Homeless veteran here, I watch all of your videos and you give me hope. In a hard spot like everyone else but its temporary. Started a couple of different businesses, and I look forward to working with you in the future. This is not how the story ends for me. I wish everyone success while pursuing their dreams.
@RavBarring my position got eliminated from my company, took a 50% reduction in pay, my transmission stopped working. Had to get a vehicle, saving money living in a car, and started some businesses with the extra money I make on side hustles because my jobs not cutting it. So I'm just not relying on my job anymore, and I've lost everything already so it's not like it can get much worse. Maybe a blessing in disguise...
I’ve been operating as an S-Corp for the last 12 years it was a game changer. But this takes it to a whole new level especially # 2 and # 3 genius!!! Thanks for this you are awesome!
Net worth snowballs after $1M! Keep investing regularly and you'll be blown away how much it can change in a few short years. Here's to $1 million and to more!
BRICS will destroy the American dollar. Look it up. Brazil, Russhah (spelling to disguise algorythm) Indi@, Chin@, SuadiaRabi@ and many others have formed an alliance to purchase fuel in what ever currency they want. (Can you tell these countries are most of the worlds population?) So, you may have rooms full of 100 dollar bills and it will buy a loaf of bread if we do not get on with safely mining oil & gas like other countries. When we buy it from them- it means more polution than if done in the USA and hi cost and dependance on our enemies. Just a thot.
@@bubbleboy821making $100k and then $1m is always the hardest. But the more you make, the more you make- it multiplies. However, lifestyle inflation is what keeps many from getting past $10m and returning back to $100k or less.
My accountant talked me into being Taxed as an S-Corp but she didn’t explain it this clearly. I’m not complaining because it saved me money, but I feel like I understand the benefits much better now. I’m going to have to schedule a board meeting to notify the board of the exciting news.
I like this guy. I have an S corporation/import company and it is everything that he described. You obviously need a functional business model, but the S corporation is a much smarter way to operate… Thanks for the great video.
Ditto - sent to business owners I had suggested this strategy to previously, but still have not done it...thought it was well laid out in a way that should convince them where I failed to
I've saved a ton on FICA but your social security check, for what it's worth, will be much lower because of your low salary. I think I'll collect 1900 at 67 versus 3200. You're saving about 7,500 a year in taxes for a 100,000 gross income less deductions. But you're giving up $16,000 SS benefits per year in retirement. So this only works if you have a very profitable S Corp.
You can compensate for this deficit but utilizing qualified retirement plans to accumulate for future retirement income (ex: SEP IRAs, Cash Balance Plans, etc.)
@@danielleon5074 Yes of course and we do. But the benefit of the S corporation election is not so clear. I think the decision should be made on some chart data instead of verbal advice.
As an s corp i will add 3 things that arent as clear here and impact. 1) The employers (your corp) 401K is not a "match" but a maximum of 25% of your W-2 salary). So you can put your $30,000 with catch yp in but if your salary is only $25,000, you certainly can't match the full 30,000. It does get confusing because the IRS lets you put up to 70K a year, But that is assuming your salary dictates that ability!!! 2) paying your wife a salary or a 1099: This will count as an expense to your business but you are married, So it's also reportable income which you then have to pay taxes on. She STILL must pay the 15.3% tax as self employment income even though its under your business. Savings here are jence often negligible, even of you toll the whole amount you paid her into jer self 401k unless you are cheating. 3) Many of the videos on this type of stuff doesn't cover that very important fact. The lower your reasonable salary the less you put into social security and hence the less you get out in retirement.
It would be nice to see an example or two of the how an LLC with a given amount of revenue, would end up paying out in taxes when maxing out a SEP-IRA and QBI vs S-Corp with 401k contributions, matching and profit sharing. Especially for finding the sweet spot where the company owner has personal expenses that are at different levels ( to be compared to the revenue of the business.. e.g. how much additional could you contribute to retirement because you have money left over after all is said and done for personal costs of living etc. what the ultimate bottom line is. I imagine there are some cases where the LLC and SEP-IRA path still comes out on top. ( particularly if you can’t afford to save anything about the 25% contribution limit )
For a business that has unpredictable income, we sometimes don't have the ability to do salary on a regular basis. So you are suggesting that we do a quarterly review and then pay out salary accordingly? Are there any tax disadvantages with larger payroll checks quarterly versus having a smaller check on a monthly basis?
Great question. We talk about his issue with some frequency in Mark's Main Street Tax Advisor Network. In our weekly meetings, we have discussed this very topic. However, each case can be different, as you demonstrate here. Your best course of action is to book a free client interview with one of us Main Street Tax Advisors. This will begin the process of open the door to apply these wonderful tax strategies in your life, which have been shown to reduce taxes and increase your wealth generating opportunities.
So let's say I'm an LLC+s-corp... Things like paying myself and partners a salary, "plowing" money into a 401k, putting money into investment vessels, having a board of directors where there are hundreds of ways to have things written-off... How much would my business need to gross to allow for all of this? I hope that question makes sense...
