How to Get the Most Profit Out of Your Home-Based Small Business | Live Q&A with Mark J Kohler

Welcome everyone to this week's live broadcast on Main street business and how to build wealth with the American dream. One in three Americans now have a side hustle, side gig, whatever you want to call it, part time small business, making some money on the side. Now that could be classified as a W2. Some people go work at 7:11 late at night for 4 hours from midnight to 4am I get it. But millions of Americans, and that's who I hope is watching right now are the people like you that have that little side business which could be driving for Uber, could be selling as an affiliate on Amazon. You could be doing mowing some lawns, cleaning garbage cans, cleaning an office, all sorts of things. And in today's economy, this COVID pandemic economy, people are trying to figure out how can I make money with a side gig, side hustle. I want to give you some ideas today and I want to answer some questions. I was quizzing some folks before this and look at some of the questions that I've already gathered here. Do I need an entity and which one? Is it worth claiming the income? Do I have to claim the income? What are the best deductions and how do I take them? Do I have enough money to start a side gig? Do I need money to start a side gig? If I do need money, how do I get it? These and many more questions are what I'm hoping to answer for you today. I'm a CPA, an attorney. I've owned small businesses since I was 10 years old, through college. I own multiple businesses. I continue to open and own small businesses on the side. And I'm an owner of a law firm and accounting firm and trust company with some amazing partners and team and staff and we consult with with people like you all day long, helping you build your American dream in the small business. So that's what today's podcast live broadcast I should say is all about. So if you have a question, please type it down below in the comment section. If you love what you're seeing or hearing, give it a thumbs up. Give me a shout out if you don't like what I'm saying. Don't be rude or drop the F bomb or something, but make a comment. Say I don't agree with Mark on this. I don't think you have to do that. And my staff here that will be filling those comments and throwing them out to everybody, they will bring those up. I'm not saying I'm all powerful, all knowing I can make mistakes and maybe my opinions are not Right on. Sometimes I want to learn from you, but we've got seven attorneys in our office doing an average of five to six consultations a day. I've been doing this 20 years. We have met with thousands of small business owners that are helping people like you build that small business in answering these questions. So I hope we have the answers for you today. So we're going to jump into it now. Now, before I get going, I'm going to give away a book. I'm not sure which one yet. I'll announce the winner of last week's book and get that new drawing out there before the end of the show. Also, I want to talk about this, the Small Business Rescue. This is something we're starting right now because there's people that can't even afford to call our office and we feel bad about that. I've tried to take calls from family and friends and neighbors that need help right now. And it's, it's weird. I'll be on a phone call with someone that's making money hand over fist. The people stuck at home pandemic has helped their business and home delivery in a huge way. Other people, their business has been destroyed. And so it's kind of a weird roller coaster every day. And what I want to do, and this is going to start next week on Thursday, is I'm going to start the Small Business Rescue with Mark J. Kohler. And I'm going to see if there's someone that's willing to share their story, what they're going through, no cost, no charge. And we're going to talk through it, this live broadcast. For some of you, that could be extremely embarrassing or concerning that you're getting it out there. For some of you, this could be a huge blessing in your life. If you're interested, if you know someone, this is, you know, Queer Eye nomination, love that show, how they help people. But if you would like to nominate a family member or friend or someone that needs some help, my team's going to start reaching out and getting that list of people to start helping doing this small business rescue show, for lack of better word, please email MarkJ Kohler.com that's my personal email. I have an amazing assistant, Maria. She's going to be helping go through those and hand them off to our marketing team and our other attorneys. And we're going to start choosing folks that we feel we can have an impact with and help them. So in the nomination, give me a few facts. Where's the city they live? What type of Business is it? What is it? They're facing no sales. They don't know how to get back on their feet. They don't know what to do with the PPP Money title money. I don't know. Give me a little background. Give us their name and phone number and we'll call them and say, you've been nominated. Nominate yourself. I'm cool with that. Nominate yourself. We'll give you a call and see if you'd like to come on our live broadcast on Thursday afternoons. If the response is overwhelming, I'll do it two or three times a week. And I'm hoping it'll help those people on the rescue call, if you will. And those of you that are watching and going, oh my gosh. And let me give a quick example of what I'm talking about. This was shortly, about a month and a half after the lockdown, where everybody was told to stay in their house. And it was the first go around and everybody was freaking out, right? Remember, everybody's like, ah, I need to stay home. And I was like, it was right that first week and I was like, hey, I'm going to pick up a sandwich. And so I went to my normal sandwich shop and I walked in and the counter was all blocked off and I was like, oh, no, it's hit, you know, I can't get a sandwich even. But they had pallets of crap everywhere. There was a line at the register and I walk in and I knew the owner and I'm like, why, can I get a soup and sandwich? He's like, nope, we're doing bulk product wholesale to help people that are doing food storage and trying to just load up on toilet paper or wheat or flour or oil or pasta or whatever. They had called Cisco and had them, that's a food delivery wholesaling company for restaurants and had them deliver pallets of different products that were deeply discounted. It's like another version than Costco on steroids. And this guy had converted his restaurant to a mini Costco. They were busy, they were paying the rent and they were making money. And just that small modification saved