Startup to Scale to Exit - Business Owners AVOID these Pitfalls!

Learning about life, you're learning about how to be a business owner. And so you're in a different phase as a person, but your business is moving at a different pace. And so when you understand that you can control and manages your businesses very differently. So I want to take you through these four phases and when you start your day out, and I know most entrepreneurs have several businesses and as a business owner, you may be in this startup mode over here and in scaling over here and being able to switch that hat and switch that mindset can be really challenging. But when you're there and you understand where you're at with that business, you also aren't as hard on yourself. Some people are like, well, Mark, I, you know, my business, I'm just not a good business owner. I'm just, I'm such a, this business is failing. It's me. It was like, no, you were treating a business that was still trying to get its systemization down, maybe in phase two, but you thought you were over here at exit. You're ready to go golf every day and live off the profits of your business. You, your business wasn't ready for that and so you made decisions that were incorrect and your business ended up suffocating. You were sucking out profit too soon, not letting it get some breathing room and grow. It was an adolescent and you were treating it like an adult. Okay, so I'm gonna go to the whiteboard and I wanna show you these four phases and I'm gonna take your questions live. I wanna hear all about your businesses and if you're in phase one and you wanna talk about where to set up your company and should your spouse be an owner and how do I pay my kids and should I do a board meeting, how do I write it off and how do I write off my private jet? Whatever, I'm a private jet. I'm just joking. But anyway, not many of my clients do. But if you want to talk about write offs or legal, I'm there with you. You want to talk about KPIs key performance indicators and systemization scaling. What is private equity and what does EBITDA mean? And how do I structure a buy sell agreement with my partners? I'm all yours. So let me show you these four phases, give a couple more examples and then I want to answer your questions. Now. I'm live on YouTube, Instagram, Facebook. I've gotten these questions coming through and thank you everybody for being here. I love small business, I love the American dream, and I want business owners to be able to Pivot and start and change their businesses and close one down and start a new one, not feel like it was a fail. Businesses will come and go, but you're always a business owner and you're going to learn more, educated and get more experience and start multiple businesses in life and treating that business through its life cycle in the right way is the hack that's changed my life in the last five years. Really, it's really helped me be a better business owner. So let's go to the whiteboard. Okay, so here we go. I want to talk about phase one. Phase one is of course startup. It is the structuring phase. It's the foundation. And there's certain questions. When a comes to me in a consultation, they're going to be talking about types of questions of set up my company, how should I set up, do I even need this Wyoming thing? Who should be the owners, what should the address be? How do I, what write offs do I take, how do I pay myself? What's the difference between an LLC and S Corp? We can talk about it today if you want to go there. I'm all yours. Number two, we're going to be in systemization, systemizing optimization. And here's where your business starts to make money. But you're trying to really duplicate yourself. You're trying to be a better manager. You're going through employment agreements, SOPs, org boards, you're trying to start make sure that your tax costs are as low as possible, your efficiency, your hiring and firing procedures, all of these systemizations you're trying to get in place so that you could duplicate yourself. If we can duplicate ourselves, we're off to the races. In phase three, it's pedal to the metal. This is when we're scaling. And when we're scaling, that's when we're like adding and developing people. Because scaling is about having your people to take you to the next level while you are the visionary and leader. If you're in doing the day to day work, you're not scaling. You need to be replacing yourself and managing people and growing. And this is when you start to put away money. You're starting to make money in the scaling phase. So what are we doing to deploy money into other areas? Are we buying rental properties? What other advanced tax strategies are we using? Where do I? Do I fund a Roth IRA, a Roth 401K? Do I do an HSA? Because you're making money and a lot of people make mistakes here, which I've done before, putting all of my profits back in my business