Setting Up an LLC

[Rhett P.]

I've tried google and BP but they haven't been my friend on this topic so I'll have to post here. 

I live in California and I'm starting to do flips all over the country. I want to set up an LLC with an S-corp for tax purposes. I hear Nevada and Wyoming are good places to set up LLCs because those states supposedly have no income taxes and they are good at hiding assets (if thats what you need to do).

Anyways, the best price I found for Wyoming is a site called https://www.incfile.com for about $149 total including state fee for a year. Legal zoom was twice as much. 

I'll probably just do my own EIN through the IRS website to save some money. 

Does this sound like a good way to go or are their other things to consider. My main use of the LLC is to get the corporate tax rates through the s-corp option, but I'm not even sure how to set that up under the LLC or under my taxes.

Once those are established I suppose its a good time to set up a business account with a bank. Is there anything else to do here?  

[Jerry W.]

Ok @Isaac A., I will bite. What is a privacy LLC and how will it keep someone from piercing the corporate veil? I am guessing it is a company that says let us file your LLC, and we will not tell anyone who you are? I may be wrong. Assuming that is the case let me run a few scenarios past you.

Someone dies in your rental because the vent pipe on your hot water heater rusted out and collapsed and the house filled up with carbon monoxide killing the medical Dr. who lived there. When a law suit is filed for 10 million dollars how do we look for the owner to determine a possible deep pocket to tap. First off did you pay cash for your house? If not there is a mortgage. I don't know about you. but my bank makes me personally guaranty the loans to my LLC. Hmm I wonder who owns it? Lets say you pay cash. You know that transactions over 10K$ have special records? No matter where the money came from, there will be a bank record. You cannot bring cash to a closing. I have tried, they won't do it. If you wire the money in there is a record. Try to do any banking over $10K without using your name and showing ID. it is almost impossible. Do you really think any banker will disobey an order from a court to turn over banking records? No way, bankers do not like jail very much. Don't forget about income tax records. All your business records can be subpoenaed or obtained through a request for production of documents. If it is your LLC you get a K1 for the profit or loss. Lets say you actually made money and decided to put $5,000 of profit from your LLC into your bank account as your reward for owning and running your LLC for 10 years. there will be a check made out to you. There are literally dozens of ways you can find out who owns an LLC. You can set up a pyramid of LLCs and operating companies to make several layers of secrecy, but if the money ever comes back to you they can find you. The cost of 8 or 10 LLC shells would be enormous for each LLC you own, let alone the cost of doing taxes and having separate bank accounts, separate book keeping, separate state filings, etc. The real trick to getting an LLC that doesn't get pierced is following the formalities of being incorporated and not under funding them. There is no trick or gimmick. It is simply doing your business right. I am not in any way saying don't educate yourself on LLCs or other forms of incorporating. Don't look for the gimmick, stick to good business practices and insurance. Forming an LLC is easy. The first one was actually formed in Wyoming in the 1970s I think. It was a joint venture between 2 oil companies. After reviewing it the IRS granted it a pass through tax status, despite it being more like a partnership than a corporation, and a new industry was born. Now every state has them and have enacted laws to give them the protection of corporations. A guy named Bill Bagley wrote a book about the first one if I recall his name right. The old LLCs were very cumbersome and had to have special features to keep their special tax status, like not having a duration of more than 30 years and other items to make them bullet proof as we said it back then. The rules change frequently and and differently in every state and individual courts modify the statutes by their rulings. Anyway, sorry I rambled on so much, but I wanted you to see that some of the stuff you see advertised or read is very misleading. I have over simplified things here but please see the general idea here. Read actual court cases if you really want to see how LLCs work. That is really the best way, don't read the squibs, read the whole case, you get a better understanding. I apologize for getting off track here. Good luck.

@Bill Gulley you knew I wouldn't be able to resist saying something here didn't you.