Main Street Business

#576 How to Set Up a Family Office Without Being Ultra-Rich

• Mark J Kohler and Mat Sorensen

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In this episode of the Main Street Business Podcast, Mark J. Kohler shows how simple board meetings and a strategic plan can supercharge your finances. He explains how to turn ordinary family gatherings into legitimate, tax-deductible business meetings that strengthen your entity structure. Get inspired to organize your goals, sharpen your decision-making, and create a family office that supports real wealth-building.

Here are some of the highlights:

  • Mark explains the concept of a family office, emphasizing that it is not limited to billionaires but can be set up by anyone.
  • The benefits of a family office include tax write-offs, better asset protection, and wealth building.
  • Mark advises participants to legitimize their LLC or corporation by holding board meetings and documenting the minutes.
  • The difference between boards of directors for corporations and boards of advisors for LLCs.
  • Mark introduces his "trifecta" concept, which includes a revocable living trust, 1040 tax return, and various assets and operations.
  • Encouragement to set up boards for all their entities, even if they only have one or two.
  • Mark emphasizes the need to update the plan regularly and share it with tax and legal advisors.
Speaker 1:

Welcome to the Main Street Business Podcast with your distinguished hosts, mark J Kohler and Matt Sorenson. Both are bestselling authors and have over 25 years of industry experience, with 10,000 client consultations, making them the leading tax and legal experts in the nation. Together, they'll unpack the most complex tax, legal and financial strategies crucial for saving more, stressing less and building generational wealth. Crucial for saving more, stressing less and building generational wealth. Today they're your personal advisors, ready to break it down for you and make the tax and legal game easier than ever. Here is Mark and Matt.

Speaker 2:

When you have a board meeting, you might go to a resort and say we're going to have a board meeting and you fly your family in, your kids, your best friend, brother, sister, mom, dad. You're going to write off 100% of the travel, you can write off the dining and you're going to have a board meeting. And when you hold your board meeting, that's the meeting minutes to legitimize your LLC or your corporation. What is a family office? Let's get this off the table. According to the financial industry's definition, it's like I'm a billionaire, I got a hundred million. I'm a family office. I can negotiate bigger deals, I have full-time employees, I've got a kick-ass team La, la, la, la la and everybody is like tries to get on social media and brag I got a family office, I'm like whatever. So, and it's true To me, my definition is you all have a family office. It's the third bedroom down the hall with a hide-a-bed in it. Okay, and so the big takeaway I want all of you to have today I literally mean this this is the biggest, this is my message today is every one of you. I'm going to give you some action items of setting up your own freaking family office by next weekend, and I want you to have your own board, your own board of advisors, board of directors. It's your family, it's your best friend, it's your mom, it's your dad, it's your kids. You need to have a family office for tax write-offs, better asset protection, building wealth. You're going to freaking love it. It's easy. My mission in the country right now is that everybody should have a freaking family office, and you already do so. Let's take advantage of it. So it's easy, it's not hard, it's not expensive and it has a lot, a lot of benefits. So when everybody says they're all on the web going I got a family office, do one of those reaction videos and say so do I. You dumbass, you know, freaking A, you know. And as you build your family office, you'll have a team. Here's the four steps, super easy.

Speaker 2:

Number one I want you to have the right tax and legal structure. So we're going to talk about my trifecta. So you want to have that structure, because you can't really have a board of directors or board of advisors if your structure is kind of jacked up. So we're going to work on that today for a minute. I want you to have clean entity documents. You can't say I have a board without a board meeting. You've got to have meetings, you've got to have minutes, you've got to make sure your LLC and S-Corp or whatever your structure is, let's make sure the docks are clean. I have paralegals. That's all they do every day. We have literally a cleanup team. There's like fixmylegalshumanitycom, like just fix it, you know, and it's very affordable to do. Let's get your docks cleaned up.

Speaker 2:

Number three I want you to have a plan and a vision written down. Now it's really easy to say, oh, I want to be worth more money, or I want this or I want that, but what is your 10 year plan? What is your five year plan, your three year plan, this year's strategic plan? Have you written it down? Because when you have a board, you're going to have a meeting and share that plan. So we've got to have that. We've got to have a plan before we can even have a meeting. You're going to get around a dinner table and look at each other really weird. So we want to make sure we have a plan and then have those meetings regularly, at least twice a year. That's it, my company. We provide a service of doing your board meetings for you for 200 bucks. So the results of doing this.

