This Will Save You A Lot of MONEY! (Every Entrepreneur NEEDS To Know This!)

You know, I kind of look at it like a game. I love playing games as a kid, I still love playing games. I think the most fascinating game is the tax game. We're all in the game. I just go, how do I win that game? It's really just understanding the rules of the game. Most people understand very few of the rules and so they pay a high cost, they lose the game, whereas, you know, you really understand the rules. It's, it's a pretty easy game to win.

Oh man, I'm so excited to talk to you. I was, I had a brief chance to catch up with you a little bit before the show and I was, I was telling you I've been selfish. I've been, I caught you on Patrick, but Dave David show and a couple of my thought leader friends, I'm like, yeah, this guy has to be on the show because the work that you're doing, I think is single handed, handedly going to create net worth for a lot of our listeners and viewers, which I'm pretty stoked to talk about. You know, not many folks get like super excited about taxes or tax strategy, but when we hear you talk about it, you're like, yeah, well, this is how it adds to your personal net worth. And bottom line, how do you even find yourself in this, in this genre?

You know, I actually I, I started as a teenager. I was, my dad had a printing company and my mother was his controller and a little bit of a mama's boy. You know, we all worked at the business, but I was the only one who worked in accounting. And so actually when I started school, I decided, well, I wanted to start in accounting. But then when I was looking, looking at graduate school, the question is, do I want to be an accountant or a lawyer? I'm going, no, I don't want to be around lawyers all the time. So, so tax law, one area where you get both law and it and numbers. And those are the two things I'm good at. So it was the natural fit for me.

I love it. Well, the crazy part is I was just thinking through this, you know, in the times that I've gotten my, I've been an entrepreneur for going on 25 plus years, call it, you know, almost 30 years. And by the time you factor in every single year that I was doing entrepreneurial venture.

Most of the times I've gotten myself in trouble. It's because I didn't either. Either I didn't have qualified advice, I didn't have advice, or I wasn't necessarily really open to the advice, if that makes any sense. You know, so talk to me a little bit about the importance of having a solid financial professional like this, really supporting your, your growth, your strategy and stuff like that. Because that's the one thing that I know cost me millions of dollars building businesses along the way was the simple fact that I just, I was all entrepreneur. Not enough, not enough consultation.

Well, you know, business is a team sport. That's true. It's not something you do on your own. I mean people who do it on their own are called sole proprietors, they're self employed, they own their job. But really if you're going to build a business as you know, you got to have a team. And I think they're important people that are, you know, like employees or you know, working kind of for you. But then there's also the group of advisors that are working with you.

Yeah.

And I think it's critical that we have people in every area of our life that are working with us. Whether it's personal development, whether it's business, whether it's, it's health. Right. You got to have those people that you can trust. And I actually think the most important thing is you have people who will ask you good questions to pull out of you. You know, they say that the word education comes from a do say, which is to pull out, Right. Not to put in and our school shove it in us.

Yeah.

But really what we ought to be doing is pulling it out. And I think the role of good advisor, a good mentor is to pull it out of you, not try to put it in you.

Yeah, no, I think it's fantastic and totally true. One of the things that has dawned on me and this is again, this is after, I would say probably a good 20 years of doing it wrong, right. Just straight up guts, right. What they call it, brains and guts. And you go after it. Is this, is this importance of reducing your risk in managing your reward. Early days entrepreneur I was 1000% all reward. There's no risk, nothing's going to happen to me. I'm Superman. Like every idea going to have, I'm going to have is going to work. And then I realized, oh, I probably should get a corporate entity. I probably should have a corporate veil. I probably should, you know, pay taxes. Like, you know, there's just the, the basics. Right. Talk to me a little about the, the importance of, of putting some of those things together. I know that, you know, some of the things that you teach us is how to actually have the government pay us and do some good work. So talk to me a little about both of those.

Absolutely. So really, you know, if you're going to get into business, if you're going to do business, you ought to act like a real business. And I always say.

Think big, right?

Yeah.

And act like the big guys, but, but do it slowly. So, you know, you, you kind of act small, but you always got to have that big thought. You know, the reality is, is that the big businesses, they're only paying 20% tax.

Yeah.

And the small business typically spend pay up to 60% tax. But the law is equal, it's fair. Anybody can, can do the same thing right in the US and so you could be a small business owner and where you might otherwise be taxed at 60% because you're a sole proprietor, you know, you haven't set up properly, or you could actually act or behave like a big business and pay 20% tax or less. And so it's really your choice. Yeah, right. Your choice is how do I behave? And how I behave is what I'm going to receive. Right. I can't have it until, until I am it.

Yeah.

So you kind of have to behave that way. And then part of that is looking at the tax law and once you recognize that, that you're a partner with the government.

You start going, okay, do I have a choice in what kind of partner I am with the government? Am I a silent partner and just go ahead and pay my tax and not, you know, and then only take home 40%? Or am I an active partner with the government, do things the government wants me to do, take advantage of the tax benefits that the government is incentivizing me to do, and then take home a lot more of my money that I can reinvest into my business, my investments, etc. But that's really all the tax law is. Tax law is just a series of incentives primarily for business owners, investors. Though there are some other tax incentives in there as well. But there's really not much revenue raising. And the tax law, it's pretty simple. You got about 30 page revenue raising, but you know, there's 6,000 pages of how to reduce your taxes. So why not, why not focus on that?

And they're not loopholes, they're actually legit.

That is correct. They're not, they're, they're not, they're not by chance. Okay. They're not mistakes, they are intentional.

Yeah. Well, I think one of the things that, that I thought that I found was pretty profound and studying your work and then reading your book and going through some things, is there, the incentives are there that like the government in many respects is wanting to partner with us to create jobs, to create opportunities, to create expansion. But when you're hearing sounds in the economy like, you know, hey, we want to, you know, we want to downsize the workforce and all that kind of stuff, is it like sending mixed signals a little bit or is it really, there's one constant and this other thing is more of an economic, just your normal economic environment.

