October 14, 2025 • 23 mins
In this episode of the Teaching Tax Flow Podcast, hosts Chris Picciurro, CPA, and John Tripolsky revisit a familiar favorite — the Limited Liability Company (LLC). Whether you’re forming your first entity or restructuring an existing one, this episode walks through the essential steps of creating and maintaining an LLC — while busting myths about tax benefits, compliance, and liability protection.
Chris explains why an LLC is first and foremost a legal entity (not a magical tax shield), while John adds real-world insights on naming, filing, and keeping your compliance in check. Together, they break down the formation process, discuss the importance of operating agreements, and clarify ongoing responsibilities such as renewals, EIN filings, and state fees.
Key Takeaways
• An LLC stands for Limited Liability Company — a legal structure, not automatically a tax advantage.
• Your attorney may get more excited than your CPA — LLCs protect assets, but don’t inherently cut taxes.
• Steps include: naming your LLC, appointing a registered agent, filing Articles of Organization, creating an Operating Agreement, and obtaining an EIN.
• Treat your Articles of Organization like your LLC’s birth certificate and your EIN as its Social Security number.
• Keep personal and business funds separate — open a dedicated business bank account.
• Stay compliant with annual (or bi-annual) state renewals and any required franchise, excise, or withholding tax filings.
• Avoid over-structuring — multiple LLCs create unnecessary admin and costs if not justified by risk.
Notable Quotes
• “An LLC is a legal entity, not a tax-saving machine.” – Chris Picciurro
• “The name doesn’t matter — the purpose does.” – John Tripolsky
• “Think of your Articles of Organization as your birth certificate.” – Chris Picciurro
• “It’s easy to form one; maintaining compliance is where people fall short.” – John Tripolsky
• “Ideas are cheap. Implementation is valuable.” – Chris Picciurro
Resources
• Wealth Builders Mortgage Group (Sponsor): wealthbuildersmortgagegroup.com
• Teaching Tax Flow Hub: teachingtaxflow.com/hub
• Join the Defeating Taxes Facebook Community: defeatingtaxes.com
- (00:00) - Exploring LLC Formation and Investor-Focused Mortgage Strategies
- (01:43) - Understanding LLC Formation and Its Legal and Tax Implications
- (12:49) - Steps to Form and Maintain an LLC
- (17:23) - Navigating LLC Formation: Costs, Compliance, and Strategic Planning
- (21:40) - Educational Tax Advice and Investment Guidance
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
John Tripolsky (00:02):
Hey, everybody, and welcome back to the teaching
tax flow podcast episode 157.Today, we are visiting an old
friend called the LLC. And as weexplore the steps in forming an
LLC, here's the quiz questionfor you. Do you know what LLC
actually stands for? You may youmay be surprised, but before we
do that, as always, let's thankour episode sponsor.
Ad Read (00:26):
This episode is sponsored by Wealth Builders
Mortgage Group, powered byMovement Mortgage, one of the
top mortgage teams in the nationand a powerhouse in the real
estate investing world. Withover 1,100,000,000 in closed
mortgage volume and more than3,000 investor deals under their
belt. They don't just talk thetalk, they walk it. Their team
(00:47):
specializes in helping shortterm and long term rental
investors scale smart withcustomized lending strategies.
They offer all STR loanproducts, including second home,
investment, non QM, bankstatement, asset based, and
HELOCs. They also offer allprimary home loan products, too.
Whether you're just starting outor expanding an existing
(01:07):
portfolio, their unique path of10 strategy is designed to help
you move from a nine to five jobto financial independence. If
you're looking for a lendingpartner who truly understands
the investor mindset, visitwealthbuildersmortgagegroup.com
and start building your road maptoday.
John Tripolsky (01:25):
Alright, everybody. Here we are back
again on the podcast, and we'regonna answer that question that
you probably heard there in theintro on what the actual
definition or I shouldn't saydefinition. What LLC actually
stands for. And to answer thatquestion, nobody better comes to
mind than my cohost ChrisPacquero. What's happening, man?
How are you?
Chris Picciurro, CPA (01:43):
I am well. How are you doing today?
John Tripolsky (01:45):
I am doing good, man. I'm excited about this one
because you know, old friend,that this is the one that I like
to poke your poke the bear, pushthe buttons with a little bit.
Our friend, the LLC. Right?
Chris Picciurro, CPA (01:57):
Oh, absolutely. And we know that
there's a lot of misnomers aboutLLCs. And, obviously, this is
teaching tax flow, the podcastlegally and ethically reducing
the tax you pay in yourlifetime. An LLC is a legal
entity, but there so we're gonnafocus on the steps to forming an
LLC, and then we'll mention someof the the tax ramifications of
(02:19):
of forming one as well. So,yeah, it's, it's a topic that's
very, very popular, and, youknow, for some reason, many
taxpayers think that that justforming an LLC provides you with
a bunch of wham bam, thank you,ma'am, tax benefits.
(02:42):
But an LLC is a very importanttool when it comes to risk
management, and operations, andit and it can definitely provide
some benefits. It's just not anautomatic gateway to dancing
around and paying no taxes.
John Tripolsky (02:59):
So, really, Chris, with with an LLC. Right?
So I I know we're gonna get intodebunking some myths with this
and define and remind everybodywhat it actually stands for.
But, really, with this, to whatyou said there, your attorney
would be more excited about anLLC than your tax professional
is what I'm taking from it.Right?
