Tax Avoidance

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Tax Avoidance

“Anyone may arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” Judge Learned Hand.

The primary tax goal of every business in the United States is to avoid income tax. That’s our wheelhouse. That’s what we do. Both the GAO & the SBA reported that most businesses pay more tax than the law requires. Considering the size & complexity of the tax code, that’s not surprising. Especially in light of the fact that the top tax talent is recruited & hired by the Global 500.

Here are the tools we use.

  1. Tax Strategy Blueprint
  2. Asset Protection Strategies
  3. Intellectual Asset Strategies
  4. Business Re-Organization Strategy
  5. Interstate Tax Strategy
  6. International Tax Strategy

 

 

Asset Protection Strategies

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Asset protection is a set of legal techniques and a body of statutory and common law dealing with protecting assets of individuals and business entities from civil money judgments. The goal of asset protection planning is to insulate assets from claims of creditors without perjury, fraudulent conveyances or tax evasion. Wikipedia

Ellis has experience & expertise in asset protection. Everything revolves around state law. There are good states; and there are bad states. Some states are good in some circumstances and bad in other circumstances. We work in tax free states that have begun providing corporate & LLC offerings offer outstanding asset protection features.

Horror stories  

Protect What’s Yours

Asset protection is comprised of tax planning strategies and legal tools used for protecting assets from lawsuits and claims of creditors. For example, asset protection trusts are some of the most powerful tools that shield wealth from lawsuits. Here is an example of the process.

    • Determine acceptable risk levels.
    • Develop a plan

First, a professional will review your assets, risks and financial goals. Then, the planning process typically includes establishing structures, such as trusts and companies to create legal barriers between creditors and you, as the debtor. The strategies often use a combination of business and estate planning tools.

A properly established plan performs three primary functions: lawsuit deterrence, settlement negotiation leverage and/or placing your assets out of the reach of a litigation. 

 

Intellectual Asset Strategies

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To achieve tax and safety goals, we recommend holding all your intangible assets such as trademarks, patent rights, domain names, web sites, company name, trade name, trade secrets, etc. in an LLC or several LLC’s.  By quietly transferring trademarks, patent rights and other intangible assets to offshore or out-of-state companies, global businesses can cut their tax bills dramatically.Intellectual Assets

Recognize & protect your intangible assets.

Most privately owned businesses don’t even know what intangible assets they own. If you ask them, they will inevitably leave some out. Every business should inventory all their intellectual assets. if they aren’t documented, document them. Assign a market value to them.

Why?

Consider this possibility. Your operating company gets sued and you lose a multi-million dollar lawsuit. The next day, you close down that company and incorporate another operating company with a generic name. Then you license all the intangible assets to them, including the business name and start conducting business like nothing happened.

Because, believe it or not, nothing did. Follow our advice and this is possible. 

The best business structure for the chaotic, tumultuous 21st Century is a combination of multiple companies, each serving a particular purpose. Intangible assets, such as patents, copyrights, trade secrets, digital properties & web domains, should be put in an a single purpose LLC where they’ll be safe from lawsuits, and licensed to the operating company.

Here it is.

We protect your business and your vital business assets through business restructuring and intellectual property rights. This approach has the ability to preserve your business and all its vital assets through serious threats to survival.

The Act that made it all possible.

“Today, President Obama signed the Defend Trade Secrets Act of 2016 (“DTSA”) into law, bringing trade secrets alongside trademarks, copyrights and patents as intellectual property rights protected under federal law.” May 23, 2016. This has been tested in a court of law, and it worked.

CFO Services

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A virtual CFO (Chief Financial Officer) is an investment in the growth of your company. As every business grows, something happens. The more they grow, the more background, bureaucratic chores consume your time. If you don’t get control of this trend, it will eventually swamp your business & your dreams along with it. Outsourcing frees your time to focus on achieving key core business goals and planning. We pull the busy work off your plate.

This is why you went into business in the first place instead of just getting a job. We pull the hated, boring, tedious but necessary functions off your hands and give them to people on our staff that love doing it. Believe it or not, there are people who love doing it. You don’t love doing it. You should fire yourself and hire us. That will make us both happy.

In addition, our qualified CFO talent is available for advice & CFO consultation. He or she is a crucial member of your strategy team. 

We have significant experience as CFO with Fortune 500 companies. 

Virtual Chief Financial Officer

CFO is an outsourced service provider offering high skill assistance in financial & administrative requirements of an organization, just like a chief financial officer & his staff do for large organizations.