instead of peeling off something and diversifying and building another bucket of wealth, starting another business, whatever it may be, we can't put our all of our eggs in one basket. So we're in our scaling phase. We're making money and. And then we get to exit and exit could look very different from one business to another. Exit doesn't mean you're selling. You might continue to provide oversight, stopping in, checking in, providing leadership. But now you are. Instead of duplicating yourself, you're replacing yourself and you're going to get a paycheck whether you're there or not. Now, once you can do that and you have sustainable profit and we can talk about EBITDA and what EBITDA means and what a buyer is looking for, if that business can move forward without you there, you're going to get a multiple. You might sell the business based on your profit. That's another type of exit. Another exit is what happens if I'm going to sell this business to my family and my employees? What if I have a partner? How does that look? So all of these questions are in the exit phase. And so my goal here is that and when I work with clients is where is your business at and what decisions are you making to help it to go to that next stage? And I've got right now, I've got a business in every one of these. I've got a business in every phase. And some days I'm working here and startup today I was doing a lot of systemization and optimization in one of my other businesses. Other times I'm just scaling. We're having meetings about growth and getting additional capital and deploying additional people. And we're in that mode where it's exciting and we're making money. And then over here we're having conversations. Are we going to sell? How are we going to sell? What's our exit plan? And so these different phases aren't your phase. Again, you're going to be a different business owner than where your business may be. Now, before I take a few more questions here and I'll talk to anything about business, use or abuse me as a tax lawyer for what structure might help you best or conversation might help you best. I want to share one or two examples here. First, I was in the startup mode with my law firm 25 years ago. I was in the startup mode. And I don't know when I really switched to systemization, but I was in this phase for nine years. Nine years I was trying to just figure it out. And a lot of times, if you think about that, you come out of school, you could be a dentist, a doctor, a lawyer, you could be a brand new business owner with a restaurant, a contractor, a developer, a realtor. And you're just trying to figure out the business, the industry, you're making connections, you're getting your system down right now. Sometimes in some businesses you can do it pretty quick, other times it just takes life experience. I'm a slow learner sometimes. So I was in this phase for about nine years then. I've been in business 25 now. But about 10, 12 years ago we freaking figured it out. Like we had our systems and now it was to scale and we did it without going into debt. I didn't want to go into debt, so my scaling was still at probably a 15 to 20% a year clip, but I didn't want to go in debt to do it. And some of you might say I'm going to bring on capital or other partners because I really want to double down for a different type of exit. And so when you have that understanding that your business is different from you, when you start another business, you're like, okay, I'm back over here and I've got businesses there right now and then I'm over. Oh, but over here I'm having this conversation this afternoon and so you can put on different hats and be a better business owner. So I've got training on this that I've now implemented for business owners all over the country in a community with mastermind meetings twice a month to talk about this process. Because this is what business owners need, is that community. They need to understand that other business owners are in the same situation and, and there's a path and everybody's journey's different and success looks different to other people. So this is exciting. So I know I've got many followers here that enjoy my tax and legal strategies. But guys, at the end of the day, every day I'm talking to business owners and I see what works and what doesn't. So I want you to just freaking. I try to brain vomit all I can to help you out here. Today I, I'm going to be going live every Thursday. Last year I went live every Thursday. First part of this year I had to get my breath, take my breath and get my mojo. But we're off to the races and so I want you to look forward to every Thursday being here and being able to ask me questions about this business growth, tax, legal, asset protection, estate planning. I just Love this opportunity to be here with you. So I'm going to sit down here and look at some of these questions and gosh, the first