Foreign.

You're listening to the Master Passive Income Podcast Network.

Welcome to the Master Passive Income Show.

My name is Dustin Heiner and I'm here to help you quit that job, that just over broke job, by investing in real estate and never work a job again.

Today I'm super pumped to bring on an expert who is fantastically amazing at asset protection, getting you out of paying taxes legally.

And, and he's going to show us how we can.

No, let me take that back.

Show me how I could do it better and show you how you can protect your assets, get out of taxes like the rich do.

All right, let's start the show.

Welcome to the Master Passive Income Podcast where we talk about investing in real estate with a special focus on making enough money so you can quit your job and live the dream life.

And now here is your host, Dustin Heiner.

What's up?

Super blessed as always to have you here with me on the show.

Now I gotta tell you, growing up, my stepdad always taught me to do things right the first time.

And you maybe have heard the saying, if it's worth doing, it's worth doing right.

Well, I a hundred percent agree with that.

And taking back what my stepdad told me when I was really, really young, if you're going to do it, do it right the first time.

Well, I am now.

I'm having to do a lot of stuff over again.

Now when I say that, because I've been investing since 2006.

In fact, in 2006, I first started an S corporation.

Literally started an S corporation.

Oh, wait, wait, hold on, pause.

I was just told by my friend Justin who listened to this podcast, he told me, I says I use the word literally a lot.

And then I realized, oh my goodness, I say literally, like literally all the time.

I'm just kidding.

But anyways, I wanted to throw that out there.

I'm going to try my best not to say funny words like that, that repeating words like literally all the time.

But who knows, it might come out.

But this is what happened.

2006, I started an S corporation to, to buy real estate because I had no clue what I was doing.

But then I realized once I learned a little bit, talked to an accountant and a lawyer, not really the best ones, but talked to some of them, they said, don't use S corporation, use an llc, that's a pass through entity.

And it's like, great.

So I started creating a bunch of LLCs for all my properties.

And so now that's the path that I've got.

I don't know, 10 +LLCs.

And I'm not necessarily that protected.

And this episode I bring on an accountant, somebody who also knows all this legal stuff, how they set everything up.

Right.

They're such a great company.

They flew me out to Las Vegas, got to hang out with them, see their operation, because I was like, you know what?

If I'm going to be trusting a company to do all of my personal asset protection, taxes and all that sort of stuff, I really want to meet them, see their operations.

And if I'm going to be bringing them on the show to be a part, they're not sponsors or anything.

There's a company that is really, really good that I really, really like.

They didn't pay me any money to be on the podcast.

Well, I wanted to meet them and I wanted to make sure that they knew what they were doing.

They've been doing this for like 30 plus years.

And they have a lot of case law showing the process of which they set everything up.

I'm not going to get into what they told me, but here's the great thing about having a podcast.

I use my podcast to get knowledge and get understanding from other people.

So in this episode, I'm literally asking, okay, here's what I have.

I have 30 plus properties.

I have X, Y and Z.

What do I need to do now?

So instead of being like metaphorical or like, well, what about this?

No, I literally said if I'm there.

I said, literally, sorry.

I told them or told Adam, who was.

I'm interviewing.

I said, adam, this is what I have.

What do I got to do?

He said, no problem.

This is what we do.

We've done this many, many times.

Set up this, set up this, set up this.

Well, this company is so fantastic.

In fact, they've helped so many people to set up their LLCs, do asset protection, creating trusts, getting out of taxes, legally, all that sort of stuff.

And they're doing it for me.

And I thought, if I'm going to have them do it for me, I want to have them do it for you.

And I even talked them into giving you a big discount.

It's like 3 or $400 off of their package to get asset protection.

So this is what I'm doing.

And when I said I started the this episode, I hate doing things wrong the first time.

In fact, I was taught to do it right the first time.

Well, now this is like the fourth time I'm having to redo everything because I'm now finding the right way to do it.

In setting up the LLC structure trusts, we're setting up land trusts as well in doing my taxes and all that stuff.

So this company, they take care of every bit of asset protection as well as all the taxes.

And I talk them into getting you a huge discount on setting up your LLC because I want you not to do what I did where set it up wrong the first time, then set it up wrong the second time and third time and then do it right the fourth time.

No, I want you to do it right the first time.

Use this company to set up because I'm doing it myself.

But you obviously do own due diligence.

Make sure that the right company from you.

The right company for me is this company.

It's nch.

But I've worked out Nevada corporate headquarters.

I've worked out a special link that if you use this link it'll give you, I don't know, three or four hundred dollars off of their LLC creation package.

It's so comprehensive that you are absolutely going to get taken care of.

I think they even give you like a free consultation.

They give you like a free six months of like lawyers and attorney.

Anyways, there's, it's really, really awesome, really great stuff.

If you go to MasterPassiveIncome.com NCH Nevada corporate headquarters is the company MasterPassiveIncome.comNCH well, I'm bringing on these guys.

They're going to be at the real estate wealth builders conference to teach even more how to do this.

