Live Open Forum Q&A with Mark J. Kohler | CPA, Attorney

Hey, everybody. Welcome to this week's tax and legal Q and A where I'm here for you. I'm a CPA attorney. Many of you catch this every week because it's a great way to get a free answer to maybe some of your burning questions in your small business structuring, which entity to use, tax planning, the marketing plan, the business plan. I'm here for you. So my name is Mark Kohler, best selling author and a big shout out to entrepreneur or we're here live on entrepreneur Facebook as well. Love Ryan Shea, CEO and what he's doing for entrepreneurs around America, around the world. So we're going to break it down. I'm the only accountant lawyer they let go live because I can walk and chew gum. I try to make it fun and interesting, which is a very difficult thing to do. So thanks everybody. Start typing your questions below. That's it. Today it is Q and A, open forum. You're driving the topics today. I've already got three or four questions. We're going to jump into them.

And.

And I'm giving away three books today, which I did last week. I'll announce the winners again, giving away the Business Owner's Guide to Financial Freedom. If you're a business owner already deciding where to distribute the profits and where to reallocate them, this book's for you. And also have the eight steps to growing or starting your business. Whether you have a mature business or just coming out of the gate. 60 little videos, webinars, podcasts, workbook. You walk away with a business plan and a strap plan ready to go. So a lot of people love. That's 99 bucks on Amazon right now. I'm giving it away today. And the Tax and Legal Playbook, second edition, just came out last month, two weeks in a row, number one in business category for Amazon. So you can win those books today just by sharing this video. Just share it. And in the morning, Maria is going to choose a winner. Three winners and then she'll let you know. So we'll do that. We've got the mic working. Do we have a mic? Mallory, give it a test. Yep, rocking. Yeah, I made her come out on the screen last week. She was not happy about that. So. But she's back. I talked her into coming back. So we got Jason, Mallory and Maria answering your questions live. There's already questions flying question on. For a grant that my kids got to start a business, they got 1500 bucks to start a business. All of them are under age 18. So I don't Know if they have several kids that each got 1500 bucks or. Or she's starting a little slave labor business with her kids for 1500. Whatever. Rhonda. And she says is it possible to get a business certificate in New York? What is the best way to create an entity, if any for them? Rhonda. I would not go with a business entity at this point. This is where my little eight steps workbook is a very helpful as well. I'd like you to just get a sole prop going. You could frankly put it under one of the kids Social Security numbers, maybe even under your own just to get it going. Let's see if we start making some revenue now. When she says a business certificate, what I'm going to do is kind of take a turn and say let's not do LLC or corporation yet. Let's just go DBA doing business as and let's get a DBA name reserved. Go open up a bank account at Chase and just start testing it out. Let's see if we're making some money. Give all the kids duties. Let's get it rolling. New York City, the five boroughs. We're talking Brooklyn, Queens, Staten Island, Manhattan and the Bronx. You do not want to set up a new S Corp in there. S Corp classification. So I'm going to lean on an LLC if you need an entity. But just get out there and test the business. Ron, if you, if you get the little eight book eight steps. I have an hour and a half video just on choosing the business format and the tax strategies and each one. So check it out. I think that would be helpful. This is not an infomercial. Get a on SBA.gov's website. It's very helpful too. That can help you get rolling there. So Rhonda, stick with the sole prop. Don't do a business certificate. At most do a dba. Okay. One more question that we're coming over to. Matt. I want to know where they're from too. I want to know, Matt, where are you from, bud? So throw down here. This is Voss. Not sure where Voss is at or he or she. But says is there a limit on the deductibility of transportation business expenses such as Lyft or Uber? And there's not. If you drive Lyft, you use Lyft every day in your business to get somewhere and whatever the cost is cool. That's going to be a write off. Think of it like a rental car. What's funny is I've got a client in Pennsylvania that is their German mennonite which is kind of similar to the Amish. And he does not drive a car. He cannot do that. That's. That's part of their religious thing. So instead of riding in a horse and buggy, he can ride in a car. He just can't drive one. So he literally. He's got a very successful business making a mill a year in revenue, at least. Very successful. And he's got a driver and a car, and he pays for the car and driver. And that's a deduction in his business because he needs that transportation service. Think a Lincoln lawyer. Matthew McConaughey. Right. He's running his business out of the back of that Lincoln. Sweet movie. That's an expense. So there's no limit on Lyft or Uber. Here's my point. The more money you make, the more I can write off. If you're only making a couple grand, I'm not going to write off two grand in Uber. So let's make sure it's legit and the business expense makes sense regarding the type of business you have and the revenue. Okay. And we're going to get the whiteboard here going too, I'm sure. Let's see what we got. Where. What's up with Matt? Do we know where he's from?

