February 20, 2025 • 55 mins
In this episode, John breaks down different types of contracts to help you understand certain terms. He also explains some of the important things you need to know about taxes.
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Speaker 1 (00:00):
Welcome the Money and Wealth with John O'Briant, a production
of the Black Effect Podcast Network and iHeartRadio. Hey, Hey,
this is John Hope Brian and this is Money and Wealth.
I am honored to bring to you a special segment
(00:24):
breaking down contracts and taxes. This is something that is
fundamental to your success in business, in life, even your
personal life. I'll cover all of this over the next
forty five minutes or so. This was inspired in part
by the artist Jailly Roll and a clip that he
(00:48):
did on social media, which I then turned into a
piece of my straight Talk Live series on my platforms
where he talked about contracts in the music business and
he broke down how artists get in a bad spot.
(01:09):
I'm not going to say taken advantage of, because as
I will describe here, in most cases, they're not being
actively taken advantage of. They're just not actively paying attention
to the thing that matters most. It's the music business.
In that example, it's the business of music, and to
think about it in any other ways is not to
(01:32):
understand what you're doing. Or to quote my dear friend,
my duty departed friend, Quincy Jones, he says, if you
think you're in the music business, and you don't own
music rights, publishing rights, licensing rights, some kind of rights,
writing rights. You're actually not in the music business. You're
(01:52):
a temporary performer. Drop the mic. Statement by Quincy Jones.
Jelly Row goes into this thing, and you can look
at the foot clip on mind, social media platforms, at
John Brian everywhere wherever you platform you Tuesday to focus
on Instagram is probably easier. I break this down in
(02:16):
great detail, but the key part of this is he
explains that when you owe a million dollars, you've been
given in advance. Make this clear. You've been given an
advance for a million dollars. You don't realize that you
owe that money back. It's not a payment and you know, oh,
(02:36):
that's all good. Next item. It is an advance against revenue.
And the way that works is you you extract things
that give it a million dollars. It's supposed to pay
for productions of your albums and your videos and your
business expenses. Oftentimes people go start raving mad and start
(02:57):
spending money on stuff, you know, cars for their friends
and jewelry and travel and all of that, and then
they run out of money. And they go back and
they may ask for some more and that's you know,
they think they're getting some more money in payment. Really
(03:20):
you really just increasing your internal credit line. And the
way that the record company gets a back is they've
got a contract with you in this example and in
his example was seventy thirty. He thought that was a
really great deal. Some artists are eighty twenty. Some artists
are ninety five to five mean meaning the record company
(03:41):
in this example. And don't get mad. Then business as
a capitalist is just a it's just not emotional. Business
is a gladiator sport. It's a non emotional situation. It's
not meant for it to be personal. They just it
is what it is. So again, be careful of the
contracts that you signed. But and this is in fair
(04:03):
exchange is no robbery. So in this example, he owned
thirty percent of his revenue. They owned seventy percent of
every dollar that was made until he paid the advance back.
Let's use a million dollars as an easy number. So
until so they got for every dollar of new album sales.
To make this easy, the record company got seventy cents
(04:24):
and he got thirty cents. Are paid back at the
rate of the deal, which means that out of his
thirty cents, the million dollars he was advanced gets paid back,
and he keeps paying that million dollars back from his
thirty percent while the record company is getting there seventy
percent until he repays the million dollars in total, in
(04:47):
which case he then starts recouping thirty percent to his
pocket paid back at the rate of the deal, which
means that the record company, the fancier, the venture capitalist,
the one who's backing you here, the one who's taking
the most risk, may earn a million dollars before you
even get your first cens of your thirty cents. In fact,
(05:09):
they will make earn a million dollars the're gonna earn.
They're gonn get their million dollars back, but they may
own it, earn another million dollars or seven hundred thousand
dollars or you know, it depends on how this gets calculated.
But they may earn a million dollars back on top
of your on top of your your million that you
(05:30):
re imburse them before you make a dime, because they're
making a seventy thirty split. It's actually they can actually
do better than that in an example, and fair exchange
is no robbery. So just just watch the contracts you signed,
because if it's a ninety five to five contract, which
some artists do sign, I mean, that's really painful. They
(05:53):
make ninety five cents of every dollar that comes in,
you make five cents, and you're going to pay them
out of your five cents the million dollars back, right,
And yeah, we don't want to do that calculation. So
let's get into the positives here, because these contracts don't
(06:14):
have to be ankles around your weights, around your angle
or and you know, some kind of a negative situation
that can be quite empowering. They've been for me in
most of my business experience. But actually I've had some
bad experiences too. I've written some bad countures, I've had
some bad agreements. I've had run ins with the irs
(06:35):
and franchise tax board in California. We'll get into that.
But let's let's talk about contracts in taxes as a
foundation for your financial success. Let's now start with my
own personal story, and I described this in my book
Financial Literacy for All, which is a bestseller, been a
(06:56):
bestseller for the last year encourage you to go get
your copy. And when I was in business, I wasn't
paying attention to paying taxes because my view was the
company wasn't making money, so why should I worry about it?
And I worry about it when I become profitable. I
(07:16):
actually made two mistakes. I hadn't paid I hadn't filed
personal tax returns for about six years in a row. Yes, me,
this is one of my teens. I was homeless during
the time. I was homeless six months of my life,
So I guess you'll understand some of that. I was
just rolling really fast, trying to hustle. You can all
relate to that. But no excuses I should have filed
(07:36):
my taxes. Well, that wasn't the worst part, the fact
that I hadn't paid my taxes, because that was not
I didn't filed taxes or I didn't know any taxes,
but I hadn't filed them. So once I did file them,
I owe penalties. And the IRS is an extraordinarily punitive lender,
so you don't you want to owe money to anybody
(07:59):
but the IRS. And they didn't come after me, they
didn't threaten me. I was a small fish not making
a lot of money at the time. But I finally
filed them all at one time before they came up
to me. I came to them, which I'm encouraging you
to do, and I just paid the penalty through a
payment agreement over time. That way they hit me was
(08:23):
later on, when I was making a little money through
the business. Well, the business was not profitable. I had
a lot of cash flowing through the business. I had
employees I was paying. I was not paying with holdings
out of the employees paycheck. So you when your employees
are a W two employee, they're a salary or hourly employee,
(08:44):
You've got to pay with holdings out of that. Well, again,
I figured the business wasn't profitable. I wasn't profitable. Why
should I do that. I just write them a straight
check for what I owe them. The Franchise Tax Board
the State of California out a wind of that, and
they literally put up a cash register in my lobby
(09:07):
and they wanted their pound of flesh. They would take
every receipt, every check that came in that front door
until they got their paid paid back the taxes plus
the penalties and interest that I owed them from the
from the employee with holdings that I stole from them.
(09:28):
I didn't steal it, but I I burrowed it. And
and it was very painful. We're talking about you know,
it was, as I recalled, bout forty thousand dollars in total.
And and back then that was a that was a
that was a death nail for me. And I had
to hustle and take care of them and take care
of my responsibility at the same time. And I learned
a very valuable lesson from that experience. Uh, those two experiences,
(09:52):
which is just just treat the irs as your business
partner and file your tax returns. Look, you cannot on
your life without you know, this whole country runs on
taxes being paid. Your police are being paid by taxes,
Your schools are being paid by taxes. Your the roads
(10:15):
and gutters and the maintenance, the building of bridges, uh lights,
street lights, sanitation services. I mean, all the infrastructure for
the city you live in and the country you live
in is paid through taxes or as a to pay
this really plane, even if you want to distribute money
(10:39):
like a socialist, you have to first collect it like
a capitalist. All this is connected and folks as well
I don't you know, I don't want to be a capitalist.
I want to work for nonprofit. Where nonprofits money comes from,
and it's in this case the government in the government
gets that money and money from taxes or if you
(11:01):
get in your money from charitable contributions from wealthy individuals,
those individuals are getting a tax break because of making
a charitable contribution to you, which affects Hello, they're taxes.
Al Capone, the famed gangster, did not get taken into prison, arrested,
(11:23):
and then put ultimately into prison because of great murder mayhem,
all of which he on some level was guilty of
but was never convicted and dieded but never convicted. He
just got away with it all. But when the IRS
came up to him for tech, when the federal government
came up to him for tax evasion, boom like. They're
(11:43):
like the government was gangster. They're like, you can make
all this money illegally if you want to, and we
can't prove you made it illegally, but your lifestyle and
such that you can't do that without making X kind
of money and you didn't pay taxes on that, so
it's ill gotten gains. We want to share, and they
put him and they locked him up and he died
(12:05):
a very painful death. After that, it was over. So
pay your taxes. So you're going to understand the basis
of contracts. In taxes, you're going to learn how to
protect themselves, yourselves from unscrupulous people, and protect your businesses.
You're going to get best practices for wealth safety and
(12:27):
well building wealth safely and legally and sustaining it retaining it. Okay,
So a contract is just simply an agreement, right to
start with the basics. A contract is simply in agreement.
But it's only as good as as it's enforceability, and
it's only as good as a people. I might also
(12:48):
add who are signing the contracts. If you have two
unethical people on two sides of a signing of a contract,
the contract is useless because it's only as good as
a full faith and ability of the people signing it.
But let's assume that people are honorable. So every major deal, partnership,
(13:08):
or investment should have a contract. I love limited liability contracts.
LLC's are simple or elegant, and they're easy for anybody
to understand. I have a ton of LLC agreements. When
I had the Promise Homes company, I since sold most
of the company, But when I had that company, we
had just I mean, I think it was hundreds of
(13:31):
LLC agreements. The ideal situation, we owned seven hundred homes.
Just under that, the ideal situation, which would have been
to have each one of the seven hundred homes in
its own limited liability corporation, its own LLC. I think
we bought the homes in bunches, so we would have
a group of homes in one limited liability corporation. So
if somebody tripped fail of fake injury or whatever on
(13:54):
a house, or wanted to sue because they realized I
owned it, or whatever, you could only sue the asset
or assets that are in that bucket of assets in
that LLC Limited about ability corporation. You couldn't punch through
the LLC and get to me or my family or
you know, my other companies are all that kind of stuff,
because you're greedy and unethical in that situation, not suggesting
(14:19):
somebody's greedy and unethical, but limited liability for alcs really
help in that regard. So key contract clauses in what
they mean payment terms avoid getting paid late or being
paid not at all by having payment terms. What's the
scope of work? It prevents misunderstandings about the responsibilities that
(14:42):
you have in a contract or someone else. What's a
termination clause is what happens if things don't work out
in an agreement. So so how do you basically how
you get out of the agreement? By the way, I
must just throw one in here. In perpetuity, right, that
means that I just I love that frame. I was
with Cam and Cam Newton, the NFL star, We did
(15:07):
a podcast together on his show Funky Fridays. You'll be
hearing that soon and it's a great, great interview with him.
