more than 35 holders, non-US holders, or non-real persons as holders, then an LLC may be a better choice. Why is it so heavily sold? The marketers of LLC's, whether they admit to the title or not, are fanning the flames. At this point the conversations are self-perpetuating. People are asking about it because they hear about it. This frenzy is not necessarily bad. The more, LLCs, the more test cases. The more test cases, the sooner you and I can make an educated consideration of LLCs and their true value.

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