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.

Making Your Real Estate Dream Team

Believe it or not, making your real estate dream team only requires three people. You need an attorney, a CPA and a deal maker. A deal maker is either a real estate agent or a wholesaler. For the attorney and the CPA, don't go cheap. A good attorney is worth their weight in gold.

You're investing thousands of dollars. Make sure the deal you're working on is going to be protected. As an attorney, that's what I do. I make sure your company structure, as well as the deal itself is going to flow.

My job is to make sure you're not going to lose your money based upon a legal technicality. Or some other event that's going to cause you a legal headache.

A CPA is also worth its weight in gold in terms of tax savings. Especially after your company gets off the ground a little bit, you're going to want to hire a CPA who's also a real estate investor. A CPA is going to know exactly how to structure the tax savings that's gonna save you the most amount of money.

The Cost Of Your Real Estate Dream Team

Now you might think, wow, I have to pay these people a lot of money for a bunch of years and that's going to cost me a ton. Well maybe not. If you're doing a repeatable kind of business, then it's gonna be the same types of legal documents, as well as the same types of taxation that's going to occur every year. Now there's going to be some minor tweaks here and there to the legalities as well as the tax structure.

But any generic CPA at that point is going to be able to look at the model used by that attorney and by the other CPA that's a specialist and be able to tell you where you're gonna need to tweak a tax return. That will mean long term savings for you.

As far as the wholesaler or your real estate agent goes, these are really the crux of your business. Because those are the people that are going to actually be the ones making you money.

Don't Cheap Out On Your Real Estate Dream Team

As a real estate investor myself, I pay my team well. After all, what they really want to do from their position is cultivate a few number of select clients (hopefully you) to be able to build up their business.

This benefits all parties involved because now they don't have to market their business out to hundreds of people and deal with all of the phone calls and headaches from that. And you get to make consistent profits.

If they could just have a few clients and be able to buy all of the properties it makes their life a lot easier. This also means that you're competing against much less people, in terms of who's negotiating after the fact about what that particular deal is going to be worth.

This increases your leverage in being able to make more money working with those people. Now you might not be able to have enough money to be able to keep a wholesaler exclusive to yourself. Which is fine because...

The Series LLC Comes Into Play

Think about the way you can JV (joint venture) with other partners in bringing in other money to investing in a particular deal. If you combine that JV strategy with a series LLC, you're able to get into more deals at no additional cost.

Remember, the series LLC structure allows you to create as many series as you want. And each one of those series is treated as its own LLC.
That means you can bring in their own JV partner. With its own EIN member, operating agreement, everything that you would do in a traditional LLC. And bringing the money there, the Series LLC doesn't require you to have any additional filing.

So you can literally create a new series on your desktop with a new operating agreement bringing in that JV money and closing the deal with that wholesaler before anyone else is gonna be able to do it.

I hope you found the above information useful. And remember, when it comes to making your real estate dream team, don't cheap! Especially on the CPA.

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.

Why You DON'T Want A Self Directed IRA LLC In California

You may have heard about the benefits of the self directed IRA before. The self directed IRA offers many advantages, including asset protection, tax benefits, and freedom of choice. But if you live in California, you don't want to get one.

California Investor: Don't Get an LLC, Get An IRA Business Trust

With an LLC you end up having to pay an $800 yearly franchise tax as a California resident. (That's on top of the filing fees.) Instead of getting an LLC, you should get what's known as a business trust.

Business trusts aren't subject to the costly franchise tax laws in California. And with a business trust you're able to do everything you can do with an LLC. You can direct your funds where you would like to and you can invest in anything you want. All without involving a custodian.

So yes, with a business trusts you will save money where fees are concerned. But there are some downsides.

The One Downside Of Using An IRA Business Trust

Unfortunately business trusts lack the asset protection you would get with an LLC. However, they're still partly anonymous, which can help you a little bit.

While a business trust won't give you all the asset protection you need, you'll still be able to invest in a cost and tax efficient manner. At the end of the day that's always better than paying custodian fees and missing out on great investment opportunities.

I wish I could've given you better news, but on the bright side at least you know what you're up against in California. If you have any questions feel free to ask me in the comment section, It'd be my pleasure to assist you.

Learn more about the exclusive benefits of having a self directed IRA.

Your IRA Isn't As Safe As You Think It Is: Protect Your IRA

People will tell you that your IRA is safe. I mean come on, it's a retirement account. Yet in reality, they're wrong. Your IRA isn't safe.

The only protection you get by default with an IRA is that it's separate from your personal assets. What this means is someone can't sue you and your IRA at the same time. They'd have to choose to sue either you or your IRA.

But that doesn't make your IRA safe from litigation, especially if your IRA is invested in a lawsuit-prone asset class such as real estate. Also, your IRA is exposed in the sense that it can be disqualified if any of its transactions aren't IRS-approved.

The last thing you want is for the IRS to disqualify your IRA. The penalties are extremely costly.

