October 17, 2025 • 39 mins
Are you structuring your business the right way — or making costly mistakes that could be draining your profits? In this episode of the Main Street Business Podcast, Mat Sorensen and Mark J. Kohler team up to answer your questions on taxes, legal structures, and real-world strategies for small business success. Together, they uncover the truth about LLCs, S-Corps, and the $50K rule that determines when to make the switch.
From transferring real estate into an LLC safely to understanding what truly qualifies as business income, this discussion covers the practical steps every entrepreneur should take to protect their assets, reduce taxes, and stay compliant. You’ll also learn how to pay yourself properly, avoid due-on-sale issues, and maximize wealth through smart entity planning.
If you’re serious about building your business the right way and keeping more of what you earn, this is an episode you can’t afford to miss!
You’ll learn:
- How to decide when it’s time to convert your LLC to an S-Corp — and how the $50K rule really works
- How to transfer real estate into an LLC without triggering the due-on-sale clause or losing financing options
- The difference between true business income and passive income (like royalties, rentals, and trading profits)
- How to pay yourself correctly as a business owner — and avoid IRS red flags with payroll, draws, and distributions
- Simple bookkeeping and payroll strategies to stay compliant and ready for tax season
- How to use smart entity structuring to protect your assets and save thousands in self-employment taxes
- Practical tips for maximizing retirement contributions through Solo 401(k)s and Mega Backdoor Roth strategies
Get a comprehensive tax consultation with one of our Main Street tax lawyers that can build a tax strategy plan with an affordable consultation that will leave you speechless!!
Here’s the link - https://kkoslawyers.com/services/comprehensive-bus-tax-consult/?utm_source=buzzsprout&utm_medium=description-link&utm_content=msbp597-smart-strategies-to-pay-yourself&utm_campaign=main-street-business-podcast
- Grab my eBook 30 Unique Strategies Every Business Owner Should Know!
- You don't want to miss this! Secure your tickets for the #1 Event For Small Business Owners On Main Street America: Main Street 360
- Looking to connect with a rock star law firm? KKOS is only a click away!
- Are you ready to get certified in EVERY strategy I teach? Start your journey with a FREE 15-minute discovery call to explore the Main Street Tax Pro Certification.
- Check out our YOUTUBE Channel Here: https://www.youtube.com/markjkohler
- Craving more content? Check out my Instagram!
Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
SPEAKER_01 (00:00):
You've got some income now, and now you're
talking about paying yourself.
Well, keep in mind the firstthing we're gonna look at is
have you been doing yourbookkeeping?
Do you know what expenses youhave versus this income that's
coming in?
SPEAKER_00 (00:10):
Get your bookkeeping done.
Make some money.
And when you start taking homemore than five grand a month
after your expenses, call yourmom, tell her she'll be so proud
of you, and then call us.
And we'll tell you how to gonext step, next level.
SPEAKER_01 (00:29):
Welcome everyone to the Main Street Business
Podcast.
This is Matt Sornsend, joined bythe incredible Mark J.
Coleman.
We are excited to be with you.
Today is open forum for thepodcast.
We have your questions here, andwe're gonna give you some
answers on tax, legal, wealthbuilding, everything small
business.
SPEAKER_00 (00:45):
Pretty stoked for it.
Yeah, no, this is a fun, this isthe people show.
This is a fun show.
Excited about it, and we're justgonna jump right in.
And I'll say it now.
If you want to present uh post,present, uh, give us a question,
please go to mainstreetbusinesspodcast.com.
Uh, we're anxious to see yourquestions.
We'd love to see them here.
And I can I lead off?
SPEAKER_01 (01:05):
Absolutely.
SPEAKER_00 (01:06):
Okay, this is a topic you and I have been really
talking about a lot lately, andthat is a business purchase
question.
Yeah, I just did a training onthat last night.
You did one yesterday.
Uh, so this is from AB Houston32that says, My S Corp purchased a
business.
On which forms do I report thepurchase?
(01:26):
Uh, the first business will payrent to the new business.
What do I claim as expenses?
I remember that that strategyfrom one of your older videos.
Please help.
Oh, AB Houstow 32, not Houston,AB Houstow.
These questions that you'reasking, um, and don't be
offended with this response.
(01:47):
If you're buying a business andhaving these questions, I can
see that you were probably notassisted in the purchase with
some tax and legal counselbecause all of these questions
and about 50 more exist.
And these are the basicquestions.
There's so, so much more you'vegot to deal with here.
Um, I'm gonna just say, I'mgonna riff for two one minute,
(02:08):
but I'm gonna just tell you youhave got to make an appointment
with one of our attorneys.
It'll save you 20 times what youpay them for just an hour
because you're these questionsare off the chart with things
that you should already, theseare water under the bridge type
questions and should have beenaddressed before you even bought
the business.
And I don't mean that rudely.
(02:30):
It will serve you.
I would talk with either um uhAshley, Scarlett, um, Max, Ryan,
Darren, a lot of the attorneyofficers are handling these
transactions.
Yeah, they're handling thesetransactions every day.
Okay, so first thing, your SCorp purchased a business, which
forms do I report the purchaseon?
You're talking about maybe theasset allocation that's form
(02:50):
8594.
It's with the IRS.
You're gonna sign it, and it hasto match the seller's tax
return.
This is a form you would havesigned at closing.
So this is a little after thefact.
So you've got to get a hold ofthe seller and go, we need to
get on the same page on this8594.
And it would normally be agreedto as an exhibit in your asset
(03:10):
purchase agreement.
Then you said the first businesswill pay rent to the new
business.
Well, apparently you're the newbusiness because you just bought
it.
So the first business, I'mpresuming, is a seller, and so
they're paying rent to you, butyou're the one that owns it now.
So now that means you're thefirst business, and then there's
a new business.
I don't know who's paying rentto who.
(03:30):
And by the way, that meansthere's real estate involved, or
is there a sublease involved?
That's going to be a factor.
And if someone's paying rent,it's a rent.
Rent is an expense for theperson paying it.
It is income for the personreceiving it.
And I don't know who's first,second, or third business in
this mix.
And so again, a huge topic of,and then the fact that you're
(03:52):
asking if that's a write-off orwhat is, there's about 20 other
write-offs you need to beworrying about.
And with your S-corp, yourpayroll strategy, your what do
you have employees in this mix?
