311. LLC Myth-Busters: Is Your Real Estate Really Protected?

Summary

Tax Smart Real Estate Investors Podcast

Episode 311: LLC Myth-Busters: Is Your Real Estate Really Protected?
Date: February 7, 2025
Hosts: Tom Wheelwright, Ryan, plus guest commentary

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Episode Overview

This episode dispels common myths and misconceptions about using LLCs (Limited Liability Companies) for real estate investment. Tom and Ryan provide a clear breakdown of how LLCs function in terms of asset protection, tax treatment, and entity structuring. They discuss best practices, common pitfalls, detailed entity layering (with holding companies and estate planning), and address listener confusion about tax savings and legal protection. The episode also references related episodes for deeper dives into legal aspects and S-corp specifics.

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Key Discussion Points and Insights

1. LLCs: Buzzword or Building Block?

• Timestamp 01:44 – 02:36
• Tom highlights that "LLC" is a popular topic and source of confusion among new real estate investors.
• Main point: LLCs are primarily legal tools offering asset protection, not tax advantages.

“LLCs are primarily for asset protection… not necessarily for tax purposes, but to help protect you in the event of lawsuits or other liabilities.” – Tom Wheelwright (01:44)

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2. Entity Types & Their Roles in Real Estate

• Timestamp 02:36 – 05:14
• Ryan explains differences between entity types:
  • LLC: Most common for holding real estate. Can be a single-member (disregarded for tax) or multi-member (taxed as partnership).
  • S Corporation: Suited for active businesses (realtors, contractors), but should be avoided for holding rental real estate due to tax complications on restructuring or asset removal.
  • C Corporation: Rarely used for standard real estate holdings; more for large ventures or sales.

“If you put rentals in an S corporation… if you need to remove the property, it could trigger a sale... and that occurs even if you’re just moving it to another entity you own.” – Tom Wheelwright (04:34)

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3. Layered Entity Structures: LLCs, Holding Companies, and Trusts

• Timestamp 07:08 – 11:22
• Ryan illustrates a common structure using three rental properties (each in its own state):
  • Base: Each property in its own state-specific LLC.
  • Middle Layer: These LLCs are owned 100% by a holding company (often a Wyoming LLC for privacy and asset protection).
  • Top Layer: The holding company is owned by a revocable living trust (for estate planning and avoiding probate).

“The point is that every single property is in an LLC that’s in and registered with that state.” – Ryan (07:57)
“Revocable living trust… that does is it helps you skip probate… administered to beneficiaries in a much more quicker process and less costly.” – Tom Wheelwright (12:15)

• Single/Married Note: If you’re married and use a joint revocable trust, you don’t need a partnership tax return.

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4. Do You Need All These Entities?

• Timestamp 14:23 – 15:27
• Tom and Ryan emphasize: You don’t need an LLC to own a rental property. You may choose to own property in your own name and use umbrella insurance for liability, but this may not match LLC protection.

“You do not need an LLC. It may be often recommended... but you can absolutely own a property in your personal name.” – Tom Wheelwright (15:01)

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5. Myth-Busting: LLCs and Taxes

• Timestamp 15:27 – 17:09
• LLCs do not provide automatic tax savings. The IRS taxes real estate income the same, whether held in an LLC or your personal name.
• Common misconception: An LLC magically makes all expenses deductible business costs.
• Clear distinction is made between legal structure and tax status.

“Creating some sort of entity… does not automatically create a business. The IRS does not see it that way.” – Ryan (16:38)

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6. Proper Money Management and the ‘Corporate Veil’

• Timestamp 17:09 – 19:34
• Importance of NOT commingling personal and business funds to maintain the LLC’s legal protection.
• If you want to use LLC funds personally, record it as a formal distribution.
• Myth dispelled: Withdrawing from your LLC’s account (once taxed) is not a new taxable event, unless in a C or S-Corp context.

