(cheerful instrumental music) - Hey guys, welcome to Advanced
Lessons in Millennial Money, featuring Robert Kiyosaki. I'm Alexandra Gonzalez, the resident millennial here at Rich Dad, social media manager, and
lover of avocado toast. In this episode, I get a chance to speak with Robert Kiyosaki and his
attorney, Garrett Sutton. Garrett is a corporate attorney,
asset protection expert, and best-selling author, who has sold more than 900,000 books that guide entrepreneurs and investors. We talk about what Robert
refers to as asset protection, which is how to protect your investment. Robert speaks about how the true path to wealth is found through the right side of the cashflow quadrant,
the B and I side. Whether you're an
entrepreneur or investor, protecting your asset is key. Listen in as Garrett explains why you want to structure your business
for asset protection. - So in some areas, people
are extremely litigious. In the United States, we are
a very litigious society. - They sue all the time. - All the time. They did a survey in
the state of Louisiana, they asked the people how
are you gonna get rich? The first way to get rich was
winning the lottery, right? The second way to get rich
was the litigation lottery, to sue someone. And so--
- That's why you see on TV, all these guys, you know,
in a wreck, get a check. You know, sue the guy
that hits you, right? That's--
- And if you don't have your assets protected, they can not only go after your insurance, but they can go after
your personal assets, the equity in your house, your
business, your real estate, if you hold it in your individual name. So, the why is we live in
a very litigious society, the solution is to set up these
entities right at the start, right as you get going
with that first investment, with your first business. - Before!
- Before. We need to set up these entities so that you're protected
right from the start. - So I'll just say it again, poor and middle-class
people, like my poor dad, oh, my house is in my name. What's wrong with that? - If your dad was sued, they could reach the equity
in the house, all right? And so, there's certain
asset protection techniques that we use, every state's
a little different. But we wanna protect the
equity in your house, we wanna protect the equity
in your rental real estate, and so we have to take steps. - Or your stock portfolio. - Exactly right, if you
have a brokerage account, you can use an LLC to hold that account and be much better protected
if there's a lawsuit. - Next, we examine the
different types of entities and which one provides you
with the best protection. Let's watch. - So would you mind giving us some of the entities you use? - Sure, we have the good,
the bad, and the ugly. And on the bad entities would
be a sole proprietorship, and that's where you do business in your individual name, right? There's absolutely no protection here. All of your assets are exposed to a claim. - A lot of people have those. - By default, you get into business and if you don't form a corporation, you're a sole proprietor and
all of your assets are exposed. We also have the ugly entities. These are the ones we really
don't wanna get involved with, and that would be the general partnership. And this is liability times two. And I just went down the line there. General partnership, if you
shake hands with someone to get into a business, you
have become their partner. They can obligate the business and you're personally
responsible for what they obligated the business for.
- Let me give you an example. - Yeah. - There's a company, a lumbar
company here in Phoenix, and there was two people got
together and they shook hands. And they formed as a general partnership. - [Garrett] Right. - One partner's daughter ran over somebody and what happened then? - The other partner was
personally responsible for that accident.
- For the other partner's kid. - [Alexandra] Wow. - Right, so that's the
ugly way to do business and it can happen with a handshake, it's called innocent formation. You shake hands with someone,
you get into business, you're personally responsible not only for your own mistakes, but
your partner's mistakes. So you'll never do business
as a general partnership. Then we have the good entities. And the government gives us
good ways to do business, good ways to protect ourself. And these are LLCs, LPs, and corporations. These are the good ones, LLCs stand for limited liability company, limited partners, LPs stand
for limited partnership, and then we have corporations. These are the ways you're going to move forward.
- This is a C corporation? - We have different taxation. You have a C corp, which is double taxed, we have the S corp, which
is a flow-through tax, there's only one tax. You're gonna work with your
CPA on what is best for you. - Robert always preaches
the importance of a team. In fact, he's written a book on it, called "More Important Than Money". The focus is if your team is strong, that's what will allow you to succeed. Here's what Robert had
to say about his team. - When I get together
with Tom Wheelwright, they have to get together with Garrett. So if the attorney's
forming it by himself, that doesn't work. If the accountant forms it
by himself, it doesn't work. Am I correct on that? - You're correct. In fact, the joke I tell
with Tom is CPA stands for Cannot Protect Assets. So you have to work with your
attorney on the protecting of the assets and your CPA
on the best way to be taxed. - I think that's really important. Robert has always incentivized
his, not only accountant, but lawyer to always
stay in communication, because there's gonna
be different benefits for the C corporation
and the S corporation, like you previously mentioned.
