#570 Should I Be Afraid to File a Tax Extension (Listen before April 15)

In this episode of the Main Street Business Podcast, Mark J. Kohler and Mat Sorensen show how a tax extension can reduce stress, cut audit risk, and buy you time for smart tax moves. Get the facts on key deadlines, solo 401(k)s, and what to do now if you’re behind.

Here are some of the highlights:

• Mark emphasizes that filing an extension gives time to prepare better, including looking for additional write-offs.
• Mat clarifies that the IRS is unlikely to shut down and that savvy individuals are extending their tax returns.
• How rushing tax returns often leads to missed deductions, which can be avoided by extending the deadline.
• Mark and Mat discuss the six-month extension available for personal returns, extending the deadline to October 15.
• Mat mentions the need to file an extension for business returns if they haven't been done by March 15.
• Filing an extension incurs no penalty and is a simple one-page form.
• The penalty for failure to pay, which is a half-percent per month, and the larger penalty for failure to file.
• How filing an extension can reduce the chances of an audit, as the IRS assigns audits based on the order of returns received.

Don't know how much you should pay when filing a tax extension? Find the answer here - https://markjkohler.com/how-much-should-i-send-in-with-my-extension/

• Grab my FREE Ultimate Tax Strategy Guide HERE!
• Are you ready to get certified in EVERY strategy I teach? Start your journey with a FREE 15-minute demo to explore the Main Street Tax Pro Certification.
• You don't want to miss this! Secure your tickets for the most significant tax & legal event of the year: Tax and Legal 360
• Looking to connect with a rock star law firm? KKOS is only a click away!
• Check out our YOUTUBE Channel Here: https://www.youtube.com/markjkohler
• Craving more content? Check out my Instagram!

Episode Transcript

Speaker 1 (00:00):
Privacy is different than asset protection, much like
camouflage is different than abulletproof vest.
You want both.
I may not be seen, but if I doget seen, I've got something
under that camouflage to protectme.
Well, the trust is part of thisoverall plan.
We want to have an LLC to helpprotect you or those assets.
That's the number one reasonfor an LLC.

(00:20):
You do it in one sheet of paper.
That's not an LLC.
You need all the pieces andparts.
When you start to design thepayroll portion in combination
with the 401k, you find a sweetspot.
You start building wealth withmore tax deductions and less tax
.
That, my friends, is what thepower of the S-Corporation
unlocks.

(00:48):
I am convinced that everyAmerican needs a trust, and I've
got four reasons why.
I've helped thousands ofclients around the country
changing their lives with astructure that always involves a
trust.
Now, what kind of trust am Italking about?
A revocable living trust.
They are a revocable trust.
You're the trustee and you canchange them anytime you want.
They're also extremelyaffordable and they will be with

(01:10):
you for the rest of your life.
And again, whether you're youngor old, married or single,
these trusts are a powerful toolin your plan.
Okay, the number one reason whyevery American needs a trust is
because it brings everythingtogether.
It is the foundation of yourtrifecta and it's going to help
you build wealth and your legacy.
Now I understand that tax andlegal topics are not sexy, no

(01:31):
matter how hard I try.
So what we've created to makeit simple and understandable and
exciting for our clients isthis visual representation we've
called the trifecta, and thistrifecta helps our clients
really organize their life tosave taxes, build wealth and
protect it.
So it starts again with thatfoundation being the revocable

(01:52):
living trust and the 1040 taxreturn here as the receptacle of
all of our income every year,and we got to file a tax return
every year.
On the left side, we want to putour operations, which are going
to generally create thisordinary income problem the most
highly taxed income in ourlives is ordinary income.

(02:13):
There might be a W-2 off to theside, but then this could
generally be some sort of sidehustle or something that's
involved into a substantialbusiness, llc or S-corporation a
substantial business, llc or Scorporation.
On the right side, we're goingto have our assets and this is
going to be generating passiveincome.
I'd like to divide this sideinto two pieces A and B.

(02:41):
Here we're going to have ourtax-free or tax-deferred buckets
, which would generally be IRAsor 401ks or health savings
accounts, and then here would beour after-tax money, kind of
our LLCs that hold rentalproperty or investments.
There is the trifecta.
I've got a left side foroperations where I'm going to
try to maximize my write-offs.
On the right side, I've gotpassive income and losses,

(03:05):
possibly with depreciation andall those goodies, but asset
protection to protect thiswealth I'm trying to grow In the
middle is this wall thatcreates this asset protection.
Most of my liability is overhere.
Well, I want to protect myassets with this barrier and say
, nope, you're not getting overon the right side where I'm
building this umbrella of assetsand who owns all this?

(03:27):
Where's it all go?
You got it down in your trustand when you see that your trust
is an anonymous name of a trustthat allows for some privacy
planning which we'll come to inone of our four items I really
like this trust to create thatfoundational picture where we
can now say, okay, as I buildwealth during my life, I want it

(03:51):
to all be able to flow intothis one area that I can then
distribute or allocate, takingcare of myself for the rest of
my life, creating privacy andalso providing some tax planning
so I can bring it all together.
And when I can see it and I canvisualize it, that's when it
happens.
Number two and that's right, Isaid it a moment ago privacy.

(04:11):
In today's world of technologyand everything out there on the
web, we have got to be morecareful than ever where our name
may pop up in the ownership ofassets.
So a trust, if named properly,can give you some of that
privacy.
Now, more specifically, privacyis different than asset
protection, much like camouflageis different than a bulletproof

(04:33):
vest.
You want both.
If I'm going into a firefight,especially when I play paintball
, which is super scary, I wantto have camouflage and some sort
of protection so that I may notbe seen.
But if I do get seen, I've gotsomething under that camouflage
to protect me.
Well, the trust is part of thisoverall plan.
When you name your trust,please do not put your name in

(04:54):
it.
You might call it the Blue SkyTrust, dated XYZ.
Well, whenever I can get awaywith using the trust name and
all the ownership of my assets,my name isn't out there in the
public realm.
Okay, now a word of warning.
Privacy can come at differentlevels too.
The trust is just the startingpoint.
As you embark on this plan, youmay want to go a little deeper

(05:16):
with some additional layers ofprivacy, and that's great.
But it starts with the trust.
Number three avoiding probate.
And what the heck is probate?
Well, probate is this courtprocess set up all over America.
There's probate judges, probatecourts, probate attorneys all
dealing with people that diedeither with or without a will

(05:37):
and no trust.
See, when you pass away,someone's got to decide where
all your stuff goes.
And a will might be nice.
It'll say here's where my stuffgoes and here's my executor,
but a court has to approve it.
Does someone have a gun totheir head when they sign that
will?
Is it really their will?
Well, a trust allows you tobypass that entire process of

(05:57):
probate.
Now, I'm not saying a will isall bad.
At least you're putting downwho gets what and you're hoping
a court will approve it andhandle it.
But it's going to be expensive.
It can take months, if notyears, and if you own property
in multiple states or businesses, there has to be a probate
court of action in every statewhere you own assets, the trust

(06:17):
avoids all of that.
Now sounds kind of simple, butwe need to be engaged in a
process of keeping our trustfunded.
When we establish a trust for aclient, we want to make sure
that the trust is funded with atleast four key assets.
And then, as you grow yourbusiness and live your life,
you're going to always use thetrust to take ownership to these

(06:37):
four critical assets.
The first one is your home,your primary residence.
We want to make sure that yourhome is deeded to the trust
after closing.
Don't worry about the loandocuments, don't worry about oh,
the bank may call the loan duebecause I transferred to a trust
.
Every state has exemptions inall the counties around the
country that allow a person totransfer their own home to their

(06:59):
own trust.
As long as you're not sellingit, they're not going to care.
The second critical asset is allof these financial assets.
We want to make sure that IRAsor 401ks and even just simply
money in the bank.
We want to make sure that thebeneficiary or ownership of
these accounts all go back tothe trust, because when you're

(07:21):
gone, we're going to come tothis later.
Where does this money go?
Because when you're gone.
We're going to come to thislater.
Where does this money go?
And the trust will distributeit.
But we want to make sure, ifthey're stocks or mutual funds
or different investments, if youown them personally and still
have that will, a court has gotto approve the distribution,
which sucks us back into a court.
When the trust owns these stocks, like maybe some Apple stock,

(07:45):
let's say, the trust says, oh,when I die, take that stock and
give it to so-and-so, and thetrustee can immediately take
care of that sale of stock withthe stockbroker.
When there's a will involved,the stockbroker is going to go
whoa, whoa, whoa.
I don't know if this is reallya valid will.
I don't know if this is reallytheir signature.

