Main Street Business

#577 Which LLC is Right for Your Business

• Mark J Kohler and Mat Sorensen

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In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen take a deep dive into the six LLC structures every entrepreneur, investor, and licensed professional should understand. Whether you're starting a business, protecting rental properties, or building wealth with a high-net-worth strategy, this episode breaks down how to choose and use the right LLC to match your goals.

Here are some of the highlights:

  • Mark and Mat discuss the six types of LLCs, starting with the most common type for rental properties.
  • Mat explains the benefits of a single-member LLC for asset protection and the flow-through of taxes on personal returns.
  •  The importance of setting up LLCs early for protection and the potential need for multiple LLCs for multiple properties.
  • Mat breaks down the tax savings from avoiding self-employment taxes and the importance of taking a reasonable salary.
  • Mark and Mat highlight the advanced planning and asset protection strategies associated with COPE LLCs.
  • Mark and Mat introduce the series LLC, which allows for separate liability treatment for multiple properties.
  • How separating different types of LLCs for asset protection and tax planning is crucial.
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:

I don't want to be running my little bakery engineering side hustle influencer business in the same LLC that owns my rental property. That's got 200 grand of equity. That's why there are six types of LLCs.

Speaker 3:

You might have a type one for your rental and this type two for your side hustle.

Speaker 2:

There are 21 million LLCs in existence in 2025. Babe, it is now time to convert your LLC to an S-corp.

Speaker 3:

Those millions of people that we just reported numbers on doing an S-corp or an LLC tax as an S-corp. The one reason they're doing it is because of this strategy. Numbers on doing an S-corp or an LLC tax as an.

Speaker 2:

S-corp. The one reason they're doing it is because of this strategy. Welcome everybody to another episode of the Main Street Business Podcast, excited to be here with you. My name's Mark Kohler. I'm here with my partner, matt Sorenson, the man I love and look up to. This is such a great topic. You've been shooting some videos on LLCs. You kind of got my juices flowing.

Speaker 3:

Oh yeah, you know I've been all over the LLC topic like white on rice.

Speaker 3:

So, I did like my masterclass. So, mark's like, let's talk about the six types of LLCs. I'm like, bring me up to speed on six. I got to know what he's talking about here and the nice thing is I did know what he was talking about. Oh, of course you did, yeah, but I think it's really important because everybody LLCs, yeah, but like, how do you structure it for you? What type of LLC works for you? We're not just talking about what state you're going to set it up in that's another consideration but like, how am I structuring this LLC from a tax and asset protection? And it comes down to six different types.

Speaker 2:

Yeah, and that's the good thing and the bad thing. The good thing is, llcs are flexible. The bad thing is, so many people are like, oh, I'll just set up an LLC, I'm done. No, you may have the wrong type of LLC for what you're trying to do. So, without any further ado, let's get into it A couple little facts. There are 21 million LLCs in existence approximately in 2025. This is over the stats the last three years and average growth rates. So we're around 21 million LLCs. Matt, why don't you tell them what the most common? We'll go with type number one. So this is type one, diabetes, type one LLC.

Speaker 3:

Which one is most common. Yeah, we're talking about the rental property that you might have and you have an LLC for that. This is typically single member and the nice thing about this is this is just flowing down on your personal return onto Schedule E. Now, this LLC we're not using for tax planning and no partners.

Speaker 3:

Yes, no partners in here. This is just you, or maybe your trust. But this is single member, meaning there's no separate tax return. It's flowing on your personal return. So why do I have this LLC? Why is this LLC so popular? Because of asset protection. Something happens on the rental property, the tenant slips and falls. They have to sue the LLC. They can only get what the LLC owns. All your other companies or all your personal assets. Those are entirely protected. You get the limited liability part of the limited liability company and so we're doing type one there for asset protection. But for all of you real estate investors out there, this is rule of thumb number one you need this LLC for asset protection, and we set up tens of thousands of these for clients over the years at our law firm, kqs Lawyers.

