All Forum Posts by: Bernard Reisz

@Hjiorst Fjioords You should certainly do extensive research prior to selecting a provider. Well-done research will make you an educated consumer and aid in your search for the right provider. Even after extensive research, you must feel extreme confidence in your provider, as there a many "unknown unknowns" that research won't uncover - and it's your choice of service provider that will determine how well those "unknown unknowns" are navigated.

@Justin Windham @Brian Eastman @Todd Goedeke haven't nearly as present on BP as I'd like to be, recently. Poking around the forums the last few days, I'm amazed at how the misinformation that's so pervasive elsewhere on the internet has made inroads to BP, as well. Nevertheless - thanks to you - BP remains one of the few places where if someone presents misinformation on these topics (QRP, EQRP, UBIT, UDFI, etc.), they can get still get honest and fact-based responses. Kudos!  

@Scott Anderson You've gotten great info from @Carl Fischer and @Bill Hampton. There are many highly qualified tax pros on BP, and it's a matter of finding the best fit for yourself. Based on your location and tax profile, I'd encourage you to get in touch with @Daniel Hyman.

As an aside, you won't technically be "filing taxes for your LLC" with the IRS; rather it will all be reported on your personal tax return.

The first year tax set up of your investment properties dictates current and future year tax deductions - so it's important that you get it right.

@Michael J Scanlon 

@Brian Eastman has provided great context for your search. It takes a substantial amount of real research to begin to reach the point at which true comparisons between providers and fees can be made. 

Real research requires accessing vetted and credentialed sources of technical info - and the ability to distinguish between the hyperbolic and the genuine.  

The first step is to assess the scope of service that you need. But, there are "document sellers" that deliberately understate the compliance requirements. Interestingly, the fees for such documents range from a few hundred dollars to a few thousand.

However, the key to avoiding compliance pitfalls and maximizing the ROI of your plan lies in its operation. For that, you'll have to identify service providers that have the expertise and integrity to give you meaningful support & insight.

@Mike S. Worth noting that the impact of the SECURE Act on "Solo 401k plans" is being grossly misrepresented by a certain promoter (whose qualifications and experience do not include tax/401k compliance). As much of the other misinformation being disseminated, it's leading to ill-informed decisions by investors.   

@jim hiler

There's lots of misinformation and misdirection on this subject, and the following should help you navigate:

• All "Qualified Retirement Plans" ("QRPs") are trusts set up for the benefit of "employees."
• A QRP can hold investments in its own name, much like any other trust.
• A QRP can also hold assets indirectly through an LLC. This is analogous to a "Checkbook IRA" that uses an IRA-owned LLC to hold SDIRA assets.
• Within an SDIRA, the only way "checkbook control" is achievable is through the use of an IRA-owned entity.
• With QRPs, in contrast, "checkbook control" does not require the use of a QRP-owned entity to hold assets.
• Notwithstanding, when correctly implemented, there are benefits to investing within a QRP-owned LLC.
• TCF appears to take a "one-size fits all" approach by requiring that (a) every client establish an 401k-owned entity and (b) that entity be a Wyoming LLC or Colorado LLC.
• A Wyoming LLC can, potentially, be a great thing - as part of comprehensive investment entity structuring. But without the proper structuring of your plan & particular investment, that Wyoming LLC can do more harm than good.

So, when you hear some talking about investing through a "QRP trust" or "retirement plan trust" - that's for investing through a plan directly. Talk of investing through a Wyoming LLC refers to QRP/401k investments done through a QRP/401k-owned LLC.

Both Solo 401k and EQRP (a registered trademark of Total Control Financial LLC) are "marketing terms" - but only one of them was created to convey specific and targeted info. Neither EQRP, nor Solo 401k, are a type of plan. With a bit of generalizing, the following should be helpful:

• The ultimate difference between a full ERISA plan and "non-ERISA plan" are the nature of eligible plan participants. Are they only business owners and spouses? Or, do they include non-owner employees?
• A Solo 401k plan is a 401k plan, is a 401k plan, is a 401k plan. Just that a 401k/QRP for an owner-only business is able to sidestep much of the complexity to which 401k plans are subject.
• In other words "Solo 401k" does not describe the type of plan; it describes the type of business that adopts the 401k plan.
• When you get a "Solo 401k," you're being given an honest description of the limits of the compliance support you'll be getting - adequate for businesses that don't have non-owner employees. 
• EQRP doesn't describe anything. It's just a trademark, not a type of plan described in the tax or labor code.
• A 401k/QRP-plan is just a piece of paper. With the proper compliance awareness and support, it's a very powerful financial tool. Without the proper compliance awareness and support, it's a ticking bomb.
• There's a limit to what can be put in a BP post, but if you'll be setting up a QRP/401k that will cover employees you must perform substantial due diligence - and it would be prudent to work with credentialed professionals that have a background in tax/401k compliance.

@Marisa Alvarez 

Your entity is a corporation, not an LLC (don't ask how I know🕵️‍♂️😉).

The info you've shared belies even more misinformation and misconceptions than we saw up to this point. You are not to blame, as you trusted people that were referred to you and were not in a position to perform due diligence yourself. 

Sometimes referrals are great, sometimes they aren't. When you are dealing with something that requires technical expertise, only value referrals from other technical experts. Your referrer may have meant well, but lacked the tools to assess professional competence. Too often, referrer's judgements are also blinded by "affiliate commissions" or "kickbacks."  

