Chat Transcript - January 28, 2008 with guest Garrett Sutton
Posted on January 29, 2008
Garrett Sutton is an attorney and the author of several books including “Own Your Own Corporation,” “The ABCs of Getting Out of Debt” and “Loopholes of the Rich.” He is also host of the Wealth Talk America Radio show and Robert Kiyosaki’s corporate advisor for the Rich Dad/Poor Dad series. His expertise is in asset protection, entity strategies, trademark and estate planning. He can be contacted at 1-800-700-1430 or on the web at www.sutlaw.com. Should you want to use his services to form a corporation or LLC, he will give you a $100 discount off his fee if you will mention Mike Summey or Weekend Millionaire.
garrett_sutton Greetings a few minutes early.
garrett_sutton I am off to a good start
Al Lee Hi, Garrett. How are you?
garrett_sutton Is this Al Lee the radio guru?
Al Lee Yep!
garrett_sutton Great. How are you?
Al Lee Busy, busy, busy!
garrett_sutton Good, how is the show going?
Al Lee I had to postpone the broadcasts because of other matters that eclipsed it. I had dozens of hosues managed by one company and they went BK. I have had to start a new management company to take up the slack.
maria Hi everyone
garrett_sutton There is one point I want to make tonight and it has to do with asset protection for corporations. Nevada has a new law that extends charging order protections to corporations with two or more shareholders. It is a great addition to asset protection strategies.
Al Lee OK, what does that mean?
garrett_sutton So if you have a business you can incorporate in Nevada for the asset protection and then qualify in your home state.
garrett_sutton It means that if someone is suing you and trying to reach your assets they are going to have a very difficult time reaching control of your corporation.
danko hi all
maria Hi danko
MarkNC Good evening everyone
garrett_sutton It is the same protection offered by Nevada and Wyoming LLCs and LPs.
Al Lee Hi, Mark
garrett_sutton Any questions for me?
danko i have
garrett_sutton Go for it
Mike_Summey Hi everyone! Looks like I’m late.
Al Lee Hi, Mike
garrett_sutton Greetings Mike
rosebud Hello, all. Me, too, Mike.
Penny Hi Mike
maria Hi Mike
Mike_Summey Wow! Garrett, you’ve really got everyone out early.
danko My attorney says buy in my LLCs name for protection. My mortgage broker says buy as an individual for better interest rates. How can I buy as an individual and still protect myself?
Mike_Summey I just completed preparing 20 annual corporate reports to mail tomorrow.
garrett_sutton If you buy in your individual name you will then need to transfer title to your LLC.
MarkNC Garrett, I have gotten the message that it makes sense to have properties in LLCs. However I have gotten conflicting advice about how many properties per LLC. Is it really necessary to have an LLC for each property or can you put several in one LLC?
garrett_sutton Of course, in some states that may involve a transfer tax.
Al Lee Garrett, does that violate yoru due-on-sale clause in the mortgage?
danko can I do that without incurring due on sale? If I transfer title to my LLC?
Mike_Summey Hi Ken
Ken Hey guys
maria I thought you could have as many properties as you want in a LLC
garrett_sutton I prefer to hold one property in one LLC. But in a state like CA where it is $800 per entity per year, sometimes you may put up to three in one LLC
danko you’re getting inundated right at the start…lol
garrett_sutton You can, but then you have a target rich LLC
Mike_Summey I transferred several hundred properties into LLCs a few years back. I simply notified the banks what I was doing and they had no problems.
Mike_Summey Sandy
maria Is it more beneficial to have one LLC per property then?
danko really, Mike? I had not heard of that. Sounds simple enough
garrett_sutton Yes, I like one per LLC
Sandy Hello, Mike and all
rosebud Mike, I thought you had suggested we hold title in our individual names. Am I remembering incorrectly?
maria Garrett what is a “tartget rich LLC?’
Lon You could also open a Series LLC in several states, then your properties will be in a separate cell and you only have to open one LLC.
