How the Rich Use the Trifecta to Pay Less in Taxes

I'm going to go out and sell a product, a service, sales training. The trifecta is the way you're going to want to organize your tax and legal life to build wealth to scale. Freaking Joe Biden did this with his s Corporation in 2016. He had a 13 million dollar book deal. He saved over 230 grand in FICA. You know it's easier to save money than it is to make money. And I love this topic. And guys, I freaking, I love you Albert, but I'm just going to say I don't care if you're making 100 grand, 200 grand, 50 grand, a million, who cares? We're all freaking business owners and taxes are the number one cost in our lives. We're trying to build wealth, we're trying to protect it, we're trying to keep it organized. And heaven forbid we have a normal conversation with a frickin accountant or lawyer, right? So today I want to make sense of this. We're going to have fun. I want you to take tons of notes, I'm not going to sell any shit. I just want you guys to learn, I want you to have a good time. You better have some paper and pen in front of you and let's have a awesome learning experience. So as all of us are trying to scale, we're all trying to get organized and if we can build it, we'll be more successful. Because whether you're trying to make a make 50 grand, make ends meet, get out of debt, whatever the case is, I do not care about all this million billion shit. Let's just, let's just freaking make money and keep organized and try to get every tax write off we can. And I think you're going to love these four principles. I could be here for six hours just rocking it. But we're going to have a good time here with this and see where we go. I'm going to talk hard and fast. I got one hour. Okay, the trifecta. How many have heard of the trifecta? Come on, you feel one hand. Oh, this is good. Okay, so the trifecta is a structure we use at a and I've been teaching this for 15 plus years to business owners around the country. Country, no matter what industrial industry they're in, no matter if they're making a millions or not or hundreds of grand, whatever. The trifecta is the way you're going to want to organize your tax and legal life to build wealth to scale. And so here's how it works. The base of your trifecta the first piece is going to be your family Revocable living trust. This is the part everybody, whether you're young or old, male or female, single, married, kids, no kids, don't care. The revocable living trust is there to organize your legacy, your estate, it owns everything. I want it to own your house, I want it to be the beneficiary of your life insurance, your investment accounts, personal home, how many in their house and I would think about, I'm going to guess 30%. Do you know it's a almost a 500 billion dollar industry of probate courts, probate judges, probate paralegals and institutes to deal with the fact of people that die without a will or trust and the amount of money spent on lawyers and family battles and fights. It's ridiculous. And you do not have to be rich to have a trust. You can establish one for 1000 bucks. You can go online and hack one out. Not that I'd like you to, but we're doing it for a couple grand around the country helping clients get their will, trust and everything organized. So just it's not a topic for today. Big in large part, but being organized with your estate, it provides privacy and organization. It's not asset protection, it's building. What are you going to build and how are you going to leave it? And if you've got kids under age 18, we're talking, they're getting everything at age 18. Not good. Scary. So anyway, that's the foundation in your tax return, is the base of this. So all of your money flows downhill into your 1040. The 1040 is like a blender. We're going to blend together your income, your losses, your write offs, your crypto, your real estate, bring it all together. And we want to create the best possible tax result we can. So that's the 1040. Now over here on the right side is where we're going to put our holdings, our investments. This might be an llc, a limited liability company. We're going to set up those LLCs in the state where our rental property is. If I have rental property in Tennessee, I'm going to have an LLC in Tennessee, not in California. I'm not going to go set up an entity in Wyoming or Nevada or get scammed on some stupid frickin entity in another state. We can't say that enough. We might go down that path if you have a lot of assets for another layer of protection. But be careful. If anyone's selling a C corp in Frickin Nevada, I've got So many articles and videos and trying to just warn people about this and it's in my books and everywhere. So we want to start out simple. If I have one or two rental properties in Arizona, then I'm going to have an Arizona LLC and I'll have my properties in that llc. So I'm going to maintain that. My investments over here on that side of the structure. So first base vocal trust, my 1040. And I'm going to let that trust own my LLC. You should not own your LLC is never do a member managed LLC either. There's no privacy. People find out where you live. You don't want that. We want to stay organized with a manager managed LLC always owned by your trust. If you add your trust later, we just switch it out. It's a membership transfer agreement. Our paralegals offer a couple of those with every estate plan set up. It should be very affordable anywhere you go. Now the left side is where we put your operations. 