by: C. Hansen, attendee
Date: 7/30/05
This article was prepared following attendance by one of our readers at a Ray Reynolds Boot Camp held at the Radisson Hotel in Newport Beach on 29-31 July 2005. It represents comments by the attendee based on experience personally attending the seminar and which were authored shortly after attending the seminar to ensure they were factual and accurate. We believe the subject of Ray Reynolds program is important to freedom minded individuals interested in asset protection because he at least claims to offer the most popular and comprehensive education of its kind in the area of corporate formation, asset protection, and corporate credit development. We have 40,000 visitors a month to this website, and we want to make sure they steer clear of snake oil.
DISCLAIMER: Note that this website is a nonprofit, free, public service. The information provided on this page does not constitute a business use of any aspect of the proceedings, but simply a consumer report/review of the products and services of the target organization by a person who was a prospective client. Furthermore, we have no intention of competing with Mr. Reynolds. He doesn't need competitors to do him in. His own arrogant persona will do that quite nicely, we predict.
COST: $1,900 each
NUMBER OF PEOPLE IN ATTENDANCE: About 60
The seminar announcement indicated that the event was sold out, but when we got there, the room was only half full and no explanation was given of where all the other people were. The author appeared as a free guest of one of his friends. He listened carefully to everything that Mr. Reynolds said and took copious notes and journaled during the event as well. The event went from 9:30a.m. to 4:15p.m. the first day. Prior to the event commencing, attendees were told that they could not tape record the event and the signup out front required them to agree in writing to the following provision:
NOTICE TO ALL PARTICIPANTS: By participating in programs, seminars and workshops of Ray Reynolds & Associates, LLC, you are gaining valuable information and tools to improve your personal and business finances and are establishing a basis for a successful and prosperous financial future. By engaging in these services, it is intended that you utilize them for your personal gain and advantage and not misappropriate any information provided to you to directly compete with Ray Reynolds & Associates, LLC by establishing any business or business relationship that interferes with the operation of Ray Reynolds & Associates, LLC. All prices, bonuses, and policies are subject to change without notice. Ray Reynolds and Associates, LLC reserves the right to terminate any and all workshop privileges at any time. All implied warranties, and in particular, the implied warranty of merchantability and the implied warranty of fitness for a particular purpose, are hereby excluded.
There was a very short stack of handouts the first day, which included:
- The Forms Packet, consisting of Exhibits A through Q.
- A Newsgram handout.
Mr. Reynolds then spent the entire first morning basically bragging about himself by:
- Showing pictures of his mansion
- Showing pictures of his two Lamborghini vehicles worth $280,000 each.
- Describing all the famous people he claimed to have as clients, including Madonna, Michael Jackson, Johnny Cochran, etc.
- Claiming that he had an IQ of 191.
- Describing the 220 properties he claims to have owned at one time or another.
- Describing the millions he claims to be worth, and how it is all in the name of a corporation.
- Claiming that he had a photographic memory and could read and remember a whole page at a time.
- Claiming he was a churchgoer, and thereby dishonoring the Lord
and other Christians such as the author. He spent all his time
talking about material wealth and how he wanted to be prosperous.
On the other hand, he claimed to be a Christian but never explained
the conflicts between the teachings of scripture and the very
earthly and selfish approach he as advocating:
"The rich rules over [and oppress and abuse] the poor, And the borrower is servant to the lender." [Prov. 22:7, Bible, NKVJ]
Lay Up Treasures in Heaven
“Do not lay up for yourselves treasures on earth, where moth and rust destroy and where thieves break in and steal; but lay up for yourselves treasures in heaven, where neither moth nor rust destroys and where thieves do not break in and steal. For where your treasure is, there your heart will be also." [Matt. 6:19-21, Bible, NKJV]
"Do not love the world or the things [or wealth] in the world. If anyone loves the world, the love of the Father is not in him." [1 John 2:15, Bible, NKJV]
I felt more like a cult member attending a worship service of the cult leader than a civilized person there to get a decent educational value that would help me honor my God. While Ray was beating his chest and stroking himself on the back, he called his help forward and then basically insulted them in front of everyone, by telling his female helper "GET THE HELL OUT OF HERE!" and then bragging to everyone that "I ALWAYS GET MY WAY AND ALWAYS WIN". His arrogance was so overbearing that it was insulting and denigrating to the author. He was a man-pleaser and a showman. When his help came forward to hand him a note, he admitted openly to the audience that it was about their plan to get more money out of everyone in the audience. He admitted that he wanted everyone's money and was unapologetic about it.
