May 13, 2025 • 36 mins
In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen take a deep dive into the six LLC structures every entrepreneur, investor, and licensed professional should understand. Whether you're starting a business, protecting rental properties, or building wealth with a high-net-worth strategy, this episode breaks down how to choose and use the right LLC to match your goals.
Here are some of the highlights:
- Mark and Mat discuss the six types of LLCs, starting with the most common type for rental properties.
- Mat explains the benefits of a single-member LLC for asset protection and the flow-through of taxes on personal returns.
- The importance of setting up LLCs early for protection and the potential need for multiple LLCs for multiple properties.
- Mat breaks down the tax savings from avoiding self-employment taxes and the importance of taking a reasonable salary.
- Mark and Mat highlight the advanced planning and asset protection strategies associated with COPE LLCs.
- Mark and Mat introduce the series LLC, which allows for separate liability treatment for multiple properties.
- How separating different types of LLCs for asset protection and tax planning is crucial.
- Grab my FREE Ultimate Tax Strategy Guide HERE!
- You don't want to miss this! Secure your tickets for the most significant business, tax & legal event of the year: Main Street 360
- Looking to connect with a rock star law firm? KKOS is only a click away!
- Are you ready to get certified in EVERY strategy I teach? Start your journey with a FREE 15-minute discovery call to explore the Main Street Tax Pro Certification.
- Check out our YOUTUBE Channel Here: https://www.youtube.com/markjkohler
- Craving more content? Check out my Instagram!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
Welcome to the Main Street Business Podcast with
your distinguished hosts, mark JKohler and Matt Sorenson.
Both are bestselling authorsand have over 25 years of
industry experience, with 10,000client consultations, making
them the leading tax and legalexperts in the nation.
Together, they'll unpack themost complex tax, legal and
financial strategies crucial forsaving more, stressing less and
(00:22):
building generational wealth.
Crucial for saving more,stressing less and building
generational wealth.
Today they're your personaladvisors, ready to break it down
for you and make the tax andlegal game easier than ever.
Here is Mark and Matt.
Speaker 2 (00:34):
I don't want to be running my little bakery
engineering side hustleinfluencer business in the same
LLC that owns my rental property.
That's got 200 grand of equity.
That's why there are six typesof LLCs.
Speaker 3 (00:44):
You might have a type one for your rental and this
type two for your side hustle.
Speaker 2 (00:48):
There are 21 million LLCs in existence in 2025.
Babe, it is now time to convertyour LLC to an S-corp.
Speaker 3 (00:58):
Those millions of people that we just reported
numbers on doing an S-corp or anLLC tax as an S-corp.
The one reason they're doing itis because of this strategy.
Numbers on doing an S-corp oran LLC tax as an.
Speaker 2 (01:06):
S-corp.
The one reason they're doing itis because of this strategy.
Welcome everybody to anotherepisode of the Main Street
Business Podcast, excited to behere with you.
My name's Mark Kohler.
I'm here with my partner, mattSorenson, the man I love and
look up to.
This is such a great topic.
You've been shooting somevideos on LLCs.
You kind of got my juicesflowing.
Speaker 3 (01:23):
Oh yeah, you know I've been all over the LLC topic
like white on rice.
So, I did like my masterclass.
So, mark's like, let's talkabout the six types of LLCs.
I'm like, bring me up to speedon six.
I got to know what he's talkingabout here and the nice thing
is I did know what he wastalking about.
Oh, of course you did, yeah,but I think it's really
important because everybody LLCs, yeah, but like, how do you
structure it for you?
(01:43):
What type of LLC works for you?
We're not just talking aboutwhat state you're going to set
it up in that's anotherconsideration but like, how am I
structuring this LLC from a taxand asset protection?
And it comes down to sixdifferent types.
Speaker 2 (01:54):
Yeah, and that's the good thing and the bad thing.
The good thing is, llcs areflexible.
The bad thing is, so manypeople are like, oh, I'll just
set up an LLC, I'm done.
No, you may have the wrong typeof LLC for what you're trying
to do.
So, without any further ado,let's get into it A couple
little facts.
There are 21 million LLCs inexistence approximately in 2025.
(02:19):
This is over the stats the lastthree years and average growth
rates.
So we're around 21 million LLCs.
Matt, why don't you tell themwhat the most common?
We'll go with type number one.
So this is type one, diabetes,type one LLC.
Speaker 3 (02:32):
Which one is most common.
Yeah, we're talking about therental property that you might
have and you have an LLC forthat.
This is typically single memberand the nice thing about this
is this is just flowing down onyour personal return onto
Schedule E.
Now, this LLC we're not usingfor tax planning and no partners
.
Yes, no partners in here.
This is just you, or maybe yourtrust.
(02:53):
But this is single member,meaning there's no separate tax
return.
It's flowing on your personalreturn.
So why do I have this LLC?
Why is this LLC so popular?
Because of asset protection.
Something happens on the rentalproperty, the tenant slips and
falls.
They have to sue the LLC.
They can only get what the LLCowns.
All your other companies or allyour personal assets.
(03:14):
Those are entirely protected.
You get the limited liabilitypart of the limited liability
company and so we're doing typeone there for asset protection.
But for all of you real estateinvestors out there, this is
rule of thumb number one youneed this LLC for asset
protection, and we set up tensof thousands of these for
clients over the years at ourlaw firm, kqs Lawyers.
Speaker 2 (03:34):
Yeah, and of those tens of thousands we set up, the
current number is approximately10 million.
So almost the majority ofcurrent LLCs filed in the 50
states today, 10 million of them, are single member LLCs that
own real estate.
And clients will ask mesometimes like well, when do I
set up an LLC for my rental?
Do you have a rental Now?
(03:57):
And do not worry.
I want to say this right now Donot worry about the mortgage
and the due on sale clause.
That's the first point I wantto make right now.
Do not worry about the mortgageand the due on sale clause.
That's the first point I wantto make.
Banks understand that they'regoing to get transferred into
LLCs and oftentimes the loandocuments.
There are provisions allowingfor a transfer to an LLC of
which the borrower owns 100% orto their revocable trust and,
(04:20):
frankly, they've already soldyour mortgage on the bond market
five times over.
They do not care and I beg ofyou, do not walk into the bank
and go.
Can I do this?
Don't.
They won't even allow you to goto the bathroom without getting
three bank approvals.
So please just transfer it toyour LLC as soon as you close
Some of you that have rentalproperties for years.
(04:41):
It's time to clean them up.
Let's get them protected orprotecting you from the tenants
in those LLCs.
Another topic we may vet butget those LLCs set up right away
is for protection and a husbandand wife.
My second point was husband andwife is considered in that
bucket because it's going to besingle member on that joint
return.
Speaker 3 (05:00):
Yeah.
The other thing I'll say iswhat if I have multiple
properties?
Should I have multiple of theseLLCs?
Possibly the one tip we havethere when we look at how many
of those this type one LLC forrental real estate how many of
those LLCs do I need?
If I have, let's say, fiveproperties, does that mean I
need five LLCs?
Not necessarily.
If each one of those propertiesonly has 10,000 of equity in it
(05:20):
, because you mortgage it to thehilt and you strip out all the
equity every second you get,we'll probably say let's just
put all five properties in oneLLC.
But here's the risk.
Let's say, on the other hand,each one of those properties has
200,000 of equity, so you got amillion of equity sitting in
one LLC.
If something goes wrong onproperty number one, that
200,000 of equity, in propertynumber two, three, four and five
(05:40):
, the other 800 grand of equity,it's all at risk Because,
remember, even though they can'tsue you personally or get to
another LLC, they can get at theequity in that LLC.
So you can break them up andput separate properties in
separate LLCs.
Our rule of thumb is around200,000 of equity.
Let's look at separating thoseproperties out and keeping them
in separate LLCs because of theasset protection and the
(06:02):
concentration risk of having allyour eggs in one basket.
Speaker 2 (06:06):
Great points, and we'll probably talk about this
LLC the most.
So just a couple more points.
Some of these other six typesdon't need as much airtime.
But now, where you set up thisLLC is a secondary issue too.
You're going to typically setup that LLC in the state where
that rental property is notwhere you live.
We want to get the protectionof the state in which that
(06:27):
property resides the tenants areliving and paying rent.
And the second point I want tomake on this is a lot of people
think well, I'm in California,it's $800 to have an LLC, so I'm
just going to get insurance.
If I get an umbrella policy,I'm good, I don't need to do an
LLC.
Well, have you made a claim forinsurance lately?
Oh, they rushed to your side,they paid exactly what the claim
(06:49):
was for and they didn't giveyou any problems.
Do you know why umbrellainsurance is so cheap?
It's because they rarely payout.
It's after every other policyis exhausted.
Even if they don't pay, thatdoesn't mean the umbrella is
going to pay.
So be careful relying oninsurance.
Be careful where you set up theLLC.
But at the end of the day,these are wonderful structures
(07:10):
for protection.
They're simple and affordable,and every rental property owner
should have one.
Speaker 3 (07:14):
Yeah, and every state you might have heard use
Wyoming, use Delaware, useNevada.
No, we're setting up an LLC inthe state where the property is
located.
Why?
Because if you get sued, you'regoing to get sued in that state
and that state court is goingto look at the LLC you have in
that state.