The Cash Balance Defined Benefit Plan is a great tool for business owners to defer hundreds of thousands of dollars in income pre-tax generating massive tax savings. You took the words out of my mouth, I was going to comment the same thing.
Far better off leveraging those profits into commercial real estate, doing tax free cash out refis then 1031 the gains upon sale. Not to mention meeting the real estate professional definition which unlocks your spouses W2 income. Thoughts?
Very solid explanation! I’m doing everything he mentioned, except the solo 401(k). I will max that thing out by the end of the year. October is usually a good time to buy stocks. I normally wait until tax loss harvesting season.
so after i do this strategy and go to collect social security i don’t have many social security credits, i now have to pay for S corporation tax return preparation and a payroll preparation company. most landscapers love piles paperwork. brilliant advice. also your reasonable compensation sounds aggressive.
Payroll company is cheap I pay 30per math and 7 bucks per employee, I do my own taxes because if you're not your a fool if your business is less than 5 million a year. My bookkeeping takes 5 to 10 min each work day and 30 min or less 1x each weekend and 2hrs at the end of the year. I don't use double entry. I use an expense ledger, a revenue ledger and a single entry hybrid system. I own multiple businesses with employees never owed taxes on an audit and they loved my bookkeeping method since it's fast and easy to cross check everything fast.
@@JuanGelogoyou don't get any credits unless you pay fica taxes. This hairbrained scheme to avoid fica taxes is a sure fire way to find yourself Ubering or living in an RV in your golden years.
As an accountant myself, I was going to mention this. If you pay yourself W2- income, there is state withholding, and federal withholding and quarterly reports that need to be done. You will most likely have to pay someone like myself to do that. Then you have to pay FUTA and in some states ,not all SUTA, that's federal and state unemployment insurance. Its not as clear cut as he is making it. Then if you want to ever buy a house, your income will be "understated" the pass through portion is not considered "earned Income".
You have explained more in 16minutes than I have understood in 5 years in business. We do happen to take advantage of all of these strategies and taxed as an scorp. But I have never understood why 😂. Thank you Sir!
I’ve been running my LLC for a few years, but I’m still confused about the best way to pay myself. Should I take a salary or just draw from the profits?
Check up on your information. The IRS has released guidance and is saying that they’re gonna start coming after people on this issue… It is not worth having your pants down on this. They may go after you retroactively.
I’m sorry, I like the strategy up to the point where you talk about 401k. Why 401k instead of a like insurance policy? Life insurance policies have way more protections than 401ks.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
I had heard of S-Corps but never understood the operation of them? Thanks, I’ll be investigating a home business just due to the growth potential. You RULE!!!
Thank you for sharing your knowledge! I'm a recently retired veteran and about to purchase a franchise. Having a tax plan that leverages AND includes your life is immensely important! I'm doing a lot of learning - does your team specialize in franchise planning?
I am part of Mark's tax advisory network and am have experience with franchising. Send me a message if you would like to schedule a discovery call or tax consult.
LLCs don't save tax? of course they do when taxed as partnerships. they may not save in terms of FICA, but you get tax-free contributions to the partnership, way more potential losses because of allocated nonrecourse liabilities, way more flexibility in the operating agreement in regard to profit-sharing, not having to deal with the restrictive S corp requirements, etc. Partnerships are literally top tier for any real estate. S corps are only better for small service businesses without much internal debt (imo). ESBT trusts are even taxed at the maximum marginal rates.
Hey mark! My dog walking LLC is defining going to make over 50k this year. I want to switch over to an scorp and also set up a self funded 401k. Is the best way to get started booking a consult for $1k???
Mark as put together a Network of Advisors that he has personally trained to bridge the gap between these videos and applying them to your situation. A personalized strategy. However, this is not a set price, so feel free to find the Advisor that's the right fit for you. Main Street Tax Advisor Network.
Great advice thank you. So with teh new FINCEN rules, each of these S corps that we setup have to be reported right? So if you use the S corps and try out new biz with a S corp or series of entities, each of them have to be registered...lotta disclosure/compliance work!
WOW! 🤩 I saved, liked and shared this video. You thank us in this video, but I actually want to THANK YOU for creating this amazing informative video. By the way, I subscribed to your channel 🥰
Why a LLC, structured as a S-Corp? Why not just incorporate? One of my business partners was the owner of the largest accounting firm in Atlanta, he advised that the LLC is a vehicle for real property/asset holdings only. Corporate entities are for everyone else. Reason being, there is no 1099 for Corporations but you must 1099 a LLC.
I’d like to dive in deeper on the reasonable comp talk. I’m no expert, but I think it would be hard to justify paying an owner that works more than full time hours less than you would pay a lawn maintenance worker. I am having trouble seeing how that’s a reasonable compensation.
Thank you Mark! This is incredibly valuable insight and clearly explained. Yes, some comments indeed point out that social security benefits may be significantly lower (I didn’t catch that in your video) but others also write valid comments on how likely it will be to actually receive full (expected) ss benefits after 2030-ish… Nonetheless, great structure and time proven concept. I might need to get in touch with you and your office soon!
