394: LLC Strategies To Keep You Safe | Next Level Asset Protection

One thing we said there, that chills down number of your spines. I already know it.

What's different from a rental property? What happens? You've got a tenant in there, what can that tenant do? They can sue you.

How to protect you and your assets from your business operations. In 20 years, I think I've had two clients that have called up, said the bank's harassing me and they're mad that I deeded it to my llc. And I go, did you go and ask him permission? Well, yeah. Well, what do you think the bank's going to do?

Welcome everyone to the Main Street Business podcast with Mark Kohler and Matt Soren. We are here for episode two.

I. I think level two is a good way of describing this too as well, because it's gonna. We're gonna get a little more advanced. Okay, so here's what we're gonna cover today. We want to talk about how to protect you and your assets from your business operations. Matt, here's what I think is the easiest way to do this. What do you think of this? Let's say you're buying your first rental property. Probably the most common, simple, easy scenario. We can talk. We're going to talk about side hustles and the main business you might be operating. But let's just say you buy a rental.

Yep.

What do you think? Can we start there?

Yeah, that's the best place to start. And that's where we want to start talking about an entity. If you don't have the business, the main business, the side hustle, or a rental property, we're generally like, you just got a home and a job. We're not setting up an entity. You don't need an LLC for your home, even if you own it. Okay, but what's different from a rental property? What happens? You've got a tenant in there, what can that tenant do? They can sue you.

I want to ask you the question I get all the time I'm going to ask you, Matt, Matt, when do I set up my LLC for a rental? When you need it, which is when you buy it. I'm sorry, I thought you were going to say when you buy it. Yeah, yeah. You buy a rental when you need it.

When you buy it. So now sometimes it's cart before the horse and people want the LLC before they close on it, but most people are just going to buy the rental in their personal name and they're going to set up the LLC and deed it to the. To. From themselves, to the LLC after. Now you could set up the LLC and buy it in the LLC to go with. Mortgages are a little different with that. But. But at the end of the day, we want the LLC to be owned. Excuse me, we want the property be owned by the LLC immediately upon purchase before you lease it. Because we're going to deed the property into the llc. And I know that may sound crazy, like, well, of course, if I have an llc, I'm going to deed a property into. Do you know how many people don't even do that? They have an llc. They even start running money through the bank account. They didn't even put the dang property in it. So we want to get the property in the llc.

And I want to back up here and we're going to explain what is an LLC here for a moment and then we'll jump to corporations a little later. But. But one thing we said there that put a chills down number of your spines. I already know it. Is that we said deed the property from yourself to your llc. But Mark, my mortgage company or bank is going to freak out. They're going to call the mortgage due. No, they're not. They don't. In 20 years, I think I've had two clients that have called up, said the bank's harassing me and they're mad that I deeded it to my llc. And I go, did you go and ask him permission? Well, yeah. Well, what do you think the bank's gonna do, you know? Yeah, they've already sold your mortgage. But bankers, they can't even allow you the key to the bathroom in the bank without getting three authorizations. You're freaking them out, people. I've talked to so many lawyers that represent banks that do not care. The only time they're gonna come after you for deeding the property from yourself to your home. I'm sorry, from yourself to your LLC is when they're pissed and you're not making the payment anyway. You make your payments, they don't care. Don't worry about this, people. Deed the damn property of the llc. You're not going to get the protection if you don't. So we'll come back to that. But Matt, let's just break down the llc. What? What's the what? In your opinion? I'll give my take too. What the freak is an llc, okay?

It's a limited liability company. That's what LLC stands for.

Hold on, I thought it was limited liability corporation.

Yeah, no, that is not. That's a rookie move. And if someone set one of those up for you, I frankly don't even know what the heck you have. But limited liability company and why most people set it up is the limited liability part. The benefit of this entity and why it's using asset protection is if something happens in the business, let's go to the rental property that has a tenant,

which is a business, which is a

business that tenant slips and falls. They're like, oh, well, this is clearly something that was a landlord's fault. I got injured. I want to file a lawsuit. They're going to sue the owner of the property that leased it to them. Well, if it was you personally, they're going to sue you personally. They can get a judgment against you personally. They can go after all your personal assets. They can garnish your personal paycheck or income out of your business. All right, that's not cool. Right? I don't want all that at risk. That's why most real estate investors are going to have an llc. So now if that plaintiff slips and falls and the LLC owns the property, the LLC leased it to them, they're forced to sue the llc. They can't come after you personally. They're stuck at the llc. All your other assets, all your other properties, your home, your retirement accounts, your business, your main business, all this stuff, totally protected, insulated.

