9 Mistakes to Avoid With an LLC

Everybody wants to have like the silver bullet. I'm going to go to Vegas and Mastermind Group and buy a $10,000 asset protection plan. And, oh, it's shiny, it's glossy. You know, really what is it worth?

But people like guarantee on the box says it on the box. It says asset protection on the box.

I know it does and it feels good. But then someone's going to break in there at night and take your box and you're going to be like, what do you got? You got nothing. You know, so this is, this is actually going to save so many of you money. You're going to love this because I bet you, Matt, 90 plus percent of our listeners have an LLC. Would you take that bet? Yeah.

Welcome everyone to the Main Street Business podcast with Matt Sorenson and Mark Kohler. We're just delighted to be with you today. Excited for today's episode.

Yeah. Can I just say this is going to be everybody's most fun on a podcast this week. And the most educational and the trifecta. You're talking tax and legal building wealth. Is that weird? We're going to bring it.

Accomplish this. If you only listen to one podcast this week, we would have nailed that.

Yeah.

Because we have, we have no competition. This was the best, the most fun. I mean, I only listen to one

podcast, so we'll see how it goes. So welcome. Yeah. Got a good topic?

Yeah. We want to talk about mistakes and how to avoid them. Really?

Yes.

Maybe how to fix them if you stepped in them on setting up an llc.

And I think we need to come out of the gate and say some of you are like, you know what, I don't need any more shame in my life. I don't need Mark and Matt telling me how I screwed up my llc. Well, we're here with, through love and compassion to just say it's okay. You're human. And you know what, if your LLC is jacked up, it's not your fault. It's probably some website's fault, some brother in law. You can always blame a good brother in law for most things.

Yeah, yeah, yeah, yeah. I mean, you can be a member of the llc. Jua. Llc jacked up. Anonymous. There's a, there's dozens of chapters. There's probably one in your neighborhood, in your city. They meet on Thursday nights usually.

I'm going on, I got my two year coin right here. Yeah. My LLC has been clean for two years. Asset protected. Yeah, it's a, it's a, it's a milestone.

So. But us as tax and business lawyers, Mark and I are both attorneys for any of you new to the podcast. We're small business owners. We're passionate about building and protecting your wealth, paying only as much tax as you need to. And the LLC is one of the most commonly used business entities. Some asset protection can be great for partnerships. Sometimes there could be some tax planning in it if you're doing an S selection on it, and maybe you got the wrong entity and you need to kind of tweak it a little. So it's a really commonly used entity. Also commonly screwed up.

Yeah. And I. I'm going to. Okay, little behind the scenes. I think I like behind the scenes. You know, sometimes the blooper reel, you know, after takes. Those are fun. So I'm going to just give you a little behind the scenes. My vote for today's show title. And I got outvoted by a number of people, including Matt Sorenson. I'm still a little butt hurt about this, but my title was. What was the title?

It wasn't very memorable. That's why I was like, yeah, no one's gonna remember that.

It was so good. Okay, what was it? What was my title, Corey, that I wanted? It was misconceptions. No, that was yours. That was a dumb one. What was it? No, the asset protection. No one talks about.

No one talks.

Okay. All right. That would. See right there. Doesn't that. Isn't that catchy? So catchy. You could remember for no love, you know, at least 10 minutes, you know. Okay, so my title for today's show was

you.

You're the only one that remembered yours. Okay, now. Okay, so my. We've got an in studio producer, Corey White, who, you know, really tries to inject himself into the show inappropriately. I just want to.

Yeah.

If you wonder what that voice was. Okay. It wasn't. God, you know, coming into our show. It's Corey behind the scenes. Okay. So I think this is the asset protection people don't talk about. Everybody wants to have like the silver bullet. I'm going to go to Vegas Mastermind group, buy a $10,000 asset protection plan and. Oh, it's shiny, it's glossy. I mean, I could put an asset protection in a box for you, but, you know, really, what is it worth? You know, it's just. Yeah, it's not. It's.

It's marked. But it. But people like, guarantee on the box says it on the box. It says asset protection on the box.

I know it does. And. And it feels good. But then someone's going to break in there at night and take your box and you're going to be like, what do you got? You got nothing. You know, so this is actually gonna save so many of you money. You're gonna love this because I bet you, Matt, 90 plus percent of our listeners have an LLC. Would you take that bet?

Yeah. Yeah. I mean, Nicki Minaj has an llc, you know, that's true. By the way, if you have not listened to the Nicki Minaj song about an llc, I don't highly recommend it,

but it's gonna bring it up anyway.

You'll get a chuckle out of it. You'll get a chuckle out of it, pretty much. You know, anybody who's anybody has an llc.

That's. I. I can subscribe to that. Okay, so now let's get to it. Let's go through our list now. I'm gonna. I want to bring what I thought was a better title for the show. I'm gonna bring that point to bear here shortly.