At 11:30am the first day, he launched a high pressure sales pitch, stating that only until 12am would he offer what he called a drastic discount on what he called his $1999 Master Founders Kit with Upgrade. It consisted of 12 tiny booklets that he called "volumes" of his materials, each volume being very short, only about 50 pages at the most, along with an audio CD. Then Reynolds proceeded to contradict himself, because after the deadline and even before the event, the same materials were offered for the same price. His highest price item was $12,000! He didn't give anyone the downside to any of his expensive materials before he launched the sales pitch, and even after the sales pitch was done, he refused to address any of the following vulnerabilities of his approach:
- Corporation #2 is a Nevada corporation that is acting essentially as a holding company, but he wouldn't identify it as such or address the restrictions on holding companies found in the Internal Revenue Code. The Nolo press Inc Your Business publication, however, does point out these very important restrictions, which create a very big weak spot in his approach. Below is what the Nolo book says about holding companies:
IRC Sections 541 through 547 impose a 15% surtax on the income of personal holding companies (PHCs). Generally, a corporation is a PHC if five or fewer shareholders own 50% or more of the corporation’s stock, and if 60% or more of the corporation’s gross income for the tax year is from “personal service contracts” (generally, contracts for personal services that name the person who must perform the services) or from passive sources such as dividends, interest, rents, or royalties. Generally, most small business corporations don’t need to worry about being classified as a PHC and having to pay this tax even if they have five or fewer shareholders since: (1) a tax adviser can tell you how to use a corporate services contract that stays clear of being classified as a “personal services contract,” and (2) most small corporations do not have significant passive income. Also, the PHC rules provide special exceptions for rental income and software royalties (this type of income is not counted to determine if a corporation is a PHC)—two of the categories of passive income most likely to be earned by small corporations. Further, if a corporation is found to be a PHC by the IRS and is assessed a PHC tax, the corporation is normally allowed to avoid the PHC surtax by making dividend payments (direct payments out of current earnings) and profits to shareholders. (Of course, these payouts will get hit with a dividends tax, usually equal to 15%, on each shareholder’s income tax return.) In other words, you are allowed to pay out profits to your shareholders, not to the IRS in the form of a PHC tax.
In the case of most corporations that Reynolds clients would form, they would have significant passive income from real estate and would therefore qualify as holding companies.
- He would not address criminal liabilities and penalties against officers of corporations found in the Internal Revenue Code sections 6671 and 7343, which both define the only type of "person" within the IRC subject to these provisions as "an officer or employee of a corporation".
- He didn't explain that in most cases, the officers of both Corporation #1 and Corporation #2 would be the same people for the people in the audience, and that Corporation #1 officers were "taxpayers" because their company has a Tax ID#, and yet they are nontaxpayers for the purposes of Corporation #2. Therefore, they would be liable under Corp. #1 and Corp #2, because their participation in Corp. #1 would subject them to the I.R.C. for Corp. #2. He also didn't explain the view of the courts for such a scenario, who would be likely to identify Corp #2 as the "alter ego" of the founder of Corp. #1. This would subject him to personal liability for all taxes on Corp. #2.
- On the one hand, he said he "loves" taxes and debt because they offset income, at least in the case of the Corporation #1, but then he doesn't mention that Corporation #2 doesn't pay tax and yet owns all the assets as a holding company. He didn't explain why the I.R.C. can apply, for instance, to Corporation #1 but not Corporation #2, when both states would be subject to the I.R.C. He doesn't seem to realize that the I.R.C. is "law" and he didn't explain why. See Great IRS Hoax, sections 5.4 through 5.4.3.6. Nor did he mention the affect of "domicile" with taxation, even though his enterprise spanned multiple states. Click here for an important article on this subject.