one I see here and I love your this is so who gave this guy 20 bucks? I love it. Stormbreaker8822 says. Well Mark, where do I go to get your services? Here's a couple thoughts. First, many of you, I don't want you to spend a dime. I just want you to start getting a little more educated on the tax, legal and business and not just depend on ChatGPT or Grok, but like get some some real life examples and experience. I've got a podcast with over a thousand episodes now, millions of downloads. I got my YouTube channel, I got several books on Amazon and if you don't have a tax and legal source that's a real lawyer and a real accountant, please consider me. I'm going to try to make it fun and simple and easy. So I'd start there. Number two, I have an education program for business owners. It's my situation room where you can go and meet with other business owners twice a month in a mastermind group that I lead live myself twice a month in the evening for an hour or more. And Also I have 40 on demand Q&A questions in these four phases and you can go watch them. Have an open forum to talk with other business owners. Plan on every other Thursday a meeting with me where you can ask questions and and that business ownership room. I'll put a link in all the descriptions down below. Go check it out. A hundred bucks a month. It's 1,000 up front. Then it's 100 bucks a month to get access to the entire forum of forms support and my AI markbot of my own library where you get questions on demand through my twin AI twin is gonna be on that platform starting next week as well. So you'll love it. Then it's the consultation you can get with the law firm. Start with a consultation where we build your structure, your trifecta, your entities and we'll go through trifecta here if you want and then we'll get you an accountant. You go to our network. I've got accountants all over the country in my main Street Tax Pro network. If you're an accountant, we have a certified Tax Pro certification program to help level you up and become the tax advisor you want to be. So I've got so much education programs and you know, for training and certification and mastermind groups and then one on one consults with my law firm kkoslawyers.com no charge to call, talk to one of my new client administrators and see how we could be observed. So there you go. Thank you so much for that question. Yeah, it's been a while since I've been here, so I appreciate you guys being here and catching up my life. Okay, Ray says, should I use my operations LLC to collect rent on my four rentals and income from my remodeling business? Thank you, sir. You rock. Okay, now everybody hear this out. Ray says, should I use my operational LLC to collect rent on my four rentals and the income from my remodeling business? Ray? I would say no. Now let me show you the white. Let's go to the whiteboard and do a trifecta. So here in this example, everybody and many of you might have this situation. We're going to build a trifecta of what Ray's structure should look like over here. On his operations side, he's a contractor, handyman, however you want to say it. He does real estate, construction, remodeling. He does remodeling. He has an LLC and he makes money as a contractor remodeling homes. Cool. He's going to have all of his write offs. Auto, dining, equipment, traffic, travel, home, office, blah blah, blah. He's going to write off everything under the sun, put the kids on the payroll, maybe have his own solo 401k, who knows what. And then his profit is going to come down here to his 1040 tax return. Boom, ba da bang. That is a basic LLC structure for operations. It should have nothing to do, Ray, with your rental property. You have four rental properties over here. Now let's assume I don't know what state you're in. I'll just say you're in Oregon. You live in Oregon, so you're going to have an Oregon LLC for your remodeling business. And let's say your rental property is in Montana. So you're going to have a Montana LLC for your rental property. That would be very typical. Everybody. I don't run off to Wyoming to, to set up a freaking llc. And anybody selling you that is using fear tactics and misinformation to oversell you on something you may not need. I've got, I have over 10 rental properties myself in multiple states. Over $2 million and probably equity in those. I don't even have a Wyoming llc. I could have one. I could call my office and set one up. We set them up every day for people that need them. Be careful. So in this example, Ray is doing business in Oregon and he has rental properties in Montana. Let's say they're in Oregon too. I don't care. So his rental properties are in Oregon, but you have a separate entity, a separate bank account that collects the rent from all these. Now someone might tell you, Ray, oh well, you can manage your rental properties and then pay a management fee over here. Why? By paying a