Okay.

But I'm going to let you go first, Matt. Okay. Mistakes people commonly make when setting up an llc. You go first, people. Do not be shamed, no matter how, you know, mean Matt sounds. Just know I'm the good cop here. I'll have a, you know, we can solve the problem.

Yeah.

Okay. Go ahead, Matt. I wanted to set that up for you. Go ahead.

Okay.

Thank you.

So, okay, first mistake, making your LLC member managed.

Ooh.

When you set up an llc, you have two options that every state has this same format. You can do manager managed, and you can disclose who the manager is, which in many times could be you. Or you can do member managed and disclose who owns it. If you do member managed, you're putting yourself down as member, and you're saying, hey, I own this. It's right on the state's website.

Come get me.

Yeah, we don't love that. No, we want manager managed for your llc. So you're the manager, and we don't know who owns it. Maybe it's you, maybe it's your trust, maybe you've got a partner in there, maybe a spouse, who knows. But there's a lot more privacy to that. And manager manages just better for a number of other reasons.

Yeah.

So first is you screwed up. The first option is this a manager managed LLC or member managed.

Yeah. And by the way, we'll get some hate mail on this because I know right out of the gate some of you that are practitioners are going, whoa, whoa, whoa, whoa. I always do member managed. These Guys are yahoos. They don't know we're doing well. First, let me a little, and I say this humbly, a little bit of credibility here. We really are lawyers. We really have a law firm and we've set up 3000s, I would dare say over 10,000 LLCs in our.

Oh, yeah, easily.

In our firm.

We did over 200 last month, you know.

Yeah.

So like 250s and have been doing this since what, we're on our 20th anniversary of the firm.

Yeah. So it's been cranking. So some of you may go. Well, all right. So I want to tell you that think we're wrong. Just put your guard down for a moment. Let me give you a couple other reasons why this is number one on the list. I like that you came out of this. I didn't know you were going to come out of the gate with this one. But Matt said privacy, which is nice because you don't want to know who the owners are. Arizona is one of those states where if you're more than a 20% owner, you have to have that disclosed on the website and in the articles. Kind of sucks. But 90% of all the other states, you can get away with just manager managed. In fact, in some states like Wyoming, you can get away with just the incorporator, like who was the lawyer that set this up. So we've always thought, why, why share it if you don't have to, you know?

Exactly. So, yeah. And another reason just on that same is, well, what if I set up my estate plan or my trust later and I want to transfer the ownership if it's manager managed. I don't need to amend anything with the state if it's member managed, you're going to have to go do an amendment to the state to transfer the ownership from you and amend that. And so you give yourself kind of more crap to do when you do member managed.

Okay. And so, and I like. And I'm going to even expand on Matt's. If you change ownership not just within your own trust or something, but you bring on a partner. So now you're 50. 50, you're whatever. So you've got multiple partners in an LLC. If you're manager managed, there's a good chance I'm not modifying a thing with the state and no one knows. That's really cool.

Yeah. Much more private.

Okay. Now third, gosh darn it, I don't know what's going. I need a, I need a drink today. I'm just like, I had my third one Right on the tip of my tongue. And okay, so it's privacy transfers. And what else would you say? Why do we want manager managed?

We tell people you want three reasons for manager, man.

I got one. I got another one. Okay. The bank.

The bank.

Because if you go in with a member managed llc, a lot of times the banks want to see all the members. They want to see the operating agreement, they want to run socials on all the members, yada, yada. More and more with the banking scenario. Setups we prefer. And we have some online banks we can give you too. They're like, who's the manager? What's their social? What's the ein for the company? Show us the articles. Done. And we did a show two or three weeks ago on what banks do to screw up the process. So they're on a need to know basis. But if you do member managed, there's a good chance the bank's going to want more crap. So that's number three. I don't have any others. But that's mistake number one. I like that, Matt.

Okay, all right. Okay. So go manager managed. And you can always fix that moving forward. So that's an amendment to the state, and we fix that often for clients.

Okay. Okay, man. Number two is a hard one. Are we doing the most important in a row? Okay, I'm not saying.

I'm not saying that.

Okay, all right. Okay. I'm just gonna throw this one out then because it's the next one that comes to mind. Setting up the LLC in the wrong state. Nice cough. Right. When I said that on the microphone, Corey, I don't know if anybody. If that would be unedible because. But I'm going to say it again, Corey, are you ready, Corey? Because I just want quiet in the studio, you know, Heaven forbid I want to set. Do some directing here. Okay.

Okay.

Setting up the LLC in the wrong state. So I'll throw it back to you, Matt. Give us an example of wrong state.

Well, there's the classic one. I set it up in Nevada.

Delaware.

Delaware. I live in California. Okay. Are you doing business in Nevada? No, but I heard an AM radio commercial that said I should set up in Nevada. Or I went to some seminar at a Holiday Inn and some corporate headquarter person that's a coach told me I needed 10 LLCs in Nevada for my small business. I run out of my house in California.

