This content was created by MARK KOHLER. This content was uploaded by MARK KOHLER. This is a YouTube presentation titled "Is an LLC Right for Me?" (recorded/published 2021-02-04) featuring MARK KOHLER delivering a solo, instructional whiteboard talk about when to form an LLC. He outlines primary reasons to use an LLC — holding rental/property assets, protecting a small sole-proprietor business (with the option to convert to an S‑corp), forming partnership LLCs for joint ventures, and using LLCs tied to retirement accounts to hold investments (including cryptocurrency). He emphasizes LLCs are for liability protection (not a tax shelter) and discusses S‑corp election mechanics and asset-structuring strategies.
Chapters
All right, there are three reasons for an llc. This is easy. Three reasons. You're going to love this. Number one, and let's go to the whiteboard. Are we on the whiteboard, Corey? Okay, on the whiteboard. The first reason which is the most common, believe it or not, is the most common for an LLC is I'm going to hold investment property. That's number one. So on my left side, right side, many of you have seen my little diagram here. So if we put operations over here or, and we're going to consider your day job part of this. So day job is here, you and or your spouse and you may have a day job or a full time small business. Over here would be your small business. Then over here would be your W2 day job. And over here we're going to use this could be your LLC for a rental property. That, my friends, is the number one reason for an llc. I want my trust to own it. So this is kind of my operations and assets side, known for my trifecta. I just love it. And this one is where I'm trying to figure out where do I put my assets? They're going to go on this side. And this is where I'm putting property and money. I'm building up my wealth. And over here, right here are my rental properties. And that's where an LLC is used first and foremost. Number two, might use an LLC for my little sole proprietor business. Not sure if it's ready for an S Corp yet, but I want to put an LLC around it for protection so that if anything happens to me, much like your rental property, you're protected if anything goes wrong on your rental property. And so you're over here and I'm going to run my little small business in an llc. Now do LLC save taxes? No, they do not. That's wake up call. I hope that some of you caught that LLCs do not save taxes. I do not need an LLC to write off my car, my home office, my cell phone, any of that. Nope. LLCs are for protection. Now I can convert this LLC to an S Corp when I want to. And that's what I like about an LLC for your small business is if you start making too much money, I can retroactively turn it into an S Corp, even back to the beginning of 2020 right now, just for a short more period of time. So I want to use an LLC for protection and the flexibility to turn it into an S Corp retroactively more than 75 days. Some of you accountants are out there like, well, you can't make an S election back further than 75 days. Yes, you can, with the right IRS rev rule listed at the top of your 2553. Do it. Been doing it for 20 years. So LLCs work well there. So number one is to hold assets, number two is to have a small business for protection and convert to an S corp. The third reason that is the most common is a partnership. So let's say that Alison in the room here with me, we're going to partner up and start selling jeans on ebay. So we're going to sell product on ebay. I might be having a storefront, I can run a landscaping business, I could do, fix and flip real estate. But it's short term deals, it's short term business, it's operational. Now in the long run, I know I need an S corporation to save taxes. LLC is not going to save me. I do not want an S Corp 1000. So what we do is my S Corp owns 50% and her S Corp owns 50%. So now my S corp becomes a partner with her. And you're going to see LLC is out there all the time. LLC is for a restaurant, LLC is for a law firm, LLC is for a dental group, for a doctor's group, blah, blah, blah. All these people are LLCs in the main business. And this is where employees could be hired. But the actual owners usually filter, they launder their money. Did I say launder? I meant filter your money through an S corporation. So S and S, that's the third main reason for an LLC is for a partnership. Now I'm going to throw out a fourth here on the fly because we just held another podcast today and it was huge on cryptocurrency. We have clients buying Bitcoin and Ethereum and others virtual currencies and they're using an LLC to do it. So you can take your IRAs, your Roths, your 401ks and create an LLC by one with one Roth, one IRA, whatever. And I can create an LLC that can owing, that can own bitcoin. I wanted to say own a bitcoin at the same time. So bitcoin or any sort of cryptocurrency. Now this could. These LLCs can own real estate, they can own investments, they can run businesses or sorts of good things. This is called self directing. This is my pre tax or tax free bucket. Now look at this. Isn't this kind of fun? You've got your bucket for real estate in your own name, your bucket for investments in your retirement account and your bucket you might have with a partnership and your bucket for your own personal income in small business. These are the four reasons and I'll switch to even a color here. Let's do it with a little bit of color to make it a little more easy to see. Number one, right here with an LLC for holding. Number two, an LLC to run my business. Number three, an LLC with a partner, an LLC to hold to hold investments with my IRA or 401k. Now I guess if Allison called me up and said I want to llc, we want to buy a rental property together. It's not an operational business, it's a rental property together. So we could have that same LLC as a partnership LLC but we would own rentals in the partnership LLC. 50 50. We wouldn't run our business in it. So I guess I could call that number five. So five reasons for an llc. Boom. There you go. It.
