LLC vs S-Corp: The Decision That Can Save You Thousands

Welcome everybody to another week of talking about your American dream. My Main street business owners out there side hustles, big hustles, and you're scaling your business. Whatever level you're at, I want to help you in your decision making for the legal structure, the tax structure and that wealth building structure. They all interplay so much. It's absolutely critical that you kind of look at it with a holistic approach. Now, I'm a CPA attorney, real estate investor, small business owner, author of three, four books, and I've done my 10,000 consultations with clients from around the country over the last 25 years helping small business owners, Currently a senior partner in a law firm on the board of directors of Directed IRA, helping clients invest their IRAs around the country and the Main Street Tax Pro Network. So I am in your world. I got you. I want you to get some straight answers and some real advice today that you can rely on. With that said, please be careful about taking advice about LLC's S Corps by just doing Google searches or talking to someone that's not. And I know this may drive some of you crazy, but a licensed attorney or tax lawyer that understands all the nuances of this and I know if you look on Google hard enough, you're going to find the answer you want. And if someone goes, well, this is the way I did it and you don't need to pay a big lawyer and you don't do it, oh, be careful now, by the way, we are very, very affordable as a law firm, helping clients around the country in all 50 states, getting on zoo, helping set up entities. We set up hundreds of entities a month and do it right. And it does not have to be expensive. Frankly, we're cheaper than some of the influencers out there trying to sell entities to others. We're cheaper and we're a real law firm. So with that, I want you to have faith and confidence in this and we're going to break it down. I want to do the whiteboard, we're going to do Q and A, I'm here for you and I'm going to give away a flash sale benefit here to one of my biggest events of the year so that you can collaborate, interact with and be in an event virtual and live with other CPAs, attorneys, enrolled agents and small business owners all working together to get the best solution affordably without big mastermind upfront fees. Blah. I don't do that. You're gonna have a good time today. All right, so talking about the S Corporation, the title of this Whole broadcast was, don't do an S Corporation until you watch this. And that's very, very important because the S Corporation can save you a lot in taxes. But it's really phase two in the growth and life cycle of a business. For example, I'm going to put this on the whiteboard. This is very, very common for so many small business owners. They may start out as a sole proprietorship. Many of you out there might be just doing a little side hustle. You might be driving Uber, selling online. You're doing some YouTube things, some Etsy things. You' service a product and this is just kind of a side hustle new small business. And you might be making just a few bucks and you're getting going. I love it. Go for it. Build your dream. Test the product and it's a service. And get out there now quite quickly. And you may even come out of the gate and form an llc. A limited liability company. They're not called limited liability corporations. And you're going to set it up in. Let me just make this clear. In your state, you are not going to run off to Nevada or Wyoming or Delaware or some crazy sales pitch you're going to get online. Watch out for that. I've talked about it for 20 years in articles, in podcasts, in videos, warning people not to set up an estate where you don't live. Set it up where your business is and where you live and operate. That is absolutely critical. And I can, I'll take Q and A here and you can call me a liar, you can call me a cheat, and I'll freaking debate it with you. I'll Charlie, Kirk you, we'll talk about it with real facts. Okay, now that's phase one. I'm actually gonna call that phase one. Phase one is kind of this sole proprietorship scenario. Then your business is starting to mature, your business is growing, and you're starting to make more money. And this is phase two. And again, many people jump straight to this first, the second phase. And so that's why I was kind of calling the S Corporation was phase three in that example or phase two. So phase three, we are going to graduate to the S Corporation. Now, this can be extremely simple. You can take an LLC and convert it to an S Corp with a simple form. It's called a 2553. Super expensive. We charge 200 bucks. Very, very simple. To make this conversion over to the S Corporation, we might be 250. I got to confirm that there's some important forms there. So this S Corporation is Your next phase. And I don't want you to run straight to the S Corp and I don't want you to stay over here, languish or stay in the LLC mode. Let's talk about why these are different. An LLC does not save you taxes. Here's what happens in the sole prop. I'm going to go sp. Here's your LLC and here's your S corp. Now this is absolutely important. Everybody is super simple. Don't let some lawyer accountant overcomplicate it. Let's say you bring in 100 grand for the year. 100 grand, same example, apples to apples to apples. We're going to keep it simple and you spend 25 grand in expenses. Cell phone, travel, auto, electronics, home office, the list goes subcontractors, marketing, everything, blah blah, blah, blah. You're going to spend all this money out here making your business grow. I love it. And you net 75,000. You net 75,000. You net75,000. So you make the same amount of money in each structure. Same amount of money. But here you are going to pay self employment tax of 15.3%. That's 10 grand. Oh, an LLC. You're going to pay the same 10 grand. Then you're going to pay fed and state income tax. Oh well, I'm going to set up my entity in Nevada. I won't pay state tax. Nope, you're going to pay state tax where you sleep at freaking night. There's no way around it. So this, this happens with the LLC and sole prop and everybody goes, oh well, it's not an llc. Save me taxes. It doesn't. But when you graduate over to the S Corp and you make 75 grand, we're going to take in this example, this is slightly aggressive, not far off. I'm going to take 25 grand and W2 and I'll take 50 grand in K1. Now for any of you accountants out there, that, that drives fear in you and you're calling me a scam artist right now and I'm too aggressive. Hold your horses. In 25 years, I have never, ever, ever had a client audited for reasonable comp. I go to every reasonable comp CE on the planet. I've read every reasonable comp case. I've worked at kpmg, the tax court. I'm a lawyer, I'm a CPA and CE on reasonable comp. I interview prior IRS agents on my podcast. I have never, ever, ever had a problem with an aggressive position. That stands for, it stands to reason for a payroll allocation Now I know this is scary for you because you might have to go to your client and go, well, last year we did XYZ and payroll. We can't change it now. It means you did something wrong. Well, you know what? Your client's starving for good advice. You can change your position on this. Now, when I do this, I pay my FICA over here and everything else. No self employment tax people. This is why the S Corporation saves money. And I just saved 15.3% on 50 grand. I saved $7,500 approximately. That is huge. So this is why I wanted to talk to all of you that have a small business. You start as an LLC and when you start to make close to $50,000 net, this is after your expenses. You're just taking home four or five grand a month.