management fee to yourself, you just created ordinary income that's subject to self employment tax. That's the last thing I want. And also for asset protection, you don't need it. You've got an LLC that can collect the rent, pay the mortgages, pay for all the HOA fees, utilities, whatever the hell. And these four rentals are in your 1 LLC and it's clean. You don't need to muddy the waters. I want to keep a firewall between your operations entity and your rental properties. Now could some of you are like, well Mark, that's oversimplified. You should have multiple llc. Okay, you could have four llc, you could, I don't know how much equity is in these. That could be overkill. Because if you have four LLC, that means you have four bank accounts, potentially four tax returns, four lease agreements, four set of books, four of everything. You just don't set up an LLC online, pay 100 bucks, whatever the hell, and then think you don't have to maintain it doesn't work that way. Good luck in court. Now if these are a million dollar properties, they absolutely should have their own llc. And sometimes you might have a Wyoming LLC in the mix to own all your other LLCs because you're trying to get this extra layer of protection, but that's not for everybody. So be careful getting sold that extra entity. And we set them up every day in the right situation, maybe for privacy, that as well. Okay, great question, Ray. I hope that helps keep them separate. I'm going to jump over to Alex, he says, mark, I have an S corp for a seasonal irrigation business that runs from April to October. Alex, I need to talk to you anyway. Oh, sorry, let me switch over here. Alex, I need to talk to you anyway. Sorry everybody. I'm looking at a wheel line for a little alfalfa field of mine at my ranch and I'm using mountain land. It's been a nightmare trying to get a good bit on that, but I'm trying to do a wheel line with six stubs to it. Anyway, what is the best approach to buy a commercial property and take a deduction, full depreciation under The S Corp. Oh, I jumped over to Vincent. I went from Alex to Vincent. I'm sorry, Alex, I'm coming back to you with your irrigation business. But let me, let me get Vincent here too then, because I kind of blended the two. Vincent says I flip properties under an S corp in Texas. I only keep the properties for a few months. What is the best approach to buy a commercial property and take a deduction, full depreciation under the S corp. Alex, I'll come back to your irrigation business here in two seconds. Okay, so everybody, this could be many of you in any regular business. Vincent says I have an S corp in Texas and he flips properties. And he's making good money flipping properties. He only keeps them two to three months, fixes them up, sells them, makes profit. Now he says he wants to buy a commercial property and take a depreciation deduction, 100% bonus under the one big beautiful bill I get you. I love it. What you're going to use is the Dash 4 election. It's called a self rental. What he's trying to do everybody. And you might have this with your restaurant. You're a contractor, a developer, you're a dentist, an engineer, a contract, whatever. You're going to buy your own building and lease it to yourself. But Vincent, you do not put it under your S corp. You set up an LLC over here. You buy your building, go get a standard SBA loan, business loan, mortgage, Fannie Mae, Freddie Mac, a lot of SBA loans. Love the self rental. And so you can get a good 504 loan. And the building is now going to be leased to your S corp. You take the depreciation and it nets with your S corp profit. And you don't have to be a real estate professional. It's called a dash for election. I've done this before myself. So you don't have to worry about material participation. There's no short term rental loophole, blah, blah, blah. You're going to buy the rental here and lease it to your business here. The write off will end up netting with your S corp. Do not put rental property in S corp. Ever. Everybody listen. Never put rental property in an S corporation. If it's already there, it's stuck. We'll do a consult to figure out when it's going to be able to come out. But you're going to have built in gains. You could have taxes unbeknownst to you that are not good. And the lack of flexibility is immense. Do not put rentals in your S corp. All right? Now let's get over to Alex. Alex said, hey Mark, I have an S corp for a seasonal irrigation business. I was back to my irrigation. I also have a handyman LLC for the off season, November to March. Any tax strategy or advice? Yeah, you want one entity. You, you don't want. I don't, I wouldn't, I wouldn't have 2s Corps either. Alex. I have a law firm where we set up hundreds of entities every month for clients all over the country. Affordable by the way. And all of you can talk to a real lawyer. I have 1s corp, 1s corp. I have multiple