What are the merchant accountsituations, your ongoing office
expenses and marketing and salesand legal, and and um, and then
you remember that strategy fromyour older videos.
(04:16):
And maybe you're referring to aself-rental where you own the
building, you're renting it toyour escort, but that's another
business in the mix.
So I am just begging of you,please make an appointment with
one of our tax lawyers and theywill set you straight.
They will answer questions youdon't even know to ask, and you
will love it.
So thank you.
Appreciate that.
SPEAKER_01 (04:33):
Yeah, just one thing on the tax forms there.
Mark said$85.94, right?
That's the allocation ofpurchase price if you just
purchase the assets of thebusiness.
And that's what it probablysounds like you did because your
S Corp bought a business.
We presume you just bought theassets of the business.
But let's say you boughtsomeone's LLC or someone's
corporation, you acquired it.
(04:54):
Well, the seller's gonna reportthat on Schedule D as a capital
gain, uh, assuming they mademoney on that sell.
But then you're gonna need totrack the basis of what you paid
for that business.
All right, so it depends on whatyou did in that scenario.
You want to make sure you getthat right.
There's a lot more, like Marksaid, to get into that.
All right, let's go.
I'm gonna go over to assetprotection here.
This is in the asset protectioncategory.
(05:14):
This was by C white J.
Um says, hi guys, big fan.
First time asking a question.
My wife and I recently moved toa new primary residence.
We want to keep our formerprimary residence as an
investment property.
SPEAKER_00 (05:28):
Ooh, this is right up your eye.
You love this.
This is Matt's MO.
SPEAKER_01 (05:31):
That's why I picked this question.
It says, I want to transfer theinvestment property from our
personal names to an LLC forasset protection purposes.
But I've heard this couldpossibly trigger the do-on-sale
clause for our mortgage.
We have very low interest rates,so understand banks are
exercising this clause moreoften so they can afford offload
(05:51):
their low interest ratemortgages.
Have you heard that?
No.
I am not reading.
How can we transfer thisproperty to an LLC without
triggering the do on sale clausefrom our mortgage company?
Thanks and keep up the greatwork, Chad.
All right, Chad, great question.
First of all, love what you'redoing here.
My point about building wealth,probably one of the number one
points, is accumulate assets.
(06:12):
So many people think, oh, I'mbuying a new house, I'll sell my
current house.
And I love how you're looking atthis, Chad, and saying, hey,
we've got a low interest rate onthis.
I assume that the rent you'regonna get is gonna cash flow the
property.
You're gonna have the value ofthe property go up over time.
And if you don't need to sellthe house to get into the next
house, totally great strategy,great way to build wealth.
(06:32):
You need to accumulate assets.
That's how you get wealthy.
Now, as to the do on sale clausequestion, because this is coming
into a rental property here.
So when it's your primaryresidence, we probably just want
it in your trust for estateplanning purposes.
No asset protection risksnecessarily here.
You live in it.
But once you put a tenant in it,we've got some asset protection
risks.
What happens if the tenant slipsand falls?
(06:53):
I don't want them suing you andcoming after all your assets.
So we're gonna have that rentalin an LLC.
Tenant slips and falls, whateverhappens, they can sue the LLC.
They can't get into any of yourother assets, they get stuck in
that LLC.
Now, you have a mortgage andyour personal name, as you said,
and most mortgages have a clausein there that says, when you
change ownership of thisproperty, you must pay off the
(07:15):
mortgage, and the and themortgage company has the right
to call the loan due.
This is the due on sale clause.
Now, what happens 99.99999% ofthe time is you transferred
ownership out of your personalname to the LLC and you have the
asset protection.
You continue to pay themortgage, the bank doesn't care.
SPEAKER_00 (07:36):
The underlying ownership did not change.
You are still the owner, you'restill the guarantor.
The bank has a hard time arguingyou sold or transferred the
property to someone else becauseyou didn't.
It's then a pass-through entitycalled an LLC.
SPEAKER_01 (07:49):
I mean, I think they could make the argument because
ownership did change out of yourname to the LLC, but they don't
care.
I'm just saying, Mark and I haveprobably had 10,000 plus
properties of our clients overthe years, tens of thousands,
transfer out of their personalname to an LLC.
And we've maybe had a few overour entire careers of 20 years
as lawyers where the bank hasactually done something clause.
(08:12):
Yep.
It's when they called thefreaking bank and asked them.
Or they stopped, they missedtheir payments.
Yeah.
And the bank's like, oh, webetter look into this and what's
going on with this property.
And is their property taxes dueto that they're not paying in?
And oh, this isn't even in theirname anymore.
Okay.
So now here's a one piece oflike maybe um safety for you,
Chad, if that's the right word.
I don't know.
Let's say the bank does send youa notice of default because you
(08:36):
have transferred the property toyour LLC and says, hey, we're
calling that.
We're the one bank out herethat's actually gonna do
something about this.
And because you've got this lowinterest rate and we want to get
it off our books, and we'regonna call the loan new.
What do you what do you do?
Deed it back in your personalname.
It's kind of like what the bankdoes when you don't make a
payment.
They have to send you notice,give you an opportunity to cure
and pay.
They can't just foreclose.
(08:57):
So if that happened, you stillhave the ability to just deed it
back in your personal name.
SPEAKER_00 (09:01):
And banks are not, people.
Let me just repeat this.
Banks are not across the countrytrying to uh exercise due on
sale clauses for people thattransfer to LLCs who are still
paying their mortgages.
It is not worth two points ofinterest.
Three, four, it's not the costto foreclose and just exercise a
(09:23):
due on sale is astronomicalcompared to the increased
interest they would get.
Maybe it's stupid.
It is not happening.
Whoever is out there saying thison the airwaves, back it up
because I am not seeing it atall, and we are helping
thousands of clowns, thousandsof clients every day with this
(09:44):
situation.
All right.
Okay, this is it's ride in solow.
It's ride in so low.
Where do people come up withthese?
I don't have the coolest handleat all.
I do not.
Okay.
So uh what is your handle?
Mark.
It's pretty creative.
Yeah.
I put an exclamation pointbehind it once in a while.
(10:06):
Okay.
Mark.
You know, that's okay.
Uh all right.
This is in the uh tax strategyuh category.
Uh does having mineral rights onyour property count as a small
business in the trifecta beforeroyalties start?