(08:05):
I don't want to be liable forgiving this Apple stock to
little Johnny here and getting alawsuit from his sister, susie.
So a judge has to come in andverify.
It's all good before the brokersends that money out.
That's why probate takes place.
But if the trust is the ownerof these different assets, then
we can avoid that whole process.

(08:26):
That is asset number two.
Okay, number three is lifeinsurance.
Now, that might surprise you,because many of you may know
that well with life insurance.
If I name the beneficiary, thelife insurance company will send
it right there.
They don't have any questions.
They're done.
No probate, yeah.
But do you really want that12-year-old of yours, or the son

(08:49):
or daughter that's maybe 32years old but doesn't know how
to handle money, receiving a bigcheck from a life insurance
company?
Have you even updated thebeneficiaries of your life
insurance?
One of the stories that blows mymind.
It was in California about 10years ago.
There was a guy, of course,died on the golf course, as many
do.
I don't know why, maybe becausethey feel like they're closer

(09:10):
to heaven when they're on thegolf course.
Anyway, this guy dies.
His wife's like oh well, gethim on the ground.
She's sad, the whole nine yards, yada, yada.
Takes the life insurance policya few months later into the
company and says hey, can I getmy check for a million dollars?
My husband died.
Here's his death certificate.
They're like okay, sounds good.
Well, what's your name?
You're not the beneficiary.

(09:32):
She's like I've been married tohim for 30 years.
Of course I'm his beneficiary.
They go no, it's so-and-so.
And it was his first wife from30 plus years ago where they
were married for about twoseconds.
Well, he had never updated thebeneficiary clause in his life
insurance.
So of course she thought, hey,I'll call this woman up, I'm
sure she'll give me that milliondollars.

(09:54):
It's mine.
I've been marrying this guy for30 years, not a big deal.
Well, after going to theSupreme Court of the state of
California, who said we don'tknow what his intention was,
maybe he meant the entire timefor his first wife to get the
money.
We don't know.
That's where the money goes.
So again, in this concept ofkeeping the courts out of our

(10:14):
lives and also bringingeverything together, when you
implement the trust you're goingto go make sure that all of
these different assets and thebeneficiary designations are
organized and set forth clearlyso a child under age 18 isn't
going to get a big check in themail and go blow it and ruin
their lives or the wrong personget the money.

(10:35):
We want to make the trust theprimary beneficiary of any life
insurance.
That way, in the provisions ofthe trust, the money can go
where it's supposed to go.
Now, number four I want anybusiness entities, maybe an LLC
with rental property, to beowned by the trust and an

(10:58):
operational company, llc orS-Corp over here that may even
have subsidiaries and othercompanies.
I want any of your businessesowned by your trust.
That way, your trustee can stepin, collect accounts receivable
, sell the rental property andrun the business and bring it to
closure, maybe even sell thebusiness A lot of times in a
trust.
I like to see a businesscontinuation plan.
We're going to talk about thatwith our clients when we design

(11:19):
a trust.
So look at this the trustdoesn't own the rental property.
The LLC owns the rentalproperty, thereby giving us
asset protection.
But the trust owns the LLC andthat's okay.
That's how it should be.
And again, when you transferthe LLC to the trust, which we
include when we design a trustfor a client, we want to make

(11:39):
sure these four asset classesare all titled and in the
ownership of the trust of whichyou are the trustee, so you're
still in control.
There's no tax return requiredby the revocable trust and these
four asset classes are now inthe name of the trust.
So if you pass away your backuptrustee, this is you dying.

(12:03):
That's what the X means.
Then your backup trustee cancome in and take over, collect
all the money and go.
Okay, now we're going todistribute it.
And number four is not aboutwho gets what, it's when and how
, it's the rules of distribution.
The beauty of designing a trustis that you get to write the law

(12:23):
.
You can say, oh, I want moneyto go to these family members in
a particular way.
Now, if you're married, you'retypically going to say to this
my spouse, they get everything.
And then, upon their passing,it goes this way.
But what happens if you havehis, hers and ours and now we've
got, maybe an ABC typestructure where assets are going

(12:45):
to go to one side of the family, another side of the family,
and then split 50-50 or amongstall the beneficiaries on both
sides?
It can get really creative andthat's okay.
That's why you're planning inadvance, because you don't want
a big lawsuit with everybodysuing, everybody else trying to
fight for their money.

(13:06):
The trust lays it outbeautifully.
Let's use an example.
Would you like a milliondollars to go to your teenager?
If something were to happen toyou and or your spouse, a
million dollars, oh my gosh.
A million dollars in my handswhen I was 16 years old, I
wouldn't be here today.
It would totally jacked up mylife.
So with a trust you get to putin all sorts of rules, rules

(13:28):
that really help your child, nothold them back.
You can put in provisions thatsay, hey, you want to go to
college, I'll pay for that.
You want to buy your first home?
You want to start a business?
Take a business plan to thetrustee.
Oh and, by the way, when youturn 25, you get a third.
When you turn 30, you get theother third.
By then they've hopefullyfigured out life a little bit.
And when you turn 35, you getwhatever's left.

(13:50):
Meanwhile your trustee has beeninvesting it and building and
growing it, and you have backuptrustees to help with this.
See, this trust lives on andreally helps make sure that your
kids, or whatever their agethey are, whoever your
beneficiaries are really step onyour shoulders and take that
hard-earned money that you'vebuilt and do good things with it

(14:10):
and not hurt themselves buthelp themselves.
When you have a will, you getto say who gets what.
But all these creativeprovisions are out the window
when we meet with a client todesign their trust and we help
clients all over the country weactually have a two-page list of
ideas we give them.
Every time we have a new clientwith a great idea, we're like,
ooh, that needs to go on thelist.

(14:31):
Maybe they get a dollar forevery dollar they earn.
Maybe, if they want to go servein the Peace Corps, do some
sort of missionary work for twoyears or three years, they can
go get money for that.
They can have money to fundtheir retirement account or buy
a rental property Anything thatyou want to help encourage them
to do graduate school or whoknows what.

(14:52):
You can stick a carrot outthere and help them get there.
There's also and to be honest,provisions you can put into
trust to protect your childrenIf they have drug addiction
issues, if they are not able totake care of themselves, if they
are in an accident orhandicapped or disabled.
The trust can then morph intowhat's called a special needs

(15:12):
trust, where provisions arethere to make sure they get
money when they need it but it'snot wasted.
Well, you get the gist here.
Lots of options.
They could include charities orother gifts or bequests in the
community or your school orchurch, and include the special
provisions for your children.
You get to write the law.
All right, you heard the fourreasons and some of you that

(15:33):
don't have kids or you're inyour 20s are thinking I don't
know, mark.
That didn't really make animpression on me that I need to
trust.
Let's review Privacy, avoidingprobate who gets what.
But what was my first reason?
That's right the foundation,the wealth building, the legacy,
People.

