Episode 825
Building a portfolio of rental properties can be your ticket to financial freedom. But it also exposes you to risks and the need for asset protection. One way to do this is by transferring your investment properties into an LLC, or another kind of legal entity, like a land trust.
That topic inspires many questions among new investors including where they should set up their LLCs. In this episode, we hear from tax and asset protection attorney, Clint Coons, who will answer that question and many more with easy to understand explanations. Among the topics he'll cover are the where, the why, and the how you might want to set up your LLC along with the difference between LLCs and other entities.
You can schedule a free session with someone at Clint's firm or watch the replay of a recent webinar by Clint on our website. You need to be a Real Wealth member to access the webinar replay inside our investor portal, but joining is easy and free at www.realwealthshow.com.
Audio Transcript:
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[00:00:00]
Announcer: You're listening to The Real Wealth Show with Kathy Fettke, the real estate investors resource.
Kathy Fettke: A common question we get from our Real Wealth members is where should I set up my LLC for the best asset protection? Well, it's not that simple. I'm Kathy Fettke. Welcome to The Real Wealth Show. Today's guest is full of information on how to protect your assets from lawsuits. I learned so much from this interview, and I'm so glad I don't have to figure this stuff out on my own. We've got an expert here to do that for us. Clint, welcome back to The Real Wealth Show.
Clint Coons: Thanks for having me.
Kathy: I got an email recently from somebody saying is it illegal to have an entity in another state from where you live? Thinking that you're tricking the IRS into thinking that you live in that state if you have an entity there. What's your response to that?
Clint: That's incorrect. Obviously, you can set up a business entity wherever you want. If you're going to own real estate in another state, take, for example, Florida, then you're legally required to have an LLC set up there or registered to do business there. For example, if you lived in California, and you had property in Florida, you take your California LLC, and you would register it in Florida to conduct business. It is doing business there. It doesn't matter where you sit, where you live, and where the entity is located.
In the eyes of the IRS, it all flows back to you, and you're going to pay taxes on that money, regardless. They don't care where it's set up.
Kathy: What you don't want to do is say open up a Nevada LLC, and say you live there when you really live in California or something like that. That would not be okay.
Clint: That's a different strategy. That is basically tax avoidance where people will-- This was [00:02:00] really popular back in the early 2000s. There'll be a lot of advertising, "Hey, set up an entity in tax-free Nevada and pay zero tax." People would do that with the thinking that if they had an entity there, they wouldn't be subject to federal income tax or state income tax on their business that is derived from a particular state.
What we found back in those times that you'd have a lot of Californians would set up Nevada entities, run an active business through their Nevada entity that's actually taking place in California and try to avoid all California state tax. Some people even think that they didn't have to pay federal tax. Those people ended up wearing orange jumpsuits out of them or else having a lot of fines when they were caught.
Kathy: You don't want to lie about where you live. In our case, our business is in a
Published on 4 years, 8 months ago
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