You know, I, I think the government constantly sends mixed signals. I mean here you have, look, you have the Federal Reserve who's trying to reduce inflation and then you have the government who's actually doing everything to increase inflation. So there's constantly the mixed signals, you know, that, that, you know, I kind of look at like a game. I love playing games as a kid. I still do. I still love playing games. I think the most fascinating game is the tax game. And you know, you're, we're all in the game. I just go, how do I win that game?

Yeah.

And it's really just understanding the rules of the game. Most people understand very few of the rules and so they pay a high cost, they lose the game. Whereas, you know, you really understand the rules. It's, it's a pretty easy game to win.

Yeah. I want to kind of maybe use a, a bit of a selfish example. I'll use a hypothetical. I know, I know a guy, I know a friend and then back our way into some of the debt usage because you know, historically I've, I've been the anti debt guy. Now this is before I got to know Dave and Sharon and all that kind of stuff. This is, this is like my first mentor said stay out of debt, you know, kind of thing. And of course my family history leading up to that point was everybody was extremely in debt. You know, personally there wasn't a business, you know, business to use expenses and see other things like that. But let's say I have a property and I've recently had the property appraised and I've got interest in selling the property to buy the property. I've got a $4 million gain or a 5 million dollar gain. Right. Because the, it's between improvements, the overall market condition and everything from the, from what I paid for it to what it's worth now. It's, you know, it's, it's a four million dollar gain. Let's say that I want to expand the property that I currently have. Meaning. Okay, well I Sell this property. I want to expand and buy a larger property. Ergo, you know, in theory make more money and rents from tenants and, you know, other, other businesses there, as well as utilize it for my own space.

Is it better to pay the property off in full or is it better to take the proceeds to a 1031 type of environment and go ahead and buy the new property and take on a little debt?

Well, I'm so, so here's my view on debt. Let's start with that one.

Sure. It.

The purpose of a liability is to buy an asset. That's the only reason you have a liability.

Yeah.

So. So the way I look at it is if you don't, if you're afraid of debt, you don't trust the asset. My question is, you try. If you, if you don't trust the asset, why are you buying it with your own money, let alone the bank's money? If you trust the asset, why not use the bank's money? It's way cheaper than using your own money. So to me, it's a matter of, you know, if you really, if you really like, if you really trust the asset and you really trust yourself to make the asset succeed, then you want as much debt as possible. I mean, the, the goal is actually 100 debt in the end. But I will tell you there's actually two answers to your question. And you've got two alternatives right now, which you didn't use, we haven't always had. One is to do that 1031 or like kind exchange. And then you don't pay any tax on the sale. And, but you're expanding. So you do get some additional depreciation in the new building because you're expanding. Right. You're not spending the same amount on the new building as you had on the old building. You're spending more. Or you actually have to run the numbers because sometimes it's better to sell the building, pay the tax and buy the new building and get the better depreciation on the new building. So it really. Because, because remember that when you sell a building, typically paying capital gains rates.

Mm.

But depreciation is ordinary deduction. So if you have, let's say you're 37% tax bracket. I'd rather have a 37% deduction and pay a 20% tax.

Yeah.

And not pay any tax on the 20.

The offsetting is a positive.

Right. The offset, the net is a 17% positive in that situation. So if you have other income from businesses, et cetera, and you can offset that 37% income and only and only have 20% gain. You actually make money by recognizing the gain.

Interesting. Interesting. Well, let me throw another little curveball in there on the 1031 side.

Yeah.

Let's assume for a second that the new property that you could find is $3 million. Okay. But yeah, you got a $4 million gain, but, you know, you're spend a million dollars in improvements to the new property. Does the million dollars also count towards an expense rather than that million dollars could technically be taxed.

It can, it can. So this is where you're going to use a qualified intermediary. And this is a little more complex situation. But again, you might be better off not doing the 1031 because the million dollars you put in may be deductible immediately as repairs, for example, or as certain improvements that are 100 deductible. So you really want to look at which way is better. Yeah, but there are ways to do that. Yes. I mean, it's amazing how many options there are in the tax law.

Yeah. Well, and I'm, and I'm, I'm selfishly, I enjoy real estate. I've. It's funny, I've. I was talking to a good friend of mine and they were like, you know, your businesses have been successful. They produce, you know, they are estimating what my businesses produce. Right. And I'm like, actually, most of my quote, wealth has actually come from handling real estate and you know, you know, as far as net, net, net wealth and stuff like that. But when we got to talking about it, you know, one of the things that, that helps me is because I'm a licensed general unlimited general contractor in my area, I can buy a property that's either in shambles and, and completely rebuild it at, you know, essentially what would be cost for me having to go out and hire a GC to do the work for me or, you know, I can build something from the ground up. And I was telling, he was asking me, well, which do you do? I said, honestly, I have to run the numbers because at certain times it's better to build it, other times it's better to buy it, renovate it. So it really depends when it comes down to real estate. Why, why? One of the things that my CPA had told me this is 15 years ago was not to buy property within my business, but instead set up a separate LLC to put the property as a holding company. Why is that strategy for my.

That's, that's to manage your risk. Right. That's not a tax issue. That's to manage your risk. So your business typically has a lot of risk to it. Yeah, right. You have customers, you have employees, which are the biggest risk right now. Right. Or employees because they get. Have so much power. Now.

You don't want your real estate to be at risk of your business. And frankly, you don't want your business to be at risk of the real estate because somebody could slip and fall in your real estate too. So the idea is to kind of separate out your assets into different entities. That way you're really managing that risk of lawsuit. Because, I mean, the reality is there are a lot of people out there who want your money. And the easiest way to get your money is to sue you. So that's just, it's just a risk management tool. And it's a very smart, smart way to manage your risk.