(15:53):
If you want to be blessed withwealth, if you want to do what
wealthy people do, you have tostart acting like it.
You have to have a structurewhere you can receive it.
You have to sometimes take aleap of faith of I'm going to
get organized, I'm going tobuild a foundation, I'm going to
have my trifecta and mystructure and my entities.
Because you know what, I'mgoing to go out and work hard.
And if I'm disorganized and Idon't have a plan, how in the

(16:15):
hell am I going to receive this?
We've got to have this.
We've got to be ready to go Now, from a biblical standpoint and
there's a lot of old parablesabout putting new wine and old
wine skins, or new wine and oldbottles If you try to put new
wine in one of these containers,they fall apart, they break.
We have to sometimes reinventourselves.
We have to really start takingourselves to the next level

(16:38):
before we can be blessed andalso have success, because the
more organized you are, the moresuccessful you're going to be
at receiving, organizing andbuilding it.
Every client that I work with,that our team works with, we
introduce the concept of thetrifecta and it's going to blow

(16:59):
your mind.
You're going to love this andit's going to help you better
understand and how to use theseLLCs.
Now the trifecta obviously ismade up of three parts and these
three parts are the foundationof how the ultra wealthy build
wealth and keep it.
Now the base of this is goingto be a trust, a revocable
living trust that has nothing todo with an LLC.

(17:19):
A trust is built for estateplanning and I've got other
videos and articles and books onthis.
But the revocable living trustis that foundation of the
trifecta and is also kind ofwhere your 1040 lies.
This is where all the moneycomes down to is your 1040 tax
return that you're going to fileevery year.
Every American has to file that.

(17:39):
Now on the left side, we'regoing to put operations.
This is where you're makingmoney to pay the bills and live
life.
These are my operational incomeand operational expenses.
On the right side is wherewe're going to put our assets or
our investments On the rightside.
Here as well, is where wecreate passive income.
This is coming into play as wetalk about these five LLCs On

(18:01):
the left side.
With operations, we're going tocreate ordinary income.
I can already ask you thequestion which one do you think
is taxed more?
That's right, ordinary.
So we want to do the best taxplanning we can on the left side
.
When we bring this all togetherNow, the left side is going to
be maybe a day job, a W-2.
Maybe you're married, yourpartner has a W-2.

(18:21):
Maybe you have a little sidehustle over here.
All right, that's cool.
But ultimately, as you expandyour side hustle, your side gig,
you have a main operation.
You're going to have anoperational entity that's going
to be owned by your trust andall the profits of this business
are going to come down to your1040.
And I'm going to talk to youabout how you pay yourself.

(18:43):
How does this work?
We're going to get into it.
On the right side, you mighthave an entity, very simply,
that owns your investments oryour assets.
Think of this like a rentalproperty.
You might have a LLC a littlespoiler alert over here owning a
LLC, and, oh, you may have anoperational online business.
Maybe you do some freelancingor sell a product or service oh,

(19:04):
that might be an LLC, butthey're different.
This is where you're going tocreate operational income.
I'll put ops and over herewe're creating this passive
income.
So this is the trifecta.
We have an entity on the left,an entity meaning a business
structure, and we have an entityon the right.
Now we might have multipleoperational pieces of income and

(19:26):
we might have multiple rentals,but we still, at this structure
level, have just two entitiesand this builds our trifecta One
, two, three.
All of this wealth comes downand is potentially taxed at our
1040.
And we want to build astructure to save taxes, create
asset protection and leave alegacy.
This trifecta is magic and it'sgoing to help you better

(19:49):
succeed.
Now that we have the basictrifecta on the table, let's
talk about these five differentLLCs and who they're best for
and if it's a good idea for you.
Sometimes I have clients thatare using all five.
It just depends.
Everybody's different.
So let's get our trifecta backon the table.
We have ops over here, we haveassets over here, we have our
estate down here or our 1040,right?

(20:10):
So this is it.
This is for everybody.
Love it.
So the number one reason for anLLC, or where they're used
primarily the most, is a holdingcompany.
This is number one.
You're going to have an LLC tohold a rental property or maybe
some investments, maybe someBitcoin, maybe a note, some sort

(20:30):
of passive investment where youput money in and your money is
doing the work, not you.
That's the first place an LLCis going to be used.
Now why do we do this?
It's to create protection.
Either there could be a lawsuitthat could arise with that
rental property and we don'twant them getting at us, or we
can design the right type of LLCdepending on the situation,

(20:51):
where, if you get into a caraccident texting and driving and
we don't want some creditor tocome after you, your or your
assets, so if they come I shouldsay if they do come after you
they can't get up into the LLCand what it's owned.
Now that can get a littlecomplex on the where we set up
the LLC, how we maintain it andwhat it owns, but the concept

(21:12):
here is that we want this LLC asa holding company.
This LLC is going to help usprotect assets or protect us
from operations in that holdingcompany Very common and what you
would typically do is, once youform the LLC in the proper
state and I'll give an examplehere in a moment you would open
a bank account with the EIN, theelectronic identification

(21:33):
number.
The LLC would be on title forthe rental property or the one
opening up the wallet or theinvestment account.
The LLC is the one holding themoney or the asset, not you, and
then, as you make money, youcan transfer that money down to
yourself.
It's called a draw or adistribution.
But if you respect the LLC, youdo an annual meeting, you pay

(21:54):
your annual fees to the state,you respect the bank account and
it's the LLC doing business,not you.
This LLC can become unstoppableand this is what the wealthy do
.
We might start setting up moreLLCs an LLC for two rentals over
in Minnesota, another LLC overhere in Nevada for an investment

(22:16):
of some sort, an LLC in thisstate or whatever.
We can have multiple LLCs,depending on how many assets you
have, and it's going to varyand we don't want to overdo it.
We want to make sure that we'revery, very careful and targeted
here and it's important that wedon't get sold something we
don't need.
But if you own a rentalproperty, if you have assets

(22:37):
that you're worried about maybelosing in a potential lawsuit,
we want to have an LLC to helpprotect you or those assets.
That's the number one reasonfor an LLC.
Now an example I'm a realtor, Ilive in California and I bought
a rental property in Tennessee.
Okay, well, a California LLC isnot going to help me because I

(22:59):
don't have a rental inCalifornia, I have a rental in
Tennessee.
Now we're not talking aboutoperational business yet, but
over here I have a rentalproperty and I got a tenant in
Tennessee and I don't want thattenant suing me and taking away
my assets.
And I want to have that LLCmaybe provide a little privacy
for me.
I don't want my name on title,I want the LLC on title.
I'm going to have a bankaccount, a property manager, all
those things that come up witha rental property.

(23:20):
So what do I do?
I set up an LLC in Tennesseefor that rental property.
That is an example of LLCnumber one.
And if you want to build wealthand protect it and do what the
wealthy do, that's when you useLLC number one.
Now I did say the word holdingcompany, right?
Well, that's just a term of art.
A holding company is an LLC.

(23:40):
It's nothing different thanthat.
It's just kind of a term thathelps you understand that this
LLC is not doing business.
It's holding something.
So that's why I use the wordholding company.
We're going to talk aboutoperational companies over here
in a minute, but this is aholding type entity.
Now the cost to set up an LLCcan vary depending on your
expertise and what you'reneeding.
On the low end, you might go toan online type service and set

(24:03):
up an LLC.
You could spend four or $500,maybe six.
Now I know some of you aregoing Mark.
The filing fee is only 50 bucks.
Yeah, you do one sheet of paper.
That's not an LLC.
You need all the pieces andparts.
So if you go to an onlineservice, you need to be checking
the boxes for an operatingagreement and minutes and
membership certificates and EINs, and that a lot of people cut

(24:26):
corners and they think they havean LLC and they don't.
So don't try to go on the cheapDIY side unless you know what
you're doing.
Typically using a lawyer and ourlaw firm helps clients all over
the country with this you'regoing to be between $800 to
$1,200, depending on how muchinvolvement you want with the
attorney.
But the beauty of using alawyer is they're going to do it

(24:46):
right and they're going toanswer questions about how
you're going to maintain thisand move forward with it.
So I think you should have abudget and you've got a filing
fee with the state and all that.
But I think you could budgetanywhere from a thousand to 13
or $1,400 on the highest end toset up an LLC holding company in
this range and you're going tokeep it forever.
You could use it over and overagain.
You could put multiple rentalsin it.