Matt's with YouTube. Can I acquire a business and also pay myself a salary if I invest in the LLC with my SD, IRA and also my regular old checking account, or can I not commingle my funds?

Matt. Wow. Okay, so Matt throws down. He brought in a self directed IRA question. Now let's get everybody on the same page here. So remember, we want to split your life into two sides. We want your operations over here, we want your assets over here. This is typically going to be a sole proprietorship. And then we're going to graduate you into an LLC or S Corp. And this could be an LLC that then morphs into an S corp. Ultimately, we want to be an S corporation so that Matt can get paid from his business. We want to do a salary, dividend split, get a W2 to K1 or a draw. This is very, very common. I talk about it all the time. This itself might generate some questions for some of you. Again, if you're making more than 30 or $40,000 a year net, I want to push it all through an S corp. If we're going to launder your money, let's save some money. Right? We got to do it right. So that's what the S corp's for. It's saving on self employment tax. That's a big deal. Over here you're going to have your LLC where you're going to buy rental property. Now I give this little background because Matt takes us to a whole new level. Matt says he wants to form an entity where his IRA is going to invest in his business. Can he invest with his own money and his IRA? Yes, but it's tricky. So let's say he's got 50 grand in his IRA and he's got 50 grand of his own money. So here's Matt down here and we're going to take 50 grand of his money and 50 grand of his IRA and form an LLC and we're going to go out and buy rentals. Can he do that? Yes, he can. We've been setting up those LLC's for almost 20 years. My partner's book is the best selling book in the country on this, the SD IRA Handbook. SDRA as in self directed sdira handbook.com. get over there, check it out. That's your handbook on how to do this. Can we form an LLC with your money and his IRA money? For sure. And you can go out and buy real estate. I've got clients that buy cows, horses, racehorses, storage units, cryptocurrency, gold, silver, whatever. You're good, you can do this. Here's where Matt's running into problems. He wants to pay himself to run that business. That is a no, no. That's called a prohibited transaction. And you go, well darn it. I want my IRA to fund my business so I can take a salary. You're talking about a Rob strategy. Now that's a bigger deal. I'll just put it in here. I love what Rob's is doing. It's a strategy. Guidant Financial is the big 800 pound gorilla in this marketplace. They're out of Seattle. I've been to the corporate offices several times. I love what they're doing there. But you're talking about a C corp now. And your IRA is going to be a part owner with your own money and then you can take a salary, a W2 to run your own business. This is called a Rob strategy. So Matt, if you want to look into that, get over to guidance in Seattle. And we don't set up these structures. There's fairly complex. What I recommend to all of you out there is invest your IRA or 401k and what you know best, but don't pay yourself to run it. It's prohibited. Get the book on this Matt and check out Guidant. You're going to be inundated. Get YouTube and watch my videos on self directing. And you're going to see real quick that I talked about not paying yourself. Alright, we got Mr. Perez over on entrepreneur Facebook. What do we got, Jason?

Yep. He says what is the main consideration we should have for creating a business model?

Wow, that's tough. What are you. Can we move on? Maria, what's your question? Okay, I'm just joking. All right, I'll answer your question. Main consideration. Well, Mr. Perez, and this is good for everybody out there, everybody's consideration is different. If I'm helping Jason start a business, he might be worried about how much money is he going to make right away. If I'm helping Mallory, she might be going, I don't care about making money right now. I want to defer and build equity in real estate and cash flow down the road. I want to build future income. And then Maria, she may go, I'm not worried about the money right now I'm partnering with someone and I'm scared to death I'm going to get ripped off. In this partnership. Other people are like, well I'm forming an entity in Nebraska, but I live in California. Mr. President, I'd say maybe reform your question, but here's the biggest issue. You should get a consult with some lawyer accountant that has a good well rounded experience. Of course I'm going to be a little jaded and tell you that my five tax attorneys are affordable and know what the freak they're doing. And in an hour they can quiz you. They can and you should go anywhere. Any of you listening here? Again, this is not an infomercial for my firm. Give you our website here and you can check it out. But the point is find a business consultant that really knows what they're doing and is affordable and is not going to try to set you up in Nevada entity or some crazy structure right out of the gate. Some of you, taxes are the biggest concern. Some of you as partnership, some of you, it's a multi state issue. So Mr. Perez, your concerns are going to be different than someone else's. Again, start out with maybe my eight steps book and start working through the business model and you're going to find out real quick what you need to stress about. If that's 100 bucks to kind of get going, that could really help you out. Now any of you, if you need a lawyer and you're like, just call us up, we'll do a 15 minute free interview to see if we're a good fit for you, get over to kkoslawyers.com and I really start with the law. The law side first. If you go to your cpa, they're thinking taxes. I want someone that knows taxes but is looking at your business structure and what your goals are. So be careful there. What do you got, Mallory?