Well, which makes complete sense to me. On the flip side, I have a good friend of mine that got himself in quite a bit of trouble. He set up an llc. He put, he put property in the llc, but he didn't necessarily treat the property like a true llc. Talk to us a little bit about that because I see I actually the one thing. All right, so look again, I have, I feel like there's really kind of, there's probably more stages, but there's three primary stages I've seen in entrepreneurship. There's the, the butts and guts guy who's going to start up. He's zero to $1 million, right. Then you got 1 million to 10 million and then 10 million to 50 and 50 and beyond. Right. That seems, kind of, seems like the track record I've seen. You know, a lot of folks will start dabbling in real estate, you know, at the higher end of the startup phase. Right. The higher end of 1 million. And you know, in, in traditional revenues, what types of protections, you know, this is when he got himself in trouble. What type, what, what, what types of protections are there that need to be monitored and protected to prevent, you know, kind of which is additional risk in this asset. And then kind of like talk to us a little bit, some of the strategies for some of these other entrepreneurs.

Well, so, so again, you need to act be. You need to act like a big business. Right. So act like a big business. And, and you would never have a big business set up as a sole proprietorship. I mean, you'd go, that would be ridiculous. Right? Why would you do that? And you never have a big business that didn't have shareholder meeting minutes, that didn't have a corporate book. That didn't have all their corporate records every I, dot and T crossed.

Yeah.

So you got to do all that. You got to do the bookkeeping. I can't tell you how many people I meet, particularly in those first two categories. Yeah, Aunt Betty. Doing their books. I'm going, are you out of your mind? I mean, if you've got somebody that is related to you doing your books, you need to fire your bookkeeper.

So. And remember, I mean, again, we're looking at. Business is a team sport, so you want good members on that team who are going to protect you and are going to look out for you. It is very easy to blow an llc because if you don't, you know, if you don't treat it like a, like a real business, a real company, then the IRS won't treat it like a real company, and neither will the courts. So you really have to. You really do have to dot your I's and crush your T's. It's not that hard.

Yeah.

It's just that so many entrepreneurs, particularly starting out, are a little lazy or they're a little anxious. You know, they're just raring to go.

Definitely impatient. Definitely impatient.

Totally impatient. Whereas that'll think about, okay, what are. If I'm going to set this up right, what are all my costs going to be? And that's part of my investment. And that includes hiring the attorney to do your, you know, to handle your legal matters. That includes hiring your accountant to do your tax matters and your. And hiring a good bookkeeper doing the bookkeeping matters. And, and, you know, don't shortcut it, because it's. When you shortcut it, you get in trouble.

Yeah, well, and this is. And that's ultimately what happened to him. He was, he, he was tapped on the shoulder for some extra taxes and some extra fees, let's put it that way. Which, fortunately, I learned. I kind of learned from his lesson a little earlier on. I was like, well, if that happened to you, I went and went immediately started looking at how we were conducting things, like, okay, good. All right, Change that one thing, I think other than that we're, you know, we're, we're. We're in a good position. Um, let's talk about some strategies for those different three levels of entrepreneurs, because obviously, you know, the, the zero to $1 million guy, he's not really, probably not focused on, you know, trying to limit most of his tax burden or an offset and stuff like that. What are some, maybe some simple strategies that, that he can use or she can use to kind of like begin to set their, the dominoes up in their favor.

Yeah, I mean, so first of all, you know, the type of entity you choose is probably the biggest thing that you can do. So most people start out as a sole proprietor, which is a mistake.

You're probably going to want to start as a llc, tax as an S corporation, or you may even want to be a C corporation, like, you know, Silicon Valley. But you definitely want to set up as an entity not just to protect yourself, but also to protect your taxes. So that's a, that's actually a big one. You want to sit down with your accountant and make sure you do that. Right. You know, the other thing is.

Besides setting up the entity is they're actually, I mean, you've probably got income coming from somewhere else. You wouldn't be able to start your business. So you want to offset that, the tax from that income. And I talk about it in chapter two, my new book, Win Win Wealth Strategy. And you can actually. The government will literally pay you to start a business. I mean, literally the tax savings from starting the business are greater than the cost of starting the business. I mean, starting business is not very expensive anymore. Right? I mean, you, you've got an iPhone, you got a laptop, you got a desk. You're good to go out of your home. And remember, now here's another thing. Don't listen to people who say don't take a home office deduction. Never listen to that one. That is a horrible idea. Never. If somebody says don't take a deduction that you're legally entitled to, you need to talk to somebody else.

Because that's a really bad idea. Home office deduction. Not only does, do you have all sorts of deductions there, but you also increases your automobile deduction because you, you no longer have a commute when you have a home office. And you know, and they're just all these little things. I mean, you start making money and pay your kids. You know, you start, you can do other things, constantly be reducing your taxes. The key is not to wait until you've made money to start reducing your taxes. The key to reduce your taxes, to start before you make money. So you never pay the taxes.

Well, that was one of the lessons that I learned. I didn't consider tax strategies from, you know, or anything of that nature. I, I was, I was all too busy trying to focus on making the money to try to get something going and try to, you know, typically, yeah, that. I think it was 2012 that I quote Unquote, Fade made my first net income of, you know, a million plus dollars. And it was my, I remember my, my CPA coming to me, said, dude, you got a lot of cash on hand. We've, we've got to do something strategically to make sure that you're, you're, you're, you're thinking about taxes, you're thinking about strategies, you're thinking about these things. And I remember the one thought that came to my mind during that season was like, I wish I'd have known sooner. Because a lot of the things that, you know, he was, he was, you know, throwing out or like, I could have done that six months ago. I could have done that a year ago or two years ago. And I think that's one of the reasons I wanted to ask that question regarding the early stage folks, because I feel like that a lot of times the early stage folks will end up losing their businesses long term because more than anything else, because they don't know any better, they're not thinking about, you know, reducing their risk. They're not necessarily thinking about, you know, you know, opportunity costs versus, you know, cost controls. There's a lot of facets that go into a business.