Mark, Excellent video! Just a clarification and a quick question if you don’t mind. You say LLCs don’t save on tax, and I understand it how you explained it - but can’t you avoid tax by holding back on S Corp. distributions by using an LLC? I guess my question is whatever profits go into the LLC don’t have to be distributed like an S Corp and could be reinvested elsewhere, hence avoiding tax?
Another overlooked advantage of the corporation structure is your customers don't have to send you a 1099 and you are explicitly an independent contractor. I dont like the LLC construct, although simpler, because the laws for LLCs are not uniform across the country. Board members are supposed to be independent. Use family members only if they have business relevant talents. Who wants to have their company sued and the plaintiff hauls all your kids into court? Stuffing profit into a 401k is the best plan ever!
It's all cool, but (1) that is 401k, you can't take it tax-free anyways, you could also pass it to Roth IRA, (2) those strategies seem to be kind of ok for $70-200k businesses and (3) it will likely cost 3-5k a year to support this legal entity (tax-deductible, but still).
Hi, love the information in this video! I’m in the process of studying to be an accountant and would like to learn more about your strategies and company. Also are there any other videos you can suggest to get me started?
This is great if you want to show income for loans, but if you don't need loans you can easily show next to nothing as a regular llc and pay almost nothing in taxes, if you take a salary you will have to pay unemployment and payroll taxes which can be the same or more
Social Security has a terrible IRR, and it only gets worse the more you make. If you’d saved and invested every penny you saved in tax you would be WAY ahead. Sounds like maybe you spent it instead?
@@ThePurpleSnork Absolutely spend it, you are going to spend it anyway why pay tax on it before you do? And you can get a mortgage or loan using bank statements anyway
In the Landscaping example, if you use the $50k to fund a retirement plan, how do you feed your family? Most of the time, the company barely makes enough to take home, after expenses. Is this strategy only for when your company earns discretionary income?
I’ve done this for years. He didn’t mention you can pay your kids and invest that money in a custodial Roth IRA which after 40+ years of compounding will be well over 1M for their retirement. The FICA savings is overblown however, depending on what is a reasonable salary of your profession. It caps at 168k, so if you’re a physician for instance, it’s hard to justify paying much less than that so it’s a wash. Everything else in the video is a big savings though. I have never set up a formal board of directors, but my wife and I are the only owners so a yearly business meeting/ vacation is legit. There are other expenses that flow through the Scorp that could likely also flow through an LLC such as phones, computers, health club dues etc.
Strategy 3 is a recipe for being audited every year. Ask yourself if business related expenses he is suggesting as legitimate and are reasonable. If not, you will have more paperwork and have to spend more money on penalties and audit defense.
For the Landscaper example, don’t you want to make a certain amount of money before entertaining an S-Corp? With all of the filing and processing to create a proper S-Corp, shouldn’t your business make an x-amount of money before filing as an S-Corp? And if so, what is that number? I personally own a handful of raw land that I would love to create into Glamping and/or mid-term rental projects out of them. How much ROI or net-profit after operating cost should I make in order for it to make sense to file as an S-Corp?
@NickMirro good point to consider. Some people have also worked w2 jobs so have padded social security prior to or even while owning a business. Each individual situation is different.
Mark has a great explanation as to why. Let me give you a hint. It has to do with Roth conversions. I was at Mark's Tax & Legal 360 event in Utah this year and there was a class that spoke on this very topic.
You can have both solo 401 k and sep ira, but you only fund one of them each year. The sep can only be 25% of your net earnings, but you make the math for yourself and see which one is worth funding each year according to your earnings
What happens if you turn your trading business into s corp and you pay yourself salary? Is it possible to inject that salary back to the s corp to use it to make even more money? The 401K strategy may sound ok, but not if you can your trading strategy to beat 401K tax deferred benefits.
Awesome video. Serious question, if I take my board meeting to Greece for 3 weeks, how many days of that trip can I write off? What parts can I write off? And how many board meetings can we have a year? Thank you.
@@TheRealKimJong-Il yep, and it isn't counted as earned income, so you can miss out on some tax credits, also if you ever want to buy a house, not sure if you can figure that into the income calculation.
I’m a CPA. He’s making it sound much easier than it is. Most will need a CPA to do this for them. This works if you’re making much more than 100,000 gross
Mark, I really enjoyed this video. Question, I have a small business and I’m an S-Corp and I W2 myself. I don’t have a 401K but I take $ from my profits and put it in a ESOP account. It’s my understanding I cant do both. Your response would be greatly appreciated. Thank you
@@ENVISIONISTLLC Yes there are several companies that specialize in that. Google "Self Directed IRA." Instead of stocks you can put your money in real estate rental property, gold, etc. Just about anything! That being said if you are just getting started building assets you might want to consider stocks for simplicity and liquidity. You can always sell the stocks later once you have several hundred thousand invested.