Hey, Brett from YouTube wants to know what are the pros and cons of using the profits of a C corp to seed your new business for an S corp?

Man, you guys are throwing crazy questions today. I like it, Brett. So he's got a C corp and he wants to take the profit from that to fund an S corp right there. I don't like it. Now you can just Google or YouTube. Mark Kohler C Corp. You're going to see multiple articles of mine on Entrepreneur, my own website and YouTube videos where I am not a fan of the. He wants to fund an S corp, which I love. And here's his left side, right side. So we got ops over here, assets over here, and he maybe he's running a little restaurant with a C corp or maybe he's got partners, I don't know. Again, this is why in a personal consult with Brett, we' break this down. But if he takes profit out of a C corp, what do we have? People, we got a problem, right? We've got corporate tax. Whenever you take money out of a C corp, you got corporate tax at now 21%. I don't want to pay tax to get money out of there, so oh well, Mark, I'll just take a salary. I'll take a W2 paycheck and then I'll, and then I can put the money in my S corp instead of paying taxes. So you can take money out of a C corp in payroll or dividend, but you're going to pay tax to get it there. Because now I'm going to pay self. Well, not self employed, but you're going to pay all the employment taxes. So here's the crazy part. Some people go, oh, oh, oh, well, I'll loan the money to my S corp, I'll loan the money over to my S corp and then my S corp can pay it back because they have to pay it back. Now once you pay back the loan, how are you going to get that money out? You got to take it as a dividend or a salary. You get in this problem of getting taxed, getting the money out. So I talk about this consistently. It's a chapter in my book right here, the tax and legal playbook. C corp myth Legend problem. Read it. Brett, I would try to get out of the C Corp before you solve this problem of getting the money out. And maybe you don't have a choice. You're stuck in a family business that was set up in 1982 and you, you're stuck in a C Corp. But you got to talk to someone. Your question is like, reap, reap. I don't like it. So be careful. Brett, get a second opinion on what to do with that C Corp, then let's get the money out and use an S corp because that's where you want to be. What do we got, Melanie? All right, Jason, what do we got?

Melanie from Entrepreneur says, I have three businesses. She has three business partners and they all own 25% of the business. If we wanted to do individual trust, is that possible? And could we have one big trust that we all own as well, or do we have to have an individual trust?

Okay, Melanie, now everybody asking questions. Try to give me a little context because I don't know if Melanie's running a catering business or a landscaping business or if Melanie's running a rental business. Because remember, we got, there's two different things going on, so let's do both options. So real quick, Melanie says, I've got three partners. All right? And you own a duplex and you got a little college rental property and your cash flowing and you all went in and fixed it up. And you're watching Chip and Joanna on fixer upper, Waco, Texas. Boom. Little shout out. You know, love Chip. He's my man. So they're doing a fixer upper. Alright, that's cool. So what do we do? Well, we have an LLC because it's passive income. It's going to be a rental property and here's our little duplex and we're going to go out and fix it up. And that's the business. A duplex is a business. So if Melanie says there's three of us at 33 apiece, is that what the story was? Three people at 25? I need 100%, Melanie. So I'm going to assume Melanie's 50% and the two partners are 25. So let's just go with that. Can each of you do this in a trust? It's not. Can you? You should absolutely have this. Each of you should have your result. Revocable Living Trust. We're not talking land trust, we're just talking a basic rlt. Is there something else to add to that?

Yeah, it's for real estate business.

Melanie, you're killing me. Real estate holdings or real estate flip commissions and wholesaling. Because remember, this is good and I'm speaking all over the country on real estate because you could have real estate holdings and you could also have real estate flips tax two different ways. So this is again, if Melanie's talking rental real estate business now we'll go to the other option. Let's say that Melanie is doing wholesaling, fix and flips and whatever. We form an llc. That's great. Now people, what do we have a problem with? This is important. If I'm doing a fix and flip business and we're making 100 grand, what tax am I worried about? Worried about self employment tax, which is going to be 15.3% right out of the gate. Now I don't have that with a rental property. So that's why I need to know from Melanie, what are we dealing with? So I would get her and all of her partners on the phone. I'd say, oh, you're fixing and flipping. Okay, that's cool. We got three way business again, 50, 25, 25. But I've got self employment tax and the self employment tax is killing me at 15.3%. I don't want to be paying this. That sucks. So how do I solve it, everybody? What is it? S Corp, right? Okay, she finally told you, what is it?

We all own 25% of the business and it's a real estate holdings, all rentals.