And if you have a Wyoming LLCfor your rental property in
Illinois, a judge in Illinois isgoing to be like what the hell
(07:36):
did you do, you idiot?
We're not even going torecognize that thing unless you
registered it foreign.
And if you're going to do that,we might as well just set it up
there in the first place.
So a lot to be said there.
And of course, our team, ourlawyers, can help you unpack
this, whether this is looking atasset protection and tax
planning, doing it all at oncewith our trifecta, but number
one rental real estate, singlemember you, your spouse, your
(07:58):
trust, going on schedule E onyour personal return.
It's a popular one.
Speaker 2 (08:06):
Yeah, it is, and I know it can already start
sounding a little confusing andyou're like I just went on
LegalZoom or some online siteand set up an entity in Wyoming
because that's what I was toldto do.
It may be time at the end ofthis podcast to do a
reevaluation and again we have alaw firm that does this every
day and we keep the cost downand make it simple.
But okay, let's go to thenumber two type of LLC and that
(08:29):
is for the small business owner.
That is around 5 million of the21 million LLCs out there.
It's just that new side hustleside gig.
Small business, no partnershusband, wife is fine, but no
outside partners, no mom withdaughter or dad with son.
In business it's either ahusband and wife or an
(08:49):
individual and it's thatquintessential main street
business in America.
They set up an LLC sometimesbecause they were told to, but
also because I want protectionfrom any accident with the
landscaping I'm doing or someoneslipping and falling in front
of my little bakery or whateverthe case may be.
So, generally, a protectionissue again.
Speaker 3 (09:10):
Yeah, generally a protection issue, but also when
you're starting up a newbusiness, this could be a side
hustle, this could be a mainhustle and we're gonna get to
level three here.
That's another twist on this,but just stick with this here.
Sole proprietorship this isgoing on schedule C you may also
think of.
Well, I want that entitybecause I want to establish my
name.
I'm going to have employees,I'm going to have vendors and
(09:34):
I'm going to have contracts.
I don't want those all in mypersonal name.
What employee wants to go workfor Matt Sorensen?
Right?
They want to make work for MattSorensen Enterprises LLC, right
?
They're like what is thisVandelay Industries?
Exactly, it's not just like artVandal.
Who's going to work for art van, you know?
But I'm just saying you have toshow some legitimacy.
Like, is this a real company?
And I'm just telling youcontractors, future employees,
(09:55):
customers are going to be likeyou don't have an entity, Hmm,
maybe I'm not going to hire you.
Are you going to be around nextmonth?
Are you just dipping your toein the water?
So, there is some little bit oflegitimacy, maybe even getting
some business credit.
There's some other reasons toit, First of which would be the
asset protection similar to therental.
And again, this is now yourcustomers, the prospective
customers, vendors, and thebranding and just a little
(10:16):
legitimacy about it is why a lotof people are setting up those
LLCs, because every big business, everything big company you
might use from all the productsyou're using today, was once a
small business.
Okay, let's not make state thatand so, but you need to kind of
get that structure in placefrom day one.
Speaker 2 (10:31):
Yeah, and a couple of other points.
Here is remember there is notax savings with this type of
LLC.
And some people go oh, I set upan LLC, I'm saving taxes, I can
now write off my car or my homeoffice.
No, you could write that offbefore.
An LLC does not give you morewrite-offs, so be careful with
that.
And the other thing is that I'dlike about this LLC is it's
(10:53):
really it's the S-corp insurancewhich brings us to the third
type of LLC.
But just to button it up, thatthis type of LLC is great for a
small business owner.
We love it.
And you're not going to putyour rentals in this same LLC.
I don't want to be running mylittle bakery engineering side
(11:13):
hustle influencer business inthe same LLC that owns my rental
property.
That's got 200 grand of equityGreat plan.
So there are two different LLCsdoing two different things.
That's why there are six typesof LLCs.
You're going to use them fordifferent things, for good
reason.
Speaker 3 (11:28):
And many of you will have a few of these different
types of LLCs.
You're not just going to haveone.
You might have a type one foryour rental and this type two
for your side hustle, and maybeyou got a day job okay, or
you're working in corporateAmerica or whatever but you've
got these two different LLCsdoing two different things.
Okay, we're keeping themseparate for asset protection.
I don't want this operatingbusiness where I have customers
(11:49):
having an issue that I've gotall my assets in it with my
rental property, with equityright, and this is our trifecta.
Well, we've got stuff split upand separated as we're doing
planning with clients across thecountry.
So, but, mark, what happens,though, when I'm making money in
this thing?
This is more than just a sidehustle.
I'm after.
I'm writing everything offunder the sun.
I'm making more than 50 K ayear.
Am I stealing in type two?
Speaker 2 (12:12):
Yeah, yeah.
We want to get you out of out oftype two as soon as possible
and let me give you an example.
We can all get our head around.
Think of a realtor.
My daughter Sydney, she's arealtor down in Orange County,
california.
Love her to death.
And she I remember her callingme going dad.
I I've been to all of yourclasses as a kid.
She would sell books outsidethe conferences at the tables,
(12:32):
and she goes don't I need an LLC?
And I'm like, yeah, and thenshe'd say, why?
Again I'm like, were you notlistening all those years?
I was, you know she was.
Oh my gosh.
We have so much fun together,all of our kids, both my and
Matt's kids.
We just love to involve them inbusiness and teach them about
the American dream.
But think of a realtor.
So a realtor starts out as thatsmall business owner, separate
(12:55):
from their rental, and they're alittle LLC not saving taxes.
They're still getting all thewrite-offs they would have got
anyway.
Now they start making 40,50,000, 60,000, $70,000 a year
and they're starting to see somesuccess.
And that's when Cindy, mydaughter, I said babe, it is now
time to convert your LLC to anS-corp, an S-corporation LLC.
(13:18):
And for those of you that havean LLC taxed as an S-corp, you
have to remember that's how I'mgoing to present myself to the
IRS and everyone around me.
I have an S-corp, Even if thethree letters at the end of your
name are still LLC and youstill have the same EIN.
You have now morphed that LLCinto an S-corp for tax savings.
Speaker 3 (13:38):
Yeah, and so your name doesn't change.
So you might start with the LLC, as Mark said, and you graduate
into the LLC, taxes and S-Corp,or you might come right out of
the gate.
You might start a business andbe like I've already know I'm
going to make this amount ofmoney.
I'm a doctor, I'm a physician,whatever.
Coming out of medical school, Iknow I'm going to make that.
Okay, so I'm going to just goLLC, taxes and S-corp and we've
(13:58):
talked about some professionshere.
By the way, this might be aPLLC, depending on your state,
or an LLC.
That just means professionalLLC.
But the difference here is youmade the S selection because
you're going to save on taxeswhen you have a business that
creates ordinary income, whereyou're selling goods or services
.
Remember, you're taxed in twodifferent ways.
You're taxed for income taxpurposes based on your income
(14:20):
tax bracket, but you also haveto pay self-employment taxes.
Okay, this is 15.3%.
You know, if you've worked at ajob, when you get a paycheck,
you see your social security andMedicare deducted off your
paycheck.
That's what this is.
By the way, the company thatyou work for also pays the equal
amount off out of your paycheck.
It's just not off of yourwithholding.
It's what they got to put in,but when you're self-employed
(14:42):
you got to pay both sides.
That's 15.3%.
Now the strategy with theS-corporation, the LLC, where
you get taxes in S-corporationis I get a save on
self-employment tax and forsomeone making 100K a year net,
you can be saving $8,000 a year,almost $9,000 a year.
How you're structuring this onself-employment tax.
(15:03):
So I do this for my own self.
I have my own S corporation,I'm doing this, Mark has it and
so and any of our clients therealtor, the doctor, the dentist
, the consultant you're makingmore than 50K a year.
We want you in the LLC taxesand S corp.
Now the LLC is for tax savings,but it's because we did the
(15:25):
S-election to it.
Speaker 2 (15:26):
Yeah, and there's data.
Our data shows this is 2.8million LLCs in America are
taxed as an S-corp.
There are approximately 6million LLC I'm sorry, 6 million
S corporations in the country,so just under half of them are
an LLC taxed as an S corp.
So it's important to note youcould be an Inc or a company or
(15:50):
a limited or some of theseunique acronyms behind your
company name that allow you tobe an S corp, or you can be an
LLC taxed as an S corp.
It's an important transitionand I'm just going to say this
right now If any of youlistening to this podcast,
watching this video, are makingmore than $50,000 a year net,
(16:11):
you're taken home after payingthe bills, expenses, writing off
the auto, the dining, the blah,blah, blah, and you're making
more than 5,000 a month inprofit.
Making more than 5,000 a monthin profit, celebrate, call your
mom and then call us, Becausenow you are a candidate for the
S-Corporation and I am sick andtired of accountants around the
(16:31):
country.
They're saying well, you don'tmake enough to justify a
reasonable, competent S-Corp.
You need to be making a hundredgrand or 200 grand or 300 grand
.
Stop, If any of you have beentold that you're getting bad
advice and any of youaccountants out there that are
freaking out and calling mereckless or wrong, I have read
every reasonable comp case inthe country for the last 20
(16:51):
years.
I teach continuing education onreasonable comp.
I've written books on this andarticles on this and videos and
trainings on this around thecountry.
