Lawsuits can ruin your business and everything you’ve worked for. Scott Smith is a real estate investor and asset protection attorney in Austin, Texas. His key secret he now uses to defeat lawsuits? That they are a business. Clients who employ Scott’s strategies tend to stay out of court altogether with his primary expertise in stopping trials before they even start. Scott is the Founder of Royal Legal Solutions, a real estate attorney and asset protection law firm focused on offering tax, business, and legal strategies to real estate investors. He breaks down the ways we can protect ourselves from an asset protection standpoint. Find out when’s the right time to start speaking with an asset protection attorney. On top of that, learn why series LLC is more cost-effective for your business than regular LLC. Finally, discover why it’s better to offload the stress of managing your LLC to a real estate attorney and asset protection law firm like Royal Legal Solutions.

Protect Your Real Estate Assets with Scott Royal Smith

Our guest is Scott Royal Smith. Scott is a real estate investor and an asset protection attorney based in Austin, Texas. He graduated from Albany Law School and began his career in high-stakes corporate litigation. Scott learned the key secret he now uses to defeat lawsuits that they are at business. Through his defense work, he targets defeating lawsuits before they are even filed by making sure the business part of a lawsuit no longer makes financial sense for a plaintiff to proceed. Scott founded Royal Legal Solutions to offer tax, business and legal strategies to real estate investors. Scott and I have something in common. He doesn’t know this yet, but we both train in Brazilian jiu-jitsu. It’s the greatest single sports activity on the planet. If you’ve never tried it, get into it. Get to a gym and try it out. Scott, thanks for joining us.

It’s awesome to be here. I’m excited to come and share with everybody what I’ve learned about real estate investing, asset protection and estate planning. I’m open game on about anything.

We’ve got a lot of syndication investors, turnkey and single-family investors that read this blog. Your specialty being asset protection, what are some ways in which we’re at risk in those specific areas of real estate investing and ways we can protect ourselves from an asset protection standpoint?

What you find with each individual type of investor is that they need different things. One of the principal rules that we look at for asset protection is going to be looking at always separating your assets from the operations of your business. A lot of people think like, “I’m an individual. I own one house or two houses or whatnot. That’s not a business.” It is. There are significant assets there. You’re engaged in the business of leasing properties. You’re being a property management business at the same time. They needed to think of it as a business and knowing what businesses face, which is the threat of lawsuits and litigation. I had a friend of mine who lost over $3 million from a single lawsuit and he had insurance in place.

He got solved all of that by having some asset protection and LLCs in place would have prevented that loss. A lot of investors are misinformed like, “Should I do insurance? Do I need company structures?” The reality of the situation is that there are a variety of tools that you can use that are appropriate to wherever you’re at inside of your wealth growth. You don’t need offshore trusts when all you’ve got is $50 in the bank account. There’s an appropriate level of wealth when you should start thinking offshore. There’s a cascade of options down from that.

I’ve heard that in the past from asset protection attorneys the idea that many of us do not separate things adequately and don’t do a lot of the work up front in terms of setting up the legal structures. There are many misconceptions out there on the part of investors. We’re not attorneys. We’re not necessarily specialists in these things, but we need to hire a specialist like you. As far as working with attorneys goes, if we say we’re getting into a syndication type of investment, when is the right time for us to start talking to an asset protection attorney?

If you’re going to be doing single-family homes or turnkey properties, the moment that you start getting your two plus properties, that’s where you need to start thinking asset protection. You’re looking at what you need to put in place now that can grow with you over the next five to ten years. There are effective ways that you can use series of LLCs and land trusts to compartmentalize every asset from liability protection that hides your ownership of the company and hide the ownership of the assets so you can enjoy having anonymity. When they look to sue you, it doesn’t look like you own anything. Come to find out that if it doesn’t look like you own things and people don’t try to sue you, for syndication investors though, a lot of your assets are already protected underneath somebody else’s LLC. That’s going to be the operator that has that deal.

Always separate your assets from the operations of your business. Click To Tweet

For a syndication investor, all you have is syndication deals. A typical LLC is going to be sufficient. I would anonymize that LLC so people don’t even know that it exists. You would have all your syndications deals owned by that one LLC or cash or stocks all owned by that one asset holding LLC. That’s going to be okay for syndication investors because they don’t have individual liability for all their investments like somebody that owns individual pieces of property. Your turnkey investors will all have individual liability for each property. Somebody can sue that asset directly and sue the company that owns it. It’s an occasion that investors are one step removed from that. For syndication investors, you always think that you need an asset holding LLC in place to hold all of your wealth that way. If you get into a car accident, that exceeds the limits of liability of your car insurance policy. They come after you and they can’t get to your assets. It’s a good state plan to make sure that those assets are going to pass in a protected manner to your heirs. With that, you’re well set on getting above that $1 million to $1.5 million of the net worth mark.