Okay, so we're over here. She says she has three other partners than herself. So they're 25. 25, 25. And they're doing holdings. So they're going to all do trust. There's your answer, Melanie. Thank you for that extra info. But let's finish this off for everybody else. So if I'm a broker, a realtor, fix and flipper, home and decorator, I'm a contractor, a developer, electrician, a plumber. This is where I'm going to be. And I'm going to have an llc. And I've got my four partners. And each partner is going to have their own S corp. And that's how we do it. That's how every dental practice, law firm, accounting firm, architectural firm, real estate brokerage, we have an LLC at the top and each partner is an S corp. Now, do we do this with rentals? No, we do not do this with rentals, Melanie. We do the family trust. So each family trust would own the 25% interest. Love it.

All right, Michelle, Michelle with YouTube wants to know my husband And I own S Corps. Can we use, can we Both utilize an HSA or IRAS? A 401KS to minimize our taxes.

Michelle. Anything else? World peace, for crying out loud. Okay, Michelle. Dylan, can you grab me another water please? Thank you. So this is, it's like 100 degrees in here in the studio with these lights because we have to turn off the AC units. So this is not hot yoga. This is hot live YouTube. So I'm going to start sweating to make it a better experience for me and for you. Okay, Shell, I've got a problem. Michelle says both her and her husband have an S Corp, right? Is that what she said? They both have an S Corp. Okay, right there. I do not like that. We just had an attorney training two hours ago with the five lawyers in her office to talk about the only times we would do that. So Michelle, I'm not a fan. I don't like that. Now you may have a good reason because you, you're doing women owned business contracts with the state federal government. I don't know. But the first issue I would do is I want to get you and your husband into the same S Corp. It's going to save you tax prep fees, it's going to save you accounting and it's going to be a lot more efficient. And if you have one S Corp husband and wife, then we can have as many subsidiaries as you want. We can run three different businesses through one S Corp as husband and wife cool with different businesses. But just run it through one frickin S Corp. That's the way to do it. Then she said can we do an health savings account? Okay, a health savings account is over here. You can have an HSA whether you own a business or not. Now I've again got articles, I have Kohler Care, a whole chapter in my book. If you want to get over to YouTube, type Kohler HSA. And don't type Kohler Lawnmower. You'll get a whole different training video. Type Kohler HSA and learn about the Health savings account. Can you both have an HSA if you're married? It's going to be a family HSA. Contributions are going to be close to $7,000 and you're going to get a write off on the front page your return. But you have to have a high deductible insurance policy, blah blah blah. The answer is Michelle has nothing to do with your structure. An HSA is an independent rule. Then you said can you do IRAs? Michelle was trying to throw in a bunch. There I will leave it. At this point, I'm not a big fan of the ira unless you can only put away four or five hundred dollars a month. If you can do better, I want to do a Solo 401K. The Solo 401 kicks butt. We do them for 499, down and dirty or 999, and you get an hour with an attorney, at least holding it together and holding your hand. Very affordable. And you can have your own 401k sponsored by your S Corp. Screw the IRA. Spit on. Hate them. They're too small. You can do better. Now, if you want to just do an IRA because you have 401ks somewhere else, we can do that too. But the IRA is independent of the business. Again, anyway, Michelle, you opened up a Pandora's box. I would set up a consult for an hour with either our office or someone else that knows what the heck they're doing. And I think you'd love it. Okay, rasheen.

Rasheen from YouTube. Can someone create a self directed IRA and set up a DBA? Or would you have to create an LLC?

Okay, so we can use this diagram. Rasheen says he wants to set up a self directed IRA and then do a DBA. I don't think I've ever done that in 20 years. But let me explain where I think Rasheen, you want to go. So let's say his IRA is over at Merrill Lynch. And Merrill lynch is great. They're very, very smart. They're on Wall street. And they can help you invest your money in their mechanism, in their stocks, bonds, and mutual funds and ETFs or whatever the heck they've got for sale this month. Real estate or a small business, a hair salon, a restaurant, racehorses, cows, whatever. You can invest your IRA in what you know best. So what Rasheen would do is roll the ira. Oh, I don't want to use the roll word. That's a rollover. That's a whole other set of rules. We're going to transfer the IRA from Merrill lynch to Directed IRA. Now, we love Directed IRA. That's www.directedira.com. so they're a trust company that allows you to self direct. There's no tax, there's no penalty. It's not a withdrawal. You're just firing Merrill lynch and hiring directed ira. The fees are a lot less here than Merrill lynch because directed IRA calls Rasheem on day two and says, rashin, what do you want to invest in? And he goes, I want to do a business. Now this is where Rasheen says, I want to do a dba. Now, if Rashin wants to do a dba, that sounds kind of businessy to me because he's going to market some name, I would. I've never done that. If you're going to start a business or you're going to kind of get this thing going, you're going to be better off in the long run. Rasheen, just setting up an LLC. The IRA owns the LLC 100%. You can be the manager of the LLC, but as I talked about earlier, I can't remember his name, that he was trying to self direct and take a salary. You can't pay yourself to be the manager, but you can provide administrative duties. You could hire a manager for the restaurant or the real estate or whatever you're going to do, but you're going to have a lot more flexibility, a lot more control. And the LLC acts like a dba. See, once you register the llc, you lock down the name in that state. If you're doing something nationwide, we can do a trademark, I don't care. But here's your business owned by the ira, of which you're the manager. So, Rasheen, I would go that route. I'd stay away from the dba. Okay, Ben. Boy, nothing on the poor Maria. She needs a comment on Facebook. All right. Okay. What do we got?