Chris Picciurro, CPA (03:17):
Yeah. And quite frankly, there are a lot
of times where your taxprofessional and your attorney
have a different opinion abouthow you're you should be
structured. You know? And we wetalk about this in the teaching
tax law community. Your youryour entity structure should
mirror the complexity and therisk of your operations.
(03:40):
So if you don't if you have alot of complexity, you have a
lot of risk, you just have amore complex structure. But a
lot of times, I feel like peopleoverdo it. You know? Might buy
one rental property but formfive LLCs because you need this
management company and thisholding company and this and
that and other thing. But we'regonna jump into that, and we're
gonna talk about the LLC.
An LLC stands for limitedliability company. A lot of
(04:04):
people don't understand that.So, yeah, an LLC is a limited
liability company, and let'stalk about the steps. The first
step when you're forming an LLCis quite simply come up with a
name. Right?
Gotta come up with a name thatis that is not utilized already.
And when you come up with aname, the name must include LLC
(04:27):
in it or limited liabilitycompany, but you're gonna wanna
check with your state secretaryof state database and the,
United States trademark databaseto make sure no one took your
name. So, John, you can't justgo create Coca Cola LLC,
unfortunately.
John Tripolsky (04:46):
That's true. And you know what? Looking back a
little bit in history, I I don'tremember where I was exactly.
But as weird as this is, and Idon't know if I've ever actually
told you this, I remember beingon the phone with you. I
remember I was driving Mhmm.
Somewhere, and I was telling youI was gonna start a marketing
(05:06):
agency. So, I mean, we're goingback, almost twenty years.
Chris Picciurro, CPA (05:11):
Right. Way back twenty years.
John Tripolsky (05:13):
And I remember even then, I was like, well
well, what do I gotta name this?You're like, I I don't care what
you name it. It doesn't matter.Like, name is it could be, you
know, 13 initials, which you'llsee, I think, you know, for some
investment, you know, investmentgroups in that. Right.
But the name does not matter.Right? It's literally just
something that's unique,identifiable. I mean, as
(05:33):
everybody else. Right?
We we're not gonna get into onthis, but there's DBAs that
doing business as, but the LLCis that, layer of liability
protection.
Chris Picciurro, CPA (05:43):
Yeah. It's it's the name it's the name of
the business. So you foreign youpick a name, and then the second
step is you select a registeredagent. So every LLC has to have
a registered agent in the statethat it operates in. It doesn't
have to be you.
So you could you could be yourown registered agent. You can
use a third party. You can use avirtual registered agent. In
(06:06):
other words, that that haslocations all over The United
States. You can use an attorney.
You can use anyone that butsomeone has to have a physical
location in the state that youform your LLC, and that's
important. So the registeredagent is the one that actually
receives all of your legal andtax documents for the LLC, and
(06:28):
you could be your own registeredagent. Now, you know, shameless
plug. We we we have a registeredagent that we work with in the
teaching tax law communitycalled Corpnet. They help people
form LLCs and and act asregistered agent all over The
United States.
Even if if, if that's somethingyou need, definitely leave a
comment in, in our commentsarea, and we will reach out to
(06:52):
you or go to the teaching taxlaw hub. John could put that
link in in the in thedescription, and we can help
guide you in the rightdirection. So the point is you
don't have to be you could livein the state of Michigan, John,
and form an LLC in the state ofFlorida if you wanted to. Again,
talk to a tax professional. Moreor less talk to your legal
(07:15):
counsel before you do that.
But when it comes to thatimplementation, we have those
tools for you. Implement ideasare cheap. Implementation is
valuable in the teaching tax lawsystem.
John Tripolsky (07:26):
And we don't wanna give any bad advice. So
here's maybe some good one. And,Chris, and tell me if I'm
extremely wrong in this one. Sothere's the disclaimer. Don't do
this.
Don't just do a Google search onForming an LLC and click on the,
the first link that tells you toregister it in Delaware.
Delaware. Let's be honest.Because that usually is one of
the first ones that come up, andwe won't get into that.
Chris Picciurro, CPA (07:46):
But So yep. So file so select the
registered agent. It could beyourself. But remember, whatever
address you put as a registeredagent is where all your official
mail goes and and can be found.So I can go into any state
database and look up an LLC.
And and I want you to thinkabout it. Do you want your if
(08:06):
you're using your home addressand one of your LLCs, that means
someone could easily find that.So just something to think
about. The third, file yourarticles of organization. That
those articles of organizationdo not I wanna stress this, do
not get sent to the internalrevenue service.
They get sent to the state, thesecretary of state office, and
(08:32):
maybe you could file themonline, depending on the state,
where you're registering yourLLC. This is what officially
creates your LLC. And in whenyou file your articles
organization, you are providingyour business name, your
address. You have to identifywho your registered agent is in
your management structure. Soare you member managed?
(08:52):
Are you manager managed? Youhave to figure that out, and
then you file those articlesorganization. That is basically
the birth of your LLC. Filingfees are gonna range. Some
states are I've seen as low as$25, $30.
Some states, California, youknow, they're about you're gonna
be up to $800 per LLC. Way togo, California. File.
John Tripolsky (09:17):
Yeah. And, Chris, it's funny that you
mentioned the, the reference ofthe birth. Right? Like, that
articles of org doc really isthe the birth certificate of
Chris Picciurro, CPA (09:27):
your LLC. Way to
John Tripolsky (09:28):
say it. And I'm so glad and it's funny. I didn't
you know, we did not talk aboutthat, so I'm super glad that you
referenced it that way. And thenhere's some more advice. Take it
from somebody who had a hardtime tracking one of theirs down
a long, long time ago.
