Why Serious Investors Never Invest in Their Own Name

My recommended methodology is to put things first into an LLC. It's probably the cheapest thing you can do that has the most benefit to you. You may think, I've got a full-time job, I don't qualify for a Solo 401k. You're wrong. What are the cons? I, I can't even think of a con.

Hey, welcome back, Future Billionaires. Do not let the title mislead you. Today is one of probably the most practical and needle-moving episodes that we have done in a very long time. Most investors never think about how they actually hold their investments. But wealthy investors are usually very intentional about it and can impact everything from taxes to liability to how they operate. And so the question is, are we missing something? And so today we're breaking down one of the most common structures high net worth investors use, which is investing through an LLC. This is also a topic that Bob and Ben cover extensively in their book Invest Like a Billionaire. But today we hear directly from Bob and Ben on how they leverage this strategy, how it works, and when it actually makes sense. Hope you enjoy.

So, Bob, you've been a big advocate of this hub LLC concept for years. In full disclosure, you guys have, you know, banged on me before. I haven't done it yet, but I think a lot of listeners are in the same spot. So, you know, why, why should we consider doing this? Why you put it in the book and, you know, make it such a big, important topic?

And we're talking about putting, you know, creating a hub LLC for your investments and your investment business. So, yeah, there's dozens of reasons. I mean, we can just start to go through the laundry list, but it's probably the cheapest thing you can do that has the most benefit to you. And it's the quickest and easiest. I mean, first off, and of course, young guys like you guys think you're immortal. And so, you don't think about anything that has to do with end of life, but I've I've just been dealing with, you know, my mother passing recently, and she had everything in trust. And if you don't have anything in trust, it goes to probate. And what that means is a court gathers all of your assets and all of your heirs and all of your creditors together and decides what to do with all of your money. Okay. So, at this point, because all of your investments are held in your name, if you were to kick the bucket, God forbid, that means the court is going to have a say of what happens to everything. They will literally decide what happens. And it's going to be, you know, possibly a multi-year-long process to untangle these assets and to figure out where the money goes and all this. And it's just a no-brainer to put everything in, you know, into a trust or some kind of trust-protected asset. And so my recommended methodology is to put things first into an LLC. If you do nothing else, just put them into an LLC. So that means your investments are titled in the name, and my LLC is called REF, my initials, Group LLC. So all of my investments are titled in REF Group LLC as an LLC. And so what that means is, you know, I can do whatever I want in that LLC and I don't have to go retitle assets. When I create a trust, everything is titled now in that. So, the first and foremost thing is to create is probate. There's asset protection, there is treating it like a business and adding other business, adding your, doing your businesses together, which I advocate. There's ability to take loans. through this portfolio. There's, um, being able to do a solo 401 and other, other protected strategies. Um, but, but it's very, very simple.

Let me pause before we go into the list. So is there a— I think that makes sense, you know, from a—

into your writing, for your endorsement.

Yeah. Uh, but here's my question. Is there a wealth level that, you know, that this that one should start this, or are you making the argument that even if you are just getting started in investing, it should be one of the first things you do?

And, and, and because the cost is so low, I mean, to form an LLC is basically free. Um, so you can go to ChatGPT and get an operating agreement and go to the irs.gov and get an EIN. And with those two things, you can go to a bank and open a checking account. And, and well, you got to register with the state. Boom, you're in business. And I argue right in the book, we argue that, that you want to treat your investments like a business. This is step one, is open a business, okay? And you can make a single-member LLC to begin with. And if you make a single-member LLC to begin with, there's not even a tax return that's required. It's called a disregarded entity. Okay. And so you don't even have to do a tax return. But so it goes, it basically rolls up into your 1040. But ultimately, as you get more sophisticated, as your assets grow, then you want to put this into a trust. So you should create a revocable trust, you know. So I know Ben has a family trust. Ellis, do you have a family trust?

I do, actually. I have made that step.

So then you should make that trust the owner. Do you have a single trust or a trust for each of you. Mine's a single trust for your whole family, correct?

Yeah.

