Live Open Forum Q&A with Mark J. Kohler | CPA, Attorney

Two.

Hey, welcome everybody to a live Q and A on tax and legal and business planning. It's been a long day, man. I've had two or three consultations with clients around the country with really insightful situations, comments and questions, and I hope to share that with you today. Not their names, of course, attorney client privilege. But hopefully I can hit as many questions as possible. Thank you. For many of you that have been waiting, you're already in the YouTube live chat and we've got Facebook on Entrepreneur Live and Facebook on my personal channel, I guess you'd call it Live. So I'm here. I'm going to quit talking. But for those that don't know me, actually I better say a quick introduction. I'm a CPA attorney, author, podcast host and national speaker and pundit, I guess, on tax and legal strategies for entrepreneurs, small business owners and investors around the country. I've got a law firm with five attorneys and staff at 20 or 30 and then the accounting firm with CPAs, 10 or 15 CPAs and a staff of 50 or 60. We're doing taxes and bookkeeping and setting up entities and estate plans and just helping people build wealth, protect it and save taxes. That's our plan. We don't go to court. I just watch Law and Order. So here we are. I'm going to do as many live Q and A questions as I can. Today is what is October? Are we on October 17th? Thursday 17th. 4:10 Mountain. So I'm live, baby. This is it. Okay, what do we got? First question, you guys, I got my amazing team. I want to say thank you. Oh, I go off my paper. Okay, I'm going to start here. Rosalie says go off this first question. Peter says, I have a small business and hire contractors. Moving forward, how do I hire them without making them employees? Petra Only if we could wish it so right. Many of you, you don't want employees because you've got to issue W2s and FICA and SUDA and FUTA and get a workers comp policy. I know, but here's the problem. People, if they look like an employee, act like an employee. You treat them like an employee. They smell like an employee, they're an employee. You just can't call them a subcontractor because you want to. And then you want to give them a 1099 and say goodbye. See you later. I've got articles on my website, markjkohler.com type in the word subcontractor, several little videos and articles that are easy to read on the topic Now, Petra's real question is, yeah, Mark, I get it, but how do I get around it? If you have someone working for you, let's just call it that. Any of you, you have someone working for you that's off site, using their own computer, using, working at their own time when they want. You're not compensating them per hour, I guess, for a specific time period every day, you just say, get this done and send me a bill. And you have a subcontractor agreement, you might be able to get away with the 1099. But again, people, if you've got someone showing up at your place using your computer, you're requiring them to work certain hours and they return and report every day, and they kind of look like an employee and act like one, you're going to have to go down the W2 route. And last point, if they act like a employee but you treat them like a subcontractor and they get hurt on the job, you're personally liable. I don't care what LLC or corporation you've got. So be careful, especially paying people under the table to work on your fix and flip or your rehab or your rental property. All right, question. Carly or Maria? We got Maria. Alejandro. Did I say that right? Alejandro, yes.

Alejandro from YouTube. Hello, Mark, thanks. Trucking business S Corp in Dallas, Texas. We started renting semi trailers too. Is it a good idea to open another entity to rent rental equipment versus altogether with trucking?

Okay, they're not rental properties. Rental equipment sounds like rental equipment, right?

Rental equipment. It's operating business s corps treated different than rental, tax wise.

Okay, so here's the concern. Everybody, let's do my trifecta. Everybody, you should know this. If you followed any of my, Follow my other videos on YouTube or my books, we're going to have our trust down here. We're going to have our S corp over here. And Alejandro says he's doing trucking. So he's got trucking services. He might have employees, he might have truckers that are 1099. That's a whole other issue. But we've got our little trucking business here. Well, if Alejandro is saying, hey, I bought rental properties in Texas as well, so he's got his Texas S corp, I got rental properties. Should I have a separate entity for that? Absolutely. If you're going to have rental properties in Texas or rental properties in Arizona, you're going to have a separate LLC for your rentals. And I'm not saying an LLC for every rental. We might pop a couple in Each one. But we're not going to set up our LLC out of the bat, out of the gate in. I should. I wanted to say right off the bat or out of the gate in Nevada or somewhere like that, we're going to set up the LLC where the rentals are, not where I live, but where the rentals are located. Now Alejandro throws a twist at us. He says, I've got equipment. Now, if he owns a trucking company, he might be talking about the trailers and the rigs and he might want a separate LLC for his equipment. So his S corp is really operating as a shell. The hard part with that is how do you get use of this equipment in your business? So you're like, well, Mark, I'll just rent the use of these trucks. So I've got this truck here. Let me see if I can do my little truck. I'm going to rent the truck to the S corp and my LLC is going to own the truck and all this equipment. When you rent personal property to your S corp, you've got to collect sales tax. Now, you're paying sales tax in Texas for using equipment that you own that's expensive. Now, I'm not saying I'm an expert on Texas sales tax, but I'm saying this is a common problem around the country. You've got to double check the sales tax rules for renting personal property, even to your own company. And I've had clients get audited and owe three years worth of personal property sales tax. It adds up quick. I just got chill saying that because it is a scary thing when it happens and you can't get out of it. So I'm just going to say this is a good for asset protection.

