Welcome to the Get Real podcast. Your high-octane, boost of full on reality therapy for personal, business, and investing success with your host, Ron Phillips. Because somebody’s gotta tell it like it is.

Ron: Hey, everybody. Welcome back to the Get Real podcast. I am Ron Phillips here with Heather Marchant yet again, another exciting show. I know you guys have already subscribed and shared us with all of your friends. Keep doing that. Keep the questions coming. Today, we’re going to talk about, well, something you guys wanted to talk about. Right, Heather? I mean, we got a bunch of questions and actually we get questions all the time about this particular topic. But we, neither Heather nor I, quite qualify to talk about it. So we have our own answers. But we decided to bring someone else in today to help us out. Jim Burch, welcome to the show. 

Jim: Hey, Ron. Thank you so much. We appreciate letting us be a part of this today. Thank you. 

Ron: Yeah, it’s gonna be fun. We’re going to talk about a subject that is that is so much fun. I mean, this is so good. So today’s topic is LLCs, and Jim is the founder and CEO of Easy Legal Planning. And they’ve helped thousands of people with revocable living trusts and LLC small business type stuff. Right. All of this really fun, you know. 

Jim: I always tell people I’m like talking about death and taxes is nothing but pure joy. It brings bliss into your life every day. It’s wonderful. 

Ron:So Jim’s done something pretty unique, actually. He’s taken this topic. And, you know, his background is actually marketing. And so he’s taken this and put it into really simple terms that even I can understand. And then he’s because of that, he’s been to help thousands of people understand it and he’s going to help us understand it today. And I don’t know about you, Heather, but really, the thing that I get most out of this is that the hair, it’s the hair. I know for those of you who cannot see Jim’s hair is I mean, it’s nice. 

Jim: I love you even more for saying that. 

Ron: As a bald man, I can say that. I can say that I am now coveting the hair. 

Jim: It is out of control right now because not only is it like big and coifed on top, but I’ve got this crazy, like, Grizzly Adams beard going on. So it is too much hair for most people at this point in time. So. But I appreciate you saying that, Ron. Thank you. 

Ron: L.L.C. is secondary, hair primary.  

Heather:  The COVID-19 haircut. I think it’s right. 

Ron: Not to go off on a tangent on hair, but there is this, there’s this kid that bags of groceries. He has the best head of hair, man. Every time I go in there, I’m like dude. And he just starts laughing. Every time he sees me now he just starts laughing because he knows that I’m just coveting his hair. Yeah, it’s actually better than yours, Jim. I hate to say it, but let’s jump in to our real topic, which is not hair, not hairstyles. LLCs. And Heather, this is something that we get like all the time. 

Heather:  And just about every day I get a question about how do I do this? I’ve heard, they usually will say, I’ve heard that I want to set up an LLC if I’m going to buy rental properties. And I don’t really know why. They don’t even know why they’ve heard that. Some people just say, I need to because I was told I need to. 

Ron: By who? I think it was the trash collector told her that she probably should. Her brother’s friend’s cousin has an LLC with property in it. But really, nobody knows. You know, they just know they heard. 

Heather:  Yeah, well, I told Jim a story that I was told by an attorney that is the best illustration I’ve had to dumb it down for me to understand why I needed an LLC. So I’ll share it really fast. So there was a man, and this is a true story, who had his primary residence and then three rental properties, all where he lived in the same state and he had a tenant in the basement unit that was asphyxiated by the furnace, and she passed away. And the family was able to prove negligence that it wasn’t maintained. And so he lost not only the three rental properties because he had to pay in this massive lawsuit, but he also lost his primary residence. 

Heather: So he lost all of his real estate holdings. And he explained it to me by saying if he would have set up an LLC and put even all three rental properties into one LLC, he would have lost his rental properties, but not his primary residence. Or if he had that property in one LLC by itself, he would have just lost that rental property in the lawsuit. And so it’s like a light bulb went off that day and I finally understood it. Even though I’d been doing this for several years. I knew it was important and it was a good way to protect yourself, but I didn’t fully grasp the benefits that way. So you said you get that question a lot, though, Jim. Right?

