Morris Invest: Using the Money In Your LLCs’ Bank Accounts

Morris Invest: Using the Money In Your LLCs’ Bank Accounts

How to use the money in
your LLCs bank accounts, that’s the subject
of today’s show. Let’s dive in. Hey everyone, I’m
Clayton Morris. I’m Natalie Morris. And welcome to the Investing
in Real Estate show. This is the show
where we focus on buy and hold real estate for the
purposes of creating legacy wealth for you and your family. So we buy real estate, we hold
it for the rest of our lives, that’s the goal, and it
produces monthly cash flow. So a lot of times on the show we
talk about different strategies for tax structure, LLC
structure, all of those things and it can get a
little complicated, it can get a little
hairy, but we’ve recently been getting some
questions about how to move some money around, right. Right, people were
asking, how do I use the money
that I make when I own rental real estate
in my personal life, because we’ve talked
about several times on this show how
it’s important to own real estate in some
kind of corporation, either an LLC or an S Corp
or whatever kind of way you want to incorporate
yourself according to your own financial
needs, because it’s a tax friendly way
to invest and also because it limits the
liability on your investments. But that begs the question
well, OK, now Natalie Morris LLC owns my rental properties. How does Natalie
Morris, the person, then benefit from
that passive income, because obviously I
need to pay my bills, I need to go to the
grocery store, right. You can’t go to
the grocery store and pay for your own
family’s groceries with the bank account
that owns real estate. That’s not the way it works. Is it illegal or
just it’s uncouth? It’s illegal that’s
co-mingling, yeah, and so what people want to know
is how do we use that money to live our lives. So that’s what we’re
going to talk about today. Now, I need to remind
you that we are not professional financial advisers. We’re just a family that
tries to run our own family business in real
estate investment to the best of our
abilities and that includes doing all the
research ourselves, trying to figure out the best
way to learn something new, and then there’s
always growing pains. And so this week I had
a call with Provision, which is the accounting firm
we’ve talked about many times that is very friendly
to real estate investors and I learned something. So this podcast is our attempt
to share what we’ve learned. OK, good, good. So at a high level,
why would you want to move money
around your LLCs, pull money out of it, what would
be the benefit of doing that? Well, first let’s talk
about the structure of how you own real estate
in your LLCs and then you’ll understand why you have
multiple accounts, because you want to treat each LLC
as its own bank entity. Now, you may have several LLCs
that own real estate or maybe you have an LLC for
your cupcake making business or your personal
speaking brand or whatever. Each of those things doesn’t–
they don’t necessarily file their own tax return. They are reported
on your tax return, because you’re the
owner of those things. So you open a business,
an S Corp, or an LLC and you get an
EIN number, right, that’s like the business’s
social security number, but that number is owned by you,
either as a partnership or an S Corporation. You report that on your tax
returns, right, because it is something you own. Right. So even though each
of them sort of operates like it’s own thing,
they’re still owned by you. So you’ll be taxed on the
income in those corporations, in an S Corp and a partnership,
on your personal returns, but that doesn’t mean
that that bank account is just yours for the
taking because you are the owner, because if you
were to take business money and say buy your groceries
out of it, that’s co-mingling. That means that you’re taking
advantage of a tax rate for businesses that is
not meant for individuals and just to recap that, the
way that a business is taxed is very different from the
way that a person is taxed. So if a business makes $100,
but has $50 in expenses, they are taxed on
the net profit. That means the government will
take their say 25, 35% tax rate and tax them on $50,
but if a person, like you Clayton Morris,
makes $100 and someone writes you a check to Clayton
Morris and you still have those $50 of
expenses, but you’re reporting this as a person so
you are taxed at your tax rate 25, 35% on $100, not $50. So the government
wants businesses to have money and make money
and make expenses and all of that stuff, because
it grows our economy, but those same rules don’t
apply to us as sole proprietors. So you can’t just start using
that money to make your money– how do I put this? You can’t just start
using business money so that there’s more
expenses in your– in your business account
and you also can’t just start using that money,
because you didn’t pay taxes on that money, right. If I were to take $100 and
go grocery shopping out of the LLC, that’s
money that I have not paid taxes on as a person. I’m benefiting on money
that’s not really– the government hasn’t had its
chance to get its hooks on. So it’s illegal co-mingling. You cannot do it. All right, so we know
that it’s illegal. OK, so now how do
we structure it so– where we can tap into
some of that money? Let’s say– well obviously– is there a difference
between an active account and a passive account? So when someone sets up
