#164 - LLCs, Trusts, and Asset Protection for Pilots with Adam Kintigh

[00:00:00] Hey everyone, before we get to the show, we wanted to announce a very special event that's happening in Las Vegas, Nevada, October 8th and 9th. It's the Passive Income Pilots Conference. We've been talking about doing this for years and it's finally actually happening.

[00:00:13] It's happening this year, 2026. So this October 8th and 9th, as you mentioned, Tait, in Las Vegas, you fly in on the 7th. We're going to have a happy hour meetup and then there's two jam packed days in a row where you're going to learn about lots of things. How do you save money on taxes, asset protection, what investment strategies are actually working in 2026 for pilots that are have been tremendously successful.

[00:00:40] We're going to do alternative investing and real estate investing and even talk about some things that are outside the box that maybe pilots aren't really thinking about. Tait, what else are we going to be doing at the event? Well, we're going to have a huge panel of experts. It's going to be a big conference. We have 250 tickets for sale. And when you buy a ticket, you actually get to bring a spouse for free. Now you can't bring your brother or your friend or the FO that you're flying with for free. They have to buy their own ticket, but spouses come for free.

[00:01:06] Go to passive income pilots.com. You click on conferences and the tickets are on sale right now for $4.97. Prices do increase in August. So we encourage you to book early. It's at the M resort and casino in Las Vegas, Nevada.

[00:01:19] Yeah. What's really fun is that it's on a Thursday and a Friday. So if you want to turn it into a Vegas weekend, bring your spouse, maybe your spouse doesn't want to go to every single event. That's okay. Right. But they can pop in for the ones that they want to see. And then you guys can turn it into an awesome weekend. Totally optional on that. But we look forward to seeing you at our very first ever PIP live event in Las Vegas. See you there.

[00:01:42] Hey, everyone. Welcome back to passive income pilots. Tait Duryea and Ryan Gibson here with you for another week of compliance and LLC and asset protection education on the show. Yeah. This episode is by popular demand because a lot of pilots call us and they say, you know, Ryan, I just got hired. And you know, you're talking about these LLCs and you're talking about all this stuff. What do I need? And you're like, right.

[00:02:06] Right. You're like, you need to trust in a will, but you probably don't need much else because you're not really doing anything yet. And then I get a lot of people who are like, I'm going to start a business and I need to start my LLC. And you're like, no, you don't. Cause you don't have a business yet. Right. So we're going to go. Things like that. Right. So people just kind of get confused on the order of operations and then they do a bunch of stuff and then they hear all these different opinions.

[00:02:26] And then the big problem is they start the entities and then they never keep them up to date. They never, you know, they're not doing their annual filings. They're not keeping their minutes. They're not, you know, actually transferring assets into the thing. Yeah. They never put anything in them in it. Actually, you know, that happens to trusts even more common. You start a revocable living trust and then it just sits there as an empty shell. Ask me how I know.

[00:02:50] So it's funny. People always come up to me. They're like, Ryan, I got my entity set up. I'm ready to go. I'm like, you don't, you're not ready to go. Like you, you know how to file a form on a secretary of state office. You're not ready to go. You need a business. You need something to do. So anyway, we have an expert coming on today. Adam can say we've had him on the show before from Nevada corporate headquarters. He's going to talk about all this stuff. Like when do you need it? Why do you need it? How do you need it? Why do you even need this in the first place? And if you're a pilot who's got a lot going on or a little going on, what do you actually need for real? Cause I know there's a lot of people that are going on.

[00:03:20] People out there are like law firms that are LLC factories that are just trying to layer you with all this crap that doesn't make any difference. And then you're confused on how to run it. And then it's not effective anyway. So we're going to dispel all those myths today on the show. And by the way, we've had him on the show before. Tate, you want to tell him, tell us a little bit about who he is? Yeah. Adam Kintigh is a senior coach at Nevada corporate headquarters. And I actually personally work with Adam for a lot of my entity structuring work and he's just fantastic. So I'm not going to sugarcoat it. Let's get into it.

[00:03:50] Let's do it. Welcome to Passive Income Pilots, where pilots upgrade their money. This is the definitive source for personal finance and investment tactics for aviators. We interview world-renowned experts and share these lessons with the blind community. So if you're ready for practical knowledge and insights, let's roll. Adam, welcome back to the show. Thanks for joining us again. Thanks for having me. Good to be here.

[00:04:18] One thing we do, Adam, is sometimes before the show, we start telling stories, right? And then we're like, whoa, whoa, whoa, whoa. Like hit record. Like the listeners want to hear the stories that we're telling. That's right. And, you know, we've had you on the show before. And before we get into your intro, you were about to tell a story. Why don't you just tell the story? Because we were talking about people who set up LLCs and then never do anything with them. And you're like, I got this story. I got to tell you. So let's start with a story today before we do intros and all that.

[00:04:43] I have a guy calls up and he's referred to me and he has a small auto dealership. Five or six years ago, his CPA told him it'd be beneficial for him to set up an S-corp. And so that CPA set up an S-corp for him and a modest, small car dealership, about $80,000 of inventory. His girlfriend, a longtime girlfriend needs a car.