Adding another perspective on just the llc, it is filed with the state. You file articles of organization. Some of you are like, well, the filing fee is only 50 bucks. Why do you guys charge this? Or why does LegalZoom charge 3 or 400 or 5 or 600? Because there's pieces and parts that go with the LLC. But an LLC is a bunch of pieces and parts. It's going to have an operating agreement, minutes, membership certificates, a tax ID number, a corporate book, articles. And you're like, whoa, no, it doesn't. When I was at my conference, they said a sheet of paper does it. All I need is the articles. Okay, you go to court with that, knock yourself out, because I've been there. We're asset protection attorneys. There's attorneys out there that want to pierce the LLC and go after you, the landlord, because you did a crappy job setting up your LLC. Oh, so it costs more than $50?

Yes.

So now the articles is where it starts. The articles are listed with the state, registered with the state. That's where you get your name. And that's when the organization company comes into existence, and that's when the veil is created. But you got to have all the parts that go with it.

Yeah, you need Every little piece and other things that happen just as from just administrative things and actually just using this. All these documents we're talking about operating agreement, tax id. The bank wants that when you go set up a frickin checking account in the name of the llc, the title company wants it. When you go to sell a property, they want to make sure all the proper documents were done. If you're getting a loan in the name of the LLC or you're later refinancing your assets in an llc, they want to see these documents. Why do they want to see them? Because they know anyone legit doing this is doing. We should have this stuff, okay? So don't be a clown, don't be out there like you don't know what the hell you're doing, all right? Just get legit, get the right documents done. That's how you should be doing your business in all aspects of it. But from the legal side, don't get this unknown, you know, this false sense of security from that sheet of paper with a little stamp from the state on it that says approved.

Yep. Okay, so we talked about, you get limited liability protection. It's a company, it's not a corporation. You're going to register it with the state. Let's talk about where and we, and I think we, we'll come back to when and funding the llc, but let's talk about where for a minute, is that okay? Matt, can I say, can I go to where I love it. So a client calls up and says I live in New Jersey or I live in California, or I live in Texas, but I'm buying a rental in Tennessee. Okay, where should we set up the llc? Now it would be fun to do a live survey on my live YouTube because I can guarantee you everybody's going to choose a different state. And not everybody, but we're not going to get 100% accuracy here and it's regrettable. So I'm going to yell this from the rooftops and I have been for 20 years. You set up the LLC or register it where the property resides. I don't care where you live, I don't care where your tenant moved from. I don't care where your grandma was born. I don't care where you like to vacation, I don't care where it has lower state tax, I don't care where you're trying to hide. I got to have an LLC registered in the freaking state where you have a rental, which is Tennessee. Now the two options are I just go and set up a Tennessee LLC with the documents, you know, we kind of alluded to here, there's a whole package. Or if I do live in New Jersey, I might have an LLC there for a little rental down the street. And I go, you know what? I don't want to set up a new LLC for Tennessee. I'll just take the current LLC I have in New Jersey and register it foreign in Tennessee. So now I have an LLC that's being used in two states for two different properties. And that way you're not setting up another basket. You put two eggs in one basket, which might be okay, they're lower value properties. We're going to talk about how many LLC you might need, but you got to make sure that the LLC is either set up in Tennessee or registered in Tennessee. That's where the where takes place.

Yeah. Now that's the important point here of, well, how many LLC do I need? I don't want all my eggs in one basket, Mark. I mean, you know, I don't. That basket goes down, all the eggs are broken. So now this is a, this is one that has some preference, but we have some guidelines here. A lot of people think I'll just do a separate LLC for every property. Okay. That's going to be expensive, particularly for those of you buying single family rentals. Now, if you're doing multi family properties, commercial properties, that makes sense. Those are bigger deals. An LLC per multifamily or commercial property makes sense. But for single family rentals, you might be doing for a few hundred grand or less. I don't know that it makes sense. Here's what's at issue. Let's say you have five rentals and they're all in one llc. Let's say something happens on property number one, plaintiff sues the llc. Well, we know they can't get after go after you. They, they can't come after your personal assets, but they can go after assets in the llc. So they can go after any equity you have in property number one, but also property two, three, four and five, those are all at risk too, because they're in the same llc. So the LLC doesn't protect the assets in the llc. This is an important distinction. If something happens in your entity, like an LLC with your rental, that equity is not protected from a lawsuit in there. Everything outside of it, all your personal assets is what is protected.

