Business Credit For Small Business

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Michael Wedaa  – Augmentus Business Solutions

 

Podcast Overview:

00:00 Understanding Business Credit Types
07:23 “Ensuring Business Credit Readiness”
12:22 Boost Business Credit with Proper Address
18:05 Kid-Friendly Jobs and Saving Tips
22:51 Passive Income through Market Rent Strategy
31:32 Protecting Assets with Equity Liens
36:55 Strategic Lien Planning Explained
41:22 Real Estate Investing with Business Credit
46:18 Delaware Business Court Advantage
48:50 “Registered Agent Requirement for Businesses”
59:11 Asset Protection Through Liens
01:04:44 “Business Rogue: Advanced Corporation Hacks”

Podcast Transcription:

Michael Wedaa [00:00:00]:
No, but, you know, business credit is what I wanted to talk about today. As you know, we focus on helping people get the most out of their corporation or llc. And one of the ways we help people do that is by helping them build business credit. And business credit is very different from personal credit. The rules are different.

James Kademan [00:00:25]:
You have found Authentic Business Adventures, the business program that brings you the struggle stories and and triumphant successes of business owners across the land. Downloadable audio episodes can be found in the podcast link found@drawincustomers.com we are locally underwritten by the bank of Sun Prairie Calls On Call, Extraordinary Answering Service, as well as the Bold Business book. And today we’re welcoming Slash, preparing to learn from Michael Wedaa of Augmentus Business Solutions. And Michael, we’re hitting a lot of things here. The business credit, I believe, is the main one. So let’s just start out with what is business credit?

Michael Wedaa [00:01:01]:
Great. No, first off, James, it’s great to spend some time with you again. It’s been a while since we last.

James Kademan [00:01:06]:
Chatted, but it has, you know, it’s funny. I’ll just elude here a little bit. YouTube is moving into shorts and all that jazz because they’re trying to compete with all the other social media things that have short videos. And so we just got fancy software, whatever to find shorts. And it’s interesting because some interviews, you’re like, yeah, there’s a handful. And yours is like, ba, bam, bam, bam, bam, bam, bam, bam. All good stuff. So I’m so happy that we have you on here a second time because, well, good.

James Kademan [00:01:34]:
Now we get more content for the masses.

Michael Wedaa [00:01:36]:
Right? That’s right. That’s right. No, but, you know, business credit is what I wanted to talk about today. As you know, we focus on helping people get the most out of their corporation or llc. And one of the ways we help people do that is, is by helping them build business credit. And business credit is very different from personal credit. The rules are different. The way you build it is different.

Michael Wedaa [00:01:59]:
And, you know, you asked me what is business credit? And business credit is credit that is tied to the ein of a business that comes in two forms, personally guaranteed and non personally guaranteed. The personally guaranteed credit is where you would put your Social Security up, Social Security number up as a business owner. And what you’re doing is you’re guaranteeing that debt so that the business can’t pay it, then it transfers over to you as an individual. And it makes the banks feel good that they have that second route of recourse, really. And then the non personally guaranteed stuff. If you can get your business credit score up high enough and get your profile looking good enough, there are banks that will give you credit lines without being tied to a to your social. So what’s great about that is that if you have trouble with your business and you need to shut it down and bankrupt the company, all they can do is take the assets in the business. So it’s important to know when people are applying for business credit, what’s personally guaranteed and what’s not.

Michael Wedaa [00:03:00]:
And really the best way to say it is that in most cases, if it’s a major signature bank like a Chase or a Wells Fargo or a Bank of America, nine times out of 10 it’s going to be a personally guaranteed account. If you’re going for a credit card, right? And people, that’s not a bad thing. You know it, all it does is it shows an inquiry on your credit. But if I got a $25,000 credit line tomorrow from let’s say Chase, all it would show is an inquiry. My personal credit, it wouldn’t show that I got my business, got awarded that $25,000 credit line. And if I maxed it out tomorrow, it would only show on my business credit profile, not on the personal credit profile. Because it’s simply a personally guaranteed personal guarantee. It doesn’t show up active account on the personal credit.

James Kademan [00:03:49]:
Oh, interesting. So you do your Experian or whatever they are, you wouldn’t see that card listed as either available credit or debt that you have there.

Michael Wedaa [00:04:02]:
Yes, because you know if you max out a card on the personal side, you get dinged in a big way. Score tanks. Right. So that’s what’s great, is that the only way your credit gets dinged is through that initial inquiry and then if you default on the debt, it will then report on your personal credit score. But if you’re just maintaining the debt and it’s fine, only one thing you’re going to see is that inquiry. Everything else will remain incognito on the business profile.

James Kademan [00:04:27]:
Interesting. So the credit bureaus, right? There’s three of them, is that right?

Michael Wedaa [00:04:32]:
Yep, that’s right.

James Kademan [00:04:33]:
Experian’s one that’s top of mind. But I’m sure there’s another two. I can’t think of their names.

Michael Wedaa [00:04:37]:
Yeah, there’s Equifax, TransUnion.

James Kademan [00:04:40]:
There we go.

Michael Wedaa [00:04:41]:
Yes, there you go.

James Kademan [00:04:42]:
Those are the three from the business side. Is it still those three companies or are there different companies?

Michael Wedaa [00:04:47]:
There’s two that are the same. There’s Dun and Bradstreet, that’s the biggest one. And then there’s Business Experian and Business Equifax. Those are the three big ones. And then there’s, you know, they dig into LexisNexis a little bit and a few other smaller ones. But the big three are Dun and Bradstreet, Business Experian and Business Equifax.

James Kademan [00:05:05]:
All right, So I remember way back when we’re talking mid 2000s, I had opened up my first business and Dun and Bradstreet sent me a letter saying, hey, if you want business credit, you have to pay us a nut or a monthly nut or something like that. And I was just a small little, I don’t know if I had two employees, something like that. It was one of those things where I’m like, why would I pay you to have business credit? I don’t need any business credit. Is that still a thing? And if it is a thing, tell us about that thing.

Michael Wedaa [00:05:36]:
Yeah, it is a thing. So here, you don’t need to pay Dun and Bradstreet, even though they will tell you that you need to. You can call them and ask them, say, I need to get a free DUNS number for verification purposes only. That’s the keywords. And they are going to go, oh, we don’t know what you talked about, or no, you needed this or it’s not going to do any good. The person on the phone gets a commission for marketing their monthly plan, their annual plan, right? And so they’re going to tell you, they’re going to fight you tooth and nail to say, you need to pay, you know, this $50 a month or you need to pay $250 for the access for the year. And you just hold fast and say, nope, I need it for verification purposes only. I’m not using it for anything else.

Michael Wedaa [00:06:14]:
And eventually they’ll capitulate and give you your DUNS number. And there is, there’s some free services. We can go in there and actually enter your information, your company information into. You build out your own report. James, that’s one of the biggest differences with personal credit from business credit is that you have to go set up your business credit where on the personal side you go get a card and it also gets set up automatically. You don’t have to go in there and physically do it. So one of the key differences is that, but yes, Dun and Bradstreet go get your Duns number, get it for free, don’t pay for it. The only time you want to pay for it is once you’ve gotten a few credit lines, you want to make sure they’re reporting properly.

Michael Wedaa [00:06:53]:
That’s, that’s the one reason to go. Maybe purchase a one time report or if you’re really active, then do the monthly plan. But when you’re getting started, no need to pay them at all.

James Kademan [00:07:02]:
Interesting. So tell me a little bit more because the personal side, everybody’s got a credit report whether you want it or not.

Michael Wedaa [00:07:08]:
Right.

James Kademan [00:07:08]:
They’re keeping track of all the debt, assets, liabilities that you have and all that kind of stuff. They’re doing you a huge favor. Keeping track of all your numbers.

Michael Wedaa [00:07:16]:
Yeah, yeah, doing you a huge favor. Right.

James Kademan [00:07:18]:
For the business side, you actually have to tell them that what you have going on.

Michael Wedaa [00:07:23]:
Yes. Now sometimes if you get particular credit products, it will report and they’ll generate a, you know, an Equifax number for you, an Experian number, or even a DUNS number for you. But if it’s not reporting, you have to go in there and request a DUNS number and then go in there and enter your company information. All you know, the state of incorporation, the date it was incorporated, the, you know, the business address, all the information that needs to be added. And that’s a key thing here. That’s one of the things we teach people. You know, our company, when we work with people on business credit, we put them through 50 fundability factors before they apply for their first credit line. And one of the factors, getting the address right, if, if your address is your old business address with the Secretary of State or with the IRS or on one of the credit bureaus, there’s an algorithm in a lot of banks that will give you an automatic denial.