Well, if you think about it, the typical evolution of a business is first year you lose money. Second year you break even, Third year you start making money. Right. That would be a typical evolution of a successful business. What happens is, is that, okay, you lost money the year, so you're not worried about taxes. Second year you're breaking, still not worried about taxes. Third year you haven't been worried about taxes, so you don't worry about taxes. So what happens is, I can't tell you how many times I've seen people all of a sudden turn that corner, they flip that switch and they make all this money. And now April 15th comes along and they owe like $100,000 in tax and they don't have the cash. Yeah, right, because they've been putting it into their business, inventory, whatever, and over.

Over, over taking it out of the business. Starving their own company or taking it out of the business.

Right, because all of a sudden they have money. So, wow, I've got money. I can spend it. No, because you didn't have withholding. You didn't pay estimated payments. And I've seen a lot of businesses fail simply because they didn't reserve for taxes or didn't do the tax planning.

Yeah, well. And, you know, even as someone like myself, it took me a while to get to the point where, you know, we were filing quarterly and doing some other things myself just strategically to make sure that you know, you don't get to the end of the year and have this go you didn't expect. The other thing too is I watched someone who very, was very close to me. They were in business for probably three and a half or four years. So they made it past the first, you know, the first two year window, which is good. Where they got themselves in trouble is in years three and four.

Because of the cycle of the economy and all kinds of things. They, they had, they had made considerable profits in the prior year, didn't pay taxes because they were heading into a, you know, winter season, kind of like we're heading into now in some cases in certain sector and they needed the cash to then have the operations. But then, you know, the government says hey, you haven't paid taxes or you need to pay more taxes or you know, you haven't paid your, your, your pre. Agreed taxes anyway your, for your, for your income level. And they were, they were caught off guard and surprised that when they unfortunately had to go file bankruptcy, that taxes weren't bankruptible. Bankruptible.

Right, right. They're not.

Which haunted them for 10 years. By the time the interest and penalties and stuff had gotten there, they had paid in almost four times the original tax. What kind of cautionary tale could we use here to kind of help some entrepreneurs like make some good decisions now?

Well, you know, that's why. So I used to have a big CPA firm and my partner and I decided to sell it. And the reason we did is because we kept having people come to us that were just starting up and we can, we can afford to serve them. Right. We were serving the, you know, the people like you. And so what we did was said, well, let's create a network of CP of firms and there are going to be some of those firms that all they do is handle startups. Right. And so, and, and they're going to be less expensive. Right. Than the, than the expensive tax advisor. So what you do is, is you actually get that early advice from somebody who specializes in startups and that's where you start. Because then A, you're going to set aside money if you need to set aside money. But B, remember we're taxed on an annual basis, right. January through December, which means that if we have income January through December and we spend the money in the next January, we don't get to deduct it in the previous December. So we have to time it so you really it really does have to be strategic, you know, like with your example, with your, your account. You said, well, I could have done that if you told me six months ago or two years ago. Well, you really want a partner in a, in a cpa. You want a partner who will work with you and actually talk to you about what's coming, not just what happened last year.

No, I think that's great. I, I do have a. Maybe, maybe we can use this as a kind of a teaching mechanism as well. What types of things from your perspective, you're obviously, you've been an industry leader for some time in the space. What types of things should an entrepreneur, early stage gu or gal be looking for in a qualified cpa? Because I could tell you that early, early days, I wouldn't have known a good CPA from a bad cpa. Like, I wouldn't have known.

Well, good News is chapter 23 in my first book, Tax Free wealth, actually tells you how to find a good tax advisor and tells you what questions to ask. I actually think the number one rule for a good advisor of any kind is somebody who asks good questions. So when you're, you know, let's say you're interviewing somebody that your friend recommend, you know, your buddy or, or your, you know, your colleague recommended inter. You're interviewing them if all they do is say, well, what questions do you have? Probably time to say next?

Yeah, right.

That's not a good fit. You don't go to a doctor and the doctor expects you to ask all the questions to find out what you've got. Right.

Yeah.

You want to be diagnosed by a professional who can really kind of inquire and dig into what's going on. So you want an advisor who will dig into what's going on, how to help you, where you are, where you're going. And on top of that, look at something like you asked. First off, you asked asset protection questions. You didn't even ask tax questions. Right. Okay. Well, you know, I actually think there's four aspects that you have to be looking at. Tax is only one of them. Asset protection is one of them. Your how you're going to use your money, that's building your wealth is one of them. But then your legacy. You know, most people don't get into business, they don't get in, into investing because they just want to barely put enough food on the table. They get in because they're building a legacy.

Yeah.

And so you want to actually look at that legacy. Maybe not the first year or two, but you Know, certainly when you get in that one to ten million dollar range, that's. Then you do want to start looking at legacy. So you want to make sure that whatever advisor you have, whatever tax advisor you have, they're taking a very holistic approach to your situation and not just focusing on you asking questions, is this deductible or not? But rather. And then the other thing I would say is I would always want an advisor who was willing to educate me because I want to. The more I understand, the more successful I'm going to be. So I want that education.

No, I think that's great. In fact, I was thinking, you know, is my C. A couple different things. So I think first of all, the only thing I would add on to that is from an entrepreneur's perspective, it's okay to change your cpa.

Yes.

