Protect Yourself from Swimming Pool Liabilities

For those that don't remember, we're going to start with a real case that was all over the news. You may have even heard about it at the time.

We're doing this to make some general points about the risks all pool owners face. Being rich and famous won't save you from an improperly maintained or managed pool. It sure didn't help Demi Moore.

Swimming Pool Lawsuit Case Study: What Happened to Demi Moore

Demi Moore’s assistant had a pool party in 2015 at Demi Moore’s California home where alcohol was served. Somebody drowned. It was an unfortunate accident and Demi Moore, who wasn’t even at the party, was quickly swimming in litigation. 

It sounds so ridiculous it could be the plot of one of Demi’s erotica thrillers.

There are carefully outlined state safety regulations that you have to comply with if you don’t want to end up on the witness stand with Tom Cruise screaming at you. In most states you are responsible for keeping your pool reasonably safe.

It doesn’t matter that it was Demi’s assistant who held the party. Demi owns the pool. Demi is responsible.

Understanding How Swimming Pool Lawsuits Happen 

There are two ways you can be considered too lazy, cheap or careless to own a pool under the law:

#1 You violate a local pool safety law

In this case, you’re strictly liable, like Demi Moore.

The solution here is simple. Bring your death trap up to code. Find out what the law is and comply. Build a fence and put on a pool cover. These are the basics.

# 2. Your pool is deemed “unsafe”

This is trickier, from a liability standpoint. Broken fences, rusty nails, lack of depth markings, and more can make a pool unsafe. Once again, this varies, but I’m sure through the use of the computer you are using to watch this video, you can figure out your local regulations. Better yet, contact an asset protection attorney to help you understand them.

Here’s another issue, and this one is key. If you party by your pool and your friends enjoy drinking cocktails, you may want to consider hiring a lifeguard for the afternoon. Preferably a sober lifeguard.

It’s a small expense that may keep somebody alive. If the conditions at the party are deemed unsafe (SEE: Rooftop cannonball championships) you might be on the hook.

Remember, like Demi, you might be liable even if you are not at the party so be sure that there are safety measures in play. It’s the summer time, so party hard. Just don’t end up paying for it.

In short, if you own the pool, you are responsible for its compliance with safety regulations. Landlords must keep this in mind when considering tenants. But you also have to make sure that everything you own is up to those same safety standards. Sorry fellas, but it’s not all collecting rent checks. Even trespassers can hold you liable if they get hurt in your unsafe pool.

How to Prevent Swimming Pool Lawsuits

Here’s a short summary of what you need to do if you want to avoid fishing dead bodies out of your pool and the costly lawsuits that come with it.

1. Comply with all safety requirements for your city and state. If you can’t afford them, you can’t afford a pool. But you’re a good little saver. Maybe next year.
2. Include a clause or separate pool disclosure and waiver. This is a tip for landlords or investors with rental property. Taking a few minutes to do this could save your ass in court. That way if some fool wants to work on his swan dive after his tenth martini, he’s already assumed the liability at least in part.

Your waiver should include the following:

Asset Protection with Royal Legal Solutions Can Keep You Above Water

Losing your investment, as noted above, is terrible. Losing your house is much worse. When it comes to owning a pool, be PROACTIVE with your liability before you have to be REACTIVE to a lawsuit.

Yes, there is work, responsibility and expense here, but you need to own a pair of big boy trunks before you go swimming in liability. Royal Legal Solutions can help you address legal matters relating to  your pool and construct an asset protection plan that keeps you out of court. If you would like advice on how to navigate this issue or begin protecting your assets like the pros, send us a message take our quick investor quiz for landlords and investors.

IRA & Real Estate Investments: What You Need To Know

If you don't have a self-directed IRA LLC, you've probably at least heard about them. Especially if you're a regular reader of this blog. Once you start looking for ways to invest your retirement funds outside of Wall Street, you'll realize there is no better way to do it than with an IRA-owned LLC.

The cost to establish a self-directed IRA LLC varies on where you go, but it usually will cost between a few hundred to about a thousand. Once you establish an LLC, a bank will serve as your custodian, which means you pay less fees and gain the ability to quickly invest your retirement money in anything except collectibles and life insurance.

We're talking about using the IRA for real estate investments, but the following are some other kinds of investments that can be made with your self-directed IRA LLC:

As you can see above, using a self-directed IRA LLC to make investments allows you to make traditional as well as non-traditional investments, such as real estate or cryptocurrency, in a tax efficient manner.If you'll direct your attention below, you can read about the most popular reasons to purchase non-traditional assets with your self-directed IRA LLC.

The Ability To Invest In What You Understand

One of the oldest pieces of advice in the world of investing is "invest in what you know". The chances are you've probably never met the person managing that mutual fund, or the CEO of that company doing an IPO next week.
Compare them to Real estate. You grew up around real estate. Remember when you bought your first home? Real estate is the one form of investing the average American knows about more than any other.
Real estate is just like any other form of investing, it's not without risk, but many retirement investors feel more comfortable buying and selling real estate than they do stocks.

Diversification

This is a no-brainer. You're always going to hear people talking about the importance of diversity. But the truth is there isn't much diversity on Wall Street. When you get a self-directed IRA LLC you won't just be thinking outside the box, you'll also be investing outside of it too!

Cryptocurrency

Cryptocurrency is one of the fastest growing investments. As of if this writing, the value of Bitcoin continues to skyrocket. For years it has been speculated that the price would crash, but so far it hasn't. With a self-directed IRA LLC, you can jump on the band wagon and cash in on the profits.

Loans & Notes

If you used a self-directed IRA LLC to loan money to a friend, all interest received would flow back into your IRA tax free. Whereas, if you lent your friend money from personal funds (non-retirement funds), you would pay taxes on the interest received.

Inflation Protection

Inflation can have a drastic impact on your retirement portfolio because it means a dollar today may not be worth a dollar tomorrow. Inflation increases the cost of things, so not only is your money worth less, everything also cost more.
Investing in real estate can provide natural protection against inflation, as rents tend to increase when prices do, acting as a hedge against inflation. People will always need homes to live in.

Just remember, being protected against inflation can mean the difference between retiring and working the rest of your life.

Hard Assets

Hard assets are things we can see and touch, like real estate and gold. They're considered non-traditional investments as well. Do you know what it feels like to drive by a building or property you own with your family, point to it, and say "We own that?" Once you invest in hard assets, you will!

Tax Deferral

Tax deferral literally means that you are putting off paying tax. Tax deferral means that all income, gains, and earnings, such as interest, dividends, rental income, royalties or capital gains, will grow tax free until you withdrawal (or distribute) the funds.

This means you can grow the money in your retirement account at a much faster pace and retire many years earlier. And, when you withdraw your IRA funds in the form of a distribution after you retire, you will likely be in a lower tax bracket and be able to keep more of what you saved.

Real Estate & Raw Land

Okay so I know I already mentioned real estate, but there's more you should know about using a self-directed IRA LLC.

Real estate is the most popular investment made with a Self-Directed IRA. Let's look at an example to see why.
Let's say you purchased a piece of property with your Self-Directed IRA for $200,000 and later sold the property for $150,000, the $50,000 gain would be tax-free. Whereas, if you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income taxes and, depending what state the property is in, state taxes.

Private Companies

With a self-directed IRA LLC you are permitted to purchase an interest in a privately held business, unless it's held by an S corporation.

