May 3, 2022 • 12 mins
Business Attorney, Asha Wilkerson goes over when you should form an LLC and information to limit liability exposure for you and your business. Additionally, she shares tips to protect gig-workers from being audited.
Guest IG: @ashawilkersonesq
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Episode Transcript
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Speaker 1 (00:00):
Hey, Money Movers, Welcome back to Money Moves, the daily
podcast determined to give you the keys to the Kingdom
of financial stability, wealth and abundance. Hey money Movers, Welcome
back to the Money Moves Podcast powered by Greenwood. People
(00:22):
always aspire to be entrepreneurs in every different industry. We
have people who are starting businesses every day, every minute,
if you will, and we want to make sure that
we're helping future entrepreneurs have all the tools so that
they can succeed in growing and scaling their business. Each
one teach one here on the Money Moves Podcast, and
who better to help us than our passionate business attorney,
(00:44):
Asha Wilkerson Money Movers, Welcome to Business Moves. Hi Ashow,
welcome back to the podcast. I'm so excited to be here,
so thank you for the opportunity. In the invitation. On
today's segment of Business School, I want to talk about
the people who have just started a business. They've gotten
up the courage to start a business. They're making plans
(01:05):
for success, but they want to know at what point
do they form an LLC. That's a great question and
it's one that I get all the time because depending
on who you talk to, you'll get different answers. So
I'm going to answer this as an attorney and not
as a c p A, which is a certified public accountant.
So the things that we think about as an attorney
are your liability exposure when you start taking money, and
(01:28):
planning for taxes. So I'll go into the liability part first.
A lot of people, you know, we're in the United States,
people are ligitious. They are really really excited to try
and sue somebody for something. Right, So, if you were
in AO, like that idea of ambulance chase, so we're
talking about how to avoid getting sued, right, absolutely, So,
(01:49):
if you were running a business where you are putting
your hands on somebody, Let's say you're a personal trainer,
or you do massage, or or you are inviting someone
into your space. Let's say you have a retail place
yourself and candles or clothes people walk in or um.
If you are advising somebody or doing something that if
it goes wrong, it has a significant impact on their life,
(02:11):
then that means that you want to make sure that
you have a legal entity, whether it's an LLLC or
corporation in place to protect you and you want to
do business from withinside that legal structure, because if someone
is unhappy you can't finish their contract, they walk into
your store and they slip and fall, or you know,
you've given somebody a massage and you've made the problem
(02:34):
a little bit worse before it gets better. Then if
they sue you and say, hey, you caused me harm,
I want you to fix this, they're suing the business
and not you. So what the legal structure does is
that protects your personal assets, so any money you have, retirement,
home vehicles, things like that, from any business liabilities. And
(02:54):
on the flip side, since healthcare we're in the middle
of COVID right now, healthcare is expensive. At least a
few years ago, one of the number one causes of
debt for people in America was medical expenses. So if
you happen to get sick and now the hospital is
coming to collect money from you, you want to make
sure that your business is also protected from your personal
(03:15):
debts so that your business can continue to grow and
you can handle the personal side in a different realm
Oh wow. And so this is like it sounds also
simplistic um, but something that you definitely want to do
from the outset. Absolutely, people, I believe, in my opinion,
people hesitate because it's unfamiliar, because they just don't know.
(03:36):
But it's not really that complicated. To start, you do
want to make sure you follow expert advice, right. You
don't just want to do it on your own, especially
not if you are going into business with somebody and
you want to make sure that you have the right
protections written in your operating agreement for an LLC or
your by laws for a corporation. But it is a
really quick and easy step to protect you for years
(03:58):
and years to come. Wow, excellent, thank you so much.
All right, So limiting our liability exposure it you know,
it comes with a lot of fear because you're like, chiechh,
I don't want that to happen to me. But you know,
if you reach out to the right people, it's definitely
going to save you time and a lot of money
in the long run. Absolutely, And it's you know, it's
(04:20):
kind of a pessimistic attitude. It's not quite you know,
if you were going to be exposed, it's really when
you're going to be exposed, and so you want to
set yourself up in the best position to win so
you're not, you know, covering for a mistake you made
in the future. I have a question because we talk
a lot on the podcast about this gig economy and
(04:40):
the different types of levels of entrepreneurship. So this makes
a lot of sense for a massage therapist. You have
a storefront where someone's going to come in, they could
slip and fall an ice out front. What about just
you know, gig economists. I'm driving for Uber. Is there
anything I should look out for in terms of that? Yeah? Absolutely, well.
