Asset Protection Masterclass: Navigating LLCs, Trusts, and Corporations

Join us for an enlightening journey into the twisty labyrinth of asset protection with our esteemed guest, Lee Phillips. Prepare to have your misconceptions about Wyoming LLCs shredded as we expose the truth about asset protection and tax strategies. Lee, with his wealth of knowledge, sheds light on the major threats to your assets, including lawsuits and the IRS, and offers some golden nuggets of wisdom on how to protect what's yours.

We'll guide you through the complex maze of LLCs, trusts, and corporations, helping you understand their unique roles in providing asset protection. Lee will unravel the enigma that is the charging order protection, a concept unique to LLCs. We'll also dispel some myths surrounding privacy in today's world, explaining why setting up your LLC in the state where you operate is not just a good idea, it's essential.

The podcast wouldn't be complete without an exploration of tax strategies and retirement planning. Did you know that the decision by Wyoming to allow LLCs to be taxed differently has opened up new avenues for tax shelters? We compare Roth IRAs and Standard IRAs, considering how the tax rate at the time of withdrawal could tilt the balance in favor of one over the other. Finally, we'll dive into the legal maelstrom surrounding LLCs, state laws and the high-stakes implications of not registering your Wyoming LLC. Hold tight, because this is going to be a wild ride!

Transcript

Speaker 1: 0:01

Welcome to the Josh Bolton show what we've done in the interesting and inspiring conversations, and now your host Josh Bolton.

Speaker 1: 0:15

Hello everybody, Today we have Lee Phillips. We've been having a great chat. Before I hit the record button From what Lee's been hinting at, he has great specialty in knowledge and LOCs. Asset protections have improved bid, but if your company gets sued, how to protect yourself the best so you can still keep retain most, if not all, your money? This man has a lot of knowledge. I'm looking forward to chatting with him. Lee, take it away.

Speaker 2: 0:41

It's good to be with you, josh, not sure quite where to go. I work with a lot of people who have set up businesses. I've actually dealt with over a million people in my career and taught them about asset protection, taxes, small business structuring, identity theft protection. I mean. Everything melts together after a little while so we can get started, and I'm assuming that most people want to talk to a lawyer. I guess I'm a lawyer.

Speaker 2: 1:17

My grandson went to school this fall and the teacher says what is your grandpa doing? He said well, he's a lawyer, and the teacher said honest, and my grandson said no, he's just a regular one. At any rate, I'm actually a counselor to the United States Supreme Court, a counselor in the United States Supreme Court. I'm a federal tax court attorney, I'm a federal court of appeals attorney, and so I deal with the federal government on a lot of different levels, and we'll talk about asset protection. You'll be stunned to know what your asset protection threats are. You alluded to the lawsuit. The lawsuit is only a little tiny bit of it, though. Really, yeah, no, 56% of all bankruptcies in the United States are a result of.

Speaker 1: 2:19

Not budgeting or.

Speaker 2: 2:22

Somebody in the family gets sick. Really 56% of all bankruptcies. So the question is are you going to lose your real estate investments? Are you going to lose your little house, your big house? Are you going to lose your house? Are you going to lose your bank accounts? Are you going to lose everything when somebody in the family simply gets sick? And that's not even your biggest asset protection threat. You'll be stunned when I tell you what your biggest asset protection threat is. What is it?

Speaker 1: 2:52

The IRS.

Speaker 2: 2:54

The IRS has taken 20, 30, 40% of everything you bring in the front door guys. Is that an asset loss? That is, I mean you'll spend more money with the IRS than you do your kids, college education, your mortgages, everything put together. So one of the goals is to cut your taxes 10 to 20%. It doesn't sound like a lot, but it's huge, because people don't understand what the IRS does to them. You have no clue what the IRS does to you.

Speaker 2: 3:32

Let's take a dollar and double it 20 times $1, $2, $2, $4, $8, $8, $16, $32. You got it, josh? Yeah, I got it. You end up with a million 48,000 and change Okay, over a million dollars. But wait, there's no tax on that, is there? So let's tax it at 40%. I have $1. I double it to two, but I've got a dollar in profit so I have to tax that at 40%. So I take 40 cents off of them, so I don't end up with $2 and with a buck 60. I double the buck 60. That's 320, but I don't get the full 320 because I had the tax, the extra buck 60. I end up with 256. So over on this side we have a million dollars. Over on this side We've taxed it at 40%. 40% of a million bucks is 400,000. So over here I've got 600,000. Over here I've got a million dollars. That's a huge loss, that is. I mean, that's unbelievable. It is. You have no clue. Okay.

Speaker 2: 4:46

How much do I have over here? I've got a million 48,000 over here. How much do I have over here? When I tax it at 40%, I'll cut to the chase. I can have fun with you, Josh. Okay. The answer is you have $12,089. So we've gone from a million and 48,000 to $12,089. What people don't know? Well, the eighth wonder of the world is Compounding interest.

