Scaling up your business - Using a Strategic Plan | Mark J Kohler LIVE |

Five. Welcome, everybody, to another live Q and A on the tax and legal strategies that you're dying to hear from and learn about. My name is Mark Kohler. Don't go anywhere till I tell you about the topic. Today we're live on YouTube, Facebook, Instagram. Rocking the house. Helping you small business owners around the country here every week, your local tax and legal advice where you can actually understand the answer. I hope we're going to do that. I've got two other attorneys here in the studio, Darren and Allison. They're answering questions live in the chat. So if you're on YouTube or Facebook, type in a question. You don't have to even pay for it per hour. This is it. Free legal advice, which is worth free. So that's not bad. So now we've got to start a regular news update. Apparently, George Clooney was in a bike crash. Really nervous about this. I didn't know. It's terrifying, apparently, but. And Megan is having twins. So I researched the news. Us and star. This is legit. I'm just joking. I'm just having fun. My studio's here next to the hair salon, and the ladies keep me up to speed on all the gossip. So I thought I'd share that with you if you hadn't been in your hair salon lately. Now you know Megan's having twins. Okay, so we're gonna do live Q and A on tax and legal questions, business questions. But today we're talking about scaling up, scaling up your small business. Now, what's interesting about this, and this is why this topic came around today. I was in the gym this morning. I know it may not look like I work out, but I do. But I was in the gym this morning with my trainer who's. He's. He's Krav. He's like Krav Maga. Some of you may have heard of that. Self defense. And he's a police officer, actually in the sheriff's department. And he works at the county jail. And he knows some moves, you know, so he's teaching me self defense. It's a boxing ring next door. It's fun. So I'm working out and he's telling me he's starting a new location, I guess, and he and his wife are going to go start a self defense class program. I want to say dojo, but it's not like that. You guys know what I'm talking about. So you start in a gym, but it's all going to be around self defense. And he knows I teach small business. I learned from him. Self defense. He learns from me. Small business and tax. And he said, I'm looking for my location. And I go, whoa, whoa, whoa. And I asked Devin, I said, can you come out on the live broadcast today and talk about your startup? He's like, I've got to go to work today or I would be there. He goes, bring it up. And he goes, I'll come on live next week and we'll make the time work. And I said, okay. So I wish I had my little brand new entrepreneur here who's working for the city as a police officer, starting his side hustle, hoping he can go full time with it, right? Some of you maybe are doing that same thing right now, trying to build your side hustle. Last year, 4.4 million new small business owners due to the COVID pandemic said, I got to start a small business to make ends meet. So I said, slow down, Devin. You'll meet Devin another day. I said, devin, hold it. You're looking for a location? What the freak? Where's your business plan? Let me see it. And it was like deer in headlights. I was like, whoa, whoa, whoa. What is your product? How are you pricing it? How many different programs are you having? Are you charging monthly? What are you doing for private lessons? Let me see your logo. What's your name? What are you doing here? How much is it going to take to up, you know, get your startup cost done? How much equipment are you buying? What are your average cost per month? I said, devin, Devin, slow down. You are not looking for a location, bud. Slow down, tiger. So I put a move on him, you know. No, I didn't. But anyway, we're in my self defense and I'm telling him no. And see, some of you I know get excited about your small business and you go open your online store, you start your E commerce, you start knocking on doors, you start making phone calls, you start shooting video on YouTube, blah, blah, blah, blah, blah. When really there's some core foundational things you've got to get going in your small business. Now you may think, why am I listening to this tax lawyer about scaling up my business? Because that's what we do. Darren and Alison are having appointments with clients every day. We've got eight other attorneys meeting with clients every day around the country. And they say, hey, I need an LLC or I need an S corp. And I'm like, well, what's your plan? Well, I'm starting a business. I go, okay, well where are you at in the process? Well, I'M opening this or I'm opening a bank account. I go, whoa, whoa, whoa, let's go through the steps here. And the clients are shocked, right? They're like, hold it, someone's talking to me about the steps of my small business startup. Because who do you turn to? Who do you go to? Right? So that's what this is about. Today I want to take you through. I designed a book about five, four years, five years ago called eight steps to start and grow your business. I did eight townhouse, townhome, whatever, Meetings, town hall, town hall. That's what they do. That's what politicians do. I did town hall meetings, an hour and a half each for eight sessions. On these eight steps, I put in a workbook, a strap plan, a business plan, and 60 videos. And I've been updating it for three years. Anyway, it sells well. It's great. 99 bucks on Amazon. I'm going to give a deal away for all of you mompreneurs out there. For any of you that are looking for a last minute gift for your mom, it's Mother's Day this weekend, so I've got a little deal on it. But today's not an infomercial. But I'm going to go through the first three steps like that. Just like in 10 minutes, I want to go through the first three steps. And that's what I did with Devin while we were there on the mats, punching bags and doing kickboxing and all those goodies, I was walking him through those 50 things that he needs to be doing before he opens his llc, before he opens his corp. Everybody thinks I got to open my LLC first. We're like, whoa, whoa, whoa. We may want to get the LLC going, but there's a bunch of other things we got to be doing. And I want to talk about startup costs. How do I track all those write offs that I'm incurring Now, even though I haven't made a sale yet, can I write off my cell phone? Can I write off my auto? Can I write off the computer? My iPad, my cell phone? A smartwatch. The answer to all those questions is yes. How do you do it? You know, a smartwatch is a write off, but a regular watch is not because a smart watch is a Bluetooth device. See, all these little things are what no one's talking about because it appears boring and stressed out and I don't know who to turn to. And it's expensive. Now, you know, every Thursday at 4 o' clock mountain, I'm right here Baby, we're talking about it. All right. Sound good? Should we do it, Darren? We rocking. Okay. Corey, we good talking to Corey, my producer shout out. I got Jack, my marketing director in here. Allison's helping out. All right, so in my eight steps, I'm literally just going to go through the