He's a great guy. And he learned the phrase in
his contract negotiations in perpetuity in negotiating on his media
company after his football crew career. He learned that lesson
(15:28):
and it's stuck in his head. That means it goes
on forever. Right, Whatever you're signing in perpetuity means you're
giving rights forever in perpetuity. These things really matter. What's
(15:50):
a non compete and confidentiality it's protecting your ideas and
your businesses. Essentially, noncompete agreement and accomplished reality. Agree. Let
me talk to you about a lesson I learned in
a contract I had done a deal with. Well, let
me tell you a bad situation first, and I'll take
(16:10):
you a good one. So when I was coming up
in business, Brian Group Companies, I believe it was w
You know, if you got the name of the end
of the evening, it was Brian New Companies and WCC
Funding Corporation. I was like nineteen twenty one years old,
and I ran this business in La Los Angeles, and
(16:31):
we were in an office building, the Westwood gave Way
Complex at Santa Monica in Los Yenaga, and my assistant
now my chief of staff, Rachel daff I'd ask her
to go downstairs every day pretty much and get myself
a sandwich or whatever, and I would just work through lunch.
And I was so focused on working and hustling whatever
(16:52):
that I created my own terms for how I was
going to pay that bill, I guess, and I had
failed to pay the cafe bill downstairs. It wasn't much,
it was eight hundred bucks or something, but even work,
and that guy sued me. I have never been sued
by anything important like no, no, anything important. I've taken
(17:13):
care of all my big deals, all mortgages, contracts. My
credit score is like cool, it's all. But this one situation,
these small ones, I let these things slip. I didn't sign,
I didn't have a contract with the cafe owner. They
let me slide basically on you know, having an informal situation,
and they took me to court, small claims court, and
(17:34):
it was very easy for them to get a judgment
against me. In that case, I didn't show up, so
the judge hit me with a default judgment. It was
a default judgment because you I didn't show up, So
if you don't show up for court, you will get
a default judgment against you. And it's very painful because
there's a one sided conversation and you can't argue about it.
And I ended up owing this guy. It wasn't a
(17:56):
lot much with eight hundred thousand dollars, but back then
there was a lot of money for me and the
more painful ones. I had a guy, Jimmy was his name,
and it was Jimmy's car detailing. I remember Jimmy and
Jimmy would wash my car and it was a Mercedes.
I think four to twenty sl Sel and I love
the car, and he would have washed the car once
(18:18):
a week. And Jimmy had a contract. Jimmy didn't have
have a high school education, right, Jimmy didn't have good
teach but Jimmy had a good sense. And Jimmy on
his bill that I or my assistant would sign every
time he finished the washing a car, we'd sign an
invoice it said at the bottom ten percent fee compounded
(18:43):
with penalties for all unpaid balances, where this whole thing
was an unpaid balance. And this dude ultimately took me
to court. I thought he was a friend. He was like, no,
I'm I'm a businessman, or as as jay Z would say,
I'm not a business man. I'm a business man. And
(19:03):
Homeboy took Homeboy with no teeth oldofsiss who I thought
was my buddy who was washing my car, oh and
returning back to the hood while I was at Westwood
Gateway Complex in West la and that marble office building
trying to be important. He took me to court in
one because he had contract agreement with me and I
(19:27):
didn't pay attention, and he was right. He had me
my signature and all these invoices, and it said clear
as day that I would pay a ten percent feet
on the unpaid balance. It was all an unpaid balance,
and I'd paid penalties and interest on the top of that.
I had no choice but to pay him, and I
(19:48):
was honored to do it. He earned it all that,
and I actually felt very bad about it. Lesson learned
later on and later on, meaning like recently I signed. Recently,
last ten years, I signed a major contract with a
couple of friends to start a business. And it was
(20:10):
a general partnership, and I had a majority of ownership,
and my two partners investors had They owned forty percent
and I owned sixty percent. And there was different kinds
of shares. I had essentially common shares, and they had
preferred shares. And it is what it sounds like. Their
(20:31):
shares were preferred at a preferred position and a preferred
in rights right than my shares, my common shares were
as it sounds common and like I didn't have common
sense to pay attention to this. It turned out just fine,
by the way, there were great guys. But I thought
I assumed because I owned sixty percent of the company
(20:53):
that that just meant I had a majority vote, a
majority of view, I'd run in the way I wanted
want to. And I was naive because these were the
money guys, and they knew what the heck they were
talking about. I was a thousand there, but they were
billionaires at least one hundred millionaires. And well I wasn't
a thousand aire, but you get the point. I was
(21:14):
outmatched on the finance understanding side of this equation. These
guys were geniuses and in what they do. And even
though I own a majority, their attorney explained to me
one day when I was pushing a narrative, pushing what
I wanted to do, John, you don't you own a
(21:37):
majority of the ownership, but they control a majority of
the company through their preferred shares. I'm gonna go off
with a tangent here just time. I tell you. There
are things like there's poison pills you can put in
a stock agreement. Like I believe Mark Zuckerberg, who I
know at Facebook now Meta, has a poison pill that
(21:57):
no matter how much the stock gets deluded, he controls
the company. There are there are founders who put these
poison pills in there. I don't know that to be
the absl case from that met up, but I'm pretty
sure it is these contracts where they found a company
and they will structure it through the goverferance agreement and
the rights where their their shock their stock has outside
(22:21):
weight to other shareholders irrespective of how much they get diluted.
De looted means uh as deluted is the opposite of concentrated.
Concentrated a strong and rigid and intense, and diluted is
what it sounds like. You delute a drink at a club.
You know what that means, right, they gave you some
cheap drinks. You dilute your interests, You have less power.
(22:42):
So so that's an aside. If you want me to
go into that, put that in comments when you see
this online. I'm happy to go into greater detail and
explain what the poison pills and all that kind of
stanf some means means and stands for. But I want
to get through a lot of content here in a
very short period of time. So back to the basic
premise that I had basically synthetic equity at common shares,
(23:07):
and they had preferred shares with rights and privileges that
were brilliantly crafted and they didn't do me no wrong.
It was all there for me to view. I was
casual about it because I knew them, and although probably
would have changed much. Actually they but the attorney explained
to me, because they put up the money, they had
(23:27):
more rights and they were right, and so I could
not just do as I like. We ended up working
it out where I did as I preferred, but I
had to consult with my partners. I did not have
the contractual right to do that. They had to give
me the right to do that, and over time, as
I proved myself, they loosened the grip on the contractual rights,
(23:52):
and at the end of the term, at the end
of the day, I was actually running exactly the way
I wanted to. But I honored my agreement with my partners,
and they left that deal very happy. We tell you
about negotiations, which is not part of a contract per se.
But if you leave a slight every good negotiation means
you leave the negotiation, but everybody in it leaves slightly irritated. Okay,
(24:17):
if you have a good negotiation, you leave the table.
Everybody slightly irritated, slightly annoyed because no one got everything.
They wanted, but you got what you needed. Let me
tell you some high profile entertainers and athletes who signed
bad contracts. Some examples. There's a group TLC love their music,
they sign an unfair deal or some people some people
(24:38):
might call an unfair deal with the Face Records. Now,
I'm saying this in particular because there's a lot of
people running around talking about my Jewish brothers and sisters
and how somehow they've ruined the music business. And I
don't know why people are picking on Jews. There are
black people. This is in the Face Records, there's with
Motown Records. There's a bunch of black people in music.
There's a bunch of white people in music. There's a
bunch of Asian people in music, a bunch of you know,
(24:59):
everybody in music. I don't know either picking on one group.
But it's just wrong to point out that, oh, this
contract is unethical. No, the contract is a legal contract.
You just don't like it because you don't like the
terms and how they got better a better negotiation to
you because they are paying attention to the dollars and
you're paying attention to the music notes. And in this
(25:22):
one example, it's the face wreck souse. We need to
like knock that off, Like we need to stop all
this hater aid and you know, hate his hate. We
just need to stop it. And we need to stop
blaming people because they're successful or more successful for us.
Maybe we're jealous, and maybe we don't understand. Don't don't
hate somebody. Try to learn from somebody. Try to understand
(25:42):
how they've mastered the game, and you can master it too.
They want to be a great singer, a great dancer
in this example, and you are a great whatever ball
player or whatever, and you want to be a better
business person. Michael Jordan Michael Jordan's Magic Johnson used to
use his celebrity status to go approach the folks on
(26:04):
the front row of the basketball games at the Lakers
and go to lunch with them. These are the people
who bought the best seats, and he wanted to trade
lunch for business knowledge. Really smart. What is Magic Johnson today?
Not just an NBA great, He's a great businessman. So
TLC signed a bad deal with the Face Records. They
thought it was a bad deal. I wasn't in it.
(26:26):
I'm sure the Face Record thought it was a great
deal when they wrote it, and I'm sure they'd say
whether people didn't pay attention, just like everybody else would
say people didn't pay attention. And there by the way
in a negotiation, at the table is the bartering place,
and one person is trying to extract as much from
you as they can while paying you the least, right,
(26:47):
that's their job. The other person's job is to give
you the least value and while getting the most money.
So both folks in that example are getting what are
doing their job. One person's trying to extract while giving
you the least, the other person is trying to give
you the lease while getting the most, and that is
(27:08):
caught a negotiation. Hello, So capitalism is a glad eator sport.
As I said, don't take it personal, which is business.
Don't get mad, just get smart. And so with it's
a face deal. They paid them only a fraction of
album sales. So the lesson here is always understand your
royalty structure and seek legal advice before signing a contract.
(27:30):
Don't be cheap, and don't think that contracts don't matter.
Contracts absolutely do matter, and I don't want you finding
out the wrong way that they matter the most. In
these situations is against the music business. In this example,
Meghani Stallion filed a legal battle with fifteen oh one
Entertainment over a restrictive contract. The lesson here is a
(27:52):
new artist should get an independent legal counsel, not just
a label provided lawyer. So if the lawyer that given
you a from the label, they probably have an interest.
Or as my friend President Bill Clinton would say, it's
hard to get somebody to agree to the truth when
the lie is paying their paycheck. Hello, I'll repeat that again.