Like it's okay. Like you've been with the guy or gal for, you know, three to five years and they did, they did great. And then all of a sudden you switch from cash accounting to accrual accounting. And then that's a, that's a different shift. Right? There's, there's different tax strategies with different types of accounting, you know, you know, from cash to accrual and so on and so forth. I know that when I was first getting started, I love my CPA to death. We, he's my rider. He was my ride or die for three to five years. And I felt horrible when I went out and hired a new guy. But the new guy did exactly what you were talking about. We sat down, he asked me a tremendous amount of questions. We began going through the business. He actually taught me on, you know, because I didn't have any professional training as a business person growing up. He taught me how to read a profit and loss. He taught me how to read the balance sheet. He taught me what cash flow really was. And it wasn't just the fact that I had money in the bank, you know, and I think you need some of those steps along the way to kind of do that. Let's talk a little bit about the, the next level of entrepreneur or the business owner. The person that's kind of gotten to that place where they, you know, they're past the 1 million dollar ceiling. They're probably somewhere in the 7, 8 million dollar category. How do things change for them a little bit?

Well, first of all, they have more opportunities. Right. First they can upgrade to a better CPA because they've got the money to do it. And that's a legitimate point that you make, you know, that we, we literally call it upgrading. So you can upgrade that cpa, you can upgrade several advisors, and you can start building a team around yourself, and that becomes very important. But the other thing is, is that, you know, pretty quick you become an accredited investor. So now you're not limited to doing stuff on your own. You're not limited to doing public stuff either. You know, you don't have to do a real estate investment trust or.

A, you know, ETF or whatever. You can actually do deals that are private equity deals. And so that opens a whole new world, but also makes add some complexity to your tax situation. So at that point, you need to make sure, well, wait a minute, I need to make sure my tax advisor knows how to deal with the private equity equity side. So you want to make sure that your advisors are always equivalent to where you are in your business. And they're either equivalent or ahead. Right. But they're never behind. You don't want, you don't want to be the one training your accountant.

You know, and then really remember, I would say that the most important thing to remember is that the more income you make, the more tax you pay, the more wealth you build, the less tax you pay.

Yeah, that's very true.

So as you know, as you put, you put your money back into real estate, you put it back in your business, you put it into energy, whatever you're doing to build your wealth, that's, you don't have to pay tax on that money you take. You pay tax on money you spend or save. That's the only tax you ever pay. It's money you spend or save. But if you put it back into the economy outside of the stock market, you put it back directly. Stock market won't do it for you. You put it back in the economy directly, then you'll get a tax benefit for it. You'll get a tax deduction. You won't be paying high taxes. So that's really the next evolution is going, okay, I now am making money. I need to start building wealth. And I'm. If you can build wealth all back in your business, I mean, we all know that the, you know best, the best investment we ever make is going to be our business. Right? But there comes a point when we can't invest it all back in our business. And if that's, that's the case, then we need to look at, okay, so what do I invest it in? That gives me the tax benefit. And the tax benefit's important because it frees up Cash flow and what, and, and the key as you know, to investing is cash flow. And the more cash flow I have, the more cash I have available, which includes cash from not paying tax, right. Cash that I would otherwise give to the government. Then, then the more I can invest and the, and the faster that compound, that compounding effect works in the investing. So that's really, that 1 to 10 million dollar range is really recognizing a, you're an accredited investor so you get additional opportunities, you get private equity opportunities. And second of all, to remember that, you know, you can build wealth. And now when you start building wealth, when you're really building wealth like that, you may not be paying much in tax. In fact, you really shouldn't pay much at all.

Yeah, no, I think that's very good. In fact, I was just thinking too, it almost at that stage, at the early part of that, I think it's about the time I really began to understand depreciation and, and being able to take depreciation on assets. And when I convinced myself that I wasn't going to play in the stock market, I was going to play in assets that I could actually touch. You know, it was funny, you know. Well, I'll say funny on social media nowadays, obviously, if you have any level of platform, you're going to have people on the social media channels, you know, basically impersonating you and the next thing you know they're trying to sell you Bitcoin and so on and and forth. And I've obviously had to get publicly say numerous times, hey guys, I don't, I'm not playing in that, that realm. One, because I don't understand it like fully. I haven't spent any time under, trying to understand it. And two, I believe in hard assets. I want to, I want to be able to touch what it is I've got my things invested in. Would you say that that's kind of almost like another mental shift before you head to the $50 million category?

It's huge. And I'll tell you an interesting story that where I learned that, I learned on safari in south, in Zimbabwe.

Okay.

My, my guide, our guide, he'd been a guide for several years. And you know, Zimbabwe, their, their currency went to zero, right? And so while that was going on, I said, well, what did you do? He said, well, the minute I got paid, I went and bought a cow or a sheep or a pig. So they bought a hard asset. So if you really want to protect your cash flow from inflation, then you buy hard assets because that asset's going to go up with inflation. So the value of a pig doesn't change. Typically, the value of real estate doesn't change. What changes is the price. But cash only loses value. Cash never gains value. And so what he was saying is, look, immediately, literally the minute I got paid, I went and bought a hard asset. And I think that's a really good lesson for all of us is that buy those hard assets that you can touch, feel, smell, whatever, whether it's energy, real estate, business, agriculture, it's a hard asset. It's not. It's not funny money, like a stock that you can just print.

Yeah, no, I love that. And I think the other thing, the scaling up from the startup guy to the intermediary and beyond is your patience increases and your diligence increases. So as you're looking at deals, you're looking at property, you're looking at energy, you're looking at cows and pigs. You know, does this pig have four legs? You know, is that going to work for you? Kind of thing, which I think is a big part of it. You know, when I was, when I was. When I was trying to pull my stuff together and began to invest in hard assets, I know one of the things that, on the fear side that I realized was, well, what if I buy it and it drops in value? Because, you know, we're, you know, I lived through 2008, and, you know, fortunately, my business actually grew during that. That time. Was very blessed that way. But in doing so, one of the things that I've tried to caution the audience to do in, in past episodes and shows is make sure you don't operate from an emotional place. Like, if you can afford to hold it, then hold on to it. Don't sell it right now, and you won't have to worry about some of that. That liquidity loss that could come with it. Would you say that's decent advice or would you do something different?