Sure.

Throw your equipment, throw your rentals all in these other entities. I get it, Alejandro. And you're going to rent them back to your S corp. I love it for asset protection. It kicks butt. But you've got to be careful about the sales tax issue. So look into that. Get your accountant or one of our tax attorneys to do a half hour of research or an hour of consultation and research. We can get an answer for you real quick. For now, I put your equipment in the S corp. That's cool bonus. Depreciate it, use it. Be careful, get good insurance. Keep your rentals over here. Probably keep the equipment in the S corp until you get a good answer from a qualified professional. All right, Carly, what do we got?

John asked. I'm switching my LLC to an S corp through your office. And I have a Question about payroll. Is it still okay that I'm starting payroll in October even though my S corp is being backdated to January? Is that going to be an issue with irs?

I love it. Great question, John. So for everybody up on the same speed here, what John has done is he's had an llc and I didn't do a perfect circle because it's taxed as a sole proprietorship, but he had his little llc. Now he's making bank enough that an S corp election would make sense. And if you've got an LLC and you're going to make around 30 to 40,000 net. So let's assume John's brought in 60 grand this year, 20 grand on expenses and he's netting 40. Well he's going to pay self employment tax out the rear end. Not exciting. So what he's going to do is convert it to an S corp. He's not going to set up a new S corp. He's going to take his LLC and make an S election and now his LLC becomes an S corp. He's still going to be John Enterprises llc, but for tax purposes this goes away and it morphs into an S corp. We only charge like 125 bucks. Very simple. And he says I'm going to backdate it to the first of 1, 119 because I was an LLC at the beginning of the year. Now this is a common strategy, we love it. If you're not an llc, you can't backdate into an S corp. Your S corp would start now, but John saying I'm going to backdate it now. If you have an S corp you've got to do payroll four times during the year for yourself. You're just going to do a payroll report. Watch my other YouTube video on when to use an LLC and when to use an S Cor. The comparison good 5 to 10 minute video on that. But John's already sees this coming. He's got to do a W2 and he's concerned because he hasn't done a W2 all the year. Is the IRS going to be pissed? The answer is no. In the first year you get a get out of jail free card. So you're okay. John, this first year to do payroll here in October for third quarter and then do another payroll at the end of the year in January for fourth quarter. So third quarter and fourth quarter you're going to be okay because you're going to knock out two payrolls. You got two weeks left to get third quarter payroll done. Get it done. We've got a payroll service, but you can do this now. Next year you're going to have to do it all four quarters, which is okay. But the first year you make that election, the IRS is not going to be mad that you just did it. At the end of the year, talk to your accountant again, someone in our office maybe, and make sure that you're W2 is chosen for the right amount for the entire year and double down the last two quarters. All right, next question.

Gonz from YouTube says hello, I am working with W2.9K Y and I have a negative cash flow rental property. Also did three fix and flip partnership with my coinvestor. Am I eligible to be real estate professional and the whole expense.

Short answer. Donaz is probably not. Now let me answer this for everybody in detail. He's got a W2 day job. That's right. And he says he's making about 92 grand. Alright, that's cool. And then over here he has an LLC with a negative income rental property which is normal. You're going to have loss on paper even though it might be appreciating and you're getting cash flow. So that's a good thing. So we've got our rental, he's got a day job. Now the loss on this rental is going to be deductible against that 92 grand. And Goldass, what I wouldn't worry about is you can deduct up to $25,000 in losses up to when you're 150 grand AGI. So I don't know if you're. It sounded like you were single, but if you're married and you got dual income, you probably aren't going to make it. But if this is just you and you've got a loss, you're going to get that loss against most of that income, which is okay. So you don't even need to be a real estate professional. But Gonz is saying if I've got a fix and flip over here and I've got a partner and I'm 5050 and I have a rental over here, is that enough to qualify me as a real estate professional? Probably not because you've got to show that your full time job is in real estate even though you're putting in 750 hours. It's a two part test. You've got a full time day job so I don't think you're going to qualify. Now for everybody out there, get over to YouTube after this broadcast and just make a Note on a pencil on a. Post it over there that you're going to watch. The real Estate professional, Mark Kohler. Just type that into YouTube and there's a great video there. I also have several articles on my website, markjkohler.com type in real estate Professional. And then in my newest book, the Tax and Legal Playbook, I've got a whole chapter on this strategy. So you want to study up on this. Everybody. If you have rental property, it's a great write off and a lot of CPAs screw it up. Now on that note, is this the book I've given away today? Okay, Rosalie said I'm giving away the book Financial Freedom. For any of you out there that share this video. You're in a drawing for the book. And in the morning Rosalie is going to give this book away and I'm going to right here sign it and write 10, 17, 19. So that's today and I'm going to say thanks for watching. So anyway, if you'll share this video, Rosalie, you'll do a little drawing in the morning and mail this out free of charge. Is a great book, the Business Owner's Guide to Financial Freedom. What Wall street isn't telling you. And if you invest in real estate or have a small business, you're going to love it. Okay, thanks Rosalie, for giving that away. Okay, Herb.