his business for that month or two. Now they're back to serving soup and sandwich, going through that their normal restaurant procedures. But that was a small modification in a weird economy that someone could make to save their business. We have all sorts of stories and examples like that. It's not just saving taxes or legal structuring. We get on the call with clients and help save their business. All right, well, if you have a question, drop it in down below. I'm going to start on some of these and see what we come up with. One of the first questions I get all the time, and we covered this on our podcast this week, was which entity is best? Do I need an entity? So if any of you out there have a side hustle or a side gig, you're going to get what's typically called a 1099. Now, some people may pay you cash under the table and you're going to live that way. I'll bring some risks up of that here in a little bit. Of course, the IRS doesn't like that and you can get caught and it's not a good thing. But some of you, like, I don't care and they're not going to catch me, fine. But some of you that are starting to sell online, you're going to get a 1099 from PayPal, possibly Etsy, possibly Amazon, Venmo. And so when you're running a business with electronic sales, there's a record. Now, if you're just going down the street and mowing people's lawns for cash, you're right, it's going to be tough for the IRS to track you down. And frankly, I don't think they're going to worry about it or have the time to worry about it. But the more money you make, the more they, they get upset. So here's the point. Here is your typical 1040. Now for those of you that look at your tax return for about five minutes once a year, and I know many of you are out there, you take your W2 that you get from your day job, maybe you're married, single, whatever, may have a couple W2s, you plug it in, you take the new standard deduction, which is $12,400 if you're single or 24, 8 if you're married, and that's this year, then you have what's called your adjusted gross income. Now, I'm desperately oversimplifying this. I know you accounts are freaking out, you got the HSA deduction, half of the self employment tax deduction, there's an IRA contribution, I get it. But just for the average individual out there, you got your income, you got your standard deduction, and you're going to end up with this, well, adjusted gross income. And again, I'm embarrassed here. For some of you accountants out there that are like, Mark, you're an idiot, AGI is before your standard deduction, but we're trying to get to this adjusted gross income, your standard deduction and get to your taxable income and then you're going to pay tax. And it's funny, I meet with a lot of college students that are like, I've never filed a tax return. This is what it's like. Yeah, you plug in your W2, you got a standard deduction, you might get a refund. Go, whoa, can you help me out with that? And then you get your taxable income, you pay your taxes. Thanks. And you're off to the races. And it can be ugly. A side gig is a separate schedule, and it's called a Schedule C. Easy schmeezy. If you work for, what's the car delivery? Oh my gosh, you're driving people around Uber. If you work for Uber, you're going to get a 1099 and you're going to pay taxes on that. And it's going to be ugly unless you take write offs. So that's a side gig. That is a small business. And so what we want to do is know that this is going to be a separate piece on our tax return and, and not be frustrated or scared by that. So that's kind of the plan. Now my director's talking to me. What do I need to do? Scoot this way a little bit. All right. Okay. Trying to give them a whiteboard. Right. While we're here on this. Thanks, everybody. So this is how it works. So do you need an entity to do that? The two main reasons. Now, there's a lot of little reasons you might set up an entity, but the two main reasons are you want protection and you want to save taxes. Those are the reasons why you might set up an entity. Now, if I'm driving for Uber, I have all the right insurance. Do I need an entity for that? Probably not. I do not recommend my Uber driver set up an LLC or a corporation. It just doesn't make sense. Now, if you're going to start doing a limo service and have four or five cars and drivers and employees, a taxi service, you're going to start doing some sort of airport shuttle, you're going to need an entity, you're going to have employees, you're going to have bigger exposure. But if it's just little old you driving Uber, you don't need an entity. And you're going to get all the write offs. Auto dining, your cell phone, laptops, home office, all sorts of good write offs. I'll come to you here in a minute. You're going to get all those write offs. So when you go to do your tax return, over here on this schedule C, if I work it right, we're going to wipe out all that income. You're clean with the irs, you didn't pay any taxes, and if I could drum up 1,000amonth in write offs, and you made 1,000amonth driving Uber, that's zero taxable income. Love it. That's $1,000 a month to buy groceries, make car payments, pay student loan payments off. You're off to the races. So that's what a side gig is all about. Trying to live under the table is scary. You want to claim the income, claim all the write offs, and you probably won't owe tax anyway, depending on how much money you're making. Now, after all those write offs, if you're still netting, and we talked about this today, Max and I, you're going to be netting more than $40,000. Now, we need to talk about a corporate entity and it's going to save you a lot of taxes. An LLC doesn't do that. We're going to get into what's called an S corporation. Alright, so that's topic number one. I hope you guys are watching this and hope you're loving it. Give me some thumbs up, give me some shouts. I don't know, I just, I want all of you watching here to be feeling out, okay? You've got an attorney here, you've got a CPA here. I'm here for you. I can be expensive per hour, depending on your revenue and how much you live on and what you make, use and abuse me. Throw down a question there and let's get into it. But the first question I wanted to hit is, do I need an entity? And which one? Nine times out of ten, when you're doing a little side gig selling crap online or driving Uber, you don't need an entity. But when you start to have concerns about protection or you need to save taxes because you're making more than 40 grand, we're going to take it to the next level. All right, so Maria, we got a question. Right. All right, Rakim, please tell us everybody, where city you're from at least it's nice to see this international national layout. Okay, what do we got, Jen?

