Owner Draw - Corporate Veil

[TJ Woolum]

I always hear wealthy investors online talking about how they borrow against their assets to generate tax free wealth. So far I've always just reinvested my real estate earnings back into my LLC. If I do a cash out refinance (titled in my LLC), how do I use the money for personal expenses without risk of piercing the corporate veil?

[Greg Scott]

The key is formalizing the flow of monies, just like a public company would.

If the LLC borrows money against an asset, the LLC now has a pile of cash. The LLC can then chose to distribute cash back to its members. Ideally this decision is formally documented in the company minutes or wherever you maintain decisions made by the LLC. The LLC would then cut a check to its members based on the decision of its managers.

Once the cash is deposited into your personal account, you can blow it on Megamillions tickets or fancy hair products without worry.

My wife and I have weekly Friday business "meetings" at a restaurant.  Sometimes it is a very fancy restaurant.  Our W2 friends have asked us how we can expense those.  I tell them the managers of the business, us, got together and agreed it was a worthwhile business expense.  (We got that idea from Tom Wheelwright.)