Form the LLC first. Get an EIN (Employer Identification Tax Number). Then fill out an IRS from 2553 electing to make your LLC a "Sub-Chapter S Corp LLC." Details from IRS website: In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
If you give people laptops for being on the board, and they are used for more than 50% of time for personal use then its NOT going to be a fun time at audit. You can't immediately write off stuff just because its vaguely associate with business use, it has to be ordinary and necessary AND also either primarily or exclusively for business use. Having a yearly business retreat in Hawaii where you spend a week, and try to write it all off while only having a 3 hour meeting one day wont work. Flights there and back, and maybe 2 nights stay may, but the rest would have to be covered by personal expense. So thinking like this is useful, but its not a magic solution where talk about business and make it a 100% write off - thats a dangerous way to start thinking about things. And this doesn't touch on how this opens up the possibility of piercing the corporate veil when done improperly
Interesting. Potentially getting into other details would be more theoretically helpful; such as the share holders in S corps, where liability sits, etc in comparison to other options. SS, deductions, and other can all take place in other business structures. It’s how it impacts the final outcome. It depends what you’re looking for. Interesting video but only explained a small little tid bit related to the equity of the business.
The C-Corp is a very different beast, and if you don't fall with a few specific needs, then you are more likely to increase your tax burden than to decrease it. However, you might fall into those few specific issues. To get the best strategy for you, then please contact one of us, Mark J Kohler, Certified Main Street Tax Advisor. You can find us on his website under Services/Tax Advisor Network.
Loved this, until you suggested the Tax Ticking Time Bomb aka Solo 401k, not to mention the losses in account value do to Stock Market related losses. Can I fund a life insurance policy instead of a Solo 401k?
yes, the business can provide a benefit to its employees aka pay-your-life-insurance benefit.However, you must offer the same benefit to all employees or all employees in the same 'class' ie c-suite, etc. Confirm w a CPA the current year's rules
This is great info but you have to have a business that actually generates profits, which is hard to do in this country these days due to runaway costs
Thank you so much for this useful videos🙏🙏🙂may I ask plz make some video help us learn how to govern salary to ourselves and also make w2 for s corporation plz 🙏🙏thank you
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Homeless veteran here, I watch all of your videos and you give me hope. In a hard spot like everyone else but its temporary. Started a couple of different businesses, and I look forward to working with you in the future. This is not how the story ends for me. I wish everyone success while pursuing their dreams.
With that mindset you will find your abundance ❤
Cheering you on! Never give up and become an inspiration.
Keep your chin up and stay strong my man!
How do you see yourself out of the situation you are in?
@RavBarring my position got eliminated from my company, took a 50% reduction in pay, my transmission stopped working. Had to get a vehicle, saving money living in a car, and started some businesses with the extra money I make on side hustles because my jobs not cutting it. So I'm just not relying on my job anymore, and I've lost everything already so it's not like it can get much worse. Maybe a blessing in disguise...
I formed my LLC earlier this year elected to be taxed as an S Corp. Im definitely adding strategy 2 and 3! Thank you for the insight!
This lowly potter was an S-corp for 35 years. I retired at 54 and have lived abroad ever since. Thanks for telling this. Anyone can have a s-corp.
I’ve been operating as an S-Corp for the last 12 years it was a game changer. But this takes it to a whole new level especially # 2 and # 3 genius!!! Thanks for this you are awesome!
In the beginning you should invest in your business not in 401k. You need a healthy, viable business first. Imo.
Net worth snowballs after $1M! Keep investing regularly and you'll be blown away how much it can change in a few short years. Here's to $1 million and to more!
Sure hope it snowballs before that too not all of us have 1m
BRICS will destroy the American dollar. Look it up. Brazil, Russhah (spelling to disguise algorythm) Indi@, Chin@, SuadiaRabi@ and many others have formed an alliance to purchase fuel in what ever currency they want. (Can you tell these countries are most of the worlds population?) So, you may have rooms full of 100 dollar bills and it will buy a loaf of bread if we do not get on with safely mining oil & gas like other countries. When we buy it from them- it means more polution than if done in the USA and hi cost and dependance on our enemies. Just a thot.
@@bubbleboy821😂 good point. It snowballs at 100k so there’s that.
spot on!
@@bubbleboy821making $100k and then $1m is always the hardest. But the more you make, the more you make- it multiplies. However, lifestyle inflation is what keeps many from getting past $10m and returning back to $100k or less.
My accountant talked me into being Taxed as an S-Corp but she didn’t explain it this clearly. I’m not complaining because it saved me money, but I feel like I understand the benefits much better now. I’m going to have to schedule a board meeting to notify the board of the exciting news.
I have 2 C corps and 1 S corp and its based off the income and the advantages of being taxed......so your probably doing good 👍
😅
Great news. What business and industry are u in?
That was so funny the last sentence
good way to add unnecessary expenses, unless your already paying these costs personally. Not a way to increase wealth.
I like this guy. I have an S corporation/import company and it is everything that he described. You obviously need a functional business model, but the S corporation is a much smarter way to operate… Thanks for the great video.
This is the best explanation I've heard. Thank you, Thank you
Ditto - sent to business owners I had suggested this strategy to previously, but still have not done it...thought it was well laid out in a way that should convince them where I failed to
I've saved a ton on FICA but your social security check, for what it's worth, will be much lower because of your low salary. I think I'll collect 1900 at 67 versus 3200. You're saving about 7,500 a year in taxes for a 100,000 gross income less deductions. But you're giving up $16,000 SS benefits per year in retirement.