Note: Remember to avoid the triggering a prohibited transaction!

Stocks, Bonds & Mutual Funds

By now you know that you can invest in just about anything. The advantage of using a self-directed IRA LLC is that you are not limited to investing only in traditional Wall Street investments. 

LLC or Corporation Vs. Umbrella Policy: Which Is Better For Real Estate Investors?

Are you a real estate investor? Chances are you either use an umbrella insurance policy or an LLC to protect yourself from liabilities concerning your property. There are, however, certain situations one can be more beneficial than the other.

To understand fully, you need to understand the different protection that each one provides. Many real estate investors don't fully understand the implications of using an LLC/Corporation, but this is especially true when it comes to umbrella policies.

What Is An Umbrella Policy And What Can It Do For You?

Umbrella insurance is a policy that adds extra protection beyond the existing limits of current in-force policies. Umbrella policies usually provide extra coverage for things like injuries, property damage, and certain lawsuits. Depending on the type of umbrella, it may cover different types of liability situations.  

Let's say you have pool insurance under your homeowners or landlord policy with $100,000 of liability coverage and business general liability insurance of $500,000. Then, you also have a $1 million umbrella policy that could give you $1.1M of pool liability coverage and $1.5 million of general business liability coverage.

An umbrella policy doesn't cover any additional areas of liability or risk. It only adds more coverage to your existing coverage. The umbrella policy isn't as great of an asset protection tool as its name implies after all.

Example: A Typical Umbrella Policy Situation

Hypothetically speaking, let's say you own a business that provides home appliance services to residential customers. One day a claim is made against you by a customer against your LLC for damages from a failed, and expensive, appliance repair.

Now, this customer is going to file a lawsuit against your LLC. But that doesn't matter, because you're covered! You don't just have liability insurance, you also have an umbrella insurance policy, that's two layers of protection! But when you go to the insurance company with the claim, you get denied on both policies.

Why? Because your general liability policy didn't provide coverage for failed repairs. But it gets worse … Because your primary General Liability policy denied the claim your umbrella policy is also not going to pay out. This is why it is imperative to have a thorough understanding of your insurance coverages and to make sure that you take the necessary steps to protect yourself and your assets.

The good news is, you are here. You have learned the fundamentals of asset protection that we teach through Royal Legal Solutions. After identifying your vulnerabilities, you may even have gotten an LLC set up. Because of that action, your personal assets are not at risk, but your business could still end up having to pay a large settlement.

An umbrella policy is a great tool when you have your defense wall set up properly. However, keep in mind, that umbrella policies only cover above existing levels of the underlying policies. They are not a catch-all. That said, if you have them set up properly, they are a cost-effective way to achieve the extra security you may want and need.

LLCs & Corporations: Always Reliable

Think of the LLC or corporate structure as Old Faithful. Insurance can and will drop you the minute you actually need it. An LLC (or other corporation), on the other hand, protects you from liabilities that arise in the LLC and prevents a plaintiff from being able to go after you personally.

What is at risk in a lawsuit against the business entity (LLC or corporation) however, is the assets of that business itself. A creditor could collect against the assets of that business. So, for example, if you have an LLC with multiple rental properties with equity, then those properties and their equity would be at risk in a lawsuit.

Next, let's go over the cost of both LLCs & Umbrella policies.

The Cost of an LLC

The cost of an LLC, depending on how you go about getting one, will cost you a few hundred dollars. You can also expect about $50-$200 in fees per year to keep your LLC active with the state (each state is different, Arizona is $0 and California is about $900 annually, for example).

If you have a partnership LLC or a corporation then you also have the cost of an LLC partnership tax return or a corporate partnership tax return.

The Cost Of An Umbrella Policy

Umbrella policies typically cost between $150 and $300 dollars for the first $1,000,000, and then on average, another $100 dollars per additional million dollars per year.

Umbrella policy benefits include access to attorneys who your insurance company will appoint and pay to defend you in order to get the lowest possible settlement payout. There may be certain exclusions to your coverage that leave you without coverage for your risk. (You might have some costly holes in your umbrella). This is why it is critical to work with a knowledgeable insurance agent who is going to do everything in their power to ensure that you have the appropriate coverage you need to protect yourself.

Now we can finally get to the part you've been waiting for!

Which Is Best For You, An LLC Or An Umbrella Policy?

What it comes down to is what kind of property you own. If you own a multi-unit property or commercial property you should consider having both an LLC and an umbrella policy because you have more liability exposure when you have more tenants.

On the other hand, if you have a single-family rental in an otherwise good neighborhood where you feel you are less likely to be sued, then you could consider having just one, an LLC or an umbrella policy.

You should always consider both an LLC and an umbrella policy. But most of all get all the information you need to make an informed decision. That way you are protecting your assets in the most efficient and cost-effective way possible. Royal Legal Solutions can assist you in forming the best structure for your situation. Schedule your asset protection consultation today and let the professionals worry about your liability instead.

How The IRS Can Take Your IRA Money: Taxes and Distributions

You're probably already aware of some of the countless ways the IRS tries to get your money. Here in the land of the free and the IRS, we all are. Let's talk about how you can give them less and pocket more using your IRA.

How Uncle Sam Gets Your IRA Money: Taxes and Distributions

Consider the main ways the IRS gets its hands on your IRA's dollars.

As a result, any money distributed from your 401k to you will be reduced by 20%. That 20% will be sent to the IRS in expectation of the taxes that will be due from you come time for distribution.

However, any money distributed from an IRA is not subject to the 20% withholding as you can opt-out of withholding. This legit loophole is just one of the advantages of using an IRA in retirement instead of a 401k. What this means is the money distributed from an IRA can be received by you in full.

Remember, the tax owed on a distribution from an IRA or 401k is identical. The difference between the two is when you are required to pay the IRS. Regardless of which you use, you will receive a 1099-R from your custodian/administrator. But in the 401k distribution, you are required to set aside and effectively pre-pay the taxes owed.

Example of Bypassing Withholding Tax on your IRA/401k

Okay so, what is the use of information if you never learn how to apply it. (College anyone?) Let’s walk through a common situation to illustrate the above information you just learned.

John is 65 years old and has successfully grown his 401k to a nice amount. He's decided to retire (finally) and enjoy his life the way it was meant to be, on a beach somewhere. He wants to take $500,000 from his 401k. He contacts his 401k administrator and is told that on a $500,000 distribution they will send him $400,000 and that $100,000 will have to be sent to the IRS for him to cover the 20% withholding requirement.

But wait. John just read this article, he knows that the 20% withholding requirement does not apply to IRAs. John decides to rollover/transfer the $500,000 from his 401k directly to an IRA.

Once the funds arrive at his IRA, John takes the $500,000 distribution from the IRA.  There is no 20% withholding tax so he actually receives $500,000 in total. John will still owe taxes on the $500,000 distribution from the IRA and he will receive a 1099-R to include on his tax return.

All in all, John has given himself the ability to access all of the money distributed for his retirement account without the need for sending money to the IRS at the time of distribution.

There you have it, folks. Don’t take distributions from a 401k and then voluntarily donate money to the IRS when you can roll over/transfer those 401k funds to an IRA and receive all of your money without a 20% withholding.