(25:06):
You're going to have thosesorts of questions in a
conversation with the lawyerthat helps you set it up.
And the last way I could say itthat might be helpful is using
the word holding company is kindof letting yourself, your
family, your planners know howyou're using the LLC.
I'm going to use this LLC forholding things, so I'm going to
call it a holding company, okay,number two the second most

(25:26):
common reason for an LLC andwhere they're great is for an
operational business.
So it's an operational company,but it's an LLC, again at its
foundation.
So let's go to the whiteboardand we'll show this distinction.
Over here is our holdingcompany.
We talked about just a momentago.
Now we're going to have anoperational LLC.
This could be doing onlinesales, it could be doing a

(25:48):
service, it could be doing aproduct, it could be doing a lot
of different things and formillions of Americans that have
a side hustle or a side gig,this is the beginning of that
process, that journey.
So I'll put side hustle overhere.
We're going to have this littleLLC over here and we're going
to start respecting it and usingit for operations Over here.

(26:09):
Again, holding Over here ops.
There's a reason we're going tokeep these separate.
First and foremost, I want awall of protection.
This wall is very important inour trifecta.
Anything that goes wrong overhere, I don't want them getting
at your assets.
It's a very important conceptin asset protection.
Also, ordinary income Rememberwe talked about that a minute

(26:30):
ago Is the worst for taxpurposes.
Now it's not a bad thing.
I want you to make money, Iwant you to create lots of
ordinary income, but we got toknow that it's going to be taxed
differently and we're going touse an operational LLC to
protect the tax rate, to protecthow much we're paying in taxes,
and this LLC is the beginningof that process.
So an example over here.

(26:54):
Let's go back to our realtor.
I said we had a realtor inCalifornia that owns a rental
property in Tennessee.
So we have this littleTennessee LLC over here.
Now we're going to have aCalifornia LLC for their realtor
business.
The broker is going to pay thema 1099 for their services as a
realtor.
They're going to have aseparate bank account for this
LLC, a separate EIN, a separatename of the LLC.

(27:17):
These are two separatecompanies and we're going to use
them for their individualpurpose holding or operations.
Now, an important point herethis LLC does not save taxes.
This LLC is the beginning of aprocess where you're going to
start using this LLC for thecollecting of the revenue,

(27:39):
paying expenses and auto andhome office and la, la, la, la
la, and whatever we make, we'regoing to take a draw or a
distribution.
That's great, but the LLCitself did not save taxes.
This is the number two reasonfor an LLC and we're going to
start to show how it can savetaxes with the third type of LLC
.
Now, number three let's go backto our trifecta.

(28:02):
Let's clean this up a little bit.
It's getting messy right.
So over here are our assets andwe've got our in our example,
we have our little Tennessee LLCand we have a rental property.
Okay, number one reason for anLLC it's a holding company
holding assets.
Over here we have our littleLLC for our new business or side

(28:23):
hustle.
This new realtor that's out inCalifornia has this LLC and
they're starting to respect itand use it in the bank and build
credit and just understand howto operate as a small business.
Any profits they take out andthey pay for expenses out of
that LLC.
Over here we're collecting rent, we're paying expenses over
here and we're taking profitover here.
Two different businesses, twodifferent purposes.
We do not want the same LLCdoing both, because we want a

(28:47):
wall down the middle.
We want protection.
Now, what's going to happenover here that's a problem is
this and I'm going to use thecolor red here is what's going
to happen here is this LLC isgoing to start making money and
the owner, this realtor, isgoing to pay self-employment tax
15.3% on all the profit.
And you're like well, I set upan LLC, I should be saving taxes

(29:08):
.
No, you're not saving tax withthat LLC.
That LLC is for holding thebusiness operations but you get
all the same write-offs youwould even if you didn't have an
LLC.
So this number two LLC can seemlike a problem and you're like
well, what's the solution?
We're going to convert this LLCinto the number three type and

(29:28):
that is an LLC taxed as anS-corp.
That process is very simple andaffordable about $250, maybe
$300 at most.
That's about what we charge andwe keep it very simple and we
can backdate this LLC to anS-corp to the beginning of the
year when it makes sense.
So if I'm going through, say2024, and I'm starting to make

(29:52):
more and more money and Inoticed that I'm going to have a
huge tax bill, you call yourmom mom, I'm making more money
and then you call our firm andyou go help me out, I got to get
this S-Corp thing going.
And you and you can, and youcall and you we just like okay.
And then you say, can youremind me why?
Here's why, when you start tomake money in this S-Corp,
there's no self-employment taxand even though it's a

(30:13):
corporation, there's nocorporate tax.
What Super cool right?
Well, there's a catch you dohave to take a salary, but we do
also create a lot of savings.
That's the main reason for thistype of LLC is so that we can
save on the self-employment tax.
Now let's unpack this a littlebit.
I know that sounded like a lotand it could be a little

(30:36):
overwhelming, so let's just do acomparison.
Let's compare a regularoperational LLC, that number two
version, with a LLC taxed as anS-corp, that third version.
When a business owner starts tomake more and more money, we
want to convert them to theS-corp strategy.
And again, here's why.
Let's say you bring in ahundred grand, you spend $25,000

(31:00):
on expenses and you net $75,000.
All right, that's cool.
Well, apples to apples.
Over in this LLC you make thesame hundred grand, you get the
same write-offs, $25,000 worthof expenses and you net 75 grand
Over here.
You're going to pay that 15.3%right out of the gate and that's
going to be around $10,000 inself-employment tax.

(31:22):
Then you pay state tax if youlive in a state with state tax
and federal.
So you're getting hit in threetimes.
And all of a sudden you realizewhat the hell this number two
type of LLC is not helping me.
So we switch over to the S-Corpand here's what we do.
We take that same 75 grand inprofit.
You're taking that money allthe time and, by the way, I have
other videos on how to use theS-Corporation.

(31:43):
We can spend a lot of time onthis, but I'm just gonna hit the
surface level issues here.
So 75 grand in profit, I'mgoing to take maybe 25 grand in
salary and I'm going to pay myfair share of self-employment
tax.
I'm going to pay my FICA overhere, and then the other 50
grand on paper I'm going to callpass-through.
Now, it's super easy to payyourself in both situations.

(32:06):
Whenever you want money, justtake it, take a draw, take the
money out of the bank account, Ido not care.
But on paper, on a quarterlybasis, your account is going to
file a 941 with the IRS andyou're going to go through kind
of a payroll procedure.
You'll learn more about this.
If you embark on this, you'regoing to do this $25,000 in
salary and this $50,000 inpass-through or K-1 or profit on

(32:28):
paper.
It's just on paper.
It's going to take more work,it's not complex, and once you
get through your first couplequarters doing this, you're like
, oh my gosh, is that why everyrealtor, dentist, doctor, lawyer
, accountant, landscaper,plumber, electrician use S-Corps
?
Yeah, that's why we do it,because as soon as you start to
make more than $50,000 a year,net, net down here at the net

(32:50):
after all your expenses.
When you start to make $50,000or more, that's when you call
your mom and then call me, andthat's when we want to convert
you to LLC number three.
At the foundation it's the samename, same EIN, same bank
account, but behind the sceneswe've changed its type.
So now we go from a holding LLCto an operational LLC, to an
S-corp LLC, and not everybodyneeds it.

(33:12):
You may stay here in LLC numbertwo for years.
Some of you needed LLC numberthree six months ago.
So start to look at yournumbers, start to figure out how
2024 is playing out and this ishow the wealthy save taxes,
because they want to get to thatS-corp.
That unlocks a lot of otherstrategies and especially helps
you on saving on FICO.

(33:33):
As I worked through collegebuilding my small business and
learning about small business, Ireally felt like I was on that
same path.
Many of you are where you'reliving month to month and it's
tough.
Sometimes you're putting thenext business expense on a
credit card to pay employees orwhatever the case may be.
I've been there, but don't giveup.
You can do this and if it'shelpful.