[00:05:05] And she test drives one, didn't like it, test drives a second. On day number four of the test drive, gets into a fender bender. Fast forward two years later, he's getting noticed that he's getting sued. And I asked the question, I said, well, my friend said to call you that I should get a trust set up. And time out, first of all, you can't do anything. You've already gotten noticed you're being sued with fraudulent conveyance, fraudulent transfer, can't do anything.

[00:05:31] I said, well, what do you have? So he said, well, I've got a piece of land. It's worth about $150,000. It's free and clear. And as my plan was saving up some money and build my dream home on it. I said, all right. We pulled up his company and his CPA sure did file it with the secretary of state. And I asked him the question. I said, normally what happens when a lawsuit comes up? Now, I'm not an attorney and I'm not giving you legal advice, but normally a lawsuit comes up. The lawyer is going to pull up the company just like I did.

[00:05:56] They're going to see it's formed by your CPA firm and they're probably going to assume exactly like I'm assuming. Where is your corporate record book? And his answer, what is that? What corporate record book? Exactly. So the CPA might have got it set up right from a tax standpoint, but I know what's going to happen. He is going to go into court and I asked the question, what would your insurance say? Well, my insurance is paying out $25,000 or as two passengers. So 50 grand, that's all they're going to pay. Nothing else.

[00:06:25] Medical bills through the roof. So he's getting sued. His girlfriend's getting sued. And of course, it was a company vehicle, so they're suing his corporation as well. And he's going to get drug into court. And most likely that attorney is going to tear this corporate entity apart. And he's probably going to lose everything after a couple of years in court. Terrible position to be in. And a lot of people are in that exact same boat. They got the company set up. They've done nothing. They haven't kept the record book up to date.

[00:06:53] They oftentimes will commingle funds. And when they need it the most, that's when they'll figure out it's not right. Yeah. And when you say corporate book too, this is really important because we've had another attorney on that tells us, if you're setting up like a simple LLC disregarded entity, maybe not such a big deal. But when you start to get into like C Corp or S Corp or any of these other more advanced LLCs, like then the record keeping comes really critical. And that's when you can sort of pierce the corporate veil and go after the person individually.

[00:07:23] And that's exactly what the subject is for today's episode, which is corporate record books, corporate formalities, and how to make sure that your records are tight and right. And what I think we should get into, Adam, before we get into the requirements for all of these things, is to kind of do a review of, you know, everybody knows that, you know, I need an LLC, right? But LLCs can take different shapes and forms. You can file an S election and make it an S Corp.

[00:07:52] You can have an LLC tax as a partnership. You can have, you can then convert to a C Corp. So in any case, before we get into all this stuff, Adam, welcome back to the show. Give us a quick background on who you are for anybody that hasn't listened to the previous episodes. And I'm also just going to plug those episodes because they were fantastic. We talked about LLCs, charging order protections, asset protection. We had another episode where we went deep into revocable living trusts. So definitely go check that out.

[00:08:19] Adam Kintigh with Nevada Corporate Headquarters. Good to see you again. Yes, sir. Thank you. So I'll give you my 32nd commercial. Our firm is at Nevada Corporate Headquarters. 36th year in business. We just crossed 20,000 five-star reviews through Trustpilot, Better Business Bureau. Great team. In-house, we have our full legal department. We're partnering with one of the best CPA firms, which I'm always excited about. They're on the bleeding edge of technology for tax and accounting things. We have a business credit team.

[00:08:48] If you're going to separate your business credit from personal, I have a team that does custom business plans. We do the estate planning, like the trust and wills, and self-directed IRAs and self-directed solo 401ks. So it is all the support services for business owners and investors is what our firm does. Personally, I've been doing this now for 25 years, 18 and a half years with NCH. Not an attorney, not a CPA, not a financial advisor. I'm not trying to give you tax and legal or financial planning advice.

[00:09:16] But I have been at the tip of the sword working with the top CPAs, top attorneys, top estate planners, top financial planners, and making sure that everything is put together from a right, the right way from a beginning to cover all those areas, which is really tough to find people that can put it all together properly. Well, and you've done all of my personal entity restructuring for our physical rental property, and obviously very much appreciate your partnership there.

[00:09:41] So with that today, I think we wanted to get into the mistakes that people make when they set up an LLC. So we got a lot of investors that listen to this show that might own rental property, and they think, I need to put this property into an LLC. And first of all, we can get into using land trusts instead of LLCs to own title to your rental property. But a lot of investors will fire up that LLC, and they stop. They don't do anything else. So Adam, turning it over to you, what do you see most?

[00:10:11] Like what's the most common mistake that people make when they set up these LLCs, and we'll try to really spend the next 50 minutes walking through how to do it right? Yeah. So I think the biggest mistake is people form it themselves. It shows right on public record who formed your corporate entity. And I was teaching a class in Dallas, Texas. We had a rental property boot camp. And in the audience, one of the students there was an attorney that specialized in suing businesses.

[00:10:41] And he said, well, I got hired. First thing I do, go to the secretary of state, pull up your company, see who formed it. He said, you'd be shocked at the number of people that form their own company, or I'll say they're registered agents, Inc., or a rocket lawyer, or one of these paperwork mills. He said, we know it's not right. So we're going to hand you a notice for suing you, along with a subpoena for your corporate record book and your bank statements. He said, most people don't have a corporate record book. If they do, they never keep it up to date. We'll subpoena the bank statements if we can find one instance of commingling of funds.