I actually think it's better. And I'm not— I'm not an estate planning attorney, that's for sure. Okay. So, so you should definitely get, get this all backed up by your attorney. But, but, you know, I've done this with my attorneys. I prefer having a— having individual trusts. So I have a— I have a revocable trust and my wife has a revocable trust. And then, then what happens is now you have two owners of this LLC. You have a dual-member LLC, and now you file a tax return, which I believe is superior. It keeps all this business activity from rolling up onto your 1040. You follow me? You, you would issue a K-1 to yourself. You follow me? So it's so all of your expenses, it's not on one tax return, it's on two. You're splitting everything between two tax returns, which I think is superior. Also gives you better asset protection. So because my wife is also an employee, of this LLC, well, then she can have her own solo 401. There also is asset protection. I believe I talked— we haven't talked about that, but I formed my LLC in the state of Wyoming, and the state of Wyoming has a lot of protections. So someone could sue me and— but, but they— but because, you know, so they could sue me for liability, right? And they could potentially seize half of my assets. But they couldn't seize all of them, right? Um, they could potentially seize us, but if it's in a trust, it gets very, very difficult. And furthermore, you know, this is really getting in the weeds, but in the state of Wyoming, um, if someone seizes my half of that LLC, well, they have to pay half of the taxes. So I could generate taxes and, and, and I don't have to generate distributions. So it's a poison pill. Anyone who takes this, they're putting a gun to their head. Anybody who seizes my assets, it's a poor man's asset protection without a big asset protection strategy. It's just having a dual-member LLC in the state of Wyoming. And so the members, to be clear, are my revocable trust and my wife's revocable trust. Okay, so this business goes into perpetuity. And so now we're both employees, so means her expenses and my expenses can be deducted, right, related to this business.

So talk about that a little bit more, 'cause I think it's such a big mindset shift. And I think for me, you know, the struggle of, you know, wanting to actually do this is one, I do think I am immortal, so that is, I have to deal with that. Um, but, but two, it also feels like, well, that's one of those things down the road that, you know, I'll deal with when I need to. But there's so many benefits right now there are you get by doing this, and it's a total mindset shift like you're saying, where I am now in the business. I'm the CEO of my wealth. We talk about that a lot in the book. And this is a very simple way to structure it as a CEO and then be able to write off expenses, being able to do different masterminds. I know you run your masterminds through this for being with other business owners and different types of travel. So, talk a little bit about how you how maybe doing this has shifted the way you view certain expenses that maybe you would have just paid for yourself, but now you can actually, "Hey, I'm actually going to make this part of a business expense. I'm going to actually turn it into a business trip where I maybe wouldn't have before." Yeah, exactly.

So, you mentioned my masterminds. I've been really enjoying masterminds, and these masterminds are investment masterminds. They're masterminds with other high-net-worth people that are telling me how to run my business and helping me figure out how to run my business and maximize my wealth and those kinds of things. So, I'm treating treating this like a business. So I am growing my business and I'm developing myself and I'm investing to do— to, to develop myself. And that means includes, you know, subscriptions that I, that I, that I write, that read, you know, I regularly read the Wall Street Journal and many other, other subscriptions. That's all a business expense, all to help me become a better investor. Um, and so all my mastermind expenses go through there and, and they're tax deductible, right? Um, uh, So, you know, it's a huge benefit. You know, you can own— you know, I have a friend that every time he pays taxes, he buys an airplane. Airplanes are an incredible tax deduction. And it sounds like a joke. It's actually not a joke. I mean, you can get 100% bonus depreciation on an airplane. It means if you pay $500,000 to buy an airplane, you get a $500,000 tax deduction the year you buy it. It's pretty good. Then he puts it in a flight school or leases it to a flight school and has income. It's a— It's a, you know, revenue generator. But the whole point here is, yeah, I have this mindset of I'm trying to grow this investment business massively, and that means continually compounding and, and looking for better investments and ways to place capital, ways, ways to pay less taxes. And, and this is definitely, uh, you know, one of the cornerstone of, of what I'm, of, of what I'm, my strategy.

So what about like, this is kind of a crazy one, just thinking what you're talking about, how you and your wife are you know, both different members of this LLC with your irrevocable trust. What about when you go travel or do vacations?