Boom.

We're going to go to the S Corporation and it's simply a form that you file. You start doing some payroll reporting and at the end of the year you do a different tax form. That's it. You have the same tax ID number, the same bank account. You're going to take money out of the business anytime you want. But on paper, we're going to call 25% of it, 30% of it, 40% of it, 50% of it payroll. We're going to allocate some of that money to payroll. I'm going to do one more example here and then I want to start answering some of your questions. I could talk about S Corporations for two hours and I've got literally two sheets of S Corp nuances. And I'm going to just see what you guys want to talk about because I just don't want to give you a lecture on S Corporations for two hours. I want to hit the highlights. So whiteboard again, let's say you're a brand new realtor and, or a landscaper, restaurant owner. And again, you bring in, let's even say you bring in 200 grand and you have 100 grand in expenses. Employees and all those other expenses. We're going to try to write off children, auto dining, computers, electronics, Best Buy, Apple Store, Home Depot. We're writing all this stuff off and you net 100 grand. You just take that money. You could have an LLC taxed as an S Corp. You can have any sort of structure like this, this, it could be an Inc taxed as an S Corp. Super easy. That 100 grand is called a draw. And you just take it anytime you want. Is that easy? But then on paper, we're going to allocate some to the W2 and some to the pass through. That's called a K1. It's like a business owner's W2. In this situation I'd probably do a 40% allocation which is 40 grand and I do 60 grand in the pass through. We just saved nine grand on this right here. So this is a big deal. Now what the payroll means is throughout the year, four times during the year you're going to send off a report in April, in July, in October and then in January at the end of the year you're going to do what's called a 941 report. Now I have, we have a relationship with ADP. I love them. They have a very, very affordable payroll process for small business owners. I want to get the link before the end of the podcast. Dylan in there for this. For any of you that want to go there. It is very, very simple and affordable. I do my own payroll at ADP now. I have an accounting firm and we, I could do my own payroll but it's even easier with this. So we, we provide some payroll services to clients. But my network, we have all sorts of people that do payroll. It doesn't matter. The point is this is super easy. And once a quarter we're going to send in our payroll deposit and we're going to send in this little deposit and we're going to claim what we need to in payroll. So if I'm going to claim 40 grand in payroll, I'm going to take 10 grand and just put it on paper and I'm going to send in my deposit. Boom, Boom, boom. Not 10,000, but I'm going to send in a deposit based on this amount. So my deposit is based on a 10k payroll. So anyway, without getting in too much of the minutiae, the goal here is for all of you to have a plan where you can graduate into the S Corp when the time is right and you make a special election and I backdate it to the first of the year. So this is a perfect time of year. We're here in May. Some of you may be hearing watching this video a year from now or six months from now. We can even in November go back and back date your LLC to an s Corp on January 1st. Very, very common. And the payroll is going to be an adjustment based on your income level. And I have a matrix. Maybe I'll here show you in a minute as well. Some of the other issues is I want to make sure that you have all the pieces and parts for An LLC or an S corporation. A lot of people just set up one sheet of paper and they go, oh, I've got my corporate, I've got my llc. Really? Do you have your minutes? Do you have your bylaws? Do you have your operating agreement? Because with the irs, in order to write off a lot of expenses like travel, reimbursements, auto, health care, all these things, we need to have an accountable plan provision that's in the documents of your company. If you get audited, you don't get the write off. It's super affordable to do it properly. We have an annual maintenance program with our clients all over the country at KQS Lawyers and we help do your minutes. Make sure all these provisions are in there and it allows you to save more money and make more money on your tax returns when you set up the proper procedure. So make sure you've got all the parts. We have a service at the law firm of fix my entity.com. i won't put any other names in there. And if you down in the description, let's make sure Dylan, we have kqslawyers.com you can make an appointment with one of our paralegals and just go, can you clean my M and D, my clean up my entity which might be an LLC and can you make it an S corp for me? And then can I get a consult? And on. I have a network of accountants all over the country that speak my language and we'll get a link here to the TaxPro network so that you can find an accountant in your area or even a state away, but they can get on zoom and speak your language. Now I really want you to drill me. I want you to bring it, bring me some questions here. I want you to say, mark, I heard this. Well, what do I do with my LLC now? Why do I do an S corp again? How do I pay my kids in my S corp? How do I write off my home office in my S corp? People, let's get it down. I want this to be a huge part of your overall tax strategy and wealth building. Now before we go to our first question, I want to mention, I said it before. I have a workshop twice a year and coming up in June is the tax and legal360 in June in Salt Lake City. 3 day event. 24 continuing education hours for any of you tax professionals, small business owners, 24 breakout sessions on topics for every area of your business. Legal, tax and building wealth, IRAs, 401k paying kids, auto dining using the S Corp. Using the LLC, charitable trust, oil and Gas. The list goes on and on and on the website. Tax Legal360. You can look at the list of classes. Friday night I have a party with food and drink and dancing. Everybody's invited. I think my general admission ticket is 500 bucks for three days. It is so affordable and you can come and hear incredible speakers. I'm going to be on the main stage two to three times a day teaching Mark Kohler and then breakout sessions for everybody is going to be an amazing time. And here's your Flash sale. You can save 100 bucks on a virtual ticket, 100 bucks on a general admission, and 100 bucks on a premium ticket which includes lunches and a couple other special pieces. We have a VIP. No. 100 bucks off. That VIP is going to freaking rock. By the way, here's the coupon code. Flash360. I think it'll be good through midnight tonight or tomorrow at most. Flash360. You save 100 bucks on any of those tickets. I promise you, if you do not have, if you come to all the event and I don't save you your cost of the ticket price, I'm going to say it right now. I'm going to get in trouble with someone. I will give you your money back. I will give you your money back if you come to the event or you get on virtual and you don't save twice what you paid to come to the event. It's just some kick ass strategy. I'll give your money back. Now what it entails. I'm going to quiz you. I'm going to say you attended all the events, what classes you go to, and that you didn't learn this. You already knew that. You were already doing that. Oh, you attended this class. You were already doing that. You already knew that. Well, so you better have knocked it out of the park and come there and go, I'm already doing all this. I don't think that's going to happen. You're going to love it and it's going to take your business to the next level. Flash360. 100 bucks off. Be there. All right, Dylan, we've got some good questions. Time is yours, everybody. I'm here for you.