How Do You Protect Your IRA's Assets?

There are two things you can do to protect your IRA.

The first thing you can do is split your IRA into multiple accounts. Doing this would limit your exposure. For example, if someone sues one of your properties, or if the IRS disqualifies one of your IRA's, the damage would be limited to only one IRA.

The second thing you can do is set up a self-directed IRA with an LLC. I personally like to use a series LLC.  What this allows you to do is take each different asset belonging to your IRA and put it into its own "series." Each series functions as its own LLC.

Let's say someone then sues one of your IRA held assets, which happens to be in a series. Worst case scenario, you lose the lawsuit. In that lawsuit only one of your assets would be affected. The majority of your IRA holdings and wealth will be protected.

Protect Your IRA Properly

By default your IRA is largely unprotected. This means that until you implement asset protection your IRA is exposed to attack, either by the IRS or someone else. If you've invested into multiple properties with your IRA I recommend implementing an asset protection right away.

I hope this information was useful to you, if you have any questions feel free to comment and ask me. Check out my other blogs to learn more about asset protection. If you need help setting up a Self-Directed IRA LLC or asset protection plan, schedule your personal consultation today.

Can Title Insurance Be Transferred? How To Preserve Title Insurance When Transferring Property

Are you in the process of transferring property? Or maybe you're planning to transfer a property, or even multiple properties in the near future. If the answer is no, let’s just hypothetically say you’re looking to transfer your properties into a legal structure as part of your new asset protection plan. Can title insurance be transferred?

Ultimately, this is something most real estate investors will have to deal with at some point in their investing careers. Get this information now so you can stay on top of your business and be prepared when the time comes.

Let's talk about how to preserve your title insurance when transferring, step-by-step.

How Title Insurance Works

Any time you transfer property, you must consider the title insurance implications. Title insurance will generally being invalidated upon the transfer of the property. However, title insurance isn't invalidated if you transfer the property to a wholly owned LLC (an LLC that is completely owned by you, the person that also owns the property).

It also won't invalidate it if you add your spouse to title.

You may also transfer the property to an inter vivos trust where you are the settlor of that trust. This is the type of strategy that we'll be using with our anonymity land trust and we start transferring property.

Property Transfers and Title Insurance

As a real estate investor, you’re painfully aware of the cost of insurance for a property. The last thing you want to do is pay more money than is absolutely necessary for insurance.

Usually when you transfer a property, your hazard and title insurance expire. This typically happens because insurance companies are pretty good at looking out for their own best interests, and have the legal personnel to make sure these stipulations are made in your insurance contract. I know nobody enjoys reading contracts, but go ahead and check if you don't believe me. The vast majority of the time, property transfer means expiration for those types of insurance.

Preserve Title Insurance With a Land Trust

But never fear, smart investor friends: there is a way around this!  You can use the oh-so-useful money-saving and anonymity-preserving land trust, a tool I've written about before here on Bigger Pockets, to preserve your title insurance as well. Here's how it works:  if you transfer your properties into a land trust you’ll be able to preserve both your hazard and title insurance. This in addition any other insurances you might have for the property.

Land trusts are a common component of many asset protection plans because of their ability to give you total anonymity. And as a small bonus, you won’t have to worry about violating the due on sale clause when you transfer your property to a trust. Follow the link in the previous paragraph for much, much more information on these other uses of the land trust.

You might be thinking it sounds too good to be true. The skeptical among you may already be wondering what kind of legal backbends you'll have to do, and if there's a catch here.

Is It Shady To Use a Land Trust? What's the Catch?

Not at all. This is perfectly legal and honest tool, and something that investors can always take advantage of. If you're holding your breath waiting for a surprise gut-punch in the fine print, exhale. You aren't going to find it.

That said, you do need to have your ducks in a row regarding both the property and the trust. First, you must be the settlor of the property you’re transferring to preserve your insurance. You must also be the beneficiary of the trust you’re transferring the property in question into.

Before transferring any property, it's definitely a good idea to review any insurance policy you have. While you're doing this, pay special attention to your title insurance policy. It shouldn’t be too hard to find the part of your insurance contract dealing with this issue. If you're having issues with this, consult with an attorney. A business-savvy professional who deals with contracts regularly, such as an insurance agent, CPA, or other legal professional can also help in a pinch.

Usually, the land trust you want to transfer property to must meet your insurance policy’s criteria for transfer eligibility.  If you’ve looked over the policy and you're still uncertain whether this is the case for you, it's time to check with your agent.

Land Trusts Preserve Title Insurance and Protect Your Assets

The good news is there’s a guaranteed way to make this transfer will work for you.

The most reliable method is fairly straightforward. All you need to do is add the land trust you plan to use as the beneficiary of your insurance policies. Adding your land trust as a beneficiary essentially guarantees that you'll get to keep your insurance.

