October 17 2007 Webinar How to Operate in

October 17, 2007 Webinar “How to Operate in a Partnership and what to do to Protect Yourself” Mathew N. Sorensen, J. D. “Eight to be Great!! Lessons t Live by for Financial Security and independence” S. James Park, J. D. , LL. M. www. kkolawyers. com 856 South Sage Dr. , Suite 300, Cedar City, Utah Telephone 435. 586. 9366 / Facsimile 435. 586. 9491 © Kyler Kohler & Ostermiller, LLP 2007

Instructor Notes Disclaimer- Although the information contained in this Presentation may be extremely useful and helpful, please understand that the presentation of this information does not constitute an attorney-client relationship. Moreover, the information contained in this Presentation is for general guidance only. It is strongly recommended that each individual or entity obtain their own legal advice, particularly applied to their own set of circumstances, facts and specific situation. Kyler Kohler & Ostermiller, LLP is not responsible or liable for any advice that is taken and applied in a situation without direct consultation and representation specific to that individual’s or company’s needs. © Kyler Kohler & Ostermiller, LLP 2007

BENEFITS of PARTNERSHIP -The primary benefits of partnerships and joint ventures is that you bring strengths together which allows for greater possibilities. What can partners offer? Credit Cash Services Knowledge Contacts

Concerns in Partnerships I. Don’t get taken advantage of and do you due diligence. Top Ten List: 1. 2. 3. 4. 5. Negotiate for the worst case scenario. All partners should realize that the business venture may not have complete success and should thus have a contingency plan if things don't turn out as planned. Get your agreement in writing and reviewed by an attorney. Make sure someone is looking out for your best interest. An ounce of prevention can be worth a pound of cure. Get "security" if you are investing cash. Don't play "banker" and fail to ask for the same terms a venture capitalist or banker would. Have a plan for YOUR investment if the business doesn't turn out. Are you willing to take all of the risk? If your credit is on the line with a mortgage or loan on the business/investment, make sure you have a plan for payment of the loan that YOU are in control of. Don't leave your credit rating in the hands of someone else. Be involved and make sure the payments on any debt you are guaranteeing is being paid. If your partner/promoter says that you don't need an attorney, a major red flag should be going off. That is probably when you need an attorney the most.

6. 7. 8. 9. 10. Do your Due Diligence on your partner(s) and the project/investment. Don't take anybody's word for it that the project is there, in good condition, and the numbers are accurate. Be cautious of cash out closings in real estate projects where your debt or your property is facilitating the transaction. Understand where the money is coming from, why, and where it is going, TO THE PENNY. Don't be too trusting. If they say you have to move IMMEDIATELY, that is the time to slow down! It doesn't mean the deal is bad, it just means be careful. Remember, there is always another deal out on the horizon. You don't have to rush for this one. Have a specific plan for service partners. If you have a partner that is doing all the work and not providing cash or credit, that's okay; just have a clear plan of what they are doing and why. Have checks and balances with rewards and consequences. Don't give your partner a blank check for profit and ownership without holding him or her accountable. Be very hesitant to give out a Power of Attorney and the Manager/President of the company too much control without your supervision. It is very scary to give someone control over your money or decision-making. II. Your partners actions can be your actions.

Partnership Terms and Structure 1. 2. 3. 4. 5. 6. 7. Funds, Services, Credit Expenses Share of profits Management responsibilities Tax responsibility and benefits Title Exit Strategy

Buy-Sell Agreements Planning for the 4 “D”s Death Disability Divorce Departure

The Half-Truth What is Advertised: To Avoid Taxes

The Rest of the Story 1. To Avoid Taxes 2. 3. 4. 5. 6. for There is no Corporate Income Tax in Nevada (Only if you are a company doing business* in Nevada. If you are a Nevada company doing business in California or any other state, you will generally be subject to that state’s income taxes. ) a. Excise payroll tax imposed on each employer at a rate of 0. 63 of wages must be paid by employer quarterly. There is no Nevada Franchise Tax (If you are a Nevada company doing business in California or any other state, you will generally be subject to that state’s Franchise Tax. ) There are no Stock Transfer taxes on Corporate Shares. There is no Minimum Capitalization requirement in Nevada. There is no IRS information sharing. Corporate federal tax payable is only 15% on the first $50, 000 of net income ANYWHERE! * ‘Doing Business’ is a term of art and is defined differently in each state, but the underlying theme is the same. See the Miscellaneous slide what is NOT ‘doing business’ in Nevada.

The Rest of the Story 7. To Avoid Taxes There is no Personal Income Tax in Nevada (Only if you are a resident of Nevada. Example 1: Joe is a Nevada resident (his home and family is there) but he commutes to Cedar City to work M-F each week. Joe will pay Utah income taxes on 100% of the money earned in Utah. Example 2: Joe lives in Utah but works exclusively in Nevada. Joe will pay Utah income taxes as a resident of Utah. = There are no Income Tax Breaks if you are not living and working in Nevada.

Miscellaneous Doing Business: In NEVADA ‘Doing Business’ does not include: maintaining or defending any legal proceeding, holding board or shareholder meetings, maintaining bank accounts in banks or credit unions, maintaining offices for transfer, exchange and registration or corporations own securities, making sales through independent contractors, soliciting orders outside state and accepting them outside of state and shipping goods into state, creating or acquiring indebtedness, mortgages and security interstate in real or personal property, securing or collecting debts or enforcing mortgages and security interests in property securing debts, owning real or personal property, isolated transaction not completed within 30 days, production of motion pictures, transacting business as out of state depository institution.

CONCLUSION The most common reasons for incorporation – INCREASED PRIVACY, INCREASED ASSET PROTECTION and LOWER TAXES AND FEES – are not as advantageous as some promoters taut them to be for most people. Notwithstanding the above, Nevada certainly provides several protections for corporations, such as a higher standard for officer wrong-doing (much more than mere negligence as found in many states); increased liability protection for high-risk business activities; the appearance of an impenetrable shield; and ofcourse you generally will get the full package of promoted benefits if you are located in and do business in the great state of Nevada.

“Corporate Credit. Fact or Fiction Is it a Possibility for my business? ” Mathew N. Sorensen, J. D.

Why Corporate Credit? - Bad Personal Credit - Need more Credit - Multiple Owners - Separates Personal and Business credit NOT TO GET AWAY FROM PAYING!!

Corporate Credit Myths - Shelf Corporation - Easy to Obtain - Need a C-Corporation - Able to buy Personal use assets under the business name

Corporate Credit Facts - Corporate Credit Takes Significant Time to Earn. - Must have an actual business. - A business entity is required.

Corporate Credit Basics and Resources Major reporting agencies are: - Dun & Bradstreet. (www. dnb. com) - Experian Business Credit Services. www. businesscreditfacts. com - A business entity is required. - Must have vendors that report payment history under company.

For more information, please contact us at: KYLER, KOHLER & OSTERMILLER, LLP 856 South Sage Dr. , Suite 300 Cedar City, Utah 84720 Tel: 435. 586. 9366 Fax: 435. 586. 9491 www. kkolawyers. com