first three steps and I'm just going to read the main sections of each step and just give two words, maybe a sentence or two, and we'll just go through it. If any of you are available right now to pull out a pad of paper with a pen, A pen or pencil, I strongly recommend it. Just, just take some notes. I know I'm going to say something that you have to go back and do since you started your business six months ago or a year ago or five years ago, or for those of you that are in startup mode right now, taking your side gig to the next level. I know I'm going to share something you got to be thinking about. Alright? Number one is concept design, product or service development. I want you to build a business plan. And as soon as you launch the business, the business plan goes in the garbage. The business plan is to tell you if it's a good idea, then the strap plan or the strategic plan is what takes you to the next level. Now, in fact, I'm going to pencil this out right. They can see my board, right, Cory? I'm good. Okay, so here's what this is like. A business plan is your main plan. And with my eight steps, digital or print, you get a business plan. I give it to you in word so you can start working on it. Prepare for the bank, prepare for partners, investors, prepare it for yourself to tell you if it's a good freaking idea. So you do your business plan. Business plan says yes, do it or no, don't. I just got chills when I said that. I've had people go, mark, if I would have just done a freaking business plan five years ago, I would have saved three years of my life. The business plan is not to raise money. Yeah, you could use it for that. But the business plan is to tell you if you've got a good gosh darn idea and if you should even do it. That's the purpose of a business plan. Now at the beginning of a business plan, and that's why I put it here before you set up a gosh darn LLC or all these things, is what are you selling? That's what I was asking Devin this morning. And the service and so I could take any business. I don't care if you're doing drumming lessons, landscaping, consulting, e commerce, a law firm, an accounting firm, an engineering firm, an architectural firm, a self defense gym. I want to know what are the services, how much you're charging, what are the products that you're going to sell. Because no matter what business you have, you better have a website and you're selling products. Because if he has a self defense gym, I want him on his website selling boxing gloves, MMA gloves, pads to kick with, a gym bag to hang in your basement to punch and all sorts of things. Every business can sell product on the side with an affiliate link to Amazon. Your e commerce is supported by with your brick and mortar. So I want to know what are you selling? What are the products you're going to sell, what are the services you're going to sell? And then I want you next level. Who is your competition? What are they charging? How far away are they? Are they doing a good job, are they doing a bad job? What difference are you going to make compared to your competition? What's your niche? That's what you're trying to figure out. I put in here what's your what? Define your product mix, find your competition, analyze your consumer. Who is your typical consumer? If you're doing a self defense gym, you're going after the ladies and the guys. What age group? Maybe everyone. Maybe you're going to do self defense for kids, all sorts of courses. Then who are the key people in your organization? How many people are you going to need to launch this and to maintain it? That's the first section. That's the core of your business plan. That's your elevator pitch. What in the freak am I going to sell for? How much? Who's my competition? And here's my target customer. If you can't rattle that off in five minutes for me while I'm kicking and punching a bag, you're not ready to go get a location. See what I'm saying? What's your what? Huge part of that. Now number two in my plan is building financials and raising capital. So the next thing I want to do is a whole section here on just startup costs. What are your startup costs? List them out. I'm going to need to pay by this. This, this is before you make any money. These are costs that are one and done startup. Then we're going to look at what are your fixed and variable costs moving forward. So your monthly costs, which you can always do an annual version. Monthly, annual. We're going to look at your fixed and variable now let's think about it. If we're going to do a self defense gym, what's fixed? Okay, we got rent, we're probably going to want Internet. I'm going to have a webpage, might have utilities, I might have a person sitting at a front desk. Maybe, maybe not. And so you're going to have janitorial. La la la la. Those are fixed. Whether you didn't make any money at all, those are fixed. Then variable costs, what are those going to be? If you're going to sell product, are you going to buy drinks at Costco and sell them in a fridge at the location? Are you going to pay trainers per hour for every hour they work and create revenue for you? See that's a variable cost. It's like cost of goods sold. If I'm going to sell a hamburger, how much does it cost to make the hamburger? If I'm going to do a self defense class, how much does it cost to pay the trainer to teach the class? Am I going to do yoga in the morning and pay a yoga instructor and take yoga revenue? Okay, those are my variable costs. In a gym, that's going to be people. I'm going to be paying people to train my customers. That's going to be probably my number one cost. So that's my fixed and variable. So I want to know how much money is it going to start this business? What am I going to need to keep the lights on? Then I fix. I teach you in this to do your variable cost per sale and then what is my break even point? How much do I need to make each month to pay my fixed costs per month and my startup cost back If I got a loan to do it? Maybe I had a partner, an investor per se. So this is what you're doing in section two is you're creating sales projections and a break even point. Boom. I got like six videos in here, a workbook to go with it and you're working on it now. Third section. And then we'll go to your tax and legal questions or we'll talk about this, whatever you want. The next section is maintaining strategic plan. Now this, we go back to the business plan. The business plan spits out two other plans. A strap plan or strategic plan and a marketing plan. That's what I carry around with me everywhere I go. Look it right here. This is my business bag. Everybody know I'm kind of a backpack guy. I like my backpack. I don't carry a briefcase or a cool legal looking bag. They seem to be more headache Than it's worth. I like a backpack. So anyway, this is a Tumi, you know, I got my monogram Tumi bag, so it's legit. Okay. Here is my strap plan. This is my marketing plan and strap plan. And I carry it with me everywhere. It was in a staff meeting this morning. I've got this plan, tells me what I'm doing every month. I've got notes in it, I've got my marketing reports, my. Oh, this is what I carry around with me in the middle of the night, I'll grab it. I, I have not every night, but