But this is a fantastic walkthrough.

Trust me, you want to do it right the first time.

I've spent so many like thousands of dollars do it wrong where now I'm having to do it again and hopefully this is the very last time.

And honestly, what these guys have been doing for 30, 40 years and more than likely I'm never going to do this again because it's all going to be done right.

So set up everything right before you start buying properties because you guys know we build the business.

We make sure we build the business first, hire the experts to do the work.

And honestly I'm finding the experts and I'm bringing them to you.

So go to masterpassiveincome.com NCH they will help you out, give you a free consultation, show you how to do all this sort of stuff and they'll even do it for you if you need them to.

Now let's jump into today's show where I bring in on the expert in asset protection, taxes and everything, Adam kindite from NCH Nevada corporate headquarters.

Adam, thank you so much for being on the show.

Yeah, thank you for having me.

So that when I look at the asset protection side of things, I just remind people all the time.

I hear people say, well, just get a good insurance policy and you'll be fine.

This morning my mom called and my father had passed away and she's got a little house and she'll be traveling a lot and wants to Airbnb it.

She said, adam, do I really need an LLC for this?

I said, mom, we're going to talk when I get home.

But absolutely, because accidents happen and at 70 years old, I don't want you going to lose everything.

The cost of litigation is ridiculous.

Of course, keep good insurance, but there's just so many things that happen that insurance won't pay or won't pay enough.

And that's where getting LLC is and trust set up properly really makes a big difference now.

So thinking about being a real estate investor.

So I have 30 plus properties, I have apartment complexes, hotels that I invest in as well.

And so looking at the breadth of everything, I didn't start there though.

I started with, you know, just one home and then love playing Monopoly growing up.

So every single time I started thinking like, how do I now play Monopoly in real life?

You know, know, scaling up and the first property that I bought, I just assumed that you didn't really need it.

Just get insurance would.

If somebody's starting out, what's the right path to go for buying a property?

Either putting your name, getting llc like you said it to your mom, but what are your thoughts?

Like if somebody's getting started, how do we start?

Yeah, so in it really depends on the financing that you're doing.

So normally if I'm going to get a 30 year fixed rate mortgage and generally get better rates doing a 30 year fixed rate mortgage, then I'm going to buy the property using my name and my credit and now it's in my name.

But my job, the money I make from my job, my wife's income, my home that I live in, it's all at risk.

So this is where just getting the LLC set up is the way to do it.

Just to create that corporate veil between you and your business assets or your investments.

Well, if we quick claim the property into an llc, you just violated the mortgage agreement.

And as soon as the bank sells the mortgage or does an internal audit, they see your name is not on record.

They could always invoke the due on sale clause and call the mortgage due.

And then you'll hear a lot of experts say, well, every property needs its own llc.

So if there's a problem with one, it will not affect the other.

Sounds nice.

Turns into a night long, a lot of work.

So instead what we do, we're focusing on residential property.

Fourplex, triplex duplex, single family home, townhome, condo.

We use land trust, become real estate privacy trust.

It's like a land trust on steroids.

It separates the liability of each property without having to have a bunch of llc is the trust has no bank account?

No.

So the property is owned by an individual land trust.

Okay.

That land trust has two types of beneficiaries.

A lifetime beneficiary.

During the course of your lifetime, the beneficiary or the owner of that land trust is an llc.

The death time beneficiary.

Upon your death, the beneficiary becomes your family trust, which says the property is going to your children or whoever you've named as beneficiaries.

But doing it this way.

There's a federal law, it's called the Garn St.

Germain act of 1982.

When we put property into a trust, by law, the bank can do nothing.

They cannot invoke the due on sale clause.

So a trust by itself doesn't provide any protection, but combining it with a Nevada or Wyoming llc, we get the very best legal protection.

And you truly become the worst nightmare of these contingency fee attorneys because they can't get paid.

Well, we're in Vegas right now.

So I'm literally on set here in Nevada, in Vegas, and I'm driving from where I'm at my hotel to this headquarters that you guys are at your office.

And I kid you not, I counted at least eight different.

And this wasn't a long drive, is maybe a mile, two miles, eight different signs for accident attorneys everywhere.

And so we know we live in a very litigious society where people just are fine to sue.

Okay, so want to protect ourselves.

But let me understand this.

So if somebody's going to buy a property, we put that in a land trust and then the land trust, we have an LLC that's outside of that does everything.

Okay, let's say we have five properties.

Maybe break it down for some reason, like every time that I listen to how to do gets convoluted in my head, like literally does.

So let me, let's break it down.

Let's say I have five properties and then do we have five different trusts and then one LLC for all of them?

How does that Work out.

Yeah, great question.

So.

And I want to pause for just a quick second and say thank you so much for listening to the show.

If you've gotten anything out of the show, I would appreciate it if you went to anywhere that you listen to, say Apple or Spotify or wherever and leave a 5.

Honestly, I really appreciate you leaving an honest review.