(33:58):
If you'll allow me, I want toshare my trifecta today, because
it took me 25, 30 years to getwhere I'm at and it doesn't
happen overnight.
I love getting rich slow.
I don't need to get rich quick,and when we have that mentality
we start to not compareourselves to others.
But here's my path and whereI'm at now.
So my trifecta.
Sometimes my family's likereally, you're going to share
that out there.
Well, I'm not going to give youmy address or anything, but so I

(34:19):
have one S Corp in my life andI teach that to a lot of clients
.
This is the first company Iformed back in 1996 and I've had
it ever since.
I maintain it.
I keep it strong and healthyand this little S Corp partners
with any other structure.
That's ordinary income.
We talked about that.
So this could be the law firm,it could be a real estate deal,
it could be my Main Street taxpros and then if I make money

(34:42):
online or I go to a speakingevent or I sell books or
anything, I'll put an event here.
Anything I'm going to makethat's operational.
I push into my S-corp, I take asalary and everything else is
profit.
Same thing you're doing If I'mgoing to go create an
operational entity, I don't useLLC number two anymore.
I don't need this little LLC onthe side.

(35:03):
I let my S-Corp own it andthat's how you'll expand.
I probably have three or fourLLCs owned by my S-Corp.
Then, over on my operationalside, I've got multiple rentals.
I've got a couple Airbnbs.
I've got a low-income housingdeal in Chicago area.
I've got a rental property inUtah and Idaho.

(35:23):
I probably have, let's say, twoor three LLCs that own rental
property and I've got probablytwo or three partnerships where
we own a rental property.
I like rental property.
It's a cool deal.
And what owns all of those LLCs?
My trust.
It all goes into my trust.
Now, what's fun is over in thisarea?
I'm going to expand that.
So let's say we expand thatsection.

(35:44):
I have multiple LLCs that areowned by my Roth IRAs or my
health savings account.
I have a health savings accountthat owns an LLC that owns a
rental property.
I have an LLC owned by my Rothand my kid's Roth.
That's not Kid Rock Love KidRock, but my kid's Roth IRAs and
we do crypto mining and it'sbeen super cool to be out there
in the crypto space with RothIRAs.

(36:06):
I have another 401k IRA LLCover here is doing I know this
sounds funny, but ranching andraw land and investing, and I
own some cows in my LLC.
At one point I've sold those.
We're looking at this next dealfor next year.
But the fun part here is thatthese different LLCs encompass
this self-directing space, and Ilearned this from wealthy

(36:29):
clients.
I was just plugging alongbuying a rental property here
and there and I was building myoperational business over here
and I had more and more wealthyclients come in and say, mark, I
need an LLC because I'm goingto go invest in this and this
and syndications and crypto andblah, blah, blah.
And I'm like, oh my gosh, I gotto be doing that too.
And that's where these specialpurpose LLCs come in.

(36:49):
Now let's dive into it.
What is an S-corporation?
An S-corporation is simply away of doing business.
So many people understand theLLC or limited liability company
.
Well, you can take an LLC andtax it as an S-corporation.
You can have an Inc or acorporation taxed as an
S-corporation.
It's a way of doing business.

(37:11):
Now, the way I've beenexplaining this for years and it
just makes so much sense, apicture says a thousand words.
Let's look at the trifecta.
This is a way I've used toexplain a business owner's
overall operations.
To build wealth and bring itall together On the left we want
to put operations, on the rightwe want to put assets, and down
at the bottom is your trust oryour 1040 tax return.

(37:31):
So when you're doing businessor operations, you could be just
a plain old sole proprietorship, you could be an LLC or you
could be an S corporation andagain, the S corp could be an
LLC, taxed as an S corp, or itcould be an Inc.
Now, if I'm going to be overhere on the asset side and buy
rental properties or invest incrypto or investments, I might
have an LLC over here.

(37:52):
And this is the trifecta Assetson the right, operations on the
left, all flowing downhill.
However, we're not worriedabout the asset side.
The S corporation lives overhere.
This is where we want to talkabout the S corporation.
It's a way of doing business.
So let's use an example here.
Let's say that you are alandscaper.

(38:12):
Everybody can get their headaround that.
As a kid, I would mow lawns andsometimes get paid for it.
At least I tried to.
Now, if I'm a landscaper, Ireally have three different ways
I could operate.
I could just start going outand talking to people and say
let me mow your lawn.
That's called a soleproprietorship.
Or I could form an LLC, limitedliability company Best
landscaper in town, llc, we mowyour lawns, llc, whatever.

(38:34):
And then over here I couldactually be an S-corp and again
it could be an LLC taxed as anS-corp.
Don't worry about that.
Now, if I'm a soleproprietorship, I'm going to
file on a Schedule C tax return.
If I'm an LLC, I'm going tofile on a Schedule C tax return,
but an S-corporation files itsown corporate tax return.
Again, it's a way of doingbusiness.

(38:55):
Now let's compare these for amoment.
Let's say I'm out there and Ibring in 100 grand.
I go out and I work my buns offand I bring in $8,000 a month
mowing lawns, doing sprinklersystems, and I spend $25,000 in
expenses Marketing auto fuelequipment supply, cell phone,
and I net $75,000.
Okay, that's cool.

(39:16):
Well, you're going to payself-employment tax right out of
the gate of 15.3%.
Well, if I do an LLC, do I getto save on that tax?
Nope, you pay the same tax,15.3%.
I brought in the same 100 grand, I spent 25 in expenses, I net
75, and I'm going to pay 10grand.
10 grand.

(39:36):
I spent $25,000 in expenses.
I net $75,000 and I'm going topay $10,000.
$10,000.
Then I might pay Fed tax, statetax.
So, people, this is animportant point, llcs do not
save tax.
Let me repeat that LLCs do notsave tax.
So I have my first way of doingbusiness is this sole
proprietorship.
My second way of business isjust doing an LLC, but it really
hasn't moved the needle.
I'm still a landscaper payingway too much in tax.

(39:57):
So what's this S-Corporation allabout?
Well, let's start to unpack it.
And this unleashes strategynumber one.
Okay, with an S-Corporation, Imake the same hundred grand, I
have the same 25 grand inexpenses and I have the same net
income.
You can even have the samebusiness account and again, you
could be an LLC, but you've madea special election to be an

(40:18):
S-corp.
By the way, let me just set thisconcern aside.
It is super expensive to becomean S-corporation.
We charge $250.
That was a joke, because I wantto let you know how easy it is.
It is not that hard to becomean S corporation, so all right.
So I'm an S corporation.
I'm making the same a hundredgrand, the same 25 grand in
expenses, I net 75.
Oh, but check this out noself-employment tax, no

(40:43):
corporate tax what?
And no Obamacare, which iscalled ACA, Affordable Cares Act
tax.
Well, this is pretty cool.
So I can avoid all these taxesby becoming an S corporation.
Well, for those of you that havealready heard about this
strategy, there's one catchYou've got to take a salary, a
reasonable salary, and theneverything else flows out the

(41:04):
bottom.
Now, in this example, I mightdo a salary of 25 grand and the
rest flows out the bottom 50, 50grand.
Now for you accountants outthere there are some of you
already freaking out.
I get it Now.
By the way, I'm a CPA, I'm atax attorney.
I teach classes on reasonablecomp.
I've read every case onreasonable comp.
Do not freak out on this.

(41:24):
I have a payroll matrix thathelps us define what this salary
needs to be.
This is just an example for amoment, but I'll tell you when I
have a client making $50,000 ormore, I might be in a 50-50
allocation, and it's not the endof the world.
I have never, ever, ever had aclient audited for taking too
low of salary in the last 25years ever, and I've even

(41:45):
interviewed prior IRS agents onmy show working in the S
Corporation Chicago officePeople, this is okay, so get
over it and just hear me out Now.
Some of you are like man Mark,you kind of unleashed there.
Well, that's because I talkedto a lot of accountants that get
stressed out about thisreasonable salary issue and this
is how S-Corporations aremisunderstood or misused.