Keep it where it's easilyaccessible. I think now you can
probably get them a lot quickerRight. From your secretary of
state online, but you'll needthose. But at the Absolutely.
(09:49):
Times you think you won't, theywill be asked of you.
Chris Picciurro, CPA (09:53):
It's a a a great way to say it. It's like a
birth certificate for yourbusiness. You're going to need
it. You will need it. Now onceyou file your articles articles
organization, then you need tocreate an operating agreement.
You I highly recommend you havea formal operating agreement
that is written, that is aliving, breathing document even
if you are a single member LLC.Now we're gonna call time out
(10:17):
here. I want to stress.Remember, a single member LLC by
default is a disregarded entityfor federal tax purposes. So,
John, if you run a business andyou form an LLC, you own a
rental property, you do form anLLC, you don't have additional
filing requirements on thefederal level just by forming an
(10:40):
LLC.
However, you should have anoperating agreement. The
operating agreement is gonna layout the ownership, the profit
splits, the management, and howyou resolve disputes. This is
your blueprint. These are therules for the organization. So
(11:00):
if you were going to if you havea dispute, if you are giving
someone the authority to act onbehalf of the LLC, even if it's
yourself, that's written out inthe operating agreement.
Now an operating agreement isnot legally required by every
state, but I can't recommend itmore highly. So even if you want
to use an online service, if youfeel that's appropriate based on
(11:23):
the complexity and risk of yourLLC, that's fine, or consult an
attorney. But the operatingagreement is a living and
breathing document that couldget amended quite often too.
John Tripolsky (11:35):
Yeah. And, Chris, here's a question for
you, not to deviate from it all,but I'm sure pretty much
everybody's seen it. Right?Like, there I feel like law
firms usually have it, whereasPLLC. What's that p stand for?
Chris Picciurro, CPA (11:47):
Yep. Professional. Professional
limited liability company. Somany many industries are
required to to to be a PLLC, andyou're gonna see that, yeah,
usually in a a law firm,accounting firm, and and that
sort of stuff. And there couldbe a couple different statutes
based on what state you're in.
John Tripolsky (12:03):
So it's the same thing, just an identifier.
Chris Picciurro, CPA (12:06):
Yes. It's a special type of LLC so for
professional service companies.Next step, I obtain a federal
identification number or EIN.Now that can be done online. It
has to be done online now.
And for many people, it'sactually required. You can just
get one on IRS website, irs.g0v.Even if you're a single member
(12:30):
LLC, you should get a federalidentification number that
separates it from your SocialSecurity number. You're gonna
want that for potentiallyanonymity. You're gonna want
that for asset protection.
You're gonna want that forbanking purposes. So get an EIN
number or work with someone toget you an EIN number. And you
can do that right online onirs.gov. It takes about five
(12:54):
minutes. However, don't screw itup.
There's some very importantquestions in that EIN number
that if you click the wrongbutton, the IRS is gonna think
you're not what you want to be,if that makes sense.
John Tripolsky (13:06):
Mhmm. And don't lose the number.
Chris Picciurro, CPA (13:08):
Oh, correct. Again Like, somebody
who knows. Number. You know,that's your Social Security.
That's your, you know, that soyou've got a birth certificate,
right, which is we've discussed.
But DIN is like your SocialSecurity number. So you need
that. Don't lose it. And whenyou get a you know, store that
(13:30):
as when you apply for it, it'llget mailed to you, but it's
gonna pop up on your computer, adownloadable PDF of that EIN.
Definitely download it.
Download that thing. The next,you're gonna now now that you've
formed your you've gottenformed, you have your operating
agreement, you've got your EIN,you're gonna wanna register for
state and business licenses ortaxes. Just depends on your
(13:52):
state where you're at. Thatcould be sales tax. It could be
franchise tax.
It could be with holding tax. Itcould be permits and business
licenses. So, John, let's saylet let's think about your
situation. Let's say you formedan LLC to have a marketing
agency. Awesome.
Marketing agencies are a servicebased business, so you're
(14:13):
typically not going to havesales tax unless you live in a
state that that taxesprofessional service or yeah.
It's it that'd be rare. But onceyou hire employees, you're gonna
have withholding tax. You'regonna have to register with the
state, or you're probably gonnahave an excise tax or or
franchise tax. You can'tregister for this in the states
(14:37):
that you're supposed to file inuntil you have the IIN number
and the operating agreement,etcetera, etcetera.
The next step or step six is toget six is to get registered
with state tax and businesslicenses. And then once you're
registered, then go open yourbank account. Try to keep your
personal and business fundsseparate, not not even if you're
(14:59):
the only only member of the LLC.And when you go to see and,
John, you mentioned this. Whenyou go to the bank, that's why
you wanna keep track of all thatstuff.
You say, hey. I formed an LLC. Iwanna start a business bank
account. They're gonna ask foryour EIN, your articles
organization, and your operatingagreement.
John Tripolsky (15:21):
And there is no leeway. If you don't have those,
you do Not pass go, and you donot collect $200
Chris Picciurro, CPA (15:26):
or don't have a bank account, and then
ultimately, you're really not anl you're you might form an LLC,
you're not acting and walkingand talking like a duck, so
you're not a duck. So, yeah,absolutely. You wanna start that
business bank account. And thenonce you're set up, it's at that
point, you have responsibility.You, the person that formed the
LLC, you have the responsibilityto maintain compliance on an
(15:52):
annual basis.