Do you make any recommendations on what state we should open? States have different laws and different costs. Everything varies from state to state. Is there an optimal state or an optimal set of states to start your LLC in?

You always want to form in Delaware, Texas, Nevada or Wyoming for your asset holding company because those are the states that have the strongest charging order protection. Charging order protection is what happens when somebody sues you. Can they go after your ownership interest in the LLC? If you form on one of those four states, they can’t go after it. It’s the best type of protection that you can get if you form in one of those states. Of those states in Delaware, Texas, and Nevada, you can form what’s called a series LLC. You can form in any one of those states and use them everywhere. With over the last twenty years, nobody has tried to challenge that. There’s no case law regarding that of anybody being able to invalidate the series LLC. With the series LLC, you can create one company with and have one bank account, one EIN, one tax filing for it and one set of accounting books. What you get is the ability to create an infinite number of what things are called child series, which functioned just like little baby LLCs for free. What you get is you form one company and you can create an infinite number of free companies after that.

That’s awesome, especially for people out there that are starting individual LLCs over and over again. Those costs can rack up, especially if you make the mistake of starting your LLCs in California. My understanding is their fees are significantly higher than any of the states that you named. Whereas starting one series LLC potentially saves you a considerable amount of cost over the life of your investments.

Usually, you start to look at it and pays after for about the second property. If you’re the normal investor in the old way of doing things, but have one LLC per property, which means they have to pay filing fees, yearly fees and maintenance for every single LLC. A series LLC is only one company to file and there’s only one company to maintain. If you form it in Texas, there are no yearly fees associated with the series LLC. There are tremendous cost savings over what the old model would be. California investors, in particular, have their own type of series structure called the Delaware Statutory Trust. It allows them to be able to protect all their assets through a trust structure. It works just like a series LLC does where you can create an infinite number of child series trust of the Delaware Statutory Trust to compartmentalize every single asset that you own. Because of that trust, you’re able to avoid franchise taxes and you’d be able to avoid all those fees. If you’re a California resident that owns property out of state, you have to be thinking about the DST.

We talked about asset protection and forming all of these legal structures like LLCs. What are some things that an LLC will protect us from versus things that it’s demonstrated in an LLC will not protect those from?

The number one thing that LLC does and protect you from is that your own misoperation of the LLC. One of the biggest ways that people mess it up is they spend all this money to set things up and they wanted all the protection. The attorney thrust it all on them to have to figure out how to maintain it and how to operate it. They’re not trained on how they do it. Inevitably, they mess it up and there’s a court case, and it doesn’t work. We’re going to take all of that on for our clients. All of our clients become a member of the company of the firm and we in-house all of the maintenance of the company structure. In that way, there’s no way for the clients to mess it up. On their end of it, what all the clients end up having to do is focus on making their investments that they want to do and keeping track of the money and we take care of everything else for them.

PWS 27 | Protecting Real Estate Assets
Protecting Real Estate Assets: The number one thing that LLC doesn’t protect you from is your own misoperation of the LLC.

 

In this way, we provide a ton of value for people because that’s the peace of mind that everybody is looking for saying, “I want to offload this to somebody else to have to worry about.” We’re uniquely positioned to be able to do that because I’ve been a real estate investor for several years. We have over 2,000 real estate investors across the country and we protect over $1.3 billion in assets. That’s the number one thing people mess up as the maintenance, and that’s something that we’ve solved at Royal Legal Solutions.

That’s an awesome service that you offer. As investors and as real estate business owners, we should be focusing on running our business and setting it up to run itself rather than working in our business doing things like managing LLCs. That’s something we’re not necessarily experts in.

It doesn’t make you much money. Learning how to manage your LLC like an expert doesn’t make you any money. It’s like the time that just evaporates on you. That’s why we think that membership is so powerful because it offloads it all into us and all of our clients get unlimited phone and email support about their business activities and their real estate. It’s the opportunity to say, “Once you’re inside of our veil of protection, you don’t have to worry about going to the internet or trusting somebody else that might not be an expert in your field.” You can get professional advice directly and it doesn’t cost you anything.