(42:07):
So what was strategy number one?
Strategy number one is that Idon't want to pay all of this
FICA.
This is a big deal because themore money you make, the more
you pay of the F word, f word,fica.
I hate FICA.
I don't want to pay FICA onevery dollar.
So we convert to an S-corp.
I got to tell you every dentist, doctor, engineer, landscaper,

(42:30):
restaurant owner, cpa, attorney,independent consultants we're
all S corporations.
Because once you make $50,000or more, I want to split this
income.
I want to call some of itsalary and some of it
pass-through.
This is the strategy.
So one of the best ways tounlock your business potential
and make more money is to usethis form of doing business and

(42:54):
create a salary that'sreasonable and push out all this
profit.
And when you start saving thismoney, we're going to start
deploying it in some verypowerful ways.
That, my friends, is strategynumber one.
Now let's unpack that a littlebit.
Some people say well, mark,that sounds super complicated
and I can't take a paycheck.
My income's up and down.
I got it, I got you, don'tworry.

(43:16):
First of all, it is not thatcomplicated.
Let me put your concerns aside.
You're going to hire a payrollcompany to do a payroll report
for you quarterly.
You're not going to get apaycheck.
I'm not going to worry aboutyour cash flow.
We're going to look at yourincome in a rear view mirror.
Every three months we're goingto look back and go, hey, how
much money did you take out?
How was your profitability?
Let's claim a little bit ofsalary.

(43:38):
Do the report Gone Done At theend of the year?
All those reports add up andwe've got your savings
calculated.
It's clean, it's easy.
Next, some of you may befighting an uphill battle with
accountants that have alreadyfreaked you out on the
S-corporation.
They're like oh my gosh, theS-corp doesn't work for you
because you got to take such abig salary and reasonable comp
and blah, blah, blah, blah.
Please get a second opinion, Ibeg of you and I talked to

(44:01):
accountants all around thecountry, teaching that
reasonable comp is not the scaryevil monster many of you have
been taught to believe.
It can be very simple.
Okay, now let's move tostrategy number two Because, as
I indicated, when you save onthat FICA and that
self-employment tax and set upthat little salary strategy,
you're unlocking more profits.
Well, I don't want you to go outand get a better lease on a BMW

(44:24):
or a Range Rover.
I want to use those profits tobuild wealth exponentially Super
powerful.
And when my clients catch thevision of this, it is
unbelievable.
They're sending me thank youcards and Christmas gifts for
years.
I'll send you my address laterNow.
Remember it's easier to savemoney than make money, trust me.

(44:45):
So let's look at our trifecta.
Here.
We go Over on the left side.
We're now going to have an Scorporation Good, again, be a
little LLC taxed as an S corp.
The sales from your businessare going to come in, your
expenses are going to go out.
You're going to take a W-2 andyou're going to get what's
called a K-1.
That's your profit and we'resaving taxes.
And that profit that you'remaking and those taxes you're

(45:06):
saving, we're going to fund asolo 401k.
Do you know you can have a 401kat your day job, your spouse
can have a 401k, you can have a401k, but you can also have a
solo 401k in your business.
Frankly, I want to tell you,you can have as many 401ks as
you want, but we need to fundthem.
So we're going to set up thissolo 401k and start to plow

(45:27):
money into it and this year itcould be as high as $30,000 that
can go deferred and come out ofyour W-2, saving you more in
taxes and fund your solo 401k,and then the company can match
that contribution up to acertain amount.
So this deferral, incombination with your match,

(45:48):
starts to build a bucket ofwealth, and this wealth is what
entrepreneurs start to build andgrow on the side.
And notice what you're doing isyou're diversifying, you've got
wealth, you're building overhere with the operations of your
business and you're building abucket of wealth with your 401k
and you can invest it in whatyou know best.
You can invest it in crypto,you can invest it in real estate

(46:10):
.
You can invest it in what youknow best.
You can invest it in crypto,you can invest it in real estate
, you can invest it in notes oreven buy your stocks, bonds and
mutual funds.
So this 401k you get to drivethe car, you get to be the
trustee of this.
And now, in step number two,you've taken the savings that
you're generating here andyou're plowing it into
additional deductions andwrite-offs and tax deferred

(46:32):
growth inside a solo 401k.
Now again, some of you may goMark, that sounds super
complicated.
Guess what it really isn't.
Again, it's understanding thatyour company can design a
retirement account for its owner, its employee, which is you.
Our fee at our law firm is athousand dollars.
I say a thousand dollars tomeet with a real attorney
anywhere in the country for itsowner, its employee, which is
you, our fee at our law firm is$1,000.
That's it $1,000 to meet with areal attorney anywhere in the

(46:55):
country and design a 401ktailored to your business.
You may have your spouse on thepayroll, you might have kids on
the payroll, you might be theonly one on the payroll.
Who knows?
We're gonna tailor it to yoursituation.
But when you start to designthe payroll portion in
combination with the 401k, youfind a sweet spot and you start
building wealth with more taxdeductions and less tax.

(47:15):
That synergy is almostuncalculable.
It's crazy how it starts tosnowball and grow for business
owners.
That, my friends, is what thepower of the S-Corporation
unlocks FICA savings and a solo401k.
Now strategy number three, andthis is one of my favorites, and
it's simple and easy and you'regoing to love it.
People remember business isfamily and family is business.

(47:38):
So let's take our S corporationand do what all the big
companies do build a board ofdirectors.
We're going to build a boardand we're going to put my mom
and dad on the board.
We're going to put my bestfriend on the board.
We're going to put my spouse onthe board, my teenage kids on
the board.
Whoever I hang out with,whoever I travel with, I want to
collaborate with, I want tomeet with, I want to talk about

(47:59):
the business, I want to explainwhat I'm doing and grow the
business with their advice andsupport and insights.
So, with an S corporation I'lleven just diagram it because I
love a picture is.
Here's my S corporation and I'mgoing to adopt a board of
directors and this board ofdirectors is going to support
the operations to increase sales, increase profitability and

(48:21):
help me design a system to buildwealth.
Now, the beauty of the board isthat whenever you travel, you
get a tax deduction togetherWhenever you have meals together
because you're going to betalking business, you may be
providing laptops, you might beproviding iPads, you might be
providing cell phones, becausethis board is supporting the
operations of your business.

(48:42):
The S-corporation unlocks thatstrategy.
It unlocks number three, andthat is bringing together the
people of your life into yourbusiness, and those tax
deductions need to be justified.
I want to write off your travel,your cell phones, your travel.
I mean, I want to create thesewrite-offs.
Let me give you a fun example.

(49:03):
Every one of my kids now are 18or older.
Every one of them is on myboard.
Well, we're going to have anannual company retreat.
Each one of them has a littleduty.
They help me out throughout theyear.
It might be marketing, it mightbe administrative.
Well, guess what I got to beable to get a hold of them.
And so if I'm helping them outwith a laptop or a computer or a
cell phone, I'm going to take atax deduction for that.

(49:23):
I'm going to take a write-offfor that.
I may even give them a 1099 atthe end of the year in their
Christmas stocking for somemoney.
I may have helped him outthroughout the year.
So now I'm generating morewrite-offs inside my S
corporation, legitimately auditprotected, to create more profit
, to fund more wealth and tosave more taxes.
It's like an equation, it's likea recipe for success.

(49:44):
It's so powerful.
Now, is it complicated?
No, not really.
You can hold a board meetingtomorrow.
For those of you that alreadyhave an LLC or a corporation,
you can say this weekend we'regoing to go on a weekend retreat
and we're going to go to thishotel and we're going to go to
this resort.
Or we're going to just gosomewhere and sit down and talk
about the business and you'regoing to pull out a sheet of
paper and go here's the minutesof our meeting and here's what

(50:05):
we're doing.
And I love you guys and I needyou on the board.
And oh, by the way, this tripwas tax deductible because
you're all part of the businessnow and you slide those minutes
into your corporate book becauseyour corporate book is your
asset protection.
You've maybe heard it in myother videos Asset protection is
maintaining that company, doingthe minutes, maintaining the

(50:26):
records and the structure.
This is the beauty of thecorporation, is that it unlocks
all these other strategies andyou know what's interesting.
Your chances of an audit withthe IRS by using an S-corp go
down by 1500%.
Statistics every year show thatover 15 times less chance of an
audit with an S-corporationcompared to an LLC.