Ben from Idaho, we got, I have a solo LLC startup. He got a couple questions. How do I pay myself from the profits and do I. How do I convert it to an S corp? What is my next steps?

Okay, cool. This is great. So Ben in Idaho says, I've got a small business with an llc, sole proprietorship. And he's thinking of converting it to an S corp. So to me, that means he's going to have an operational business that's not rental property. It's operational. So if he's over here as an llc, his first question is, how does he pay himself? Just write yourself a check. You just take a draw anytime you want to take money. Let's say he's out selling crap on ebay and he brings in $10,000. He can pay for his cell phone, pay for the car, the home office, the new PDA, the laptop, the computer. Oh, and there's $2,000 left over. He could write himself a check any day of the week, any time of the day, any month. I do not care. It's not an expense, it's a draw. And at the end of the year, this 100% owned LLC is going to go on his schedule. C on his 1040. And many of you watching here in Ben's situation, you got this little small business on the side. You're an LLC. You own it 100%. You take profit whenever you want. We're going to write off everything we can. I mean, I have whole videos just on writing off your auto. My gosh, the auto deductions here are insane. So this is really, really good. And I like what Ben's doing. But what happens if Ben starts to make not $2,000, but he makes 20,000, 30,000, 40,000. So let's say he brings in 60 grand, spends 20 grand on expenses and nets 40. And he took out his 40 grand. I'm cool with that. Whatever he wants. Well, now he's going to pay self employment tax on 15.3%. That's $6,000 in self employment tax. Then he's going to pay federal tax and Idaho tax, the state tax. So he's getting hit three times and thinking, oh, this LLC was great. Well, it was great when you were making a couple grand, but once you start making 30, 40 grand or more, that's when Ben said, ooh, ooh, I better switch to an S corp. So you just simply keep the same name, the same tax ID number, the same bank account, and you're going to be now still an llc. On the face of it, Ben's business LLC didn't change. But behind the scenes, we converted it to an S Corp. Now we can do the salary split. I can cut this in half. I just say, Ben, $3,000. Boom. And the more he makes, the more he saves. Go down the S corp route. There's tons of opportunity there. And this is where a lot of you need to go. And it's really, really expensive to switch to an S Corp. We charge $125. Yeah. Cheap, easy. And I'm going to backdate it to the first of the year so he gets his 2019 entirely as an S corp. So if you need to do that, get over to our law firm if any of you are in that situation. But I don't want to convert you to an S corp. Even though it's 125 bucks. I don't want to do it until I see that you have 30 or 40 grand in profit. That's what I'm worried about. Okay, Evan. Whoo. Come on. What do we got, Maria?

Evan from Facebook says if you have. If you take a loan out of yourself, directed 401k, then after you make a few payments and want to pay it Back all at once. Do you just pay back the principal balance?

Okay, so we'll use this diagram that I think Michelle had. They set up a 401k and then Evan asked, I'm going to borrow from my 401k. Now that's not self directing. So Rashin was taking his IRA and forming an LLC and self directing in this situation. Evan is borrowing from his 401k and you can do that. You can borrow up to 50,000 or 50%, whichever is less. So he goes into his little 401k administrator at work or it's his own little 401k in his corporation. It could be a solo 401k where it's just him, but he writes up a note and. Or he goes to his employer and they provide the documentation. Or you go to Merrill lynch or wherever the hell your 401k is and you borrow 50 grand. Let's say you borrow 50 grand. Typically the terms are going to be over 5 years with Libor interest rate plus 2. So nothing big deal. Maybe 8% interest. So Evan is paying interest back to his own 401k. Now check this out. How cool this is. Let's say Evan uses the money to form an LLC to buy a rental property. Okay, so we borrow 50 grand from his 401k to use as a down payment to go buy a rental property that cash flows. And the cash flow from the rental property is paid, paying the loan back to his 401k. Is this crazy? So he's getting a tax deduction to pay himself interest tax free. No one's paying tax on this. It's freaking awesome. So I want him to use that 50 grand. Not to cruise around the world. Let's use that 50 grand to start a gosh darn business. And then use the interest payment that you're paying to yourself tax free as a deduction in the business. Now Evan says, can I pay it back all at once? Sure, feel free. It's your loan to yourself. Who's the best borrower? You. You know where you live, you can go collect, you can break your own knees. I don't care. But here's the point. Your 401k is loaning to you. So you can pay it back whenever you want. And you'll just pay the principal, whatever's left on the note. I don't care. Easy schmeasy. So, okay, Nino, What? Are we out on time? Are we doing okay? Maybe ten more minutes. Okay, two or three more questions. Nino, what do you got?

