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Wyoming vs Delaware vs Nevada LLCs 馃憠(AVOID THIS!!)馃憟 - YouTube
Channel: Clint Coons Esq. | Real Estate Asset Protection
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- Hi, Clint Coons here and in this video
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I'm going to discuss when you should
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never use a Nevada,
Wyoming, or Delaware LLC
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to hold your renter real estate.
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Okay, let's get started.
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(upbeat music)
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All right so, you've
heard about the benefits
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of Nevada, Wyoming, and Delaware.
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I mean, you can't miss it.
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If you've been out
there doing any research
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on the internet there's
a lot of information
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about these jurisdictions.
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And a lot of it is correct,
there's no doubt about it.
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Nevada, Wyoming, Delaware, they offer
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excellent asset protection.
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They even offer anonymity
for you, as well,
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if you know how to take advantage of it
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so that people don't know that you own
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that LLC that you've set up.
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However, for real estate investors
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many of these companies
that promote these types
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of jurisdictions also don't
tell you the full story.
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When it comes to investing in real estate,
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if you're gonna own property directly
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in the name of a limited liability company
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and not use a land trust,
be sure to check out
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some of my other videos on land trusts
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and the benefits of using
them in your investing,
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but if you're going to own the
property directly in the LLC
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then the number one
mistake you're gonna make,
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if that property does not exist
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in Nevada, Wyoming, or Delaware,
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is using one of those
LLCs to own that property.
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I'll give you an example
of what'll actually happen.
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So, there's a company out of Las Vegas.
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It has three initials in its name.
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I'm not gonna mention it.
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And they set up structures for people,
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and I've picked up quite a few clients
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that have come to me with this problem.
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They're set up with a
Nevada LLC right here.
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So this company sets up Nevada LLCs.
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They're basically an entity mill.
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It's a one-size-fits-all approach,
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and you know I talk about that a lot
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that real estate investing is not
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a one-size-fits-all approach.
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You really have to
understand the motivations
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of the client and what
they're trying to accomplish.
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So, they set up this Nevada LLC
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for this individual investor
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to own property that's located over here,
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this rental property in Illinois, right?
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Now, why did they do this?
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Well, Nevada offers great
charging order protection,
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so if you get sued they
can't take the LLC from you.
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100% accurate information.
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Nevada offers anonymity,
so if somebody looks
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they don't see you, if you
use a nominee, that is.
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100% accurate information.
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Nevada, no taxes.
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100% accurate information,
if you live in Nevada.
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So, they tell you a number of benefits
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of using this Nevada
limited liability company
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to own your real estate.
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Low and behold, you do it.
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And just like anything, it works just fine
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until something happens.
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Now, what's happened in this
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particular individual's situation is that
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his tenant quit paying rent.
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Well, if my tenants quit paying
me rent, first thing I do
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is move for an unlawful detainer
action to kick them out.
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Well, he tried to move for
an unlawful detainer action
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to remove that tenant from
the property and he lost.
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Yeah, the court allowed
the tenant to remain
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in the property not paying him rent.
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I mean, talk about
adding salt to the wound!
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Well, why was that?
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Well, because the court
accurately applied the law,
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which states that this LLC, Nevada LLC,
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was doing business in Illinois
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and it wasn't registered
to do business there.
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And by not being registered
to do business there
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then you can not
prosecute an action there,
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meaning bringing a law suit
to kick out your tenant.
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So, the case was dismissed.
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So, here's an individual
real estate investor
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has a tenant now living
in the property rent-free,
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because he set up an LLC
that wasn't registered
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in the state where the
property was located.
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Now, he said, "What can I do?".
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Well, obviously there's two
ways to handle this situation.
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Number one is you're gonna foreign file
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your Nevada LLC, foreign
file it in Illinois.
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So, now it's gonna be registered in Nevada
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and it'll be registered in Illinois.
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The only problem with that is, you know,
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if you know the filing fees,
Illinois is about $700,
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and Nevada over here is now $350.
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So, now you're up to $1000 a year
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for this structure to
get his thing set up.
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So, there's no compelling reason
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to have a Nevada LLC
foreign filed in Illinois
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because at the end of the day,
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remember those benefits
we were talking about?
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Charging order protections, anonymity,
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taxation, and everything else
that goes with a Nevada LLC.
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Well, as soon as you register
it in Illinois, gone.
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You lose all of that.
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So, now you're paying for a Nevada LLC
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that's providing you zero
benefit under Nevada laws
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because it's now been
registered in Illinois.
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And so that is the biggest
scam I see out there
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from these entity mills
that set up structures.
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They're not attorney involved,
they're just salesmen.
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Maybe they have one
pseudo-attorney on staff,
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they oftentimes say, that
they create for people
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that they end up running into problems.
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So, do not set up this type of structure.
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If you want the benefits of
that, do not make the mistake
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of trying to own property out of state.
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If the property was owned in Nevada,
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obviously we would go with a Nevada
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limited liability company.
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To get the benefits, the way we do it
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as you've watched from my other videos,
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create an Illinois LLC right here.
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Better yet, because it's in Illinois,
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maybe use a series LLC.
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Watch my video on series
limited liability companies.
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Exceptional tool, especially
in Illinois, works great.
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And then have that
limited liability company
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owned down here by a
Wyoming LLC to pick up
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the anonymity, the
charging order protections.
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The things that you were
trying to accomplish here,
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but it wasn't working out.
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So, when you're going about there
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and putting together your
real estate structures,
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make sure that you're creating the LLC
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in the state where the
property is located,
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unless of course, you're
using a land trust,
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and then you can do it a different way,
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and I have plenty of
videos on that, as well.
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Don't fall into that trap.
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Don't let the slick
salesman on the other end
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of that phone line convince
you to do something
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that is not in your best interests.
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This is never, real estate investing
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is never a one-size-fits-all approach.
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(upbeat music)
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