Oh, for sure, for sure. I mean, here's the. Here's what, you know, here's why I kept telling people in 2008, 2009, they'll say, should I sell this? If I do, I'll lose money. I'm going, you already lost the money. Whether you sell it or not, you already lost the money. You just didn't realize that loss. And so, you know, you always have to look at, you know, I take a very simple approach to finance. I go, look, okay, we've got income, expense, assets and liabilities. What's the purpose? Well, the purpose of income is to Produce cash flow. Right. You know, you can have accounts receivable that don't produce cash flow.

So that you don't produce cash flow, you're going out of business.

That's right. The purpose of an expense is to produce income. Right. The purpose of an asset is to either produce income or reduce an expense. And the only person purpose of a liability is to buy an asset.

Yeah.

So when you simplify it that much, then you go, okay, if I have an asset, let's say I'm evaluating my balance sheet. I'm going, I've got an asset and it's not producing cash flow. So I got two choices. Either I get rid of it.

Yeah.

Because it's a non performing asset or I figure out how to get it to be performing. Those are my choices. But just leaving it there is, is, you know, that's a different choice and that's always a bad choice. Right. Don't just ignore it like most people do when they get their, their, their, their finance, their, their, their portfolio statements from their stockbroker. Don't just shove them in a drawer. Don't ignore it. You got to pay attention to it. And so I, I really think you can always evaluate any type of income, expense, asset or liability that way. And the other thing I, I always remind people is that again, if, if you don't like the liability, it's probably because you shouldn't be in the asset. Yeah, they go together.

No, that's, that's, no, that's totally true. I was just thinking too, you know, in the, where I'm at now, I'm sure where you're at and others that we're acquainted with are, you know, we look at down, we look at down markets and, and we see opportunity.

Sure.

For those who haven't prepared, haven't been patient, haven't gotten with a professional, haven't spent time understanding tax, haven't spent time understanding really what their, their personal net worth is, what their businesses were. All of that. They haven't taken the time to do all of that. That they're not in a position to take advantage. I was, I was, I was interviewed not that long ago and they said, are you scared about, you know, the recession? And I said not exactly. And they said, well, why? I said, well, I have some cash on hand and I'm planning on buying some stuff on sale because, because of the emotion that, that people do. And you know, that's one of the reasons I was trying to say, you know, hey guys, let's, let's make A data driven decision. If the data supports that your asset is, is not going to produce now or in. You're in a, you went from an area of town that was really good and all of a sudden that area town is falling apart. You know, there needs to be significant reinvestment. Maybe, maybe you look at doing something with the asset. But to your point, a lot of the assets that I buy are right there in that ring between the, the new stuff and the old stuff. Right. Because I know that if I can create an additional value on that ring, then I'm going to increase value because my comps are right beside me rather than, you know, you know, trying to let the, the more dilapidated, dilapidated areas of town kind of bite me in the heine. Let's talk about the, the, the entrepreneur that's, he's eight, nine figures, right. So he's got significant liquidity personally net worth on a consistent annual basis. His game is definitely changed from what I understand. Would you say that's more of a danger because you have so much to play with or so much to invest or.

That scares me, like complexity wise, it's like I know I can only consume so much.

You know, there are only two problems that you can have with money. Not enough and too much.

Yeah.

And what the first thing you have to realize when you get to that level eight, nine figures is you have to decide what do I want?

Do I want to maintain it? Do I really want to the, you know, like 3x4 exit? I mean, do I really care or do I want to really, you know, they, they asked one of the Walton kids from Walmart said, what's your target rate of return? And she said 3%. Because if you've got $30 billion, you can't.

You can't spend 3%. So all she was trying to do is maintain. Right. So, so there is a level where you have to decide. So really question is, is what am I looking for? What am I trying to do? I do think though, there comes a level where you need to start maybe paying a little more, more attention to protection and, and maybe peel some of that money off. We call it like getaway money. And it may be even that you start looking offshore. Yeah, it may that you start looking at precious metals, gold and silver. It may be that you, you know, I mean even in that tier lower, you might look at like heavy life insurance because this is, you know, you're looking, there's got to be some assets. You go, wow, if I'm safe so that I don't have to worry about anything. I've got this other money that I can grow. But if I'm putting all my money now, I'm at enormous amount of risk. Do I really want to do that? Do I want to take some of the risk off the table? This is where private equity firms come into a business like yours, for example, and they say, look, why don't we take some of that risk off the table for you? And that's why so many people say, yeah, I want some of that risk off the table. I don't want all of my risk in my business anymore. So I do think that you, you do have to shift your mindset and look at what am I trying to accomplish because there does come a stage where you go, I need to have some safe assets and not put everything at risk. You know, that also comes, by the way with age, as I can tell you that the older you get, you also go, well, wait a minute, I can't recover quite as fast. I don't have as long to recover. And so I also want to think about, well, there's some safe assets that I want to have. So I think it is a very different mentality once you get in that seven, eight, you know, eight, nine figure role.

Have you done any research or looking into the infinite banking theology?

Oh yeah, yeah, yeah.

I'm curious. What are your thoughts on the infinite? Infinite?

Well, you know, so. Well, first of all. So I'll tell you the, the reality of it. Okay, first of all, you have term life insurance versus whole life. And universal life's just whole life. Remember that one is an expense and the other's an asset. Right? Term life is an expense.

It always comes back to the expense and assets with you.