(50:46):
I'm giving you a strategy thatsaves you more in taxes and it's
less chance of getting audited.
That's how crazy it is.
Unfortunately, most peoplebelieve building wealth is
reserved solely for the top 1%,implementing complex systems and
using expensive advisors.
But the reality is the bestsystems that wealthy use are

(51:08):
available to every person inAmerica, and today I'm going to
walk you through the very bestsystem there is to save
thousands on your taxes, andthese are the steps I have
personally used to help clientsbuild wealth all over the
country.
And the system we're talkingabout today is the trifecta.
Now let's dive into it.
There's three issues thatAmericans are worried about and
stress about in their pursuit ofthe American dream.

(51:30):
These issues are obviouslysaving taxes, the number one
cost in their lives.
How do I save taxes and do itin an organized way?
And then, number two how do Ibuild wealth?
How do I protect it?
How do I grow this wealth sothat I can use it in the future?
And number three how does itall come together and I'm able
to leave a legacy and to use itwith privacy and protection.

(51:51):
If I can bring those threepieces together, I'm going to
maximize the benefits and reducethe exposure.
I'm going to get the bestresult in saving taxes, building
wealth and leaving a legacy.
The trifecta brings all threeof those together.
So let's look at it, let's go tothe whiteboard and then I'll
show you more examples here in alittle bit, and you're going to
see the power of this and howyou can design and build your

(52:13):
own trifecta to better live theAmerican dream, save thousands
in taxes and build the wealthyou've been dreaming of.
And you know what's interesting?
It's that simple.
This is what the wealthy do.
They sit down and plan on aregular basis and they want to
see it and visualize it so wecan build it and enjoy it.
Now, as we dive into it as well, I want you to know it's simple

(52:33):
, it's elegant, it's because itwill grow and expand with you.
You may just be starting outwith a W-2 and 500 bucks in the
bank.
Some of you might have 10rental properties and two
businesses and a family of 12.
I don't know.
The point is, no matter whereyou're at on your stage of your
American dream, the trifectabecomes your framework.
It becomes something that'ssuper easy and simple to start

(52:56):
with and then expand and buildupon.
So let's look at it here.
This is what the basics areThree parts, as I said, a
three-part system.
So we're going to start with afoundation of a revocable living
trust and I'll explain a littlebit more of what that entails
and on the left side we're goingto have our operations.
And then on the right sidewe're going to put our assets.
The operations side createsordinary income, the type of

(53:18):
income that's taxed at thehighest rate, and the assets we
want to create passive income.
We get some different types oftax strategy and money that we
can make while we're sleeping.
On the operations side, wemight have a side hustle, a
little LLC, we might have afull-time business, might be an
S corporation, we might evenhave a day job or in a married
relationship, or two people withtwo W-2s.

(53:39):
All of this is going to flowdown into your trust or your
1040 tax return, just like waterflows downhill.
That's the left side.
So part one is our foundation orour legacy, and part two is our
operational income.
What are we doing to pay thebills?
And then part three is ourwealth building.
It could be an LLC with somerental property, it could be our

(54:00):
IRA, it could be a 401k thatwe're funding through a day job
or a small business, it could bea health savings account.
But we're going to start tobuild wealth in part three.
These three parts, when they'reall connected, build a tapestry
of what the wealthy use to livetheir American dream, and you
can do it too.
Now, that was just the beginning.
We're going to start to unpackthis.
Now.

(54:20):
Let me kind of show you the endof the movie here and show you
the crazy Kohler family trifectaand what it might look like.
And let's put this up on thescreen.
Wow Right, all these littlebubbles and boxes.
It can seem a littleoverwhelming.
All right, now, before you getoverwhelmed, let's come back
here.
Okay, now, hang tight, we'regoing to get there and I want to
kind of show you how it evolvesto that.
And there's no rush, don't feelpressure.

(54:43):
Some of you are like Mark, I'mjust trying to pay my bills
right now, or I'm in the middleof my business and expanding and
growing.
What?
Slow down, let's take a breath,because what I want to do is
show that this is a process ofevolving.
It's a journey.
The trifecta is not just onepicture that works for everybody
.
It's something that isparticular to you.
It's special.
Start to unpack it and I want totell you the story of how this
trifecta evolved for me.

(55:04):
I didn't learn this in lawschool and you ask any lawyer
hey, how was your class on thetrifecta?
No, there's no story.
And you go to accounting schooland you take the CPA exam.
They don't teach this, but Iwas.
I was passionate to help thesmall business owner.
My dad was a small businessowner, my mom was a small
business owner.
We had a farm and I grew up onmain street America.

(55:24):
I wanted to be a tax lawyer andI don't even know what that
meant at the time, I think.
But I felt like I could speakto the small business owner and
we all grew up thinking thatlawyers were expensive and
accountants didn't even speakEnglish and they were too
expensive and so many businessowners in America are starving
for practical advice.
So I came out of law schoolwith this dream.

(55:44):
I was like I can help the smallbusiness owner and I started to
talk at the local chamber ofcommerce meetings and realtor
groups would say, hey, come talkto our group, and I get up and
I try to explain what I thoughtwould work for them and I just
failed at it.
It was just so excruciatinglyhard to take what I learned in
law school and make sense of itfor the small business owner.

(56:05):
And I don't know, maybe I waslike doc and back to the future
and I had my flex capacitormoment where this came to me.
There was one day when I startedto teach a class to a bunch of
investors and realtors andbrokers and I kind of just threw
up a line down the middle ofthe paper and said you know what
, let's keep our operations overhere and let's put our assets
over here, and like water it allflows downhill.
We'll put our tax return downhere at the bottom and kind of

(56:27):
this trust concept.
And at that time I was tryingto figure out my own structure
too.
I don't even know if I had atrust.
The first couple of years outof law school I was still trying
to make sense of all of it.
And you think you're strugglingto figure this out.
You come out of law school andyou're trying to figure this out
.
And that day I remember,actually, the classroom I was in
and I was teaching this conceptof the left and right side and

(56:48):
bringing it all together and itjust came out in this one
presentation and maybe I washaving fun with it and said the
word trifecta, but it stuck withme and I remember so many
people coming up to me afterthat event saying, mark, oh my
gosh, it finally clicked.
I've been trying to make senseof my legal structure and my tax
returns and, oh my gosh, canyou meet with me and help me

(57:10):
build my trifecta?
And I don't know.
I think that's when it allstarted and I started to teach
future lawyers in my practiceand my employees and my
accountants and our team startedto grow and this was probably
15 plus years ago and thistrifecta was magical for so many
people because it allowed us tosee where we were going.
A picture says a thousand wordsand, damn it, if you can see it

(57:31):
, you can make it happen.
And so when I started to draw uptrifectas for clients and teach
my team how to do it, and Istarted to figure it out myself
better and better and build myown.
I started to build wealth.
I started to get wealthy.
I started to just have theseclients come through the door
that I idolized and I was likehow'd you do that?
And we start putting it on apaper and they're like, yeah,
yeah, no one had drawn that outfor me before.