I just love giving all this information out and I want to see you succeed.

Also, send this to one person.

Just tell one person and say, hey, Dustin wants to help a million people to invest in real estate.

You need to listen to this because it's going to change your life.

Lastly, get my real estate investment course completely for free.

Text the word rental.

R E N T A L rental to 33777.

Rental to 33777.

I'll literally give you my course showing you everything in the business so that you can become financially independent.

Think of it as an umbrella.

At the top of the umbrella we have the llc.

One llc.

One llc.

Okay.

We're organized under, usually we organize under the laws of Wyoming.

We register with whatever state your properties are in that one llc as a.

Foreign entity, you're saying register rent.

Got it.

Okay.

And then below that, every one of your properties has its own land trust.

We have the one, two three Main Street Trust, the 707 Oak Street Stuff Trust.

Each property gets its own land trust that separates the liability of each property without having to have a bunch of llc.

So I have one llc, one checking account.

It collects the rent, pays the expenses, whatever is left, write yourself a check.

Very simple to set up, very simple to maintain.

And the reason I like doing it this way is it is truly manageable, scalable and financially efficient.

Hmm.

Now I will note that, that the using the land trust, the real estate privacy Trust, this is only for residential real estate.

4 Plex, triplex duplex, single family home, townhome condo will use for units and below.

Yes, got it, got it.

But for commercial properties, which we can.

I definitely want to touch on that because as I share with all of my audience to investors and students, there's a roadmap that we do as real estate investors.

So you start, basically you need to prove to yourself that it works.

So zero to five properties, you're basically a mom and pop or a beginner real estate investor.

Then you start getting, realizing I need to now scale.

So you get out of being a beginner to being a business owner or a scaler in your business.

So you go from six to hopefully 20 properties and we got to Scale and utilizing something like this is going to help us to scale faster and not have so much red tape that we have to go through or you know, just organizing things.

But then after that we be out of becoming the scaler to business owner.

Then we become an investor, the investor.

We now have more money than time and so we're like, well, you just need to start investing in other things.

Asset classes being commercial is fantastic.

Okay, so let me get this right.

We have one LLC with these trusts.

Now I've always been told you have one LLC per property.

I would also tell my students, well, I personally like to have not one.

Like if you have $100,000 home, it's not the best use of time and effort.

If you had one LLC for one property, that's $100,000.

That's a lot of work.

So what I've done in the past is I put out one LLC that has, let's say five properties.

Total equity that doesn't have a mortgage would be like $304,000.

So if one LLC is attacked, you know, lawsuit, then they can just get the 3 or $400,000 in equity.

But this way how do we protect?

Because it seems like the LLC is what protects.

But if each one's in all five are in a trust and you have an llc, how do they, do they not get past the trust and not get to the LLC that owns the or trustee or beneficiaries of all the other trusts?

Yes, this is, that's a really good question.

So that one trust is all they can sue is a slip and fall.

At 123 Main street they go out and hire an attorney.

The attorney looks to see who owns a property and they're going to see the 1, 2, 3 Main street trust strike one.

The attorney at that point is probably saying, hey listen, this is not the low hanging fruit that we're looking to go after.

But if they do proceed, these trusts have the lifetime beneficiary which is not on public record.

There is nothing on public record that.

Shows it's not a recorded document of the county.

Yeah.

Or other properties.

Yep.

Which.

So it only allows them attack that one trust.

And there's different options on what we do.

I could take those other four trusts, assign my beneficial ownership to another llc.

I didn't sell the property.

I'm not committing fraudulent conveyance or fraudulent transfer.

I'm just changing beneficial ownership to isolate the problem.

That's one option to remind me, you know, talking about three to five properties and typically I would tell you if you're going to hold title directly in the name of the LLC, that is the rule I follow.

Three to five properties per LLC, no more than $1 million of fair market value per LLC, never makes commercial with residential.

And it really boils down to your risk tolerance level and total age you want in that basket in the financing.

Also, because if I'm doing like a DSCR loan or a private money loan, I'm not doing a 30 year fixed rate mortgage.

I could go ahead and just get the loan in the name of the llc, close on it, and then move it into a land trust.

So again, we're separating that liability.

But it reminds me of this.

I was teaching a class in Newark, New Jersey and explaining this structure.

And at the end of class, a guy comes up, he says, adam, we need to talk.

He said, I've got 21 properties.

They're all, at that time, they're all, this is back in 2015, each property was between 3 and 500,000, all free and clear.

The guy that owned all of it, 65 years old.

And every time he bought a new property, he would just go order a new LLC, file the, pay the one 25 bucks with the New Jersey Secretary of State, open up a checking account, get an ein number.

So much work.

So much work.

Yeah.

So he does this and he says, adam, I've got a problem right now at a squatter where one of my properties was vacant.

There's a squatter, she was drunk and high, slipped and fell and broke her leg and filed a lawsuit.

As you were saying, you come in, you saw these contingency fee attorneys.

They are every everywhere online.

TikTok you, you name, they're always advertising.