a passive real estate account or a passive
real estate LLC, that is their company
is just there as an LLC collecting rent
payments every month. That’s different than
an active business, like we run an active business. For most real estate advisors,
they’re just setting up an LLC as a passive LLC
and therefore the money’s coming into that bank account. Is there any difference
there, whether or not active or passive? A bank account is
really a bank account and we’ve talked about how it’s
important for your business to have four different accounts
and you pay yourself first. This is the profit first system
that we’ve gone over many times and so– Oh, by the way, we have a
whole episode, episode 10, with Mike Michalowicz,
our interview with him. He’s the author of the
profit first system. Go back and listen to
episode 10 of the show, the Investing in
Real Estate show. You can find it on iTunes, so
go back and listen to that. And then we separately
did a whole episode on how to set up the profit
first system as well. So that’s in the archives
as well and that is– let’s see if I can even find it. You know what, make your point
and I’ll see if I can find it. OK, well at a very
minimum every dollar spent should be allocated to– some of it for
operating expenses, meaning how do you
run these properties, your property management, what
have you, some for tax savings, because you will be
taxed on this money, some for paying the owners,
right, your paycheck, that’s how you get
money out of it, and then some for– what was
it– operating expense, tax, taxes– oh and the profit account, which
is like your savings account. OK, so those are the four
different accounts in profit first. OK, so we are going to assume
that your LLC has at least those accounts. Now, your owner pay doesn’t
have to be owned by the LLC, right, because your
owner pay account is like your personal
checking account. So say you’ve got this business,
Natalie LLC, and it makes $100. Some goes into the tax savings,
some goes into the profit savings, some stays in that
checking account for operating expense, it’s a business
checking account, and then some goes
to me, my personal. That’s how I benefit
from this money, right. Now, the question is, how
do I move those dollars into those different
accounts, because– well first of all, your LLC
has to own the bank account. You can’t just open a new
bank account and say, OK, well I’m going to use this
bank account that I just got at my local bank as
the business account. It belongs to me and I’ll
just put money in there, one, because your rent
checks should be coming in the name of your LLC. So then you can’t deposit
that in your checking account and two, because
the bank is going to report that money on
the EIN of the business. So the business has to own
the bank account, not you. Obviously you own the
business and that– they could peel back
the onion and find you, but you have to have a
business savings account, a business checking
account, right, they have to be owned
by the business. Now, let’s say you have
several of these LLCs. Let’s say you have at
least one or two, right. There– these two
LLCs own property and we like to say
you put about $150,000 in value of real estate. So that could be three
or four properties, it could be one multifamily,
it could be whatever, right. So let’s say you have Natalie
LLC and Clayton LLC and they both own rental
real estate, OK– OK –and they’re owned
by a holding company. This is like– it’s an LLC
ta— in our case, anyway, we have an LLC that’s taxed
as an S Corp and it’s like– think of it as an umbrella. This is the company
that owns these two– So let’s call it Ultimate LLC,
but it’s actually an S Corp– That’s a good one. So Ultimate– All right. –and that’s the umbrella. I’m terrible at coming up
with these names on the fly. Well, I mean, I
just help the people understand that it sits above
Clayton LLC and Natalie LLC. So it’s Ultimate LLC is– it’s taxed as an S Corp,
right, because we created it as an S Cor– it’s
technically is an LLC. The way that we structured
it with our lawyers though is that it is– it is– it is
taxed as an S Corp. Right. OK. How to do that, I don’t know. That– this is where you
bring in the big guns, right. You make sure that– you make sure that someone
knows how to set up corporation exactly so, because this is–
again, it’s owned by you. It could be you
and your spouse, it could be you alone, it
could be you in a partner, doesn’t really matter
who is the second person or how many people,
right, but you are– you are one of the owners of
it on your personal social security number. So– OK, so Ultimate LLC owns
these two LLCs, right, Natalie and Clayton. OK, now how do I
move money into– can I move money between
Natalie and Clayton? Here’s the question. No. No good. You got it right. All right. You cannot, you cannot do that. Because you– the reas– because remember that one
time when I accidentally deposited a check that
was made out to me. I deposited– no it was made
out to the company somehow and I deposited it
into my personal– our joint checking account
and you flipped out at me. I’d never– I mean,
she can get fiery. She’s got that Latina fire
in her, right, but she– oh man, don’t cross her. This was the most angry I
think I’ve ever seen her. Well, right, because it
was a pretty sizable check and I didn’t want to pay taxes
on that on our personal return, because of the way that the