Michael Wedaa [00:08:13]:
And so there’s these silly little mistakes. Maybe it says sweet number instead of just number sign for the, you know, suite number. That’ll get you kicked out. And they don’t send you, they don’t have to tell you like they do on personal credit while you got denied, they just go, sorry, we denied your application. So you’re going to keep trying and you’re going to look at your business credit report. Everything looks good. And it might be because your address is off in some way with either the state, the IRS or with one of the business credit bureaus. So, you know, it’s important to know there’s these little nuances that will get a business, even if it’s a strong business with a strong personal guarantor, that it’ll get automatically denied for reasons like that.

James Kademan [00:08:53]:
And is it Is there some way to check that or verify that?

Michael Wedaa [00:08:56]:
Or go to your Secretary of State website and look is the address up to date? You look at your last tax return that was filed by your cpa, it’ll have your address listed there. That address that’s on that is the one that is used by your CPA. CPAs will copy and paste. So if you don’t tell them that you move, they’re going to use the address from before and that can cause a problem for you. But here’s an interesting one. Phone number. Nobody has a landline these days, right? You and I remember those days where we had a landline. If you’re doing business from your cell phone, even if it’s in the business name, it shows up as a red flag on your business credit profile.

Michael Wedaa [00:09:33]:
So you need to get a, either a landline in the business name and, or you need to get a voiceover ip. And the reason for that is it shows up as a business line and it automatically reports to the national 411 directory. And that makes the banks feel like, okay, this is a legitimate business. It doesn’t have that fraud flag. So you could be, you could have a multi million dollar business. And if you’re running it from your cell phone, then it’ll get, it’ll get flagged as a cell phone business as opposed to a landliner voiceover ip.

James Kademan [00:10:02]:
That is interesting. You know, it’s interesting you say that because we. So I have a call answering service and the number of businesses that we reach out to, they’re like, yes, we want caller answering service that they have. The owner’s cell phone is also the main line for their business. It is. And we just did. We signed on a graphic design company, I think they had 15 employees and the owner was about to go on vacation for the first time in however many years. And she’s like, how do we do this? And I’m like, you get a new cell phone with a personal number and you share that with your mom and your friends.

James Kademan [00:10:38]:
But outside of that, that number is now your business number. And it was so interesting because you could just see the fear on her face. I’m like, okay, this is going to be a pain in the butt initially. But once you go through that pain, the business number doesn’t change, right? So that’s just the business number. Your personal thing changes. But think of all the freedom that you’re going to now have. And it’s interesting because after a couple weeks of her, like she finally did it and she’s like, it’s amazing. I went on vacation and nobody bugged me.

Michael Wedaa [00:11:10]:
That’s great. And as a business owner, whether you’re on vacation or not, you shouldn’t be so available. You know, you need to delegate to a team like that. You know, even when you’re home, but especially when you’re on vacation. You and I both know about that because we both like to travel a lot.

James Kademan [00:11:24]:
Yeah, that’s the. Yeah. I don’t want to be in some restaurant hanging out, meeting people and stuff like that. And I’m like, oh, I got to take this call from some customer or employee or something that can actually wait. But Because I’m too easy to get a hold of.

Michael Wedaa [00:11:37]:
That’s it? Yeah, that’s it. You got it right. You got it right.

James Kademan [00:11:41]:
Interesting.

Michael Wedaa [00:11:41]:
So that’s a phone issue. One more thing I just want to cover because there’s 50 fundability factors. So I’m just giving you the top two or three here, if that’s okay. Okay.

James Kademan [00:11:48]:
Yeah.

Michael Wedaa [00:11:48]:
The other one is address. Most of us, we, you know, we do business from our home, and that’s great. You know, we don’t need an office. It shows up as a potential fraud flag on a business credit profile if it’s a residential address. So two ways to solve that. One is get a virtual address. You know, there’s companies like Regis and things like that where you can get for, you know, anywhere from 25 to 60 or 70amonth, depending upon your locale. You can get a virtual address where when they Google it, they see this big office building and you actually have, you know, you can have mail, go there if you like.

Michael Wedaa [00:12:22]:
But what that does is it makes a more robust business credit profile. The bank’s like, okay, this is a legitimate business. It’s a commercially zoned address. So we’re more likely to give them a better interest rate and a higher credit limit. The alternative is if you know a lot of people in business, you can say, hey, you know, if you have a warehouse, one of your friends or one of your clients has a warehouse or an office somewhere, you say, can I use your address? No liability comes on to them for that. It’s just they might get some mail here and there. You know, that’s really it. So if they’re willing to let you do it, that’s another alternative, a free alternative.

Michael Wedaa [00:12:57]:
But then you get to list it on your business credit profile as an actual commercial address, and you have your phone number set up, and you’re going to take care of a lot of issues there as far as getting avoiding those automatic denials when you apply for credit.

James Kademan [00:13:11]:
That’s awesome. One of the things I want to talk about the address a little bit. I was trying to verify something. I don’t remember if it was a Google business profile or something, but it asked for a utility bill. And I’m like, I don’t have a utility. Like I rent. I don’t have a utility bill in that business name at this address. Like, it seemed to me like they were treating it like it should be your house.

James Kademan [00:13:37]:
Right. You get your gas bill or whatever to your name at your address. This is you. But I was thinking when they’re asking for this verification thing with the address, the business name on a utility bill, I bet there’s a lot of businesses that don’t have any utility bills that come directly to them. So I wonder how they get around that.

Michael Wedaa [00:13:56]:
So they are starting to get a little more liberal with that. And so a utility bill is one of the options. Now they will let you. Not everybody, but a lot of banks will let you use an invoice from one of your credit companies. Right. So if you have one of your business credit lines going to the address, you can show them a statement that shows that or a bank statement or some other. It can be a business license that has the address on it in some cases. Right.

Michael Wedaa [00:14:19]:
Or a lease, a lease agreement. You know that, that would also work if the, if the utilities are covered by the landlord. So they’re starting to catch on to that, that, hey, just because I don’t have a utility bill here doesn’t mean, you know, if I’m subletting from someone, they’re not going to let me put my name on the utilities. Right. So banks are starting to wisen up and give us alternatives for that.

James Kademan [00:14:38]:
Gotcha. So what do you typically see? The businesses that are applying for credit or going through these things, are they going through that in anticipation of needing loan or funding of some kind? Or is this something you recommend people doing even if they’re not necessarily looking for a loan, just to prepare that they might sometime in the future?

Michael Wedaa [00:14:59]:
We get people, People always come to us when. When what I call when it’s too late, when they need money and then we have to start the process from ground zero. So I think it’s. It’s better to have the money available when you don’t need it. Right. Because a bank is someone that will lend you money when you can prove you don’t need it.

James Kademan [00:15:18]:
So you’re exactly right.

Michael Wedaa [00:15:20]:
And then start Applying. Right. So it’s good to have it ready to go and it gives you options. You know, there’s a lot of business expansion opportunities or maybe there’s an investment deal that comes up. It’s good to have that, what I call dry powder available and money available to use. And that’s why I like credit lines over loans. You get a loan and you don’t have a need for it, you’re going to be paying interest and making payments on money you don’t need. Credit lines are great because it just sits there available and you only pay interest on it when you use it.

Michael Wedaa [00:15:48]:
And we have a lot of zero percent interest products where they, you know, they have an introductory period for 12 to 18 months. So that’s really great for you know, people who are investing and are purchasing a business or, or purchasing a piece of equipment for their business. It’s a really good opt.

James Kademan [00:16:02]:
Yeah. You know, you raise an interesting point. I should shift gears here a little bit and ask what all does Augmentus do?

Michael Wedaa [00:16:09]:
So we do the best tagline. The catch, all that I use is that we help people get the most out of their corporation or llc. Right. So that includes consulting, which, which entity is best for you? Llc, S Corp, C Corp. It includes setting up the entity for the business. We help, we help people move their assets from their personal self to the, to the business. But the key, one of the key ones we do is we help, we show people how to legally trans transfer up to $250,000 of personal expenses to the business. Right? Yeah.

Michael Wedaa [00:16:40]:
So that’s one of the big ones is like okay, let’s, you know, let’s transfer some of the, some of your personal vehicle expenses over. Let’s transfer a portion of your mortgage over to the, to the business. Let’s. Even if you’re funding your kids college education or your kid’s retirement or maybe purchasing a car, maybe saving for a down payment on one of their houses in the future. You can transfer that to the business. You can transfer retirement investments over to the business. So there’s all kinds of stuff that you can transfer the business. And that along with the business credit is, are some of the ways that we help people get the most out of the corporation or LLC that they set up.

James Kademan [00:17:16]:
So tell me you named a lot of things there. Let’s start with the one you mentioned.

Michael Wedaa [00:17:21]:
The.

James Kademan [00:17:21]:
Let’s say kids college. Let’s start there. How do you move that to a business expense?