40 plus million Americans now have a side hustle. I don't care if you're selling online, you're doing a product or service, a small business of any sort, that's your side hustle. And if you've graduated to the next level, you'd have your S corporation and you would convert your LLC to an S corp. Once you make that S election, don't tell me you have an llc. Go to your account and say I have an S corp. Now you might have Mark Kohler Enterprises llc, but once you tax as an S corp, everybody in your ecosystem needs to know it's an S corp. This is where we're going to start saving on self employment tax. It was so awesome. One of the video guys came up to me right before I came on stage was like Mark, I actually worked on an event two years ago and I was paid 28 grand in self employment tax with my LLC. And I was there videoing you and I watched, you know, I went out the next day and talked to my accountant. We converted me over to an S corp. This year he goes, I saved over $20,000 in tax just using my S corporation. LLCs do not save tax. I almost would want you all to repeat, llcs do not save tax. S corporations allow us to save on self employment tax, reduce our chances of an audit by 15 times and help us explode into other strategies like the solo K getting my family board dialed in. We really want to move to that S corp. The point to switch is when you're making about 50 grand a year, if you're making 50,000 or more a year. We better be over here in an S Corp realm in the state where you live, not in freaking Nevada. We can get into that if you want. Okay, so that is the trifecta. And if I go back here, I just want to point this out. Well, I want you to have one of these and carry it around with you. I have my own trifecta open on my laptop right now. At lunch, I was working on my own little trifecta. I want to build this structure to pull the whole thing together. And we're going to look at more complex trifectas here in a minute. This is basic. This is like realtor rental trust. Single, married, kids, no kids, don't care. Dentist, building trust. The more properties you have, the more LLC we might get, the more operations over here we're going to dive into that. So I'm going to give you four strategies, but we're building on the trifecta every time. But that said, strategy number one, S corpse, let's break it down now. Here's the average small business owner is going to say, okay, hey, I'm going to go out and sell a product, a service, sales training, solar, whatever the hell you want to sell. Don't care. I'm a realtor, I'm a broker. I do an llc. Well, as an llc, you're going to file a schedule C, as in Charlie. It's going to go into your 1040 and whatever your profit is, you're going to pay self employment tax, the F word. Fica. I know you're thinking of a different F word, but it's FICA. What? The FICA. I don't want you to pay FICA. FICA is 15.3% on the first 170 grand this year. Then it's another 3% until you hit 250. Then it's 2% in perpetuity. This is a big expense that blindsides a lot of small business owners. You will pay this every day of the week with an llc. So we want to decide, what do I do? Well, someone told me I should be a C corporation. Now, I live in Texas, I'm doing business in Texas, but I'm going to do this in a C corporation. Okay, well, now with a C corporation, I pay corporate tax. So I have the same 250 grand of income. In both of these, I've got the same income. And so. 250 grand of income, 50 grand in expenses, 200 net here. I'm going to have over probably $18,000 in self employment tax. Here I've got to pay corporate tax of 21%, another 27 grand and I've got to take a salary out of it. So this is C Corps are not for small business owners. If someone's gotten you in a C corp, we literally have a service to take you out of it because they're typically the person that sold you that isn't around anymore and would get a second opinion if you're stuck in one of these. Now the next option here is the S Corporation. This is every dentist, doctor, attorney, cpa, realtor, restaurant owner, landscaper, online marketer. We're all S corporations. If you're making more than 50 grand a year before then just stay in LLC. It's all good. We'll stay down as a sole prop. Once we're scaling and making money, we want to be over here. So the S Corporation is where we will take the income. So same 250 grand of income, 50 grand in expenses and then a third is going to come out in salary and I'm going to take 2/3 as pass through. No corporate tax, no FICA, no Obamacare. Bam. Right here, I'm saving 10 grand. Every small business owner, their first step is to set up their S corporation and take part salary. You don't wait around for a paycheck. You just take their draws anytime you want, just like an llc. And then quarterly we go back in time and, and we do your payroll for first quarter right now in April and next week. Payroll departments are going crazy everywhere. Freaking Joe Biden did this with his s Corporation in 2016. He had a $13 million book deal and he took his book deal and took a $500,000 salary on 13 million. He saved over 230 grand. In FICA we do the same thing. The more money you make, the more you save. So anyway, it's a big day in April when you decide your payroll for the last quarter. Another client calls him, oh, it sucked. I didn't make any money. Quarter. Okay, zero payroll. And then we'd true it up at the end of the year. This. So how many of us already S Corps in the house? Boom. Look at that. Probably about 20 or 30 of you. So we want to dial this in. The second problem I see is people not an S corp. And sorry, the first problem is they're not an S corp. And then the second problem is they're jacked up on their payroll. They're taking way too much payroll because their account scared of their own shadow. Guys isn't this weird. The number one cost in our lives are taxes. And we go hire the most conservative, scared individual to help us tax plan. That are actually usually terrible at communicating. Not you. You look great. But we out there accountants. They're the ones at the football games in high school. They were the ones up in the band playing the flute. That's your accountant you want. The guy that was under the bleacher smoking weed? That's the accountant you want? That was me. Okay. But I was aggressive but smart. I went on to law school, and I'm killing it. Best tax attorney in the country. And I love helping small business owners. Today I just wanted to come to help. To help you guys because I love small business and it's so fun. So, no, thank you.