Alrighty, he says, what is the best structure for an E commerce business? I am assuming llc.

Oh, Nino, why would you assume that? You're killing me, Nino. What do you mean? Have you been listening? Okay, e commerce business. Now what e commerce is nowadays, you know, little workshops in Vegas and all over the place is a lot of people are setting up e commerce businesses on the web. They set up their website, they might do affiliate work where they're selling through an affiliate relationship, they're selling on ebay, through Etsy, Craigslist, everything, right? That's an E commerce business. Now let me ask you, everybody I'm going to ask my team, is an E commerce business short term ordinary income or passive long term? Come on, take a stab at it. What? I got short term. Mallory comes out of the gate. Had some guts. Woo. She got it right. If you're selling crap on the web jeans to China, I don't care. Importing shrimp from Japan, you are creating ordinary income. So on our diagram, which side are we? If we're over here and I'm doing E commerce, I'm not doing a rental property or investing in the oil well, I'm doing E commerce, that is ordinary income. So I'm going to ask my team again. If I'm doing ordinary income, what tax am I worried about? Guys are killing me. Don't you listen? No, it's not income tax. Starts with an S. Next word starts with an E. Self employment tax. Gosh, I was going to buy these guys lunch after it's off. Screw you. Okay, I'm doing an E commerce business or a restaurant or a fix and flip. What am I worried about? Self employment tax. I'm not even going to ask him what the tax rate is. You're killing me. Okay, so I've got my little E commerce business and I'm making 100 grand. Freaking. He's killing it. He's out there, Nino. And he's doing E commerce and he's making 100 grand. What tax, Nino? Self employment tax. Let me ask everybody. This is jeans and boxes to China. What the hell is your liability? Now if you're running a bungee jumping class down in Grand Canyon throwing people off cliffs. All right, I want an llc. But the point is you've got self employment tax coming out of you know where. So what do we do? What entity saves on self employment tax? S Corp. Thank you, Mallory. Someone's been paying attention. All right now, S Corp. So I'm going to do my conversion. How much do I charge? 125 bucks. Done. Or you set up an S corp just to begin with. So, Nino, you do not assume an LLC is best. You assume that the S corp is best. But I'll give you this. In the short run, just like Rhonda out in New York, you want to start slow. If you're not making a lot of money, I could start with an llc. But what do you want to be long term? A gosh darn S Corp. So that's where you want to be. So start with an llc, but you're going to convert to an S corp as soon as possible. As soon as you start making more money. Okay. Diamond.

Diamond, he's from Detroit. Wants to know. He's a cpa. He's working at a CPA firm. He's paying his own health insurance and life insurance. He recently formed an apparel company, an S Corp in May. Can I deduct the insurance under my S corp?

Yes. Now, I love this. Okay, so this is very common. Many of you watching today, you have a day job, a W2, or your spouse has a W2. And diamond here is also a CPA working in a big accounting firm. He's probably doing auditing, which I know you want to shoot yourself in the head most days. Diamond, I get it. You love tax and you wish you were doing tax with me every day. Move out to Idaho or Utah. We'll take care of you, bud. Detroit. Detroit. Come on, you can watch all the NBA games. Have you ever heard of Dish Network sports package? You can live in Utah or Idaho. Save a lot more money, Diamond. Okay, anyway, so Dimon started an S corp on the side, and he is an apparel business on the side. But he pays his own health insurance because the accounting firm he works for is too cheap. So he's paying his own health insurance. That, my friends, is a 100% deduction. Bam. When you start a side business, I can write off your cell phone, your home office, your auto, your entertainment. Not entertainment anymore. That changed. Right? Freudian slip. For 20 years I've been saying that, dining, and even your health insurance. But let's take it to the next level. Could he also take profit and fund a health savings account? Yes. Oh, but his poor family has. Someone in the family has cancer or they have kidney dialysis. So they have some terrible disease that needs a lot of medication and they have huge medical expenses. And the HSA is tapped out. What can we do? We can do an hra. This is all part of Kohler care. Screw Obamacare's Kohler Care. So, diamond, get my Book, tax and legal playbook. You can get it on Kindle or audio or print. Right now it's out. Get over there and read the chapter on health care. In fact, last week I did seven or Dylan, we shot a video, seven Key strategies for Health Care Savings for Business Owners. Well, you're a business owner, forget that you have a day job and that video is on YouTube right now. Go check that out. Get the book on this. But you could do an HSA, you could do an HRA and deduct your health insurance 100%. There you go, Diamond. Loving it. Okay, Jason, what do you got?