Okay. I love it. Great explanation, Matt. And so this is where a lot of people get ripped off is they get sold. The fact they need an LLC for every property or they get unlimited or free LLCs. And you may say, well, Mark, what's the big deal if I'm getting free LLCs? It's not just the setup cost, it's the maintenance and the headache on the back end. And I don't want to imply that LLC is, are a headache, but when you have more LLC than you need, that's the headache. And so you want to go in with your eyes wide open with a long term plan. And so this is where when we say spend 1,000 bucks, get the right entity, set up in the right state and meet with one of our attorneys, build a plan for the next two to three years, talk about your family, talk about your assets, talk about your goals, and then attorney who we want you to come back to us. We don't want to just sell you something and say, see you later. We want you to walk away going, oh my gosh, that was great advice. I'm going to call them next deal. I'm going to call them a year from now because we don't want to lead you astray and then have you frustrated a year from now going, what the hell? Why'd they sell me stuff I didn't need? Because you'll figure it out. A lot of these folks that get sold crap at these workshops, they figure out they got ripped off, they're not going back to them. We, we want you to cut, we have a vested interest in making sure that you have a great experience and we set you up on a long term plan. That's why you do a consult with a lawyer. You think, well, I'm going to save money up front and avoid the lawyer. You're costing yourself in the long run three times as much because you've got too much of a headache.

So, yeah, yeah. So let me sit, let me break this down though, on how many to do though, because I want to answer that question. Our rule of thumb is when you have multiple properties and, and you're trying to Decide how many LLCs should I set up. We like to look at how much equity do you have between the properties. If you have 250,000 or more in equity between multiple properties, we think it's time to set up separate LLCs. So for example, let's say I have three rentals. Each one of them has 150,000 of equity in it.

Okay.

It's gone up in value. I've been paying out the mortgage and they're all in one LLC. Well, if something goes wrong on one of those three properties, that whole $450,000 of equity between all three properties is at risk. Now, that's a lot of money and worth protecting. In that instance, we like setting up a separate llc maybe for each of those properties, or maybe you do two and one and one and another to kind of spread the risk out. If I did a separate LLC for each property there, because each of them has 150,000 of equity, something goes wrong on property number one that they can only sue that LLC and get at that equity. They can't get the equity in property number two, which is a separate llc, or property number three, which is in a separate llc. So each LLC gets separate protection. Now, remember, you always have protection from your personal assets. We're just trying to isolate equity between properties. That's where we're looking at 250,000. That's our rule of thumb. And sometimes we might say, you know, analyze it a little more. If you're in California, where it's 800 bucks a year for an LLC, that's a rule of thumb, 250,000. Look at the equity worth protecting. If you have 10 properties with 10,000 of equity each, put them all in the same LLC, you have 100,000 of equity total to protect, you know, your little kingdom of Baltic Avenue and Oriental Avenue. That's not that valuable. That could, you know, we can let those go if we have a lawsuit, they can be in the same llc.

Okay, great comments. I'm loving it. Now, I want to talk about the when again. We just said when you buy a rental, you set up an llc. Okay, that's. That's a little simplified when that. Let's go back to my example. Client lives in New Jersey, buys a rental in Tennessee. Or I should say, they call up and go, I'm going to buy a rental in Tennessee. At our firm. You'll be happy to know we do not set up your LLC in Tennessee until we know you at least have something under contract. Because what happens? The deal falls through, you don't close, there's a problem with the mortgage, who knows what. Now you're stuck with an LLC in Tennessee, and you're like, why don't you guys tell me so we've been down that path. I've made that rookie mistake. And some of you out there, as individuals who go out and try to do this on Google or LegalZoom, you've made that same mistake. You went and set up an entity and. And then you never bought a property in Texas. Now you're sitting on a Texas entity going, what the hell so, so this is where when you do a call and a little planning, we'd say, hey, you have a retainer here. When you're ready, we'll pull the trigger. We got all of the information we need. As soon as it's under contract and you're 30 days out, boom, we set up the LLC, you close, and then you deed it over to your llc, you're good to go. Now, Matt did say some people are like, well, I want to purchase it in the name of the llc. I'm doing a subject to deal. I'm using a land trust. I'm getting really creative, and I'm not using a traditional bank mortgage. So I can have my LLC right out of the gate, write the offer and da, da, da. Okay, that's cool. But I'm just saying if you're doing a regular bank loan and a typical purchase transaction, you're going to close in your own name. The LLC is just a kind of a ancillary pain at that point. Just closing your name, let the LLC get created, be ready to go, and then deed it over. Don't worry about due on sale clause crap. That's when you transfer over in the future. You have your Tennessee LLC and you go to buy Tennessee property number two. Your LLC is already there, ready to go.

