Garrett Sutton | Asset Protection Secrets for Business Owners

Adam LeanPodcast

As an entrepreneur, you’re focused on making money and growing your business. But, says attorney and best-selling author Garrett Sutton, you can’t forget to protect your money at the same time. 

He shares asset protection strategies in plain English – no legalese – that you can use to make you don’t lose unnecessarily profits you should be taking home… or even your personal assets.

It all starts at the beginning, when you first structure your business. Garrett talks about the pros and cons of sole proprietorships, LLCs, and corporations. And that’s just the start of our conversation. 

We also cover…

  • The biggest legal mistakes startup business owners make – and how to avoid them
  • Ways to avoid personal liability and seizure of personal assets like bank accounts and home equity
  • How business owners often unknowingly sabotage their asset protection strategies
  • The business structure that gives you the best asset protection – and tax benefits
  • And more

Listen now…

Mentioned in this episode:


Adam Lean: In this episode, we’re going to talk about how to protect your business. We’re going to talk to a business attorney about how to protect your business’s assets while maximizing your financial goals. This is P is for Profit. 

Adam Lean: Welcome to P is for Profit. My name is Adam Lean and I along with the rest of the team at The CFO Project are passionate about helping business owners improve the profitability of their business. My guest today is Garrett Sutton. He’s a business attorney and asset protection expert and best-selling author with over 900,000 copies sold. Garrett, welcome to the show.

Garrett Sutton: Thanks, Adam. A pleasure to be with you today.

Adam: Yeah, I’m really excited to talk with you because, of course, you’re a business attorney and we live in a litigious society. So before we dive in, tell us a little bit about yourself, why you started doing this.

How Garrett Got Started in Corporate Law

Garrett: Well, I grew up in the San Francisco Bay Area and went to Berkeley. Got my undergraduate degree there and went across the bay to San Francisco and Hastings Law School. And, you know, I always liked corporate law. You know, typically people when you go to law school, it’s pretty difficult. But there’s always one course that people like. And I liked corporate law. 

Just the idea of being able to help people protect their assets and use the legal system to their advantage, whether it’s in business or real estate investing. And so I really like skiing, as we spoke about earlier, Adam, and I moved up to Reno, Nevada. Nevada has great corporate law and near Reno, there’s great skiing. And so I’ve been practicing here in Reno for a number of years. And I became very fortunate to become associated with Robert Kiyosaki and the Rich Dad Poor Dad team. And they asked me to write a book, and I did and it did okay. And they asked me to write another and then another. 

So I’ve written seven books in the Rich Dad Advisor Series. And it’s really law for the layman. I, you know, I don’t use legalese. I try and break it down and use stories to illustrate various legal principles. And, you know, they don’t teach this in school, Adam. You have to get it on your own. And that’s why these books have been, have sold because we just provide this important information in a way that’s accessible for people.

Adam: Yeah, that makes sense. There’s a lot of overlap between what you do and what we do in that I went to school, I was an accountant, accounting major. And the accounting did not appeal to me. What appealed to me was helping business owners. And I realized that they, business owners, they’re experts in the craft of what they do. 

You know, dentist goes to dental school, not business school, but yet they, a lot of them own businesses. You know, a cook starts a restaurant because they know, cook, they know the restaurant industry. I know how to cook but they’re not business people. And so, you know, I enjoy helping make numbers and business seems simple to them. And sounds like you do the same thing but from a legal perspective.

Garrett: Absolutely. And one of the messages that Robert Kiyosaki puts out there is that business and real estate investing are team sports. And you need an attorney on your team. You need a CFO on your team. You don’t need to learn accounting and law, you just need to get the right people on your team that can help you grow your business.

Adam: Absolutely. One of my favorite quotes in Rich Dad Poor Dad’s book is it’s not what you make that matters. It’s what you keep. It’s so important.

Garrett: That’s right. That’s where a good CPA and CFO come in handy. 

Adam: Absolutely. So let’s dive in and talk about business law. So just off the bat, how can a business, and I know that every situation is, you know, different? Everybody, every entity, every business is just different, but overall, how can a business best protect themselves?