That includes annual taxreturns. Now some states are
biannual for the LLC. So here'swhat happens, John. Let's say
you form an LLC. I'm gonna usethe the state of Tennessee, for
example.
In the state of Tennessee, youform an LLC. Every year, you
have to you have to renew yourLLC with the secretary of state
(16:13):
and pay that fee. Separate fromthat, you have to file with the
department of revenue afranchise and excise tax return.
They're two completely differentfilings. The secretary of state
renewal is something that isdone has nothing to do with your
income tax.
It is a legal document that isfiled by your registered agent.
(16:34):
I can't tell you how many timestaxpayers have their LLCs
dissolved because they don'tfile their renewals. They lose
their all the stuff they workfor their asset protection, and
they're thinking, well, I filedtax returns. Yeah. That's
different than filing yourrenewal with the state.
John Tripolsky (16:55):
And that's a that's something I bet you a lot
of people don't know. Right? Soit's I mean, I would say it's
almost like a blessing and acurse. Right? Like, I could in
the state of Michigan here, Ithink it's maybe I'm guessing
here maybe $80 or a $110,something like that.
I could literally leave my desk,and by the time I get to my car,
I could have an LLC formed, havean EIN, and I'm on my way to the
(17:17):
bank. Like, it's that quick thatthings happen. And why I say
it's a blessing and a curse,like, now it's so easy to do it.
But the curse side of it is is Ithink some people jump into it
like you had mentioned. Theycreate so many of them thinking
that, you know, oh, everybody'sgonna love me.
I'm gonna be so organizedbecause I have everything
separated, but it almost becomesin a little bit of an admin
(17:37):
headache at some point. And thenyou realize like, oh, wow. This
really didn't help me on the taxside. Liability side maybe, but
now my compliance costs, akafiling your taxes, now the cost
of doing that just went up,maybe, because you have 40 LLCs
for every
Chris Picciurro, CPA (17:54):
And there are some states that allow what
are cost a concept called seriesLLCs that you can kinda roll one
into one one, but you've gotyeah. You've gotta look on a
state by state basis. As far asa maintain ongoing compliance is
what we're gonna wrap it up onthis is because we do have
additional content. Your LLC isa the the one of the positives
of it is it is a flexibleentity, meaning it can always
(18:17):
elect to be taxed as a ccorporation. It could elect to
be taxed as an s corporation.
It could bring on new members.But if the LLC goes moves from a
single member to multi member,the tax reporting completely
changes. So just make sure thatyou understand that concept of
price versus cost. Yes. It mightbe inexpensive to create an LLC.
(18:41):
It doesn't mean it's going to bea low cost to maintain it. You
know, I've I've got tons ofterrible stories of people
buying, you know, one rentalproperty. They've got eight
partners, and they don't realizenow, oh gosh. It's gonna cost me
$3,000 a year just to file a taxreturn. It doesn't matter if the
rental property is an $80,000property or a 10 unit apartment
(19:03):
building.
It's the same amount ofreporting. LLCs could be great.
They can help you out with assetprotection. They could be a tax
planning tool. They can give youpeace of mind.
However, make sure you talk toyour centers of influence, your
tax professionals, and mostimportantly, your legal counsel
to apply these concepts. Again,ideas are cheap. Implementation
(19:25):
is valuable to you, to yoursituation, and if it makes sense
to form an LLC. Also, you'vegotta put the asset in the LLC.
I can't tell you how many times.
Well, I formed this LLC. Oh, didyou did you do you have a piece
of real estate? Did you put itin the LLC? No. Not yet.
Okay. Well, John, it's likepacking a bag, checking a bag at
the airport, rather checking abag at the airport with nothing
(19:46):
in it, but you paid for thatcar. Hey. I can promise you it's
gonna be underweight. That's forsure.
So it's a team sport. And ifyou're gonna form an LLC, make
sure you not only file thosesteps we talked about, but
maintain the ongoing complianceas well.
John Tripolsky (20:02):
And that's a great example. Right? Because an
an LLC could be as small as astartup cookie company, But then
they can also be as large asthink the example that we
actually brought up on the lastpodcast we did on this couple
years ago now was, wasStellantis, with, which is
actually Chrysler. Right? So itwas Chrysler, which is
(20:25):
Stellantis, I think, owned them.
It's if I remember right, someform of that name was actually,
an LLC. So it's a you know,obviously, it's cheaper to do
compliance for, for the bakery,I'd imagine, than a auto
manufacturer. So just anexample. And let's close it on
that. If anybody is interested,obviously, in any more
(20:45):
information that we have onLLCs, really just get on our
YouTube, check out all thecontent we have on there, and
really just look at what'sthere.
Just look at it. Search LLC.Search any topic you can think
of on there. Tons of stuff isgonna come up. You're gonna find
reels.
You're gonna find podcasts.You're gonna find all kinds of
things. I think we had guests onthere talking about different
(21:06):
types of them. Check them out.There's an endless amount of
information.
I promise you, you will find theanswer that you're looking for.
So, Chris, as I was justmentioning here, right, is, you
know, sending people to YouTube.Do a search. You're gonna find a
ton of LLC stuff. And I I wasgiven the example, right, of
Stellantis being an LLC and thestartup cookie company being an
LLC, but the compliance costsand efforts are a lot different
(21:30):
than the two of those.
So any any final suggestions youhave for somebody if they're
thinking of forming an LLCbesides don't go over the top
and
Chris Picciurro, CPA (21:40):
form one for your LLC? Listen to this
podcast. Take our advice.