Speaker 2:

Yeah, and of those tens of thousands we set up, the current number is approximately 10 million. So almost the majority of current LLCs filed in the 50 states today, 10 million of them, are single member LLCs that own real estate. And clients will ask me sometimes like well, when do I set up an LLC for my rental? Do you have a rental Now? And do not worry. I want to say this right now Do not worry about the mortgage and the due on sale clause. That's the first point I want to make right now. Do not worry about the mortgage and the due on sale clause. That's the first point I want to make.

Speaker 2:

Banks understand that they're going to get transferred into LLCs and oftentimes the loan documents. There are provisions allowing for a transfer to an LLC of which the borrower owns 100% or to their revocable trust and, frankly, they've already sold your mortgage on the bond market five times over. They do not care and I beg of you, do not walk into the bank and go. Can I do this? Don't. They won't even allow you to go to the bathroom without getting three bank approvals. So please just transfer it to your LLC as soon as you close Some of you that have rental properties for years. It's time to clean them up. Let's get them protected or protecting you from the tenants in those LLCs. Another topic we may vet but get those LLCs set up right away is for protection and a husband and wife. My second point was husband and wife is considered in that bucket because it's going to be single member on that joint return.

Speaker 3:

Yeah. The other thing I'll say is what if I have multiple properties? Should I have multiple of these LLCs? Possibly the one tip we have there when we look at how many of those this type one LLC for rental real estate how many of those LLCs do I need? If I have, let's say, five properties, does that mean I need five LLCs? Not necessarily. If each one of those properties only has 10,000 of equity in it, because you mortgage it to the hilt and you strip out all the equity every second you get, we'll probably say let's just put all five properties in one LLC.

Speaker 3:

But here's the risk. Let's say, on the other hand, each one of those properties has 200,000 of equity, so you got a million of equity sitting in one LLC. If something goes wrong on property number one, that 200,000 of equity, in property number two, three, four and five, the other 800 grand of equity, it's all at risk Because, remember, even though they can't sue you personally or get to another LLC, they can get at the equity in that LLC. So you can break them up and put separate properties in separate LLCs. Our rule of thumb is around 200,000 of equity. Let's look at separating those properties out and keeping them in separate LLCs because of the asset protection and the concentration risk of having all your eggs in one basket.

Speaker 2:

Great points, and we'll probably talk about this LLC the most. So just a couple more points. Some of these other six types don't need as much airtime. But now, where you set up this LLC is a secondary issue too. You're going to typically set up that LLC in the state where that rental property is not where you live. We want to get the protection of the state in which that property resides the tenants are living and paying rent.

Speaker 2:

And the second point I want to make on this is a lot of people think well, I'm in California, it's $800 to have an LLC, so I'm just going to get insurance. If I get an umbrella policy, I'm good, I don't need to do an LLC. Well, have you made a claim for insurance lately? Oh, they rushed to your side, they paid exactly what the claim was for and they didn't give you any problems. Do you know why umbrella insurance is so cheap? It's because they rarely pay out. It's after every other policy is exhausted. Even if they don't pay, that doesn't mean the umbrella is going to pay. So be careful relying on insurance. Be careful where you set up the LLC. But at the end of the day, these are wonderful structures for protection. They're simple and affordable, and every rental property owner should have one.

Speaker 3:

Yeah, and every state you might have heard use Wyoming, use Delaware, use Nevada. No, we're setting up an LLC in the state where the property is located. Why? Because if you get sued, you're going to get sued in that state and that state court is going to look at the LLC you have in that state. And if you have a Wyoming LLC for your rental property in Illinois, a judge in Illinois is going to be like what the hell did you do, you idiot? We're not even going to recognize that thing unless you registered it foreign. And if you're going to do that, we might as well just set it up there in the first place. So a lot to be said there. And of course, our team, our lawyers, can help you unpack this, whether this is looking at asset protection and tax planning, doing it all at once with our trifecta, but number one rental real estate, single member you, your spouse, your trust, going on schedule E on your personal return. It's a popular one.

Speaker 2:

Yeah, it is, and I know it can already start sounding a little confusing and you're like I just went on LegalZoom or some online site and set up an entity in Wyoming because that's what I was told to do. It may be time at the end of this podcast to do a reevaluation and again we have a law firm that does this every day and we keep the cost down and make it simple. But okay, let's go to the number two type of LLC and that is for the small business owner. That is around 5 million of the 21 million LLCs out there. It's just that new side hustle side gig.