I mean, Max Rakeem says, how do you fund your LLC once it's established without commingling funds? Like for example, if I have a budget set aside already.

Okay, so Rakim says, how do I fund my business? And I'm going to even break it down further. Do I need a bank account for my business? How do I if I do set up an entity. Do I set up a bank account for that? And that was Rakim general question. I know I kind of took some liberties there, but I'm going to go through option one and two. Maybe we'll go to three and four. Option one, I'm going to call down and dirty. And some accountants watching this might be a little upset by this or lawyers. But folks, I want to see my clients making some money before we go spend a lot in legal and accounting fees. Let's at least get out there and test what we're doing. Let's make sure it makes money. So the down and dirty is I would like you to have a separate bank account that you're going to use for your business. Now, a lot of times that's going to require what's called a dba and you can register them in your local state or county or city. Get online. We do it for our clients for like 50 bucks. It's not a big thing. We love to sell. It's not a lot of profit in it for us. And you can do it yourself. Just get a DBA doing business as there's no protection and there's no entity, but it allows you to open up a bank account. So I would say get a bank account, get a DBA and set up your Venmo, set up your PayPal. Start collecting all the income that you make, collect income and pay expenses for your business out of that account. Now if some of you say, well, do I need a credit card? I'd like you to have one that you dedicate to business in my wallet here. If I say, okay, I'm going to use my American Express for business and I'm going to use my Delta Hawaiian Airlines card. Delta is my American Express. Hawaiian airlines is my MasterCard. I use one for business and one for personal. Now, do I have to have my business name on these cards? No, it's okay. But just try to keep separation. And that's what Rakim's talking about. You don't want to co mingle. So the sooner this is down and dirty. Option one, just get a separate bank account. Even if you're driving for freaking Uber, get a separate bank account, pay for your gas out of that account, pay for a new cell phone case, pay for your cell phone service, Let your business and we'll get into more write offs here. Let your business pay for your expenses. Get into the habit of having that separate account. Maria, this is like the handyman service we were talking about. Handyman services. There should be a separate account for that. If you're going to go out and buy tools, use that account, use that credit card. That's option one. Now option two is, and Rakim said this, I'm going to go out and set up an actual llc. Now when you do that at the state level, we do it for 450 bucks. Done. Paralegals, all the pieces and parts cheaper than LegalZoom. Because LegalZoom's 99 bucks, right? Yeah. When you get all the parts you're supposed to. It's more than that. So get the LLC set up. Call our office if you need it. We got great paralegals knocking them out every day and all the states around the country. Then you're going to get what's called an ein, an electronic identification number, sometimes referred to as the tax ID number ein. With that you're going to open a business bank account and you're going to be a little more legit. And Rakim says, well, how do I fund that? How do, what do I do? Well, you're going to just go in and put a hundred bucks in there. It's okay. Put in a thousand bucks, put in the bank account. It's just a personal deposit and you're going to start getting that bank account going. If you're ever short, put money in it. If you ever make profit, take it out. You can put money in and take money out. That's not commingling. Okay everybody. What's commingling is when Rakim takes his LLC bank account and goes buys groceries. That's co mingling. Take the money out, put it in your personal account and then go buy groceries. In fact, Jack, would you help me out? Can you hand me my red card? You've got it on you. I want to even just demonstrate my personal life here. I've got two credit cards, one for business and one for personal. And I also have two debit cards, one for my. I'm not going to hold it the other way around because with digital media nowadays, someone will freeze frame it, zoom in and steal my card number. But I have my. This is my gray card. And now everybody on my team knows this is my corporate or business card. It's a debit card and I use it for business. My red one is for personal. If I'm going to go buy groceries or underwear, I'm going to go use this. If I'm going to go to Wendy's in my local little town, buy Pizza Hut, I'm going to use my personal card. But If I'm going to go out of town and do business or I'm going to buy food for my staff or my lunch for my staff, I use my business card. If I go to Apple Store, I use my business card. If I go to Victoria's Secret, I use my personal card. We can't write that off anymore. Entertainment expense, it's gone. It's sad. It's ridiculous anyway. Personal business. Personal business. So, Rakim, if you need to put money in your business account because you're short, put it in. That's okay. I put money into my business account to go to the Apple store and buy a new iPhone because I want my business to buy the iPhone so it's a more audit proofed write off. All right, so there we go again. I'm hoping this is helping folks. I mean, just here to talk about what you want to talk about and we'll get into some of these other questions I fielded, like our best deductions. I'll come to that in a minute. Okay. Another question. Christine in California, current client. We recognize the name and thank you, Christine. Appreciate you.

I have been working with you to set up your. My escort with my screen printing company. I also have a ranch.

E.C. ranch. An E.C. what?

KZ.

I'm sorry?