Always, always. That's how finance works. That's right. But whole life's an asset. 97 of whole life policies are cashed in. Less than 1% of term life policies are cashed in. So if you, if you want an asset, don't look at the, the term, look at that whole life. The advantage of the life insurance is that from a government perspective, and I actually write this in chapter seven of my book Win Win Wealth. From a government perspective, they never want a life insurance company to fail. And so if a life insurance company looks like it's going to fail, they actually require another life insurance company take over the portfolio. So it's a very safe asset. Well, then you go, okay, so I've got all this money sitting in my life insurance. How do I use it? Well, you can always Borrow, use that insurance, the cash remainder value. Right. You can always use that cash value in that policy as collateral with the insurance company. And so you actually use it as collateral and borrow from the insurance company and use your cash surrender value as the collateral. Well, they have very standard rates and if you can take and pay 5% or 6% and you can get 20 or 30%, that might be a good way to do it. So let's say, for example, let's take your situation where you're going, okay, I want to have some cash set aside because I think things are going on sale. Well, what if you had that cash set aside in a life insurance policy? Well, okay, well now I've got, let's say I've got $5 million set aside in that life insurance policy. Well, I can always go to the life insurance company and borrow $5 million.

Yeah.

And then I can go buy those assets when they're on sale. But in the meantime, that cash render value is still growing, it's still earning income because you're not pulling the money out of your policy you're using as collateral. And so I think there's some real valid. Now remember the first five to seven years, you're making zero on that.

Yeah.

So for, you know, you have to remember this is a safe asset, this is a long term. I find it works extraordinarily well for people who don't make very much money because it's a savings account account. Right. So it works really well for them. And then it works for really well for people who have a lot of money. It's actually the people in the 1 to 10 million that it makes the least amount of sense for. Yeah, the people over 10 million, it makes a whole lot of sense. And the people under a million, it makes a whole lot of sense. In the middle, I'm not convinced because you can never make up the returns that you lose in that first five to seven years. But if you just want to have some money set aside that's safe money, but that you can use anytime you want to in order to, in order to invest. Because you need, you know, you want this fund, but you don't want to borrow it from the bank because maybe the bank's not lending anymore. In a recession, banks don't lend. Right. So you go, well, I'm going to borrow from my own insurance policy, which is, you know, infinite banking. That's your bank. Right. Bank of you. And, and I think it can, I've seen it work really well. So it's not it's, it's not good for everybody.

Yeah, right.

This is why you have advisors sit down and say, well, where am I?

I was just gonna say that. Yeah, because every situation is a little bit different. You know, how, how the money's earned, how much of your, how much of your, your top line revenue is actually going to trickle down into your, your net proceeds or your, your cash, your cash position long term, you know, that's, that's a big important thing, you know, I think so. First of all, everybody needs to win. Everybody needs to read win win in everybody. If you're a business owner, you're a professional, you're having any, any, any ideas of building wealth. It is a absolute must read. Just telling that for the entire audience. But I know that you've recently done some stuff with some of your partners and folks that you're connected with that you're trying to even scale, helping us not, well, make sure we basically are more wealthy than we can be. So talk to me about what kind of the CPA stuff you guys are building out.

So basically what we did is, you know, we, we want you to always be able to upgrade basically, you know, when it comes to advisors. So what we did is we actually build a system for reducing taxes. It's actually a wealth creation tax reduction system which includes asset protection, includes, includes the legacy site. So we look at all four of them and we've actually built it into our own software so we have our own proprietary software. What that does is. So the biggest question is, well, how do I know I'm going to the CPA I go with is going to be the right cpa? Well, you don't. Okay, first of all, I know the CPA better than you do and I'm better at matching you up than you are.

Sure.

But second of all, what I want is I don't want a CPA that I have to rely on that cpa. I want a CPA that a has a network of 65 other CPA firms and I want a CPA who's using a system that's been proven for 20 years that absolutely works. Because what I know about CPAs is, is that CPAs are really good at following a recipe, but they're not really good at creating a recipe. And so what we've done, my company Wealthability, is we've actually created the recipe for the CPAs to use and we just train them how to use our recipe, how to use our system, and then that way we can get repeatable results no matter which CPA you're with?

Well, yeah. And you guys have been incredibly successful at doing it. So it's not like this is an unproven technology or unproving theology. I mean I learned something. Every time I watch an interview that you're on or I'm even now I've learned stuff. And you know, I'll continue to follow your career just for that reason. I know you got, you've already blessed my life and helped me understand wealth at a different level. And I'm, and I'm heading into a different level of wealth. Right. So I need, I need these additional strategies. I need these additional techniques. I need these additional teachings, if you will. Let's talk a little about real fast. If someone wants to find out more as an like. So let's say they're an entrepreneur. Doesn't matter what level they want to say, okay, I want to find out more about your, your program. How do I learn more about it?

Just go to wealthability.com. it's fairly simple. We have a, you know, schedule a call. What we'll do is we'll review your tax returns, no charge. We'll let you know if we see something that is missing or some opportunities. And then if, if you want, you know, more help, we'll, we'll actually match you up with the right accounting firm and you know, for, if you're just starting out, it may even be an enrolled agent, may not even be a cpa, somebody who just handles consultants. Right. Or if you're very, you know, really sophisticated, you're in that eight, nine figure. We're going to match you up with the CPA firm that handles the eight, nine figure people. So that's the advantage of having the network. That's actually why we created it because we couldn't handle everybody. Yeah. When we were a single CPA firm. But as a network of CPA firms, we can.

Well, and that's one of the reasons I wanted to bring it up because you, you guys literally do have a solution for the vast majority of, of of our entrepreneurial following, our startup guys, our scale up folks, and even our growing folks.