“The corporate veil is like the invisible wall between you and your LLC that protects you… It's not your personal piggy bank.” – Tom Wheelwright (17:19)
“If you have money, cash in your business bank account, that money has already been taxed.” – Ryan (18:29)

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7. Transferring Property into an LLC & The 'Due on Sale' Clause

• Timestamp 19:34 – 21:34
• Common situation: Financing limits force purchases in your personal name; you later transfer the property to your LLC by "quit claim" deed.
• Banks could call the loan due (“due on sale” clause), but this is rare unless payments default.

“I’ve never seen it actually happen… unless you default on your payments… but that’s not to say it can’t happen.” – Tom Wheelwright (20:41)

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8. Final Recap and Related Resources

• Episode 267: Deep dive on S Corps
• Episode 269: “The Cold Hard Truth About LLCs” with attorney Ron Rody
• Facebook group: TaxPoint Investors, for further questions and community support.

“Big picture, yeah… LLC just in general, no tax savings. They are primarily for legal protection.” – Ryan (21:34)

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Notable Quotes & Memorable Moments

• On perceived ‘legitimacy’:
  “LLC is just something that seems so sexy. It’s like a sexy word that everybody makes you feel legit, right?” – Tom Wheelwright (01:44)

• On S Corps and rentals:
  “If you have one in there right now, don’t panic… just know you just want to avoid it going forward.” – Tom Wheelwright (05:49)

• On simplifying tax myth:
  “If something is a business expense, whether you have an LLC, an S Corp, a C Corp, or not—it’s business or it’s not, regardless of the entity structure you have.” – Ryan (17:09)

• On the value of trusts:
  “With [a] revocable living trust, everything… is just administered to beneficiaries in a much quicker process and less costly.” – Tom Wheelwright (12:15)

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Timestamps for Key Segments

| Timestamp | Segment Description | |-----------|--------------------------------------------------------| | 01:44 | Introduction to LLCs and the purpose of entity structuring | | 03:16 | Difference between LLC, S Corp, and C Corp | | 04:34 | Why S Corps are problematic for rentals | | 07:08 | Visualizing the ideal entity structure (state LLCs, holding company, trust) | | 12:15 | How trusts help avoid probate and ease inheritance | | 14:23 | LLC is not required for tax or asset protection | | 15:27 | Myth: LLC creates tax savings automatically | | 17:09 | Importance of not commingling funds; distributions | | 18:29 | Withdrawing cash not a taxable event for LLCs | | 19:34 | Transferring property, due on sale clause explained |

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Conclusion

Bottom Line:

• LLCs are primarily legal protection tools, not tax-saving vehicles.
• Avoid putting rental properties in S Corps due to harsh tax consequences for asset removal.
• A layered structure—property-level LLCs, a holding company, and optionally a revocable trust—is common but not mandatory.
• Meticulous separation of personal/business funds is critical to keeping LLC protection.
• An LLC does not turn your personal expenses into deductible business costs.
• Always consult professionals for legal and tax-specific questions tailored to your situation.

Further Learning:

• Episode 267 (“S Corps with Nathan Sosa”)
• Episode 269 (“LLC Legal Deep Dive with Ron Rody”)
• TaxPoint Investors Facebook group

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Episode summary prepared for those seeking practical, actionable advice on real estate entity structuring and LLC realities without the fluff or misinformation found elsewhere.

Transcript

[Tom Wheelwright]

You're now listening to the Tax Smart REI Podcast, the number one tax podcast for real estate investors.

[Podcast Host]

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Thanks for tuning in to this week's episode of the Tax Smart REI Podcast.

Today we're going to be talking about.

[Tom Wheelwright]

LLCs and entity structuring. Do you need an LLC? What are the tax elements of an LLC that you need to be aware of? What are the pros and cons, myths, misconceptions, things like that? If you're thinking about starting a rental business, or maybe you just have questions about LLCs, this is an episode you don't want to miss. We'll be diving into all that in just one minute.

[Podcast Host]

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[Tom Wheelwright]

Money in your pocket.

[Podcast Host]

That's ww.therealestatecpa.com2025 tax changes because smart investors don't just make money, they know how to keep it. We'll see you over there, but right now we'll jump right into today's episode.

