You need to make sure your LLC is set up the right way—otherwise, all those benefits you thought you were getting? Asset protection, tax savings, legitimacy… you might not be getting any of it.

This is where a lot of people mess up. After 20+ years and thousands of LLCs formed for clients nationwide, I’ve seen how small mistakes at the start can turn into expensive problems later.

In this article—I’ll walk you through the four steps to properly set up your LLC and the key decisions you don’t want to get wrong.

Step 1: File Your Articles of Organization

The articles or organization is the official document filed with your state that forms the LLC. It includes:

• Your business name
• Registered agent (who gets served lawsuits and legal notices
• Management structure (manager vs. member-managed) – Member is LLC lingo for “owner”
• Principal address

What state should you file in?
File in the state where you’re actually doing business. If you live in California and own a rental in Ohio, file in Ohio. Don’t fall for the “Delaware or Wyoming” structure unless you’re in an advanced situation and you’re intentionally layering for privacy, capital raising, or charging order protection (more on that in another video). Otherwise, filing in the wrong state means double fees and extra registrations.

Tip: Choose manager-managed. It gives you more privacy and flexibility—you list yourself as the manager, not as the owner, which keeps your name as owner off public records in many states. It’s also easier to change ownership as the member owner isn’t listed and doesn’t need to change if say your revocable trust becomes owner of the LLC – or if you add a partner.

Tip: Choose a registered agent company to serve as your registered agent to keep your name and address off the public filing and to avoid getting a lawsuit or served at your home. If you’re setting up an LLC in a state where you do not reside you must use a registered agent company as every state requires a physical address (no PO Box) and a person or company AT that address be listed. This can cost you from $125/yr to $350/year depending on the company. My clients use our registered agent company, Main Street Business Services who serves as Registered Agent for $125/yr in all 50 states.

Step 2: Get an EIN (Tax ID) from the IRS

An EIN (Employer Identification Number) is like a Social Security number for your business. It’s how the IRS identifies the company for tax purposes. It is also called a tax ID. You’ll need it to:

• Open a business bank account
• Receive 1099s
• File taxes for the business

You can get this directly from the IRS. Our law firm includes this in our LLC setup service.

Step 3: Create Your Operating Agreement & Initial Minutes

The operating agreement is a much more detailed document than the articles. It documents:

• The Limited Liability protection.
• Who owns the LLC
• How much each person owns
• Rights and responsibilities of members and managers
• Profit splits and dispute resolution

If you have partners or investors, this is critical. Your operating agreement is your partnership agreement. It’s your roadmap—and skipping it leads to confusion and legal chaos down the line.

Step 4: Choose the Right Tax Status

LLCs don’t save taxes by default. The savings come from how your LLC is structured for tax planning.

By default:

• A single-member LLC is taxed as a sole proprietorship
• A multi-member LLC is taxed as a partnership

But you can elect to be taxed as an S corporation, and that’s where real tax strategy comes into play—especially if you’re earning more than $50,000 in net income and running a service-based business.

Here’s how it works:

S Corporation Tax Strategy

If you make $100,000 as a sole prop or default LLC, you pay 15.3% self-employment tax to the IRS on the full amount—$15,300 just in SE tax.

With an S corporation, you can split that $100K into:

• $40K salary (subject to self-employment tax)
• $60K distribution (not subject to SE tax)

• Annual savings: ~$9,000

You still pay regular income tax based on your tax bracket on both, but avoiding SE tax on the net profit portion is a significant win.

Important: Only elect S corp if you’re operating a business and clearing $50K+ net profit. If you own rentals or only make a few thousand (cost of s-corp return not worth not worth saving), the S election doesn’t help and might hurt.

You can make the election later if needed—just don’t wait too long and miss your opportunity to save on taxes.

