We're going to talk about the
how we're setting up LLCs and what you should be focused on
when it comes to structuring, which you have covered in a lot of the videos.
But I think you just can't hear it enough because the questions I'm getting.
So I'm going to go to a whiteboard here.
Check this out.
Ipad. There we go.
Excellent. You know how I like to draw.
So here's the thing.
When it comes to setting up your real estate
for for your structuring.
What we always want to do is determine where is that
property located, because that's really going to drive the decision
as to what type of structure we're going to be creating
for this piece of residential real estate.
And what I mean by that is that, you know, a lot of people
talk in terms of, hey, let's just set up a limited liability company.
Put that property into the LLC and we're good to go.
But, you know, depending
on where this property resides,
there might be a better structure for that deal that, you know,
if you want to avoid any transfer taxes, of course, we have to be focused on that.
You want to make sure that you're putting together a structure
that's optimized for what you're doing, so you're not having to create
a ton of entities possibly if the state permits for a certain type of structure.
So there's many layers that we're going to focus on when we're determining
how we want to own our rental real estate inside of business entities.
And of course, you have to know
whether or not you're using financing and how that that plays into this as well.
So couple of things to consider here.
When we're thinking about structuring, where is a property located,
here are the states where we're typically not going to use
a traditional limited liability company structure.
So I just want you to know that Florida is one.
So if you want real estate in Florida and it's encumbered by a mortgage,
we're not necessarily going to be using an LLC for that property
unless you can buy in the name of the in the LLC.
But if you have, buy it in your own name because you're using financing,
you currently have it and has a mortgage on it.
We're not going to be
using an LLC in Florida.
Another issue that we run into when it comes
to structuring is going to be Pennsylvania.
So if you're thinking about investing in Pennsylvania, one of the issues we have
there is that, again, if you own the property in your own name
and you're not buying in the LLC, they Pennsylvania will tax you
when you transfer that property into your limited liability company.
So we need it.
We need a different type of strategy for that state.
If you're buying in California or California, the issue is,
is that it's $800 a year for any limited liability company is set up.
So let's minimize that fee for those limited liability companies
or come up with a structure that does not impose that on us.
And then if you're investing in a serious state such as Texas,
you know, Wyoming, Oklahoma, and there's there's a if you look at my series
videos, I have all those states that recognize this type of structure.
If you're going invest there, maybe we look at then using a series LLC
so we can minimize the number of companies we have to create for our properties.
So that's something I focus on when I'm looking at where the investment
properties held.
And so this is some of the key metrics we're going to we're going to
we look at now
before we talk about the exact planning along there, I would just throw this out.
If you're using Florida,
then we're going to use a land trust typically for for those investments.
That's the type of structure you're going to be using there.
If you're investing in Pennsylvania,
you're going to use an under recorded deed
into a into a limited liability.
Company will typically use an unrecorded deed.
They're in California.
I'm going to be using a
statutory trust, a Wyoming statutory trust.
Here, I would use a West
Wyoming statutory trust in California is for California investments.
Or if you're a California resident investing outside of California,
you're going to use that so you can avoid the the franchise fee.
And then if, as I say, in these states here, we're going to use a series
limited liability company.
So so when I look at someone that came to me,
she comes to me and they have these types of assets.
I'm looking at where the properties are located.
So once I determine where your investments are located,
then the next question you want to ask yourself is Do you want anonymity
for for your structure
so that if somebody looks at your property, for example, if I had this
LLC set up and I have a rental property in there,
if somebody were to look at this company right here, pull up that that LLC
with the Secretary of State's website, are they going to see me associated to it?
So you see, hey, Clint owns this LLC.
Do we want that type of information out there
that was speaking to an individual two days ago on this exact topic?
They said, Well, what is the value
in having anonymity for my limited liability company?
I mean, I really don't care.
People know that I own it because if they sued, the LLC is going to protect me.
So that's one way to look at it all.
And I said, the other thing to think about is that
let's assume that the tenant doesn't have a claim against you,
so they're not going to sue you because the attorney won't take the case.
If the tenant is disgruntled, what could they do?
Well, they can figure out where you work and cause problems for you at work
by calling up and harassing your employer, making false statements about you.
Get online and try to destroy you on social media.
So there's things that they can do that
you don't have much recourse for, especially if they go online.
I don't know if anybody's ever been through that process before.