taxation works and also just for a lot of different reasons. I was afraid– that could raise
a red flag if the IRS was like, what’s this? This is business money going
straight into their pocket. That’s not– that wasn’t
taxed appropriately. That raises your
risk for an audit. So I asked our lawyer– or our
accountants about it and they said, well OK, keep this
email as a record and keep– transfer that money right
over and keep a record of it. So if anyone ever came knocking
we’d have– we would just say this was a bonehead mistake,
we didn’t mean to do it, and then we put it right
away in the right account. You don’t want to be
moving money around like this, unless you
have a good reason to. You’re going to have a good
record of what you pay yourself every month, right. You’re going to have a good
record of what you purchase. So one of my big questions
was, OK, say in Clayton LLC we’ve accumulated enough
money to buy a new property, but we’re not putting new
properties into Clayton LLC. Can I use the money
from that bank account and buy a new property
into Natalie LLC? What do you think? Use the money from Clayton
LLC to buy a property that will go into Natalie LLC? I would think, yes, you could. You can’t. You can’t either? So what I was ta– I mean, you can, but
again, what you’re trying to do is treat each
entity as its own burning and turning piece. Think of it like, OK, you
run a landscaping company, which could be Clayton LLC,
and you run a hair salon, which is Natalie LLC, right. Yeah, I guess that’s a
good way to think of it. Natalie LLC, or
Natalie’s Hair Salon wouldn’t buy a lawnmower
for the landscaping company. Well, it could if it wanted
to write a note on that. My dad does that sometimes
actually, because he has– [INTERPOSING VOICES] A mortgage on it right. He could– And he– well, he’ll do– I’ll lend to this business, but
I’ll structure a proper note and make sure that it’s
properly paper trailed, but yeah, you wouldn’t
just give money in between the two businesses. So what I was told to do,
if you want to do that, send that money up through
Ultimate LLC, the umbrella LLC, and then– Just transfer, a simple
transfer to Ultimate LLC. Yeah, he’s like you– I mean, our accountant
was like, it’s just a few clicks
on a bank site, because you own all
of these things. Most– hopefully,
most of your accounts are within the same bank. You just send it up
to one, and then he said, put it in
your personal name. Put that money either
through the umbrella company or directly to you,
doesn’t matter, into your personal name, and
then purchase it in the LLC and that is– that is OK. And so my big
question was, well OK, but then say I needed
$40,000 to buy a property and I sent that $40,000
into my own account, am I taxed on that? Do I get taxed on that
$40,000 at my personal tax rate, because that would
be double taxation, right, because the company already
paid taxes on that money before I put it in
a savings account, and then I’m going to
pay taxes on it too and so I didn’t
want to take– just take money freely out of
these business accounts, because I was afraid
that it would really put a hard burden on our tax bill. And what he said to me is
that a distribution, which is just when you
give yourself money out of these– out
of these accounts, a distribution from an S Corp
and a partnership are not taxed, because you will be taxed
on the income in the S Corp. Let me say this again. You will be taxed on the net
income in an S Corporation and a partnership on
your personal return. Does that make sense? Right, so your S Corp is not
a massive corporation that’s going to be taxed separately. You’re S Corp is already going
to show up on your personal tax returns and therefore you will
have already been taxed on it. So you’re not going to be
being double taxed in an effort to use that money. But I think net is an
important word there, because you’re going to
be taxed on the net income in the business. So obviously the expenses
you have in the business are going to lower
your net income and that’s going
to be great, right. So that’s why we love
expenses, because they lower your net income, but that
net income then is reported on our personal return. So in years past we’ve had– we’ve had it so the
company owed some money, but because the net
income of the company was reported on our
personal tax return, Clayton pays a lot of money
in his paycheck to taxes. So the amount that he
had paid in his day job offset what we owed
for the business, because it’s all part of
the same beast, right. Does that make sense? Right So– right, OK, so do
you have questions? No, but I was going to
say, why did we even think about doing this
in the first place? Well, we wanted to start using
some of our rental income to pay our primary
mortgage that we own where we live right now,
which you’re seeing us here on camera. This is our primary– primary residence, primary
offices, and so forth. We wanted to pay this down. It was a new house. We just moved in. We wanted to really
start being targeted in paying off our primary
note on this property. How did we want to do that? We wanted to use some
money from the business or the rental income from
our rental properties. So how do we do that, and
before we started to do it, we wanted to get
these answers so we could take that $10,000
a month, $20,000 a month, from our rental
income and just do it like a laser targeted
