The Best Structure for Your Business: Q&A with Mark J Kohler CPA, Attorney

Hey, welcome, everybody, to another Facebook YouTube live, where I'm here for you, helping you build your American dream. Now, my name is Mark Kohler. I'm a CPA attorney. Before you go too far and turn this little live broadcast off on your feed, let me tell you what it's about. I want to help you structure your business properly. Do you have the right structure now? How big is your business? How much money you're making? What are you doing in your business? Well, I'm here for you. I'm going to give you some basics. We're going to get on the whiteboard approximately a half hour and I've already got some online questions ready to go through the social media platforms and I want you to type your questions below. I'm also going to give away some books. I got a new book out this year. I just got it in the mail and it's not available on Amazon for another month. So you're going to get a new release book that you can't get anywhere else. And I don't know, we're going to see how it goes. So I'm here for you, helping small business owners around the country and our law firm and accounting firm. Every week we've got about five attorneys and 10 CPAs, and we're just a little boutique firm, but trying to change the world, make it a better place. So I'm here for you. We're going to do your Q and A on structuring your business and I want to get right to it. So let's do it. And type your questions below. And I've got Carly and Mallory here. We're going to throw those out on YouTube and on Facebook. So first, this is Startup Academy. Startup Hiccup Me, Instagram, I'm probably not saying it right, says I am starting an online coaching school for startups and I live in California where taxes are nuts, because my company will be an online academy. Do I have to form the company in California or can I create another office space in Delaware, Nevada, Washington or Texas? Or one of these where there's no state tax? Now, I'm glad you're asking this Startup Academy. And if you're asking this question and you're starting an academy to help startups, dude, let's work together. Let me help you with some videos and stuff. This is. If you're asking this question, there's about 50 questions you don't even know to ask. If you're helping people start their businesses, we need to try to figure something else where I can help You. So here's the bottom line answer for everybody listening. If you're running an operational company, you've got to register it in the state where you're doing business. Business and where you live. Oh, but I'm online. I have a server in Nevada and I have an office in Nevada. Does not matter if you eat, drink and sleep. And you've got your bud in California and that's where you live as a resident. That's where your operational business takes place. It's been all the way to the Supreme Court of California countless times. Done over, forget about it. And someone on the web is going to tell you that you can set up in Nevada or Delaware and operate in California, not pay the franchise tax. You get it in writing from that. When you're audited, they'll pay the bill and you'll see how their answer changes. Sorry, I hate to say it. And I just moved from California. I was there for eight years and I love California, but your operational entity must be licensed and registered there if that's where you live. Okay, now you're typing your question below. So Mallory and Carly are going to hook me up, but I'm going to about five more questions that were here before. Now I want to get a little basic information out there as I try to answer these questions for everybody else. Dylan's out. Okay on the camera. We good?

Okay.