What if I'm a, what if I'm a cpa And I'm saying, hey look, I really like this guy. I, I'm okay with the recipe I've been following, but I realize there might be something, some additives I could add to my recipe. How would I can, how would we connect them with you to learn more about possibly being a partner with you guys?

I love that question. Thank you for, for that one. I wasn't expecting it, but I love it. You go to wealthability.com again and schedule a call. But schedule call as a cpa and we are building this network as fast as we can. Our goal eventually is 10,000 CPA firms worldwide. So we are looking to completely revolutionize a profession. We're not looking just to. We love entrepreneurs, so that is, is the passion.

We love you back, just for the record.

Good. Because I literally, when I started my first CPA firm, I had two clients. And my goal was to create a place where people loved coming to work and where we could give entrepreneurs the highest level of advice. Because I didn't see them getting it. They're still. 25 years later, they're still not getting it. And it's really disappointing because I see all these big accounting firms and all they're trying to do is get as much work done as possible. They're not really spending the time. You know, we all know that if we want really good food, we go to a local restaurant. We don't go to a chain.

Yeah, it's true.

If you go to a chain, you're going to get mediocre food, but a really big menu. Right. We call it Cheesecake Factory firms.

And yeah, nothing wrong. Cheesecake Factory, if that's what you want.

Yeah.

Right. But a lot of people would rather go to the, you know, the small restaurant that's got a great chef and they really care about you and they, they really produce great food. And my wife and I was at, at our neighborhood restaurant just last night. Oh, my heavens. The food was so good and the attention, the service is so good. And so that, that's really been. Our goal is to provide that level of service and attention to the entrepreneur. It's really all about the entrepreneurs. I just, I just love entrepreneurs so.

Well, and the crazy part is, is, you know, I want the audience to have a complete appreciation not just for your, your skill and your net and your, and your talent and your passion. You're, you're, you're truly passionate about the entrepreneur. You're truly passionate about this. Make it basically making them stronger, better, further, faster, which I greatly appreciate. I also want them to fully appreciate some of the, some of the, folks that you work with, including Robert Kiyosaki and others. Like there's that, that in of itself, I mean, you've got folks that are operating at that level and you're, and you're consulting with them and you're working with them and others like them that Goes a long way in my book of saying, hey, I know these guys are incredibly successful. I know that they're following a plan and strategy because if they. If they wouldn't, then all these little recessions that pop up would take them out. So I know that they're doing something right. So on our final little thing out here, I just want to, first of all, appreciate you for stopping by the show big time. Second of all, maybe if you, if it's okay, maybe talk about a handful of clients that maybe that you've worked with, that, if you're allowed to, that maybe have a couple of good stories that you can. Can.

Yeah, I can tell you a couple. I mean, Robert. Robert's a great one. I remember Robert and I were on stage at the Paris in Las Vegas. This was 2012. And I was up there doing my thing on taxes. And I said, well, the tax law is really a series of incentives for entrepreneurs and investors. And he looks at me and goes, really?

And I said, yeah, that's all it is. I mean, it's like stimulus packages. Right? That's what it is. Sense.

Yeah.

And it goes, wow. And ever since then, we've traveled all over the world together because the light went on. He goes, well, what you're saying then is that the tax law actually supports what I'm teaching. And so that's why we work so well together. And I love teaching with Robert. He's. He's amazing teacher. And, and, and they do go together. It's a little good cop, bad cop. I would be the good cop.

You guys hold each other accountable, which is good. We do.

We absolutely do. I. Another one that's fairly public is Brad Summrock, who's a. Teaches multifamily real estate. You probably know Brad. And Brad loves to say. He. He calls. Calls us his tax zero hero.

Tax zero. I like that.

Because that should be your next.

That should be your next book title, tax0hero.

So he actually. So. And, and this is all public, so I'm not, I'm not sharing anything that he hasn't shared a hundred times. Yeah, he actually went from a tax bill of 935,000 the year before we met to zero the next year.

All right, that's enough. That's enough. I've paid tax bills like that. You and I are going to talk some more.

That does not. That does not always happen.

I'm going to tell you the fact that it happened once.

I'll tell you what, Brad is a great client because. And Robert is too. What I love about these two is that they do what you tell them to do and they don't second guess you. You. This is my profession. I'm. I'm a. I've been a tax guy for over 40 years. This is what I do. This is all I do. Okay. I know this stuff. I know the tax law, and so. And I know how it works, and so they don't second guess me. And this is the biggest issue. I think this is the biggest problem that entrepreneurs have, is they second guess everybody.

Yeah.

And including themselves. Okay. And so I just say, stop second guessing yourself. Stop second guessing your advisor. If you don't, don't. If you don't trust your advisor, you need a different advisor. So you need to find the advisor you trust, and once you do, you need to trust them and then do what they tell you to do, and you'll pay less tax and make more money.

I love it, man. Dude, thank you so much for stopping by today. Yeah, seriously, massive blessing. And I'm hoping all of our CPA folks. I'm trying to connect with some of mine that I work with and recommend you as well to maybe help you out, because I've got some great folks that have helped me along the years that. Yeah, I think that. I think they could. I think they could use some additional strategies that would help them be successful.

I would love it. I would absolutely love to meet them. I love entrepreneurs who happen to be CPAs.

Very cool. I've got a couple for sure that I want to introduce you to. For sure.

Cool. Awesome, awesome, awesome.

Well, you take care. We'll talk to you soon.

All right, thank you. Bye. Bye. I hope you liked that video.

And if you did, make sure you check out this next video right here.

We often put ourselves into the idea of success would be following what your parents had done, or they had a house and they had two cars and they were married and they had a dog, and. And then we get there, and maybe in life we get close to that, and then we say, okay, now I'm successful, but if you can erase that idea of success and you can say, I'm going to create my own idea of success, or even just say, I'm living life the way I want to, then there's nothing that stops you from doing anything you want.