Jason from Facebook saying is a services company operational, Florida based LLC with spouse that files as an S corp is good enough or the same as an S corp or does it need to be a straight S corp in the typical Kohler models?

Jason, I love you. I was just down in Florida, my workshop down there two months ago. Loved it. Of course I made it down to south beach, had a Cuban sandwich. I love, love what you're doing. So let's hear what Jason's doing. He's down in Florida and he's got. Here, let's do a new piece of paper here. He's down in Florida which has no state tax as well. Freaking loving it. Right? He's got his LLC and what type of business was it? Maria, what was it? I can't remember what his business was. Husband and wife and they both own this llc. All good so far. And then he said, I've got it taxed as an S corp and his question was, Mark, is that good enough? Do I have to be an Inc or can I be an LLC taxed as an S corp? Jason, you're going to love this answer. You can be an LLC taxed as an S corp and you get the same benefit. We're going to do your salary dividend split. We're going to save you income tax. We can set up a solo 401k. We can write off your health insurance, blah blah blah. You're going to love it. So I want to be this LLC taxes and S corp in Florida. Don't change a thing, Jason. Just get out there and make some money. Love it. Okay, two last questions. Okay, we got Kenneth.

Kenneth, okay, from Facebook. I have an S corp and haven't filed taxes on it since I put it together. There was no income in the business. Will they penalize me? And then you have the second question as an S corp.

Okay, Kenneth, you've got two questions. I don't know if I can go there. But let me say this first question. This is everybody. Kenneth says I set up an S Corp, but. And I didn't make any money, so I don't have to file a return, right? Kenneth, sorry, I got to bear some bad news. But the penalty for not filing an S Corp return by March 15th. Now, I'm assuming you probably didn't file an extension. The penalty is, I think it's 295 or 195. I believe it's $295. You better pray it's 195 per shareholder per month that you do not file that S Corp. And I think it's up to six or nine months. It is brutal. So, Kenneth, what I might is. Kenneth. Right. I might recommend let that baby go float down the river. Forget about it, kiss it goodbye. Because if you show up at the IRS's door, they're going to want all those penalties. Kill it. Set up a new S Corp. All right, I'll take the second question. If it's quickie, put S Corp. Okay, cool. All right, so you're good. But Kenneth, I'd probably get rid of it. Unless you really, really need it. If you haven't made any money, just kill it and set up a new one. Talk to our paralegals. We got a paralegal set up for 400 bucks. Talk to an attorney for 800. Any entity in any state will take care of you. Okay, we're doing each one of you, one question. So this is one from Mallory. Her last question today.

This is from Michelle earlier. She was Talking about the 2s Corps she wanted to know. She is a dentist. Her husband is a painting contractor, both S Corps. How could we share an S corp? Is that possible?

All right, Michelle, of course you would pick the one reason why you both can have gosh darn S Corps. So let's just put it up here. Operations. Her husband is a painting contractor and she is a dentist. Because under department of Professional Licensing in almost every state in the country, Dennis have to have their own S Corp. Usually it's going to be a PC Like I'm Mark J. Kohler PC as an attorney or cpa. So engineers, architects, dentists, doctors, lawyers, accountants, we're going to have to be a professional corp. And it's right. Michelle is going to have to own her own S Corp 100%. And then husband is going to own his own S Corp as a contractor. I. I mean, Michelle, if it's really a pain and you want to convert, you might be able to Take one S Corp and have a DBA out here or a subsidiary LLC for your husband's business and funnel it all through the S Corp. But because you're a professional and he's got his contracting business, I probably would lean on 2s corps. I don't know how active you are as a dentist. If it's part time, not a lot of income. I may set up a subsidiary LLC of which your husband is the manager, and then let all the income flow into the One S Corp. And you both take your W2s here. But it may be more clunky than it's worth. So I think, Michelle, you're headed on the right path. I like what you're doing. Maximize all those write offs. You got lots of options there. But you're probably stuck with 2s corps. Then we have final question from. Oh, now listen, don't go anywhere. I got a couple important announcements and I'm going to give away these books. So if you joined us late, hang tight. I'm going to bring this all together. Got some important announcements. You can get a free book as well. So. Herb, Herb, Herb, Herb. Okay, what do you got?