Set Up Your LLC While You Still Can

Garrett: Well, at the start, you have choices on how you’re going to conduct your business. You can be a sole proprietor, which means that you are operating under your own name, you have no protection. It’s an easy way to get started, but you have no asset protection. The other choice you have is to set up an LLC or a corporation, whereby you have much better protection. If you’re sued in your business, they can reach what’s inside the company, the LLC or corporation, but they can’t get beyond that to reach your personal assets. So that is a really fundamental protective step that people can take. 

And some people, Adam, will get started as a sole proprietor. They’ll say to themselves, look, I can’t afford a corporation right now, I’ll just get started as a sole proprietor and take the risk that if I get sued, I lose everything. And someday, when I have enough money, I’ll set up a corporation or an LLC. Well, what happens is they get so busy, they forget to set up the corporation or LLC. And once you get sued in your business, if you’re operating as a sole proprietor, you can’t switch to a corporation or LLC. 

It’s too late at that point. So that’s a fundamental thing for people to consider when they’re starting out. You know, setting up a corporation or LLC is not expensive at all. And it gives you that protection that if something bad does happen, and bad things happen, like you said, we live in a litigious society. If something bad happens, you’re not going to be held personally responsible for it.

Adam: So just to make sure that we’re on the same page, asset protection. So explain the types of assets that people can protect by forming these, you know, like an LLC or other entities.

Garrett: Yeah. So let’s say you started out as a plumber, and, you know, you go to work and you do a job and something bad happens, and hopefully, you have insurance. But the claim is horrific and it exceeds your insurance. If you’re operating as a sole proprietor or as a general partner with another person, you’re personally liable. And what they can reach is the equity in your home, your personal bank accounts, your other personal assets. And so by setting up the corporation or LLC, you’re limiting what they can reach. 

They can reach the assets of the business, you know, the truck that you use in the plumbing business, your tools and equipment, but they can’t reach outside of that corporation to get at your personal assets. So that’s one of the fundamental ways to protect your personal assets in a business. And we do the same for real estate. But in a business, we want to operate through that corporation or LLC, we want to maintain it properly and thus our personal assets will be protected.

Adam: Yeah, no that makes sense. So what is the difference between the different entities, the LLC, the corporation? Is there a big difference? What should people choose? Or does it depend?

Garrett: Well, the good lawyer answer is it depends. But typically, nowadays, Adam, people are forming LLCs. The LLCs give you better asset protection. And we can go into that, but the LLC gives you the better asset protection than a corporation and they’re very flexible in terms of taxation. 

You can be taxed as a partnership, you can be taxed as an S corp, which allows you to minimize payroll taxes, you can be taxed as a C Corp. For example, if medical premiums are, you know, deducting those are important to you. So with the LLC, we have a great deal of flexibility as well as protection. Now, there’s some cases where you have to operate as a corporation. For example, in California, you can’t be a doctor or a lawyer or a real estate broker through an LLC. You have to operate through a corporation. 

And so in that situation, we’re going to use a corporation and follow California law. So, you know, there are certain circumstances where you’re going to use a corporation. But it’s interesting, Adam. You know, the LLC started in the United States and Wyoming in 1977. They’re a fairly new entity. But they are the most, yeah, they’re the most popular entity in use today. And they’ve only been around for what’s that? 40 years or so.

Adam: Wow. Then an LLC stands for, what? Limited liability corporation? company.

Garrett: Company

Adam: Company. Interesting. Wow. I didn’t realize that it was that recent. 

Garrett: Yeah. It’s that recent. It, you know, they started in Germany at the turn of the last century. There they’re called the GMBH. And these wildcatters from Wyoming, discovered them overseas and brought them back to the, you know, brought the idea back to the Wyoming legislature and they lobbied the legislature which involves buying drinks and they were able to get it passed in 1977. And it’s spread across the country since then.

Adam: As a business attorney, you see a lot of clients that own businesses. What are some of the biggest mistakes people make when it comes to their legal setup or just legal issues in general when it comes to their business?

