Wendy Byford runs Your Entity Solution – a company that specializes in helping businesses protect their assets by ensuring they comply with any and all regulations that would be relevant for them. In this episode, Jack Bosch talks to Wendy about her work and how she helps her clients keep their assets safe. You’ll discover the concept of “piercing the corporate veil” – which would allow someone to legally everything from your business as well as your personal assets! It’s vitally important for every business owner to listen to this podcast and discover whether or not they have adequate protection – and it’s simpler to do this than you might think.
Listen and enjoy:
Learn about the work that Wendy Byford does
- Understand the concept of “piercing the corporate veil”
- Find out if your business has adequate protection
- Discover the common mistakes that many businesses make
Mentioned in this episode
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- Check out BizEngaged to find out how you can protect your business: https://www.bizengaged.com/
- Contact Wendy Byford at: firstname.lastname@example.org or call 702 506 0190
Jack: All right. Hello everyone. This is Jack Bosch speaking. This is another episode of “The Forever Cash Life Real Estate” podcast, where we talk all things about cash flow, assets, creating wealth and true land flipping, or any kind of real estate. And also today we’re going to talk about how you can protect your assets, and how you make sure that if you have an LLC, your LLC doesn’t get pierced and you lose everything. All right, we’re gonna talk about what people do wrong, and what you can do to fix it with our guest today.
Announcer: Welcome to “The Forever Cash Life Real Estate Investing,” podcast with your host Jack and Michelle Bosch. Together, let’s uncover the secrets to building true wealth through real estate and living a Purpose Driven Life.
Jack: All right, so we’re back. So as I already said in the teaser, we are going to talk today about entities and how you can use them best to protect you, as well as also what happens if you don’t take care of them. And if you don’t do your annual meetings, and how you can protect yourself from that and make sure that what you build in your life is always safe. And our guest today is Wendy Byford. Hi, Wendy, how are you doing?
Wendy: I’m doing just fine. Thanks, Jack. Good to be with you.
Jack: Wonderful. So Wendy has been a long time…well, let’s say we have been working with Wendy for a long time. Our very first LLCs that we set up in the United States were set up by them. By her and Gary Bauer and Wendy Byford from yourentitysolution.com, and they have done just a phenomenal job in setting this all up. But more over the years, we have learned that you guys do much, much more than just entity setup. You’re really are in that peace of mind business, right?
Wendy: Absolutely. You know, it’s interesting that most people think that you file with the state, you get your piece of paper for your LLC, you run over to the IRS, you get your tax number, your EIN, and then you take those pieces of paper and you throw them in a drawer and you forget about it. You’re safe, right? You’re protected.
Jack: And you say it’s not like that?
Wendy: I wish it were. It would make life so much easier for everybody. But unfortunately, no. The thing about having an LLC is that like anything else, there are certain things that you need to do. And they’re not very difficult but if you don’t do them, then you run the risk of having your corporate veil pierced if you go into court. That means that essentially the judge is going to look at you and say, “You’re running this business just like a sole proprietor, just like a normal person. So I’m going to let this guy over here who’s suing you get everything, personal and business, if he wins.” And…
Jack: So let’s jump into that. So you have been doing this for a while right now. So let’s just right jump into a horror scenario. What’s kind of the worst case scenario that can happen when somebody does not take care of their business. So let’s say first scenario somebody has, like, a nice house in their own name and perhaps a few nice cars and has a good paying job. Also has a business, but then they have an LLC where they do some stuff and some business stuff and perhaps real estate investing, perhaps other stuff, perhaps even just as a professional doing work and they don’t take care of this stuff and they get involved in a lawsuit. So what you’re saying is that if they don’t have their documentation properly updated, not just an operating agreement and the [inaudible 00:03:26] but, like, annual. What all pieces do they have to have in place in order to be reasonably sure, of course, there’s no sure thing where the Judge ultimately decides. But to be reasonably sure that nobody can go through or in other words, explain the work that the LLC can be pierced? What does that mean?