This method is leaps and bounds better for you than getting a new insurance policy. Why, you ask? Because, as I’m sure you know, a new insurance policy would have to use the current value of the property. And thanks to a little thing called appreciation, which is usually a good thing for investors, the current value is almost certainly higher than it was when you bought it. And while that's good news if you plan to sell it, it's bad news if you're having to get a new insurance policy. It means you’d actually end up having to pay more, perhaps a lot more,  than before. So you want to hold your policy to the last minute before being forced to renew.

First you’d have to pay to re-issue the policy, and since your property has probably appreciated in value, your policy will be more expensive. Second, if you're policy isn't already near its expiration date, you're unnecessarily costing yourself extra money. Extra money which could be used for much more pleasant things than insurance. This is why it's worth the effort to use the land trust method to avoid triggering the expiration clause in that crafty insurance contract.

 

What's The Due On Sale Clause and How Do I Avoid It With A Land Trust?

Despite what you might read on the Internet, you shouldn't worry about the due on sale clause.

Banks are in the business of making loans and collecting mortgage payments. It's true that the due on sale clause would allow them to foreclose on a property, but why would they do that? This could only hurt their interest. They can't collect on payments if there isn't a borrower to pay them.

The fact is, since before 1960 we haven't seen any banks foreclose based upon a violation of the due on sale clause while the borrower was making payments on time.

When Do Banks Invoke The Due On Sale Clause?

I've seen a couple instances where a bank did decide to invoke the due on sale clause. But in all of those situations the mortgage wasn't getting paid. The property was going to get foreclosed on anyway.

These days interest rates are at an all time low. This makes banks unlikely to invoke the due on sale clause. However, if interest rates were to go back up to the standard 6%, then they might change their minds. What exactly do I mean by that?

Let's say you're behind in payments on a 30 year mortgage with a 3.5% interest rate in a market where the prime rate is 6%. If the bank invokes the due on sale clause on your property and resells it, they'll be able to make more money. This is because the property will be re-sold with a 6% interest rate instead of a measly 3.5%.

How Do I Avoid the Due On Sale Clause?

It's important to remember that tens of thousands of real estate investors violate their loan covenants everyday. Yet the banks don't invoke the due on sale clause. But if the banks really wanted to, they could.

Instead of gambling with your properties, what you should do is use a land trust. By using a land trust, you'll be able to transfer your property without angering the bank.

For this method you'll need an LLC and a land trust. So first you'll create a anonymous land trust and place the property(s) into the land trust. Then you'll make your LLC a beneficiary of the land trust. Problem solved!

Not only will a land trust help you avoid triggering the due on sale, but it also helps with transfer taxes and keeping your real estate holdings private.

Get Help With Your Land Trust and Asset Protection Needs

If you have any more questions about asset protection or the due on sale clause, I'd be happy to answer them for you in the comments below.

Also, while we're on the subject of transferring property, you may be interested in our free educational resource on  how to transfer your property and keep your old insurance. We offer these to all of our prospective clients and fellow investors to empower you to make the best choice for your real estate business.

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).

 

The Three Company Structure For Real Estate Investors

Many real estate investors buy and sell property without a company or LLC. While this is okay for investors with 1 or 2 properties, someone with multiple properties would be better off knowing how to structure a real estate investment company. He or she would be better off using the 3 company structure for tax and asset protection purposes.

Just think, the more properties you own, the more risk you're facing, and the more taxes you're paying. That's why it makes sense to use the 3 company structure, which is made up of 2 LLCs and your operating company, a corporation. Note: if you haven't already, see our info on how to start an LLC.

Three Ways to Use an LLC

  1. Buy & Hold LLC. This LLC is for your long-term rentals and other properties that you expect to hold for longer than a year. We can structure this LLC to make it friendly for long-term capital gains tax.
  2. Fix & Flip LLC. This LLC is for properties you plan on holding for less than a year. We can also structure this LLC to make it tax-friendly for short-term capital gains tax.
  3. Operating Company. The operating company will generally be a corporation. Having an operating company will shield you from personal liability.

By using the three company structure, your assets will be protected and your business will become more tax efficient. When you combine the Buy & Hold LLC and the Fix & Flip LLC, all your assets will be protected.

Now, all that's left are your personal assets. These will fall under the protection of your operating company, preventing liability and the risk of having to forfeit your assets in a lawsuit.

In essence, the three company structure protects you and your assets from lawsuits and allows you to get the most money out of your properties.

Why Should I Use Three LLCs?

If you're wondering why one LLC isn't enough, you're not the first investor to ask that question.

Remember the expression, "Don't put all your eggs in one basket?" Not to mix our poultry metaphors, but with one LLC, you're a sitting duck because all your assets can be found in one place. By separating them, not only will it make a lawsuit less likely in the first place, but you can also rake in more profits from these tax-efficient legal structures.

The name of the game (asset protection) is separation and anonymity. Your LLCs will hold everything that's valuable, and nobody except you will know they exist. Your operating company will exist only to sign contracts and negotiate with clients.

