How to Use Legal Structures and Taxes as PRIME Strategy for Your Business

Hey, it's Mark Pinolski, the land geek with the favorite ditchy real estate website, thelangeek.com and on this week's podcast, I'm all excited for everyone to learn about something that I know is going to get your heart pumping. Legal structures and taxes and scaling and trusts and all that good stuff. But my guest today is Tommy thornberg from. From primecorporateservices.com Tommy, welcome.

Thank you for having me. That's not the first time you've done an intro. I can tell. I'm excited to be here.

No, this is my second or third. So. So, Tommy, talk to me about a little bit about your background and why you are so passionate about Prime Corporate services.

Sure, sounds good. I we. It's funny when you say get your heart pumping because I will say that I, I know we do the boring stuff, but I think we can all agree that asset protection and tax minimization is one of the most important parts of any entrepreneur's journey. A little bit about my background. So going all the way back, my mom was a real estate agent and my dad owned a real estate brokerage. So I thought it was always going to be real estate for me. And when I was 18 years old, I went and knocked door to door selling pest control. Super, super sexy self employment start. I made about $40,000 in four months. And at 18 I thought I was like the smartest human in the world. But Uncle Sam came knocking for 10,000 and that money was already gone. So at a very early age I started asking around 18, 19 years old, how do I lower my tax bill? And it became very apparent that not too many people had a clue. So fast forward, Prime Corporate. We've been in business for 12 years. We started with a lot of ebay businesses, online businesses. We now have majority real estate investors and land investors. But our whole goal is how to make sure that you're protecting your assets and keeping more money in your corner. Because no one cares about your money more than you do. So if you understand it, it's a lot easier to make decisions on how to save money and compound that.

Well, yeah, it's so true. And you know, I'm always talking about your biggest expense as an entrepreneur is typically taxes, especially if you're lucky enough to be successful. And a lot of people don't think about it like that. And we don't talk too much on this podcast. I mean, I've had real estate attorneys on asset protection attorneys on the podcast, but it's always a Good reminder of just the most simple asset protection, which is just se setting up a corporate entity. So could you kind of walk us through different structures, different entities, and what you recommend to somebody at. At different phases?

Absolutely, yeah. I. One thing I'll say about this, you asked 10 attorneys the same question. You're going to get 15 different answers or 10, it depends. So I will start with that because I promise I've asked all the attorneys. We got a full staff of them, hundreds of hours from good old YouTube, university and podcasts. But here's what I can tell you. There's three things that I think everyone should take into consideration whenever you set up a new business entity. Number one is privacy and protection. How much privacy do you want? Do you want your name listed on there? Do you want your address listed on there? Most of the time that answer is no. The second is tax benefits. Profit or loss? So good or bad, profit or loss? How long do you. Are you planning on holding whatever it is that you're purchasing, in this case land, and what is your tax liability going to be? And then number three is credibility. Show yourself as a legitimate business, not only to buyers, sellers, clientele in general, but also to banks and lenders. One of the areas we focus on is building business credit and opening the doors for additional funding options. So having an LLC in the beginning, a limited liability company, is simple. It's easy. It gives you excellent benefits. And then if it's active income, s corps, a lot of clients like to keep things in trusts. So our goal is to try and help you understand the pros and cons so that you can make the best decision for where you are currently and what those long term goals are.

I love it. I love it. So, Tommy, let's play devil's advocate. If I'm listening to this, I'm wondering to myself, well, why don't I just go to my local attorney, he can set up an LLC for me. I could go on my state's website and set it up for 50 bucks. I could go on legal zoom. What? Why Prime Corporate Services? What's. What's so special about this company?

I love it. This is a great question. The first thing I'll say is, I don't care what you do, just do it. Please. Set up an entity. Legitimize yourself as a business. But I think what makes Prime Corporate very special and very unique is we only focus on entrepreneurs. We only focus on business owners. Over the last 12 years, we've set up over 150,000 businesses. And what We've really tried to do is take care of partners, take care of affiliate relationships like this where the cost is much lower. You can go to an attorney and a lot of times pay 1,000 to $2,000 and get your operating agreements and really take care of everything that you need. I think that's a much better option than going to the state website. State website. Oftentimes you're paying a fee and filling out your own documents. What I think that we've done really well with is we've kind of landed in between. We want to make sure you have everything you need from your articles of incorporation and your operating agreements. We want to make sure everything's paid and that you understand what it is and then you have a contact point. Business is going to change. It's not a one and done. I think that having an advisor or having a consultant that you can reach out to as you grow, as you scale, as you have questions, I think that pretty clearly is what sets us aside in those areas.

