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DOMESTIC & OFFSHORE ASSET PROTECTION FOR THE COMMON MAN, AND WOMAN

OBJECTIVES
  • Explain to the creditor that it's better to settle out of court than to deal with the charging order, the expenses of collecting against the interest of an LLC, ambiguity and uncertainty.
  • Compel the creditor go back to settlement even if he already wins the lawsuit.
  • Use an offshore jurisdiction, in combination with the US, to increase protection of assets from the lack of due process, and from abusive collection practices.
  • Cooperate with the U.S. courts when mandated to provide information, and cooperate with U.S. court orders.  Be 100% truthful all the time.
  • Maintain sufficient control over accounts in order to prevent fraud, embezzlement, and unauthorized transfers.
  • Maintain tax compliance in all areas.
  • Report everything, as legally required, to avoid penalties and problems with the IRS.
  • As you may know about the discovery phase in litigation, it's common for your tax returns, bank statements and other records to be disclosed.  Turn this into an advantage.
  • Use the IRS as leverage to encourage a settlement.  In this situation, the IRS is your friend.  The creditor is faces a tax obligation for LLC earnings, and a delayed payment that may be indefinite.

STRUCTURE

  • Utilize a domestic LLC (Wyoming) and an offshore LLC (Panama).
  • Wyoming LLC

    Background on Wyoming LLC:

    • You and another US person are members/partners of the Wyoming LLC.
      • Members can be a natural person, corporation, or any other legal entity.
    • These three conditions must be met to take advantage of the charging order protection in the U.S.
      • The Wyoming LLC is taxed as a partnership.
      • The Wyoming LLC is manager-managed
      • There are at least two members in the Wyoming LLC. 
    • The charging order protection is the key.  The creditor ends up paying taxes on earnings, from the LLC, that he hasn't received.  This is an excellent tool to encourage your creditor to settle out of court, even after he wins the lawsuit.
    • The Wyoming LLC has a street address, PO Box, and a validating fax and phone.
    • You apply for the EIN of the LLC and you're the signer for the LLC's bank account in the U.S.
      • This prevents a fraudulent conveyance claim.
    • There is a privacy element.  Your name doesn't appear on public record as a manager or member. 
    • The IRS and the bank identify you as the contact person for the Wyoming LLC.  This is important to show that everything is transparent and no fraudulent conveyance is involved.
    • The manager of the Wyoming LLC is a Panama LLC.
  • Panama LLC

    The Panama LLC serves as a manager of the Wyoming LLC.

    • The Panama LLC has a Panamanian attorney as it's manager.
    • The Panama LLC has a bank account in a well-established Panamanian bank.
    • You and the Panamanian attorney (or person designated by attorney) are co-signers of the Panamanian bank account.
      • Since you and the Panamanian attorney are co-signers, two signatures are required to transfer funds out of the Panamanian bank account.  One signature, by either person, is not enough to transfer funds.
      • Again, each transfer requires your signature, you have peace of mind that the Panamanian attorney is not able to embezzle the funds, and he cannot use it for an unauthorized purpose.
      • Even if you agree to move the funds back to the US, to satisfy a court order, the Panamanian attorney may not agree to authorize the transfer.  The duty of the Panamanian attorney is to look after the LLC, it's assets, and the interests of the members.  After all, you cannot force the hand of legal counsel to authorize the funds transfer and neither can the U.S. courts.  That's the independent decision of the Panamanian manager.  Ask Mr. Guardia how the creditor must file suit in Panama to court order the Panamanian attorney to co-sign the asset transfer. 
      • You must declare to the US Treasury that you're have at least 50% control on an offshore account once the balance has a balance of $10,000 USD or more (form TDF 90.22.1).
      • You file the income tax returns of the Panama LLC, as a general member/partner.
      • The income tax returns, Form 1065 and the K1, are easy and simple to complete by a tax practitioner.  The tax counsel works for you and can be the same accountant you currently use.

       

  • Aggressive Operating Agreement of the Wyoming LLC

     

    • We provide an aggressive promissory note and operating agreement.  For more on this, click here.
  • Compliance

     

    • All income and assets are reported to the IRS and the US Treasury.
    • This is simple reporting as a partnership.

