Don't Set-Up Your Entity in These States Unless...

Welcome everybody to this week's live Facebook and YouTube. My name is Mark Kohler. I am your Main street small business Tax lawyer of America and I'm excited to be here with you. Now you may have seen and hopefully you see the title there. Should I set up my LLC or corporation in Nevada or Delaware? In my career of 20 years, I have not seen any strategy full of more deception, fraud and scams than in this area alone. Now does that mean Nevada and Delaware bad? Nope. But it is not for everybody. This broadcast is going to save you thousands and thousands of dollars wasted time and heartache. Please don't go anywhere for at least the first 10 minutes. I'll hit the highlights and then I'm all yours. Q and A from around the country. So if you have a question, type it in down below in YouTube or Facebook. And I'm also got all my Instagram questions. I have more questions than I can answer so I'm going to do my best. Please put your first name in the city and state you're from and I'm going to tackle it. So thanks to my studio. Corey White running the team in the behind the camera and Whitney and Allison and Jack helping with the Q and A, the the lighting and all of the promotion for this week's broadcast. So we're going to hit it shout out to entrepreneur as well. Grateful to be here with them and I love Entrepreneur and everything they do for you and me as small business owners in America. Okay, now I'm going to make this so simple it's going to blow your mind. I mean that when I explain it this simply you're like why did I get ripped off? Why are people selling this crap? And that's what it is of Nevada and Delaware for everyone. And I'll go toe to toe with anyone. I've written my books, my articles and my videos. I stand behind the law and what is recommended for most people even though it's sold to frickin everybody. Okay, so the first principle we've got to deal with is the trifecta. The Mark Kohler small business trifecta. Been teaching for 15 plus years so hopefully we can see here without a lot of glare. We are going to split your life into two sides. Down here is your 1040 tax return or your revocable trust RLT Revocable Living Trust. Whether you're married or single, that's the foundation. It's going to create privacy and everything flows downhill to your 1040. Over here are going to be your operations. Over here are going to be your assets. We're going to set up assets in two categories, kind of the zero tax or pre tax strategies. So think of Roths and IRAs and 401ks. And we're going to build up our retirement accounts as fast and as big as we can, investing what we knew we know best, not what Wall street says to do. And then over here we're going to build up our other investments that are after tax investments. And these are going to be our rental properties or gold, silver, crypto, whatever we want to buy over here. Now on this side, over half of Americans now have a side hustle or a side gig. And owning a rental property is a side hustle. This little rental property that you're running is considered a side hustle and you can take advantage of it for some awesome tax write offs. But many of you are going to start out with a sole proprietorship, this little SP sole proprietorship. That's cool, you got your little soul prop, you're off to the races. When do I make the jump to an entity, whether it's an LLC or an S corp. And we're going to talk about that a little bit more here, but first we're going to talk about jurisdiction, venue. Where in the crap do I set this thing up? Here's the easy part. We're just going to do the low hanging fruit first. If you're going to buy rental property, you set up the LLC where the rental property exists, period. Now if we want to add an extra layer of protection after the fact or you're buying 10 rentals for a million dollars right out of the gate, I might set up a barrier cope charging order protection entity holding company as a second layer of protection. In a Wyoming, I don't even use Nevada or Delaware. But in a Wyoming or New Mexico or Utah or some other state that gives me some great protection, that's simple and easy and affordable. But I do not set up an entity in Nevada or Delaware to buy my first freaking rental property. It's a scam, don't do it. And I'll take the hate mail and I get it. Set up the entity where you are going to buy a rental. Now you may say, well Mark, I live in California and I'm buying a rental in Arizona and California requires me to register in California. No, they don't. They don't require you to register with the Secretary of State. They require you to register, register with the Franchise Tax board and pay 800 bucks a year. And that's it for being the manager of that llc. But if you have an LLC in Arizona and you're the owner but not the manager of the llc, not the manager of the property, but not the manager of the llc, you don't even have to pay the franchise tax board in California, go look up the law. You may say, I live in New York and I'm buying a, I'm buying a rental property up in Poughkeepsie or Newburgh, little upstate from the city. And you go, I'm going to get a Delaware llc. Why? You don't need it. The New York LLC is going to hold your rental property and protect you from any liability. Period. Now, if you want to try to be a slum landlord and be a jerk and not take care of the rental and hide and avoid any potential lawsuit for being negligent or grossly negligent, or you want to pay the extra fee because Delaware sounds sexy, feel free. You don't need it. Now sometimes, as I said, when I have clients with a lot of rental properties and they've got five or six, LLC is around the country and they've got all these LLCs in Arizona, Nebraska or Arkansas and I want to create one parent company to hold all of my other LLC and get an extra layer of protection. It's called a COPE entity. Frankly, I'm going to choose Wyoming. I'm going to get better asset protection and better privacy and is cheaper than Nevada and