So if anything ever went wrong between you and a client business-wise, they wouldn't get anything if from suing you.

But let's say you don't flip homes. If that's the case, then you won't need a Fix & Flip LLC. The same applies to the Buy & Hold LLC if all you're doing is flipping homes. You could have two of each instead in these situations.

And sure, filing an LLC costs money, but unlike a lawsuit, you won't have to worry about bankruptcy. Get maximum asset protection and tax efficiency with the 3 company structure.

Protect Your Assets With An LLC & Property Management Company

As a real estate investor, your priority is to get a return on your investment. But if someone, most likely a tenant or other business, files a lawsuit against you, your profits and assets will instantly vanish. You have to protect your real estate assets. If you think you can rely on your insurance to protect them, think again. Check out our previous post on why insurance is not asset protection for details on protecting your assets properly.

Would you believe me if I told you there's a new real estate investment method that not only allows you to protect your investments, but also save money and increase your return on investment?

I'm referring to the traditional, single purpose LLC. My new method is simple. First you form an LLC. Then you put your property in it. For each property you have, you form one LLC.

By doing this you'll be able to limit your personal liability and reap tax benefits depending on what state you form your LLCs in. You can form an LLC in any state you choose. Smart investors "shop around" to find the state that suits their needs best.

Let's say you have two LLCs, each one holding one separate property. Note that you can also use a Series LLC for this purpose.

What Happens To My Real Estate Assets If One of My LLCs Gets Sued?

Only the property held in the LLC which is subject to the lawsuit can be used to settle judgments. And that's only if you lose, which is unlikely with me at your side.

But if you do lose your other property will be untouchable, your credit will be safe and nobody will be able to bring down your mini real estate empire.
Protecting your credit is essential. Without good credit you can't get future financing, which means your days of real estate investing will most likely come to an end. One lawsuit can ruin everything you've worked for.

Then there's your family to consider if you have one. By holding your properties in an LLC, you will protect them from the fallout of lawsuits as well.

Using An LLC Alone Won't Completely Protect Your Real Estate Assets

Do you want the greatest level of asset protection? Consider putting your asset protection strategy on steroids by forming a corporation to act as your property management company.

This property management company is completely separate from your LLCs. And for a good reason too!

Let's say you have a contractor or tenant that would sue you. Or anybody else that's in business with your real estate company who would sue you. They would only be able to sue your property management company, because it's separate from your LLCs.

They won't have a single claim against any of your real estate investment properties. This is exactly what you want. If they sue you and win, they'd be lucky to get their legal fees paid. Learn more about how I can  make your real estate investment assets untouchable.

The Series LLC vs. LLC (Traditional): Which Is Better For Investors?

A limited liability company (LLC) is a popular way for real estate investors and other entrepreneurs to file a business entity. The LLC offers owners more flexibility than other types of businesses entities. As its name implies, an LLC also affords owners limited liability that can protect them from incurred debt or lawsuits.

The Series LLC is a type of LLC that has been around since 1996, originally starting in Delaware. The Series LLC has become popular because more and more states are allowing these companies to operate. Similar to a corporate umbrella, a Series LLC has a “parent” LLC with one or more “child” LLCs that are filed beneath it.

How does the Series LLC stack up against the traditional LLC? Keep reading to find out!

Think of the Series LLC as a Parent-Child Relationship

I know that sounds weird. I'll explain.

Series LLCs allow a company to separate and “box” specific assets into various sub-LLCs to isolate them from each other. If a lawsuit is brought against one of the LLCs,  the assets and earnings of the other LLCs are shielded from legal consequences.

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.

Let's say you have one Series LLC, a company you will form in the state of Texas. When you form a real estate LLC in Texas it will be recognized as a legitimate company inside of that state. However, unlike most LLCs, yours will outline special provisions in its operating agreement.

And it is through these special provisions that your LLC will have the ability to become a series and have "children". By children, I mean companies within a company. Separate, yet equal.

With a Series LLC, you're able to create as many "children" as you want. Each child is known as a series. This is a powerful advantage because each series is treated separately for liability purposes, just as if it were its own LLC.

As an investor, it's important that you do this from an asset protection point of view. As the saying goes, "never put all your eggs in one basket". I personally think the Series LLC is better than the regular LLC.

Series LLC vs. LLC: The Similarities

A traditional LLC and a series LLC follow the same formation regulations. Articles of formation, and any associated fees, must be filed with the appropriate government body. Most states also require an operating agreement. Both versions of the LLC protect owners from liabilities. Additionally, they do not limit the number of stakeholders or owners and permit non-US citizens to take part in the company.

Series LLC vs. LLC: The Differences

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.