If we don't win, you don't pay a die.

So what happened?

The guy files a lawsuit or the lady files the lawsuit and.

Exactly.

The problem was they sued the one llc.

Well, as soon as the attorney was deciding whether or not he would take the case.

Can I figure out what else?

Yeah, 10 minutes to figure out.

This guy owned 20 other LLCs.

And because they were set up in New Jersey, we don't get this law called charging order protection.

And statistically the corporate bail gets pierced almost 50% of the time.

So it's literally a coin flip as to whether or not they're going to sue that llc, but they're also going to sue you as the owner of the llc.

You get brought into a deposition.

And remember, failure to disclose is a felony.

So you must list that you own all other quentie llc and now everything is at risk.

What a complete waste of time and money to do those separate LLC for all those.

So I'm quickly interrupt because I want you to keep going.

So it because we've all, everybody like attorneys, they always say get an llc, get an llc, get an llc.

But you're saying yes, get an llc.

But you have to also do something else which is the land trust which is another thing that actually keeps people.

Because lawsuits are only because a lawyer says yes, I will take that case because I see a lot of money out there on the table.

There's only one property and they can't see the other properties.

Like it's not worth my time.

Of course you, you broke your neck, whatever, blah blah, blah.

I believe in the heart for you but I'm not going to make any money so I'm not going to do it.

So if you are able to guard that.

Wow.

So get back, get back to that story.

So you now have.

Because I literally have like 7 LLC.

I follow what the photocope, you know people say on Instagram and TikTok 7 LLC.

Like you know, let's say five properties here, five properties here, blah blah, blah, that I'm the owner on all of them.

And so I'm looking at this like wow, I have a lot that people can find or a lawyer then they can find and hopefully not come after but they might want to.

Yep.

So that.

So in your situation with all of your different properties, again you have the option of moving those properties into individual land trust under that llc.

Now where the LLC is formed is so very important and I'm sure our audience have heard people say incorporate in Delaware, Nevada or Wyoming.

And it's no joke.

All the big companies, Microsoft, Walmart, Disney, they're all Delaware.

Delaware has the best laws for big business.

The laws are so good.

Those companies pay the state of Delaware billions and millions of dollars a year in setup and renewal fees which they gladly pay because all the laws protect the shareholders.

Quickly ask.

So I just heard Elon Musk actually fire at in through Twitter Delaware saying that Delaware is now breaking what used to be a protection and now it's not looking very good.

What are your quick thoughts about that?

Yeah, so Elon Musk had this pay package of $50 billion.

It was nearly impossible that he was even going to hit this.

The board of directors approved yet if you 10x our company, we're paying you $50 billion.

He did.

Against all odds he did it.

And he had one shareholder and a lawyer in Delaware that owned 12 shares of stock, I think.

And that guy filed a lawsuit claiming that this pay package was excessive.

And our woke court system made that ruling.

Yeah, they agreed with it.

It went back to vogue.

And again they voted the same.

So twice this went into court and Elon said, the heck with this, I am moving it.

So you'll see that Elon Musk, that company Tesla, he converted to Texas.

And again, big companies, there are different laws in place.

I would never do Texas for a small business, publicly traded company, different ballgame, small business, Nevada and Wyoming.

But that's what happened with the Elon Musk deal.

He also has neural link and some other entities that are in Nevada.

So interesting enough for that.

But the reason this is important.

So Nevada, back in the 1950s and 60s, when the mob came to Nevada, they started heavily.

I learned about, I laughed because learning about this stuff being here in Vegas now, it's just like, wow.

Yes, the mob did come here back.

In the 1950s and 60s when the mob came, they started heavily influencing our politicians to create all these great laws to protect their business owner.

And even though the mob officially moved to Wall street back in the 90s, Nevada kept this law strong for small business, big revenue generator for Nevada.

Well, over the years, Nevada's kept raising its fees.

Wyoming came in, modeled their laws after Nevada.

In my opinion, they actually made them a little better through some court cases.

And the renewal cost is less.

So all my LLCs are in Wyoming.

Yep.

Yeah.

So it's.

It truly gives you the very best legal protection.

I talked about the piercing the veil happens almost 50% of the time.

I was teaching another class in Texas and one of my students was an attorney that specializes in suing businesses.

He said.

He said, adam, I hear you telling the audience that the corporate veil gets pierced 50% of the time.

Well, I'm an attorney and I'm in the business of suing businesses and I specialize in piercing the corporate veil.

He said other law firms hire me to pierce the veil.

That's what I do.

He said, if I see one, two, even three people's name on public record with the Secretary of State, I pierce the veil almost 95%.

He said, no one ever sets these things up right.

They never maintain them properly.

We have a huge success in veil piercing.

He said, if I see Nevada or Wyoming, I won't even take the case, so I can't get paid.

He said, I'm glad more people don't know about Nevada and Wyoming or I would be out of a job.

But I had A really good talk.

He said three things.

I will not sue Nevada, Wyoming or if it is a trust and I don't know what type of trust it is.