Jim: We do. And that’s a great example. I mean, really and truly is. I actually had one kind of similar. It was a guy that he lived in Texas and he had his primary and seven properties and he ended up. He turned around the corner and it was just it was kind of dusk. And he couldn’t see very well end that hitting somebody in a crosswalk and killed them. And they were suing him for everything. And he again, same thing. He lost everything. And he was calling going. Can I set up an LLC and dump all my profit? And I’m like, no, after the fact, you can’t do anything. No one is that once that bell has been rung. So you’ve got to get all this stuff set up ahead of time. But any of that. Your example is great. That’s a great, perfect example of adding to ways. 

Heather:  Awesome. Some people can think it’s only for if the tenant suits you or if there’s a problem with that property. It cannot be someone coming after you personally in any lawsuit. Right, that they can…..

Jim: OK. That’s exactly right. Because something like that, it exceeded his auto insurance very quickly. And he had no umbrella. He had I mean, he just wasn’t set up. Which was kind of interesting because for somebody that owns eight properties, that’s a lot of properties and he had a lot of equity in those properties. And you would think that somewhere during that path, somebody would have clued him in and said, you really probably ought to set things up properly, but it didn’t happen until it was too late. 

Ron: We found that a lot, Jim. People don’tunderstand what the benefits of an LLC are. They don’t know when they need the LLC versus insurance. Like people are just, generally speaking, confused about the topic. Yeah. I think a lot of people don’t like talking to attorneys anyway. And so it’s kind of like the dentist, you know. I mean, like, I know I need to go to the dentist, but I’m probably not going to go unless I have pain. Right in the property world is kind of like dental, right? Once you have the pain, it’s too late. Now you want to have a root canal where you didn’t have to have the root canal. And it’s kind of similar. But tell us a little bit about what all of the benefits of the L..C.. Why would someone want to do that? 

Jim: Right. Great question. One of the biggest benefits is really what we’re talking about, which is liability. The liability protection is probably the biggest reason why people are setting up LLC is because essentially what an LLC is doing is it’s drawing a line in the sand and saying these are business assets and these are my personal assets. And so it just it separates or segregates things. Now, I have you’re probably gonna ask me this question because I know you get this question all the time as well. But a lot of people go, well, I’ve got two or three or even sometimes more than that, rental properties. And they go, well, should I put them all into one LLC? 

Jim: And again, there’s a few different trains of thought with doing that on the liability front of things. Because the thing that people have to understand is if they set up one LLC and they put all three of those properties into that one LLC. Well, if that one LLC got sued. So again, let’s say that one of the tenants got 50, 60. That’s such a weird word. I I’m having a hard time saying nine is more to hated General. Sorry with that. We’re doing that. But if they were to sue that LLC and the LLC owns three properties, they’re coming after those three properties. And so then becomes the complexity of people going, oh, well, then should I set up a separate LLC for each of my properties and for liability purposes, the answer is yes. That obviously provides the most protection. But again, that also comes with you’re setting up three LLCs and the cost of setting up those and the maintenance fees and your, you know, the fees that come along with that. 

Jim: So that’s some of the things that people have to take into consideration. Now, we do have another train of thought where people go, well, once I hit a certain amount of equity, then I’m going to create a second LLC. So sometimes they’ll go, you know, and this is different for everybody. Some people’s risk tolerance and equity threshold is different. So sometimes people say, once I have fifty thousand dollars of equity in the property and then I’m going to start dividing them. And sometimes people go minus one hundred fifty thousand and some people go mine. Three hundred thousand, whatever that is. Once your equity hits a certain amount, then people go. Okay, now I’m going to set up a second LLC. So let’s just say hypothetically was one hundred fifty thousand and they had three properties and that one LLC. Well once that equity got above one hundred fifty thousand men, if they ended up getting another property or whatever, then they would start to separate it out and get your LLC number two billing. 

Jim: But liability is one of the biggest reasons why people do that, LLC and the other. The other thing you have to understand, my LLC is, is it works both ways as well. So kind of an example, but I was getting it. You’re if let’s say we had a client that they got in a car accident and it exceeded their auto insurance and they’re getting sued personally. Well, they can get sued personally. But if they’ve got LLCs, they can’t go after the LLCs. So there’s a separation there, depending on where that liability is coming from. So that’s one of the biggest things. And then the other side would be the taxing side of things, why a lot of people will set up LLC. It just gives them an easier way of writing things off. 