Speaker 2:

One I love the tax write-offs of a good family board meeting. I've taken my kids all over the world and just on a Zoom call when you have a board meeting, you might go to a resort and say we're going to have a board meeting and you fly your family in your kids your best friend, brother, sister, mom, dad, whoever the hell and if you're paying for it, it's a write-off for you. You're going to write off 100% of the travel, can write off the dining and you're going to have a board meeting. It's a write-off. This Christmas Patty and I had all the kids there at Christmas in Park City, utah, and we had a board meeting. I wrote their airfare off. The company paid for it. It was not a family reunion, it was a board meeting and it's okay because you take notes and you have legitimately a board meeting. It's not high risk Anybody on the web or some social media platform saying you can't have a board meeting.

Speaker 2:

They're wrong. I stand behind this in my books and my white paper and writings. It's so straightforward. Number two if your LLC consists of one sheet of paper on LegalZoom from three years ago, that is not an LLC. Good luck in court. You've got to have your corporate book. You've got to have an operating agreement. You've got to have minutes and when you hold your board meeting, that's the meeting minutes to legitimize your LLC or your corporation. Super easy, so it makes you more legit. It's great. Now there's no bulletproof asset protection. I hate it when people say bulletproof and they're trying to sell these crappy trusts out there. Be careful. But just having good board meeting minutes for all of your entities so easy, so good. Number three you're gonna have better organization, decision making and a foundation for success In your board meeting.

Speaker 2:

I want you to prepare with a financial statement. How did we do last year? How are we doing this year? What are our goals? What are our plans? It kind of makes you have your shit together, which is good. It helps you build a relationship with your family. Sorry, I'm a little emotional about this. I texted my kids this week and said Tuesday night we're having a board meeting. I need you all on Zoom. I got all my kids Three of them are married and I said I want your spouses on. We're going to have a board meeting Tuesday night. We're going to talk about the business. We're talking about some financial matters and I've asked each one of them to bring their biggest win this year. That's our board meeting. It gives you something to talk about. Teaching our kids about financial literacy, our mom, our dad, our best friend, is so important. And it's a little shout out to Farrah and Carter. Are they in here still? Oh, there's Farrah.

Speaker 2:

When I started my Main Street Tax Pro training we're now at 1,100 accountants around the country we're training. Every week we have a meeting. I thought this would be cool. I'll get all my cool strategies from my books and I'll do a training every week. And la, la, la and Farrah may remember this because she was one of the first to join we had 100 people join right out of the gate. We had our first meeting in January two years ago, and in the first meeting it had to be the first or the second I was teaching some strategy, like put your kids on payroll or something, and everybody's like, oh, don't forget this Mark. And I was like holy crap, I didn forget this mark. And I was like holy crap, I didn't know that. I was like I need to know that too. And Carter would join us on a regular basis and I'd be like, oh my gosh, that's a great strategy. You don't know what you don't know. I found out in my community. I was learning more from them than they were learning more from me, and so when I have our little family board meetings, I'm looking for my kids too, and you're working together. Sorry, okay. So have your board meeting.

Speaker 2:

I challenge all of you to have your first quarter board meeting in the next six weeks. It's cool, it's so easy. So now let me show you how this looks. We're going to work through it. Then we'll do Q&A.

Speaker 2:

So my trifecta what I've been teaching for 20 years almost now 15 years ago I trademarked it was your trifecta starts with your revocable living trust and your 1040 tax return, because all of your money flows downhill your K-1s, your W-2s, dividends, blah, blah, blah. It's all going to end up on your 1040. So that's your foundation. Now your revocable living trust is going to own everything. Now you might do some more advanced planning trusts, crts, islets Please watch out for these irrevocable asset protection trusts that people sell. They're crap. But this is your foundation. Super easy. Some of you have already done a trust with our office Could range from $2,000 to $3,000. You work with one of my lawyers around the country. Boom Got it done. You can update it every four or five years. It's wonderful.

Speaker 2:

The left side is your operations, which could include a W-2 coming in from the side, but this is really kind of your side hustle or main hustle. What am I doing to generate ordinary income? Tax strategy planning? La la la. The right side is your assets, your passive income. On the left side, your assets working. On the right side, your assets are working. You want to try to like split the two to the left and right and then down the middle is a firewall for asset protection. Tax planning occurs on both sides, but we want to create this asset protection that operations generally create more liability. So we want to kind of put our assets on the right side, never letting our operations own our investments. So as we build this, it would look like this I want my life insurance beneficiary to be my trust investment accounts, my home.

Speaker 2:

When we set up a trust for you, we're going to really work on making sure it's funded. We just can't create a trust. We want to make sure it's funded. Then your investments. Let's just think of some basic rental properties, Short-term, long-term syndications don't care, you're gonna have an LLC over here that would own your real estate in this example. Then on the left, you might have a side hustle, a little LLC, and if you're making any money at all, boom, you're going to graduate to an S corporation. So consulting services, a restaurant, you're a landscaper, you're selling online, manufacturing whatever. That's going to be your basic trifecta. We've got operations on the left, assets on the right and it all flows down to your trust. That's your basic trifecta. Then we're going to add a board of directors trifecta. Then we're going to add a board of directors. So the board of directors would be for any corporation you own.