So this only works if you have a very profitable S Corp.
Ss is a scam. You can do so much more with that money now vs what the government can do with it. If there even is anything left.
@@erezjr very slowly explain how you do that
You can compensate for this deficit but utilizing qualified retirement plans to accumulate for future retirement income (ex: SEP IRAs, Cash Balance Plans, etc.)
@@danielleon5074 Yes of course and we do. But the benefit of the S corporation election is not so clear. I think the decision should be made on some chart data instead of verbal advice.
Throw it in something that will grow. stocks with dividends, growing assets, IRAs...
As an s corp i will add 3 things that arent as clear here and impact. 1) The employers (your corp) 401K is not a "match" but a maximum of 25% of your W-2 salary). So you can put your $30,000 with catch yp in but if your salary is only $25,000, you certainly can't match the full 30,000. It does get confusing because the IRS lets you put up to 70K a year, But that is assuming your salary dictates that ability!!! 2) paying your wife a salary or a 1099: This will count as an expense to your business but you are married, So it's also reportable income which you then have to pay taxes on. She STILL must pay the 15.3% tax as self employment income even though its under your business. Savings here are jence often negligible, even of you toll the whole amount you paid her into jer self 401k unless you are cheating. 3) Many of the videos on this type of stuff doesn't cover that very important fact. The lower your reasonable salary the less you put into social security and hence the less you get out in retirement.
Protect this man.
How do I contact your team?
It would be nice to see an example or two of the how an LLC with a given amount of revenue, would end up paying out in taxes when maxing out a SEP-IRA and QBI vs S-Corp with 401k contributions, matching and profit sharing.
Especially for finding the sweet spot where the company owner has personal expenses that are at different levels ( to be compared to the revenue of the business.. e.g. how much additional could you contribute to retirement because you have money left over after all is said and done for personal costs of living etc.
what the ultimate bottom line is. I imagine there are some cases where the LLC and SEP-IRA path still comes out on top. ( particularly if you can’t afford to save anything about the 25% contribution limit )
For a business that has unpredictable income, we sometimes don't have the ability to do salary on a regular basis. So you are suggesting that we do a quarterly review and then pay out salary accordingly? Are there any tax disadvantages with larger payroll checks quarterly versus having a smaller check on a monthly basis?
Great question. We talk about his issue with some frequency in Mark's Main Street Tax Advisor Network. In our weekly meetings, we have discussed this very topic. However, each case can be different, as you demonstrate here. Your best course of action is to book a free client interview with one of us Main Street Tax Advisors. This will begin the process of open the door to apply these wonderful tax strategies in your life, which have been shown to reduce taxes and increase your wealth generating opportunities.
My understanding is this is all about accounting: take what money you need when you need it, aggregate what you took once every quarter as a dividend.
Do a distribution, I think 1065 is easier for that reason
This is gold. So much info here.
So let's say I'm an LLC+s-corp... Things like paying myself and partners a salary, "plowing" money into a 401k, putting money into investment vessels, having a board of directors where there are hundreds of ways to have things written-off... How much would my business need to gross to allow for all of this? I hope that question makes sense...
Mark, you should do a show on funding a Defined Benefit Pension Plan from a single-shareholder S-corp.
The Cash Balance Defined Benefit Plan is a great tool for business owners to defer hundreds of thousands of dollars in income pre-tax generating massive tax savings. You took the words out of my mouth, I was going to comment the same thing.
The cash balance db plan really should be criminal, if you’re a high earner you can defer literally hundreds of thousands of dollars a year
Far better off leveraging those profits into commercial real estate, doing tax free cash out refis then 1031 the gains upon sale. Not to mention meeting the real estate professional definition which unlocks your spouses W2 income. Thoughts?
Very solid explanation! I’m doing everything he mentioned, except the solo 401(k). I will max that thing out by the end of the year. October is usually a good time to buy stocks. I normally wait until tax loss harvesting season.
so after i do this strategy and go to collect social security i don’t have many social security credits, i now have to pay for S corporation tax return preparation and a payroll preparation company. most landscapers love piles paperwork. brilliant advice. also your reasonable compensation sounds aggressive.
Payroll company is cheap I pay 30per math and 7 bucks per employee, I do my own taxes because if you're not your a fool if your business is less than 5 million a year. My bookkeeping takes 5 to 10 min each work day and 30 min or less 1x each weekend and 2hrs at the end of the year. I don't use double entry. I use an expense ledger, a revenue ledger and a single entry hybrid system. I own multiple businesses with employees never owed taxes on an audit and they loved my bookkeeping method since it's fast and easy to cross check everything fast.
Also you get full credits each year from very little income so doesn't take much payroll to earn maximum credits each year
@@JuanGelogoyou don't get any credits unless you pay fica taxes.
This hairbrained scheme to avoid fica taxes is a sure fire way to find yourself Ubering or living in an RV in your golden years.