MarkNC So Mike, how many properties do you have in each LLC
Mike_Summey Hi Tommy
Al Lee Mike, you do not have residential mortgages on your properties, though. If you had Fannie-Mae loans, they would ogject, I think
Al Lee object
Mike_Summey Mark, I have several in each LLC.
garrett_sutton I do not like the Series LLC. There are no court cases supporting the concept.
maria Is that per large properties or just the average house?
Mike_Summey I also have LLCs with just one property.
danko yes, will it make a difference with a traditional 30year fixed loan? The bank won’t mind my transferring to my LLC?
garrett_sutton A target rich LLC is one with five or more properties in it. You don’t want to have too many assets in one LLC
tommyd Hi Mike
Rod Garrett, my friend and I want to partner together to buy property but we want to test eachother out before starting a corporation or LLC together - how do we stay protected legally?
maria Garrett why is that ?
Al Lee If you use commercial loans it is not unusual to own in an LLC
Mike_Summey Hi KC
garrett_sutton Rod, I would start with an LLC in your situation.
broadway Garrett, how many is too many? properties in one LLC. I have several LLC’s myself and keeping up with the bookkeepping and taxes is a little tough
Ken What are your thougths on Legal Zoom or other organizations?
Al Lee How do you feel about doing yoru own appendectomy?
garrett_sutton If you use single member LLCs owned by one asset holding LLC you do not have to file separate tax returns for each of the single member LLCs. They flow into the asset holding LLC
danko DYI surgery kit…called “suture self”…sorry
Mike_Summey Garrett, how much protection do you feel it gives you if you are heavily insured?
Mike_Summey Hi Ben
garrett_sutton Ken, I agree with Al on that
Corey Mike I wanted to get your thoughts on a local wholesaler here will sell a property for say 60% of value then after closing will refund downpayment and closing cost outside of the formal closing
maria lol danko
garrett_sutton Ask the people after Katrina how much good their insurance was. You need entities as a second line of defense.
Mike_Summey Corey, I don’t know how that works. I’ve never done anything like that. It seems a bit shaky to me.
benbarnhill hey mike
benbarnhill i can’t stay long
Ken garrett al sorry but you lost me
Mike_Summey Garrett, what good would an LLC have been for the Katrina victims?
danko Garrett…what are your thoughts on land trusts?
Al Lee Ken, we are saying “Get a lawyer”
garrett_sutton Ken, the do it yourself services, or the very cheap services, don’t always give you all you need to fully protect yourself.
Ken Thanks My schedule makes it extremely hard to research this, the SBA is not to helpful. Thanks
garrett_sutton Land trusts have their place but they do not offer asset protection. The beneficiary needs to be a LLC. If that is the case, why not just set up a LLC to begin with.
danko that’s what I’d heard elsewhere, too. Thanks for confirming that
Mike_Summey Single member LLCs are treated for tax purposes like you owned the properties in your name only. Multiple member LLCs require a separate tax return with K1s going to the members.
Al Lee What you don’t know or overlook when using a self-service legal service is the thing that will get you later on.
benbarnhill i’m trying to set up an owner finance deal right now. i need to get conventional financing for a portion of the balance, but my local mortgage companies are snubbing me. anyone know of a good company to work with?
MarkNC Garrett, you lost me on the single member LLcs and one asset holding LLC. Any chance you could give a brief explanation.
danko would a married couple be considered a single member LLC?
rosebud Ben:
rosebud Where are you located, Ben?
benbarnhill mobile, al
rosebud Sorry. Don’t know anything about that state.
garrett_sutton Mark: The single member LLC is owned by one person or entity. The tax return for it flows to that owner or person. so the tax return is handled by the asset holding LLC.
benbarnhill that’s ok.
benbarnhill any ideas Mike?
