Frequently Asked Questions
Q. Does a Tribal LLC have to register with the state?
A. As with most questions you ask a lawyer, the answer is, “it depends.” A company is usually required to register to do business with the state in one of two scenarios: 1) If the company is actually conducting a business within the state (like a restaurant or retail shop), or 2) if the company owns real property within the state.
The tribe’s position is that Tribal LLCs are not required to register since a state’s sovereignty is less than that of a tribe, and therefore a Tribal LLC is a sovereign entity. Until each state makes a formal ruling on this matter, I suggest that if your Tribal LLC is conducting business or owns property in a state, that you register in that state; at least until their position is clear.
However, it is clear that there is no need to have a Tribal LLC, or any LLC or business, register within the state if the LLC merely owns personal property there. For example. If you set up an LLC as a holding company to just hold on to your assets, like bank accounts, brokerage accounts, beneficial interests in trusts, and other personal property, there would be no need to register that company within the state since it neither conducts business nor owns real property within that State. This is one reason why I am an advocate of owning properties in land trusts.
Q. Does a Tribal LLC have to pay taxes?
A. Once again, you get the lawyer’s answer, “it depends.” In fact, the answer to this question is very much like the answer to the previous question. If the company is required to register with the state, then it will likely be required to pay taxes as well.
This is kind of a trick question because even a standard LLC does not pay federal taxes (unless you elected to have the LLC taxed as a Subchapter C-Corp). Also, the tribe that issues your Tribal LLC imposes no tax. With an LLC the profit (or loss), for federal tax purposes, is reported on the individual member’s personal return. For federal tax purposes, a Tribal LLC is treated no differently than a state-issued LLC.
Q. Who should have a Tribal LLC?
A. Not everyone needs a Tribal LLC. However, if you are an entrepreneur or an owner of any type of business, if you have any real estate investments, or if you have assets you want to protect, then a Tribal LLC is for you.
Q. What is Asset Protection?
A. In today’s lawsuit-happy society, if you have money then sooner or later someone will sue you. If you make over two hundred fifty thousand dollars a year and are in a high-risk profession, then you are almost guaranteed to be in a lawsuit.
Asset protection is just that: protecting your financial and real property assets from the world’s legal pitfalls. Be it real estate you own or some extra income from that little piece of rental property you bought, or any sort of investment at all, you can be vulnerable to a few things that can bring your life and dreams crashing down, specifically lawsuits, taxes, and creditors.
If you own rental property or other premises that invites visitors, you could be sued if an injury occurs on the property. If you are a doctor, lawyer, or other professional, you could be sued simply because the client/patient/customer was unhappy with the outcome. Insurance is not enough to protect you from lawsuits. Asset protection involves a set of legal tools that protect your assets from lawsuits, taxes and creditors; in short, other people who want your money and will try to find ways to get it if they can.
Q. What is a Land Trust?
A. A land trust is a revocable trust that differs from other trusts in that the trustee holds both the legal and equitable title for the beneficiaries. The land is conferred to a trustee under an agreement that maintains full control and management of the property with the stated beneficiaries. The trustee deals with all matters of deeds, mortgages, and such, under the written direction of the beneficiaries, while the beneficiaries collect any income derived from the property, make any needed improvements, manage the property, and handle all rights of ownership other than that which deals specifically with the legal title.
This arrangement provides anonymity to the true owner of the property in question. No amount of looking through the public records office will reveal the beneficiaries of the land trust as his name simply does not appear. This can fend off a lot of frivolous lawsuits, or people looking for “deep pockets” to sue based on the number of properties they own. Privacy is also good for matters of keeping the competition out of your affairs; if they’re trying to keep track of what you’re up to by the properties you buy and sell then copy what you do, then this can keep them away. In essence, this kind of privacy takes the bull’s eye off your forehead. Creating a Tribal LLC to be the beneficiary of a land trust adds a further layer of protection.