John Tripolsky (21:45):
Bingo. So if you made it this far in the show,
you've actually already takenthe advice whether you knew it
or not. So Absolutely. Place toend. So alright, everybody.
Again, any questions, drop us aline. We're here to help. Get on
defeatingtaxes.com. That's aprivate Facebook group that we
always mention on the show. Youare welcome.
Here's your private invite. Andthen those show notes as well
too. We'll put a link downthere, as Chris mentioned, for
the hub and reach out to us. Ifyou have any questions, we're
(22:08):
happy to catch you. We don't dothat in teaching tax flow as far
as for doing the registeredagent side.
We don't do a whole lot, youknow, in setting up on that at
all. We have a partner that doesit, and that's who we'll connect
you with. So until next time,next week, same day of the week,
different date, completelydifferent topic here on the
Teaching Tax Flow podcast. Havea good week, everybody.
Disclaimer (22:32):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer. The content of
this podcast does not constitutean offer of securities.
(22:54):
Offerings can only be madethrough an offering memorandum,
and you should carefully examinethe risk factors and other
information contained in thememorandum.
Hey, everybody, and welcome back to the teaching
tax flow podcast episode 157.Today, we are visiting an old
friend called the LLC. And as weexplore the steps in forming an
LLC, here's the quiz questionfor you. Do you know what LLC
actually stands for? You may youmay be surprised, but before we
do that, as always, let's thankour episode sponsor.
Ad Read (00:26):
This episode is sponsored by Wealth Builders
Mortgage Group, powered byMovement Mortgage, one of the
top mortgage teams in the nationand a powerhouse in the real
estate investing world. Withover 1,100,000,000 in closed
mortgage volume and more than3,000 investor deals under their
belt. They don't just talk thetalk, they walk it. Their team
(00:47):
specializes in helping shortterm and long term rental
investors scale smart withcustomized lending strategies.
They offer all STR loanproducts, including second home,
investment, non QM, bankstatement, asset based, and
HELOCs. They also offer allprimary home loan products, too.
Whether you're just starting outor expanding an existing
(01:07):
portfolio, their unique path of10 strategy is designed to help
you move from a nine to five jobto financial independence. If
you're looking for a lendingpartner who truly understands
the investor mindset, visitwealthbuildersmortgagegroup.com
and start building your road maptoday.
John Tripolsky (01:25):
Alright, everybody. Here we are back
again on the podcast, and we'regonna answer that question that
you probably heard there in theintro on what the actual
definition or I shouldn't saydefinition. What LLC actually
stands for. And to answer thatquestion, nobody better comes to
mind than my cohost ChrisPacquero. What's happening, man?
How are you?
Chris Picciurro, CPA (01:43):
I am well. How are you doing today?
John Tripolsky (01:45):
I am doing good, man. I'm excited about this one
because you know, old friend,that this is the one that I like
to poke your poke the bear, pushthe buttons with a little bit.
Our friend, the LLC. Right?
Chris Picciurro, CPA (01:57):
Oh, absolutely. And we know that
there's a lot of misnomers aboutLLCs. And, obviously, this is
teaching tax flow, the podcastlegally and ethically reducing
the tax you pay in yourlifetime. An LLC is a legal
entity, but there so we're gonnafocus on the steps to forming an
LLC, and then we'll mention someof the the tax ramifications of
(02:19):
of forming one as well. So,yeah, it's, it's a topic that's
very, very popular, and, youknow, for some reason, many
taxpayers think that that justforming an LLC provides you with
a bunch of wham bam, thank you,ma'am, tax benefits.
(02:42):
But an LLC is a very importanttool when it comes to risk
management, and operations, andit and it can definitely provide
some benefits. It's just not anautomatic gateway to dancing
around and paying no taxes.
John Tripolsky (02:59):
So, really, Chris, with with an LLC. Right?
So I I know we're gonna get intodebunking some myths with this
and define and remind everybodywhat it actually stands for.
But, really, with this, to whatyou said there, your attorney
would be more excited about anLLC than your tax professional
is what I'm taking from it.Right?
Chris Picciurro, CPA (03:17):
Yeah. And quite frankly, there are a lot
of times where your taxprofessional and your attorney
have a different opinion abouthow you're you should be
structured. You know? And we wetalk about this in the teaching
tax law community. Your youryour entity structure should
mirror the complexity and therisk of your operations.
(03:40):
So if you don't if you have alot of complexity, you have a
lot of risk, you just have amore complex structure. But a
lot of times, I feel like peopleoverdo it. You know? Might buy
one rental property but formfive LLCs because you need this
management company and thisholding company and this and
that and other thing. But we'regonna jump into that, and we're
gonna talk about the LLC.
An LLC stands for limitedliability company. A lot of
(04:04):
people don't understand that.So, yeah, an LLC is a limited
liability company, and let'stalk about the steps. The first
step when you're forming an LLCis quite simply come up with a
name. Right?
Gotta come up with a name thatis that is not utilized already.
And when you come up with aname, the name must include LLC
(04:27):
in it or limited liabilitycompany, but you're gonna wanna
check with your state secretaryof state database and the,
United States trademark databaseto make sure no one took your
name. So, John, you can't justgo create Coca Cola LLC,
unfortunately.
John Tripolsky (04:46):
That's true. And you know what? Looking back a
little bit in history, I I don'tremember where I was exactly.
But as weird as this is, and Idon't know if I've ever actually
told you this, I remember beingon the phone with you. I
remember I was driving Mhmm.