I'm two weeks out from signing acontract that has a one-time
payout of 200K.
(10:27):
Woo! Boy, Beverly Hill Billy,someone went out with a shovel
and hit some oil in theirbackyard with the possibility of
12 to 20K a month in royaltiesif they drill on or under my
property.
I love this.
So uh, if you've watched themovie Landman, this is in the
last episode, and this is theguy standing by the trunk, and
(10:50):
Billy Bob Thornton's uh son isout there schmoozing people,
saying, Sign here, I will hookyou up.
And so this is very, very commonfor those of you in certain
states, i.e.
Oklahoma, Texas, maybe South orNorth Dakota, that have mineral
right opportunities.
You're in that lane or thatfairway.
All right, I'll get to theanswer.
(11:10):
No, it is not a business, it ispassive income.
And I know what you're trying todo.
Try to find a way to write offsomething against this royalty
payment.
And it's a it's a it's a uhadvanced royalty payment, is
what you're receiving.
And it's passive income.
Count yourself lucky andblessed.
It's not subject toself-employment tax, but you
(11:30):
cannot take a write-off againstit.
It's similar to a dividend orinterest income because you're
making income off your property.
Um, you're not going out andworking or creating labor to
sell sales, uh, services orproducts.
But um, man, exciting.
SPEAKER_01 (11:45):
Yeah, the nice thing is it's already taxed at a
preferential rate in that you'renot having to pay
self-employment tax on it, butit is still your regular rate of
income.
So, but it's like that's likerental income, you know, in that
sense, um, although you can'ttake expenses there.
Okay, great question there.
Um, this one's from CW Clark.
Um says, Hi guys, I recentlyfound your videos on YouTube and
(12:06):
can't get enough of them.
Entertaining and informative.
Woo! I'm in the process ofstarting my own business,
originally planning on justgoing with an LLC.
After watching some of yourvideos, you suggest switching to
an S-Corp from the LLC at the50K mark.
I understand the benefits of theS-Corp and I'm considering that
right out of the gate.
But what is the significance ofusing 50K at the time to change?
(12:27):
I've not seen a good explanationof that reasoning yet.
Well, stay tuned, CW Clark,because we're gonna give you
that good explanation right now.
Um, all right.
Now, first off, I like whereyou're going, starting a new
business, gonna go with an LLC.
Now you can just do anS-election to that.
Keep in mind you don't have tochange the LLC to a corporation.
You can just elect for Scorporation tax treatment with
(12:50):
the IRS.
Our office does this all thetime.
It's a filing you simply make tothe IRS.
But with the state, you're stilljust Vandalay Industries LLC.
Okay, you're you're still justan LLC.
You just made the tax election.
Now, the reason the 50K mark isimportant is the strategy of the
S corporation is we're gonnatake some of the income coming
out of the LLC taxes and S Corpor the S-Corp, and we're gonna
(13:13):
pay salary, which you payself-employment tax on.
The other portion we're gonnapay out is dividend or net
income profit, and that is notsubject to self-employment tax,
which is where the tax savingsis.
Now, if you only have 30,000 ofincome there, the tax savings on
that isn't gonna cover the costof having to do an S-corporation
(13:33):
tax return now.
It's quarterly payroll.
The additional work of the Scorporation, which is a separate
corporate return.
If you're just an LLC, just you,it's just falling onto Schedule
C on your personal return.
It's not an additional corporatereturn.
You do not necessarily have todo quarterly payroll.
But once you elect S-corporationtreatment, oh, you got to do
(13:53):
payroll now.
Oh, you got to issue a W-2 atthe end of the year.
Oh, we want an 1120 S taxreturn.
So you're gonna need an engagingaccountant.
Do not do this on your own.
You would be a fool to do that.
Focus on making more money inyour business, unless you are an
accountant.
But um, I don't know, I had tothrow that in there.
I love it.
(14:14):
There's always an exceptionhere, so I got to be the lawyer.
Um, so that's the reasoning hereis is the juice worth the
squeeze?
It's not worth the squeeze untilyou hit 50k of net income.
SPEAKER_00 (14:24):
Yep, I'm with you.
Well said, my friend.
All right, our next questionhere is from AJ, and I want this
out on social media as wellbecause it's so important.
He says, I do a fair amount oftrading.
I'm familiar with trader taxstatus, so that's day trader
status, and certain that I don'twant that.
Good move.
And I probably also don't wantto make the market-to-market
election.
(14:44):
Good move, AJ.
So he says, I'd like to writeoff expenses for home office,
data services, trading tools, etcetera.
Here's what I'd like to do.
Tell me if I'm nuts.
Okay, AJ, you asked for it, soyou're gonna get it.
Option A.
I'm gonna set up an LLC andtake, make an S election, then
open a brokerage account in thename of the LLC and trade in
that account and then deduct allmy ordinary and necessary
expenses.
(15:04):
Uh not allowed.
You are still trying to writeoff trading expenses for a
trading practice that is not abusiness.
Trading is not a business.
And you do not want to makethese elections and to have day
trader status.
You already know that.
Setting up an entity and makingan S election does not somehow
morph you into the ability towrite off these expenses.
(15:27):
It's not a business, whetherit's in an LLC or an S-corp,
before or after you set up anentity.
And I know someone is trying tosell you this strategy.
They are crooks, they arescammers, they're not the ones
signing your tax return, andthey're wrong.
And I'll stand by it every dayof the week and on Sunday.
You got me?
Yep.
You're clicking on five, baby.
Yeah.
But you want to hear, he's gotan option B.
(15:47):
Oh, option B.
I think this will be worse.
Okay, okay.
Okay, I'll let you riff on this.
Two LLCs, a management companyand a holding company.
One owns the brokerage account,the other is likely a Wyoming
LLC.
Oh, that's gonna solve it.
I didn't know I needed a WyomingLLC.
All you freaking scammers outthere selling Wyoming LLCs right
and left.
(16:08):
I'm so glad you're saving thisguy's life tax-wise.
You're you're amazing.
Thank you so much.
I didn't know you could set up aWyoming LLC and all of a sudden
manufacture write-offs forsomething that's not even a
business anyway.
But that's his idea.
And AJ, you asked for it.
Okay.
He said 80% owned by me, 20% bythe management company.