All right. Whenever I talk to a business owner and we've got questions right here on this topic, I want to put your short term operations on one side, your long term operations on the other and your family trust down here at the bottom. This is where your 1040 is going to come into play as well. So you got your 1040 tax return, you got your family trust down here, and we're going to put assets over here and we're going to put operations over here. Now that's going to play into all this. So when Online Academy says, I'm selling training online, but I live in California, that's an operational business. Now someone says, this is Ashley says, what is your opinion on a C corporation? Is it better than an S corporation? How do I determine which better structure is best for me? Ashley, I love your question. In my book, I have a whole comparison chart where I compare the C Corp to S Corp. And let me tell you out of a thousand times, for small business owners, when I run the comparison, let me see, 990 times, the S Corporation, S as in small is going to win. Now let me tell you why. And everybody out there, and I know there's some C Corp lovers watching this and your blood pressure is going up by the second as I talk like this. But just hear me out. We first know from asset protection that an S Corp and a C Corp are the same. If you live in Arizona and you've got a corporation, if you live in New Jersey, Florida, Washington state, when you form your corporation, you get the protection from the Secretary of State of having a corporation. The only entity that cares if you're a C or an S is the taxing authorities, which is going to start with the irs. So a C corp or an S Corp is what you elect when you go online with this irs. And Ashley's question is a good one for everybody here and we got to cover it quickly. If I'm going to make money, I'm going to bring in 100 grand. Apples to apples, I got a C Corp and an S Corp set up in the state of Washington, all right? C Corp, S Corp, I make 100 grand in sales, doing a service, a product, whatever, and I have 25 grand in expenses. And your business is often running direct cell phone, home office marketing, legal, accounting, blah blah blah. And you net 75 grand. Now if I take that entire profit out in my C Corp, I'm going to pay C Corp tax. Oh, but someone's going to say, oh you can borrow it out. Oh yeah, you're going to pay someday. Because when you shut down that C Corp, any loans that you have not paid off to the corporation have to be recognized as ordinary income and you're going to have double taxation. So don't think that you can borrow this money out of your C Corp and it'll all just mysteriously go away someday. Bullcrap. So, and I help clients get out of C Corp's all the time because some bozo sold them a C Corp at a conference. Now let me tell you this. C Corp is going to pay 21% in corporate tax. Whether you borrow it out and pay it later or now. 21% on 75 grand, we're looking at least 15,000 in tax. Then you're going to pay your state and your federal tax. Now because I used a Washington state example, there's no state tax, but if I live in California or Arizona, I'm going to pay state tax. Now here's how the S Corporation works, Ashley. And this is why the S Corp is going to be a great fit for you when you make that 75 grand. There is no corporate tax and there is no self employment tax. So everybody and this is one of the other questions that comes up. Kenneth, the next question said, I heard an LLC doesn't save taxes. Is that true? Oh, I'm coming to the llc, so hang tight, people. Oh, I just dropped my water bottle. Sorry. Okay, so no corporate tax, no self employment tax, but do I really get out of fica? The F word? Yes, but I only. I've got to still take a salary, so I only get out for partial. So with this 75 grand, let's say I take 25 grand as salary. 50 grand is K1. Oh, and I know some ucpas are freaking out about that. I've got a chapter in my book with a payroll matrix that tells you the exact payroll. Well, I shouldn't say exact, the reasonable payroll based on IRS regs, IRS cases of what a reasonable salary is. But in this example for Ashley, she's going to take 25 grand and a W2. She's going to take a K1 as dividend or pass through. She's going to get a pass through deduction and no corporate tax and no self employment tax. She's going to easily save close to seven to eight to $9,000 with, with an S corp compared to a C corp. And I can run the numbers every time. Now if you want to start out as an llc, there's no tax savings with an llc, but I get the protection. I can convert an LLC to an S corp. And some of you out there are like, well, Mark, I'm an S corp. I'm just an LLC taxed as an S corp. That's the same thing, people. It's cool. So back to our original plan. Let me just throw this out. There's a lot here in just a half an hour. I'm trying to give a lot of info. Your operations are going to be an LLC until you convert to an S corp. And then we're going to use LLC to hold assets. So I put my rentals and LLCs, I start my business, my operations, maybe as an LLC and then convert it to an S corp. I charge 125 bucks to convert it. So Ashley asked which one is best between an S and A C Corp. Nine times out of 10, if not 95% of the time, the S corp is going to be better. And then over here, Kenneth says, does an LLC save taxes? And no, it does not. An LLC is for protection. Or I can convert it to an S corp later, but LLC do not save taxes in and of themselves. Okay, let's do a few questions.

Mallory first, Paul wants To know if this is live. So he'd ask that you say orange. So Paul, Paul wants you to say orange.

Says the word orange.

Orange.

Okay.

This is live. I don't know what to do, Paul. I do it live. This is it.

This is it.

It's uncensored. Tbma. Yeah. We're serious. Okay, so Mitchell, what's Mitchell's.

Mitchell has a question. Other than a 1099 hack for LLCs, is there any other way to pay for education through an S corp?

His first point was what?

Other than a 1099 hack for LLCs, is there any other way to pay for education through an S corp?

