397: Your LLC Could Be Worthless - Here's What To Do...

Your LLC can be worthless. If your LLC consists of one sheet of paper, you need to listen.

And we know that's two thirds of you.

With an llc, we got three options of how you can tidy up and clean this problem, fix this problem.

Welcome, everyone, to the Main Street Business Podcast with Matt Sorenson and Mark Kohler. It's an amazing day today. We're so excited for the topic today. Talking about LLCs, baby.

Yeah, well, you've seen the title, Your LLC could be worthless. Now, before we go any further, let me explain who you might be, where your LLC could be worthless. Let's just. So that way, you know, should I listen to this thing? Watch this on YouTube, whatever it is, I'll throw out a couple if you're here. Give me your yellow pad, dammit. Okay, look it. Okay, if your LLC consists of one sheet of paper, you need to listen. Okay? That is not an llc. You may have thought it was when you went to the state.

This podcast is for you. And we know that's 2/3 of you with an LLC.

All right, one sheet of paper. That's not an LLC. An LLC is a bundle of documents. We're going to explain this a little later. We got three options of how you can tidy up and clean this problem, fix this problem. But the first one is if you got one sheet of paper, you don't have a complete book, you don't have membership certificates, you don't have an ein. We'll talk about maintenance here in a minute. But if you don't even have the basic structure of an llc, you may go, well, you don't have to have that to have an llc. Well, you don't have to floss your teeth either, but you're going to lose your teeth. Yeah, you know. Yeah, there's no law.

Yeah, good analogy. You know, and nine out of 10 lawyers recommend that you have all these documents in the llc. And you know what, that one other lawyer is who he is.

No, I don't either. So Denison lawyers are together on this? Yeah.

He doesn't know what he's doing. Okay. So it's really important. But let alone, let me just say this, how having the right documents in order, it's also how did you structure it? How is this coordinate with your estate plan? How's this coordinate with your tax planning? How does this coordinate with your asset protection planning?

Did you even get the right a.

Did you put it together right when you did it online?

Yeah, the ownership.

Yes, the ownership. The tax election you made.

Yep. Love it.

Then third, what did you use it for what assets? Did you put it in? Are you running multiple things into it?

I mean, got Matt started here. Okay.

Yeah. I love it. I love it.

Okay. Third, I'm going to say this. Let's say you got lucky and you set it up properly and you had the right structure. Have you even maintained it? Have you used separate accounting? Have you done your annual minutes again? Well, I don't have to do that. No, you do. You want the real asset protection? Have you funded it properly? Have you used the name and the lease agreements? Do you have the title to the property in the name of the llc? Have you done all this maintenance?

Yeah.

With all the money and work you did to get it set up, have you even done the maintenance? If you haven't, this podcast for you. Right.

And we know we've just grabbed 90% of the people that have an LLC. I hate to say it, but one of the things we see so much in our office is more people doing it wrong than doing it right.

Yes.

And so we're here to try and help get you on the right path. It's okay. Sometimes we can just clean up what you're doing.

Yep. Well, Matt, I just pulled something out of my pocket.

Okay.

Okay. I need to tell everybody. This is your. We call this. We have an annual rehab special where we can rehab your situation. Let's get it cleaned up. Let's dial it in. We have a team of paralegals that are doing this all year long, but every time, it's kind of back to school time.

Yeah.

We're like. It's kind of cleanup time. Let's get. Let's get everything in order before the holidays, before year end. And so this is with. In light of our annual rehab special. This, people, is your intervention. This is your. We're going to. We're going to. We need to intervene. We got. You have to have a wake up call. If you get an IRS audit, if you get into a lawsuit, your LLC is worthless. You think it's okay, but it's not. So, Matt, I need to reach you something.

Oh, is this for me?

This is your intervention.

We're doing this on the air?

Yeah.

Is this being recorded?