businesses. So here's what I recommend to many of you with a question just like Alex's. He's got an S corp where half of the year he does a certain type of business and now he's got this other. Now here's your trifecta. So we're not talking about rental property and he's got an LLC in here and this LLC is over here making money the other part of the year. What you want, Alex, is everything to go in this S corp. So if you do want a separate entity for this, what I would do is slide your S corp down, have it be the branded entity for the first half of the year with irrigation, then use your LLC for the handyman. That's fine. You got a separate merchant account, brand, whatever, have it owned by your S corp. So your S Corporation owns the LLC 100%. You just save the extra tax form. The LLC income is included in the S corp. That allows you to save on self employment tax. You take 1w2, you saved on self employment tax, you can set up your own solo 401k. You take all the write offs you want here, but you don't have self employment tax problem. See everybody, here's the problem with Alex. If he has an LLC here and an S corp here and he runs it as an S corp because he's making big money. But he has an LLC over here because he's making little money. But he's still going to have self employment tax here where with the S corp he has a strategy he's saving. Well we got to solve this problem. So move it above the S corp. We do this with a membership transfer agreement. We want to charge you three or 400 bucks. And I backdated to 11 26. And so what happens is you move the LLC up above the S corporation. That's the way to go. You guys having fun? Isn't this fun? I love this stuff. I hope you guys are having a good time. I. I just like small business, love investing, love real estate, love crypto. Buy more XRP tonight it is down. I'm stoked on that. So, my crypto followers, I know you're here too. I just love it. So let's jump over here to another question. Oh, someone said they love to see me at zero. Down with Pace. Morby, thanks so much for being here. I love Pace. He is awesome. Okay, let's see. All right, so Stormbreaker says, Mark, can you draw up my future trifecta, please? I'm in Orlando, Florida, and I started my own lawn service. Okay, you guys up for that? Let's do that for Stormbreaker. Okay, so Stormbreaker has a lawn service and they need a trifecta. So what? A trifecta is as a way of organizing your tax and legal life to give you better asset protection. Save taxes, keep it simple, save administrative costs, and don't get oversold crap you don't need. That's the trifecta. Anywhere between 1500 bucks and 2 grand. We set those up for clients all over the country and include an entity that you need, an llc, an S corporation. Whatever you need, we're going to add that to the mix. So you're off to the races. So Stormbreaker has a lawn service in Orlando, Florida. What should his or her trifecta look like? So, Stormbreaker, we're going to start out with your foundation being your revocable living trust. Whether you're single, married, kids, no kids, young, old, if you're going to start a business, and then eventually you're going to buy assets with that business, even your own home or rental property, you need a revocable living trust. Start now. Get it done. 50% of Americans don't even have a will. But that's the foundation. So put it on the to do list this year. You can always add it after an llc. You can always add it before an llc. We split your life in half, and we're going to put your operations over here. Ops Operations. And we're going to put your assets over here for operations for your lawn service. Because a lawn service is Operational income. Service income. We're going to form an llc and eventually it's going to become an S corporation. For any of you out there that have an llc, remember, llc. Do not. Do not save taxes. The S Corporation does. But I don't want you to pull the trigger on an S corp until you're making how much money? Wait for it. Wait for it. Around 40 to 50,000. When you start to make 40 to 50 grand net, so that's four or five grand a month. When you're doing four to five grand a month net, after all your write offs, boom, we're going to an S Corp. So you're going to have a Florida llc. You're going to name it, brand it, start your all of your merchant accounts and systemization. You're in startup mode, your foundation, you're in phase one of your business phase one. And you're going to take as long as it takes, one year, three years, five years to get your systems down. How many trailers do I have? How many trucks, what type of equipment? Am I going with chargeables or are I going with gas? What are my, how many employees do I need? How many lawns can I cut? What's my profit margin on my fertilizer and sprinkler systems and mowing lawns and putting in trees and landscape, all that, you're going to have your service line. Once