What's up, guys.
Is there a Golden State to form your next limited liability company in?
In this video, I'm going to give you my top five states to form an LLC
and what you need to look out
for when it comes to setting up your next limited liability company.
All right. Let's get started.
Okay.
So when it comes to forming LLCs, I know there's a lot of opinions out there,
but what I like to look at are several different factors.
More importantly, I want to know about the asset protection
feature of that limited liability company, because I want to make sure
that if my business gets sued, they're not going to be able
to come after and reverse.
They'll pierce the company
and sue me personally as well as if I get sued individually.
They can't take my company from me because it takes a lot of effort
to go out there and build up an asset base or generate a business.
And the last thing you want is one mistake ripping that away.
At the same time, I don't want to have an LLC set up where the government,
the State government that is, is coming in and taking all my profits.
So I need to be aware of both the asset protection laws
and the tax laws of these various states when it comes to setting up an LLC.
So I can make sure I'm creating an LLC that works for me and not against me.
Well, here's what I've done.
I've put together a chart of all 50 states, and I'm going to show you
what that chart looks like.
And at the end of the video, I'll show you how you can get this chart.
You can download
it and has a ton of information that you can use in forming your next
limited liability company.
All right. Let's go over and take a look at this.
So here's what I did.
I went through and I put down all the states.
And as you can see here, I've kind of color coded these things out.
I've got blue, green, red in white.
And the way I look at it when I'm forming a limited liability company
or picking the right state
is, first off, as I stated, I want to have asset protection.
And so when you see a green line here, a green state, really what
that's referring to is that state offers the best asset protection
and it probably offers you the best when it comes to taxes that that is
there is no taxes, state
taxes in that particular state for that limited liability company.
Now, if it's red, it means that it does not offer asset protection.
I call those bad states, blue states.
They they offer some asset protection, but not all the way.
And again, I'm going to break this down.
And then the white states, it's a little unclear where you're going to be there.
Maybe it's good, maybe it's bad.
It depends on the court.
Okay. So what are we going out here?
Well, first, let's talk about asset protection.
So when we look at asset protection,
what we're looking for when we're setting up an LLC is we want to make sure
that the state law offers charging order protections.
And so if we're thinking of the colors here, the green, the blue and the white
states, as you see here on the chart, they all offer charging order protections.
Now, what does that mean?
It means that their state statute reads that
a creditor of a member that is me, a member of my own LLC,
if I'm involved in a lawsuit and someone gets a judgment against me
that creditors only remedy is to obtain a charging order.
And so a charging order
means that they sue me and they have this judgment against me
and they place it against my LLC interest.
Then if I choose to take out a distribution paid out to myself,
I have to pay it to my creditor until that judgment is satisfied.
Now, some states go further in the state.
Well, if there's a judgment against a member
and that does not pay me mean the creditors not getting paid,
then they can foreclose on that interest and take the interest or appoint
a receiver to control the distributions, hence the word bad.
So we're looking at states to form our LLC.
Then we want to find those states where the charging order
protections exist in the state statute.
That's key,
but it's even better if we can find that the charging order
is the exclusive remedy, meaning that the court cannot offer
any other remedy to a creditor of a member.
Now that wording is important
because in these white states
the statutes will read that the charge in order is the remedy
for a creditor of a member, but it doesn't use the word exclusive.
Now, the reason why that's a problem for you
is that there have been some court decisions that have held
if the does not have the word exclusive in there,
then the court can award foreclosures or other remedies that they're not bound
just by the statute itself to state that the creditor doesn't get paid,
the creditor can have other options.
So I look for the word exclusive.
You want that in the statute.
Now, if we want to make sure that's even more protected,
then we also want to look for those states where it has charge order language,
it has exclusive language, and it provides
for single member LLC protections.
Now this is really important because I get this question all the time.
I talked to so-and-so or I watch this video and they say
Single member LLC offers zero asset protection.
And I always tell them, you don't know what you're
they don't know what they're talking about because many or a few state
statutes specifically protect single member LLC.
So if I have a single member LLC where I'm the only owner,
it has charging order protections and it has the exclusive remedy in there.
How very
no one that's going to take my LLC for me because the state law doesn't allow it.
Those get my green badge.
So that's how I've broken this out.