Herb says I have an LLC taxed as an S corp for real estate flipping. I also have an LLC for my rental properties. Should I transfer both of these entities into my living trust as part of my estate plan?

Yes, Herb, great question. What do I owe you five bucks? That's a freaking awesome question. Everybody wants to know that answer. So Herb has a trust and this is a rlt, Revocable Living Trust. He might be married, single, kids, no kids, whatever, but what he's doing is saying, hey, if something happens to me, want my assets to be distributed with no court involvement, no probate, and no blood sucking lawyers. So this is what a trust will do for you. So he wants his trust to own his LLC that owns the rental. That's great. He's got asset protection here and then he has an S corp for flipping properties. And the S corp should be owned by the trust as well. Now if we set up your trust, Mallory Warner. Say that slowly. Mallory Warner, call the office. She'll make sure that your ownership of your companies is transferred to your trust. We include it with almost every estate plan. Depending on which plan you're in, it's usually not a problem. Going to be included But I want also, don't forget John. I want Herb. Sorry, Herb. I want your home owned by the trust and all your IRAs and 401ks to go into the trust. So you want to fund the trust. Life insurance as well. Anyway, it should all go there. It's good. There's no tax problem, there's no banking problem and it's going to save you a ton of legal fees and make your family a lot happier. When you're dead and you're in the coffin, you're going to be like covered you and they're all going to be happy. They're going to dance on your grave, be happy. I don't know that I'm going to give up. That was really bad. Okay, what do we got? Anything else? Home Investor from California.

Yes, he says hi Mark, thanks so much for being awesome. We live in California. See you in OC on 12 7. Question is individual LLCs, copes s corpse holding entity and Wyoming privacy protection.

Okay, just kind of explain it. It sounds like. Okay, Home Investor in California says. Mark, will you mention this rental property Cope Wyoming thing? Was that it?

Yeah, I kind of skipped a part. Wife and I have six rentals in Arizona looking to expand decent equity equity and each no else, no LLC yet. Homes are in personal names.

Okay, I'm going to say Home investor in California. You've got two or three options and I'm not the type that's going to sell you a Cadillac when maybe a Honda Civic will do the trick. So let's look at your two options. And also Home Investor mentioned that I'll be in Orange county on December 7th for a full day workshop, includes lunch. I think we're going Mexican food. It's Orange County. It's going to rock. When I'm in Philadelphia, we're doing Philly subs and when I'm in Chicago, we're doing Portillo. See, I do the thing Hawaii luau. That's what my workshops are all about. Making it fun, getting you a tax write off. Anyway, you can watch live on the web for 99 bucks all day long on December 7th. So thanks for mentioning that. So Home Investor has seven rentals. They live in California, but they have. But they've got rentals in Arizona. Going to give them three options. Okay, so here's the operation side. We're not going to worry about that. They've got option one. They could set up one Arizona LLC and put all seven rentals in it. It's better than nothing. Did you notice what Home Investor said? All their rentals are in their individual name. That is not good. If anything goes wrong, they can come after your home. Get a personal judgment against you. Garnish wages. Do not do that. Home investor. At least get one LLC in Arizona because you live in California. You're going to have to register in California as well. Kind of sucks, but it's great asset protection and you're going to divide it amongst all seven properties. The cost. So this would be option one. Now option two, you would probably get two LLC Arizona and I would put four properties in one and three in another. least you're splitting your eggs into separate baskets. You're going to have to register these in both in California and Arizona and you're like mark, it's 800 bucks a year for that LLC. It sucks and I know but you've got some equity, you've got valuable properties. It's just a cost of doing business. So own it. Now option three, which I think will actually save you on your California fees and give you better asset protection and better privacy is to go with the cope and that's what they applied here. What I do is I set up an entity in Wyoming, then I register it in California foreign and I get two way protection with this. I can form it with your address and name nowhere to be found in Wyoming. Then I could register this, I register two LLC in Arizona and make the Wyoming entity the owner and then I go three and four. Now I'm only going to pay one California fee and have my Wyoming entity and then have it own these two other LLCs. So now you have three LLC but I have one tax return, one registration in California and I get the protection of inside outside. That's going to be more of the Cadillac version. This is more kind of the, I don't know, medium sized car. This is the cheap car. So you can choose which method fits you best in a consultation. We tailor it to your needs. But I'll see in California on December 7th. Great question. Lots of options and it depends on your situation and how much you want to spend. Okay.

Michael is rolling over my 401k to an investment for my business. A good idea.