BONUS: Skip the BOI Filing (For Now)

You may have heard about the Beneficial Ownership Information (BOI) filing with FinCEN. It was set to apply to most LLCs in 2024—but due to federal court rulings and guidance from the U.S. Treasury Department, you do not need to file a BOI report in 2025 if you’re a U.S. LLC or corporation. The Treasury Department states that they will not enforce the BOI rule.

That could change in future administrations, but for now—skip it.

Recap: The Right Way to Set Up Your LLC

To do it right, make sure you check all these boxes:

• Articles of Organization in the correct state
• Manager-managed structure for ownership privacy and ease of use
• EIN from the IRS
• Operating Agreement & Minutes (even if it’s just you)
• S Corp election (if you’re earning over $50K from services)
• No BOI filing required (for now)

Need Help?

Our law firm, KKOS Lawyers, can handle all of this for you—proper filing, EIN, operating agreement, S election, and more. We’ve set up thousands of LLCs and know how to tailor the setup for your unique situation.

👉 Get Started with KKOS Lawyers

Key Takeaways

• File in the state where you do business – Not where influencers say. Avoid double fees.
• Go manager-managed – Gives you privacy and keeps your ownership off public record.
• EIN and bank account are essential – You need both to operate cleanly and separate business from personal finances.
• Operating agreement matters – Especially with partners. Don’t skip this documentation.
• Elect S Corp if you’re earning $50K+ in net income – It can save you $9,000/year in self-employment tax.
• Skip the BOI filing for now – It’s not required in 2025 due to U.S. Treasury guidance.
• Choose a Registered Agent company to keep your name and address off the state filing and to avoid getting served lawsuits or legal notices at your home or business. It’s also required to use a R.A. company if you don’t live in the state of the LLC.

Do you need an LLC for your business or your real estate investments?

This is the most common question we get from entrepreneurs, side hustlers, and real estate investors—and for good reason. LLCs are one of the powerful tools for protecting assets, building legitimacy, and structuring ownership the right way.

But not everyone needs one.

After setting up over 10,000 LLCs nationwide through my law firm, KKOS Lawyers here are the four key scenarios where you absolutely should have an LLC—and what you’re risking if you don’t.

1. You Need Asset Protection

The #1 reason to form an LLC is to protect yourself from liability. LLC stands for Limited Liability Company—and the “limited” part is the whole point.

If something goes wrong in the business—whether it’s a tenant slip-and-fall, a customer lawsuit, or a product dispute—the lawsuit is forced to stop at the LLC. The suing plaintiff can only go after the LLC and its assets. That means your personal assets (home, savings, retirement accounts) are shielded.

Without an LLC, everything you own is at risk. And if you’re running a business or managing real estate, it’s not a matter of if liabilities arise—it’s when.

2. You’re Starting a Business and Want to Be Taken Seriously

If you’re working with customers, contractors, or vendors—or you want to hire employees—you need a real business structure. A DBA (“doing business as”) isn’t enough.

People take you more seriously when you have an LLC. It adds credibility and gives your business a professional structure for:

• Opening a business bank account
• Establishing a company name and brand
  
• Tracking business income and expenses- separate from your personal life
  
• Establishing business credit
  
• Applying for financing
• Contracting with potential customers
• Hiring Employees or Contractors

You want to build a legit business? Act like one. Set up an LLC. That being said, if you’re driving Door Dash on the weekends, you’re self-employed, but don’t necessarily need an LLC

3. You Have Business Partners or Investors

Anytime there’s another party involved—whether it’s a service-based partnership or a financial investor—you need clear documentation.

That’s where the operating agreement for your LLC comes in. It spells out:

• Who owns what
• What everyone’s responsibilities are
• How profits (and losses) are split
• What happens if someone leaves or needs to invest more capital

If you skip this step, you’re begging for a future dispute. This is your company’s prenup—don’t run a partnership without one.

4. You Own (or Plan to Own) Rental Properties

Rental properties come with liability risk—tenants, contractors, injuries, and more. That’s why real estate investors should use an LLC to hold their properties. If there’s ever a legal issue, the lawsuit hits the LLC, not you.