President Bill Clinton said, it's hard to get someone to
(28:13):
agree to the truth when the lie is paying their paycheck.
Or as I would say, to rationalize is to tell
rational lies. So if you are getting paid by the
record label to be an attorney, guess whose interests you're
most interested in. It's not the artist that you're in
the room with, it's the person that you're aligned with. Said,
(28:35):
I did a deal recently where and I knew what
was going on. I did deal recently where I had contracts.
I let my partner draw up contracts, and it was
sort of two against one, so to speak, And I
knew that the contract would be imbalanced, as I would say,
But I made sure that things that were most important
to me were handled, and I let them get away
(28:56):
with the things that were less important than me, because
I didn't want to win the battle and lose the
war or the spirit of that partnership and where we
were going next was more important to me than fighting
over the details that they were fighting over. That's another
conversation as a more sophisticated situation. In order to play
that game, you know the game you're playing, it's got
to be chess and not. You know, some people are
paying chess, some people are changing checkers. I'm playing chess.
(29:19):
Lo Wayne. He struggled with the cash money records deal
for years. The lesson was always have an exit clause
and dispute resolution terms in your contract. Is easy to
get married, it's hard to get divorced. Scottie Pippen, the
NBA signed a long term deal with the Chicago Bulls
that severely undervalued him. In his opinion, I sort of agree,
(29:44):
but again, it's just business. That is not to Chicago
Bulls job to pay you top dollar, pay you every
dollar they can pay you. Their job is not to
give you, to empty their pockets to give you everything
they got their job is to give you at least
that they can that they can get away with getting
you with having without having you be unhappy. So what's
the lesson here? Consider how contracts evolve over time and
(30:06):
inflation is a factor in a long term contract, and
consider all that before locking in long term deal terms.
You can do contracts and phases or have them have
renewal clauses and have you know, sort of check in
points in a contract. So the best practice for smart
smart contract and get it in writing. A handshake is
(30:28):
not a contract. Hello, Hello, Hello. People are like, I
don't remember that you remember that? I don't know. I
don't know if people get get amnesia when they don't
like a situation, right, uh, and read before you sign
what is the fine print? And if you don't like
fine print, get somebody with glasses who's an accountant and
a lawyer who love fine print. By the way, you're
(30:49):
a counting your lawyers should not be at the club
hanging out with your people. If folks, if your if
your professionals are hanging out with you the club, then
may be the wrong people you want, boring people. You
want people who don't want to go to bed at
eight o'clock two, theoclock at night. Right, you know, if
you want whose evening starts at one in the morning
talking about the attorney, they are lawyer, they your account
That is just not my suggestion. You want left brain
(31:10):
analytical people who are absolutely is obsessed with accounting and
numbers and all that stuff, as you're assessed with music
and notes and all that stuff if you're in the
music business, so the fine print is really really important.
They can get you on the fine print, and somebody
can get you on the interpretation of five words that
look common sense to you. But an attorney will understand
uh uh that gets you know that needs to be
(31:33):
uh that that needs to be treated in a very
special way. But only attorney would know that. Hire an
attorney when it when it when it's serious. Don't do
a d I Y contract when the stakes are high.
In other words, don't do a do it yourself contract
when the stakes are right. I mean going to YouTube
talking about I'm a lawyer now, because I watched the
YouTube video, you get clocked. So common mistakes that can
(31:54):
cost you not defining clear payment terms, signing something without
understanding all the terms. This is a common mistake. In
the music business, not having a contract at all. Verbal
agreements equal risk. Okay, how to play the game and win, right,
And let's now talk about the tax system. Uh, tax
(32:20):
laws favorite business owners and investors over employees. Uh, it's
just the way a t I is. You know, tax
business owners like me and investors have lobbyists, right, and
they spent a lifetime in Washington, d C. Trying to
get terms that benefit them. So don't don't get mad.
The game is, understand it. But also business owners and
(32:42):
investors take more risks and employees. So there you go,
and an employee as a W two relationship, so the
chances in sort of taxes are sort of pre defined
in that situation. So you know, as long as you
understand it, you should be. Okay, it's more dynamic for
business owner entrepreneur like me, but understanding your tax strategy
can help you legally and contractually more than more than
(33:09):
you can truly appreciate. For instance, Warren Buffett said famously
a secretary, he pays more taxes than I do. People
got all upset about that. Well, it's true because Warren
Buffett is not a W two employee, meaning he doesn't
take a salary, or he doesn't a paycheck. He doesn't.
(33:31):
If you don't have a paycheck every week, every month,
then you don't have taxes taken out of it. His
secretary was a W two employee. Warren Buffett was compensated
through capital gains when he sold stock, when he sold
a business, when he liquidated a business, then he got
capital gains, a capital gains tax obligation. And the taxes
(33:55):
from W two's are thirty thirty five, fty percent sometimes
depending on federal state taxes and so forth. But capital
gains taxes is twenty one percent, twenty percent, depending on
where you are. Hello, So I love capital gains, and
that's what happens when you take more risk and you
(34:15):
you sell some real estate, or you sell a business,
or you sell some stock. That's a capital gain, a
gain on your capital. It's a different tax structure. So
one Buffet paid out crapload of taxes. He doesn't pay
any income tax. He paid capital gains tax. He didn't
pay traditional income tax. Most of the taxes actually paid
this country paid by the wealthy. So anybody no need
to hate it on the wealthy. Y'all not paying your taxes.
(34:36):
They do. We I guess we do pay the majority
of taxes in this country, so feel good about that.
It's just a different kind of taxes. And maybe I'll come
to do another if you want me to do another
video on this, sorry, another podcast on this, to go deeper,
I will be happy to just just just tell me
in the comments when you see this on a video
roll or on a social media clip, and I'll be
(34:57):
happy to take note of that. And let me tell
you some high profile entertainers and athletes who struggled with taxes.
Wesley Snipes, actor, Sir time federal time for tax evasion. Yes,
went to prison, the movie star. What's the lesson? Always
file your taxes, even if you dispute the amount. A
(35:18):
friend of mine called me recently because he was about
to have his taxes, his income tax, of his income,
his paycheck taken from him because the federal government had
reached in his bank was an employer and garnished it.
(35:38):
And he was days away from having a paycheck go
from you know, twenty thousand dollars or ten thousand dollars whatever,
it was down to literally one hundred and fifty bucks,
he told me. And I was able to make a
phone call get him connected with some folks and he
was able to make payment arrangements with the irs. And
you know, they don't want you to go to prison,
(36:00):
and they don't want to take your money, want their money.
So they made a painting arrangements and it was It
was a fair changes, no robbery. Both people walked away
slightly irritated but happy. Some entertainers, some creative people, don't
think that taxes are legal or whatever. Look, don't don't
make that. Don't do that. Don't do that. Don't start
fighting with the federal government after you've made a lot
(36:20):
of money talking about the federal government's not a real
tax in structure is not real. No, no, no, that's
a philosophical argument. You will lose it. Right again. I'd
rather owe money to my mother, god, rest of a
soul than the federal government. Pay your taxes, file your returns.
If you wanted to fight a legal battle or philosophical battle,
separate from that. Knock yourself out. But not after you
(36:43):
owe some money, after you made some money, and then
you decide you don't want to pay it. That is
a bad move. Lauryn Hill, the singer when to prison
for unpaid taxes. Did you hear me? Hello? Hello? Yeah?
(37:05):
Lauren Hill and Wesley Snipes went to prison for unpaid taxes. Lesson,
never ignore irs notices, work out a payment plan if needed,
give them the respect of a partner of a general partner.
Alan Irison NBA star blew through millions was saved by
(37:27):
a trust fund. Lesson set aside money for taxes and
long term security. Fat Joe the Rapper face jail time
for failing to pay millions in taxes. Lesson, have a
trusted CPA or tax attorney to keep you compliant. I
have a tax pro here in Atlanta, one of the
(37:49):
big four firms here in Atlanta, Big six firms Aprio.
I use them. I think they're fantastic. And I have
a I have a let me see. I have a accountant,
I have a bookkeeper. I have a controller, I have
a chief financial officer. I have an auditor, and I'm
(38:10):
a chief accountant outside of countant, and then I have
an auditor. All have different functions. I made sure that
I take that. I make sure to make that money straight.
I was born at night, not last night. You never
kid me, catch me slipping, and if I can at
all afford it. Avoid it. When you pay your taxes,
(38:31):
by the way, you pay attention to public services. I
was I paid thousand dollars in the state taxes one
year in Georgia. Yes, the total tax bill was much
much larger. And I drove down the street and ran
over a pothole. Do you know I would like went
back home and wrote a letter to the mayor and
the city council people, and the county officials and the
(38:53):
and the state transportation officials and the governor's office. Hey,
you need to pay you need to fix these potholes
like a meet Like I just paid eight hundred thousand
of dollars in the state taxes. This is I'm literally
that's literally my business. Right. You know they paid it paid?
Do you know they they filled that pothole and quick.
I'm a taxpayer. And conversely, nobody washes rental cars. Hello,
(39:17):
if you drive a rental car around, you don't own it,
what do you do? You drive it until the wheels
fall off? The dirty is all all get up in
two weeks, take it back. It's filthy. You can be
a saint and you don't wash the car. It's a
very rare person that washes a rental car because you
don't own it. There is something that happens when you
when you own something, when you own a house, it's
(39:38):
amazing that when you rent the house, the lawn is
up to your eyeballs. When you own the house, well,
the lawn gets cut somehow. DMX the wrapper he owed
millions to the irs. Lesson taxes are not optional. If
you earn money, plan for what you owe. Understanding the
basics income tax versus capital gains tax. So you know,
(40:04):
as I've said, investments are taxed differently and you're taking
more risk. It's a more complicated explanation, but essentially capital
gains is a better deal if you ever get to
a point where but you're again you're taking risk and
lose everything. There's no guarantee with an investment that's going
(40:24):
to pay off, and you're not getting a regular paycheck.
So the American capitalist system rewards you a little bit
by charging you a reduced tax amount, but it's still
a lot of money if you're making If you're talking
about over a million dollars somebot ten fifty million dollars,
twenty percent a lot of money. Right write offs and deductions,
(40:47):
the government wants businesses to reinvest, so use that to
your advantage. If you have a business expense, a proper
legitimate business expense, you can write it off. Check with
your tax prone what those look like. Talk to my
Hope financial coaches. They'll walk you through that. I'm going
to just take a moment here just talk about earned
income tax credit. If you have a tax pro or
if you don't, I want you to look into the
(41:09):
earned income tax credit. I've said this a million times.