you get it systemized now you start to duplicate yourself and you start freaking scaling. Now you got two trailers, two crews, three crews, a sprinkler crew, a landscape crew, a lawn service crew. You know what I'm saying? I've had clients do this over and over again through my whole career. But you're going to do it all in one entity. Your llc, that's going to become an S corp. And we're going to make that conversion to an S corp. Because you're going to pay way too much in self employment tax. After that, 40 to 50,000. This is where you take all your revenue in from all the different services and you take all your write offs. Your trust owns your LLC or S corp. Now as Stormbreaker starts to make money, we're going to start to peel off some of the profit. We're going to form a health savings account. We're going to make sure we have health insurance. We might have kids on payroll, spouse on payroll, don't know. We're going to start funding our Roth ira. We're going to start buying crypto, gold, silver, other businesses. Whatever we want in our Roth, we want to self direct it. I might buy stocks, bonds and mutual funds, whatever floats your boat. Then you're going to form the self directed 401k and you can have a solo 401k until you have full time employees. And so you're going to keep that and then convert it to a standard safe harbor 401k. So you're going to be building wealth here then you're going to pull out profit and start buying your own rental property or warehouse to rent back. All of my contractors, my lawn service contractors have an LLC that owns their own metal building shop and they rent it back to the rest corp dash for election, huge depreciation. And it's a combination of the S Corp in the llc. Then you're going to go out and buy other rental properties. Who knows in Georgia, Alabama, in the Southeast. You live down in Florida. We want to buy rentals down in the Southeast. You're going to set up as many LLC as it takes to buy more and more rental property. You're going to start investing in what floats your boat again. Crypto to Wall street, whatever you want. And then you're going to buy your own home. When the time's right, you buy your home. You might buy it before rentals, you might buy it after rentals. This, my friends, is Stormbreakers trifecta. And we're going to bring it all together. We have asset protection in the middle. We have freaking awesome tax write offs here. We're taking write offs for our rental property here. We own our home. We've got our retirement accounts, our health savings account. It's rocking. All right, let's do a couple more questions here. Loving this, you guys. I'm having so much fun. All righty, let's see. Okay. Is there no sound right now? Are we golden? I'm hearing no sound. I guess we're okay. So I think we're good now. Could you elaborate on a short term strategy from Vincent? Also I've got Jolina. How do you balance reasonable salary with maximizing retirement contributions? Ooh, this is good. I think we could take both of those. Stormbreaker says. Wow, thank you. Amazing trifecta. You just motivated me more. Thanks so much. Okay, let's do this reasonable comp conversation, Vincent, because I've already covered you and okay, you guys can hear me. Thanks. From James in Virginia. Okay, so reasonable comp. Let's talk about this. If you guys have a small business and you set up just a regular llc, let's talk about a realtor. All of you understand what a realtor does? Realtors close on the sale of property. They get a commission. Yeah, that glare is kind of crappy, huh? So realtors get a commission when they sell property. It goes into their llc. Now this is going to come to the real. Any of you that own a small business, you got to know this. You're going to take write offs for dining, travel, autos, home office, computers, electronics, your Board meetings, paying your kids, paying yourself 401ks, blah blah, blah. You're going to write off all that stuff. Let's say you net 100 grand after all your expenses, you take home 8 grand a month or something. That's awesome. You know, that's what we want to be working towards as a business owner, making 100 to 200 grand a year. That's our goal at least, bare minimum. Right. And you're going to pay self employment tax out of the gate. That self employment tax is going to be 15.3%. So that's 15 grand. Then you're going to pay income tax on the remaining 85 federal and state. So you're paying self employment tax, then federal, then state. You might be 20%, 25% fed, 5% state. Guys, you're, you're out 45% in taxes. 