WYOMING LLC & THE CHARGING ORDER PROTECTION

  • You and another US person are member (partners) of the Wyoming LLC.
  • Funds can be shifted between the Wyoming LLC and the Panama LLC without a problem.
  • The manager is a Panama LLC, and chooses when to distribute assets and earnings from the LLC. Earnings and other distributions can be refused to be distributed, at the discretion of the manager.  This is important.
  • If a creditor obtains a charging order against the Wyoming LLC, that means that the creditor has now placed himself first in line to be paid (before you) until the debt is satisfied.  A charging order means that the creditor must be paid first.  Anything that was supposed to paid to you as a member is now owed to the creditor.
  • The manager, as mentioned previously, can refuse to distribute anything from the LLC.  Ask your tax advisor how the IRS (Revenue Ruling 77-137) makes the creditor liable for the income earned from the LLC, even though he hasn't received a penny. 

    Here's an example:

    • Joe sues you for $200,000 and wins.  You have a 50% member (partner) interest in a Wyoming LLC.  The Wyoming LLC earned $100,000 in taxable income.  This means that you earned 50% of the $100,000, or $50,000.  But you owe Joe the $200,000 because of the lawsuit. 

      • Joe (creditor) is in for an unpleasant result:

        • The LLC is a manager-managed, and there are at least two members, and it's tax as a partnership.  This means that the charging order protection applies.

        • This means that Joe is liable for paying income on the $50,000 in taxable income, even if he hasn't seen a penny of it (according to the IRS).  Joe's lawyer isn't going to be happy either and may demand additional legal fees from the creditor.

        • The manager of the LLC can restrict distributions to Joe (creditor).

        • Ask your tax advisor about Revenue Ruling 77-137 !!!  The creditor must pay the taxes on what was otherwise your share of LLC earnings once he has the charging order against your LLC interest.

        • Joe may go through the effort of trying to compel the manager to release the distributions from the Wyoming LLC. 

        • Visit this presentation on the LLC charging order protection if you're unclear on any of this.

        • Wyoming LLC charging protection:  Ask your legal counsel on the wording of this effective statute.

        • Let's now consider the manager's position, as an LLC in the foreign jurisdiction of Panama.

PANAMA LLC & THE CHARGING ORDER PROTECTION
  • You, and another US person, are members (partners) of the Panama LLC.
  • The manager of the Panama LLC is an attorney.
  • The Panama LLC has bank accounts in Panama.
  • The signers of the Panama bank accounts are the US client (you) and a Panamanian attorney(or someone he assigns to this position agreeable by you).
    • Both signatures are required to authorize a check, or transfer of outgoing funds, from Panama.
    • This prevents the Panamanian attorney from misappropriating the funds.  You have peace of mind that the funds are secure.  Again, two people (you and the attorney in Panama), must sign to approve a fund transfer, or a check.
    • This also prevents the US client (you) from being compelled to turn over the funds to an abusive creditor who is violating your due process rights.  If you're compelled to transfer the funds back to the US, you're only doing what he's ordered to do. 
    • The Panamanian manager of the Panama LLC is not subject to US court orders.
    • The creditor must file his suit in the jurisdiction of Panama and break through the attorney-client privilege in that country.  This is exceptionally difficult and expensive to do.
  • As this unfolds, the creditor remains liable for all income earned through the LLC that is not released by the manager.

FAQ

  • Can the creditor go after the assets in the Wyoming LLC?
    • The creditor can only obtain a charging order against your member interest in the LLC.  Example:
      • You own a 40% interest in an LLC that earned $60,000 in taxable income.  This means your share of $24,000 is supposed to be distributed to you, at the discretion of the manager.  But since the creditor has a charging order against your interest, he's first to collect on those funds.  The Manager can restrict the distributions to the creditor.  This makes the creditor responsible for the earned income, although he hasn't received any of the distributions.  No one wants to pay taxes on money that's not in hand.
      • The manager can be court ordered, possibly, to release the distributions to the creditor.  This may be exceptionally difficult for the creditor if the manager is a person outside US jurisdiction, such as a Panamanian LLC.
      • Since the Wyoming LLC possesses a short-term amount of cash and other assets, under your signing authority, then those funds can be immediately used to pay off financial obligations.  There may be no funds in the Wyoming LLC to distribute to this particular creditor.  You can't be criticized for paying off your US obligations and you choose which creditor to pay.