Delaware, Wyoming. Done. Now, you may already be asking, why does everybody do it in Delaware? Mark, all the public companies are set up in Delaware, Nevada. That's because they went public. That's because they're selling stock. It's because they had to go to an underwriter, a broker, dealer, an investment banker, and they wanted to go public or sell shares. And the securities law is the best in the country in Nevada and Delaware. If you're going public, if you're going to sell stock, that's it. That's it. Now if I'm going to buy a rental property in Reno, Nevada or Vegas, then I'll set up an LLC in Nevada. That's it. That's how easy to. So this is strategy number one. I set up the entity where my rental property is. Now let's go to the other side of the equation. You're saying, well, Mark, I opened up a, an online business or I'm, I'm a plumber, I'm an electrician, I'm a service business, I opened a restaurant, a food truck, I'm a realtor and I live, I'm going to use California as an example. Then we'll go east coast as well. But I live in California and I don't want to pay California tax. So I'm going to set up my entity in Nevada even if my business is online because I, you know, I'm going to have my server not even in California. That's your argument, right? So California is not going to tax me, even though you're the one running the business franchise Tax Board will audit you every time and you're going to pay tax in freaking California. And I know I sound so adamant about this because I'm sick and tired of the scammers out there selling this crap. And it's usually a non lawyer, non accountant, but I stand behind this and I will put it in writing everywhere, everything I'm saying today. So if you live in California and you own and operate a business in California, simply registering it in Nevada does not escape California tax. No way. Now if I move to Nevada and I run my business in Nevada, I don't pay any tax because there's no state tax in Nevada. Well, that's great. Oh, but I'm going to move to Nevada and then run my business back in California because that's where I can make all the money. So I'm going to move to Reno or I'm going to get apartment in Nevada. I'm going to move my voter registration and my driver's license and my car registration and I'm going to say I'm a Nevada resident. Even though every week I drive to California and they can't tax me because I'm a Nevada resident. Nope. If you make the money in California and once you hire an employee there or buy property or rent property, they're going to find you. If I'm doing business in California, they're going to tax it. If I live in California and make money somewhere else, California's going to tax it. And don't get pissed about California. It's the same rule in New Jersey, in New York, in Oregon, when people try to run across the border in Washington, Washington. In Arizona, when people try to run across the border into Nevada and people in Georgia that want to run across the border into Florida and pay no state tax, it's the same damn problem. So wherever you live is where you set up your entity. Now we can talk about why llc, why S Corp? Those are some of the questions I already had for today. But the location of where you set up your entity is the state and where you're doing business. Now One last example. I have an S corp. That's what I use. And so I've got this S corp and I do business with offices and employees in four states. Here's my S corp. And I own part of a law firm that does work in Arizona. We have an office in Arizona, Utah, Idaho, in California. And so what I'm required to do, and this is every other business out there, trust me, I'm a tax lawyer. If I could get around the law legally on this, I do it. But I have to take my overall net income, all my profit, and I have to allocate it between these four states and it adds up to 100%. My income has to be divided amongst these four states, period. And I do a non resident tax return in three of them and a personal return in one of them. Because you have to be a resident of some state. So wherever you earn the money, you have to divide the income. And one example that might blow your mind is in honor of Kobe Bryant, the amazing basketball player that died in that horrific helicopter crash two years ago. And it's gone by quick over a year ago when he played for the Lakers and they go play a game in Salt Lake City for the Jazz or they go to New Jersey and play the Nets. He would have to allocate his revenue as an NBA player from the Lakers franchise as well as all of his sponsorship income from Nike or Gatorade or whoever. And he'd have to divide it amongst all the cities that he played his games throughout the year. Because New Jersey is not like, hey, you can't come to our state. You can't play a basketball game in our arena and make money off our fans in our expensive stadium and not pay tax in our state. You did business in our state when you started to dribble a basketball and the buzzer went off. That's how it works. So wherever you earn the money, you have to pay tax, or you pay tax in the state where you live and you get a credit if you pay it somewhere else. If you're like, well, I did business in Nevada, I didn't pay tax. Well, then you don't get a credit and you're gonna have to pay tax wherever you live. So there's the answer. I know it sucks, but you set up your entity where you live and operate, you set up your rental where the rental is, and then we try to keep that trifecta going. And it's a really simple trifecta, and I've been teaching it for years, is we're just going to put our rental on this side. Llc, my business over here, which will ultimately be an S corp, and it all is owned by my trust and flows into my 1040. The end. I can talk about how you're paid, how you take a salary, how we save, taxes, protection, all of that comes next. But we set these up where we're doing business. All righty. Well, with that said, hopefully that was helpful. Now you can call our law firm. We charge 800 bucks to do an entity in any state. And you get an hour directly on a camera if you want, with an attorney dedicated to you. One of our attorneys, we have seven of them. You can talk to one of them and they will design the structure for you, build a little diagram and hand it off to you on a silver plower. You get a whole hour with them. No online crap with a paralegal where you don't get to talk to anybody. 