I'll say it again. Now, you make less than sixty
five thousand dollars a year, the government owes you a
check for working. It's not a handout, it's it's a
bonus for working. You get a bonus on Wall Street
from your employer. At the end of the day after
a good year, you get a bonus from the government.
(41:30):
This is bipartisan legislation. This has been around since the seventies.
I believe it's the Earned Income Tax Credit is EIITC
twenty billion dollars goes back to the federal government every year.
Because we don't ask for the money that we're owed.
Don't jump with some free games. Jay Z would say,
I'm giving you a million dollars with a game of
nine to ninety nine. This is no ninety nine because
you're not even paying for the subscription of this podcast. So,
(41:53):
if you're making less than sixty five thousand dollars a
year and you earn money legitimately, the government owes you
a check. Now I'm gonna do it, sweet spot. Here,
you make thirty eight thousand dollars a year, you have
three children, the government owes you approximately sixty five hundred
seventy five hundred dollars, give or take. And if you
never file or eiitc if you have no idea what
I'm talking about, congratulations is retroactive for three years. So
(42:17):
if you make thirty eight thousand dollars a year and
you get a check for three times seven thousand dollars
just doing average, that's about, give or take twenty thousand dollars.
That's more money than you'd ever see at one time
in your life. Pay off your car note, pay down
your credit cards and pay them off. Put it down,
payment for your a house, start a business, start an
(42:38):
investment account. There's no restrictions on the money. It's your money,
and it's not a tax break. It's a check. Like
you get it wired to you when you modify or
file your tax returns. Say and this is transformational in
your life. So check with my people to obreas shop
about the earned income tax credit. Back to understanding the
(42:59):
basics LLC's, S corps and ten ninety nine income. And
by the way, I talk about corporate entities on my
season one podcast for a Money and for Money and Wealth,
So go back and watch or listen to that podcast.
Structuring yourself properly to minimize taxes is tied to which
kind of entity you you select, So limited reliability corporations
(43:23):
and S corpor C corp, all these different corporations, and
ten ninety nine income, which is contract income versus W
two income which is salary UH employee former employee income.
I'm not going too fast, which covering a lot of time,
and I've always hid in nine ninety nine. I will
try to wrap like Jay z in one in one podcast,
(43:44):
try and get a lot in in an hour. I
said it's gonna be forty five minutes, but this is
going to go over a little bit so I can
cover everything. Keep your records. This is top top tax
strategies for individuals and entrepreneurs. Keep receipts and track expenses right.
This is why I book keeping really matters. Right and
understand and understanding proper terms. My people at Operation can
(44:06):
help you with this. I remember it was a farmer
drug dealer who came to Operation no starting a restaurant
and he'd already brought up the restaurant equipment, at least
a building, all this stuff, and he came to us
for some business coaching and I ran into him and
I said, well, can you show me a balance sheet?
And he said, what's that? He was a smart guy,
but no one ever taught him the basics about a
balance sheet and income statement and network statement. A budget.
(44:29):
Everybody needs a budget. I have a budget. Everybody needs
a budget. That's a different podcast for another day. I'll
go through budgets for you, by the way. Tell me
the topics that you want me to break down, and
I'll be happy to break those down too. Keep receipts
and track expenses. Use business deductions wisely what the I
use basically get only what the IRS allows. If you overreach,
(44:52):
if you play games, the IRS is going to slap
you upside the head and it won't be nice and
they'll hit you with penalties, so just use proper business deductions.
By the way, if you have an office in your house,
as I do, you can deduct expenses tied to that office. Hello,
but talk to your tax pro about that. You can't
(45:12):
deduct the whole house, just the part that you use
for business. Plan for tax payments. Avoid the April surprise
by setting aside money quarterly or at least have a
plan for how you're going to pay these taxes or
work out a payment arrangement. But just don't ignore it.
Common tax pitfalls and how to avoid them. Not filing
(45:36):
taxes on time is just the Again, that was my mistake,
and penalties add up fast. I mean, the IRS charge
is an incredible extruciating amount of interest because they don't
want you owing them money. They want you to get
out of debt from them as soon as you can,
as fast as you can, and they don't care who you are.
One of my famous friends, the womantioned his name, but
(45:57):
he called me and he had this problem with the IRS,
and he was a household name, and I called for
him and got him connected with people, and it took
months to get that. Such situation. There was this lady
who made you know, I don't know, sixty two thousand
dollars a year, who was completely in control of this
guy's life, and she didn't care for his confidence, and
she made it extraordinarily painful for him. But she was
(46:20):
in charge of everything. We finally got her moved out
of the way after months and months and months. But
this guy couldn't sleep for a while because she basically
could have She could have ruined his whole life. And so,
you know, just be just do it right the first time.
So following time, mixing personal and business expenses a no no.
Get separate accounts, separate accounts for business, separate accounts for
(46:44):
personal in my opinion, Ignoring tax planning another no no.
The wealthy used tax strategies before tax season, not after,
including me. I'm working on my tax strategy all year round.
Here's some takeaways. Contracts are about protection. Never enter a
business or a financial agreement without a contract. Someone in
(47:06):
my life, a loved one, wanted to borrow some money
recently for a business. People in my family not I
had to come to John Brian sideways asking for money.
I covered this with Cam again, Cam Newton when I
was with him on my podcast with him. We had
a lot of fun together talking about family coming to
us asking us crazy stuff. People don't come to me
(47:26):
asking crazy stuff anymore because they know I'm going to respond,
so they're prepared. So somebody had a business idea and
they knew the revenue was coming in, so they knew
they could say, Hey, this money, this check's coming in,
it's just delayed. Can I get can you basically factor this?
Can you, as they call it, factory, can you bridge
this for me? So I gave them a small loan
(47:46):
and they were going to pay me back in thirty days.
They signed a contract. It was a simple contract, one pager,
but they signed it. And I know these people very well.
I love them, but this is business and they needed
a thirty day extension, which I gave them. But I
got my money. Hello, people get amnesia, particularly with it.
You know them. They're really nice when they want to
(48:09):
borrow the money. When you want to back Wait, what
you sweating me about that for? Because it's my money
and you wanted you weren't pay You know, an attitude
when you borrow the money from me? Right, People were funny. Okay.
Taxes are part of the game. People learn how to
play it legally and to maximize your wealth. Be proactive,
not reactive. By the way, I had one investment that
(48:32):
wasn't paying off for me the way I thought, and
I was sort of upset about that until those losses
from that investment help to defer a tax obligation. Turn
a tax obligation to a tax refund. So even though
I lost money on the business on revenue. There's two
(48:53):
ways to make money, make more or spend less. And again,
once you gain some wealth, gain some traction, you're going
to have a tax obligation every year, and legitimate business
expenses and legitimate tax write offs all qualify you have
a commercial real estate building. This doesn't work for your
primary residence or commercial real estate as an example, or
income producing real estate. You can have depreciation, which is
(49:17):
a tax write off a tax benefit. Anyway, I want
you to learn all this stuff, but step by step,
be proactive, not react. Of a smart contract and tax
strategies can save you money stress and legal trouble and
jail time. Wealth is not just about making money, it's
about keeping it and protecting it. Take a step today,
(49:40):
review a contract you've got, talk to a tax professional
that you know, find a pro, find build a team
right and set up a financial system for your future
like get quick Quicken or quick books, or get an
Excel spreadsheet or money. I think I think Apple calls
it mac iOS calls there is money or numbers. I
(50:01):
think they call it numbers, which is the and Mac
and Microsoft calls and Excel, use a use a spreadsheet,
or use a financial app. There's no excuse in this
technology world not to get it right right. And I
want you to follow me on money and wealth and
tell your friends to do the same, and get the
book Financial Literacy for All and tell go to Operation
(50:23):
Hope and tell them I sent you. They'll give you
because I sent you, they'll give you a one thousand
dollars financial coaching and scholarship and Operation Hope good for
a year to help you get through your credit score
and get through your initial budgeting and review where you
are on all your books and your records, and talk
to them about textas and talk to them about your contracting.
(50:44):
And then and then from there you might graduate to
our business courses and in a more detailed financial coaching
opportunity through Operational But we're going to give you this
thousand dollars scholarship on me for coaching and counseling. That's
the value of it. It be does you listen to money
and wealth and you're part of the silver rights movement?
(51:06):
From civil rights to silver rights, from the streets to
cutting deals in the suites, from protesting in the suites
to getting a seat in the business suite. This is
the new movement. This is real world transformational change. Because
you get in game, you are gaining your financial literacy,
(51:29):
which I believe is a silver rights issue of degeneration.
Actually think it's a civil rights issue of degeneration. I
think that AI literacy is a silver rights issue degeneration.
And I want you to follow all of Operation Hope's work,
follow all of John O'Briant my work on all accounts.
Get the book Financial Literacy for All. Tell your friends
to listen to this podcast, have a meeting with your friends,
(51:50):
meeting with your family. On contract. By the way, I
hate to break this to you, but marriage is a
form of a contract. You don't think it's a contract.
Try to get divorced and see what happens. Right in
California's a community property state, which is different from Georgia.
That's a fairness state. And you know, you got to
know all this stuff because it affects you. Like seriously,
(52:14):
I was talking to Cam Newton and he he was like,
do you realize that when you're working for the NFL,
you're an employee. You're a W two employee, So you
can't be signing though talking about I want to just
pay me and pay my ALLC and I'll pay my
own taxes. You are an employee. They're giving you health
and benefits and they're taking the entrepreneurial risk, and you
pay taxes per game, per city, per state if you're
(52:34):
in the NFL. Now get that one, all right? This
is dropping the mic with John O'Brien. I hope you
love the light. I hope you saw the light. I
hope that you get some light and don't think light
and think lightly of this and end up having to
stare down the desk of an IRS agent who is
not so friendly. I want you, or a legal contractor
(52:57):
a court because you didn't pay attention to a contract
you sign, or arguing with somebody over who got you
good because they've paid attention to a contract and you didn't.
And again don't be emotional about this. This is just business.
Capitalism is a gladiator sport, and you can master it.
You've been doing so much with so little for so long.
You can almost do anything with nothing. God made you
(53:19):
to succeed. He made you great. Now go find your greatness.
This is John O'Brien, and this has been money and Wealth.
(53:40):
Money and Wealth with John O'Brien is a production of
the Black Effect Podcast Network. For more podcasts from the
Black Effect Podcast Network, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.