(16:28):
It's also gonna be an LC, butI'm gonna use C Corp status.
Oh, if you go from an S-corp toa C Corp, it unlocks all of
this.
It somehow morphs trading intobusiness.
Um, no, I'm sorry.
I don't uh I and I don't want tosteal your thunder.
He goes on and on, and blessyour heart, separate accounting,
a separate management fee, and aC Corp, and I've got to take a
(16:49):
salary and the la la.
And here's the sad part.
AJ goes, I no longer have a W-2.
I pay for my own healthinsurance, my own medical costs,
I've got all these expenses.
I want to write them off.
I want the HSA, I want all ofthis, but I'm a trader and
you're a successful trader.
That's great.
AJ, start a business on theside, become a consultant, do
(17:11):
something that's a freakingbusiness.
Trading will not get you there.
But Matt, this option B, youthink it works?
You know?
SPEAKER_01 (17:17):
Well, he started with tell me if I'm nuts.
And I don't know that you'renuts, but whoever's giving you
this advice, and maybe this ischat GPT, maybe this is some
ridiculous seminar you went toat a holiday in last night.
I don't know what it is, butsee, you have to keep in mind
what are you doing?
What is the income you'recreating?
It's the same for real estateinvestors and everybody else.
We don't just put it in anentity, and now it changes the
(17:39):
nature of it, and I can getdifferent write-offs.
The yes corporation has aspecific strategy here for
self-employment tax savings, butit doesn't change the nature of
the income that you're making.
So you have to start at the verybeginning, which is how you
phrased it.
Am I a trader or not?
Are you taking that status ornot?
It doesn't matter what entityyou set it up in, doesn't matter
(17:59):
what state you set it up in,doesn't matter the gymnastics
you try to go through, it willnot work.
SPEAKER_00 (18:04):
One last example, because we just had a caller
with this question.
They found mineral rights wereunder their land in Oklahoma,
and they're gonna pay themroyalties.
And they would love to take atax write-off for receiving
royalties for oil and gas.
Is that a business?
No.
Oh, well, I'll I'll open an LLCto receive the oil and gas
(18:24):
royalties.
Now I can write them up.
No, it's still royalties for oiland gas.
See the point?
You have to go look at the heartof what you're really doing.
And trading stock is not abusiness.
It's a passive activity.
Enjoy your short-term and caplong-term capital gain and go
start a consulting business onthe side.
Where's my pen?
I'll just draw it.
SPEAKER_01 (18:44):
I love that.
By the way, that's the creativestrategy at the end of the day
is start a consulting businesson the side.
You're good.
If you're someone at trading andyou're good at it, start writing
about it, start talking aboutit, start consulting other
people about it.
Maybe do a training or educationprogram.
Now all the stuff you're doingto learn about trading and be
better at trading now can becomean expense because you have a
business and ordinary incomecoming in.
(19:05):
Same thing with someone with theroyalty income.
Maybe you're gonna teach otherpeople how to discover mineral
rights under their property andoptimize it.
Maybe you're gonna create awebsite that creates income
about it.
I don't know what you're gonnado.
Maybe you're gonna sell coolt-shirts that said I hit oil.
You know, I don't know.
Let's do something with someordinary income that's gonna
give us a write-off.
SPEAKER_00 (19:22):
Now you're here's a warning because I know where
you're gonna go next.
Well, I'll start managing otherpeople's money, and they'll just
give me access to their bankaccount or their wallet or their
this or their that and theirtrading account, and I'll start
managing their money because I'mso good at it.
Now you're going to jail unlessyou want to go get licensed
under the SEC.
So you can't start managingother people's money unless you
(19:42):
get licensed to do that.
So you're in this weird spacewhere you get to be a
consultant, an educator, atrainer, a coach, a great guy,
and charge for it.
But that's trading's not thebusiness.
That's the business.
AJ, thank you.
SPEAKER_01 (20:00):
All right.
Next question was from corecouchmen.
I don't know what these titlesdescribe.
SPEAKER_00 (20:06):
What could that mean?
That's half the equation.
You're like, I'm on a couch orI'm a core couch man that at my
core.
I like being on the couch.
SPEAKER_01 (20:15):
All right.
Well, let's roll with thisquestion.
I says, I just started my newsmall business LLC in Colorado,
an advertising agency.
Three questions.
One person.
You sucked his ass.
He says about three questions.
All right.
Thanks for the heads up.
When can I file my escortelection?
The Form 2553 is confusing whereit states it will not be
(20:36):
considered if submitted beforeNovember 8th.
Am I reading that correctly?
Uh no.
All right.
So you can have an effectivedate on the 2553 of when you
want an effective, but also youcan go back in time with what's
called a RevProc, which our teamknows how to file, or you can go
back in time.
Let's say this is January of2026, and you want to go back in
(21:00):
time.
You can even elect that as longas your LLC was set up before
that time or the entity was setup.
We can go back in time to createthat.
So now maybe this is talkingabout forward looking.
I don't know this instructionwhere this November 8th date is
confusing you, or if this is astate form that goes along on
the state side of the 2553, butum don't worry about that.
If it's confusing you, that canbe effective when you set up the
(21:23):
entity from day one, or it canbe effective at a future date.
Um, or we can go back in time.
Uh so that's question one.
SPEAKER_00 (21:32):
Is there a second question in there?
SPEAKER_01 (21:34):
That's question one.
Second question.
I have my first paying clientwhen distributing a fair salary
wage to myself versus thedividend distribution.
What percentage should bedistributed?
How to remain in line with taxesand paying the least?
Okay.
Last question.
What are all the things to beaware of?
(21:56):
What are all the things to beaware of?
How can we have world peace ordoing before the end of the year
for my small business andlooking ahead to next year?
SPEAKER_00 (22:05):
I'll take the world peace question.
SPEAKER_01 (22:06):
I'm gonna like the last one for Mark.
All right.
And um, you know, this thisquestion, I mean, we could, you
know, that's we'll get to thatone.
All right.
This is a good question, though.
Is you've got some income now,and now you're talking about
paying yourself.
And what am I gonna distributeto myself?
Well, keep in mind the firstthing we're gonna look at is
have you been doing yourbookkeeping?
(22:27):
Do you know what expenses youhave versus this income that's
coming in?
Now you've got some income topay yourself.
Um now maybe this is just goinginto the bank account, I don't
know.