Ellis experienced CFOs, executives, accountants & tax professionals perform administrative, accounting & payroll functions can help owners, management, and board members solve financial management & operational issues by providing unique guidance and advice. See business services.

You can depend on experienced, high-level professionals to provide the financial insights you need to meet the challenges you face. We provide all the back room services you need; as well as advice, explanations & recommendations.

    • Financial strategy
    • Short & long term forecasting
    • Financial systems strategy & design
    • Budgeting
    • Projections
    • Facilitating & supporting financial reporting
    • Raising capital
    • Interim CFO services
    • Cash flow analysis & restructuring
    • Renegotiating vendor contracts
    • Restructuring client contracts
    • Ensuring pricing is aligned with company & industry trends
    • Analyzing commission structures
    • Supply chain management
    • Attributing costs to revenues
    • Accounting & bookkeeping
    • Payroll
    • Financial Statement
    • Bill pay
    • Collections
    • Data driven management
    • Capture & interpret critical operating data
    • CFO service
    • Streamline & simplify
    • Cash management
    • Remote office
    • Management financial statements
    • Compiled financial statements

Tax Controversy

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Getting Audited

We may be the least audited firm in the country

A convergence of global forces has resulted in a substantial increase in the number and size of tax audits, assessments, and disputes with revenue authorities locally, nationally & worldwide. Virtually no area of tax enforcement has escaped this phenomenon, which includes direct taxes, indirect taxes, penalties, fees & direct  taxes (e.g., VAT and GST, domestic and international) , as well as specialist areas such as customs, tax fraud, and white collar tax issues. This new situation places a premium on audit and dispute prevention techniques because local, national & multinational companies are under constant competitive pressure to structure business operations effectively and efficiently. Larger companies need to develop coordinated approaches to audits and disputes, adopt preventative measures (such as pre-filing rulings and enhanced relationships with certain revenue authorities), and leverage both traditional and new alternative dispute resolution techniques in order to achieve the best possible results.

Knock on wood, we don’t get audited much. We may be the least audited firm in the country. We’ve never had a bad outcome on audit. The last audit we had, three years ago, there were no changes.

If and when you get an audit letter, send it to us and we will handle the entire audit. We may allow the IRS to have an initial interview with you, but that’s it. After that, we won’t allow any contact between you & the IRS. We’ll keep you in the loop and pass on any settlement offers they may make. This approach has always worked well for us and our clients. It’s still the best approach.

 

Outsourcing

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Ellis offers a full menu of outsourcing services, including CFO services.

We bring expertise in the full array of business services to solve your business problems efficiently, effectively &  affordably. The two main reasons that organizations decide to outsource are to reduce costs and to free up the time to focus on achieving your core business goals and planning. We pull the busy work off your plate. 

We are experts at outsourcing. We have been doing it for two decades. We’re experts at every facet of running a businesses in hundreds of trades & professions.

Business Services

    • Business Services
    • Bookkeeping
    • Accounting
    • Payroll
    • Financial strategy
    • Short & long term forecasting
    • Financial systems strategy & design
    • Budgeting
    • Projections
    • Facilitating & supporting financial reporting
    • Raising capital
    • Interim CFO services
    • Cash flow analysis & restructuring
    • Renegotiating vendor contracts
    • Restructuring client contracts
    • Ensuring pricing is aligned with company & industry trends
    • Analyzing commission structures
    • Supply chain management
    • Attributing costs to revenues
    • Accounting & bookkeeping
    • Payroll
    • Financial Statement
    • Bill pay
    • Collections
    • Data driven management
    • Capture & interpret critical operating data
    • CFO service
    • Streamline & simplify
    • Cash management
    • Remote office
    • Management financial statements
    • Compiled financial statements

Business Services consist of all the backroom administrative services that are essential for every business. We take care of everything so you can devote 100% of your time to growing your business and carving your mark on the universe.

Did you know that the data of 25% of U.S. companies is believed to be inaccurate?

We have a reputation for excellent, responsive client service, and for handling all the accounting, payroll & administrative aspects of relatively large companies, including large startups. Startups, especially large startups, move fast and break things that get in their way. They are unique challenges, and we have mastered them.

Doing administrative services poorly can be the kiss of death. We know companies that failed because they did not do a good job of handling administrative functions. We had a client that came to us too late to save them, but they could have easily been saved had they come to us a year earlier. Don’t wait until it’s too late.

 

Tax Strategy Blueprint

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STRATEGIC TAX REDUCTION PLAN

 

What is a Tax Strategy Blueprint and why do I need one?
Answer: It’s the foundation of your financial life.  