Jim: And also, depending on how much money they’re making, you know, if they had if somebody had a lot of properties that were in these different LLCs, you know, their CPA or their accountant structure, things tend to really save them a lot of money in some different types of taxes, as they say. Heather, bless your heart. I can tell that something went down the wrong pipe there. So what how’d that happened? How’d that happened before? 

Heather:  I have some air conditioning, like blowing really hard. So I think it just dried out my throat for a second. So I was over here muting myself. 

Jim:So I’ve been there, done that. Been there. Done that. But Ron, kind of going back to your initial question. Those are typically the two reasons why people will do that. The LLCs is they’re setting up the LLCsto separate those business assets from their personal assets for liability purposes and then for taxing purposes as well. 

Ron: Yes. So, you know, LLC is or they’re I think they’re a little bit scary to people, too, like they don’t understand, you know. So I’ve got this umbrella policy now. I’ve exceeded the umbrella policy. So now I’m into that one hundred fifty thousand. You were talking about, which is my threshold, and it’s kind of above the umbrella policy. Now I need the LLC and it starts to in my, you know, in some people’s brains starts to get really complicated where this really isn’t that complicated. But there’s some things surrounding an LLC that people need to be aware of, too. Maybe you can keep us in on what those are like. What are some things if I open this thing up that I need to be aware of so that I don’t get through it all up? Right. 

Jim: Perfect. That’s right. That’s a great, great question. Now, when you’re first off another and again, I know, Heather, you get this question as well by both of you. But people think it’s going to be this knockdown drag out, take a really long time to set up an LLC. They’re like, is this going to take months to do? And the answer is no. Most of the time the LLC is can be setup. You know, some of them within 24 hours. Some of them seven to 14 business days. But typically, it doesn’t go too much farther out than that. So usually within a two-week period, everything’s filed with the estate and everything’s ready to go. Now, in reference to the actual documents and to your point, Ron, of what you know, what they need to expect when you’re setting up an LLC, you have to file with the with the secretary of state. 

Jim: Now, some states don’t call the secretary of state. They call it like a division of corporation or a corporation commission. Same thing as the secretary of state. It’s just kind of an interchangeable term. But you have to file what are called articles of organization. Now, normally, that’s what we’re doing. Like, we’re preparing the articles of organization for the clients. So that way everything is done the proper way and the clients aren’t second guessing themselves. When I did, I do that right? Or do they feel that out the right way? And so on and so forth. Now, just so you’re aware, it’s also called like a certificate of organization or some states called a certificate of formation. All the same thing. So whether it’s in articles of organization, a certificate of organization, a certificate of formation, same exact thing. It’s the documents that are filed with the state saying, I’m registering my LLC. Here’s the name that I want to function under in that state. And then a lot of states require ownership. So they’ll be like, OK, who owns this LLC and what’s the address? And then you also have to have what’s called a registered agent. 

Jim: The registered agent is simply the person that receives the mail on behalf of the company. We’re going to talk about that in just a second, a little bit more if you happen to set up a business in another state. But you have to file those articles of organization. And then we also prepare what’s called an operating agreement. So the operating agreement is kind of like the backbone of the business. That indicates who owns the business, what happens if they decided to bring on a business partner or let’s say it was a partnership and one of the partners wanted out? 

Jim: The operating agreement stipulates, OK, what happens, you know, as an exit strategy or what happens if somebody dies? So that’s what that’s what the operating agreement is doing is taking care of ownership and then some of those what ifs. But doing that and then the other document that we prepare is the employer identification number with the IRS. So it’s technically called your federal employee identification number. But most people refer to it as a tax I.D. number. 

Jim:So all the time people call in there like I need to get my my tax I.D. number, and then sometimes we’ll email them and say, hey, here’s your federal employer identification number. They’re like, wait, I thought I needed a tax I.D. number, and we’re like that’s the same thing. That’s the same thing with doing that. But those are typically the three key documents that are needed to establish in an LLC in any given state. And with doing that, did that does that make sense or to that answer that question? 

Heather:  Yeah. So a follow up question on that is a lot of our clients are purchasing with a conventional loan and then with a conventional loan, you cannot use an entity. You have to buy in your personal name. And so a lot of our clients are deeding the property post-closing into the L.L.C., is that something that I mean, I know a lot of questions I get is that the lender has a due on sale clause that if I deed the property out of my name, it can cause the due on sale clause where you have to pay back the loan. Right. That they can call the loan due. How do you handle that concern with clients?