But you're gonna start takingsome payment out of here.
Now, wouldn't it be nice ifthere was like a matrix or
something?
Have you ever ran across like amatrix that says what you're
making and how much salary youpay versus the dividend?
SPEAKER_00 (22:49):
If only there was a maybe even a Kohler payroll
matrix.
Oh, if Mark Kohler did one, thatwould that would be freaking
awesome.
That would be great.
SPEAKER_01 (22:57):
Yeah, well, if you get lucky, like like maybe like
a CPA and a tax lawyer, likethat did one.
SPEAKER_00 (23:02):
Yeah.
So uh that's out there, CoreCouchman.
Uh, I've created a matrixthat'll tell you what to pay
yourself on paper to satisfy thetax planning strategy here.
But I like what Matt said.
Get your bookkeeping done, makesome money, take money out.
Just call the draw.
Just start making money.
Get proof of product.
You're doing it, you're going.
(23:22):
And when you start taking homemore than five grand a month
after your expenses, call yourmom, tell her she'll be so proud
of you, and then call us.
And we'll tell you how to gonext step, next level.
Do not make this a selection, myfine sir or woman.
Please do not do that.
Just start making money.
SPEAKER_01 (23:42):
Yes, yes.
And what I would say too on thisquestion is when you start doing
that salary dividend split,whatever we want to call it
here, remember you're not likecutting yourself a salary check
and then taking a separate checkout that's like your dividend or
profit out of the business.
This is like an after-the-factpayroll where you're looking
back at the quarter and you'resaying, All right, I took 30
(24:04):
grand out of the business thisquarter.
I'm gonna say 10,000 of that wassalary, and 30,000 of that was
dividend or profit out of thebusiness.
And then you do a payroll reportfor 10,000 for the quarter.
Okay.
So don't think you gotta likewrite yourself multiple checks
here and everything.
You're really looking at thisquarterly after the fact.
SPEAKER_00 (24:22):
And your final question is and I and by the
way, thank you for submitting aquestion.
We're not trying to shame ordemean you in any way.
We have been a little feistytoday.
We've been feisty today, but um,I'm glad you're contacting us
about this.
And your last question is isthere anything else I should
know?
Yes, a ton.
And I would encourage youstrongly, please continue to
(24:43):
binge on our podcast, binge onmy YouTube channel, Matt's
YouTube channel.
We have our 360 event here inNovember.
You can catch it virtually orcome to Phoenix.
It's a three-day event with 20different classes or more.
And immerse yourself in this.
It will make you money.
It will make you better.
It is going to save you money.
You are on to something here.
(25:04):
People, the number one cost inyour life is taxes.
And when you can get organizedand dialed in, the universe will
bless you with success.
Good bookkeeping, understandingwhat you're trying to do, and
saving on taxes makes you a moresuccessful business owner.
And I know that resonates withyou.
It just feels right.
And it's scary, and you're like,I don't know where to start, and
(25:25):
I don't know what to do, and I'mnot that smart, and it this is
hard.
It's not that hard.
You are smart enough.
We our our special sauce, ourclaim to fame, is that we make
tax and legal easy tounderstand.
And yeah, you can dive deep andget technical.
And we train accountants andlawyers and all that too when
you want to go deep.
But really, it's about proof ofproduct, get out and market,
(25:47):
collect your money, pay yourbills.
Let's do the bookkeeping, seewhere you're at, take it home,
and keep learning, keep beinghere.
You are in a safe place.
We are not selling you some$20,000 boot camp or a Wyoming
LLC to be a part of this plan,to be a part of the American
dream.
So keep listening and thank youfor being here.
Amen.
(26:08):
All right, Jean Marie says, Ifor two and a half years, we've
owned a vacation rental inHawaii.
Wow, good luck.
You got around all the vacationrental law issues.
Hawaii has been tenacious withthe Airbnb short-term rental
rules.
Um, last year we purchased a carto alleviate renting a car when
we were there working on thecondo.
(26:30):
I love those keywords.
Condo starts to make me a littlenervous.
You're gonna work on a condo.
Boy, that's like saying I have aleased vehicle with repairs.
Really?
You do?
I can work on a house.
I got you know, things to dowith a house, landscaping, all
sorts of good things.
A condo?
What are you gonna go in andlike tighten up the sink and
(26:51):
paint the bathroom for the 38thtime?
Okay, but whatever.
So we which we combine with daysof vacationing.
So we record all meals and foodand mileage and travel, and
however, we missed the bonusdepreciation on the car, a
Subaru cross-track.
It hurt me with the Subaru.
Okay, just the fact you chose aSubaru, no offense.
(27:11):
Okay, last year, according toour tax preparer, we should have
done bonus.
This year we need to buy andinstall a new window and
purchase a new sofa bed, whichwill take you a half a day at
IKEA, but that's okay.
Is this the best year to do it?
And should we both should we buyboth in the same year?
We are both retired, no debt,small farm in Illinois.
(27:33):
Oh, I love that.
Live in California, ouch, moveto Illinois.
So I would say this, and thanks,Jean.
I'm being a little feisty.
Um you've got a vacation rentalin Hawaii.
Love it.
It's going on a schedule E as anecho.
It's on your tax return, you'rewriting off your expenses to get
there.
You're gonna have fix-up days,you're gonna keep a good log of
(27:54):
what you're working on.
Again, be careful and not tooaggressive with the condo.
I just don't know how much realwork you're gonna be doing
there.
And then you're gonna write offa vehicle while you're there.
By the way, you can onlydepreciate it if it's used 50%
or more in a business.
And uh you're you're you gottahave a decent log to show that
you're there 50% or more of thetime working on this thing.
(28:17):
How many days are you spendingvacationing there?
So it's it it appears.
Um I like the strategy.
You're gonna take write-offswhen you go there.
Love it.
And you're checking on it andyou're working on it.
Just I uh tongue in cheek here,how much work is really
happening?
Be careful not being tooaggressive with the write-offs.
That's all I'm saying.
(28:38):
Um, and the last question weneed to buy and install a new
window and purchase a new sofabed.
Do it! If it okay, we want tomake money with this STR
short-term rental.
If it needs a new sofa bed, ifit needs a new window, do it and
write it off.
By the way, you can write it alloff in the same damn year.
A write-off today is better thana write-off a year from now.