Michael Wedaa [00:17:27]:
So you know people who have children and it works typically with kids that are around age 8 to about 20. Right. The key is, is they can’t be working full time elsewhere. Right? So that’s why when I say 20, that’s, you know, typically kids are working at that point, and the first $15,000 that any individual makes is tax free because that’s the standard deduction, right? So if you have two kids, you can have the business pay them up to $15,000 a year, tax free. And if you want to pay more, let’s say you want to pay them 25. That additional 10,000 is only taxed at 10 or 12%. Right. So taxes are minimal.

Michael Wedaa [00:18:05]:
So you can have kids do filing, you can have them do janitorial work. They have to be doing something. If they’re older, they can do data entry or some more, you know, skilled activities. But what happens then is that it goes through payroll and transfers over to the child, and you have control over that money. You can either just give them that money and let them spend it, or put it away for them to save for something they want to spend money on. Or you can parlay it and put it into an IRA for that. Right. Or you can put it into a fund where you’re like, hey, listen, you know, as you work and do this stuff, you know, I’m going to buy a car for you in.

Michael Wedaa [00:18:36]:
In five years. And so what’s happening is you’re making that eventual car purchase for the kid or college or whatever you want to call it, a business expense because it became an expense through payroll over to the child, tax free. And you can help the child, you know, with whatever you want to help them with, but you’re transferring that expense over to your business, which is a really good way to do it.

James Kademan [00:18:59]:
That is amazing. I just learned this, I want to say, last year, year and a half ago, something like that. And it was because I got a big tax bill. So I start poking around online, finding how can I knock this down. The account that I had was just a numbers guy. I gave him the numbers, he entered them and told me a big number that I owed.

Michael Wedaa [00:19:18]:
Yeah.

James Kademan [00:19:19]:
And I asked him, like, this is crazy. What’s. What do we have for options for knocking this down? Then he was like, make less money.

Michael Wedaa [00:19:27]:
Yeah.

James Kademan [00:19:28]:
Yeah. What else you got?

Michael Wedaa [00:19:29]:
Yeah, that’s not an option. What else you got?

James Kademan [00:19:31]:
So then I remember asking him, I’m like, can I hire my kid? According to the Internets, I can hire my kid. And he’s like, yeah, you can do that. So I hire my kid. He cleans an office and stuff like that. Once a week he does little odd jobs. I am running conduit and stuff like this. And I learned. I’m in Wisconsin, so I learned from a better accountant that I have now that the national number is 15,000, but the state was 12, whatever, 12,000 something, before they have to file a return.

James Kademan [00:20:06]:
So to avoid filing a return, I just pay him that 12 grand or whatever it is. And most of it, I just stick in retirement for him because he doesn’t need thousands of dollars.

Michael Wedaa [00:20:18]:
Yeah, right.

James Kademan [00:20:19]:
I don’t know what he’d do with thousands of dollars. He would probably make me angry if I learned what he’d do with thousands of dollars.

Michael Wedaa [00:20:24]:
Yeah, right.

James Kademan [00:20:25]:
We’ll just set you up. You’ll hate me now and then thank me in 40 years when you don’t have to work anymore.

Michael Wedaa [00:20:31]:
That’s right. Yeah, but that’s what you did. You transferred your child’s retirement over to your business. That expense. You transferred it over. Yeah. So that’s. It’s good that you did that.

Michael Wedaa [00:20:40]:
And it’s funny. I find it hilarious that you found it and not your cpa. And that’s the issue, is that we’re teaching people, challenge your cpa. You know what I mean? Take these things to your CPA, ask them these questions. CPAs hate me. And. And what’s funny is, is they always want to challenge me. I say, look, I’m not looking for your job.

Michael Wedaa [00:20:57]:
I’m a business consultant. I’m just trying to help my client and giving them some options. So, you know, I like putting CPAs to work because they like to do the copy and paste and file the return, and they’re not really looking for any other tax stuff. It takes the client looking stuff up and ask him, oh, yeah, you can do that. Well, why didn’t you. Why didn’t you see Mr. CPA tell me that I could do this? Why did I have to find it?

James Kademan [00:21:19]:
Right. I had the same thing. I asked about segmented depreciation, and he was like, you could do that, but there’s an expense. Right? Like, okay, so I went through that whole thing, ended up saving quite a bit of money on that. And it’s one of those where I don’t know if I’d say I got pushback from him. I got. I’m going to call it lack of interest.

Michael Wedaa [00:21:43]:
Yes. A lot of times you can do that. But that or, oh, you don’t want to do that. A translation for you don’t want to do that means I don’t understand it fair.

James Kademan [00:21:54]:
Totally fair. Nailed it.

Michael Wedaa [00:21:56]:
Yeah.

James Kademan [00:21:57]:
Tell me a story about. You mentioned the mortgage thing, writing off part of your mortgage as a business expense. Let’s go down that road.

Michael Wedaa [00:22:03]:
So a lot of people, this is one that a lot of people are aware of, but it’s writing off the office space or having your, your entity pay rent to you as an individual for the office space. And a lot of people do that incorrectly. So one of the ways is they don’t capture all the space. You know, if I have a bedroom in my house that’s an office, I can write off the entire bedroom. Right. If it’s. If. If the bedroom has a bed in it and I just have a desk, I can only write off a portion of the bedroom.

Michael Wedaa [00:22:30]:
Right. So that’s one of the ways people screwed up. But a lot of times people have storage in their garage. Right. Or storage elsewhere in the house. You can also add that square footage as well. Right. So the key is, is to figure out what is the total cost of your mortgage and you write off the percentage of that, you know, total square footage.

Michael Wedaa [00:22:51]:
But what I like to do is I like to figure out what the market rents are in the area because typically that’ll be higher than what a mortgage is, especially if you’ve had a mortgage for 15 or 20 years. Right. So I look at the market rents for a bedroom in the area or for an entire house, and then I take a percentage of that and it allows my company to pay me rent money from my corporation to myself as an individual. And because it’s passive income, it gets taxed. It’s tax advantaged. Right. Earned income is taxed the most. So that’s a way for me to subsidize my housing expense by having my company pay me rent for the storage in my garage, you know, because I got books and boxes there.

Michael Wedaa [00:23:29]:
I have stuff for when I speak at seminars. A lot of my setup stuff is stored in my garage, plus this office in my home. Those are all. I add up the square footage and look at the local rent rental rates, and I raise the rents every couple of years. So my company pays me more on the rental side for that every year.

James Kademan [00:23:48]:
So. And is that the company cutting a check to you?

Michael Wedaa [00:23:51]:
Yes.

James Kademan [00:23:52]:
Are you setting up an LLC for your house or something like that?

Michael Wedaa [00:23:55]:
No, no. The company cuts a check to me and then I pay the mortgage out of my personal account.

James Kademan [00:23:59]:
Gotcha. Okay. And that, that money, that rent payment isn’t treated as income. So it’s essentially tax free.

Michael Wedaa [00:24:07]:
It’s. It’s treated as, as rental income and that’s taxed differently. So you’re avoiding payroll taxes and all the other stuff on that as well. So. Yeah.

James Kademan [00:24:15]:
Does that end up as a 1099 or something like that from your business to you?

Michael Wedaa [00:24:20]:
No, it’s. It’s on, it’s on a different schedule of the 1040 for the individual. So. And then the business gets to write it off as just rent, which is great. Okay, so. So that’s the way. Because it’s rent for the business, you get to write it off from the business. And then that’s the way to cover a portion of your mortgage.

Michael Wedaa [00:24:35]:
And I bought my house so long ago that the rent that my company pays me for my office, it puts a positive cash flow into my. It’s more than what my mortgage is now.

James Kademan [00:24:45]:
Oh, nice. Okay.

Michael Wedaa [00:24:47]:
Yeah. I bought this house 26 or 27 years ago, so my mortgage is very small compared to that. Now if I bought a house today, that would be different. It’d only be a small percentage of what the mortgage is. Right.

James Kademan [00:24:58]:
Yeah. Real estate’s changed a bit in a couple decades, right?

Michael Wedaa [00:25:02]:
Yes, yes, that’s right. That’s right.

James Kademan [00:25:04]:
So let’s just say for fun, keep it around numbers. The rent’s a thousand bucks. So thousand dollar expense from the business side going to you, and that’s that thousand bucks a month shows up on your 1040 as passive rental income or something like that.

Michael Wedaa [00:25:20]:
Yes, correct. That’s exactly right.

James Kademan [00:25:22]:
And so is that, is that tax just as your typical tax rate or is there, where there’s FICA and all that kind of stuff coming out of there? That’s different.