Jim: Great question with that. And the first thing I always tell people is lenders are very familiar with LLCs and this is not anything new. And so they’re very, very aware. But also the most important critical part of that is making sure that however the house is owned or the loan is owned. So whether it’s an individual or the husband and wife, they’re both on that loan. They need to structure the LLC to match that or mimic that. So if it was an individual that was on the title about property, on the loan, they would need to set up an individual LLC. So that way, when that property moves over to the LLC, the ownership structure is still the same. There are some states that are very particular about that. Meaning you couldn’t set up, let’s say that we had an individual that was on the loan and then they were married and said I really wanted to have myself and my spouse on the LLC. And then they create this partnership LLC and then move the property over that back can create problems because it doesn’t match that ownership structure. 

Jim: So as long asthey’re, you know, they’re keeping that in mind of going, OK. However, we own this property, the LLC needs to be structured the same way. They should be just absolutely fine on that. Again, most, you know, the due on sale clause, you know, obviously that’s something that is in a lot of loans, but it’s not something that they’re obligated to do. So it’s like if a lender caught when that somebody had moved it over into an LLC, the first thing they’re going to do is go, are they making their payments every month? And if they’re making their payments, then, well, a lot of times they go, well, we’re not going to rile the hornet’s nest here because, again, they’ve got so many bad loans they’re going after. But they have no incentive or no reason to go after somebody that’s actually paying with that. So that’s typically the you know, the approach that we tell people is, you know, as long as the ownership structure is the same, you know, you should be fine. 

Jim:And then again, as long as you’re making your payments, don’t miss payments. And then you’re not they’re not gonna be looking elsewhere with what’s going on with that. So. But again, at the at the end of the day, lenders are very, very familiar. Oh. Another thing that people aren’t totally aware of is when you move a title or you deed the property over into the LLC. That doesn’t just automatically notify the lender. Like it’s not like they get some notification that says, hey, the titles then moved out, moved over into an LLC because the title is recorded at the county record or where that property is located and it’s completely separate from the loan. So again, it’s not like they’re getting notified and, you know, people are getting nervous going, oh, no, my lender is going to be notified that I just move this property over into an LLC. But my lenders are very familiar with LLC and what they do and why people set them up. It’s nothing new. 

Heather:  OK, because a lot of our clients do have one spouse on the conventional loan and then deed it into an LLC that is jointly owned. But, I’ve said the same thing. No, it’s a spouse. You’re not deeding it to a business partner or, you know, someone that’s not related to you. So it’s usually pretty low risk. But there is the due on sale clause in every conventional loan I’ve seen. Right. So. Right. That’s just something that you maybe have to be comfortable with taking a small risk that, you know, they could call the loan deal. So another question that I get a lot is how do I name my LLC? 

Ron:  My attorney hates it when it comes down to naming the next LLC. I actually usually tell them I don’t care whatever you want. But yeah. 

Jim: Which is, it’s funny you said that. This honestly is probably the biggest hang up for most people. I’m not kidding. I’ll talk to people and they’re like, okay, we’re ready to go. And I’m like, what do you want to name the LLC, and they’re like uhhh. Sometimes it’ll take them literally two months. They’re trying to figure out a name and then they’ll call back two months later and they’re like, I finally came up with a name and I’m like, it took you two months to come up with a name? And they’re like, Yeah, sorry. I wanted to make sure it’s dialed in. I know. Right. And so anyhow, the name really and truly does not matter, although it does have to be a name that nobody else is utilizing in that state. So most people you ever once in a while people will say, oh, I want to do something very basic. I’m trying to think of something basic, basic off the top of my head, like, you know, ABC Rental Properties. That’s going to be taken by somebody, you know, in the state. So you got to be a little bit more creative. 

Ron: But if I had, I had to get I’ve been trying to get Wayne Enterprises for so long, like my middle name is Wayne. And I mean, I should. I should have it. 

Heather:  But Ron, I did not know that that’s funny. 

Ron: I’ve been trying to get it, but I can’t get it. 

Jim: Hey, we’re gonna keep our fingers crossed. If I see that pop up somewhere, I’m going to let you know we’re going to get it. 