KZ Ranch, what it's called. With 20 acres, we rodeo and my team rope. We are raising horses and hoping, steering and having thought about adding a beef cow. We have been doing this a while.

Thanks, everybody. I'm just gathering the question here.

How do I set this up as a real business? I'm also just starting to raise mini beagles. Pocket beagles. Should I do them as a separate business or should.

Okay, Christine's in California and she gives us a little longer scenario which is okay, this is good. It's a good example for everybody. She has a screen printing business and we set up an S corporation for her screen printing business. So all of her sales, online, Venmo, PayPal, checks, cash, whatever, all of her screen printing business is going to go into screen printing is going to go into her S Corp. That's great. Then she's going to write off expenses for all of her screen printing expenses. She can take a draw anytime she wants. And then we're going to set up a little paycheck for her and we're going to have this all funneled down to her 1040. All right. That's her first business. Then I'm going to add a little twist to this. Christine, thank you for letting me take some liberties. Christine, Has a rental property. So over here she has a little rental property in Arizona. Okay, so she has an LLC in Arizona and that's where we have a checkbook for our rental property. See, rentals go on this side, operations go on this side. So I'm going to put ops and assets. So a rental property would go over here. Alright. Now we set up the entity where the rental property is. Now we're not trying to get out of the $800 minimum tax in California. We might have to register with the franchise tax board, but not the secretary of state. It's a long story. But for people in California, they get nailed with an llc. So we want to get that LLC out of the state of California and use it to hold our rental in Arizona. Now here's what gets interesting. Christine says, and I'm going to just be broad here, she has a farming business. Now she said she has some acreage. I'm going to say 40 acres. So she's got 40 acres. Now if you had 40 acres of farmland, would you say that's an asset? I would. And if there was a lawsuit somewhere, I want to protect that farmland. You go talk to a farmer. Their land is their most valuable thing next to their family or kids. I mean, this is it. Farmland is like gold. You're not anybody unless you own land. What was that movie the other night? I was watching that. What are you going to do with your money? And the guy says, I'm going to buy land. Oh, Aru, come to me. So here's 40 acres of land. We, we might put that 40 acres in an LLC to protect the farm from a potential lawsuit. Then she says, mark, we're raising horses, we're doing rodeo, we're going to raise beagles, we're going to raise. What else was it? A cow. We're going to get a beef cow. Maybe we'll get a milking cow. I've got a little kid that I had on my radio show last year that had about 40 chickens and he was producing about four dozen eggs a day. And he had a little rat out and he was selling eggs. He was going to make 15 grand last year selling eggs to the neighbors. Crazy. I loved it. Now that is called a farming business, which goes on a tax return on what's called a schedule F. Now to make this simple and really, Christine has two options. The simple option is she would have a separate entity. Maybe, maybe we do it as a sole proprietorship, but a sole prop or an llc and she would file this as a schedule F because it's a farm and she would run the operations of the farm here. If I point to this Janay, do they see it? Okay, so I'd run the operations of the farm here, but the farm would be owned over here. That way I have better asset protection. Very common. This is the Applebee's building. This is the Applebee's restaurant. This is the dental building. This is the dentist. Very common. Farmers do the same thing. So we put the farm over here and I can tell you some horrific stories of farm accidents. They happen and we don't want to lose the farm in a lawsuit. So we over here with insurance and we run the farm. Now, Christine's probably going to say, mark, I'm not going to make a ton of money in this thing. It could just be for write offs. I'm cool with that. Show the revenue. You're making money selling cattle, selling horses, selling beagles, selling livestock or eggs or hay or wheat or potatoes. So whatever you're doing in your farm, that's called a Schedule F for farm. And I would definitely set up a separate bank account for it. That's option one. Now your other option is you could make this little operation a subsidiary of the S Corp and so you would run all the farming operations through here and then through your S corp. In my life, that's how I do it. I have an s Corp. That's it, 1s Corp called Mark J. Kohler Inc. If I was going to start a little farming operation, I'd probably set up an LLC and have my S Corp own it 100%. That way I get protection. But I have a separate bank account for my farming operation. Now, Christine's question is a good one, right? Kind of interesting. It's quickly how it expands, but look at, we're providing asset protection, we're taking write offs and we're separating her farming operation from her screen printing operation. Hope that helps Christine. All right, next question. This is from Bella in Florida. Did Bella. Bella was on last week. I think this is good. She was laughing last week about a Florida man that bought a Lamborghini with their PPP money. I think that was you, Bella. Right? Okay.

She says she's a big fan.

Oh, thanks, Bella. Big fan.

One of four partners in an S corp. And she asked, can all of my salary and or profit distribution as an owner be paid to my sole prop. Llc Managed?