“Anyone may arrange his affairs so that his taxes shall be as low as possible. He is not bound to choose that pattern which best pays the treasury. There is not even a patriotic duty to increase one’s taxes.” This is the essence of tax planning. Judge Learned Hand.

Tax Strategy Blueprint

The Tax Strategy Blueprint creates a clear, proactive, strategic tax avoidance plan for avoiding tax legally. It’s specifically customized for you and your business. It is definitely not one-size-fits-all. Every business is different, but a fundamental goal of every business should be to maximize income and minimize outflow. The easiest way to turbocharge profit is to avoid wasting money on unnecessary expenses, such as paying more tax than requires.

 

THERE ARE CPA’S & there are cpa’s.

The great majority of CPA’s & other tax professionals do not know how to do this level of tax planning for two reasons.

 

  1. First, because most of the truly competent tax professional are hired by the Big 4 and the Global 1000.
  2. Second, because they are trained how to fill out tax forms from your historical data, but not how to proactively plan your taxes.

Very few tax professionals do actual proactive tax planning. They don’t know how, plus they work in the past, not the future, preparing tax returns for what you’ve already done, not where you are right now, or where you will be the future. And the way they do that is SALY, the Same As Last Year. To leverage the benefits interspersed throughout tax law requires proactive forward thinking, & a Strategy Tax Reduction plan.

 

LEGAL, ETHICAL, MORAL

 

U.S. tax law is 250,000 pages of mystery. yes it does levy tax, but it also tells you how you can avoid tax by re-arranging your affairs to make your taxes as low as possible. But most tax professionals and most tax payers miss the mystery in their effort to prepare tax returns. Very few tax professionals know how to use the entire tax law to save taxes.

They are like the young man who left home to make his fortune, who returned home years later to find a diamond mine where his farm used to be.

 

Every tax reduction strategy we employ is legal, ethical, and moral; right in the middle of U.S. tax law. We avoid the dreaded grey areas because that’s the purview of incompetent tax professionals because that area is audit bait.

 

THE SAVINGS 

What could you do if you kept more of your money? $20,000, $50,000, $100,000 in tax savings a year.

GUARANTEE
If we can’t save you more than we cost, we’ll reimburse the difference. That means you’ll never pay more we save you. It doesn’t get easier than that.

 

IT’S NOT WHAT YOU MAKE, IT’S WHAT YOU KEEP 

Every minute you wait is more of your hard-money that you will never see, overpaid in taxes you don’t legally, ethically, or morally owe, all because you don’t have a Strategic Tax Plan!

 

YES! I WANT A ‘STRATEGIC TAX PLAN’ – SHOW ME HOW!

Schedule a Talk

The GAO reported that most businesses pay more tax than the law requires at rates higher than the global 500.

The SBA reported that only one in 10,000 startups every have more than 100 employees. 

Statistics tell us privately owned businesses pay more tax than then the law requires; & more tax at higher rates than the Global 500.

Upload last year’s tax returns to out drop box & we’ll tell you how much you overpaid, why it happened & what to do about it.

We will cut your tax to the legal minimum by manipulating your circumstances (completely & thoroughly legal). Easily measured concrete results. Every dollar we save drops straight to the bottom line as another dollar of cash, profits, working capital & competitive advantage created out of thin air. If we don’t cut your tax, we’ll reimburse the difference. 

Why firms & their owners pay more tax than the law requires: The Definitive Study of Human Performance.

 

 

International Tax Strategies

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International trade is the exchange of capital, goods, and services across international borders or territories. In most countries, such trade represents a significant share of gross domestic product (GDP). In international tax strategies, we take advantage of tax rate differentials among 171 countries to cut income tax to the legal minimum. There are a wide variety of tax rates among nations & other jurisdictions that can be mined for substantial tax savings.

International tax advantages

With any system of taxation, it is possible to shift or re-characterize income in a manner that reduces tax. However,  internationally, it’s not as simple as simply transferring money from company to company,. Transfer pricing rules come into play. (We don’t recommend those approaches.) But if you have a valid business purpose, everything becomes possible. Agreements among governments (treaties) often provide a framework of what is subject to taxation, and what is not. In addition, most tax treaties provide for at least a skeleton mechanism for resolution of disputes between the parties.