As an accountant myself, I was going to mention this. If you pay yourself W2- income, there is state withholding, and federal withholding and quarterly reports that need to be done. You will most likely have to pay someone like myself to do that. Then you have to pay FUTA and in some states ,not all SUTA, that's federal and state unemployment insurance. Its not as clear cut as he is making it. Then if you want to ever buy a house, your income will be "understated" the pass through portion is not considered "earned Income".
Can you do this while also being employed full time at another company under 1040 wages?
Great video Mark! Do you have a link to your video(s) on the Corporate Book and how to maintain said book?
You have explained more in 16minutes than I have understood in 5 years in business. We do happen to take advantage of all of these strategies and taxed as an scorp. But I have never understood why 😂. Thank you Sir!
"welcome back" + background music playing at medium volume = infomercial.
If you are currently an LLC, can you change later to S Corp?
I’ve been running my LLC for a few years, but I’m still confused about the best way to pay myself. Should I take a salary or just draw from the profits?
Excellent video. I'm also a CPA and tax attorney, I agree with you regarding the reasonable comp issue.
Agreed! 15 years at 24K a year with no issues.
I teach this at work and thought this video was great. We always do a bit higher comp but our clients are wealthy.
Check up on your information. The IRS has released guidance and is saying that they’re gonna start coming after people on this issue… It is not worth having your pants down on this. They may go after you retroactively.
I don't think he mentioned S-Corps with employees and how that affects reasonable salary scrutiny.
@@TXTractorLifeeach state has workers comp minimum salaries. I think if you adjusted to those values you should be in the clear.
I’m sorry, I like the strategy up to the point where you talk about 401k. Why 401k instead of a like insurance policy? Life insurance policies have way more protections than 401ks.
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.
Impressive can you share more info?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
I had heard of S-Corps but never understood the operation of them? Thanks, I’ll be investigating a home business just due to the growth potential. You RULE!!!
Who knew Lex Luther was so knowledgeable about corporate taxes?
Thank you for sharing your knowledge!
I'm a recently retired veteran and about to purchase a franchise. Having a tax plan that leverages AND includes your life is immensely important! I'm doing a lot of learning - does your team specialize in franchise planning?
I am part of Mark's tax advisory network and am have experience with franchising. Send me a message if you would like to schedule a discovery call or tax consult.
Hello. I would like to schedule a meeting with one of your tax consultants to set all of this up for my business.
LLCs don't save tax? of course they do when taxed as partnerships. they may not save in terms of FICA, but you get tax-free contributions to the partnership, way more potential losses because of allocated nonrecourse liabilities, way more flexibility in the operating agreement in regard to profit-sharing, not having to deal with the restrictive S corp requirements, etc. Partnerships are literally top tier for any real estate. S corps are only better for small service businesses without much internal debt (imo). ESBT trusts are even taxed at the maximum marginal rates.
Hey mark! My dog walking LLC is defining going to make over 50k this year. I want to switch over to an scorp and also set up a self funded 401k. Is the best way to get started booking a consult for $1k???
Mark as put together a Network of Advisors that he has personally trained to bridge the gap between these videos and applying them to your situation. A personalized strategy. However, this is not a set price, so feel free to find the Advisor that's the right fit for you. Main Street Tax Advisor Network.
Great advice thank you. So with teh new FINCEN rules, each of these S corps that we setup have to be reported right? So if you use the S corps and try out new biz with a S corp or series of entities, each of them have to be registered...lotta disclosure/compliance work!
Can’t you write off your meals, travel, etc. for your board of directors even with a sole proprietor status? I don’t think you need an S corp for that
WOW! 🤩 I saved, liked and shared this video. You thank us in this video, but I actually want to THANK YOU for creating this amazing informative video. By the way, I subscribed to your channel 🥰
Why a LLC, structured as a S-Corp? Why not just incorporate? One of my business partners was the owner of the largest accounting firm in Atlanta, he advised that the LLC is a vehicle for real property/asset holdings only. Corporate entities are for everyone else. Reason being, there is no 1099 for Corporations but you must 1099 a LLC.
this becomes really explosive after irs audits
How so?
@@be5718 because the IRS doesn't like people artificially paying themselves a low salary.
Listened passively once. I'm going to come back and watch when I have a chance to actively listen and focus. Thanks
Best S-Corp video ever. Kevin Rutherford a trucking accountant never explained it like this.
I’d like to dive in deeper on the reasonable comp talk. I’m no expert, but I think it would be hard to justify paying an owner that works more than full time hours less than you would pay a lawn maintenance worker. I am having trouble seeing how that’s a reasonable compensation.
Wouldn't you be paying more taxes on that deferred income later when making more money?
Where can we get your payroll matrix? I'm established, but feel like I'm paying myself too high of a salary.
Thank you Mark! This is incredibly valuable insight and clearly explained. Yes, some comments indeed point out that social security benefits may be significantly lower (I didn’t catch that in your video) but others also write valid comments on how likely it will be to actually receive full (expected) ss benefits after 2030-ish… Nonetheless, great structure and time proven concept. I might need to get in touch with you and your office soon!
At what income level does this often make sense? $100k?
Thanks Mark, great eye opening topic. I needed to see this video and understand why it’s importance.
When you form a Board of Directors with your home state, where else do you have to file on the Federal level to be compliant?