Wow. So Michael says and thanks for letting me do kind of a new picture for every question. Michael's got a 401k over here. Now I don't know if that 401k was from his own S Corp or if it's from a day job. And he's got this 401k. It sounds like it's an old 401k because he left employment somewhere and now he's saying, I want to use that 401k to start my business. This sound right? Well, you really have three options. I know this is deep. The first option is if he's got a current day job and this is a 401k that's currently active, the most he'll probably be able to do is borrow from it. And you can borrow up to $50,000 or 50%. So I'm going to call that option one, borrow. And he's going to be really. The maximum is going to be about 50 grand and then he can use that as the seed money to start a business or to go buy a rental somewhere. I'm okay with that. That's option one. Option two is, it's called a rob strategy. Now this is deep. This is a company that really. The company that's the best at this right now is Guidant. They're out in Seattle. I love them, they do a great job. I've been to their corporate offices twice in the last four or five years. We work closely with them. You're looking at at least five grand to set up a structure like this. But the 401k becomes an owner through it. What's called an ESOP. And the 401k kind of goes, well now the 401k still there. In fact, I'm going to move the ESOP up above and then you create a new corporation and it's a C corp. And your 401k really funds the new business and then the C Corp can hire you as an employee. So now you don't own the corporation, your 401k owns it and you get to work for your own company and all the profits goes to your 401k and you get a salary. A lot of people like this think of it like a franchise opportunity. My 401k is going to create a corporation to buy a McDonald's franchise and I get to run the McDonald's and all the profit goes tax free into my 401k. That's option two. Option three and this probably the one we've done the most over the years is we take this old 401k and we roll it out to a self directed IRA and this IRA goes and forms an LLC. Then you go start a business. The drawback here is that you can't work for that llc. And so all the profits are going to go back to your IRA and you'll be like, Mark, well, I want a Business. And I want the 401k to start my business for me. Well, now you're looking at the rob strategy. And I'm going to put robs and anybody interested in this, go search Guidance Financial up in Seattle and type in the word robs. And that's going to be this option, too. And then if you're over here, you're going to borrow against the 401k. And that's option one. My pen's dying. Okay. Rosalie's taking care of me. No more big fat Sharpie, huh? Okay, just down a little diet do here. Having a good time with you guys. Thanks for being here. I love this. Okay, I've got to keep moving. Tim. Or is that. Are we over to Carly? Tim.

Tim from YouTube. I have a solo prop in Cal in California that nets about 42k. I'm freezing out over the 18 months. Have started a new Biz LLC form. Should I bother forming a S corp with the solar prop just to dissolve it later?

Okay. And I may even have you repeat a little bit of this. So we've got a sole proprietorship in California netting around 45 grand.

42.

42. Tomato, tomato. Okay. And then we're in California and then he's got an LLC or he doesn't.

He's phasing out the this solar prop over the next 18 months because he started a new biz which is formed llc. So his question is, should I bother forming an S corp with solo prop just to dissolve it later?

Well, Tim, I don't like your answer or solution at this point. Now, I don't know all the facts in your situation, but let's look at this, people. He's got a sole proprietorship and he's out there and he's making 40 grand. Now, on the face of it, I'd want to get this into an S corp and it's going to save him taxes. Even if you pay 800 bucks to California, you're still saving more than it cost. But he says, mark, I formed an LLC to start a new business. And Tim, I'm going to go out on a limb here. If this is your new business and this is your new llc, just let it also run your sole proprietorship. Run both businesses in the same LLC and set up an LLC that's a generic name like Tim Enterprises and then let her run the old sole proprietorship until it dies in 18 months and let it start the new business, which might be a new URL or a different DBA or a different trademark. Don't Set up the new business under the name. Sorry, don't set up the new LLC under the name of the new business. Set up a generic name. This is your Microsoft. Then you can have multiple businesses flowing into one llc. And what are you going to do? Make an S election. So this will be a new S Corp to run multiple businesses. Now you've knocked out several birds with one stone. Now, Tim, I don't know if your fact pattern would allow for that, but that's where I'd go with it. Set up an hour with one of my attorneys. It includes the setup of your LLC or S Corp. Whichever way we go, we charge 800 bucks for an entity in any state in the country and you get an hour with a real tax attorney planning for you. Not someone sitting in a cube in Nevada that's going down the hall that asks an attorney what to do. This is a tax attorney. Lee Devin, Kevin, Jerem, or Christie. Those five attorneys are going to be on the phone with you to decide what's best. And it's 800 bucks. That's worth it. So check that out. Tim, great question. All right, Derek. Okay.

I have a W2 job as a regional manager for a small self storage portfolio. I end up driving my own car about 300 miles once a week to check on different facilities and managers. I pay for gas with a company card. Am I able to deduct miles on my personal taxes minus the dollar amount the company actually spent for my gas?

Derek, the answer is no. Sorry, Bud. Derek, is this is a big problem with the new GOP tax bill. Now don't go hating on Trump or the gop. They did a lot for big corporations and on Main street businesses. We got some sweet benefits for auto and S Corps and all sorts of things. But where we took it in the shorts is anybody. Listen everybody, if you have a day job and you have unreimbursed employee expenses, they are no longer a write off. So if I'm a cop and buy a gun or a fireman and buy some new boots, or I'm an employee driving the company car, but I got to pay for my own gas for this stupid thing, you're not going to be able to write that off. So I'm sorry, Tim, what I want you to focus is a timing.