Michael Wedaa [00:25:29]:
No, fica, that’s what’s great about it is, is passive income, like rental income. You avoid fica, so you’re just paying your normal. Whatever your tax rate is on that. You’re paying that. But what’s great too is that you get a lot of deductions from renting out your house. You know what I mean? You get to deduct a portion of the utilities, a portion of the housekeeper, a portion of a lot of different things. So even the, you know, and you’re deducting your property taxes and things like that. So it really ends up being a, a good way to transfer money without, you know, FICA is 15.3%.

Michael Wedaa [00:26:04]:
So you save money right off the board right there. So it’s really good.

James Kademan [00:26:07]:
Yeah, FICA’s insane. But that’s, it’s interesting when I’m talking to my employees about their hourly rate and Then the burden rate, what every employer has to pay. On top of that, they’re like, just because you’re making 20 bucks an hour doesn’t mean that it’s costing us as business owners only 20 bucks an hour to have you.

Michael Wedaa [00:26:28]:
Yes. Workers comp. You got the. You’re half of the FICA taxes and all. Yes. It’s. It’s crazy.

James Kademan [00:26:34]:
Yeah. The insurance, the hiring, the firing, all that kind of stuff. Like it’s a lot of money.

Michael Wedaa [00:26:38]:
Yeah, yeah, that’s right.

James Kademan [00:26:40]:
I met a guy. I met a guy that was just on his own as a handyman and he’s charging $30 an hour to do handyman stuff.

Michael Wedaa [00:26:47]:
Okay. Wow. Okay.

James Kademan [00:26:49]:
And I’m like, dude, you’re crazy. You gotta double or triple that, at least.

Michael Wedaa [00:26:54]:
Yeah.

James Kademan [00:26:54]:
He’s like, what? I was making 20 bucks an hour where it was before, now I’m making 30. He thought he gave himself a huge raise.

Michael Wedaa [00:27:01]:
Yeah, that’s right. He didn’t catch that. He wasn’t.

James Kademan [00:27:04]:
I mean, check your math, Budd. At the end of the year when you’re doing your taxes and stuff like that, just come back and tell me I’m wrong. I hope I am. I don’t believe I am.

Michael Wedaa [00:27:12]:
Yeah. And the FICA taxes double when you’re self employed because you’re the employer and the employee and a lot of people get that.

James Kademan [00:27:18]:
Yeah.

Michael Wedaa [00:27:19]:
So it’s split when you’re working a W2 job for somebody.

James Kademan [00:27:22]:
Let’s. I want to talk about LLC and S Corporation. C Corporation stuff. I know we touched on it at the last in podcast interview. I don’t know, a year or two ago, something like that. Pandemic time, way back when.

Michael Wedaa [00:27:35]:
Yeah, that’s right.

James Kademan [00:27:37]:
But let’s talk about that really briefly. Pros, cons, what you recommend for people just starting and if there’s ways to transition or reasons to transition.

Michael Wedaa [00:27:47]:
Yeah, you know, so any entity will work. C Corp, S Corp, llc. Any entity work for any business. People tend to overthink it. The only thing that would. That comes up is you might be leaving some tax dollars on the table. Now, my general advice for people is start an llc. And there’s two reasons for that.

Michael Wedaa [00:28:06]:
One is it’s less formal. You don’t have to. With corporations, you have to document every major action, even if you’re the sole owner of the corporation. You have to have a meeting with yourself and record meeting minutes and create corporate resolutions to open a bank account or to obtain business credit and get a loan, or to sign a lease for an office. It’s a pain, right? LLCs are not required to do that because they’re a less formal entity. So there’s a lot less paperwork. That’s reason number one. Reason number two is that LLC is the most versatile.

Michael Wedaa [00:28:38]:
So that means that I can have an LLC taxed as a sole proprietorship, a partnership. I can have it taxed as an S corp. If I choose to, I can have it taxed as a C corp. So what’s great about an LLC is that as I grow and I want to say tell the irs, hey, look, I just file a form and say, I want you to tax me like I’m an S corp. My legal structure is an llc, but I’m putting on a jacket that says escort, meaning tax me like that. And if I start making so much money that I want to, you know, get taxed at the. At the corp, the C Corporate of 21%, I can file another paper that says, hey, tax me like a C corp. Now, I’m still the legal structure of an llc, but that’s what I mean by an LLC being the most versatile.

Michael Wedaa [00:29:18]:
It gives you wiggle room to move around as your business grows without having to shut it down and start a new entity. Right. So it’s usually the way to go. You know, there’s times where you do want to start a corporation. If you’re going to bring on a bunch of investors and there’s a different, you know, there’s. And you’re going to go that route you want to go. The more formal route was in some cases or if anything that requires a license. There’s some states that require you to have what’s called a personal service corporation.

Michael Wedaa [00:29:43]:
So if you’re doing therapy stuff or if any medical stuff or. Or even some real estate stuff, if you have some sort of a license, they require you to have a personal service corporation in some states. So, you know, people who are performing those types of services need to be aware of that. An LLC is not an option in some cases, but in general, the LLC is the way to go. Easiest to maintain, gives you the most options.

James Kademan [00:30:07]:
Awesome. Tell me. Let’s shift gears a little bit into protecting assets. LLCs come up in protecting assets. And I understand you’re somewhat of a guru when it comes to that.

Michael Wedaa [00:30:19]:
Yeah.

James Kademan [00:30:19]:
So let’s just start with the basics as far as things that people may not necessarily understand about things that they can do, including llc, to protect their assets.

Michael Wedaa [00:30:29]:
Yeah. So there’s. There’s a lot of ways to do it. And so when you form the Reason people form an LLC or corporation is to protect their personal assets if they get sued in the business. Right. So if someone sues you in your business, they can only touch what’s in the business itself, the business assets, the bank accounts and such. It’s difficult for them to pierce the corporate veil and come after your home or your, or your investments or whatever it is. But there’s a way to protect yourself.

Michael Wedaa [00:30:55]:
There’s some advanced stuff that you could do to protect your personal assets in case you get sued on the personal side using your business. Okay. Before we were talking about business credit. And so what I have people do, build up some business credit. If you get yourself a big credit line, let’s say you get yourself, you know, fifty thousand dollar credit line. If I get several of those, let’s say I lend my, my business lends me the individual $300,000. What I do is I then have my LLC act as the bank and they put a lien on my home. And the reason for that is, is that that protects the equity of my home.

Michael Wedaa [00:31:32]:
So if I have a mortgage, that’s first position lien. And let’s say I have a 300, $300,000 in equity that’s just sitting there waiting for someone to take. If I get in a car accident or they slip and fall on my property, what they can do is they sue you in court. If they win, they put a judgment on you, they can put a lien on your property. But if your property is all leaned up, it’s all spoken for by the bank that has your mortgage and by your business because you lent $300,000 to yourself, then what happens is that if someone sues you, they’re in third position. So if you sell your house, there’s no house left. So they get screwed, right? But, so that’s, that’s an advanced tactic to protect your personal assets. But now if you want to get really crazy, that 300,000 in business credit that you lent yourself, you take that money as an individual and lend it back to your business.

Michael Wedaa [00:32:15]:
Don’t pay it off the loan, lend it back to your business. And if your business has vehicles or real estate or any type of other asset, you as an individual now put a lien on those assets that the business has so that if you get sued in the business, those assets are spoken for. And when you lend that money back to the business, it can pay off the credit lines and then that those go back to zero. And you have these two ghost notes or ghost loans. And even if you were to pay it off, the loan to the business, and you forget to take off the lien. Nobody knows that. So if you got sued, say, here’s the note, the promissory note that says that money was linked. You can show the transaction and say that’s why there’s a lien on the house.

Michael Wedaa [00:32:56]:
And then they go, okay, great. As long as you do it before there’s trouble, before you get sued, then it doesn’t look like you’re trying to hide assets. So you want to do it before you get in trouble, and then that makes it hard for a judge or a opposing attorney to challenge the transaction.

James Kademan [00:33:12]:
Gotcha. That’s right. The homeless people don’t get sued, right?

Michael Wedaa [00:33:15]:
Yeah, that’s right. Yes.

James Kademan [00:33:17]:
They always go after the people. Yeah. Right. Tell me. So you want to loan money from your business to you and then from you to your business. There must be some paperwork involved.

Michael Wedaa [00:33:30]:
Yep.

James Kademan [00:33:30]:
So I can’t just write in crayon or something like that.

Michael Wedaa [00:33:34]:
Yeah, yeah. You want to do a promissory note, and that. That actually shows that there was a loan. And if. And if you can prove that there’s a transaction, that helps too. Some people will do this technique without doing a transaction and say that they lent the money. That’s harder because, you know, if you get sued, a savvy attorney is going to say, show me the transaction, show me the paperwork, and it’ll. It’ll stand up.