Corey Mike, he is very well known here and actually a mortgage broker was showing me one of the deals he was doing for this wholesaler. aprasial was 73000. this is what the investor bought it for with the mortgage. His down payment and closing cost came to like 17000 so the investor actually paid roughly 56k after he was reimbursed from the wholsaler after the closing
garrett_sutton In a community property state husband and wife can be a single member LLC
Mike_Summey Garrett, participating in these chats will improve your typing speed! 
garrett_sutton Better yet, another asset holding LLC can be a single member LLC.
danko yeah, garrett…are you sorry you came yet? lol
garrett_sutton Yes, the carpal tunnel (sp?) is kicking in
broadway Garrett, my wife and I have all major assets in LLC which are owned by a family limited partnership by my family. My wife and I own 1% each. Is there any other suggestions you might have for any further protection?
MarkNC So each property is held in a single member LLC and all of them are owned by the asset holding LLC. Is that correct.
garrett_sutton How do you hold the 1%? In your indiv. name?
garrett_sutton Mark: You got it.
broadway Yes, individual names
garrett_sutton Are you general or ltd. partners?
Mike_Summey Garrett, how does adding a holding LLC increase your protection?
broadway general partners. We’re also managing members in the LLC’s too
Al Lee broadway, it sounds like you have pierced your own veil of protection by being managing partners
garrett_sutton If you are general partners as individuals then you have no asset protection. There are promoters selling these FLPs out there that have people set them up this way and there is no asset protection
broadway Al, that might be, that’s why I’m asking
garrett_sutton Mike: If someone is suing you as an individual we have the asset holding LLC in NV or WY and they are not going to reach into any of the LLXCs
broadway Now, I’m not a general partner in the LLC just in the LP. I’m a managing member. Does that make a difference>
garrett_sutton If you are the GP of the LP as an indiv. someone suing you can reach your indiv. interest and in some cases control the whole LP
Lon garrett, I have heard WY is the new NV. The collect even less information than NV does. Do you have a preference on either state?
Corey Mike, he is very well known here and actually a mortgage broker was showing me one of the deals he was doing for this wholesaler. aprasial was 73000. this is what the investor bought it for with the mortgage. His down payment and closing cost came to like 17000 so the investor actually paid roughly 56k after he was reimbursed from the wholsaler after the closing.
broadway WOW, I did not know that. I’m talking to my attorney this week!
garrett_sutton I like both NV and WY. Wy is a little less expensive but as you grow you should have some in each state to make it even tougher for someone to get at you.
garrett_sutton Yes Broadway, you have a chink in your protection
Lon Corey, you might want to consult an attorney, that does not sound right.
Mike_Summey Garrett, what are the annual fees in WY & NV & how would you avoid the fees here charged for a non-domestic entity?
Ken is there a specific kinda attorney that sets up corporations?
broadway Thanks Garrett, I’m glad I asked. I’ve always wondered about some of this anyway. It’s bothered me even owning 1%
Mike_Summey Corey, as I said earlier, it sounds a bit shaky or fishy. I’d check it out carefully before getting involved. It almost sounds a bit like fraud.
Mike_Summey Hi Alex
alex hello, where is Garrett Sutton?
alex hi
Corey It sounded shady to me also just was wondering if anyone had done anything like this before.
Mike_Summey Alex, he is here. Just ask your questions.
garrett_sutton We are attys and set up entities for $695 plus the state filing fees. Of course, if you mention Mike Summey you get a discount. But I will cease with the shameless self promotion.
garrett_sutton Broadway: The 1% should be owned by a separate corp or LLC
Mike_Summey Garrett provides a good service and I would recommend him even if he is a shameless promoter.
garrett_sutton The annual fees for WY are $50 and NV’s are $225
alex How much to form a Nevada LCC?
danko are we talking about setting up an LLC for $695, plus state filing fees?
Mike_Summey Hi Jim
jimNC hi mike
danko or did I miss something?
broadway Garrett, at what point does the individual have an ownership?
Corey mike do you do terminte control on your properites?
garrett_sutton Alex: $695 less the Summey discount of $100 plus the state filing fees.
Mike_Summey Corey, yes I do.