[Tom Wheelwright]

All right, and we're back. And today again, we're talking about. LLC seems to be everybody's favorite buzzword, right? Whenever someone gets started in a business or thinks about buying real estate for the first time, LLC is just something that seems so sexy. It's like a sexy word that everybody makes you feel legit, right? I got an LLC now. But with that, it becomes a lot of myths and misconceptions around LLCs and potential pitfalls that you do want to avoid. So let me just start by saying this and then we'll kick it over to Ryan. LLCs are primarily for asset protection, meaning you're starting an LLC, not necessarily for tax purposes, but to help protect you in the event of lawsuits or other liabilities that might come your way from a legal perspective. All right, so that's the first thing to understand just about llc, but there are some tax elements you do need to be aware of.

[Ryan]

I think we should highlight that a little bit more too, as we talk about myths here in just a couple of minutes. But yeah, LLC is primarily a legal asset protection. Now, you might have an LLC as a single member, meaning you just have one owner. Maybe it's just you. Even a couple might just have one of the spouses be owner. But you could have partnerships. Right. Maybe you're going into business with, say it's me and Tom, right? We want to own something 50. 50, great. Now we've got an LLC partnership, and that LLC is important to have. We've also got S Corporations, right? S Corps, you might hear that online oftentimes. Right. You can create. And I'll just make a couple comments here. You can make an LLC and then elect for that to be an S corporation.

[Tom Wheelwright]

Right?

[Ryan]

Same thing with a corporation that you can create. You can elect to have that be an S corporation. Now just a quick comment on that and we can dive more if we want some. But basically S corporations are really common for business owners of active businesses.

[Tom Wheelwright]

Okay.

[Ryan]

And I just want to make that clear when we say something like active businesses for our listeners, it's probably like real estate agents, wholesalers, maybe people who own construction companies, things like that. You've got an active business where it's not just owning real estate. And that's just something I'll comment on real quick. When it comes to real estate, the most common entity structuring is an llc.

[Tom Wheelwright]

Okay.

[Ryan]

We're just talking about what type of entity is going to own the real estate. Most common is an llc.

[Tom Wheelwright]

Okay.

[Ryan]

But again, S Corps are going to be more for active businesses. And C Corporations kind of being the last one. I'll just highlight really broadly here. C Corporations, in my opinion, think of like the apples, the Teslas, the Facebooks. Generally those are going to be C Corps. Or if you're a new business owner, maybe listening to this, or you're thinking about starting a business that maybe one day you sell a C Corp could be a really good option for you in Our business. Right. We're kind of specialized in helping real estate investors. A C corp is going to be pretty rare, but those are kind of, broadly speaking, kind of the big picture highlights of different entity structures.

[Tom Wheelwright]

Yeah, absolutely. If there's. The one major takeaway with entity structuring and LLCs for real estate investors is you definitely want to avoid the S Corporation like Ryan said it is for active businesses. But if you put rentals in S Corporation, it's. It's okay. I mean, you could operate in an S corporation. It's not going to be the end of the world. But the problem is, is that if you eventually need to remove the property from the S corporation for some reason, and, and it happens more often than you would think, and you may not even see the need for it right now, it could trigger a sale. And when it triggers a sale, if your property is appreciated, it's going to trigger capital gains, depreciation, recapture taxes. And that occurs even if you're just moving it to another entity that you own.

[Podcast Guest]

Right.

[Tom Wheelwright]

So, for example, say that you have a property is highly appreciated. Maybe you bought it for 500,000 and all of a sudden it's a million dollars a few years later, whatever the case is. And now you need to restructure for maybe estate planning purposes. Maybe you need to restructure because you're refinancing the property and the bank wants it in a standalone LLC or something along those lines. And that happens all the time.

[Podcast Guest]

Right.

[Tom Wheelwright]

There's other reasons that you might restructure, but let's just say that it happens. By moving the property out, you now just triggered a $500,000 capital gain.

[Podcast Guest]

Right.

[Tom Wheelwright]

And we're not even accounting for depreciation recapture in here.

[Podcast Guest]

Right.

[Tom Wheelwright]

So that's painful. That's why you want to avoid putting rental properties in an S corporation. If you have one in there right now, like, don't panic. It's not the end of the world. Just know you just want to avoid it going forward.