An LLC Must Always Fulfil the Annual Requirements

Garrett: Well, we set up and maintain corporations and LLCs so, I see the mistakes, you know, kind of in that milieu and there are a couple. One is, as we mentioned at the start, starting off as a sole proprietor instead of a corporation or LLC. That’s a big mistake. The other one is, they’ll set up the LLC, let’s just use LLC from now on, because that’s the most popular, they’ll set up the LLC but they won’t take the steps to follow the ongoing requirements of an LLC. 

To stay protected, you have these annual requirements that you have to follow. So for example, you need to pay your fee to the state. In Wyoming, it’s $50 a year. You have to pay that annual fee to the state. You have to have a meeting once a year and you have to have minutes of that meeting proving that you have the meeting. So, and a lot of people will say well, with an LLC, you don’t need meeting minutes, but you really do. 

That’s one of the formalities. You need to file a separate tax return in most cases. You need to put the world on notice that they’re doing business with an LLC. So if your company is XYZ, when you sign contracts and all it needs to be under the name XYZ LLC, so people know they’re doing business with an LLC. And Adam, these formalities are not hard to follow. They’re really pretty easy. But if you don’t follow them, someone can pierce the veil, which means the corporation owes the money. 

The corporate, or the LLC has no money so they say that you didn’t follow the formalities, thereby, you’re not entitled to the LLC protections. We’re going to go through the LLC and reach your personal assets because you didn’t follow all these formalities. So we don’t want that to happen. And so part of our job is to protect people from having their veil pierced. And one of the mistakes I see, Adam, is that people just fail to follow these simple formalities and in half of all cases, the veil is pierced. People are being held personally responsible.

Adam: And another area that I see all the time with, you know, of course, I’m not an attorney, but with, in regards to piercing the corporate veil is they will commingle personal and business funds. Can you talk a little bit about that?

Garrett: That is a great point, Adam. Yes, you cannot mix your personal monies with your business monies. You need to have two separate bank accounts. One for your personal activities, one for your business activities. And if you use a business check to pay for your groceries, you know, that’s commingling of assets. You just shouldn’t do that. You need to have the business checks solely for business expenses. You’ll pay yourself a salary from the business account into your personal account. And that’s where you pay all your personal expenses. You need to keep them separate. And as you mentioned, Adam, if you don’t, people can pierce the veil on you for commingling funds.

Adam: What do you believe separates from a, you know, from your view, being the legal business attorney when working with clients? What do you believe separates successful business owners from those that just always seem to struggle?

You Can’t Keep Doing It All Yourself Forever

Garrett: You know, that’s interesting, I think one of the key things is just hard work. You’ve got to put in the time. And entrepreneurs, most of them are good at that. They’ll put in the time. But then they’re so used to doing everything themselves, they’re so used to putting in all that time, that they don’t rely on a team. And so that’s another mistake is thinking that as the entrepreneur, as the head of the business, you need to do it all. You have to do it all. But really, you need to have an attorney, a CPA, a CFO, you need a team around you to help you do this. So those would be some of the things I’ve seen at least.

Adam: Yeah, I completely agree with you. And, you know, a lot of business owners, and I’m definitely guilty of this as well, is trying to do everything because I feel like maybe, you know, somebody else couldn’t do it as well as I could. But it’s like you have to pick the, your sort of zone of genius. The only thing that you can do and sort of give everything else to other people.

Garrett: Well, if you’re good at building a business, why would you, you know, waste your time doing legal work or accounting work? Go out and build the business. That’s where your efforts are best, you know, put towards that. And let other people help you with things that you may not even enjoy doing or understand doing. You need that team on board with you. 

Adam: Yeah. Let me ask you this. What is a myth that business owners have about the law or the law in general that you would like to dispel?

Garrett: Well, I think one thing to dispel is that attorneys are just so overly expensive. You know, that used to be the case maybe 30 years ago, but with the internet, there’s a lot of information on the internet as well as misinformation, especially when it comes to corporate formations and land trusts and other things like that. But, you know, at the high level with the fortune 500 companies, yes, attorneys are expensive. But if you’re starting out, there are plenty of resources out there that you can access to assist you. 