For more information on making your retirement dollars work harder for you, contact us with any questions. Feel free to look around at our many other articles on 401ks, IRAs, the self-directed IRA LLC, and of course, the mighty Roth IRA. Which choices will be best for you depends on many factors, but you can save a lot of time and money by getting advice from our legal and tax experts. Take our tax discovery quiz and schedule your personal retirement consultation today, and live large in the long run.

7 Benefits Of The Self-Directed IRA

The benefits of the self-directed IRA include absolute freedom & control to decide how you invest and what you invest in. When you think about it, this is a privilege the average investor lacks.

IRA stands for Individual Retirement Account, and it's a great way to save for your retirement. A lot of people think an IRA itself is an investment - but it's just the vehicle in which you keep stocks, bonds, mutual funds and other assets. A self-directed individual retirement account (SDIRA) is a special IRA that can hold a variety of investments types normally prohibited from regular IRAs.

While there are many advantages to this powerful investment tool, we've taken the time to list some of our favorites. Below you can read about the top seven exclusive & cost effective benefits of the self-directed IRA LLC.

Benefit #1: Tax Advantages

With a self-directed IRA LLC, you have all the tax advantages of traditional IRAs, as well as tax deferral and tax free gains. All income and gains generated by your IRA investment will flow back to your IRA tax free.
What this means is that you'll experience tax free growth.

Instead of paying tax on the returns from your investments, tax is paid only at a later date when a distribution is taken, leaving your investment to grow tax free.

Benefit #2: Investment & Diversification Benefits

What about self-directed IRA real estate? Your choices include real estate & private business entities. Once again, you can do this tax free.This will also enable you to build a solid portfolio that'll generate beefy returns in both good times and bad times.

Benefit #3: Access

The benefits of the self-directed IRA LLC include having direct access to your IRA funds. This  allows you to make an investment quickly and efficiently. There is no need to obtain approvals or send money to an IRA custodian.

Benefit #4: Speed 

With a self-directed IRA LLC, whenever you find an investment that you want to make with your IRA funds, simply write a check or wire the funds straight from your LLC bank account to make the investment. Other retirement accounts usually have to talk with their custodian first, which can cause a delay.

Benefit #5: Lower Fees

Another advantage to a self-directed IRA LLC account is that you can save a lot of money on custodian fees.
You will not be required to pay custodian transaction fees and account valuation fees. (Which can add up to be thousands of dollars over the years.)

Benefit #6: Limited Liability

By using a self-directed IRA LLC, your IRA will benefit from the limited liability protection afforded by using an LLC. With an LLC, all your IRA assets held outside the LLC will be "shielded" from attack.

This is especially important in the case of IRA real estate investments. This is an area where many state statutes impose an extended statute of limitation for claims arising from defects in the design or construction of improvements to real estate.

Benefit #7: Asset & Creditor Protection

By using this distinct category of retirement account, you will be protected for up to $1 million in the case of personal bankruptcy. Most states will also protect a SDIRA from creditors.

The Bottom Line: The Self-Directed IRA Makes Sense

The self-directed IRA LLC is like an IRA on steroids. If you want to take control of your finances, consider this legal entity for your real estate investments (or other assets).
 

Owning Coins With Your Self-Directed IRA LLC

Are you a current or aspiring coin collector? Of course this can be a satisfying hobby in its own right, but what if you want your coins to be protected as an investment? You may already be familiar with, or even already investing with a Self-Directed IRA LLC. But many investors don't know that sometimes you can hold certain types of coins within a Self-Directed IRA LLC. Of course, holding your coins with this type of account is not without heavy restriction from the taxman. Ensuring with your compliance with the law can be a complex matter, but we're here to break it down as simply as possible.

When it comes to investing and holding coins or metals with your Self-Directed IRA, Internal Revenue Code Section 408 outlines what your friends at the IRS say you can and can’t do.  Items classified as "collectibles" can't be held within your Self-Directed IRA LLC. These include, but aren't limited to, the following:

But wait, there are some exceptions.

Exceptions for Coins in a Self-Directed IRA


The IRS makes specific allowances fors specific types of  gold or silver coins, as well as any coins minted or issued within the U.S. This will be a recurring theme in the life of a coin-collecting investor.  All of the coins allowed in a Self-Directed IRA have to originate and have been crafted by either the federal or a state government.

So what defines these exceptions? Here are  the rules, which you can read for yourself (scroll down to section "m" for the exceptions). And yes, this will involve some serious reading. As you read, remember that collectibles are NOT fair game. This should help you determine what items in your collection meet the specifics. Don't worry, we'll go over all of this in more detail below.
Here's a quick summary of everything above you just read. Or, more likely, skipped right on over. And I don't blame you, at least I get paid to read this stuff. This portion of the tax code is basically saying any metals must be in the "physical possession" of an American institution, such as a bank.  This, however, doesn't apply to specific coins, such as you might have in your own collection. More details about the physical possession requirement can be found below.
31 U.S.C. 5112 gives a comprehensive list and definition of the types of coins that the IRS allows. Refer to it in the link above if you're unsure whether your coins are permitted in your Self-Directed IRA LLC.

How Do Investors Hold IRS-Approved Coins With A Self-Directed IRA?

Hopefully you now have at least some understanding about how the IRS views Self-Directed IRA’s holding coins. If you don’t, I can’t blame you. There’s a reason people pay me money to interpret these IRS rules for them!
Did you know that a coin can be treated as bullion? This means that, it's essentially going to be treated similarly to precious metals (such as raw platinum, etc.). That "physical possession" requirement  we discussed above will apply if this is the case.

What’s the Key Difference Between Bullion and Money?

Think of bullion as raw material. Gold, as we all know, can be made into lots of stuff: jewelry, coins, nuggets, bars, even a lovely commode if you're ultra-wealthy and eccentric. Bullion is distinguished from money based on the fact that it is appraised, bought, and sold at a given price based on mass and purity.  The smart-alecks reading this are likely already aware that the value of these kinds of items can fluctuate substantially.
Money, however, only has a face value. Most of the time, what you see is what you get.  Whether we're talking a $20 bill or a quarter, you know exactly what it's worth and can exchange it for items of equivalent value basically anywhere in the U.S.

Physical Possession

It appears those requirements regarding where IRA-held coins are stored apply both to bullion and coins. This includes the IRS-approved coins, such as the American Eagle gold coins collectors know and love. The rationale behind this is the fact that many of these coins are worth far more than their face value, based on the fact that their materials are worth more than however much they were stamped to be worth when they were minted.

Which means, legally speaking, you should put all IRS approved coins in a bank or other trust.

Putting IRS-Approved Coins in a Bank


Banks are a smart place to hold your coins.  They're also often the only legal place to do so, at least if you want the coins in your Self-Directed IRA LLC. There's some debate over whether safe deposit boxes are compliant with the Taxman's requirements.
Many people believe a safe deposit box held within your Self-Directed IRA LLC (complete with its name on it, not yours) will be okay with Uncle Sam.  IRS-approved precious metals should not be stored at home or in the personal possession of an individual the IRS wouldn't consider a trustee. So if you own the coins, don’t keep them at home or at your friend's house.
Here’s my personal take on this issue. So before I give you my perspective from a legal standpoint, just remember, it’s my job to help you avoid costly fees and penalties. Also keep in mind that unless you've paid a retainer and have  a signed contract with both of our names on it, I'm not your lawyer.
Your best option when it comes to IRS-approved precious metals or coins which are owned by your retirement account is to keep them in a depository approved by the IRS. This will eliminate any doubt that you're keeping in line with the physical possession requirements.  
If you would like answers to any questions you have about owning coins, collectables, or anything else  with your Self-Directed IRA LLC, call Royal Legal Solutions at (512) 757–3994 to schedule your consultation.
 