Well, Mitchell says everybody heard that because she's on a microphone. I don't know what a LLC 1099 hack H A C K is. And by the way, I'm a CPA that speaks around the country and writes books and listens to every guru on the planet that might have a legitimate strategy. So someone might be calling this something, Mitchell, a hack. A 1099 hack. I don't know what that is. And also I don't know if Mitchell's talking about real estate, education, personal improvement, or if he's going to college. Let me just say this. If you have a small business and you're going to go to a conference to help build your business, I'm going to try to write that off as continuing education. Or if you're starting a business, I'm going to write it off as a startup cost. Now, I've got some emails right now I need to reply to some people. They're asking, how do I write this off in my tax return? Your CPNU might have a strategy that is legitimate or it might be pushing the envelope, but it works for you, that's fine. But education is a squirrely one. And whether it's an LLC or an S corp, Mitchell, I'm going to go continue an education or a startup cost generally. So, Carly, Bo has a question.

He said, how much should a good bookkeeper cost in relation, particularly percentage wise to a business's gross income?

Well, Bo, that's a tricky one. Boy, you guys are asking hard questions today. So bookkeeping costs, there's no real good percentage of gross income. In my example here of someone making 100 grand and then how much should their bookkeeping fees be? For some clients to do an Internet based business where it's all on merchant accounts and going right into a, let's say online QuickBooks, your bookkeeping cost might be $100 a month, $1,200 a year, that might be 1% of gross sales. Other people that have a store and they've got a lot of transactions and their books are a mess and they're a disaster. Their bookkeeping could be 2 or $3,000 because they need the help every month. Some people are good at bookkeeping, some people are bad at bookkeeping. So Bo, I wouldn't say there's a percentage of gross sales that you should allocate to accounting or tax planning. I would say this. Let's just talk hard costs. Most business owners are going to spend 100 to $400 a month in bookkeeping services. Now if you've got a half a million in sales and 20 employees or whatever, you might need a full time bookkeeper. Everybody's different. Now your tax return for an LLC or an S Corp is going to be around 1,000 to $1,200. You're going to have payroll services for at least yourself and an S corp. Do you have other employees? So Bo, let me say this. Call my office. We can give you a quote for bookkeeping and then get two or three other quotes. And let be very clear with people the complexity of your business and what type of services you need. Okay, now I'm going to hit another question. This is From James on YouTube. Can you use an SBA loan to buy an LLC that holds several properties of. Yes. By the way, we just recorded a podcast. I have a podcast every week. I'll tell you guys how to get to it. We've been doing it for 10 years. It's awesome. Next week is our call in show you SBA loans can be used to buy real estate. Now usually if you're going to buy an LLC that has properties, the SBA is going to want to look through the LLC and loan and take a lien against those properties inside the llc. Now I'm serious, James, get to refresh your wealth. Go to itunes or stitcher. If you're an Android user, type in the word refresh your wealth. We did an SBA loan show four weeks ago. Listen to that show. We have an SBA expert come on the show and their contact information is there. If any of you need that contact information for the the SBA lender or just you want to email me and say, mark, I got a bigger question. Can you answer it? Or I need a consultation with one of your attorneys or CPAs, go to markjkohler.com that's markjkohler.com and when you get there, Maria, my assistant will help return that email get you to the right paralegal or, or even set up a consultation for you. So we'll go from there. Okay, Now I'm going to do one more quick question and then I'll go over to Mallory, I think it's her term. I want to establish a trucking company. I intend to do business in the USA and Canada. What is better, an LLC parent of an S Corp or an S Corp parent of an llc? That's a great question. So, people, let's go through our basic point here. If I'm going to open a trucking company, some you might be opening an Internet company or doing consulting or services. That's going to be operations. So we. And if he's going to run a trucking company and make more than 50 grand, you know, I want him to have an S corporation. So I would use the S Corp as the parent and then he could open an LLC for the trucking business, an LLC for his side restaurant business, maybe a DBA for his drywall business, and maybe a URL for his online business. So the S Corp is the parent and then you can open different LLC as subsidiaries. Now, I put the subsidiaries above because I like to show the money flowing down and then onto his 1040. I hope that makes sense. And that's how I would do it. Now, if you have partners over here, that's great because if you go to open your trucking company, you. You want your S Corp to own a share of that llc. So. Whoa. I hope you guys are having fun. I should be doing some stand up comedy or something to make this more enjoyable. I'm trying to keep this as interesting and as lively as possible. I don't know if I'm succeeding today. We'll give it a shot here. So. Okay, Mallory, what do we got? Give me something good, Kendrick.