approach on paying off our primary residence. Well, can we mix them? Can we use rental income
from the business, as an LLC and the
holding company, to pay Clayton
and Natalie, which is the primary
residence where we live. So would it operate
the same way, and the answer is
yes, we can do it. We can. We can and know we will
not be double taxed. Right, Yeah, so like I said,
I was just really worried, oh, if we take too much
out, because we take a salary from
our businesses that we own, a regular
salary that’s already taxed, because we pay
federal taxes on it. We pay ourselves as
employees of the business, but then can we take
any more of that money without increasing our
taxation and the answer is no, but again, you just want
to be careful of how you move that money about. Like I said, you can’t
use one to the other– it can’t go across. It’s got to go just up. It’s got to go up the
chain to the hold– and if you go above Ultimate
LLC, it’s us as people, right. Right. So it’s Clayton and Natalie own
Ultimate and then down below is whatever LLCs we own. Right, so let me ask you this
question before we wrap it up, is it important to have– I mean, how many
rental properties do you need to have before
you’ve set up an umbrella– Ultimate LLC, the
holding company? For us, we waited until I think
we had I don’t five or 10– actually, maybe more than
that, 20 properties– We had 18. –and before we even set up
the umbrella holding company– And it was an expensive
thing to remedy, so you should do it first. Oh, so do it early, OK. Yeah you should do
it early, because– yeah, it was– it cost us a lot
of money in legal fees to get it restructured, and then– And your mileage may vary based
on your own family history and connect– and partnerships too,
because you might– it might be a partner outside
of your family so it might not operate the same way, but this
is why you’ll definitely want to– we’ve got a great episode
upcoming, in fact, with our attorney team that
we use and they are fantastic. They– coming up on– let’s see, we’ve got on the
8th of June basic estate planning for legacy
wealth building with Andrew Howell,
which is fantastic. So we dive into this. They– their law firm will
teach you on that show how to connect with
them and work with them and then we also did
business entity structuring for legacy wealth building. We did a two part series
with Andrew Howell. You don’t want to miss that. That’s coming up on the 8th of
June, so be sure to subscribe, because we’re
going to dive deep, and then you can
hire these guys. I mean, we don’t get
anything from it, but we highly, highly,
highly recommend them. So that does it. So, yeah, please be sure to
check out episode 167 and 170 for– with Andrew
Howell and that’s when we’ll dive deep into
some of that business entity structuring, but do–
again, don’t over think it. Just turn it over to the experts
and let them handle that as– certainly as you start acquiring
a lot more rental properties and building that
structuring out. Don’t let that– don’t
let that impede you from taking action and
starting– getting started with real estate investing. You might be saying to
yourself, oh my gosh, this is so overwhelming. I don’t even want
to get started. No, no, no, no,
please do not do that. That would be a huge
mistake, because this is the kind of stuff that can
keep people from taking action. So– right, we don’t want people
to stop taking action on this. Well yeah, and the point
is, you can use this money. This is money that
you’re going to earn that’s going to be taxed
at a more favorable rate and it’s for you. This is money for you to use. It’s just you have
to learn how to– if you’re going to
start a business, you have to learn
to start a business. This is sort of basic
business operating and we all have to do it. So we have people
write us all the time on how to use that money. We had one person actually in
our family was like, oh, uh oh, I’d been using that money out
of our LLC to pay my bills and I was like, what? So people just don’t know that. Everyone has to learn. Yeah, so that’s going to
do it for today’s episode. Thank you so much
for subscribing to the show, the investing
and real estate show. You can find us on
iTunes, you can find us on the youtu– on
the YouTubes as well and if you are interested
in taking action and working with our team to pick up
your first rental property, we’ll take great care of you. Just go over to our web
site, and then click on the
schedule a consultation button if you’re ready to pick
up a rental property. Our properties typically
costs in that 40 to $50,000 range and we take
care of everything for you, from soup to
nuts, meaning we renovate the property, we
place a great tenant in the property with our
property management teams that we work with, and then
you just sit back and let the cash flow come in. That’s what we do. So any final thoughts
before we say goodbye? No, that’s it, but if we did not
answer your questions, write us and I will try and
figure out whatever it is that we’re trying to
figure out, because this is something that we’re all just
trying to figure out together. Right, there’s no–
there’s no rule book, but that’s why we leave this
in the hands of the experts. So we’re trying to help
you get as much information out there as possible to take
action with all of this stuff. So until next time everyone. Go out there, take action,
become a real estate investor. We’ll see you next time. Much love to you all.