But be careful: you don’t want to put every property in an LLC.

• Primary residence? No—your name should be put into your revocable living trust for estate planning.
• Second home that’s also an Airbnb? Yes—consider an LLC for asset protection.If it generates income and has legal risk (e.g. tenants), it probably belongs in an LLC.
  

  *See diagram below from KKOS Lawyers where we illustrate a strategic diagram organizing the three major areas of an entrepreneur’s tax and legal world.
  
  

   

Ask Yourself These 4 Questions

Still unsure whether you really need an LLC? Ask yourself these four questions:

1. Do I need asset protection?
   If there’s risk involved in what you’re doing—customers, clients, employees, tenants—you probably do.
2. Am I starting a company?
   You’ll need an LLC to open a business account, to keep finances clean, to establish your company name and brand, and build legitimacy.
3. Do I have partners or investors?
   Then you absolutely need an operating agreement (aka partnership agreement) to define roles and protect everyone involved.
4. Do I own rental property or other risk-based assets?
   If it has liability exposure (e.g. tenants), it needs to be in an LLC.

If you answered yes to any of these, it’s time to consider forming an LLC.

Tax Considerations

When you set up an LLC you need to make tax elections. Doing this incorrectly will cost you greatly with the IRS. In general you should make the following S-Corp elections:

• Operating Businesses: If you sell goods or services at less than $50K per year – choose to be taxed as an S-Corp – See vid above for why
• Partnership: If you have a partner or more than 1 owner you’ll typically opt partnership
• Sole Proprietorship: If you have a rental or an operating business making less than $50K per year

Final Thoughts

LLCs aren’t one-size-fits-all—but they’re a smart move in the right situations.

At KKOS Lawyers, we’ve helped thousands of clients form, fix, and optimize their LLCs in all 50 states. Whether you’re starting something new or need to clean up an existing structure, we can help.

Contact KKOS Lawyers to Get Started

Key Takeaways

• LLCs protect your personal assets – If something goes wrong in the business, lawsuits stop at the LLC.
• A real company needs a real structure – An LLC adds legitimacy, helps you get financing, and separates business from personal finances.
• Partners and investors = operating agreement – Don’t run a business with others unless you have the terms spelled out.
• Rental properties should be in an LLC – It protects your other assets and keeps your real estate investments legally insulated.
• Ask the right questions – If you’re dealing with liability, growth, partnerships, or rental income, an LLC is likely the right call.
• LLC’s can be taxed differently – Choose the right tax election for your situation to minimize your tax liability

The House Ways and Means Committee released its sweeping tax bill with tax provisions for small businesses and individuals. From QSBS Small Business 199A Deduction of 22% (made permanent) to individual reduced rates and increased standard deductions, there are plenty of breaks and benefits for every taxpayer.

📄 Download the Full Explanation from the Joint Committee on Taxation
👉 View the Full Explanation PDF

📘 Read the House Summary of the Tax Bill
👉 View the Summary (JCX-18-25)

Key Proposed Changes:

• Increased Qualified Business Income Deduction (above the current 20%).
• Expanded Child Tax Credit and higher individual tax credits.
• Permanent extension of several key tax cuts from the prior tax reform.
• Enhanced standard deduction and additional temporary increases.

What to Do When the Stock Market Drops

The market’s dropping, and your portfolio’s taking a hit. If you’re like most investors, your first instinct might be to panic—maybe even pull everything out and wait it out in cash.

But before you make a move, take a breath. Let’s talk strategy.

The S&P 500 is now down more than 15% from its recent high. That means a $100,000 account might be sitting at $85,000 today. But this isn’t the time to get emotional. It’s time to get smart.

Here are three critical things you should do when the market drops—because corrections are part of the cycle, and smart investors use them to build wealth, not lose it.

1. The Market Always Comes Back

Let’s get this straight: the market always recovers. That’s not wishful thinking—it’s data.