Speaker 2:

If you already have a corporation, it's easy. You can literally this weekend you don't even need my law firm pull out a sheet of paper and go. We're having a board of directors meeting, you're on the board, you're on the board, you're on the board. And let's talk about our business. Yep, we bought this, we sold that, we got rid of some employees, hired some new employees. We're going to do this. We looked at our financials and you have a conversation with people that can give you some good advice. What should I be doing with social media? You know, I texted my son right after lunch and I said, hey, what can you do for Farrah on her social media? He's like oh, I do this, this and this. I'm like all right, I'll let her know. I mean, my children have better social media strategies than I have, so I listen to them, I talk to them.

Speaker 2:

Then you could also have a board of advisors. If you have an LLC, you have a board of advisors. Every time we set up an LLC for our clients, we make sure we implement a board of advisors. If you have a corporation, you set up a board of directors. So if you have 10 LLCs, you have 10 boards. Now you can have one board meeting and have 10 sheets of paper out there and you have one big board meeting. You cover all of them at once. This is sweet, right. Then we go next level. Bam, I was playing with this on the plane last night. I was kind of tidying it up a little. So this is kind of a master trifecta. When you work with one of my tax lawyers, we'd build a trifecta and then hand it off to your tax person, your insurance person. And look at this, it's super fun.

Speaker 2:

You might have a W-2. You may say, oh my gosh, this is crazy. I swear. Half of you in the room already have this. We just got to diagram it. Look at this. Here's your W-2. You or your spouse, day job 401k. Are we doing matching out? What are our investments in that day job 401k? Because we want to get the match and get the hell out. Then you might have a side hustle Board of advisors for that LLC. What are we doing there to take write-offs as we do a sole proprietorship? Maybe we have an HRA for health expenses. Boom flows into our 1040.

Speaker 2:

Oh, you've got an S corporation. I've got a partnership. I have one S Corp in my life. Then I have my LLC. That's a law firm and an LLC that's another company or another company. I have a board of directors for my S Corporation. It could be an LLC taxed as an S Corp. Then it'd be a board of advisors.

Speaker 2:

I take a W-2. I do my K-1. I have a family management company. I pay kids under age 18 out of this. I may have an HRA through my spouse Now my kids are older than 18 now. So I still have this company, kohler Family Management. It's at Wells Fargo but I don't pay the kids out of here. I might use it for healthcare strategies.

Speaker 2:

I have a health savings account. Patty and I just pooled our HSAs. We're buying another 20 cows inside of our HSA. We have a cattle operation and my health savings account, as well as a long-term rental in Chicago, so I'm self-directing my HSA. I could have a solo 401k or a safe harbor. I have a safe harbor 401k because I have other employees. Patty has a solo 401k. We use our 401k to self-direct and invest in all assets or whatever the hell we want. We have Roth IRAs for all of the kids and me and Patty. We do that every year, no matter what your income level is or your age. I want to do a Roth IRA every year. So that's our tax for your pre-tax section. See, many of you already have this but do we have it written down?

Speaker 2:

Do we have a vision of it? Because if you can see it, you can believe it and if you believe it you'll do it. That's the power of this. It's not rocket science, it's just getting it on freaking paper. Then you might have your after-tax investments. This is real estate. I own three different buildings that I self-rental to my operations. That's a dash four election. I don't have to be a real estate professional. We can talk about that if you want. I have two short Patty and I have three short-term rentals. Each one of them we put on the tool belt and worked on them. You can go to my social media and look at me drywalling and fixing this and fixing that painting and putting up a deck, and I walling and fixing this and fixing that painting and putting up a deck and blah. I love that. That's my happy place. I have a ranch operation. You can have a COPE, a charging order protection entity, out of Wyoming or Ohio. There's six or seven different states I like for that, not Nevada or not Delaware. Life insurance, investments, boats, rvs Patty and I are in the market for a suite RV. I think we're going to go fifth wheel on this one Boat home, domestic asset protection trust, charitable trust, you might have carry forward losses, short-term or long-term rentals, got it, got it and it all flows into the trust.

Speaker 2:

Got to keep it updated. That's it Isn't this fun. And if you meet with your tax lawyer once a year, you're like, okay, I get it and you share it with your accountant and you have a strategy session. Anyway, I just want to say thank you. I love being here with you. I hope this was helpful and you guys control your own destiny. You're the captain of your ship. Have your board meetings, have your first quarterly board meeting this year, and it'll really bless your life. It's a lot of fun.

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