Our LLC Real Estate Compliance Coaching Program is an on-going year-round coaching, planning and compliance system specifically designed for LLCs holding rentals, long-term real estate and passive investments, which receive favorable tax treatment under the passive activity provisions of the Tax Code.
The program helps to protect your LLC’s tax and asset protection benefits by outsourcing the on-going compliance to us. By letting us maintain your LLC’s Records Book, your LLC is more assured of maintaining legal standing and protection of its benefits, contracts and the very purpose for its existence.
Our compliance services include handling your LLC filings and other compliance requirements, holding your annual meeting, any special meetings, recording the minutes and resolutions and more. Occasionally, you’ll need minutes more often than annually, which we include in the program. (See: “LLC compliance and filings” below for a partial list of compliance services included).
Our systematic coaching services includes answers to your questions in writing, occasional classes at our location, on-going educational modules on essential concepts of real estate LLCs, advisory for good practices to minimize lawsuits and problems, recordkeeping helps to survive legal challenges and IRS audits, tools to avoid alter ego actions, which can undo your benefits and more.
Combining compliance, coaching and tax planning helps to maximize your LLCs tax benefits, protect your personal assets from legal actions against your LLC, reduce your stress and allow you time for things you value most. All at an affordable fee. There’s no other program like this anywhere.
Maintaining legal standing. LLCs provide great asset protection, but only IF properly formed and maintained. Many California LLCs have absolutely no legal standing, due to incomplete formation and lack of compliance. Lack of legal standing may void your LLC’s contracts, thus barring your LLC from enforcing or defending its contracts or from collecting damages. Often owners aren’t aware until legal issues arise. This program helps maintain legal standing.
CA LLCs can lose legal standing for any of the following reasons:
- If suspended or forfeited by the Secretary of State or FTB.
- For failure to adopt operating agreements.
- Failure to file Statements of Information.
- Out-of-state LLCs for failure to register to do business in CA.
- Failure to file returns or pay taxes and more.
Having approved Articles and being listed on the Secretary of State website DOES NOT grant legal standing. Lack of legal standing destroys business and allows creditors and judgments to attach to the personal assets of owners. This program is designed to maintain the legal standing of your LLC.
Alter ego blunders pierce LLC protections. LLCs are often formed to protect the homes and personal assets of their owners from business liability, but for most, it’s a myth! Most have NO protection whatsoever, because their owners commit alter ego blunders.
Alter ego results when owners fail to treat their LLCs as separate and distinct from themselves. When that happens, the law views LLCs as alter egos of the owners, dissolving the veil of separation, thus allowing LLC assets and personal assets to be available to judgements and creditors of the other. This program helps you avoid alter ego blunders.
LLCs are separate from their owners and must NOT pay personal expenses and owners of LLCs must NOT personally pay LLC expenses or it could lose the asset protection provided by law and be denied tax benefits (due to alter ego).
Vehicles and alter ego. Members of LLCs often create alter ego problems in how they deduct vehicles used for LLCs. LLCs must NOT DEDUCT expenses or reimburse expenses for members’ personally owned vehicles. When company-owned vehicles are provided to members, the Tax Code treats any personal use (like commuting) as guaranteed payments (for LLCs not taxed as corps).
Alter ego, IRS and operating agreements. The IRS and Tax Court used alter ego to deny tax benefits in disallowing an LLC partner’s deduction on his 1040 for expenses incurred in using his personal vehicle in LLC business, because there was no provision in the LLC operating agreement that required him to pay LLC expenses from personal funds. (Michael Hines, TCS 2004-55).
Our recommendations are based on court cases. We use court cases for our advice in this program. For example, based on the case cited above, we advise members of LLCs, who drive personally owned autos for LLC business, that their Operating Agreement MUST require them to use their autos for LLC activities and authorize them to deduct expenses for qualified business use.
Educational modules to convey essential concepts. About once a month you will receive an in-depth email module regarding important topics pertaining to real estate LLCs and real estate holdings. Each module will focus on one major idea and provide in-depth discussion of the topic, including court cases to help convey the importance of the issue. (See below for list of module topics).
Access to our team of professionals. You will have access to our tax and compliance professionals throughout the year for questions on real estate LLCs, taxes and compliance issues without charge by email or telephone. We usually respond in writing to reduce misunderstandings and so that you can reference our answers at a later date or when it’s time to implement a strategy for you.
We’re able to provide the program for a flat monthly fee of $25 once your LLC Records Book is brought current. Contact us for a quote on what it will take to bring your LLC’s Book up to date. Once current, your LLC should qualify for our on-going compliance and coaching program.
We can provide the program for a low fee by combing custom hands-on LLC compliance with educational modules (see above), saving you lots of money by not paying hourly consulting fees. We follow up to answer your questions and implement any concepts included in the program for no additional cost to you.
Caveat: This program is designed for non-business LLCs holding rentals, long-term real estate and passive investments, which receive favorable tax treatment under the passive activity provisions of the Tax Code.