[00:11:10] That is the crack we need. And because of this, he said, I pierce the veil 95% of the time based on that. He also said, if I see Nevada or Wyoming, I won't even take the case because I can't get paid. So it's a huge, huge that it's set up right and using a credible company to do that. When we pull up those documents, there are some states that you can see everything was filed. Some you cannot.

[00:11:35] But at the end of the day, your paperwork needs to be in order because piercing the corporate veil has truly become one of the most litigated issues in corporate law today. And that is the goal of most attorneys. Sue the LLC, take whatever it has, and sue you personally as the owner of the LLC. And statistically, that veil gets pierced over 50% of the time, which is crazy. So that's the most important thing is you're going to form the entity.

[00:12:03] You want to make sure you're operating it properly so that they can't go back to the courts and say, your honor, you set this up. It's nothing more than a sham. It's a piggy bank. Failure to maintain appropriate corporate records, commingling of funds. There's all these different things that they look at. And we want to make sure we have good housekeeping, good business practice, making sure that when they see that, first thing they look at is a well-formed entity. They can see who formed it. Like our firm, very reputable firm.

[00:12:30] We never allow you to set up an entity. And would you like to file your articles of an organization? Would you like a corporate record book? Would you like an EIN number? Would you like an operating agreement? And most people, they don't know. So as a result, they say, well, it's just me. I really don't need a record book and operating. That is, but yeah, we will pay for that EIN number. Okay. And oh, that was pretty easy. So that's what a lot of people do. And it is unfortunate. Can we take a step back, Adam, real quick?

[00:12:58] And just why do I need an LLC? Because I think a lot of pilots, you know, they say, well, I can't start my business until I start an LLC. And then they let that be like a thing that blocks them from going out and doing things. And then also people think that, well, I need an LLC to save on taxes. And that isn't really the case in a lot of cases. Like why do people need an LLC? And what does it do and what does it not do?

[00:13:24] So the number one reason is that legal separation between you and the business. So the corporate veil is probably the most valuable benefit of forming that LLC. That's that invisible line that separates you from the company so that if something bad happens, they can sue you. They can win. We don't want them to be able to touch any of your business assets. If the business gets sued, we don't want them to touch your personal assets. So that is the most valuable benefit. Can you operate without one?

[00:13:54] Absolutely. Absolutely. And I hear people all the time that they say, well, I just have one rental property, so I really don't need an LLC. It's really up to you. It's based on your risk tolerance level. I hear a lot of people say, well, just have good insurance and get an umbrella on top of that. And yes, you should have good insurance. But just so many things that happen that insurance won't pay or won't pay enough. And that's why it's so important to have the LLC there is that that shield is going to protect you. Secondly, you have the tax benefits.

[00:14:24] If you have an active income business, we can save you a bunch of money in self-employment taxes, significantly reduce your audit risk. Sole proprietors, you file a Schedule C if you have a business, and you are way more likely to be audited when you file a Schedule C. If we have a business and we elect to be taxed as an S-Corp, the audit risk is almost zero. True, less than one quarter of 1%. I was just talking to one of our CPAs.

[00:14:50] He said in 35 years that he has been doing taxes, and he does a lot of business returns. I said, how many times have you seen an S-Corp get audited? His answer, Adam, I don't think I have ever seen an S-Corp get audited. I said, not once. He said, not once. Me personally, I've seen it happen two times. Both times, people filed their own business returns, their own S-return, and they got audited. Now, I will say for a lot of the folks listening on the show, most don't have businesses.

[00:15:19] Ryan and I both have operating companies with some of these corporate structures. For most people, they're probably not going to have an S-Corp in their personal quiver, right? Because you don't want to hold rental property in S-Corp. The reason, if you ever need to refinance it, you need to sweep that property out of the S-Corp. You're going to have to pay capital gains tax on whatever the current value is. I've been in this situation. I actually had, I'll share a fun story.

[00:15:45] So I had a previous CPA that wanted to take advantage of that low audit risk, and they put, they did S-elections on all of my real estate LLCs. They said, oh, this is great. This means that you can take all these losses and your audit risk is low. And well, that was all well and good. But then when rates dropped down to 2.5% during COVID, and I wanted to refinance, I needed to take the property out of the LLC.

[00:16:10] Well, you now have appreciated property sitting inside of an S-Corp or an LLC taxed as an S-Corp. And we have that S-election. Anytime you move property out of it, you have to pay capital gains tax, even though you didn't sell it. So that bit me hard. And I owed capital gains on about a $300,000 gain that I had to figure out ways to offset. So don't make that mistake. So I want to make sure that people are aware of that. You know, we're talking a lot about, oh, S-Corps are great and audit risk is low.

[00:16:38] S-Corps work really well for a business. If you are a realtor or you're doing consultant work, or let's say you have, I don't know, your flight instructing on the side and you're doing it through an LLC, perfect S-election right there, but not a great way to hold rental real estate. Correct. And not only, like you say, you know, refinance the property, you want to pull it out. We got tax issues there. On top of that, just last week, I talked to a lady, her husband, he passed away, owned

[00:17:06] a piece of commercial real estate and their CPA said, oh yeah, put it in the S-Corp. You're making all this money with us. And I think it was somebody who's a brick and mortar office building for a service business. So the property, they purchased it for around 500,000. He had put it on the market for 1.75 million. They've gone up quite a bit in value. Ended up passing away. They took it off the market and fast forward. She finally selling that property. And in her area, the market has dipped a little bit.