Wendy: Well, if you go into a court, and the other side is suing you, they want to get not just what’s inside that LLC. They want to get everything that you own. Let’s face it, let’s say that you’ve got a LLC that has a small business, and the business is making a little bit of money and maybe there’s $10,000 in the LLC. Nobody really cares about the $10,000. They care about the house that you have, and the car that you have, and the savings that you have, and your kids college funds and all kinds of stuff that you’ve put aside over the years, as you’ve been working that business, what you’ve done with that money, those investments that you’ve made, that’s what they really wanna go for. But in order to get to those assets, they have to do what’s called pierce the veil. So think of your LLC as a box. It’s a steel box, it’s got really strong sides, and everything in the box is owned by the LLC. So that’s your business and your LLC bank accounts and your phone, and maybe your car, and your client list, and all of that stuff inside the box. That’s all owned by the LLC. Everything else that you have outside the box is owned by you. Well, that attorney is going to look at that box and say, “Yeah, that’s a bunch of nice stuff. But I really want this stuff over here that you’ve got.” You know, like Jack’s nice house, and car and investments and all those wonderful things. So I’m going to have to punch a hole through the wall…
Jack: Don’t give people any ideas. That’s not done on my stuff plus, on top of it. We have a multi layer protection with trust and remarkable trust, and really, like, somebody would have to spend a fortune to get through through our stuff. So if it’s impossible, but yeah, go ahead. So.
Wendy: You’re doing things right Jack, but most people don’t. They’ve got this little LLC that they haven’t been looking after. And what the attorney wants to do is he wants to punch a hole through that wall so that he can reach through the company wall through that LLC, into all of the personal assets that are sitting outside of that box. That’s what they wanna do. It’s called piercing your corporate veil. Now how does the judge know that it’s okay, to allow that attorney to punch that hole through the wall? Well, the judge is going to look at how you’re running your business. And what he’s looking for is to see whether or not you’re treating that business, like a professional organization separate and distinct from you, the owner, or are you treating it like it’s all just you?
So he’s going to look at things like your financials. Did you bring in a shoebox full of receipts and a spreadsheet? Or did you bring in reports from financial accounting software? Right, so did you have QuickBooks or did you just scribble things on a piece of paper throw it in a shoebox and bring it in? Did you have a separate bank account for your LLC? And do you make sure that you only pay business expenses for the LLC out of that bank account? Or did you commingle your funds? Did you maybe pay the rent on your car from that bank account? Did you maybe have a personal party with that bank account, they’re going to look at all of these things to see just how professional and how strict you’ve been to make a determination whether or not that opposing attorney should be allowed to reach into your personal assets.
So they have to look at what you’re doing. And they say, “Well, you didn’t document any of your decisions. You file your reports with the state late. You don’t have reasonable financial software. So you can never tell what you’re doing. You’re kind of flying by the seat of your pants. You’re doing all kinds of things that just show that you’re making whatever decisions you want, whenever you want, for whatever is in your best interest, not in the company’s best interest.” Then the judge is gonna say “Great, go ahead, pierce that corporate veil and get to all the assets.” And so if that attorney wins. And the judgment exceeds what your insurance will pay. Because hopefully you’ve got business insurance, right? You’re all smart people. So you know, your insurance is your first line of support. And your LLC walls are your second line. So you’ve got insurance for $500,000, and the judgment is a million dollars, well, then that attorney is going to look at it and say, “Well, you know, you’ve got $25,000 sitting in your LLC, but you’ve got a house worth $400,000, you’ve got a car for $30,000, you’ve got savings for $20,000. You’ve got a bank account for your children over here for another $10,000. We’re gonna go after all of that.”
So it doesn’t make any sense not to do the few simple things that you need to do to look after that LLC so that you can walk into a court and say, “Your Honor, I am running a professional business. Here are all the resolutions that document the important decisions that I’ve made over the years. Here is my accounting software reports that show that all of my financials are in good order. Here is my bank statements showing that I’ve never paid myself anything out of here except my payroll company has issued a W2 to pay me and here are my distributions and everything is documented correctly in the financial software. Here’s everything that you need to show that I am running a professional company.”
Jack: All right, so let’s jump in here for a moment. So now that we scared the living hell out of everyone, but that’s okay, right? We have a little bit time, we can solve the puzzle too. This is actually something very, very important. So first of all how long have you guys helped people do this?
Wendy: Oh, we’ve been in business over 15 years and we’ve filed probably in excess of 30,000 entities over the years.
Jack: All right, wow. So you guys created 30,000 entities. Now I think the first mistake that people make when they file an entity is that they think that just with filing it and getting it approved, they have the minimum information that the minimum piece is necessary. But is that actually true?