Yes, it is. Okay. I've written this letter for you, Matt. What you're doing is hurting yourself and me. Okay? I just. I know this hurts.

Okay?

The door's locked. There's a van down on the street, and you're gonna have to get in it when I'm done with this. Okay?

Is that why you packed My bags this morning.

I did. I packed your bags. Okay. Your LLC is a mess, and it's damaging me, too.

Yeah.

I am your partner and it hurts. Yeah. I can't live like this anymore. You need help.

I need this. I need to hear this.

You need to hear it. So the van is going to take you to the law office and they're going to sit down and redo your llc.

Okay.

But you're going to come out feeling better.

I'm going to be a better for all of us. I'm going to be protected.

Yes.

I'm going to be okay.

Yes. Now, we could go around the room. Everybody. They've all written notes, too. Everybody, are you ready? Okay. But you need this intervention. So it's time we clean up your llc. Can you do it? Will you commit?

I can do it. Am I. But I want to know, am I, Can I. Can I clean it up? Or am I more of a do over?

Well, you'll find out when you're in rehab. When the van gets to the office, that's what determines. They're going to figure that out.

They're going to shuffle you in and they're going to be like, we can't really clean this guy up. He's a do over.

The paralegals are going to. Through an intense session that may seem difficult. And you're, you know, your. Your electronic devices have been taken away from you. You're going to have to.

I don't know if this is funny for everyone else.

Yeah. Even now for some of you that

have just like, Mark, this is hilarious.

Hey, I've. I've been in interventions and I know we may. Okay, there's a disclaimer. No, seriously, I've. I've helped usher the family individual into the. Into the van. So I know this is a. We may be making light of something that offends some of you, but hopefully time's healed a little bit. You can laugh about this a little and don't be too offended, but this is real and we want to make it fun. Hopefully you can remember this is your intervention, Matt. We will not. Okay. After this podcast, you're off. But anyway, so let's talk about. Let's assume you're now at the law office. You're on a phone call with one of our lawyers, and you're paralegals. And all of you out there, you're feeling the love, you know, we want to help you. You got some options. Yeah. So what would that intervention. What were some of those options?

Well, what they do you know is like at the rehab center, they're going to do an intake, they're going to get your information, they're going to, they're gonna get that one piece of paper that you have and they're gonna, and they're gonna ask some questions, right? We wanna know, well, what are you doing with this llc? Is this an operating business? Does it hold assets, like rental properties? Like we wanna know because that's gonna dictate how you set this up, how did you tax it, who owns it? We wanna know these details. So there's gonna be some intake process, but we wanna also know what type of income do you make? Is this a side hustle? Is this a main business? Do you have employees? We want to know this type of stuff.

And you know, this is the stuff that many of you try to self medicate with on Google. You're like, I'm gonna click, click, click, click, click, and I'm gonna find what I think I need.

And they got some essential oils and you mix them together and you know,

you have an apparatus that involves a lighter maybe, but the point is, you've probably tried to figure this out on your own and you know it's messed up. And that's the self realization, the first step. Boy, we're covering a lot of ground here. Step one in your, in the 12 steps here of getting your LLC put together. But you have to be able to admit, yeah, my LLC is jacked up. And so then the, this, this conversation actually at our office is with a lawyer. The lawyer's gonna say, let's decide what to do. You can be on a phone call around the world. We've helped clients in military bases working on their LLC with rental property back in Tennessee, and we're helping them clean up their llc. So anywhere in the world you can get on a zoom call with one of our attorneys and in that intake, these are the questions you should have but you didn't know to ask when you created that one sheet of paper.