How To Buy Real Estate With A Self-Directed IRA LLC

Remembering these tips will not only help you make more money, but they'll also keep your friends at the IRS happy!
So I realize you might be wondering...

Why buy real estate investments with a Self-Directed IRA LLC?

A self-directed IRA LLC offers you the ability to use your retirement funds to make almost any type of investment. The IRS permits using this legal entity to purchase real estate or raw land. Making a real estate investment is as simple as writing a check from your Self-Directed IRA bank account.

The advantage of purchasing real estate with your self-directed IRA LLC is that all gains are tax-deferred until a distribution is taken (pre-tax 401k distributions are not required until you turn 70 1/2). In the case of a Roth Self-Directed IRA, all gains are tax-free.

For example, if you purchased real estate with your self-directed IRA LLC for $500,000 and you later sold the property for $800,000, the $300,000 of gain appreciation would generally be tax-deferred.

If you purchased the property using personal funds (non-retirement funds), the gain would be subject to federal income tax and probably state income tax as well. (Which obviously sucks.)

Tips For Self-Directed IRA LLC Investing

If you have any questions about investing in real estate with a self-directed IRA LLC, Royal Legal Solutions is here to help you.

Top 10 Features Of The Solo 401k Plan: Empower Your Business

Are you an independent contractor or the only employee of a business you own? If so, you may want to learn about the Solo 401k.

A Solo 401k is a dream come true for small businesses, independent contractors and sole proprietors, such as consultants or freelance writers. A Solo 401k Plan can be adopted by any business with no employees other than the owner(s).

The business can be a sole proprietorship, LLC, corporation, or partnership. The Solo 401k is a tax efficient and cost effective plan offering all the benefits of a Self-Directed IRA, plus additional features.

Solo 401k Features and Benefits

1. Easy to maintain.

There is no annual filing requirement unless your solo 401k plan exceeds $250,000 in assets. If it does you will need to file a short information return with the IRS (Form 5500-EZ).

2. Freedom of choice and tax-free investing.

With a Solo 401K Plan, you will be able to invest in almost any type of investment opportunity, including:

Your only limit is your imagination.
Note: The income and gains from these investments will flow back into your Solo 401K Plan tax-free.

3.You can get a loan.

The Solo 401k allows you to borrow up to $50,000 or 50% of your account value, whichever is less. The interest rate will be the current prime rate. You can use the money for anything you want.

4. No Custodian fees.

A Solo 401k plan allows you to eliminate the expense and delays that come with an IRA custodian. This enables you to act quickly when the right investment opportunity presents itself.

Also, because you can open a Solo 401k at any local bank or credit union you won't have to pay custodian fees for the account as you would in the case of an IRA.

Another benefit of the Solo 401k plan is that it doesn't require you to hire a bank or trust company to serve as trustee. This flexibility allows you to serve in the trustee role. This means all assets of the 401k trust are under your direct control.

5. High contribution limits.

While an IRA only allows a $5,500 contribution limit (with a $1,000 additional “catch up” contribution for those over age 50), the solo 401(k) contribution limits are $54,000.  (With an additional $6,000 catch up contribution if you're over age 50.)

Under the 2017 Solo 401k contribution rules, if you're under the age of 50 you can make a maximum employee deferral contribution in the amount of $18,000. That amount can be made in pre-tax or after tax. The after-tax method is known as the Roth account.

On the profit sharing side, your business can make a 25% (20% in the case of a sole proprietorship or single member LLC) profit sharing contribution up to a combined maximum, including your employee deferral, of $54,000.

If you're over the age of 50, you can make a maximum employee deferral contribution in the amount of $24,000. That amount can be made in pre tax or after tax (Roth). (Up to a combined maximum of $60,000.)

6. Contribution options.

You always have the option to contribute as much as legally possible, as well as the option of reducing or even suspending plan contributions if necessary.

7. Roth contributions.

The Solo 401k plan contains a built-in Roth sub-account you can contribute to without any income restrictions. With a Roth sub-account, you can make Roth type contributions while having the ability to make significantly greater contributions than with an IRA.

8. Tax deductions can offset the cost of your plan.

By paying for your Solo 401k with business funds, you would be eligible to claim a deduction for the cost of the plan, including annual maintenance fees.

9. Exemption from UDFI tax.

When an IRA buys real estate that is leveraged with mortgage financing, it creates Unrelated Debt Financed Income (UDFI). This means you're going to be paying a lot of money in taxes!

How much is a lot you ask? The UBTI tax is approximately 40% for 2017-2018! Learn more details about this whopping tax penalty from our previous UBTI breakdown.

But, with a Solo 401k plan, you can use leverage without being subject to the UDFI rules and UBTI tax. This exemption provides significant tax advantages for using a Solo 401k Plan over an IRA for real estate purchases.

10. Rollover options.

A Solo 401k plan can accept rollovers of funds from another retirement savings vehicle, such as an IRA, a SEP, or a previous employer's 401k plan. Which means you can directly rollover your IRA or qualified plan funds to your new 401k Plan for investment or loan purposes.
Note: Roth IRA funds can't be rolled into a Solo 401k Plan.

Still Using an IRA?

While the IRA is nice and all, it just can't compete. With a solo 401k plan, your business will pay less in tax, and you won't have to deal with the typical IRA restrictions.

Are you interested in learning more about Solo 401ks? Call Royal Legal Solutions at (512) 757–3994 to schedule your retirement consultation today.

Most Real Estate Investors Don't Need To Pay For A Registered Agent

If you don't own an LLC yet and you plan on getting one, read this first.

You may or may not know that you're required to have a registered agent in every state where your LLC does business, including the state you formed your LLC in. Each state has different rules when it comes to who can and can't be a registered agent.

The purpose of a registered agent is to receive and process government notices and file annual reports. As I said, every state has their own rules about registered agents. But there are 3 rules that you can find in almost every state:

  1. The Registered Agent must be a resident of the state he or she plans on being a registered agent.
  2. The Registered Agent must have a physical address in the state. (Meaning you can't use a PO box.)
  3. The Registered Agent must be available during “normal” business hours. (As in from 8 to 5 Monday through Friday.)

A registered agent is a permanent requirement. You're required to have one as long as your business continues to operate.

What Happens if I Don't Get a Registered Agent?

Your business could be administratively dissolved (they'll revoke your license) and lose it's ability to do business in a state. Furthermore, you will lose your legal protections and be vulnerable to lawsuits. But where they really stick it to you is the reinstatement process.

The reinstatement process can take several months to a year in some states. Then there's the fees, which can get expensive depending on what state we're talking about.

Should I Be My Own Registered Agent?

That depends.
I'm going to assume you're a real estate investor. If you only own properties in your home state (your state of residence) I wouldn't bother getting an agent. But if you have privacy concerns, then you may want to get one. Otherwise save your money and be your own registered agent.

Learn more about being successful as a real estate investor. Or better yet, contact us to discuss your individual situation. And yes, we can serve as your registered agent in many cases.

What is a Charging Order?

So what's a charging order? I'd like to answer this question with a story.