- He didn't explain what the officers of Corporation #2 are going to tell the IRS when they want to know who the shareholders are of Corp. #2. Failure to provide a good answer to that question could implicate them in tax evasion charges under 26 U.S.C. §7201
The people we attended with were promised by the salesman before attending that they had been given the complete kit, but found once appearing at the seminar that they had been mislead. There was a "bait and switch", apparently, and they were told once arriving that there were additional modules that they would have to spent several hundred more dollars to get once there in order to have "the complete package". We didn't comment on this at the time of the seminar, but most of the introductory materials are covered by books published by Nolo Press on the same subject for a small fraction of the price, including the following, none of which cost more than about $59 each:
- LLC or Corporation?-Nolo Press
- INC Your Business-Nolo
- The Corporate Records Handbook: Meetings, Minutes, and Resolutions-Nolo press
- Corporations v. LLC's?-Nolo Press
- Form Your Own Limited Liability Company-Nolo
- Your Limited Liability Company: An Operating Manual-Nolo
- LLC Manual-Nolo
We think the above materials, all of which we have bought and were reading at the time we attended the seminar, are equal or greater in value to what he offers, and we couldn't understand why people were spending $12,000 on his materials, sight unseen, no less. We wanted to look at the materials he was offering before paying the high price and they were not available for inspection in an accessible place. He put them in an area way up in front behind a row of tables that formed a barrier so that no one could examine them, even during the break. Then he guarded it during the breaks so no one would go up and look at it. This forced the audience to operate on faith and trust him. He also disappeared for most of the breaks, so that people couldn't get help or advice without signing up for very pricy webcasts in which they could get "individualized help".
During Mr. Reynolds presentation, he repeatedly claimed that:
- Corporations are a good way to shelter people from liability
- Anyone can form a corporation.
- The only liability that a person forming a corporation can have is to the bank that loans to the corporation.
- Nevada corporations make the best method for controlling taxable corporations you setup in the state of your domicile.
- One can build up their credit by playing shell games with money, by seeding the corporation with personal assets and then moving it around and then borrowing on it to multiply it to inflate the leverage of the corporation using fictitious money.
- The best venture to get into with a corporation is real estate investing.
- Homesteading forms are a good way for a third party to control the equity of client who the corporation is lending to in order to guarantee the loan.
- The corporation should not avoid debt, because it is a way to reduce profits and therefore shelter the corporation from taxes.
- Debt is good, not bad.
Mr. Reynolds claimed that a corporation and a trust are basically equivalent, which isn't true at all. They are completely different structures with unique characteristics. A corporation is a "citizen" under the Fourteenth Amendment, as he admitted, while a trust is not a citizen nor subject to any laws unless it chooses to be. Pure trusts are not taxable while corporations are, etc. He obviously doesn't seem to know much about trusts.
In an effort to help Mr. Reynolds improve his materials, the author pointed out on the first day that the Homesteading form presented by Mr. Reynolds did not appear as though it could be used to secure the equity held by a third party corporation, because lines 3 and 4 on the form identified the signer of the form as the homeowner and had a space to put his equity interest, but not that of a third party. The author pointed out that a corporation is not covered by Homestead protections and therefore cannot be listed on the form. Mr. Reynolds dismissed that observation but then covered it the first thing the next day by saying that he had looked up Homestead forms on the Internet the previous evening looking for one that did not have the defect pointed out by the author, and could not find one, after examining nine different forms. Therefore, his whole discussion the previous day about securing interest in a property by the corporation using the Homestead form was basically moot and he looked silly, but he couldn't just admit that, so he launched an attack against the author when he asked his first question on the second day.