Welcome the Money and Wealth with John O'Briant, a production
of the Black Effect Podcast Network and iHeartRadio. Hey, Hey,
this is John Hope Brian and this is Money and Wealth.
I am honored to bring to you a special segment
(00:24):
breaking down contracts and taxes. This is something that is
fundamental to your success in business, in life, even your
personal life. I'll cover all of this over the next
forty five minutes or so. This was inspired in part
by the artist Jailly Roll and a clip that he
(00:48):
did on social media, which I then turned into a
piece of my straight Talk Live series on my platforms
where he talked about contracts in the music business and
he broke down how artists get in a bad spot.
(01:09):
I'm not going to say taken advantage of, because as
I will describe here, in most cases, they're not being
actively taken advantage of. They're just not actively paying attention
to the thing that matters most. It's the music business.
In that example, it's the business of music, and to
think about it in any other ways is not to
(01:32):
understand what you're doing. Or to quote my dear friend,
my duty departed friend, Quincy Jones, he says, if you
think you're in the music business, and you don't own
music rights, publishing rights, licensing rights, some kind of rights,
writing rights. You're actually not in the music business. You're
(01:52):
a temporary performer. Drop the mic. Statement by Quincy Jones.
Jelly Row goes into this thing, and you can look
at the foot clip on mind, social media platforms, at
John Brian everywhere wherever you platform you Tuesday to focus
on Instagram is probably easier. I break this down in
(02:16):
great detail, but the key part of this is he
explains that when you owe a million dollars, you've been
given in advance. Make this clear. You've been given an
advance for a million dollars. You don't realize that you
owe that money back. It's not a payment and you know, oh,
(02:36):
that's all good. Next item. It is an advance against revenue.
And the way that works is you you extract things
that give it a million dollars. It's supposed to pay
for productions of your albums and your videos and your
business expenses. Oftentimes people go start raving mad and start
(02:57):
spending money on stuff, you know, cars for their friends
and jewelry and travel and all of that, and then
they run out of money. And they go back and
they may ask for some more and that's you know,
they think they're getting some more money in payment. Really
(03:20):
you really just increasing your internal credit line. And the
way that the record company gets a back is they've
got a contract with you in this example and in
his example was seventy thirty. He thought that was a
really great deal. Some artists are eighty twenty. Some artists
are ninety five to five mean meaning the record company
(03:41):
in this example. And don't get mad. Then business as
a capitalist is just a it's just not emotional. Business
is a gladiator sport. It's a non emotional situation. It's
not meant for it to be personal. They just it
is what it is. So again, be careful of the
contracts that you signed. But and this is in fair
(04:03):
exchange is no robbery. So in this example, he owned
thirty percent of his revenue. They owned seventy percent of
every dollar that was made until he paid the advance back.
Let's use a million dollars as an easy number. So
until so they got for every dollar of new album sales.
To make this easy, the record company got seventy cents
(04:24):
and he got thirty cents. Are paid back at the
rate of the deal, which means that out of his
thirty cents, the million dollars he was advanced gets paid back,
and he keeps paying that million dollars back from his
thirty percent while the record company is getting there seventy
percent until he repays the million dollars in total, in
(04:47):
which case he then starts recouping thirty percent to his
pocket paid back at the rate of the deal, which
means that the record company, the fancier, the venture capitalist,
the one who's backing you here, the one who's taking
the most risk, may earn a million dollars before you
even get your first cens of your thirty cents. In fact,
(05:09):
they will make earn a million dollars the're gonna earn.
They're gonn get their million dollars back, but they may
own it, earn another million dollars or seven hundred thousand
dollars or you know, it depends on how this gets calculated.
But they may earn a million dollars back on top
of your on top of your your million that you
(05:30):
re imburse them before you make a dime, because they're
making a seventy thirty split. It's actually they can actually
do better than that in an example, and fair exchange
is no robbery. So just just watch the contracts you signed,
because if it's a ninety five to five contract, which
some artists do sign, I mean, that's really painful. They
(05:53):
make ninety five cents of every dollar that comes in,
you make five cents, and you're going to pay them
out of your five cents the million dollars back, right,
And yeah, we don't want to do that calculation. So
let's get into the positives here, because these contracts don't
(06:14):
have to be ankles around your weights, around your angle
or and you know, some kind of a negative situation
that can be quite empowering. They've been for me in
most of my business experience. But actually I've had some
bad experiences too. I've written some bad countures, I've had
some bad agreements. I've had run ins with the irs
(06:35):
and franchise tax board in California. We'll get into that.
But let's let's talk about contracts in taxes as a
foundation for your financial success. Let's now start with my
own personal story, and I described this in my book
Financial Literacy for All, which is a bestseller, been a
(06:56):
bestseller for the last year encourage you to go get
your copy. And when I was in business, I wasn't
paying attention to paying taxes because my view was the
company wasn't making money, so why should I worry about it?
And I worry about it when I become profitable. I
(07:16):
actually made two mistakes. I hadn't paid I hadn't filed
personal tax returns for about six years in a row. Yes, me,
this is one of my teens. I was homeless during
the time. I was homeless six months of my life,
So I guess you'll understand some of that. I was
just rolling really fast, trying to hustle. You can all
relate to that. But no excuses I should have filed
(07:36):
my taxes. Well, that wasn't the worst part, the fact
that I hadn't paid my taxes, because that was not
I didn't filed taxes or I didn't know any taxes,
but I hadn't filed them. So once I did file them,
I owe penalties. And the IRS is an extraordinarily punitive lender,
so you don't you want to owe money to anybody
(07:59):
but the IRS. And they didn't come after me, they
didn't threaten me. I was a small fish not making
a lot of money at the time. But I finally
filed them all at one time before they came up
to me. I came to them, which I'm encouraging you
to do, and I just paid the penalty through a
payment agreement over time. That way they hit me was
(08:23):
later on, when I was making a little money through
the business. Well, the business was not profitable. I had
a lot of cash flowing through the business. I had
employees I was paying. I was not paying with holdings
out of the employees paycheck. So you when your employees
are a W two employee, they're a salary or hourly employee,
(08:44):
You've got to pay with holdings out of that. Well, again,
I figured the business wasn't profitable. I wasn't profitable. Why
should I do that. I just write them a straight
check for what I owe them. The Franchise Tax Board
the State of California out a wind of that, and
they literally put up a cash register in my lobby
(09:07):
and they wanted their pound of flesh. They would take
every receipt, every check that came in that front door
until they got their paid paid back the taxes plus
the penalties and interest that I owed them from the
from the employee with holdings that I stole from them.
(09:28):
I didn't steal it, but I I burrowed it. And
and it was very painful. We're talking about you know,
it was, as I recalled, bout forty thousand dollars in total.
And and back then that was a that was a
that was a death nail for me. And I had
to hustle and take care of them and take care
of my responsibility at the same time. And I learned
a very valuable lesson from that experience. Uh, those two experiences,
(09:52):
which is just just treat the irs as your business
partner and file your tax returns. Look, you cannot on
your life without you know, this whole country runs on
taxes being paid. Your police are being paid by taxes,
Your schools are being paid by taxes. Your the roads
(10:15):
and gutters and the maintenance, the building of bridges, uh lights,
street lights, sanitation services. I mean, all the infrastructure for
the city you live in and the country you live
in is paid through taxes or as a to pay
this really plane, even if you want to distribute money
(10:39):
like a socialist, you have to first collect it like
a capitalist. All this is connected and folks as well
I don't you know, I don't want to be a capitalist.
I want to work for nonprofit. Where nonprofits money comes from,
and it's in this case the government in the government
gets that money and money from taxes or if you
(11:01):
get in your money from charitable contributions from wealthy individuals,
those individuals are getting a tax break because of making
a charitable contribution to you, which affects Hello, they're taxes.
Al Capone, the famed gangster, did not get taken into prison, arrested,
(11:23):
and then put ultimately into prison because of great murder mayhem,
all of which he on some level was guilty of
but was never convicted and dieded but never convicted. He
just got away with it all. But when the IRS
came up to him for tech, when the federal government
came up to him for tax evasion, boom like. They're
(11:43):
like the government was gangster. They're like, you can make
all this money illegally if you want to, and we
can't prove you made it illegally, but your lifestyle and
such that you can't do that without making X kind
of money and you didn't pay taxes on that, so
it's ill gotten gains. We want to share, and they
put him and they locked him up and he died
(12:05):
a very painful death. After that, it was over. So
pay your taxes. So you're going to understand the basis
of contracts. In taxes, you're going to learn how to
protect themselves, yourselves from unscrupulous people, and protect your businesses.
You're going to get best practices for wealth safety and
(12:27):
well building wealth safely and legally and sustaining it retaining it. Okay,
So a contract is just simply an agreement, right to
start with the basics. A contract is simply in agreement.
But it's only as good as as it's enforceability, and
it's only as good as a people. I might also
(12:48):
add who are signing the contracts. If you have two
unethical people on two sides of a signing of a contract,
the contract is useless because it's only as good as
a full faith and ability of the people signing it.
But let's assume that people are honorable. So every major deal, partnership,
(13:08):
or investment should have a contract. I love limited liability contracts.
LLC's are simple or elegant, and they're easy for anybody
to understand. I have a ton of LLC agreements. When
I had the Promise Homes company, I since sold most
of the company, But when I had that company, we
had just I mean, I think it was hundreds of
(13:31):
LLC agreements. The ideal situation, we owned seven hundred homes.
Just under that, the ideal situation, which would have been
to have each one of the seven hundred homes in
its own limited liability corporation, its own LLC. I think
we bought the homes in bunches, so we would have
a group of homes in one limited liability corporation. So
if somebody tripped fail of fake injury or whatever on
(13:54):
a house, or wanted to sue because they realized I
owned it, or whatever, you could only sue the asset
or assets that are in that bucket of assets in
that LLC Limited about ability corporation. You couldn't punch through
the LLC and get to me or my family or
you know, my other companies are all that kind of stuff,
because you're greedy and unethical in that situation, not suggesting
(14:19):
somebody's greedy and unethical, but limited liability for alcs really
help in that regard. So key contract clauses in what
they mean payment terms avoid getting paid late or being
paid not at all by having payment terms. What's the
scope of work? It prevents misunderstandings about the responsibilities that
(14:42):
you have in a contract or someone else. What's a
termination clause is what happens if things don't work out
in an agreement. So so how do you basically how
you get out of the agreement? By the way, I
must just throw one in here. In perpetuity, right, that
means that I just I love that frame. I was
with Cam and Cam Newton, the NFL star, We did
(15:07):
a podcast together on his show Funky Fridays. You'll be
hearing that soon and it's a great, great interview with him.