Ron: I’ll incorporate in that state unless it’s California or New York. 

Jim:So in reference to the name. Some people are very creative and it’s very easy. But I always tell people have a plan A and a plan B because if you come back and say, oh, let’s name it this, and it’s not available. Instead of having to call back and go back and forth and try to figure out another name, just come up with two names right out of the gates. And then that way we’ve got option, you know, one and option two already ready to go. Now, if you’re not very creative, just use the address of the rental property. That’s right. That’s one of the easiest things to do because it’s a very unique name. Super simple to do that. And literally it’s the address come my LLC that that would be the name of that. So if you’re not creative, just do that. So that’s. So that’s how that works with doing that. I did. Did that answer that question, Ron? Did that make sense on that with the name?

Ron: Oh yeah. Yeah. 

Heather: So I think one thing that we haven’t talked about is with the out-of-state LLCs and what you need to know and why do people do it, I guess. Like why do you have an LLC registered outside of the state you live in?  

Jim: Right. Great question. Now, a typical rule of thumb for most people is wherever the property is physically located, then that’s where you should establish the LLC. And again, it doesn’t have to be like that all the time because and I’m going explain what I mean. But that’s kind of a general rule of thumb is if you’ve got property or you’ve got a brick and mortar building there, that state wants you to set up the LLC there. Or the other option is you can set up and establish the LLC in your home state. That’s called your domestic state. So, again, let’s just say again, I live in Utah, so let’s say I set up an LLC in Utah. That would be my domestic state. But if I ended up having property, let’s say, in Alabama, I would need to register my Utah domestic LLC in Alabama as a foreign LLC. And so as long as you’re registered one way or the other, it’s completely fine with doing that. 

Jim: So as long as I’ve either got my LLC registered here in Utah and then registered as a foreign LLC and in Alabama because that’s where property’s physically located and they want, you know, because you’ve got property that the state wants you to have a presence or an LLC established there, or we did the flip side where we would register the LLC in Alabama and then that would be domestic. So it’d be a domestic LLC in Alabama. And then I would have to register as a foreign LLC in my home state. So if I did register an LLC in Alabama, I’d have to register it as a foreign entity here in Utah. And a lot of people asking, they go, why do you have to register it in Utah? The business is in Alabama and the property’s in Alabama. Why do I have to register Utah? And the answer is to set up my business bank account. Because if I go into the bank and again, whether it was a large bank or a small bank, and I said, hey, I need to set up my LLC or my business bank account, when they look at the articles of organization and they say and they say, oh, this is an Alabama business, I’m going to say, yeah, this is set up in Alabama. 

Jim: They’re going to say, oh, well, that’s fine, but we need you to register as a foreign LLC here in Utah so that we can see on the records here with the Utah division of corporations that you’re registered so we can open up the business bank account. Is it difficult? No, it’s really, really easy. Literally, it’s usually a one-page document. Now, one thing that you do have to do is let’s say that I registered in Alabama and I was registering as a foreign LLC here in Utah. Well, most states require what’s called a certificate of existence. So basically what happens is we just have to go online and order. And typically, you know, it’s anywhere from ten dollars to fifty dollars, you know, on the high end to get a certificate of existence. 

Jim: And all that is, is it’s basically the secretary of state is sending a little certificate that says they are an LLC and it was established on such and such date. And usually that has to be done usually within three to six months. So like sometimes people go, oh, I have a certificate of existence, but it’s two years old. Well, unfortunately, that’s not going to work. You have to have one that is usually within three to six months. And every state’s a little bit different. And they will tell you. The state will say you need to have, you know, a certificate of this existence that’s no older than three months or whatever the case is. So it’s very easy and very straightforward. 

Ron: You can’t not pay your taxes. That’s the real deal here. 

Jim: That’s right. That’s right. You’re right. 

Heather:  So I have a question. Follow up. What? Why do you want to open a bank account with your LLC? 

Jim: Great question. So we get this all the time, but people like. Do I need a separate bank account? And the answer is yes. You want to keep everything separate. And again, it goes back to the liability side of things. If you’re comingling, you know, all of your personal assets and your business assets, the LLC probably isn’t going to work because you’re getting sued. One of the first things that. Attorneys are going to do is they’re going to say, OK, let’s look at the structure. Let’s look how money is going into the LLC and how money is coming out of the LLC and all of a sudden it’s completely commingled. They’re gonna be like, you’re not running this thing like a business. And they could they call piercing the corporate veil. They could pierce that corporate veil and go after them. 