You do need true expert guidance to navigate this for optimal outcomes. Even moderately competent advisors can steer clients from major trouble by applying general rules of thumb, such as "never have real estate in a corporation" - even if they don't fully grasp the logic. However, once mis-steps have been made, you need true expertise to navigate.  

@Marisa Alvarez I'd love to use bullet-points for clarity, but you know what the last attempt looked like :) Since BP made same changes a while back, can't quite see the bullet-points as I type - with the results showing only once you hit "post reply."

There are 2 distinct components to entity structuring - (1) legal and (2) tax. 

Tax

@Chris K. has linked to some solid resources that cover the tax pitfalls of using a corps (S-corp or C-corp) to hold real estate or other appreciating asset. No need for me to rehash all that, but in a nutshell: getting an appreciated asset out of a corporation - for whatever reason you may have to do that - can be very painful.

2 points on this (just can't resist those bullet points):

•  Some of the links are dated, so the info is no longer entirely accurate. Still, the concepts hold true
• I am aware of "tax strategies" to get appreciated real property out of a corporation. Those are of dubious merit.

The bigger question is, why would someone place real estate in a C-corp to begin with ? What was the benefit of doing so? You must have had a reason to use a C-corp, and perhaps those reasons were important enough and outweighed the potential pitfalls. 

There must have been a reason, though, because by using a C-corp you give up many of the tax benefits of real estate ownership - the depreciation losses flowing through to your personal tax return and potentially offsetting other income on your 1040 (Speak to @Yonah Weiss!). 

How is your CPA proposing that you get all these assets into new LLCs from the C-corp?! That's exactly where the achilles heel of C-corps are! Also, if your assets on are in Fl the real estate transfer tax from C-corp should be punishing.

I've been in this game long enough to know that every scenario is unique and that each individual needs a tailored approach. As I wrote above, if your CPA is truly a pro, there must be good reason for your structure - and I can use conjecture to guess what those reasons are. 

If your CPA is not a real pro, or you followed internet mis-information, that's another story altogether. Internet misinformation and misdirection abound - caveat emptor. Often, the folks that spend the least proportion of resources - time and funds - on acquiring true expertise, invest the most heavily in marketing their "expertise." 

Asset-protection/Anonymity

@Chris K. also referenced some of the asset-protection disadvantages of corporations. However, those presume that you truly have a corporation - which you don't seem to have confirmed anywhere. You did mention that you have a "C-corp" - which is a tax concept, not a legal entity concept. An LLC can be a C-corp.

There are actually additional drawbacks to using a corporation, but no need to to go there if what you have is an LLC taxed as a C-corp. What do you have, an LLC taxed as a C-corp or a corporation taxed as a C-corp?

Your scenario

Bottom line, you may be able to benefit for single-member LLC asset-protection provided by the domiciles that offer that - and there may be ways to achieve that without a tax hit. That would require a single LLC only, as only ownership of the corporation would be changing, not the individual properties.

A FL land trust, which actually does provide some true asset-protection (in contrast with just about every other domicile), would not acheive much in your scenario - at the moment.

There are:

• service-providers that possess true expertise and provide customized solutions for you
• service-providers that don't possess the expertise they market aggressively
• service-providers that possess true expertise, but have monetized that expertise through business models that don't provide clients with customized solutions

In my work, I've had cause to see the LLC statutes of most states and have been part of the formation of LLCs in every domicile. I see, daily, the good and "not-so-good" in the entity set-up space and - unless you have expertise in this field - you can't possibly tell them apart. Hopefully, all the feedback shared on this forum will give you a discerning eye.

@Clint Coons I welcome your feedback on all this.

@Marisa Alvarez Just posting this to acknowledge your questions, but not in position to post a detailed response. I'll get back to this thread as soon as an opportunity presents itself. @Clint Coons same, but sounds more like we're aligned on this topic. Appreciate your response.

@Marisa Alvarez

I'll chime in here, based on my experience and what goes on in the "asset protection" market-place - in which there are:

• quality operations that have expertise and truly want to help you, and 
• others that are just trying to "sell" as many of the identical (every "client" gets the exact same "structure" and a clerk just changes the names) legal documents, as possible.

If you have a great history with your CPA and he's well-versed in LLC & tax, you'll probably do well to follow him on this. Otherwise.....

• With regard to using a WY LLC as holding company, the benefit would be the single-member LLC charging order.
• For anonymity purposes, a FL LLC can be made anonymous without involving a WY entity.
• For strictly anonymity purposes, FL investors can use a land trust.
• FL land trust + plus LLC may be able to get the best of both worlds.
• Once your in the chain of title, it's a bit late to get anonymity.
• Watch out for loan acceleration clauses, when transferring beneficial ownership.
• TAXES: Here's the thing that some asset-protection people overlook.
  • Income tax: Holding real estate in a corporate entity, S-corp or C-corp is usually ill-advised.
  • Real estate transfer tax: Most states and counties that have real estate transfer tax also impose the transfer tax when there's a change in beneficial ownership, including FL.

You would not be tied for life to whoever set up the entities. You would own and control them.

Hope all this helps. Pardon all the extra "bullet points" - struggling with the BP editing :)