Speaker 2:

Small business, no partners husband, wife is fine, but no outside partners, no mom with daughter or dad with son. In business it's either a husband and wife or an individual and it's that quintessential main street business in America. They set up an LLC sometimes because they were told to, but also because I want protection from any accident with the landscaping I'm doing or someone slipping and falling in front of my little bakery or whatever the case may be. So, generally, a protection issue again.

Speaker 3:

Yeah, generally a protection issue, but also when you're starting up a new business, this could be a side hustle, this could be a main hustle and we're gonna get to level three here. That's another twist on this, but just stick with this here. Sole proprietorship this is going on schedule C you may also think of. Well, I want that entity because I want to establish my name. I'm going to have employees, I'm going to have vendors and I'm going to have contracts. I don't want those all in my personal name.

Speaker 3:

What employee wants to go work for Matt Sorensen? Right? They want to make work for Matt Sorensen Enterprises LLC, right? They're like what is this Vandelay Industries? Exactly, it's not just like art Vandal. Who's going to work for art van, you know?

Speaker 3:

But I'm just saying you have to show some legitimacy. Like, is this a real company? And I'm just telling you contractors, future employees, customers are going to be like you don't have an entity, Hmm, maybe I'm not going to hire you. Are you going to be around next month? Are you just dipping your toe in the water? So, there is some little bit of legitimacy, maybe even getting some business credit. There's some other reasons to it, First of which would be the asset protection similar to the rental. And again, this is now your customers, the prospective customers, vendors, and the branding and just a little legitimacy about it is why a lot of people are setting up those LLCs, because every big business, everything big company you might use from all the products you're using today, was once a small business. Okay, let's not make state that and so, but you need to kind of get that structure in place from day one.

Speaker 2:

Yeah, and a couple of other points. Here is remember there is no tax savings with this type of LLC. And some people go oh, I set up an LLC, I'm saving taxes, I can now write off my car or my home office. No, you could write that off before. An LLC does not give you more write-offs, so be careful with that. And the other thing is that I'd like about this LLC is it's really it's the S-corp insurance which brings us to the third type of LLC. But just to button it up, that this type of LLC is great for a small business owner. We love it. And you're not going to put your rentals in this same LLC. I don't want to be running my little bakery engineering side hustle influencer business in the same LLC that owns my rental property. That's got 200 grand of equity Great plan. So there are two different LLCs doing two different things. That's why there are six types of LLCs. You're going to use them for different things, for good reason.

Speaker 3:

And many of you will have a few of these different types of LLCs. You're not just going to have one. You might have a type one for your rental and this type two for your side hustle, and maybe you got a day job okay, or you're working in corporate America or whatever but you've got these two different LLCs doing two different things. Okay, we're keeping them separate for asset protection. I don't want this operating business where I have customers having an issue that I've got all my assets in it with my rental property, with equity right, and this is our trifecta. Well, we've got stuff split up and separated as we're doing planning with clients across the country. So, but, mark, what happens, though, when I'm making money in this thing? This is more than just a side hustle. I'm after. I'm writing everything off under the sun. I'm making more than 50 K a year. Am I stealing in type two?

Speaker 2:

Yeah, yeah.

Speaker 2:

We want to get you out of out of type two as soon as possible and let me give you an example. We can all get our head around. Think of a realtor. My daughter Sydney, she's a realtor down in Orange County, california. Love her to death. And she I remember her calling me going dad. I I've been to all of your classes as a kid. She would sell books outside the conferences at the tables, and she goes don't I need an LLC? And I'm like, yeah, and then she'd say, why? Again I'm like, were you not listening all those years? I was, you know she was. Oh my gosh. We have so much fun together, all of our kids, both my and Matt's kids. We just love to involve them in business and teach them about the American dream. But think of a realtor.