He's a great guy. And he learned the phrase in
his contract negotiations in perpetuity in negotiating on his media
company after his football crew career. He learned that lesson
(15:28):
and it's stuck in his head. That means it goes
on forever. Right, Whatever you're signing in perpetuity means you're
giving rights forever in perpetuity. These things really matter. What's
(15:50):
a non compete and confidentiality it's protecting your ideas and
your businesses. Essentially, noncompete agreement and accomplished reality. Agree. Let
me talk to you about a lesson I learned in
a contract I had done a deal with. Well, let
me tell you a bad situation first, and I'll take
(16:10):
you a good one. So when I was coming up
in business, Brian Group Companies, I believe it was w
You know, if you got the name of the end
of the evening, it was Brian New Companies and WCC
Funding Corporation. I was like nineteen twenty one years old,
and I ran this business in La Los Angeles, and
(16:31):
we were in an office building, the Westwood gave Way
Complex at Santa Monica in Los Yenaga, and my assistant
now my chief of staff, Rachel daff I'd ask her
to go downstairs every day pretty much and get myself
a sandwich or whatever, and I would just work through lunch.
And I was so focused on working and hustling whatever
(16:52):
that I created my own terms for how I was
going to pay that bill, I guess, and I had
failed to pay the cafe bill downstairs. It wasn't much,
it was eight hundred bucks or something, but even work,
and that guy sued me. I have never been sued
by anything important like no, no, anything important. I've taken
(17:13):
care of all my big deals, all mortgages, contracts. My
credit score is like cool, it's all. But this one situation,
these small ones, I let these things slip. I didn't sign,
I didn't have a contract with the cafe owner. They
let me slide basically on you know, having an informal situation,
and they took me to court, small claims court, and
(17:34):
it was very easy for them to get a judgment
against me. In that case, I didn't show up, so
the judge hit me with a default judgment. It was
a default judgment because you I didn't show up, So
if you don't show up for court, you will get
a default judgment against you. And it's very painful because
there's a one sided conversation and you can't argue about it.
And I ended up owing this guy. It wasn't a
(17:56):
lot much with eight hundred thousand dollars, but back then
there was a lot of money for me and the
more painful ones. I had a guy, Jimmy was his name,
and it was Jimmy's car detailing. I remember Jimmy and
Jimmy would wash my car and it was a Mercedes.
I think four to twenty sl Sel and I love
the car, and he would have washed the car once
(18:18):
a week. And Jimmy had a contract. Jimmy didn't have
have a high school education, right, Jimmy didn't have good
teach but Jimmy had a good sense. And Jimmy on
his bill that I or my assistant would sign every
time he finished the washing a car, we'd sign an
invoice it said at the bottom ten percent fee compounded
(18:43):
with penalties for all unpaid balances, where this whole thing
was an unpaid balance. And this dude ultimately took me
to court. I thought he was a friend. He was like, no,
I'm I'm a businessman, or as as jay Z would say,
I'm not a business man. I'm a business man. And
(19:03):
Homeboy took Homeboy with no teeth oldofsiss who I thought
was my buddy who was washing my car, oh and
returning back to the hood while I was at Westwood
Gateway Complex in West la and that marble office building
trying to be important. He took me to court in
one because he had contract agreement with me and I
(19:27):
didn't pay attention, and he was right. He had me
my signature and all these invoices, and it said clear
as day that I would pay a ten percent feet
on the unpaid balance. It was all an unpaid balance,
and I'd paid penalties and interest on the top of that.
I had no choice but to pay him, and I
(19:48):
was honored to do it. He earned it all that,
and I actually felt very bad about it. Lesson learned
later on and later on, meaning like recently I signed. Recently,
last ten years, I signed a major contract with a
couple of friends to start a business. And it was
(20:10):
a general partnership, and I had a majority of ownership,
and my two partners investors had They owned forty percent
and I owned sixty percent. And there was different kinds
of shares. I had essentially common shares, and they had
preferred shares. And it is what it sounds like. Their
(20:31):
shares were preferred at a preferred position and a preferred
in rights right than my shares, my common shares were
as it sounds common and like I didn't have common
sense to pay attention to this. It turned out just fine,
by the way, there were great guys. But I thought
I assumed because I owned sixty percent of the company
(20:53):
that that just meant I had a majority vote, a
majority of view, I'd run in the way I wanted
want to. And I was naive because these were the
money guys, and they knew what the heck they were
talking about. I was a thousand there, but they were
billionaires at least one hundred millionaires. And well I wasn't
a thousand aire, but you get the point. I was
(21:14):
outmatched on the finance understanding side of this equation. These
guys were geniuses and in what they do. And even
though I own a majority, their attorney explained to me
one day when I was pushing a narrative, pushing what
I wanted to do, John, you don't you own a
(21:37):
majority of the ownership, but they control a majority of
the company through their preferred shares. I'm gonna go off
with a tangent here just time. I tell you. There
are things like there's poison pills you can put in
a stock agreement. Like I believe Mark Zuckerberg, who I
know at Facebook now Meta, has a poison pill that
(21:57):
no matter how much the stock gets deluded, he controls
the company. There are there are founders who put these
poison pills in there. I don't know that to be
the absl case from that met up, but I'm pretty
sure it is these contracts where they found a company
and they will structure it through the goverferance agreement and
the rights where their their shock their stock has outside
(22:21):
weight to other shareholders irrespective of how much they get diluted.
De looted means uh as deluted is the opposite of concentrated.
Concentrated a strong and rigid and intense, and diluted is
what it sounds like. You delute a drink at a club.
You know what that means, right, they gave you some
cheap drinks. You dilute your interests, You have less power.
(22:42):
So so that's an aside. If you want me to
go into that, put that in comments when you see
this online. I'm happy to go into greater detail and
explain what the poison pills and all that kind of
stanf some means means and stands for. But I want
to get through a lot of content here in a
very short period of time. So back to the basic
premise that I had basically synthetic equity at common shares,
(23:07):
and they had preferred shares with rights and privileges that
were brilliantly crafted and they didn't do me no wrong.
It was all there for me to view. I was
casual about it because I knew them, and although probably
would have changed much. Actually they but the attorney explained
to me, because they put up the money, they had
(23:27):
more rights and they were right, and so I could
not just do as I like. We ended up working
it out where I did as I preferred, but I
had to consult with my partners. I did not have
the contractual right to do that. They had to give
me the right to do that, and over time, as
I proved myself, they loosened the grip on the contractual rights,
(23:52):
and at the end of the term, at the end
of the day, I was actually running exactly the way
I wanted to. But I honored my agreement with my partners,
and they left that deal very happy. We tell you
about negotiations, which is not part of a contract per se.
But if you leave a slight every good negotiation means
you leave the negotiation, but everybody in it leaves slightly irritated. Okay,
(24:17):
if you have a good negotiation, you leave the table.
Everybody slightly irritated, slightly annoyed because no one got everything.
They wanted, but you got what you needed. Let me
tell you some high profile entertainers and athletes who signed
bad contracts. Some examples. There's a group TLC love their music,
they sign an unfair deal or some people some people
(24:38):
might call an unfair deal with the Face Records. Now,
I'm saying this in particular because there's a lot of
people running around talking about my Jewish brothers and sisters
and how somehow they've ruined the music business. And I
don't know why people are picking on Jews. There are
black people. This is in the Face Records, there's with
Motown Records. There's a bunch of black people in music.
There's a bunch of white people in music. There's a
bunch of Asian people in music, a bunch of you know,
(24:59):
everybody in music. I don't know either picking on one group.
But it's just wrong to point out that, oh, this
contract is unethical. No, the contract is a legal contract.
You just don't like it because you don't like the
terms and how they got better a better negotiation to
you because they are paying attention to the dollars and
you're paying attention to the music notes. And in this
(25:22):
one example, it's the face wreck souse. We need to
like knock that off, Like we need to stop all
this hater aid and you know, hate his hate. We
just need to stop it. And we need to stop
blaming people because they're successful or more successful for us.
Maybe we're jealous, and maybe we don't understand. Don't don't
hate somebody. Try to learn from somebody. Try to understand
(25:42):
how they've mastered the game, and you can master it too.
They want to be a great singer, a great dancer
in this example, and you are a great whatever ball
player or whatever, and you want to be a better
business person. Michael Jordan Michael Jordan's Magic Johnson used to
use his celebrity status to go approach the folks on
(26:04):
the front row of the basketball games at the Lakers
and go to lunch with them. These are the people
who bought the best seats, and he wanted to trade
lunch for business knowledge. Really smart. What is Magic Johnson today?
Not just an NBA great, He's a great businessman. So
TLC signed a bad deal with the Face Records. They
thought it was a bad deal. I wasn't in it.
(26:26):
I'm sure the Face Record thought it was a great
deal when they wrote it, and I'm sure they'd say
whether people didn't pay attention, just like everybody else would
say people didn't pay attention. And there by the way
in a negotiation, at the table is the bartering place,
and one person is trying to extract as much from
you as they can while paying you the least, right,
(26:47):
that's their job. The other person's job is to give
you the least value and while getting the most money.
So both folks in that example are getting what are
doing their job. One person's trying to extract while giving
you the least, the other person is trying to give
you the lease while getting the most, and that is
(27:08):
caught a negotiation. Hello, So capitalism is a glad eator sport.
As I said, don't take it personal, which is business.
Don't get mad, just get smart. And so with it's
a face deal. They paid them only a fraction of
album sales. So the lesson here is always understand your
royalty structure and seek legal advice before signing a contract.
(27:30):
Don't be cheap, and don't think that contracts don't matter.
Contracts absolutely do matter, and I don't want you finding
out the wrong way that they matter the most. In
these situations is against the music business. In this example,
Meghani Stallion filed a legal battle with fifteen oh one
Entertainment over a restrictive contract. The lesson here is a
(27:52):
new artist should get an independent legal counsel, not just
a label provided lawyer. So if the lawyer that given
you a from the label, they probably have an interest.
Or as my friend President Bill Clinton would say, it's
hard to get somebody to agree to the truth when
the lie is paying their paycheck. Hello, I'll repeat that again.
President Bill Clinton said, it's hard to get someone to
(28:13):
agree to the truth when the lie is paying their paycheck.