last month I woke up at four in the morning and had an idea. I pulled out my strap plan and wrote it down. A strap plan is the how you're going to execute and start your business and scale it up over the next three, six, nine months. The marketing plan are the tasks I'm going to take to make the phones ring, to bring in the sales. And I want you carrying around those with you everywhere you go. Once you decide to do the business plan, you're going to frame it and put it in a drawer. Then you're going to carry around your strap plan. A marketing plan everywhere you go. So number three in the workbook is building a strap plan. I have an hour and a half on how to do it and a strap plan template. And in here you're going to create your 10 year vision because I'm going to ask Devin. You're going to go, devin, where do you want to be with this gym in 5 years or 10 years? When clients call up and talk to Darren or Alison, they're going to go, hey, what's your plan? You're starting to do real estate. How many rentals do you want? How many fix and flips are you going to do? You're doing a crypto mine. How long are you going to do it? Oh, you're doing landscaping, you're running a farm, you're doing export import, you're doing E Commerce. I don't care. I don't give a rat's patoot what the freak you're doing. But I'm going to ask you, what's your plan? Where do you want to be in five years, 10 years? What's your gross revenue going to be? What's your goal? How many employees? How many locations? How many sales have a goal in mind, damn it. And you're going to write it down. Then we're going to work backwards and we're going to come up with a 5, 3 and a 1. Year plan. So if this is your 10 year goal or your what, your ideal scene, that's what I'm going to have you write down is your ideal scene ten years from now. Then we're going to work back and go, okay, what should it look like five years from now? Okay, now if I'm going to be there in five years, what should it look like in three years from now? Okay. And then in three years, if I want to be there, where should I be next year? And you go, okay, next year I better be right here. This is my target. Wow, I, I don't think I can do that in a year. All of a sudden you go, ooh, my goal is a little much. I can tone it down because I don't want you to turn your life upside down. If next year I want to be x, I've got 12 months to get there. So how am I going to do it? What are my tasks that I have to do every month, every week, every month to get there? Make it realistic. Don't kill yourself, people. This isn't a race, it's a journey. It's your journey. Don't care what Mark Kohler did. Don't care what Cory did or Alison or Darren. Don't, don't think of your neighbor, your pastor, your, your best friends. They're driving a Mercedes and they're. No, don't compare yourself to anyone. Get off freaking social media if you have to. This is your journey and you're going to pack your backpack and you're going to make a plan and how are you going to get there? And don't stress out. Don't kill yourself. And you're gonna, we're gonna do your five year plan, your three year plan. We're gonna talk about when to open your bank account. And this is what I was talking about with Darren Devin. I was like, okay, when are we gonna open your bank account? What are your startup costs? Do you have your logo? Do you have your slogan? Who's your target market? What are your marketing pieces gonna look like? What are your class sizes gonna look like? And you work backwards and you go, oh my gosh. Okay, now I see where I want to be with this. And that's where we're gonna come up with your 12 month steps and your six months, your three months personal training and education, organizational and management, product and service development, employees and vendors. And then we're going to have a daily battle plan. I have a whole video on just how to do a daily battle plan. Because no one's looking over your shoulder. This is your business. How are you going to do it? Now we're here in Idaho and Allison, you might work with her, one of our attorneys. They got a farm. Can I say it? She has a farm. They have a potato farm. Is that weird? Idaho potatoes. No, but that's where you go. You go to five guys and you got potatoes from Idaho. And she. Every year they make a plan. That's how farmers work. They're the best at this because farmers learn what's called the law of the harvest. We got a plan. Plant our seeds, water, pray for good weather. Then we got a harvest. We got a store for the next season. They live that cycle every year. A lot of times us as brand new business owners, we got to learn the law of the harvest. You don't get rich quick. You don't plant potato seeds one day and then the next day have potatoes. But for some reason we think we're going to put up a website on Amazon and then the next day we're going to be billionaires. No, it takes time. And then we beat ourselves up when we don't make it. Anyway, that's today's presentation. There you go. If that got your juices flowing, I hope so. But I'm here for you. Darren's answering questions online like crazy. J. Casey says my uncle's a farmer. Your uncle must be cool. Check this out. I got my hat here. I'm throwing down, I watch Yellowstone. Kevin Costner is looking the best he's ever looked. That guy's freaking awesome. So I own cows in my health savings account. Anyway, I put on a hat once in a while. There you go. Just wanted to let you know I can fit in the crowd. Alright. Okay. We're going to answer some questions. I'm all yours for the next 40 minutes. 45 minutes. What am I doing, Darren? Am I answering these? Answer these. Okay, I'm answering these. Jonathan sends yes. Yes, Mark. Should I change my sole prop to an S corp if I made over 50k this year? Jonathan freak. Yeah. Now everybody, real quick. We're going to do these fast. Jonathan says, mark, I got a business already. I'm making 50 grand. I'm a sole prop. What's a sole prop? The sole prop is I'm in business. You don't need an ein, you don't need a dba. You freaking start selling crap this weekend at a garage sale. You're a sole proprietor. That's what Jonathan's doing. I don't know what kind of business he has. But Jonathan, a sole proprietor, and when he brings in 80 grand and spends 30 grand on expenses, he's going to net 50. He just said that. He said, mark, I've made over 50 grand this year. Now I'm worried about net. Jonathan, I'm not worried about gross. This is your gross sales. I'm worried about your net. What is my net? His net's 50 grand. Now the problem with that is, look at this. I'm going to go to red on this net 50 grand. He's going to pay self employment tax of 15.3%. Holy crap, that's 7,500. Then he's got to pay state tax and federal tax. Bend over, John. This isn't looking good. Right, so he's got tax, tax, tax. And then he goes, man, being a small business owner is expensive. But Jonathan's been listening and he said, mark, maybe I should be an S corp. So to get everybody up to speed, what he would do is he's going to transition his sole prop to an S corp. Now, it could be an LLC taxed as an S corp. Any of you out there have an llc? We can convert it to an S corp for. Yep, it's expensive. 