I love it. I love it. And so if, let's say I've got 40 acres in Arizona, right, And my buyer goes to look out at the property and they, they're, they're walking the property, they, they trip on a, a rock and they break their hip and now they're going to sue me personally. Is that why I want to have an LLC or do I want to have a different type of structure? Talk to me a little bit more about asset protection as it pertains. So I get the tax advantages of my entity, I get the legitimacy. But let's go a little deeper into the asset protection.

I, I don't think anyone listening to this will argue that it's a sue happy world. I read a report that last year there was an average of 76 new lawsuits filed every minute. Kind of scary, pretty ridiculous. So with that being said, asset protection is crucial. I think that giving yourself a baseline. One of my favorite attorneys that we have on staff, he always says if people just set their businesses up with the thought in mind of it's not if you get sued, but when you get sued, they'd certainly do things a lot different. And to your example, if you find yourself in that position or someone trips, breaks their hip on your land, you would much rather that be in an entity that's isolated or some sort of a trust, so that it's separating your personal and your business. Right? That's one of the big messages that we are obvious. We're constantly saying personals, personal businesses, business. The More that you can separate those two legally and financially. You've worked hard for your personal, home and bank accounts and retirement accounts. You'd much rather lose on a case where if it is your fault, it's in an LLC or it's in a trust and it doesn't commingle your liability of your personal assets. So having that separation, having that protection is a no brainer for any entrepreneur across the board.

Fantastic. And so for estate planning as well, because you know we are in real estate, your net worth is going to grow. That's also a consideration as well. Let's, let's talk a little bit about the trusts and how you are currently seeing the average entrepreneur set up their trusts.

Yeah. So one of the things that we do are we do full estate plans. So trust wills, living wills, power of attorneys. This is a very biased opinion. Everyone should have a trust. Just from what I've seen and the clients that we've worked with, my uncle unexpectedly passed away about a month ago. And if that trust wasn't in place, it would have gone into probate in California and California would have stepped in to take about $200,000. That now gets to go go to my cousins instead. So every state is going to vary. If you search how to avoid probate in the state that you are living in, I think that having some sort of a living trust is the most important. But you could have revocable trust, irrevocable trusts, land trust, business trusts. What I would say to you is if you are getting a land trust, it is likely going to be specific to what is going to benefit that state. For instance, Florida has great, great, great Homestead act and has great liability out of Florida. We have a lot of clients that like doing land trusts out of Florida and Texas. But a trust also, we have to be careful on how quickly you're going to be flipping it over. If you buy that same 40 acres last month and sell it next month, it's active or ordinary income. And I would hate to see you get taxed at the highest rate because of a trust being in place. So if we can combo out the asset protection and what the tax savings really is, long term plays are going to be different than short term plays. And that's where we want to make sure that we're really in the weeds with you and you have someone that you can call to talk about what you plan on doing with the deal that you're getting involved with.

Excellent, excellent. So let's, let's kind of get into the weeds as Far as the, the services of, of prime corporate and, and how that works and what could I expect?

Sure. So I, I mean I think that the, the main thing is making sure that you have some sort of a one on one consultation for where you are currently what you already have in place. Some of you listening to this, maybe I already have 10 entities and a trust and I may need help saving money on taxes. Some of you may be brand new and looking to get into your first land deal. So I think that making sure that we have a baseline on where you are is most important. But the four primary services that we offer, entity structure, so LLCs and corporations, tax planning, tax preparation, bookkeeping. We've got about 80 accountants on staff, so we do all personal and all business tax filings, estate planning, trust wills, living wills, power of attorneys. And then also we have a really cool and unique business credit development service that teaches people how to build a separate credit profile for their business. Super, super valuable. Just to give you an example of how I've used this personally. Building business credit doesn't happen overnight. It does take some time, usually six months to a year. But I've never met an entrepreneur that says I wish I had less money either. So I share that because the more funding options that you can create for yourself, the easier it is to grow in scale and the easier it is to help more people. Right. So over the eight years I've been building this about, oh, probably about three, four months ago, I had an opportunity to buy eight acres and two mobile homes in Missouri. And when interest rates were a little bit higher, I would have been looking at 8% on an investment loan where I said, I've got a business line of credit at 4%. So I purchased this for $150,000 at 4% instead of 8%. It's going to be more of a long term buy and hold. But having that funding option in place saved me 4% where I probably still would have done the deal and it would have just taken me longer to cash flow. So having those funding options, making sure your entities are set up properly and having a game plan on how money's going to go out and come back in I think is crucial to any business owner.

I love it. I love it. And you know, when I set up my entities, I don't really hear back from my attorney. Is there any type of follow up once this is set up? Is there any type of check in? Hey, you know, we set up your entity, you know, maybe let's look at setting up your Trust. Let's look at setting, setting up your business credit. Is, is it, is there any kind of process like that? Because we're all busy entrepreneurs, if someone's not proactively reaching out, it's probably not going to get happened. That's going to happen as we get lost in the day to day of life.