Let's say I'm a real estate investor (I really am) who has all his properties properly structured inside of an LLC. One day I get into a car wreck.

This results in a judgment against me because it exceeded the limits of the liability for my auto-insurance policy. Because of that they want to try and shake down my LLC.

But they can't touch my LLC.  This is due to the protections that an LLC gives you. It allows your assets to be protected from the personal actions you take in your day to day life. And then of course the charging order comes into play.

How Charging Orders Work

The charging order protects you from creditors. It's not something you get in the mail. In most states, there are 3 things a charging order prevents creditors from doing:

  1. Taking your membership interest in an LLC,
  2. Taking over the management function of your LLC
  3. Force your LLC to sell its assets

In the unlikely event you do lose a lawsuit with an LLC, you'll be okay for the most part. However, you don't just get off "Scott free" (ironically, my name is Scott and I get people off all the time when it comes to lawsuits.)

How a Lien Can Affect Your LLC

What they can do is put a lien against your LLC.  If the creditors put a lien against your LLC, that means any distributions from your LLC to you will go straight to your creditors.

Not to worry, there are ways around a lien if you do ever end up with one against your LLC, or an LLC you have an interest in.
One of the ways to get around a lien is to sell your interest in the LLC to another party. They won't be able to touch the money you gain from that sale, which makes the lien useless.

Make sure you know the laws regarding a charging order before you form one in a specific state. As always when it comes to an LLC structure. some states offer certain advantages and disadvantages.

Fun Fact: The charging order wasn't originally created to protect debtors. It was actually meant to protect co-owners of an LLC from having to work with creditors or a deceased co-owners spouse.

Thanks for reading. If you need assistance with your LLC, contact us today.

What is the Self-Directed IRA?

Do you have an IRA? If yes, you've probably only invested in mutual funds and other types of stock investments. But did you know lot of people that are in the know are now using their IRAs to invest in real estate and other more productive assets? All thanks to the self-directed IRA.

The Self-Directed IRA Basics

As its name suggest, the self directed IRA is an IRA you self-direct, or control. You might think that you control your IRA already. The truth is you don't. Your IRA is controlled by a custodian, and you have a limited choice of investments. You can only invest in things like stocks, bonds and mutual funds.
But by using a self-directed IRA, you'll be able to take complete control of your IRA. You'll be able to streamline the investment process and cut out the custodian, which means no more custodian fees or undue delays. And the best part? You can invest in real estate using a self directed IRA!

The Self-Directed IRA Rules

However, there are certain restrictions that apply to self directed IRA investors. You don't want to violate the IRA rules. (If you do, there are several consequences, including a fine.)
For example, one of these IRA rules is you can't loan money to a disqualified person. Also, there are certain assets that you can't invest in such as artwork, life insurance or collectibles.
Yet despite all these IRA rules, the self-directed IRA is the most powerful investment tool available for an IRA owner. Once you have a self directed IRA, you'll be able to use to invest your IRA funds into highly profitable asset classes with the ease of not having to involve a custodian.
If you have any questions about the self directed IRA, I've written several blog post that should be able to answer all of your questions. To learn more about the self-directed IRA (including how to fund and create one), check out our answers to top self-directed IRA questions. You may also be interested in learning how to buy real estate with your self-directed IRA.
If you have more questions or want to establish your self-directed IRA, Royal Legal Solutions is here to help. Contact us today.

What Makes a Series LLC Different from an LLC?

Have you heard about the Series LLC? It's basically a newer and better version of the normal LLC. Now you might be wondering, what makes the Series LLC different from a normal LLC? Hint: if you have children, you'll catch on fast.

The Series LLC works as if it's a parent-child structure. At the top you have the parent, the Series LLC. It'll have an EIN number and an official formation document stating what state you formed the Series LLC in.

Below the Series LLC you have the series themselves. You'll have series A, series B, etc. The series are what I refer to as the children because they all come from the original Series LLC parent. In this way the Series LLC looks like a family tree.

A Series LLC Can Grow Forever

A Series LLC is just like a parent, it can have as many children as it wants, unlike a normal LLC. And this might surprise you, but just like in real life, these children don't cost any extra money to create. That's true before AND after they're born.

Whereas, if you want to put 10 properties in 10 normal LLCs, you'd have to pay state filing fees for each LLC you form.

Each series in a Series LLC is going to be treated for liability purposes as if it were its own LLC. You can take advantage of this by putting one property in each series/child.

This means if you ever have a lawsuit resulting in some type of action against a house belonging to series A, it won't affect the houses held in series B or C, etc.

I forgot to mention, do you like doing joint ventures? The Series LLC is perfect for doing joint ventures!

For example, series C could be a joint venture agreement with as many people as you would like without involving the other series. It'll have its own EIN number, tax return and its own operating agreement to conduct the business of your JV agreement.

The Series LLC Is More Efficient Than a Traditional LLC

The Series LLC is the next evolution of the normal LLC. Compared to a normal LLC, A Series LLC is:

And best of all, you'll be able to file each one of your series (no matter how many you have) on the same tax return. This means thousands of dollars a year in tax preparation savings for you.

If you have any questions about forming a Series LLC I'd be happy to answer them in the comments below. Learn more about how a Series LLC can help you expand your business. If you're ready to form yours, contact us today.

💸 2 Ways Real Estate Investors Lose Money

Believe it or not, as a real estate investor you can only lose money in two ways.

Think about it. Either you make a bad investment, or someone sues you and takes your hard-earned money. Other then that, you've got nothing to worry about!

As an attorney, and someone who used to sue people, I can honestly say that lawsuits are basically just legalized stealing. Although, sometimes lawsuits are for a good purpose. But usually they're not, especially in the real estate industry.

How Do I Protect my Money & Real Estate?

So remember, getting sued is one of two ways you can lose money as a real estate investor. This means one of the key things we have to do to guard against half of the way we can lose our money in real estate investing is to protect ourselves specifically from lawsuits.

You're able to protect yourself from lawsuits by using an asset protection strategy. An asset protection strategy protects you from lawsuits and anybody looking to try to sue you. It makes suing you a gamble.

But here's a question. Why do real estate investors, or anyone else for that matter, get sued?

Real Estate Investors Are Sued for Their Success

Basically, you get sued because you have money. Someone else will always want your money. If you didn't have any money (or real estate assets that represent money), nobody would waste their time trying to sue you. So the question becomes, "how do I make it look as if I own nothing?"

You do that by using an LLC structure. You put your assets in an LLC, which is then owned by an anonymous trust. Nobody will be able to trace your assets back to you, meaning nobody will be able to sue you.

Another way to protect your money from lawsuits is by creating a series of fortresses (LLC's) to put your assets in. What we do is make each LLC appear low value and difficult to penetrate during a lawsuit. So even if they do penetrate it, they'll get nothing.

Suing you will be seen a gamble. And guess what?

Attorneys Don't Like Gambling on Protected Real Estate Investors

What an asset protection strategy does is make an attorney feel like suing you is the equivalent of going to Las Vegas to gamble. Suing you is usually a gamble for an attorney anyway, since most attorneys take cases on contingency (they don't get paid unless they win.)

Since most attorneys take their cases on contingency, they're playing to win. So there's no way they'll take a case they think they can't win or isn't worth their time.