Kendrick wants to know the best way to set up your living trust when you have multiple LLCs.

Oh, good, Kendrick. Okay, I'm not going to repeat the question because we got her on the mic there. So Kendrick needs a revocable living trust and I'm just going to use this opportunity for a shameless plug. And Paul said, are you live? I'm really live. Orange, banana, orange peel, whatever. Here's the deal. This weekend, Father's Day weekend, make sure to call your dad if you're in good graces or hopefully they're still alive or who knows what. But if you have a father that you call once in a while, give him a shout out. This weekend, our estate planning special Ends and we do it once a year, and we knock off up to $400, some as low. It's 100 to $400 off, depending on the type of estate plan you need. It's awesome. And you got to get it done. And so Kendrick needs a living trust. Maybe give our office a call. Get over to kkos lawyers, kkoslawyers.com any of you watching right now, you can pay right there for your estate plan. You get an hour consultation with me or one of our other six attorneys, and they will put together a plan for you. We can talk about your taxes, your entities, and Kendrick's question is, I take this trust and I have multiple llc. Well, when we establish your trust, we transfer the LLC ownership. Remember, we got our left side, right side, short term, long term, and LLCs for rentals. I'm going to have these LLCs that Kendrick says he has. We're going to transfer the membership. Kendrick still the manager of these LLCs, but we're going to have the ownership be the trust. We give you a membership transfer form. In fact, Mallory, who is here in the studio with me, she is our paralegal that helps our clients fund their trust. So if you set up a trust with us, you'll be on the phone or on the email with Mallory, so saying, hey, I've got five LLCs. How do I transfer the ownership to my trust? We give you a membership transfer form. Easy schmeasy. And your trust becomes the owner. I want your trust to own your home. I want your life insurance and investment accounts and money all transferred beneficiaries to the trust. And your trust will own your s corporation. So if this is your trucking company, then your trucking company company will be owned by your trust. That's how it works. Okay, what do we got, Carly?

Charismatic.

Charismatic. Whoo. If that's their real name, that's pretty cool.

Yeah. She asks, I want to start a smoothie bar. However, I'm also a government worker. What preparation is that for me for tax credit?

I love it. So Chrismatic, lives in Texas, no state tax. Gotta love it. But this time of year is muggy and hot and miserable. God bless you. Get over to Buc EE's and get a big Diet Coke on ice. Buc EE's some ribs tonight? Oh, I'd be great. Okay. Charismatic. She has a side hustle. I'm going to go with Charismatic. Being a female name, I'm just going to take that plunge and hopefully I'm correct. So Charismatics in Texas government worker with a W2. She's starting a side business, a little side hustle. A lot of times, I'll be honest. Now, that's an operational business. She didn't say she was going to buy a rental property, so. So what I would do, Charismatic is you have two choices. You could start out just as a sole proprietorship, get a DBA doing business as and open your bank account, get your merchant account online, your affiliate forms, whatever you're going to be doing online. The smoothie bar, you'll probably have a swipe, you know, some sort of square so that you can get people paying you on the spot. Then you'll be operating as a sole proprietorship. Easy, schmeezy. Now, you may want to test your product out, make sure it's legit and it's going to take off, but because you're out there with a smoothie bar, people could slip and fall, they could choke. They could be on, you know, sucking down their straw and whatever. We might want to have an llc. So it's a. It's not an S Corp level yet because you just have a W2. The side is your business. So she's got a W2 and this little side business, Charismatic. I'd probably do an llc, which is quite affordable in the state of Texas, and get your dba, maybe get some corporate credit, get your ein going. All of this here. You don't need a DBA with an llc. I want to correct myself there. The LLC reserves the name for you, and that's how I do it. I just do a sole proprietorship and then get. Convert it over to an LLC right away. Okay, another question here. I got two more. This is minimalist. Michelle on Instagram says, is there a book you can think of if you're a beginner, LLC Stocks Rental, that has one of your favorites. Oh, my gosh. Well, this is a good chance to say, and I'm not kidding, minimus, Michelle. This is the best book for small business owners in America, in my opinion. And I took a year to write the second edition titled the Tax and Legal Playbook. Has a whole chapter on LLCs, a whole chapter on rental properties, whole chapter on S Corps, and got 30 plus chapters here with diagrams and case studies. It's fun. And it's titled the Game Has Changed. Now I'm going to raffle this off tonight based on everybody that shares this little broadcast. So Rosalie, my social media director, in the morning, she'll look at all the people that shared this video. Then she's going to Draw from that and give away this book. This game has changed. Book is only available on my website right now@markjkohler.com or on Amazon for pre order. Released on July 23rd. So this is a big deal. It was exciting this week to get it in the mail and I will give this away. Our winner for last week's book was Financial Freedom was Jose Diaz on the Entrepreneur Facebook. My what your CPA isn't telling you is another book of mine. We gave that away to Tony Abreu and then my workbook. This is a big one. This is a $99 workbook with 60 videos, a business plan, a strap plan, a marketing plan, and Charismatic down in Texas. I really would recommend this little workbook. It is going to help you build your business, build your marketing plan. I do an hour and a half video for each of the eight steps. It's a lot of fun. And again, this is. I'm not trying to do an infomercial here, but I'm going to give this away today randomly to one of our people, that is a viewer as well. So get over there, Minimus. Michelle, I think you'd love the book. And get over to my website, markjkohler.com order the book and we'll get it right out to your. Email me. Okay, Question, Lynetta.