Somewhere, and I was telling youI was gonna start a marketing
(05:06):
agency. So, I mean, we're goingback, almost twenty years.
Chris Picciurro, CPA (05:11):
Right. Way back twenty years.
John Tripolsky (05:13):
And I remember even then, I was like, well
well, what do I gotta name this?You're like, I I don't care what
you name it. It doesn't matter.Like, name is it could be, you
know, 13 initials, which you'llsee, I think, you know, for some
investment, you know, investmentgroups in that. Right.
But the name does not matter.Right? It's literally just
something that's unique,identifiable. I mean, as
(05:33):
everybody else. Right?
We we're not gonna get into onthis, but there's DBAs that
doing business as, but the LLCis that, layer of liability
protection.
Chris Picciurro, CPA (05:43):
Yeah. It's it's the name it's the name of
the business. So you foreign youpick a name, and then the second
step is you select a registeredagent. So every LLC has to have
a registered agent in the statethat it operates in. It doesn't
have to be you.
So you could you could be yourown registered agent. You can
use a third party. You can use avirtual registered agent. In
(06:06):
other words, that that haslocations all over The United
States. You can use an attorney.
You can use anyone that butsomeone has to have a physical
location in the state that youform your LLC, and that's
important. So the registeredagent is the one that actually
receives all of your legal andtax documents for the LLC, and
(06:28):
you could be your own registeredagent. Now, you know, shameless
plug. We we we have a registeredagent that we work with in the
teaching tax law communitycalled Corpnet. They help people
form LLCs and and act asregistered agent all over The
United States.
Even if if, if that's somethingyou need, definitely leave a
comment in, in our commentsarea, and we will reach out to
(06:52):
you or go to the teaching taxlaw hub. John could put that
link in in the in thedescription, and we can help
guide you in the rightdirection. So the point is you
don't have to be you could livein the state of Michigan, John,
and form an LLC in the state ofFlorida if you wanted to. Again,
talk to a tax professional. Moreor less talk to your legal
(07:15):
counsel before you do that.
But when it comes to thatimplementation, we have those
tools for you. Implement ideasare cheap. Implementation is
valuable in the teaching tax lawsystem.
John Tripolsky (07:26):
And we don't wanna give any bad advice. So
here's maybe some good one. And,Chris, and tell me if I'm
extremely wrong in this one. Sothere's the disclaimer. Don't do
this.
Don't just do a Google search onForming an LLC and click on the,
the first link that tells you toregister it in Delaware.
Delaware. Let's be honest.Because that usually is one of
the first ones that come up, andwe won't get into that.
Chris Picciurro, CPA (07:46):
But So yep. So file so select the
registered agent. It could beyourself. But remember, whatever
address you put as a registeredagent is where all your official
mail goes and and can be found.So I can go into any state
database and look up an LLC.
And and I want you to thinkabout it. Do you want your if
(08:06):
you're using your home addressand one of your LLCs, that means
someone could easily find that.So just something to think
about. The third, file yourarticles of organization. That
those articles of organizationdo not I wanna stress this, do
not get sent to the internalrevenue service.
They get sent to the state, thesecretary of state office, and
(08:32):
maybe you could file themonline, depending on the state,
where you're registering yourLLC. This is what officially
creates your LLC. And in whenyou file your articles
organization, you are providingyour business name, your
address. You have to identifywho your registered agent is in
your management structure. Soare you member managed?
(08:52):
Are you manager managed? Youhave to figure that out, and
then you file those articlesorganization. That is basically
the birth of your LLC. Filingfees are gonna range. Some
states are I've seen as low as$25, $30.
Some states, California, youknow, they're about you're gonna
be up to $800 per LLC. Way togo, California. File.
John Tripolsky (09:17):
Yeah. And, Chris, it's funny that you
mentioned the, the reference ofthe birth. Right? Like, that
articles of org doc really isthe the birth certificate of
Chris Picciurro, CPA (09:27):
your LLC. Way to
John Tripolsky (09:28):
say it. And I'm so glad and it's funny. I didn't
you know, we did not talk aboutthat, so I'm super glad that you
referenced it that way. And thenhere's some more advice. Take it
from somebody who had a hardtime tracking one of theirs down
a long, long time ago.
Keep it where it's easilyaccessible. I think now you can
probably get them a lot quickerRight. From your secretary of
state online, but you'll needthose. But at the Absolutely.
(09:49):
Times you think you won't, theywill be asked of you.
Chris Picciurro, CPA (09:53):
It's a a a great way to say it. It's like a
birth certificate for yourbusiness. You're going to need
it. You will need it. Now onceyou file your articles articles
organization, then you need tocreate an operating agreement.
You I highly recommend you havea formal operating agreement
that is written, that is aliving, breathing document even
if you are a single member LLC.Now we're gonna call time out
(10:17):
here. I want to stress.Remember, a single member LLC by
default is a disregarded entityfor federal tax purposes. So,
John, if you run a business andyou form an LLC, you own a
rental property, you do form anLLC, you don't have additional
filing requirements on thefederal level just by forming an
(10:40):
LLC.
However, you should have anoperating agreement. The
operating agreement is gonna layout the ownership, the profit
splits, the management, and howyou resolve disputes. This is
your blueprint. These are therules for the organization. So
(11:00):
if you were going to if you havea dispute, if you are giving
someone the authority to act onbehalf of the LLC, even if it's
yourself, that's written out inthe operating agreement.