Speaker 2: 5:16

Compounding interest. What people don't understand is taxes are compounding interest in reverse. I mean, if compound interest is that powerful, taxes are that powerful in reverse. And so if I can save you just 10 or 20% on your taxes, that isn't 100 bucks out of $1,000. That's millions of dollars over your lifetime. It's huge. So how do we do that? Well, we use certain legal tools, and one that's I would recommend today for most people is something called the limited liability company in LLC. The problem is, you set up your LLC, you set up your corporation, you have your little business, sole proprietorship, whatever it is. You have your little business.

Speaker 2: 6:18

Your accountants never brought you in, put his arm around you and said you know, we need to teach you how to use your little business as a tax shelter. They've never done that, and yet your little business is your most important tax shelter. It's huge, and the reason is it works above the line. Oh, what's above the line? Well, it's an accounting term, so we got to understand a little bit about accounting. Okay, your financial planner dude says you're going to take off your home interest, mortgage stuff, you're going to deduct your medical expenses, you're going to deduct your charitable contributions, all that crap, everything your financial planner dude does is below the line. What's the line? The line is the adjusted gross income line on your 1040 form, your AGI. Why is AGI important? Well, it basically determines what tax bracket you're in, and the accounts just said now, phillips, that's not what you figured. Well, it basically is, guys. It determines whether or not you get your Roth IRA, whether your child care deductions come off, whether you get alternative, whether you pay alternative minimum tax.

Speaker 2: 7:43

Most people don't even know what AMT alternative minimum tax is. What you don't understand is when Trump put his tax laws in effect. Before, that, alternative minimum tax was a calculation that your accountant applied to your tax numbers to make sure that you paid more than you normally would pay, to make sure that the rich paid their fair share. Well, I've got news for you guys. Before Trump, the rich started at $80,000 a year in income that's not exactly the rich in my book and yet your account never even told you that he was using an alternative tax calculation to make sure that you paid more money. Trump raised it from about $80,000 up to $400,000 for a couple, and it depends on how you make your money whether it's capital gains, whether it's earned income and a bunch of crap, but we're basically dealing at $80,000 versus $400,000. What people don't understand is Trump didn't have enough votes in Congress to make his tax changes permanent.

Speaker 2: 9:08

So well, january or December 31, 2025, everything twinkles back to what it was in 2016. So you're not going to be at $400,000 calculating an alternative minimum tax, you're going to be at $80,000. And that's a big hit, guys. The adjusted gross income determines whether you get your $199 deduction. You need to pay attention to the $199 deduction. $199 is something that Trump put into place when he took the corporate tax and lowered it from the 35% and all these percentages down to a flat 21%. The little guy said, hey, hey, wait a minute, what about us? And so they said okay, you get to take 20% of your profit. Wham right off the top.

Speaker 2: 10:09

Not bad huh Right, the problem is you've got to pay yourself a salary during the period. You've got to do this, you've got to do that. We've actually developed computer programs that maximize where that is, but your accountant doesn't do this for you. And we took a guy who had a pretty good business. It was taxed as a partnership. Well, a partnership a partner doesn't get a wage, a W2. They get a distribution from the partnership, so they don't count towards the $199. The guy got zero in $199. The next year we calculated, we gave him a salary yes, he had to pay the Social Security taxes and stuff on a salary, but it wasn't that much and on $199 deduction we got him an extra $723,000.

Speaker 2: 11:12

So this is a big deal, guys, and your accountant is not maximizing it for you. You've got to go to him and you've got to say how can I maximize this $199 deduction? So you got to worry about your AGI. If your AGI is under like 250,000, no problem. If it's over 400,000, you got a big problem. So we need to play this game and adjust your AGI, your adjusted gross income. The problem is, as an individual you can't do a thing to adjust your gross adjusted gross income. You can't lower it. The only thing you can do to lower it is basically contribute to a standard, not a Roth standard IRA, and that will take the 6,000, whatever it is 7,000, if you're old you get more but that will take that much off your adjusted gross income. There are two things that you can do that come in above the line, the adjusted gross income line. The two things you have are, one, your business and two, your real estate investments. Those two things come in above the line.

Speaker 2: 12:35

So if I can use the little business as a tax shelter, it's huge, it compounds itself and it's just something that you need to inherently know how to do. Because I will guarantee your accountant is not doing it. He's taking the numbers that you give him or her and they are plugging them in the computer and they are spitting out your tax. They will not counsel you. The reason is, if they tell you to do something and it doesn't work, they're liable. They've learned to keep their mouth shut. If they take your numbers, plug them into the computer, spit out your taxes, there's zero liability in that. But if you go to them and say we need to do this, they'll look at you and say, wow, you're smart and you look, that's a great idea. You thought of it, didn't you? Can you see what we're doing, josh?

Speaker 2: 13:37

So you've got to learn to use your little business as the tax shelter, and the way you want to conduct your business is undoubtedly with a limited liability company, not a corporation. If you are currently a corporation, you need to change from a corporate legal structure to an LLC, a limited liability legal structure. Now it's easy. You go to your state, they have a form, you fill out the form and it will change you from a corporation to an LLC. You don't get a tax, new tax ID number, the IRS doesn't know and they don't care whether you have a corporate legal structure or a limited liability legal structure. They don't care. So you're going to make this change for asset protection purposes, and the reason is the LLC gives you twice, two times as much asset protection as a corporation, and that's significant.