At Royal Legal Solutions, we make it a gamble for attorneys to come after your money and your real estate investments. And remember, lawsuits are a business. By making it a gamble to sue you, the reality is it won't make business sense to try suing you. They just won't try it.

Your Insurance Company Won't Help You Protect Your Assets

We’ve been trained to believe insurance companies are there to watch our back. The reality is that your insurance provider is a company, just like Nike or McDonalds. They exist because they make more money than they spend.

These insurance companies are more than happy to take your money as long as things are going well. You would never have any reason to doubt their protection until you decide to file a claim...and get dropped! 

Have you ever noticed how people start suing insurance companies every time a natural disaster happens? Why do you think that is?

Now of course, you should have insurance and you should file claims. This is going to work out fine most of the time. But the reality of the situation is that when you file a big claim, they are going to take a second look and see if they can wiggle out of their responsibility to cover you (see our landlord FAQ article for more on this).

You may just find yourself suing your insurance company like the folks after disasters.

Your Insurance Company Won't Protect Your Assets

While everything's fine, your insurance company will take your money. Yet as soon as something happens and you decide to file a claim, you get dropped. The reality of the situation is, if you have a big claim you'll end up having to sue your insurance company just to get them to pay out.

As an investor you shouldn't rely on filing a claim with your insurance company to protect your assets. Sure, they're possibly going to cover the $5,000 slip and fall case that happened on your icy front porch.

But what they won't cover is where the real story is here. Here's an example of a claim that only an asset protection plan will help. Imagine telling your insurance company that grandma fell through the staircase, broke her hip, and now will be permanently disabled for the rest of her life. You'd almost certainly be unceremoniously dropped.

Don't expect their empathy, either. Instead, they're going to say it was your fault grandma fell through the staircase because you should've known there was something wrong. They'll say your claim is a case of "gross negligence", which is your fault and thus outside of your policy limits.

Your insurance company knows they can do this. The fact is, they have millions of dollars to spend on their legal team, whereas most investors only have a few thousand dollars to spend on ONE attorney.

Protect Your Assets By Being Proactive

Instead of relying on your insurance company to protect your assets, be proactive. You worked hard to get to where you are now, don't lose what you've built.

What you need to do is protect your assets with a proper asset protection strategy, incorporating anonymous trusts and LLCs/Series LLCs to keep people from coming after your money. These legal structures will stop lawsuits before they happen.

Asset protection involves making your ownership anonymous, as well as legally limiting your liability. People won't sue you if they think you have nothing worth taking. They certainly won't be able to sue you if they don't know what you own. Doesn't that sound a lot better than filing a claim? Learn more about basic asset protection strategy from the many articles here on the Royal Legal Solutions website.

If you have any questions, just comment below and I'll answer them as soon as I can. If you're not willing to risk everything you've earned on the futile hope that insurance will protect you, schedule your asset protection consultation today.

Protect Your Assets With a Network Of LLCs and Trusts

If you're a real estate investor in the U.S. with assets in your personal name you need to wake up.

You're in the most litigated industry (real estate) and the most litigious country in the world. Anyone off the street can sue you. It's time for you to get real and learn to protect your assets the right way.

By the end of this article, you'll know the steps you need to take to become judgment-proof.

You should at least spend a little bit of money to protect your wealth, especially if you're investing tens of thousands of dollars into acquiring properties. Otherwise you might lose hundreds of thousands of dollars in just one lawsuit.

A Network Of LLCs and Trusts

Rich investors don't own assets, and for good reason. When you own assets, people can sue you and get to them.

What you need is a network of LLCs and Trusts. Using those legal structures will protect your assets and hide them from people looking to sue you for your hard-earned money.

A network of LLCs and Trusts will make people think they have nothing to gain from you in a lawsuit. On paper, it will look as if you own nothing. At least, you as a person won't. The company will. This means nobody will waste their time trying to sue you.

But let's say they actually find out you own assets. It's still highly unlikely that they'd win a lawsuit against you. And even if they did, they'd get next to nothing because your assets will be separated from your personal name.

Why You Need an Asset Protection Plan Now

Can you afford to lose tens of thousands of dollars? That's what you should be asking yourself, because without an asset protection plan your assets are exposed.

Before I became an asset protection attorney, I used to sue people. I know how these attorneys think when it comes to suing people. I know the strategies they use to see if a case against you is "worth it." If they see that you own assets, they won't hesitate to help someone sue you.

You can call me today to get set up with an asset protection plan to protect your assets. My firm will also connect you  with our trusted CPAs to create a customized tax strategy to optimize your tax benefits and insurance.
As always, if you have any questions feel free to ask me in the comments below.

Learn more about asset protection, then take our quick investor quiz and we'll work with you to protect your assets.

Doing Joint Venture Real Estate Deals With An LLC

A Joint Venture is an efficient way to pool money, skills and other resources to buy properties. Whenever you do a Joint Venture you'll almost always use a Joint Venture LLC. We'll explain why in this article.

Not only will you pay less taxes on your profits when you use an LLC, but you'll also be protected from lawsuits because the property will be owned by an LLC.

So if anybody were to sue you or your partner, they can't get to your assets.

But using an LLC doesn't guarantee the success of your Joint Venture. Read on ...

Real-Life Real Estate Joint Venture Scenario

Here's a case study. Say you and your friend both own an LLC. Then you both decide to use that LLC for a Joint Venture and buy a house.

Everything is going great, until your friend gets sued. Eventually he or she loses the lawsuit. As a result, a "charging order" is placed against all of your friend's assets. A charging order is something creditors use to collect someones debt. Since you both chose to use an LLC for your Joint Venture, the creditors will be entitled to your friend's share of the profits. Oops!

Now your friend probably won't want to distribute any money from the LLC. Which means you won't be able to get any of your-hard earned money. (As partners, you both have to agree to distribute the money!)

The Best Way To Handle Joint Ventures for Real Estate

This wouldn't have been the case if you both used your personal LLCs to do the Joint Venture.

That might sound confusing, but this is how it works: You and someone else each have your own personal LLC. Then you both use your personal LLCs to become members of another LLC as part of a Joint Venture. That's your Joint Venture LLC.

By being members of an LLC using your personal limited liability companies you'll be able to distribute your share of the money (to your personal LLC) without forcing your partner to pay off their creditors. This way you're both happy and your relationship isn't soured.

I'd be glad to answer any questions you have about using LLCs to do Joint Venture in the comments below. Or you can start with our investor quiz and we'll help you figure out the next step.

Do I Need A Registered Agent for My Out Of State LLC?

Whether you're new to the real estate business or not, if you do business outside of your home state you're going to need an LLC registered agent. Learn more about this requirement and how to satisfy it below.

Why a Registered Agent Is Required For Every LLC

An LLC registered agent is required in every state that it does business. The only reason for the registered agent to even exist is because if someone wants to sue your LLC, and they're not able to get to a member or manager personally to be able to serve them. Then this allows them to serve the lawsuit onto the Secretary of State and be able to have a person that must receive service of process or the lawsuit. Typically, these services are able to be engaged for anywhere from between 40 and $75 per year online. And they're all fungible, meaning that they're all the same, no matter where you go. So I always recommend saying, what's the best deal that you an get, and be able to go with that. My name is Scott Smith, I'm an Asset Protection Attorney at Austin, Texas. I'm a real estate investor, and I wanna help you.

Why Is a Registered Agent Required For My LLC?