45% on 100 grand. That's brutal. Right, so what do you do? So with, first thing we want to do is minimize this $15,000 in self employment tax. Then we want to make sure we're taking all the write offs we can and deploying profits to generate other write offs. That's how the rich get richer. So what we do is we do the S corporation and in this example we've got 100 grand of profit. So it's the same write offs, same profit. But I took my LLC and I make an S election right now. You can do an S election back to the beginning of the year. It buckle up, it's super expensive. We charge around $250. I know, I know it's super expensive, but you're going to save thousands. So I think I could spend a couple hundred bucks to save thousands. So I've got my same LLC, but now it's an S Corp and 100 grand of profit. Well in order to do this and every dentist, doctor, lawyer, accountant, realtor, contractor, lawn service, S online influencer, Etsy salesman, whatever salesman, I, we use the same strategy. You're going to take this 100 grand and you're going to take part of it as a salary which is called reasonable comp. Reasonable comp. And then the rest is going to come out the bottom as profit. And we call it kind of a K1 or profit. You want to nail your W2. So the IRS is happy, it's got to be reasonable. Now if you hit it in a range that's not worth the IRS's time, you're fine. You don't need any extra software. You don't be like, oh My gosh. I'm a. I'm a doctor in Denver with three kids in the suburbs of this county, and I worked this many hours. You plug it in a computer and this is what my salary should be. No, you don't need to stress out. I've got a matrix that I'll show you here in two seconds where you can just find a safe harbor. Meaning you land your boat there, you don't get a storm, you're going to be okay. That's a safe harbor. So in this example of 100 grand of profit, safe harbor, 40 grand, I probably go down to 36. So you're going to take 40 grand. In a W2, the net profit will be 60. You just saved 15% on 60 grand. That's $9,000. You just saved $9,000 by converting to an S corp. And this is no audit risk. If you accounts out there, your guys, you're like, mark, that's way too risky. My accountant says this or you're an accountant listening to this and you're like, that's way guys. In 25 years, thousands and thousands of S Corp tax returns and structures. I've owned my own accounting firm for years. We have never had a client audited, ever for taking too low of reasonable comp, ever. And I've been teaching the payroll matrix now, trademarked and designed payroll matrix for over 15 years at least. So here's how it works. This is your profit. This is how much you're taking in draws. Maybe it's 20 grand. 25, 50, 100, 200, 300, 400. So this is how much you're taking out of the business. This is you making money. You're making more and more money. This is your salary, your reasonable comp and a percentage. Do I take 100% in salary or 50% in salary? 40%? 30, 20. What do I take? Well, what's interesting, as your profit goes up, your payroll as a percentage goes down. Now the sweet spot is around this 40% and 100 grand. So if I make in 100 grand in profit, I'm going to take about 40,000 in W2. Super safe. I've interviewed prior IRS agents on my website. I mean, on my podcast, they're like, we went audit that. That's golden, you're good. Now the people that get in trouble are like, I'm going to take a $10,000 salary when I make 100 grand. No, that's when you get audited. Don't do it. Joe Biden did a 20. No, about an 8% calculation on his salary on his book deal. In 2016, before he came president, he had a $13 million book deal and he took about 800 grand in salary. I've got his tax return here on my laptop. Donald Trump only paid $600 in tax because he took depreciation off his hotels and wiped out his commercial income and his TV income and all that stuff he was doing. He was a real state professional. I want you to do take bonus against your income. So both guys were doing wonderful strategies that are available to you. Using the S corp and using the real estate professional strategy doesn't make Democrats bad or good or Republicans bad or good. I'm going to take whatever the tax code is and freaking make it happen for you. So the question was, how much should my reasonable comp be? Well, it's going to vary every year. It's going to depend on your draws and income. The more money you make, the less payroll I'm going to take as a percentage. So if you're making 400 grand, I might do payroll of 20%. 