Jim:So you have to make sure that you’re keeping very good records and that they’re completely separate. I had this question the other day and it was really kind of funny because we always indicate that two people are saying, OK, when you set up your business bank account, make sure that your renters are paying the money to the LLC, not to you personally, or if they’re gonna do an auto draft, make sure it goes right into your business account. 

Jim: And somebody called back and they said, oh, well, I ended up having a renter and they just paid me. And then I just deposited into my account and then moved it right over into my business account without work. And I was like, no, that’s not going to, you know, that’s the opposite of working. With that, I said. So no, I said, you have to get your, you know, the tenant to write the check or deposit that into the business account and then find the business account. Then you can pay yourself, you know, after you paid any mortgages or whatever your expenses are or deductions, you can do that and then pay yourself out of that, but that you just want to make sure that the money is going into the business account first so you can show very distinct and clear records. Just think of it like this. You’re running a business. And I know that that sounds weird because people like, oh, it’s just a rental property. Well, you’re in the business of a rental property and you have to run it as such with doing that. So that’s one of the, we get that question all the time. And it always kind of makes me it makes me laugh with that, with doing that, because the answer is an absolute. Yes. With that. With making sure that it’s separate. 

Heather:  OK. No, that’s perfect. And what if they’ve been doing it wrong so far? Can they change and get their books right to protect themselves and then they’re OK? 

Jim: Absolutely. With that. Oh, another thing that I was going to mention on what we’re talking about, that is the lease agreement. So if somebody sets up an LLC, they need to redo their lease agreements with the tenant so that it’s no longer between the individual and the tenant. It’s now between the LLC and the tenant. 

Heather:  Yeah. But professional management, it wouldn’t matter. Right? 

Jim: Right. Yeah, if it’s being professionally managed. That’s a different thing. That’s just if somebody was if they were doing it by themselves and they didn’t have professional management. 

Ron: It’s really important, though that people understand the reason why that is. So let me make sure I clear it up, because the reason that you have to have your LLC on the lease, if you don’t have a professional property management companies, because the lease is between that LLC and the tenant. When you have a professional management company, the LLC has an agreement with the management company. So it’s really important. You still have the LLC that has the agreement. So the agreement’s not in your personal name, when you have an LLC, it’s in the LLC name. So you still have it. It’s just indirect because it goes through the management company and management company then has the lease with the tenant. Right. So the same principle. You can’t commingle just because you have a management company that still doesn’t work. You still have to have a separate account. You still have to have your LLC with the agreement, the agreements just between you and the management company instead of you and the tenant. 

Jim: Well, yeah, well, well said. And thanks for clearing that up, Ron again. That’s perfect. Let me go over one other thing. Just because I’m starting to get these things are coming to my mind a question that all of a sudden comes into play here. Another question that people ask as they go. What about the title of the of the house? So I have this LLC and I’ve got all these lease agreements with, you know, between the LLC and my tenants. I’ve got all that. And I’m having them deposit the money into the bank. You know, my business bank account. Then they go. Can I leave that the title of the house in my individual name? 

Jim: Or does it also need to get moved over and transferred into the LLC? And I know we kind of talked a little bit about that earlier, but I just wanted to kind of hit on that point again. People miss that all the time where they get this LLC set up and they’re running the LLC. But the title of the rental property is still in their personal name or it’s in there, their spouse in their names as joint tenants. Now, that can’t happen. That has to get that that has to get transferred over into the LLC. And the way that that gets transferred is by recording a deed at the county where that property is located at the properties located in Alabama. It’s in Montgomery County, the deed has to be recorded in Montgomery County to transfer the title out of the husband and wife’s names as joint tenants and move it over into the LLC. I know we touched on a little bit before, but we didn’t really go into it again. Yeah, connect the dots on doing that. So I just again, wanted to give you a heads up on that. 