Most countries in the world levy income tax on both individuals & businesses. Many countries have tax treaties with the United States that govern how the country will tax U.S. based companies or citizens. However, there are a number of tax havens that either don’t tax income or tax it more leniently than other world governments. These are know as ‘Tax Havens‘ World systems of taxation vary widely, and there are no broad general rules. Plus We mix & match 200 countries with different tax rates for overall tax savings. We do the same thing multinationals do.

This has led to a cottage industry of foreign tax shelters of overseas business income.

We explore tax saving opportunities provided by differences in tax rates among 200 countries. There are a wide variety of tax rates & methodologies among nations that can be mined for tax savings. We explore maneuverability opportunities related to international commerce.

How U.S. tax reform rewards companies that shift profit to tax havens. This is the approach we basically use. Nothing tricky here. But, you don’t ‘want to make a mistake, or (2) leave money on the table. This is nowhere for lesser talents to be fiddling around.

Existing Tax Shelters

Most of the Global 5000, including Apple, Google & Caterpillar elected to do something different. Why the did that when the strategy immediately above works like a charm, who knows. They aren’t talking. They utilize different foreign tax shelters that have kept them continuously in hot water. Caterpillar absolutely pushed the envelop to far. Apple got it right but the EU retroactively changed the rules and came after them. Apple sat down the the Irish government and signed a contract that what they intended to do was legal. But the EU recently got involved and sued Apple & Ireland for back taxes. And as everyone knows, governments win 90% of the time. Apple has been all over the news recently because of their Double Irish & a Dutch Sandwich tax strategy. This is a transfer pricing strategy.

This points out two primary lessons.

One. Don’t push the envelop. Stick with the tried & true approaches that have proven successful for years, and are even shored up in recent tax reform.  Two. Don’t be a multinational.

Competitive Advantage

International taxation can become a massive competitive advantage. Consider Apple. Although they are litigating right now,  Apple was on the verge of bankruptcy when Steve Jobs returned in 1997. He laid off 2/3 of the staff and cut cut costs to save Apple. I don’t know if he was responsible, but that is about the time the Double Irish tax strategy was implemented. From then until 2011, 14 years later, they were continually profitable until Apple became the most valuable company in the world. They have continued profitable and most valuable company until this day. Apple even became the first trillion dollar company for a bit in 2018.

I believe Apple is getting screwed by the EU. But that’s not uncommon. Dolce & Gabanni similarly got screwed, but they won in court. Hopefully Apple will too.

About the EU

The EU is deadly opposed to any favorable tax treatment for businesses or individuals. However, the primary tax device among EU countries are the Value Added Tax, which is somewhat like a sales tax that is levied against anything sold in the EU. Income tax is not a significant business tax in the EU. So it’s generally not a problem for companies. However, Apple specifically used the Double Irish tax strategy to avoid US taxes, not EU taxes. Then ten years after the fact, EU brought a tax avoidance case against Apple. From what I can tell, they are attempting to force Apple into double taxation. Although Apple has delayed bringing overseas profits back home because of high US tax rates, they are still subject to US tax. If the EU is also allowed to tax the same profits, that will make Apple subject to double taxation. The Wall Street Journal doesn’t thing Apple can win the case. The case in ongoing.

Are you immigrating?

We are experts at helping businesses immigrate into the U.S.where they have to deal with a more complex tax environment. No other country has the complexity of 50 different state income taxes. Plus sales tax is an oddity in the world, but each state, city & various special taxing districts in the United States can levy sales tax on a sale. This is easily handled, but it can be daunting to a foreign company not expecting the complexity.

We help foreign companies immigrate to the US. Turmoil in other countries, notably South Africa, combined with our current tax atmosphere is making the US look very appealing. Especially if they are doing business internationally. US taxation from sales tax to state Income tax and Federal income tax leaves them shaking their heads. Many don’t have an international tax strategy in place either. These companies can save a tremendous amount of headaches and taxes by using Ellis to navigate US tax issues. If you refer them to us, we will take good care of them. And in the process you can increase your influence as a trusted adviser or savvy businessman.

Biz Re-org Strategies

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Ellis CPA is one of America’s experts in business reorganization, including recommending entity type and state or country of organization for best asset protection and tax advantage.

Business Re-organization

Most businesses are not structured to their best advantage. Most privately owned businesses have only one company., which often hinders their success. But Global 500 companies have several, sometimes hundreds, of subsidiaries to achieve all their business goals. One of my clients is VP of tax for a Global 500, and her brother jokes that she’s always creating new foreign subsidiaries. They are the tools of her trade.