No.

What is his name? Derek. Derek. Bud, what I would recommend is let's start facilitating a small business on the side. Now I can start writing off maybe home, office, cell phone, some mileage, some computer, some laptops, all sorts of things. And everybody. Some people go, well, Mark, it's, it's too, you know, and this is one of the consultations I had today. Some people say, mark, it's too risky to start a small business. I go, it's too risky not to start a small business. What happens if Derek loses his job? Does he have a small business that he can fall back on and really ramp up? I think it's, it's income security to have a small business on the side. And Derek, you're going to get a lot better write offs. Then I had another consultation this afternoon where someone was like, I'm going to. I really want to quit my job and start a small business. I'm like, no, no. Start the small business on the side until it's extremely successful. Keep the day job as long as you can. You don't want to just quit a day job to start something on the side. And then you're going to put too much pressure on your business to pay your bills. Watch out. You want to find a balance, people. And just that conversation alone could save you a ton. So make sure you talk to a kind of a tax legal professional that's not pushing you to quit your job. That's scary. Not Good. Okay, Justin, YouTube says, how do you

handle equipment, vehicles, home office deductions when you have a W2 LLC side hustle? Not enough income for S corp and a rental in an llc.

Wow. Okay. I love this. Justin. Did everybody hear this? Let's diagram Justin's situation. He's got three things going on. He's got a W2 day job. All right, that's cool. He has a side hustle llc. Cool. So this is the side hustle. And not enough income for an S election, but that's cool. And then Justin, what did he say? He's got a rental property. So now he's over here and he's got a rental. Now in our world, we've got to figure out is he married or single? How much money is he making? What's the plan for the side hustle? What's the plan for the rental? But generally, we're going to want two LLCs. One for the rental, one for the side hustle, and then his day job. Now, are we going to get any write off for his day job expenses? No, that's the problem. Derek had just one question ago. Derek's like, what the hell? I don't get to write off any of those car expenses. But in Justin's situation, he's got a side hustle. So this is where we're going to write off equipment, we're going to write off home, office, we're going to write off Internet, cell phone, travel, dining. Oh, all this good stuff. This is what I talk about in my book, is all the sweet write offs that most CPAs aren't talking about. Let's make this happen. Oh, but he's got another bucket where he could write crap off over here in the rental property business. So we're going to take a bunch of expenses here, a bunch of expenses here, and a good accountant going to try to balance this and get the maximum deduction from the two of them. That's what's going on here. So, Justin, I like where you're headed. Make sure your accountant is talking with you and trying to put this together in a creative way to maximize your savings. That's what, that's, that's the goal here.

Ash, I have an llc. Can liability insurance or EM insurance protect us from being sued?

And he just said an llc. We don't know what kind of business. Okay, so Ash said. And we can use Justin's example here. So let's kind of bring Ash's question. On top of this, Ash says, do I have an LLC and should I also have insurance? Is that kind of what he's asking? I think is a good balance. You want to have both? Some people say, oh, I don't need it now. I literally, I had a consultation two days ago. The older couple, they've got five rentals in la. No llc. Oh, we just have insurance. We're okay. What, are you kidding me? Some of them were expensive rentals. One was an Airbnb, the other one was low income housing. Well, we've never had an insurance claim either. We're good. One problem, they could lose it all. You. Oh, we're in California. No one sues anybody in California. Are you kidding me? It's not that they have the wrong accident, it's they have a tenant get the wrong attorney and some attorney wants to go all in on this thing, they could lose all the rentals. So we want to have both. We want to have a two layer protection, we want to have an LLC for our rentals and we want to have a decent insurance policy. Now is our insurance going to help us every time? Maybe, maybe not. What type of claim are we going to have now? I don't want to double down. Well, I'll get an umbrella policy. Do you know umbrella policies pay out 1% of the time? Because they come in after and only after the regular policy Covers it and maxes out so many people in California go, I'll just buy umbrella insurance. I'm good. It's cheaper. No, they rarely, rarely ever pay off. Now do I have an umbrella policy? Sure. Because if I get some uninsured motorist texting and driving, I want an umbrella policy to protect me. But I'm also going to have an LLC. Oh, well, it cost 800 bucks. Now that's California. Everybody else, generally you're going to be a lot more affordable. New York can be expensive. Texas, Illinois, some of those states are going to be a little higher expensive. But California is the most expensive. But look at you got the Sea Breeze, you got In N Out Burger. You know the coast, Venice beach. That costs. People costs. So unless you're enjoying the benefits of California, pack the bag, get out. It's too expensive. All right. Okay, well, who else we got

says please do the Molly story.