Articles on this and videos andtrainings on this around the
country.
Please trust me and realize in25 years, I have never had a
client get audited for nottaking reasonable comp.
We can be very careful yetaggressive with taking less
(17:17):
compensation and making theS-corp work for our clients.
Holy crap, Joe Biden got a bookdeal in 2016, the year he ran
for president, and he did anS-Corporation, took 700 grand in
salary on a $14 million bookdeal.
He saved almost $600,000 inFICA and it made page 32 of the
(17:40):
Wall Street Journal.
Donald Trump claimed realestate professional status, paid
six hundred dollars and wroteoff a ton of depreciation and it
was front page.
You're a crook?
Well, holy crap, they're bothgood tax strategies and millions
of Americans use both taxstrategies.
And not getting too politicalhere, I'm just saying don't
stress about this, accountants.
Reasonable comp is doable.
(18:01):
It's okay.
The S-Corporation is live andwell, and any of you again
listening today.
I know I'm getting fired upabout this, Matt, yeah, yeah,
but I want people to know youare leaving money on the table.
If your accountant is afraid oftheir own shadow, so get that
LLC taxed as an S-Corp.
Call our law firm tomorrow.
The cost of us setting up anentity for you should be a tenth
(18:22):
of the tax savings we create onthat first phone call.
We are going to be here with arelationship with you for many
years to come.
Speaker 3 (18:28):
Yeah, and I think even Jill Biden had an
S-Corporation for her speakingfees and her book, you know, and
was doing the same strategy,and also the other millions of
people that have anS-Corporation.
The whole point of it is to dothis one strategy.
Those millions of people thatwe just reported numbers on
doing an S-corp or an LLC tax asan S-corp, the one reason
they're doing it is because ofthis strategy.
(18:49):
So you've got to implement thisstrategy.
You've got to do this strategyand believe in it.
There's a whole nationalassociation for S-corporations
in Washington that promotes andtries to keep this strategy
intact.
Now you do need to take areasonable salary, like Mark
said and that's part of thestrategy, by the way, which is
the dividend and profit you takeout from the S-corp or LLC tax.
As an S-corp, you don't have topay self-employment tax on.
(19:10):
That's where the tax savingsare.
But you need to take areasonable salary too if you're
running and working in thebusiness as well, and so that's
how the strategy gets down.
You strategy gets down.
You need a little bit of taxplanning work.
With a good tax advisor orlawyers in our office, we can
just make sure that's set up andstructured.
It is not rocket science.
You just get it done, you getit set up, you get on a routine,
you do it every year and thenyou join the tax savings.
All right?
Speaker 2 (19:30):
Well, we are now through three types of LLCs.
Number one, the rental propertyLLC.
Number two, the small businessLLC sole proprietorship.
Number two the small businessLLC sole proprietorship.
Number three, the LLC that wenow tax as an S corporation.
Those are actually threedifferent tax returns Schedule E
, schedule C, as in Charlie, andan 1120S.
(19:52):
So you can see that's whythere's so many variations here.
Now number four, themulti-member LLC.
And you know what?
Damn it, matt.
I've already added a numberseven and a number eight now, so
we started out going.
There's six.
I'm already at number eight,because there's a special
purpose LLC we're going to talkabout here in a minute.
That's true, that's true,that's true.
(20:13):
Oh, my gosh, I can't believe weforgot.
How could we forget about that?
I know, okay.
So but, multi-member LLC is 3.2million.
Speaker 3 (20:19):
Yeah, mark and I are like those jazz musicians in the
club that.
Just they're like when arethese guys going to stop?
We're just going to keepriffing on this forever, oh my
gosh, all right, okay, thepartnership LLC.
Okay, this could be a lot ofdifferent variations, but the
point of it is you have apartner in the business.
Mark and I have partnershipLLCs and a couple of different
variations.
I'll just give you an example.
(20:40):
We own real estate, rentalcommercial real estate that I
own in my trust, mark owns inhis trust.
And then that LLC is apartnership.
It files a 1065 partnershipreturn, but it owns commercial
rental real estate.
We get rental income in it.
We've owned other ones thatwe've sold and had gain in it
when we sold the property.
So there's a couple ofvariations of even type four
(21:01):
here.
Let's go over to the second typeof variation.
That's also a partnership, andthis I'm just giving Mark and I
as the example here.
Just you know, cause we'resitting here and I don't want to
air our other clientsstructures without their
permission, of course, you know,and you could have three or
four or five or 10 partners here.
I'm just given our scenario.
The other is what about anoperating business.
(21:26):
I may have an LLC as theoperating business.
It's the partnership that doesbusiness KKOS lawyers, for
example, main Street BusinessServices LLC.
That's our corporate complianceentity and, of course, our law
firm.
Those are entities that are LLCs.
But then I own mine, my 50%with my S corporation.
Mark owns his 50% with his Scorporation because those are
operating businesses.
We're making enough money inthose.
(21:47):
You pay self-employment taxover there, so we want those to
run through our S corporations.
The partnership that we ownreal estate with it's just Mark
and I personally, because onyour rental real estate you
don't pay self-employment tax.
On it I don't need theSemployment tax on it, I don't
need the S-corp strategyunderneath it.
So there can be lots ofdifferent ways you do the
partnership but that companyitself receives the income, pays
the expenses and then pays itdown to the partners.
(22:09):
Or that's you individually onreal estate, or it could be down
to the rest of corporations Ifyou have a bigger business of
partners that are involved,selling goods or services.
Speaker 2 (22:18):
I like the way you summarized that.
I'll say it another way,because some of you are like, oh
my gosh, my brain's turning toSally, so we don't want that.
This fourth type is think of itcalled a partnership LLC,
multi-member LLC.
Some husbands and wives willset up a two-member LLC.
(22:38):
So, and some husbands and wiveswill set up a two-member LLC.
There could be some strategicreasons for that Second
marriages, maybe some assetprotection.
So that's fine.
And statistics don't tell usexactly how these three and a
half million approximatemulti-member LLCs are structured
.
As owners, they could be two Scorporations like Matt and I.
(22:59):
They could be two trusts buyingrental property.
It could be a husband and wifein a bakery or a landscaping
business again.
So there's a lot of variety.
But the interesting point hereis it's going to be a different
tax return again because we havetwo members or more, and so
that is a certain type of LLCthat's very unique.
And this is again the beauty ofthe LLC world.
(23:22):
We have a lot of flexibility.
When we're planning with you, welike to do what we call a
trifecta.
I've just got to introduce thatwhen you meet with one of our
lawyers, we're going to build apicture of how everything is
integrated.
If you want to have some fun, Iam not going to get on Google,
get on ChatGBT, get on Grok andsay what do Mark Kohler and Matt
Sorenson say about the trifecta?
It'll take you two seconds andyou're going to see diagrams and
(23:44):
videos and articles aboutbringing your tax and legal
picture together.
And then, when you call the lawfirm, we're going to tailor it
to you and it is life-changing.
It will make you so much money,far, far, far, far more than
you ever would pay us to supportyou, so love it.
Ah, matt, now where do we gonext?
I'm kind of like let's do theseries, if that's okay.
(24:05):
Okay, I'll say it this way.
The next two Well, no, no,you're right.
Go go series LLC.
This could be single member ormulti-member.
Speaker 3 (24:14):
Now we're getting into another variation.
Yes, yes.
So, as you see, there'scomplexity to this and that's
why you need a good team helpingyou out.
But, all right, Series LLC thisis an LLC that about 20
different states have.
Not every state has a seriesLLC.
Texas has it, utah has it,nevada, illinois, virginia those
are some of the bigger stateswe're setting them up in
(24:36):
regularly.
But in the series LLC, whatthat is is you file one LLC with
the state and it's your parentmaster LLC, and then that LLC
can adopt sub-series withouthaving to file with the state
and those sub-series getseparate liability treatment.
Why would you use a series LLC?
Well, let's go back to thatreal estate investor example we
(24:56):
gave earlier the five rentalproperties all in one LLC.
Well, what if I want separateliability treatment on all five
rental properties?
That'd mean I have to set upfive LLCs.
Not if those properties are ina state that allows for series
LLCs, because what you do thereis we set up the series LLC, the
master, with the state andwe'll put property one in
sub-series one, property two insub-series two, property three
(25:18):
in sub-series three.
Each of those gets separateliability treatment.
There's not a separate filingto the state or a whole separate
setup.
It's one LLC that can adoptsub-series that gets separate
liability treatment.
So we love the Series LLC forreal estate investors in those
states that have multipleproperties.
Now, again, that could be justyou owning it 100% and it's
(25:38):
single member going on toSchedule E.
This could be a partnershipstructure as well, you with
other partners where there is a1065.
So there's a couple ofvariations of that, but that is
the series LLC.
It's kind of an enhanced assetprotection strategy to get
separate liability treatment inyour separate properties.
That, my friends, is the seriesLLC.
Speaker 2 (25:57):
Now one last factoid on this.
In my handy dandy Mark J Kohlerannual tax planning calendar
for business owners, which youcan get on my website,
markjkohlercom, we have 21series LLCs across America now,
21 different states that providethis strategy, and you're going
to set up that series LLC inthe state where the properties
(26:19):
are and where you have more thanthree to four properties.
That's when you pull thistrigger.