Mark, Excellent video! Just a clarification and a quick question if you don’t mind. You say LLCs don’t save on tax, and I understand it how you explained it - but can’t you avoid tax by holding back on S Corp. distributions by using an LLC? I guess my question is whatever profits go into the LLC don’t have to be distributed like an S Corp and could be reinvested elsewhere, hence avoiding tax?
Another overlooked advantage of the corporation structure is your customers don't have to send you a 1099 and you are explicitly an independent contractor.
I dont like the LLC construct, although simpler, because the laws for LLCs are not uniform across the country.
Board members are supposed to be independent. Use family members only if they have business relevant talents. Who wants to have their company sued and the plaintiff hauls all your kids into court?
Stuffing profit into a 401k is the best plan ever!
It's all cool, but (1) that is 401k, you can't take it tax-free anyways, you could also pass it to Roth IRA, (2) those strategies seem to be kind of ok for $70-200k businesses and (3) it will likely cost 3-5k a year to support this legal entity (tax-deductible, but still).
Thanks for the great explanation!
Hi, love the information in this video! I’m in the process of studying to be an accountant and would like to learn more about your strategies and company. Also are there any other videos you can suggest to get me started?
Great video - Liked and Subscribed!
Question: We have a C Corp as we are not US Citizens, does this same rules apply?
This is great if you want to show income for loans, but if you don't need loans you can easily show next to nothing as a regular llc and pay almost nothing in taxes, if you take a salary you will have to pay unemployment and payroll taxes which can be the same or more
Social Security has a terrible IRR, and it only gets worse the more you make. If you’d saved and invested every penny you saved in tax you would be WAY ahead. Sounds like maybe you spent it instead?
@@ThePurpleSnork Absolutely spend it, you are going to spend it anyway why pay tax on it before you do? And you can get a mortgage or loan using bank statements anyway
In the Landscaping example, if you use the $50k to fund a retirement plan, how do you feed your family? Most of the time, the company barely makes enough to take home, after expenses. Is this strategy only for when your company earns discretionary income?
It’s a hypothetical example. Literally made up numbers for an example.
You can still do the fica savings part..
Fantastic content/video! so much value, thank you Mark!
I’ve done this for years. He didn’t mention you can pay your kids and invest that money in a custodial Roth IRA which after 40+ years of compounding will be well over 1M for their retirement. The FICA savings is overblown however, depending on what is a reasonable salary of your profession. It caps at 168k, so if you’re a physician for instance, it’s hard to justify paying much less than that so it’s a wash. Everything else in the video is a big savings though. I have never set up a formal board of directors, but my wife and I are the only owners so a yearly business meeting/ vacation is legit. There are other expenses that flow through the Scorp that could likely also flow through an LLC such as phones, computers, health club dues etc.
This is a phenomenal explanation of this strategy
Do we get one meeting for 1k ?
Strategy 3 is a recipe for being audited every year. Ask yourself if business related expenses he is suggesting as legitimate and are reasonable. If not, you will have more paperwork and have to spend more money on penalties and audit defense.
Unfortunately you don't seem to have advisors in Puerto Rico
For the Landscaper example, don’t you want to make a certain amount of money before entertaining an S-Corp?
With all of the filing and processing to create a proper S-Corp, shouldn’t your business make an x-amount of money before filing as an S-Corp? And if so, what is that number?
I personally own a handful of raw land that I would love to create into Glamping and/or mid-term rental projects out of them. How much ROI or net-profit after operating cost should I make in order for it to make sense to file as an S-Corp?
My tax pro told me any business earning north of 40k yearly, is when he recommends S-Corp consideration
Remember if you're only declaring 24,000 a year in income, your social security at retirement will be pretty small.
@NickMirro good point to consider. Some people have also worked w2 jobs so have padded social security prior to or even while owning a business. Each individual situation is different.
They all say different but if you do the math around 70k minimum is better due to the cost of maintaining a S-Corp with payroll
@@wiregrassveteranrealtor I own an S Corp with no current employees. So even lower if you're a one man band. 🙂
Does this strategy work if you have employees (that are not your spouse or family members)?
Mark, why a Solo 401k versus a SIMPLE or SEP? (I’ve heard 401ks are expensive.)
Mark has a great explanation as to why. Let me give you a hint. It has to do with Roth conversions. I was at Mark's Tax & Legal 360 event in Utah this year and there was a class that spoke on this very topic.
You can have both solo 401 k and sep ira, but you only fund one of them each year. The sep can only be 25% of your net earnings, but you make the math for yourself and see which one is worth funding each year according to your earnings
Bravo 👏🏽 Excellent explanation ! Makes so much sense. Thank you!
Woww 😮 you got me so excited and anxious to find out what is my business is under. Do you guys offer services for public ?😆
And keep in mind the exit/cap gains strategy & implications of S vs. C. Great video!
Do you have direct knowledge and understanding of Act 60 of Puerto Rico and can talk on the good, bad, and realism of the program?
What happens if you turn your trading business into s corp and you pay yourself salary? Is it possible to inject that salary back to the s corp to use it to make even more money? The 401K strategy may sound ok, but not if you can your trading strategy to beat 401K tax deferred benefits.