800 bucks is well worth it to get a real tax lawyer advising you on your structure. And if you don't use our firm, that's fine. Use someone else. But don't go slap it out on some online website and then come to our office six months later and go, I don't even know what I set up and why. Every time it costs and it wasn't worth it. We literally have a paralegal team that just fixes entities for clients. All right, well, I'm going to jump over to our questions and we're going to start diving into it. And let's see here. I'm going to jump over to Instagram first and let's see what we have. Okay, so if you receive a 1099 NEC, this is Maria 12Ps. She says, who receives a 1099 NEC, which stands for non employee compensation. And if the servicing company is incorporated, do they get one? Okay, so she says, who gets a 1099 NEC? Well, if you're a business owner, you're going to be giving them and you're going to be receiving them. That's how it works. The IRS said this is a new form this year. If you have a small business, whenever you pay someone for the work you do. Let's expand this. I think you can see a little bit more. Let's expand this diagram to make this bigger. Okay, so here's our 1040 and then here's our sole proprietor. And then we're going to graduate to an S corp. And here's our llc. And we're going to graduate to an S Corp when the time's Right. One of the questions we did on Instagram this week was, does an LLC save taxes? No. An LLC does not save taxes ever. If you have an LLC and make an S election, you don't have an LLC anymore, you have an S corp. And those save taxes. Now at the end of the name may still say LLC for the state of Nebraska, but for the irs, you're now an S corp. So when you call my office, don't say, oh, I have an llc. And I know we're going to get confused. Well, why are you running your engineering business through an llc? Well, that's what I thought. And then we find out 30 minutes later, oh, I made an S election. Then you're a freakin S corp. So once you make an S election, you're an S corp. Don't tell anyone you have an llc. Doesn't matter what's on the end of your letters of your business name, you're an S corp. So you're going to graduate to an S corp. And here's your llc. And when you start doing business, whenever you pay someone more than $600 for services, you want to get what's called a W9, you can go on the, on the web, just Google W9 PDF, download it and send it to people and you're going to say, fill that out before I give your money. Well, just pay me under the table. Bull crap. Because if you pay them under the table and you get audited, you don't get a write off. So you say, if you're playing in America, pony up and give me a freaking W9. Well, I just work under the table. That's how I operate. Then see you later. Bye. Don't help encourage people. Working under the table doesn't help you and doesn't help me. And if they cause any problems on your job site or someone gets hurt, it's going to cost you a hundred times more than just paying someone that's licensed or legit and you can give them a 1099. So anybody that you give money to, you get a W9 from them, then you pay them and you get a write off for that. Anybody you pay more than $600. Now Maria, it is true. When they send you the W9 back, don't take their word for it. When they send you the W9 back and they go, I'm a corporation and here's my ein and they sign it, then you do not have to give them a W2. I mean, you do not have to give them a 1099 because they filled out the form and they're a corporation. Now. You, when you go work for people, people are going to want to give you a 1099. People, send me 1099. When in doubt, send them a 1099. Dot your I's, cross your T's. Send anybody a 1099 that you paid more than 600 bucks. Now, they were due by January 31st this year, February 1st, and there's penalties if you didn't do it. You want to get on this? Ask for the first time abatement, resolve it as quick as you can. If you want to call our office, Corey, or my team, would you please type it in down below? Talk to Jackson. Jackson is our 1099 administrator. That's what he does for clients, 1099 W2s and all those kind of weird forms. Jackson's great at it. So just email Jackson or call and go, jackson, I need help with my 1099s. I missed the deadline. What do I do? So that's how that goes. All right, I'm going to do a couple more on Instagram, then we'll jump over to YouTube and Facebook. For business, this is the gun bag guy. The business what for business, what bank do you guys recommend? Credit unions or big banks or what bank do you guys recommend? Credit unions or big banks? He's from Fort Worth, Texas. So answering this in 60 seconds or less, the gun mag guy and everybody out there, I hate to say it, I know credit unions have a great purpose and they can save money for people in certain situations and they generally have lower fees. But when I'm doing business in multiple states and I've got rental properties in multiple states and I've got QuickBooks and I want online banking and I want everything in one spot and I'm going to move money around between my companies and my person and my paying my kids and all this, I just tend to find a big bank is easier. And so I tend to use Wells Fargo. But some people hate Wells Fargo and they love B of A. Some people hate B of A and like Chase. But I think you choose one of those big three, four, five and consolidate your banking as best as possible. There you go. 60 seconds or less. The Mario Herrera says, I'm a sole proprietor. Should I become an S Corp or stay the same? I do pest control in la, Los Angeles, California. Okay. If you're a sole proprietor, I'm