Mark Kohler explains why side hustlers should split their business into two entities: an operational LLC that handles sales and expenses, and a separate holding company that owns assets. This structure protects personal assets from business lawsuits and sets up tax planning strategies, though forming an LLC alone doesn't cut taxes.
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Now we're going to have an operational llc. This could be doing online sales, it could be doing a service, it could be doing a product, it could be doing a lot of different things. And for millions of Americans that have a side hustle or a side gig, this is the beginning of that process, that journey. So I'll put side hustle over here. You're going to have just a little LLC over here, and we're going to start respecting it and using it for operations over here. Again, holding over here. Ops, There's a reason we're going to keep these separate. First and foremost, I want a wall of protection. This wall is very important trifecta. Anything that goes wrong over here, I don't want them getting at your assets. It's a very important concept in asset protection. Also, ordinary income is the worst for tax purposes. Now, it's not a bad thing. I want you to make money, I want you to create lots of ordinary income. But we got to know that it's going to be taxed differently. And we're going to use a operational LLC to protect the tax rate, to protect how much we're paying in taxes. And this LLC is the beginning of that process. Now, an important point here, this LLC does not save taxes. This LLC is the beginning of a process where you're going to start using this LLC for collecting of the revenue, paying expenses and auto and home office and la la, la, la la. And whatever we make, we're going to take a draw or a distribution. That's great. But the LLC itself did not save taxes.