100 thoughts on “Morris Invest: Using the Money In Your LLCs’ Bank Accounts

  1. Thank you so much for your informative show! Keep up the great work.

  2. Woot! Woot! Taking baby steps but thinking BIG!

  3. Thank you So much for all the transparent advice which I'm taking.

  4. Hi guys! I'm still a little confused about the LLC's under the "Ultimate Umbrella" LLC and the bank accts that are attached to these. Is there a book you can recommend that goes deep into detail of managing all these LLC's and bank accts and how to start paying yourself from the "ultimate umbrella" LLC. And is the "ultimate" LLC taxed at your personal tax rate which is why we are not double taxed when transferring money from the ultimate to our own personal bank acct? I Hope this made sense. Great show!

  5. Is the money that you take out from the business considered your salary? Is your salary part of the business expenses? Can one use the money from the business profit to pay something without considering it salary as long as one doesn't claim those expenses as business expenses?

  6. Once upon a time people paid lower tax rates than corporations. Is this true. Also, once upon a time, corporations were temporary charters with definite expiration dates. Is this also true (or untrue)?

  7. How do you pay no taxes on rental property?

  8. She either doesn't understand truly understand the ira/LLC concept or just can't explain it well.

  9. Once you Distribute money to yourself from the holding company do you have to pay taxes on the amount of the money distributed? How do I file taxes for it?

  10. Hey Clayton, Thank you for the great videos. I am looking at buying 3 new properties as my first investments. Would you suggest a new LLC for each property? Do you have a separate company for each and every property? or do you lump a few in certain geographical regions into a company?

  11. These folks should stick to real estate, they are a real Stan and Ollie team when it comes to tax discussions.

  12. Couldn’t I treat all my LLCs as disregarded entities so everything essentially goes to the holding company?

  13. If each house has an LLC and each LLC has 4 accounts (Profit, Op Expense, Taxes, Owner Pay) to it, how do you keep track of it
    all? Especially with the amount of properties you have in various states. Could you have your business LLC (S-corp) own one LLC bank account that has all those 4 accounts and you deposit all your properties funds into them?

  14. The woman give bad examples and you making it more frustrating than it is..

  15. How do I protect myself as a single member llc?? How do I sign up properly so that I personally won't be sued??

  16. Great video, awesome topic. Would be good, at least for me, to demonstrate using something like a white board to help the focus. Very important topic though-thank you for the video!

  17. You're never double taxed as an owner of an LLC. The LLC does not pay taxes, the net income of the LLC flows through to the LLC owner's personal tax return (owners of an LLC will receive a form K-1 each year that states the taxable portion of the LLC's net income that should be included in their personal tax return). Therefore, it doesn't matter if the owner takes distributions from the LLC or not. Either way, the money is taxed in the same manner. You aren't taxed personally on just the distributions, you're taxed personally on all of the LLC's income.

    Also, just because the LLC doesn't pay taxes doesn't mean it doesn't need to file a return. A return must still be filed with the IRS, that states the business's finances for the year and resulting net income.

    Note: I'm not a tax or financial professional, I'm just an LLC owner who does his own taxes.

  18. Oy, going ahead with my plan to meet with a CPA next week! I think I prob need to make my “parent" LLC an S-corp, and DEFINITELY need more advice and clarification on distributions.

  19. You guys may bump Chip and Joanna as the cutest couple in the US.

  20. I've never had a business savings acct. But I do have a payroll acct. General business and personal acct.

  21. Any suggestions on how to find a great real estate attorney and also a great real estate accountant?

  22. I watch a lot of Real Estate investing channels and your channel is probably the best. You guys provide so much in depth information like this.