No. So her question is only Bella knows her question. She goes, I've got an S corp and I have four partners. And she goes, can all of my payments to me go to some sort of management company and so I can take write offs. That's really what Bella's after. I know that's what you want, Bella, because here's the problem. In an S corp. Her partners don't all want an iPad this month, but she goes and buys one, she may not be able to write it off. That's not a good thing. So we want to have a way for Bella to write off her personal business expenses, but it's tricky. And so she's saying, can I just 1099 my little management company? The problem is, I'm sorry, I'm just itching my face here is that we've got a W2 scenario that could be happening. We've got K1s that are certainly going to be happening, and Bella's trying to find write offs. Bella, here's the hard part. I don't like your structure. It's a mess. Do we have my Tax and legal playbook? Can you hand it to me real quick? The chapter I want to give as a recommendation for Bella and for everybody is in the Tax and legal playbook. There's a chapter on partners. And so partners partnering is going to be on Chapter 22 of the Tax and Legal Playbook, page 253. And I go through ways to structure a partnership to get Bella her best write offs. I'll just cut to it. Bella, you want to get this S corp into an LLC in a bad way. That's how it's normally done. Whoever set this up for you was a nut and I apologize. I will go head to head with him. I'll tell him it's a joke. I would never do this for anyone. So this is a bad structure. I would normally do an LLC for the partnership and each partner is an S corp. Now, Bella, you can take all the write offs you want. Say this is Bella over here. She can take all the write offs she wants in her S corp, but the partnership is an LLC and this is where the main income comes in. And then each partner gets a K1 and they can write off all the expenses they want that may relate to their personal businesses because Bella might have other sources of income. So, Bella, we need to work in that direction before year end. And that would be your best partnership structure. Now, I'm going to do this before I take this question from Sherry in California. One of the questions people got that threw out to me was what are the best deductions and how to take them? I'm just going to rattle these off people, whether you're Bella in Florida or Christine in California doing a farming business, whatever it is, what I want are the big write offs. I'll just give you 10 off the cuff here. I just said 10. I better come up with 10. 1. Dining. Love to write off dining. I've got little videos on this in my tax and legal library on my website. They're in my books. I'm there for you. Once in a while I ask you to pay. I try to make deposits with you. And once in a while I ask for withdrawal. Get my tax and legal library on my website. My eight steps to start a business. You would love it. But dining, electronics and computers. When I talk about electronics, I'm talking about supplies and equipment. But I also want you to write off. And this is a separate line item and a lot of times what I teach is cell phones and Internet service and this is something that you might write off for your spouse, your kids. Because I want all of my family on my board of directors and I want to be writing off all their cell phones. Number four, Travel. Every time you travel somewhere, I want you doing business. I've got little videos and sections on this and a lot of what I talk about. Think about this. Let's go to Christine in California. If Christine has a little farming business and she goes to a rodeo four states away, we're going to write off all the travel there. We're going to write off all the food on the way. We're going to write off, my gosh, gas, supplies, equipment. Because her farming operation is also a ranching operation. Watch Yellowstone. Okay. Travel. We're going to write off children or family. I want kids in the business. And if you're single or no kids, do you help your mom, your dad, your niece, your nephew, your spouse? Lot of people have a business and they're helping people. Let's get them in the business and give them a W2 or a 1099. Baby 6. Auto. Love the auto deduction. Everybody should be taking auto whether it's a truck, an SUV or car. Are you going to do mileage or actual. I've got great articles on my website on that and sections of the books. And this is stuff you can read up on people. You've got to manage your accountant. And if you're knocking this out on TurboTax, fine. Then you better freaking up with your game. You got to know this stuff. If you're going to go out and just try to run your business and hope your accountant gets it, they Won't. Seven, Home office. Home office is a legitimate and wonderful write off. Eight, we're going to worry about self employment tax. And when you start to build your business, you're going to need an S corp at some point. In self employment tax. I'm going to. What else should I write in here? Max, what am I missing? We got dining, electronic, cell phone, travel, children, auto, home office, the self employment tax. I'm going to write off rental property expenses, which includes depreciation, and I encourage so many of my clients to buy one rental property a year. What am I missing in my list? I just did 15 the other day. Yeah, charitable. Who wants to give money to charity? Screw that. Come on, give me some good ones, people. Make some comments down there. What? Okay, education and training. I could go with that. Education. Training. Now, when I say education, you're not going to Write off Title 9. College education. We're talking about continuing education, working workshops. Going to my workshop and training. Love it. Thank you, Jack. We'll leave it at that. Workshops. There's 10 people. Those are legit. 10 things you should be writing off. And of course I'm going to just say this. Office supplies. If you have a small business, and equipment, you're going to be buying computers. And again, that's electronics. But let's talk about desks, tools. A lot of times, people, everything you buy at Home Depot should be in your business, too. All right, we got Evan, not Sherry in California. She dropped off, huh? Okay, we got Evan.

Since an LLC needs to have a business purpose, is there a way to structure an asset protection design with trusts, entities, et cetera, for a personal residence?