Yes, it's, it's a great question. I mean, our message to our clients is always recommending them to be more proactive than reactive. And a lot of that comes from a tax standpoint. I can't tell you how many people come to us and they say, my accountant talks to me when they file the taxes. I cross my fingers that I'm either getting a return or I'm not going to get killed. From a tax standpoint. Said, you're not the only one. So our tax clients, we are hounding them year round to make sure they're tracking those expenses. On the estate planning side, it really is a matter of every three to five years. Let's make sure that it's updated, let's make sure that we have all your assets included. From an entity standpoint, if you asked me this question a year ago, I would have said no. We were kind of like your attorneys. Good luck. Let us know if you need anything. But January 1, 2024, you may have heard of this. There was a new law that was passed by the Financial Enforcement Government Agency. So this is very important for anyone that's listening that has entities. If you set up your business entities before January 1, you have to make sure to fill out this new BOI requirement by 2025. If you set up your business entity after January 1, 2024, you have 90 days. So what we have done to help our clients, both current and existing and future clients, is we have put a bunch of money into creating a portal that allows you to enter your information. They're going to ask for your name, they're going to ask for your address. You're going to have to actually upload a photo ID or a passport. And then when your driver's license is going to expire, we'll reach out to you and tell you to update it. So our goal with this portal is to automate staying in front of you so that if you have questions, you're remembering us, and if you move or if you change your address, you're staying compliant with these new guidelines for what they say is to chase money launderers, scammers, tax evaders. So it's a new thing. FinCEN F I N C-E-N.org is the government agency that you'll have to upload all this information. But it is something that we can also help with if you need any assistance from FinCEN directly.

Interesting. Interesting. Yeah, I, I didn't, I didn't know about that. I, you know, maybe I'd heard some whispers of it or read something about it when. But not that amount of detail. I think it's an overreaction to blockchain.

Hey, who knows? But what I will tell you is they're saying that if you're not compliant with it, they're going to find up to 500 a day and they're even threatening up to two years in jail. So.

Wow.

Mark, let's make sure we get your entities compliant.

You hear me? Yeah. So all, so all your. Even existing entities or just new entities.

All ent any entity previous. If you set it up before January 1, 2024, you have all of 2025. So I haven't even done it on my entities. I'm going to wait until June or July just to see how everything shakes out and what updates they make. But every entity is going to be required to upload this information to stay compliant with FinCEN. If not, they're subject to penalty.

Wow.

Crazy, right? Hey, and I will say there's. There's a lot of things online after, now that we've talked about it, you're going to get blown up on Instagram about it and all these scare tactics. What I tell people is like, it's just part of being self employed. You do have to do it. You have to probably update it once a year. But we've built our portal to make it very easy so that you can go in and upload any changes. We submit it for you and it just feels like you're filing your taxes. There was a lot of people that thought taxes were crazy back in the day, but look at us now. And I think this is just one more thing and one more reason why it's beneficial to have someone like prime help you to make sure you stay compliant.

So even if I'm not setting up a new llc, I could still use that service through Prime?

Oh, yeah, absolutely.

That's fantastic. All right, Tommy, here's. Here's the question I love always asking. What's the worst advice you see or hear given in your area of expertise of setting up entities? Tax savings. Helping entrepreneurs scale and create better credit.

But Tommy, my CPA told me I shouldn't do anything until I make some money. That One's my favorite, and here's why. Okay, out of a hundred percent of audits that happened last year, what percentage do you think were business related? I'm gonna, I'm gonna let you guys. 100.6. Less than 1%.

Way off. So what, who's getting audited?

Most of them are personal. Now this is obviously. Oh, I see, I see corporate, a skewed statistic, right. So there's a lot more people than there are businesses. And that obviously skews this quite a bit. But I think if you're going to do something, doing it right from the very beginning is extremely important. And this is what makes this topic difficult. You ask an attorney, they'll say, set up a business and legitimize yourself. You ask an accountant, and they're going to be path of least resistance often. So you can take startup expenses, you can take organizational expenses, but I think setting up a business entity properly from the beginning, understanding the pros and cons of what you're dealing with and being able to grow and scale from a solid foundation is a benefit to any business owner, even if they are just getting started. That's one of my, that's one of my most important things that I find is. I don't love the term fake it till you make it, but I think there is some truth behind it. And as opposed to always faking it, legitimize your business, be the CEO of your venture, be the business owner where you can at least go out and give yourself that credibility to play the part as you generate income. That would be the number one thing that I see.

Yeah, I mean, I also think there's some, some benefits to even just psychologically putting yourself out there publicly saying, I've just started this company. As you know, there's been studies done when people say, hey, I'm going to do this, and they say it publicly, they're way more likely that end up following through with it than if they just quietly say, oh yeah, I'm gonna start this, you know, working out three days a week and, and you know, lose 10 pounds. Right? But when they say, they publicly, I'm doing this and I'm, you know, hold me accountable, watch me on my journey. It's the same thing setting up your corporate entity. It's like, hey, I've started this land company, I'm in business to do, to create this passive income without any renters or rehabs, renovations or rodents. You know, watch this journey. And with that first step comes all the next important steps in following through on the myriad things that you have to do to create and sustain and build and scale a land business. So I definitely think there's value to it.