Speaker 2:

So a realtor starts out as that small business owner, separate from their rental, and they're a little LLC not saving taxes. They're still getting all the write-offs they would have got anyway. Now they start making 40, 50,000, 60,000, $70,000 a year and they're starting to see some success. And that's when Cindy, my daughter, I said babe, it is now time to convert your LLC to an S-corp, an S-corporation LLC. And for those of you that have an LLC taxed as an S-corp, you have to remember that's how I'm going to present myself to the IRS and everyone around me. I have an S-corp, Even if the three letters at the end of your name are still LLC and you still have the same EIN. You have now morphed that LLC into an S-corp for tax savings.

Speaker 3:

Yeah, and so your name doesn't change. So you might start with the LLC, as Mark said, and you graduate into the LLC, taxes and S-Corp, or you might come right out of the gate. You might start a business and be like I've already know I'm going to make this amount of money. I'm a doctor, I'm a physician, whatever. Coming out of medical school, I know I'm going to make that. Okay, so I'm going to just go LLC, taxes and S-corp and we've talked about some professions here. By the way, this might be a PLLC, depending on your state, or an LLC. That just means professional LLC. But the difference here is you made the S selection because you're going to save on taxes when you have a business that creates ordinary income, where you're selling goods or services.

Speaker 3:

Remember, you're taxed in two different ways. You're taxed for income tax purposes based on your income tax bracket, but you also have to pay self-employment taxes. Okay, this is 15.3%. You know, if you've worked at a job, when you get a paycheck, you see your social security and Medicare deducted off your paycheck. That's what this is. By the way, the company that you work for also pays the equal amount off out of your paycheck. It's just not off of your withholding. It's what they got to put in, but when you're self-employed you got to pay both sides. That's 15.3%.

Speaker 3:

Now the strategy with the S-corporation, the LLC, where you get taxes in S-corporation is I get a save on self-employment tax and for someone making 100K a year net, you can be saving $8,000 a year, almost $9,000 a year. How you're structuring this on self-employment tax. So I do this for my own self. I have my own S corporation, I'm doing this, Mark has it and so and any of our clients the realtor, the doctor, the dentist, the consultant you're making more than 50K a year. We want you in the LLC taxes and S corp. Now the LLC is for tax savings, but it's because we did the S-election to it.

Speaker 2:

Yeah, and there's data. Our data shows this is 2.8 million LLCs in America are taxed as an S-corp. There are approximately 6 million LLC I'm sorry, 6 million S corporations in the country, so just under half of them are an LLC taxed as an S corp. So it's important to note you could be an Inc or a company or a limited or some of these unique acronyms behind your company name that allow you to be an S corp, or you can be an LLC taxed as an S corp. It's an important transition and I'm just going to say this right now If any of you listening to this podcast, watching this video, are making more than $50,000 a year net, you're taken home after paying the bills, expenses, writing off the auto, the dining, the blah, blah, blah, and you're making more than 5,000 a month in profit.

Speaker 2:

Making more than 5,000 a month in profit, celebrate, call your mom and then call us, Because now you are a candidate for the S-Corporation and I am sick and tired of accountants around the country. They're saying well, you don't make enough to justify a reasonable, competent S-Corp. You need to be making a hundred grand or 200 grand or 300 grand. Stop, If any of you have been told that you're getting bad advice and any of you accountants out there that are freaking out and calling me reckless or wrong, I have read every reasonable comp case in the country for the last 20 years. I teach continuing education on reasonable comp. I've written books on this and articles on this and videos and trainings on this around the country. Articles on this and videos and trainings on this around the country. Please trust me and realize in 25 years, I have never had a client get audited for not taking reasonable comp. We can be very careful yet aggressive with taking less compensation and making the S-corp work for our clients.

Speaker 2:

Holy crap, Joe Biden got a book deal in 2016, the year he ran for president, and he did an S-Corporation, took 700 grand in salary on a $14 million book deal. He saved almost $600,000 in FICA and it made page 32 of the Wall Street Journal. Donald Trump claimed real estate professional status, paid six hundred dollars and wrote off a ton of depreciation and it was front page. You're a crook? Well, holy crap, they're both good tax strategies and millions of Americans use both tax strategies.