Speaker 1: 14:43

That's what I was going to ask is because I've been thinking of getting an S corp because I do a service business, so I should just do LLC instead.

Speaker 2: 14:52

Well, you've made I'm going to say the classic mistake. Can I pull you apart, josh?

Speaker 1: 14:58

Of course go.

Speaker 2: 15:00

Subchapter S is a subchapter in the IRS code. It controls how your taxes are calculated in a business. That subchapter S can be applied to a corporate business structure or it can be applied to an LLC business structure and the IRS doesn't know whether you've got a corporate or an LLC. All they know is your taxed under subchapter S, so taxation and legal structure have nothing to do with each other. Okay, that's interesting.

Speaker 2: 15:41

It's a concept most people have never grasped. So you're going to have the LLC legal structure because it's a better legal structure. Then you get to pick how you want it taxed. If you are selling goods and services, doing pool businesses or whatever, then you want a subchapter S taxation. If you are investing in real estate and the income that you're getting is rents, you want a partnership tax structure. And very few people will tell you this, but you either want a subchapter S or partnership. You do not. No.

Speaker 2: 16:26

No, no, no no no, no, you do not want a sole proprietorship. The reason is the IRS. They've added 30,000 new IRS agents this year. Before Biden took over, they had 85,000 IRS agents. Biden is giving them an additional 87,000. He's more than doubling the number of IRS agents. Every one of those IRS agents can audit at 1040. With a schedule C, that's your little business, or a schedule E, that's your real estate. Less than one half of 1% of those agents can audit a partnership or a subchapter S.

Speaker 1: 17:16

Read the guidelines guys yeah, that makes sense. Yeah, I'm still for me. I like, like I told you earlier before, hit the record like I'm just starting a pool business and that's where even my agents like first year, they're probably not going to even look at you, but you're like next, the second year and third year, yeah, they're probably going to look at you.

Speaker 2: 17:37

Well, if you, if you're set up as a subass or you're set up as a partnership, now you're selling goods and services, you're putting in pools. So you want a subchapter S taxation.

Speaker 1: 17:51

And it's more. I'm more offering your servants. I'm subcontract, so I'm offering a service to my boss, kind of thing. Okay.

Speaker 2: 17:58

Well, you're still selling goods or services, so I would need to you're not getting rent.

Speaker 2: 18:06

Rent is what we call passive income. Right, you're getting what we call non-passive or active income. Now what you're going to do is you're going to take a reasonable salary out of your company and then you're going to distribute the rest of the money, your profit, out of the company. You take off the 20% for 199A, then you distribute the rest of it and that distribution comes to you without having to pay the employment tax and Social Security. If I could feed it all that money. So you're going to do that. The 15.3% is the unemployment. Taxes and stuff do not apply to passive income. That's why you want to have a taxed as a partnership, because all of it passes through to you. If you have a taxed as a subchapter S, the law says you have to take a reasonable salary and then and that subject to the Social Security, fike of Feud and all that crap. Okay, so why pay the 15.3% on anything if all of your income is passive? But you have non-passive income, so you need to take it as a subchapter S.

Speaker 1: 19:34

Okay, subchapter S got it. So then here's a side technical question, and I'm more than certain you actually know this. I've always been told you want to form a trust in whatever a lot of people say Wyoming for some reason. But they say you also want to form a holding LLC in Wyoming for your real estate and then put that holding company in your trust. Is that getting a little jinky and kind of thing, or is that a good strategy too?

Speaker 2: 20:03

It's basically BS, really, yeah, you want me to tell you what BS means. You're good there.

Speaker 1: 20:12

Yeah, I'm good. I was trying to think of a smart alec comment.

Speaker 2: 20:18

So look, this whole concept of Nevada, delaware, Wyoming LLCs is basically BS. Okay, you're going to put your LLC in the state where you are doing business or where you own the property. End of discussion. Okay, I do not have a holding company, because if you have a holding company, I can attack a holding company and then I can get all of the companies underneath it.

Speaker 2: 20:52

If I have separate LLCs set up side by side but independent, not linked to each other, then I have to sue each one individually, and I can't do that because I can only sue somebody who has a causal connection to the problem. They acted, they caused the problem, they owned whatever caused the problem or they managed whatever caused the problem. That's the only way I can sue you. So if this LLC, if your pool company is one LLC and your real estate owning company is the other LLC, your pool company causes a problem that has nothing to do with your real estate owning LLC. If there is an upper LLC, maybe I can go through this LLC, the pool company, and I can get to the holding company. If I can get to the holding company, then I own everything.

Speaker 1: 22:02

So it's actually a linchpin, essentially.

