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The Limited Liability Company (LLC) is neither a partnership nor a corporation. It is a particular type of
organization that many find combines the best of both corporations and partnerships. As a separate entity for
liability protection, it has the corporate advantage of limited liability. LLC participants are protected from personal
liability for LLC debts, except to the extent of their investment in the LLC. The participants of the LLC also receive
the partnership-like advantage of pass-through taxation, unless they elect to be taxed as a C corporation. LLC
participants are called members, and though a managing member makes the active business decisions, all the LLC’s
members are treated equally or as agreed upon in their articles of organization or the operating agreement. An LLC
is almost identical from both a tax and liability perspective to an S corporation, but the annual reporting
requirements and other more flexible tax treatments make them the most popular of entity structures today,
particularly for real estate investing.

Trusts

A trust is a legal structure that is used to hold legal title to property for the benefit of one or more persons. There are
usually three parties to a trust: (1) the trust creator or grantor, who creates the trust; (2) the trustee, the person or
institution holding legal title to the property; and (3) the beneficiary or beneficiaries who are intended to benefit
from the trust. The trust serves as a separate entity, used for estate planning and sometimes for asset protection
purposes. Typically a trust is outside the reach of creditors and inaccessible as a means of satisfying other debt
obligations, but only if it is irrevocable, that is, if it cannot be changed by the grantor, which is not always the case.
For example, a family living trust is a revocable trust that allows the assets to avoid going through probate but
provides no liability protection. As a result, if you have a living trust and want asset protection, you may need other
constructs or entities to protect you from liability. The trust is also outside the reach of the beneficiaries themselves,
until a designated date. Trusts can also be used in certain cases to pass a certain amount of property along tax-free.
I always recommend that a trust be the umbrella of your entire organization and all your entities, so that your
trust, and not you, is named as a participant in each of your businesses. From now on it’s not about you making
money; it’s about your company making money. Any of these entities may serve your purposes, and it is important
to recognize the benefits and limitations of each one. For example, the entities that allow taxes to pass through, such
as the S corporation, the LLC, and the trusts, also provide business continuity after you die. I recommend that you
consider several legal entities as part of your wealth structure, each serving as a vehicle for like-type assets. It is
important to engage a qualified attorney on your team and follow his or her advice as you lead your wealth creation.

Maximizing Tax Strategies
In my experience, most business owners and investors don’t make proper use of legitimate business deductions.
They pay too many deductible business expenses from their personal funds. This failure frequently costs them
substantial amounts of money that could be invested in their business or other wealth-generating assets. The
following list identifies some of the typical business expenses that you can deduct to minimize your tax burden. You
must have a legal business structure in place in order to take advantage of these deductions. Also, each entity has its
own guidelines and legal specifications that determine what can be deducted and for how much. Possible business
deductions include

Utilities
Computer equipment
Rent for office or home office deduction
Phone
Office supplies
Employee salaries and bonuses
Fees for legal, accounting, bookkeeping, coaching, mentoring, and contractors
Education
Internet
Web sites
Marketing