Corey mike sorry termite
alex thanks
garrett_sutton Broadway: Can you clarify?
Mike_Summey Garrett, are there tax implications involved if you transfer personal ownership in an LLC to a holding LLC?
broadway Garrett, for example, if my FLP owns 50% of an LLC that owns the property. My FLP is owned individually by my wife and I each at 1% as general partners. My two sons each own 48% as limited partners.
garrett_sutton Mike: No it is a transfer not a sale
garrett_sutton Your sons are protected as ltds but you are exposed as generals
Ken Does anyone have error and ommisions insurance? Is it needed or a corporation?
tommyd Mike, sorry if this has already been asked but I’ can’t find a lender who will allow the seller to provide any financing, they still want some down payment from me. Any suggestions?
Mike_Summey Garrett, why don’t you provide some contact information in case someone here or who may be reading the transcript later would like to contact you about setting up an LLC or other entity.
garrett_sutton Many of my clients have E&O coverage and use a corp as well.
Ken E&O seems extremely expensive
rosebud Tommy, some banks in NC will make a loan based on the improved value of a fixer=upper. Check with your bank and see if they will do the same.
garrett_sutton Sure. I can be reached at 800 700 1430 or on the web at www.sutlaw.com
garrett_sutton We also have more information at corporatedirect.com and www.successdna.com
alex what is a “crop”?
Mike_Summey tommy, I’ve never seen a lender who would not loan less than 50% on a first mortgage with the seller carrying the balance. With that type structure the lender has both you and the seller insuring their loan will be paid. The seller is not going to allow the property to be foreclosed on and lose all of their interest.
garrett_sutton E&O coverage has come down in the last year
jimNC moving out of my home in 1 month, which will become my 1st rental property. is it advisable to set up LLC? will my bank allow transfer of ownership? other investors tell me they’re not using LLC. Sorry if this has been covered…
garrett_sutton Crop is corporation misspelled
alex thanks
danko Mike, do you have a minimum cash flow that you will accept when making offers? I am making an offer on twin 4-plexes in the next week, and don’t think I can get a huge cash flow, but don’t want to slice it too thin? $500 per unit is unrealistic…$10 per unit is too low? What is the minimum cash flow you would accept before moving on? Do you have a cash flow expectancy when making an offer?
Al Lee Garrett must be drinking the same wine I am drinking. His typing is starting to look lik mine.
garrett_sutton Jim: Anytime you have a rental property you should consider a LLC. There are too many ways to be sued these days
danko sorry to stray from asset protection for the moment
garrett_sutton I get my wine in half an hour
tommyd Mike, my deal was more like 80/20 is that not enough protection for the lender?
jimNC thanks garrettt
Mike_Summey danko, In the beginning I’m happy if I can break even after paying the mortgage payment. As time passes, the mortgage pays down and the rents go up and the cash flow increases.
Mike_Summey Hi asimmons
danko thanks, Mike. It’s my first big offer…so I’m a little nervous
garrett_sutton Your bank may not allow such a transfer. All of my clients do it anyway. The bank is protected with a first and a personal guarantee. their position is not changed. The key is to notify your insurance carrier that title has changed
jimNC my home is going to break even. better than selling in down market/paying realtor commission, etc
Mike_Summey Al, nobody’s typing is that bad!!!
jimNC thanks again garrett
Al Lee Interesting note about the current lending market. I own some land in OK that I just refinanced and took out $100k cash. The new loan payment is about the saem as the old one because of the lower interest rate.
Al Lee same
garrett_sutton Plus, banks aren’t too keen on calling good notes these days
Ken AL is that your ranch?
Al Lee yes
jimNC good point
Ken Good deal thats awesome
Mike_Summey tommy, no bank will loan 80% & let you borrow the other 20% from the seller. Any bank will loan 20-50% with the seller taking back a second.
asimmons No. I’m listening. Watching.
Al Lee I just could not keep form taking advantage of the lower rates today. What a deal!