How can a Series LLC reduce startup and ongoing administrative costs? For example, if you file for a traditional LLC in Kansas, the fee is $160. If you file for a series LLC, the master will cost $250 and each series will be an additional $100. If you want to protect three separate assets from debt and litigation, under a Series LLC, this will cost you $450. To get the same protection from a traditional LLC, you would need to file three separate LLC entities, for a total of $480.

Another great advantage of the Series LLC is that it receives one EIN Number (Tax ID), which is filed underneath the company name. (You won't have to use a new EIN number for each series you create.) This allows you to streamline your tax preparation so you don't have to file taxes for each individual company.

Series LLCs are not recognized by every state. Those that do recognize and permit the formation of a Series LLC may have varying laws that dictate how to do so.

Other states, like California, do not permit Series LLCs to be formed but do recognize those legally established in other states.

If The Series LLC is Better, Why Isn't Every Investor Using It?

It comes down to risk tolerance.

Some people think if a series was subject to a lawsuit that it wouldn't be recognized in a state that doesn't formally have a law regarding the usage of series. And if a series isn't recognized in a lawsuit, you'll lose all your legal protection. This means someone's attorney will "go to town" on your assets.

Unfortunately, there haven't been many cases regarding the recognition of a series from state to state. But there are a lot of good reasons and precedent suggesting a Series LLC would be recognized in any state. For example, states already recognize LLCs formed in other states.

At the end of the day, a Series LLC is still an LLC.

Is a Series LLC Too Risky?

You can always form a regular old-fashioned single-purpose LLC. However, these are more expensive than a Series LLC if you're looking to separate your assets.

If you know what the LLC costs, you may be wondering how are they more expensive? Well, you have to pay for the tax preparation for each one of those companies at the end of every year. Then you'll get a nice bill for those LLC fees too. You'll have to pay formation fees, operations fees, management fees, and registered agent fees for each LLC you create.

Those fees will cost you about $1000 every year.

In the end, all you can do is weigh your odds and consider the risk. How do you feel about the Series LLC versus the regular LLC? Let me know in the comments below, I'd love to hear your opinion as a fellow real estate investor.

A Series LLC Can Grow Forever

A Series LLC is just like a parent, so 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.

Need Help Deciding Between an LLC vs. A Series LLC?

Royal Legal Solutions can provide professional guidance to help you make the most of your entrepreneurial dreams. Our staff understands the nuances of state laws throughout the United States and Canada. As experts, our experience can help you avoid accidentally violating the various regulations your company may encounter and maintain your limited liability.

The 3 Best States to Form a Limited Liability Company

When forming a Limited Liability Company (LLC), not all states will treat you kindly. What it comes down to is the restrictions and benefits they provide under their jurisdiction. Some states offer more legal protection for a limited liability company, while others offer operational benefits.

So what are the best states for LLCs? I have to tell you, there are plenty of advantages for forming an LLC within your home state. But they will likely pale in comparison to places like Nevada, Texas, or Delaware. You may also be interested in our article, Anonymity & The LLC: States Where Business Owners Love The Laws.

Certain states, like those mentioned above, optimize their internal legislation to be extremely business friendly. And why? Because the filing fees for establishing an LLC generate huge revenue for these states. It's almost like a contest since an LLC can be established in any state whether you live there or not.

Now then, let's go over the 3 best states to form a limited liability company, starting with Texas-—where everything really is bigger (especially the asset protection).

best states for llc

Texas: Low Maintenance LLC Bookkeeping

The main benefit of forming a Texas series LLC is the management fees. Or should I say, the lack of management fees.

LLCs are required to produce a significant amount of legal documentation to be fully covered from an operational standpoint, such as taking meeting minutes.

In Texas, companies can bypass this costly annoyance without losing their legal protection. This will make your life a thousand times easier and also improve your chance of beating a potential lawsuit. (Something you definitely want to make sure you do.)

You can read about Texas LLC laws directly on the state's website.

Next up is Nevada. The place nobody would visit if it wasn't for Las Vegas. (Just joking.)

Nevada: Privacy & Lack of Taxes

Unlike Texas, companies formed in Nevada have two major benefits instead of one. These may seem more enticing than the benefit provided by Texas. However, they're merely operational benefits and do little in the way of fully covering you from lawsuits.

The best thing about forming an LLC in Nevada is the lack of taxes. Nevada LLC's don't have to pay any state level taxes, from corporate to personal.

There's also the privacy to consider. If you form your LLC in Nevada you won't have to disclose who the owners are. Needless to say, many shady individuals form an LLC in Nevada just for that reason alone.

So yeah, you might just want to move to Nevada to do business. You'll get over the year-round heat before you know it. And you might even pick up a gambling habit or two with Las Vegas being so close.

Learn more about forming an LLC in Nevada by speaking with Royal Legal. Anyway, enough talk about glorified deserts Nevada.  Next up is Delaware!

Delaware: Favorable Courts, Legal Protection & Operational Benefits

You may have heard about the excellent business terms provided by Delaware. When it comes to legal protection, the key benefit in Delaware is the Chancery Court.