Yeah. We have some fantastic questions to kick things off. Let's start on Instagram. The Vogue aesthetics asks, how much should we be making before making or transitioning to an S corp?

Okay. It's not about how much you're bringing in gross, it's how much you're Netting and let's go whiteboard. Let's just do a quick example. If I'm bringing in 100 grand, you might say, oh Mark, I need to be an S corp. I brought in a hundred grand and I'm going to go, what's your net? And you go, oh man, I've got tons of expenses. I've got this I'm writing off and a new car, a new truck and home office travel, some education. Da da da da da da da da da da. And I have 80 grand in expenses. So what did you net? Well, I netted 20 grand. I took home about 2,000amonth. Okay, that's not time to go to an S corp. I want to see this at least at 40 grand. So if you say, well, I wrote off 50 to 60 grand in expenses and I netted 40, okay, now we've got traction because I can take this 40 and split it in half and I could do a W2 for 20 and the pass through is 20 and I can save $3,500. That $3,500 makes the cost of the S Corp process, the tax return and payroll. Because here's the cost. I'm not trying to hide this from you. You've got to do an 1120s tax return. That's going to cost you at least 1000. And then you've got to do payroll throughout the year and that's going to cost you about, I think ADP is at about 150 to 200. And so you're going to be about 800 bucks here. So if I, let's do the math. Spend 1800, I'm going to have to spend 1800. I'm going to save 3500. Okay, this is really hard math. Spend 18, save 35. I don't know, don't be making money. That's so complicated. It's so complicated. Sometimes you got to spend money to make money, people. So here's, here's the trick. Another times, this is an important question. Well, Mark, why do I have to wait till it's 40? Because the IRS, when you're only making 20 grand, they're like, you can't split that. You got to pay FICA self employment tax on all that. Oh, once you make 40 or 50, okay, we can allocate a little bit of that to goodwill, to you, to just your brand, your name and likeness and image. You started something that doesn't always take your labor. Okay, that's pass through, that's the split. And so we're gonna find the right amount. But I'll tell you everybody, if you're netting on paper at the end of the day after all Your write offs $50,000 or more and you think you're going to do that this year, call me. Let's get that into an S corp right frickin. Now start your payroll procedure and you're going to save thousands. Thousands. Right? Next question.