Yeah, you don't know what you don't know and that's okay. So what we're trying to emphasize here is get some planning. We've done 20,000 plus entities over the years, okay? We've done this a lot. We've learned some stuff. We've helped clients and do tax planning, we've helped clients with asset protection, we've had clients that have had lawsuits that have had to rely on this stuff. Okay, so let us help coordinate that for you. Now let's get to the point Though I want to talk about, you talked about really fast at the beginning of what are the documents that should have been included? When you come here with your one piece of paper from the state, we are going to clean that up and that's going to include an operating agreement, that's going to include some initial minutes, maybe some minutes for the prior two years that talked about the company and what it's, what it's done and have you made any changes to it. We're going to make sure there's clear ownership certificates on who owns it. These are called membership certificates. We're going to have a corporate book. Now, those are just the documents alone. What's going into those matters too. And that's a conversation where the planning and coordination of your tax, asset protection, estate planning is important.

Okay. And the perfect lead into the point in our annual special, which we're doing this year round. But in our annual special, we give a little discount down here in the link below. Even if the annual special is over with by the time you hear this, it's going to be through the month of September here in 2022. But if you're listening to this podcast or catching this video after that date, the link will still be valid. It'll take you to our homepage and you'll see what these options are. But what Matt's talking about is our option one, which is let's just, you know what, your answers are pretty vanilla. Everything you tried to set up is okay, let's just clean it up. And that's a lower price. It's simple. The lawyer kind of verifies that you had your heart in the right spot. But let's just clean that up. That's option one. Option two is it's here's. Did you hear that? That's your one sheet of paper. It's a goner.

And it's gone.

Yeah, and it's gone. And now what we're going to do is a brand new LLC with or S Corp, or what you should have got in the first place because it's cheaper to do that than try to clean up the old one.

For example, those of you that set an entity up in Nevada and you don't live there, you don't do business there, you have nothing to do with Nevada, or you set up an entity in Delaware or some other state because you got online and googled for 30 seconds and thought you figured it all out. Okay, well, you're probably paying way more in fees than you need to. You're paying these out of state fees. You. You need to be registered in the state you should be in. So in a lot of those instances, we're going to dissolve that thing. That's a turd, and you can't polish a turd. So we're going to start over with the new entity in the right state, get you off on the right foot. Now, there's some stuff that happens there. Well, I want to keep the name, you know, I want to. You know, and we'll look and try and work with that the best we can. So there's always some of those considerations we're going to look at and try and find an easy solution for you.

And don't fixate on Mets analogy of polishing a turd. Don't attempt that at home. We're just. Just trust us on that one.

They did it on Mythbusters, but they're professionals, and they did have a disclaimer. Do not try this at home.

Yes. Fair enough.

They were actually successful in polishing the turd.

Oh, really?

Yeah, they were.

Wow.

Yeah.

That must have been an old turd. That was a petrified turd. Dinosaur turd. That was a dino.

What was that, the Museum of Natural History now?

Yeah. Was that from Land of the Lost? Oh, my gosh. Okay. I got a Will Ferrell quote in me somewhere on that one. All right, so that's option two. We're going to actually, in that consult, the attorney's going to help advise you on. Let's. Let's set up the right thing. Let's redo this, and it's going to save you money in the long run. And you're like, you feel better coming out of the rehab? You're like, okay, this rehab really helped me. I know where I'm headed. The third option.

Well, can I throw one more thing in here? On the second option, sometimes we do something called a domestication. Now, some of you have done the wrong state thing, and you're like, I want to keep this entity. I got my bank account going. My tax IDs all out on all the stuff I'm doing. I really want to keep this, but I know I set it up in the wrong state. Or maybe you did it in the right state and you've just moved. This is another time to utilize this special. We can do what's called a domestication of the entity in most states.

Where.

Where we can move it. Let's say you were in Oregon, and now you've moved to Arizona. We can move it from one state to the other. It's the same entity, keeps the same tax id, keep the bank accounts the same. You want to update some certain parties, but it's to now turn into an Arizona entity. Same name and it gets dissolved in the old state.