going to use a red pen here. If you're a sole proprietor doing pest control and Mario makes more than $50,000 so let's say he brings in $80,000 in sales, he spends 30 grand on expenses, and he nets 50. See, that's the net. He brought in 80, 30 grand in expenses. Net 50. Let's just say, Mario, you've got to pay self employment tax at 15.3% on that 50 grand right out of the gate. That's 7,500 bucks. Bam. Then you've got to pay California state income tax and federal. This could be a 5 to 10% and I don't know what else is in your life, but this could easily be 20 to 30%. So all of a sudden you're almost 40% in taxes. Wow, not good. Now, I'm assuming Mario might have other income with his spouse. Or it's him, he has a day job, another job, I don't know. But these tax rates can add up quick. So Mario and I beg of all of you, if you're netting more than 40,000 a year, which is around 3,000amonth. So if you're taking home after all your expenses, 3,000amonth or more, we want to convert to an S Corp. Now, let's say Mario converts over and he brings in 150 grand and he spends 50 grand on expenses and he nets 100 grand. He'd still have savings here. In fact, I'll even be apples to apples. If he had 50 grand in income, I might do 30 in payroll and 20 is draw. 30 in payroll and 20 grand and draw. I feel we could argue that's reasonable comp. We do a reasonable comp analysis and we stand behind all of our reasonable comp analyses for our clients. If you get audited and we recommended the wrong payroll, we pay the penalty. So if he took $20,000 as a draw, he saves 15% on that. So 15% of 20 grand is 3,500. Save $3,500. Now, Morrow's going to go well in California. It cost me $800 to have the company and I got to do an S Corp tax return and I got to maintain it. You're right. You're going to spend a couple grand a year maintaining that S Corp. But let me see, spend two grand, save 3,500. I think you're in the money. And if you make a hundred grand and we do a payroll of 40 and you do a draw of 60, which is very common, a 40, 60 split on 100 grand. Holy crap. I just saved 15% on 60,000. That's $9,000 in savings. The more you make, the more you save. With an S corp. Mario, get a consult with someone. Don't go online and just freaking do it and hope you do it right. Pay someone, find someone. Cheaper than us or better than us, I do not care. You can call the number down below or 800 bucks. This is not an infomercial. It's trying to give you resources and answers. All right, now I'm going to switch over to YouTube. Sorry. Over to. Aaron says on YouTube, Hey, I'm a client of yours. I'm looking forward looking to get a commercial umbrella policy on my rentals in LLCs. Name insured on each LLC and or Wyoming cope. Thank you always. Okay, so what Aaron's saying, let's jump over there is Aaron's got a couple layers of entities. He has a cope, which is a charging order protection entity. And that's in my book. And I'm going to give away a book today for all of you that have stayed on this long. Corey and Whitney, I want you to choose someone randomly that's making comments, giving me some love, whatever. Choose a random winner and we're going to give them the tax and legal playbook. I have a whole chapter on this topic that Aaron's asking right now. So we're going to give this away. I'll ask you for the winner here in a minute. Corey or Whitney, you can text it to me. Now, the COPE is in Wyoming. The COPE really doesn't own a rental. It owns LLC that own the rentals. Now the reason why we do this is sometimes you're in a state that does not have serious LLC and you want better protection and you want privacy. I did a whole hour video on this in my tax and legal library on my website. One time fee, lifetime access. Check it out on asset protection advanced strategies. But Aaron is going out there and he's getting an umbrella insurance policy. Very common. So he's going to get this umbrella. And I recommend that the umbrella policy is going to be generally cheap because it only pays out after all the insurance taps out. It doesn't come in place if your regular insurance doesn't cover you. Umbrella doesn't pay. That's why it's cheap. And don't think you could just say I'll buy an umbrella insurance and not get an entity or an llc. Wrong. They only pay out. They pay out less than 1% of the time. Umbrella policies, I have one. But for specific issues. Teenage drivers, uninsured motorists. And after my insurance taps out policy limits, the umbrella insurance clicks in. And Aaron is asking, well, who should Be insured on the policy. Should I have the LLCs and the COPE is additionally insured? Absolutely. I would name all of these llc Aaron as additionally insured on that umbrella policy. And shop around, I mean some insurance agent may say, well Mark, you can't do that. Okay, fine, shop around, find another insurance. I don't sell insurance. I just know that I'm not kidding. I can go to three different insurance agents and get three different freaking answers. Right, so shop around, read the fine print, show them your diagram, do some research on it and get some good insurance, Aaron. Love it. Okay, jumping back over to YouTube. Todd says what monies go in Wyoming LLC versus an individual LLC in other states for protection in REI real estate investment. That's what I understand Todd saying. So Todd, let's repeat this again. What monies go into The Wyoming LLC versus the individual LLCs in the other states? Great question. Why don't we put in green? Let's use green and let's follow the money. Okay, let's do an Arizona LLC and a Minnesota llc. So I've got my Arizona and Minnesota LLC owned by my Wyoming llc. Extra protection, a little more privacy, we could implement mail forwarding, registered agent services and no one may know you even own those LLCs. I don't want your name in the LLC. That's a little extra cost here and there, but few hundred dollars here and there, it's not thousands and thousands. So we're looking at camouflage, which is privacy on top of protection, which is a bulletproof