Dylan, Next question comes from Sunny on YouTube and they ask how about a seasonal business? And I'm assuming they're talking about an

S corp course, what kind of business?

They just mentioned a seasonal business. Something like say Halloween or Christmas trees.

Halloween or Christmas trees. Okay, so if you have your S corp everybody, let's do seasonal. So here's our S corp and let's say what's their first name? Or Sunny. So say that sonny's gonna make 80 grand. That's his net. And he's like man, I should be an S corp. You want to take your payroll during the year when it's seasonal and you're making money. So you might have first quarter, second quarter, third quarter, fourth and you're like I make all my money in fourth quarter. Let's say like Dylan said, it's like Christmas or Halloween type business. So you're making all your money here. You make 000. You're making all your profit here. Well I'm going to take a big ass payroll right here at the end of the year. So I might, I might even take, I'd probably take 30 in payroll and 50 and draw a pass through and I'm going to save 7,500 bucks. There's my savings. If not just be an LLC, you're going to pay $7,500 more to just be an LLC. But if I can elect the S corp I'm going to save and you're going to do your payroll right here. So in these other reports you do zero. You just do zero reports throughout the year. And then whatever your profit is, you estimate you're going to do a big payroll here at the end of the year and that's how you do it. So seasonal businesses, it's the same story at the end of the day you've got your 1120s and you're taking in this example 30 grand on a W2 and you're taking profit of 50. See everybody, you still pay tax on 80 grand. You're going to still pay income tax on 80 grand. But I'm only paying the F word. FICA. I'm only paying FICA on this piece. This is the damage. And so I'm only going to pay it on this if I do it right.

All right, next question comes from an individual on Facebook, Deepa. And I'm asking this one because it, it does sound very similar. Okay, so they said, I have an S corp and I'm the sole person working for the company and I take a paycheck once a year. Should I take it quarterly?

Okay, if you're taking. Okay, by the way, everybody, Deepa, I'm not saying you ever, ever, ever take a paycheck. You're, you never have to pay yourself people. You're just going to put the payroll amount on a report. So, Deepa, let's say we're doing 50 grand net and he's like, I'm going to take payroll of 25 and we've got our four quarters. You'd never give yourself a paycheck. You're just, he's saying, at the end of the year, I put on my 941report, I put it all on the fourth quarter report, 25 grand. I put it all here. And then, Deepa, you still have to do your quarterly reports or you're going to get a nasty letter from the IRS. So you do a 941-0941-09410 and then you pick it all up on the last report of the year. Okay? That's what Deepa is doing, everybody. Now here's the problem. Do you think the IRS wants to wait for their dollars in tax on FICA at the end of the year or would they like it throughout the year? Now, if the business is seasonal, Deepa's okay, I made all my money in the fourth quarter. That's when I'm going to pay you your IRS dammit. But if I'm making money throughout the year, the IRS is like, nah, we'd like our money sooner. So there is a good chance you could get a nasty letter from the IRS saying, just do deposits throughout the year. Let's divide this 25 into, oh my gosh, 8 grand. 8 grand. 8 grand. 8 Grand. Now here's another benefit of doing that. If you just divide your payroll up throughout the year, okay, you're actually making deposits that don't break your brag. If you take all your payroll at once at the end of the year, that's right after Christmas, you're writing a check to the IRS for almost three, four grand. Holy crap. I'd rather write that check throughout the year of 800, $900 a quarter, then throw it all at once at the end of the year. So, Deepa, can you do it this way? Yes. Do you have the risk the IRS could get a little pissed? Yes. Maybe some penalties and interest. It's not going to be bad. But from a practical reason, why not do it throughout the year, make your deposits when the cash flow is there rather than hitting yourself over the head in end of December, early January with a big deposit. So hope that helps.

Next question comes From Galena on YouTube. And they asked, how do you set up a reimbursable account in an S Corp for home office payments?