[00:17:35] So I think she's going to get 1.3 for it, but they do not get a step up in basis. So because they had that S-Corp in there. Because it's in the S-Corp. Ouch. Ouch. She's got a $300,000 tax bill, almost 400,000 that she's going to be paying because that property was there. Don't put rental property in S-Corps. Okay. So moving on to corporate records. You know, we just recently had a gentleman named Scott Williams on the show, General Aviation Law. He's an attorney, helps a lot of pilots buy and sell aircraft.

[00:18:05] And we talked about entity ownership of aircraft. And one of the things he was mentioning is, hey, LLCs are great because there aren't a whole lot of corporate formalities involved in just a simple disregarded entity, LLC. Adam, do you want to speak to that in terms of what you've seen in terms of piercing the corporate veil? And what do people need to do at a very base case in order to maintain a healthy LLC? Yeah. So have the right pieces so that you are, in fact, an LLC.

[00:18:32] So you have your initial organizational minutes, an operating agreement, the record book, having a record book with membership certificates that have been issued. There are states that say you don't have to have a corporate record book. That's an advantage to the lawyers that are suing you. So when they say you don't have to have one, you really should. If you have electronically, at least. But there are states where failure to assign ownership is grounds for piercing the veil because you were not an entity to begin with.

[00:19:00] You never issued those membership certificates, even if it was just you. And in that operating agreement, that is the rules that you have to follow for your business. And like our firm, we have an operating agreement that we put there that you have to have one board meeting every year. And the reason for that is that though LLC is the big allure is that you do not have to have all these formalities that a corporation has, and therefore you get better legal protection by virtue of not having all these formalities that no one ever does.

[00:19:30] But having at least one board meeting a year, that allows us to show that separation, that you are not operating this as a sham. And it's silly. There's no legal requirement that any details of this annual meeting be documented. We just have to document that a meeting was held and the members were present. So if you do that and you keep your accounting separate, no commingling funds. Do not use that business checkbook to pay your personal bills. You want to take money out of it? Get a business bank account as well.

[00:20:00] First step, right? A lot of people stop there. They form the LLC. I think, if I may, I think that one of the two biggest mistakes that rookies make is number one, they form the LLC. Let's say it's to hold rental property and they never actually deed the rental property into the LLC. So you've got rental property that's still personally held in this LLC that just isn't even doing anything off to the side that you're paying for for nothing. And they don't form a bank account under the business name and EIN number. Yeah.

[00:20:29] It's extremely important. If you're paying for things, you have your rental properties and you may have repairs, maintenance, or improvements that pop up. And if your LLC does not have the money to cover it, can you pay for those things? Yeah. That is commingling funds unless you account for it properly. Keep those receipts and talk with your CPA and say, should we treat this as capitalization money I've given the LLC? Or should we do it as a reimbursement where the LLC is going to pay me back?

[00:20:56] But those are conversations that most people never have with their CPA and they operate not knowing. So really simple. The LLC deals with the tenants or the property manager. It collects rents. It pays your mortgage. Whatever is left over. Most CPAs, when you bank transfer to yourself, they have you mark that as a distribution. Tax time rolls around. Most LLCs are disregarded for tax purpose. It's just you or you and your spouse. It may be disregarded.

[00:21:25] You don't even file a separate return. It all reports on your personal 1040 Schedule E. But very simple. The money that goes in and out of that account needs to be accounted for properly. That's where they nail you for those commingling of funds. It's so easy to avoid. Now, what do you say to someone who might own a rental property that's worth $300,000 and it's in a state that they don't live in anymore?

[00:21:51] And you're now talking about books and records and accounting systems. I mean, QuickBooks Online costs $75 a month. It's no small charge. $750 or what is that? $900 a year that you're paying for that. Where do the economies of scale really kick in? And how can people get these types of protections and comply with these corporate formalities without creating a huge burden financially or just time and brain hemorrhage?

[00:22:19] So the accounting system, there is no legal requirement that you have to use QuickBooks or anything else. And you can use a spiral notebook if you want to or a spreadsheet. But we're tracking the properties. And whatever is easy and convenient for you is the direction we want to go, something that you can stay on top of. So QuickBooks, for example, a wonderful program. And I asked our CPA, Russ, I asked him, at what point do you normally recommend that someone get QuickBooks if they have rental properties?

[00:22:48] He said, usually about three properties, it starts making sense. So before that, you'll have an Excel spreadsheet. It would be just fine. It's whatever is convenient for you that you can do. Because if you're not operating it properly, then it's worthless. So whatever system you can use that is time efficient for you, does not take a lot of time out of your day, that's the direction we want to go. I also think that if you silo the bank accounts, this is something for anybody who's kind of a newbie out there. They're buying their first rental property and you're going,

[00:23:18] oh man, books and accounting. Really, if you have, when you buy that property, start up that business bank account. You've got that checking account, apply for a business credit card. You can use your own personal credit. It'll hit your credit, right? You're guaranteeing that credit card debt, but it's attached to your business. It's going to say your LLC on the front of the credit card. And that way, when you go to Home Depot, you can spend on that company credit card, right? And make sure that you never put personal expenses on there.