Speaker 2: 22:05

It's a linchpin in a way. They say it's private. Let me just tell you, anonymity today is a myth. We can literally, josh, tell you what underwear you're wearing. I mean, there is no privacy today. I was doing asset protection 10, 15 years ago for a guy and he kept saying I'm off the grid, I'm off the grid, no, I'm not going to do that. That exposed me and finally I threw up my hands and I said give me an address With one address. Does the tenant know the address of the property that they live in? I said give me an address. I don't care if it's in an LLC, I don't care if it's in a land trust, I don't care how it's owned. Give me an address With that address. I came back with a 40-page printout. I had every bank account this guy had ever had. I had every company he had ever owned any stock in, including private companies. I had every insurance policy he had ever bought. I had everything on it. I faxed it off to him. I didn't hear back from him. Lee, I talked him through.

Speaker 2: 23:27

But yeah, you had everything on him I had everything on him. I faxed it off to him and I didn't hear from him for two or three days and he called me up and he says okay, anonymity doesn't work. Now what do we do Interesting? So if you think you're anonymous today, I got another thing coming for you, buddy. Oh yeah, it's only getting worse too.

Speaker 1: 23:53

And I'll give it to you.

Speaker 2: 23:54

I have access to databases the general public doesn't have access to, but we can tell you everything about you. That's crazy, so the LLC is the way you're going to protect yourself.

Speaker 2: 24:10

Now you mentioned a trust. The trust is going to own the LLC. The trust is what we call a disregarded entity. Everybody ignores it. It's you. You use your Social Security number. The IRS doesn't even care that it's there. It's you.

Speaker 2: 24:29

But when you die the company that's owned by the trust we don't have to probate its ownership Because technically, you don't have to use your own trust Because technically, if the trust owns the company and that means you're going to put the trust's name on the ownership documents it's going to be in the operating agreement as the person who owns the company, the member, and so when you die, the owner of the LLC didn't die. We get a new director, a new trustee of the trust and they have full authority to do whatever the trust tells them to do. The written document. So the trust is a probate avoidance tool. It is not an asset protection tool, but it is critical that you avoid probate with the trust. That means the trust has to own your stocks, your bonds, your bank account, your safe account, your safe deposit box, your automobile, anything that you have to sign your number, anything that you have to sign your name for, and that includes your little business ownership.

Speaker 1: 25:54

So the trust owns the business too, which is a layer of protection.

Speaker 2: 25:59

Is that a layer of protection too?

Speaker 1: 26:01

What's that? Is that like another layer of protection? Because then they can only go after the trust, not you.

Speaker 2: 26:06

No, it's no layer of protection. You are the trust. The trust gives you zero asset protection.

Speaker 1: 26:15

So tying into that, one thing I've been thinking about and you're definitely the guy I've been needing to talk to about this is I do futures contract trading. I'm certain you know what that is, I don't explain it anymore to anyone else, but there's a lot of taxes with that, like the whole 60, 40, 60% at 40, and whatever. I was thinking of forming an LLC just for the trading. So also, if shit blows up, it hits the LLC, kind of thing.

Speaker 2: 26:44

Well, the LLC isn't gonna reduce taxes on the trades any more than they would be normally. The LLC, if it's taxed properly, would reduce the chance of an audit. You can structure it without the LLC and get the same tax advantage or benefit. The LLC gives you the asset protection. So if it's in an LLC and you've got a large pot of trading money, then the LLC would protect that pot of trading money from what happens to you. The LLC I said had twice the asset protection of a corporation.

Speaker 2: 27:41

The corporation has the corporate shield. It's the veil I hide behind it. It protects me from what happens in the company, from the slip and fall of the tenant or from the pool has a problem. It protects me and my assets personally from what happens within the company. The LLC, that's the corporate shield. That's what the corporation does. The LLC has another asset protection facet to it, which the corporation and no other entity.

Speaker 2: 28:16

Well, that's not true. Partnerships have it. Oh, you just said, wait, partnerships don't have any asset protection. Well, they do. I'll explain it in a minute. I'll give you a listen. Okay, All right, but it protects the assets of the company from what happens to the owner of the company. So if you get in trouble personally. You get sued because you hit a kid in the crosswalk on the way to church. That's not a business problem. You get sued because somebody in the family gets sick and you have to clear bankruptcy. You get sued because you get divorced. You get sued personally. The assets of the LLC are not available to satisfy that lawsuit. The assets of the corporation are available to satisfy that lawsuit. That's a huge difference.

Speaker 1: 29:15

That is huge actually.

Speaker 2: 29:17

That's huge. I've seen more people lose their company and your company is likely your biggest asset. I've seen a lot more people lose their company because the person gets in trouble than I have ever seen the person lose their house because there's a problem in the business. So it's a big deal. Let me explain it to you. It's called charging order protection. Okay.

Speaker 2: 29:48

So 400 years ago in England, me and you, josh and Joe, we formed a great business. The only type of business structure 400 years ago in England was a partnership. So me and you and Joe were partners. Well, okay, joe gets in trouble and I'm not exactly sure how you got in trouble 400 years ago in England. You didn't pay the king, you hit somebody with your horse. You got divorced. There was a problem. Joe got sued, got it. His creditor, the guy suing him, gets a judgment against him and they take away his partnership interest. Josh and Lee now have a new partner.