  23. Honestly I don't know how you don't have a 30 million subs. Very interesting topic and very excellently explained! I run into this issue between businesses sometimes and my accountant hates me.

  24. Hi, how do make my first deposit to the llc. To buy my first investment property?

  25. Hey , you know something. I started watxhing your vids about 3 weeks ago and i was getting very discouraged due to the complexity of things, but this video made me want to keep going due to the simple complexity of your altruism! Thanks so much guys!

  26. So should Every property you buy have its own LLC set up Or can you have multiple properties under one LLC?

  27. I appreciate the content of a lot of your videos, but these explanations were not the most clearly explained. Try using a whiteboard or infographic to explain the details, instead of trying to explain it all aloud with fictitious entity names. Perhaps bringing in a professional and interviewing them would be more effective, and lend credibility to what you say on this topic.

  28. I Want staaaaaaartttttt

  29. Clayton, Natali where and how do I deposit/withdraw my tenants security deposits with out making it look like taxable income? Is there separate accounts for tenant security deposits?

  30. I am sorry these 2 mean well for sure but they are really fumbling through this explanation especially the woman. Everyone first needs to learn the difference between LLC, S-Corp and personal pass through income. Also when it is beneficial to even claim the S-Corp exemption through the IRS in the first place. That is all it is…Either form an S-Corp or an LLC here. There is really no need to form an S-corp in the first place, only LLC's including the umbrella Co. What the 2 are talking about is forming multiple LLC's within an umbrella LLC. The Umbrella LLC is then taxed as an S-corp but is still an LLC ( it is not an S-Corp ). Confusing for sure but stay with me here.
    The owners of the umbrella LLC that elect to be taxed as an S-Corp will draw a salary ( paycheck ) that runs payroll and pays earned income tax. The salary must be reasonable to their job and they are seen as employees of the LLC. The remainder can be distributed as dividend income to the members. These dividends are free of the self employment and social taxes therefore saving a TON of money especially if the business is making over $120,000 per year. That is the baseline income you want before even considering electing to be taxed as "S-Corp" status. You simply elect that status to be taxed only as an S-Corp IF and only if you have the income threshold requirements to make it worthwhile. They have the right idea here but this explanation they are trying to give should be just left for a tax accountant.

  31. I appreciate your interview formate, which highlights Natalie’s knowledge; very egalitarian of y’all. So, a summary: 1. Form Holding LLC S-Corp first. 2. Form all other LLCs under the Holding Co. 3. Follow profit first methodology. 4. Take Reasonable Salary 5. Make distributions by channeling non-salary net profit through S-Corp. 6. Do not cross pollinate/commingle funds. Question: how often/regular/timed are your distributions?

  32. So interesting, thank you guys for sharing.

    Edit: I wanted to add this question. What is in it for your company? Why wouldn't you just fix up the property, put a tenant in it, and then collect the ROI for yourself? Maybe I'm looking at getting into the wrong business here. I see lots of "real estate start up companies" and am wondering what is making the wheels turn. Just an observation and a genuine curiosity. Thanks for the video!!!

  33. So glad I came across this! I was sent a video by hubbie and wouldn’t you know it!, I’ve been a fan of Natali Morris for some time! Created the Give Save Spend jars thanks to her! Keep sharing guys ❤️

  34. Long time subscriber, am I the only one think this guy a genuis giving Natilie more airtime? For marketing, advertising, and us paying attention…..all hail Queen Natilie 😎

  35. Guys
    Try to use a white board with some complex topics

    It was quite confusing this video

  36. Are you making these videos long on purpose so you get long hours and hours of YouTube viewing ?
    Try to summarize please before the video on a white board the content of the video

  37. You said provision accounting?

  38. awesome video! Thank you.

  39. Please have your real estate accountant and attorney come on your show. I think some more clarification may be needed for most viewers.

  40. maybe I need to watch again. But, it seems like you didn't address the most simple question. If I have an LLC that owns several properties and has its own bank account, I presume that you can either pay yourself a salary or pay yourself a dividend. Is this the extent of the choice? If so, it seems paying yourself a dividend would be preferred in terms of taxation.