My husband and I both have LLCs taxed as S Corps. How can we take advantage of an hra? Do we need to restructure?

You need to restructure, Lynetta, I have a whole chapter in my book Tax and Legal Playbook on health care expenses and how to create an hra. Let me just tell you the answer. I'm all about giving you answers. Some of you. This is going to blow your mind, Lydetta. You know what I'm saying? I'm going to do this. First of all, you and your husband both have an S Corp. Not a good idea. Unless your husband's a doctor and you're a realtor or there's some sort of professional designation that requires you to have 2s corps. Fine. What I would prefer is one S Corp. And then this other spouse is the owner of a family support company, a little sole proprietorship. This is where. Let's just. I'll say you, Lynetta, maybe your husband is the owner of the S Corp. He takes a salary here. And then your family management company takes a payment from the S Corp. And this is where we hire you and give you an hra. That's one idea. We also could take one of your S Corps and convert it into a C corp. And I earlier said I don't like C Corps for operational businesses. So we'd run the bulk of your business through the S Corp, turn this one into a C. Zero it out so there's no corporate tax, and give both of you an HRA here. That could work, but you need a consult, please, please call us. Lynetta, get over to our website, kkoslawyers.com Talk to any of our new client associates and they can tell you about our firm. And for half hour to an hour, consult with one of our tax attorneys. We'll lay out a plan, get you an hra, get you restructured. It'll save you thousands of dollars. I think you would love it. Okay, Carly.

Okay. Derek asks, can I set up trust accounts in America and the UK when I'm here in South Africa?