- Not benefits, different reason to form them.
- Reasons. - And most people ask advice
from their brother-in-law, who's not an accountant or an attorney and then they wonder why
they're in trouble all the time. - Right, and you need to
get someone on your team who is willing to work with you, who's willing to talk to you. And you want that person,
that attorney for example, to be able to talk to the CPA. Too many times people will
say, an attorney says, well, that's a CPA question. And you go back to the CPA and they say that's an attorney question and you're playing ping
pong for six months. Get everybody in the
room together, talking, and you can solve it in half an hour. - I've read a lot of Robert's books, I've even attended many of his seminars. One question that I know
a lot of our viewers and subscribers wanted to know was, can you use debt for asset protection? Let's see what Garrett had to say. - If you have a piece of rental property and it's worth $300,000 and
you've borrowed 250,000, the bank has first dibs on the 250,000. So if you're sued, the
tenant suing for example, would only get the 50,000. So debt is a form of asset protection. You still wanna use these LLCs to protect the 30,000 in equity, but you can use debt and Robert
advocates using debt anyway. - Next, Kim joined the group
so she and Robert could discuss how they use asset protection
to guarantee their success. See what Robert and Kim had to say about having Garrett on their team. - So Kim, what would happen if we hadn't
had Garrett on our team? - Well, I remember attending, actually, an evening seminar and the gentleman said that the poor and
middle-class own everything and control nothing. But the rich own nothing,
but control everything. And he went on to explain
some of the entities and how you properly hold
assets and businesses. And at that time, we had
everything in our name. And we didn't have a
whole lot at that time, but we had enough. We had real estate and we had businesses, and it was all in our name
and I remember panicking. Going, "Oh my god, somebody's
gonna sue me today. "And we're gonna lose everything." So thank god we found Garrett, and who helped us really
set it up properly, so that when problems did
arise, we were protected. - If you're wondering, is it too late to protect my assets? Garrett answers that question next. Let's watch. - If you haven't moved the assets, your business, your real estate,
into LLCs or corporations, once you've been sued, it's too late. You can't move assets
into protective entities once you've been sued, which means you have to do this right now. - Yeah, it's like you have a car, but you don't have car insurance. - Right. - So you get in a wreck. Well, you can't buy insurance
after you're in a wreck. And the same as you have a house, you can't buy insurance
after the house burns down. So the reason it's very important for advanced millennial money is to know what you have to do before you get rich. - Right.
- And it's a good point, it is, it's insurance for your business, for all of your assets. - I explain to clients that
this is just another form of insurance, right? You're setting up an entity, you're gonna have to pay
an annual fee to the state, but it's a form of insurance. - And to wrap up our discussion, Robert, Kim, and Garrett discuss why being a sole
proprietor is not an entity for asset protection. - So what does sole stand for? - Well, in the business world, if you're a sole proprietor, that means you're out on your own, you have no other partners, it's just you, and it's a way to do business. - And everything's in your name, too. - Everything is in your name,
you're operating in your name. And so as a sole proprietor,
let's say you're a plumber. You go out to a job, something goes wrong, there's damage at the house. The person suing you can reach, not only all your plumbing equipment, the truck and the tools, but they can get all of your
personal assets as well, so--
- They can take your house, car.
- They can take the equity in your house, your car, your-- - Because it's all in your individual name.
- It's all in your name. So, you the plumber had
a claim against you, they can get whatever
you own in your name. So like Robert says, the rich don't want to own
things in their personal name, they want to use these entities. So SOLE is a way to explain what happens if you don't use an entity. Someday you'll lose everything. - So Kim, (Kim chuckles) if we hadn't followed Garrett's
advice when we had nothing, would we have lost everything? - We would've lost pretty much everything we had, yes.
- Right. - We had a situation that
happened and thank god that Garrett had protected
our assets the way you had. And because of that we are fine. - Well, and Robert,
you're a great teacher, but you're also a good student. You listen to people (Kim
chuckles) who give you adivce on how to protect yourself.
- Well, we listen, we listen to to smart people
who know what they're doing and practice this every single day. You do this every single day, Garrett.
- That's all I do. - [Kim] Yup. - And that's it for this episode of Advanced Lessons in Millennial Money. We'll see you next time. Don't forget to follow us
on Instagram, Facebook, and YouTube. (cheerful instrumental music) Robert (chuckles), I'm Alexandra (laughs), there. The resident, uh. Social media manager and
lover of avocado toast, what? And his attorney, Garrett (chuckles). (laughs) Oh my god. - (music drowns out speaker)
- Okay okay, okay.
such an informative video1!