Comment on Do you need separate entity for monitoring July 7, 2023

KEN KIRSCHENBAUM, ESQ
ALARM - SECURITY INDUSTRY LEGAL EMAIL NEWSLETTER / THE ALARM EXCHANGE
You can read all of our articles on our website. Having trouble getting our emails? Change your spam controls and whitelist ken@kirschenbaumesq.com
************
Comment on Do you need separate entity for monitoring
July 7, 2023
*
Comment on Do you need separate entity for monitoring from article on June 15, 2023
*
Ken,
          Commenting on the article on June 15, 2023 from “Barry” who asked about “Selling” his monitoring accounts to a new LLC. His intent was to keep a “litigation happy person” from getting to his most valuable asset, his accounts. Your advice was absolutely correct and, as you mentioned, if he has a claim it would probably be due to monitoring. I have seen numerous claims due to monitoring issues that have been in the millions of dollars, but I have rarely seen one from install or service that even met the insurance deductible.
          If Barry wants to protect his company from a litigation happy person he should get more insurance. Setting up a new entity for this purpose may sound good to a layman, but the chances of the litigious person, not having a lawyer are pretty slim. Playing “legal games” with lawyers is not a good idea. There are some other issues with a plan like this:
          When he “sells” the accounts to the other entity, it will be a tax event. 900 accounts can be worth $1million, and the tax on this would be around $350,000; does he have this much lying around?
          He will now have a monitoring company that earns 75% to 80% net income and a sales/service company that barely breaks even. If he starts playing accounting games to move the money around, it will cost a lot in accounting fees (way more than more liability insurance), and, the two companies will look a lot like one company.
          When the Plaintiff’s start looking for the pot of gold they are going to see the monitoring company and go after it.   It won’t even take long because, if he is the sole member of the LLC, he would report the income from both companies on his personal tax return.
          The two LLCs may look like what the IRS calls a “Sham” and, even if he has done nothing wrong, he may get a visit from a Revenue Agent.   That can be expensive in accounting fees alone; again, way more than additional liability insurance.
          With all of the “Takeover” companies who go after customers with existing contracts, do you really want to send a letter to your customers that could confuse them and set your accounts up to be taken over by another company. If you guard against this by giving your separate “monitoring company” the same name, the corporate veil is gets thinner.
          I get calls like this all of the time. Most of the time the “litigation happy person” is a lender, taxing authority, or an entity that is trying to collect on something. I explain that these entities weren’t born yesterday, and, not only will they bust through this scheme, there may even be criminal penalties for engaging in tax collection shams. We negotiate with tax collectors every day. They typically don’t want to put a company out of business, and they don’t want to carry your assets out the door. They typically have 10 year periods to collect the taxes, and will allow payment plans. If you try to trick them, a lot of these tools go out the window.
   Mitch Reitman
   817 698 9999 XT 101
Reitman Consulting Group
Fort Worth, TX
http://www.reitman.us
*
Response
***********
          Pretty simple formula to stay out of trouble:
* a good lawyer
* a good accountant
* good contracts
* plenty of insurance
* good employee training
* required licenses
* a little luck
****************
STANDARD FORM AGREEMENTS: To order up to date Standard Form Alarm / Security / Fire and related Agreements click here: www.alarmcontracts.com
*
CONCIERGE LAWYER SERVICE PROGRAM FOR THE ALARM INDUSTRY - You can check out the program and sign up here: https://www.kirschenbaumesq.com/page/concierge or contact our Program Coordinator Stacy Spector, Esq at 516 747 6700 x 304.
*
ALARM ARTICLES:  You can always read our Articles on our website at www.kirschenbaumesq.com/page/alarm-articles  updated daily ***
THE ALARM EXCHANGE - the alarm industries leading classified and business exchange - updated daily.
https://www.kirschenbaumesq.com/page/alarm-exchange
*
Wondering how much your alarm company is worth?
Click here:  https://www.kirschenbaumesq.com/page/what-is-my-alarm-company-worth

Getting on our email list / Articles archived:
Many of you are forwarding these emails to friends or asking that others be added to the list.  Sign up for our daily newsletter here: Sign Up.
********
Ken Kirschenbaum,Esq
Kirschenbaum & Kirschenbaum PC
Attorneys at Law
200 Garden City Plaza
Garden City, NY 11530
516 747 6700 x 301
ken@kirschenbaumesq.com
www.KirschenbaumEsq.com