Ooh, I like this. Okay, when it comes to the home office deduction, everybody, shall you whiteboard this? Maybe I'll white. I love my whiteboard. Okay, let's say I'm just an LLC or sole prop. Okay? If I'm an LLC or sole prop, I'm doing my taxes on a schedule C. The home office deduction is right here. You do the math. You take the write off and it just kicks out. And then here's your net plus or minus. All right? When you're an S corporation, you're doing the 1120s tax return. Well, here's the thing. An S corp can't have a house. You have a house. You're a sole proprietorship. And S Corp is a company, so it can't have a home office because it's not a person. It doesn't have a home. It's a corporation. So how do you do it? So you're going to take a deduction for rent. You are reimbursing the shareholder, which is you. So this is down here, you, you're reimbursing the shareholder for the use of their home. It's almost like you hire an employee and say, hey, if you work from home, I'll give you an extra 100 bucks a month. And you get a write off as a business owner. And it's tax free to your employee because you're reimbursing them for using the home. It's not going in their paycheck. But you get a write off and so you take it as a rent expense. So as an S Corp owner, this is the first point where you write off home office is in rent. The S Corp is paying rent to you to use your house. Okay, Now I'm not talking about the Augusta rule. Chill out, everybody. The company is just reimbursing you for the use of your home. Now, there's two ways to get this on the books. The first option is having a reimbursement process that's physically driven. The company is going to write you a check for 200amonth to reimburse you for the use of your home. Now it cannot be a big amount. It's got to be the cost of what it would normally be for a home office expense. You can't say oh well to my home rent, my rent. My home office would rent for $200 a month. So the corporation is going to pay it. If the corporation pays fair market value rent, you got to claim that rent. What we're trying to do is reimburse you for the cost of your room in your house. Then it's tax free to you and a deduction for the S Corp. So our question here is Mark, how do you set up that account? Well, there's not an account. The first option, I said there's two options. The first option is the corporation. You guess what, you figure out what the reimbursement's going to be. Let's say it's $2,400 a year. So that's 200amonth. So you write a check from the S corp to you and you call it rent as the S corp level and it's tax free to you. You don't have to claim it as income. Super cool. Now the pain in the butt part is you got to remember to write yourself a check or do an online transfer every month for the $200. And you better have an accountable plan in the minutes for your corporation. Which we do that for you at the law firm. We charge 200 bucks a year to do all your minutes and include all this. But you're doing a physical reimbursement. There's no account. It's just going from rent into your pocket, tax free. Option two, this is what I do. Option two, just do a frickin journal entry at the end of the year. Accountants do this all the time. In December or actually after even in the end of the year. I go, hey, we're doing home office, right? Yeah, we're doing home office. Okay, let's see what the cost might be. And we do the same worksheet that you would do for a schedule C. And you go, okay, home office is going to be 200amonth, okay? And they go, well I didn't write myself a check for 200amonth. That's fine. We're going to do a journal entry. So the accountant does a debit credit. We're going to debit expense rent and we're going to credit a capital account. I contributed $200 of money from my home to use my home office for the business. So it's a journal entry. There's no money that changes hands. There's no account. It's a journal entry. All accountants out there know how to do it. And it's just a journal entry on the books of the S Corp to close it out for the year. And it's based on the accountable plan that's in the minutes for your bylaws of your corporation or the minutes for your LLC operating agreement. And we do this whole setup for you and your structure at the law firm so affordably. And our tax pros know how to do it. So that's how you got two options. Do a physical check or transfer or do a journal entry at the end of the year. Both are satisfactory. Just choose the right amount. Next one.

Next question comes From Anthony on YouTube and he asks if you can touch on any franchise taxes on California S Corps. He believes it's just the 1.5%, but he's asking if there are others as well.