In the last 20 years, the S&P 500 has experienced 26 market corrections. That’s more than one a year. In 2022, the S&P dropped 27%… and came back within 282 days. In 2024? A 6% dip. Again, it bounced back.

Today we’re in a 15% correction. History tells us what happens next: recovery.

If you’re a long-term investor, the worst move you can make is panic-selling at the bottom. Wealth is built by staying the course through the downturns—because that’s how you’re still holding the bag when it starts climbing again.

That said, not every sale is a panic move. Which brings us to…

2. Use the Downturn to Your Advantage: Tax Loss Harvesting

Let’s add some nuance here: not all selling is bad. Smart investors know how to use a market decline to create opportunity—without abandoning their investment strategy.

Enter: tax loss harvesting.

Let’s say you bought $300,000 of an S&P 500 index fund. It’s now worth $255,000. If you sell today, you lock in a $45,000 capital loss.

That $45,000 can be used to offset capital gains from other investments—reducing your tax bill now or in future years.

But here’s the key: you’re not leaving the market. You take that $255,000 and reinvest it in a similar (but not identical) fund—maintaining your market exposure, while locking in the tax benefit.

This is not panic selling. It’s strategic repositioning.

Just make sure you avoid the wash sale rule—you can’t buy back the exact same fund within 30 days. Work with your advisor to choose a comparable asset.

3. Re-Evaluate Your Allocation: Are You Too Heavy in Stocks?

If this downturn has you sweating bullets, it might be a sign that your portfolio is overallocated to the stock market.

And here’s a stat that should make you pause:

• Mass affluent investors (net worth ~$1M) have 86% of their portfolio in stocks
  
• High-net-worth investors (net worth over $10M) have just 19% in stocks

What’s in the rest of their portfolio?

• Real estate
• Private equity
• Private funds
• Oil & gas
• Crypto
• Other alternative assets

The ultra-wealthy diversify intentionally—and for good reason. These assets often deliver higher returns with lower volatility than the public markets.

Even JP Morgan agrees: their recommended “modern portfolio” now includes:

• 40% stocks
• 30% bonds
• 30% alternatives

At Directed IRA, we’ve helped thousands of investors shift their retirement dollars into alternatives—real estate, private funds, even crypto. These are all assets your IRA or 401(k) can legally own through a self-directed account.

Want to Diversify with Your IRA?

If you’ve never heard of using your IRA to invest in alternatives, you’re not alone—but you’re missing a massive opportunity.

📞 Book a call with our team at Directed IRA

We’ll show you how to use your IRA or solo 401(k) to invest beyond the stock market—with full IRS compliance.

Key Takeaways

•  The market always comes back – 26 corrections in 20 years, and every one recovered.
•  Tax loss harvesting can be smart – Strategic selling lets you lock in losses for tax benefits—without exiting the market.
• Diversify like the wealthy – Ultra-wealthy investors allocate less to stocks and more to alternatives like real estate, private equity, venture capital, private funds, and even crypto.
• Don’t sell low—unless it’s strategic – Stay invested to benefit from the rebound. If you’re selling, have a plan (like tax-loss harvesting or reallocating to alternatives).

How the “Buy, Borrow, Die” Strategy Builds Wealth and Avoids Taxes

What if you could access millions in wealth without selling your assets—or paying a dime in taxes? That’s exactly what the wealthiest Americans have been doing for decades using a strategy called Buy, Borrow, Die.

While it may sound like a clickbait slogan, this approach is a time-tested way to build and preserve wealth. And despite what you may think, it’s not just for billionaires. Everyday investors use the same strategy with brokerage accounts, real estate, and small businesses.

In this article, we’ll break down how Buy, Borrow, Die works, why it’s so effective, and how you can start using it to grow your wealth while minimizing taxes—legally.

Step 1: Buy Appreciating, Income-Producing Assets

The first step is buying assets you understand—those that generate income and have the potential to appreciate over time.