Oh, okay. All right, Yvonne. I like this. Everybody that's funny. And some of you are like, who's the Molly story? All right, okay, let's use Justin here as an example. Now this is a good one. Okay, I'll keep this short within 5 minutes and do a couple more questions. Is that alright? Okay. One of the strategies I teach in my book, and it's a big one, is putting your kids on payroll. Now, Molly, who's now 16, they grow up so fast. It was almost 10 years ago. Six years old, I put her on the payroll. I mean, I get kids on the payroll when they're six. They're shredding paper, they're cleaning the office, emptying trash. Be careful. They get their fingers cut in the shredder. But it's okay, they'll grow out of it. But anyway, so that was a joke. I didn't want her fingers stuck in the shredder. Now anyway, I would get Molly working on the payroll. So let's talk about Justin here. Justin has two businesses. He could hire his teenagers, his six year old maybe even. He's got college students he's still supporting. What if Justin was buying rental properties where his kids are going to college? Wouldn't that make sense? He's got three kids. So Justin's over here with three rental properties and he's got kids going to college. They could manage the llc. And if they're the manager of the LLC and another state than California, he's not even paying the California registration tax. So this is a really good thing. Any of you, wherever your grandma or kids live, buy rentals where they go. So your Kids could be getting a 1099 because they're over age 18. Over age 18, managing your rental properties. You're getting a write off to go visit your kids at their college or your grandma, whatever. Okay, well, Molly, back when she was six or eight years old, she was working for my S Corporation. And what we do is you have a family management company and I pay a management fee and then I pay my kids under age 18. Kids over age 18 get a 1099 either out of the LLC or directly out of the S Corp. But kids under age 18, you take this extra step. Now, this is all a chapter in my book, tax and legal playbook. And you, I've got videos in my tax and legal library. You'd love it. Couple hundred bucks, lifetime membership. I shoot videos every year. I've been doing it nine years. So anyway, Molly, one day comes up to me and she's like, dad, Dad, I need money to go to the mall. I'm like, okay. Now her teenage sisters had invited her to go to the mall. Now if your older sisters invite you to the mall, this is a big deal, right? And she's like, dad, dad, I need 10 bucks. Now I'm up at the computer, this is on a Saturday. And I'm typing and I'm working in the home office trying to get some emails out. And Molly's like, I need 10 bucks. I'm like, did you do your paper shredding? And she's like, no, you can't have 10 bucks until you get your paper shredding done. Remember, she's working for the biz. You got to get her work done. Meanwhile, her older sisters are out in the park, you know, out in the driveway honking, honk, honk. And they're texting me, we're going to leave Molly if she doesn't come, I'm like, you better not leave her. You're going to be, you're going to be grounded. And they're like, come on, dad, we're trying to be nice. I'm like, shut up. Get out there. I'm trying to return emails, Molly screaming and crying, trying to shred paper. I mean, all hell's breaking loose, but I'm a fair and reasonable employer. So I say, molly, you get your shredding done, you can have 10 bucks. Meanwhile, I'm texting the older kids, stay out there, you're grounded. Everybody's mad I'm not getting any work done, but, you know, whatever. So Molly shreds all over paper and comes back and is like, dad, dad, can I make 10 bucks? Like, you didn't empty the shredder. She's like, dad, oh my gosh, this sucks. I hate my life. I'm like, just deal with it, empty the freaking shredder. She's like, all right. So she goes over there, you know, empties the shredder. She's crying, she's like, dad, oh, this is terrible. And so I'm like, I'm like, shut up. Meanwhile, the kids are texting me, we're leaving. I'm like, no, you're not. Oh, I was going to go crazy. I almost fired her right there. Anyway, I was good, I stayed on. Anyway, so she finally empties the shredder, drags it out to the garage, and there's paper shredding all the way to the garage. And she comes up, she's like, can I have my $10 now? I'm like, look at this mess, you got to sweep this up. She's like, oh my gosh, dad falls on the ground, starts crying. Some of you have employees like this, they throw a temper tantrum right there in the office. So I'm like, molly, please just clean up the mess. Crying, emptying up all the paper. She's like, can I have my $10 now? I'm like, okay. So I transfer $10 right on my app. I transfer $10 from my S Corp to the family management company and $10 into her 6 year old debit card at Wells Fargo. I just got a write off for 10 bucks. Leaves, the kids drive away. Now, was it worth it? A$10 write off? Probably not worth the write off, but what did I accomplish? I mean, this was huge. We talk about this in our family all the time and joke about it because what did I do? Taught Molly, you don't get paid till your work's done. Number two, you don't get paid unless you do a good job. And then she's got this $10 that's on her debit card now. A month or two later, this is great. We're at the mall and she's like, dad, I want to go to Godiva and get some chocolate. I'm like, alright, go ahead, you got your own freaking money. You do whatever you want. I'm not giving you money. So I just took her to the food court and took a tax write off for my employee experience, you know, you know, it's good stuff, you know, so anyway, so she's over at Godiva and she's trying to. And they won't use her debit card because it didn't have the cash reserve. Little symbol. Now, that's improved. This was a few years ago, right? So anyway, she. I'm like, well, go get. Go to the ATM and get 10 bucks or whatever for 20 bucks. And she's like, all right. She goes over and she goes, I can't get $20 out of the ATM. I go, you have money on your card? She's like, dad, that's a bad atm. I go, what do you mean it's a bad atm? They take two bucks. I'm like. I was like, oh, my gosh. Hallelujah. You know, like, she's totally figured it out. I'm like, this is amazing. I got. College students are like, I don't care. Bank fees. I don't care. She's 6 years old, and she realized if you don't use a Wells Fargo atm, you lose two bucks. I mean, this was hard. This was blood money. She learned, you know, she had to shred paper for this 10 bucks. She ain't given 2 bucks to, you know, chase. Whatever. She's like. I was like, oh, my gosh, this is amazing. So anyway, the moral of the story is I have so many clients that start a business because it's a family business. They're teaching the American dream. They're saving money paying their kids to work at the New York deli, the Oklahoma farm, the Idaho potato farm, whatever it is. Get your kids involved in the business. Teach them the value of $10 because they got to earn it. And you get a tax write off. And some people go, mark, that's way too risky. You can't pay your kids. That. That's totally. I had literally last week a CPA here in my little town that was, like, going ballistic because I was paying kids. I'm like, are you kidding me? I mean, I write this everywhere over the country. I teach CPAs all over the country about this. They're like, oh, my gosh, I didn't learn this on the CPA exam. No, you don't. You learn it through the effort of becoming a creative tax planner. And so this is cpa. Last week was like, you can't do that. I'm like, really? Give me a break. And you know what? Frankly, I would love to have the IRS audit me. And I've got to be careful, Knock on wood. But if they audited me and say, do you really pay Molly? I'm like, oh, you don't think I pay my kids to work in the business? Hang on one second. Walk out of the room. Go get Molly, my key witness, bring her in. And they'd have the hot lamp on her, right? You know, they'd have the lamp on her at the table. And they'd be like, molly, do you really work for your dad? Oh, you don't know the pain. He makes me shred paper. I can't do this. And the agent would freak out and go, okay, okay, fine. You get the write off. See what I'm saying? You got to make this real. You got to be ethical. You got to be honest about it. And you got to get your kids involved in the freaking business. Guys, this is the American dream. That we're tracking our expenses. We're building businesses. You're not quitting the day job. You're working your butt off. But you're not up all night playing video games or watching Netflix binging on Breaking Bad for four days. You're building your business once in a while. See what I'm saying? I'm there with you. I went to bed at 2am on Monday night writing a blog article. I'm freaking a little older than a millennial and I'm still working my butt off because I want to build something. I want to have some extra income so I'm not killing myself someday in the future when I do want to take a break. Anyway, that's the Molly story. It's, you know, it's life changing. Right. Okay. Anyway, two more questions. Are we good? Sorry, that was Yvonne that asked that question. Thanks, Ivan. That was good. I gotta have a drink. All right, what do we got?