So. Okay, love it. All right, well, let's talk about. I want to talk about some of the things you need to do once the LLC is set up, because there's a lot of things you need to do once the LLC set up that also get overlooked. And if you don't do these things, well, you've lost the whole benefit and the reason for doing the llc, which is the asset protection. So the first thing is you're going to need to set up a bank account in the LLC's name. You need a bank checking account in the LLC's name. Now, some banks are a pain in the butt. If you need help with a bank checking account, where there's lots of banks that want to work with small business owners, we can certainly help help you out with some referrals there. But you need a bank in the LLC's name. Start receiving your income and paying expenses for the property out of this. Not only is this awesome for asset protection, it's also great for your bookkeeping to keep this separate from your other bank accounts. It's personal, so always use a separate bank account for your llc. If you got four different llc, you're going to have four different bank accounts. Okay, we need to keep this. These Assets separate. Because if you want to go to court, if you get sued and say, hey, you can't come after my personal assets. It's separate. This LLC is separate from me. You better have been treating that LLC like it's separate from you. You better have a separate bank account. That property better be deeded into it. The lease with the tenant better be in the name of the LLC as landlord and not between you and the tenant personally.

And a lot of people ask, well, okay, so you don't commingle. Some of you may have heard that word, commingle. They get nervous when they go, well, I have to put money in the llc. That's okay. That's not commingling. Well, I want to pay myself. Write yourself a check, do a bank transfer. Well, isn't that commingling? No, that's not co mingling. That's good. You're putting money in, you're taking money out. The co mingling is when you're at Costco, but you're at Costco. And then you go through the line and you're buying all these personal items and you use your LLC bank account. That's commingling. What you're doing is when you're in line and there's two or three people with their big old carts in front of you, you get on your online app, on your phone for your bank, and you transfer money from your LLC to your personal account. That's cool. Then let your personal account buy the muffins. That's okay, because your personal account bought personal things. Let your LLC buy business things and then transfer money, you personally, when you want to buy personal things. That's the difference in that commingling issue.

An important thing is, and this is again, we're hitting basics, but this gets overlooked. You need to pay the state. Everyone pays them the first year because it ain't happening unless you pay them the first year. But most states want you to send them a check every year. Some states are biannual every other year. You know, some states, like Arizona, for an llc, they don't want to hear from you at all unless you want to dissolve it. So every state's a little different. And this is where we want to look at in your situation, what makes sense and make sure you know what's your requirement to file this and renew it on an annual basis. Some states are 20 bucks to keep it active every year. Some states are 100 bucks. Some states, like California, are 800 bucks minimum. All right. And so it just depends on what state you're in the regularity of filing that, which also includes some paperwork. It's not just paying the fee. Okay, so you want to know the regularity of it and also the amount.

This brings up what we call at our firm annual company maintenance. This is separate from your minutes, this is separate from your contracts. We're going to come to that in a moment. But let me reiterate, everybody. You, you bought a rental, set up your llc. You're like, okay, guys, I want protection. Matt talked about deeding, we'll come back to that. But this annual maintenance is really the first step out of the gate. I've got to make sure I pay my annual fee and I want to make sure I continue to be registered with the state. And in that maintenance package, we have a little package at our office to help clients get all this done. We'll give you a 20 point, 25 point questionnaire to do your minutes for you, to make sure that your corporate book is up to date and you've got all the guts necessary in there. Did you change ownership during the year? Did you give ownership to a kid, your spouse? Did you bring on a partner during the year? Did you enter into any loans or whatever? You want to document all this? This helps you with an audit with the irs, helps you in a lawsuit. And some of you may say, well, under LLC law, I don't have to do that. These guys are just trying to sell me crap. You know what, bud? Guess what you're going to be doing the night before you go to court when you got your little one sheet of paper, Frickin llc. And you said Kohler and Sorensen are full of crap. I don't have to do all that. Guess what your lawyer's gonna have you be doing the night before you go to court. Three years of this maintenance, hoping the judge doesn't see through it is bullcrap because you didn't do it. And you're saying, well, it's not required. Well, guess what? It's not a law. You brush your teeth every day. It's not a law that you floss. Your dentist recommends it. You can do it or you can't, but when you got a cavity, you're going to be regretting it. And so when you have a lawsuit, you're going to be regretting if you don't do this. So it's just doing the maintenance. Keep brushing your teeth, keep flossing, even if it's not a law. It makes frickin sense.