Revocable trust. Did I say irrevocable?

No, sorry. Revocable trust. When you guys are going to go to your island hopping trip, is that— can you write that travel off because you guys are going down there and you're talking about investments? I mean, can you go that far on something like this?

Like an island hopping trip to the Bahamas? That one I can't.

Okay.

You know, it has to be that you can read the book for— it has It has to be ordinary, it has to be necessary. The primary purpose needs to be business. Okay, for that, the primary purpose is not business. It's not ordinary, it's not necessary, right? Meaning investment businesses, do they typically do island hopping trips to the Bahamas? And is it necessary? We don't have one. We wouldn't know. And the answer is no.

Got it.

So you can't stretch it. And it's up to you, your comfort level with stretching things. I really don't. So it has to be ordinary, necessary. It has to be the purpose is to grow the revenue of the business. It has to be all of those things. So, but there's a lot of things that fall into that camp, right? And especially one of the things I talk about in the book is combining your businesses, right? So, my little LLC also is my authoring business. So, I run all my, you know, I get all my royalties through the books, you know, that come into there. And then I can write off all my expensive— Yeah, billions. But I then I write off all my expenses related to book authoring. Okay, so that means travel to go speak on podcasts. That means, it means, you know, masterminds that help me develop my, you know, you know, grow my book business, etc. And I also in years past had a consulting business that ran through there. And this also, this business also does consulting. In fact, I have consulting agreements with several of my businesses. My Little Hub LLC does in order to basically, because I'm serving those businesses, in order to compensate me for serving those businesses. But then I can also travel and do other things related to those, to that, to that consulting. So everything's combined. And, and so it just increases the things you can deduct and, and these kind of things. There's no law that says you can, you know, your business can do one thing. I can do, you can do 3 or 4 things in a business, right? We're a We're an investment/publishing business, whatever, right? You can, you know, so you do whatever business you want to do and all your activities can be related to that business.

I mean, in the most simple way, all things equal, if you do this structure versus not doing the structure, you're— these expenses that you're already paying for anyway now become tax deductible, right? Versus before you're paying them all and it doesn't reduce your tax liability. So That right there is— yeah, I gotta get my button to give this year. I'm doing it.

And let's, let's talk, let's talk about taxes again. So one of the, one of the greatest things that our tax code did, um, for entrepreneurs is create, uh, 401s and solo 401s. Now people may think— now you may think, I've got a full-time job, I don't qualify for a solo 401. You're wrong. So I have a 401 through, through my employer. I also have a solo 401. So my Investment Hub business has 2 employees and no— me and my wife. That's it. So, so we call it— we're qualified as a solo business, right? This is a solopreneurship. And what the tax code is trying to do is to create incentives for people like us to build retirement wealth and figuring that a lot of entrepreneurs are under-resourced in their retirement. And they are, right? So they've created this incredible program called Solo 401s. Now, my wife and I are both employees, so we can both have a Solo 401. Now, Solo 401s are insane. It's like a super mega IRA. So because of— and it's all accelerated based on age. So I'm 65 years old. Because of that, I'm— I, I was able this year to put away $77,500 into tax-deferred accounts, and my wife did the same. Think about that in IRA now and compound that for, for 20 years. Um, and, and what's more is I was putting into a Roth, so most of that is a Roth. In fact, all of it's a Roth. And, um, and so I, I open up account with, with, with Solo 401, and, and I've just wrote the Solo 401 guys and said, hey, let's get a podcast together. So we'll see if they can, they can, they can really talk about how to do this. But, but it's— it can be either tax deductible, it means it reduces your, your tax liability in the year you make the contribution, or it's Roth, which means it grows. And, and me, because I'm 65 years old I can pull money out without penalty right now. So, I can decide as long as I want to grow it, I grow it. And it's interesting. But for young bucks like you that are immortal, I'm sure it's, again, less appealing because you can't really touch the money.

No, I think we do understand compounding. But I will say this, so, to summarize or clarify that. If anyone, especially who is just looking for additional buckets to, you know, for, uh, you know, taxable money, this is— make— this makes a ton of sense. This is essentially another place to put another $150,000 if you have tax-deferred.