Michael Wedaa [00:33:54]:
That’s why it’s always better to have some sort of a money transfer or write the check and hold it there for a little bit, and then you can, you know, pay it back in different payments if you want. It doesn’t have to be a $300,000 check and $300,000 check. It can be 300,000, our check, 25,000, 50,000, 100,000 to kind of break it up. That looks a little better. But yes, if you can show that paperwork, the promissory note, along with the actual bank transaction, you’re going to be. It’s going to be a lot better for you.

James Kademan [00:34:22]:
Gotcha. So you are actually transferring money or moving it from business to you and you to business.

Michael Wedaa [00:34:29]:
Yes. Because a lot of people don’t have 300 grand sitting around. That’s where the credit lines come in. Right. So.

James Kademan [00:34:33]:
Right.

Michael Wedaa [00:34:35]:
That helps you. Helps you a lot. Earlier we talked about creative uses for business credit. That was one of them was the, the asset protection being folded into business credit. So that was a. That’s a good option for it, and.

James Kademan [00:34:49]:
It’S a Promissory note. Just a piece of paper that says promissory note on it?

Michael Wedaa [00:34:53]:
Yeah, it just has to be a legitimate agreement that has, you know, an interest rate, payment, terms, all those different things. And that’s what you have to just. You can pull one of those off the Internet. It’s not, it doesn’t have to be recorded anywhere. It doesn’t have to be notarized. It just has to ex lists and be ready.

James Kademan [00:35:11]:
How would a creditor that was searching your stuff see that there was essentially a second lien on your house?

Michael Wedaa [00:35:19]:
So if you’re trying to refinance or if you’re trying to get a HELOC or something, or an equity equity loan, they would ask. So you’d have to pull the lien off the property, do a release of lien so that they could put their first position lien back on or put the, the second position equity loan back on, and then you file the paperwork to become third position, if that’s the case. Right. So you take the lien off so that they can be where they, what they need and then put it back on. Creditors have no idea that you have a lien in your house unless you’re trying to get a mortgage. Like, they won’t, they won’t see that if you’re applying for a credit card or a car loan, they don’t see that that exists. It doesn’t affect them. But they’re going to run a search on a property if they’re going to lend you money on a property because they’re, you know, they want to make sure they’re, they’re protected with their lien and that they’re one of the first position holders.

Michael Wedaa [00:36:06]:
So that’s okay.

James Kademan [00:36:09]:
I’m just thinking you get in a car accident and you hit somebody in their Bugatti. In that bugatti, they had $10 million worth of diamonds that got scattered and lost. And they also had their grandma that was a brain surgeon that was making 2 million a year or something like that, she got killed or injured. Right. She can’t earn money, but she’s still in the hospital. Kind of thing like worst case scenario for you to get in a car accident and the attorney, people that want to sue you say, we’re coming after you for $50 million and we can see. Let’s just say your house is paid off or some, or you owe $6 on your house, your house is worth a million dollars. How do they see a lien on there that’s saying like, hey man, you got to stand in line here because I got other liens stacked up here.

Michael Wedaa [00:36:55]:
So what they would do is they, the attorney could look it up and see that it was leaned up. But if they’re smart, what they’ll do, you know, if you have a mortgage in first position and then your business promissory note is in second position, right. What a good attorney would do is they would get the judgment and put a lien on the house anyway, right? So if Your house is $1 million and it’s all leaned up from your business and your mortgage, they’re going to put it on for more than the house is worth, because chances are the individual is not going to sell that house today. They might sell it in 10 or 20 years. And what that does is it ensure, you know, probably appreciation is going to happen, or at least they’ll get something. You know, it might be a $50 million lien, but if there’s only 200,000 left over after they sell that house, they’ll get 200,000 sent to them, right? So if they’re smart, that’s what they’ll do. But the key about having the house cleaned up is that they look and say this person has no assets, then the attorney is going to tell them, look, you’re going to spend all this money to go after them, and there’s nothing to go after. Right.

Michael Wedaa [00:37:54]:
So it can help from that perspective. But, you know, filing a lien is not that expensive to do. So if it’s a lot of money, then it’s worth doing it, even if the house is cleaned up. But it is going scare away some attorneys that are trying to sue you.

James Kademan [00:38:08]:
All right, where. So you file a lien. Who do you file a lien with?

Michael Wedaa [00:38:11]:
Typically it’s with the secretary of state, or sometimes it’s with the county, depending upon where you’re located and where you live. But that’s. They basically record the. The, the lien is what they do. And there’s a form that you fill out and it tells you the lien holder is. And. And all that. So it’s, it’s a fairly simple process, but you can also hire someone to do the paperwork for you.

Michael Wedaa [00:38:31]:
It’s, you know, a few hundred bucks. Maybe you could get someone to do it.

James Kademan [00:38:34]:
Okay. Simple enough. Let’s go. Keep going down the road of protecting assets. What are some other things people can do?

Michael Wedaa [00:38:42]:
So a lot of stuff that I tell people to do is to have multiple corporations or LLCs, right. I work with businesses where they have a lot of expensive equipment. Right. Maybe they have expensive sound equipment or. Or things like that. So what I tell them is, let’s say you have $150,000 in equipment, equipment or vehicles or whatever it is, and they house it under one business. Well, the business that’s front facing, dealing with the customer has the most liability. So what I tell them to do is form a separate LLC that owns the vehicles or the sound equipment or whatever the assets are, and you rent that equipment to the LLC that’s signing the contract and performing the service.

Michael Wedaa [00:39:23]:
That second LLC that’s signing the contract with the customer is. What it does is it owns no assets other than what’s in its bank account, whether its bank accounts are. And so if ever that LLC gets sued, it’s like, okay, you can have the $2,000 that’s in my bank account. And if you’re keeping your balances low because you want to keep that liability low. Right. And they go, well, what about your vehicle? Oh, we rent that. That’s not ours. You know, you can try and go after them, but it’s not ours.

Michael Wedaa [00:39:48]:
And they’d have a hard time trying to go after that vehicle. Unless the vehicle was in an accident, that would be an issue. But in the case of sound equipment or other assets, it’s very difficult for people to take rented equipment. So it’s a way to add another shelter over that in addition to insurance. People always tell me when I speak at these business events around the country, oh, well, that’s what liability insurance is for. And that’s when I say, what is the number one job of an insurance adjuster? To figure out a way to not get you paid. So this technique helps protect you in case that happens. Yeah.

James Kademan [00:40:24]:
Insurance always seems like you’re paying for a promise that you don’t want them to have to keep and they have no interest in keeping.

Michael Wedaa [00:40:31]:
That’s right. Yes. Yeah, it’s definitely a racket. I’ve had insurance pay out in. In certain instances, and I’m happy, but I’ve had them also not in others. And I just love when, you know, I want to get into the business where you pay even if they don’t provide the service.

James Kademan [00:40:46]:
Right.

Michael Wedaa [00:40:47]:
That seems like a genius business to get into.

James Kademan [00:40:50]:
Oh, my gosh. Yeah, we were. So I’m in Wisconsin. There’s a bunch of insurance companies around here. I remember driving past the Acuity headquarters and it’s amazing. It’s beautiful. No expense was spared. And I was like, that’s what you get when people just pay you and you don’t pay out.

Michael Wedaa [00:41:07]:
That’s what’s up. Exactly.

James Kademan [00:41:09]:
We didn’t get rich writing checks, right?

Michael Wedaa [00:41:12]:
Yeah, it’s crazy. But you know, James, another asset protection technique that’s fun, that ties into business credit, I think you’ll like. Do you invest in real estate?

James Kademan [00:41:22]:
Yeah.

Michael Wedaa [00:41:22]:
You do? Okay, good. So this is for the real estate investors. If you get business credit from your LLC and you know, you get some of these 0% products for, you know, 12 to 18 months, whatever you, if you buy a, a property using business credit, there’s no lien on the property because it’s not a mortgage loan. Right. So if you buy a property with vidna credit money, as long as it’s not owned by the same llc and let’s say several years down the road, something goes bad and you have to bankrupt this llc, it would be very difficult for the bank to come and try and take that property, because if you lend it out to another company or to you as an individual and the, and the transaction was far away from the date that you actually got into trouble, it’d be very difficult for them to come take that property. So that property, you essentially own a property that would be technically paid off even though you have this business credit debt. And if you rented that property out, you can use that money to service that debt. But technically you could go get a new mortgage on that property, and now you, you just have, you just double that and you go buy another property with it.

Michael Wedaa [00:42:27]:
So using business credit to purchase properties without liens on the property, that’s a really good way. I call that an asset protection technique in that it’s difficult for the bank to come take that property, and it gives you the opportunity to leverage it again and go purchase another. The property from there. So a lot of fun stuff you can do there with, with business credit and asset protection. Married together.

James Kademan [00:42:46]:
I got to try to wrap my head around this a little bit.