Wendy: Well, there are a few things that you need in order to have a viable company set up. First, of course, is you need to file with the state and say, “Hey, state, I wanna do business. Here’s my name, here’s the information that you require.” And you do your filing. And then of course, you get your federal tax ID, that EIN. Now, that’s where normally most people stop. But there’s another thing that you need to do in order to have a viable company that people don’t think about and it’s really important, and that’s that your company has to be capitalized properly. Now what does that mean? It means that if you open up the bank account with $5, and say “I’m in business.” Then you better have a really good reason why $5 is all you need to get into business. Because the court is going to look at whether or not you intended to set up a professional business. And when you intend to setup a professional business, you have enough money invested in the business, to pay for all of the expenses that you’re going to have getting that business up and running until it can make money in its own name.
Jack: Right. So probably opening the account with 100 bucks is enough for the moment as long as within a reasonable time period, fund it, right.
Wendy: So you have to fund it and you have to call it capitalization. Don’t call it a loan. Don’t say that I’m lending money to the company, because then capitalization shows us $100 and that’s not good enough. But let’s say that you open the bank account with $100 and then you do a little bit of calculation, you say, “It’s gonna take me three months to get up and running, because Jack’s program is really great. And in three months, I should know what I’m doing. And in that time, I’m gonna be paying this person or that person, or this program, that program. So I need $500.” So you can open the bank account with $100. And then as quickly as you can put in that other $400 and call it capitalization, okay.
Jack: Or it could be $1000 for mailing costs and something, yes. All right, so there’s another piece, though, and that is used to actually that to my understanding that you can’t, sometimes even open a bank account with and that is the operating agreement, right?
Wendy: Correct. The operating agreement…
Jack: Talk about that a little.
Wendy: They’re the rules by which you agree you’re going to run the company. And typically when you go to the bank, they’re gonna ask you for a copy of your operating agreement. Now, by law, not every LLC has to have an operating agreement. However, if you do not have an operating agreement, then you are required to run your company according to the statutes of the state. Now, if you’re not gonna spend a day sitting down reading an operating agreement, I guarantee you’re not gonna read the statutes of the state. So you’re gonna have no idea what it is that you’re supposed to be doing with this company. So you really should have an operating agreement. In fact, a complete company record book, and the record book will have the articles that you filed, it’ll have a copy of that operating agreement, which are your rules, then there’s a little bit of flexibility in the rules. So make sure that whatever operating agreement you get, you read, and if you need to make changes, you make those changes and typically you can make them fairly easily by a resolution.
And then you’re going to have someplace in that book where you’re going to put your resolutions, your written consents and your minutes documenting your decisions. You may have ownership certificates in that book as well and a register of all of the owners of the LLC. So that company record book gives you a place to keep everything together.
Jack: Right. So we go into the operating agreement. And so just for those who really are brand new to any of this, the name operating agreement is a very cool name and very fitting name and permanence, which is actually in German. It’s called the [foreign language 00:14:18]. What that means, of course, means nothing in English. It only sounds like I just coughed. But what it really is it’s basically, it’s the agreement of all members on how to do business and how to operate, and how to also dissolve the company if it needs to come to dissolve, and how to talk about disputes and things like that. Now, if you’re the only owner of an LLC, you might say, “Why the heck do I need this?” Well, it also has the rules of who can sign for it? Who are the members? It talks about all these different things. Who is the signing authority for it? And a couple of things like that. And then it’s being amended with those resolutions. So the thing is, without an operating agreement, you have a piece of paper that says, “Who is the manager?” Because you put that in with the state, but it doesn’t say anything at all of how the company is being run.
And that might fly. Not for a core case if you don’t have an operating agreement, and you should have one then it’s an issue. But that might fly if nobody sue’s you for a long term. But the moment you have two partners together, you need an operating agreement. The problem when you have two members. Because I’ve seen so many cases where people go into business really happy. And after a year or 10 years or 20 years, they don’t get along anymore. And if the operating agreement isn’t there, it’s not clear how does the thing get separated? How does it work? And that’s where you see the big lawsuits happening, where by now that company is big, there’s millions of dollars in there and everyone wants a piece and there’s no rules or rhyme or reason of how things are being done. So not only the bank usually want one because they wanna know who is authorized to sign. But also, it’s really good to have just for crisis management down the road.