If you want to have those posts removed, comments that people are making about you,
it's extremely difficult to get that stuff taken down.
So I think that from from a landlord's perspective,
I want to keep my my ownership private.
I don't want people to know that I don't own the asset.
I'm going to use anonymity because I don't want to give them
any additional leverage points against me
because people will use it if they know what's available
in certain circumstances, not everyone, but it's just why run the risk?
So if you want anonymity, then what I suggest you do.
You've heard me talk about this many, many times
is we start with an LLC in Wyoming right here.
This would be a Wyoming LLC.
And the reason why we're going to set up this Wyoming
limited liability company is because
I had
when I set it up in Wyoming, I don't have to list anyone
far as the members or managers are with the secretary of state.
So I'm going to be be the one running this company.
So I'm going to make this one manager managed.
I'm going to be listed as the manager, and I'm going to be the member
down here of my my LLC of I'm married.
I'm going to bring my spouse in as well.
And so she's going to be on this LLC as a member and she may also be a manager.
Why not?
Let's put both of us are going to be managers and members of this LLC.
And so when we set this up
to make sure that we have anonymity, okay, you can't set it up on your own.
I couldn't go to Wyoming and set this LLC up on my own,
because if I did that, when I file it,
I'm going to have to list myself as the organizer.
And so I got this question the other day on the YouTube channel.
Somebody was asking, Clint, can I set up a Wyoming LLC for anonymity?
I said, Yes, you can, but you can't do it yourself.
You have to hire someone to do it for you, because when you submit the filing,
if you're the one doing it, you have to put your name there.
And on an annual basis you want that
same person to file the annual renewal.
I have a client that I've been working with out of Texas
and he created an LLC
before he came to us in Wyoming with another party.
And then he came to us and he's written out.
Now he's working with Anderson here for restructuring, and I saw his existing
Wyoming LLC and I said, Hey, before we get going any further,
we may want to create a new one for you, because on the annual renewal statement
that was submitted, because he'd had it set up
for for over a year, I said, you filed that.
The person you originally used to set it up, you didn't
have them file it when you filed it, your name got listed there.
So if you want anonymity, you want to keep it in place.
You can't be making any of the filings or else you would you'll you'll destroy it.
So what do you set this entity up first?
Then once that entity is created, we need to look into determine
where your property is located.
So if this property here was located in Florida, then
what I would do is I would set up a Florida land trust for that property
because assuming it has debt, if it's debt free, you could use an LLC,
but it has debt on it.
Then I would use a land trust because transferring real estate
in Florida into a land trust is not subject to a transfer tax.
Whereas if you transfer a real estate that's encumbered by a mortgage
into an LLC, it's subject to a transfer tax.
So I want to avoid that.
Florida offers asset protection for their land trusts.
So great.
I'm going to have asset protection with this land trust.
So if anything happens with the property, I'm protected.
So I would set up a Florida LLC, make the benefit of Florida Land Trust
and make with a Wyoming LLC the beneficiary.
Let's say I pull another investment over here.
And this one, this property happens to be located in
Texas.
Well, if I know that I'm going to be continuing
to invest in Texas, I'm going to be buying more properties there.
Then what I would create is a Texas series
LLC that is member
managed by the Wyoming LLC.
And so what that's going to do for me
is that when I file this Texas series and I set it up with Texas,
it's going to ask for who is the member of this limited liability company?
The member manager.
And I'm going to put on there the Wyoming LLC.
Okay.
So then everything points back to here and nothing points to me individually.
Now for this property, it's not going to sit directly in the pair
because this is a series LLC.
If you're not familiar with it,
what a series LLC allows you to do is create little cells in each of these
cells, operate like a separate, limited liability company.
But the difference is, is that you don't have to pay
the fee to set up a whole new LLC to get that protection.
All you have to do is register it with the state of Texas.
You go to the Secretary of State's website, we file
we file the cell DBA for it.
I think it's $15. It takes about 3 minutes.
And then you have this structure created that can hold real estate.
So you put your property into that cell,
and if you buy another property, you put it into the other cell like that.
And then all these cells are owned back here by the Parent
LLC that you have in Texas.
So that's a unique strategy to Texas.
And you may be saying, Well, Clint, I don't live in Texas.
I my, my, my, my investments are in North Carolina.
Great. If they're in North Carolina,
then what we're going to do is we're going to create a typical
standard North Carolina limited liability company,
and it's going to be owned back here, just like
we did these other ones by this Wyoming LLC.