On the second day, the IRS form 433A and 433B were covered, the offer in compromise. He said that one should always settle their IRS problems and pay what was due. He used the word "Play by the rules", and called the Internal Revenue Code "the Code", but then never referred to it as law. Instead of saying "obeying the law", he said that they should "play by the rules". This appeared to the author as an admission by Mr. Reynolds that the I.R.C. is not really "law", but instead is simply a "political rulebook". We would agree with that conclusion, but it was clear that Mr. Reynolds did not want to be so bold as to admit that truth. He also contradicted himself, because he implied on the one hand that a corporation in California should "play by the IRS Rules", but then the corporation in Nevada did not have to play by the same rules. What about "equal protection of the law"? Why do the IRS "rules" have to be obeyed in California but not in Nevada? He never answered that contradiction.
On the second day, Mr. Reynolds kept repeating again and again the phrase "The only liability that a person forming a corporation can have is to the bank that loans to the corporation.". The author responded by raising his hand and asking the following instructive question:
AUTHOR: "Mr. Reynolds, you mentioned that the only liability that a CFO of a corporation has to worry about is the loan liability to the bank. You keep stating that over and over. However, Internal Revenue Code sections 6671 and 7343, which govern assessable penalties and the criminal provisions of the Internal Revenue Code, make the only proper subject of those provisions an 'officer or employee of a corporation'. Don't these provisions also create additional personal liability concerns that a CFO or the officer of any corporation ought to also be concerned about?"
He immediately launched on the attack against the author. Here is a paraphrase of his response:
REYNOLDS: "First, those code sections you cite are simply wrong and you haven't read the Internal Revenue Code. The Internal Revenue Code also doesn't apply in Nevada, and this man [the author] hasn't done his homework. Corporation #1 isn't a taxpayer"
[COMMENT: That comment basically caused Mr. Reynolds to contradict himself. First, he says the I.R.C. doesn't apply in Nevada, but then he says that Corporation #1 in California is a taxpayer that should file returns. Under the concept of equal protection, both states must be subject to the same laws so how can a corporation in California be a federal taxpayer, and the same corporation in Nevada not be under the Internal Revenue Code? His comments contradict themselves and reveal that he doesn't know what he is talking about.]
AUTHOR: "Doesn't the Tax ID number make it into a taxpayer and subject it to federal jurisdiction? The only entities who apply for Taxpayer Identification Numbers numbers are alien taxpayers who are within federal jurisdiction, right? Otherwise, why get one?"
REYNOLDS: "No, the Tax ID number is only for doing payroll. Furthermore, I tell everyone in this room that they should take care of their IRS problems and play by the rules so they don't have the kind of liability you describe. There aren't any people in this room who have tax problems."
AUTHOR: "I bet there are a lot of people in this room who have tax problems."
REYNOLDS: "Lets see a show of hands of people who have IRS problems. [Three people reluctantly raised their hands, and more would have, if they weren't afraid of alienating Mr. Reynolds] My suspicions are confirmed. You are a guest at this seminar and guests who haven't paid to be here shouldn't be raising such issues. You are disrupting this seminar. Guests ALWAYS DO THAT. You said that ALL the people in the room have tax problems and that obviously isn't true. [In fact, I never said that and the man sitting near me admitted to me later I never said that and that Mr. Reynolds was wrong, and was being 'brutal'.]"
His bungling of that occasion to educate the audience was basically a very public slap in the author's face. The author didn't want to be rude or interrupt or dishonor him, so he then raised his hand for an opportunity to defend himself after Reynolds basically called him stupid in front of everyone. Reynolds refused to let the author talk and interrupted him, and then later he mumbled again about the author being rude. Other guests with whom we spoke actually said that my question was impersonal and not accusatory at all and that the response to the question was vindictive and uncalled for.