Yeah, you have to stay organized and you know, this comes up in other areas. Let's say you get audited. Your business entity gets audited. I remember I had a client years ago get audited. What is the standard. You know what the standard audit request list on an entity is? They asked for the corporate documents. They asked for the annual minutes.

It's called discovery.

Yeah, they wanted this, though, just the irs, even in an audit. Okay. Because they want to make. Is this a real legit business? Are you treating it like one? Okay, so these little things do matter. But we've tried to make it simple with a company maintenance service to make sure your entity gets renewed every year it stays intact, it's in good standing with the state. And then also we take care of those minutes for you as part of that process, too.

And you know What? We charge 150 bucks, 150 bucks a year. And I know some of you are like, hold it. Whoa, whoa, whoa. You do the minutes and make sure the fee gets paid to the state. Yeah, we don't pay the fee for you. We'll bill you the fee, but we'll make sure it gets paid. We'll literally pay the fee for you. Get all this crap done. Make sure the minutes get done. Keep it in a digital server for you so you can access it whenever you need for 150 bucks a year. And I know some of you are like, well, the company in Nevada is charging me $300 or $500 a year for their bulletproof asset protection crap, which is essentially company maintenance. So we really are trying to keep this affordable for you. Now, do you have to do this for every LLC you set up? Yes, every LLC you set up. You've got to do this, and it's okay. And so this is why having multiple LLCs can be cumbersome, because you don't have to be doing this.

Yeah, okay, but that's. But let me tie that back out, though. This is why at the beginning, on episode one, you know, of the season of Asset Protection here, we talked about, don't build a massive safe if you've got nothing to protect, because not only does it cost you a lot of money, it also has some administrative burdens every year, some paperwork you gotta file, some fees and fines if you don't get stuff in on time. So there's stuff you gotta do now when you have the assets worth protecting. Okay, let's put the right stuff around it. Let's get it protected. Let's build the right safe or buy the right safe to protect this stuff. So now it makes sense. Now it's worth it. Now we got something, you know, we got some equity, some value here, some other assets. We're protecting it.

Okay, Omaha, Omaha. Can I go to the whiteboard? Are we. Are we. Do we have that technology that from.

Yes, sir, we.

We sure do. Okay, what's that from at. We have the technology. We have the $6 million, man.

$6 million, man.

You know, I hear they're remaking that, by the way, but probably it's $6 billion, man now. Six million. They're like, yeah, you can't even get a Jason Bourne for 6 million anymore. So here's my trifecta. So I'm going to put ops on the left. That's my side hustle or main business will come back to that. On the right, I'm going to put my assets. Now, my assets. In a typical trifecta, I've got my trust down here. At the bottom. That's the bottom of the trifecta. On the right, I own an LLC that owns my rental.

And.

And on the left, I have my side hustle or main business that's owned by the trust as well. And that's going to be an LLC that will morph into an S corp, if it's not already. So if you're watching on, on YouTube, you can see now we have a line down the middle of the paper for those that I need to describe this for. At the bottom is our box, which is our trust. And the trust owns the LLC on the right, 100%. And this LLC on the right then owns with the deed. Like Matt said, we have to deed the property over to the llc. And now the property is owned by the LLC and the LLC is owned by the trust. Now you're the manager off to the left, you get to manage the llc. And the LLC has a checkbook. All of you can see what I'm writing here on YouTube. So we got a checkbook, we got the deed, we got. You're the manager. The. That's you, that little stick figure mat. And then 100% owned by the trust. That is this wall that I'm creating now is that barrier that if anything goes wrong up in that little house, that rental, they can't get out of the llc. They're stuck to whatever that LLC has. So at most we might put two, maybe three properties in that llc and then we're going to leave that basket alone. That basket's clean.

Depending on the equity again, 250,000 of equity is what we're going to be looking at.

Totally. Sorry. So if you. I mean, you got a strip mall or a commercial building, it's going to be one property. So, yeah, we got all these variations, but a little single family home or an all CFR single family home rental is going to be just maybe two or three at most. Now, this trust is going to own other things. It's going to own my home. It might own an RV or cars or all sorts of toys. And it's going to. I'm going to have retirement accounts rolling into this trust. But before we go to the operations side, Matt, anything you'd add? I mean, that's just kind of. That's the visual of what this is all about.

Yeah. And remember, when you. You can't go as a plaintiff, see, we're protecting against someone suing you.

Okay?

This is what asset protection is. Where are your liabilities? Now, when you look at that asset protection, this trifecta that we have here, where are your. Your risks? Well, they're in that rental property. And we know they have to sue that LLC, but they can't jump over to other LLCs in your business. On the left side, your operating business, you've got customers there. You've got deals you've done. Whatever business you may be in. And we've talked about on episode one, some of you may be super high risk. You're doing bungee jumping at the state fair. Some of you are selling, you know, Beanie Babies on ebay. Pretty low risk. All right,

Beanie Babies. I haven't even heard that word in, like, 10 years.