Ron:  I mean, for people who don’t do this all the time, this likely sounds really complicated. And it and it’s not. It’s really not that hard. There’s a lot of little moving pieces there. But when you work with a professional company that does this all the time, they make it super easy. Right.  It makes all the difference. Yeah. It’s not. I mean, if you try to do this on your own and it kind of is complicated. I’ve actually never done it on my own. So I don’t know how complicated it is. But I’m sure that it is really complicated. Right. I have so many LLC’s my gosh, my daughter, who is my assistant. The other day she said, do you have this, you know, X, Y, Z Company, LLC. And I’m like, yes, yes I do. She goes, well I’ve never heard of it. I said, we’ll add it to the list then because we need to make sure we keep track of it. You can get to the point where it’s a little bit absurd how many LLCs you have, but the process is the same for all of them. It’s not that complicated if you if you have somebody who can help you through this and make it easy for you. Right. 

Jim: Right. And to that point. Right. Just because, again, when you were said that you hadn’t done it yourself, I talked to a lot of people that have tried to do it themselves, and some of them actually do it properly, but they’re always second guessing themselves. That and that probably is the biggest thing for most people, is they don’t want the stress of second guessing themselves going oh. Did I really do that? Right. That’s one of the biggest issues that we run it. 

Ron: It doesn’t make any difference because I screwed up. 

Jim: Yeah, that’s exactly right. 

Heather:  I think we’re down to only a couple more questions. So can you save taxes by setting up an LLC in a state that has no income tax? 

Jim: No, I was going to say I didn’t mean to yell at you, Heather. That was not a yell at you. That was. I’m not kidding. I get this all the time. 

Ron: That was a yell at everybody else. 

Jim: I get that all the time. Like I’ve been reading on the interwebs that that I want to set up an LLC in Nevada because they don’t have any state tax. And that’s going to be awesome because that’ll save me in, you know, in state taxes. It does not work like that. You have to pay taxes wherever you live. So you have somewhere other than Nevada, it doesn’t make sense to set up, you know, Nevada LLC for income tax. You save on this had the state income tax. So it just. Yeah. So the answer’s now run on you. 

Ron: If you’re sick of paying ridiculous income taxes, move out of New York. Right. Move out of California. I can keep that momentum. But you guys know where I live. You just suck it up and pay the taxes if you want to live in those places. Otherwise, move like everybody else is doing. Yeah. Yeah. I’ve going to say there are other states other than Nevada that don’t have state income taxes. So, you know, choose wisely. Right. There are some with oceans and there’s some with some great cool little mountains and Washington. Right. Yeah. I mean, you I mean, Florida has no state income tax. Pretty sure Texas doesn’t. And Tennessee doesn’t. There’s a lot of states catching on these days that people are kind of spent on paying pun intended on paying taxes. Right. So. Yeah. 

Heather:  So and then I guess in relation to that, I guess if you’re setting up an LLC in Alabama, you go back to our example, but you live in Utah, you need to have a physical address in that.

Jim: I’m so glad you reminded me of that because that is a really important thing. So thank you for jogging my memory on that one. This is a big one that people are unaware of. So if you set up a business in another state, whether it is a domestic LLC or a foreign LLC, and that’s where people, again, don’t they sometimes don’t connect the dots on that. So let’s say that I ended up sending up an LLC in Alabama. I don’t live in Alabama, so I don’t have a physical address to receive the mail in Alabama. But if I’m going to set up an LLC, they require to have a registered agent or somebody that has a physical address. So we have a third party company that we’ve worked with for years. They’re called in court services. They’re based out of Las Vegas, Nevada, and they charge ninety-nine dollars a year. You can actually get it less than that if you’re if you’re able to. If you want to commit to more years. So, like, if you were like, hey, I know I’m going to have this rental property for five years. Then they charge like sixty-four dollars a year or something like that. So it can get cheaper if you do more years. 

Jim: But the point being is you have to have a physical address in that state so that when you register the documentation, the state goes, oh, you’ve got a physical address. It cannot be a P.O. box. People are like I’ll just get a P.O. box. And you cannot do a P.O. box, it has to be a physical address. And that’s why you have to hire a third-party company to do that. Now, it also works the same way. Like, let’s say I set up the LLC here in Utah. Well, I live here in Utah, so I don’t need to hire a third-party registered agent because I live here. I can be my own registered agent, but if I have property in Alabama, I have I still have to register my LLC as a foreign LLC in Alabama, and I still have to have a registered agent. So again, it goes both ways. Sometimes people go, oh, well, if I set up the LLC in my domestic state, then I won’t have to pay in Corp know in the state where my rental properties are. And the answer is no. Now, you still have to pay in court because even if you file a foreign LLC, they require a registered agent. 