150 bucks. Cheap, easy, schmeezy. Get an hour with one of my attorneys, talk about your conversion. When are you going to do it? When are you going to be a believer? This is spiritual. You're going to become an S Corp. 150 bucks and you convert your LLC to an S corp. Now, when Jonathan makes the same 50 grand, we're going to split it. We're going to split it into part W2 and part K1, which is pass through. Pass through. There's no corporate tax. Now the beauty of this is he's going to pay 15%. He's going to pay his fair share of FICA. The F word. FICA. FICA. I hate FICA. What? The FICA. He's going to pay his 15% over here, but no FICA here. We just cut 7,500 in half. Jonathan just saved 3,250 bucks, people. That's a Caribbean cruise for two. Probably at balcony cabin too. Nice shore excursions. Three grand, Jonathan. Let me see. Do you want to be a sole proprietor or be an S corp and go on a cruise? I'd go for the cruise. So you're trying to save money here and the more money Jonathan makes, the more he saves. That's the beauty. So I'm going to say this to everybody. Don't even ask if you're an E Commerce if you're a chiropractor, if you're a plumber, an electrician, an accountant, a lawyer, a chiropractor, a realtor, a broker selling crap on ebay, Any of that and you make 50 grand or more, you convert to an S corp, get on the phone with one of my tax attorneys and just say, and I'm not trying to be an infomercial here. Don't call us. I don't care. We're busy. You're going to be out about a week to get an appointment, and the attorneys will get on the phone with you and they'll go through your structure, ask about your plan, and decide, should we be an LLC and convert to an S corp or be an S Corp out of the gate? We charge 800 bucks for an entity in any state around the country and you get an hour with a real tax attorney on the phone building a diagram, and you get it done right. And Jonathan, in the first year in this situation, you'd save over three grand. So everybody, it's the same answer. I don't care what business you have if it's ordinary income. And this is where the trifecta comes in. We just want to get the trifecta out there. The bottom is your 1040. This is where everything comes down here to your 1040. This is your revocable living trust. We split it in half. And over here is your sole proprietor or your side hustle. And then you're going to convert to an S corp, and some of you may be an llc. And we're going to convert to an S corp. Over here is where we put your LLC with your rentals. So we put passive properties over here or assets and we put operations over here. Jonathan, great question. Love you, man. Okay, Darwin Davison. I bought an APU for my truck and I would prefer to depreciate 100% first year and CPA said not to because of too many deductions. Does this make sense to you? What's an Apu? What's an Apu for a truck. Apu. Apu. I own a truck. I have a sweet F150. Nothing. We even have a farmer over here that doesn't know what an APU is. So you drive a truck. Are you guys Ford or Chevy's? Chevy. Damn. I'm a Ford. Okay, anyway. Okay, but here's the point. Forget about APU for a minute. Darwin says, I bought a truck and I wanted to appreciate it 100% in the first year. Guys, if you spend something on your business and you can write it. Am I Mike in the wrong spot? Is that. We're good. Okay, listen everybody. I don't care if you're Darwin buying a truck or you're a cardiologist buying an MRI unit or you're a realtor buying a copy machine. The list goes on and on. I don't care if you're Mark Kohler and I'm buying a new camera. If I can write it off in the first year, 100%. Do it. Do it. Would you rather have a write off from the irs, Darwin, for a third of it this year, a third of it next year, a third of it the year after, or would you like to just write it all off in the first year and take it? I'd like the 100% of the write off now. I don't want to wait for three years to get it all. Now some of you go, well, Mark, there's depreciation recapture. It's an interest free loan from the irs. Yeah, when you go sell it, you might have to recapture some, but you've got to use that tax. Why pay taxes, get your money, use it for three years and then give it back with depreciation recapture if you even have to. So now, Darwin, if you're already losing money in your business, if you don't have profit in your business, people want you to depreciate it over time. So we can use that write off in the future when you do make money. But Darwin, if you're making money, freaking cash in, baby. Take it. Okay, we're over to YouTube. Jay Tennyson currently receiving 100k of passive income. Love it. From mineral royalties. Love it. Also have two rentals. Is there any entity or business I can create to save on taxes? What do you want? World peace. Geez. Freaking A. All right, Jay Tennyson. All right, let me hit a few points that are good for everybody. Entities don't save taxes when it comes to passive income. Okay, let me repeat that. So down here is your trust and all of us, I want you building up your Iraq, Your Roth, your 401k, yada, yada yada. Right? So we got all these tax deferred structures. Then over here I have my rentals. Over here Jay Tennison has minerals. I don't know, I don't know how to draw a mineral, but here's a little mineral. And it's kicking out cash in his rentals, are kicking out depreciation and write offs and cash. Passive income is netted against passive losses. So, Jay Tennison, I don't know your whole story. I would recommend you getting a second opinion or meeting with your accountant or one of my tax lawyers for just an hour. If you're a real estate professional, the more rentals you buy, the depreciation from those rentals is going to wipe out or reduce the taxes on your hundred grand from the mineral royalties. Now, everybody in my book, what your CPA isn't telling you, I'm gonna grab it right here in this book off the shelf here. Well, your CPA isn't telling you. I talk about the principle of real estate professional and buying rentals is I buy rentals. It's a great deal. Am I a real estate professional? Nope. Wish my wife was. Wish I was, but I'm not. But I still buy rentals because they make sense financially. In this book, I talk about a family that discovers if one of the spouses is a real estate professional, that's a big whole other conversation. Then the rental losses on all of this rental property are a write off not only against Jay Tennison's mineral income, but his or her day job too. Rental losses are awesome. This is why rich people buy rentals. When I analyzed Joe Biden's and Donald Trump's tax returns, the ones we could get our hands on last year, Joe Biden had a rental. Joe Biden had an S corp. Donald Trump had an S corp. Donald Trump has rentals. That's what people do. Donald Trump just happened to be a real estate professional because we know as a real estate developer before he took presidency. Now you can hate Donald Trump, you can love him, I don't care. But there's a lot of real estate developers out there and real estate investors that qualify as a real estate professional. That's why Donald Trump didn't pay a lot in taxes, because all the depreciation from his hotels and golf courses and all this real estate wiped out his income from the Apprentice. Joe Biden had