So as you can see here, when you go through this,
I've listed out all the statutes.
So these are all clickable links.
I'm going to show you how to get this spreadsheet at the very end of the video.
So what we have here is you'll see is Alaska.
That's one of my top five states when it comes to setting up LLC is
because it states that the charging order is the exclusive remedy.
There are no other remedies available to a creditor
and it has protection for single member limited liability companies.
It does not allow foreclosure, which means that you can take
someone's interest from them
and it does not have a tax on the limited liability company.
So we've got Alaska, we also have Delaware,
although Delaware does have a franchise tax there.
It's de minimis.
If you're not actually conducting business in Delaware.
Oh, we can scroll down here.
The next one is, of course, going to be Nevada.
Nevada. Nevada's the same way.
Single member LLC protection charging or the exclusive remedy.
It does have a commerce tax.
But again,
if you're not doing business there or you're under I think it was $1,000,000
or something, it's not a bad tax, so it's not enough to take it off my list.
And then Texas, of course, is going to be a great one as well.
Franchise tax isn't really a problem.
It's been a mess for LLC.
But here's the thing.
It does Texas now offer single member protections?
This just recently changed.
It was signed into law this year.
So in Texas now they recognize via statute that single member losses are protected.
That now made my list. It never used to be on. There.
It is there.
And then, of course, you hear me always talking about Wyoming
charging or an exclusive.
It has a single member language, of course, and it has no taxes.
So my top five or what I just put out here, we have Wyoming,
we have Texas, we have Nevada, we have Delaware and we have Alaska.
And if I put them together the way I would do it is I'd go Wyoming,
Delaware, Nevada,
Alaska in Texas or Texas and Alaska basically be the same.
Now, that being said, what do I mean
then by the blues in the whites, if we're looking at that?
So if you when you get this chart, you download it, these other states
that are in blue, they state the charging order is the exclusive remedy.
So that's really good. They have that language in there.
That is the exclusive remedy.
So if you again, if you get sued, a creditor can't take your LLC from you.
But the statute does not protect single member LLC.
It means it does not specifically identify that.
So that's why it's not at a green level.
Now, the white ones that you see up on here, say Georgia or Arkansas,
those guys, I mean, they recognize that the charging order
is a remedy or for a creditor, but they don't go further
and they leave it open by not including the word exclusive.
So they are kind of, you know, hesitant to make that recommendation.
The other problem you're going to have is taxes, of course, over here.
So these are all clickable links.
You can click the there to see the tax rates on these
on limited liability companies in those various states.
So so that's another problem that they have
and that's why
they don't make typically the green list if they have a high tax
on their companies.
Now, the red states, those states, I mean, that's just stay away from them.
Do not be a member in a red state limited liability company.
So let's assume that I was looking to set up an LLC in Colorado.
Okay. Because I own Colorado real estate.
Yeah, that's what you can do.
Set up your Colorado limited liability company, but don't own it.
Take your Colorado LLC and have it owned by a Green State LLC.
Now some of these Green State LLC is the other reason why I like them
is because certain ones will offer anonymity.
So the Delaware LLC
or the Wyoming Limited Liability Companies give you anonymity.
So when you set up those companies, you don't have to disclose anything
through the state.
So that makes it even provides you even more protection as well.
So if I setting something up in Colorado, I know it doesn't have charge charging
order protections as the exclusive remedy.
So I'm going to have my Colorado LLC owned
by my Wyoming Limited Liability Company.
Therefore, I'm picking up the anonymity.
I'm picking up the charging order protections of Wyoming,
because if somebody sues me, they can only get what I own.
And I do not own that. Colorado LLC.
So that's taking away from my personal creditors and have to pay
any taxes on that income that flow through that Wyoming Limited Liability Company.
So when you're trying to determine where you should set up your limited liability
company, you should still consult with a professional about this.
But keep in mind, asset protection is really important.
Do not only LLC that are in the red columns
because if you're involved in a lawsuit, you're most likely going to use
that lose that limited liability company to a creditor.
All right, guys.
Hey, I told you, you can get this list.
Check out the link above.
Click on that card.
It'll take you where you can download this, this, this sheet right here.
You can use it in planning your own limited liability.
Companies use this chart, walk you through it,
figure out what's most important to you when you're creating your next LLC.
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Take care.