Whoo. Derek is in South Africa, huh? Well, I think it's pretty cool someone from South Africa is watching this podcast. We love you. Thank you. But he wants an entity in the US to pay him. And then even though he lives in South Africa, that's fairly unique. Usually my clients that are living out of the country are making money in that place they're living, not back in the US So it's a little unique that Derek's making money in the US and as well as being a US citizen living in another country now, maybe he's South African descent and he's not a US citizen. So I'm going to say this, and I think you're going to love this, Derek. Believe it or not, I'm here again for everybody as much as I can. Christy Parker, she is the attorney in our office. Kristi K R I S T I E is our international tax lawyer. She helps a lot of our clients that are living abroad and then foreigners that are investing in the U.S. let me tell you her email Christy koslawyers.com so christyqslawyers.com if you want to give us a call, 888-800-0010. Oh, no, I did that wrong. It's 1-800-888-0010. Give us a call. One of the attorneys can make an appointment with you. I would meet with Christy Derek. Schedule just a half hour. Don't pay for more than a half an hour. She can point in the right direction. We can go from there. Okay, I've got one last question, then we'll come over to Jeffrey Taylor off Facebook, says, I am fresh out of college. And I don't know what I should do with my future and where to start. Well, I wish you the best, Taylor. I'm glad that you're watching this. All I know is I want to be my own boss. Well, love it. You're talking workbook here. I just taught a college class this morning for an hour and a half of construction law majors that are just going to get their construction degree. And I gave away two books to that class as well. They were loving it. I was thinking of opening up my own food truck. What is your recommended place to get a loan with low interest? Do I need to get a food license? Do I register my food truck as an llc? Please help. Taylor, I just got chills and I've got to say this right now. You're 2, 3, 4, 10 steps asking questions where I'd like you to slow down when you say I'm thinking of opening up my own food truck. What I'd love you to say is and this is good for everybody listening, I literally just got chills when I'm going to say this to Taylor because this is where I love helping people. Taylor, stop the question. I want you here. I hear you saying is. Mark, I did a business plan. I took about two to three weeks to write up and analyze what food truck business may be best for me. I've tested all of the competitors in my area. I've even done a few market tests making the food product that I hope to sell. I've also done some price testing and surveys in my local area. I've also sat out and camped out and watched the other food trucks in my area for the number of patrons that are visiting their location. And I've looked at the prices they're charging. I now have an estimated gross sales projection as to what my food truck would do and I've got it nailed down to the exact food I'm going to sell. I am ready to start my business. Mark, what do I do next? That's the question I want to hear from you, Taylor. Spend. If you don't like my book, that's fine. But find a book that can help you build your business strategic and marketing plan. This is on Amazon. 99 bucks. Call my office, we'll help you out. Taylor, we're going to set up the entity, probably an LLC for your food truck business. Once you know that that food truck business is going to make sense. For an hour and a half I talk about a churro business and how they were going to succeed or fail based on their marketing Projection. They failed within three months. I called it. I use them as a case study in the first section of my book for an hour and a half. Then I compare it to a hair salon where they're talking about doing colors for women or pedicures or haircuts for men. Which one's the most profitable? I'm not going to tell you. You got to watch the video to find out. So it's really interesting. When you think you want to start a business, I want to hear you more confidently say, I have figured it out. I know what business I'm going to start. I'm ready to go. What type of loan do I get? Should I look for some partners or investors? Should I form an llc? But I'm ready to go. And I know down to the penny the money I need to start my business. Taylor, that's what I want to hear you saying. So slow down, tiger. Get on that business plan. What do we got, Mallory?

We got Jeffrey. Does it make sense to set up an entity in a state outside of where you're buying goods?

Wow, Jeffrey, you. I was ready to go for it, and then you said, where you're buying goods. Let me give an example here. So he didn't rent in real estate. Now, let me just help you out. If you're buying rental properties in Oklahoma, you set up a freaking Oklahoma LLC and you buy your rental property and transfer it into your Oklahoma llc. But what I'm hearing from Jeffrey is it sounds like an operational business. He says, I'm buying goods. So let's say Jeffrey lives in Wyoming. Okay? He lives in Jackson Hole, Wyoming. So I'm going to have an entity in Wyoming. Just like I was saying at the very beginning for Startup Academy in California. If Jeffrey lives in Wyoming and that's where his operational business is going to take place, where he's going to sell from a website when he's going to sleep, eat, drink and go to the gym. We're going to set up a Wyoming llc. Now, we might convert it to an S corp down the road, but we're going to start as an llc. I'm not worried about saving taxes. I'm worried about Jeffrey getting his business going and making money. Then he said something interesting. Do I set up in the state where I'm buying product? Jeffrey, if you live in Wyoming and you're buying product from Oklahoma, New Jersey, Minnesota or Texas, I don't care, you're going to buy product from those locations. You ship it back to you in Wyoming, put it together, package it, resell it. Whatever the hell you're going to do in Wyoming, it's happening in Wyoming. So I'm not going to set up your entity where you're buying. Now, what Jeffrey might be saying, and some of you are, well, Mark, I live in Wyoming, but I'm going to open up a storefront in Illinois. I love going to Chicago. I'm going to have a storefront in Chicago. If Jeffrey's going to have a storefront where he's selling product. And he might have meant to say that you're going to set up your entity in Wyoming and register to do business in Chicago or Illinois because you have a store location there. So it is true. Wherever you have employees, real estate, product or storefronts, you're going to register your business in those states. Now, last point. If I'm just going to have product, and I think this is online coaching with Startup Academy, again, because he or she lives in California, their entity is going to be in California, but they might have coaching going on for a student that lives in New Hampshire. Do I have to register in New Hampshire? No, I don't have an office in New Hampshire. I don't have a storefront in New Hampshire. I don't have employees in New Hampshire or go to New Hampshire, but I have a customer that online is using me coaching in California. So I registered to do business in California, but I don't have to register in New Hampshire unless I get a storefront there. Whoo. Jeffrey, you opened up a big can of worms. All right, now we're into this about a half hour, 35 minutes, few more questions. You guys doing okay? All right. I hope I'm getting some good comments down below. I appreciate you guys and gals. This is exciting.