Wendy: It actually covers, as you said, a number of different areas, and you want to look at very specific areas in your operating agreement. Because it may be a case of not that you wanna get rid of your partner, but your partner may die. So what happens when your partner dies? Do his heirs actually have the right to manage the company? Or do they become economic members? That means that essentially, they would be paid what your partner would have been paid, but they have no right to make any decisions as managers of the company.
Jack: Right, and stuff needs to be thought through. As a matter of fact, it’s great example, my attorney literally called me today that one of our students that started our land business and partnered up with somebody else, they accumulated 180 land parcels, like, they flipped a whole bunch of them, but they also accumulated them for land banking, or I don’t know, I’ve received actually the list of them today. So I can look at them and see what they are. Because what happens is exactly that, they’re partners in an LLC that owns 180 land parcels, and a lot of the partners, the other partner that we don’t know, passed away. So now this has been hung up in probate and in lawsuits over these 180 properties, which at every count, even if they’re only worth $10,000 apiece, that’s $1.8 million worth of assets that’s sitting in there, that now the heirs and the two other remaining members or our students are fighting over.
And finally came to some resolution, which gives my attorney the power to go sell them as an executive of the estate or something like that. Or our state, by court appointed as secretary of the state. And he came to me and see if I don’t wanna buy them or go I don’t wanna flip them or help them sell them and so on. So I’m consulting with them and I’m helping them find a solution because, obviously our style is to buy them at 25 cents on the dollar, which I don’t think they want to sell them to us at 25 cents on the dollar. But so my approach is more like to see if I can bring them together with a couple of our students that are big hitters, and do like a joint venture for them to sell them together. So it’s like I got my own hands full.
Wendy: You actually brought up an interesting point much earlier on Jack, that you have things that are owned by trust. And an LLC doesn’t necessarily have to be owned by individuals. Where interested, an LLC can be owned by a trust. And the reason why you might wanna do that is because people assume that if a husband and wife for example, own an LLC, or there’s two partners in an LLC, the assumption is always “Well, if somebody dies, then I own the whole thing. Because the other guy’s gone.” That’s not the case. The estate of the person who died owns their piece, even if it’s your spouse, and you have to go by the rules that govern that estate. Well, if you put your interest into a trust, the trust will then very clearly state what happens to your interest in this company.
So let’s say for example, Gary and I own BizEngaged, which is our education arm with Warren. Now, I know that if Gary and I die, my kids aren’t going to know anything about this. They don’t want to be involved in the company. They don’t have anything to do with it. But Warren, of course, does, because he’s invested time in this. And so our trust can give our part of the company to Warren, it doesn’t have to go to our children. If we say nothing, and we just own it in our own right, then it will go into our estate which will go to our children. So you can do some things that are much more sensible if your LLC is owned by a trust if you’re interested in that LLC is owned by a trust, rather than having it owned by an individual.
Jack: The beautiful thing I want to throw in here, by the way, none of what we’re talking about, of course, is legal advice. Neither of us is attorneys. We are not attorneys. But you guys, if somebody comes with you with a complicated structure, you can bring in the advisor for attorneys. And you pull those two guys in so that the overall solution is a solid solution that makes sense for the person that you work with right?
Wendy: Correct. Sometimes we have people turn up and say, “Oh, by the way, I’m getting divorced, should I get my LLC set up?” Now my first response is “Go talk to your divorce attorney. Once you’ve got the advice from them that you need, then come back and see me.”
Jack: Right, exactly. So now that we basically scared everyone, which is the wonderful thing because people need to be scared, sometimes into action. And in this case, it’s 100% true, because everyone just assumes, “Oh, were fine.” And then they realize, “Oh, my God, I’ve had an LLC for 15 years and I’ve never done a resolution. I’ve never done an annual meeting, I’ve never done an update to the managers. I’ve never removed my former assistant from bank account access. I’ve never done XYZ.”. What do they need to do? Well, this is kind of, like, let’s go back and see what is the proper standard practice to do to make sure we keep our LLC, let’s say if it’s in LLC, our entity in proper standing and properly protected.
Wendy: Okay, so when we review an LLC, if somebody says, “You know, I haven’t been doing anything with this thing for five years,” then there are a number of things that we look at to start with. So we’re going to look and see whether or not that LLC is in good standing and we’re looking to see, first of all, if the state says that it’s in compliance. To be in compliance, it means that whatever filings the state has required that LLC to file have been filed and they’ve been filed on time. The next thing we’re gonna look at is have they filed their taxes? And if you have employees have you done the proper withholding, and had all of that filed properly. Then we’re going to look at some other things like in your bank account. Has there been any commingling of funds? Have you used any of those funds for your personal use? If you make a mistake, there are ways that you can solve the problem. It’s not a problem, you just need to know that you’ve done it. We’re looking to see that you’ve documented your important legal, financial and tax decisions.