Wow. They're coming back, baby. They're coming back. Wow.

Okay. We went to Colombo to Beanie Babies. You've been. You've been on the classic rock channel way too long. I don't know. True tv. What are you watching Andy Griffith at night? Geez. Okay, all right. You've been into Golden Girls, sitting down with your mom at night, Little Betty White. Okay, whatever.

Yeah.

Oh, gosh.

Okay. You know what I'm saying, though?

Okay.

I want you to think of where your risks are at, because these entities are what we're putting into place that prevents these risks from coming down to you personally. You're at the bottom of that trifecta, Your other assets on the right side. So we're trying to keep those things separate. So if you think about it, let's think about like a. On this trifecta, maybe you had a brokerage account with half a million bucks in it. Yeah. All right, well, I don't want Someone to get at that. How do I protect that? Well, I'm doing an LLC on my rental because if something happens without that tenant, I want them stuck and contained in there. I'm going to do an llc. Or maybe I got a corporation for my business or side hustle, an S corporation, because if something happens to that, I want them contained over there too. The brokerage account doesn't create liability, so I don't need an entity for it. If I have entities around this stuff protecting where the risks are coming from, my non risk assets, like just the brokerage account. Or this could be raw land. Doesn't really need an entity around it. You could, but it doesn't need it.

Yeah, I love it. And Matt, you just opened the door to the operations side. So let's do that. Everybody right now, let's say you have a little landscaping business, maybe you're doing some consulting, maybe you've got a little.

We do have the listener that has the landscaping business and the barber business. Yeah, they're and lawn scissorhands or something.

Yeah, that's right. We love that guy, that client. You're just doing a little everything. But you might be shipping product out of your garage. You might have employees and you're doing a call center. You might be just an affiliate marketer. You might be doing Turo with two or three cars. You might be doing driving Uber. So any of those little. And you might be a dentist, an engineer, an architect, a landscaper, who knows what you're doing.

Okay, Import or exporter?

Import, exporter. You might own Vandalay Industries. Okay, so that, my friends, is an operational entity. And if you're still watching on YouTube here, we're going to create this wall down the middle. This line down the middle of the paper is separating our asset businesses from our operational businesses. And so I had a question this week I was doing a live webinar and someone said, well, I have an llc. Can't I do my TURO in the same llc? I own my rental. No, because if something goes wrong with that TURO rental, what do they get? Anything in the llc? Oh, well, guess what. The LLC owns this cute little rental property down the street with 100 grand of equity in it. Don't want that. So we want these on the left side to really be shells. These are shell entities and they just run businesses. So you got multiple businesses in here. And we'll talk about how many entities you need for this in a moment. But you've got these shell entity, which is the left. The Right side is your LLC for your rental entity and they both flow down to the trust. That's the trifecta at its most basic level. Operation entity on the left, holding company on the right, down to your trust on the operational entities. Matt, you since you talked about the number of LLC we might need, how many entities do you need for operations?

I mean most people just need one. Depends on what you're doing though. But most people just need one. And you could be the landscaping business client with the barber shop too. You could be doing turo, you could be doing, I mean driving Uber. I mean you could have the restaurant. Whatever small business you are, you can be doing multiple things out of that. I mean just think of my own S corporation. I do multiple things out of it. Lots of different stuff. I don't need a separate entity for different types of businesses. Now if you have partners in some things that aren't partners in others, you may have different entities. Maybe you have large businesses and you have reasons to separate these things out for payroll or other purposes. But if it's you self employed person, entrepreneur, hustling out there doing lots of different things, you're doing real estate and you're whatever, we're going to generally have one entity. All of it's going to run into it. Because unlike asset side where we may be accumulating assets that have equity on the operations side, we're not. That is cash flow. We're just trying to generate cash over there. We're going to push that cash over to the right side where we deploy and have assets. So this left side doesn't really accumulate assets that need protecting. It's really just businesses that can create cash flow that you use to go buy other assets.