Diego asked, referencing a series llc. Can each sub have its own entity?

Well, Diego, each sub is in this no man's land. It's not really an entity. It's part of the Series LLC entity. So what Diego's talking about everybody. There's 15 states where you can have one LLC and then have as many baby subs as you want. I'll just call them a sub. But you only have to file one llc. So you get the benefit of filing one llc, one tax return. But I'm going to have a separate checkbook for each sub and each subs going to have a little different name, but they all flow into one llc. It's pretty cool. So you can have all these different rentals. So I don't know. Look at that again, Carly. So Diego saying, is each sub its own entity? Not really. They're kind of a piece of the parent. And you're getting asset protection as if they were a different entity. Now this is why Again, you want the book? I don't even have it memorized. Which 15 states? You can do this. Can't do it in California, Sorry. Nor New York. Okay, but here's the list. Series LLCs, Alabama, Delaware, Washington, D.C. illinois, Iowa, Kansas, Minnesota, Missouri, Montana, Nevada, North Dakota, Oklahoma, Tennessee, Texas, Utah and Wisconsin. So if you have rentals in one of those states, you're allowed to do the series llc. It's freaking awesome. Better asset protection. Cheaper, easier, simpler. So, Diego, you're on the right track. Matt.

Matt from YouTube. I have an out of state attorney suggesting to put my assets in a series LLC with the land trust. However, my state, Washington doesn't recognize series LLC or land trust as a legal entity. Should I avoid.