[Podcast Guest]

Right.

[Tom Wheelwright]

It's not the ideal structure. You want to use an LLC. So next question is like, what? LLCs do work.

[Podcast Guest]

Okay.

[Tom Wheelwright]

Again, this is mainly for legal protection. So if you want a legal perspective on this, I'd encourage you to go check out episode 269, it's the Cold Hard Truth About LLCs with Ron Rody, he's an attorney we had on it was an excellent episode. All of it still basically relevant today. So if you want to go back and hear the legal aspect of all the entity structuring, do Go check out that episode. But from a tax perspective, what's going to be relevant is what Ryan said before. If you're a single owner, you're the only owner of a property. A single member LLC that's disregarded for tax purposes is just fine. You know, from a tax perspective, that's going to report right onto your 1040. If you have multiple owners, you have partners, a multi member LLC that's taxed as a partnership is going to be the appropriate structure. All right, Ryan, why don't we jump into some of the hold co structures, the whole like the holding companies and the revocable living trust, how that all layers in. Because inevitably when you are thinking about entity structuring, you're going to run across these structures and we just want to break it down how that works or how that looks, at least from a tax perspective.

[Ryan]

Yeah. And before I kind of jump into that, what I'll kind of walk through is probably a structure I've seen and even recommended by attorneys like 90% of the time. Right. This is kind of somewhere within an individual's structure. So if you're watching, I'm going to kind of use my hands. But if you're just listening and maybe just try to visualize this with me as I explain it. Let's pretend we've got three rental properties. We've got a rental property in Florida, Tennessee and Texas. Just picking some random states. Let's say that's kind of your situation.

[Tom Wheelwright]

Okay.

[Ryan]

What might a good kind of base entity structure look like? First thing I would recommend is that you have an LLC in the state, wherever the property is. So for example, like I said, Tennessee, Florida, Texas, you would then create an LLC registered with that secretary of state in Tennessee, Texas and Florida.

[Tom Wheelwright]

Okay.

[Ryan]

So basically the point is that every single property is in an LLC that's in and registered with that state.

[Tom Wheelwright]

Okay.

[Ryan]

So we basically got three LLC is kind of at the bottom layer.

[Tom Wheelwright]

Okay.

[Ryan]

From there, and I'm kind of assuming you own these properties 100%.

[Tom Wheelwright]

I should probably mention that for the visualization, let's look at this like a pyramid.

[Podcast Guest]

Right.

[Tom Wheelwright]

You're just laying the base of the pyramid right now with those three LLCs.

Exactly.

[Ryan]

So from there, the next layer up in this pyramid would be a holding company. Now a holding company is going to own each of these three LLC down below 100%.

[Tom Wheelwright]

Okay.

[Ryan]

So what's common in the common comment I just like to make for the holding company is usually that's going to be in a state like Wyoming, Delaware, Nevada, Something like that. And I just want to comment. You don't have to have that llc, the holding company specifically be in the state that you reside in or be in a state that your property is, for example. But it is common to use something like Wyoming specifically is what I commonly recommend, primarily because Wyoming has a little bit of that additional kind of business friendly laws and regulations around it, but it also has uniquely some additional anonymity rules. And I think we talked about that, if I remember correctly with Ron back in episode 269. So go listen to that like Tom said. But point is, is that we've got kind of some additional layers there because we're going into a unique state like Wyoming for the holding company. So holding company owning each of these three policies below. Okay, so what then owns the holding company above that? Basically what I commonly recommend then is a revocable living trust, okay? Not to be confused with an irrevocable living trust. The revocable living trust is partly an estate planning play and primarily to kind of think through, okay, we're all going to pass away, okay? Just a reality of life.

[Tom Wheelwright]

Okay?

[Ryan]

Maybe it seems morbid on a show like this, but it's just reality, okay? I think we talked about estate planning with someone else on another episode recently, but point is, is that we are going to use then a revocable living trust that is going to own down below 100% of that holding company, okay? That's the only owner of that holding company. Usually you're going to do that in your state that you reside in, work with an estate planning attorney.

[Tom Wheelwright]

Okay?