So even setting these things up, how you name things is so very important.

And like with your, with your real estate privacy trust or the land trust, keep it simple.

The 1, 2, 3 Main Street Trust, the 707 Oak Street Trust.

So that property name is.

Because a lot of students, I've got thousands of students now, big questions always.

Well, Dustin, what should I name my llc?

I say do not name it Dustin Heiner llc.

Because that's absolutely going to be like, okay, that's his.

We have to know that.

Make it as arbitrary or vague as possible so that they can't say, let's correlate this to this to this.

Now I personally broke my own rule of doing that because I made something very similar just so I can personally keep a track in my head.

But now I'm like, this is so much better.

We have.

So let's, let's get back to.

So you have five properties or more let's say multiple, but five properties, one LLC for like that's because I literally have 30, 33 properties or something like that.

Lots of properties.

In five different states you're seeing one LLC, but put all of those into a land trust.

So in what we're going to keep separate is, and this is completely up to you, but I've got a client that has 50 land trust, they're all in their own land trust with one LLC managing all of it.

Just property managers for everything.

And it's all perfectly clean.

And have lawsuits come up.

They have, but we put these attorneys in a position where the best they could do is go after your insurance.

Just had this a few weeks ago, a guy was him on about, you know, getting his LLC set up and he lived in California.

So in California you have to pay.

The 800, 800 franchise stats and rip off.

Yeah.

So he has him on about this.

He had five properties, four or five properties he bought in Florida.

And he called me in December and said, Adam, I just want to call, say thank you.

I said, what happened?

He said, I just got notice from some Morgan something company, contingency fee law firm requesting my insurance.

He said I wouldn't.

I called my attorney and the guy said if it, if this would have not been set up this way, they would have been suing you, coming after all of your stuff.

Wow.

So it's really powerful to have that.

But getting it set up in Wyoming and again, I need this to be manageable and financially efficient.

So if you want to put all 30 properties into their own land trust, you sure could.

If you wanted to have maybe 10 properties in one LLC, 10 in another, you could do that.

But at the end of the day, because they're each in their own land trust, that is all they can go after in the event of a lawsuit.

So it's a great way to do it.

Your commercial, you must keep separate.

So five units and above those will get their own LLCs.

My wealthiest client has $2.6 billion of real estate in 23 states.

Wow.

Huge commercial properties all over the place.

And, you know, it's really word be out like it's nothing.

It's a billion.

That's a lot.

So that guy's got 1400 LLCs, so absolutely incredible.

So to hire you guys just to manage all the network, always kind of, you know, he has got teams and stuff.

Yeah, he's got 60 teams of CPAs doing the taxes.

He's got an office with five ladies.

All they do is stay on top of renewal diet.

So.

Wow.

Okay.

So I have.

Let's just walk through what I have.

So my.

I had one apartment complex, 355 units.

We have one LLC over that.

So yes, we already have that taken care.

Let's just talk about my residential, you know, four units and below.

So I have 30 plus properties.

So what we need now is one LLC and then transfer.

Because all of them are already in an llc, its own llc.

Is there any tax liabilities to transfer it out of the LLC into a trust or anything like that?

Like walk me through that process that I need to watch out for or Herman's or landmines.

I need to jump over.

Yeah.

So there is no transfer tax because you're not selling the property.

We're merely changing the way you hold title.

So I'm going from your LLC just quick claiming the property into its own real estate Privacy Trust, the 1, 2, 3 Main Street Trust.

And we're doing that with each property.

So now if there's a slip and fall on one property right now, you said we've got 7 LLC, and there's a few in this one and a few in that one.

Well, they're Wyoming, so you are protected and we get the charging order protection.

So makes you very unattractive.

But at the end of the day, a lawyer could come back and say, yeah, he's got seven properties in that llc.

Got a couple hundred thousand dollars of equity there.

Yeah, we'll Take that case for free.

We got like 1.3 million attorneys in the U.S.

there's just not enough good cases to go around.

So these poor guys get stuck taking bad cases with bad facts just trying to make a living.

And if they can find $50,000 of equity somewhere, they'll take the case for free.

Do you have any idea how much it cost you to hire an attorney just to file a response?

No, I don't.

Thousands of dollars.

I had this happen last year.

I got chatgpt as my lawyer.

Does that.

What?

I was getting $30,000 for him to file a darn response.

My goodness.

And these things get stuck in court.

I had another lady, she did a.

Who.

She'd been in court for two years.

She had spent over $100,000 in legal fees because the square footage on a contract was wrong.

Absolutely crazy.

And of course, I tell everybody, keep good insurance, but insurance companies have adjusters and attorneys whose job it is to pay out as little as possible on claims.

So you are competing with your insurance company to pay the least amount and who is going to win every tithe.

That's a great point.

So, okay, we have a plan for my residential, so we need to get one llc.

And this is also a reason why I'm actually here to talk to you guys.

I'm like, let's go to the office.

You guys had me come out.