The purpose of the registered agent is to receive legal correspondence. So for example, if someone wants to sue your LLC, they'll mail the notices to your agent and not your house.

A registered agent is your LLC's point of contact for all legal matters in the state which it does business. The agent is legally responsible for all of your LLC's tax and legal documents.

So, let's say you formed an LLC in Delaware and you live in Florida. You would be required to get someone (it can honestly be anyone) who is a legal resident of the state of Delaware to be your LLC's registered agent. However, there are some exceptions to this requirement.

A few states allow your LLC to be its own agent. And in most states, you won't have to get an agent as long as you have a physical address in that particular state. (Don't try to use a PO box!)

Also worth mentioning is that you can be your own agent.

Can I Be My Own Registered Agent?

Yes you can! But fair warning: If you decide to be your own registered agent, you will be legally responsible for all of your LLC's tax and legal documents. This may cause you to miss an important piece of mail while you're on vacation or sick, etc.

The advantage in having someone else be your agent is that it removes your legal liability. And in that sense, a registered agent is a form of asset protection. Hiring an agent should cost you between $40 and $75 per year online.

And don't worry, they're all the same no matter where you go. So you won't have to compare anything except price when you shop around for an agent.

What Happens if I Don't Get a Registered Agent?

If you don't get an agent, you may be subject to fines and kept from entering into legal contracts or the state court system in the particular state that your LLC was formed in. Some states will even file criminal charges against you.

If you have any questions about registered agents and LLCs, feel free to ask me in the comments below. In the meantime, learn more about LLCs and the all new Series LLC structure.

If you still have personal questions or want to learn more about Royal Legal Solutions' Registered Agent Service, contact us now.

The Different Kinds of LLCs & The Way They Pay Taxes

Surprise surprise, for every different kind of LLC, there are also different taxes. It's important for you to know the different taxes for each kind of LLC. You want to keep your friends at the IRS on your good side, don't you?
Let's go over the different types of LLCs, along with the taxes you have to pay for each particular LLC.

The Single-Member LLC

The single-member LLC is an LLC with only one member, as its name suggests. The single-member LLC will always have passthrough LLC tax treatment. This means that instead of having to pay the 39.1%  corporate tax, you can include the profits of your LLC on your personal income taxes.

A Married Couple LLC

A married couple LLC is an LLC whose only members are two people who are married to each other. A married couple LLC will usually have pass-through tax treatment. But this isn't the case if the LLC is formed in a community property state.

If your LLC is formed in a community property state, you will have to file a partnership tax return for your LLC. As of 2018, the following states have community property laws: Louisiana, Arizona, California, Texas, Washington, Idaho, Nevada, New Mexico, and Wisconsin.

If you file a partnership return, you and your spouse will have to include your respective share of the profits on your income taxes.

Multi-Member LLC

If your LLC has two members that aren't married, then it's considered a multi-member LLC. A multi-member LLC receives pass-through tax treatment. Each member will claim his or her share of the LLC's profits on their respective personal tax returns.

The Series LLC

If you've read my blog before, you may already know a bit about the Series LLC. The Series LLC allows you to create as many "series" as you want. They operate directly under your original LLC, but are treated separately for liability purposes. When it comes to paying taxes with an LLC, things can get tricky.

For example, in California, each series in a Series LLC will have to pay an $800 franchise tax. But in Delaware, no matter how many series you have in your Series LLC, you'd only pay the $300 franchise tax one time.

Because the Series LLC is fairly new, most states allow you to choose the way it gets taxed. Although as new laws get passed, this may or may not change from state to state.

If you have any questions about the tax treatment of LLC's feel free to ask me in the comments below, I'd be glad to help you! In the meantime, check out our previous posts to learn more about pass through tax treatment.

What Does An LLC Cost? And Is It Worth It For Investors?

People ask us all the time: "Is an LLC's cost really worth it?" This one has a simple answer. Absolutely, and this article will show you exactly why.

Let's be honest here. The cost of an LLC isn't nothing. But I promise you, not setting up an LLC is more expensive in the long run.

Setting up an LLC might cost you around $1000 depending on how much you want done with it. I know $1000 may seem like a lot to pay at first. However, an LLC will pay dividends in the long run. Check out my video:

Setting Up And Properly Structuring LLCs: The True Cost

Setting up and properly structuring LLCs isn't cheap.  However, they pay dividends in the long run.

Asset holding company is where you have a lot of your money tied up. The question becomes, do I really need an operating company? Do I really need the shell corporation for me to do all of my business?

A shell corporation (operating company) allows you to have a face to the world. It limits your personal liability from all of the business dealings that you do. This means real dollars, because a lawsuit against you, even if they can't collect against the assets, will go against your credit score. And with a low credit score, you won't be able to obtain the financing you need to operate your business and acquire property.

We're talking about less than $1,000 to protect your credit score, it's pennies on the future dollars that a bad credit score will cost.

An LLC/Shell Corporation Is Cheaper Than A Lawsuit

If you plan on being in the real estate business for the long haul, (I'm talking 10, 20, 30 years), the cost of an LLC is completely worth it.

On the other hand, no one can afford a lawsuit. The details of a lawsuit are required to be listed in public databases by law. So besides severely damaging your credit score and crippling your business, your reputation will also be jeopardized.

Who's going to want to do business with someone who's been sued before? Think about that.

I hope the above information has helped you. If you have any questions, I'd be more than happy to answer them in the comments below. In addition to being an asset protection specialist, I'm also a real estate investor. I know how it feels to be in your shoes.

If you have questions about what the LLC can do for you, schedule your consultation now.

How To Protect Your Series LLC: Doing Your Part

The Series LLC is an excellent legal structure. Assuming you're doing your part, you don't have anything to worry about. If you don't know about the Series LLC, read this Series LLC Primer now. Then come back for the rest.

Everyone else, keep reading.

Protecting the series structure of an LLC is much like protecting multiple LLCs. Each series of a Series LLC is treated just like an individual LLC.

This is something you need to remember when you're running your LLC business. Let's imagine you hae a Series LLC with five different series underneath it. You have to treat each series as if they were five different LLC's.

Keep Adequate Records To Protect Your Series LLC

There's a few things you need to do to protect your series LLC.

One is you must track the money for each different series separately. You must keep those records as if the series are their own LLC.

You should also consider having separate bank accounts for each series. While this isn't a requirement, having separate bank accounts will make the accounting process so much easier.

What Happens If You Fail To Keep Adequate Records?

What happens is that all your series will be merged together by the court as if they were all one company. This completely defeats the purpose of the series.

It's not that your LLC will completely go away and then you end up with no protection. It's just now all of your money is in one pool. This cripples your asset protection strategy. Remember, the reason you have a Series LLC is to minimize the amount of money anybody can come after at any one time.

Let's say you find yourself in a lawsuit and the court decides to treat all the series you've made as one company. If all of your series get treated as one company you better believe the attorney for the other side is going to do everything in his or her power to win that lawsuit.

After all, the more assets you have for the taking, the more money an attorney can earn from suing you. Then let's say you actually lose the lawsuit. That's the equivalent of someone winning the power-ball, with the prize pool being all of your assets!

On the other hand, if your series hadn't all been merged together, the majority of your wealth and assets would have been untouched.

So remember: keep separate bank accounts, keep adequate records, and make sure you're doing your part!