Now an operating agreement isnot legally required by every
state, but I can't recommend itmore highly. So even if you want
to use an online service, if youfeel that's appropriate based on
(11:23):
the complexity and risk of yourLLC, that's fine, or consult an
attorney. But the operatingagreement is a living and
breathing document that couldget amended quite often too.
John Tripolsky (11:35):
Yeah. And, Chris, here's a question for
you, not to deviate from it all,but I'm sure pretty much
everybody's seen it. Right?Like, there I feel like law
firms usually have it, whereasPLLC. What's that p stand for?
Chris Picciurro, CPA (11:47):
Yep. Professional. Professional
limited liability company. Somany many industries are
required to to to be a PLLC, andyou're gonna see that, yeah,
usually in a a law firm,accounting firm, and and that
sort of stuff. And there couldbe a couple different statutes
based on what state you're in.
John Tripolsky (12:03):
So it's the same thing, just an identifier.
Chris Picciurro, CPA (12:06):
Yes. It's a special type of LLC so for
professional service companies.Next step, I obtain a federal
identification number or EIN.Now that can be done online. It
has to be done online now.
And for many people, it'sactually required. You can just
get one on IRS website, irs.g0v.Even if you're a single member
(12:30):
LLC, you should get a federalidentification number that
separates it from your SocialSecurity number. You're gonna
want that for potentiallyanonymity. You're gonna want
that for asset protection.
You're gonna want that forbanking purposes. So get an EIN
number or work with someone toget you an EIN number. And you
can do that right online onirs.gov. It takes about five
(12:54):
minutes. However, don't screw itup.
There's some very importantquestions in that EIN number
that if you click the wrongbutton, the IRS is gonna think
you're not what you want to be,if that makes sense.
John Tripolsky (13:06):
Mhmm. And don't lose the number.
Chris Picciurro, CPA (13:08):
Oh, correct. Again Like, somebody
who knows. Number. You know,that's your Social Security.
That's your, you know, that soyou've got a birth certificate,
right, which is we've discussed.
But DIN is like your SocialSecurity number. So you need
that. Don't lose it. And whenyou get a you know, store that
(13:30):
as when you apply for it, it'llget mailed to you, but it's
gonna pop up on your computer, adownloadable PDF of that EIN.
Definitely download it.
Download that thing. The next,you're gonna now now that you've
formed your you've gottenformed, you have your operating
agreement, you've got your EIN,you're gonna wanna register for
state and business licenses ortaxes. Just depends on your
(13:52):
state where you're at. Thatcould be sales tax. It could be
franchise tax.
It could be with holding tax. Itcould be permits and business
licenses. So, John, let's saylet let's think about your
situation. Let's say you formedan LLC to have a marketing
agency. Awesome.
Marketing agencies are a servicebased business, so you're
(14:13):
typically not going to havesales tax unless you live in a
state that that taxesprofessional service or yeah.
It's it that'd be rare. But onceyou hire employees, you're gonna
have withholding tax. You'regonna have to register with the
state, or you're probably gonnahave an excise tax or or
franchise tax. You can'tregister for this in the states
(14:37):
that you're supposed to file inuntil you have the IIN number
and the operating agreement,etcetera, etcetera.
The next step or step six is toget six is to get registered
with state tax and businesslicenses. And then once you're
registered, then go open yourbank account. Try to keep your
personal and business fundsseparate, not not even if you're
(14:59):
the only only member of the LLC.And when you go to see and,
John, you mentioned this. Whenyou go to the bank, that's why
you wanna keep track of all thatstuff.
You say, hey. I formed an LLC. Iwanna start a business bank
account. They're gonna ask foryour EIN, your articles
organization, and your operatingagreement.
John Tripolsky (15:21):
And there is no leeway. If you don't have those,
you do Not pass go, and you donot collect $200
Chris Picciurro, CPA (15:26):
or don't have a bank account, and then
ultimately, you're really not anl you're you might form an LLC,
you're not acting and walkingand talking like a duck, so
you're not a duck. So, yeah,absolutely. You wanna start that
business bank account. And thenonce you're set up, it's at that
point, you have responsibility.You, the person that formed the
LLC, you have the responsibilityto maintain compliance on an
(15:52):
annual basis.
That includes annual taxreturns. Now some states are
biannual for the LLC. So here'swhat happens, John. Let's say
you form an LLC. I'm gonna usethe the state of Tennessee, for
example.
In the state of Tennessee, youform an LLC. Every year, you
have to you have to renew yourLLC with the secretary of state
(16:13):
and pay that fee. Separate fromthat, you have to file with the
department of revenue afranchise and excise tax return.
They're two completely differentfilings. The secretary of state
renewal is something that isdone has nothing to do with your
income tax.
It is a legal document that isfiled by your registered agent.
(16:34):
I can't tell you how many timestaxpayers have their LLCs
dissolved because they don'tfile their renewals. They lose
their all the stuff they workfor their asset protection, and
they're thinking, well, I filedtax returns. Yeah. That's
different than filing yourrenewal with the state.
John Tripolsky (16:55):
And that's a that's something I bet you a lot
of people don't know. Right? Soit's I mean, I would say it's
almost like a blessing and acurse. Right? Like, I could in
the state of Michigan here, Ithink it's maybe I'm guessing
here maybe $80 or a $110,something like that.
I could literally leave my desk,and by the time I get to my car,
I could have an LLC formed, havean EIN, and I'm on my way to the
(17:17):
bank. Like, it's that quick thatthings happen. And why I say
it's a blessing and a curse,like, now it's so easy to do it.