Rod Garrett, I know someone that has 2 rental properties valued at about $2M each (no debt). A lawyer told him to skip the LLCs and just get a very large valued umbrella insurance. Would you agree with that advice?
jimNC I am refinancing my ARM into a 30yr fixed at 5.25% good deal right?
Al Lee Buyers with good credit can get great loans. Buyers with marginal credit virtually cannot get a loan. That is the market in which an investor with good credit can clean up.
Mike_Summey If you acquire a property in your name personally and sign the note personally, most lenders will have no problem iwth you transferring title to a single member LLC. If you want to transfer it to a multiple member LLC they might object as the ownership is actually changing.
Lon Jim - great deal
garrett_sutton Rod: I totally disagree with that advice
Al Lee jim, very nice deal!
Mike_Summey Rod, where are you lacated?
broadway Mike, thank you! My wife has been driving me crazy about a condo I rented. I told her it was a good deal! Since you said that about breaking even, she’ll believe it now!
Rod New York City
garrett_sutton Insurance companies find reasons not to cover you. Your LLC won’t do that to you
Mike_Summey Jim, sounds good to me.
jimNC arm had 2 yrs left at 5.25%, so i’m happy. plus, if I’d waited any longer, would need an investor loan
Rod The rationale was that if the LLC gets sued, $2M is still a lot (i.e. you can’t break up the value).
garrett_sutton But if it is in your own name you are going to lose not only the $2M but all of your other assets
Rod right. good point.
garrett_sutton As well, you might want to do some creative equity stripping with a second LLC to make the property appear to be encumbered
Mike_Summey Garrett, please comment on the importance of keeping the proper records on your LLC to avoid the corporate structure being penetrated.
Rod Or take out a home equity loan to buy other property 
jimNC that’s what I was told: no need for LLC because good atty will be able to get past it…
Mike_Summey I’ve seen many people handle money for several LLCs and their personal money through a single account
Mike_Summey Hi Linda
garrett_sutton Good point Mike. You need to follow the corporate formalities or your entity can be considered not proper. Following the formalities (annual minutes and such) is not hard, but the consequences are dramatic if you don’t
Linda@bostonbusinessadvisors.com Hello.
garrett_sutton A good atty is not going to get past a NV or WY LLC.
jimNC ok, i’ll check into NV and WY LLC. thanks
garrett_sutton The charging order protection in those states is mandated by state statutue
Ken Garrett how will you be protected if you operate out of NV but perform services in other states such as NC?
Mike_Summey Garrett, I have a separate corporate records book and separate bank accounts for all of my entities except one and that one has entered into a written management agreement with one of my corporations to handle all it’s funds for a small fee.
rosebud Don’t you have to comply with two states’ sets of rules and regs. if you operate out of NV or WY?
garrett_sutton By forming in NV abnd qualifying in NC you have chosen NV law to apply. In most cases, if you get sued, they have to deal with NV law, which is to your advantage
Linda@bostonbusinessadvisors.com I just joined for the first time here, and I was wondering, does it make sense to put each investment property (we own 4) into LLC’S we are in MA?
garrett_sutton Linda: Yes it makes sense to use four separate LLCs. If cost is an issue you may want to use two LLCs for the four.
rosebud And own property in another state, I mean.
garrett_sutton Rosebud: There are no state taxes in NV or WY. If you are qualified and doing biz in NC then you are subject to their regular laws. But your asset protection is based in NV
Linda@bostonbusinessadvisors.com Is that something I can do myself with the online Legal services out there? Did I understand that you should keep separate accounting, income/expenses per property?
Mike_Summey Garrett, could you comment more on using an LLC for equity stripping and would the LLCs you strip equity from have to pay interest to the other LLC to make it stick?
garrett_sutton I do not suggest using the online services. I have seen too many horror stories
jimNC separate bank acct for each property as well?
Mike_Summey Linda, you’re a bit late to the chat and we have talked quite a bit about that issue earlier. You may want to read the transcript tomorrow to take it all in.
Linda@bostonbusinessadvisors.com Ok.