Yeah. And I get unlimited LLC is, by

the way, you know, I can set up as many as I want. Yeah, yeah. And it's only $100 more for each one I set up. Okay. All right, Nice. Well, let's get to the state issue. If you're buying real estate, let's talk about that first. We always recommend setting up the LLC in the state where you own the property. So if I'm buying a Nevada property, cool. Do a Nevada llc. But if I'm buying an Arizona rental property, I'm not going to do a Nevada llc. To do that, I'm going to have to pay fees in Nevada. Then I'm have to register it in Arizona and pay fees in Arizona, and then I can use that llc. Why don't I just go straight to Arizona and do an Arizona llc? There's this misconception out there that, that Nevada has this heightened level of asset protection that's portable, that you can move over to any state that matters for the basic real estate investor or business owner. It doesn't.

Yeah, it's.

It's not worth it. The fees in Nevada are expensive. Delaware too, so beware of those states. Sure, they're nice for big corporations and certain nuanced situations, but for the typical small business owner, entrepreneur, real estate investor, you know, you small business owners, we're going to set up the state where you operate from. If you're an online business, you might go to online.

If I may I interject. So let's stay with this real estate for a month and let's vet this a little bit more. Matt, some of us, you know, in the industry, we say peel away the onion.

Okay.

Get it.

You know, is that a technical term

you may want to adopt that it's okay.

Is that why I cry when you explain this stuff?

Fair enough. It's got a two prong effect. Okay, okay, so. So let's go back to Matt's example. I live in Arizona and I have a rental in Arizona, but I got sucked into a Nevada llc. Now, we can talk about how to fix it in a moment. I'll give you some good news there. There is hope. See? No shame. Hope. Small subtle thing there. Okay, so could you set up an Arizona. Sorry, let's back up. Could I set up a Nevada LLC and register it foreign in Arizona? Sure. I'm not saying that that's bad. And I'm not saying Nevada LLC don't have good asset protection. If I'm doing business in Nevada. And there can be what we call a charging order protection entity status. That's called a COPE C O P E. We've done separate podcasts just on that topic. Holding up this Amazing book on screen here on YouTube. I just, just want it. Where do you put your hands? I don't know. Put your hands down. I don't know where to put my hands now. So in my book I talk about kind of high level asset protection and so a cope may be necessary for some people with more assets. So I may go Nevada, I may go Wyoming, I may go maybe a Delaware, but that's something we grow into. So for again, for the common client that just has a simple rental property in Arizona, maybe I live in California. I'd set up an Arizona llc, hold that rental property. Now I know Californians have a franchise tax issue. Do I need to register to do business in California? Maybe at least with the franchise tax board and pay my fee, whatever. That's a topic for another day. But the point is to get asset protection, I have to have the LLC registered in the state where the property is. So why pay double fees? Having it in Nevada, having it and in Arizona, in that example, if I'm just getting started, have four or five rentals, there's no need to double down on cost. Yeah, yeah.

And there are some states that say if you have an out of state entity that you don't register to do business in our state and you have a lawsuit here, we don't even recognize that llc, it's you pretty much. And other states have fees, they ding you for failure to do that. So you want to be careful on that. I actually have a blog article on it on my blog. But just, just get registered in the state you're actually doing business for you operational business owners, small business owners, you're going to want to be in the state you're doing business in, property owners state where the property's at. Those are the best guidelines there. Beware of people recommending Nevada or Delaware when you don't live there.

Yeah. And again, not that it's not bad. I, we'd all like to drive a sports car that's worth 100 grand. But it, it may not fit your situation, it may not, you know, you're just not a sports car guy, you know, and it's okay, stay in your lane. You might be a minivan guy and you just own it. Just do it.

Just own it.

Is, is there really such a thing as a minivan guy or is we just.

I think there is.

Is there?

Yeah.

Okay. All right. I don't, I don't want to put labels on people, you know, that's, that's inappropriate. We are inclusive here of minivan owners. And sports car owners. You're all welcome here.

That's right.

Okay. All right, number three, what would you say? Number three.

Okay.

I think we brushed over something. Matt, may I? Is your.

Okay.