[00:23:47] And likewise, you never put business expenses on your personal. And that way, everything is separated. And when you pull that Amex or Chase statement, it's going to have all your business transactions. Just can make things very easy. Well, you're saying siloing off a separate bank account per property? Correct. Or, I mean, we can get into, you know, the structure that we've set up, which is land trusts and then a holding company if we'd like to. But if we'd like to stay on the corporate formalities, we could do that as well.

[00:24:14] So ideally, on the formality side, you're not required with an LLC. You're not required to do resolutions, amendments, and meeting minutes. So again, that's the allure. There is nothing wrong with doing those things. And it actually strengthens your protection. Because if you get drugged in front of a judge, you go to court, we want it to show that that company is its own person. And we have these meeting minutes where we've noted things that the company is doing or has done. Very simple stuff.

[00:24:43] And ChatGPT, wonderful tool for doing your annual meeting minutes and resolutions and such. And if you use the ones that kind of track you and what you do, you can set that up with your EIN number in there. And anytime you're doing something, you can prompt it to teach you when to keep your resolutions, amendments, and meeting minutes and make those things really easy. It can only help you. It can't hurt you to do those things.

[00:25:08] Though you're not required to, it's good business practice to keep those things up to date. However, there was a recent court case where a guy trying to help his attorney mount a legal defense, went to ChatGPT and did all these research to try and help himself out and help his attorney. And that got brought into court. And we learned that you do not have attorney-client privilege when you work with ChatGPT or any of those AI tools.

[00:25:34] So great tools for certain things, but just be mindful that those things can and will be used against you in a court of law when things happen. And they found it wasn't just the chat history that was related to that specific incident. It was his entire chat history. So be mindful of that. Ryan, I know you're dying to jump in here. Yeah. How do you keep track of all this stuff? I mean, practically, right? So, I mean, I hear all this stuff and it starts to make my head spin.

[00:26:00] What are some best practices for people who have multiple entities, multiple LLCs, and who just, you know, different record keeping, different books? Oh my God, how do I keep track of the filing requirements? What is a busy professional to do to keep track of this? Because this sounds like a nightmare to me. Oh, I have 100 entities. So it isn't, I have a team. But, you know, to the person who's going to do four or five of these things, you know, how do they keep track of it all? Yeah. So the simplicity is the key.

[00:26:27] And there's a lot of different strategies for five properties. Well, have five LLCs and have that LLC owned by another LLC. And our philosophy at NCH is to keep it simple. And whether you have one or five LLCs, you should have a corporate record book. Print them out. If you don't have a record book, print out your documents and get a three-ring binder and keep those on your shelf. And set a calendar once a year, have your annual board meeting. And, you know, keep it that simple.

[00:26:54] If you have multiple entities for a tax purpose, you should be talking with your accountant or your CPA to find out, am I doing it right? And most people wait until tax time rolls around. And then your CPA has got 5,000 other clients. And their job is to prepare and file an accurate return based on the information that you provide. Their job is not to audit you. So people say, well, I take those receipts and I give them to my CPA.

[00:27:21] Do you think your CPA is honestly going through each one of those receipts and doing something with it? He probably looks at it and goes, eh, it's about 500 bucks. Okay. Right. So it's important that you've got multiple entities that you keep it simple in a manageable way. So, for example, instead of having five different LLCs for five different properties, we use these real estate privacy trusts that allow us to separate liability without having a bunch of LLCs.

[00:27:49] And they don't have bank accounts or tax returns. So kind of the top of the umbrella, we got an LLC. And below that, we have multiple trusts in there. But again, how do you do it? Getting systems and processes in place and calendar reminders. If you're an entrepreneur or you're an investor, get used to having entities and have that time where, like on our firm, we have our renewals department that every year when it's time to renew, they call you, mail you, text you, email you, just so that nothing ever goes late.

[00:28:18] Because if your company is not in good standing, it's worthless. So just having the team on the backside, you've got 100 entities, you've got a team of people that do it. And for a person that doesn't have a team, it's literally just having a system and keeping it as simple as possible, knowing that you're going to have to manage these things. You're going to have to file the taxes on these things. So just keep that in mind when you're setting things up. Simplicity is always good because the more complicated you make things, the bigger the chances are you're not going to be doing it right.

[00:28:48] Let's step up the ladder for a second and talk about S-Corps. So let's say somebody has an S-Corp because they are doing some consulting work on the side. Whatever it is, right? I can think of a dozen different examples. Somebody's, let's say, flight instructing down at the local school or they're a DPE. And so they're running that income through an S-Corp for tax efficiency and also for some asset protection while they're performing those duties.

[00:29:12] What's the step up in corporate formalities that needs to occur when you do an S-selection on your LLC? So the LLC, again, our only legal requirement per our operating agreement is that we have one board meeting every year. If you want to do resolutions to go purchase a new vehicle or its major formalities or things that need to be documented, its major expenses that are outside of normal business activity.

[00:29:39] If you're going to be hiring employees or bringing on partners or partnering with other businesses, major things that the company does, those are the formalities that we want to have. You're not required to have those things because it's an LLC. But when you're operating as an S-corporation, from a tax standpoint, I don't think there's, from CPAs I've worked with, I don't think the IRS has ever said, well, you didn't do formalities, so we're not going to allow you to have the S-selection. I don't think that's going to happen. It's just good business practice to keep these things up to date the best you can.