When we broke for lunch, Reynolds announced to everyone that the author was being disruptive and was requested not to return after the lunch break. The man sitting in front of the author looked at me and nodded towards Mr. Reynolds and said "That was brutal what he did." When the author asked the seminar assistant for an opportunity to at least defend his honor in front of Mr. Reynolds and everyone else listening, he was refused. Obviously, the notion that forming a corporation did NOT insulate officers from personal liability under the Internal Revenue Code sections 6671 and 7343 was not something Reynolds wanted to admit or discuss, because it destroyed the main reason why everyone was there: to escape liability. It was just too painful to admit that there is in fact a down side to what he was suggesting at the seminar that people needed to hear about. This was apparently a hot button for Reynolds that was a little to close to the truth for comfort and which more importantly, might have put a damper on his sales. Imagine that: money being more important than telling people the truth at the seminar and saving them headaches. How can one trust basically a salesman who dishonors his help in front of the whole audience, deceives the audience about the requirements of the Internal Revenue Code, and then slanders those who point out the misinformation because of greater concern for his own prestige than for truth or justice?
For the record, Mr. Reynolds knows nothing about the credentials of the author, was not interested and didn't ask him about them before he launched his vicious public attack, and was fully unqualified to say that the author was wrong without at least offering proof or giving him the chance to defend himself in just as public away as he was attacked. Just a few minutes prior to that, Reynolds had bragged about how he reads the law every day. Yet:
- He said that no one should either hire or rely upon attorneys or CPAs
- None of the materials in any of his packets that we could see teach people how to do legal research or to replace the functions of the attorney that he said they would be "stupid" to hire.
- Therefore his clients end up being in a very vulnerable position: Legally unable to rely on an attorney but also ignorant, vulnerable, and unable to perform the functions of the attorney. This is not a good way to limit one's liability: by being legally ignorant.
Nor would Mr. Reynolds allow the author to explain that he has studied the Internal Revenue Code for over six years, written 6,000 pages of books on the subject in the past four years, trained thousands of freedom fighters and orders of magnitude more people than ever attended his seminars, and had his work reviewed by hundreds of thousands of people on this website. To allow the author to do that would force him to address the issues directly and admit that his education was incomplete. We didn't want him to admit he was wrong because this wasn't an ego contest. We just wanted everyone to benefit by hearing the complete truth. Since he had just spent nearly one day bragging about himself repeatedly out of the two days we were there, he wasn't about to step down off his high horse and admit that his education was incomplete. Someone who is charging $12,000 for materials that are available from Nolo press for about $250 is not about to admit that his understanding isn't perfect or complete, or to thank any of his students for educating him. Remember, Mr. Reynolds admitted his favorite saying is "I always win". Isn't that basically the same thing that SATAN wanted? To be LIKE God and to have everything his way? Isn't SATAN a boaster and a covetous slanderer?
To his credit, Mr. Reynolds did have several good ideas which he communicated at the seminar, and he is definitely an "out of the box thinker". However, his own inflated arrogance and sense of self importance and bragadoccio destroyed the value that he obviously could impart to his audience, and also interfered with the improvement of his materials. He wasn't interested in listening to anyone or reasoning conflicts in his advice, and that fatal flaw destroyed the value of his message. The only people who are allowed to have legal knowledge or an opinion at his seminars are him, and when anyone even comes close to knowing those subjects, they are quickly dismissed, so that the pied piper headed toward the cliff can continue unchallenged. As our secretary once said:
"Nobody cares how much you know until they know how much you care."
BOTTOM LINE: Don't buy or attend Ray Raymond's incorporation seminars: His products are way overpriced and he is an arrogant and stubborn person who refuses to listen or reason. His organization is a cult, not an educational institution. A cult is an organization that hurts its members by keeping secrets from them, and we identified several of the secrets he was keeping. You are better off buying the Nolo press books and/or visiting his competitors, such as any one of the following:
- The Company Corporation
- CorporateNevada.com
- Nevada Corporations Online
- Legal Zoom
- Nevada Corporate Planners
- MyNevadaCorporation
As a consequence of our very negative experience, we have removed all links from this website to the Ray Reynolds website except that found above. If you need information about filing a corporation in a specific state, refer to the link below:
- State legal resources (see the column entitled UCC)