Speaker 2: 30:37

By definition of law, that new partner can come in. They don't need our approval. They sell our company right out from under us. And yet we have spent 30 years building this company with Joe and Joe lost it in the lawsuit and you and I just lost everything because Joe screwed up. That's not fair, right? And the Brit said, yeah, that's not fair. So they passed the law.

Speaker 2: 31:07

That said, when Joe's creditor, the guy suing him, gets a judgment against him, they can't come and take his partnership interest. They can't take his partnership interest. They have to go back to court and get an order which charges the debt that Joe owes his creditor against his ownership interest in the partnership. But the creditor can't come in. They can't sell the partnership interest out from under me and you. They can't decide what we pay ourselves a salary. But if the partnership declares a profit, not Joe but Joe's creditors now get that profit.

Speaker 2: 31:56

So it's called charging order protection. It protected our partnership from Joe's creditor and likewise it protected our partnership from your credit If you got in trouble. So it protects the assets of the company when an owner of the company gets in trouble, and that's a big deal. That is now. Ibm is a corporation. Ibm doesn't have charging order protection. But if you own a bunch of IBM stock and you get sued, you're going to lose your IBM stock. But your IBM stock in no way has any controlling interest in IBM. You can't sell IBM. You can't do anything with the amount of stock that you have, right, and if you're the only owner of that corporation and I get your stock, I now own your company, lock, stock and barrel. I do whatever I want with it.

Speaker 2: 33:01

So the corporation does not have the charging order protection the LLC does. Okay.

Speaker 1: 33:11

I'm catching up, we're going.

Speaker 2: 33:14

When Wyoming 1977, wyoming created LLCs in the United States. They're actually old European entities. We have the LTDs in Britain You've probably heard of that. We have the GMBHs in Germany Gershelschoff, miss Rancor, hoftung I just screwed the pooch on that German pronunciation. It's okay, but it's company with limited liability.

Speaker 2: 33:49

So Wyoming in 1977 says we're going to create this in the United States. So they did. Basically, what they did is they took a corporation and a partnership and they married them. We got the genetic corporate shield from the daddy corporation. We got the charging order protection from the mommy partnership DNA. So we have a mixed DNA of corporations and partnerships and we got twice the asset protection. The first thing that happened when Wyoming created the LLC is they said okay, mr IRS, how are you going to tax it? Well, it took 20 years for the IRS to come back and say we don't care how you tax it, you choose. So you can have your LLC taxed under sub chapter S as a partnership, as a sole proprietorship, under chapter C, like a C corporation. You can have your LLC taxed any way you want, they don't care.

Speaker 1: 35:01

As long as they get their money.

Speaker 2: 35:03

As long as they get their money. Yeah, they want their money. But that gives you an opportunity because your little company has the tax shelter capabilities that you don't have. It has the 199A. It can write off your computer, it can write off your cell phone, it can write off mileage. It can do all sorts of things to appreciate realistic. It can do all kinds of things that you can't do as an individual. It can put a benefit plan in place and make all your medical, not tax deductible tax free. That's huge guys, that is huge.

Speaker 1: 35:48

That is huge actually.

Speaker 2: 35:50

So these are big deals. You can have the benefit plans, the HSA, the HRA, the 125, the 105. You can have all of these benefit plans that basically make your medical expenses tax free, not tax deductible, and, as an individual, your financial planning dude says you can deduct your medical expenses. Well, yeah, but no, you can't, because you have to meet 10% of your adjusted gross income before you can deduct a dime off of your medical expenses. So most people can't really deduct their medical expenses because that means if you make $100,000 a year, you've got to have $10,000 in medical expenses and the $10,000 in first dollar you can deduct the first dollar.

Speaker 1: 36:50

Man, you would have to make a lot of money to try to use that as a leverage.

Speaker 2: 36:54

Yeah, no, you can't do it. But if I set one of these HSAs or HRAs in place, then I can fund that with money from the company, which is a tax deduction from the company, which would have ended up in your pocket and you would have paid tax on it. But you can fund it with a tax deductible dollar and then you can spend this money in the benefit plan on your medical expenses and you get 100% reimbursement. It's not income to you, it's just and basically what you've done is you've made your medical expenses tax-free.

Speaker 1: 37:34

Okay, so you mentioned earlier as well. On the health HSA, you said a normal IRA, not a Roth IRA, just a normal IRA to help your income. I have a Roth because I still don't make that much. That helped me.

Speaker 2: 37:52

You're paying with an after-tax dollar, so you didn't get a deduction for putting your Roth in. I just get the growth tax-free. You get to take it out tax-free, which is pretty cool, Right. But you didn't get a deduction. You didn't lower your adjusted gross income. You didn't lower any income because you didn't deduct the expense that you paid into the Roth IRA. Now the question is which one's better a Roth IRA or a standard IRA?

Speaker 1: 38:31

Or let's say trading. Let's say I'm doing futures contracts and I could wait. I don't care.

Speaker 2: 38:35

I don't care how it's invested. Got it which one's better Sounds like a normal IRA.