Our Internal Revenue Code, the i r S Code favors businesses.
(05:03):
It really really favors big corporations and in corporation regular
corporations after that, and then limited liability companies or ll c's,
and it does not favor sole proprietorships that don't have
any legal structure. So actually, what does that even mean.
What it means is that you get tax breaks and
tax write offs when you have a business. So if
(05:24):
you are working in the gig economy, or let's say
you left your corporate job and now you're just taking
contract work, there are a number of things you will
not be able to write off as a sole proprietor
because the i r S says you have to show
a profit for the last five of the last seven
years that you have been in business. Right, But if
(05:45):
you have an LLC or a corporation, you have told
the government, Hey, I'm trying to be legit. There's nothing
that says that you have to be profitable once you
start a business, but it says I'm trying to be legit.
You know, there are tax breaks that you can take
advantage of, and if it happens that you don't end
up paying taxes because of the way things shake out,
then that's okay. When you have an LLC or a corporation.
(06:06):
If you just have a sole proprietorship, the government says
you can't get a tax break for having a hobby.
And if you're not reporting an income or you're trying
to take a tax break, we're more likely or they're
more likely to audit you and to really look at
all the things that you're doing. If you haven't taken
this step to set up an LLC or corporation, well
you don't have to tell me twice. Like that's it.
(06:28):
That's the end of the podcast, guys, totally, totally. And
the other thing that I always tell people when they
come to me and ask about llc s or corporations,
is that I always tell them also to talk to
a c p A so an accountant, Right, somebody that's
certain faction. Not your uncle who's been doing the books
for his business, you know, for a number of years,
but somebody who went to school, has a license and
(06:50):
has something to lose UM for giving you bad advice.
And usually you know the c p a s are
going to look at it from what can you save
in terms of income? But for my position, I'm really
trying to put black and brown businesses in a in
a place to win, and having that legal structure around
you puts you in a place to win again. It
allows you to take care or take tax deductions. If
(07:12):
you have children who are working aige, you can pay
them and the I R S isn't going to take UM.
I think it's like FICA, like the normal payroll taxes out.
Because they want you to create jobs, they are going
to give you the benefit of hiring your children in
that process. Right, you can run retirement accounts through your business,
(07:34):
You can pay for medical expenses, anything that you would
do or that you would look for if you were
working for a big time corporation, think about using your
business in that same way and take all of those
benefits for you. Wow, that's a lot of smarts and
expertise packed into just our first um answer to that.
All right, so let's move on to part two. Um,
(07:55):
what was the second thing that you recommended on when
early entrepreneur or should form an LLC? So, in my opinion,
as soon as you start transacting and taking money from somebody,
I want that to be in your business bank account
for you. And if you aren't going to set up
an LLC or a corporation, you have to set up
(08:16):
a separate bank account for your business. But it's even
say that again, Yeah, you have to separate. You cannot
commingle funds. They call it co mingle, thing about mingling
at a party. You don't want to mingle anything with
your business and your personal life. So if there is
some dispute like a chargeback, or you know, some issue
with the money that you're taking, you just want to
(08:38):
move all of that liability into the business and take
it away from you personally. You want to protect yourself
and protect your business. Okay, okay, I love that. So
as soon as you start transacting, and that means cash
at Benmo, all those payment systems that have now become
so easy, from Stripe to this. But you're taking money,
you're getting fees for services. You eat an LLC absolutely,
(09:01):
and you gotta get it set up correctly, and you've
got to get your accounting stuff set up correctly as well.
So again, don't just rely on your uncle that's been
doing his own books. Do not do it right. Go
to somebody who can help you get set up, and
if you can't pay them regularly, pay for them to
set you up properly and to teach you how to
(09:21):
do it so you could do it yourself until you
grow and can hire the expert in that area. And
that's like a very good point. If you can't pay
them regularly, just start fresh and writes absolutely absolutely all right,
last tip for us today. Yeah, So, you know, one
thing that I hear all the time from folks in
my community is like it's just not right, Like I
just gotta I just I don't know, maybe when I
(09:43):
make this amount or or when I've set up this
sales funnel, don't worry about that. As soon as you
start your business think about this business as your baby.
