business owners I am so excited to talk to you about the S corporation there is so much misinformation out there on when how what the savings are what what about an LLC versus an escorp we're going to break it down right here this is going to be your money video where you're going to be able to better succeed and Excel as a business owner with the right information now I want you to be confident with what you're about to hear I'm a CPA an attorney bestselling author radio show host podcaster YouTuber there is no one
else in the country with my credentials that has more followers more downloads and more videos blogs and articles on this topic I'm a member of the aicpa I'm licensed in five different states lawyer or accountant we've got a team of 150 plus employees helping clients around the country we are legit I want you to know you can believe in this and I stand behind it and I train other CPAs and accounts around the country enrolled ages with a certified advisor program backing up hundreds and thousands of business owners every year on this this topic so
take out a piece of paper and write this down hey everybody want to take a quick moment and talk about my sponsor uplift Capital they help small businesses with funding and small business loans love their website love what they're doing to help small business owners go to the next level grow their businesses expand let's take a moment and go through their website I think you're going to love what you see what's cool is uplift Capital does business finance differently with more options tailored for you less hassle and the right guidance to keep your mind at
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start is we're going to have a picture we want to make sure this makes sense and so what I've been coined with with talking about for years is the trifecta and let me tell you how the trifecta works because that's going to help answer so many of your questions regarding the S corporation and when it's right for you the trifecta starts with a foundation it all begins with the trifecta this is what I've been teaching for probably 10 plus years now around the country and it makes so much sense for my clients that are worth
millions and for my brand new business owners young or old male or female large or small this is the foundation that's going to help you build your business build your wealth Better Tax planning asset protection and let you know where the escort fits so here's how the trifecta works the foundation is your trust your revocable living trust for privacy not asset protection don't get sucked into some Delaware statutory trust irrevocable BS that's a whole other conversation revocable living trust is for everyone it's simple it's easy I've got all sorts of videos on this is for
privacy and estate planning this is also the foundation where your 1040 goes your tax return all your money runs downhill so I look at this is your tax return issue too not only we have asset protection we've got money flowing all into one spot so we divide your life in half we put your operations over here and your assets over here and this is just the basic Trifecta I expand on this even further as clients wealth grows and their operations grow this is where your ordinary income goes and this is where your passive income goes
and we want a firewall between the two for asset protection I want operations over here with shell companies I want enties over here that hold your assets anything from rental property to notes to crypto to stocks to Investments syndications that's all going over here well over here is your operations now a d job W2 is going to be outside the box that could be you your spouse you've got an extra source of income that's great it goes right into your 10 40 there's no tax planning I can do hardly at all that's going to help
you solve your W2 taxation problem and that's okay W2s are still good I'm not telling people quit your day jobs your W2 could provide benefits and security a great creditworthiness aspect with your credit score and a day job your banks are loving you you're building assets that's great but over 45% of Americans now have a side hustle that means they have a business and the wealthy in America have side hustles they have operations say own a business and for many of you watching this you're like Mark I don't have a DE to I'm a freaking
business owner and you may start out as an LLC I'm not even going to talk about the sole proprietorship you got to get out of the sole prop right away but the LLC is usually the starting point for this and an LLC does not save taxes they don't whoever told you you have to have an LLC to start your business or you have to have an LLC to save taxes or your LLC needs to be why in Wyoming they're full of crap they're a scam artist get a second opinion watch out and I'll say it
all day freaking long and I stand behind it now there is a place for Wyoming llc's and Nevada llc's and Delaware and all that and some taxs and wealth building strategies and asset protection but not in your operational business unless you live in freaking Jackson or Wyoming and own a restaurant we're going to talk about an LLC in Wyoming okay so for operations I want your entity set up in the state where you're doing business then when you start making a little too much money because you're paying self-employment tax out the butt which I'm going
to talk about here in a moment you're going to transition to an escort so in the trifecta your operational entity will be owned by your trust this is operations could be an LLC taxed as an escorp I'm fine with that or it's a plain old Inc doesn't matter but it's going to be taxed as an escorp this side of the equation is your LLC or llc's that own rental property or hold assets or Investments this is all passive income and we're going to be doing all sorts of Tax Strategies over here for pass through losses
cost segregation rent real estate professional STS ltrs oil and gas blah blah I can talk about this all day long don't even get me started on IRAs and 401ks and all the self-directing that's going to be over on this side but today's conversation is about when do I do an escort and why now the best way to explain when and why for an S corporation is to compare it to the LLC so the LLC is a wonderful entity it's a sole proprietorship it's a side hustle you started your business I have dentists that have been