Okay. In the state of California, and I'm sorry, it sucks. There is a tax called the franchise tax on the net income of an S corporation and it's around 1.5%. There's a gross receipts tax on LLCs. Now, once you take an LLC and convert it to an S corp, the gross receipts tax goes away because you're not an LLC anymore in the state of California. You may, it may say John Doe llc, but once you make an S election, you've changed the color of your llc. You're now an S corp. So the State of California Franchise Tax Board says, okay, no more gross receipts tax. You're an S corp now. Okay, we're going to tax the net. Well, the net is an $800 minimum until it's more than that and it starts to exceed $800. With the 1.5% test at about 250. I don't have the number in front of me. It's around 250 to 300 grand net. If you go above that now, that $800 goes up a little bit. Now let's think everybody. This is where a lot of people get upset. You know what? Let's do this. This is going to be fun. Let's go to the whiteboard. So I'm in California, let's just say, and this is good for everybody to learn. It's a good point. If my gross is 400 grand and my net is 200 grand, okay, what's that mean my expenses were 200. So I brought in gross and I netted 200k. And I'm an LLC. Now over here I'm an LLC taxed as an S corp and I have the same numbers. I brought in 400, I spent 200 and I net 200. Okay, that's cool. Now over here there's a gross receipts tax, it's $800 minimum plus this gross receipts tax. Well it would be, it would be zero in this example and the net and over here the net tax, it's a franchise tax, would be net zero here because it's below the threshold. This is below the threshold. Now if I double this and I go to 800 grand, there's going to be a gross receipts tax and I'm going to net 400. Now I'm paying self employment tax on. Oh my gosh, the self employment tax on 400 grand would be probably 30 to 40 thousand dollars. And over here my net would be 400 or really because I'm going to take payroll over here. So let's say I take payroll of 100. Now my net is only 300 and I'm only going to pay this 1.5% on everything over 200. Let's say I'm just being given rough examples. But the point is whatever this number is, it is a lot less than paying out self employment tax on every dollar. And so by doing the S corp, I'm paying it on the net and I'm also not paying self employment tax on all of this. I'm only paying it over here. So here's my. Now for those in California, that may have made a lot of sense for some of you, I'm sorry, I'm not going to ever hide the ball. I'm going to answer your freaking questions. But let me say this everybody, you have to look at the net cost of your strategy. If I have an LLC and no gross receipts tax, but I'm paying out the butt on self employment. Hmm, how much is that? Or I come over to the S corp and oh, I've got to pay a little tax on the net, but I have the split and I'm paying a lot less in self employment tax. What's the cost? Compare the two. Oh, the S corp is a lot cheaper overall. Yeah, but I'm paying, I'm paying franchise tax. Yeah, but you're paying a lot less in self employment tax. You've got to look at the net net. So sometimes you have to pay a dollar to save five rather than over here. Oh, I didn't have to pay a dollar. Yeah, but you're paying five more.

Oh.

So I'm going to tell you the moral of the story is in California, if you're doing a salary dividend split, the S Corp will save you every time compared to the LLC because the self employment tax is so bad, it's worse than the gross receipts tax or the net franchise tax. So do the math, Talk to your tax advisor.

Sweet.

Next question.

Next question comes from fella Marie. Sorry if I mispronounced your name. She asks. I am a full time registered nurse and a part time Realtor. I'm making 197k as a nurse and less than 50k as a realtor per year. Should I do an escort?

No, that's the gist of it. But I'll answer why. Now I'm going to repeat this for everybody. She's got a W2 up here at the hospital and what's cool, she's got probably a group 401k at the hospital, right? And you've got probably kick ass benefits, so you're getting health care and then on the side and she's making like 190k. So she's paying FICA out the rear end. And then she has a side hustle. She's a realtor and she's a realtor with an LLC and she's making 50 grand over here. Should she do an S corp? Well, part of you'd be like, well yeah, because she's going to pay FICA on 50 grand mark. So let's split it. Let's do 25 here, 25 here. And she's going to save a ton of money because she's already maxed out her FICA up here. This 25, she's only only going to save 2.9% on it because she already paid her 15.3% this year. It goes to 170, 168. 5. So she's going to pay 15.3% on the first 71, 70. So what I'm getting at is the savings is not enough. Now if you said as a realtor you were making 200 grand, we'd go to an S corp. So the answer is whenever you have a big fat W2 on a day job with your side hustle, the more you make, the more likely we're going to go to an S corp. The less you make, the less likely we're going to do it. So it's all about the math. You just got to crunch the Math. Now, I want to tell everybody. This is why I want you to get over to the Main Street Tax Pro Network. Main Street. And Dylan, make sure this is down in the description. The Main Street Tax Pro Network is over 500 accountants that have gotten certified with me, trained with me every week. And in that network you can choose an accountant that speaks Mark Kohler. So get over to that link. I make no money if you hire them or not. I make money when I train them. They're paying me. But when they engage with you, that's your relationship. And I've got a network of hundreds of them. Please get over there if you've got an accountant that doesn't speak this language. Dylan, I'm going to email you as well that information on adp. So what's our next question?

Next question comes from James, and he asked if he can do a backdoor Roth even if I could contribute or even though he contributes to a Roth regularly.

Can he do a backdoor Roth even though he contributes to a Roth regularly? Okay, everybody, if this year I've got my handy dandy calendar, I'm not sure what his age is, but this year you can do 7,000 if you're under age 50, or 8,000 if you're 50 or older into a Roth. Okay? Now if you make too much money, you have to do a backdoor method. If you don't make enough money or less than a certain amount, you can go in the front door. So you either gotta go in the front door and put in seven grand or you go around the back and put in seven grand. Now the question's a little, no offense, a little odd because you're like, well, I'm already putting in my seven grand and my Roth. Can I do a back door too? No, you get to put in seven grand. That's either do the front door or you do the back door for seven grand. We got to find out how much money you're making. Now, because I've done this a long time. I have a feeling what you're asking is can I do the mega, mega backdoor Roth on top of my regular $7,000 Roth. Yes, but you're going to use a 401k to kick that. You're going to have your little small business set up a solo 401k or we're going to take more payroll in our S Corp and do what's called an after tax contribution. And I can drop over $70,000 in your Roth this year, but it's going to be part of a Roth 401K. So I've got podcasts on this, more information, make an appointment with one of my lawyers and they will help get you the information you need on the mega Backdoor Roth, which is a combination of your front door, back door, and then the 401k. That's what I think you're asking. All right, Dylan, next.