Heather:  Yeah. Good point. A lot of our property managers will do it for our clients as well. Ask your property manager to see. I have a couple that charge like a one-time setup fee and then they’ll just get your mail from then on out. Keep that in mind, too. You can just check and see if they’re willing to do it, if not InCorp services. That sounds like a pretty inexpensive option to sell. 

Jim: And again, I don’t care who you use. I mean, really and truly, I just use InCorp because we worked with a lot of different companies and they seem to do a really good job. And they’re on the, I hate saying cheaper there on the more cost-effective side of things. A lot of the other companies that are that are out there and they’re charging, you know, one hundred and thirty to one hundred sixty dollars a year for the exact same thing. 

Heather:  I’ve seen that too. That has been great. So informative.

Ron: Love LLCs. So much fun. 

Jim: It’s been a whole just ball above joy for me as well. It’s actually been a pleasure. I’m glad that you guys have good sense of humor is about this as well because literally you know, talking about liability and death and taxes, I mean it’s not that fun to talk about, but I mean it’s a really important thing. 

Ron: At least it’s not taxes. So we’ve got that going for us. Right. Totally. 

Heather:  Talk about in taxes. But, you know, that’s true. 

Ron: So, Jim, if people if people listen to this and they said, man, I really need to do this and I’d love Jim to just do it for me, how do they get a hold of you and where can they find you? 

Jim: You bet. So a couple of things. Usually what happens is they’re talking to Heather and then Heather just emails me with the client’s information and then I’ll email, respond back to them, and get them on my computer. Is that right? So that’s an easy thing. You can also visit the Web site, which is just easy legal planning dot com and make sure you don’t spell easy e, z. when we get that all the time. I might know it’s easy if I ask why. He’s like, oh, I was thinking like e and then z. 

Ron:Oh you mean like not text language. Right. Exactly. Like the king’s English. Like that old, old, old time. 

Jim: Like I am not a millennial here. I was going to say I am not. So now we’ve got the full easy so easy legal planning. My personal email is just, Jim, an easy legal planning. And then again, I’ll get my phone number right here. Why is that? Can I give my phone number? 

Ron: No, no. Don’t do it. OK, yeah. Go ahead. OK, yeah. Go ahead. 

Jim:Eight zero one, six five six seven one three seven. And again, you call me or text me on that number as well. But yeah. Oh, and then cost wise. We don’t even go over that. So what is it setting up? 

Ron: I thought it was free for all of our free for all the right reasons. 

Jim: Right now I’m just kidding. Now, one good one bad thing is, is we did negotiate a little deal. On the first L.L.C. that you guys do, you do get a fifty-dollar discount. Our normal cost is three hundred and fifteen dollars to set up all the paperwork. But you guys get a fifty-dollar discount, it’s two hundred sixty five. And that does not include the state filing fees and every state is a little bit different. Some states are really inexpensive when you’re setting up an LLC and some states are very expensive. If you happen to live in Illinois and you’re listening to this, I apologize ahead of time. Their filing fee. It’s five hundred dollars just for the filing fee. That doesn’t include the filing fee fees. So the two sixty five for the first LLC that gets all your articles of organization, your operating agreement, your tax identification number and gets all those. We prepare all those for you. We also get you all set up with InCorp if you decided to use in corp. We get that all set up and taking care for you as well. But that also doesn’t include the ninety-nine-dollar fee. With that, we’re doing that. So it essentially up to 65 plus the ninety nine dollars. If you are establishing an LLC in a different state and then whatever those state filing fees are with doing that. 

Ron: Sweet. Well we appreciate it. You’re so welcome. Yeah. OK, well, so guys, if you have other questions or anything like that about L.L.C., make sure you reach out to Jim. And if you like the show, which of course you did because it was awesome, then you should hit the little thumbs up button and leave us a review. Share us with your friends and everything like that. We’ll be back next week with something equally as awesome. And we’ll see you then.

Jim: Thank you. Thank you. Thank you both. 

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