Yeah, so, so my— that $150,000 I put away this year, that's going to grow tax-free, right, until I decide to pull the money out. And because it's all in Roth, that's what you can do. And I'm going to do that again next year and again next year. So, compound that. So, for a young person, I sat with one guy and he asked me to do a portfolio review. And I looked at his entire financial situation. He's your age. And I said, "This is a huge piece of low-hanging fruit for you." And he said, "I don't want to put money that I can't touch for 30 years." And, and I, I said, well, that's actually a plus. What if, what if you, what if you, you know, look, can't you— don't you want to have long-term savings? You know, what would that number be? Take, take 5% of your earnings, or 10%, or 20%, pick a number and just say, I'm going to save that. I'm going to put it away as a pure investment. And, and the cool thing about 401s is you can't touch it. So, so it's going to be forced to compound in spite of you, right? And that's honestly what most of us need, right? And but, but 401s, if you're buying a house, I, I believe there's some, a couple exceptions, um, like buying a house, your first-time buyer of a house, or tuition. I believe you, you can, you can rob your 401 for those things if you want. You can also borrow up to $50,000. From your 401 at any time. So, so, you know, um, so there, there is answers, but I would argue that this is a no-brainer way to, to put some handcuffs on yourself, some good positive handcuffs to keep you from, you know, from doing dumb things, and, uh, and, and to, and to help you do the right thing.

Well, the, the power of compounding only works if you don't interrupt it, right? So exactly, very, very powerful tool, but as humans, it's very difficult to to, to not touch things while, while it's cooking, right?

And, and here's, here's, here's one of the things that you can do in 401s. And, you know, there's, there's, you know, new legislation they're talking about now about, you know, creating alternatives, letting all— letting 401s access private alts. Well, it's— you can actually do it today with some custodians. Um, so what they're trying to do is make the laws to make it more simpler and, and fewer liabilities. But they're already— you can do it. It's called a self-directed 401. And my provider, the company that I use, allows me to do self-directed 401s. So, so literally I created these, these solo 401 accounts, and there was, you know, my wife and I had 3 of them because of the way the tax code works. It had a traditional bucket, a Roth bucket, and an after-tax bucket. And so I created— I opened up 3 accounts at Schwab. For me and 3 accounts for my wife. I got a checkbook for those, so I can literally write checks. And that's a plus and a minus because my wife wrote a check she shouldn't have wrote out of there, like, oh, this check is handy, you know, let me write this. You know, so I'm trying to fix that now. So, you want to keep them away from the animals.

From the spenders. Yeah, from the spenders.

But so, I can literally fund investment accounts, I can fund into an LLC, you know, private investment like one of our Aspen investments, you know. Now, actually, I can't do that, okay? Because it's conflicted. You can't have some— you can't invest in yourself or something that you—

because you're a principal, you're a principal on that fund.

Correct. And so, but you could, you could buy an Airbnb, you could invest with somebody who doesn't have your name. You know, and as long as you don't get any other benefit except what your money earns, um, you can buy rental houses, you can do a lot of things with it, but you can also invest in the stock market if you want. So, you know, and I would probably be doing that if I, if I was a fan of the stock market this time. I just still think everything's overvalued. But so, huge, huge opportunities there, and it's just, it's just a no-brainer. Again, one of the exercises everyone should do is sit down and build a little spreadsheet, compound it at 7%, 10%, and 13% of whatever your savings are for the next however long you think you're going to live and put a plan in place to do that.

So, let's talk a little bit about, are there any downsides? One place my head goes is because this is a little more complicated, does it increase your audit risk with the IRS? And I know you just kind of went through an audit.

Was anything flagged in these things, you know, or was it through two audits and basically got— went through scot-free? So I'm a rare bird.

So, so in your mind, these don't really increase audit risk and/or scrutiny?

I mean, as long as you're not writing off island hopping, it sounds like.