Next question comes From Gerard on YouTube and he asks, I'm a real estate broker doing short term flips personally. Can I hire my S corp to run the project to ultimately Supercharge my solo 401k?

Can you hire your S corp? You should be doing all of this in the S Corp anyway. What was he saying? Like I'm, I've got my. I'm doing fix and flips. Well, who's doing the project? You are personally. Is that what he's saying? He does the project personally, but you want to hire your S corp. Let me throw this out. And Dylan, I'm sending this to Dylan at Mark J. Kohler. Make sure you put this. This is the ADP info for any of you out there that need payroll in an S corp. You've got to get this going. And ADP is a great place to start. So send that over Dylan and you just email Brandon and say Mark Kohler sent you. All right, now here's the. I'm doing fix and flips and I'm going to hire my S corp to do it. Yeah, don't do. You do not do flips personally. So I think what you're trying to ask is what I need you to do is if you're doing flips personally, so you're house hacking, you're doing whatever. I love it. I'm a huge fan. I do fix and flips. And you're doing this personally. You're putting it on a schedule C and you're getting killed tax wise. You don't hire your S corp. You just quit fricking doing it. You set up an LLC taxed as an S or you do an INC taxed as an S and you start moving the operations over here. So now you're doing all the flips in the S corp. You don't hire the S corp to do it. You're going to get asset protection here too. You want the corp to do the flips. So stop the insanity. No more doing flips. Let the S corp do the flips. You don't hire your S corp. You say, I'm not doing this anymore. I got a new entity. The entity does them now. If you're like, well, I got mortgage lending, I've got hard money loans and all that, I get it. You don't think this is my first rodeo. You're going to learn to do the entire deal in the S Corp on title and whatever it takes. I teach classes on this. We've got podcasts, we've got 14 lawyers that can meet with you to do this. And trust me, you're going to save more money, get better asset protection. You just kind of don't know what you don't know. So get a consult and I promise you it'll save you thousands and thousands of dollars.

Hey, next question. Next question comes from an individual on YouTube and they ask, how do we turn our regular employees over to W2 employees?

All employees are W2. So if, let me rephrase that. How do we trade? How do we move our regular employees to W2 employees? I think what you're saying is you have a bunch of people you're paying as subs or under the table until you pay them with a W2. They're not employees. By definition, an employee gets a W2. So what I think you wanted to say was, Mark, how do we move our workers who are paying in some crazy way we shouldn't be? How do we move our workers over to an employee with a W2? You simply set up in a payroll service and you start doing it right. And trust me, you're going to get better protection with workers comp. State unemployment, federal unemployment. You're doing it right. Well, these people, they don't want, they don't want me to withhold from them, then fire them. I was about to flip them off. I am so sick of people going, well, yeah, if you give me a W2, I'm not going to work for you. Then fine, go work in another country. Because this is how we do it here. We're going to do it legit here. So quit paying people under the table. If you need to pay them an extra dollar an hour and withhold from them, it protects you. Do you know you can't write it off if you don't pay them properly with a 1099 or a W2, you cannot take a write off for paying someone under the table. So if you're asking, how do I move my workers who I'm not paying properly to a W2 employee. Did you get that link? You're going to see a link in the chat and all the chats of Brandon Berkeley. He's over at adp. He gives all of My referrals a great price and they're sponsors of my events. They're great. So get over to Brandon and go, Brandon, Bring all my employees on board and he'll hook you up. Next question.

Dylan, how do you feel about two more questions?

Sure, that sounds great.

Okay, next question comes from fired tradesman and he asks, fleet of vehicles owned personally and 100% depreciated via sole prop disregarded LLC. If making an S selection on that LLC, do vehicles have to be retitled into the name of the llc?