       

  • What tax or other compliance reports are required?
    • Ask your tax advisor about filing the SS4 forms for an EIN application.
      • The Wyoming LLC needs an EIN to be taxed as a partnership
        • The LLC must be taxed as a partnership to obtain the charging order protection.  And remember that there must be two members to the LLC.
        • The Panama LLC does not need an EIN to establish a bank account in Panama.
    • Ask your tax advisor about filing forms 1065 and 1065K1 (K1).  Each member of the LLC must file his or her own income tax returns and declare any taxable income.  See your tax advisor about the forms, tax advice and other tax information.  These are simple and easy to file by any qualified tax preparer.  An offshore LLC, such as in Panama, is simple, quick and easy (according to preparers that are knowledgeable about filing partnership returns).
    • File form TDF 9022.1 once you are signer, or co-signer, of any foreign (offshore) bank account that's worth $10,000 USD, or more. Do this by June 30th

     

  • Can a court require you to bring the assets back into the US?
    • In this legal environment, your attorney may tell you that anything is possible.  Ask your lawyer about this approach:
      • Be completely forthright in all reporting of financial transactions and asset transfers.
        • This prevents anyone of accusing you of doing something fraudulent.
      • Pay all taxes to the IRS and make certain that partnership returns (1065 and K1) are filed on time.  Always confer with a qualified tax advisor knowledgeable about partnership returns.
      • Cooperate with all demands for information from the court.
        • This prevents a contempt issue.
      • Cooperate with all demands for compliance from the court, in terms of authorizing asset transfers back to the U.S.
        • This prevents you from being jailed for contempt.  Always seek legal counsel.
        • A US court cannot compel compliance from a foreign person.  The Panamanian attorney is outside U.S. jurisdiction and cannot be compelled to co-sign the asset transfer. 
        • The Panamanian bank will demand that both persons (you and your Panamanian attorney) authorize the asset transfer.
        • The funds stay in Panama as long as the Panamanian attorney agrees to withhold authorization of the asset transfer.

 

  • Where is this plan weak?
    • You create your own weaknesses.
      • Fraud, theft, intent to deceive, illegal activity and other threats are serious threats that jeopardize the asset protection.  It simply won't work.
      • The attorney in Panama and the US planners won't tolerate fraud, theft or illegal activity.
      • This plan only works if you don't commit fraud, the money is legal, there's no illicit activity, you file income tax returns for both LLC's and you pay taxes.

       

  • Where are the tax savings?
    • There are no tax savings.  There is no tax benefit.

 

  • Can you get ripped off using offshore accounts and a Panama LLC?
    • You're biggest threat is from the other member/partner.  Choose wisely.
    • The Panamanian attorney doesn't have access to the funds without your permission.
      • Remember that two signatures are required to transfer funds out of the Panama bank account of the Panama LLC.
        • Your signature and that of the Panamanian co-signor.
      • We chose a competent and ethical attorney in Panama who has practiced law for many years in Panama City.  He's well respected and an honorable person.

 

  • What portions of the funds do I place in the Wyoming LLC or the Panama LLC?
    • You must be able to meet financial obligations in the US and yet protect the nest egg offshore. 

     

  • Is there any privacy?
    • There is privacy from public records in the U.S. because the Panama LLC serves as a manager of the Wyoming LLC.
    • Banking in Panama is private.  These banks won't disclose any information unless it's demanded by the Panamanian courts or the Panamanian Attorney General in criminal situations (money laundering, gun running, drug smuggling, terrorism).  When it's a civil dispute, banks don't disclose this information.  Since there is full disclosure on the income tax returns, this bank privacy is not a factor.  The key remains in the charging order protection, and the inability of forcing the co-signer in Panama, from releasing the funds to the creditor.
    • Again, the protection lies in your ability to move funds to the jurisdiction of Panama to maintain the integrity and security of the account so others can't demand it from the bank.  They will need to sue you in Panama, and win, to obtain the funds.
    • The creditor obtains a copy of your income tax returns (past 3 to 5 years).  The K1 issued from the Wyoming LLC and the Panama LLC are part of the returns.  This means that the creditor knows of these assets.  This prevents a fraudulent conveyance claim.

     

  • Can I increase my privacy?
    • Yes, this is possible through the use of corporations.  If necessary, Wyoming corporations can serve as members of a Wyoming LLC.  No one would know about your ownership in the corporations unless you told them.  Stockholder information is not collected in Wyoming.

     

  • What is included and how much does it cost?
    • Panama LLC
      • Formation
      • Filing fees
      • Panamanian attorney
      • Introduction to stable and well-respected Panamanian bank, and the opening of the Panama account.
      • Opening of Panamanian bank account
      • Attorney co-signs on the application.
      • Panama virtual office
        • Includes live receptionist with general greeting, mail forwarding, street address, PO Box, telephone number.
    • Wyoming LLC
      • Formation
      • Filing fees
      • Wyoming Virtual Office
        • Includes live receptionist with general greeting, street address, PO Box, validating fax and phone numbers, mail forwarding.
    • $5000 first year. 
    • Add $1000 in anticipated tax return preparation fees.