96 grand. You're safe. Now the question also said, but Marks, I want to maximize my 401k. So if I take lower salary, I can't put as much in my 401k. Well, guys, check this out. This is so good. Great question. If I have my S corp and I want to put Money in my 401, let's go to my calendar for this year. So I go over here, I'm going to look at my calendar and I've got all my numbers. You guys can buy this in a couple of weeks. It's at the printer right now. This year in my 401k, I can put $24,500 in my 401k right off the top. So that means before, after FICA, whatever my net is, I'm going to take a salary. Okay, let's do this. Here's my 401k. Let's stay with the same hundred grand. If I take 40,000 in salary, I can put 24,500 in the 401k plus 25% of whatever my salary is. So it's 40 grand. What's 25% of 40? I got to make this bigger, right? Okay, I get to take 25% of 40, which is 10 grand. So 24,500 this year plus the 10 grand, I can put $34,500 in my 401k on a salary of 40. Well, you're like, well, Mark, I can, I mean I can do a maximum. What's the maximum? I can do a maximum this year of 72,000. Well, I, I want to put away 72,000. Okay, well if you want to put in 72,000, then you have to increase your salary to get this 25% bump. So if I take, let's say $40,000 more in salary, so I'm going to double my salary so I can put in 20,000, right, because I get 25%. So I'm going to double my salary and I double my contribution. Now if I double my salary and I do it, I don't have to, but I do it just because I want to put more money in my 401k. That means I took 40,000 more dollars. I got to pay thica on that a 15.3%. So I've got to pay $6,000 in taxes when I take $40,000 more in salary. But I can only put $10,000 more in my 401k. So see, there's a law of diminishing returns. Meaning if I take more salary, I have to pay more self employment tax. And the difference here, I'm only up 4 grand. I paid 6 grand in tax to get 10 more in my 401k. The net benefit was only 4 grand. I don't know if I do that now. If you have to take this much salary because of the matrix, then let's freaking do it. Let's take as much as we can in our 401. But my answer to you is don't take more salary just for the hell of it. To put more in your 401. What I'd recommend is put more money in your Roth ira. I, I can put another. How much? This year I can put $7500 in my Roth IRA, still have a 401k and I don't have to take more salary. You see that? So I just added, instead of an additional 10, have to pay tax of 6, I add 7,500 and I do it with the Roth IRA with no extra FICA. Okay, now some of you are like, what the hell? You just blew my brain, Mark. Okay, let me say this. I want to bring it all together. Guys, you're in the right spot. I am so grateful you were here because it does, it takes a little bit of time to start to understand some of these tax strategies. This is what the wealthy talk about. If you go to a cocktail party with rich people, I swear to you, I'm the head of the party. If I get around the, you know, pouring drinks or I'm getting hors d' oeuvres and I say, I'm a tax lawyer. Everybody's like, oh, I'm doing this tax strategy. What do you think of this, Mark? Wealthy people love to talk about saving taxes. You are in the right spot right here. You're learning the phases of business. You're learning that a business is going to evolve as you evolve, but it's different. You could have a business in different phases and you're going to learn about tax strategies that are going to be different in every phase of your business. That's all I do. That's all I talk about every day. And so if you want to check out our business owner situation room, where you can go to your own situation room like the President of the United States does, and get quick answers to questions in these different phases, have an open forum conversation with other real business owners, not AI around the country, and then have a conversation with me every two weeks and all the business owners in a mastermind group. You just found the perfect place to grow your business. You will freaking love it. So go check it out. Last night we just had a Mastermind call for 2 hours and I was just answering questions. Like, this one call could save you tens of thousands of dollars. So anyway, continue to learn you're in the right place. I'm going to be here every Thursday with a live broadcast. I've got a very robust YouTube channel with more videos. Go check it out there. Get a consult with one of our tax lawyers. Let's. If you've got too many entities, let's get the right ones. Let's get your trifecta done. Anyway, I could go on and on. Thank you so much for your questions. I so grateful to be here. And I want to. I want to tell those out there that are struggling today with maybe a death in your family, a client that didn't pay the bill, and you're not sure where the next dollar is coming from in your small business. I've been there and I'm there on a regular basis. It's tough. Some of my businesses, I've been building this year. I haven't. I haven't taken a profit in 12 months and I'm still hacking it out. You're not alone. Don't give up. You're not a failure as a business owner. Some businesses need to change or pivot, but it doesn't mean you're a failure. Some businesses just need a little tweaking. That's what smart business owners do. They're nimble, they're creative, they're flexible. And that's not failure. That's success. And so I'm grateful that I can share any of these thoughts with you. Don't give up. And be here next week. And I'll see you at the podcast, see you on YouTube, and keep living the dream. See you soon.