Okay, Carly Darren asks, I have an existing single member LLC that we designated to be taxed as an S corp. Do I still need to have a parent S Corp? There are two rental properties owned by the llc.

Oh, ouch. Darren, you're killing me. I was doing so well there for a minute. Oh, it's hard to focus here, too, because Darin Carley just got back from Hawaii. She's tan. She's, like, just complaining about living in Idaho. Really? We're kind of sick of it. We're like, carly, we don't want to hear about your trip to Hawaii anymore. Just zip it. You know? But she's here having a good time. We appreciate it. Okay, now, guys, everybody, Darren brought up several things. Thanks, Carly. Darren says he's got an S corp, and then he threw out rentals. So let's go in reverse here. Do you ever. People listen. Do you ever put rental property in an S corp? No. Even if it's a VRBO Airbnb short term rental? No rentals. Never, ever, ever go in an S corp or an LLC taxed as an S corp. So, Darren, I would get on the phone with you right away and talk about unraveling that. We might want to remove your S election. We might want to move those properties out right away. I want to have an LLC for Darren's properties, and we're going to set up the LLC in the state where the rentals are located. If his rentals are in Georgia and he's got great little rentals down in Atlanta, then we're going to have a Georgia LLC owning his Atlanta rentals. Now, going in reverse, Jeremy says, I've got an LLC taxed as an S corp. Okay, I'm good with that. If I was on the phone with you, I'd say, tell me about your business. Well, I have rentals. No. No, you don't. You do not put rentals in an Escort. So I'd be like, are you selling online? Do you do services? Do you do products? Are you a landscaper? Are you a contractor? Do you run a hair salon? Are you an accountant? An engineer? See, this is service, product business. Service and product business goes in Jeremy's LLC taxed as an S corp. He doesn't need another S Corp. No more S Corps. Now, what was his name that says, I'm opening a trucking company? Trench. Trench Grinder says, I'm opening up a trucking company. He could do the trucking business right out of this. Or he could set up a subsidiary LLC owned 100% by the S Corp. But I don't. I don't have two S Corps in this. So, Jeremy, I would recommend a consult with one of my tax lawyers. We can dial you in in an hour or less, and then once a year get a little checkup and we'll see where we're going. Okay, Mallory.

Tico asks, I have my first rental in a Single Member LLC.

Okay, Single Member LLC, 100% owned. That means Tico is right down here. Tico has a single member llc. Makes sense. Okay, keep rolling.

He wants to know how he can eventually pull out profits for his personal.

I love it. So Tico Couple Rentals, LLC, 100% owned, single member. Tico's here. He says, when can I take money? Here's the best answer of the day. Anytime you freaking want that's a technical term. You just take a draw. That's what it's called, a draw. When you have rental properties. You don't take a salary, you don't set up a guaranteed payment, you don't set up a W2. It's called a draw. You just take money when you want. Now, what I hope Tico and everybody listening. Let's talk a little bit more maintenance here for Tico. He should have a QuickBooks Online QuickBooks account for this. He's collecting rent, he's paying bills, he's got leftover money at the end of the month on his QuickBooks. He would allocate that as a draw. And the accountant at the end of the year would know how to deal with that on the tax return. So you just take money anytime you want. I usually recommend you're going to keep two to three months as a reserve. So if you have a repair or a problem with the tenant, you might even be setting up an account to put money into to refurbish the, refinish the driveway or redo the roof at some point. So you're going to have an account that you're managing here or multiple bank accounts. But when you're ready to take a draw, you just take it. And here's what's cool, Tico. It's probably tax free because on paper you're losing money with depreciation and mortgage interest. That's what I love about rental property. It creates tax free cash flow. So I think you're in business there. Okay, where are we doing? Are we doing okay? Oh, we're done. No more. You wrote down that name. You don't want to do it. We're going to do this because you wrote down. This is Josie. This is for you.