in LLC for three years and they're paying way too much in tax C that have manufacturing it operational businesses that have been in LLC because they're accountant didn't tell them to consider the escort the problem with the LLC though even even though it's easy and it's great asset protection is that when I get have make money in my LLC I pay what's called self-employment tax this is one of the main reasons we start to consider an escort so if I have an LLC here let's say I bring in 100 Grand in sales I spend 25
on expenses and I net 75 well now I'm going to pay self-employment tax of 15.3% 15. 3% that's going to be 10 grand then I pay state and fed wherever I'm at so this tax is not good it's a it's terrible it's a pain in the butt we don't want that we want to avoid this issue I was just talking to a family member last night that thought they were in LLC come to find out they were actually an escorp we ran the numbers on it they were going to say five grand or more just
just with that slight change of becoming an escorp which they had actually done it was a wonderful piece of news the S corporation is where we want to be when we start to make too much money so the self-employment tax is the number one trigger of when we convert to an escorp let me tell you how the escorp works the escorp could actually even be an LLC tax as an es Corp very simple and easy to do with a special election we charge a couple hundred bunks on our Law Firm to make the transition and
the S corporation again will be in the state where you're doing business and where you live you can't be well it's online business and I live in California and I don't want to pay the $800 tax so I set up in Nevada and doesn't work does not work you you think California hasn't figured that out about 15 years ago it does wherever you you are a resident and your butt is sitting even on a computer that's where you're going to pay state tax I hate to tell you and I love to save on state tax
I got all sorts of strategies but if you choose to live in a California or an Illinois or New York you're going to pay out the butt in state tax and there's no way around it unless you move out of that freaking state if you make money in Florida and live in New York you're going to pay New York tax on your Florida income because you're a resident of New York and that's how it works so in this whole equation be careful of getting sold the pitch that this entity needs to be in Nevada Wyoming
or Delaware it doesn't matter we want asset protection in the state where you're operating we want to save on self-employment tax and I can freaking save you thousands so we have our S corporation here or LLC tax as an S corp we let's compare apples to apples I make the same 100 Grand I have the same bank account when I make this transition nothing changes I keep my Ein I keep the same bank account I'm off to the races and then I spend the same 25 Grand on expenses I write off everything I can cell
phone dining Auto computers Electronics Home Office boom I pay I write all that off love it and I net 75 I at the same result net income of 75 grand 6 grand a month well instead of paying self-employment tax on every dollar what the S corporation allows you to do is take a salary a W2 and the salary is only going to be a portion of your net income we designate that salary in advance at the beginning of the year and we adjust it throughout the year you do quarterly payroll reports you do not have
to take a paycheck you do not have to get set up on a paycheck service some people do but you don't have to it's simple and easy number two accountants are going to tell you accountants that are afraid of Their Own Shadow and baby old farts and by the way I'm over age 50 I'll take you on I have never had a client audited and lose what alone audited or lose on this reasonable comp allocation of W2 in my entire career I have prior IRS agents as partners in my firm I've interviewed prior IRS agents
we've been doing payroll planning for 25 years done thousands of es Corp returns and never once has a client had to reallocate their design ation of payroll because we were too aggressive oh we've had the Audits and guess what they're going after the 1099s to other people rather not than W2s for their employees they're like oh this is you paying your kids oh this is your W2 looks good to me done so don't be afraid and if you're an enrolled agent or CPA hearing this please give me a chance I'm going to show you my
payroll Matrix here in a minute give me a chance to show you that you've been brainwashed by some old fart in the corner office of your counting firm that oh my gosh you're going to get audited on reasonable comp or the ESC corp's going away it's not going away Joe Biden had a freaking escorp the year before he went into office had a $13 million book deal and took 750 Grand in salary yeah it was buried on page 32 of the Wall Street Journal and he was saving on self-employment tax and Medicare and Obamacare and
he did the same damn strategy he probably took less Peril than I would have made him take people get over it it is a strategy that millions of Americans are using the S corporation kicks ass own it be engaged with your accountant have a conversation about your payroll people you are the captain of your ship you've got to understand where your escorp Falls in your payroll what writeoffs you're taking I'm not telling you how to do your tax return I'm teaching you how to manage your tax return people you're business owners you got to know
where your numbers are going all right so in this situation what do I do here I might go 50/50 I could go 375 375 all even be conservative with that usually around 75 to 100 Grand I'm on a 50/50 allocation once we hit 100 Grand in net income I might do 40% so I'm going to take 375 in payroll and 375 in K1 so this is what it looks like on an es Corp you have a K1 and a W2 I only pay the FW F self-employment tax the f word we hate F I pay