     

  • What are the maintenance fees?
    • $2000 per year covers everything for the Wyoming LLC and the Panama LLC for all the services combined (not the tax return preparation fees).

     

  • Must I travel to Panama?
    • Travel to Panama is necessary for the bank interview.  The highly-regarded banks in Panama require this interview.
    • This will also familiarize yourself with the legitimacy and stability of the banks, economy, and the political environment.
    • Take a pleasant trip to a place full of beaches, water, music, culture, sun, the Panama Canal, fishing, boating and other diversions. 

     

  • What type of persons are excluded from this service?
    • Any person that talks about hiding money from the IRS, illegal activity or hiding money from their children when paying child support.  Any mention of these things and we'll drop you, as they say in America, "like a hot potato."

     

  • How do I start?
    • Contact G.D. Jalil in the U.S.,  phone (307)237.2580, protect@assetprofile.com
      • Ask questions.
      • Pick the name of the Wyoming LLC.
      • Full contact information:
        • Guillermo D. Jalil
        • 123 West First Street, Suite 675, Casper WY 82601
        • PO Box 2264, Casper WY 82602
        • office (307) 237.2580, fax (702) 920.8824, cell (484) 256.4563
      • The LLC is filed and forwarded to you immediately.
      • Pay G.D. Jalil $500.00 for his services
        • Address the check or money order to:
          • G.D. Jalil, PO Box 4161, Reading, PA 19606
      • You'll receive a Wyoming LLC in the mail with an aggressive operation agreement and promissory note.  In addition, mail forwarding and virtual office services are provided.
    • Contact Roberto Guardia in Panama City, phone + 507.263.3917, rig@orcag.com

      • From the U.S., call 011.507.263.3917

      • Ask questions.  The attorney will also have questions for you.

      • Obtain the name of the banks for which you are applying.

      • Negotiate date of arrival, possible date of the bank interview, and the date of departure.

      • Work out any other concerns or questions.

      • Pick the name of the Panama LLC.

      • Full contact information:

        • LIC. ROBERTO I. GUARDIA R.

        • ORILLAC, CARLES & GUARDIA, Abogados-Attorneys at Law

        • Ave Samuel Lewis y Calle 58

        • P.H. Torre ADR Technologies, Piso 7, Office 7-A

        • Apartado 0816-04373

        • Panama 3, Republica de Panama

        • E-mail: rig@orcag.com

        • Website:  http://www.orcag.com

        • Office:  507.263.3917, Fax:  507.263.3924, Cell:  507.612.5429

    • Prepare for the bank interview.

      • It's recommended that you obtain two bank references that are addressed to the name of the banks for which you are applying.  A general "To Whom It May Concern" letter won't do.

        • The bank reference letter must state the following:

          • Your name, or company name

          • Date the account was opened

          • The number of digits that reflect the average balance of the account.

            • At least four (4) digits.

          • The account is in good standing

      • You must have at least one bank reference and one reference from your attorney or accountant.

      • The references must not be 30 days days old, or more, for the bank application.

      • Bring the Wyoming LLC documents with you to Panama.  You may need them for the Panama bank interview, if they ask to see them.

      • The Panama bank is concerned about tax evasion and money laundering. 

        • The bank's concerns don't apply to you because you're disclosing everything to the US authorities and on your income tax return.  There's nothing to for the bank to be concerned about.

    • Prepare for the trip.

      • You don't need special electrical extensions because everything is up to US standards.

      • People speak English but you should learn a few words of Spanish to be polite.

      • Contact your travel agent and schedule your trip, or do it online.

      • Bring cash for the bank deposits and to pay the attorney.  The rest of the funds can be wired in.  If you carry $10,000 or more in negotiable instruments on your person, then you'll need to declare it on customs forms.  Not declaring the funds, when more than $10,000 can lead to the confiscation of the entire amount on your person.

      • For every day you intend to stay in Panama, bring $40 in $1 bills for taxi service, lunch, and other low cost items.

      • Credit cards are accepted everywhere.

      • Don't make the bank deposit in traveler's checks.  Banks charge a fee for this service.

      • Visit PanamaG.com for tips on Panama travel.

    • What to expect.

      • Fly into Panama City's Tocumen airport.   Mr. Guardia's liaison will meet you at the airport and retrieve your luggage.

      • Formalities at the airport are handled according to the laws of Panama.

      • You're transported, with the liaison, to your hotel.  Check in and bring everything for the appointment with the attorney.

      • Meet the attorney.  Compete part of the bank application.  Sign the memorandum of understanding.

      • Pay the attorney for his fee, incorporation fees (Panama LLC), bank application and the virtual office services.  $4500.00