When we have children, they start small and then macro
right growth is inevitable. Think of your business in the
same way and know that getting things perfect is not
going to happen. So getting things done is better than
(10:04):
getting them perfect. So don't hesitate, don't hold yourself back
because you are unsure. We talked about in the last episode,
so many free, really good resources out there for the
experts because we all want to see you win, So
take advantage of them. Start your company, and you know,
do it like all the bosses do. You're right there,
just gotta do it. I love that take the leap
(10:27):
and done is better than perfect. You know, you can
perfect things and tweak things along the way, but you
can't get anywhere if you don't take that first leap.
So I love that. Um, you know, we support all
the business entrepreneurs and all the visionaries who are really
out there trying to change the world and build something
from nothing. But you've got to do it right, and
(10:48):
you've got to have the great people in your corner.
And I'm so grateful to you Asha for being here
today just to help school us and give us all
the tips and tricks to success. Thank you so much.
I love it so Asha. Before you leave, can you
tell us where our Money Moves audience can find you
on social media so they can keep up with all
the gems that you are dropping. Absolutely, come hang out
(11:09):
with me on Instagram. My I G handle is Asha
Wilkerson e s Q and you can also check out
my website, the Wilkerson Law Office dot com. All right,
Money Movers, that's all the time we have for today,
but make sure to follow Asha on all of our
social media handles, and of course, make sure to tune
in Monday through Friday and subscribe to the Money Moves
(11:29):
podcast powered by Greenwood so that you two can have
the keys to financial freedom that you so rightly deserve.
Thank you so much for tuning in Money Moves audience.
If you want more or a recap of this episode,
please go to the bank Greenwood dot com and check
out the Money Moves podcast blog. Money Moves is an
(11:52):
I Heart radio podcast powered by Greenwood Executive produced by
Sunwise Media, Inc. For more podcasts on I heart Radio,
visit the i heart Radio app, Apple Podcasts, or wherever
you get your podcasts from
Hey, Money Movers, Welcome back to Money Moves, the daily
podcast determined to give you the keys to the Kingdom
of financial stability, wealth and abundance. Hey money Movers, Welcome
back to the Money Moves Podcast powered by Greenwood. People
(00:22):
always aspire to be entrepreneurs in every different industry. We
have people who are starting businesses every day, every minute,
if you will, and we want to make sure that
we're helping future entrepreneurs have all the tools so that
they can succeed in growing and scaling their business. Each
one teach one here on the Money Moves Podcast, and
who better to help us than our passionate business attorney,
(00:44):
Asha Wilkerson Money Movers, Welcome to Business Moves. Hi Ashow,
welcome back to the podcast. I'm so excited to be here,
so thank you for the opportunity. In the invitation. On
today's segment of Business School, I want to talk about
the people who have just started a business. They've gotten
up the courage to start a business. They're making plans
(01:05):
for success, but they want to know at what point
do they form an LLC. That's a great question and
it's one that I get all the time because depending
on who you talk to, you'll get different answers. So
I'm going to answer this as an attorney and not
as a c p A, which is a certified public accountant.
So the things that we think about as an attorney
are your liability exposure when you start taking money, and
(01:28):
planning for taxes. So I'll go into the liability part first.
A lot of people, you know, we're in the United States,
people are ligitious. They are really really excited to try
and sue somebody for something. Right, So, if you were
in AO, like that idea of ambulance chase, so we're
talking about how to avoid getting sued, right, absolutely, So,
(01:49):
if you were running a business where you are putting
your hands on somebody, Let's say you're a personal trainer,
or you do massage, or or you are inviting someone
into your space. Let's say you have a retail place
yourself and candles or clothes people walk in or um.