Okay, let's make this very clear. If I'm buying rental property, it's not where I live or where the best asset protection is. First and foremost, I set the entity up where the rental property is. Then we talk about additional strategies. That's step two or three. Don't overdo it, people. If you're an operational business, I don't want to skimp over that. If I'm a realtor, I'm a contractor, I'm a plumber, I'm a consultant, I'm selling stuff online, and I live in New Jersey, you may say, well, Well, I don't need a New Jersey llc. Cause I sell everything online. So I could set up a Florida LLC and not pay any tax because I want a Florida llc. Well, you're not going to get around state tax because you're a resident of New Jersey, bottom line. And you're not going to get protection in New Jersey setting up a Florida entity. And third, if you're doing an operational business, you're going to have to pay FICA the F word in. And you're gonna say one day. What the fica? And we're gonna say, we feel your pain. And so if you need to elect your LLC to be an S corporation to get around FICA and we can save you thousands with that strategy, go to another podcast on that one for us. Okay, you're gonna need that entity registered in New Jersey. Cause I have to get a tax ID number in New Jersey. I need to do my payroll in New Jersey. I'm gonna pay state tax in New Jersey. And setting up in Florida or Texas or Nevada is not going to save me state tax. I set it up in the wrong state. And so I think that's a strong number two because there's so many ways to screw that up. Okay, do you feel more comfortable now

that I subpart two to mistake number three? I'm just confused where we're at here.

Really? You're going to throw out that passive aggressive comment?

That wasn't passive aggressive. What number are we on?

We're on number two. The wrong state.

Okay, all right. Number one was member managed instead of manager manage. Number two is the wrong state. Can I give number three because you dipped your toe in? I think it's a big one.

You guys know how smart Matt is because you've Listened to the show, and I think he's playing dumb. I think he's sending me a message that I was going into number three when I shouldn't have been. Okay, what's your number three? What's number three?

Number three is you set up an llc and you should have set up

an S Corp. Ooh, that's why you were thinking two and three were bleeding there. Okay, I see where you're going, Mr. Sorensen. Yeah.

And I. I saw you kind of throw out the S Corp.

Okay.

And I think that is a really common mistake, but it's one easily fixed. That's the good news.

That tastes good. I'll have that. What's that? Soup of the day? Yeah. Really? I. I think that's a good point, Matt, because people think, oh, an llc. Safe taxes. No, it doesn't. The S Corp can save you taxes. So come out of the gate with the right fricking entity.

Yeah.

Like it.

So, yeah. So let's get the right entity. So the second. Sorry, third mistake is you set up an llc, but you really needed an S Corp. Now, when do you need an S Corporation? Now, we have a whole separate podcast episode on the power of the S Corp. Lots of content. That, you know, ridiculous book Mark was waving around has plenty of information on the S Corp. This is not the S Corp. The S Corp for corporation.

Yeah.

And I know you may want to

listen to some podcasts about escorts that. We wouldn't do that. That's very inappropriate. We have a lot of female listeners that may be offended with the escort topic.

I thought you were talking about, like, the Ford. Little Sedan.

Little.

The Escort model. The Ford.

Oh, yeah.

What were you talking about?

Okay, sorry. Yeah.

S Corporation.

Dirty Birdie. Mark Fuller, Dirty Birdie.

So, S Corporation.

On that note, I'm gonna stick with my fries. Corey brought me some French fries and it. And I'm just gonna just nibble a little bit here during our podcast. Is that okay?

Okay.

All right, all right. Okay. Escort. It makes sense when it's operational, Right?

Operational businesses. So you real estate investors that are buying rentals, don't worry about it. Okay? But you operational business owners, the consultant, the small business selling goods or services, you know, the Internet marketer, the agent, the real estate professional contractor. You. You people should all be in an S Corporation. Now, you. If you're a low income or this is a side hustle, you only make 10 or 20 a year net income. You may just stay in an LLC, but if you're making 40, 50 more a year net after everything you can expense, the S Corporation is going to save you thousands of dollars in taxes. It's a better structure. Now, since Mark's still eating, let me

tell you, I'm ready to go. You know, I'm just.

Okay.

I'm just nibbling. I'm just nibbling. All right. Okay. You're going to go to number four.

Okay.

Were you going to take away number four for me?

No, I'm finishing three. Okay.

Gosh, I didn't know where we were.

Hey, four is all yours. Okay. All right. You got.

When we get there. Okay, Go ahead.

I'm glad mark's. I'm glad Mark's eating now because he's a little hangry. So. Some French fries. Let me finish number three.

Okay.

All right. Is that caffeine free? Soda? What are you drinking there? I just want to know what I'm working with.

You know what? I have not had my rock star today yet, so I'm just a little. So this is a diet Dr. Pepper, if you wanted to know. Thank you for sharing my eating habits with the universe. I'm a little self conscious about that.

You know there's a video camera on you. Yeah.

Everybody's like, man, I thought Mark was pretty fit. No, he's not. No French fries and diet Dr. Pepper. That's his lunch. Why are we listening to this bozo? You know, that's what you're thinking, but.

But you went with diet. I mean, that seems pretty reasonable. That's, you know, so. Okay, here's the good news. You set up an LLC. You're an operational business. You're making more than 50k net a year. Crap. Do I need to shut this down and go start to set up a new S Corp? No, you can add an S election to that llc. Okay. We change the tax status with the irs, and now you're an LLC still with the state. You can keep your same bank account, keep the same name, keep operating as you have, but you have an S corporation for tax purposes. You'll need to start doing some payroll and you'll have a different tax return. So you need to kind of learn that. That nuance there. But now you can avail yourself for the S Corporation tax strategies, even though you're still an llc. Yeah, you just claim that S corporation tax status. Easy way to opt in with the S election.