losses on his rental property. He just didn't have enough rental property to wipe out his income of $13 million on a book deal. They were both making money. I'm okay with that. I love it that Joe Biden was making money. I love it that Donald Trump was making money. I want Americans to make money and pay the least amount of tax. They have to. But we're going to pay some because we have a great country. All right, Jay Tennyson, no LLC is going to save you taxes. LLCs are for protecting your assets. I'd have an LLC for your rentals, for sure. I don't know about your mineral royalties, but I would just say, Jenny Tennison, you want to go down the real estate professional conversation with the tax advisor and go from there? Okay. I'm gonna take a drink here now. One other thing. My marketing director, Jack just gave me the signal. As you noticed, early on I Talked about my 8 Steps workbook. The paper print version, 99 bucks. You also get it in digital. It's 50 bucks. Digital version. Immediate access on my website@markjkohler.com you can also buy the Kindle version on Amazon immediately. 50 bucks. But if you go to my website and you use the code, this is right, right? Mompreneur. Get it? Your mom is an entrepreneur. Mompreneur. If you go to my website, markjkohler.com and put in Mompreneur is a promo code to get eight steps. You get 50% off this weekend for Mother's Day. So 50% off. So that makes the digital version with 60 videos in this, 25 bucks. The print version with the digital combined 50 bucks. And you get a business plan, marketing plan and strap plan in digital format with both versions. Anyway, today is not an infomercial. Entrepreneur appreciates that. I don't sell on this broadcast much at all. I just want to give you that benefit if you want it. So go to markjkohler.com, eight steps, 50% off. Put in Mompreneur for the code. All right, next question. George Zierzy. Hey, Mark, big fan. Live in San Jose, California. Thanks, George. I appreciate that. I have a W2 job and a side gig. Liking it. My wife is an immigration lawyer and has set up an escort. Okay. We are planning to upgrade our home office AC system to energy efficient AC heat pump, blah, blah, blah. What is your suggestion? To write off the upgrade cost. Wow. Okay, so let's do our diagram. If I had George on the phone, we'd go through a share screen. That's what all my attorneys would do. And they go, okay, we got a side gig over here. And he's got a day job, W2. And then his wife has an S corp. And if she has an S corp, she's got a W2. And if she's got an S corp, they may even have a solo 401k. Also if he's in San Jose, I bet you George is in the tech business maybe. And he's probably got a group 401k at work. I just know this because we just work with so Many clients just fit this model perfectly. So he's got a side gig over here with a gain or loss. Don't know. His wife's got a K1, got a W2, we're saving on FICA, W2 day job group 401k, probably some benefits over here. And then he says we're doing an upgrade to our home office. Now I'm just going to give you the easy answer. And then I've got some videos on YouTube under Home Office. Corey, maybe in the chat you could put in a couple articles on you on home office. Maybe even Darren could throw those in. He's good at that. Maybe a link to a home office video or blog article. Let me just say this, the home office would get split between the side gig and the S Corp. So I want to do home office here and here. Now the home office is a non taxable reimbursement to the employee sharing the home office that's his wife. So his wife is sharing the home office. So she gets a payment from the S Corp every month, tax free. It's just like I work from home for Microsoft and Microsoft gives me a stipend for the use of my home. So that is tax free to me and a write off to Microsoft. Same thing here. Now how much we do, I don't know, the cost of these improvements, the cost of the home office, the furniture, utilities, the property taxes, all those things. I'm going to do some calculations and then I'm going to try to figure out George, how much should this home office cost? And then I'm going to probably allocate 3/4 of it, 75% of it. I've just got feeling here to the S Corp. Less chance of an audit. Better write off in the S Corp and then maybe allocate 25% of the home office to your side gig. But I don't know what your side gig is, how much money you're making. So there's lots of variables here. But the first thing is I want to calculate how much the home office deduction is. And with your AC unit, if it's specifically for the home office only, which I doubt it, it's probably for the whole house. But if it's for the home office only, I'll write it off as a piece of equipment probably in the S Corp. I just have the S Corp buy it. But if it's for the whole house, you're going to have to do a percentage of the improvement to the house. So say it was five grand and your home office is 20% of the home. Then I could take $1,000 and just write it off just like that. So there's lots of options there. One other thing that I'd say on buying energy efficient equipment is there is a business energy tax credit. So if you buy certain pieces of equipment to make your business more energy efficient, there's a tax credit. There's also a personal home energy tax credit. If you go to Home Depot, they have little labels that will literally tell you, on this water heater, this qualifies for this tax credit or this one doesn't, or this or that. And it's pretty easy to google home improvement energy tax credits and just read up on it. It's not that hard. I've got a couple articles out there on it. And George, I. So you can go get the tax credit possibly based on what you're buying. And number two, I want to add it as a piece of equipment to the S Corp or bury it in the home office deduction, which you should be allocating to the two businesses. Bottom line, George, it's a freaking write off. Just how your accountant and you approach it. That's the big question mark. All right, do I just keep cranking here? Cory, are we good? You guys having fun? Isn't this exciting? All right, I'm going to jump to Daniel Martinez on Facebook. Daniel, great client here. He says, is there a fee for filing personal taxes couple of days after the tax deadline? Guys, if you're multitasking, stop. You've got to listen. This is probably one of this question right here, I think is the most important one today so far. Listen to Daniel's question. Is there a fee for filing personal taxes a couple of days after the tax deadline? The answer is maybe so. Listen, all of you, all of you, if you cannot pay your taxes by May 17, this next week and a half from now, 10 days from now, approximately, taxes are due. If you can't pay or you don't have your crap together yet and you can't file. Extend. The form for Your personal is a 4868. That's your form. Can you confirm that for me? I believe so. 4868. You're going to file that form and file your extension. That's number one. If you file an extension, there's no fee. If you file a little later. Okay, that's number one. That's called a non filing penalty. I had the number right? That means I'm a really big geek, okay? I dream tax form numbers at Night. I know it's a turn on ladies. I