If you are advising somebody or doing something that if
it goes wrong, it has a significant impact on their life,
(02:11):
then that means that you want to make sure that
you have a legal entity, whether it's an LLLC or
corporation in place to protect you and you want to
do business from withinside that legal structure, because if someone
is unhappy you can't finish their contract, they walk into
your store and they slip and fall, or you know,
you've given somebody a massage and you've made the problem
(02:34):
a little bit worse before it gets better. Then if
they sue you and say, hey, you caused me harm,
I want you to fix this, they're suing the business
and not you. So what the legal structure does is
that protects your personal assets, so any money you have, retirement,
home vehicles, things like that, from any business liabilities. And
(02:54):
on the flip side, since healthcare we're in the middle
of COVID right now, healthcare is expensive. At least a
few years ago, one of the number one causes of
debt for people in America was medical expenses. So if
you happen to get sick and now the hospital is
coming to collect money from you, you want to make
sure that your business is also protected from your personal
(03:15):
debts so that your business can continue to grow and
you can handle the personal side in a different realm
Oh wow. And so this is like it sounds also
simplistic um, but something that you definitely want to do
from the outset. Absolutely, people, I believe, in my opinion,
people hesitate because it's unfamiliar, because they just don't know.
(03:36):
But it's not really that complicated. To start, you do
want to make sure you follow expert advice, right. You
don't just want to do it on your own, especially
not if you are going into business with somebody and
you want to make sure that you have the right
protections written in your operating agreement for an LLC or
your by laws for a corporation. But it is a
really quick and easy step to protect you for years
(03:58):
and years to come. Wow, excellent, thank you so much.
All right, So limiting our liability exposure it you know,
it comes with a lot of fear because you're like, chiechh,
I don't want that to happen to me. But you know,
if you reach out to the right people, it's definitely
going to save you time and a lot of money
in the long run. Absolutely, And it's you know, it's
(04:20):
kind of a pessimistic attitude. It's not quite you know,
if you were going to be exposed, it's really when
you're going to be exposed, and so you want to
set yourself up in the best position to win so
you're not, you know, covering for a mistake you made
in the future. I have a question because we talk
a lot on the podcast about this gig economy and
(04:40):
the different types of levels of entrepreneurship. So this makes
a lot of sense for a massage therapist. You have
a storefront where someone's going to come in, they could
slip and fall an ice out front. What about just
you know, gig economists. I'm driving for Uber. Is there
anything I should look out for in terms of that? Yeah? Absolutely, well.
Our Internal Revenue Code, the i r S Code favors businesses.
(05:03):
It really really favors big corporations and in corporation regular
corporations after that, and then limited liability companies or ll c's,
and it does not favor sole proprietorships that don't have
any legal structure. So actually, what does that even mean.
What it means is that you get tax breaks and
tax write offs when you have a business. So if
(05:24):
you are working in the gig economy, or let's say
you left your corporate job and now you're just taking
contract work, there are a number of things you will
not be able to write off as a sole proprietor
because the i r S says you have to show
a profit for the last five of the last seven
years that you have been in business. Right, But if
(05:45):
you have an LLC or a corporation, you have told
the government, Hey, I'm trying to be legit. There's nothing
that says that you have to be profitable once you
start a business, but it says I'm trying to be legit.
You know, there are tax breaks that you can take
advantage of, and if it happens that you don't end
up paying taxes because of the way things shake out,
then that's okay. When you have an LLC or a corporation.
(06:06):
If you just have a sole proprietorship, the government says
you can't get a tax break for having a hobby.
And if you're not reporting an income or you're trying
to take a tax break, we're more likely or they're
more likely to audit you and to really look at
all the things that you're doing. If you haven't taken
this step to set up an LLC or corporation, well
you don't have to tell me twice. Like that's it.
(06:28):
That's the end of the podcast, guys, totally, totally. And
the other thing that I always tell people when they
come to me and ask about llc s or corporations,
is that I always tell them also to talk to
a c p A so an accountant, Right, somebody that's
certain faction. Not your uncle who's been doing the books
for his business, you know, for a number of years,
but somebody who went to school, has a license and
(06:50):
has something to lose UM for giving you bad advice.
And usually you know the c p a s are
going to look at it from what can you save
in terms of income? But for my position, I'm really
trying to put black and brown businesses in a in
a place to win, and having that legal structure around
you puts you in a place to win again. It
allows you to take care or take tax deductions. If
(07:12):
you have children who are working aige, you can pay
them and the I R S isn't going to take UM.