We look to see, have you done an annual meeting. Now, in most states, you don’t have to hold an annual meeting. But that annual meeting is another way of showing the court that you are behaving like a professional organization. And usually in that annual meeting is where you’re going to vote in who are going to be the managers for the coming year. We’re going to look to see whether or not your operating agreement matches the way that your company is set up. So many times people will change to a Sub-chapter S tax election, partway through. So maybe you’ve got the first three years as a partnership, and then you change to a Sub S, but you never change your operating agreement and you never create a resolution saying that you’re going to make that tax change. So we look for that.
And we look for a number of other smaller things to make sure that everything is in compliance so that we know that this is solid if you go to court, or if you go through an IRS audit, most people aren’t aware that if you are audited by the IRS, they’re gonna ask for your company record book, did you know that? They wanna see whether or not you’re running this company professionally. Because if they see that you are not running this company like a business, even though you have an LLC, they will deem it as a hobby. And the wonderful thing about hobbies is you can only deduct the amount of expense equal to the amount of income. So if you have some time where you’re ramping up, so you’re spending more than your making until you kind of hit that curve and then you’re up and into the right. They’re not going to allow you to take all those expenses if they deem that your business is a hobby.
So you wanna make sure that everything is correct not just from a court standpoint, but also from the IRS standpoint, that if they look at what you’re doing, they see that everything is done professionally. So those resolutions for that Sub S, the operating agreement matching your Sub S tax election, all of that is really important. So we look through all of this.
Jack: Wonderful. So you guys obviously, provide that service. So and we’ll let you share that the link to that later and put it into the show notes too. So now to take some of the, a little bit of fear away is the…and I know you’re recovering from a bad cold. So thank you for being on the call. So those resolutions they don’t have to oblige to any kind or they don’t have to follow any kind of restricted format, right? It basically just needs to be a letter that is signed and perhaps shows who was attending kind of like a meeting minutes, right meeting minutes that says, well not meeting minutes, but it says, “Hey, this was the date, this was the meeting. This was the location. This was who was there. This is what was decided,” and then a signature of the decision makers, Right?
Wendy: Right. Well, there’s two ways that you can document one is with meeting minutes that are a little bit more formal. The other way to do it is called a written consent. And what the written consent says is, whereas, reason for the decision, it is resolved decision, and everybody signs and it’s a piece of cake. In fact, we’ve put together a whole package to help people do their minutes really simply with a bunch of templates that they can just do cut and paste and then print out sign and put in their book. So it’s just that simple.
Jack: That’s great. So yeah, because I can already see people contacting us saying like, “Jack, this is great. This is a great session. I’m learning so much, but what do I need to have like a legal format? Does it need to follow this or that?” So the answer is yes, and no, it should have some components in it, it should look professional. So it shouldn’t be done on the back of a napkin or something with beer spilled. It should be somewhat professional. But I mean, just think about it. The big companies in this world, like, if you look at Berkshire Hathaway, with Warren Buffett, what do they do? They do an annual meeting every year, right? Now, they’re an Inc, of course, that has shares and the shareholders are not around and so on. But still they have an annual meeting.
So if you wanna make sure that the world sees you as a real company, even though your LLC might not have the requirement to do an annual meeting, you definitely want to have an annual meeting. And now we can actually make the case and I think a lot of CPAs will allow you to do that. And the IRS has held that up to my knowledge is that your annual meeting, if Warren Buffett let’s say…it’s not to use Warren Buffett because he does it in his hometown Omaha. But if IBM let’s say, does their annual shareholder meeting one year in the Bahamas, the next year in Florida, the next year and in Las Vegas, the next year somewhere else, then why couldn’t we, right?