Speaker 2:

And not getting too political here, I'm just saying don't stress about this, accountants. Reasonable comp is doable. It's okay. The S-Corporation is live and well, and any of you again listening today. I know I'm getting fired up about this, Matt, yeah, yeah, but I want people to know you are leaving money on the table. If your accountant is afraid of their own shadow, so get that LLC taxed as an S-Corp. Call our law firm tomorrow. The cost of us setting up an entity for you should be a tenth of the tax savings we create on that first phone call. We are going to be here with a relationship with you for many years to come.

Speaker 3:

Yeah, and I think even Jill Biden had an S-Corporation for her speaking fees and her book, you know, and was doing the same strategy, and also the other millions of people that have an S-Corporation. The whole point of it is to do this one strategy. Those millions of people that we just reported numbers on doing an S-corp or an LLC tax as an S-corp, the one reason they're doing it is because of this strategy. So you've got to implement this strategy. You've got to do this strategy and believe in it. There's a whole national association for S-corporations in Washington that promotes and tries to keep this strategy intact.

Speaker 3:

Now you do need to take a reasonable salary, like Mark said and that's part of the strategy, by the way, which is the dividend and profit you take out from the S-corp or LLC tax. As an S-corp, you don't have to pay self-employment tax on. That's where the tax savings are. But you need to take a reasonable salary too if you're running and working in the business as well, and so that's how the strategy gets down. You strategy gets down. You need a little bit of tax planning work. With a good tax advisor or lawyers in our office, we can just make sure that's set up and structured. It is not rocket science. You just get it done, you get it set up, you get on a routine, you do it every year and then you join the tax savings. All right?

Speaker 2:

Well, we are now through three types of LLCs. Number one, the rental property LLC. Number two, the small business LLC sole proprietorship. Number two the small business LLC sole proprietorship. Number three, the LLC that we now tax as an S corporation. Those are actually three different tax returns Schedule E, schedule C, as in Charlie, and an 1120S. So you can see that's why there's so many variations here. Now number four, the multi-member LLC. And you know what? Damn it, matt. I've already added a number seven and a number eight now, so we started out going. There's six. I'm already at number eight, because there's a special purpose LLC we're going to talk about here in a minute. That's true, that's true, that's true. Oh, my gosh, I can't believe we forgot. How could we forget about that? I know, okay.

Speaker 2:

So but, multi-member LLC is 3.2 million.

Speaker 3:

Yeah, mark and I are like those jazz musicians in the club that. Just they're like when are these guys going to stop? We're just going to keep riffing on this forever, oh my gosh, all right, okay, the partnership LLC. Okay, this could be a lot of different variations, but the point of it is you have a partner in the business. Mark and I have partnership LLCs and a couple of different variations. I'll just give you an example. We own real estate, rental commercial real estate that I own in my trust, mark owns in his trust. And then that LLC is a partnership. It files a 1065 partnership return, but it owns commercial rental real estate. We get rental income in it. We've owned other ones that we've sold and had gain in it when we sold the property. So there's a couple of variations of even type four here.

Speaker 3:

Let's go over to the second type of variation. That's also a partnership, and this I'm just giving Mark and I as the example here. Just you know, cause we're sitting here and I don't want to air our other clients structures without their permission, of course, you know, and you could have three or four or five or 10 partners here. I'm just given our scenario. The other is what about an operating business. I may have an LLC as the operating business. It's the partnership that does business KKOS lawyers, for example, main Street Business Services LLC. That's our corporate compliance entity and, of course, our law firm.

Speaker 3:

Those are entities that are LLCs. But then I own mine, my 50% with my S corporation. Mark owns his 50% with his S corporation because those are operating businesses. We're making enough money in those. You pay self-employment tax over there, so we want those to run through our S corporations. The partnership that we own real estate with it's just Mark and I personally, because on your rental real estate you don't pay self-employment tax. On it I don't need the Semployment tax on it, I don't need the S-corp strategy underneath it. So there can be lots of different ways you do the partnership but that company itself receives the income, pays the expenses and then pays it down to the partners. Or that's you individually on real estate, or it could be down to the rest of corporations If you have a bigger business of partners that are involved, selling goods or services.

