A proactive approach that achieves both form and function
Many corporate clients or business owners with multiple corporations or limited liability companies have no structure to their holdings. Like a home with additions added by different owners over the years, their holdings have no cohesive plan. You bought a new investment property, open an LLC, you’re doing an asset purchase of a local business, open another LLC, no, maybe a corporation. When these business owners work with attorneys who are simply reactive, opening new entities as needed without looking at the client’s overall corporate structure or forming a proper foundation for their holdings from the very beginning, the result is the equivalent of a Colonial style home with a mid-century modern kitchen bump out and a Victorian sunroom off one side, really ugly and probably not a structure that functions well for the client. Fornaro Law does things differently, we take a proactive approach looking at the client’s needs now and in the future. Our firm understands that having good corporate structure can save our client’s money in addition to providing greater liability protection and we educate our clients about these benefits.
An example of this is the case of a successful businessman who came to us with real estate holdings, some of which he held personally, some of which he held through various LLC’s, in addition to an operating company he owned personally. It was basically a small ranch that already had an ugly addition stuck on the back. And now this client was preparing to purchase additional properties, both residential and commercial and was working with contractors that he wanted to start a company with, to rehab some properties. Rather than simply reacting to what the client was doing and adding another ugly addition or two to his already unwieldy structure, Fornaro Law took a more proactive approach. We reviewed the client’s current holdings, discussed with him where he saw his future growth and developed an overall corporate structure that redesigned what he already held and that allowed for future additions so his holdings could expand easily and in an organized manner. The structure we developed was not only more elegant, it also provided far greater liability protection and tax advantages: form and function.
How did we do this you ask, it was a multi-step process. First, we needed to review all of the client’s current businesses, understand the ownership and management of each, and understand how they functioned together. How big was his family, how old were the kids, how many bedrooms and baths was he going to need? We needed to review which entities had employees, confirm all appropriate corporate governance documents were in place (bylaws, operating agreements, employee contracts, lease agreements, etc.) and determine the potential liability each entity faced. Once we fully understood the client’s holdings and ownership of each, we prepared an organizational chart showing this ownership in addition to any agreements between the companies in a clear and concise way. The blueprints we needed to begin our renovation of the structure.
Next we created a second organizational chart where we projected our proposed structure for the entities; the addition of a holding company for additional liability protection, a management company for both ease of management and a way to potentially offset some tax liability, a lending company so the client could self-finance his real estate purchases, and an additional operating company to separate assets held by one of the client’s entities from potential liability related to the rehab construction of same. This proposed organizational chart also took into consideration future growth of the client’s holdings, it provided a strong foundation on which we could build future additions. Finally, the structure accounted for the client’s estate planning, ensuring that none of the benefits provided by our plan would be lost when he passed these holdings down to his beneficiaries.
Then, again taking the proactive approach, Fornaro Law reviewed this proposed organizational chart with the client’s accountant and tax advisor and made changes as needed so the proposed structure maximized not only asset and liability protection for the client but also maximized the tax benefits (both now and when taking estate planning into consideration). The equivalent of going through the zoning, permitting, and inspection process for our new structure, we got the input and approval of all relevant parties. This collaborative approach is something we have discovered very few attorneys take and many accountants greatly appreciate. The accountant for this client in particular didn’t have a full picture of all of the client’s holdings or his plans for future growth and when we provided this to the accountant he immediately saw opportunities for how we could structure things to take far greater advantage of the tax laws saving the client thousands. The blueprint was complete, we were ready to begin construction!
Fornaro Law formed the additional LLC’s and Corporations that were needed to bring this newly proposed structure to life. We drafted agreements between the companies so all corporate governance requirements were met, we continued to work with the client’s accountant constantly maximizing the tax advantages of the structure, and we managed the client’s estate planning so all holdings would pass easily to his beneficiaries with minimal estate tax issues. We turned an ugly two bed two bath ranch into an elegant six-bedroom family home with a mother-in-law suite to boot.
Fornaro law’s proactive approach gave this client a clear corporate structure that protects him from liability in a greater way than his previous structure did, provides tax savings that he hadn’t previously realized, protects his assets by separating them from any entities with significant liability, and provides for ease of growth as he adds new businesses and properties to his portfolio. The structure also allowed for greater ease of funding for his trust, a value add that the client never expected.
Fornaro Law can do this same thing for your ugly duckling. Whether you own a bungalow, a Greystone, an old Victorian, or you want to start with new construction, Fornaro Law can design a corporate structure for you that maximizes protections, minimizes liabilities, and takes into account tax issues and future planning. We look forward to working with you on your renovation!