The judges presiding over this court specialize in business law and are known to provide fair rulings. Just remember this won’t help you if you don’t have proper legal coverage or haven’t maintained your records correctly.

Also worth mentioning is that Delaware provides some of the same operational benefits as Nevada. You can learn more about forming an LLC in Delaware on the state's handy website.

So which state do you think is best for forming your LLC? Tell me in the comments below, I'm always interested in hearing your perspective!

Do you need personalized advice on the best state for forming an LLC? Get in touch with us! Or see my article on the Best States To Form LLCs for Real Estate on BiggerPockets.

How To Hide Ownership Of A Company: 3 Simple Steps

The main reason you might want to know how to hide ownership of a company is to prevent lawsuits.

With that being said, the purpose of this article is to introduce the concept of anonymity, and one of the most effective tools for maintaining your anonymity is the Anonymous Trust. When set up correctly, the anonymous trust can be extremely effective at hiding ownership of your company—which in turn prevents you from being sued.

Here are three simple steps you can follow to hide company ownership and prevent lawsuits.

Step #1: Form an Anonymous Trust

The Series LLC reduces your liability exposure, which effectively limits the potential damage a lawsuit can do to you. What it doesn't do is stop the lawsuit from happening in the first place. On the other hand, an anonymous trust can. If you truly want to make your company litigation proof and protect your assets, you need an anonymous land trust.

The probability of a lawsuit happening is based on three separate components: legal, factual, and financial.  An anonymous trust will attack each of those motivating factors. What this does is reduce the chance of a lawsuit happening in the first place.

Step #2: List Your Anonymous Trust as a Member of Your LLC

Yes, believe it or not, you can do that, at least in America. (You have several options when it comes to structuring your business assets.) Anyway, this tactic targets the financial component of a lawsuit.

Why? 

Because lawsuits only happen when a plaintiff believes they have a reasonable case for seizing assets to cover damages. If there's nothing they think they can seize from you, they won't sue you. 

The anonymous trust structure enables you to hide company ownership by listing your company as a member in your LLC’s Articles of Incorporation. Another advantage of an anonymous trust is that you don't have to file it with the state. This means the people who want to sue you won’t be able to access your ownership information in the public records.

There will be nothing to associate the assets with your name, shielding you from potential legal action.

Note that you can use this strategy with any type of LLC, including the Series LLC.

Step #3: Allow Uncertainty to Work Its Magic

People sue you because they want your money. Most of the time the people suing you have little to no money in the first place. And if they don't have enough money they can't pay a lawyer to sue you.

People usually get around this obstacle by offering their lawyers part of the settlement. This means it's up to the lawyer whether or not you get sued.

If a lawyer is uncertain about whether you own assets worth anything, they won't waste their time trying to sue you. After your anonymous trust is in place it will be next to impossible for someone to determine what you own. 

No lawyer is going to spend months or years trying to figure out what you own, period. I would know, I'm an attorney myself.

I hope you enjoyed this article. If you want to hide company ownership, make sure you do it right. To learn more about setting up an anonymous trust, visit our Land Trust hub or take our investor's quiz and find out if engaging with us is a good option for you.

How to Easily Transfer The Ownership of Your LLC

Transferring ownership interest in a Limited Liability Company (LLC) may seem like a straightforward process. But you need to be careful! The proceedings can easily be sidetracked by anything going back to the original company formation. And if that happens you may end up missing out on opportunities. Even worse, you could lose the protections that you wanted the LLC for in the first place. All while spending unnecessary time in paperwork hell. So how do you safely and easily transfer the owner the ownership of an LLC? I came up with a few simple steps. Check them out below!

Step 1: Identify the Transaction Process Of Ownership

The first thing you want to do is identify what type of transfer process is appropriate in your particular case. There are several reasons for transferring ownership. They can be put into two core categories.

Changing LLC Membership

Whether you're adding new members or losing existing ones, changes to the LLC’s membership must look to your company's buy-sell agreement or buyout provisions. Both terms refer to the same concept: a set of guidelines for how to transfer ownership interest within the company.

If this is your objective, then skip down the page to step #2 where we talk about operating agreements.

Selling the Business Itself

Preparing for an acquisition is much more complex and requires a good understanding of legal and fiscal options. You can draft the initial sale agreement in a memorandum of understanding or term sheet. However you will need to follow-up with a formal contract of sale. For this type of process, it’s always a good idea to consult a lawyer who specializes in buying and selling LLCs.

Step 2: Abide By Legal Requirements

Next, you need to look at the legal and operational requirements to execute the transfer. It’s important to abide by external law as well as internal policy. Let’s take a quick look at how both of these can affect your business transfer.

The LLC Operating Agreement

Members of an LLC generally sign a binding contract called an operating agreement. This document specifies the way a company will operate and covers various aspects of business processes. Including buy-sell contracts and buyout provisions.