Michael Wedaa [00:42:49]:
Yeah.

James Kademan [00:42:49]:
So the, the business credit that you’re using is credit from and a business that you own, or is this business credit from a bank?

Michael Wedaa [00:42:58]:
No, it’s business credit from a business you own. Like, but, but it’s a, a, a credit line issued by a bank to your llc. Right, Gotcha. And so, you know, if it’s a, a credit line, a lot of times they provide you a check that you can write. So I could write a check to myself as an individual or to the, the seller of the property. Right. I probably want to separate it out and not make it like the business is purchasing that property. I’d probably write the check to myself, maybe do some loan paperwork that’s off the books, and then go buy that property.

Michael Wedaa [00:43:30]:
And then I have a property that’s paid off even though there’s this debt. I service the debt from the rents, the debt, the business credit line debt.

James Kademan [00:43:38]:
Right, I see what you’re saying. So you’re essentially getting a line of credit for ABC llc.

Michael Wedaa [00:43:43]:
Yep.

James Kademan [00:43:43]:
And it’s just a line of credit. The bank doesn’t care what you do with it.

Michael Wedaa [00:43:46]:
That’s right. As long as you pay it.

James Kademan [00:43:47]:
Here’s your, whatever, $500,000 line of credit. You take that $500,000, you pay cash for a property.

Michael Wedaa [00:43:56]:
Yep.

James Kademan [00:43:56]:
So that property is essentially paid off through a loan.

Michael Wedaa [00:44:01]:
Yes.

James Kademan [00:44:01]:
You get rents on that property, using those rents to pay the business loan that you have that line of credit.

Michael Wedaa [00:44:07]:
Yeah.

James Kademan [00:44:08]:
But there’s no actual lien on the property.

Michael Wedaa [00:44:10]:
That’s right. Money off of that property if you want it, and then rinse and repeat. Right. So it’s kind of cool.

James Kademan [00:44:16]:
Well, so you could borrow against the property. That’s fully.

Michael Wedaa [00:44:19]:
Because it’s free and clear. That property is free and clear. And so as long as you’re being responsible and you pull money off of that to buy another property. Now you have two rents coming in and you have two appreciating assets that are, you know, you have them appreciating on that side. Plus rents usually go up over time. So it’s a good way to kind of jumpstart your. Your real estate investing game.

James Kademan [00:44:39]:
That is pretty clever. That is very clever. Yeah. I’m impressed.

Michael Wedaa [00:44:45]:
Business credit is fine if you know how to play the game. Business credit is fun.

James Kademan [00:44:49]:
You know, it’s so funny that you mentioned the word game because I was joking with someone after I found out about all this. I’m going to say a fraction of the. The tax opportunity that we have to not overpay. And I’m like, this seems like I’m playing a game of Monopoly, but only, let’s say the instructions are split up in 100 pieces and there’s a hundred people that have one piece of instruction and they’re all scattered amongst the entire population and you have to try to dig to find out all the rules of the game. Even though we’re all still playing the game.

Michael Wedaa [00:45:25]:
Yeah. Yeah.

James Kademan [00:45:26]:
It’s interesting. You almost have to look at, like, it’s kind of fun. Even though sometimes you end up overpaying in taxes grossly. And, I don’t know, you just discover the. The ways to protect yourself. Limit your liability, pay less in taxes, all that kind of thing.

Michael Wedaa [00:45:43]:
Yeah, yeah, yeah, that’s right.

James Kademan [00:45:45]:
Tell me, I wanted to ask you because you’re the LLC guy. Tell me a story about Del. Delaware, llc, Wyoming, Nevada. I think there’s another state that seems to come up when you dig up LLCs, the big three.

Michael Wedaa [00:45:59]:
Let’s, let’s go through them quickly. People think Delaware is great. They think they’re going to save taxes there. They’re not. Delaware is a normal tax. It’s not bad, it’s not great, it’s not low. Delaware is good for. That’s why a lot of bigger companies like Coca Cola and things like that, they’re good for asset protection.

Michael Wedaa [00:46:18]:
And the reason is, is they have their own corporation court, right? So what that means is that if it’s a business lawsuit, they have their own court that specializes in business practices and they tend to favor the business. Right. So there’s, there’s states where the business is the big bad evil rich guy, even if it’s just a mom and pop business. And so if someone slips and falls and they’re obviously, you know, an, you know, they’re, they’re represented by an ambulance chaser, they’ll still win in some states. In Delaware they’re more fair. And, and, and like I said, they err on the side of the business. So that’s why the larger corporations will incorporate there. For the small business owner, I don’t think it’s necessarily the best option because then you’d have to qualify your corporation as a foreign corporation in the state that you’re actually doing business in.

Michael Wedaa [00:47:05]:
And that can. Now you’re paying fees in two different states. Right. Wyoming and Nevada are great because for privacy, they don’t share a lot of information with other states. So that’s the first reason. Second reason is, is that they are no tax states. So that’s great. I like Wyoming better than Nevada because Nevada got smart.

Michael Wedaa [00:47:27]:
So many people were forming Nevada corporations and there were zero taxes. Their fees are so high that their fees alone are about a thousand dollars a year to maintain an LLC or a corporation in Nevada. Just the fees and hey, that’s great because you’re not paying taxes over there. That’s cool. So if that makes sense for you, you know, then, then it’s still a good move. But you can do the same thing. It’s $60 to maintain an LLC or a corporation in Wyoming. Right.

Michael Wedaa [00:47:52]:
And then plus if you need a registered agent and things like that. But Wyoming is a favorite for that reason. But I always tell people it’s better to form the LLC or corporation in the state in which you’re doing business because that state will require you. They think, you know, you can’t just because Wyoming is a no tax state. You can’t avoid taxes if you’re doing business in California. Even if it’s Wyoming corporation, they’ll still come after you. They’ll figure it out. They trade information with the IRS and so they’ll.

Michael Wedaa [00:48:20]:
I’ve had that happen where California calls me. We want our cut. Right. So it’s good to always, to usually form where you’re doing business. If it’s a property in a different state from where you live, it’s okay to form an LLC where the property’s located. But a lot of people think they can avoid their state tax by going to Nevada or Wyoming, and that’s not always true.

James Kademan [00:48:39]:
Gotcha. Tell me, you mentioned registered agent. And registered agents is just something that I learned about a little while ago. So help me out with what is a registered agent.

Michael Wedaa [00:48:50]:
Every business has to have an individual that can, that can accept a lawsuit summons during business hours. Right now you can act as your own registered agent. If you’re operating from your home, you can just list your home address and put yourself as a registered agent. There’s people, for privacy reasons, or maybe they’re not in their office all day long, they will hire a registered agent. And so what it is, is it’s a, it’s an address that’s in a commercial space where there’s, it’s always, the desk is always manned with somebody. Right. And so if someone’s trying to sue my company, they go to that registered agent office and hand them the lawsuit summons. And everybody has to have a registered agent.

Michael Wedaa [00:49:26]:
They just don’t have have to have a professional paid one. They can act as their own. So obviously if I’m opening up a Wyoming company, I’m not living there. So I have to pay someone to be able to accept that, that right. Typically the cost is 100 bucks a year somewhere in that time frame. If you buy multiple years, you can save money on that. But for privacy reasons, I say just do it. Have someone else do it.

Michael Wedaa [00:49:46]:
And it makes you look more professional. If you look up someone’s business and they’re acting as their own registered agent, it’s an indicator that it’s probably a smaller company. So it’s a way to kind of look bigger when you’re, when you’re not. For a small fee.

James Kademan [00:49:57]:
I know some based out of Wisconsin. And I just learned recently that all your information is right there for anyone to look at. So when I first started my business, I started out of my house, so there’s a business, my home address right there for anyone to see. And it’s one of those. Like, I didn’t know that the world could see that. That’s kind of creepy.

Michael Wedaa [00:50:20]:
Yeah. Yeah. So if someone knew the name of your company and they wanted to sue you, they’d look it up and go, oh, it’s owned by this individual. And then they do a search on this individual and everything they own. Right. So, yeah, that’s. That can be an issue.

James Kademan [00:50:34]:
Tell me about LLCs or multiple LLCs. I want to talk about real estate specifically. I’ve heard some people say, get an LLC for each individual property. I’ve heard some people say get LLCs for the region that you’re in if you have real estate in multiple places and stuff like that. Tell me your take on that.

Michael Wedaa [00:50:54]:
So having a bunch of LLCs. I’m sorry, a bunch of properties in a single LLC. So it’s good in that you’re not paying all these fees and doing all the tax returns on 10 different LLCs. What’s bad is that if you get sued on one property and the LLC owns four properties, they can take down all four properties. Right. So let’s say filing fees and tax stuff. If you have properties all over the country, then, okay, good. You can put four or five in each one.