And an STR with a new sofa bedis better today than a year from
(29:00):
now.
Make money, make this STR rock.
Get in there and do what ittakes to make it the best STR in
the neighborhood or whateveryou're trying to do to optimize
it.
A little shout out to DanielRustin.
Airbnb Profit Book is amazing.
Go get it on Amazon, everyone.
But this is a question aboutfinancial decisions, not tax
(29:20):
decisions.
Do what's best for the propertyand don't be too aggressive on
your write-offs with a condo andprobably limited repairs.
So man, just go hang out in thatfarm in Illinois.
Just I I dream of that.
Okay, thank you.
SPEAKER_01 (29:36):
Yeah, I was probably the number one pizza advice.
Yeah, you're probably double.
Get out in California.
I know you love the sunshine,uh, but from a tax standpoint,
uh I don't know, Illinois is notthat great either, but yeah.
Yeah, it's true.
Um Muggs338.
Uh Mugs 338 says, I have a W 2job in the public sector.
(29:57):
I have a 457 plan that I max.
Out.
My wife is self-employed and hasa 401k that she offers to
employees.
All right, she's got a 401k withemployees.
What is the max amount of taxdeferral for deduction purposes
we can do as we are marriedfiling joint?
All right, great question,Muggs.
This really comes down to bothof you individually.
(30:18):
Doesn't really matter thatyou're married filing joint so
much.
Well, let's break it down here.
Now, on a 457, this is like anemployer plan government
sponsored, similar to a 401kthat you might have in the
public sector that your wifeactually has with her company.
So for you, you can do$23,500 asan employee that you can put
(30:39):
into the 457 of your money andtake a tax deduction.
Now you could do Roth and nottake a tax deduction, but you
said you want deductions.
So I'm presuming we're going todo traditional here.
Now, the amount of match you'regoing to get that the employer's
going to put in on your 457depends on the plan.
You don't get a dictate that.
All right.
Now your spouse has a 401k andshe owns the business that she
(31:00):
offers to herself as she's anemployee in the business and to
her employees.
So she can also do$23,500 inthat.
She can put is an employeecontribution.
Now, if you are$50 or older, oryour spouse, you can do$7,500 on
top of that, which would bringyou to$31,000.
Okay.
(31:20):
And by the way, this is 2025numbers here.
That$31,000 will be deductibledollars.
So between the two of you, Iknow you can at least get in
$62,000.
Now, for those of you that havea$401 at a job where you work,
you may be able to do the megabackdoor Roth and do additional
(31:41):
after-tax contributions as anemployee to get up to$70,000 a
year into it.
However, there are a couplecategories of people that can't
do the mega backdoor Roth whereyou can get more money in.
Now keep in mind, these would beRoth contributions.
You're not getting a deduction,but it could be more retirement
plan dollars.
The reason I note that is itwill not work for your spouse
(32:06):
because she owns a business withemployees.
Me, our 401k plan and our lawfirm, F-Directed IRA, I'm an
owner in the business.
Mark's not in the business.
I can't do the mega backdoorRoth, even though I'd want to.
So who can do the mega backdoorRoth?
If you have a solo 401k with noemployees, you can.
Or if you're an employee at acompany that you don't own, you
(32:26):
can do the mega backdoor Roth.
There's an ownership issue rulewhere it just doesn't work.
But I don't know that matteredfor you, Muggs, but bottom line,
you can do 62K each at aminimum.
This is an addition.
On top of that, you can havematching from the companies.
That's determined based on theplan and what the employer
offers.
Now your wife could adjust thatin the business, but if she's
(32:46):
matching more for herself, she'sgonna be matching more for her
employees.
But keep in mind, on top ofthis, you can do a backdoor Roth
IRA.
I assume you guys are highincome if you're trying to max
out retirement accounts here.
So I presume you're high income.
You can't just do a regular RothIRA.
You actually can't even do atraditional IRA and get
deductions because you're highincome here and you're
(33:07):
contributing to 401k plans, butyou can do a backdoor Roth IRA,
which can get you another 7,000in each, which could that's
another 14 grand.
So now we're up to$76,000 intoretirement accounts in the year.
And we're not even including thematch that could come from the
457 or from the 401k.
So there you have it, Muggs.
(33:29):
I think that's a lot of moneyyou can get in each year.
Uh hopefully that was helpful.
SPEAKER_00 (33:33):
I love it.
Well, I think we'll wrap up theday with one or I'll do my last
question.
Yeah.
Once you finish it.
I'd like to transition to theIRA conversation.
This is great uh points Mattjust made there.
This is from uh L.
McCoy.
My self-directed IRA owns anLLC.
(33:54):
Okay, and that LLC is part of ajoint venture with another
company.
So we have an LLC owned by anIRA, 100%.
And then it owns part of anotherLLC with another company that is
not a self-directed IRA LLC.
So that's kind of like my IRAowns an LLC that partnered with
Matt in an LLC, but just Matt.
(34:15):
There's no other IRA on theother side.
Okay, so that's the facts.
Does any property the JV, sothat's the partnership LLC, get
with a loan still have to benon-recourse or a non-recourse
loan?
Probably, but I don't haveenough facts.
It would depend on yourownership percentage in the JV
(34:37):
partnership.
Now let's just assume you're50-50.
Yes.
It would have to be anon-recourse loan if they want
you to sign as a guarantor.
If you do not sign as aguarantor, but someone on the
other side's willing to do it,that's cool.
You just cannot sign as aguarantor.
So theoretically, it would haveto be a non-recourse loan to
(35:00):
you, but someone else could signon it and be just fine.
But that's again assuming you're50-50.
If you're just a 10% owner inthis deal or 20% owner, and this
is where we get the shades ofgray, from 50 to 0% ownership, I
think you're gonna be better offto stay away from a recourse
loan, period.
(35:21):
Um, but ownership percentagecould play a role.
Yeah.
SPEAKER_01 (35:24):
But usually if in that structure, if you're doing
it right, the J there's gonna bea new LLC that's a JV.
Are they not doing a J V?
SPEAKER_00 (35:33):
No, it's her LLC, it's a single member LLC with
her IRA with a in a JV LLC.
But the other partner is not anIRA.
SPEAKER_01 (35:40):
But there's a J V LLC, so the partnership LLC will
be the borrower on the loan.