[Ryan]

I do recommend that CPAs might have a part to play, but do work with an attorney on that. Now from there with the revocable living trust. And Tom, just obviously comment as we finish this structure kind of big picture first, but basically from there, if you're just single, you're just going to own the revocable living trust 100% yourself and everything's just going to get reported on your Form 1040, your individual tax return. With this structure. Now, if you're married, you might be splitting that revocable living trust 50, 50 between you and your spouse. Now, some of you listening are going to say, oh, that sounds like a partnership tax return. There's not. There's actually a explicit exception in the regulations that say you don't have to create a partnership tax return if it's a trust that is owned by a married filing joint couple. Okay, you might have an issue with that if you are married filing separate or Whatever.

[Tom Wheelwright]

Okay.

[Ryan]

But just know that that is the probably the most common structure. So, big picture one more time, Tom, and then give me your comments. Bottom layer, this pyramid. Three LLCs in each of the states that the properties are in.

[Tom Wheelwright]

Okay.

[Ryan]

From there, they're owned 100% by a holding company. I'm usually recommending Wyoming.

[Tom Wheelwright]

Okay.

[Ryan]

From there, take the next step up of the pyramid. Revocable Living Trust owns that holding company 100%. And then from there, depending on if you're single or married, is basically going to be you as the individual or you and your spouse. That's kind of the holistic big picture.

[Tom Wheelwright]

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[Podcast Host]

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[Tom Wheelwright]

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[Tom Wheelwright]

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[Podcast Host]

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[Tom Wheelwright]

Yep. So just a few comments on that. Yeah, so this is a very common structure. Like Ryan mentioned before, a lot of attorneys will recommend this. The way that Ryan just described it is appropriate from a tax perspective. As you can see, there's no S corporations in there for your rentals, which is thumbs up. So just some quick notes on the Revocable Living Trust. That's not necessary, although it is very common to Ryan's point, because the Revocable Living Trust, what that does is it helps you skip probate right when you pass away. If you don't have Revocable Living Trust or some other type of similar entity, then what happens is your assets are exposed to the public in open court. And this whole entire process, it's costly. It takes a lot of time for your assets to get administered down to your heirs. With vocal Living Trust, everything that rolls up to the vocal Living Trust is just administered to the beneficiaries in a much more quicker process and less costly. So that's the reason why you have the revocable living Trust. Not necessary but a very good tool for a lot of people. Now when it comes to the holding company, here's one thing to note too. Like if you have the holding company, everything that's owned by the living trust, everything's under that is going to roll right up to the vocal Living Trust. You don't have to add every little thing you do underneath the subsidiaries to it. So that's an added just administrative perk of it. When it comes to holding company like Ryan said, usually Wyoming because as said to have better asset protection purposes. Think it's it's widely known at this point of why that is but that's usually going to be it could be a single member LLC if you're single or it could be an LLC tax as a partnership if you're married. In many cases that does happen if you're not in a community property state. Now as for the LLCs under it again, all owned 100%. Now if you do have partners, like I say me and Ryan were to partner up on a property, my holding company would maybe own 50% of that specific property LLC. He might own 50% of that specific property llc. Usually you're not partnering up with people who's not your spouse or perhaps another family member maybe at that holding company level. That holding company level is like your holding company for your real estate rentals and then you partner up and whatnot below that. All right, so that's very common structure, very popular, very widely used. However, again this is. It's not necessary that you do that. You could just buy a property in a single member llc. That's if it's just you or you buy just a partnership.

[Podcast Guest]

Okay.

[Tom Wheelwright]

There's no need to necessarily do that. So that's pretty much the gist of entity structuring for the most part. That's what you're going to see. Now want to move into some myths, right? There's a lot of myths, misconceptions, things like that around LLCs. The first one being is that you need an LLC for a rental property. No, it's not true. You do not need an llc. It may be often recommended in a best practice from a legal and asset protection standpoint and whatnot, what we just discussed. But you can absolutely own a property in your personal name. You'll still report on schedule E of Your tax return, you'll still get your tax deductions. You could still use reps, you could still use str loophole, you could still pass, go and collect 200 bucks.

[Podcast Guest]

Right?