  41. Soooo…now EVERYONE is a real estate investor? Who's going to live in the properties!?

  42. Your LLC only uses a SSN number if it is a sole proprietor, else you get an EIN number. Getting an EIN is recommended for several reasons. Seek legal advice to descover the benefits of an EIN number.

  43. There's your umbrella LLC name… Bonehead LLC.

  44. Think about your exposure and consult with your CPA and a Lawyer again.

    For example; If you had some case where someone was injured on one of your propertyies… all assets in that LLC where that property is held are at risk if you are sued.

    What State you set up your
    LLC in also matters from a liability standpoint.

    I would try and set up multipule LLC's for all properties below each of your individule LLC's. You can bundle verious assets together under a few LLC's or create a unigue LLC for each property depending on the tax deduction ramifications and what your CPA and Lawyer think are best.

    Each LLC will have its own checking and savings account.

    Diversifiction of your exposure is the goal here. Do not put each of your two LLC's in an unsystematic risk scenario.

    Treat your business as a business.

    Consult with your CPA and Attorney as to what is best for your risk exposure.

    Create or modify an Operating Agreement to include how you want to manage your LLC's and follow that guideline. The purpose is to make sure you do not pierce the corporate veil by commingling your funds or not funding the LLC with enough to cover operating expenses.

    Consult with both your CPA and Lawyer concerning unsystematic risk and setting up LLC's under your individual LLC's to minimize that risk.

    Ask your CPA about K1 fillings to understand your personal tax liability.

    Enjoyed your video, good luck.

  45. For anyone looking to do something significant with real estate going forward, this video was freaking incredible. Thank you so much for taking the time to put this together and answer all of the beginning or questions that many of us have and we likely wouldn’t figure out until we had gone down this path and gotten our hand slapped a bunch of time

  46. Is a umbrella company the same as a holding company ?

  47. You guys are great! Love the channel!

  48. Real estate should never be in an s-corp.

  49. Hello and thank you for all your efforts, my question is is it possible for you guys to creat a flow chart in regards to personal income from and holding s corp from a llc? To kinda help me get a picture from a to z? thank you so much, Brian

  50. Now I'm Confused

  51. Hi. I want to clear something. It is not because you are just an owner, it is because all business except C corporation are taxed at the owner personal tax return. That's the law. It is called Flow-throw entities, which means, income from these kind of businesses are taxed at the individual level ( income is just taxed once). In contrast, C corporation are taxed at the corporate level, and the owners receiving money (dividends) pay taxes at the personal level again.

  52. Hey guys, you are confusing many people here. Remember no matter the money you gain in those LLC you have to pay taxes on that money. Just this money is taxed as passive income and it is tried at different tax rate.

  53. Because it is passive income you do not have to pay self-employment tax.

  54. Great topic to cover. I look forward to more discussions involving real estate business structures. I'm in the Michigan market where you must have all of your documentation ready and available when ready to do deals…

  55. They are making something simple way too complicated! This would scare anyone getting started!Alot of what they say is right but they CORNFUSE me and IM SMARt!

  56. If you’re going to invest in real estate, there are a lot of decisions you’ll have to make. You’ll need to decide on the kind of property, the way you want to make money, and the security you’ll use to offset the risk. You know, Natali, you’re exactly the kind of person who seems to be able to handle a lot of decisions at once. You’re fantastic. Have a great day! 😊

    Bert Levi from San Diego
    Levi Family Jewelers

  57. Great video content, I Love it.
    Thanks for your time.
    God Bless.

  58. Another great video! Natalie is great! We also use pro-vision after reading Tax Free Wealth. 🙂

  59. audio is out of sync with the video

  60. Feels like discussion is a bit all over the place or I'm just not following. So what I've gathered in order to withdraw money for yourself to use for personal reasons you have to be structured as an employee???? Say you're the sole owner/ member of this LLC, no way will you have to pay tax twice??

  61. I watched many of your videos and found them both informative and entertaining but this one has quite a few holes. You might want to have a tax accountant on a future episode to how most real estate investors setup each prop as a single member LLC vs a multi member LLC etc. Also clarify that distributions from an S-Corp accumulated adjustment account are taken in the following year and not the current year. That’s what makes them tax free distributions.