Speaker 2: 38:43

Let's take $10,000 and say you've got a 25% tax. So forget about the IRA numbers and everything. I'm just using $10,000 because I can think of it. So if it's 25% tax, that means if I can put it in with a pre-tax dollar like a standard IRA, I get a deduction. Right, so I can put my full $10,000 in. If I do it with a Roth, I've got to pay 25% tax and then whatever's left I can put in. So over here I put $10,000 in. Over here I only put $7,000 in. So now let's run it for 10 years, 20 years doesn't matter, they make the same return. Doesn't matter where they're invested, they make the same return. At the end of the period I take this money out. Now I've got a full $10,000. That's been growing over the years. I've got more money in my standard IRA than I do my Roth IRA because I didn't start with as much money, right? So I take the money out of my standard IRA. I pay the tax 25%, right, I get to take the money out of the Roth IRA no tax.

Speaker 1: 40:12

Can you have both at the same time though?

Speaker 2: 40:14

Well, no, you can't basically but which one gives me more money to spend the standard IRA or the Roth IRA? Because it grew without a tax and I spent it without a tax. I got a deduction for putting it in so I could put the full $10,000 in. Then it grew without a tax, I took it out and I paid the 25% tax. The numbers are identical.

Speaker 1: 40:42

Interesting. The right Okay. Okay, you've got a full $10,000.

Speaker 2: 40:49

Which one's better there's. There's an assumption that's wrong in what I just told you. What is it?

Speaker 1: 40:59

That it's the same amount of money or same amount of losses.

Speaker 2: 41:02

Either way, that it's the same tax going in today as I pay, coming out right 20 years from now. 20 years from now, if the tax is greater, then I win on the standard IRA Because I have to pay more in tax than the 25%.

Speaker 2: 41:24

Mm-hmm that it cost me in the beginning of the Roth IRA. If the tax is less 20 years from now, then I got screwed Because I can take more money out of the standard IRA, pay a smaller tax on it. I end up with more money than I would have done over here in the Roth.

Speaker 1: 41:47

And, generally speaking, taxes are going up, so it would be better to get the normal that's the, that's the assumption.

Speaker 2: 41:53

It's better to do the Roth, then it is the standard IRA, because we're gonna bet the taxes are going up mm-hmm.

Speaker 1: 42:03

Have you noticed that in your your career that generally taxes keep going up, not down, other than Trump?

Speaker 2: 42:09

Ah Well, I wish I had the the diagram to show you, but that was cool. I Can find it and share my screen, although we're probably gonna get screwed up as soon as I try and do that. Right?

Speaker 1: 42:26

No, we're good, I have a set for you can share too.

Speaker 2: 42:31

Just a minute, let me look it up. I got to go to my my slides here. I've got to get my my diagrammy here, diagrammy. There we go. There's the diagrammy. So now I'm gonna go back to zoomie. One gotta go back to zoom, go to zoom and Come back to here and now I am going to Share screen and I'm gonna take that one right there. Can you see that, josh? Yep, you're coming through really good, loud and clear huh.

Speaker 2: 43:24

Yep, I'll even put it on big-style How's that? Oh, that's it. Okay, the tax we didn't. We didn't have income taxes until 1913, okay, and we made an amendment to the Constitution that said that the government could tax, and the politicians, the Congress, the president, everybody Swore on a stack of Bibles 50 feet high that they would never raise the tax above 8.5%. So in 1913, we started out witha 8.5% tax. Can you see my cursor there? Yes, yes, within a few years it had gone up to 73, 75 percent. You want to know something, josh? What politicians lied just as good in 1913 as they do today, and they're really good at it.

Speaker 1: 44:23

That's their profession.

Speaker 2: 44:24

That's their profession. And In the early 20s the tax came from 70 percent down to 25 percent. What did they call a 20s? They called the 20s the roaring 20s. When the interest, or when the interest, when the tax rate dropped down to 25 percent, the economy went nuts. The economy in 1933 was sputtering and Hurt. This is Herbert Hoover, right there. Herbert Hoover raised the tax, figuring he'd save the economy hit. And he raised it from 25 percent all the way up to 79 percent and that put the economy into a tailspin and the economy died. It couldn't recover. That's the great impression. Right, you realized during the 50s and 60s you could make a million dollars and pay 920,000 of it out in tax. Hey, I actually remember a clip of Ronald Reagan, long before he was president. Reagan said he was an actor you might remember. Mm-hmm.

Speaker 2: 45:40

Reagan said I will never make another movie. I don't make any money. That's it right there. This is Reagan as president. He brought it from 70 percent down to 28 percent. This is Clinton, this is Bushy, this is Obama and this is Trumpy. Basically, we are at how historic tax laws right now. You're probably right, josh, interest rates are gonna go up, or tax rates, rather, are gonna go up. Interest rates are already going up. The Fed raised the Raise the interest rate again, didn't they? Yep, but Ah, we're basically at historic tax law. So does that give you an idea of where taxes are and what we're doing?

Speaker 1: 46:36

Yeah, so the the Roth IRA is the safer bet in this situation.