Speaker 2:

I like the way you summarized that. I'll say it another way, because some of you are like, oh my gosh, my brain's turning to Sally, so we don't want that. This fourth type is think of it called a partnership LLC, multi-member LLC. Some husbands and wives will set up a two-member LLC. So, and some husbands and wives will set up a two-member LLC. There could be some strategic reasons for that Second marriages, maybe some asset protection. So that's fine. And statistics don't tell us exactly how these three and a half million approximate multi-member LLCs are structured. As owners, they could be two S corporations like Matt and I. They could be two trusts buying rental property. It could be a husband and wife in a bakery or a landscaping business again. So there's a lot of variety. But the interesting point here is it's going to be a different tax return again because we have two members or more, and so that is a certain type of LLC that's very unique. And this is again the beauty of the LLC world. We have a lot of flexibility.

Speaker 2:

When we're planning with you, we like to do what we call a trifecta. I've just got to introduce that when you meet with one of our lawyers, we're going to build a picture of how everything is integrated. If you want to have some fun, I am not going to get on Google, get on ChatGBT, get on Grok and say what do Mark Kohler and Matt Sorenson say about the trifecta? It'll take you two seconds and you're going to see diagrams and videos and articles about bringing your tax and legal picture together. And then, when you call the law firm, we're going to tailor it to you and it is life-changing. It will make you so much money, far, far, far, far more than you ever would pay us to support you, so love it. Ah, matt, now where do we go next? I'm kind of like let's do the series, if that's okay.

Speaker 2:

Okay, I'll say it this way. The next two Well, no, no, you're right. Go go series LLC. This could be single member or multi-member.

Speaker 3:

Now we're getting into another variation.

Speaker 3:

Yes, yes. So, as you see, there's complexity to this and that's why you need a good team helping you out. But, all right, Series LLC this is an LLC that about 20 different states have. Not every state has a series LLC. Texas has it, utah has it, nevada, illinois, virginia those are some of the bigger states we're setting them up in regularly. But in the series LLC, what that is is you file one LLC with the state and it's your parent master LLC, and then that LLC can adopt sub-series without having to file with the state and those sub-series get separate liability treatment.

Speaker 3:

Why would you use a series LLC? Well, let's go back to that real estate investor example we gave earlier the five rental properties all in one LLC. Well, what if I want separate liability treatment on all five rental properties? That'd mean I have to set up five LLCs. Not if those properties are in a state that allows for series LLCs, because what you do there is we set up the series LLC, the master, with the state and we'll put property one in sub-series one, property two in sub-series two, property three in sub-series three.

Speaker 3:

Each of those gets separate liability treatment. There's not a separate filing to the state or a whole separate setup. It's one LLC that can adopt sub-series that gets separate liability treatment. So we love the Series LLC for real estate investors in those states that have multiple properties. Now, again, that could be just you owning it 100% and it's single member going on to Schedule E. This could be a partnership structure as well, you with other partners where there is a 1065. So there's a couple of variations of that, but that is the series LLC. It's kind of an enhanced asset protection strategy to get separate liability treatment in your separate properties. That, my friends, is the series LLC.

Speaker 2:

Now one last factoid on this. In my handy dandy Mark J Kohler annual tax planning calendar for business owners, which you can get on my website, markjkohlercom, we have 21 series LLCs across America now, 21 different states that provide this strategy, and you're going to set up that series LLC in the state where the properties are and where you have more than three to four properties. That's when you pull this trigger. So it could be a single member or a two member LLC, but it's going to have this special classification as a series LLC, which gave us number five. Series LLC, which gave us number five, now number six.

Speaker 2:

In this vein of asset protection and I like the way you said this. Before we started the podcast, matt said yeah, the Series LLC is about how many properties you have. The COPE LLC is about how much equity you have. It's kind of like a risk equity issue. You can only have a couple of properties and need a COPE LLC or other assets too. Yeah, that's true too. So the COPE is called a charging order protection entity. Believe it or not, this is the first year ever there's 21 COPE states. This year, legislatures say that three times around the country are passing laws for the COPE and the series more and more to help Americans build wealth and protect assets. So the COPE is a protection type LLC that you would be worried more about. Asset value more than quantity. Would you go with that?