That’s much better than putting a post on BiggerPockets asking how to set your things up. What does membership look like? I’ve got to say I like that unlimited support. That is an awesome feature to hear about.

It’s phone and email support and we do all the maintenance for your company structure. We charge $49 a month for it. That gives you all of the support staff when you call in. If you need us to say, “I need you to review this twenty-page contract or I need you to draft these documents,” or produce a legal work product, we have to charge separately for that. There’s no way we could possibly do all of that for $50 a month. The idea here is to say that for the guidance that you need to say, “Is this an issue I need to worry about or not worry about? Is this something that I’m curious about? It seems that the answers are unclear here from what I can find.” You always know that you have that support just by picking up the phone or shooting an email to us.

People should take advantage of that for the price that you named. It’s a steal. It’s an awesome deal. People should check that. If the audience wants to learn more about that offer, where can they find you?

The RoyalLegalSolutions.com website is the best way to do it. We have consultations that we offer people to get a customized plan for what it is that they’re going to need in terms of asset protection. That membership that we’re talking about is called a Family Office Membership. What we do is we work on how to create lifelong relationships with investors and business owners. We know that the more that we can help and empower other people to grow, one hand washes the other. I started Royal Legal Solutions with that in mind, which is why we’ve had such tremendous success and growing hundreds of percent year over year since the inception of the company. It’s about how can we put you and a client in a position to explore the things that are the most creative and the most powerful you financially let somebody else be able to handle all of the other backend “problems” of your life. In that way, you can focus on the things that are most important to you.

You can't manage things that you don't know anything about. Click To Tweet

Scott, what is the best investment you ever made?

The best investment I ever made was partnering with my partner here, Mark Swedberg. It’s an investment inside of another person to bring them on board with what I was doing at Royal Legal Solutions. It’s a high-risk investment when you invest inside of another person. You have to spend a lot of time with them. You’re not sure if it’s going to work out and if you’re going to jive together. I had a good feeling about it. I decided, “This is somebody that I can work with and that I can mold into being able to help me take it everything that I’m doing to the next level. It has been something that’s paid me thousands of percent return per year having Mark with me. He still works with me to this day.

What is the worst investment you ever made?

It was trying to build things in the Royal Legal Solution that I didn’t have any idea how they worked. It was just blindly trusting other people that we hired in to be able to build a piece of marketing or whatnot. They say that they’re good at it and they seem good and I don’t know anything about it. I’ll trust that they know how to do it. It turned out to be a bad investment in the sense and none of it worked out. Overall, it probably cost me somewhere around $50,000 to $80,000. The upside to it is that I learned an important lesson, which is you’ve got to know at least the minimum to know if what people are doing makes sense. What happens is even if they think they’re doing the right thing and they might be good, it might be out of sync with everything else that’s going on that they don’t know about like the rest of the company. You have to be careful. You can’t manage things that you don’t know anything about.

What is the most important lesson you’ve learned about investing?

I learned to not worry about it so much. Look at the deal at the front end of it, make the decision, see it through all the way to the execution and move onto the next thing that you need to go do. A lot of it has to do with the ability to realize like, “I’m not in control of most things. I’m only in control of certain things. I have certain rules and processes I follow and that’s my Bible of what do I do.” In those situations, what kind of investment am I going to make? I don’t deviate from that.

That’s why we as investors learning it from this lesson that you mentioned. If we get the right professionals in place handling things like asset protections and what we’re talking about, we cannot worry about those things. I don’t know anything about asset protection, that’s why I put an expert in place to handle that.

PWS 27 | Protecting Real Estate Assets
Protecting Real Estate Assets: The more you can educate people about what it is that you do and why what you do is cool, the more likely they are to partner with you.

 

When we have clients that come in, our job is to educate clients all throughout the process. From the very beginning and the first phone call, I’d start educating people on what are the tools that you use, why you would use those tools versus other tools, etc. What you find is that the more you can educate people about what it is that you do and why what you do is cool, the more likely they are to partner with you in whatever you’re doing. If somebody is partnering with for us to partner with them on their asset protection or whether that’s in my real estate transactions that I’m doing or whether I’m trying to raise $2 million for the next deal that I want to go do, all of it fundamentally comes down to education. When people can understand where you’re coming from and what it is you’re doing, they now buy into what it is that you’re doing and they can understand it. They can believe that what you’re doing is correct.