I think it's like FICA, like the normal payroll taxes out.
Because they want you to create jobs, they are going
to give you the benefit of hiring your children in
that process. Right, you can run retirement accounts through your business,
(07:34):
You can pay for medical expenses, anything that you would
do or that you would look for if you were
working for a big time corporation, think about using your
business in that same way and take all of those
benefits for you. Wow, that's a lot of smarts and
expertise packed into just our first um answer to that.
All right, so let's move on to part two. Um,
(07:55):
what was the second thing that you recommended on when
early entrepreneur or should form an LLC? So, in my opinion,
as soon as you start transacting and taking money from somebody,
I want that to be in your business bank account
for you. And if you aren't going to set up
an LLC or a corporation, you have to set up
(08:16):
a separate bank account for your business. But it's even
say that again, Yeah, you have to separate. You cannot
commingle funds. They call it co mingle, thing about mingling
at a party. You don't want to mingle anything with
your business and your personal life. So if there is
some dispute like a chargeback, or you know, some issue
with the money that you're taking, you just want to
(08:38):
move all of that liability into the business and take
it away from you personally. You want to protect yourself
and protect your business. Okay, okay, I love that. So
as soon as you start transacting, and that means cash
at Benmo, all those payment systems that have now become
so easy, from Stripe to this. But you're taking money,
you're getting fees for services. You eat an LLC absolutely,
(09:01):
and you gotta get it set up correctly, and you've
got to get your accounting stuff set up correctly as well.
So again, don't just rely on your uncle that's been
doing his own books. Do not do it right. Go
to somebody who can help you get set up, and
if you can't pay them regularly, pay for them to
set you up properly and to teach you how to
(09:21):
do it so you could do it yourself until you
grow and can hire the expert in that area. And
that's like a very good point. If you can't pay
them regularly, just start fresh and writes absolutely absolutely all right,
last tip for us today. Yeah, So, you know, one
thing that I hear all the time from folks in
my community is like it's just not right, Like I
just gotta I just I don't know, maybe when I
(09:43):
make this amount or or when I've set up this
sales funnel, don't worry about that. As soon as you
start your business think about this business as your baby.
When we have children, they start small and then macro
right growth is inevitable. Think of your business in the
same way and know that getting things perfect is not
going to happen. So getting things done is better than
(10:04):
getting them perfect. So don't hesitate, don't hold yourself back
because you are unsure. We talked about in the last episode,
so many free, really good resources out there for the
experts because we all want to see you win, So
take advantage of them. Start your company, and you know,
do it like all the bosses do. You're right there,
just gotta do it. I love that take the leap
(10:27):
and done is better than perfect. You know, you can
perfect things and tweak things along the way, but you
can't get anywhere if you don't take that first leap.
So I love that. Um, you know, we support all
the business entrepreneurs and all the visionaries who are really
out there trying to change the world and build something
from nothing. But you've got to do it right, and
(10:48):
you've got to have the great people in your corner.
And I'm so grateful to you Asha for being here
today just to help school us and give us all
the tips and tricks to success. Thank you so much.
I love it so Asha. Before you leave, can you
tell us where our Money Moves audience can find you
on social media so they can keep up with all
the gems that you are dropping. Absolutely, come hang out
(11:09):
with me on Instagram. My I G handle is Asha
Wilkerson e s Q and you can also check out
my website, the Wilkerson Law Office dot com. All right,
Money Movers, that's all the time we have for today,
but make sure to follow Asha on all of our
social media handles, and of course, make sure to tune
in Monday through Friday and subscribe to the Money Moves
(11:29):
podcast powered by Greenwood so that you two can have
the keys to financial freedom that you so rightly deserve.
Thank you so much for tuning in Money Moves audience.
If you want more or a recap of this episode,
please go to the bank Greenwood dot com and check
out the Money Moves podcast blog. Money Moves is an
(11:52):
I Heart radio podcast powered by Greenwood Executive produced by
Sunwise Media, Inc. For more podcasts on I heart Radio,
visit the i heart Radio app, Apple Podcasts, or wherever
you get your podcasts from
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