Speaker 3:

Yeah, so this is where we typically use Wyoming. Mark said there's other states, but most of those states give cope protection, for if you have more than one partner, wyoming is, and that some of them are silent. They don't say one or the other. Wyoming says if there's only one owner of the LLC, we still give you this cope protection. Well, what the hell is cope protection? Okay, what we're doing here is we're trying to protect your assets from your personal liabilities.

Speaker 3:

Most LLCs and most structures we've talked about so far, we're trying to protect your business operations from your personal assets. So now we're doing the opposite. How do I protect my assets from my personal actions? For example, you get in an accident and you get for drunk driving. Insurance doesn't cover it and you got a million dollar lawsuit against you. You're texting and driving, whatever, and they're like well, we want to collect against your assets. They can go right into your LLCs that you own a hundred percent and force you to sell assets. Let's say you got a property in there with a million dollars of equity. They can force the sale of it and you're thinking but why do I got LLC protection? No, no, the regular LLC asset protection is something that happens in the LLC and they're trying to get down to you personally not something that happened to you personally and now they're trying to get into the LLC.

Speaker 3:

However, that is where cope protection comes in and where we may use a Wyoming LLC, because we know we get the COPE protection there. Their statute is very clear no matter how many partners single member, multi-member you can get COPE. Now there's other states, like Mark said, if you're doing partnership or there's some nuances to this. I was trying to summarize here you get a whole series on this COPE thing, but what I would say here is if you're like this is getting confusing I'm barely learning about LLCs, don't worry about this. This is advanced planning, advanced strategy. If you have less than a million dollars of net worth, don't even worry about this. However, if you're building a lot of assets, you got a million dollars more of net worth and you got some privacy concerns. This COPE entity can be a great compliment or thing to add in, and so we do that for certain clients that have those additional concerns a lot of assets, maybe even some privacy because there's some other things we can do with the COPE entity for privacy.

Speaker 2:

I love it. I'm not going to add to anything Matt said except tell you we have resources, we've got podcasts on the COPE, we have articles on the COPE. I have my book, the Tax and Legal playbook, with a chapter on this, and I would recommend any of you with more than a million dollars of net worth in your life this is a conversation point you should be bringing up with your lawyer, and some of you are like what lawyer do I call? I know divorce lawyers. I know criminal lawyers. I know, hopefully you don't know any criminal lawyers the ambulance chasing lawyers or whatever you call them, and but where do I find a lawyer that understands taxes and asset protection? It's kkoslawyerscom and give us a call and we'll do a consult and once a year you're doing that checkup to try to bring it all together.

Speaker 2:

So, okay, so we have now talked about six LLCs and we've got a couple more to finish. Yeah, some bonus LLCs. So the six were rental property LLC. Small business LLC, llc. Taxes, s-corp LLC, taxes S-corp. The multi-member LLC and all the variations go with that. The series LLC for those of you that have lots of little properties in a particular state that would allow for it. The COPE LLC if you need asset protection for one reason or another. And then now we get to bring up the Special Purpose LLC. This is a special LLC that is allowed to be owned by an IRA. Maybe, please pray, tell you know a little something about this.

Speaker 3:

This, yeah, I've written a book on this, the self-directed IRA handbook. It's got a chapter on the IRA LLC. But essentially what this is is you can have your self-directed IRA own an LLC. This could be 100% or you could partner in too, but let's just go with the easiest. Your IRA owns an LLC a hundred percent. You can be manager of the LLC. The LLC has a business checking account. That LLC can go do real estate deals, invest in private companies. It could have a crypto wallet okay All these other investments that we talk about on our sister podcast, the Directed IRA podcast.

Speaker 3:

You can do with an IRA LLC. Okay. Now we've got other videos on this. I've, like I said, a chapter in my book. We've got a podcast the Directed RA podcast on the IRLC structure multiple ones on it, but this isn't an entity type. We set up quite a bit for our self-directed investor customers. Not every self-directed investor needs the IRLC, but certain ones may be doing real estate deals or buying properties at auction where you need the money quickly. Some people call this the checkbook control IRA, but it is an LLC structure. It's an IRA LLC. That is the seventh, yeah, and that's the bonus.