Herb or entrepreneur. I contributed 300,000 to my LLC that is taxed as an S corp. The contribution was helped to fund the business. When I start taking my the money back out, I am assuming that it will be untaxed as is it a profit, but money that I contributed to help fund the business.

Is that correct, Herb? You would wish that was correct. Only if I could wish it true. So let's put it in perspective. Herb started an LLC taxed as an S Corp, put in 300 grand. Now let's be. Let's give a couple scenarios. Let's say he formed a business on day one, and 15 days later he's like, I hate this, it sucks. And he takes his 300 grand back out, no tax. He put in 300 grand. He took out his 300 grand. That's cool. That is not tax. Herb, let's go. Scenario two. You put 300 grand in your business. Oh. And you went out and did some sales. You made some money. Five grand on expenses and you made 75. Now, what does your capital account show? It shows 300 plus 75. Now, if everything was held constant here and you didn't have any more expenses, you could take out 375 grand, but you're still taxed on the profit. See, this is what's tricky about a pass through entity. The money you put in, you can take out, but it Might be tied up in assets, inventory, bank accounts. And you're taxed on your profit. Every year there's a picture taken. So how much was your revenue? How much were your expenses? Oh, I made 75 grand. And you go, oh, but I want to take out my 301st. Doesn't work that way. You got to pay taxes on the profit you make. Take that out, and if there's anything left that's return of capital, I'm cool with that. But this is a tricky accounting thing. When you take. When you go to law school or a master's in accounting, you spend a whole semester on just S Corps. It's that tricky. So you want to make sure, Herb, you're talking to your accountant, they understand what your plan is. How much money are you making, what are you doing? And let's make sure that you save as much tax as possible. But if you're making profit, you're paying tax. Okay? Now here's how you can get a free book, tax and legal playbook that just came out two weeks ago. This is Flying off the Shelf, number one on Amazon for tax. Doing five workshops this fall, I'm doing an early bird special for the next month or so. But this weekend, up until this weekend, I'm giving a free book away with every early bird ticket. Now you can watch it live virtual on December 8th out of Orange County. It'll be broadcast live virtual around the country for 79 bucks. Jason. Right, 79 bucks and you get a free copy of my book. After that, it's $99. So if you want to sign up now, I will autograph and send you a book in the next week. And you're signed up for the virtual workshop of which you get a recording. This is a six hour workshop on business. So I'm not talking a mile a minute. I've got lots of good jokes, stories and I'm teaching. It's a lot of fun. Now, if you come to One of the five workshops, it's 150 bucks, includes lunch. Seattle, Chicago, Orange County, Honolulu. I didn't really want to do Honolulu. I mean, who wants to get on a plane and go to Honolulu? But I did it for you. So anyway, get to Honolulu and 150 bucks, that's the early bird special. And then it's 200. We got to wrap this up. Oh, repeat them. I thought you were saying wrap it up. Repeat locations. Philadelphia, Chicago, Orange County, Seattle, and Honolulu. All the dates are between September and December. Get to my website and if you sign up now, Again this weekend you get a big discount and you get a book and it's markjkohler.com and just get over there and sign up for the workshop. Everybody that attends the workshop gets a recording so you can watch it over and over again. Share it with your family. If you come to one of the live workshops, it includes lunch. We're doing Portello's Chicago. We're doing L and L Bakery in Hawaii. Oh, it's going to be good. Philadelphia. We're doing Philly subs. It's going to be good. Okay, let me see what else. This weekend I'm in Honolulu for the SDIRA Summit if any of you want to come. We're going to be at Pearl City Country Club. Got to love it. Looking over Pearl Harbor. Subscribe to my newsletter if you haven't already. Every week there's tips and here's the winners of the books from last week. Eight Steps was Mark Elkhill won Eight Steps Free Copy and Super Dave Rains won. Financial Freedom was the winner of that and Aaron Burgess was the winner of the Tax and Legal Playbook. So if you share this video with on your social media we'll see that we put you in the drawing and tomorrow morning Maria will choose a winner and email all of you. I want to say thanks to my team, Jason, Mallory and Maria, fielding questions and getting them out there. And also Dylan, my amazing videographer. I'm related to him as well. He's amazing. If you want to build awesome videos, he will be launching his own video making website where you can buy your own equipment for less than $500 and create a studio like this. You're going to freaking love it. So anyway, thanks everybody. We'll be talking to you next week, Wednesday or Thursday. Probably Thursday I'll be here. So keep following me on social media in the newsletter and I'll announce these dates then. Thanks everybody. Keep living the dream.