Mike_Summey Linda, it should be posted by mid day.
garrett_sutton Mike: In msany cases we just have a line of credit established so that the property may be encumbered if need be. You don’t need to actually borrow the money, but the first (or other ) deed will be on record indicating the property is encumbered
Linda@bostonbusinessadvisors.com Thanks, I’ll just watch for now.
Mike_Summey Garrett, thanks. I thought that was the case but I ask the question for everyone else’s benefit.
garrett_sutton Again, you can’t mispresent to a court of law that the property is fully encumbered but this strategy helps to keep the predators at bay
garrett_sutton Mike: Many of my clients use your strategy of a separate management company handling all of the accting for each LLC
Mike_Summey Garrett, my brother sent me a picture a few hours ago of the weather you got today!
garrett_sutton Yeah, wicked snow in the mountains but good spring skiing lies ahead
Mike_Summey everyone, Garrett is in Reno. I have a brother in Carson City.
garrett_sutton And we are having some kind of winter here right now
alex Garrett, is that one property management company to handle several of your LCCs, or an accountant handleing several of your LCC’s?
Mike_Summey Garrett, would you rate the use of LLCs better for estate planning or liability protection?
garrett_sutton I like the separate company handling it Alex
alex thanks
MarkNC I’ve got to go but I would like to thank all of you for one of the most informative chats I have been in. It was great and gave me a lot to work on. Thanks, Garrett, Mike.
garrett_sutton LLCs are first used for asset protection but have great utility in estate planning situations as well
garrett_sutton Thanks Mark
Mike_Summey Alex, I use separate management companies to handle my rentals and I require them to carry liability and errors & Omissions insurance with me as a named insured. That provides another layer of protection.
rosebud Okay, everyone. I’ve got information overload and I need to re-read all of this and mull on it, so I’m saying goodnight. Thanks to Mike and Garrett for the advice and to others for the excellent questions. I’m just not there yet.
garrett_sutton Thanks for being involved tonight
jimNC thanks garrett, have your book but haven’t read it yet
danko True, it is a lot of information, but it is important information.
garrett_sutton It is the cure for insomnia
jimNC lol
danko lol
alex what is Garret’s book?
Mike_Summey Garrett, it is coming up on 9:00 here & I know you and everyone else probably wants to watch the president speak so we’ll quit promptly on the hour tonight.
garrett_sutton Thanks for having me Mike
danko “better sleep through asset protection”….sorry…lol
Mike_Summey Garrett, thanks you so much for being here.
garrett_sutton The books are at successdna.com
garrett_sutton My pleasure
danko thanks, Garrett. it was great info and thanks for clearing up a lot of questions
Mike_Summey everyone, what would you think of being able to go directly from one of these chats to a live call in radio show where you could ask me questions directly?
alex thanks
sparky37 Awesome Mike
Lon that would be great
garrett_sutton I think it would be great
poboy absolutely Please do it!!!!
danko it would be great if we could get through on the phone. I wouldn’t like being on hold forever
Mike_Summey Garrett & I have discussed this possibility. We’ll let you know if it works out.
maria I’m in nz so would miss out
jimNC good idea, but i like being able to read the transcripts since i can’t always get here for hte caht
alex good night, thanks to all
Zoe3 GREAT
jimNC the chat
broadway sounds great to me too
alex yeah
Mike_Summey maria, sorry! That’s too bad. I’d love to talk with you.
danko ‘night, all
garrett_sutton Good night everyone
broadway thanks garrett
alex good night
Mike_Summey Garrett, we’ll have to discuss that idea more in the next few days.
garrett_sutton Deal
Zoe3 gn
Mike_Summey Goodnight all.
Mike_Summey See you here next week.
Linda@bostonbusinessadvisors.com Good night….
broadway thanks mike goodnight all
maria Well maybe one day you will get to a nz radio station.
Jeff S take care all
poboy thanks Mike
maria thanks everyone. As usual I have learned heaps and have much to mull ove. Thanks
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