Speaker 2: 46:41

Probably it's a safer bet. In this, in this situation, we're gonna escape, we're gonna close this, close this. This screen is top-sharing. Okay, we're back and we didn't even lose you. I'm stunned. Wow no done at any rate. Does that help, josh? How long do you want to go here? How long do you want?

Speaker 1: 47:12

to go.

Speaker 2: 47:14

As long as you need me. I don't want to bore people.

Speaker 1: 47:17

Ah, if they they're a rayboard, they didn't make this point of conversation already bored, huh. Okay, they would have left already. I'm enjoying this.

Speaker 2: 47:25

You're saying we don't have anybody listening is what you're saying.

Speaker 1: 47:29

May or may not be. Listen to. Retention, especially with tick-tock, has gotten really bad as it. Mm-hmm. I know this on my data on the back end after about three minutes.

Speaker 2: 47:40

Just tails, just dives, huh well, I'm uh, you know, we can go on and we can talk for hours, but I think this gives you an overview of what the LLC does. I have a 30 pages you about this, on how to, how to work with an LLC, how to use an LLC. I would, I would love to get that you book.

Speaker 2: 48:07

I'd be happy to give it to you. I'd be happy to give it to your folks. Why don't we set up a site which is, let's say, legalese? It's a pun on my name, legal le gal and then it's EES. There's only one L in the middle of it legalese, only one L in the middle Dot-com. And let's say forward, slash Josh, and We'll give them the LLC ebook. It's free, don't worry about it, and I'm not gonna sell your Information or anything. I don't use it it's. I'm just giving it to you as a, as a promo, and I told Josh earlier I don't take clients. I'm old, I'm senile, I'm retired and I don't want any more clients.

Speaker 2: 49:00

I have my fun people and happy to educate them.

Speaker 1: 49:04

Now this was extremely educational. You, you set me straight on a lot of things because I was like I was talking with, like the oh, I'll form a trust in this area. I get my LLC in Wyoming, do the holding company, so I make all the money, do the holding to the trust. And now you just say that the holding company, so it's printed in let me go into that a little deeper, okay.

Speaker 2: 49:24

Okay, because you can't give me a reason why you set it up in Wyoming. They say anonymous no it's not. Okay, you're gonna take your Wyoming LLC and you've got your registered agent up there and that guy's name is on it. You're going to Bring it down and you're gonna register it in which state of you and Josh.

Speaker 1: 49:51

California. Oh, I know, I already know I'm getting just annihilated in Texas.

Speaker 2: 49:59

Hell. No, you're not gonna have a Wyoming LLC because by law, any entity that you have more than 25% interest in you have to register in California and pay the eight hundred and fifty bucks a year franchise fee and all the taxes. Okay but let's say you're in Ohio, so, or even in California. You take the Wyoming LLC, you register in California by law. You are now subject to all of California laws. I Don't give a damn.

Speaker 1: 50:37

Everyone says that I don't care what.

Speaker 2: 50:39

Wyoming says Now the registered agent may use their name to register the new LLC, the, the LLC in California. But if you get sued in California, that registered agent in Wyoming that you're paying In 200 bucks a year to, he ain't gonna defend you, he ain't gonna do a damn thing. He's gonna turn over you in 10 seconds mm-hmm.

Speaker 2: 51:03

So you're right back to square one in court. Any money that you make in California is taxed in California, anybody that sues you. They don't have to go to Wyoming, they sue you in in California. And and, like I say, if you don't register in California, california finds you 300 or $3,000 a year that's, they're fine For not registering in California.

Speaker 2: 51:32

It you and I can set up a company. I can buy a house with the money that you give me in Utah and I'll tell you what you get 40% of the deal. You put up all the money. I get 60% of the deal. I found it, I manage it, I do everything with it. Sure fact that you own 40% of that company, even though you've never seen the property in Utah, you've never done anything, you've never been to Utah. The sheer fact that you own 40% of it means that you have to register In California and pay all the taxes in California and the franchise fees. That's the only state that requires that. But All the taxes will be paid in Utah. If, if you have a Wyoming company and you're doing business in Ohio, a hundred percent of your taxes are gonna pay paid in Ohio. You don't have to pay any taxes in the world because you didn't earn any money in Wyoming.

Speaker 1: 52:33

Okay, okay. So yeah, really it wouldn't be that smart, because they all the internet gurus are saying like I think, but they're talking real estate, though for Wyoming they're saying I don't care what the LLC holds.

Speaker 2: 52:47

Okay, if you set up a Wyoming company and you buy a piece of property in Ohio or North Carolina or Tennessee or Nevada or wherever and you don't register the Wyoming company in Florida, then I'm the tenant. I ain't gonna pay any rent. There's nothing you can do to me. You don't have any rights in Florida until you register that company in Florida.

Speaker 1: 53:17

So at that point, like, let's say I bought a really big swamp for cheap, like under a million bucks, hundreds of acres, I wouldn't. The legal advice would be, but get the LLC to own that land, I'm gonna think. Or a truck? Why? Okay, let's say there's a tenant there too. Bye, I don't know.