[Tom Wheelwright]

There's nothing stopping you from doing that. Some people do that. They get an additional layer of umbrella insurance in lieu of the LLC. But like we talked about with Pran Rode episode 269, that's often not enough. Umbrella assurance often is not enough for an asset protection standpoint, which is why the LLC comes in to have an additional layer of protection. So that's the first myth. The biggest myth is that you need one. You don't. It's helpful, but you don't need one. Ryan, what myths have you heard?

[Ryan]

Misconceptions that an LLC provides more tax savings. And this is my, like, favorite like, of all time, only because probably it's most aggravating, but I've also probably heard it the most. So I don't know where this came from. I really don't. I think from my own thinking about this, talking with several people is it's not just social media I think to blame. I think the big picture idea, like you said early on, Tom, is, hey, I've got an llc, therefore I have a business, okay? As though creating some sort of entity, structuring and registering it with the Secretary of state, wherever you're doing that, somehow automatically creates a business. The IRS does not see it that way. If that were the case, me, Tom, everyone who's a tax strategist at this firm would create an llc, and we would just run our entire life through that, okay? We'd pay no tax. That does not happen. I just want to make sure everyone's clear who's listening to this. That does not happen. And there's a reason we don't do it, because our personal lives are not business. Making something a quote unquote business LLC does not automatically mean anything that runs through that LLC is a business expense that you could just write off.

[Tom Wheelwright]

Okay?

[Ryan]

That's like, the most frustrating part, is that for some reason, we think, I've got a legal entity. Therefore, anything that runs through that, that bank account or that quote, unquote LLC is now somehow a business expense. Not the way that the IRS has seen it, I don't think, ever. So, again, I don't know where this came from, but that is, like, the most common to me myth, and we just want to break that to say, hey, if something is a business expense, whether you have an llc, an S Corp, a C corp, or not it's business or it's not, regardless of the entity structure you have.

[Podcast Guest]

Right?

[Tom Wheelwright]

That's right. And that brings me to, you know, a related point on that. And that is, you know, maybe a misconception or just a mistake people make with LLCs is they commingle funds.

[Podcast Guest]

Right.

[Tom Wheelwright]

And LLC, there's something called the corporate veil. The corporate veil is like the invisible wall between you and your LLC that protects you.

[Podcast Guest]

Right.

[Tom Wheelwright]

Like if I have an llc, I'm doing business. Maybe I'm doing consulting or something. I'm just making something up for the sake of argument. I'm not going to go into my llc. First of all, my LLC is going to have a business bank account that's under the llc. I might be receiving revenues in that bank account from clients. Right. Or whatever, my customers. Then I'm going to be paying expenses, business expenses. I would not go and swipe my credit card at the grocery store to buy personal groceries with that llc. I mean, you could do that and you could fix it, but it's not something you should be doing. You want to separate that, go use your personal card.

[Podcast Guest]

Okay.

[Tom Wheelwright]

For that. Now it's not your personal piggy bank is what I'm trying to say. If you do want to take money out of your llc, you do a distribution. So the distribution will be recorded in your books, in your bookkeeping. Hopefully you have bookkeeping.

[Podcast Guest]

Okay.

[Tom Wheelwright]

And then the distribution goes into your personal name. Right. And then you spend the money.

[Podcast Guest]

Right.

[Tom Wheelwright]

There's a flow and order of procedures in the way the money is used.

[Podcast Guest]

Okay.

[Tom Wheelwright]

That just helps you from an accounting perspective, not so much a tax perspective, but accounting perspective. Definitely something you want to get a handle on.

Yep.

[Ryan]

And just to maybe add on to that one small minor point, a lot of people think, oh, I can't move money out of my llc, otherwise it's going to be taxable. That is a common myth that I've seen. There is a slight difference there with C Corps and S. Corps, but we're primarily here talking about llc. So I just want to make clear to people listening, if you have money, cash in your business bank account, that money has already been taxed. What I mean by that is if you've got an llc, partnership or single member, you are a pass through entity and you are taxed based on your profit, which is on your P and L. Okay. Cash is on your balance sheet. The only way you have cash in there is either you infuse the money or which is not income has nothing to do with Profit or it is profit that's coming from your business operations and now that gets moved into your cash and it sits there. Well, guess what, you've already been taxed on that. Okay, so the common myth is I can't move money out of my business bank account because if I do, it's going to get taxed. Nope, it's already been taxed. So that's another myth I just wanted to highlight as you talk about bookkeeping and money in our bank accounts here.