Yeah. And frankly, Matt, what he just gave is an example of multiple options. There are. There's a lot of options here. Have you integrated your revocable living trust? Are you married? Are you single? Did you set it up with some weird ownership to begin with? Which brings us really to the third option where the attorney's going to ask, what's your overall picture look like? And if you go, it's a disaster. Okay, well, let's use this as a jumping off point to really do a little more in depth rehab. You need to stay a little longer. We discovered some things in your blood work.

Yeah. And this is called the transformation.

Yeah. Yeah. It's time we really buckle down here. Call your family, your employer. We're going to figure this out. So. Okay. So anyway, in option three, that's where the attorney is going to say, let's upgrade this to a trifecta. Let's really build a diagram with an annual plan where we can circle back next year, see what progress you've made. And in this trifecta, which many of you that are followers of our podcast or videos have seen, we're going to build really a structure around your goals, your purpose, your business, your income, your family, because everybody's different. And so this little trifecta is a really nice tool where you can feel like not only is my LLC cleaned up, but now I know how it functions in the overall plan.

Yeah. And I think for a lot of people, particularly new business owners, all of us were a new business owner at some point.

Yeah.

And you don't learn this in school. A lot of us haven't worked with lawyers before as you get out and start business, or investing in real estate or what you may be doing. And so you don't know what you're supposed to do. You just don't. There's not like a guide for you. I mean, there's a tax and legal

playbook, of course, but, you know, book is amazing.

That might be helpful as you're trying to navigate this. But, but in seriousness, like, it's not like, oh, I'm just going to go run with someone that's ran a marathon before and I'm going to learn how you run a marathon. You buy the shoes, but you got to get your butt out there every morning and you got to do this and you got to do that and you got to eat like this, and you got to do this much by this date. You know, there's like a process, tax and legal planning. A lot of people kind of self discover after 10 years of trial and error, and they're finally like, oh, this is how I really do it. And you finally get over to you plan, you get the big picture, you do the trifecta. You realize doing it on your own, you made a lot of mistakes. You left a lot of money on the table in tax planning. You've left yourself exposed for asset protection. And you finally get over to, I need to get my crap together. And so what we really feel with the trifecta is this is what you should do from the start. This is what you need. You need overall tax planning considerations. Talk about what you want to do now, but also look into the future of the things you might be doing. Talk to your lawyer about that. Say, here's where I'm at today. Let's help get me fixed today. But here's what I'm looking to do in the next couple of years. And then we can help build that out and show you how that works in your tax and legal planning because

you want that foundation moving forward. I like the way you brought that together. Now let me give you some tips. Right now, some of you may be a little frustrated. Well, tell me what to do now. Really, I'm going to beg of you to not go the DIY route. That's the do it yourself Home Depot route. At this point, if you know your LLC is a mess, let's buckle down, make an appointment, and let the attorney guide you through one of these three options. If you're on a budget, we get it. We're not wanting you to spend more than you have to. We want you to be coming back year after year and say, I found a safe haven. This law firm really helps the main street small business owner. Let's keep it simple. So here's some tips. Start gathering what you have. Now, if you've got that one sheet of paper somewhere, maybe it's in an email from whatever Zoom website or whatever. You know, get that scanned in a folder. Let's get your last year's tax return so we can see how you report it. A lot of times people say, oh, this is how my LLC is owned. Okay. And then we look at their tax return. No, it's not.

Yeah.

And so let's. This is the blood work. Really. We need to see your last year's tax Return. Get your llc. If you don't have all this stuff, that's fine. But do what you can to gather data. Down below is a link you can get on. Make an appointment, at least for the first service. Even if the cleanup gets upgraded down the road, it's okay. Make the appointment, start gathering your info, and then in that appointment, you can shed tears and spill your guts, and we'll figure it out.

Yeah.

Yeah.

I mean, we want to. Sometimes what you think you have is not actually what you have, you know, Shocker. But as being lawyers doing this for years, we've just ran into that with clients. So we want to see where you're at, because that's what we're gonna have to work with here. But I also want to say, I mean, we have. We have hundreds of clients in our law firm that are lawyers. Okay. They don't want to DIY it.