I love it. Now for those that are willing and able and it's not willing sometimes it's just you have the ability with your schedule to watch this portion of the podcast on YouTube. I just took the trifecta to level two. On level two on the operation side, we have a one parent. This is where I like to use the word parent entity. And Matt alluded to his S corporation and I'm going to use mine. I have. Some of you are like, well, you're a lawyer, you got paralegals, you got a law firm, you probably have five S corps. Nope, I have one. I don't want multiple S corps. I have one S corp. I do my little W2 out of this. I'm going to try to write off as many as expenses as I can that are related to my Personal life that are business related. But up here I'm going to have several LLCs flow into that S corporation. So Matt and I might have an LLC for the law firm. And my S corp owns part and his S corp owns part. Probably 75% me, 25% Matt. Anyway, so the fun part here people, is if I start a new business, say one of you call me up and go, hey Mark, let's do some import export. Cool. I'm not going to do it with you. I'm going to let my S corp do it with you. We'll probably form an LLC for our partnership, but the S corporation is there for tax planning. We've had whole entire shows on why US corporations, but we won't go there today. But when it comes to asset protection, there's the wall again. I want this wall between my S corp and me or my llc. Some of you, starting with a side hustle, just have a plain old llc. We're going to take that LLC and have it owned by my trust and create a barrier. So that way if a customer that is over on the right side, it was a tenant, but on this side it's a customer, it's an employee, a vendor, there's some lawsuit that's created for my small business. I have a wall and I've got multiple businesses, maybe in multiple partners, all flowing into that same parent company. That's next level. This is why you do a consult. So when you meet with the law, the law firm, the lawyer in the law firm and they go, hey, if your two to three year plan is this, here's how we should structure it. Oh my gosh, I have clients that are worth millions that have been working with lawyers for years that are like revolutionary. Thank you guys. Trifecta makes total sense.

But we know clients like a visual representation. So I just want to say that, you know, it's 1200 bucks to do an entity with a full trifecta in our office that goes over this, personalizing your situation. If you just want to do an entity with one of the, with one of the attorneys, get an hour consult, that's 800 bucks. But we can do this overall planning of where you're going. What's the next steps? Where are you sitting now? What needs to be set up? That 1200 bucks includes a new entity or cleaning up something you might already

have and commercial interruption there. Oh, I love it. Now on the right side, to finish out the more advanced trifecta, I really divide the asset side into two halves. The first half Is your tax free the haves not. Yeah, the hat is true. It's all really. It really is. That was ironic. Tax free or tax deferred side, which is. We'll call that the A side on the left of the asset side. So we're kind of dividing the right side into two pieces and then the to be side on the other piece is your after tax. So this is where you might have a rental in your own name with an LLC like we talked about, all owned by your trust. But then on the tax free section or tax deferred section, you might have an IRA LLC that owns a rental. And see, this is where we have clients now building up two buckets of assets. They've got rentals in their own name and rentals in their retirement account. And we're going to use a different asset protection technique for your retirement account assets. Guess what, folks, spoiler alert level three. So next week we're going to be getting into this section here of the retirement accounts and ooh, so sexy, so fun. So we're going to start expanding the trifecta and really building on it. So. Okay, Matt, let's do this. Give me your summary. I think we're ready for a summary. Tell me what you got, what you think are the big takeaways of today. What do you think, Matt? Anything we're missing? What's your summary?

I think the most important thing I want to say was with these LLC is I want to say it's now. I mean, it's not permanent, but it creates problems if you do it wrong. Okay, so you want to get it set up right? A lot of people just think, oh, I'll get started. I kind of think of like me sometimes when I used to try to work on my car, you know, and it's like, oh, I get started and I'm trying to fix my car. I don't know what the hell I'm doing. And then it's jacked up more than if I just took it into the mechanic in the first place. This is sometimes how it is with asset protection planning. A lot of people start working on it because it sounds fun. They just watch Law and Order, you know, they're like all in the mood. They watch suits. They're like, I'm going to go be lawyer. I'm going to go set this up. I know what I'm doing. The Internet has all the answers, surely, you know, and they go setting stuff up and it's all jacked up and it's more of a mess than if they would have just gone to the lawyer in the first place, they would have saved time and all these things. So get some planning. It's not that expensive. You do not have to spend tens of thousands of dollars. You don't need that. A thousand bucks, maybe 800 bucks. Even if you just need one entity to get going and get an hour of advice that will set you in the right direction on what you really need. Because there's so many considerations and I hope everybody can see that, from the state to the type of entity, to knowing what your fees are going to be, to what your filing requirements. We didn't even talk about the taxes on this. What's the tax election you're having? I mean that's something you need to be going over with your attorney or who are setting up this entity as well.