[Tom Wheelwright]

Yeah, absolutely. There's one more thing I want to touch on and I think we've covered a lot of the things that we need to cover in LLC state. Believe it or not, everybody listening. Like from a tax perspective, this is largely what you need to know. It's not some big black hole. We basically summarized a whole bunch of information into like a 25 minute episode here. So hopefully that helps. And again, if you do want more in the legal aspect of it, I mentioned like six times by now, episode 269. It was a great episode. All right, so the final thing that I wanted to touch on was transferring properties into your llc. Now, oftentimes, if you don't have a seasoned entity structure, and we're not getting into details on seasoning entities here, but if you don't have an llc, it's been open for a while and you've been operating business on, oftentimes banks won't lend to your llc. You're going to have to do is you have to buy your property in your name initially because you're often getting financing like a regular mortgage and that's going to be based on your personal ability to get credit.

[Podcast Guest]

Okay.

[Tom Wheelwright]

And what happens is, how do you get that property into the llc? Well, usually you quit claim the deed into the LLC after you purchase it. Now there's nothing like wrong with that per se.

[Podcast Guest]

Okay.

[Tom Wheelwright]

From a tax perspective, you go ahead and do that. However, there's something called the due on sales clause and the bank, usually they don't call it. Usually they don't. I've never seen it actually happen. Unless you default on your payments and you stop paying it or some other wild extremity happens, they're usually not going to take it back. But that's not to say it can't happen, just something to be aware of. Because that's another question we get. It's just like I have my llc, but I had to buy the property in the personal name because the bank would not finance to the LLC or you know, allow me to buy the property in the llc. So that's usually what happens again. You can speak to your attorney on whether or not you're comfortable with that risk. I've never seen anybody get called ever, but that's just my experience. So that's pretty much what you need to know from an llc. If you do have questions about this do go join our Facebook group search TaxPoint investors love to see you in there. Ask questions. Any final words?

[Ryan]

Ryan yeah, I think just to highlight what we said at the very beginning. Again, LLCs are for primarily asset legal protection. They in general do not provide any sort of tax savings. They are primarily legal and asset. There are ways to mess things up if you do start to set things up in like S Corps, which we've talked about. And just to highlight too, if you want to hear more about the S Corp conversation, it was episode 267 with Nathan Sosa. We kind of walk through a bunch of like do's and don'ts S corporations. So go back to that. Actually pretty close to the 269 that episode we had with Ron. But yeah, if you want to hear more about that about S Corps or you've already got properties in an S Corp, what can you do? Go take a listen to that. But big picture, yeah, llc just in general, no tax savings. They are primarily for illegal protection.

[Tom Wheelwright]

All right, so with that being said, if you are looking for a CPA to help you navigate the complexities of the task code and set up entities that are that makes sense for you and strategies that will help you maximize your tax savings. Make sure you're not missing out on major opportunities for tax savings or making any critical mistakes. We'd love to hear from you. We'd love to learn more about your situation. How we can help you can head on over to www.therealestatecpa.com podcasts. Just fill out the quick form and our team will follow with next steps. Link will also be in the show notes to this episode if you do want to check it out there.

[Podcast Host]

With that being said, that's it for today.

Today we'll catch you on the next.

[Tom Wheelwright]

Week'S episode of the Tax Smart REI Podcast.

[Podcast Host]

Thanks for listening to today's show. If you enjoyed the show, please find us on itunes and leave us a review. You can also email [e-mail] with any feedback or topic suggestions. We are always taking on new clients and with the new tax laws in play, you really don't want to navigate this alone. Let us help you save money on taxes with your accounting and CFO needs to become a client. Navigate to our client [e-mail] and fill out a web form with as much detail about your situation as possible. Thanks so much for listening. Have a great rest of your week.