So it could be a single memberor a two member LLC, but it's
going to have this specialclassification as a series LLC,
which gave us number five.
Series LLC, which gave usnumber five, now number six.
In this vein of asset protectionand I like the way you said
(26:45):
this.
Before we started the podcast,matt said yeah, the Series LLC
is about how many properties youhave.
The COPE LLC is about how muchequity you have.
It's kind of like a risk equityissue.
You can only have a couple ofproperties and need a COPE LLC
or other assets too.
Yeah, that's true too.
So the COPE is called acharging order protection entity
.
Believe it or not, this is thefirst year ever there's 21 COPE
(27:07):
states.
This year, legislatures saythat three times around the
country are passing laws for theCOPE and the series more and
more to help Americans buildwealth and protect assets.
So the COPE is a protectiontype LLC that you would be
worried more about.
Asset value more than quantity.
(27:30):
Would you go with that?
Speaker 3 (27:31):
Yeah, so this is where we typically use Wyoming.
Mark said there's other states,but most of those states give
cope protection, for if you havemore than one partner, wyoming
is, and that some of them aresilent.
They don't say one or the other.
Wyoming says if there's onlyone owner of the LLC, we still
give you this cope protection.
Well, what the hell is copeprotection?
Okay, what we're doing here iswe're trying to protect your
(27:55):
assets from your personalliabilities.
Most LLCs and most structureswe've talked about so far, we're
trying to protect your businessoperations from your personal
assets.
So now we're doing the opposite.
How do I protect my assets frommy personal actions?
For example, you get in anaccident and you get for drunk
(28:17):
driving.
Insurance doesn't cover it andyou got a million dollar lawsuit
against you.
You're texting and driving,whatever, and they're like well,
we want to collect against yourassets.
They can go right into yourLLCs that you own a hundred
percent and force you to sellassets.
Let's say you got a property inthere with a million dollars of
equity.
They can force the sale of itand you're thinking but why do I
got LLC protection?
No, no, the regular LLC assetprotection is something that
(28:41):
happens in the LLC and they'retrying to get down to you
personally not something thathappened to you personally and
now they're trying to get intothe LLC.
However, that is where copeprotection comes in and where we
may use a Wyoming LLC, becausewe know we get the COPE
protection there.
Their statute is very clear nomatter how many partners single
member, multi-member you can getCOPE.
Now there's other states, likeMark said, if you're doing
(29:02):
partnership or there's somenuances to this.
I was trying to summarize hereyou get a whole series on this
COPE thing, but what I would sayhere is if you're like this is
getting confusing I'm barelylearning about LLCs, don't worry
about this.
This is advanced planning,advanced strategy.
If you have less than a milliondollars of net worth, don't
(29:24):
even worry about this.
However, if you're building alot of assets, you got a million
dollars more of net worth andyou got some privacy concerns.
This COPE entity can be a greatcompliment or thing to add in,
and so we do that for certainclients that have those
additional concerns a lot ofassets, maybe even some privacy
because there's some otherthings we can do with the COPE
entity for privacy.
Speaker 2 (29:40):
I love it.
I'm not going to add toanything Matt said except tell
you we have resources, we've gotpodcasts on the COPE, we have
articles on the COPE.
I have my book, the Tax andLegal playbook, with a chapter
on this, and I would recommendany of you with more than a
(30:01):
million dollars of net worth inyour life this is a conversation
point you should be bringing upwith your lawyer, and some of
you are like what lawyer do Icall?
I know divorce lawyers.
I know criminal lawyers.
I know, hopefully you don'tknow any criminal lawyers the
ambulance chasing lawyers orwhatever you call them, and but
where do I find a lawyer thatunderstands taxes and asset
(30:22):
protection?
It's kkoslawyerscom and give usa call and we'll do a consult
and once a year you're doingthat checkup to try to bring it
all together.
So, okay, so we have now talkedabout six LLCs and we've got a
couple more to finish.
Yeah, some bonus LLCs.
So the six were rental propertyLLC.
(30:43):
Small business LLC, llc.
Taxes, s-corp LLC, taxes S-corp.
The multi-member LLC and allthe variations go with that.
The series LLC for those of youthat have lots of little
properties in a particular statethat would allow for it.
The COPE LLC if you need assetprotection for one reason or
another.
And then now we get to bring upthe Special Purpose LLC.
(31:07):
This is a special LLC that isallowed to be owned by an IRA.
Maybe, please pray, tell youknow a little something about
this.
Speaker 3 (31:19):
This, yeah, I've written a book on this, the
self-directed IRA handbook.
It's got a chapter on the IRALLC.
But essentially what this is isyou can have your self-directed
IRA own an LLC.
This could be 100% or you couldpartner in too, but let's just
go with the easiest.
Your IRA owns an LLC a hundredpercent.
You can be manager of the LLC.
The LLC has a business checkingaccount.
That LLC can go do real estatedeals, invest in private
companies.
(31:40):
It could have a crypto walletokay All these other investments
that we talk about on oursister podcast, the Directed IRA
podcast.
You can do with an IRA LLC.
Okay.
Now we've got other videos onthis.
I've, like I said, a chapter inmy book.
We've got a podcast theDirected RA podcast on the IRLC
(32:02):
structure multiple ones on it,but this isn't an entity type.
We set up quite a bit for ourself-directed investor customers
.
Not every self-directedinvestor needs the IRLC, but
certain ones may be doing realestate deals or buying
properties at auction where youneed the money quickly.
Some people call this thecheckbook control IRA, but it is
an LLC structure.
It's an IRA LLC.
That is the seventh, yeah, andthat's the bonus.
Speaker 2 (32:21):
Yeah, well, and I made the list.
I know I can't believe it.
Yeah, it's crazy.
Now number eight this is calledthe PLLC, or a professional
limited liability company.
It is related to what youmight've heard of called the
limited liability partnershipsor LLP, or limited liability
liability partnerships.
(32:42):
Oh my gosh.
But the PLLC is a special typeof LLC that have been passed in
almost all 50 states as part ofthe uniform partnership act or
the uniform limited PartnershipAct, and this PLLC is built for
professionals.
And this type of LLC would be.
(33:03):
If Matt and I are going to bepartners in a law firm, we went
with an LLP, which is verysimilar to a PLLC.
But with a PLLC, if you're adentist, a doctor, a lawyer, and
all the states have lists ofthe professional designations
that are allowed to do this, wecan set up an LLC and go out and
do business together asco-managers, co-owners, and
(33:25):
we're not liable for eachother's professional liability,
where he can give bad advice orgood advice, I can give bad
advice or good advice and we'renot liable to one another.
But we can still form aprofessional partnership.
And that's a unique thing whenyou're a professional, because
when you start doing surgery ordoing tax returns or giving
(33:48):
legal advice, you kind of worrywhat your partner might be doing
down the hall, and so these arespecial types of entities for
that.
Speaker 3 (33:54):
Yeah, where we see these, the most popular is going
to be the doctor, the dentist,the lawyer, the architect.
This could be in some states itcould be the realtor, but other
professions you might be.
Well, I'm an electricalcontractor, I'm a plumber, don't
worry about it.
Okay, you can just do a regularLLC.
So there are certain professionsthat have gotten pigeonholed in
the states to say you need todo this so we can help you sort
(34:14):
that out.
You've got to, of course,coordinate with your licensing
board when you're doing that,but if you're going to be in a
profession for a long time,that's the entity setup you're
going to need to do.
You're going to look at all theother players in your industry,
in your profession, and whatare they doing in your state,
and the big players usually aredoing it right.
So you might see PLLC afterthem, or PC or medical
(34:35):
corporation or you know these.
California has some weird ones,of course, and twists, as they
always do.
Yeah, but just worry about thisIf you're a professional with a
certain licensed profession,typically more white collar, but
they make you do this structure.
Speaker 2 (34:48):
It's funny you bring up California because that's
where a lot of our staff, whenthey come on board with our law
firm, have to learn all 50states because it gets tricky
when they come on board with ourlaw firm, have to learn all 50
states because it gets tricky.
But the licensed marriagefamily therapist is a unique one
where these professionallicensing boards require a
certain type of entity becausethey don't want you partnering
with a non-licensed individual.
So California is one where ifyou are a licensed therapist,
(35:10):
you've got to set up a PLLC.
They're going to require that.
They won't let you do an LLCbecause you've got to go get
your license registered with theDoppel or Department of
Professional Licensing and theywant to see a copy of your
entity.
So it can get tricky whenyou're out there.
So this is another entity whereplease do not hack this out
online in the middle of thenight in your underwear after a
(35:33):
bowl of cereal.
Please call the law firm, makea legitimate appointment and we
get you.
Speaker 3 (35:36):
We got you.
Yeah, this is what we do.
Focus on your business and howyou make more money doing what
you do.
That's probably a better use ofyour time.
Outsource the things that youcan, and this is where we'd love
to be a resource on the taxlegal planning.
We want to keep more money inyour pocket, make sure your
assets are protected, and thecritical component to this is
getting your LLCs and yourentity structuring right.
Hopefully, you got some goodideas to make sure you're
(35:59):
optimizing and your situation.
We're here for you if you needus Our law firm, kqs Lawyers and
you don't have to use us.
You can choose the second bestoption.
