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Home » Resources » Articles And Reports » Episode 41: Structuring Your Empire – The Mentor Podcast

Episode 41: Structuring Your Empire – The Mentor Podcast

                Ron: Hey everybody, it’s Ron here. I get a lot of requests to do a class on structuring your empire and entity structuring stuff, so I’ll do one for you here. Before I do, I want you to know that this is a broad subject and I’ll do the best I can and give you the basics. I also want you to know that I am not an attorney, I won’t be sending you a bill, so keep that in mind that I am not giving you legal advice.

                Let’s start with the basics. What I am about to tell you, you don’t have to do any of this, especially if you are only going out to do one or two deals. If you are going to run a business in buying and selling houses, even if its five to eight houses a year, you’re probably going to need to set everything up like this. These are just my suggestions and I will tell you, I have these entities and there’s really good reasons why, but I am not sure if I will get through all of them today.

                First you have what’s called an LLCA, and this is the LLC that I would like your IRA to own. There are good reasons for that, because this is the LLC that you are going to do business in TAX FREE if it’s the Roth IRA that owns the LLC. We use Quest IRA and they do a great job for us, they are easy to work with, and they come to all of our quick start boot camps. When you get your IRA set up, you want to put at least 1,000 bucks in it as a contribution, then you can take that money to purchase the LLC. There are several steps to that, which are posted on the Gold Club site. It does need to be formed with the state, which is nothing more than you just filling in the blanks, make the IRA the owner, and then you will need to get an EIN number for this LLC. Once this LLC is formed and has a bank account, it is ready to do business for your IRA and that’s the key. So, the day you get this up and running with your 1000-dollar investment to for a LLC, now this LLC can buy houses for you or anything else your IRA is allowed to buy, instead of your IRA having to buy it.

                There are several reasons to this. Number one, if I have my IRA buy a house from me, and I am dealing directly with Quest, I have to fill out a form to receive any of the money, which is a pain in the neck! However, if I take 1000 bucks out of my IRA and I form this LLC, from that day forward, the LLC writes the earnest money deposit. It collects the rent, it pays the payments, it does anything and everything it has to do with the properties that are within that LLC. So, I eliminate the need going back and forth with Quest. Plus, when I take title to the property, which means this LLC will buy some properties, and this can be short term or it can be long term. This doesn’t matter in this case since the IRA owns it, which most of them are going to be tax free. Regardless of how, or who, owns a property, they all are going to be titled to a land trust. So, regardless of which entity owns the house, the land trust is going to own the house, and then you can decide which entity owns the land trust.

                So, I have two land trusts in two different entities, and they all go down into the beneficial interest of these LLCs, whichever one is applicable.  If it’s your IRA of course, the beneficial interest of the land trusts would be LLCA. Now the reason for that is, I don’t want anybody, ever, ever take title to a property and have your IRA as the owner of that property on public record. That is deadly, deadly, deadly! Don’t let anyone talk you into that. Remember, if a big calamity were to happen on your property like a big fire, multimillion-dollar judgement. That judgement would be against the owner of the property. So, the owner of that property better not be your IRA because if it is, everything in your IRA is gone. That is one way they will take your IRA from you if you put it out there and make it the owner of something that has a big issue. In this case the land trust owns the property and the land trust owns one house, so the only possible thing you can lose is that house. Your LLC is not affected because it has no other liability and it’s the beneficial interest of the trust, of course your IRA is not affected because it’s the owner of this LLC, so all the liability goes right here to this land trust. One house, one trust, that’s the way I want you to keep it. Regardless of who owns the trust, each house is in an individual land trust.

               Now, you have courses on land trusts on the Gold Club site. You have the Warranty deed to put it into a trust and you have the declaration and agreement to go and fill out to put it your filing cabinet, and that’s the only place the beneficial interest will disclose is on that land trust agreement. Therefore, land trusts give you total privacy. They are nowhere are public record too show who is the beneficial interest of the land trust is. Privacy is just one advantage of a land trust and another one is lean attachment. A learn or judgement against you will not attach to a house you do not own. You do not own a house that is in a land trust. The land trust owns the house, you just happen to own the land trust, and in this case, the LLCA happens to own the land trust. Owners do have liability but remember, the LLC is not the owner and neither is your IRA, the land trust is the owner, so it’s the only one with the liability. So, a lean against you is not attached to a property you do not own.

                Thirdly, if the house is in a land trust, and the owner dies, the owner dies. The land trust does not die, people die, so there’s no probate. It totally eliminates probate just because your house is in a land trust. I know this is a simplified version and you will need to do more studying, but this is all I got for the time we have. So, let me finish this LLCA here, again, your IRA owns it but you cannot manage it.  You can’t manage it because, to make it very simple, you cannot directly control the money in your IRA. As far as I am concerned, if you control the money in the LLC that is owned by your IRA, you are then controlling the money in your IRA, and I wouldn’t want to try and defend that to the IRS. So, you cannot write checks on your IRA.

               Now obviously, you are telling the custodian what to do with it, but you can’t write checks on it. So, the LLC writes checks. Now, if you are the manager and you write the check, then you are controlling the money. So, you are going to need a manager to manage the LLC, that is not you, and the definition of you is you or your spouse, parents, grandparents, children or grandchildren. Anybody in either of your decent, up or down, cannot be compensated in either way, shape or form from the LLCA. Therefore, they cannot touch the money and they cannot get paid for any of the activities of the LLCA or the IRA. That’s the one rule you better remember because that’s the rule to start getting you in trouble if you start to violate it. So, treat you LLCA just like you treat your IRA. Can’t do business with you or any other entity you control. Which means A cannot do business with B or C or vice versa. You can’t loan money to each other, you and yours cannot even live in a house owned by this land trust that is owned by this LLCA. You can’t put houses in it, you can’t do anything except buy houses on land trust that’s own by the LLC that is owned by your IRA. If you do, that is called, “self-dealing,” and that could wipe out your entire IRA by disallowing your IRA and they will go back and tax you with penalties and interest. Keep it Clean!

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9 Responses to Episode 41: Structuring Your Empire – The Mentor Podcast

  1. Dean Muhammad says:

    Great, Thank you! This becomes more clear every time I hear and read this subject. What should you do if your LLC is already setup and you did not use money from your Quest ROTH IRA to fund LLC? Can you restructure LLC with your attorney or with Quest?

  2. Beresford Kirton says:

    In my humble opinion to begin, bottom line, I need an LLCA that my IRA owns. Then follow the rules and I’ll be golden. Thanks Ron

  3. Emeline Faaumu-Niutei says:

    wOW! Golden nuggets. Setting up goals now to assigned $1,000 to contribute to an IRA. Do you have referrals to attorney who can do this for us?

  4. Daniel Ohene Djan says:

    This is an eye opener. I wil start to straiten things up with my LLC.
    Thanks so much.

  5. Lashaun Lang says:

    Wow thanks so much!!

  6. Corey Diemer says:

    Wow so much to learn about this very informative

  7. Samuel Peters says:

    Okay what???…Hello Ron I just took my 401 retirement account and converted it into a Roth IRA, my plan was ti use it to buy property so that I could put that property in my IRA, that is until I got this lesson, now I’m confused, so you are saying that I need to set up an LLCA for the Roth IRA and a manager?

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