SPEAKER_00 (35:46):
Yeah.
SPEAKER_01 (35:46):
So what recourse does the bank have?
Well, they only have recourse tothe LLC.
So I don't for me, I'm like, aslong as that LLC is the
borrower, not you, not your IRA,it can be recourse.
But like Mark said, don't beguaranteeing it.
That's what's the problem.
Most of those banks are going tobe like, anybody that's a 20% or
more, you know, underlying ownerhere has to sign a guarantee.
(36:10):
So so you want to make sure aslong as the loan is done just to
the LLC, that is effectivelynon-recourse.
Um your partners could sign acase.
Um with a but you need to sign apersonal guarantee, that's where
you'll get jobs.
SPEAKER_00 (36:24):
Yeah, but your partners could, is what I'm
saying.
Exactly.
Your partner could.
Yeah.
Now the second question was canI do some business functions
like book work and get a fee?
Oof, and but have the fee go tomy self-directed IRA LLC.
Oh my gosh, where did you gowith this, Al McCoy?
You were like doing so well.
You understood the non-recourseloan and you said, Can I do some
(36:45):
business functions like bookwork?
Okay.
Oh, you're going you want to getpaid.
Oh, no, you don't even want toget paid.
You want your IRA to get paid.
Uh, bless your heart.
Um, it's a slippery slope tohell, isn't it?
Um, just joking.
Okay.
Right.
So the answer is yes, you coulddo some basic LLC management of
(37:07):
your own IRA LLC as in thisstate of bookkeeping would be
fine and things like that.
But you cannot get, okay, andthis is again where we need more
facts.
Percentage of ownership couldplay a big role here.
If you only own 10% with yourIRA LLC of this JV partnership
where non-family members,non-related parties own 90% of
(37:31):
the LLC, and you only own 10%,then you would be allowed to
take a fee, but it's got to goto you, not your IRA.
Your IRA cannot do human work.
So they cannot get paid for yourwork.
So you could work for the JV LLCif your ownership percentage was
in a minority position, but it'snot going to your IRA.
SPEAKER_01 (37:52):
So keep in mind, any like bookkeeping, administrative
tasks, you can do anyways forthe LLC.
You just not get getting paidfor or compensated for it, nor
is your IRA.
The IRS wants you to be keepingtrack of the records and what's
going on and the bookkeeping andeverything like that.
And that's just good managementthat anybody should have for any
of their investments.
And so that's okay to bedealing.
I'd recommend you do that, butyou're not getting any special
(38:15):
payment or benefit personally,nor should your IRA.
SPEAKER_00 (38:18):
Yeah.
All right.
Well, are we wrapping it uptoday?
SPEAKER_01 (38:21):
Yeah, I just want to say thanks everyone for the
questions.
Despite Mark and I's littleangstiness on some of these, we
are so grateful for those of yousubmitted questions.
I don't want to discourage you.
Yeah.
And it's okay if you got to dosome, you know, secret screen
names like Muggs338, whateveryou got to do, you know, to just
you know be a little incognito.
That's okay.
We do like at least a first nameand what state you're from.
SPEAKER_00 (38:41):
Or if you're male or female, just so we can say you,
he, she, whatever.
But anyway, but thank you,everyone.
And we are going to be hereevery week, and we'd love your
questions.
And please don't give up on theAmerican dream next week.
Well, by the time you hear this,you could be right on top of
you.
And that is the Alt AssetSummit.
Get over to Altassetsummit.com.
You can watch virtually, and weare going to be parading all
(39:04):
sorts of investment ideas andstrategies from third parties
that are bringing it to your IRAor 401k.
And you get to just watch andlisten and learn.
I think you would love it.
Get to altassetsummit.com.
And then in November, we haveour tax and legal and finance
and business wealth buildingMain Street 360 event.
So get to mainstreet360.com tocheck that out as well.
(39:27):
Thanks, everybody, and we'll seeyou next week.
You've got some income now, and now you're
talking about paying yourself.
Well, keep in mind the firstthing we're gonna look at is
have you been doing yourbookkeeping?
Do you know what expenses youhave versus this income that's
coming in?
SPEAKER_00 (00:10):
Get your bookkeeping done.
Make some money.
And when you start taking homemore than five grand a month
after your expenses, call yourmom, tell her she'll be so proud
of you, and then call us.
And we'll tell you how to gonext step, next level.
SPEAKER_01 (00:29):
Welcome everyone to the Main Street Business
Podcast.
This is Matt Sornsend, joined bythe incredible Mark J.
Coleman.
We are excited to be with you.
Today is open forum for thepodcast.
We have your questions here, andwe're gonna give you some
answers on tax, legal, wealthbuilding, everything small
business.
SPEAKER_00 (00:45):
Pretty stoked for it.
Yeah, no, this is a fun, this isthe people show.
This is a fun show.
Excited about it, and we're justgonna jump right in.
And I'll say it now.
If you want to present uh post,present, uh, give us a question,
please go to mainstreetbusinesspodcast.com.
Uh, we're anxious to see yourquestions.
We'd love to see them here.
And I can I lead off?
SPEAKER_01 (01:05):
Absolutely.
SPEAKER_00 (01:06):
Okay, this is a topic you and I have been really
talking about a lot lately, andthat is a business purchase
question.
Yeah, I just did a training onthat last night.
You did one yesterday.
Uh, so this is from AB Houston32that says, My S Corp purchased a
business.
On which forms do I report thepurchase?
(01:26):
Uh, the first business will payrent to the new business.
What do I claim as expenses?
I remember that that strategyfrom one of your older videos.
Please help.
Oh, AB Houstow 32, not Houston,AB Houstow.
These questions that you'reasking, um, and don't be
offended with this response.
(01:47):
If you're buying a business andhaving these questions, I can
see that you were probably notassisted in the purchase with
some tax and legal counselbecause all of these questions
and about 50 more exist.
And these are the basicquestions.
There's so, so much more you'vegot to deal with here.
Um, I'm gonna just say, I'mgonna riff for two one minute,
(02:08):
but I'm gonna just tell you youhave got to make an appointment
with one of our attorneys.
It'll save you 20 times what youpay them for just an hour
because you're these questionsare off the chart with things
that you should already, theseare water under the bridge type
questions and should have beenaddressed before you even bought
the business.
And I don't mean that rudely.