Speaker 2 (36:07):
Yeah, and remember that maybe Ricky Bobby says
there's either first or thelosers out there, so you can be
a winner.
Speaker 3 (36:14):
Yeah, you can choose Saul Goodman if you want.
You know whoever you want touse.
Speaker 2 (36:18):
That's right.
Well, thanks everybody forlistening and participating in
this incredible journey calledthe American Dream.
We're here for you.
We love Main Street America.
We are so grateful to be a partof your lives and hopefully
this has opened your eyes to alot of opportunity.
And planning the more organizedyou are, the and planning the
more organized you are, the moresuccessful you are.
I know that to be true.
(36:38):
We all know it in our core andwork on your business some days,
not in it.
This is an opportunity for youto level up and hopefully we've
been a part of that process.
See you next time.
Welcome to the Main Street Business Podcast with
your distinguished hosts, mark JKohler and Matt Sorenson.
Both are bestselling authorsand have over 25 years of
industry experience, with 10,000client consultations, making
them the leading tax and legalexperts in the nation.
Together, they'll unpack themost complex tax, legal and
financial strategies crucial forsaving more, stressing less and
(00:22):
building generational wealth.
Crucial for saving more,stressing less and building
generational wealth.
Today they're your personaladvisors, ready to break it down
for you and make the tax andlegal game easier than ever.
Here is Mark and Matt.
Speaker 2 (00:34):
I don't want to be running my little bakery
engineering side hustleinfluencer business in the same
LLC that owns my rental property.
That's got 200 grand of equity.
That's why there are six typesof LLCs.
Speaker 3 (00:44):
You might have a type one for your rental and this
type two for your side hustle.
Speaker 2 (00:48):
There are 21 million LLCs in existence in 2025.
Babe, it is now time to convertyour LLC to an S-corp.
Speaker 3 (00:58):
Those millions of people that we just reported
numbers on doing an S-corp or anLLC tax as an S-corp.
The one reason they're doing itis because of this strategy.
Numbers on doing an S-corp oran LLC tax as an.
Speaker 2 (01:06):
S-corp.
The one reason they're doing itis because of this strategy.
Welcome everybody to anotherepisode of the Main Street
Business Podcast, excited to behere with you.
My name's Mark Kohler.
I'm here with my partner, mattSorenson, the man I love and
look up to.
This is such a great topic.
You've been shooting somevideos on LLCs.
You kind of got my juicesflowing.
Speaker 3 (01:23):
Oh yeah, you know I've been all over the LLC topic
like white on rice.
So, I did like my masterclass.
So, mark's like, let's talkabout the six types of LLCs.
I'm like, bring me up to speedon six.
I got to know what he's talkingabout here and the nice thing
is I did know what he wastalking about.
Oh, of course you did, yeah,but I think it's really
important because everybody LLCs, yeah, but like, how do you
structure it for you?
(01:43):
What type of LLC works for you?
We're not just talking aboutwhat state you're going to set
it up in that's anotherconsideration but like, how am I
structuring this LLC from a taxand asset protection?
And it comes down to sixdifferent types.
Speaker 2 (01:54):
Yeah, and that's the good thing and the bad thing.
The good thing is, llcs areflexible.
The bad thing is, so manypeople are like, oh, I'll just
set up an LLC, I'm done.
No, you may have the wrong typeof LLC for what you're trying
to do.
So, without any further ado,let's get into it A couple
little facts.
There are 21 million LLCs inexistence approximately in 2025.
(02:19):
This is over the stats the lastthree years and average growth
rates.
So we're around 21 million LLCs.
Matt, why don't you tell themwhat the most common?
We'll go with type number one.
So this is type one, diabetes,type one LLC.
Speaker 3 (02:32):
Which one is most common.
Yeah, we're talking about therental property that you might
have and you have an LLC forthat.
This is typically single memberand the nice thing about this
is this is just flowing down onyour personal return onto
Schedule E.
Now, this LLC we're not usingfor tax planning and no partners
.
Yes, no partners in here.
This is just you, or maybe yourtrust.
(02:53):
But this is single member,meaning there's no separate tax
return.
It's flowing on your personalreturn.
So why do I have this LLC?
Why is this LLC so popular?
Because of asset protection.
Something happens on the rentalproperty, the tenant slips and
falls.
They have to sue the LLC.
They can only get what the LLCowns.
All your other companies or allyour personal assets.
(03:14):
Those are entirely protected.
You get the limited liabilitypart of the limited liability
company and so we're doing typeone there for asset protection.
But for all of you real estateinvestors out there, this is
rule of thumb number one youneed this LLC for asset
protection, and we set up tensof thousands of these for
clients over the years at ourlaw firm, kqs Lawyers.
Speaker 2 (03:34):
Yeah, and of those tens of thousands we set up, the
current number is approximately10 million.
So almost the majority ofcurrent LLCs filed in the 50
states today, 10 million of them, are single member LLCs that
own real estate.
And clients will ask mesometimes like well, when do I
set up an LLC for my rental?
Do you have a rental Now?
(03:57):
And do not worry.
I want to say this right now Donot worry about the mortgage
and the due on sale clause.
That's the first point I wantto make right now.
Do not worry about the mortgageand the due on sale clause.
That's the first point I wantto make.
Banks understand that they'regoing to get transferred into
LLCs and oftentimes the loandocuments.
There are provisions allowingfor a transfer to an LLC of
which the borrower owns 100% orto their revocable trust and,
(04:20):
frankly, they've already soldyour mortgage on the bond market
five times over.
They do not care and I beg ofyou, do not walk into the bank
and go.
Can I do this?
Don't.
They won't even allow you to goto the bathroom without getting
three bank approvals.
So please just transfer it toyour LLC as soon as you close
Some of you that have rentalproperties for years.
(04:41):
It's time to clean them up.
Let's get them protected orprotecting you from the tenants
in those LLCs.
Another topic we may vet butget those LLCs set up right away
is for protection and a husbandand wife.
My second point was husband andwife is considered in that
bucket because it's going to besingle member on that joint
return.
Speaker 3 (05:00):
Yeah.
The other thing I'll say iswhat if I have multiple
properties?
Should I have multiple of theseLLCs?
Possibly the one tip we havethere when we look at how many
of those this type one LLC forrental real estate how many of
those LLCs do I need?
If I have, let's say, fiveproperties, does that mean I
need five LLCs?
Not necessarily.
If each one of those propertiesonly has 10,000 of equity in it
(05:20):
, because you mortgage it to thehilt and you strip out all the
equity every second you get,we'll probably say let's just
put all five properties in oneLLC.
But here's the risk.
Let's say, on the other hand,each one of those properties has
200,000 of equity, so you got amillion of equity sitting in
one LLC.
If something goes wrong onproperty number one, that
200,000 of equity, in propertynumber two, three, four and five
(05:40):
, the other 800 grand of equity,it's all at risk Because,
remember, even though they can'tsue you personally or get to
another LLC, they can get at theequity in that LLC.
So you can break them up andput separate properties in
separate LLCs.
Our rule of thumb is around200,000 of equity.
Let's look at separating thoseproperties out and keeping them
in separate LLCs because of theasset protection and the
(06:02):
concentration risk of having allyour eggs in one basket.
Speaker 2 (06:06):
Great points, and we'll probably talk about this
LLC the most.
So just a couple more points.
Some of these other six typesdon't need as much airtime.
But now, where you set up thisLLC is a secondary issue too.
You're going to typically setup that LLC in the state where
that rental property is notwhere you live.
We want to get the protectionof the state in which that
(06:27):
property resides the tenants areliving and paying rent.
And the second point I want tomake on this is a lot of people
think well, I'm in California,it's $800 to have an LLC, so I'm
just going to get insurance.
If I get an umbrella policy,I'm good, I don't need to do an
LLC.
Well, have you made a claim forinsurance lately?
Oh, they rushed to your side,they paid exactly what the claim
(06:49):
was for and they didn't giveyou any problems.
Do you know why umbrellainsurance is so cheap?
It's because they rarely payout.
It's after every other policyis exhausted.
Even if they don't pay, thatdoesn't mean the umbrella is
going to pay.
So be careful relying oninsurance.
Be careful where you set up theLLC.
But at the end of the day,these are wonderful structures
(07:10):
for protection.
They're simple and affordable,and every rental property owner
should have one.
Speaker 3 (07:14):
Yeah, and every state you might have heard use
Wyoming, use Delaware, useNevada.
No, we're setting up an LLC inthe state where the property is
located.
Why?
Because if you get sued, you'regoing to get sued in that state
and that state court is goingto look at the LLC you have in
that state.
And if you have a Wyoming LLCfor your rental property in
Illinois, a judge in Illinois isgoing to be like what the hell
(07:36):
did you do, you idiot?
We're not even going torecognize that thing unless you
registered it foreign.
And if you're going to do that,we might as well just set it up
there in the first place.
So a lot to be said there.
And of course, our team, ourlawyers, can help you unpack
this, whether this is looking atasset protection and tax
planning, doing it all at oncewith our trifecta, but number
one rental real estate, singlemember you, your spouse, your
(07:58):
trust, going on schedule E onyour personal return.
It's a popular one.
Speaker 2 (08:06):
Yeah, it is, and I know it can already start
sounding a little confusing andyou're like I just went on
LegalZoom or some online siteand set up an entity in Wyoming
because that's what I was toldto do.