Or as I would say, to rationalize is to tell
rational lies. So if you are getting paid by the
record label to be an attorney, guess whose interests you're
most interested in. It's not the artist that you're in
the room with, it's the person that you're aligned with. Said,
(28:35):
I did a deal recently where and I knew what
was going on. I did deal recently where I had contracts.
I let my partner draw up contracts, and it was
sort of two against one, so to speak, And I
knew that the contract would be imbalanced, as I would say,
But I made sure that things that were most important
to me were handled, and I let them get away
(28:56):
with the things that were less important than me, because
I didn't want to win the battle and lose the
war or the spirit of that partnership and where we
were going next was more important to me than fighting
over the details that they were fighting over. That's another
conversation as a more sophisticated situation. In order to play
that game, you know the game you're playing, it's got
to be chess and not. You know, some people are
paying chess, some people are changing checkers. I'm playing chess.
(29:19):
Lo Wayne. He struggled with the cash money records deal
for years. The lesson was always have an exit clause
and dispute resolution terms in your contract. Is easy to
get married, it's hard to get divorced. Scottie Pippen, the
NBA signed a long term deal with the Chicago Bulls
that severely undervalued him. In his opinion, I sort of agree,
(29:44):
but again, it's just business. That is not to Chicago
Bulls job to pay you top dollar, pay you every
dollar they can pay you. Their job is not to
give you, to empty their pockets to give you everything
they got their job is to give you at least
that they can that they can get away with getting
you with having without having you be unhappy. So what's
the lesson here? Consider how contracts evolve over time and
(30:06):
inflation is a factor in a long term contract, and
consider all that before locking in long term deal terms.
You can do contracts and phases or have them have
renewal clauses and have you know, sort of check in
points in a contract. So the best practice for smart
smart contract and get it in writing. A handshake is
(30:28):
not a contract. Hello, Hello, Hello. People are like, I
don't remember that you remember that? I don't know. I
don't know if people get get amnesia when they don't
like a situation, right, uh, and read before you sign
what is the fine print? And if you don't like
fine print, get somebody with glasses who's an accountant and
a lawyer who love fine print. By the way, you're
(30:49):
a counting your lawyers should not be at the club
hanging out with your people. If folks, if your if
your professionals are hanging out with you the club, then
may be the wrong people you want, boring people. You
want people who don't want to go to bed at
eight o'clock two, theoclock at night. Right, you know, if
you want whose evening starts at one in the morning
talking about the attorney, they are lawyer, they your account
That is just not my suggestion. You want left brain
(31:10):
analytical people who are absolutely is obsessed with accounting and
numbers and all that stuff, as you're assessed with music
and notes and all that stuff if you're in the
music business, so the fine print is really really important.
They can get you on the fine print, and somebody
can get you on the interpretation of five words that
look common sense to you. But an attorney will understand
uh uh that gets you know that needs to be
(31:33):
uh that that needs to be treated in a very
special way. But only attorney would know that. Hire an
attorney when it when it when it's serious. Don't do
a d I Y contract when the stakes are high.
In other words, don't do a do it yourself contract
when the stakes are right. I mean going to YouTube
talking about I'm a lawyer now, because I watched the
YouTube video, you get clocked. So common mistakes that can
(31:54):
cost you not defining clear payment terms, signing something without
understanding all the terms. This is a common mistake. In
the music business, not having a contract at all. Verbal
agreements equal risk. Okay, how to play the game and win, right,
And let's now talk about the tax system. Uh, tax
(32:20):
laws favorite business owners and investors over employees. Uh, it's
just the way a t I is. You know, tax
business owners like me and investors have lobbyists, right, and
they spent a lifetime in Washington, d C. Trying to
get terms that benefit them. So don't don't get mad.
The game is, understand it. But also business owners and
(32:42):
investors take more risks and employees. So there you go,
and an employee as a W two relationship, so the
chances in sort of taxes are sort of pre defined
in that situation. So you know, as long as you
understand it, you should be. Okay, it's more dynamic for
business owner entrepreneur like me, but understanding your tax strategy
can help you legally and contractually more than more than
(33:09):
you can truly appreciate. For instance, Warren Buffett said famously
a secretary, he pays more taxes than I do. People
got all upset about that. Well, it's true because Warren
Buffett is not a W two employee, meaning he doesn't
take a salary, or he doesn't a paycheck. He doesn't.
(33:31):
If you don't have a paycheck every week, every month,
then you don't have taxes taken out of it. His
secretary was a W two employee. Warren Buffett was compensated
through capital gains when he sold stock, when he sold
a business, when he liquidated a business, then he got
capital gains, a capital gains tax obligation. And the taxes
(33:55):
from W two's are thirty thirty five, fty percent sometimes
depending on federal state taxes and so forth. But capital
gains taxes is twenty one percent, twenty percent, depending on
where you are. Hello, So I love capital gains, and
that's what happens when you take more risk and you
(34:15):
you sell some real estate, or you sell a business,
or you sell some stock. That's a capital gain, a
gain on your capital. It's a different tax structure. So
one Buffet paid out crapload of taxes. He doesn't pay
any income tax. He paid capital gains tax. He didn't
pay traditional income tax. Most of the taxes actually paid
this country paid by the wealthy. So anybody no need
to hate it on the wealthy. Y'all not paying your taxes.
(34:36):
They do. We I guess we do pay the majority
of taxes in this country, so feel good about that.
It's just a different kind of taxes. And maybe I'll come
to do another if you want me to do another
video on this, sorry, another podcast on this, to go deeper,
I will be happy to just just just tell me
in the comments when you see this on a video
roll or on a social media clip, and I'll be
(34:57):
happy to take note of that. And let me tell
you some high profile entertainers and athletes who struggled with taxes.
Wesley Snipes, actor, Sir time federal time for tax evasion. Yes,
went to prison, the movie star. What's the lesson? Always
file your taxes, even if you dispute the amount. A
(35:18):
friend of mine called me recently because he was about
to have his taxes, his income tax, of his income,
his paycheck taken from him because the federal government had
reached in his bank was an employer and garnished it.
(35:38):
And he was days away from having a paycheck go
from you know, twenty thousand dollars or ten thousand dollars whatever,
it was down to literally one hundred and fifty bucks,
he told me. And I was able to make a
phone call get him connected with some folks and he
was able to make payment arrangements with the irs. And
you know, they don't want you to go to prison,
(36:00):
and they don't want to take your money, want their money.
So they made a painting arrangements and it was It
was a fair changes, no robbery. Both people walked away
slightly irritated but happy. Some entertainers, some creative people, don't
think that taxes are legal or whatever. Look, don't don't
make that. Don't do that. Don't do that. Don't start
fighting with the federal government after you've made a lot
(36:20):
of money talking about the federal government's not a real
tax in structure is not real. No, no, no, that's
a philosophical argument. You will lose it. Right again. I'd
rather owe money to my mother, god, rest of a
soul than the federal government. Pay your taxes, file your returns.
If you wanted to fight a legal battle or philosophical battle,
separate from that. Knock yourself out. But not after you
(36:43):
owe some money, after you made some money, and then
you decide you don't want to pay it. That is
a bad move. Lauryn Hill, the singer when to prison
for unpaid taxes. Did you hear me? Hello? Hello? Yeah?
(37:05):
Lauren Hill and Wesley Snipes went to prison for unpaid taxes. Lesson,
never ignore irs notices, work out a payment plan if needed,
give them the respect of a partner of a general partner.
Alan Irison NBA star blew through millions was saved by
(37:27):
a trust fund. Lesson set aside money for taxes and
long term security. Fat Joe the Rapper face jail time
for failing to pay millions in taxes. Lesson, have a
trusted CPA or tax attorney to keep you compliant. I
have a tax pro here in Atlanta, one of the
(37:49):
big four firms here in Atlanta, Big six firms Aprio.
I use them. I think they're fantastic. And I have
a I have a let me see. I have a accountant,
I have a bookkeeper. I have a controller, I have
a chief financial officer. I have an auditor, and I'm
(38:10):
a chief accountant outside of countant, and then I have
an auditor. All have different functions. I made sure that
I take that. I make sure to make that money straight.
I was born at night, not last night. You never
kid me, catch me slipping, and if I can at
all afford it. Avoid it. When you pay your taxes,
(38:31):
by the way, you pay attention to public services. I
was I paid thousand dollars in the state taxes one
year in Georgia. Yes, the total tax bill was much
much larger. And I drove down the street and ran
over a pothole. Do you know I would like went
back home and wrote a letter to the mayor and
the city council people, and the county officials and the
(38:53):
and the state transportation officials and the governor's office. Hey,
you need to pay you need to fix these potholes
like a meet Like I just paid eight hundred thousand
of dollars in the state taxes. This is I'm literally
that's literally my business. Right. You know they paid it paid?
Do you know they they filled that pothole and quick.
I'm a taxpayer. And conversely, nobody washes rental cars. Hello,
(39:17):
if you drive a rental car around, you don't own it,
what do you do? You drive it until the wheels
fall off? The dirty is all all get up in
two weeks, take it back. It's filthy. You can be
a saint and you don't wash the car. It's a
very rare person that washes a rental car because you
don't own it. There is something that happens when you
when you own something, when you own a house, it's
(39:38):
amazing that when you rent the house, the lawn is
up to your eyeballs. When you own the house, well,
the lawn gets cut somehow. DMX the wrapper he owed
millions to the irs. Lesson taxes are not optional. If
you earn money, plan for what you owe. Understanding the
basics income tax versus capital gains tax. So you know,
(40:04):
as I've said, investments are taxed differently and you're taking
more risk. It's a more complicated explanation, but essentially capital
gains is a better deal if you ever get to
a point where but you're again you're taking risk and
lose everything. There's no guarantee with an investment that's going
(40:24):
to pay off, and you're not getting a regular paycheck.
So the American capitalist system rewards you a little bit
by charging you a reduced tax amount, but it's still
a lot of money if you're making If you're talking
about over a million dollars somebot ten fifty million dollars,
twenty percent a lot of money. Right write offs and deductions,
(40:47):
the government wants businesses to reinvest, so use that to
your advantage. If you have a business expense, a proper
legitimate business expense, you can write it off. Check with
your tax prone what those look like. Talk to my
Hope financial coaches. They'll walk you through that. I'm going
to just take a moment here just talk about earned
income tax credit. If you have a tax pro or
if you don't, I want you to look into the
(41:09):
earned income tax credit. I've said this a million times.