So isn’t there a case to be made that the annual meeting could also be combined with a special occasion? In other words, that you could have it in your favorite resort if you ever wanted to do a trip to Hawaii that you could technically do your annual meeting in Hawaii. Now, obviously, you might not be able to deduct the entire two weeks worth of vacation, a hotel for that but at least a flight there and the flight back and a night or two at the hotel might be able to be deducted because it’s reasonable that you fly there. You get there in the afternoon, next day you have your meeting, or perhaps a day or two later you have your meeting and then a day later you fly back and so the flight there back and a two, three nights hotel would be deductible. Would you agree with that? Again, this is not legal advice, but that’s what…
Wendy: There are very specific rules that you can follow, which would allow you to go to Hawaii for your meetings. So the trip there and back, the purpose of the trip has to be business. So if let’s say that you decide to go to Maui, because you wanna find some land to flip. Okay, great. Business trip. So your flight there and back is a business expense, then every day that you work a minimum of four hours, then that’s a business day and you could deduct the expenses for that day. So it doesn’t mean that you have to go out looking for land every day. But let’s say that you have your annual meeting for one of your companies one morning for four hours, and then you do planning session for the coming year. That’s easily four hours been there, done that, got the T shirt.
So I know you can do that. Then you go the next day and you go out and look for land. The next day, you have a whole bunch of viewings set up, but your rep doesn’t turn up because he’s sick. Well, that still counts because it’s not your fault that he’s sick. So that still counts as a business day. And then maybe the last day that you’re there you have another meeting in the morning because you’ve decided that for this business, you’re going to do a little bit of coaching. And so you wanna do some some videos and things out in this beautiful landscape. And so you that for four hours. And that’s a business day as well and you deduct all the expenses for that the next day you get on your plane, and you come home. So now you have your business trip.
Jack: All right, so the annual meeting as long as it’s four hours… So there’s some specific rules around that. So I wanted to make sure that that’s the case. And obviously, Michelle and I do lots of planning meetings when we’re in Hawaii. We actually do. We love going there and we love looking at properties there and looking at land there. And our daughter goes to the kids club because she loves it there, she knows that the people they’ll take care of her there. And then we go sit down often under shady tree, our favorite shady tree in our favorite resort and we sit down and we plan out the entire year, we plan out the next quarter, we plan out the next land sales, the next land promotion and things like that. So it’s definitely something that can be done. But it also can be done I mean, that’s the beauty of this land business that it can be anywhere, so great.
So now with that said, if you present yourself properly and you show those things, not only are you protected from potential losses piercing your LLC, or your entity, you’re also protected potentially from the IRS to throw away your company. And so it’s really, really important for everyone that watches that to make sure that you treat your entity not just as something that you set up for $120 and put it away. But you treat it really properly and with that annual meeting and with some accounting and so on for it, and so on, so forth, so that it looks on. So if you haven’t done that, if you’re thinking about setting up an LLC, you definitely, it’s my recommendation, you want to hire Wendy and Gary from Your Entity Solution. So I’m gonna give you guys the link because we have used them daily, we’re currently talking about them, doing exactly what she just talked about. We believe our records are in good conditions, but we want to have them look over them just to make sure that they are really in stellar conditions.
And so we’re working on that right now with Wendy ourselves. So for entity setup, to make sure that your entity are in good shape, and for just ongoing support, these guys are absolutely great. So Wendy, can you repeat your website and how people can get a hold of you, please?
Wendy: The best way for people to get hold of us is just to email me email@example.com and I’ll send you that link you put in the notes section. Or you can always call our office at 702-506-0190 and we’re happy to talk to you. That’s the best way to get hold of us. We have a separate education arm from the setup arm bizengaged.com just the way it sounds B-I-Z-E-N-G-A-G-E-D and you can go in there there are some free things that are there. And then you’ll see there’s a membership section that actually is a paid for membership. However, if we set up your LLC for you, you get six months of the BizEngaged membership for free, and you get access to us to answer your questions. And at the end of that six months, if you wanna continue on, then it’s a monthly membership. So we try our very best to make sure that you understand the things that you need to do to keep you safe. They’re not difficult to do, you just set them up at the beginning and then just run them like any other system, just like the systems that Jack tells you about in order to flip your land. It’s just another system that you set up in the beginning and you continue through and you’ll be perfectly fine.