No. No. And what you're doing is great, except you should be an S corp. So you've written off all these vehicles. You're operating on a schedule C and I already know what's going on. You're probably smiling. You are paying taxes out the butt. The vehicles don't have to change anything. They don't need to change on title. Your accountant's going to perfectly move you over to an s election. 1120s. It's not high. You know everybody. You reduce your chances of an audit with the IRS when you come in S corp. If you're an llc, let's fire the tradesman. If you're an LLC on a schedule C, you're paying. Sorry. Your chances of an audit are 15 times more than being an S corp. You may go. Well, Mark, this is really risky. No, you're actually reducing your risk becoming an S corp. You do not need to change the titles of your vehicles. You do not need to change the ein. You do not change the name of your company. You're still going to be an LLC on paper, but an S corp for tax purposes. And we charge like 2, 250 bucks to make the change. You've got to get a tax pro that knows what the hell they're doing because whoever's been doing your taxes should have already recommended this. So whoever's doing it, I don't care if it's your sister in law, it's time to fire them and upgrade. Level up, people. Next question, Dylan.

Okay, this is the last question. Now, I know you've kind of answered this question already, but I wanted to give you an opportunity again to re approach that, since I'm not lying. There have been at least five additional individuals asking the same thing.

Okay?

And it's all about the seasonal S corp kind of situation. So John from YouTube asks, My gross income is made in June, July, August, September. It's during the summer months.

Summer sales. I know what you're saying. Summer sales. All right.

They asked, do I take a W2 for only these months split or do I put it in one big W2 in September. And they did mention that their business is in the Jersey Shore.

Okay. All right, everybody, so here's the year, and we're going to say this is 2024, and you're making the bulk of your money here. And nothing here. Nothing here. Okay, everybody, yours could be the opposite of that. It could be similar to that. Whatever. This is typically a summer sale type business. Or it could be Jersey Shore, they're selling boat rentals and beach gear and maybe they're a shop on the, you know, on the boardwalk or they're at a carnival. Who knows what? Okay, cool. Okay, now listen to their question. Do you take a big W2 in the middle of the year or at the end of the year? Okay, Everybody, you get one W2. So you always get one W2. So don't be offended. You're asking the wrong question. So, Dylan, back to the whiteboard. You're going to get one W2. It comes out in January. It's going to be for the whole year. What you want to ask is, mark, on my 941reports, can I take those here in July and here in October, can I make a big fat 941, make my deposit and then do 0941s here? And it saves you time and effort with your payroll company. And there's no deposit. That's what you're asking. And you're asking, can I do 0941s in the fourth quarter and in the first quarter and then pick up all my payroll amount? You're not going to get a paycheck. You're not going to get a paycheck. You're just going to send in a report. These two reports, one and two, you're going to send them up for third quarter and fourth quarter. Can you do that? Yes. In fact, that's what you're supposed to do. And then these two total up and you get one W2 at the end of the year. That's how it works. So no matter who you are seasonally, you're going to make your 941 deposit when it makes sense for your business. And then you're going to. They're all going to add up for one W2. You're not taking W2s throughout the year. You're making 941 deposits throughout the year, and then they end up on a W2. All right, now flash360. Flash360. That gets you 100 bucks off an event that you can watch virtually in first week of June. And I guarantee you you will save at least three times. I'd like to say 10. I've held that before, too, but I'll say three. Here, verbally record this. Put up your phone. I promise you you will save three times whatever your ticket cost is, or I'll give you your money back. You better attend all the classes. You better tell me you better doing all this stuff in those classes. I'm not going to give you a refund because you got to show me you didn't save. But I know you will. And you're going to make new contacts and new relationships. Quit running off to a sexy Tony Robbins event. They're great. Go do it. That's how you make money. Run over to a Mark Kohler event once in a while and learn how to save money. So you got to make money, you got to save money. That' my rich clients get rich. That's how it works. So Flash, 360, sign up for the freaking event. You're going to have a great time. If you come in person, you're going to have an awesome time on virtual. Lots of Q and a going on. I'm going to have attorneys manning the Q and A during the entire event. You're going to get all your questions answered. You're going to freaking love it. And everybody here, please continue to live the American dream. Main Street. America needs you. America needs you. I need you. We need each other. Having a small business, stimulating the economy, controlling your destiny, building a Roth IRA, building rental property, building your solo 401k, investing in what you know, people. It's the most exciting experience of your life. Is it hard? Yeah, it's hard. It's hard, but it's fun because you get to control your own destiny. Go in with the right mindset. Don't do it if you don't want to. But if you've got a dream, you got a hobby, you've got a strategy, a product, a service that you're passionate about. Oh, my gosh. There are so many consumers out there that want someone that's going to pick up the call, that's going to answer the email, that's going to provide the service they're looking for. If you're passionate about what you do and you do it well, you're going to make a ton of money and just do it right and save taxes, protect yourself and build wealth in the process. That's what I'm doing myself. We've helped thousands of clients do it. I'm not going anywhere. Check out my books on Amazon. Check out my podcast. Main Street Business podcast. I'm all over YouTube. I'm all over social media. I'm not going anywhere, people. I'm going to be there with you till the bitter end. I love you.