Love it. All right, number.

Number four. All you.

Okay. And I've got a really good analogy that goes with this one. Number four. You set up your LLC with one sheet of paper. Now, you may Think you're, like, so clever, you know, I'm like, ooh, I found the website. It's only a $52 filing fee. These lawyers are ripoff. I can do it myself. And you file your articles and you're like, I'm set. I'm ready to go. Well, you really only have about 20% at best of what you really need to have a legitimate llc. There's a lot of pieces and parts. You should have an operating agreement. You should have organizational minutes. You should have membership certificates, a corporate book. There may be an EIN or tax ID application filled out. Are you going to do an S election? Why did you even freaking do this in the first place? Are you just doing it because someone told you to or. Or because it's cheap and so you think that's what everybody else does, that's what I should do it. All of these reasons are number four of I cut corners and I think I'm okay. The problem is, when you get into court or into an IRS audit, you really don't have a legitimate llc. It's a piece of crap. It's not worth the paper it's printed on. And so we. Here's the analogy. You ready? Everybody thinks asset protection is this, I got to pay a bunch for it, or if I. You get what you pay for in asset protection.

That's what people think.

And that's wrong. You may say, well, I spent five grand, so I have great asset protection. It could suck. The best asset protection is sometimes the easiest things to do. It's just maintaining your llc, doing your annual minutes, your annual board meeting. And I know some of you professionals out there are going to go. You don't have to do that with an llc. All right, maybe technically you don't. Do you want to go into court and say that your judge. You know what? We didn't have to do those formalities, so we didn't. So just deal with it. Our LLC is great. Why not show up in court with your crap together? And a lot of clients at night, before a court hearing or before depositions, are working on their LLC because it's a wreck. Don't get caught. So here's the. Here's the analogy, okay? Abs are earned in the kitchen. Abs are earned. It's the little things. You don't have to go spend thousands on a, you know, diet or this crazy thing or liposuction.

I don't need the thousand dollar ab roller.

No. Now, this is coming from the guy eating french fries.

Personal trainer for $7, 50 cents a month. I don't need that.

You don't need a personal trainer. Now, mind you, this. This metaphor is coming from the guy eating French fries during this point. I do not get distracted by that.

I was called a paradox.

It's called something. It's not gonna be good. I have a friend that's like, French fries. You can eat those all day. Those are good for you. I'm like, you know what? I'm gonna adopt that. I thought that was.

I mean, you live in Idaho.

True. I'm very.

Come on, cut, Cut. Yeah, cut me a break.

Yeah, I got to support the peeps. You know, there's farmers out here, you know, trying to help my fellow man and woman and farmer and kid, you know, by the way, potato harvest is around the corner. I'm so excited. Okay, now, but here's my point. It's the little things in asset protection that are cheap and affordable and simple that give you the best asset protection. And it's just like, again, exercise and workout. It's the little things doing them daily that really get you the biggest bang for losing weight. So they say, hey, Corey, do we have any fry sauce?

Can I dip these into some saturated.

I need some fry sauce. Okay, what point were we on? All right.

Okay, here, let me add to that. This is a really important one. When you have an llc, you should have a tax id. You should have an operating agreement. You should have the membership certificates. You should have a corporate book. Okay, now here's another time where I hear it. It's not just when you go to court. There's a couple interesting points on this. I always get the calls of someone who's trying to sell real estate. They bought it in an LLC and no one cared. When you buy in an llc, especially if you just bought with cash. But now they're selling the property, and the title company's like, well, what's your tax id? Oh, it's just my social. Okay, where's your operating agreement? I don't have one. Okay. So they come running to us because the title company's like, yeah, we're not going to sell this property. This little piece of paper you have, that's not it. You didn't do the whole thing. Or you go to the bank and you try and get a loan, and the bank's like, oh, you got an LLC. Here's a list of documents you need for the LLC. Operating agreement, tax ID, SS4. All these documents they're going to ask for. It's not the one piece of paper that comes from the state that you just paid the fee, and it came back with a nice little stamp on it. So. Okay.

Love it. Now, if this was some other podcast that gave self serving, you know, advertising during their podcast, you might expect someone to bring up the fact that they had a special in the law firm this month where we do what's called a corporate cleanup or an LLC cleanup. I mean, that would be a shameless plug that I would not want to stoop to.

But.

Yeah.

And I think, you know, that company probably offer, like, 50 bucks off. Yeah. Just try and make a little sweeter for people to give them a little incentive to get it done now that they've learned something that their LLC is all jacked up.

