I receive some questions each week from real estate investors who are unsure how to properly structure their investing. Unfortunately, many of these investors have already been set up with complicated structures by entity mills that only understand one thing – how to process credit cards. Consider Karen, who was set up with Nevada LLC sponsoring a Qualified Retirement Plan “QRP”, which owned a Wyoming LLC. She was told this was the appropriate structure for someone who wants to use her IRA or rollover 401k for real estate. Granted, if you are a reader of my previous posts you know I am a strong proponent of QRPs over Self-Directed IRAs, but this plan was utterly ridiculous and here is why:
- Karen has an existing business with no employees this entity should have sponsored the QRP because the Nevada LLC has no business purpose and she could use the plan to make 401k or profit sharing contributions thereby reducing her taxable income;
- The property she plans to acquire inside of the QRP owned Wyoming LLC is located in Indiana thus; the Wyoming LLC will need to register in Indiana, an added cost; and
- The Nevada LLC’s business purpose is to buy and sell real estate. Karen does not plan to engage in any real estate outside of her QRP thus, the Nevada LLC lacks a business purpose and could potentially disqualify her QRP for not being a legitimate plan sponsor; and
- The salesman told her she should set up another QRP for her consulting business to reduce income taxes. Total sham. The existing business is covered under the Nevada LLC sponsored QRP because she owns both companies.
I am tired of investors like Karen being taken advantage of by unscrupulous salesmen who lack the knowledge to advise anyone on this subject and are only interested in a commission. Join me on a call each Wednesday and I will answer your real estate tax and asset protection questions between 8:00 and 9:00 A.M. Pacific. This program is called Clint’s Office Hours and it is FREE for any who wish to attend. Here is a link you can use to be part of the discussion: JOIN CLINT’S OFFICE HOURS.
Further, below is video from today’s inaugural call. I hope to speak with you shortly.