Speaker 2: 53:41

When you bought that piece of property in Florida, you became subject to all of the laws associated with Florida. When you registered the Wyoming LLC in Florida which you had to do in order to buy the property legally, you had to register in Florida to buy the property in Florida. Okay, when you registered it in Florida, florida law specifically says that company is now 100% subject to Florida laws. We don't care what Wyoming says. You will pay property taxes in Florida. If you make income from the tenant in Florida, you will pay Florida income taxes. Now, florida doesn't have personal income taxes, but they have company income taxes. The tenant does not have to go to Wyoming to sue you. They will sue you in Florida. The trial will be in Florida. They will use Florida law.

Speaker 2: 54:45

You can't give me a reason. You can say well, I'm anonymous, my name's not on it in Wyoming BS. I can find everything out about you in two seconds. Flat One, two. We're going to what's called digital currency in the next couple of years. At that point, the federal government will see every dime that you spent. There will be no privacy period. Right now, I can give you $100 bill and nobody ever knows that, do they? Josh?

Speaker 1: 55:20

Nope.

Speaker 2: 55:21

I can't do that. In the future, when we have digital cash, it'll have to go through the government computer and they'll know that you got $100. So there is zero privacy in another two years, and even at that, there's almost no privacy today. You still can't give me a reason why you have a company in Wyoming.

Speaker 1: 55:51

That's very valid. I was just like I was saying it's just those internet gurus. They always talk a good talk.

Speaker 2: 55:56

Well look if I can get you to pay me $200 to be the registered agent in Wyoming and I get 1,000 people paying me $200 a year as a registered agent. As a registered agent, I get one piece of mail from the state of Wyoming and forward it on to you. That's my only responsibility. If you get sued, if the LLC gets sued in Wyoming, I hurry and send the lawsuit to you. But the Wyoming company is never going to be sued. It's going to be sued in Florida. So the registered agent in Wyoming has zero to do. If I get 1,000 people paying me $200 a month or $200 a year, that's $200,000 for zero, not bad, huh?

Speaker 1: 56:57

Yeah, I could convince about 1,000 suckers so they can pay me, kind of thing.

Speaker 2: 57:01

Yeah, I mean, it's great business. Plus, they get the $700, $800 for setting it up in the first place and it takes five minutes on a computer to put the information in the state website. You can do that too. You can access Wyoming's website and you can set up an LLC in Wyoming just as fast as they can, and you pay the Wyoming fee with your credit card. You now have a Wyoming company. You do have to have a registered agent in Wyoming. That's where they come in, but they've made $1,000 up front. So if I get 2,000 people paying me $1,000, what's that? $10,000, $10 million.

Speaker 1: 57:49

A thousand by a thousand, I think that would be at least a million.

Speaker 2: 57:52

That's six. So that's only one million, isn't it? Yeah, so I get a million bucks for setting it up and then I get 250,000 the first year for being the agent doing zero. That's pretty good business, guys it is. It takes me all of 10 minutes to set up that Wyoming LLC. You pay me $1,000 and then I get an additional $200 every year.

Speaker 1: 58:23

And you have to have the agent, so it's not like, oh, I don't want Josh, I want to go to Lee, kind of thing.

Speaker 2: 58:28

Yeah, I've got to have a registered agent in Wyoming. So but Wyoming, nevada, there's a group running around it's selling you get three Utah LLCs for $5,000. I'm licensed in Utah. Why would I? Unless I'm doing work in Utah? You can't give me one reason, not one, to have a Utah LLC if you're doing business in Florida. But if you're something like you can't do it.

Speaker 1: 59:03

What I would say. But if you're something like Coca-Cola company where you're doing business in all states, if you're a Coca-Cola company, you need to go to Delaware.

Speaker 2: 59:14

Delaware, over the decades, has passed very good laws that allow transfer of ownership of corporations and stuff. 90% of all publicly traded companies are in Delaware. But yes, coca-cola has to be registered in all 50 states.

Speaker 1: 59:35

So that's where I've noticed a lot of Pepsi Coke FritoLays. They have Coca-Cola Coke, but then they have the FritoLays LLC.

Speaker 2: 59:45

Yeah, they have dozens of companies. If you're doing business in multiple states, you're not trading stock. Okay, go do it in Wyoming. Wyoming's as good as any other place. So, yeah, go do it. But other than that, the answer is no. So I hate to throw water on you, oh no it's good.

Speaker 1: 1:00:14

That like popped all their bubbles. It makes sense that they would want to push something like that where it's like oh I'm an expert in this and if you buy my $2,000 course, I'll cover your setup thing and retain you for whatever price. It makes sense that they market and hype it the way they do.

Speaker 2: 1:00:31

Well, the good news is, I'm not marketing LLCs. I'm not marketing anything to you, right? So wonderful.

Speaker 1: 1:00:41

There you have it, josh. Thank you, lee, it's actually been an honor and a pleasure. I learned a lot. It's great to be with you. You set me straight on a lot of things, all right.

Speaker 2: 1:00:52

We'll catch you later, sir. Sounds good.