Yeah. So if some of you might come across the podcast that would stoop to that level of talking about a certain special they do for maybe the seventh year in a row, and people find it very helpful to get their LLC cleaned up, you would want to go to kkos lawyers.com kkos lawyers.com and maybe just look at that. I mean, it could really benefit you, just hypothetically.

Yeah.

So.

Yeah, so we'll leave. So there's that.

So there's that Caddyshack quote. Caddy? You went to Caddyshack? You know.

Yep. So I got.

On my deathbed. I got total consciousness. So I got that going for me. I'm impressed.

Yeah. No, you're welcome. Okay. So, all right. Should we hit number five? We're on five, right?

Yes. Okay.

And we could maybe just.

I've got a number five. You have another five? I've got a number five.

Well, I.

You got one. Okay, go ahead.

Refer to the senator from the great state of Idaho.

You're deferring. Okay.

Yeah.

Number five.

Nice. The great center from the state of Idaho.

Now, you got to help me out with a good metaphor. Something that.

Okay, I'll be ready.

But here, I'm going to give. I'm going to give the quote, and then the problem here, number five, and then you can take it to the hoop. I mean, this is what some may call an alley. Oop. You ready?

Okay. All right.

Sometimes more isn't better. Sometimes you can set up too many LLCs rather than no LLC at all. So sometimes less is better, and sometimes more is not better. Do you have anything to make that really insightful? What would be a good example?

Sauce.

Ooh, sauce.

Yeah, you know, you got the right amount of sauce, you put too much sauce on something.

Yeah.

Your French fries, your hamburger. Like, let me Give you an example. I used to love Whoppers. Then one day I asked for extra ketchup on my Whopper and there was way too much ketchup on it. I haven't had a Whopper for like 20 years since. Really ruined it. Yes.

You. In our entire relationship, you've never shared this before. I didn't know that.

Yeah, Yeah.

I always wondered when we went.

Never mattered until now.

So I can't remember when you and I went through a Burger King drive through, but yeah, if you snuck by there without a Whopper, I didn't notice. But no, man, are you okay? I mean.

I mean, I've survived okay. You know.

All right.

It's just been, you know, powerful. One of those burdens in life.

Well, you heard.

Here's another analogy, though. Let me give you another one. It's like vitamins or medicine, okay? You can take too much. You can OD on this stuff. And I think a lot of people just think, well, I mean, you take this. If you got headaches, should I just take 100 of them? No, you're going to overdo it. And here's the. There's a cost to asset protection. There's a cost to all these entities. There's a cost to set it up. There's the cost to maintain it. Here's what else we see. People have so much going on. They don't. They can't even keep it together. They don't even use them properly because they've got so much going on. They got oversold, this structure that they don't even know how to operate and frankly, doesn't do them any benefit anyways. And now they've screwed up just even the basic components of it because they got overwhelmed.

You know what, And I feel bad because I could have said it better. I was using the word better. You know, like, more is not always better. Whatever. It's. Here's the proper way to say, can you have too much of a good thing? I think with an llc, you can have too many and it becomes expensive and unnecessary. And so when someone's trying to sell you, oh, you can have unlimited llc and it's a flat fee. That's not a good thing. You know, it's like saying you can have unlimited ice cream anytime you want. No, that's. I don't want that. I don't need that. Now. There are some things that one might say, you can't have too much of a good thing. A couple come to mind, but. Okay, sorry. I'm sorry. I got Carried away. I was just thinking of something, but Corey said we have to make sure we keep our PG rating here, so we're just gonna. I don't know. You were probably thinking of the Ford Escort car again, so I'm just gonna.

Yeah, yeah, yeah. That's exactly what I was going to. All right, let me give another. Can I. Are we ready for the next one? I'm actually gonna do another one. I'm gonna do it. I'm gonna do next. I don't want to get sucked into here.

I'm trying to just refocus again because I was thinking too much of a good thing, so.

All right, are we. Oh, six now. Can I go to six?

What? We're on number six. Okay. Number five was too many LLCs. Okay. So

can I just.

I've got number six.

You just did five. I gotta do six.

Oh, you got one now. I was just. I was just trying to save you if you didn't have one ready. Okay, go ahead.

No, I'm ready.

Okay. Number six,

you bought an LLC off the shelf, and it doesn't fit your situation. Okay. That's number six, your llc. There's the analogy. Since we're all about analogies here, this one's going to be, you know, this is. This one's for everyone. Your LLC should be like a tailored suit. Don't just buy it off the shelf. There's not a one size fits all. The LLC you do for different things that you do is going to be different. The LLC you have with a partner is different from the llc. That's just you. The LLC that you use for a rental property in one state may be different from an LLC in another state. And so people who just kind of sell this off the shelf, it's the same thing for everyone. Just do an LLC for this and that. And it's just. That's all they sell. They're doing the wrong structure. Maybe you need a series LLC in your situation, and you're in a state that offers a series LLC that's better tailored for your situation, that's more efficient and has better asset protection. Maybe you need an LLC for charging order protection because you're trying to protect assets from your personal liabilities rather than protect your personal assets from the business liabilities. Maybe you have an operational business, maybe you have a partner. All these things are more tailored solutions for your LLC that you should get some advice on. You should get educated on yourself as well, and then get the tailored LLC for your situation.