It may be time at the end ofthis podcast to do a
reevaluation and again we have alaw firm that does this every
day and we keep the cost downand make it simple.
But okay, let's go to thenumber two type of LLC and that
(08:29):
is for the small business owner.
That is around 5 million of the21 million LLCs out there.
It's just that new side hustleside gig.
Small business, no partnershusband, wife is fine, but no
outside partners, no mom withdaughter or dad with son.
In business it's either ahusband and wife or an
(08:49):
individual and it's thatquintessential main street
business in America.
They set up an LLC sometimesbecause they were told to, but
also because I want protectionfrom any accident with the
landscaping I'm doing or someoneslipping and falling in front
of my little bakery or whateverthe case may be.
So, generally, a protectionissue again.
Speaker 3 (09:10):
Yeah, generally a protection issue, but also when
you're starting up a newbusiness, this could be a side
hustle, this could be a mainhustle and we're gonna get to
level three here.
That's another twist on this,but just stick with this here.
Sole proprietorship this isgoing on schedule C you may also
think of.
Well, I want that entitybecause I want to establish my
name.
I'm going to have employees,I'm going to have vendors and
(09:34):
I'm going to have contracts.
I don't want those all in mypersonal name.
What employee wants to go workfor Matt Sorensen?
Right?
They want to make work for MattSorensen Enterprises LLC, right
?
They're like what is thisVandelay Industries?
Exactly, it's not just like artVandal.
Who's going to work for art van, you know?
But I'm just saying you have toshow some legitimacy.
Like, is this a real company?
And I'm just telling youcontractors, future employees,
(09:55):
customers are going to be likeyou don't have an entity, Hmm,
maybe I'm not going to hire you.
Are you going to be around nextmonth?
Are you just dipping your toein the water?
So, there is some little bit oflegitimacy, maybe even getting
some business credit.
There's some other reasons toit, First of which would be the
asset protection similar to therental.
And again, this is now yourcustomers, the prospective
customers, vendors, and thebranding and just a little
(10:16):
legitimacy about it is why a lotof people are setting up those
LLCs, because every big business, everything big company you
might use from all the productsyou're using today, was once a
small business.
Okay, let's not make state thatand so, but you need to kind of
get that structure in placefrom day one.
Speaker 2 (10:31):
Yeah, and a couple of other points.
Here is remember there is notax savings with this type of
LLC.
And some people go oh, I set upan LLC, I'm saving taxes, I can
now write off my car or my homeoffice.
No, you could write that offbefore.
An LLC does not give you morewrite-offs, so be careful with
that.
And the other thing is that I'dlike about this LLC is it's
(10:53):
really it's the S-corp insurancewhich brings us to the third
type of LLC.
But just to button it up, thatthis type of LLC is great for a
small business owner.
We love it.
And you're not going to putyour rentals in this same LLC.
I don't want to be running mylittle bakery engineering side
(11:13):
hustle influencer business inthe same LLC that owns my rental
property.
That's got 200 grand of equityGreat plan.
So there are two different LLCsdoing two different things.
That's why there are six typesof LLCs.
You're going to use them fordifferent things, for good
reason.
Speaker 3 (11:28):
And many of you will have a few of these different
types of LLCs.
You're not just going to haveone.
You might have a type one foryour rental and this type two
for your side hustle, and maybeyou got a day job okay, or
you're working in corporateAmerica or whatever but you've
got these two different LLCsdoing two different things.
Okay, we're keeping themseparate for asset protection.
I don't want this operatingbusiness where I have customers
(11:49):
having an issue that I've gotall my assets in it with my
rental property, with equityright, and this is our trifecta.
Well, we've got stuff split upand separated as we're doing
planning with clients across thecountry.
So, but, mark, what happens,though, when I'm making money in
this thing?
This is more than just a sidehustle.
I'm after.
I'm writing everything offunder the sun.
I'm making more than 50 K ayear.
Am I stealing in type two?
Speaker 2 (12:12):
Yeah, yeah.
We want to get you out of out oftype two as soon as possible
and let me give you an example.
We can all get our head around.
Think of a realtor.
My daughter Sydney, she's arealtor down in Orange County,
california.
Love her to death.
And she I remember her callingme going dad.
I I've been to all of yourclasses as a kid.
She would sell books outsidethe conferences at the tables,
(12:32):
and she goes don't I need an LLC?
And I'm like, yeah, and thenshe'd say, why?
Again I'm like, were you notlistening all those years?
I was, you know she was.
Oh my gosh.
We have so much fun together,all of our kids, both my and
Matt's kids.
We just love to involve them inbusiness and teach them about
the American dream.
But think of a realtor.
So a realtor starts out as thatsmall business owner, separate
(12:55):
from their rental, and they're alittle LLC not saving taxes.
They're still getting all thewrite-offs they would have got
anyway.
Now they start making 40,50,000, 60,000, $70,000 a year
and they're starting to see somesuccess.
And that's when Cindy, mydaughter, I said babe, it is now
time to convert your LLC to anS-corp, an S-corporation LLC.
(13:18):
And for those of you that havean LLC taxed as an S-corp, you
have to remember that's how I'mgoing to present myself to the
IRS and everyone around me.
I have an S-corp, Even if thethree letters at the end of your
name are still LLC and youstill have the same EIN.
You have now morphed that LLCinto an S-corp for tax savings.
Speaker 3 (13:38):
Yeah, and so your name doesn't change.
So you might start with the LLC, as Mark said, and you graduate
into the LLC, taxes and S-Corp,or you might come right out of
the gate.
You might start a business andbe like I've already know I'm
going to make this amount ofmoney.
I'm a doctor, I'm a physician,whatever.
Coming out of medical school, Iknow I'm going to make that.
Okay, so I'm going to just goLLC, taxes and S-corp and we've
(13:58):
talked about some professionshere.
By the way, this might be aPLLC, depending on your state,
or an LLC.
That just means professionalLLC.
But the difference here is youmade the S selection because
you're going to save on taxeswhen you have a business that
creates ordinary income, whereyou're selling goods or services
.
Remember, you're taxed in twodifferent ways.
You're taxed for income taxpurposes based on your income
(14:20):
tax bracket, but you also haveto pay self-employment taxes.
Okay, this is 15.3%.
You know, if you've worked at ajob, when you get a paycheck,
you see your social security andMedicare deducted off your
paycheck.
That's what this is.
By the way, the company thatyou work for also pays the equal
amount off out of your paycheck.
It's just not off of yourwithholding.
It's what they got to put in,but when you're self-employed
(14:42):
you got to pay both sides.
That's 15.3%.
Now the strategy with theS-corporation, the LLC, where
you get taxes in S-corporationis I get a save on
self-employment tax and forsomeone making 100K a year net,
you can be saving $8,000 a year,almost $9,000 a year.
How you're structuring this onself-employment tax.
(15:03):
So I do this for my own self.
I have my own S corporation,I'm doing this, Mark has it and
so and any of our clients therealtor, the doctor, the dentist
, the consultant you're makingmore than 50K a year.
We want you in the LLC taxesand S corp.
Now the LLC is for tax savings,but it's because we did the
(15:25):
S-election to it.
Speaker 2 (15:26):
Yeah, and there's data.
Our data shows this is 2.8million LLCs in America are
taxed as an S-corp.
There are approximately 6million LLC I'm sorry, 6 million
S corporations in the country,so just under half of them are
an LLC taxed as an S corp.
So it's important to note youcould be an Inc or a company or
(15:50):
a limited or some of theseunique acronyms behind your
company name that allow you tobe an S corp, or you can be an
LLC taxed as an S corp.
It's an important transitionand I'm just going to say this
right now If any of youlistening to this podcast,
watching this video, are makingmore than $50,000 a year net,
(16:11):
you're taken home after payingthe bills, expenses, writing off
the auto, the dining, the blah,blah, blah, and you're making
more than 5,000 a month inprofit.
Making more than 5,000 a monthin profit, celebrate, call your
mom and then call us, Becausenow you are a candidate for the
S-Corporation and I am sick andtired of accountants around the
(16:31):
country.
They're saying well, you don'tmake enough to justify a
reasonable, competent S-Corp.
You need to be making a hundredgrand or 200 grand or 300 grand
.
Stop, If any of you have beentold that you're getting bad
advice and any of youaccountants out there that are
freaking out and calling mereckless or wrong, I have read
every reasonable comp case inthe country for the last 20
(16:51):
years.
I teach continuing education onreasonable comp.
I've written books on this andarticles on this and videos and
trainings on this around thecountry.
Articles on this and videos andtrainings on this around the
country.
Please trust me and realize in25 years, I have never had a
client get audited for nottaking reasonable comp.
We can be very careful yetaggressive with taking less
(17:17):
compensation and making theS-corp work for our clients.
Holy crap, Joe Biden got a bookdeal in 2016, the year he ran
for president, and he did anS-Corporation, took 700 grand in
salary on a $14 million bookdeal.
He saved almost $600,000 inFICA and it made page 32 of the
(17:40):
Wall Street Journal.
Donald Trump claimed realestate professional status, paid
six hundred dollars and wroteoff a ton of depreciation and it
was front page.
You're a crook?
Well, holy crap, they're bothgood tax strategies and millions
of Americans use both taxstrategies.