Michael Wedaa [00:51:22]:
You can do it that way knowing that they’d be able to take them down. But at least you’re separated. It’s not one individual owning 30 properties across the country. And then if one gets sued, then they can take all 30. So from a legal perspective, it’s better to have each property in a separate LLC so that it stay. If the bomb goes off in one llc, it seems contained in that llc. Right. So that’s my take on that.

Michael Wedaa [00:51:46]:
But I know people will. You have to weigh how comfortable you are, comfortable you are with possibly having multiple properties taken down versus paying that extra money to have a separate LLC for each property. Right. So I don’t have a piece of advice there. That’s an individual thing based on their comfort level. It’s just important to know that if you put multiple properties under a single entity, that they can all potentially be taken down. If the lawsuit is big enough, that’s how the person can make the decision.

James Kademan [00:52:14]:
Gotcha. Fair enough. Tell me a story about you have multiple LLCs, bank accounts and all that jazz. How do you recommend people doing or taking care of that? So imagine you got 10 LLCs. Do you have 10 bank accounts each set up for each individual LLC?

Michael Wedaa [00:52:32]:
And you absolutely have to, because they can, like each LLC is a legal individual, right? You have their own ein number and all that stuff. So you can’t use a bank account for an LLC that has a different name. Right. You can’t deposit a check in there. They won’t accept it. So each LLC legally has to have its own bank account. So yes, you do have to track that if you’re. If you’re operating a business with DBAs.

Michael Wedaa [00:52:54]:
So let’s say I have an LLC, that’s augmentous business Solutions. Right. And let’s say I want to do a publishing company and I’ll do like a DBA underneath it, that’s XYZ Publishing. So you can. Some banks will let you have up to three business names on a single account, so it’d be your corporation name. And then two DBAs they’ll let you have. And so that way you can put all the money into the same bank account that way. But if they’re separate LLCs, that’s separate legal entities.

Michael Wedaa [00:53:22]:
They need their own bank account.

James Kademan [00:53:24]:
Gotcha. Piggybacking on that. You have your Nevada, Delaware, Wyoming, llc, whatever state. Are you getting a bank account in those respective states?

Michael Wedaa [00:53:34]:
You don’t have to. So, you know, I like to get banks that are nationwide or at least in most states, so that if ever I’m traveling and I have to do a banking transaction, I can. But if I have a, you know, Chase is in, I think all 50 states or 48 or something, they’re in a lot of them. If I have a Wyoming company, I could open a bank account here because they have branches over there. So you can, you can do it that way if you so choose. Because I think it’s better to choose a bank that is in a lot of different states and then open it for wherever it’s convenient for you.

James Kademan [00:54:05]:
Okay. Next I want to ask you about is LLCs. I was told about having multiple LLCs, and then an LLC that owns those LLCs or gets kind of a tiered system. Can you talk about that?

Michael Wedaa [00:54:18]:
Yeah. So that’s what they call a holding company. And what that does is it provides another layer of protection between you and all the companies. So let’s use the real estate example. You own 10 properties that are 10 separate LLCs. And what happens is, like you said, your information’s all over the Internet, right? So if you Have a holding company, it does two things. One, another layer of privacy. So if someone tries to sue you in LLC number seven, property number seven, they’re going to say, oh, who owns it? Oh, this llc, it’s an extra step for them to try and go see who owns the holding company.

Michael Wedaa [00:54:51]:
Right. Doesn’t stop them from finding out, but sometimes that’s enough to stop someone who’s lazy from going through. But it also provides another fortress. So if someone sues property number seven, they have to break through property number seven’s LLC and then they have to break through the holding company before they can come to your assets. So it adds another front line of defense. So from an asset protection standpoint and from a privacy standpoint, it can help you.

James Kademan [00:55:16]:
Gotcha. And typically what I’ve heard is people have that Wyoming LLC as the holding one, isn’t it? As an example?

Michael Wedaa [00:55:24]:
You can do that because they don’t share a lot of information. And your information is not as out there. You can still find it, but that’s where you can use. You know, one of my clients brought this to me recently and I started offering it as a service through a partner of mine, something called land trust trusts and personal property trusts. A land trust is not like a living trust. It’s completely different. It’s meant solely to own a property. So if you buy a property and you put it in a land trust, it’s hard for someone to figure out who owns or who benefits from a land trust.

Michael Wedaa [00:55:54]:
So the trustee, the person who controls the property, is public. So that could be an llc. Right? The LLC controls the property, but the beneficiary, which would be you, if you own the property, is not publicly listed, and it’s very hard to find out. And now the LLC can be owned by a personal property trust. You said your information’s out there. If you have it owned by a personal property trust, then they’re like, okay, let’s see who owns this property. Oh, this weird land trust, we can’t find anything. Oh, it’s, it’s controlled by this llc.

Michael Wedaa [00:56:24]:
Look at the llc. Oh, it’s owned by this personal property trust that doesn’t say who owns. So it’s just a way to kind of be a goat posts. And it makes it very hard for someone to come find you because you got to know who the person is to sue them. Right. So it’s, you know, if you use Multiple layers, multiple LLCs, in conjunction with land trusts and personal property trusts, you’re getting privacy and asset protection in a way Simply because they can’t find you, not because the trust provide any form of asset protection, but just in that they can’t find you to sue you.

James Kademan [00:56:55]:
Yeah, it’s. I guess it’s protection through obscurity. Right?

Michael Wedaa [00:56:59]:
That’s right. That’s what it is.

James Kademan [00:57:01]:
Yeah.

Michael Wedaa [00:57:02]:
Nothing control everything, James. Own nothing.

James Kademan [00:57:05]:
That’s the rule. That’s the rule. Tell me, just so I understand, you got this property that is held by an llc, and then the LLC is owned by a trust.

Michael Wedaa [00:57:16]:
So the property is owned by a land trust. Owned by land trust. The land trust is controlled by the llc.

James Kademan [00:57:25]:
Okay.

Michael Wedaa [00:57:25]:
And then the LLC is owned by the personal property trust. And you, James, would be the beneficiary of that property trust.

James Kademan [00:57:31]:
Gotcha. All right.

Michael Wedaa [00:57:32]:
Yeah.

James Kademan [00:57:33]:
And that’s individual trust for each piece of property.

Michael Wedaa [00:57:37]:
It could be. Yeah. Yeah. You could do the same trust. But yeah, I think it wouldn’t be smart to do an individual trust for each property.

James Kademan [00:57:42]:
Gotcha. You know, it’s interesting because I was just learning about the whole trust thing, and I spoke with a few attorneys, and the ones that I spoke with had no idea what I was talking about when I talked about multiple trusts. They’re like, you just need one with all your stuff in it. Yeah.

Michael Wedaa [00:58:00]:
And that’s the thing is they. They’re talking about a. A trust to avoid probate. You know, a living trust of some kind or a revoke revocable trust. So in that case, yes, you just need one. But in. There’s other types of trusts that that trust attorney is may not be aware of. Right.

Michael Wedaa [00:58:14]:
That’s probably how you got that answer. Yeah. Because they specialize in that type to just pass on your assets after you pass away without, you know, while avoiding probate. So that’s a different instrument for different purposes.

James Kademan [00:58:27]:
Fair. And are those I mentioned, those are different based on state or is that more or less a universal thing?

Michael Wedaa [00:58:32]:
It’s pretty close. The law is pretty similar. I mean, there’s a couple small nuances that are different in each state, but for the most part, those are all pretty much the same.

James Kademan [00:58:40]:
Gotcha. Let’s see here. I think we hit everything. Am I missing a spot? We talked about business credit uses. Protecting assets. Just really quick. Protecting assets both from the inside of the business. So somebody slips and falls on your.

James Kademan [00:58:58]:
But I don’t know, your bulldozer runs into someone or something like that. But also the flip side, somebody slips and falls on your house, they want to take your bulldozer. Can you talk just really quick about protecting from both Directions.

Michael Wedaa [00:59:11]:
Yeah. So what we talked about earlier was putting the liens by lending money back and forth, right? So to reiterate, that is, you know, you get business credit, borrow from that credit line, lend it to yourself as an individual and put a lien on your house. Or you could actually put a lien on any, any asset really on the personal side for doing that. And then you take that money, that 300,000, if that’s the amount you lend, and you lend it back to the business. And you, as an individual, because you’re lending that money to the business, can put liens on the assets in the business as well. Right. So if you use that in conjunction with the multiple LLC strategy of owning the equipment and running it to the, to the one that faces the public and you have insurance, I mean, it makes it so somebody would really have to come in with a nuclear bomb to, to take those assets away from you. You know what I mean?