  62. Do you have the link to the accounting firm you mentioned in this show?

  63. I love the back and forth hahah

  64. The lady is soooo annoying

  65. So separate bank accounts for each LLC and your ULTIMATE LLC has a bank account as well and you want transfer money from LLC1 to LLC2 you have to move it from LLC1 to ULTIMATE LLC bank acct then to LLC2? Is that what you are trying to say? Thanks …

  66. So, are you saying that you need multiple LLC's? Why not just one? I can see it if you actually had different kinds of businesses like the salon and the landscaping etc.

  67. Really enjoying your channel. You guys answer the questions that real estate investors want/need to know.

  68. oy this stuff is sooo confusing! I have a cpa but can I just hire him to sit down with me for an hour or two outside of the work day and run me through the options best for me?

  69. what if one month my expenses outweigh what I gained in rental income, how do i get a consistent dividend going then?

  70. What percentage do you pay yourself on this passive income? Let's say a quadplex renting at 700 per unit.

  71. Is a smllc taxed as a sole proprietorship

  72. Thanks for the encouragement.😁👏👏👏👏

  73. How do you pay yourself as employees? 1099? W-2? Distribution? And are you paying yourself as property managers or member managers? How does that work?


  75. Under contract on my first investment property. To make things easier I am purchasing it under my name and will be rolling it over into my LLC after. Well thats the plan. My question is, how should I go about doing that correctly? Most importantly so that the loan is not called due. I have heard that it can be called due at times when its owned by an LLC. Thanks

  76. So in order to use the income from my LLC I need to set up an S Corp over my LLC? And take a distribution from the SCorp?

  77. It's one thing to be informed by a video, it's another thing to be inspired, informed and educated!! Hands down yall make the best real estate videos!!

  78. It's not co mingling if it's one owner taxed as pass-through.

  79. Hi guys, great video! The link for episode 10 is not working. I also tried looking for it on iTunes podcast but there are only more recent episodes. Help!

  80. I am so grateful I discovered your channel. You are providing such a wealth of knowledge in a clear, concise way that I novice (like myself) would understand. THANK YOU!

  81. Wow! Your videos are increadibly personable, informative, and easy to understand. Thank you for the work both of you are doing for those of us who do not yet own real estate, but want to make that leap.

  82. Can you have a heloc under an LLC?

  83. Great vid. Nobody talks about this.

  84. Hello thanks for all this information very helpful. I have a question, I have a LLC cleaning business, can I buy properties with this company or have to be specializing for rentals?

  85. if you take a distribution in the same your you earned it that is called income and you have to pay social security and medicare out of it. can a s corp own a LLC.  I believe a c corp can

  86. great video Clayton and Natalie, quick question: when setting up a bank account and paying yourself (paying the owners/Paycheck) are you then taxed on that money as an individual ? also are you taxed on the profit account (savings account)? im still not sure on how the taxes work with LLC's

  87. Thank you. Great information

  88. Great information as always! I found this helpful article on LegalZoom that folks may find useful too. It gives a great description of LLC and S-Corp taxation. Thanks and keep up the great videos.

  89. What banks do you guys use for your real estate business?

  90. Great info

  91. Thank you super great information 👍

  92. Hey Clayton, should I hire a realtor to list my first rental property and find the right tenants?

  93. My c.p.a screwed me in taxes

  94. You two guys are geniuses thank u

  95. It can be confusing stuff for sure. I have several LLC, but not an umbrella company. It sounds like you guys have several LLC’s that are disregarded entities for tax purposes and in turn owned by an LLC that is taxed as an S Corp?

  96. The biggest reason that you do not commingle funds is because you could lose your liability protection!!

  97. So get into real estate to pay for real estate? And still be poor ?

  98. I had a business with a 50% owner partner, it was a Franchise LLC starting 2015 ending for me 2018 cause I got out. Partner commingled in our business bank acct. He filed 2015 as sole proprietor, 2016 filed as a partnership 17' and 18' I don't know, now i'm in trouble with the IRS cause he has lied about everything to the IRS. What can I do? He says I was only a partner in 2016. I've also been told he is telling IRS our business different start till 2017' what a mess he has started.

  99. Why you can’t buy a property from one business account for another? What if you make that perches as an investment?

  100. I agree with the comment above, I’ve learned so much from y’all and this video is what I’ve been waiting on. Stay positive guys and please keep them coming!

Leave a Reply

Your email address will not be published. Required fields are marked *