It’s essential to determine whether your company has an operating agreement. If it does, you should find out whether it has any guidelines or requirements for transferring ownership.

Laws Of The Company's Home State

Limited Liability Companies are entities of the state in which they were formed. Which means they're subject to state laws. Each state takes its own unique stance on business law. Some are lenient, others not so much. You can read about my advice on which to form an LLC here. Spend some time looking through the governing state’s laws regarding your LLC. Take notes related to any restrictions or requirements you may need to follow. It’s also a good idea to make sure the operating agreement proceedings fall in  line with state statute. If you're lost, get an attorney with experience in entity formation and similar transactions to help. Being a great investor doesn't mean you can also be your own lawyer. State LLC law is complex. You can view a this example of Texas's LLC laws if you want to know my pain.

Quick Recap: Follow Instructions and Get Professional Help With Your LLC

If you're interested in transferring ownership or membership of your Limited Liability Company, make sure to read your operating agreement, buyout provisions, and state legislation. And if you want to sell your company or are considering purchasing a business, then you should consult a legal expert to make sure your transfer goes smoothly. Royal Legal Solutions offers full-service LLC and (S)LLC formation. This means, we can help you transfer ownership while you get back to what you do best: running your business. Reach out for your LLC transfer consultation today.

Litigation Proof? How the Right Business Structure Can Save Your Hide

Making your company litigation-proof is like trying to make a house tornado-proof. There's a lot you can do, but there's always going to be some vulnerability there.

Business owners and investors might as well think of lawsuits as a force of nature. You can't predict them, and you can barely protect yourself from one. This is even more true once the lawsuit has been filed. These life-ruining events pick up momentum from the beginning, just like a tornado.

The reality is you will be sued as long as the conditions are right. The only thing preventing a lawsuit is the correct set of circumstances.

Don’t assume probability will save you. One in four Americans are sued in their lifetimes. Business owners and investors are even more likely than a regular Joe to be sued. It could easily happen to you!

Remember, lawsuits are like nature: they're inevitable. It's a question of when, not if, they will happen or not.

Litigation Proof: Tornado

Why Do Lawsuits Happen?

There are three conditions that make a lawsuit extremely likely. If all three are active at the same time, then a lawsuit is almost guaranteed to happen.

How To Make Your Company Litigation Proof

While there is no way to make your company immune to a lawsuit, you can definitely lower the probability of one taking place. A good asset protection plan addresses each of the conditions/steps I mentioned above. The goal is to stop, prevent, or make it extremely difficult for a plaintiff's legal team to go through each step.

So how do you make it difficult for them to go through each step? The solution is simple.

Spread out your company assets with a series LLC.

Limited Liability Companies (LLCs) prevent someone from suing you personally. You can learn how to start an LLC here. However, storing all your assets in one place is still a risky strategy. What you want to do is spread your holdings across multiple business entities. This will reduce your exposure and make it difficult for someone to determine your net worth.

 

Which One Protects You More From Lawsuits: An LLC or The Series LLC?

If you've got money, people want it. Lawsuits are one of the easiest, yet still legal, ways to get your money. The more money you have the more likely it is someone will try to take it from you in a lawsuit. The same applies to your LLC if you have one.

The more money or equity you have inside your individual LLC, the more attractive it's going to be for someone to sue you. And when they do, all of your assets will be caught under one legal net.

That's why, compared to an LLC, a series LLC offers far more protection for you and your assets when it comes to lawsuits.

The series LLC allows you to "compartmentalize" assets. Which simply means you can spread your assets out so in case someone does sue you, only one of your assets will be at risk. I've already written a lot about the series LLC, you're welcome to read about them here. You can also read about what the IRS thinks about an LLC here.

Today I'd like to answer a question I've never answered before, at least on this blog. I know you might be wondering...

How Much Money Will Setting Up a Series LLC Cost Me?

Our pricing packages for setting up either an LLC or Series LLC at Royal Legal Solutions range from $850 to $4000.

So why should you bother paying for an LLC when you technically don't need to have one? I hate to answer a question with a question, but I've got no choice this time! Ask yourself this: Would you rather risk losing hundreds of thousands of dollars in a lawsuit or spend a couple thousand protecting your assets?

I don't want to see you caught up in a lawsuit with your pants down. I bet you don't either. And remember, you're not just paying for an LLC when you come to Royal Legal Solutions. You're paying for our expertise, professionalism, and unwavering commitment to making sure your assets are protected from lawsuits.

The Land Trust: The Real Estate Investor's Secret Weapon

For longer than any of us has been alive, real estate investors have struggled to prevent lawsuits. And honestly, there is no surefire way to do that. But one of the best ways is using a trust, or specifically, a land trust.

Land trusts are trusts you can use to exclusively hold real estate titles. On their own, they don't protect you from lawsuits, but they can be a critical component of an asset protection plan. They are different from the typical trust because they don't usually involve family.