Reorganizing the business to protect assets & cash flow & cut taxes will eventually become essential for success in the chaotic, tumultuous 21st century.  

See the following list Global 500 companies with links to their SEC filing.

Many of them have hundreds related companies. Why do they have so many? They aren’t just for show. Don’t add companies without a purpose in mind, but many businesses should have related businesses owned by the same owners. Generally speaking, your ideal structure will involve more than one company.

Tax Avoidance Purpose

The S corp is the best organization for tax purpose. Income earned by an LLC is subject to three taxes: income tax, FICA tax & Medicare tax. Income earned by an S corp is subject only to the income tax.

A client’s business was hit with a nuisance suit. They mounted a defense, which was just a knee jerk reaction.  When they told me about it, I told the principals since their vital business assets were in another company, the company owned nothing worth incurring a lot of legal fees to defend. I advised them talk to their attorney about abandoning the company. He agreed.  Problem solved. But had they been doing business under their previous structure, they would have been if for a long and expensive lawsuit.

Asset Protection Purpose

If you personally lose a lawsuit, you could lose everything you own.  But if your corporation loses a lawsuit, only corporate assets are subject to forfeiture. And even that can be protected with more entities.

Business Organization Purpose

We have organized hundreds (thousands?) of businesses from initial startups, to complex businesses, including a significant number of companies needing to be re-organized to do business in the chaotic 21st century. We create all the companies, recognize the and define the operating relationships. We utilize every entity in the book, but primarily the big 4, partnership, LLC, S corp., C corp.

We are partial to forming companies in states that specialize in businesses and/or asset protection. Among them are Wyoming, Delaware & Nevada. Neither of those states are entirely tax free.

Business Re-org Purpose

“Restructuring is the corporate management term for the act of reorganizing the legal, ownership, operational, or other structures of a company for the purpose of making it more profitable, or better organized for its present needs.” (Wikipedia.)

To meet their full potential, 99% of successful businesses restructure at some point. It’a almost impossible to avoid. The structure selected at founding is seldom adequate for a thriving business.

Caterpillar is a good example. They regularly re-organize. I can’t help but wonder if more businesses would be more successful if they followed the Caterpillar example. This is not the first time Caterpillar as restructured.

GE is also restructuring. This isn’t their only bite at the apple, but this reorg may determine GE’s future.

 

Interstate Tax Strategies

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Interstate taxation is based on the the concept of NEXUS.  Nexus is typically created for income tax purposes if an entity derives income from sources within the state, owns or leases property in the state, has employees in the state in activities that exceed “mere solicitation,” or has capital assets or property in the state.

State Income Taxation

Northwestern States held that a state could constitutionally impose a nondiscriminatory, fairly apportioned net income tax on an out-of-state corporation engaged exclusively in interstate commerce in the taxing state. “For the first time outside the context of property taxation, the Court explicitly recognized that an exclusively interstate business could be subjected to the states’ taxing powers.” Thus, in Northwestern States, foreign corporations that maintained a sales office and employed sales staff in the taxing state for solicitation of orders for their merchandise that, upon acceptance of the orders at their home office in another jurisdiction, were shipped to customers in the taxing state, were held liable to pay the latter’s income tax on that portion of the net income of their interstate business as was attributable to such solicitation.

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Nexus, also called “sufficient physical presence,” is a legal term that refers to the requirement for companies doing business in a state to collect and pay tax on sales in that state. For example, if you sell goods or services in Los Angeles, you must file and pay California state taxes.

Sales tax nexus is different for income tax nexus.

Interstate trade

Interstate trade is the exchange of capital, goods, and services across state borders. In the U.S, such trade represents a significant share of gross domestic product (GDP). In interstate tax strategies, we take advantage of tax rate & regulatory differentials among 50 states, counties, cities and other tax & regulatory jurisdictions to cut income & sales tax to the legal minimum.

Ellis & Tax Saving Opportunities

We explore all tax savings opportunities by mixing and matching tax rates among 50 states. The goal is avoid nexus is high tax states and establish nexus in tax free or low tax states. Historically, we have saved income tax for 100% of our  our interstate clients. When that happens, sometimes the tax savings are enormous.

The Commerce Clause describes an enumerated power listed in the United States Constitution (Article I, Section 8, Clause 3). The clause states that the United States Congress shall have power “To regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes. 

 

The Fifth and Fourteenth Amendments to the United States Constitution each contain a due process clauseDue process deals with the administration of justice and thus the due process clause acts as a safeguard from arbitrary denial of life, liberty, or property by the government outside the sanction of law.