Take that in contrast to the story I talked about. I didn’t understand anything at all. I was operating purely on my blind faith in somebody else and I got burned with it. You’d find that investors that operate that way in the real estate context usually are the ones that are going to get burned time and time again because they can’t sniff out the bad operators. From an operator side, I usually say, “If that guy is going to give you a bunch of money and he doesn’t understand anything about the deal, that’s the guy that’s going to be the biggest pain and you know why.” Maybe think about not taking that money because it’s probably not worth the time. You want the investors that asked you a ton of questions in the front end because once they make the deal, they washed their hands of it. They don’t understand that they’ve done it and they’re onto the next thing.

Scott, where can our audience get in touch with you? We already talked about it, but where are the best places if they want to learn more and maybe engage your services and move forward?

The best place to look for us is the RoyalLegalSolutions.com website or you can call us at (512) 7573- 994. We also have a free asset protection guide for anybody that texts us into Royal. It’s Royal 247-4747. We will go ahead and send you out that guide. I’d say that the absolute best thing you can do as an investor or a business owner is to go to the website and sign up for that consultation. It’s $150 for the consultation. We charge for it because the information we’re going to give you during that hour-long consult is going to be a custom game plan of what you need to be doing right now and what you need to be doing here in the future.

It’s an incredible amount of information and you can take it anywhere to any attorney and say that here’s the game plan that you want to go with. We have particular expertise in how to put everything together and streamline everything from how to move assets from your personal name into the land trusts and series LLC while voiding the due-on-sale clause, how your insurance needs to work and how your banking and taxes. Everything from start to finish was one stop shop for it and we can teach you all of that during the consultation of what exactly you need to do with that. Go to the RoyalLegalSolutions.com website and sign up for a consultation.

The value that you’d get out of that consultation compared to the price is incredible. The value-to-cost ratio is excellent. One of my favorite quotes that I think Oscar Wilde said was that “A cynic knows the price of everything and the value of nothing.” As investors, we need to be focused on value and not price, the price is very reasonable. The value you get I’m sure far exceeds the price that you pay. It sounds like a great deal. People should check it out. For now, I want to thank everyone for reading this blog. I’m enjoying hosting the show for you. I hope you’re getting something out of it. If you know anyone that could use this advice, whether about asset protection, growing your wealth or anything like that, please share the show with them and bring them onto the team. I hope you have a great week. We’ll talk to you on the next one.

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About Scott Smith

PWS 27 | Protecting Real Estate AssetsScott Royal Smith is a real estate investor and asset protection attorney in Austin, TX. He graduated from Albany Law School and began his career in high-stakes corporate litigation. Scott learned the key secret he now uses to defeat lawsuits: that they are a business. Through his defense work, he targets defeating lawsuits before they are even filed by making sure the business part of a lawsuit no longer makes financial sense for a plaintiff to proceed.

Scott founded Royal Legal Solutions to offer tax, business, and legal strategies to real estate investors. He has spent the past 8 years of his career diving through case law, reading the ever-changing tax code, and analyzing real estate investment so that you don’t have to. He works with clients all over the United States and Canada who want to grow their businesses and protect their hard-earned assets. For reasons only he may know, he gets a particular thrill out of sharing the secrets he studied and worked very hard to learn with ordinary investors. He is a regular expert contributor to BiggerPockets.com and other real investment communities and is currently writing an eBook on asset protection strategies to help educate the public.

Scott isn’t just a lawyer, he is also a real estate investor himself. His claim to fame as an attorney is his uncanny ability to make his clients “judgment-proof.” He uses a combination of his legal expertise, experience as an investor, and love of helping others grow and protect their businesses to build ironclad asset protection plans for his clients. Clients who employ Scott’s strategies tend to stay out of court altogether. His primary expertise is in stopping lawsuits before they even start. Lawsuits can ruin your business and everything you’ve worked for. If you’re a real estate investor, contact Scott today to see how well your strategies are working for you and protect yourself before it’s too late.

Scott and his staff at Royal Legal Solutions pride themselves of creating customized plans for your business success. Currently, Scott lives in East Austin and is the proud father of an adorable Poodle named Franny. When he isn’t busy protecting his clients, he loves to practice jiu-jitsu / muy Thai kickboxing, explore the outdoors, and travel. His personal goal this year was to climb Mt. Kilaminjaro, and he succeeded.

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About the Host

Taylor on stage

Hi, I’m Taylor. To date I’ve acquired or partnered on over $250 Million in Commercial Real Estate Investments. I help busy professionals invest in multifamily and self storage real estate through my company NT Capital

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