I’m helping a family member who is interested in forming an LLC to hold his mineral interests. What type of advisor does he need?
He’s heard the good folks at NARO mention an LLC structure, but he really doesn’t understand what that means for him. He needs someone who can explain the pro and cons of the LLC, help him make the right elections for the LLC structure for today and also for the future after his death. He is also needing advice on the tax consequences of an LLC and how it can be set up with tax efficiency in mind. Who should he consult with, a business attorney, tax attorney or CPA? Or someone else?
The majority of his interests are in Arkansas, so I was thinking that finding an advisor in AR makes sense as they likely have expertise with the mineral industry. Is this necessary or am I over thinking? His home state of Michigan has little expertise in this area.
If finding an Arkansas advisor is the best course, does anyone have any recommendations?
Decisions need to be made in conjunction with advice of his current estate attorney and CPA. Many use an LLC to hold minerals as means to avoid filing probate in others states and filings in multiple counties since ownership passes as shared. It will not avoid need file return to report royalty income to each state such as AR and to include in Michigan taxes. He needs to decide in which state to incorporate and will need to file deeds to assign minerals to LLC in all county records in every state where he owns the minerals to be assigned. All states of incorporation have some required annual return or form for LLC and most have annual fee. There is a big difference between single member LLC (report on personal return) and multiple-owner LLC which has to file federal return. Either way a timely election has to be made as to tax treatment. CPA will do this in first year. I suggest you and relative research online about LLC to have better basic understanding of pros and cons and estate and tax issues, before incurring hourly legal and accounting costs. That will enable you both to ask specific questions.
Thanks for your input. All of the items you mentioned are on my radar from my research, so I must be on the right track. I’m at the point that I either know enough to be dangerous or I just don’t know what I don’t know, hence the desire to consult a professional.
Hire a CPA! Its the best investment anyone can make. I have 7 LLC’s that Ive set up on my own with my CPA overseeing them. They are very easy to set up, all you have to do is click buttons, register with the state and get a tax id number for banking purposes. Your CPA can do this for a charge, Im just old, bored and cheap, so I created them on my own but Im a horrible accountant so give all my stuff to my CPA every month to oversee