And then that would hold your North Carolina property like this.
So now you have anonymity there.
Now, when we're setting these up,
not all states collect information on on the LLC
as far as a members or managers are, as far as the managers are concerned.
So when I tell you that we're going to make this LLC member managed
by this Wyoming LLC,
I'm using that very generically because when I set up the structures,
one of the things
that I want to make sure of is that the client is put in a position
where they have a paired authority over their limited liability company.
What do I mean by that?
Well,
if you went in,
you're working with a lender,
you're working with a bank, and they ask for a copy of your operating agreement.
They want to see your name somewhere on that operating agreement many times.
So if I drafted a North Carolina limited liability company
and I stated that's member managed by a Wyoming LLC, when they look at that
operating agreement, they're going to see the LLC name listed as the member.
You'll be listed as the manager, but you won't be listed.
There is any type of direct relation
to that North Carolina limited liability company.
So what you can do then to give yourself additional flexibility in setting these
individual structures up is you can appoint yourself an officer.
So for example, if I was
setting up an LLC in Washington State for myself and I wanted anonymity,
I'd make it a member managed LLC by my Wyoming company.
So on the filing
with the state of Washington, it lists my Wyoming limited liability company.
That's it. I don't see anything else.
Now on my operating agreement, it's going to list me
as the president, so I'll list myself in the operating agreement as a present.
So then when I take that operating agreement to the bank, they see that like,
Oh, it's owned by Wyoming LLC, but Clint's the president of this company,
so that remains private because it's only in my operating agreement.
It's not registered with the state.
Now, if I'm setting up an LLC, let's say, in
Ohio and
Ohio doesn't collect any information
on the managers of a limited liability company.
Well, this was an Ohio LLC.
I would set it up as a manager Managed LLC with Clint is the manager
and this Wyoming LLC as the member. Why?
Because none of that information is going to be disclosed anyway.
So now I have my LLC operating agreement that lists me as the manager.
So again, if I have to provide that to someone,
they say, Hey, yeah, this is in control by Clint.
And the reason I'm telling you this
is that I want you to understand that there's nuances.
You know, it's not a one size fits all approach.
And then when you're setting it up, if anonymity,
is that what you're looking for in your structuring,
then you should be aware that we're going to use different techniques
based upon where the asset
is located to make sure that we're able to achieve,
you know, asset protection for, you know, transfer taxes are moving the asset in.
And then at the same time, you hear me always talk about that business planning
component, making sure that you can effectively run this business
and you're not going to run into too little roadblocks along the way
because you're working with someone
who doesn't understand what it is you're doing.
So they're safe.
Space answer is always, Oh, you can't do that. Why?
Because I mean, what type of responses
that you give me, give me an actual reason why.
Okay. So this is how
we're
typically going to to create those and you just keep building them out.
Now, the key here in setting this up is that all of these structures up top,
whatever state you're investing in, these are all going to be disregarded.
If it's just you, you don't have any other owners, it's just you.
They're going to be disregarded for federal tax purposes.
So you don't have to file a tax return for any of these entities.
Okay, now the blue box down here,
I like to treat this as a partnership,
so it will file at 1065.
And if you watch a lot of my videos, I talk about the benefits of this is that
in filing a tax return for the blue box, the holding company,
you're going to change how that income hits your 1040
and what it's going to do for you is if you're going to be working
with traditional lenders and trying to, you know,
increase the size of your portfolio through debt financing,
then you want to ensure that you're
going to get credit for every nickel you bring in and rental income.
And if you don't have a structure set up that treats the income
through a partnership, that is you own the real estate in your own name
or you hold it through disregarded entities
that if the lender you're working with is a Freddie Fannie lender,
that is their right in a loan using Freddie Fannie guidelines,
they're going to hold back 25% of your income
and that's going to create problems for you on your debt to income ratio.
So we want to think down the line
when we're creating these structures to make sure that we're maximizing
the structure's overall benefit for our plan going forward.
And so that's why I would treat this one
as a partnership in my structure.
So what you should get out of this is that
whenever you're setting up an entity or an entity to own real estate,
if it's a rental real estate, then that entity needs to
somehow be tied to the state where the property is located.
I do want to thank you for for those you this subscribe to the channel and for you
watching it and keep up those questions
and and we'll keep the conversation rolling.
Take care, everyone. Thanks a lot.