But the curse side of it is is Ithink some people jump into it
like you had mentioned. Theycreate so many of them thinking
that, you know, oh, everybody'sgonna love me.
I'm gonna be so organizedbecause I have everything
separated, but it almost becomesin a little bit of an admin
(17:37):
headache at some point. And thenyou realize like, oh, wow. This
really didn't help me on the taxside. Liability side maybe, but
now my compliance costs, akafiling your taxes, now the cost
of doing that just went up,maybe, because you have 40 LLCs
for every
Chris Picciurro, CPA (17:54):
And there are some states that allow what
are cost a concept called seriesLLCs that you can kinda roll one
into one one, but you've gotyeah. You've gotta look on a
state by state basis. As far asa maintain ongoing compliance is
what we're gonna wrap it up onthis is because we do have
additional content. Your LLC isa the the one of the positives
of it is it is a flexibleentity, meaning it can always
(18:17):
elect to be taxed as a ccorporation. It could elect to
be taxed as an s corporation.
It could bring on new members.But if the LLC goes moves from a
single member to multi member,the tax reporting completely
changes. So just make sure thatyou understand that concept of
price versus cost. Yes. It mightbe inexpensive to create an LLC.
(18:41):
It doesn't mean it's going to bea low cost to maintain it. You
know, I've I've got tons ofterrible stories of people
buying, you know, one rentalproperty. They've got eight
partners, and they don't realizenow, oh gosh. It's gonna cost me
$3,000 a year just to file a taxreturn. It doesn't matter if the
rental property is an $80,000property or a 10 unit apartment
(19:03):
building.
It's the same amount ofreporting. LLCs could be great.
They can help you out with assetprotection. They could be a tax
planning tool. They can give youpeace of mind.
However, make sure you talk toyour centers of influence, your
tax professionals, and mostimportantly, your legal counsel
to apply these concepts. Again,ideas are cheap. Implementation
(19:25):
is valuable to you, to yoursituation, and if it makes sense
to form an LLC. Also, you'vegotta put the asset in the LLC.
I can't tell you how many times.
Well, I formed this LLC. Oh, didyou did you do you have a piece
of real estate? Did you put itin the LLC? No. Not yet.
Okay. Well, John, it's likepacking a bag, checking a bag at
the airport, rather checking abag at the airport with nothing
(19:46):
in it, but you paid for thatcar. Hey. I can promise you it's
gonna be underweight. That's forsure.
So it's a team sport. And ifyou're gonna form an LLC, make
sure you not only file thosesteps we talked about, but
maintain the ongoing complianceas well.
John Tripolsky (20:02):
And that's a great example. Right? Because an
an LLC could be as small as astartup cookie company, But then
they can also be as large asthink the example that we
actually brought up on the lastpodcast we did on this couple
years ago now was, wasStellantis, with, which is
actually Chrysler. Right? So itwas Chrysler, which is
(20:25):
Stellantis, I think, owned them.
It's if I remember right, someform of that name was actually,
an LLC. So it's a you know,obviously, it's cheaper to do
compliance for, for the bakery,I'd imagine, than a auto
manufacturer. So just anexample. And let's close it on
that. If anybody is interested,obviously, in any more
(20:45):
information that we have onLLCs, really just get on our
YouTube, check out all thecontent we have on there, and
really just look at what'sthere.
Just look at it. Search LLC.Search any topic you can think
of on there. Tons of stuff isgonna come up. You're gonna find
reels.
You're gonna find podcasts.You're gonna find all kinds of
things. I think we had guests onthere talking about different
(21:06):
types of them. Check them out.There's an endless amount of
information.
I promise you, you will find theanswer that you're looking for.
So, Chris, as I was justmentioning here, right, is, you
know, sending people to YouTube.Do a search. You're gonna find a
ton of LLC stuff. And I I wasgiven the example, right, of
Stellantis being an LLC and thestartup cookie company being an
LLC, but the compliance costsand efforts are a lot different
(21:30):
than the two of those.
So any any final suggestions youhave for somebody if they're
thinking of forming an LLCbesides don't go over the top
and
Chris Picciurro, CPA (21:40):
form one for your LLC? Listen to this
podcast. Take our advice.
John Tripolsky (21:45):
Bingo. So if you made it this far in the show,
you've actually already takenthe advice whether you knew it
or not. So Absolutely. Place toend. So alright, everybody.
Again, any questions, drop us aline. We're here to help. Get on
defeatingtaxes.com. That's aprivate Facebook group that we
always mention on the show. Youare welcome.
Here's your private invite. Andthen those show notes as well
too. We'll put a link downthere, as Chris mentioned, for
the hub and reach out to us. Ifyou have any questions, we're
(22:08):
happy to catch you. We don't dothat in teaching tax flow as far
as for doing the registeredagent side.
We don't do a whole lot, youknow, in setting up on that at
all. We have a partner that doesit, and that's who we'll connect
you with. So until next time,next week, same day of the week,
different date, completelydifferent topic here on the
Teaching Tax Flow podcast. Havea good week, everybody.
Disclaimer (22:32):
The content provided is for educational purposes
only. We encourage you to seekpersonalized investment advice
from your financialprofessional. For all tax and
legal advice, please consultyour CPA or attorney. Investment
advisory services are offeredthrough Cabin Advisors, a
registered investment advisor.Securities are offered through
Cabin Securities, a registeredbroker dealer. The content of
this podcast does not constitutean offer of securities.
(22:54):
Offerings can only be madethrough an offering memorandum,
and you should carefully examinethe risk factors and other
information contained in thememorandum.
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