(57:54):
And, oh my gosh, you're puttingon paper what I dreamt about or
slept and dreamed of doing.
And so the trifecta became thispassion project for me to help
people build their Americandream.
And you can do it too, and itcan be simple.
It just starts with one or twobubbles and a trust at the
bottom and we can start to buildthis dream for ourselves and

(58:15):
our clients and our families,and make it happen.
All right.
So let's go to the whiteboardand I'll start to show what I
did, because I wanted to live itfirst.
If I was going to teach it, Ihad to do it for myself first.
So if we go to the whiteboard, Ithink what really started for
me was understanding my businessstructure.
Maybe it was small businessthat I wanted to build, and it

(58:36):
was when I started my first lawfirm, and so I started this
entity and this entity was goingto be my operational structure.
To build wealth, I had to startwith something, and so this was
, to be honest, a professionalcorporation that I taxed as an S
corporation.
And some people use an LLC,some people use an ink, whatever
.
And when I went to go structurethis, to start my practice and

(58:59):
start doing tax and legal, Iasked myself who's going to own
this?
Am I going to own it?
Is my wife and I going to ownit together?
What did I really want to dofor the long haul?
What was the long-term picture?
And that's when I started myrevocable living trust.
The trust was the structurethat was going to own the
business, because if anythinghappened to me, I wanted to know

(59:20):
where that wealth was going togo.
So the trust became thereceptacle for that operation.
Now I was going to take a W-2and I was going to take a K-1
and it was all going to flowdown to a tax return here and
all those goodies.
But legally I wanted to makesure that my trust owned my
operations.
And then I started to make somemoney and I'm like, ok, where do

(59:41):
I put it?
Oh, I'm going to come over hereon the asset side and I'm going
to create an LLC and buy abuilding, and one of the first
investments I made that reallymade sense is we bought a
building to rent back to ouroperations.
The first best renter you canhave is yourself, and so many
business owners are like payingrent to other people.
Why don't we pay rent toourselves?
And that was the beginning ofit, and I saw this trifecta

(01:00:04):
start to manifest my future.
And then we'd set up other LLCsto come with other rental
properties and oh, I was goingto start funding an IRA or a
Roth or a health savings accountand I started to build a
structure that would createwealth.
And I was going to start savingtaxes along the way, right off
home office, right off auto,right off travel, right off
equipment, right off supplies,and so I could start saving

(01:00:27):
taxes and then taking my profitsand building wealth.
And everybody's structure isgoing to look a little different
.
Every process is going to takeon a different timeline, but
that's how I did it.
I just started to go out andstart my entrepreneurial dream
and, as I was starting to teachit to others, I was trying to
get my own structure andalignment, because I didn't want

(01:00:48):
to be fake, I wanted to betransparent.
I wanted to be transparent.
I wanted to let people know I'mdoing the same thing you're
trying to do.
I'm trying to build assets tocreate passive income so I don't
have to work my ass off all thetime.
And so it was like businessstructure, trust and estate and
LLCs or holding companies, andit evolves.
Maybe let's look at a coupleother pictures or diagrams that
are simple to grasp this.

(01:01:09):
First, here would be a basictrifecta, and this is a diagram
that we do at our workshops andI build for clients, where we
have our day job off on the leftside and operations and
ordinary income, our assets andpassive income.
And then we might get to thenext level and we start to add
in these tax deferred ortax-free strategies like the
Roth IRA or the solo 401k, theday job 401k, so we might have a

(01:01:32):
side hustle that evolves intoan S corporation.
And notice, down here on theright side, we want to have all
of our real personal assets beowned by the trust as well.
We've got our home, ourinvestment accounts.
We want our trust to be thebeneficiary of our life
insurance, so it goes to theright people at the right times
in their lives.
And then let's see it again.
Right, bam?
It can evolve, it can grow, butyou shouldn't be daunted by

(01:01:57):
this.
You should be excited by this.
You can start to bring togethera structure that it's perfect
for you, and it's not a race,it's a journey.
Don't compare yourself toothers Now.
Another beautiful thing aboutthe trifecta is that you can
manage it yourself.
With the right professionals.
You're the captain of your ship.
You shouldn't have to be at themercy of expensive or complex

(01:02:20):
planners.
We build trifectas for clientsand a comprehensive consult for
around $1,600.
That's really quite affordable.
You can meet with a real lawyeron Zoom and build your trifecta
and build a future and anaction plan, and you can start
to learn about this on mypodcast and in my books and
start captaining your ship.
You shouldn't feel like that.
You're at the mercy again ofexpensive or complex planners.

(01:02:42):
You can do this, and that's thetrifecta.
It's simple, it's elegant, it'scomplex, it's amazing, and when
you can see it, you canmanifest it and you can do it.
Okay, now I want to share someof the biggest wins in my life
applying the trifecta.
Now, what's interesting here isthat I talk about leaving a
legacy.
Well, I haven't died yet.
So I'm hoping I build atrifecta that's going to work

(01:03:08):
perfectly for my kids and myfamily when I leave.
So, after I built my owntrifecta, what do you usually do
?
You share it with your family,you do it for your family.
So I built a trifecta for mymom and dad, who have now passed
on.
So let's go to the whiteboard.
Remember the revocable livingtrust.
One of the first main assetsyou're going to put into it is
your home.
Well, I went and built atrifecta for my mom and dad.
They had to have a trifecta andI put their home into the trust

(01:03:30):
.
Well, my dad went on to haveParkinson's and my mom to have
Alzheimer's, and when theypassed away, I was able to make
it simple and easy for the saleof their home and their primary
residence just flowed right downinto the trust and they could
leave their wealth and assets totheir children and
grandchildren in a structuredformat.

(01:03:51):
That involved no lawyers, noprobate.
Do you know?
50% of Americans don't evenhave a will.
They don't even have astructure at all.
But with this trust we wereable to keep the sale of their
home private.
We had no legal fees andeverything went into the proper
way to the next generation.
That was a huge win.
That was a win that changed thetrajectory for our entire

(01:04:14):
family, because we had a planand we left a legacy to the next
generation, with grandchildreninvolved and everyone.
That trust was really, reallyspecial.
And one of the biggest wins ofthis situation with my parents
was that there was clarity.
It was very, very clear wheretheir wealth went.
There was no infighting.

(01:04:34):
There was no one bickering andfighting over who gets what,
because my parents have laidthat all out and when you lay
out your trust, you get todecide where your wealth goes,
in stages or in pieces and parts, and who gets what.
When you don't, it's anightmare and it's a disaster,
and you've heard about thesetypes of stories.
So that was a huge win to seethe trifecta play out in that

(01:04:57):
process and to see that it keptthe family together.
It created family unity and itwas actually very special and it
was all because of the trust.
Now let me share another win.
Let's go back to that realestate that I talked about.
All right, so let's go back andboom, I've got this LLC and
I've bought that rental propertythat I want to lease back to my
operational business.

(01:05:17):
Well, when you go out to builda structure like this, there's a
lot of question marks who'sgoing to own this building and
what happens if there's anaccident or a lawsuit?
Well, it's kind of funny.
This is how the trifectastarted to play out for me.
It was a wintery day inSouthern Utah.
Believe it or not, southernUtah is not just red rock,
beautiful desert it snows.

(01:05:38):
So I had built my trifecta withan LLC to own the building and
I was saving taxes.
That's part of the beauty ofthis.
I'm getting a write-off rentingthe property back to myself.
I mean, there's a really subtletax strategy here.
That's beautiful, but it's alsobuilt for asset protection.
And so there was this situationwhere HOA had not been salting

(01:06:01):
the driveway and there was iceeverywhere, and my building was
part of this HOA situation, withmy employees coming in and out
of the parking lot and cominginto the building.
Well, one day this employeeslipped and fell.
Oh, it was so sad.
She had really broken her armand wrist in a terrible way and
someone's got to pay for thatand we wanted to make sure she

(01:06:21):
was taken care of.
And so we start to call ourinsurance company and the
workers' comp and all thosegoodies.
And, of course, questions canbe asked and there was maybe
going to be some sort of biggerlawsuit.
Insurance companies like toblame someone else and go
collect money from someone.
Well, when they started to peelaway the onion, they said oh,
there's an LLC here, the LLCowns the building, oh, and

(01:06:44):
Mark's maintaining it and it'sprotected.
And oh, this works Okay.
So the insurance paid out, Ouremployee was taken care of, but
there was no big lawsuit, therewas no big loss.
The structure worked.
The structure created assetprotection for my building and
for my family and for what wewere trying to build.
And, at the same time, I wasgetting tax write-offs, paying
rent back to myself and gettingdepreciation, and the system was

(01:07:08):
working.
The trifecta proved itself andthat was a big win for me.
I was like proof of product.
All right, this is cool.
And so as I went out andcontinued to teach the trifecta,
I knew that I was teachingsomething that was legitimate,
it worked.
There was tax savings, assetprotection, and I had just seen
this experience with my mom anddad, knowing that at the end of
the day, it was going to allcome together.