vest or a barrier. Well, I've got a rental in Minnesota. Where does the tenant send in their rent? Well, let's go to our green money. The tenant sends the rent to the Minnesota llc, just goes right in here. Right here. Okay, then I pay the mortgage. And by the way, don't worry about the due on sale clause. As soon as you buy rentals, you deed them over to your frickin LLC and you let the LLC pay the bills. You don't run into the bank and ask permission. They've already sold your mortgage on Wall street to some big hedge fund anyway. So just get in there, move the LLC and every mortgage has an exception for you. Transferring a property to your trust and typically an LLC. When you're the 100% owner and you haven't sold the underlying asset, they do not care. Okay, so you're going to transfer the property to the llc. The LLC is going to collect the rent, pay all the bills. Well, at the end of the month Todd's got 500 bucks $500. Can Todd pay himself that? No. Todd is not the owner of that llc. Who's the owner of that llc, the Wyoming Cope. Oh. So any monies this LLC makes are distributed to the Wyoming llc. So they go through a second filter here. I might take another round of write offs. Travel, dining, home, office, some other expenses, got kids involved, who knows what. Sometimes the expenses here are just related to that property or properties, this property or properties in Minnesota. All the net revenue goes into my Wyoming llc. Then I'm going to pay myself. And even though my trust is the ultimate owner of the llc, a revocable living trust is see through. And so this revocable living trust is simply like your personal bank account. Then we take the green money and push it from here down to Todd's bank account. And that's how it goes. So it goes from the subsidiary. I like to put the subsidiaries up above because I like money flowing downhill like water flows downhill into the Wyoming LLC and then down here. Okay, I'm going to go back. I was going to do a Facebook question and we'll go back to Instagram. Thanks, everybody too. I hope you're enjoying this. I really appreciate you finding time to be here. I guess we've got such a great team in our accounting firm, law firm and trust company helping People self direct IRAs and set up entities in their estate plans. We're lovers, not fighters. And if you feel like you're getting some clear answers and you're like a breath of fresh air, please share this. Just get it out there, that's all. And you don't have to use our services if you don't want to. We don't want to. We're busy. We're grateful for that. And I also have a couple podcasts every week. Main Street Business, Main Street Business Podcast and Directed Ira Podcast. Directed Ira Podcast. Check those out. They're free, of course, and you'll love them. Okay, this is Vincent on Facebook. I set up a two. Oh. I set up two single member LLCs in January. All right? One is Home Improvement and the other is Home Inspections. They needed to be separate to avoid perceived conflict of interest with inspection rules and my contracting. Now I see you say I should have an S corp. How do I retroactively create a parent company? Vincent, I am so glad you said this. You are going to love this answer. I just got chills. That's how geeky I am. Okay, everybody, let's hear this. Let me repeat it, Vincent. And let's put his example up on the Board. I love it. So Vincent and. Sorry, that was gross. Okay. Vincent says I set up two entities in January and this is common. Sometimes I have clients that are a realtor and their spouse is a lender or a client that's a doctor and their spouse is a lawyer. And so you've got to have separate entities sometimes. And so that's normal. And so Vincent didn't do anything wrong. He set up two entities because the state licensing or, you know, like he said, conflict of interest. He wanted to be a little clean. Squeaky. Okay, so revocable. So here's my revocable living trust down here. Now, Vincent said He set up two LLCs for inspections and home improvement or a handyman service. Are those operational or passive? Think everybody, or is that operational or passive? Well, hopefully you answered operational. He didn't say he was buying a rental. He didn't say he was buying cryptocurrency. Didn't say he was buying gold. No dividends, no loan for interest, no capital gain. He set up two operational entities, two LLCs. Now you're not hurting Vincent. I have a plan for you. But sometimes what people do, and I hope Vincent did this, he set them up. Manager managed, not member managed because manager managed are private. No one knows who the members are. Arizona is one of the few states that has you actually disclose who the members are. And we have, we have to do a second layer of privacy protection there in Arizona. But let's say I don't know where he's from, but Vincent set up two LLCs. I would typically make a manager managed for Vincent two separate bank accounts, two separate tax ID numbers and his trust owns each one 100%. Now what's the problem? The problem is, is that Vincent makes 30 grand. 50 grand. 40 grand maybe he makes 30 grand here and 50 grand here. Net. He made 80 grand total. He's paying self employment tax of 15% on $80,000. That's $12,000 of extra tax. So Vincent's freaking out and I'm glad you're listening, Vincent. Now, option one, and this is not what I'm going to recommend, but hang tight. Option one is we go set up a new S Corp and we take away the ownership from the trust and transfer the ownership into the S Corp. Cool. We do it immediately. It's only been a month. So I'm going to make the S Corp the new owner 100%. 