The program is NOT for LLCs that operate businesses, those taxed as corps or for real estate activities taxed as businesses, like flipping, development or agent-broker real estate sales. Real estate businesses generally do best as S-corps and should subscribe to our Biz Tax & Compliance Coaching Program.
COMPLIANCE SERVICES & EDUCATIONAL MODULES
The following describes some of the services and educational concepts covered in the program. It may seem overwhelming, but don’t worry—we deal with ONE CONCEPT AT A TIME. That is why it is on-going. Over time you will better understand WHAT to do and WHY it must be done a particular way.
LLC compliance and filings (partial list of included services)
- On-going LLC document compliance as required for legal standing
- Custom preparation and filing of required State docs to avoid penalties
- We serve as your LLC’s Agent for Service of Process
- We facilitate your Annual Meeting & formalize your minutes
- Complete upkeep of your LLC Records Book
- Prepare Resolutions when needed
- Adoption of Agreements when needed to pass IRS scrutiny
- Discuss asset protection issues and alter ego problems
- All LLC documents digitally backed up and stored for your protection
The following are some of the topics to be addressed in future modules:
Protecting your assets and LLC benefits
- Segregating assets & activities into separate legal buckets
- Titling real estate for best protections
- Coaching managers on how to avoid alter ego problems
- Enacting good practices to minimize legal problems
- Risk management, agreements, and the role of insurance
- Protecting benefits with proper Agreements and records
- Increasing privacy using land trusts and LLCs
- Complying with applicable Federal, State & local laws
Tax and legal structuring of your real estate holdings
- The best tax and legal structure for your circumstances and goals
- Protecting tax benefits with proper compliance and recordkeeping
- Should your LLC own the work vehicle?
- The best way to deduct vehicles used for LLCs
- The best way to dispose of vehicles used for LLCs
- Better ways to deduct your home office
- Lessons learned from court cases
IRS audit compliance
- Maintaining records that prove tax & legal structure chosen
- Lowering your chance of an IRS audit
- Recommended documents & agreements to withstand IRS scrutiny
- Mileage logs & time logs (vacation rentals, active or material participation)
- The proper way to document travel, meals and entertainment expenses
- Proving basis, mortgage tracing, proper recordkeeping and retention
- Recordkeeping templates for better tracking of expenses
Taxation of real estate
- Profit motive, business purpose & fair-market-rents—keys to deductions
- Real estate taxed as investments vs. real estate taxed as businesses
- Residences, second homes and “rentals” deemed residences
- Variations in the taxation of real estate-passive, active, material, personal
- Investor vs. dealer tax issues
- 1031 exchanges—deferring or avoiding taxation on gains
- Mortgage interest deductions and tracing issues
- Co-ownership of real estate, TICs, JVs, LLC members, etc.
- Repairs vs. capital improvements—tax issues, records, compliance
- Foreclosures, short-sales, cancellation of debt tax issues and reporting
- Secured notes, defaults and repossessions
- Vacation rentals, short-term stays, taxed as “hotels” or “residence inn” biz
- What real estate should be held in LLCs, which ones in S corps?
Landlord-tenant issues and compliance
- Avoiding discrimination and fair housing complaints
- Landlord limitations, tenant notifications and privacy rights
- Better rental, lease agreements
- Safety and maintenance issues and inspections
Contracts & contractor Issues
- What should be in a contract?
- Problems using unlicensed contractors
- Contractor relationships; misclassified employee issues
- Protecting your LLC’s contracts from being null and void
Real estate holdings outside of California
- Registering out-of-state LLC doing business in California
- Out-of-state real estate, situs laws and nexus issues
- LLC management, nexus and California tax filings
- What you should know about hiring employees and/ or family members
- Which Labor laws should you be concerned about?
- EDD, Workers Comp, payroll reporting docs and compliance issues
- Sample Employment contracts; employee handbook & policies
- Employee reimbursement plans; employee benefits
- Protecting yourself from employee lawsuits; HR court cases
- Are you exposing your assets to undo risk?
- How to avoid major landlord and investor blunders
- Protecting your personal assets from tenant and investor liability
- Protecting your LLC from personal judgments and legal issues
- Types of agreements and contracts needed
- What types of insurance coverage is needed?
- How to better protect your data from cyber-attacks and theft
- Setting up records retention system; how long to retain them?
Estate and succession planning
- Eliminating probate issues and fees
- Estate planning and aging issues for business owners
- Techniques in passing real estate to the next generation
- When to use family limited partnerships in succession planning
- Gifting highly appreciated real estate to charities for tax benefits
Real estate in retirement plans
- Types of real estate investments in qualified retirement plans
- When to self-direct your retirement plans
- Opportunities and problems with self-directed retirement plans
- Unlimited access by email for your real estate questions
- Monthly prompting to include management decisions in your Minutes
- Annual assessment of your tax and legal structure and real estate goals
- Education modules with timely articles, information, alerts and updates
- Updates on new compliance legislation
- Ongoing tax tips, alerts and updates when the rules change
- Occasional classroom education at our location