know. But, you know, I can talk. I can talk tax. It's pretty sexy. All right, so you don't want to pay the late filing penalty. So if you file an extension, you're good. You have until October 15th. Now, what happens if Daniel owes money? Well, the IRS is not too excited. If you owe money and you don't pay by May 17, there will be a small penalty and some interest. Now, I have an article and a YouTube video on this right now on my site, and I'm going to ask you to throw it in, if you could, in the chat. And it's titled, what if I can't pay my taxes by May 17, what do I do? And read that article, Daniel, because everybody, sometimes I can't pay all my taxes by May 17th. No big deal. No one's going to jail. File your extension and then make sure you make your payment as soon as you can. Now, October 15th. Now all hell breaks loose if you can't pay by October 15th for 2020. Taxes. I've got other strategies, and they're a little more serious. That's when the IRS gets a lot more pissy. So let's just worry about May 17 and October 15 for now, everybody, and go read that article, Daniel, and you'll love it. Everybody, please. Tommy says, hey, great stuff as usual. I'll get up to Ofa Buddha Boda here in a moment. Tommy says, hey, Mark, great stuff as always. My business partner and I are close to closing on a property which is a building that includes a bar and restaurant. The CPA I reached out to suggested we put the building in an llc, the bar in an llc, and have it pay rent to the. Oh, sorry. Let's start over. Okay? Let's get this right. This is good. Tommy, the CPA I reached out to suggested we put the building in an llp. Hmm. I haven't heard that recommendation in a long time. So we want. He wants to put the building here, the bar, in an llc. He says, take a drink of rock star and let me know your thoughts. Dude, I'm on my second rock star today. I had to go to water because I'm about ready to flip out, so. But I'm still. I'm still a rock star, dude. Just because I'm not drinking it today. I'm still a rock star. Thanks, Tommy. Okay, now, everybody, this is important, okay? They bought a building that has a restaurant and bar. Okay, now this is important. Now we're talking about an asset and an operation. This is very common. Think of it like this. You're doing E commerce and you rented a property or bought a building for your business. You're a dentist with a building. You're a realtor and run your brokerage in a building you own. You're a contractor with a warehouse. So this is very common. Okay, so Tommy's got a building with a business in it. Now with this business in it, we, if we have a business running a restaurant, what are we subject to? If I have a. If I have a gain and I make money in the restaurant, what tax am I worried about? Everybody. Self employment tax. So why would this accountant recommend an LLC? Because LLCs don't save taxes. Why would he do this? I'm hoping the CPA was thinking, let's do an llc and Tommy and his partner set up their own S corps. That way Tommy and his partner each have their own S corp to do personal tax planning. But they have an LLC for the restaurant and bar. They pay their employees up here, they do their marketing, and whatever profit they make goes down to the 2s Corps. Now that is a topic in my tax and legal playbook, how to partner. I have a section here on partnering on the eight steps. And so right here we have an LLC running the business with 2s corps. Do you know what, everybody, Mark Kohler, this is me. I don't mind sharing this. I have my trust. I won't tell you the name of it. And then, because that's for privacy. Trusts are good for privacy. But I have an S corp. That's it. I have one S corp. A lot of you are like, well Mark, you got a law firm and accountants, you must have like 10s corps. Nope, I have one. I don't want a bunch of freaking S corps. I have 1s corp, but it owns part of a law firm, part of an accounting firm. It could own part of Tommy's restaurant. It could own part of a real estate development. See, all these LLC's are operational businesses, but they flow down into my S corp. So I want Tommy to have one S corp in his life. His wife might run a business here, and they're selling on jeans on ebay and they're doing drywall, but the restaurant and bar profit goes into his S corp. Okay, so that's strategy number one. And why are we doing to save on self employment tax. Need I say more? But I don't want an S corp up here. If some of you are like thinking, well, don't you want an S corp up Here. No, I never want an S corp between partners. Only between a husband and wife. Maybe a mom and daughter, dad and son, maybe family. But I do not want two people in an S corp. If Darren and I were in an S corp together, how do I write off my home office? Darren's like, I don't want to write off your home office. And he's writing off his kids. I don't want to write off your kid. See, his S corp can do his thing. My S corp can do my thing. All right. Now they also have a rental property LLP I do not like for rental properties because any losses are considered limited in nature and they go into a loss carry forward bucket and you can't take those losses. And until you sell the building. Now, I don't know what state you're in, Tommy, but I just, I would not do an LLP. The only time I do LLPs are for ranches, a beach house, a second home, a cabin. But if it's a rental property with income, no way. Now is your accountant right? Yes. You're going to pay rent over here. You're going to pay rent. The building for asset protection is going to be owned. This is the building and it's going to be owned by the LLC. And guess who's going to own the LLC? Your trust, 50% and your partner's trust 50%. See, I don't want S corps to own a building. I want your trust to own the assets, then your trust to own your S corp. This is how you launder money, Tommy. Come on, baby. Haven't you been watching Ozark? Breaking Bad? This is what it's about. Your S corp is laundering ordinary income to save on self employment tax. And I know that sounds really bad or crazy or a joke, but it's true. We're changing this from being all self employment taxed to only part of it. And the IRS allows for that Again. Joe Biden and Donald Trump both did this. They took a salary out of their S corp. It's not that, it's not crazy. This actually reduces your chance of an audit. I want to get you less chance of an audit and save you taxes. This doesn't. The building separate, I'd go llc. Both the trusts own it. Okay. Daniel. Oh, Daniel's trying to get another question in here. Bless your heart, Daniel. Being greedy. I don't know if I can get to it. We'll see. We got lots of questions. Okay. This is Ovididu Boda from Virginia. Thanks for listening. Watching. I have an S Corp for my operational contracting business and just started with five condos under another llc. How should I classify for tax purposes my rentals under the llc? Okay, what threw me off there for a minute is when a video a voodoo O V D. I hope I'm saying that right. I apologize. Cool. Say again and whatever. I'm sorry, Mr. Bota. Mr. Bota, you're awesome. Thanks for putting up with me. From Virginia says, let's do his diagram. This is what we do. We get on the phone, we do our diagram. Okay, so he has