Yeah, 1, 100%. I we had a partner that we worked with for a long time and they, they used to always preach, you want to find out who your friends are. Post that you started a business on social media and you'll be shocked how many people come out of the woodworks telling you congratulations, letting you know that they'll be on the lookout for you. And you'll also be shocked how many people don't say anything. And it's a rude awakening of putting yourself out there and legitimizing yourself as a business owner. People want to support you. I think there's a lot of great people out there and the more boots on the ground that you have looking for deals for you, I think that's nothing but a benefit long term.

Absolutely. Absolutely. Well, Tommy, we're at that point in the podcast and your, your mentorship has been invaluable, but I'm going to put you on the spot one more time and ask you for your tip of the week. A website, a resource, a book, something else actionable, but the art of passive income listeners go improve their businesses, improve their lives. What have you got?

I'm gonna, can I give two? I'm gonna give two here?

Yeah, you can give two.

The first one is. The first one is to reiterate fincen.org let's make sure that if you want our help with it, feel free to reach out. If not, make sure that you are staying compliant on finsen.org the second one, my favorite book from a business standpoint that I have read is Rocket Fuel by Gino Wickman. I know it's a common one that's thrown out there, but what I love about it is helping identify your personality on being either a visionary or an integrator. It really, really helped Steve Harward, the CEO and I understand a lot of how we operate and what our roles are and what we want to do more of and what we want to do less of. So Rocket Fuel is one of my favorites to not only put systems in place but to identify what you like to do. And if you can lean into that and do more of it, I think it's a very, very valuable thing as far as enjoyment of your business is concerned.

Yeah, absolutely. He, you know, Gina Wickman's written a bunch of great books. I think his most famous one is Traction and walks you through the eos Entrepreneurial Operating System, which is fantastic. I was lucky enough to hear him speak live at a mastermind group.

That's awesome.

Super smart, super interesting guy for sure.

Well, yeah, after I read Rocket Fuel, we read Traction, and we've implemented that whole EOS L10 throughout our whole organization. And he's. He's awesome. I like all of his stuff.

He's.

I've never had the chance to meet him. I'm jealous. But that's great.

Yeah, that's great. Well, my tip of the week is, you know, start setting up your entities, start protecting your assets, start setting up structures to save money on taxes, start really building your credit so that you can borrow at a lower interest rate. Because when you're making the returns that we're making in land, it's almost irrelevant what you're going to be borrowing money at so you don't have to do these equity deals. And I'm going to have a link to it in the notes, but it's going to be primepartner.info TLG for the land geek. That is going to be my affiliate link because I am affiliated with Prime Corporate because I believe in their mission. I believe in what they're doing. I've spoken to Steve, Tommy's partner, and they are just very laser focused on providing value for their clients. And they're doing it in a way that is not just savvy and ethical, but also at prices that I think you're going to find irresistible. So they're a great partner to have, especially in, you know, the, the real estate space. Entrepreneurs are great, but they really focus on, on entrepreneurs and help lots of land businesses. So I'll have a link to that. That link is again, primepartner.info tog. We'll have a link in the show notes. Tommy, are we good?

I appreciate you having me. This is fun. I could talk about this stuff all day. So I.

We're good.

Schedule a call and feel free. Just when you do schedule that call, know that it's for you. Like Mark said, it's all about value back to you and entity, business, credit, tax. Let us know what you want to know more about. And that's what that call is all about. So thank you, Mark. I appreciate you having me on.

Yeah, thank you. I just want to remind the listeners, today's podcast is sponsored by flight school. Schedule a call, learn how you can start building your passive income and go up, up that, that mountain quickly, safely and efficiently with our team that's done it thousands of times. Go to the landgeek.com forward slash training thelangic.com forward slash training and schedule a free call. Now you're thinking, oh, the investment, the tuition ain't gonna cost you nothing. Guaranteed you're gonna make it back 180 days or less. Just show us you did the work so you've got everything to gain, nothing to lose. The landgeek.com training. And the only way I'm gonna get Tommy to come back is if you do three little favors. You gotta follow rate, review the podcast, send a screenshot of that, Review support@landgeek.com and send you for free a signed copy of Dirt Rich. All right. Let freedom ring. Thanks, everybody. Thanks, Tommy.

Thanks for listening to the Art of Passive Income podcast. Are you ready to learn how you can start building a passive income without renters, rehabs, renovations or rodents? Schedule a free consultation@thelandgeek.com training let freedom ring.