And not getting too politicalhere, I'm just saying don't
stress about this, accountants.
Reasonable comp is doable.
(18:01):
It's okay.
The S-Corporation is live andwell, and any of you again
listening today.
I know I'm getting fired upabout this, Matt, yeah, yeah,
but I want people to know youare leaving money on the table.
If your accountant is afraid oftheir own shadow, so get that
LLC taxed as an S-Corp.
Call our law firm tomorrow.
The cost of us setting up anentity for you should be a tenth
(18:22):
of the tax savings we create onthat first phone call.
We are going to be here with arelationship with you for many
years to come.
Speaker 3 (18:28):
Yeah, and I think even Jill Biden had an
S-Corporation for her speakingfees and her book, you know, and
was doing the same strategy,and also the other millions of
people that have anS-Corporation.
The whole point of it is to dothis one strategy.
Those millions of people thatwe just reported numbers on
doing an S-corp or an LLC tax asan S-corp, the one reason
they're doing it is because ofthis strategy.
(18:49):
So you've got to implement thisstrategy.
You've got to do this strategyand believe in it.
There's a whole nationalassociation for S-corporations
in Washington that promotes andtries to keep this strategy
intact.
Now you do need to take areasonable salary, like Mark
said and that's part of thestrategy, by the way, which is
the dividend and profit you takeout from the S-corp or LLC tax.
As an S-corp, you don't have topay self-employment tax on.
(19:10):
That's where the tax savingsare.
But you need to take areasonable salary too if you're
running and working in thebusiness as well, and so that's
how the strategy gets down.
You strategy gets down.
You need a little bit of taxplanning work.
With a good tax advisor orlawyers in our office, we can
just make sure that's set up andstructured.
It is not rocket science.
You just get it done, you getit set up, you get on a routine,
you do it every year and thenyou join the tax savings.
All right?
Speaker 2 (19:30):
Well, we are now through three types of LLCs.
Number one, the rental propertyLLC.
Number two, the small businessLLC sole proprietorship.
Number two the small businessLLC sole proprietorship.
Number three, the LLC that wenow tax as an S corporation.
Those are actually threedifferent tax returns Schedule E
, schedule C, as in Charlie, andan 1120S.
(19:52):
So you can see that's whythere's so many variations here.
Now number four, themulti-member LLC.
And you know what?
Damn it, matt.
I've already added a numberseven and a number eight now, so
we started out going.
There's six.
I'm already at number eight,because there's a special
purpose LLC we're going to talkabout here in a minute.
That's true, that's true,that's true.
(20:13):
Oh, my gosh, I can't believe weforgot.
How could we forget about that?
I know, okay.
So but, multi-member LLC is 3.2million.
Speaker 3 (20:19):
Yeah, mark and I are like those jazz musicians in the
club that.
Just they're like when arethese guys going to stop?
We're just going to keepriffing on this forever, oh my
gosh, all right, okay, thepartnership LLC.
Okay, this could be a lot ofdifferent variations, but the
point of it is you have apartner in the business.
Mark and I have partnershipLLCs and a couple of different
variations.
I'll just give you an example.
(20:40):
We own real estate, rentalcommercial real estate that I
own in my trust, mark owns inhis trust.
And then that LLC is apartnership.
It files a 1065 partnershipreturn, but it owns commercial
rental real estate.
We get rental income in it.
We've owned other ones thatwe've sold and had gain in it
when we sold the property.
So there's a couple ofvariations of even type four
(21:01):
here.
Let's go over to the second typeof variation.
That's also a partnership, andthis I'm just giving Mark and I
as the example here.
Just you know, cause we'resitting here and I don't want to
air our other clientsstructures without their
permission, of course, you know,and you could have three or
four or five or 10 partners here.
I'm just given our scenario.
The other is what about anoperating business.
(21:26):
I may have an LLC as theoperating business.
It's the partnership that doesbusiness KKOS lawyers, for
example, main Street BusinessServices LLC.
That's our corporate complianceentity and, of course, our law
firm.
Those are entities that are LLCs.
But then I own mine, my 50%with my S corporation.
Mark owns his 50% with his Scorporation because those are
operating businesses.
We're making enough money inthose.
(21:47):
You pay self-employment taxover there, so we want those to
run through our S corporations.
The partnership that we ownreal estate with it's just Mark
and I personally, because onyour rental real estate you
don't pay self-employment tax.
On it I don't need theSemployment tax on it, I don't
need the S-corp strategyunderneath it.
So there can be lots ofdifferent ways you do the
partnership but that companyitself receives the income, pays
the expenses and then pays itdown to the partners.
(22:09):
Or that's you individually onreal estate, or it could be down
to the rest of corporations Ifyou have a bigger business of
partners that are involved,selling goods or services.
Speaker 2 (22:18):
I like the way you summarized that.
I'll say it another way,because some of you are like, oh
my gosh, my brain's turning toSally, so we don't want that.
This fourth type is think of itcalled a partnership LLC,
multi-member LLC.
Some husbands and wives willset up a two-member LLC.
(22:38):
So, and some husbands and wiveswill set up a two-member LLC.
There could be some strategicreasons for that Second
marriages, maybe some assetprotection.
So that's fine.
And statistics don't tell usexactly how these three and a
half million approximatemulti-member LLCs are structured
.
As owners, they could be two Scorporations like Matt and I.
(22:59):
They could be two trusts buyingrental property.
It could be a husband and wifein a bakery or a landscaping
business again.
So there's a lot of variety.
But the interesting point hereis it's going to be a different
tax return again because we havetwo members or more, and so
that is a certain type of LLCthat's very unique.
And this is again the beauty ofthe LLC world.
(23:22):
We have a lot of flexibility.
When we're planning with you, welike to do what we call a
trifecta.
I've just got to introduce thatwhen you meet with one of our
lawyers, we're going to build apicture of how everything is
integrated.
If you want to have some fun, Iam not going to get on Google,
get on ChatGBT, get on Grok andsay what do Mark Kohler and Matt
Sorenson say about the trifecta?
It'll take you two seconds andyou're going to see diagrams and
(23:44):
videos and articles aboutbringing your tax and legal
picture together.
And then, when you call the lawfirm, we're going to tailor it
to you and it is life-changing.
It will make you so much money,far, far, far, far more than
you ever would pay us to supportyou, so love it.
Ah, matt, now where do we gonext?
I'm kind of like let's do theseries, if that's okay.
(24:05):
Okay, I'll say it this way.
The next two Well, no, no,you're right.
Go go series LLC.
This could be single member ormulti-member.
Speaker 3 (24:14):
Now we're getting into another variation.
Yes, yes.
So, as you see, there'scomplexity to this and that's
why you need a good team helpingyou out.
But, all right, Series LLC thisis an LLC that about 20
different states have.
Not every state has a seriesLLC.
Texas has it, utah has it,nevada, illinois, virginia those
are some of the bigger stateswe're setting them up in
(24:36):
regularly.
But in the series LLC, whatthat is is you file one LLC with
the state and it's your parentmaster LLC, and then that LLC
can adopt sub-series withouthaving to file with the state
and those sub-series getseparate liability treatment.
Why would you use a series LLC?
Well, let's go back to thatreal estate investor example we
(24:56):
gave earlier the five rentalproperties all in one LLC.
Well, what if I want separateliability treatment on all five
rental properties?
That'd mean I have to set upfive LLCs.
Not if those properties are ina state that allows for series
LLCs, because what you do thereis we set up the series LLC, the
master, with the state andwe'll put property one in
sub-series one, property two insub-series two, property three
(25:18):
in sub-series three.
Each of those gets separateliability treatment.
There's not a separate filingto the state or a whole separate
setup.
It's one LLC that can adoptsub-series that gets separate
liability treatment.
So we love the Series LLC forreal estate investors in those
states that have multipleproperties.
Now, again, that could be justyou owning it 100% and it's
(25:38):
single member going on toSchedule E.
This could be a partnershipstructure as well, you with
other partners where there is a1065.
So there's a couple ofvariations of that, but that is
the series LLC.
It's kind of an enhanced assetprotection strategy to get
separate liability treatment inyour separate properties.
That, my friends, is the seriesLLC.
Speaker 2 (25:57):
Now one last factoid on this.
In my handy dandy Mark J Kohlerannual tax planning calendar
for business owners, which youcan get on my website,
markjkohlercom, we have 21series LLCs across America now,
21 different states that providethis strategy, and you're going
to set up that series LLC inthe state where the properties
(26:19):
are and where you have more thanthree to four properties.
That's when you pull thistrigger.
So it could be a single memberor a two member LLC, but it's
going to have this specialclassification as a series LLC,
which gave us number five.
Series LLC, which gave usnumber five, now number six.
In this vein of asset protectionand I like the way you said
(26:45):
this.
Before we started the podcast,matt said yeah, the Series LLC
is about how many properties youhave.
The COPE LLC is about how muchequity you have.
It's kind of like a risk equityissue.
You can only have a couple ofproperties and need a COPE LLC
or other assets too.
Yeah, that's true too.
So the COPE is called acharging order protection entity
.
Believe it or not, this is thefirst year ever there's 21 COPE
(27:07):
states.
This year, legislatures saythat three times around the
country are passing laws for theCOPE and the series more and
more to help Americans buildwealth and protect assets.