Here in Reno, the University of Nevada here in Reno has an entrepreneur center, and they have people who will help you with your business free of charge. And so I would reach out to the various resources that are out there. Our firm sets up corporations and LLCs and it’s not expensive at all. And so just don’t be, you know, hamstrung by the idea that the attorneys and the CPAs are going to charge you way too much. The fees nowadays are very affordable.

Adam: So how does the process work? I mean, you know, somebody already has an established business, I’m assuming it’s not too late to get this set up. So I guess how does the process work?

Setting Up a Corporation or an LLC

Garrett: Well, let’s say you started as a sole proprietor and now it’s time to set up a corporation or an LLC. You know, we offer a free 15-minute consult. They certainly can get in touch with us and we’ll go through what the steps are. But typically, the steps are, you would file articles of incorporation for a corporation with the state you’re going to do business in. Or Nevada offers good asset protection for corporations. 

It’s the only state that does. So you could set up in Nevada and qualify to do business in South Carolina. So then you would qualify, get the state, I mean, get the business registered with the state, then you need to prepare bylaws for a corporation, an operating agreement for an LLC. You need to have minutes of a first meeting and you need to issue ownership certificates. That’s key. A lot of these online services never issue the ownership certificate. 

And if the IRS ever comes calling, they want to see those certificates. That’s an important corporate formality. But let’s say you started as a sole proprietor and now it’s time to be a corporation or an LLC. I mean, we can get this done in a matter of weeks. And once you start operate, you’re going to set up a separate bank account, as we mentioned, but once you start operating through the LLC, then you’re protected. You wouldn’t be protected for what happened while you were a sole proprietor. 

But from November 1 on, you’re operating through an LLC and you have much better protection than if you’re operating in your individual name. Now, a second thing to know, Adam, is some people haven’t done the corporate formalities. They haven’t done the minutes every year, they don’t have an operating agreement. We can help them clean that up. So it’s not fatal that you haven’t done it. We can remedy that for you as well.

Adam: Okay. Yeah, that seems straightforward enough. Well, Garrett, if somebody does have, you know, questions, or they want to get that consultation, I think you said, what, 15-minute consultation, where can they find you?

Garrett: Well, our main website is And then you can also call our 800 number to set up the 15-minute consult. And that’s 800-600-1760. So 800-600-1760, and we’re happy to get on the phone with you and explain what our services are and our pricing and see if we can help you.

Adam: Excellent. And we’ll put those two things, the phone number and the website in the show notes. But you also mentioned pre-show chat that you have a new book. Tell us about it.

Garrett: I do. It’s interesting, Adam. One of the, the Rich Dad Company did a survey of what people are kind of most afraid of in their business and personal life. And one of the top things is being scammed. I mean, we’re being inundated now with all these scams over the telephone and the internet and everything. 

So they asked me to write the book on how to deal with all these scams. And so the book comes out October 27. It’s called Scam-Proof Your Assets. And we go through all the various scams that are out there. But more importantly, you know, the scams change all the time, there’s no way to keep up with them all. But, you know, we talk about ways that you can be vigilant and keep your guard up against all this widespread deception out there.

Adam: Yeah, that seems very important. Where can somebody find the book?

Garrett: It’s available now on Amazon. And you can go to as well. It’s available at the Rich Dad Advisor press page as well.

Adam: Got it. Okay. Well, Garrett, thank you so much for lending your wisdom and for taking the time today.

Garrett: Adam, it’s been a pleasure. And I think it’s great that, I love getting on these podcasts because a lot of us, you know, they don’t teach this in school and you’ve got to get this information on your own. So it’s great that you’re doing this kind of podcast.

Adam: Absolutely. Well, thank you. And, you know, anybody listening, if you would like to see if Garrett and his team can help you with your business, please reach out. I’ll put his phone number and then the website for that consultation in the show notes. But thank you so much for listening. And remember, the goal of your business should be to make more profit than last year and turn that profit into cash that you get to keep. Thanks for listening.