100%. He can go out and do business separately, but at the end of the day, the s Corp owns one, owns them both. And the 80 grand that comes out of net income, we'll probably do maybe $40,000 salary in a 40,000 draw. And we just saved $6,000. Music to your ears, right, Vincent? That's option one. Not what I'd recommend. Now, I don't know your whole story. Married, single, other businesses, maybe this would work. I don't have all your facts. That's why I want you to call the office and not set up these LLCs on your own. Because this is why you're in this mess. No offense. So the other option I would do, and this would be the simplest and cheapest, is I have you choose one of them as the parent, and I slide it down here, and I make it the owner of this one. And I make this one an S Corp. We charge 150 bucks to do a 2553s election. Very simple. And I would backdate both of these. I would backdate the ownership. So this LLC really comes down over here, owns this llc, and I backdate it internally, which is fine, nothing illegal. I'm going to backdate it internally and transfer that back to the date you set these bad boys up. And then I'm going to make this one the S corp and set up your payroll services. And this one is owned by your trust. This one owns this LLC 100%. Now, to use our service to maybe do this, 500 bucks maybe. We got to do a membership transfer agreement here. Membership transfer agreement here. We got to see if you got a trust set up. That's a whole other topic. And do an S election. Meet with an attorney for half hour. Done. See, going to a tax lawyer should save you money, not cost you money. So, Vincent, that's what I do. Good luck. Give us a call if you need some help getting that done. Okay, I'm going to jump back over to. If Vincent gives me a hug and a kiss or a little heart in red, I want to see it, Whitney. Okay. By the way, I'm on location today in Riverside, California. I'm in Melina Boswell's office. I love her. She's a great lady running a real estate club down here in Southern California. And I'm speaking to their group a little later. And I said, can I do my Facebook live in your office? And so I want to give her a shout out. She's just a great lady. So I'm going to go back over to Instagram now. Instagram. Let's see what we have here. Can I write off. This is IROD 39. He says and I'm gonna try to answer this in 60 seconds or less. Can I write anything off for a custom home build this year? Yes. Any costs that are directly to improving the custom home build that you're gonna sell is what I presume it's not gonna be a rental. You're gonna do a custom home build, sometimes called a spec, and you're going to sell it. Any direct costs of labor and materials to build the house you don't write off this year. If you don't sell it, you get to write it off in the year you sell the property. So if you spend all this year on custom home build, any expenses going into that place are capitalized, they're a part of the basis. But irod, you can write off all of your office expenses managing the business. See, you've got a business running the custom home build. So home, office, auto, meals, equipment, entertainment. No entertainment right now, sorry. Electronics, cell phone, kids, blah, blah, blah. So all of those office expenses you're able to write off, but not the improvements. Okay, I'm going to jump over again to Instagram, 60 seconds or less. This is D, by the way. I left my glasses at a driven event this last weekend in Malibu and I can't see a thing. All right, Dr. John. And I know who you are. You've been here before, John. Thanks for your patience. Can I have a foreign partner investor in an LLC for an operating business or real estate? The answer is yes. Now this is deep, Dr. John. He says I'm going to set up again, no rental property. He said we're going to do an LLC for operations. Well, can he have a foreigner living in another country or here on a Visa or green card? Illegal alien, whatever. Can he have a foreigner be a partner in an llc? Yes. Whether it's a long term hold LLC or an operational llc. So we set up an llc. And here's Jonathan and here's partner, and this is the foreign partner. Oh no, what's my problem For Jonathan? This isn't good. What tax is Jonathan going to face in an operational llc? Does an LLC save taxes, Everybody? No. Oh, well, Mark, I better make it an S election. No, a foreigner cannot own an S corp. What do we do? So, Dr. John, this is when we set up an S corp for you and it owns your share of the llc. Your partner, the foreigner, owns their share of the llc and everybody wins. Your money comes down here into your S corp. And also think about it, Dr. Jacques, you're going to have other income. If you call me, you Know what, Everybody? I have one S Corp in my life. I'm a lawyer with seven lawyers and 15 CPAs. I can have as many S Corps as I want, and I only have one. So, Dr. John, I'd have one S corp, and it owns your share of any operational business. Can you feel it? Whoo, man, that was awesome. All right, by the way, call our office and work with Christy. Christy Parker is our foreign or our international tax lawyer as well as our bread and butter attorney. All of our tax lawyers do the same thing, but each one specializes in a certain area. And Christy handles all of our investors coming from other countries or our clients in the U.S. investing in other countries. So talk to Christy. She'll help you out. Okay, now we're over to. Oh, Vincent's from Kentucky and he sent a little red heart. Thanks, Vincent. You got it, baby. You know what to do now. You're going to love it. YouTube Patrick from Nashville says, I have an S Corp registered in South Carolina. All right? And I. And I'm thinking of buying my first rental property in South Carolina. Okay, See, would I normally want Patrick to have an LLC in South Carolina? No, he's not doing business there. He lives in Tennessee, but he says, I'm thinking of buying my first rental property in South Carolina, but I live in Tennessee. Anything I need to be aware of? Well, this is not to make Patrick feel bad, but when a client calls me out, say Patrick called me up and said, hey, Mark, I live in Tennessee. I want to buy a property in South Carolina. Okay, cool. We're going to set up a South Carolina LLC once you're ready to close, because what happens if the deal falls through? And now I've got an LLC in South Carolina doing frickin nothing. And I have clients that shop all