Okay, Evan says, since an LLC needs a business purpose. Agree. What do I do to structure asset protection for my home, my primary residence? Love it. I've got a lot of good stuff. And then he threw in California, the worst state in the country, to protect your assets. Okay, I have a whole chapter in this book on how to protect your primary residence. And so I want to at least say that because this is an important topic. Protecting your home from a lawsuit. Chapter 19. Chapter 19. Janae, will you write that down, too? I don't know if I have a good YouTube vid on that. Protecting your home in a lawsuit. Let's see if we can shoot a little YouTube bit on that. I think I already do, but I'm going to give this answer for everybody. And then, Evan, try to backdoor in some ideas for California. The number one way to protect your home from a potential lawsuit is the. Okay, let's do this protecting your home. And I go through this in the chapter of that book. Since I wrote the book, I can hopefully do this from memory. Number one is the homestead exemption. You want to look at what is the exemption in my state for owning a home? Now, what this means is state legislatures around the country have said in your state, if you get into a car accident, you're texting and driving, you blow through a crosswalk, you kill someone, walk, whatever, there's a homestead exemption. And no one can get at your home for this exemption. We don't want to leave you homeless. We'll pay off the mortgage, whatever equity is, we'll give you your exemption amount, and the rest we're going to give to the creditor, to the family of five. You blew through that crosswalk. O.J. simpson, knowing this was coming, moved his primary residence from California during the criminal lawsuit to Florida because it's an unlimited homestead exemption in Florida. During all the craziness of O.J. simpson's life, he was able to keep his home in Florida. Now, Florida was so embarrassed by that, they changed some of the laws regarding current lawsuits and pending actions and moving here, but he was able to pull it off. Now, in the back of my book, I have a table and I go through what are the homestead exemptions around the country. It tells you what that dollar amount is. So California, I'm going to do this without my glasses, too. If you're married, it's 100 grand. If you're over age 50 in California, I know it goes up. Let me see if I have that. Yes, in California, it goes up to 175,000. If the debtor or debtor spouse is over age 65, there's some other exemptions. So California for you, Evan, the first hundred grand. So let's say your home is worth 500 grand. You have a mortgage for 300 grand. That means you equity. See, people, this is what you have to do. So if you say my home is worth 500 grand and I got into a lawsuit, my mortgage at Wells Fargo is 300 grand. What is the equity in your home? 200 grand. How much can that creditor get? Well, got to go to the homestead exemption, 100 grand. Evan's married. It's 75 grand if you're single. So the first hundred grand, we're going to sell the house. We're going to give Evan 100 grand. That's the homestead exemption. So he's not homeless. Go out and get a new house. Evan, go buy a mobile home somewhere and then 100 grand, because in California, he'll be lucky to find a mobile home for 100 grand. Then the remaining 100 grand goes to the creditor. That's how the homestead exemption works. We're going to protect this amount for Evan in a lawsuit. Now, some of the other states are unlimited. Texas, Florida, South Dakota, Kansas, other states give you a lot more. Nevada is 550,000. Arkansas, they give you a car up on blocks in your mobile home, 30 grand. Arkansas, throwing down. That was a joke, but it's a true number. Connecticut, 150 grand. What are some big ones? New York, 165,000 to 331. I don't know why that's so weird. Minnesota, 390 grand. So you want to know what the homestead exemption is in your state? Is. Is this interesting? I hope this is interesting. You loving this. Evan asked the question number two, tenancy by the entirety. If you're married, is it fair that your husband or wife is a bozo and gets into a lawsuit and you lose the house? No, it's not fair. Right. So in a number of states, if your spouse gets into a lawsuit and they're an idiot, they can't take the house away from you because it wasn't your lawsuit. What states give you that? Delaware, Washington, D.C. florida, Hawaii, Indiana, Maryland, Michigan, Mississippi, Missouri, North Carolina, Pennsylvania, Rhode Island, Tennessee, Vermont, Virginia, and Wyoming. So if you live in North Carolina and you marry an idiot that gets in a lawsuit, they can't take your house away, no matter how much it's worth. It's called tenancy by the entirety. Now, again, Evan's like, well, what can I do in California? Because my homestead exemption sucks. Tenancy by entirety doesn't apply in California. What you do is equity stripping. And you use a second mortgage to hopefully pull out some of the revenue and the. And the equity and use it wisely, because then it's stripped out of there. In a lot of their states, we use a domestic asset protection trust. You can put it in an irrevocable trust, spendthrift trust, which is like adapt, but California doesn't like it. Evan, you're fighting an uphill battle. It's just tough. So when we do a consultation with clients, we ask you, how much equity is in your home? Where do you live? What are your plans? And we do the best we can to protect every dollar in your home, but it's not a generic answer. All right, Tiago in Oceanside, California. Lots of listeners today from California. That's because you got a 16% tax rate being thrown around. Can you believe that? 16% is getting thrown around to get dig out of the hole. We're in California. With all the money being spent on Covid with federal California, you'd be at 56% in taxes now. 16 plus 37. Okay, fine. I'll give you 54, 53, 54%. So for every dollar you make in California over a certain amount, down the toilet in taxes, is that crazy? Unbelievable. That's why I live in Idaho. Dis all you want on Idaho potatoes, but you go to five guys, you know what I'm talking about. You love those potatoes. They get them out of my backyard. Alright. Tiago and Oceanside says, can I start

an E Commerce just to try and see if it will work and then get the entity?