James Kademan [00:59:58]:
Yeah. You know, it’s so interesting learning all this because I don’t have any fear, I shouldn’t say that I don’t have any concerns about people suing me for millions of dollars or anything. I ain’t got millions of dollars. But I, I’m going to call it. Business acquaintance that I had, he knew a guy, he was a contractor. He ended up hitting some pedestrian and this little girl ended up in the hospital. He got sued and they won. And it was something like $25 million.

James Kademan [01:00:29]:
This guy didn’t have $25 million. Yeah, but it was. So it was. The number that, that she. They were rewarded was astronomical considering what happened. Like break a leg kind of thing. Not saying it’s good to run around hitting people or anything like that, but the number was like the, the spilled hot coffee kind of thing at McDonald’s. It was like you were rewarded.

James Kademan [01:00:50]:
What? And from this guy, that he didn’t have that kind of money, not anywhere close. So he was trying to find ways to leave the country because he figured he would have to work until he died just to pay for that thing. And it was one of those, like. Oh, because they went like, he had his insurance, he had his umbrella. They blew past that, you got your million dollar insurance policy. Great. We got $24 million that we’re after. It was insane.

James Kademan [01:01:20]:
The. What this guy was under, the, the pressure, the gun, whatever. I don’t know the entire story. What I do know is that he didn’t have $25 million. Every dime that he earned until he got that paid was gonna go to them. And it was just one of those, like, oh, my gosh. They probably sued him or went after him because they thought that he had a means getting $25 million.

Michael Wedaa [01:01:47]:
Yeah.

James Kademan [01:01:47]:
Somehow, legally, I guess. I don’t know. But it’s just one of those, like, oh, yeah, I don’t want to be in that position. I guess, like, when you’re a kid, you’re going to school, no one’s like, hey, this is how you get a mortgage. Or this is how you protect your assets.

Michael Wedaa [01:02:02]:
Yeah.

James Kademan [01:02:02]:
This is how you reduce your tax liability.

Michael Wedaa [01:02:04]:
They teach you how to be an employee in school. They don’t teach you these other things that you’re talking about. Yeah. They don’t teach you about how credit works and why it’s important to have it on the personal side, even. Right.

James Kademan [01:02:14]:
Not even a little bit. Not even.

Michael Wedaa [01:02:15]:
That’s why these college kids, they run up a credit card and just stop paying it. Then they realize when they go try and buy a car or a house later, you know, they don’t teach us that in school. They need to, you know, how do checking accounts work? How do investments work? Right, right.

James Kademan [01:02:27]:
It’s so interesting you mentioned the credit thing, because I was reading somewhere that they said, as long as you have over 650 credit, blah, blah, blah. And I was thinking, who has under 650 credit? Like, how bad? In college, I messed up. I messed up because I looked at my bank account on the money machine, whatever, and I was like, oh, that’s how much money I have. I was bouncing checks left and right because I had no idea I was a. I don’t think I ever went below 600. So I’m like, who. Who is below that and how bad are they?

Michael Wedaa [01:03:02]:
Things are in collections, they’re charged off, or they declared bankruptcy. That’s like that type of situation.

James Kademan [01:03:08]:
That’s bizarre. So stay above that because it’s very tough to dig out of a hole.

Michael Wedaa [01:03:12]:
Yeah, yeah, yeah, that’s right. You’re very right. Yeah.

James Kademan [01:03:15]:
So, Michael, I don’t want to keep you too much longer here. Where can people find you?

Michael Wedaa [01:03:20]:
So the name of our website is augmentous inc.com. so it’s the word augment us. Augmentous inc.com and they can buy my books on Amazon Corporation and LLC Secrets has all the stuff that we talked about today in it. And also, why are we in business? It’s so that we can, you know, live the lifestyle we like. I also have a book called International Travel Secrets that you and I were discussing. Shows ways to travel to Multiple countries. And save money on that. Yeah, but those are two ways that they can.

Michael Wedaa [01:03:49]:
They can interact.

James Kademan [01:03:50]:
They’re both incredible books, I should say. Yeah, I was happy to read it. Both I did.

Michael Wedaa [01:03:55]:
Oh, good. Right on.

James Kademan [01:03:56]:
And I’m absorbing as much as I can about this whole LLC thing. And then you’re right. I mean, why do we do all this? To have the freedom so you can have the fun. Right. And in my case.

Michael Wedaa [01:04:06]:
Right.

James Kademan [01:04:07]:
Travel like you. I’m trying to catch up to all the countries you’ve been. That’s. I got some work to do. But how about. Is there Instagram or anything of that nature?

Michael Wedaa [01:04:19]:
Yes, my Instagram is Corp. LLC Guru. It’s Corp. Underscore llc. Underscore Guru Corp. LLC Guru. There’s some videos on there with some little snippets about some of the stuff we talked about and more. So that’s another place they can look.

James Kademan [01:04:33]:
Right on. How about YouTube?

Michael Wedaa [01:04:36]:
No YouTube yet. No YouTube yet.

James Kademan [01:04:37]:
That’s okay.

Michael Wedaa [01:04:38]:
It’s coming soon.

James Kademan [01:04:40]:
And then do you want to mention the book that’s going to be out?

Michael Wedaa [01:04:44]:
Yes, that’s right. So the book that is done being written, but still in the process of being formatted and things is called Business Rogue. And Business Rogue is. It’s talking about all these degen hack system hacks that we discussed today and more Corporation and LLC Secrets has some of the hacks it has. It’s a complete guide. It has beginner stuff for people just starting and it has advanced stuff for people who are already in the game. And what Business Rogue is, is it takes the advanced section of that book and puts it on steroids. And it goes into all this crazy land trust stuff that we talked about.

Michael Wedaa [01:05:18]:
All the ultimate privacy things and, you know, different investment tactics using your business. I mean, there’s so much good stuff that’s going to be in there. So watch for Business Rogue. Probably end of 2025, beginning of 2026. That’s probably about when it’s going to come out. You and I will be in touch. Maybe we’ll do another episode when it comes out. We’ll go over some of the tactics in there.

Michael Wedaa [01:05:39]:
If that works for you.

James Kademan [01:05:40]:
Oh, my gosh. Absolutely. I learned something. Well, I guess I got notes here. I learned 20 somethings here every time you’re on the show. So I appreciate it. If I learn something, I’m presuming that the listeners did as well. So that’s the important thing.

Michael Wedaa [01:05:52]:
No, that’s great. It’s always fun talking to you. We always have a Great chat.

James Kademan [01:05:55]:
Yes, it’s good fun. This is very good fun. Michael, I appreciate you being on the show. Can you tell us the website one more time?

Michael Wedaa [01:06:02]:
Yes, it’s Augmentus Inc.com. AugmentusInc.com.

James Kademan [01:06:07]:
Awesome. I should ask, what is Augmentus?

Michael Wedaa [01:06:10]:
You know, it’s, it’s, it’s weird. That name came to me in a dream. I woke up and it came to me and it’s like augment us, like, it’s like helping businesses grow, helping people do it. Right. So it’s augmenting us and it just kind of fits what I do. I like it. It just, it resonates with me.

James Kademan [01:06:27]:
All right, It, I love it. And it starts with an A, so it shows up. Up top.

Michael Wedaa [01:06:31]:
That’s right. That’s right.

James Kademan [01:06:33]:
I don’t know if that’s important anymore or not, but I remember back in the yellow pages days, you wanted your.

Michael Wedaa [01:06:39]:
That’s right. All those people. The AAA company has got all the business.

James Kademan [01:06:43]:
Yeah, that’s right. Way back in the day.

Michael Wedaa [01:06:47]:
Yeah.

James Kademan [01:06:47]:
That’s funny. Thank you so much for being on the show, Michael.

Michael Wedaa [01:06:50]:
Great. Thanks for having me, James. A lot of fun as always.

James Kademan [01:06:53]:
Yeah. This has been Authentic Business Adventures, the business program that brings you the struggle stories and triumphant successes of business owners across the land. My name is James Kademan and Authentic Business Adventures is brought to you by Calls On Call, offering call answering and reception services for service businesses across the country. On the web https://callsoncall.com and of course, the Bold Business Book, a book for the entrepreneur in all of us, available wherever fine books are sold. If you’re listening or watching this on the web, if you could do us a huge favor, give it a big old thumbs up, subscribe and of course share it with your entrepreneurial friends. And of course, those friends that want to start a business would like to travel. Michael’s got books on that. So all good.

James Kademan [01:07:36]:
We’d like to thank you, our wonderful listeners as well as our guest, Michael Wedaa of Augmentus Business Solutions. Michael, the website, one more time if you don’t mind.

Michael Wedaa [01:07:45]:
https://www.augmentusinc.com

James Kademan [01:07:47]:
Love it. Past episodes can be found morning, noon and night at the podcast link found drawincustomers.com thank you for joining us. We will see you next week. I want you to stay awesome and if you do nothing else, enjoy your business.