around the country for rentals. So they might be going around and looking at Georgia, South Carolina, North Carolina, Virginia. And all of a sudden Patrick finds one in North Carolina. Now I got to move the LLC to North Carolina. So 1 thought I have, Patrick, is if you've already set up your LLC there and it sounds like you've got your eye on it, maybe there's family there you like to visit there you have a reason to travel there for, so you can get a tax write off every time you go, then I would hyper focus on South Carolina so that you can take advantage of the LLC you already set up. So that's number one. Number two, remember that you're going to close in the rental in your name. You'll probably do maybe you do an owner occupy loan and go live there for six months and fix it up and then move out and rent it. Maybe it's a. You're going to. It's going to be a duplex or a fourplex. So. But the point is, no matter what type of loan you get, whether it's fha, Virginia, or a Freddie Ma Mac, private lending, Fannie Mae, whatever, close in your name, people. Patrick, close in your name and then deed the property to your LLC a week after closing. Make sure the lease agreement with any tenants is in the name of the llc. You have an LLC bank account. You have an LLC corporate book. You have LLC minutes. You have an LLC stock certificate. If you don't have any of those things. Oh, let me tell you, everybody, this is. If you have an entity and it's kind of a mess and it's just one page, get it cleaned up. Susan Compy in my office runs a team, and we have a cleanup special to just kind of clean up entities that are one sheet of paper, get all the parts done. Patrick, any of you out there. Vincent, in Kentucky, I don't know if you did all the pieces and parts, but get them done. We also have a company maintenance program that's 150 bucks a year where we help you do your minutes, keep it registered with the state and do all those goodies. So if you haven't done those things in a while and you want to get that maintenance program going right now, the special ends in 10 days. Well, less than 10 days. We do it once a year. It's 100 bucks. You say 50 bucks, you can go on a cruise. But get your company maintenance going, people. If you haven't. All right, I'm going to jump over to. I'm just following Whitney here. She's telling me what to do. I'm going to do Facebook and then maybe a couple more on Instagram and we'll call it a day. Facebook. Tatiana says, is there a minimum age to make my kids part of my board of directors? Tatiana, I love this question. Everybody, you're gonna Love this. Only 10 more minutes and I promise this is gonna save you money, make you money right now. Okay, so let's say this is Patrick over here, and I think this was Aaron over here. And Aaron has three LLCs for his real estate portfolio. And he's got a lot going on. So he wants that Patrick has his own S Corp and then a foreign investor over here. That's cool. And if you remember, Vincent in Kentucky had two entities, and I Think someone else was Todd or someone had one rental over here. Okay, here's the point I want to make. Whenever you set up an entity, any of these people here, Tatiana, I want you to have a board of advisors for your llc. A board of advisors for your sole proprietorship. Or a board of directors if you actually have a corporation. People are going to love this. If you're on our company maintenance program, this $100 deal, we set up the board for you and do all the minutes. Very cheap and affordable. But if you want to do it yourself, you can. You don't file anything with the state. Pull out a piece of paper and go. Okay. I call this meeting to order. You three people are on my board of advisors. Let me tell you about my strap plan for the year. Here's my. I need your advice. You take him to dinner, you have a party, you write off all the food. You write off the travel involved, if there's any. I'm going to Mexico next month and I'm taking my adult children and my teenager, my youngest is a teenager now, 17, Molly. And we're going to go to Mexico and have a board meeting. Now, I can't write off five days for one board meeting, but I can write off a day to get there. The day for our meeting and the day to fly back. And Tatiana is right on. You want your family on your board. If you're married or single, doesn't matter, kids or no kids. Put your mom on the board, put your dad on the board, your brother, your sister, your best friend, whoever you travel with. And you want to get a write off and you need their advice and someone to hold you accountable. Being an entrepreneur can be lonely. Well, the board of advisors, board of directors strategy is legal. Simple. A great tax write off and a great network and a safety net to help you succeed. So you just do the internal documents yourself, put them in your corporate book, and you're off to the races. I've got a video on YouTube on this. It's a chapter in my tax legal playbook. And I want to give away another book, by the way. Whitney, I need to know who's going to get a book. I'm going to give away also what your CPA isn't telling you. This is a story of how tax planning can actually change your life. Good kids, bad kids, someone dies, there's divorce in here. It's going to be a made for TV movie someday. Literally. I have a friend, there's a screenwriter, she texted me last week that already has a screenplay for this. So we'll see. Now, I'm also going to give away. This is a $99 workbook on Amazon and it's got 50, 60 videos. Eight steps to start or grow your business as it currently stands, all the videos. You've got QR codes. You can start watching videos or webinars immediately. It comes with a business plan, a strap plan, and a marketing plan. It's like Dave Ramsey's Financial Peace University. But to start a business, you'll love it. 99 bucks. I'm going to give this away, too. So I need three names, Whitney, of winners for being with me today. And please share the broadcast. To be a winner, you got to share the video. Okay. Tatiana.