Yes, I love it. Tiago says, mark, I'm just going to start some E Commerce and then see how it goes. Do I have to set up an entity right away? No, you're going to go with option one, the down and dirty. Just get a separate bank Account, get a DBA, get your Venmo, get your PayPal, start making sales online and go for it. Things start to kick butt, you're going to switch over to an LLC and ultimately an S Corp. I have some online marketers that are making 2 to 300 grand a month. You're going to get there, we're going to do the S Corp thing. So it's all good. All right. John in Minnesota,

he says, can I write off travel expenses for my 2 year old? We are traveling for business.

We cannot leave her behind.

Probably not. Just curious if you're going through.

Okay, so John is in Minnesota and he says I want to write off my 2 year old when she travels with me. Now let's look at the one extreme here. On one hand, the answer is generally no because the 2 year old is not participating in the business. I would presume generally I'm going to give you two options, everybody. But it's kind of a continuum. So on this side, if I'm taking my 2 year old with me to a workshop in Chicago, maybe I have a nanny, maybe it's personal. I can't write that off unless there's a business purpose. Now Molly, my 16, 17 year old, when she went with me to Chicago, she was checking people in at the registration desk, she was helping carry around my bags and, and I wrote off all of Molly's airfare, her food while she was there, her hotel, because she was an employee. Child of the me and the Business owner and she was working legitimately in the business. So that's very common. I want you to write off your spouse's expenses, your kids expenses when they travel and help you with business. But when you got a two year old, we start now going, when are they really going to be helping in the business? Now if John says, oh, my kid is the next Miley Cyrus, we're traveling for her. She's auditioning for shows. She's a photo, you know, magnet for like baby magazines and parenting magazines. And she's the Michelin baby sitting in the middle of the tire. She's already making 50 grand a year and as a 2 year old, all right, now her travel is a write off. Some people go, well, my child's a model and I'm using them on stage of how my kid is so cute and pretty. Be careful. If I was an IRS agent too, I'd be like, bullshit. It ain't happening. So be careful. Trying to write off a two year old. You got to be cautious. I have some clients that can. I have a client that's a pediatric dentist. He. He uses his child, his children actually, in videos on his website to talk about children dentistry. He's got pictures of them in the children dentist office. I'm good with that. We're writing that crap off, but I don't know, I don't know what John's business is in Minnesota. We got to be careful. Okay? We got Vinny.

He says, I'm thinking of creating an LLC for my rental business. Do I need to think of asset protection in order to protect my personal home? Which is, which is a higher price in a higher price market just in case I get.

