In this video Mark J. Kohler explains the advantages and drawbacks of using Wyoming limited liability companies (LLCs) for real‑estate investors. He starts by defining a COPE (Charging Order Protection Entity) and notes that Wyoming is the only state that offers COPE protection to single‑member LLCs, meaning a creditor can only obtain a charging order on any distributions, not the underlying rental asset. He then outlines two additional benefits: privacy (the incorporator and manager can be hidden for a year using a law‑firm address and mail‑forwarding service) and low cost (formation fees around $100, registered‑agent and mail‑forwarding services under $400 total, plus modest annual state fees). Kohler warns that Wyoming entities are often oversold to investors who do not conduct business there, leading to unnecessary dual‑state costs and complexity. Finally, he presents his preferred structure: a Wyoming holding LLC that provides COPE protection, with separate “baby” LLCs in each state where the rental properties are located, allowing a single tax return while retaining asset protection in each jurisdiction. He advises this approach only for clients with substantial assets and multiple rentals, and concludes with a call to action for his ebook and social media.
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Hi, Mark Kohler here with another tax and legal tip. I want to talk about the Wyoming Corporation, or llc. Now, these are awesome for asset protection, but they're also oversold. So I want to break down some of the good, a little bit of the bad, and then tell you where I really like to use the Wyoming entity. Okay. The first benefit of a Wyoming entity is the COPE protection. Now, what COPE stands for is Charging Order Protection Entity. Now, I have a whole chapter on my book on COPE entities, but there's only about 13 to 15 states around the country that have this type of protection. Let me tell you what it is. If you set up a LLC for your rental property and something goes wrong and your tenants licking the mold off the wall or they fall down the stairs, you know, because of, you know, termites or something, can they sue you personally? No. You're protected. That's the beauty of the llc. If there's a problem inside the llc, you're protected. But what happens if you are in a lawsuit, heaven forbid, texting and driving and someone comes after you? Can they bust into your LLC and take away your rental? In most states they can, but with the charging order protection entity, there's outside protection. They can't get into the LLC and take away your rental. Your rental is protected with this coat protection. A judge will only give a charging order that any money that comes out goes to the creditor. That's the charging order protection. They can't get the asset. They only get money if money comes out. And are you ever going to distribute money? You're not? Well, Wyoming is one of these entities and they give charging order protection if it is a single member llc. And that's the only state in the country right now. That's awesome. So Wyoming entities are great for this coat protection. The second benefit of a Wyoming entity is privacy. Because if you ask me to set up your Wyoming llc, I can set it up as the incorporator at the law firm. I can even use our mail forwarding address service so your address doesn't show up anywhere. This is pretty cool. So your name doesn't pop up on public record in Wyoming for at least a year. And at the one year mark, you have to disclose who the manager of the of the LLC is, but not for a whole year. That's huge for privacy protection. Third benefit of the LLC is they're affordable. Now, I'm going to come back to the oversell issue in a minute, but you can set up a Wyoming LLC for a hundred bucks. We can be Your registered agent in Wyoming for 125. And we can be your mail forwarding for up to three companies for 150 bucks a year. So the filing fees are with all that, you're still under three or four hundred bucks. And then the annual fee with the state is either 50 or 100 bucks, depending on your sales. So the LLC can be really affordable in Wyoming for its initial setup and maintenance. A lot cheaper than Nevada, which is again, oversold as well. Now, the problem with the Wyoming entity is they're oversold. Too many people get sold into this Wyoming entity when they're not even doing business in Wyoming. So they got rentals in Georgia and they're like, mark, I need a Wyoming entity. And I'm like, okay, now I've got a registered Wyoming and Georgia. And if they're just getting started and they don't have a lot of equity in their property, they're paying for two states. And it's just a cost that the brand new investor really doesn't need. But they're oversold again. And everybody at every little workshop out there that thinks they're a real estate legal guru, even though they're not lawyers or they're overselling this and it's too expensive. And watch out, be careful on overdoing it with a Wyoming entity. So finally, let me show you my master diagram here. Here's where I love the Wyoming entity. So real quick. A lot of times you might have one LLC with multiple properties in it. You might have two or three LLCs with multiple properties, but you have barriers between each one. And then you might even have, let's make my picture pretty here. Or you might even have a series LLC with little baby subs. But you can only do that in a few states. So the series LLC doesn't work for everybody. But when I have a client with a lot of assets, we'll set up a Wyoming entity and Then have baby LLCs in multiple states for their other rentals. Now I get the COPE protection of Wyoming and then I get the protection of the LLCs in these multiple states. This could be Arizona, this is Nebraska, this is California, and then we've got Georgia. So we got multiple states. But it's one tax return, one llc. And you're getting charging order protection, Wyoming. But I only do this if I have clients with a lot of assets and a lot of rental properties. Now you can probably see why I named this a tax and legal tip and not a two minute tip because I sometimes get carried away. Anyway, in summary, asset protections for real, and it can work. But make sure you have enough assets before you think about this Wyoming thing, folks. Don't give up on your American Dream. Hey, thanks for watching and if you found that information helpful, please click below. Subscribe to the channel Every time I shoot a new video, you'll get a ping. Also, check out my new ebook, the top 10 tax strategies everyone should know. New this year 2016. You're gonna love it. And finally, check out my social media links. If you're into social media, I got daily posts and all sorts of little fun tips and strategies that come out to highlighting my radio show every week as well. Please check it out and I'll be there for you as we both try to better live the American Dream. Thanks.