[00:30:09] All right. One more step. Let's say somebody goes C-Corp and now they're being taxed as a corporation. They've got an ink at the end of the name. Yeah. So that is super important. Now the formalities are critical. So if we do a corporation, an ink or corp at the end of your name, you can have a C-corporation, which files Form 1120, or an S-corp, which files Form 1120S. Well, most of those big companies, Microsoft, Walmart, Disney, they are C-corporations.

[00:30:39] They have investors. For a small business, as you or a very small number of people, the S-corp is usually the best route to go. It avoids double taxation. You get a C-corp, there's problems with double taxation. You lose some tax benefits for small businesses. But you get to that level where you're a C-corporation, we have monthly board meeting minutes or monthly meeting minutes that need to be kept, unless you do a waiver to waive these things.

[00:31:06] But a much stricter level of compliance, we actually have a compliance department that does these things for you, whether you find out what your business is doing and then make sure that we have those proper documents in place. It doesn't take a lot of time when you use a service to do that, but it absolutely is important. Well, we won't spend a bunch of time on C-corps because they don't make sense for most people because of the double taxation thing. And of course, all of these really onerous reporting requirements.

[00:31:33] And so in any case, this is why you typically don't see individual investors running around with C-corps. But with that, I'll turn it over to you, Ryan. Yeah. Speaking of which, I want to make this, I think the listeners are going to fall in one of three categories. And Adam, I'd love for you to kind of help guide each category of listener on what they really need. Right. So let's just talk about tier one. United Pilot just got hired, you know, maybe has a self-directed IRA that they're thinking about setting up.

[00:32:01] And they just found our podcast and they're thinking about doing a syndication or two with Tate and I. Right. They're thinking about doing an oil and gas deal. Maybe they're thinking about doing a storage deal with us. I want that's like your kind of level one. Right. Like what kind of entity asset help can NCA provide that person? I think the next layer up is you've listened to all of our episodes and you've gotten the bug on you bought a couple of short term rentals. You've done four or five syndications.

[00:32:31] You maybe got a little excited. You bought some more rentals, whatever, whatever it might be. Maybe you've got a few more pieces of property and you're starting to do some kind of advanced stuff. And I think the third listener is everything we just described, except maybe that listener goes out and buys an operating business like they own a FedEx store or FedEx trucking company or they have a UPS store or they have a franchise.

[00:32:56] Maybe their wife are going to bring on a guest in the coming weeks that last guy, his wife went out and bought a chain of cafes. Right. And, you know, is running like a multimillion dollar operation with lots of employees and things like that. Let's just think of those three tiers. Like what does each of those tiers really need to stay protected and, you know, keep their operation moving smoothly? I think everybody should put on their to do list. If you don't have one, get your revocable living trust and will done.

[00:33:24] And we kind of think of that as the foundation for everything. If you're going to go out and invest in some of the syndications, you can certainly do that in your name. Or if you set up a revocable trust and you put your personal checking account into the trust name, you know, it makes that investment. And you do not have to have an LLC to do an investment like a syndication. You're coming in as just a small part. It's like owning stock in Microsoft. Microsoft gets sued. They can't sue you as a shareholder. Same concept with the commercial syndication.

[00:33:54] Risk level is very low. But if you got sued personally, like this guy whose girlfriend gets into a car accident and he's getting sued in his car, you get brought into a deposition. You got to list everything you own, your house, your cars, and you have those commercial syndications or those oil and gas investments. So this is where having a Wyoming LLC, they're organized under the laws of Wyoming. Now they can sue you. They can win.

[00:34:19] They cannot touch that Wyoming LLC to satisfy your personal debts and obligations. So that will probably make sense for most people. Or if you have a brokerage account, if you got $20,000 or $30,000 sitting in a brokerage account, do you need an LLC for that? Probably not. Maybe some people, you'll sleep better at night if you have it. But I look at, you get $100,000 plus. Okay. The $20,000 or $30,000, that could disappear real quick. You gambled that away in Vegas quickly. But $100,000, that's not going to disappear.

[00:34:48] So understanding that a lawsuit comes up, usually if a case doesn't settle within the first three to six months, it will take three to five years. And so with that in mind, and your insurance, please keep good insurance. If you don't have one, umbrella policies are cheap, and they're cheap for a reason. So that baseline investor, revocable trust, an LLC that's disregarded for tax purpose, no additional tax filings. And make sure you have good insurance.

[00:35:16] Just in case there's a car accident, the umbrella is cheap because it only kicks in if the underlying policy exhausts its policy limits. So this guy that had his girlfriend getting a car wreck, they paid out $50,000. That did not exhaust policy limits. He is now, his umbrella is worthless. So that's why they're cheap. But I think it's a one-in-flight event. The second investor, now we start looking at separating out your risk.

[00:35:45] And it's really based on your risk tolerance level and how many eggs you want in one basket. So I see that a commercial syndication or a brokerage account, we always consider that a safe asset. Holding a brokerage account in an LLC, the chance of that, you can't get sued for owning stock or having a syndication. Could you get sued? You could. Could you get sued? Unlikely.

[00:36:06] So theoretically, if we're doing the structuring for these things, we'd have a separate LLC for your rental properties because it is a risk-producing asset. It's going to produce risk. Or if you have a business, you're a consultant of some kind, that produces risk. You're dealing with other people. So separating out your risk is always important. And I want to keep things that are on your rental properties separate from safe assets, separate from your business activity.