Think:

• Investment real estate (rental properties)
• Stock Portfolios (stocks, ETFs, mutual funds)
• Privately held businesses (your own company or private equity)

These assets grow over time and, in many cases, generate cash flow along the way via rental income or dividends. That means they not only increase your net worth, they also create ongoing income—which sets the stage for the “borrow” part of the strategy.

Key Rule: Don’t buy and sell. Buy and hold. That’s where real wealth is built.

Step 2: Borrow Against the Assets (Without Selling)

This is where most of the tax planning magic happens.

Rather than selling your appreciated assets—and triggering capital gains tax—you borrow against them. Equity in assets accessed via a loan isn’t taxable income. That means you can unlock your wealth selling assets or owing the IRS.

Two Common Borrowing Scenarios for Building Wealth

1. Brokerage Account
   Let’s say you’ve built a $1M stock portfolio. You need $200K for a large expense—could be taxes, a business opportunity, or even a major life event.

• Option A: Sell investments → You trigger capital gains tax. Depending on your bracket and state, you could lose $50K or more just in taxes.
• Option B: Borrow against your portfolio → You pay no tax. Your portfolio stays fully invested and continues to grow.

This strategy is called securities-based lending. With a securities-backed line of credit, firms like JP Morgan, Wells Fargo, or your private bank will lend you 70–90% of your portfolio’s value, using your stocks, bonds, or mutual funds as collateral.

• Stay invested
• Access low-interest liquidity
• Avoid triggering capital gains tax

Bottom line: You get the cash you need—without dismantling your long-term investment plan.

📉 See chart above: Client B uses a line of credit instead of liquidating assets. They keep their portfolio fully invested, pay minimal loan interest, and walk away with $148,500 more in net returns.

2. Investment Real Estate (Cash-Out Refi)
   Own a $1M rental property with equity? Use a cash-out refinance to pull $700K without selling. You still own the asset, still collect rent, and you pay no tax on the money you borrowed.

Step 3: Die (and Pass It on Tax-Free)

Let’s be honest—this is the least fun part of the strategy. But it’s one of the most powerful.

When you die, your heirs receive a step-up in basis. That means all of the appreciation during your lifetime—stocks, real estate, businesses—is wiped clean from a tax standpoint.

Let’s say:

• You bought a stock for $100K
• It’s worth $1M when you pass away
• You borrowed $700K against it during your lifetime

Your heirs inherit the asset at a $1M stepped up basis – which means they can sell it the next day for $1M and pay zero capital gains tax. The $700K loan is paid off, and the rest goes to them tax-free. In the end neither you nor your heirs paid capital gains tax.

Why This Strategy Works (Even If You’re Not a Billionaire)

You don’t need a $10M portfolio to use this. In fact, many investors use this strategy with:

• $250K brokerage accounts
• A single rental property
• Business equity

Here’s why it works:

• Loans are not taxable
• Assets keep appreciating
• You avoid selling (and shrinking) your net worth
• Your heirs benefit from a tax-free step-up in basis

Congress has taken notice and bills have been introduced to limit or eliminate the step-up in basis. There have even been bills intended to tax you when you access equity in an asset via a loan. Those bills have all failed. For now, Buy, Borrow, Die remains one of the most powerful—and legal—wealth-building and tax-saving strategies available.

Key Takeaways

• Buy assets that appreciate and produce income
• Don’t sell—borrow
• Loans are not taxable income
• Borrowing allows you to enjoy your wealth without shrinking your net worth
• Your heirs can inherit assets tax-free with a step-up in basis
• This strategy works for real estate, stock portfolios, and even businesses

Ready to Build Your Wealth—Step by Step?

The Buy, Borrow, Die strategy is just one piece of a bigger picture. If you want to know where to start and what to do next, download Mat’s guide on the Ideal Order of Investing.

Whether you’re just getting started or ready to expand into real estate, Roth IRAs, or alternative assets—this is the roadmap.

👉 Download the Free Guide: The Ideal Order of Investing

Take control of your financial future—one smart move at a time.