Wonderful summary. I want to take kind of a summary approach as well from what we covered here. Remember level one, let's just everybody take a breath. Level one were just good basic asset protection strategies. We talked about insurance, avoiding the scams, assessing risk, assessing assets, umbrella insurance. Be smart with hiring contractors even at your home. Do due diligence on your partners and your people. Tailor it to your plan and what you have. That's kind of our eight there again, we've got articles on this and a summary from last week in the description for last week. But today is okay. Now I'm out building wealth. I'm going to buy rentals. I'm going to have a side hustle, a business on top of my day job, whatever it is. Once you venture into that world, the trifecta comes into play. Now we've got our trust at the bottom. We all should have a revocable living trust which we build a trifecta with our trust plans. Bring that up with your. With our phone schedulers at the law firm. But once you have your trust and you have a business operation of some sort, that's where the LLC comes into play. The limited liability company, which can be morphed into an S corp. If you're doing operations. Go catch a podcast on why we would do that. But the LLC is really fundamentally the same type of setup and maintenance as any corporation. We're going to set it up properly. We're going to set it up in the right state, we're going to set it up at the right time. We want to get a little advice from a professional. If, if it's our first go and then we want to maintain it. We don't want to commingle we're going to have a bank account for that entity. It's going to have its own ein, and we're going to maintain it every year, which is a great tax write off opportunity. I want you to have a board of directors, a board of advisors. We have whole shows on that. And how do you maintain this entity to make it actually empower you to get better tax write offs and less risk of an audit. And so that's what this piece is about, protecting you from these operations. Next week we're going to talk about protecting other assets from you being an idiot. That's level three. Oh, you got teenage drivers. Boom, next level. So we're. So anyway, we're going to get there. But level two is really about just this business venture. Is that fair, Matt?

I mean, yeah, and I think it's, it's also about looking, like I said, when you look at the trifecta or you just, just for those just listening to the podcast, just think of where your risks are. Where am I likely to get sued? What barrier, what, what defense do I put out on the field because of that risk? Okay, so everybody's risks are a little different. So we might need a little different defensive scheme, you know, out there. Are we doing nickel, you know, are we playing, you know, cover two? What are we doing, you know, Omaha.

Omaha.

So, so we're putting a different set of defense up there. But, but that defense is there to protect all these other assets, to protect you. And, but we're looking and we're focused on where the liabilities can come.

All right, we're here, we're setting up our defense to protect our end zone, our end game. What's our end game here? We want to have wealth, financial security, streams of income. That's our end zone. And we got to protect it. Yeah, we got to have the right game.

The other way is we want to win the game now on serious. A lot of people are great at scoring points. They know how to make money, but they lose it all. They play crappy defense, they're sloppy. They're not doing good tax planning, they're doing poor asset protection planning. They're just bad with their money. Their defense sucks. So they never end up accumulating or winning the game. Okay. They get scored on. And so asset protection is one of the critical parts of defense to building wealth. Because we don't want to get scored on. Okay. We're working hard to go put points up on the board. We don't want them taken away. So I love it.

Great football Analogy coming around the corner. College football is just weeks away, so. Well, everybody, hopefully that was, again, a wonderful podcast to help you in your effort to win the game. Protect your end zone, play good defense. Ooh, Matt, you brought that together so well at the end. Love you guys. Love that we're here with you. Please continue to listen, share the podcast. Any final words? Take us out.

No, I want. I want to say one last thing about next week, too. We're going to talk about your home. Well, this is some of the stuff now we're going to hit, like your retirement account assets, your home. A lot of these places where we have wealth that some people are really confused on how to protect. So we're going to hit that. Talk about how to protect those assets. Some of the stuff that's most important to you that you're looking forward to living off of in the future that gives you that sense of security, having your home paid off and all that equity. We're gonna hit that next week and try to, I don't know, bring it home.

You're just full of it today. You must have had a good. You had Wheaties for breakfast.

You know, I'm finally waking up. I have to say, it's. I want to thank. You know, this is not a rock star, because I'm not a rock. This is Aspire. Healthy energy.

Sounds disgusting. Shout out.

That's okay. I can't handle a rock star, though. These are like 60, you know what is like 60 grams of caffeine? 80. I can't handle that. Rock star.

Yeah. This is your cup of coffee in the morning. 160 grams. That's. That's a whatever. A vente. Whatever. Who knows what. Say it. I always. I'm Starbucks. I'm like, I want that size.

Yeah.

I mean, the words for their cup sizes never match what you really think you're getting. It drives me nuts.

I want a small. Oh, you want a tall.

Who was your branding person when they did this? I think a couple years later, they're like, who is the dumbass we hired to name the size of our cups? Well, yeah, I don't know. Okay, well, everybody, thanks for being here. We'll see you next week. Keep living the dream. Sa.