an S corp and he's doing contracting. So he's a contractor. All right, and here is Mr. Bota down here. And okay, now I know he's a mister because I can see his picture. He's a good looking guy. And okay, so we're doing a W2 and we're doing a K1 and his trust owns the S corp. See, it just starts to make sense. Okay, then he goes, now what threw me off? Can you go back up to his question? He says, I just started with five condos under another llc. Now that threw me off because I didn't know if he meant he started five rehabs or five rentals. But then he said, how should I classify these for rentals? Because when he said he started them. Because if Mr. Botto was doing five rehabs or five fix and flips, I put them over here. And depending on what state it is, I might even do an individual LLC for each rehab because I want to isolate the exposure for each rehab. A lot of contractors do that in some states it's way too expensive, like California. Hell no, I'm not going to set up a new LLC for every rent, every project. But in some states it's super cheap. Okay, but anyway, he's not doing fix and flip. He says, I have five rentals. Now the next question I'd ask Mr. Boda, are they all in Virginia? And he may say, oh no, a couple of them are in South Carolina. Oh well I'm going to set up an LLC for Virginia and an LLC for South Carolina. Now they may all be in Virginia for Mr. Boda, but I'm just saying, giving an example here, I might put two rentals here and three rentals in an LLC for the South Carolina rentals. These are for tax purposes. This guys, this is so good because Mr. Bota is a real estate professional. He's a contractor. My contractors retire on rentals. All of the losses from depreciation here, all of these losses are going to be a direct Write off against his W2 and K1. This is huge. If I was Mr. Bota, I'd be buying a frickin rental every six months for the rest of my life until I'm ready to retire. That's what he's going to retire on. So you need LLC's and with five rentals I might put them all in one LLC, I might put them in two LLCs. It depends on how much equity are they. High risk, are they not? And so there's lots of questions there. I have a little slide that I use for that. I don't even have it up here so I'll just bag that. But anyway, Ovido get with one of my attorneys. Darren here could get on a phone call with you and design the LLCs. If he does multiple LLCs, he'll usually discount the second or third one or spend time with you to get them set up. Get the properties transferred into the LLC and you're off to the races. But I love it, you're headed in the right direction. Okay, Chris Collins, can you talk about this hype of being a California resident but doing LLC's corpse out of state, is that a scam? Yes. Is it legal? No. Is it smart? No. Don't I ultimately pay California taxes anyway since I live there? Yes. Everybody listen. Let's say Mr. Bota, Ovidio, he's an S corp in Virginia. If he set up a Delaware corporation, which is kind of a big deal out east. A lot of people out east think Delaware or Florida. A lot of people out west think Nevada or Texas or Washington because those are tax free states. Mr. Bota lives in Virginia, He's a contractor in Virginia. He has rentals in Virginia. His kids go to school in Virginia. He's got his voter registration in Virginia. Do you really think if he set up an entity in Delaware it's going to help him? Hell no. Oh, I get so upset. So Kris, thank you for bringing this up. I just, I literally got a ting of emotion like it makes me mad, it hurts me because I have people call up and go, someone in California said I can set up a Nevada LLC or a Nevada C corp. Heaven forbid. Never do that in some freaking call center in Nevada after a workshop and they call you from their headquarters in Nevada and they tell you you need a C corp in Nevada. BS Kris, it's a scam. Don't do it. It's not going to help you if you're a California resident doing business in California set up in California now one out of 50 times. I might want you to have a Nevada entity for additional asset protection as a layer between you and your assets in another state. Might even use Wyoming or Utah or some other states that are even cheaper and easier than freaking Nevada. But that's for asset protection, not tax savings. Sorry. I get so upset, everybody. I just, I hate to see this. All right, thanks, Kris. Jackie Quintanilla. I love that name. Quintanilla. Jackie says, are you able to pay your child under age 18 to do some work for you and is it considered taxable? Oh, my gosh, Jackie, I love you. Okay. I love this strategy. Okay. I don't know. Could you. Cory's going to pull the plug on our presentation here soon, so I want to get this out. Okay? Jackie says, how do you pay your kids? And she said they're under age 18, so let's do under age 18 first. Now, everybody out there, we talked about the side gig in and then Virginia and we talked about, we're talking about all these states and businesses and all that. Here's the principle. Everybody listen. Quit paying taxes and giving your kids money. Quit paying taxes at your rate and paying for your kids soccer or school clothes or school lunch or private school. Pay your kids as part of the business and let them pay their own taxes, maybe even no taxes. Okay? Now, Jackie, this is not a scam. You are going to pay your kids for legitimate work in the business. If you have a two year old, they're probably not working in the business. But if you have a six or seven year old, they might be cleaning the office every weekend, emptying trash, shredding paper, vacuuming cleaning windows. Could we pay them $100 to $200 a month for helping with the business? Absolutely. So everybody, point number one, don't pay taxes at your rate and give your kids money. Point number two, make sure your kids are legitimately working in the business. Point number three, your kids don't pay federal taxes this year on the first $12,550. So Jackie, if you pay your little daughter, I think that may be your daughter in the picture. She's adorable. Let's say you're paying your daughter five grand for helping all year. You get a write off for five grand and your daughter pays zero federal tax because her standard deduction is 12,550. Well, I want her to be a dependent on my tax return. She is. She's still a dependent on your tax return. But if she goes and works at McDonald's and earns five grand, she doesn't Pay tax because it's earned income and she's under age 18, she gets a standard deduction. Miley Cyrus did not pay taxes on her when she was under age 18. She didn't pay taxes on her first $6,000 of income or whatever it was back then. The standard deduction. Now it's 12,550. So, Jackie, that's the third point. Now number four. How do you do it? Okay, so here's our diagram. This is for kids under age 18. Now, for those of you that have a side gig and you have a little sole proprietor, you just pay your kids and you put it in other expenses. Other expenses is outside labor for you accountants and enrolled agents and CPAs. That's where we put it. Do not put it on the payroll line because the IRS is going to look for what, payroll taxes? Well, you're not withholding taxes because when you pay your kids under age 18, you don't have to withhold