You know what I got? I had Another deep thought. I've never said this before.

This.

You've heard it here first on Main street business. Sometimes the greatest strength can also be your greatest weakness. For example, one of the greatest strengths of an LLC is they're so flexible. I mean, you can do so many different things with an llc. That's their greatest strength. But it can also be their weakness because people will just take a vanilla one and think it does all of those things automatically. It doesn't. You have to still tailor it. Do you like that? I like that.

Yeah.

I'm trying to think of what my greatest strength is that is also weakness, but nothing comes to mind. So maybe it doesn't work in all cases.

Yeah, it's not a universal concept, just a small work for LLCs.

Yeah, yeah. I mean, works for other people, not me. Now I'm ready with number seven. Okay. Okay. Thinking the LLC does more than it really does. So you set up an llc, thinking, oh, this thing's awesome. It doesn't even do what you think it's going to do. For example, okay, some people go, hey, I got this rental property. I set up an llc. That's awesome. And then they get on. Get on their phone, driving down the road, texting and driving, and they get in an accident, and heaven forbid that they really, really hurt someone or kill someone. And it's happening more and more in the country. Distracted driving. More and more, prosecutors are throwing down involuntary manslaughter as if it was drunk driving. I mean, it's serious. So someone's out there texting and driving, gets in an accident, and they go, hey, but you know what? I got an llc. It's going to protect my rental. No, it's not. The LLC is not there to protect the rental from you being an idiot. The purpose of the LLC is to protect you and your assets from the tenant or the property or a problem that could happen inside the llc. And people are always shocked to hear that. Now, there are some states that give us that outside protection, and inside, again, like Matt said, a tailored suit. So you got to get into that detail and make sure it's doing what you want. If you want a pocket there, we got to sew a pocket there. You just can't assume it's going to just appear out of nowhere. So Some people think LLCs do more than they really do. Go in with your eyes wide open. The main purpose of an LLC is to protect you from whatever the freak the LLC is doing, not to protect the asset in the LLC from your teenage driver. You like that. Number seven.

I like that. That was a good one. Okay.

I liked your number six. I didn't say it. A little delayed.

Okay.

Delayed gratification there. But I want to let you know.

Thank you.

You're doing a great job today, Matt.

I was curious. I wanted to know what you felt about it. I value your opinion. Okay. Why are we on eight?

Yeah, should we do eight? Okay. You know, I really shut Corey down. He was popping off earlier in the show, and now he's like, so, Corey, if I offended you, I just want to. I just want to say I'm sorry. Yeah, he's. Yeah, he's not even responding now, I think.

Okay, I got number eight.

This is a good eight. All right, Throw down eight.

I got. I got eight. Number eight. You set up the llc, but you don't use it. Right.

All right.

This is common. A lot of people set up the llc. Maybe they even got all the documents. Okay, they did. They got all the stuff. It's the right entity and structure for them. It's in the right state. We've nailed all these other things we've talked about, but they don't operate it properly. They receive money in their personal bank account, and they pay all the LLC's expenses out of a personal bank account. They have a rental property, and the LLC doesn't even own the rental property. They have a lease. And the lease isn't. Isn't in the name of the llc. It's just in their personal name. You don't have an llc. You've got one, but it's not doing anything. It's on the bench. It's not even in the game. All right. You've got to put the LLC in the game. How do you put it in the game?

That's a great analogy. Thank you.

That's football season. Okay. It's coming up, baby. Excited. So there's a. A few key steps. Step one, open a bank account. The LLC knows its own bank account separate from your personal stuff.

Okay.

This goes back to making sure you're getting the asset protection of it. There are seminars, continuing education for lawyers on how to pierce the corporate veil.

Yeah.

How to blow through someone's LLC that they didn't set up. Right. They didn't get the right documents or they didn't operate it properly. Okay. These are the things that we're talking about that these lawyers that are gonna try and blow through your LLC so they can get to your personal assets. This is the stuff we're talking about here. One of them would Be. They don't use the bank account of the llc. They just use their own personal bank account and they call this alter ego. They basically say you're like Batman and Bruce Wayne. You're not really Batman. You just go back and forth. And we don't really know which is which. So both of you are responsible. Okay.

Wow.

So your separate bank account treated it separate.

Okay.

Wow.

I. I like it. And all these examples just in number eight. It's kind of blown my brain. I'm going to go back to the. Because it is fantasy football team time.

Okay.

You know a friend of mine.

Football time.

