Business Accounts

Corporation

Corporate accounts are opened under the name and tax identification number of an incorporated business.

General Partnership

General Partnership accounts are opened under the name and tax identification of a general partnership. At least one partner can place trades on behalf of the partnership.

Investment Club

Investment Club accounts are opened under the name and tax identification of an investment club. At least one club member can place trades on behalf of the club.

Limited Liability Company (LLC)

Limited Liability Company accounts are opened under the name and tax identification of the LLC.

Limited Partnership

Limited Partnership accounts are opened under the name and tax identification of a limited partnership. At least one partner can place trades on behalf of the partnership.

Sole Proprietorship

Sole Proprietorship accounts are opened under the name of an unincorporated business that is wholly owned by one individual.

Individual and Joint Accounts

Individual

Individual accounts are owned by one person. If the account owner dies, the account is transferred to the owner's estate.

Revocable Trust

Revocable trusts are typically created for individuals, who are then referred to as grantors. The advisor manages the trust's assets for the grantors and designated trustees - on behalf of the trust's beneficiaries. The provisions of a revocable trust can be changed at any time. In addition, the trust can be cancelled.

The grantors of the trust receive income from the assets held in the trust. When the grantors die, the property passes to the beneficiaries immediately without having to go through probate court. However, estate taxes will have to be paid on the value of the trust property. In short, a Revocable Trust offers a lot of flexibility without the tax advantages of a Business Trust.

Joint

Joint accounts are owned by more than one person for the benefit of all account owners. You can only add a FOLIO Advisor client as a joint account owner.

If a client(s) is a non-resident aliens, all joint tenants must be a non-resident aliens who pay income taxes to the same country.

Joint - Rights of Survivorship

Each account owner owns the entire account. If an account owner dies, the person's share is equally distributed among the remaining account holders.

Joint - Tenants in Common

Each Account owner owns an equal percentage of the account. If an account owner dies, the person's share is transferred to his or her estate.

Joint - Tenants by Entirety

Account owners must be married. Each owns half the account. If an account owner dies, his or her portion is transferred to their spouse. The following states recognize Tenants by Entirety joint accounts:

Arizona
Delaware
Florida
Hawaii
Kentucky
Maryland
Massachusetts
Michigan
Mississippi
Missouri
New Jersey
Oklahoma
Pennsylvania
Rhode Island
Tennessee
Vermont
Virginia
Wyoming
Washington, DC

Joint - Community Property

Account owners must be married. Each owns half the account. If an account owner dies, his or her share is transferred to his or her estate. The property does not automatically transfer to the spouse. The following states recognize Community Property joint accounts:

Arizona
California
Idaho
Louisiana
Nevada
New Mexico
Puerto Rico
Texas
Washington
Wisconsin

Retirement Accounts

Individual Retirement Account (IRA)

IRAs are individually owned accounts with tax incentives that encourage saving for retirement. IRA accounts have strict rules for contributions and distributions. You can contribute $3,000 a year to a Traditional or Roth in 2003, $4,000 in 2005 and $5,000 in 2008. Typically, distributions or withdrawals from an IRA account before the owner reaches 59 ½ years of age are subject to a tax penalty.

Currently, you cannot open an IRA account at FOLIO Advisor for a client who is a non-resident alien.

Traditional IRA

In a traditional IRA, contributions and earnings are not taxed until the owner takes distributions out of the account. Contributions may be tax deductible. Distributions, usually taken during retirement when the owner's income may be lower, is in most cases taxed as income.

Account withdrawals made before the owner reaches 59 ½ years old are generally subject to a 10% early withdrawal penalty.

IRA Rollover

Individuals changing jobs can use this account to transfer assets from their previous employer's retirement plan to a new IRA Rollover account. If proper procedures are followed, no tax penalty will occur.

Roth IRA

In a Roth IRA account, contributions to the account are not deductible. Withdrawals are not taxed as long as the owner meets the program's requirements.

Money cannot be distributed penalty-free from a Roth IRA until the account has been open for 5 years.

SEP-IRA (Simplified Employee Pension)

A SEP-IRA is an employer sponsored retirement plan mostly used by sole proprietorships, partnerships, and small corporations. Contributions to a SEP-IRA can only be made by an employer and are not considered compensation for the employee. Contributions and earnings are not taxed until the owner takes distributions out of the account. LIke a traditional IRA, withdrawals can be made anytime subject to ordinary income tax and a 10% penalty for early withdrawals (currently any withdrawal made before 59½ is considered early). Contact your employer to find out if you may be eligible for a SEP-IRA plan.

Custodial (UGMA/UTMA)

Custodial accounts are opened for the benefit of a minor. The account is opened in the minor's name and social security number, but a custodian manages the account for the minor's benefit. UGMA/UTMA accounts are held in trust until the minor reaches the age of majority.

If you want to open a custodial account, and the custodian is a non-resident alien, the minor must have a social security number. Otherwise, the custodial account cannot be opened.

Custodial accounts are created in compliance with the Uniform Gifts to Minors Act (UGMA) or Uniform Transfer to Minors Act (UTMA), depending on the legal state of residence.

Other Accounts

Investment Club

Investment Club accounts can be opened on behalf of investment club clients. The members of the club own the account. The club must have its own tax identification number.

Business Trust

Business trusts are typically created by individuals, who are then referred to as grantors. The trust's assets are managed by designated trustees on behalf of the trust's beneficiaries. The provisions of the trust cannot be changed or terminated by the creators without the agreement of the beneficiaries. All property placed in the trust must stay there. Trustees cannot be replaced unless they die or resign.

Any taxes the trust accrues are paid by the trust. When a trustee dies, no estate taxes will be charged on the trust's assets. In short, a Business Trust offers tax advantages without the flexibility of a Revocable Trust.

Unincorporated Organization

Unincorporated Organization accounts are opened under the name and tax identification number of the unincorporated organization, such as a charity, foundation, labor union, government entity, educational institution, or religious group.