All right, Matt, this is really good question. It kind of ticks me off because it's kind of a strategy I'm not a fan of. Now I could bet. I almost wanted to look at some of the states they might be recommending this. Matt's living in Washington. So here's Matt and he's in Washington state. By the way, I was raised in Washington, born in Oregon. I was adopted. I don't even know who my parents are. I was born in Eugene, Oregon. Conceived in the back of a Volkswagen bus. It was about after Woodstock. So I think I was conceived at Woodstock. And then they drove across the country and just had me in Oregon, dropped me off at a law office. My parents picked me up. So anyway, true story. Anyway, I grew up in Washington state and I love Washington. Go Hawks. Russell Wilson, you're the man. Okay, so anyway, so I got. I'm here in Washington with Matt and someone is pitching him on all of his assets in an out of state series llc. Now he might be thinking of Utah because you get COPE protection with a Utah LLC not in Wyoming. And I can have a series LLC in Wyoming, I'm sorry, a series LLC in Utah with COPE protection. So Matt, I'm okay with that kind of so far. But then if you have a series LLC in Washington, Washington doesn't recognize the subs. So is the series LLC really helping us? I don't think so. So I don't know where all your assets are at, but. So I'm already having some concerns. Now here's the real one that Matt said that freaks me out. He goes, oh, but I'm going to have a land trust. So I'm going to create this little LT land trust and that's going to be on title to my rental property in Washington. Then a sub is going to be the beneficiary of the land trust, which is a sub of a series LLC in another state. You see where I'm at. And some blowhard attorney is probably trying to sell this to Matt for three or four grand or something, which is something we would never charge to do this. And I never recommend this because here's the issue. Matt says, well, a land trust isn't recognized in Washington. Fine, I don't care. Let me ask this. Does a land trust give you asset protection? That's a good question, right? Well, let's go to the tax and legal playbook where I will tell you that a land trust is a bunch of crap when it comes to asset protection. Now, is a land trust give you an amenity? Does it help you hide? Can I avoid the due on sale clause? Sure. I mean, I love the land trust for hiding, but do I get asset protection with it? Hell no. Sorry, this is PG today, so. Matt, that is a bunch of crap. So even if the land trust was recognized in Washington, there's no asset protection with it. It's a freaking hiding mechanism. Now, I've done here on this very YouTube live, I've worn camouflage and I've said a land trust is good for hiding. But once they've got you in their sights, you're a goner. Because it doesn't protect you. It just helps you hide. And someone with enough money and pissed off enough, they're going to find you so everybody out there don't get sold this stupid land trust strategy for asset protection. Now, it's okay for hiding if you go in with your eyes wide open and know that's why you're doing it. So I'm not saying land trusts are bad, but don't believe anybody if they say it's for asset protection. It's for privacy and hiding. Now then, Matt, I got it. Seriously, I'd have you get a consult and go, where's your rentals? You live in Washington. You're setting up an out of state series. Where are your assets? I got issues. I mean, something's not adding up for me. Get a second opinion. You can pay any of my attorneys 300 bucks for an hour and you might be out a week for an appointment and get a second opinion if you're to spend all this money. You know, I'll put my name where my mouth is here and tell you that there's something weird there. Well, everybody, don't give up. It's hard. Life's hard. It is. We're here for a life experience trying to make good decisions, hopefully having a good impact on other people and avoiding all those losers out there that are ruining our lives. Bad girlfriends, bad boyfriends, bad wives and husbands, crooks, thieves. Be careful. Be careful what people promise you and always get a second opinion. Do your due diligence, do a little bit of asset protection and structure. And I will finish with a quote from the infamous Kevin Costner. If you don't build it, they won't come. You're not going to have success in life if you don't have a structure to receive it. Call it karma, call it providence, call it spiritual, God given, whatever. If you're not ready for it, it ain't happening. So don't think you're going to get rich quick playing around on LegalZoom in the middle of the night. Get some consultations from some real professionals. Keep working hard. Don't give up. The American dream is real. It's not going to fall in your lap and that's okay. But have some other sources of income and I'll be there with you. I'll be here every week doing a little Facebook, YouTube Live, trying to give you some good helpful info. Now I'm going to be in Philadelphia on the two days after Halloween. So that's on November 2nd. I will be in Philadelphia for a full day workshop. Good food, 200 bucks. Boom. And we're going to sell out. So I think we've got about 55 people there now. I think 10 or so more seats. So it's going to be a great day. If you're on the east coast, book a flight. It's a tax write off. Come spend the weekend in Philadelphia. And Dylan, am I right? I think it's a home football game on Sunday after my workshop. And so you could get a tax write off to come in for the weekend for the workshop and stay for the Philly football game. You got to tell me who's playing that day, Dylan. And then you got to subscribe to my newsletter, people. I send out a cool newsletter every week. Follow me on social media if you will. And then the live broadcast is on December 7th in Orange County. So if you're in the Southern California area, want to come out, get a tax write off or watch it live anywhere in the country for 99 bucks. And all of you get a recording of the workshop. So it's a wonderful little day. And there we go. Dylan, who are they playing, man? He must have an Android. If I was on Apple phone, it would tell me November 3rd. Yeah, who is it? The Bears. The Bears are at Philly on November 3rd. It's a tax write off. Go on, Stubhub. Get some cheap tickets. Now, you can't write off the ticket to the game, but you can write off all your food at the game, your travel and your hotel to come to my workshop on November 2nd and stay for the game on the 3rd. Fly out on Monday. Boom. Alright, everybody, have a good weekend. We'll see you later. Keep living the dream. Oh, there we go. Bam.