Jack: And even though, it sounds like a lot of work, if you have one LLC, you really and you do, like, two resolutions a year and you keep proper accounting for it, you’re really good, right and you have annual meeting. So we have 40 LLCs, so for us it’s quite a bit of effort. But if somebody just starts and does one LLC, just make sure you have those quarterly or annual annual things and when you’re making a decision, when you bring somebody on, when you give them certain rights for the company, you add that to your notes, and you’re really golden. But again, if you’ve done this for a while, it can be cumbersome to go back five or 10 years and update it all. So in that case, it comes in and Wendy and Gary can help with that. Or if you haven’t even started yet, start it the right way is my point. Because when you start an LLC on your own, you don’t have operating agreement, you don’t want to buy an operating agreement from LegalZoom or something like that. Because it’s not state specific. It’s not adjusted. It’s not adjusted to your needs. And it’s just something that you don’t even know what it says. So go get the experts to help you with that. So I would definitely recommend you guys. I’ve worked with you guys. And it’s a pleasure working with you guys.
Wendy: Well. Thank you.
Jack: Wonderful. So with that said, do you have any kind of parting words that you would like to add to…and if somebody’s kind of like on the fence right now and wanted to start in real estate in general? What would you tell them?
Wendy: I would tell them the most important thing for any entrepreneur is get started. That’s the most important thing. If you’re thinking I have to have everything together in place before I do anything, listen to what Jack is telling you go out, do your first deal, then set up your LLC. Is it the best way to do it? No, because in that first deal, you won’t have any protection. But don’t let it stop you by saying, “I don’t have the money to set this up. I can’t do this.” Go do a deal. Get started. Then take the money from that deal set up your LLC and then never look back. Just keep going.
Jack: Most people do have the money to set up the LLC because it is not very expensive to do this, even with your services. It’s not very expensive to do that. So what I see a lot of people do is, what I recommend a lot people do is go get started, pick your name, right, have them pick your name. And while they set up, while Your Entity Solution and Wendy is setting up your LLC, you’re already getting going and by the time you have a deal that you actually purchasing, the entity is ready to put them into. And that’s really the best way because now you’re doing both in parallel, and you’re kicking butt and you’re being successful, and you’re doing everything within the proper legal protection.
And even with our guys right now, we have a few students coming on board from Germany, they’re doing the exact same thing. They picked their name, they started the process. But they’re already sending out letters while you guys and other companies…while their systems and their LLC and so on are being set up, right. So it makes total sense to do that in parallel. So we would never really tell you to do a deal in your own name first, because it’s up to you if you’re not okay, with that live only out there and do it in parallel. I do it in parallel.
We even, Michelle and I started, I always say, we did our first three deals in our own name, because we also realized that only anyone who’s gonna sue anyone if they have something to sue for. And since we came with two suitcases with a bunch of student debt, with a bunch of credit card debt, with no money to our name, and we started doing deals with $3500 saved up, that’s all the money we had. We figured once we spent that money on deals and we we made, like, our first one $400 to $4000, the next one $500 into $10,000. That’s the money we used to then set us up nicely professionally. And we had still a ton of it leftover because it only costs a fraction of that to set it up.
So bottom-line is we did it in our own name because we figured, “Who’s gonna sue us? And for what?” So if you’re in that situation, then go ahead, do it in your own name. If you’re in a situation that you have a bunch of assets, then starting it in parallel is not a problem whatsoever. And if you’re somewhere in the middle, then you still have the $1000, $1500, you go set up the LLC and send out some letters and do it all in parallel.
Wendy: Right. The main thing is just don’t procrastinate. Get going.
Jack: Exactly right.
Wendy: Don’t let anything stop you. And just make sure that when we set this up that you maintain it. And if you’ve got questions, ask those questions. There is no such thing as a dumb question.
Jack: Right, exactly. And you guys are great at answering questions. So again, contact Wendy at firstname.lastname@example.org. And also go to their website and call the phone number she went through, we’ll put it all in the show notes again. So with that said, Thank you very much, Wendy. I really enjoyed it. We scared people a little bit. But we also gave them a way out by showing that…because I’m all in favor of, like, if something is dangerous, if you do it the wrong way, we got to call it out. We got to tell and say what is dangerous. And I know that 99% of the people who have LLCs, or probably 95% that there really is, are not having their stuff set up the proper way. So if you’re one of them, go contact them. Go do it yourself, whichever way you wanna do it. But I always find that the expert help is faster and ultimately cheaper than doing it yourself. So with that said, thank you very much.
Wendy: Thank you, Jack.
Jack: My regards to Gary and we’ll see you very soon in our next webinar in May 1st to the 3rd in Phoenix, Arizona. All right, bye-bye everyone.
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