Lesson 3 – What is a Pass Through Entity
The 2D Pass Through Entity Structure is made to separate two different operations. For example, someone is going to sue you and your fashion company; your production company is not affected and can be more stable. The person is limited to sue only the fashion company, in which may be the case. That same person will not have knowledge that you also own a production arm of the fashion business or can be completely clueless about the production which can then be making millions by producing other people’s clothes. This works best even if you are not manufacturing your own fashion products. You will just be transacting with a manufacturing company under Swift Production, LLC. As a result, instead of claiming $63,750 as income for all the expenses because the production company
spends capital to purchase its production company materials, it will spend its capital on purchasing products as a hybrid entity.
The question becomes how you are going to pay the taxes. Remember, you still owe your company a fee whether it is a holdings, consultant, management, non-banking, or investment company. The advantage is that your Private Delaware Company is set up to avoid the day-to-day operation with the public’s own design income tax to collect public income from your other entities. The Delaware structured vehicle stays invisible to the eye of other companies that transact with your other entities of operations, not your Delaware holdings that’s based on privacy protection laws etc which are not a direct subject to income taxes. The Holding Company holds capital and contains assets that you manage for tax purposes.
“The Delaware loophole is based on one primarily element Delaware has no Intellectual Property Tax which is intangible assets meaning your Delaware Company loops around the income tax from income that’s pass from your state
operation company that your Delaware Company own by Intellectual procedures and investment holdings strategies”…Passive Income.
The entire taxes shift to the parent company which creates a tax bill for only
$11,400. But the Delaware Holdings that is owned by its private living trust is not subject to income tax either. Let’s say you had a fashion business that sold 5000 T-shirts at $50.00, and your company is receiving $250,000 revenue yearly. After an estimated 65% expense, your company’s net operating income (NOI) is
$87,500, with a worst corporate tax of 39% that costs you $34,25 in taxes.
Now, if you set up a production company etc that would be charging your Fashion Company about $12.75, which the covering is added in sales tax, shipping and handling etc. for your product sales of delivery.
Even if you don’t produce your products, your production company will be doing business with your manufacturers/vendor via separating sales and production company; let’s say your production operation becomes more profitable than your fashion operation separate (entities) with their own business models. And most people won’t know you and your fashion business owns; control a production
company by an anonymous Delaware shell company, your name won’t show up on the public records for subsidiaries of the Delaware parent company, or on the Delaware company you set up in Delaware that owns these entities making you more anonymous by the invisible structure for more protection.