I mean, you know, well, so it's interesting because I have two, two investment entities. And I want to talk about the second one as well, which we haven't touched on, which is C corporations. I have two investment entities that all file their own tax returns. Okay. And when I got audited personally, they didn't, they didn't audit. I, you know, all my income into my personal, my personal return comes in through K-1s and they didn't audit any of my businesses. They audited me. And so now if they're going to audit my, my business, well, which business you're going to audit? And then, then they got those businesses, well, they're going to have to audit all the, all the LLCs that I'm invested in there. You, you get that, you get my point. It's a freaking rabbit hole that leads to 100 rabbit holes that leads each lead to 100 other rabbit holes. And so how much work are they going to do? You know, um, and, and the, the truth is, you know, I don't want to, I don't want to make it seem like I'm trying to convolute things. I'm not. It's, it is just, I'm— when I become a passive investor, I own a bunch of LLCs, right? Then I, I, I'm also an active in a couple LLCs, um, with partners. And then I'm all— I also— so all of that stuff rolls into my personal tax return. So, so to audit me, you're gonna have to audit I mean, if you really did a full audit, you're going to audit, you know, 200 organizations. So good luck with that. And so, so I think it's, I think it's a, it's, it's actually creates a little bit of safety. You know, if you're, if you just put everything on your own tax return, everything's rolling in there. You have no control, no nothing. And let me talk about one more, one more thing. And this is the C corporation. So I also have A, a hub corporation. So one of the things that happened is I realized by look, by doing some analysis of my tax situation, that I was paying a lot of taxes. Um, and so a few years back, uh, you know, they, they, they, they changed the laws where corporations are taxed at 21%, and I was paying far more than that. So I, I, I put one of my main moneymakers businesses into a C corporation. And I also, I donated a certain amount of the shares there to, to a donor-advised fund. So I got a big tax deduction. And so that business is partly owned by charity right now. But I also, I'm only paying 21% taxes. And if you're, if you're paying a lot more than 21% taxes, you might consider this, getting into a C corporation. And here's the other thing, it's, it's, it's so C corporation. So, you know, with, with personal You have 3 major tax buckets, right? You've got ordinary, ordinary or earned income. You've got passive income. You've got portfolio income, right? And if you have losses in portfolio, okay, you cannot use those losses to offset active gains. If you have, if you have losses in your active business, you have a net operating loss. You can't use that against portfolio gains. So these buckets and what that does, it creates a lot of inefficiency in the, in the tax code, or efficiency from the government's perspective, right? So that people are going to pay taxes no matter what, even if they have a lot of freaking losses. Okay, in a corporation, there's no— there's one bucket. There's one bucket. So you need to do an analysis of, do you have— are you generating losses that you can't use? And are you consistently generating losses that you can't lose— use? In your tax situation, you should consider going into a C corporation. And I realize the big risk of a C corporation is that, you know, they could change the law tomorrow and the tax rates go up. And that is what it is. But still, it was— I figured the risk there, I was paying so much in taxes, the risk there was so high. And then what happens, all of that stuff doesn't go on anything earned by a C corporation. It pays its own taxes. It's a person. It's a taxpayer, so it doesn't roll up to you personally. So you can take your tax bracket down. You follow me? If you're in this high tax bracket, you can take your tax bracket down because nothing is rolling up into it. So it allows you just a lever that allows you to control how much taxes you're paying.

But for someone who's considering this, who's the best person to start with? You go to your CPA, but then your CPA doesn't necessarily know entity structure. So like, who are the key members of building this for you and your team?

It was honestly me, but I do have a financial advisor who is great with this and helps me. It's a DuWealth, and they're fantastic. So, they're great. But I think start with the book. Get the book, Invest Like a Billionaire, and go through it. I mean, it's all pretty clearly spelled out in the book. It's not that difficult to create an LLC. It's like I said, 3, 3 steps and go to the bank. And if you don't want to pay, you know, file a tax return for it, well, just do a single-member LLC. And if you don't have an estate plan in place, that's all right. Change the members down the road. Once you create your estate plan and your trust, then amend your operating agreement and transfer your ownership from your personally to, to the to your trust. And if you, if you are ready to file a tax return, then put your wife in there as well if you have a spouse. So you can just, just start with an LLC, nothing else, right? Just start with an LLC. And I would recommend a Wyoming LLC.