it f on the entire amount in an LC I only pay FICA on this half at an escorp that's it so I just save 15.3% on this piece because I don't pay it over here so I take the 10K and I just cut it in half now I'm only paying five grand in FICA and $5,000 in savings sounds pretty nice to me I think it's a good Royal Caribbean cruise on the Oasis larest Cru ship it's so fun right you got use this money to build your business to pay other taxes to build your wealth
not to go on a cruise that's probably Reckless people this savings is real and for those of you that are in California or somewhere go oh my gosh it's $800 a year for an entity and an escorp uh let me see uh save five grand uh pay for a tax return you might be out about 1,200 bucks around here and then you got payroll 400 bucks or so and 800 for the state you might be out two grand a year you got to pay money to make money so if I spend two grand to go
through the the structure throughout the year and own the process and get engaged and manage the process as a business owner using my Tax Advisor and I'll give you a link down here below of where you can find a tax adviser that speaks marcer that this process might cost you two grand a year and I just save five spend two save five I think you're ahead of the game and more money you make the more you save let bring this all together I promised a little payroll Matrix then I want to give you some other
ongoing checklist that you want to take care of when you're doing this process the Matrix is simply this meeting with your a tax adviser throughout the year regular quarterly meetings for an hour and if you're meeting with a real tax adviser they're saving you 10 times whatever you're paying them every time you meet I have clients that call me up Mark I'll pay you $1,000 for an hour because I know you're going to make me 10 that's what a Tax Advisor does for you guys small business owners I know it's hard to find them but
I got a network that I am certifying advisers around the country no longer you need need to go to Turbo Tax and Google and just wish for the best so the more money you make the lower your payroll goes as a percentage so this is your payroll percentage and you accountant out there these are your draws or net income we're going to look at your M2 and we're going to look at um the distributions to dictate our salary level so when I have a client that's about a 100 grand net we might be over here
at a 40% allocation so with 100 Grand we might split that into 40,000 payroll and 60k net that's where we want to go with that so this split is what saves us because I'm not paying self-employment tax on this chunk the more money you make the more you save so as again as a client starts making more money I'm going to drive their payroll percentage down I usually Flatline it at maybe 20% I have clients to make a million dollars a year and only take 200 Grand in salary they can fund their 401K do the
solo do a lot of different other strategies maybe a cash balance plan a DB plan all sorts of goodies but they keep their salary level down because we don't want to pay the F the Medicare goes on and on ObamaCare goes on and on so we want to as my clients start making more money we're going to use the escort per Advantage now final point I want to make sure that you're doing all the things to maintain your escort oration let me just give you a quick checklist you're going to have an entity that is
clean you are going uh to make sure that you have proper legal documentation set up bylaws minutes if you have an LLC operating agreement corporate books stock certificates membership certificates our company get to kkos lawyers the links down below we have such an affordable affordable cleanup system where we can clean up your current entity and get it in compliance with the state and guess what we've got coming down this next year the CTA the corporate transparency act finsen the Big Brother you've got to report your ownership and make sure your docks are clean to the
feds starting January 1st 2024 we have a whole system for that and it's included and no extra charge when you set up an entity at our office because we know what the hell we're doing no longer you're going trying to knock this out online and hope it works out use a real lawyer with attorney client privilege where no one can hear that conversation and what you strategize about and set up the entity right and folks we're less than 1,200 bucks for most entities around the country it w we're cheaper then the scam artist selling you
crap in Wyoming or Nevada or Delaware give the laer a call down below get your entity cleaned up we want to have good entity docs you need to have an EIN you need to have a bank account and then you're going to do annual company maintenance every year you're going to have minutes done and maintain the entity and inside it you're going to have accountable plans for Tax Strategies riding off home office Auto uh travel dining there's a you got to have accountable plans in your minutes or if you get audited you can't do it
and then you're going to nail your payroll level so if you can be talking with your adviser on a regular basis maintaining this entity it's a machine that's going to help you be more successful make more money and better live the American dream people it's real it's legit and I stand behind it 100% check out my books on Amazon get onto the blog just Google Mar J Coler YouTube please follow I've got a great podcast I'm here for you I love Main Street America I love small business get your advice from legit licensed professionals that
have a service platform that they stand behind with malpractice insurance and licensure to do it right we want to build a relationship with our clients get you to a tax adviser and if you go to Mar jer.com I have the Tax Advisor Network the tax proo Network where you can go and find and interview an adviser in your area or across the country young or old male or female big firm small firm en agent CPA get over there find an an adviser that you can meet with cly that understands this crap people don't give up
American dream is real see you on the backside
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