Yeah. Sherry off night. I want to give her a shout out. She was working on her fantasy league last night and. And I. And it was a big deal. And I. I don't have my league set up or my team anything close to it. But anyway, I like what Matt's saying is if you're going to spend all the time to draft this player and put them on your team, let them play in the game, make sure they're suited up, they got their helmet on, you're using them properly. Thought I'd just take your analogy to the next level.

I like that. I like that. Yeah. Get them out there, you know, because your LLC is, you know, they're playing defense, right? They're playing defense. They're trying. It's, you know, they want playing a scoring points on you, so you gotta get them out there.

Okay. Now, are we okay just saying nine mistakes or do we have to do 10 because it's kind of cliche, you know, like you're reaching.

Different.

10.

Let's be different. Let's go with nine.

Okay. You want number nine?

Okay, let's do it.

Let's close it out. Biggest mistake in setting up an llc.

No pressure. This is the last one.

Yeah.

I think you're gonna like, like, you know, this is like the Closer.

You know, this is the Closer. Oh, you're gonna love it.

This is the Closer. All right. This is like.

Ah.

Who's the guy? Never mind. Just go, I guess. Okay.

Like number nine.

Sinatra. That's who I was gonna say. Sinatra. He closes his show with my way. Okay, that's a Closer. Great song. My. One of my top fave songs. Yeah.

Sinatra is a classic. Okay, Number nine. Number. Number nine. Mistake in setting up your LLC is not using kkos lawyers.

O.

May I? Was that a little too much? You know, what do they call that? Presumptive? Cocky?

Presumptuous. Yeah, that's. That's just solid advice. Yeah.

We tried to do a good job. That is, if you set up an LLC with us and you're not satisfied or felt like you didn't get what you promised or whatever, we want to solve it. Believe it or not, we're a law firm with customer service. So we have customers, we have service. Try to put both together.

So here's. And here's why all that matters and what we talked about and this. You know, there's other law firms out there. Let's. I mean, you can use someone else, but, you know, they could also suck. And there's the biggest competition, I have to say that we have is not other lawyers. It's pretend lawyers.

Yeah, that's right.

Corporate headquarter places that are like business coaches or we're asset protection gurus. They're not real lawyers. They're not standing by what they're doing. They're not licensed. They don't have malpractice insurance. All right. And that's the ones that we see people come in in tears, frustrated, frankly, a little scared. They felt like they got taken advantage of. And a lot of those clients thought they did all the right stuff. They thought they were spending the money and being like, doing what they were supposed to do, but they got taken advantage of.

Yeah. And we, we hate to see that here.

And our fees are reasonable. 800 bucks for an LLC. When you can you get up to an hour with the law, who's gonna go over and make sure you get all the right documents for it? That's gonna talk about getting it in the right state. That's gonna put it in the tax issues.

What's that Put it in the big picture. Look at your.

Yeah.

Where does this look over your.

Exactly. And, and so, so that's, you know, if you do it, an entity on LegalZoom, that's about 700 bucks to do all pieces that you're supposed to do. Now, I know they tease you like 99 bucks, but that's just for your one piece of paper that we've already talked about. So. But to get all the pieces that they do offer, but you gotta click, click, click and keep adding them. You're basically the same price as we are at a law firm to get it done. Well, plus you get a trade client privilege with all your conversations and what's going on here, you're not getting that illegal zoo.

Yeah. And I, and I, and I'll say this in all seriousness, wrapping it up too, is. Yeah, we're joking around, self serving that. You know, check our firm out, blah, blah, blah. But if you don't use us, at least look for those same characteristics, those same services, those same pricing model. And please, please, please listen to this podcast with your business partner, your individual personal partner, your kids, your family. Make sure that anybody you're trying to help build their American dream, they're getting advice from the right type of advisor. Business coaches are great, accountants are great, financial advisors are great, bankers are great. But they all, we all need to stay in our lane. And so we're trying to stay in our lane, explain these issues. We have guests come on our show that drive in a different lane. And so we hope that you continue to listen. We're grateful to have you here and great show. Matt, you did a great job.

Just wanna let you know, I think you did an amazing job and I liked how you're wearing the KQS lawyers hat.

Oh, representing.

Yeah, that was nice. For any of you watching on YouTube and you can check this out on Mark's YouTube, you know, if you want to see Mark's amazing, beautiful studio that he's in or you want to see my office with terrible lighting and rinky dink setup, you know, he's feeling a little contrast there.

Yeah, we're going to solve that problem. Well, everybody, thank you so much and we will see you next week for another episode of Main Street Business podcast. Please give us a five star rating. Let us know how you feel, if it's really positive and then tell your good friends about it.

If you, yeah, if it's a negative comment, just, you know, send it to your brother. Yeah, just email mark@markjcohler.com and just, you know, then get it out there.

See you guys next week. Thanks.

Thanks everyone.