Hey, Mark. Yeah, hey, this is Cory.

I'm going to.

I'm going to call out the names on through with my voice out here.

Okay. By the way, this in right here. Okay, Hang on. My computer's about to die. I barely caught that. Okay, so Corey, you're gonna type the winners in there. I'm not gonna call out their names.

I'll call them out right here when I'm ready.

Okay, When Corey's ready. Okay. I want to go over to Instagram and answer two 60 second questions. Oh, by the way, Tatiana said how old the kids are gonna. Can they be. Sorry, Tatiana, I don't put kids on the board until they're about 15 years old. Any younger than that. Can they really be on a board of directors or board advisors? No. Plus, you want teenagers on your board of directors because they know everything and they'll tell you. So, Tatiana, they're your most valuable member of your board of directors because you're an idiot. And they're smart. Once they turn 21, they figure it out that really you're kind of smart. Okay, Now, Garrett from Missouri, any tips for getting mortgages as a new S Corp? Well, Garrett, I'm going to be honest with you. I've never got a mortgage in my entire life in my S corp. Interesting, right? Why not? Garrett, think about it. Does my S Corp own property? Is my S corp going to ever get a mortgage? Nope. Now, if I'm doing a fix or flip, and maybe I've got hard money and there's a first trust deed or some sort of private money involved to do my rehab, okay, you could call that a mortgage. But I'll tell you, you're going to go private on that. You're not going to walk into a bank and pull that off, right, Garrett? So my S Corp never has a mortgage. Where are my mortgages. They're over here where Aaron is setting up his cope. He's going to go get a mortgage in his own name and then deed it to the llc. Now what I do have are SBA loans. I have a couple SBA loans in my S Corp for operational purposes and things like that, but not to buy real estate. So Garrett, I stay away from that. Maria says again. Well Maria, I already answered one of your questions. Some a lot of questions here folks. Thanks for your patience. Let me get one more on Instagram Quick 60 second 1. Non stick glue says what is the time period on reimbursements from a health savings account benefits to stacking and claiming later in life? Nonstick glue everybody. A health savings account HSA is like a supercharged Roth IRA for health care. You get a write off to put in the money. It grows tax free and comes out anytime for medical expenses in your life. Todd, you can use it. The rest nonstick glue, sorry, nonstick glue. You can use it the rest of your life anytime. If you die, it goes to your spouse's hsa. If you don't have a spouse, it can go into your kid, it goes to your kids as if it was an IRA. And at the age 70, 60, whatever, you decide that I don't need it for medical, I'm never sick and you want to pull it out like an ira, you can pay tax like a traditional IRA and pull it out. So non stick glue, there is no limit on the time of when you can pull it out. Now everybody, what's interesting, I literally talked to a client last week that has 160,000 plus dollars in their HSA. I was like sweet, how'd you do that? They said I've been putting in my 4, 5, 6 grand every year for the last 10 years and I've been self directing it and doing some good investments. A little penny stock here or there averaging a 15 to 20% rate of return. Now some of you are like how can you get a 15, 20% rate of return? My ETF at Merrill lynch doesn't do that. You can't get a mutual fund to pay more than 8%. It's because you've got to work outside the box. You've got to self direct control your stocks, control your portfolio and invest your Iraq into what you know best. My IRA owns a stack of servers mining for cryptocurrency topic for another day. We're going to be doing cryptocurrency on our show in two weeks right here. We'll be covering it. Okay, well there you go. Hopefully those were short enough Allie and Corey and all that. Can we call out our winners of our book? Yes, yes.

Tell me which which book is going first? Tax and Legal Playbook that is belongs to a Patrick Hindeman.

Patrick Hindeman.

Hindeman.

Okay now Patrick, you've got to email Corey and that's C o r e yarkj kohler.com so just email Corey and say I'm Patrick Hindeman, don't lie anyone and we will get that sent off to you. Next winner of what your CPA isn't

telling you, Lisa Morgan.

Lisa Morgan email Corey C O r e y markj kohler.com Lisa and he'll get your address and send that to you. And the grand prize winner, a 99 workbook, no shipping to you value. Who's the winner?

Corey Joshua A. Sharps.

Joshua a again email coreykj kohler.com Corey, thanks for your hard work today. You did a fantastic job making this work remote. Whitney thank you for creating all those nice simple to read texts with the questions and everybody, if I didn't get to your question, please don't be frustrated. Next week on Wednesday is our Open Forum show on our podcast for a whole hour. If you want to submit a question there, copy and paste. What I didn't get to today, put it over in mainstreetbusiness.com mainstreetbusinesspodcast.com or mainstreetbusiness.com both work and click on Leave a question. Give us a question for next week's podcast and also next week we're doing our directed Iraq Open Forum which is on Thursday. And you can get to directed ira.com podcast and leave a question there if it's self directed. Related People, don't give up on the American dream. Keep trying. It's hard. I have late nights, it's up and down, good days, bad days. But at least you're in control of some income in your own life that you can invest and build and grow entrepreneurs. Successful entrepreneurs never fail. They get flexible. So if your business changes, that didn't mean your business failed. It means you adapted, you pivoted, you shifted, and you modified your plan to succeed. Hang in there. I'll see you next Thursday live right here at four o' Clock Mountain, helping you live the dream.