[00:36:35] So you start that small business. And like the gentleman has his wife going out and doing the openings of different shops. Those are going to be an active income business. Those are going to be something taxed as an S corporation that will significantly reduce your taxes and your audit risk. So these are things that we would look at. Baseline, family trust, and or LLC. You get a little more complicated.

[00:37:03] It's just separating out those liabilities as you go. Now, there's a lot of CPAs that will tell you that you don't need to make the S election until you're making a certain amount of money. Okay, you can work with your CPA on that. My view is that regardless of how much money you're making, to get rid of that darn Schedule C is well worth it. It costs you a couple hundred dollars extra, but keeps you very low for the audit risk, something you just don't want to deal with. So that's how we map things out.

[00:37:31] You know, I want to tag on to that S corp thing because we've talked in the past about about $50,000 worth of income inside of an S corp is kind of the break even point where the tax benefits start to outweigh because it's all about Social Security, Medicare tax and avoiding self-employment tax on the entire basket of income. Right. And about that $50,000 mark is the cutover point.

[00:37:53] However, I love what you said because, you know, I'm in a position now where I have very complicated tax returns and everything I'm doing with entity restructuring and everything that I do in terms of structuring looking forward is looking for ways to simplify my return and to get it from, you know, multiple hundreds of pages down to a more manageable level so that when I send it off to a lender to buy a new property, it doesn't make their head explode.

[00:38:20] And that S election is such a great point because now you're when you file when you do an S instead of the LLC reporting all of its income and losses straight onto your 1040, which is going to show up in a schedule. Instead, the 1120 S files its own tax return. It's its own separate return. So you'll send your tax return plus the return of your S corporation. It keeps everything off of your personal tax return. Yeah. And you bring up a great point is when you get to a certain level of properties or a number of properties.

[00:38:49] I talked to a guy last week. He's got 80 rental properties and this is all reporting on his personal tax return. And I said, your bank must absolutely love you. Not that he goes in there. Those bankers, he's not the girl they want to date because they got to enter all those properties in. Every time they do a loan, it's a nightmare. So he would be a very wise move that he could have. He could separate liability of properties using different LLCs.

[00:39:16] But that's where I would have an LLC taxed as a partnership that kind of this holding company that has all of his rentals underneath it. That partnership now generates a K-1. So his personal tax return is nice and clean. Some W-2s and K-1s. Let's make this really, really clear for people because this is such an important part of entity structuring. When you have a single member LLC, it is a disregarded entity for tax purposes.

[00:39:43] It means that anything that the LLC holds, anything that it earns or loses is going to flow right through onto your 1040. From the IRS's perspective, it is not a separate entity. It is from a legal perspective. So it is a separate entity from you from a legal perspective. But anything that is in it and any profit or loss that it generates just flows through to you. That's why it's called a DRE or disregarded entity.

[00:40:11] As soon as you add another person to that LLC and now it is a multi-member LLC, it becomes a partnership, which means that it is now a separate entity for taxation purposes. That entity will now file a 1065. It's separate. It's off of your 1040, just like the S corporation or the LLC taxed as an S corp.

[00:40:36] Similarly, the partnership files a 1065 and it kicks off K-1s to the members, which could be two. It could be many. But Adam, you want to correct me where I'm wrong there, fill in the gaps because I think this is so important. So if you're looking for something that gets all this stuff off of your personal return, partnerships are fantastic. They really are. And a lot of people, I talk with a lot of pilots that they love that short-term rental loophole. Oh, yeah.

[00:41:05] So they finally passed the Trump made it permanent. So for those of you that have not ever had to deal with this, bonus depreciation is a really big deal for a short-term rental. You get to do a cost seg study. And I know you've got some really good episodes with the cost seg studies and such. We do. But this creates this giant loss that then offsets your income and can save you thousands and thousands of dollars in taxes.

[00:41:30] Well, that short-term rental loophole would be on a single-member LLC, disregarded. Or if it's you and your spouse, you may file it as a partnership. And filing as a partnership, again, further reduces your audit risk. Keep in mind, short-term rental, you've got to have 100 hours of material participation to get that extra bonus. But if you've got a partner, they also have to have the 100 hours. So keep that in mind.

[00:41:56] If you're a pilot and got your day job, then your spouse is going to run that Airbnb for you. Fantastic. But if you file as a partnership, you have to have 100 hours just like your spouse does for the material participation test. But again, certainly filing as a Schedule E, that's not known to have a high audit risk. Filing as a partnership further reduces your audit risk when it comes to rentals.

[00:42:21] Well, and it's just going to take all of that short-term rental loss and all of that garbage associated with that property, and it's going to get it off of the schedules of your 1040. And instead, it's going to come to you as a K-1. Right. Yeah. And that's another thing that you think about is as a self-employed individual or if you have that active income business, a lot of people, they operate as a sole proprietor, when they go to get a bank loan, they're not making any money,

[00:42:50] and it makes it difficult for you to get good rates on a bank loan. So having that S-Corp allows you to now take a W-2 paycheck. So again, looking at all the totality of everything we're doing, that corporate entity, it separates you from a business. It can save you money in taxes, reduce your audit risk, add the business credit. You talked about that, which is awesome, having business cards that do not report on your personal tax return