I love it. Vinnie takes us to a new realm. A lot of today's conversation has been operations. I'm selling product. I'm selling service, product, service, a farm, a 1099, screen printing, you know, we're talking operational business. Then he comes out and goes, whoa, whoa, whoa, Mark, I got a day job I like, but I'm going to buy a rental property. Should I think about an llc? Let me think about it. Yes, yes, absolutely. Hell yes. Because that tenant gets hurt on the property, we want to protect you, your home, and garnishing of wages and personal liability big time. Whenever I have a client buying a rental, we're going to start with an llc. Now, does that mean you set up an LLC for every rental? No, we're going to start with one llc. Vinnie, we might put three rentals in it. That's okay, but get that initial wall of protection from these tenants. And you're going to set up the LLC where the rental property is, not where you live, but where the rental property is. If it's in New Jersey, and I got a client with a whole heck of properties all over New Jersey. Love it. Killing it. It's going to be a New Jersey llc, then we're going to be able to protect our home. That has a lot of equity in it. And that's what Vinny said. Now, the last piece of this is the trifecta. His trust is going to own the llc. His trust is going to own the home. Now, does the trust give me asset protection? No. The trust is there to make sure my assets go to my beneficiaries when I die. Without the blood sucking lawyers and the government, you don't want probate and you don't want your 18 year old daughter or son running around with a million dollars from selling your home and screwing off the rest of their life because they got too much money when they were guys. My parents would have left me a million dollars when I was 18 years old. There is no way I'd be here today. No way. No way. You know what that much money would do to an 18 year old? It would jack them up. It would have screwed me up. We need to learn how to grow and mature with money and finances. And that's what a trust can do. It can give money to our kids or our beneficiaries or nieces or nephew over time. And so we have the trust own the llc, the LLC owns the rentals. So trust owns the llc, LLC owns the rentals, trust owns the home. And down here is Vinnie. And he's going to distribute that money as it comes in, totally separate from operations. All right, next question. Okay. All right. Was that our last one? You guys are calling time of death. Ooh, it's 5:00'. Clock. Okay, let me pull up one of my other questions. Before they were prepared to cut me off. Let me just see. I'm going to go with Janae's question. She said, how do I raise money or do I need money to start a side hustle? Guys, some of the best businesses to start on the side take very, very little capital. When I was a freshman in college and I proposed to my wife, I was faced. I had an offer for a W2 job. It was like 10 or 12 bucks an hour. That's fine. And I've always been an entrepreneur. It's not a right way or a wrong way. Some people are Like, Mark, I do not want a small business. I want to go to work, get my paycheck, take off at 5, and I don't want to worry about it. And that's cool. More and more people are saying, well, maybe I'll do a little something on the side. I've been bugging Janae to buy a little rental property, a little fixer upper. Well, that takes a little more of an investment. But when I was just getting married, I went out and said, I'm going to clean buildings. And Janae, I went out and bought a mop bucket. I bought a vacuum. I bought a wet dry vac. I got some business cards made at Alpha Graphics. I remember the very day I went and bought, walked out with my first little box of business cards, and I walked around town and went to every freaking building and said, I'd like to clean your building at night. Oh, we already have a janitor on the 10th door. Someone said, sure, give me a bid. Gave me a bid on the 20th door. Sure, give me a bid. After I gave four bids, one of them came through. It's all numbers. You just knock on the doors. And pretty soon I was cleaning a bowling alley. I was cleaning a common area of an apartment building and condo complex. Then we started cleaning a grocery store. We cleaned a TGI Fridays for three years at night. I started hiring employees. I got an llc and it just started growing. But Jena, I did the whole thing for 500 bucks right out of the gate. Start mowing lawns, start cleaning garbage cans. What are the businesses? I've been trying to get some people to do in my little area. You go talk to a contractor. They are swamped right now, and so many people are unemployment. They can't find employees. They're swamped wallpapering. Wallpapering is coming back. It's a big deal. And I talk to contractors all the time. Do you have a good wallpaper? I can't find anybody. And homeowners are going in doing wallpaper at night because they can't find someone to do wallpapering. Go to YouTube, watch nine videos on how to wallpaper. Start putting. Go to every contractor in town and say, hey, when your customer, you're building a spec home, they want wallpapering. Call me, go over there, give the homeowner a bid. I'll wallpaper for X dollars per foot. You buy the wallpaper, or I'll give you a little catalog of wallpaper. Here's the website I like. Now, this is where affiliate marketing comes in. You sign up as an Amazon affiliate, set up your own website for selling wallpaper. You don't have to carry any stock, you don't have to carry any inventory. And you go out to bid a job to a customer and go, yeah, I love this website of mine. I designed it. I've got four or five vendors. I go through Amazon. Here's the wallpaper I like. Pick one of these. We'll have it drop shipped to your place as soon as it arrives, I'll schedule you and I'll come in and lay your wallpaper. When they buy wallpaper on Amazon, you as an Amazon affiliate may make 5, 10, 15% or more. You just got a wallpaper store set up on a website done. And you're making money doing the wallpapering. And then what are you going to do? You're going to start bringing along a teenager or a college student and say, let me teach you how to do this. After they do it with you three or four times, the next job you bid, you bid it so you can pay the college student and you go bid the next one. Now you're making money off that employee while they're wallpapering and you're bidding the next job. That's how you grow. In fact, I'm going to go over there real quick. I don't know, Janae, if I can do it. Let's give it a shot. Maybe turn off my screen for a minute. Just before we get there, I'm going to go to Amazon.com and I want to just show you guys how easy it is to become an affiliate. I got a kid that's teaching drumming lessons, and I said, are you selling drumming supplies? No, I don't have enough money to buy inventory. You don't need inventory. Become an Amazon affiliate and email links out to your customers. They go buy drumming supplies. You make money. Amazon puts money in your bank account every month. So if I go to Amazon, look at this. Am I over there? Now? People can see this. Okay, I'm going to go on a leap of faith. Go to the bottom of the Amazon website. Let's see what we've got. Get to know us, Amazon. Make money with us. I just got chills. Hold it. News alert. Go to Amazon.com the very bottom it says, make money with us. Sell on Amazon. How to own an Amazon business. Sell your apps on Amazon. Become an affiliate of Amazon. What this says is, sell wallpaper on Amazon to your customers before you go install it. That's it. You just got your side gig. That's it. It's that easy, people. Alright, any final questions? We're good. Calling time of death. I love small business. I love you guys. I got to tell you who won the book last week. I'm going to give away this tax and legal playbook. Janae is going to choose someone on social media that shares this live broadcast on YouTube or Facebook. You share it, she's going to put your name into a hat, all the names that share it, and pull out a name. If you send chocolates, your name may come up higher. Janae, my office. Okay. Last week's winner was Marcel Balburan. Marisol Balbaran. She won the 8 Steps workbook, $99 value on Amazon. Because I sell on Amazon. There you go, people. Tax and legal playbook. Janae's going to give it away tomorrow. I'm going to sign it right now. I don't have a pen, so I will sign as soon as we go offline. Oh, boom. Here's my pen. Live the dream. It is not a nightmare. It is not underlined a nightmare. Don't give up. It's hard. I didn't say it was easy. But you can live your little piece of the American dream after hours. Building a small business, doing. You love fishing. You're good at fishing. Set up a little website with links to Amazon products on fishing. Get people to go to your website, make money. Was it that easy? Yes. Don't give up. Mark Kohler. Thanks, everybody. See you next week. And nominate a friend or yourself for a small business rescue highlight next week and I'll be here to answer your questions. If you want a different topic, give me a topic. We'll hit it. Thanks, everybody.