If you have any questions about what we just went over don't hesitate to ask me in the comments! I'd be glad to help you by answering any questions you have below. If you want to discuss your unique situation, schedule your personal consultation today.

Is Your LLC Easy to Sue or Is it Litigation-Proof?

You've likely heard online from some keyboard warrior or a CPA or perhaps even from an attorney that an suing an LLC is easy. This is absolutely not true.

LLCs are incredibly hard to sue, if not litigation proof, if they are maintained correctly. The problem is that most LLC owners don't do the things necessary to maintain their LLC's legal status. If you don't treat your LLC like an LLC, then when a lawsuit comes around the courts won't either.

Let's go over what you need to do to keep your LLC litigation-proof during a lawsuit.

How To Keep Your LLC Litigation-Proof

The first thing you need to keep in mind is that you must maintain records and accurate accounting of your company. If you don't have a company bank account, you need to get one ASAP. Here are two things you should ask yourself when it comes to your company bank account:

You need to run everything through a bank account for your company to make sure its seen as a legitimate and separate entity from yourself. Bonus: This will also make doing your taxes easier.

You cannot treat your company bank account as if it's your personal piggy bank. This means you have to be careful in the accounting for your company. If you ever take money out of your company account you must keep a record of it as a dividend from your company.

If you fail to do the above, your LLC's legal status will no longer apply. You will be easy to sue. Keep your records on point to keep your LLC protected.

Maintain Accurate Records And Suing Your LLC Will Be Harder

I recommend keeping an eye on your company bank account at all times. Even CPAs can make mistakes.

If you have any questions about what we just went over feel free to ask me in the comments section, I'd be glad to help you. If you've got this down, check out our other posts to learn more about preserving your wealth with an LLC structure.

If you're ready to form your LLC or improve your asset protection plan, we can help you. Schedule your personal consultation today. Our experts can assist with every aspect of company formation, management, and oversight. We're also happy to address your business banking and tax questions.

What's a 'Pass Through Entity' & How Does It Help Real Estate Investors?

A pass-through entity is a business structure, such as an LLC, series LLC, or S corporation. We use the term "pass-through" because you can claim the income of these types of businesses on your personal income tax returns instead of a separate business tax return. Watch the video below and I'll explain:

LLCs Can Function as Pass-Through Entities

The LLC, or Series LLC, has the easiest tax returns for a single member. As a pass-through entity, all of the income from your company can be recorded on your personal income tax return.

That means you won't be taxed twice and or have to pay thousands of dollars to a CPA to file a business tax return. Normally other business structures have to file a business tax return.

Do you and your spouse file joint income tax returns? That's no problem, the above would still apply. But there are some instances where you will have to file a separate return, despite using a pass-through entity. We'll discuss this, and some of the other basics you should know about pass-through entities, below.

The Partnership Return for Multi-Member LLCs

Some states require at least two members in an LLC. Let's say, for example, you and your partner have an LLC. You're going to file what's known as a partnership return. A partnership return is a separate return for the business itself.

Due to the complexity of a partnership return, you're most likely going to want somebody to help you prepare it. I suggest you hire a CPA who is also a real estate investor.

Also note that an LLC is able to be taxed as a corporation. In some instances it can make sense in terms for your operating company to have that LLC taxed as an S corporation. So keep that in mind.

Speaking of real estate LLCs...

Which Pass-Through Entity Is Best For A Real Estate Investor?

The series LLC offers unbeatable asset protection, easy tax filing and is the foundation of a solid asset protection plan.

Say you own 5 properties. Instead of holding all 5 properties in one LLC, with a series LLC you can create a "series" within your LLC. Each series will hold one property.

The benefit of this is if someone sues one of your series and wins, only that one property in that one series will be affected. The majority of your wealth and assets would be protected.

Another great benefit is, no matter how many "series" you have within your LLC, they can all be filed on the same income tax return. This is a huge cost saving benefit you can't get with a regular LLC.

Total Asset Protection: Do What Rich People Do

"Asset protection" may conjure up images of top hat-wearing, cigar-chomping billionaires, but you don't have to be rich to preserve your wealth. You just have to make sure you don't lose what wealth you've earned so far. You especially don't want to lose money due to something unnecessary, such as a lawsuit.

And that's exactly what an asset protection specialist can help you accomplish. By separating your assets and making your holdings anonymous, you'll never have to worry about another lawsuit again. And that's exactly what we're going to talk about today.

Benefits of Investing with an LLC (Limited Liability Company)

A real estate investor who does not use some kind of entity to own their property is risking everything to a single lawsuit. Even worse, if that investor has entered into partnerships with other investors they likely used a general partnership (a handshake.) From an attorney’s point of view this ownership structure is a beautiful opportunity because it exposes the investor. This means a judgement against the investor could take everything.

are your assets covered? donkey photo

No ... We said 'Cover Your ASSETS' ....

Chances are that you have already heard about using an LLC (limited liability company) for asset protection. By forming and operating an LLC properly, assets you place in the LLC are separated from your personal name. If a lawsuit happens, the judgement is limited to the assets within the LLC. Not only does this mean you are risking less in a worst-case scenario, but it also means you are less likely to face that scenario. Why? People will have less incentive to sue you, since you are limiting the potential earnings they could take.

Take a scenario where someone initiates a lawsuit and you lose, but you hold that property in an LLC. The lawsuit would only impact the assets within the LLC. While you could lose that single property to a lawsuit, it is a much better option than losing the property AND your personal assets. The cost of forming an LLC protects your house and other assets from landing in a future settlement or judgement. And this protection scales for investors with large portfolios utilizing entities such as the series LLC.

Setting up an LLC can take anywhere between a few weeks to a couple months, depending on whether the state approves the name you select for your LLC. Once the LLC is formed you will receive an EIN and can set up a bank account. This allows you to operate the LLC separate from your personal finances. You will balance all collections and expenses through the LLC bank account, proving it can operate on its own. When tax season comes around, most people simply have the LLC function file as a pass-through entity.

Preserve Your Wealth with LLCs & Trusts

We have talked about LLCs and the protections they give you when it comes to lawsuits and money-hungry attorneys. But what you might not know is how you can benefit from using LLCs and trusts at the same time.

Did you know that you can actually use trusts to own LLCs? And since trusts are private documents, nobody will be able to find out who owns the trust, or who the beneficiary of the trust is. (You would be the beneficiary.)

What this means is you can own an LLC anonymously. And yes, you can do a lot to hide ownership of an LLC without a trust. But anytime you put a property in an LLC, you're creating a back door for lawyers to walk through and take your assets.

How? Because every property comes with a deed. Your name will be on that deed (most likely).

But when you have a trust you can put the trust on the deed instead of your name and then put that property in an LLC. Nobody will be able to connect your property to your company. And nobody will be able to figure out who owns your company or who owns your trust because the trust is a private document.

Total Asset Protection requires anonymity - man in hoodie

Anonymity is your friend.

Combine a Trust With An LLC For Total Asset Protection

So let me break this down for you real quick. To achieve total asset protection first you establish a trust. Then you file an LLC. After doing both of those you then buy a property using the trust and put said property in your LLC. End of story.  Now you have total asset protection.

Are You A Real Estate Investor? Help Is Available!

Are you interested in learning more about other asset protection plans? Our free resources are here for you to  learn more about asset protection plans. And always remember, if you want to preserve your wealth, don't put all your eggs (properties) in one basket (a traditional LLC).