I always thought that Ref said Reef on your subscription documents. I didn't actually realize those are your initials. What is the— what's the E? What's your— what's the E stand for?

E is for exceptional. I knew it.

That's exactly what I would have guessed. Surely.

Yeah, you had— you had to know that. Yeah, yeah, yeah.

Wonderful.

No, E is for Ewing, which is my mother's maiden name.

What— what— one last thing I forgot to ask earlier, but with your plane, um, do you— do you have that owned by one of your hub LLCs or one of your companies or the plane is owned by my Hub LLC.

Okay.

And then so then you can choose to write off a business trip like we'll do sometimes for right asset tours or whatever. And then you'll just charge whatever expenses were to the LLC and write off the LLC, absorbs all the expenses.

That's right. Yeah. I can't because I'm not a commercial pilot. I can't actually get paid or reimbursed for flying other people.

But the expenses of the flight, like fuel and other things.

Yeah, everything, hangaring, the whole thing. It's a business. It's owned by the business. It's a business airplane. Airplane. And that's a whole other topic. I actually have a CPA that does nothing but aviation tax. And they created an LLC for my airplane that's a wholly owned LLC by my hub corporation. And then I put my flight logs together every year and they tell me how much of it's deductible based on my usage. So, I track my usage, business and personal. Oh, cool. And, you know, and so, and with flight hours and who's flying, the whole thing. So, it's quite complicated, but they give me a logbook and Excel spreadsheet I fill out and I send it off. And every year they send me a report that I use for my tax return.

Very cool. All right. So, go get the book.

So, Ben, when is it going to happen? When are you actually going to do it?

Well, I'm on the record here, so I'm going to do it in 2026. So, if I'm not, then you can publicly shame me next year if I haven't done it for this year.

How about you, Ellis?

Yeah, I'm going to do it faster than Ben. Is my answer. So I'll have it done for sure.

I mean, what do you think, Ellis? Do the pluses outweigh the minuses?

I think, you know, if I put this in a pro-con list, the pros would probably far outweigh the cons.

What are the cons? I can't even think of a con except the time and energy required to do so.

Time to do it. No, actually, the LLC— I mean, I just launched my first Kansas LLC. You know, I'm new to Kansas. And it took me probably half an hour online, uh, one night. It's very, very easy to do. And I didn't even need an attorney to go do that. Uh, you know, you can just go do all that online. And so I, I think, yeah, it's— it, it makes a lot of sense.

Yeah. And, and, you know, the other big caution there is if you do a 401, do not, do not fudge the rules, you know, about, um, about, you know, uh, prohibited transactions. Just to understand what prohibited transactions are. You cannot invest in anything that you get anything Besides what your money earned you, nothing, no other benefits can accrue to you. And the other thing is in the LLC, do not commingle funds. So do not treat it as a personal bank account. So, you know, you can pull money in and out freely. It's called a draw when you pull money out and it's called a contribution when you put money in. So you can move money in and out, but you cannot use it for your dry cleaning and your groceries and everything else. Just do not do that. So be careful not to do that because that's the one, that's really the negative if you will not be disciplined about how you treat that LLC.

The other thing too, one last question, I'm so curious, you know, all my LLCs in the past I've had lines of credit on. I mean, at some point, as this has a tax return and income and expense, like you could also get additional lines of credit for this too, I would imagine.

Yeah, we didn't even mention that, but that's absolutely right. You know, there is a limit on tax deductibility. I believe it's $600,000 of debt on a residence, primary residence, right? You can have a limit. Well, if you have a house that's more than that, you're paying more than that in, you know, you have larger loans, you can actually, you know, they're just talking to my banker who said, pay off your loan, your mortgage in cash. And then there's a time period. Your CPA will tell you what it is. You can pull out the money as a business loan secured by your house, and now it's 100% tax deductible. Yeah, the interest expense.

Interesting.

Yeah, there's just so many, there's so many benefits. It's a business. So do it. 2026, Ben.

Okay, do it.

You gave yourself a big window. I did.

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