FICA. You don't have to withhold Sudafooda, FICA, Workers Comp. No, none of that. They don't pay any taxes on that. If you have an LLC taxed as a sole proprietor, just pay your kids other income outside labor. If you have an LLC with rental property. Jackie, pay your kids right here. Other income. This is on a schedule E. This will be on a schedule C. Now, for those of you that have an S corp, you never ever pay your kids directly out of an S Corp under age 18, because now you have to issue a W2 and withhold computer. It's a mess. So what I do is set up a little sole proprietorship management company, just like the janitorial company that supports the S Corp. We've been doing this for 20 years. I have never had a client audited for paying their kids. This is a New York City deli. Paying their kids after school for working in the deli. This is the Oklahoma farm. For paying their kids working on the farm. This is the realtor in California paying their kid to mow the rental property lawn. It's legal. Okay, but we. And you do not have to issue a W2 to your kids. Unless. A couple situations I want to point out, but generally you're just going to call it outside labor. And this is a schedule C. There's no LLC here. You just go set up a sole proprietorship bank account. Now, this strategy is in my workbook. It's also in my tax and legal playbook. I've got videos on this on YouTube. How to pay your kids. Look up how to pay your kids. Call. I got blog articles on this. Just Google it. I'm trying to be one of the nationwide leaders on this. So there's plenty of material to read out there on this. Okay? The only time I'd issue Jackie, your kid a W2 is when you want to fund your daughter's Roth IRA. Because once your daughter has a W2 now, you still don't have to withhold FICA. Your daughter's still not going to pay tax, but you want to document that you paid her. So you basically do a W2 with zero boxes everywhere. You accountants know what I'm saying. Some of you are freaking out that I'm saying you don't have to do a W2. You don't because the penalty is based on the withholdings. There is no withholdings. Number two, if you're in a state where the standard deduction is less than 12,000 5:50, you might need to issue a W2. This is in my, my calendar that I issue every year. Get one next year when they come out the standard deduction. Let's look at a few states right here. California is one of the crappy ones. Surprise, surprise. The standard deduction is 4600. So if Jackie paid her daughter $5000 and they lived in California, her daughter would pay zero federal tax. But she'd have to pay tax on $400 of California income because she had 5,000 of income minus the 4,600. Delaware, 3,250. Georgia, 7,300. Hawaii, 2,200. Iowa 2,100. Kansas, 3,000. So there's a number of states, about 20 states where you would have to make sure your kids file a state tax return even though they don't file a federal. So don't forget about that. Kids over age 18. I just issued 1099s and all my kids are on the board of directors or board of advisors. You can do YouTube board of directors. Kohler board of advisors. Pay your kids over age 18. Great videos out there. You'll freaking love them. Okay. Mo says, Do I need a business plan if I am copying a business module? Mo. I would say yes, everybody's. And when I say a business plan, Mo, everybody, it might be three pages long. You know what's funny, Jack? I'm going to bring up roller skating. Can I bring it up? Okay. Jack, my son in law, total stud was thinking he and his daughter, my daughter, he and his wife. He does not have any daughter. No kids yet. Right. I'm not a grandfather. Okay. My daughter is married to Jack, and. And they're into roller skating. Roller skating is kind of a new gig. It's kind of fun. And they were saying there is no roller skating rink for almost 40 miles around us. And kids would love to have a roller skating rink. I'm like, okay, I'm always open to a new business idea. I love it. They actually went out and found a couple locations that looked pretty good for it. And so we said, all right, let's start running some numbers. They started to take numbers on what the competition was doing in a couple cities. One a little further away, three or four hours, and another one an hour away. And said, what are they charging? How busy are there? What days of the week are they busier? And we tried to estimate the revenue of their competition, and we started to run the revenue models and. Okay, and this is how much we'd make. This is that. How much the rent would be for this facility. Our business plan mo two pages. We weren't going to take it to a bank, but we needed to decide for ourselves if it made sense. The business plan, you're borrowing from someone, that may be a great place to start, but tailor it to you and your market and your competition and where you're going to raise the money to do and your standard costs and fixed costs and variable costs. So, mo, you got to tailor it to you Now. I love it out there. Everybody start with a business plan of someone else's of a similar business, and then tailor it to yourself. Well, lo and behold, I think, Jack. It took us two nights. We started running numbers, and all of a sudden we realized this would be a lot of work for not as much return as we thought we passed on it. You know what? We saved so much time and energy and anguish jerking around with an idea. If we wouldn't have ran those numbers right at the beginning. That's a business plan. It doesn't have to be laminated and 80 pages long. Just run the freaking numbers. Look at your competition. All right, one more question or not. We done? Okay, everybody, if you want eight steps, even if you're buying it for yourself, there's a special this weekend. Mompreneur. Go to markjkohler.com you can get it half off. I normally don't do that very often. So those that are followers of mine, you know that. But I love my mom, and, you know, I better get my mom something. I'm two days out. Oh, I'll send my mom an eight steps book. She's 82 years old. I need to get her starting a business. She's being a little lazy watching way too much Golden Girls. Yeah, I'm gonna give her the promo code. In fact, I'm not even gonna buy it for her. I'll just give her the promo code as the gift. I'll say, mom, here's a gift for you. You can buy eight steps. You know, that's how good of a stunt I am. I'm gonna give you a discount. Only you, Mom. I would never do that. Ladies. Okay, well, I got some great books on Amazon. Lots of YouTube videos. Please get over to YouTube and subscribe. I got. I do new videos every week. Lots of content that's free. And when you're ready, set up a consult with one of the attorneys. You get an hour. It includes setting up your entity. We've got our estate planning special coming down the pipe once a year. That's coming here in a couple weeks. Get your trust done. Create some privacy. But thanks, everybody. Thanks to Corey, our producer in house, we got Jack running the Instagram and questions. Appreciate you, Jack. Darren answered questions. Questions like crazy over here. I'm sorry if I couldn't get to your questions, folks. It was just a busy hour. But I'll be back here next week at 4 o' clock trying to make it happen. Have a good week.