I'll say it again. Now, you make less than sixty
five thousand dollars a year, the government owes you a
check for working. It's not a handout, it's it's a
bonus for working. You get a bonus on Wall Street
from your employer. At the end of the day after
a good year, you get a bonus from the government.
(41:30):
This is bipartisan legislation. This has been around since the seventies.
I believe it's the Earned Income Tax Credit is EIITC
twenty billion dollars goes back to the federal government every year.
Because we don't ask for the money that we're owed.
Don't jump with some free games. Jay Z would say,
I'm giving you a million dollars with a game of
nine to ninety nine. This is no ninety nine because
you're not even paying for the subscription of this podcast. So,
(41:53):
if you're making less than sixty five thousand dollars a
year and you earn money legitimately, the government owes you
a check. Now I'm gonna do it, sweet spot. Here,
you make thirty eight thousand dollars a year, you have
three children, the government owes you approximately sixty five hundred
seventy five hundred dollars, give or take. And if you
never file or eiitc if you have no idea what
I'm talking about, congratulations is retroactive for three years. So
(42:17):
if you make thirty eight thousand dollars a year and
you get a check for three times seven thousand dollars
just doing average, that's about, give or take twenty thousand dollars.
That's more money than you'd ever see at one time
in your life. Pay off your car note, pay down
your credit cards and pay them off. Put it down,
payment for your a house, start a business, start an
(42:38):
investment account. There's no restrictions on the money. It's your money,
and it's not a tax break. It's a check. Like
you get it wired to you when you modify or
file your tax returns. Say and this is transformational in
your life. So check with my people to obreas shop
about the earned income tax credit. Back to understanding the
(42:59):
basics LLC's, S corps and ten ninety nine income. And
by the way, I talk about corporate entities on my
season one podcast for a Money and for Money and Wealth,
So go back and watch or listen to that podcast.
Structuring yourself properly to minimize taxes is tied to which
kind of entity you you select, So limited reliability corporations
(43:23):
and S corpor C corp, all these different corporations, and
ten ninety nine income, which is contract income versus W
two income which is salary UH employee former employee income.
I'm not going too fast, which covering a lot of time,
and I've always hid in nine ninety nine. I will
try to wrap like Jay z in one in one podcast,
(43:44):
try and get a lot in in an hour. I
said it's gonna be forty five minutes, but this is
going to go over a little bit so I can
cover everything. Keep your records. This is top top tax
strategies for individuals and entrepreneurs. Keep receipts and track expenses right.
This is why I book keeping really matters. Right and
understand and understanding proper terms. My people at Operation can
(44:06):
help you with this. I remember it was a farmer
drug dealer who came to Operation no starting a restaurant
and he'd already brought up the restaurant equipment, at least
a building, all this stuff, and he came to us
for some business coaching and I ran into him and
I said, well, can you show me a balance sheet?
And he said, what's that? He was a smart guy,
but no one ever taught him the basics about a
balance sheet and income statement and network statement. A budget.
(44:29):
Everybody needs a budget. I have a budget. Everybody needs
a budget. That's a different podcast for another day. I'll
go through budgets for you, by the way. Tell me
the topics that you want me to break down, and
I'll be happy to break those down too. Keep receipts
and track expenses. Use business deductions wisely what the I
use basically get only what the IRS allows. If you overreach,
(44:52):
if you play games, the IRS is going to slap
you upside the head and it won't be nice and
they'll hit you with penalties, so just use proper business deductions.
By the way, if you have an office in your house,
as I do, you can deduct expenses tied to that office. Hello,
but talk to your tax pro about that. You can't
(45:12):
deduct the whole house, just the part that you use
for business. Plan for tax payments. Avoid the April surprise
by setting aside money quarterly or at least have a
plan for how you're going to pay these taxes or
work out a payment arrangement. But just don't ignore it.
Common tax pitfalls and how to avoid them. Not filing
(45:36):
taxes on time is just the Again, that was my mistake,
and penalties add up fast. I mean, the IRS charge
is an incredible extruciating amount of interest because they don't
want you owing them money. They want you to get
out of debt from them as soon as you can,
as fast as you can, and they don't care who you are.
One of my famous friends, the womantioned his name, but
(45:57):
he called me and he had this problem with the IRS,
and he was a household name, and I called for
him and got him connected with people, and it took
months to get that. Such situation. There was this lady
who made you know, I don't know, sixty two thousand
dollars a year, who was completely in control of this
guy's life, and she didn't care for his confidence, and
she made it extraordinarily painful for him. But she was
(46:20):
in charge of everything. We finally got her moved out
of the way after months and months and months. But
this guy couldn't sleep for a while because she basically
could have She could have ruined his whole life. And so,
you know, just be just do it right the first time.
So following time, mixing personal and business expenses a no no.
Get separate accounts, separate accounts for business, separate accounts for
(46:44):
personal in my opinion, Ignoring tax planning another no no.
The wealthy used tax strategies before tax season, not after,
including me. I'm working on my tax strategy all year round.
Here's some takeaways. Contracts are about protection. Never enter a
business or a financial agreement without a contract. Someone in
(47:06):
my life, a loved one, wanted to borrow some money
recently for a business. People in my family not I
had to come to John Brian sideways asking for money.
I covered this with Cam again, Cam Newton when I
was with him on my podcast with him. We had
a lot of fun together talking about family coming to
us asking us crazy stuff. People don't come to me
(47:26):
asking crazy stuff anymore because they know I'm going to respond,
so they're prepared. So somebody had a business idea and
they knew the revenue was coming in, so they knew
they could say, Hey, this money, this check's coming in,
it's just delayed. Can I get can you basically factor this?
Can you, as they call it, factory, can you bridge
this for me? So I gave them a small loan
(47:46):
and they were going to pay me back in thirty days.
They signed a contract. It was a simple contract, one pager,
but they signed it. And I know these people very well.
I love them, but this is business and they needed
a thirty day extension, which I gave them. But I
got my money. Hello, people get amnesia, particularly with it.
You know them. They're really nice when they want to
(48:09):
borrow the money. When you want to back Wait, what
you sweating me about that for? Because it's my money
and you wanted you weren't pay You know, an attitude
when you borrow the money from me? Right, People were funny. Okay.
Taxes are part of the game. People learn how to
play it legally and to maximize your wealth. Be proactive,
not reactive. By the way, I had one investment that
(48:32):
wasn't paying off for me the way I thought, and
I was sort of upset about that until those losses
from that investment help to defer a tax obligation. Turn
a tax obligation to a tax refund. So even though
I lost money on the business on revenue. There's two
(48:53):
ways to make money, make more or spend less. And again,
once you gain some wealth, gain some traction, you're going
to have a tax obligation every year, and legitimate business
expenses and legitimate tax write offs all qualify you have
a commercial real estate building. This doesn't work for your
primary residence or commercial real estate as an example, or
income producing real estate. You can have depreciation, which is
(49:17):
a tax write off a tax benefit. Anyway, I want
you to learn all this stuff, but step by step,
be proactive, not react. Of a smart contract and tax
strategies can save you money stress and legal trouble and
jail time. Wealth is not just about making money, it's
about keeping it and protecting it. Take a step today,
(49:40):
review a contract you've got, talk to a tax professional
that you know, find a pro, find build a team
right and set up a financial system for your future
like get quick Quicken or quick books, or get an
Excel spreadsheet or money. I think I think Apple calls
it mac iOS calls there is money or numbers. I
(50:01):
think they call it numbers, which is the and Mac
and Microsoft calls and Excel, use a use a spreadsheet,
or use a financial app. There's no excuse in this
technology world not to get it right right. And I
want you to follow me on money and wealth and
tell your friends to do the same, and get the
book Financial Literacy for All and tell go to Operation
(50:23):
Hope and tell them I sent you. They'll give you
because I sent you, they'll give you a one thousand
dollars financial coaching and scholarship and Operation Hope good for
a year to help you get through your credit score
and get through your initial budgeting and review where you
are on all your books and your records, and talk
to them about textas and talk to them about your contracting.
(50:44):
And then and then from there you might graduate to
our business courses and in a more detailed financial coaching
opportunity through Operational But we're going to give you this
thousand dollars scholarship on me for coaching and counseling. That's
the value of it. It be does you listen to money
and wealth and you're part of the silver rights movement?
(51:06):
From civil rights to silver rights, from the streets to
cutting deals in the suites, from protesting in the suites
to getting a seat in the business suite. This is
the new movement. This is real world transformational change. Because
you get in game, you are gaining your financial literacy,
(51:29):
which I believe is a silver rights issue of degeneration.
Actually think it's a civil rights issue of degeneration. I
think that AI literacy is a silver rights issue degeneration.
And I want you to follow all of Operation Hope's work,
follow all of John O'Briant my work on all accounts.
Get the book Financial Literacy for All. Tell your friends
to listen to this podcast, have a meeting with your friends,
(51:50):
meeting with your family. On contract. By the way, I
hate to break this to you, but marriage is a
form of a contract. You don't think it's a contract.
Try to get divorced and see what happens. Right in
California's a community property state, which is different from Georgia.
That's a fairness state. And you know, you got to
know all this stuff because it affects you. Like seriously,
(52:14):
I was talking to Cam Newton and he he was like,
do you realize that when you're working for the NFL,
you're an employee. You're a W two employee, So you
can't be signing though talking about I want to just
pay me and pay my ALLC and I'll pay my
own taxes. You are an employee. They're giving you health
and benefits and they're taking the entrepreneurial risk, and you
pay taxes per game, per city, per state if you're
(52:34):
in the NFL. Now get that one, all right? This
is dropping the mic with John O'Brien. I hope you
love the light. I hope you saw the light. I
hope that you get some light and don't think light
and think lightly of this and end up having to
stare down the desk of an IRS agent who is
not so friendly. I want you, or a legal contractor
(52:57):
a court because you didn't pay attention to a contract
you sign, or arguing with somebody over who got you
good because they've paid attention to a contract and you didn't.
And again don't be emotional about this. This is just business.
Capitalism is a gladiator sport, and you can master it.
You've been doing so much with so little for so long.
You can almost do anything with nothing. God made you
(53:19):
to succeed. He made you great. Now go find your greatness.
This is John O'Brien, and this has been money and Wealth.
(53:40):
Money and Wealth with John O'Brien is a production of
the Black Effect Podcast Network. For more podcasts from the
Black Effect Podcast Network, visit the iHeartRadio app, Apple Podcasts,
or wherever you listen to your favorite shows.
Host
John Hope Bryant
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