This is Joshie.

Oh, Joshi. Okay. Sorry. Josie could be male or female. Joshy.

Okay, I have an S corp. It's just me and my wife.

Okay. S corp, Joshy and his wife. Joshy and W for wife. Okay, they have an S corp.

Okay. I work full time on 1099. I have two questions. Is it advisable to open an LLC to have the rental property? So that's the first question.

And that's it.

Oh. The second question is, since it's a relatively new S corp, I have to take personal loans to buy a rental property. Can I still use an S Corp on the rental income during tax filing?

Okay, so the first part of that was easy. I should have never asked for the second question there. Josie and wife own an S corp. He gets a 1099. They're running the show. They're doing a W2. And my little chapter on S corporations would be awesome. Get over to YouTube and just type Kohler S Corp. I've got two or three videos that would be very, very helpful for you. Joshi. Joshi. Joshy. Hope that's not what your wife calls you at night. Joshi, let me cuddle up with you. I don't know, Joshi. Really? I think it's Josh. I'm just playing. Okay. Joshi here. Okay. Has his escort. Then he says, I'm going to have a rental property. Should I set up an llc? Yes. Resoundingly, yes. So I'm going to set up an LLC for your rental. Guys, this is the dentist. This is the building. This is the restaurant. This is the building. This is the realtor. This is the rental. See, I always want to have a wall between your real estate and operations. Yes. Corp doesn't own the rentals. It owns the fix and flips. Because Chip and Joanna are down there in Waco, Texas, flipping properties. They're doing it in an S Corp, but if they hold a rental, they set up an LLC. That's how it works now. LLCs and S Corps LLC and he says had to borrow money to get a rental. That's normal. I want you to get leverage. So you got the bank over here, and the bank's gonna loan you money to get your rental going. And then you're gonna have rental income. And you can take this as a draw. Just like Jeremy, I think, was asking you just take a draw when you want it. And Tico was asking, so you take a draw when you have rental income. If you have profit here to help supplement the llc, that's okay, too. That's called a contribution. So on your books, you're going to have contributions and draws, rent contribution, draw, mortgage payment. And your books will handle that. So I think we're good. Okay. A few other things. If you share this video, you're in for the drawing for my books. This will be the first book I have given away here on a Facebook, YouTube Live. This is brand new, so it's so much work went into this. So share it and we'll give it away. A couple other notes, please. If you're watching on YouTube, give me a like, if you wouldn't mind, please, and click the bell. Every time I go live or shoot a new video, you get a little ping. If you're watching on Facebook, please get over to YouTube. I've got a great channel with 70 plus videos over there that are free that can help you with a lot of your American Dream type tax and legal questions. I've got a weekly newsletter that's free every week. You can get to markjkohler.com or kqoslawyers.com and subscribe to the newsletter. And our estates planning special ends this weekend and you want that 2 or $400 off. You got to do it this weekend or no go. And our directed IRA summit is in Hawaii. Carly, you just want to go along, don't you? Her boyfriend's in Hawaii too. So I mean this is a big deal. So I'm just playing around. So we're going to go to Hawaii on August 10th and do our workshop and we only have about 15 seats left. So you can get to KQS lawyers and look for this directed IRA summit. And I think this is it. Pre order my book on Amazon or get to my website markjkohler.com and I think you can get Jason to send you one sooner and I'll personalize it too. Thanks everybody. Keep living the dream. Don't give up. And I'll be here. Yes, I will be here next week on Thursday to shoot another Facebook YouTube live.