Yeah.

And they know that this is just not what they do every day, you know?

On this note, I gotta say this. Yesterday, John Miller. We love John Advanced Tax Solutions out in Idaho. He helps with IRS resolution for a lot of our clients. He's great guy. He was like, hey, I need you to hook up and help me out with some lawyers. And the lawyers are like, they need you guys. These are incredible lawyers. It's specialists. I don't want to say anymore. I mean, what they do. But he's like. They're like, who are the lawyers that can do this? I've got a couple of lawyers on retainer right now. I'm using lawyers. That's okay. So these are people that actually went to law school, and they're not even diying their own llc, right?

Yeah.

And they're like, I need the person that knows what they're doing.

Right, exactly. So I catch up.

Sorry, but that was an example.

When they say they need the guys, we're the guys, you know, and we got the gals, too. You know, we got a team here, 70 plus in the law firm that can help on it. All right, so let me go back to this. I want to hit just the discounts, just so you know. Okay. We're gonna save 100 bucks on the business entity structure console. That's if you want the whole trifecta. Think. Then that's 1200 bucks down to 1100. A new entity is 800 bucks. Get 50 bucks off if you do it under the special. We do not ever do an entity less than that price where an attorney's involved consulting. You can't even get out of legalzoom to have all these documents and you won't even talk to an attorney or have real tax or legal planning in the process at that price. Then the cleanup is also 700 bucks. Sorry, is 700 bucks minus $50 discount. So that's 650. So that's the pricing and discounts. Great time. Month of September. That's your time to take advantage of it.

I love it. So last thing I wanted to say is, on an emotional note, don't feel overwhelmed. Don't feel all is lost. You might be like, oh my gosh, one more thing to work on, one more thing to do. This. Being a business owner is. It's a journey. It just takes. It's baby steps. And just because someone else is more organized or making more money, don't judge yourself. This is your journey, it's your business. You get to choose the pace. These little things that we're talking about are just little pit stops along the way on your journey. Pull over, get this taken care of. And guess what? You're going to have a little more hop in your step when you take off. You're going to feel a little more organized, have a better vision of where you want to go. It's going to help you be more successful. And there's not a terrible rush. But the longer you procrastinate doing this, the more you're exposed in a potential lawsuit with the irs and all these things too. It's just a mess.

Yeah. And this is one of those things. You just kind of got to rip the band aid off. It's something that we know a lot of you have, like put this off, you've delayed it. You know, you need this. You know, you need to re examine this and get it cleaned up. But you just got to do it once. One and done.

Okay?

You get it done, you move forward. We have our company maintenance program. If you want to get on that. It's only 150 bucks a year. We do your renewal for you. We make sure your entity is actually active with the state, which by the way, how many times we get an entity in that's not even active with a state anymore because someone didn't know. Oh, you have to pay them every year and send them a form. Yes. Okay. But we can take care of that for you and do your minutes as well. So. So get on it. You won't have to worry about it. That's the other thing I think a lot of people just, they have to worry about, like, I just want to run my business. I want to do my deals. I want to do my investments.

Yeah.

I don't have to worry about all this stuff we got. You let us take that burden. Let us fix it. You don't have stress.

Yeah. So, in summary, it works. LLCs work. Life's good. Business is amazing. It's the American dream. We get to design our future. So take this little intervention podcast to heart, please. Share it with your loved ones, write them a note.

And I'm going to be on leave of absence for the next couple weeks. That's right. You know where I'll be. But I'm gonna come back a better person.

Yeah. And as soon as the camera goes off, Matt's gonna make a run for it. But we have security outside the door. I just wanna point that out, so it's. Yeah, it's not gonna. It's not gonna work. So just cooperate, please. It's for all of us. We love you guys. We'll see you next week for another episode of Main Street Business. Keep living the dream. And.