[00:43:15] and allow you in certain situations to take that W-2 paycheck to help you save money in the future, getting better rates on properties and such. So all these things start working together. It's really important. Well, I know this is a lot to absorb, but you should probably come out to Vegas on October 8th and 9th. The entire Nevada corporate headquarters team will be there with Ryan and I, and we're throwing the Passive Income Pilots Conference, the first of its kind,

[00:43:43] and we're going to do two days of all sorts of alternative investing strategies, corporate formalities, entity structuring, asset protection, trust and estate planning, all the above. So with that, Ryan, I know that you've got some more questions before we bring things home. I just wanted to say, I think one of the biggest benefits we have, we were able to organize this for the conferences. I know that everybody's situation is different. I specifically mentioned that, you know, we have listeners that have nothing going on

[00:44:12] and are thinking about it and they might not need every bell and whistle LLC. We have listeners who have started to do it. We have listeners who have started to buy a lot of property and listeners that have a business. So you might really want to know, what's this mean to me? What do I specifically need in my specific situation?

[00:45:00] Right. What do I need for their situation so that they're just not like sitting on stage and then leaving and going, or listening to the speakers and leaving and going, I don't know where I fit into all this. I don't know what I really need. I'm super lost. And that's how most conferences are, right? You go to these conferences and it's like, people's up, they're all up there talking about different things you need and you leave. And you're just kind of like, I'm more confused, but I have no idea what to do. Yeah. Like, where do I start?

[00:45:25] So like, I think, I think that's going to be the biggest, me personally, I think that's gonna be the biggest value that I think you, you know, you guys have so graciously offered to do, which is like sit down with each individual unique person and go through their unique situation. Cause everybody's a little bit different and you might even be like, Hey, I don't have anything going on. Can I still sit down and talk about my situation? And maybe like, what would happen if I decided to do certain things? So that way you're ready for it.

[00:45:51] And so I think that's just going to be personally, I think that's gonna be the best part of the conference. Second to that is hallway conversations. You know, when you go to a conference, you're going to meet other pilots who have done or about to have done what you are about to do. And I think that is so powerful as you get to see like, Hey, like how's your short term rental business going? And you might run into somebody and they're just like, man, it sucks. Or they might be like, Oh, it's going great. And one little thing you hear could completely change your trajectory and how you're doing.

[00:46:21] Right. Like one little piece of advice, one little nugget. That's like, that's what you're looking for when you go to something like this is like, it's not just like how big is the content. It's usually the one thing you take away that you would have otherwise not gotten through the internet or through chat GPT. Because yeah, chat GPT will tell you what to do. And if you have the question, if you know the prompt, but what chat GPT doesn't do is like kind of give you a presentation and then have something in there that you're like, I never thought of that. And then you can go down the rabbit hole. Right. So.

[00:46:50] And as well, you know, we've been doing this podcast for three years now, Ryan. And we really have built a community of listeners and nobody knows each other. Right. And so this is really the first step in creating a more interconnected community, you know, meeting other listeners. And most of whom are pilots who are airline pilots who are in the same situation as you are. You know, they're trying to figure this stuff out. They've been listening. They're starting to learn this stuff. And this is, again, really creating that interconnected community.

[00:47:18] So we're very honored to have Nevada Corporate Headquarters at our conference. Thank you, Adam. And we're really, really looking forward to it. So October 8th and 9th, you're going to have to fly in on the 7th. We hope you'll fly in on the 7th because we're going to have a big opening ceremony that evening. And then kicks off two full days of events on October 8th and 9th. Yeah. And Adam, if someone can't make the conference for whatever reason, how do they get a hold of you to set up a consultation so they can learn about maybe their specific situation? Yeah. So we're going to put a special link that I'll send over for you.

[00:47:47] We have a special link that you can go to. You can call our office or go to our website, nchinc.com. Or you can call our office. It's 1-800-508-1729. But very, very important. Please make sure that when you call into the office or you submit a scheduled appointment online, make sure that you note that you are part of the Passive Income Pilots. We have a small group of SEAL Team 6, guys like me, that we cover everything.

[00:48:18] And I think the youngest guy that we have on our team has eight years of experience. Most of the guys like me, 20 years plus doing this. So just a small group that does that. And I just want to make sure that you're talking with the right people with the right level of expertise. So please let us know that you found us through the Passive Income Pilots so we can make sure you're getting the service and support you need. Fantastic. Fantastic. Or if you just want to get a head start, you know, if you want to start on some of this stuff so that you're a little bit further along in the process when you get to the conference, that way you can fine tune.

[00:48:47] But in any case, Adam, thank you so much for the information. It's always a learning experience for me, even though I've been doing this for years and years and years. I always pick a few things up. So thank you for your wisdom. And we look forward to seeing you in Vegas in October. Thank you. Likewise. Thanks, Adam. Thanks for listening, everybody. Catch you on the next one. Well, thanks again, everybody, for listening to the show.

[00:49:11] Before you leave, don't forget we're meeting for the PIP live events in October 8th and 9th in Las Vegas, Nevada. If you enjoy our content, what you're hearing, what we're talking about, and you want to network with other pilots who are doing what you're doing, tax and legal and investment professionals, see you in Las Vegas. Go to PassiveIncomePilots.com to get your tickets. Ticket prices do go up in August. So jump on that as soon as you can. Thanks, everybody. Meabholford keyboard. Thanks, Everybody. Peace, everyone.