A land trust is great if you want to remain anonymous. This prevents lawsuits in one simple way. The logic is, if the "other side" doesn't know you own the property, how can they sue you?

Parts of a Real Estate Land Trust

A land trust has three parts. You have a grantor of the trust, a trustee, and a beneficiary. A trustee has control of the property and manages the trust itself.

The beneficiary is the person who receives all the benefits of the land trust (i.e., the income made from the land trust). In some circumstances you'll have to disclose who the trustee of a land trust is. But let's say you don't want to let people know who the trustee is.

For that situation, you can use a nominee trustee. This is a person whose name appears on the trust document. He or she has specific powers which allow them to file tax returns on behalf of the trust. It is the nominee trustee's responsibility to send the tax returns of the trust to the proper tax agency or for filing purposes of the deed(s).

Selling Real Estate From A Land Trust

If someone is looking to actually alienate a property, sell it, or dispose of the trust asset they will want to look at the trust agreement before they buy an asset from a land trust. In that agreement they will see that the nominee trustee doesn't have those powers. Which means you don't have to worry about somebody "running away" with your property. The person who will have the power to sell assets of a trust will be stated in the trust agreement.

The best part is, this person can be you.

If you want to learn more about how land trusts can protect your real estate investments, contact us today. I'd be glad to answer any questions you have.

The Benefits Of Homestead Exemptions

Homestead exemptions protect your property from taxes and creditors. Homestead exemptions are available in 48 states, notably Texas. If you live in one of the states that have these exemptions you can save you thousands in taxes.

Also, If your state has homestead protection, never put it into an LLC. Homestead protection is usually superior to what you can get from an LLC. But you may want to put it into a trust for estate planning purposes.

Every state that has homestead protections and exemptions will have different amounts for what they allow to be exempted. Whatever the exempt amount is, neither the IRS nor creditors can touch your property.

Let's Look at an Example of Homestead Exemptions

If your homestead exemption is $100,000  and your house is $50,000, well then it makes sense to pay off your entire house because we know all that money is going to be protected from a lawsuit since the exemption tells us that no one can get to it.

However, if your house values $200,000 and your homestead is $100,000 then what we want to do is create a lien (harmless debt) against your property to cover that gap so you can pay less in taxes and be protected more from creditors.

Homestead Exemptions Can Be Superior to LLC Protections

If you live in a state which has homestead exemptions, you're better off filing for those then an LLC. It will not only be cheaper (in most cases) but also more beneficial as far as property taxes go.

There are many ways to lower the value of your home and meet a homestead exemption limit. You could use a home equity line of credit and another bank loan or establish your own mortgage company.
These options aren't as complicated or expensive as you might think, especially when it comes to establishing your own mortgage company.

Always Know What Your Homestead Protections & Exemption Limits Are!

They're powerful, cheap to get and "old". The homestead laws have been around for over a century, which means they're not going anywhere.  Remember, never transfer your property to an LLC if you live in a state with homestead laws.

If you're interested in learning more about homestead protections & exemptions, call Royal Legal Solutions now to schedule your free consultation.

3 Key Bookkeeping Requirements For Your Series LLC

Don't turn back if you own a traditional LLC--the information about LLC bookkeeping below applies to both the traditional and series LLCs.

The series LLC is a powerful tool for real estate investors. It helps spread your assets across multiple legal entities, which protects your assets during a lawsuit.

Remember that old saying, "never put all your eggs in one basket"? A series LLC is the best way to spread your "eggs". 

As great as this structure is, it's no substitute for sloppy bookkeeping. If you as a business owner fail to abide by State requirements regarding their LLC essentially violate their agreement with that State. This leave you vulnerable to lawsuits.

LLC bookkeeping can be complex since the rules and regulations vary between States. We strongly recommend hiring a seasoned professional to help in this area. Today we’ll cover three of the most common mistakes business owners make with Series LLCs.

Mistake #1: Failing to Maintain Separation

A series LLC is multiple, individual LLCs. Each LLC within the series is distinct and needs to maintain its own records. Once you know how to start an LLC, you know that a series isn't that much more complicated (and often brings you added protections).

The purpose of the series structure is to make it easier to manage multiple businesses. It streamlines the management process. However, you should not try to combine  the different accounting records of your LLCs. Doing so can invalidate the series structure, leaving you unprotected, among other things.

Mistake #2: Not Naming a Registered Agent

Most states require your company to name an LLC registered agent, which is a physical address within the state. If this is one of the requirements in the state you filed your business, then foregoing that responsibility will invalidate your LLC and leave you unprotected.

Mistake #3: Being Unlicensed To Manage a Series LLC

Some states require you to have a special license in order to manage properties held by another entity or to run a property management company. Violating that specific state’s laws can put your series LLC in jeopardy and result in a costly lawsuit.

That's it for the requirements. But If you're interested in learning more about how to protect yourself and your assets from lawsuits, check out this article on the power of the series LLC with Anonymous Trusts.