So the COPE is a protectiontype LLC that you would be
worried more about.
Asset value more than quantity.
(27:30):
Would you go with that?
Speaker 3 (27:31):
Yeah, so this is where we typically use Wyoming.
Mark said there's other states,but most of those states give
cope protection, for if you havemore than one partner, wyoming
is, and that some of them aresilent.
They don't say one or the other.
Wyoming says if there's onlyone owner of the LLC, we still
give you this cope protection.
Well, what the hell is copeprotection?
Okay, what we're doing here iswe're trying to protect your
(27:55):
assets from your personalliabilities.
Most LLCs and most structureswe've talked about so far, we're
trying to protect your businessoperations from your personal
assets.
So now we're doing the opposite.
How do I protect my assets frommy personal actions?
For example, you get in anaccident and you get for drunk
(28:17):
driving.
Insurance doesn't cover it andyou got a million dollar lawsuit
against you.
You're texting and driving,whatever, and they're like well,
we want to collect against yourassets.
They can go right into yourLLCs that you own a hundred
percent and force you to sellassets.
Let's say you got a property inthere with a million dollars of
equity.
They can force the sale of itand you're thinking but why do I
got LLC protection?
No, no, the regular LLC assetprotection is something that
(28:41):
happens in the LLC and they'retrying to get down to you
personally not something thathappened to you personally and
now they're trying to get intothe LLC.
However, that is where copeprotection comes in and where we
may use a Wyoming LLC, becausewe know we get the COPE
protection there.
Their statute is very clear nomatter how many partners single
member, multi-member you can getCOPE.
Now there's other states, likeMark said, if you're doing
(29:02):
partnership or there's somenuances to this.
I was trying to summarize hereyou get a whole series on this
COPE thing, but what I would sayhere is if you're like this is
getting confusing I'm barelylearning about LLCs, don't worry
about this.
This is advanced planning,advanced strategy.
If you have less than a milliondollars of net worth, don't
(29:24):
even worry about this.
However, if you're building alot of assets, you got a million
dollars more of net worth andyou got some privacy concerns.
This COPE entity can be a greatcompliment or thing to add in,
and so we do that for certainclients that have those
additional concerns a lot ofassets, maybe even some privacy
because there's some otherthings we can do with the COPE
entity for privacy.
Speaker 2 (29:40):
I love it.
I'm not going to add toanything Matt said except tell
you we have resources, we've gotpodcasts on the COPE, we have
articles on the COPE.
I have my book, the Tax andLegal playbook, with a chapter
on this, and I would recommendany of you with more than a
(30:01):
million dollars of net worth inyour life this is a conversation
point you should be bringing upwith your lawyer, and some of
you are like what lawyer do Icall?
I know divorce lawyers.
I know criminal lawyers.
I know, hopefully you don'tknow any criminal lawyers the
ambulance chasing lawyers orwhatever you call them, and but
where do I find a lawyer thatunderstands taxes and asset
(30:22):
protection?
It's kkoslawyerscom and give usa call and we'll do a consult
and once a year you're doingthat checkup to try to bring it
all together.
So, okay, so we have now talkedabout six LLCs and we've got a
couple more to finish.
Yeah, some bonus LLCs.
So the six were rental propertyLLC.
(30:43):
Small business LLC, llc.
Taxes, s-corp LLC, taxes S-corp.
The multi-member LLC and allthe variations go with that.
The series LLC for those of youthat have lots of little
properties in a particular statethat would allow for it.
The COPE LLC if you need assetprotection for one reason or
another.
And then now we get to bring upthe Special Purpose LLC.
(31:07):
This is a special LLC that isallowed to be owned by an IRA.
Maybe, please pray, tell youknow a little something about
this.
Speaker 3 (31:19):
This, yeah, I've written a book on this, the
self-directed IRA handbook.
It's got a chapter on the IRALLC.
But essentially what this is isyou can have your self-directed
IRA own an LLC.
This could be 100% or you couldpartner in too, but let's just
go with the easiest.
Your IRA owns an LLC a hundredpercent.
You can be manager of the LLC.
The LLC has a business checkingaccount.
That LLC can go do real estatedeals, invest in private
companies.
(31:40):
It could have a crypto walletokay All these other investments
that we talk about on oursister podcast, the Directed IRA
podcast.
You can do with an IRA LLC.
Okay.
Now we've got other videos onthis.
I've, like I said, a chapter inmy book.
We've got a podcast theDirected RA podcast on the IRLC
(32:02):
structure multiple ones on it,but this isn't an entity type.
We set up quite a bit for ourself-directed investor customers
.
Not every self-directedinvestor needs the IRLC, but
certain ones may be doing realestate deals or buying
properties at auction where youneed the money quickly.
Some people call this thecheckbook control IRA, but it is
an LLC structure.
It's an IRA LLC.
That is the seventh, yeah, andthat's the bonus.
Speaker 2 (32:21):
Yeah, well, and I made the list.
I know I can't believe it.
Yeah, it's crazy.
Now number eight this is calledthe PLLC, or a professional
limited liability company.
It is related to what youmight've heard of called the
limited liability partnershipsor LLP, or limited liability
liability partnerships.
(32:42):
Oh my gosh.
But the PLLC is a special typeof LLC that have been passed in
almost all 50 states as part ofthe uniform partnership act or
the uniform limited PartnershipAct, and this PLLC is built for
professionals.
And this type of LLC would be.
(33:03):
If Matt and I are going to bepartners in a law firm, we went
with an LLP, which is verysimilar to a PLLC.
But with a PLLC, if you're adentist, a doctor, a lawyer, and
all the states have lists ofthe professional designations
that are allowed to do this, wecan set up an LLC and go out and
do business together asco-managers, co-owners, and
(33:25):
we're not liable for eachother's professional liability,
where he can give bad advice orgood advice, I can give bad
advice or good advice and we'renot liable to one another.
But we can still form aprofessional partnership.
And that's a unique thing whenyou're a professional, because
when you start doing surgery ordoing tax returns or giving
(33:48):
legal advice, you kind of worrywhat your partner might be doing
down the hall, and so these arespecial types of entities for
that.
Speaker 3 (33:54):
Yeah, where we see these, the most popular is going
to be the doctor, the dentist,the lawyer, the architect.
This could be in some states itcould be the realtor, but other
professions you might be.
Well, I'm an electricalcontractor, I'm a plumber, don't
worry about it.
Okay, you can just do a regularLLC.
So there are certain professionsthat have gotten pigeonholed in
the states to say you need todo this so we can help you sort
(34:14):
that out.
You've got to, of course,coordinate with your licensing
board when you're doing that,but if you're going to be in a
profession for a long time,that's the entity setup you're
going to need to do.
You're going to look at all theother players in your industry,
in your profession, and whatare they doing in your state,
and the big players usually aredoing it right.
So you might see PLLC afterthem, or PC or medical
(34:35):
corporation or you know these.
California has some weird ones,of course, and twists, as they
always do.
Yeah, but just worry about thisIf you're a professional with a
certain licensed profession,typically more white collar, but
they make you do this structure.
Speaker 2 (34:48):
It's funny you bring up California because that's
where a lot of our staff, whenthey come on board with our law
firm, have to learn all 50states because it gets tricky
when they come on board with ourlaw firm, have to learn all 50
states because it gets tricky.
But the licensed marriagefamily therapist is a unique one
where these professionallicensing boards require a
certain type of entity becausethey don't want you partnering
with a non-licensed individual.
So California is one where ifyou are a licensed therapist,
(35:10):
you've got to set up a PLLC.
They're going to require that.
They won't let you do an LLCbecause you've got to go get
your license registered with theDoppel or Department of
Professional Licensing and theywant to see a copy of your
entity.
So it can get tricky whenyou're out there.
So this is another entity whereplease do not hack this out
online in the middle of thenight in your underwear after a
(35:33):
bowl of cereal.
Please call the law firm, makea legitimate appointment and we
get you.
Speaker 3 (35:36):
We got you.
Yeah, this is what we do.
Focus on your business and howyou make more money doing what
you do.
That's probably a better use ofyour time.
Outsource the things that youcan, and this is where we'd love
to be a resource on the taxlegal planning.
We want to keep more money inyour pocket, make sure your
assets are protected, and thecritical component to this is
getting your LLCs and yourentity structuring right.
Hopefully, you got some goodideas to make sure you're
(35:59):
optimizing and your situation.
We're here for you if you needus Our law firm, kqs Lawyers and
you don't have to use us.
You can choose the second bestoption.
Speaker 2 (36:07):
Yeah, and remember that maybe Ricky Bobby says
there's either first or thelosers out there, so you can be
a winner.
Speaker 3 (36:14):
Yeah, you can choose Saul Goodman if you want.
You know whoever you want touse.
Speaker 2 (36:18):
That's right.
Well, thanks everybody forlistening and participating in
this incredible journey calledthe American Dream.
We're here for you.
We love Main Street America.
We are so grateful to be a partof your lives and hopefully
this has opened your eyes to alot of opportunity.
And planning the more organizedyou are, the and planning the
more organized you are, the moresuccessful you are.
I know that to be true.
(36:38):
We all know it in our core andwork on your business some days,
not in it.
This is an opportunity for youto level up and hopefully we've
been a part of that process.
See you next time.
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