This is just great.

Being able to see everything, like, the breadth of everything is due.

And then we had you on a workshop recently that you personally gave so many great insights on taxes, how to actually protect your money from the irs.

Take it, like, legally, which is great.

I want to transition a little bit of that because you guys also do that too, which I usually tell all my students.

We got thousands of students now.

Well, I say.

Used to say, you know, find an accountant and find an attorney on your own.

Like, just go ahead and do that because there's so many of them and I don't know who to actually point them to.

But then started working with you guys personally.

I'm like, man, this is a great company.

Has both.

Like, literally, we can cover both things at one time.

So NCH is a company I go with.

But anyways, walk us through now that we have the corporate structure.

And so like I said, I'm putting.

I'm working with you guys to get all my properties structured correctly.

And I wish I would have done this from the very beginning.

I wish I had been this for the very first time because I wouldn't have to be doing all this stuff all over again.

I hate doing things multiple times.

I like doing it once the first time.

So doing this right now, talk about how do we protect and keep more of our money from the irs.

Yeah, so this gets really interesting.

So passive income automatically gets offset by passive losses.

So and most likely you're a real estate professional.

So that's another day, another topic.

But so you've got your passive income automatically getting offset by your depreciation, mortgage interest, property taxes and insurance.

So you're paying little or no tax on the money you're collecting on those rentals.

That all happens automatically.

The one thing that I want everyone to realize is do not ever put rental properties in an LLC taxed as an S corp or as an S Corp.

So we want to separate out active income and passive income.

So when we talk about now you're at the point where you've got your 30 rentals and now that's all passive income, which could only be offset by passive losses.

But you've got travel expenses, you know, flying out to Las Vegas.

You have websites and other things that you do, and management expenses, which are active expenses.

So what we do to really save money in taxes is to have an LLC taxed as an S Corp.

This serves as your management company.

I can use that to pay the kids, use that for my travel expenses, manage the accounting, manage my property managers.

I've got this management company that's charging a fee of maybe could be a guaranteed payment where every month is getting $3,000 a month just to watch over this stuff.

You own the company, you control the company, but legally you're not the company.

So I'm taking some of that passive income that could only be offset by passive losses, paying a management fee to your management company, turning it into active income that I can now use to pay for these various expenses.

So it's really a great way to do it.

You could do this without having an LLC taxed as an S Corp.

However, all those expenses will land on a schedule C.

So you could do an office expense.

You have an administrative office in the home where you get to write off 15% of the square footage of your home and your mileage.

I always tell you, see app mile IQ 70 cents a mile for every mile you drive.

And everywhere you go, you're always looking for property.

So you leave a business card with someone in the produce aisle at Walmart.

Purpose of the trip?

Marketing.

Marketing every hour, do good deal.

I get deals all the time from everywhere.

Yeah, so that's through your active company.

But you could write all those things off.

But it goes on schedule c.

You are 900% more likely to be audited when you file a schedule C.

Those are active expenses that would go on schedule C.

S corp or an LLC taxed as an S corp.

The audit risk is almost zero, less than 1/4 of 1%.

So big difference in the audit risk.

But again, now I got an active income business and I got my passive income.

So there's two different LLCs.

One would be the passive income, but that's the same holding company that has all the trusts.

Okay.

And then we have a second LLC and that's the active income taxed as an S corporation.

Oh.

So think about this way.

If you, if you hire a property manager, they're going to charge you 10%.

10%?

Yeah, so.

So they're collecting the rent for you, they're keeping their 10% and then they're paying you and you're paying your mortgages.

Well, you don't have to have a property manager.

You could do that yourself.

And as a matter of fact, we can still use that management company to manage our property managers.

So I am going to want to follow up on the properties and I do need to follow up on my property managers and still make decisions on repairs, maintenance and capital improvements and all those things.

So we could do an LLC to do that.

It's not helpful for every situation, but some situations it makes a huge, huge difference.

Okay, so two LLCs, one for the passive, one for the active.

And then because I was talking to my accountant last year and he was saying that you want it to be a S corporation, pay yourself a reasonable salary so that you're taxed at a different, like just that salary, let's say $60,000 a year, you're tax that.

But everything else is a passive income where you're tax a little bit lower.

Does that make sense?

Yeah.

So the way it works is your passive income is taxed at your ordinary tax rate, but there is no Social Security in Medicare.

So you just subject to state and federal tax, you know, you could be at A, at 20% or if you're making a lot of money, you could be at 37%.

And you rent, you're collecting those getting offset by depreciation.

So you're selling a little bit of profit that you're actually paying taxes on, even though you're putting a bunch of money in your pocket every month.

That's all on the passive side.

So on the active side, that is subject to state, federal and Social Security and Medicare.

If Social Security and Medicare is 15.3% too.

So if you made an extra 50, let's say an extra 100 grand, easy map, that is $15,000, $300 that you will pay into our wonderful Social Security.

And you hope it's going to be there when you.

But it's not.

I don't expect it to be in there.

