Taking a Family Business Corporate

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Scott Miedema, COO & Sid Miedema, CEO 7/14/2011:

Scott Miedema, COO & Sid Miedema, CEO 7/14/2011 Presentation for National Auctioneers Association by

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Brief Intro To Miedema Companies Note: This information and material is in no way intended to be legal advice. Rules and regulations change constantly and different states may operate with different rules, etc. We strongly recommend consulting a professional CPA and lawyer prior to any actions you may take in regard to this material.

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MIEDEMA AUCTIONEERING INC Traditional live onsite auctions Live Webcast auctions via the internet to allow for simultaneous bidding at a live auction Sells equipment and real estate

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MIEDEMA APPRAISALS INC Professional machinery and equipment appraisers

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REPOCAST.COM Weekly & special online only auctions Sells from our fixed warehouse locations

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ORBITBID.COM Online only auctions Sells primarily from the seller’s location

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LASTBIDREALESTATE.COM Online only Real Estate Auctions

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We now license software across the United States to others desiring to sell assets at online auction – not necessarily auctioneers These are independently owned and operated, but are on our platform and utilize our bidding system Huge growth and bigger plans ahead - large corporations, etc. Will see more on our site – Currently approx. 20 active IAO’s.

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Real Estate Holding Companies Names are not important, but the liability protection and tax issues as well as succession are.

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Sid Scott SSLJ Corporation (subchapter S) Burlingame Investors Limited Partnership Sid and Scott Miedema Organizational Structure for Real Estate Development, Etc. Shareholders 50% 50% 1% general partner 49.5 % limited partner 49.5 % limited partner

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SSLJ Corporation As general partner, corporation will manage the real estate limited partnership. Use for short-term, quick turn-around deals involving purchase and sale of equipment and real estate (such as recent construction equipment deal); these deals can be financed with short-term loans from shareholders; to the extent that these activities generate ordinary income, rather than capital gain, the corporate form of organization will avoid Social Security and Medicare taxes on income (although officers, as employees, will have to receive “reasonable” W-2 compensation for their services). Employees can be hired by corporation, or “leased” by corporation from Miedema Auctioneering, as necessary or desirable (officers, as employees, could be “leased” too). Burlingame Investors Limited Partnership -Use for pending real estate project and other long-term real estate acquisition, development, and leasing activities. -Partnership form of organization will allow flexibility in capital contributions, cash distributions, and tax allocations for different projects, and will also allow non-taxable distribution of property. -Limited partnership form of organization, with corporation as general partner, will avoid Social Security and Medicare taxes on income.

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Helping charitable causes through the online auction process Could be public or private ORBITBIDCHARITY.COM

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REPOCAST.COM FISHING TEAM LLC Solely owned LLC

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REASONS TO CONSIDER INCORPORATION AT ALL? OR NOT? Advantages Provides more professional appearance to obtain business Easier to obtain corporate accounts and larger business deals Owners personal assets are protected from business debt and liability Corporate records such as financials etc. are separated from personal income and expenses. Corporations have unlimited life extending beyond the illness or death of the owners A llows for specializations or nice business opportunities Tax free benefits such as insurance, travel, and retirement plan deductions – Can do personally also Future sale of business is certainly much easier T ransfer of ownership facilitated by sale of stock Greater flexibility in management and organization of business – DBA will accomplish some of same Change of ownership need not affect management Easier to raise capital through sale of stocks and bonds Makes succession plans much easier Make partnerships clearly and legally defined Makes borrowing easier and more direct – LOC may not need personal guarantee Opportunity to promote your company once again to clients and customers

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Disadvantages It is NOT for everyone More expensive to form and operate than proprietorship or partnerships – CPA, Attorney More legal formality More paperwork More state and federal rules and regulations More employees (potentially) – Most difficult part of business Harder to get bonding until established with assets REASONS TO CONSIDER INCORPORATION AT ALL? OR NOT?

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TYPES OF CORPORATIONS

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S CORPORATION

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S CORPORATION RESTRICTIONS

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HOW TO FILE A S CORPORATION

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C CORPORATION

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LIMITED LIABILITY COMPANY (LLC)

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Important Note Regarding the Federal Taxation of LLCs

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CASE STUDY BASED ON OUR COMPANIES

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GROWTH PATTERN PROFESSIONALISM MARKETING CROSS MARKETING INSURANCE LIABILITY LABOR BILLING PROFIT SHARING TEAM BUILDING

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Why does it work so well? Traffic

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Process & Marketing

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QUESTIONS & ANSWERS

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SUMMARY There are basically three types of corporations in the business world; C corporation, S corporation and LLC. Let us begin the discussion with S Corporation. The S corporation is a corporation that eliminates any chance of having double taxes on the running of the business. In the S corporation, all its profits are taxed to the shareholders of the business and to the business owners, with no additional federal corporate taxes. One just has to pay an annual tax return through the form 1120S. The income, profits, expenses and losses of the S corporation are all disclosed in this form. Shareholders of the S corporation are issued separate forms called the Form K-1. In this form, the income that the shareholders received through the corporation and its tax returns are reported. Employees of an S corporation are also taxed with their taxes getting filed with the company. It is necessary for the S corporation to file their tax returns, with deadlines being met punctually. If the deadline is not met for some reason or the other, the business is offered an extra six months’ time to file taxes. If once again there is another delay, the business is offered the choice of selecting S corporation status for the following year. For a business to elect for S corporation status, its shareholders, both present and prospective have to give consent. Without any consent, the election of S corporation is considered invalid. On the other hand, LLC is basically the acronym for Limited Liability Company, or Limited Liability Corporation. While corporations offer attractive limits on personal liability and partnerships offer better tax advantages, the limited liability company works on a combination of these features. In the process, the LLC basically offers protection against any personal liability with a lot of tax advantages. An LLC is preferred over an S or C corporation not only for these points, but also because they are more flexible than the corporations. In addition to this, all legalities that are connected to the running of the LLC are less formal. This in turn leads to a LLC having a tax advantage. In terms of federal taxation laws, the LLC exercises flexibility in accessing tax advantages. With more than a partner in the firm, the firm is considered a partnership while multiple owner LLCs are treated as either an S or C corporation. And single owner LLCs are considered either as a sole proprietorship or as a C or S corporation. The main tax advantages of an LLC are owing to the fact that it is able to avoid double taxation and that its dividends are not taxed. In an LLC, its income is forfeited on initial taxation and only each member is taxed on individual allocations. However, some LLCs tend to have franchise taxes on them or may have some annual fees to be paid.

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Miedema Company Contacts   Sid Miedema, CEO - Miedema Companies 616-560-2709 – Cell [email protected] Scott Miedema, COO - Miedema Companies 616-560-6707 – Cell [email protected] Duane Mingerink, President - Repocast.com 616-813-7154 – Cell [email protected] Jim Smith, - President – Orbitbid.com 616-560-0768 – Cell [email protected] Kurt Mingerink, Vice President – Orbitbid.com 616-893-4346 – Cell [email protected] Doug Heuker, President - Lastbidrealestate.com 231-878-2482 – Cell [email protected]    

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