Can you do anything for Canadians ?
I am an S Corp and my first employee (non-owner) starts next week. When they start can I still have a SOLO401k? I have been told no.
In general you are correct. You can still have a 401K but it would have to be offered to your employees including the match.
Thank you for sharing this with us
Awesome video. Serious question, if I take my board meeting to Greece for 3 weeks, how many days of that trip can I write off? What parts can I write off? And how many board meetings can we have a year? Thank you.
If you can afford to do that, you should pay a CPA or attorney to answer your questions.
@@davidwood3315 lol. Touché
You can also invest that money and move to Greece later.
Strategy 2, wouldn't it be tax when you when you take it out from the 401k?
Thank you for making this video. I'm 2 years into my LLC, I never knew about this stuff
I’m glad I came across this video! Very informative .TY
Fantastic video!!!!
I own several businesses and all are S corps except for one which is a C corp. I've been doing #2 but not #3. I need to do that.
What happens to the 50K passthrough funds?
It gets taxed as regular income at the personal tax rate and brackets on your personal tax return
@@TheRealKimJong-Il yep, and it isn't counted as earned income, so you can miss out on some tax credits, also if you ever want to buy a house, not sure if you can figure that into the income calculation.
what if you have assets like IP, trademarks, etc... should that live in an S-corp?
Awesome!!! thank you!! can I do the same if I have a C corp.? I'm Small business owner.
At what business revenue do you recommended submitting an entity reclassification as an S-CORP? I believe I heard $50k?…
I’m a CPA. He’s making it sound much easier than it is. Most will need a CPA to do this for them. This works if you’re making much more than 100,000 gross
What did you do with K1 profit from S Corp?
Mark, I really enjoyed this video. Question, I have a small business and I’m an S-Corp and I W2 myself. I don’t have a 401K but I take $ from my profits and put it in a ESOP account. It’s my understanding I cant do both. Your response would be greatly appreciated. Thank you
Oh wow!! im so glad i watched your video .... thank you.
Excellent break down definately a game changer
Can you invest in real estate instead of the 401k?
To my understanding, you can use the money from your 401k to invest in real estate, crypto etc.. 9:37
@@ENVISIONISTLLC Yes there are several companies that specialize in that. Google "Self Directed IRA." Instead of stocks you can put your money in real estate rental property, gold, etc. Just about anything!
That being said if you are just getting started building assets you might want to consider stocks for simplicity and liquidity. You can always sell the stocks later once you have several hundred thousand invested.
How does QBI impact the decision whether or not being an S Corp (that costs $800 annually in CA)
Is it best to keep the LLC and tax it as an S-corp, or go ahead and convert it to an S-corp?
Form the LLC first. Get an EIN (Employer Identification Tax Number). Then fill out an IRS from 2553 electing to make your LLC a "Sub-Chapter S Corp LLC."
Details from IRS website: In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
Thank you so much for your information!
It's so funny how amped up he gets.
If you give people laptops for being on the board, and they are used for more than 50% of time for personal use then its NOT going to be a fun time at audit. You can't immediately write off stuff just because its vaguely associate with business use, it has to be ordinary and necessary AND also either primarily or exclusively for business use. Having a yearly business retreat in Hawaii where you spend a week, and try to write it all off while only having a 3 hour meeting one day wont work. Flights there and back, and maybe 2 nights stay may, but the rest would have to be covered by personal expense. So thinking like this is useful, but its not a magic solution where talk about business and make it a 100% write off - thats a dangerous way to start thinking about things. And this doesn't touch on how this opens up the possibility of piercing the corporate veil when done improperly
Interesting. Potentially getting into other details would be more theoretically helpful; such as the share holders in S corps, where liability sits, etc in comparison to other options. SS, deductions, and other can all take place in other business structures. It’s how it impacts the final outcome. It depends what you’re looking for. Interesting video but only explained a small little tid bit related to the equity of the business.
Can this strategy work with a C Corp?
The C-Corp is a very different beast, and if you don't fall with a few specific needs, then you are more likely to increase your tax burden than to decrease it. However, you might fall into those few specific issues. To get the best strategy for you, then please contact one of us, Mark J Kohler, Certified Main Street Tax Advisor. You can find us on his website under Services/Tax Advisor Network.
Who gives this information in Australia?
i plan to go solo as a contractor. This episode was so cool. I may call you.
Loved this, until you suggested the Tax Ticking Time Bomb aka Solo 401k, not to mention the losses in account value do to Stock Market related losses. Can I fund a life insurance policy instead of a Solo 401k?
yes, the business can provide a benefit to its employees aka pay-your-life-insurance benefit.However, you must offer the same benefit to all employees or all employees in the same 'class' ie c-suite, etc. Confirm w a CPA the current year's rules
This is great info but you have to have a business that actually generates profits, which is hard to do in this country these days due to runaway costs
Thank you so much for this useful videos🙏🙏🙂may I ask plz make some video help us learn how to govern salary to ourselves and also make w2 for s corporation plz 🙏🙏thank you