Okay, keep going.

Having your S corp, your account say, well, we need an S corp.

The reason is now you can pay yourself the reasonable salary.

Reasonable is typically no less than 30% of your net profit.

Some months or more, some months or less.

But by the end of the year, get 100,000 as your net profit.

I want to give you a W2 for 30 grand.

The Social Security of Medicare drops from 15,300 down to 4,590, saving you $10,000 in Social Security and Medicare.

So you got 100 grand, took out 30 as a W2.

The other $70,000, that's still your money, but the IRS allows us to pay that to you as a K1 distribution, sometimes known as an owner's draw.

That is not subject to Social Security and Medicare, though, if all we do is just pay tonight.

On your active income, yes.

And if you have a business, maybe you're a real estate agent or a construction business or who knows.

Whatever business you have and you're not incorporated, you are missing the boat.

Hmm.

Well, Adam, I could literally personally talk to you so much, like forever about this and at the same time, there's so much more to go over.

But I want people to know how to work with you guys because we do workshops here at masterpass.

I can bring you guys on.

So they need to join those workshops.

So everybody check the link in description for all that information.

How to work with you.

But I personally love working with NCH because of how knowledgeable you guys are as well as you work with investors too.

So Adam, it's been great having you on.

So Definitely check out masterpassiveincome.com NCH Nevada corporate headquarters.

We actually worked out a special deal, literally fifteen hundred dollars of what normally would charge.

And you guys white glove service, which basically means you guys take care of everything for real estate investor from from legal setting things up to accounting.

Like it's so much stuff, which I've done it before and I we discounted it like you guys have discounted because say, hey Dustin, you have an awesome audience as your students.

And so it's a discounted rate.

It's under $1,000 for, but for everything.

And here's the thing I would say if you listen to this, I wish I would have done this from the very beginning.

I, I went through an online company, set it up one time, and I did it wrong.

I did a C Corporation for same stupid reason back in 2006, because I just, I was in a corporation.

So I started C Corporation.

Then I heard somebody else on, let's say Zoom, not Zoom, YouTube, you know, do it saying, hey, you, what you want to do is you want to get an LLC per property.

So I did that.

So I change it again.

Now I'm hearing this, I'm like, this sounds so much better.

I wish I had done this from the beginning.

So for everybody listening live from my mistake, do it right the first time.

Hi to the right people who's done this many, many times.

And on top of that, you're not going to have to do it all over again and you'd be protected.

So I'm going to try to do this as fast as possible just because if you don't have this done, you're open for liability and lawsuits.

But Adam, is there anything else?

Like, what else could I have missed talking about, you know, legally setting up or tax or anything like that?

So that for accounting purpose, get in the habit of keeping good records.

So whether it's active income or passive income, your rental portfolio, you buy these properties, keep things organized per property, keep receipts for everything, keep meticulous record, because all of this comes back in the form of tax savings.

Get a competent CPA, because not all CPAs are created equal.

One CPA says you owe 10,000.

Another CPA, same numbers, says you're getting 10,000 back.

So there's a huge discrepancy in good CPAs.

But regardless of whether you're using our experts or your own experts, you want to make sure that CPAs are only as good as the record you keep.

So if you haven't been doing it, get in the record or get in the habit of keeping good records and keeping active income and passive income separate.

Everybody has a unique situation.

So I love about working for and with NCH is that we actually take the time to understand what you're doing, how you're doing it, so we can put together a comprehensive plan and say, okay, this is what you need from a tax and legal standpoint.

Here's what your setup cost is, here's what your renewal cost is, so everything is taken care of for you.

Like I said, the white glove service, if you want to do it yourself, do it yourself.

But remember when you need it the most, you're going to find out when that LLC was not set up properly.

Like the attorney I told you about.

Oh my goodness.

He said, I go right on the Secretary of State, I pull up the company shows right on public record who formed the ll.

Totally it does.

And when you are just starting your format yourself, that is always on public record.

And that's why that attorney says he pierces the veil 95% of the time.

I had a question now that came up to mind.

So when.

And these are all the like legal gurus out on TikTok and Instagram, all that sort of stuff, but they say is you need to have every property have its own llc.

And then if you're going to do it right to hopefully not have your culprit bail pierced, then you need to have another bank account for every.

So if you had 30 properties, you have to have 30 bank accounts.

If you have 30 LLC.

So I'm like oh my goodness.

So in this structure, one llc, land trust, do we just need one bank account?

Oh my goodness, that makes it so much easier.

That's why I say this is manageable, scalable and financially efficient.

So every property, new property that we buy, you put it in the similars like you would do the other ones, the Netherland Trust, when you purchase it and then you then make sure that the LLC is the beneficiary of it, not trustee, the beneficiary of it.

Beneficiary of it.

Wow.

I love it.

Because man, I got too many bank accounts.

I'm like, it's just, this is more.

I didn't want to think that much.

I want it to be scalable like you're saying.

Because when you have 30, you know, LLC, 30 bank accounts, it's like it just takes more time administration wise when if you do it like this.