Speaker 2:

Yeah, well, and I made the list. I know I can't believe it. Yeah, it's crazy. Now number eight this is called the PLLC, or a professional limited liability company. It is related to what you might've heard of called the limited liability partnerships or LLP, or limited liability liability partnerships. Oh my gosh. But the PLLC is a special type of LLC that have been passed in almost all 50 states as part of the uniform partnership act or the uniform limited Partnership Act, and this PLLC is built for professionals. And this type of LLC would be.

Speaker 2:

If Matt and I are going to be partners in a law firm, we went with an LLP, which is very similar to a PLLC. But with a PLLC, if you're a dentist, a doctor, a lawyer, and all the states have lists of the professional designations that are allowed to do this, we can set up an LLC and go out and do business together as co-managers, co-owners, and we're not liable for each other's professional liability, where he can give bad advice or good advice, I can give bad advice or good advice and we're not liable to one another. But we can still form a professional partnership. And that's a unique thing when you're a professional, because when you start doing surgery or doing tax returns or giving legal advice, you kind of worry what your partner might be doing down the hall, and so these are special types of entities for that.

Speaker 3:

Yeah, where we see these, the most popular is going to be the doctor, the dentist, the lawyer, the architect. This could be in some states it could be the realtor, but other professions you might be. Well, I'm an electrical contractor, I'm a plumber, don't worry about it. Okay, you can just do a regular LLC.

Speaker 3:

So there are certain professions that have gotten pigeonholed in the states to say you need to do this so we can help you sort that out. You've got to, of course, coordinate with your licensing board when you're doing that, but if you're going to be in a profession for a long time, that's the entity setup you're going to need to do. You're going to look at all the other players in your industry, in your profession, and what are they doing in your state, and the big players usually are doing it right. So you might see PLLC after them, or PC or medical corporation or you know these. California has some weird ones, of course, and twists, as they always do. Yeah, but just worry about this If you're a professional with a certain licensed profession, typically more white collar, but they make you do this structure.

Speaker 2:

It's funny you bring up California because that's where a lot of our staff, when they come on board with our law firm, have to learn all 50 states because it gets tricky when they come on board with our law firm, have to learn all 50 states because it gets tricky. But the licensed marriage family therapist is a unique one where these professional licensing boards require a certain type of entity because they don't want you partnering with a non-licensed individual. So California is one where if you are a licensed therapist, you've got to set up a PLLC. They're going to require that. They won't let you do an LLC because you've got to go get your license registered with the Doppel or Department of Professional Licensing and they want to see a copy of your entity. So it can get tricky when you're out there. So this is another entity where please do not hack this out online in the middle of the night in your underwear after a bowl of cereal. Please call the law firm, make a legitimate appointment and we get you.

Speaker 3:

We got you. Yeah, this is what we do. Focus on your business and how you make more money doing what you do. That's probably a better use of your time. Outsource the things that you can, and this is where we'd love to be a resource on the tax legal planning. We want to keep more money in your pocket, make sure your assets are protected, and the critical component to this is getting your LLCs and your entity structuring right. Hopefully, you got some good ideas to make sure you're optimizing and your situation. We're here for you if you need us Our law firm, kqs Lawyers and you don't have to use us. You can choose the second best option.

Speaker 2:

Yeah, and remember that maybe Ricky Bobby says there's either first or the losers out there, so you can be a winner.

Speaker 3:

Yeah, you can choose Saul Goodman if you want. You know whoever you want to use.

Speaker 2:

That's right. Well, thanks everybody for listening and participating in this incredible journey called the American Dream. We're here for you. We love Main Street America. We are so grateful to be a part of your lives and hopefully this has opened your eyes to a lot of opportunity. And planning the more organized you are, the and planning the more organized you are, the more successful you are. I know that to be true. We all know it in our core and work on your business some days, not in it. This is an opportunity for you to level up and hopefully we've been a part of that process. See you next time.

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Mark J. Kohler

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