Oh one quick.

Another question people talk about all the time.

I get this question because I hear people on Instagram reels and stuff.

Oh, a Delilah LLC.

What's that?

Multiple LLCs.

What's that called?

The Series LLC LLC.

They're all excited about that.

Oh, it's a Series LLC.

And so I mean I have my thoughts but what are your thoughts on the series llc?

Yeah, super good question.

So the series LLC was developed by hedge funds.

So billion dollar hedge fund with full time legal teams and yeah they got lawyers that, that are part of their team and the concept was to separate the liability of various investments without having to re register with the sec.

Then someone could say, oh, we could do this for real estate.

Well, we don't use them for a reason.

First of all, they've not been around very long.

They're only recognized.

They're not recognized in all 50 states.

They haven't been around that long.

But we have little or no legal precedence to know if you have this parent company and then you have these cells within the series that theoretically will separate the liability.

But in the event of a lawsuit, for that cell to be its own entity, it has to have its own checking account, its own record, its own everything.

Yeah.

For it to be treated legally separate, you just turn yourself into a.

Back into a nightmare.

It seems like it.

It may have saved you a little bit of money in filing fees, but then cost you a lot of time.

Well, like what you said, the legal precedent, if you don't understand what that means, court cases that have proven that this actually works and it protects you, was this route.

Talk to us a little bit about that list.

When I say less the LLC with the trusts legal precedence there, like what, what have you seen and how has that worked out and played out?

Yeah, it is tried and true.

And that's one of the things that I love about working with NCH is we have our legal department when.

When questions pop up.

We provide such great service.

I think we're the only entity formation company online.

We've got a perfect five star rating with Trustpilot, which is amazing.

We've got over 18,000 five star reviews.

A really good company providing really good service.

But when it's set up right, they say the greatest victory is the battle never fought.

Oh, yes.

And by merely getting it set up and putting your property in the trust and using your LLC properly, you're protected.

And God forbid anything ever happens, you're in a really good shape.

So you have some young ones.

I have six boys and five of them drive and they drive my vehicle.

So if they get a wreck, guess who's getting sued?

Absolutely huge advantage of having the Wyoming llc.

They can sue me, they can win.

And I touch my LLC to satisfy my personal islands and obligations.

That got me thinking of.

Okay, so if we have our properties set up, what about your primary residence?

Same thing.

Another land trust.

Yeah.

So the primary residence, assuming you're not renting it out, that needs to go into a revocable living trust, personal trust, like your family.

Got it, got it, got it, got it.

Okay, so we have one trust that has, or, sorry, a trust for every single property that the LLC is the Beneficiary of.

And then like prime, I guess, personal property like my.

My personal residence cars and put it into a living trust.

Revocable living trust for the family.

Right.

So is that Ms.

Anything in there?

Yeah, not the car.

So.

Oh, how about your primary residence?

Your personal checking account, savings account.

You have a brokerage account.

The membership of your LLCs.

So myself, the LLC, I list you as the manager.

Membership we assign to your family trust for planning purpose.

That's not on public record anyway.

So that is your revocable trust.

And then when we set it up, we don't put your cars in there.

Not only is it a pain to title cars in the name of the trust, but I don't want to have a car accident and then have them see my.

My house because I'm not naming my trust the Adam and Claudia Kente family Trust.

So my trust is called the legacy Six Dynasty Trust.

Okay.

No clue who that is.

The.

Yeah.

And if a lawyer looked at it, they're thinking automatically that I have an irrevocable multigenerational dynasty trust.

Got it.

And I'm not worth suing.

That's.

It's a smokescreen.

But you got to call it something.

Let's call out everything good but the car is recovered by a poor over will.

Just like pouring a glass of water.

Okay.

Anything you forgot to put in the trust or chose not to put in the trust automatically goes in the trust.

When you is meant as a catch all for things like vehicles.

Hey.

So primary residence, personal checking account, savings account.

The membership of the LLC is you have pretty much any titled asset I'm going to put into your family trust for estate planning purpose because we're all going to die someday when the good lord takes you never know if you have nothing in place or if you only have a will.

You have no idea how much time and money it's going to cost your family.

Oh my goodness.

Ridiculous.

Absolutely ridiculous.

Man.

Adam, I could literally talk to you forever about this.

But everybody I want you to check out nch great company.

I'm here working with them personally and on top of that getting all of my stuff set up properly now which is.

I'm so excited to make sure it's done right.

And so definitely get go to masterpassiveincome.com NCH we have a page there dedicated to everybody.

It's a part of Master Passive Income.

We want to get you a big discount.

Get.

Honestly get everything set up right the first time.

So Adam, thank you so much for.

Being on the show.

And that is it for today.

Go ahead and get my free real estate investing course, Texas word rental.

The 33777.

R E N T A L to 33777.

You can also join my Real Estate Wealth Builders Group coaching.

Get all my courses.

All right, guys, we'll see you in the next show.

See ya.