(02:30):
It will serve you.
I would talk with either um uhAshley, Scarlett, um, Max, Ryan,
Darren, a lot of the attorneyofficers are handling these
transactions.
Yeah, they're handling thesetransactions every day.
Okay, so first thing, your SCorp purchased a business, which
forms do I report the purchaseon?
You're talking about maybe theasset allocation that's form
(02:50):
8594.
It's with the IRS.
You're gonna sign it, and it hasto match the seller's tax
return.
This is a form you would havesigned at closing.
So this is a little after thefact.
So you've got to get a hold ofthe seller and go, we need to
get on the same page on this8594.
And it would normally be agreedto as an exhibit in your asset
(03:10):
purchase agreement.
Then you said the first businesswill pay rent to the new
business.
Well, apparently you're the newbusiness because you just bought
it.
So the first business, I'mpresuming, is a seller, and so
they're paying rent to you, butyou're the one that owns it now.
So now that means you're thefirst business, and then there's
a new business.
I don't know who's paying rentto who.
(03:30):
And by the way, that meansthere's real estate involved, or
is there a sublease involved?
That's going to be a factor.
And if someone's paying rent,it's a rent.
Rent is an expense for theperson paying it.
It is income for the personreceiving it.
And I don't know who's first,second, or third business in
this mix.
And so again, a huge topic of,and then the fact that you're
(03:52):
asking if that's a write-off orwhat is, there's about 20 other
write-offs you need to beworrying about.
And with your S-corp, yourpayroll strategy, your what do
you have employees in this mix?
What are the merchant accountsituations, your ongoing office
expenses and marketing and salesand legal, and and um, and then
you remember that strategy fromyour older videos.
(04:16):
And maybe you're referring to aself-rental where you own the
building, you're renting it toyour escort, but that's another
business in the mix.
So I am just begging of you,please make an appointment with
one of our tax lawyers and theywill set you straight.
They will answer questions youdon't even know to ask, and you
will love it.
So thank you.
Appreciate that.
SPEAKER_01 (04:33):
Yeah, just one thing on the tax forms there.
Mark said$85.94, right?
That's the allocation ofpurchase price if you just
purchase the assets of thebusiness.
And that's what it probablysounds like you did because your
S Corp bought a business.
We presume you just bought theassets of the business.
But let's say you boughtsomeone's LLC or someone's
corporation, you acquired it.
(04:54):
Well, the seller's gonna reportthat on Schedule D as a capital
gain, uh, assuming they mademoney on that sell.
But then you're gonna need totrack the basis of what you paid
for that business.
All right, so it depends on whatyou did in that scenario.
You want to make sure you getthat right.
There's a lot more, like Marksaid, to get into that.
All right, let's go.
I'm gonna go over to assetprotection here.
This is in the asset protectioncategory.
(05:14):
This was by C white J.
Um says, hi guys, big fan.
First time asking a question.
My wife and I recently moved toa new primary residence.
We want to keep our formerprimary residence as an
investment property.
SPEAKER_00 (05:28):
Ooh, this is right up your eye.
You love this.
This is Matt's MO.
SPEAKER_01 (05:31):
That's why I picked this question.
It says, I want to transfer theinvestment property from our
personal names to an LLC forasset protection purposes.
But I've heard this couldpossibly trigger the do-on-sale
clause for our mortgage.
We have very low interest rates,so understand banks are
exercising this clause moreoften so they can afford offload
(05:51):
their low interest ratemortgages.
Have you heard that?
No.
I am not reading.
How can we transfer thisproperty to an LLC without
triggering the do on sale clausefrom our mortgage company?
Thanks and keep up the greatwork, Chad.
All right, Chad, great question.
First of all, love what you'redoing here.
My point about building wealth,probably one of the number one
points, is accumulate assets.
(06:12):
So many people think, oh, I'mbuying a new house, I'll sell my
current house.
And I love how you're looking atthis, Chad, and saying, hey,
we've got a low interest rate onthis.
I assume that the rent you'regonna get is gonna cash flow the
property.
You're gonna have the value ofthe property go up over time.
And if you don't need to sellthe house to get into the next
house, totally great strategy,great way to build wealth.
(06:32):
You need to accumulate assets.
That's how you get wealthy.
Now, as to the do on sale clausequestion, because this is coming
into a rental property here.
So when it's your primaryresidence, we probably just want
it in your trust for estateplanning purposes.
No asset protection risksnecessarily here.
You live in it.
But once you put a tenant in it,we've got some asset protection
risks.
What happens if the tenant slipsand falls?
(06:53):
I don't want them suing you andcoming after all your assets.
So we're gonna have that rentalin an LLC.
Tenant slips and falls, whateverhappens, they can sue the LLC.
They can't get into any of yourother assets, they get stuck in
that LLC.
Now, you have a mortgage andyour personal name, as you said,
and most mortgages have a clausein there that says, when you
change ownership of thisproperty, you must pay off the
(07:15):
mortgage, and the and themortgage company has the right
to call the loan due.
This is the due on sale clause.
Now, what happens 99.99999% ofthe time is you transferred
ownership out of your personalname to the LLC and you have the
asset protection.
You continue to pay themortgage, the bank doesn't care.
SPEAKER_00 (07:36):
The underlying ownership did not change.
You are still the owner, you'restill the guarantor.
The bank has a hard time arguingyou sold or transferred the
property to someone else becauseyou didn't.
It's then a pass-through entitycalled an LLC.
SPEAKER_01 (07:49):
I mean, I think they could make the argument because
ownership did change out of yourname to the LLC, but they don't
care.
I'm just saying, Mark and I haveprobably had 10,000 plus
properties of our clients overthe years, tens of thousands,
transfer out of their personalname to an LLC.
And we've maybe had a few overour entire careers of 20 years
as lawyers where the bank hasactually done something clause.
(08:12):
Yep.
It's when they called thefreaking bank and asked them.
Or they stopped, they missedtheir payments.
Yeah.
And the bank's like, oh, webetter look into this and what's
going on with this property.
And is their property taxes dueto that they're not paying in?
And oh, this isn't even in theirname anymore.
Okay.
So now here's a one piece oflike maybe um safety for you,
Chad, if that's the right word.
I don't know.
Let's say the bank does send youa notice of default because you
(08:36):
have transferred the property toyour LLC and says, hey, we're
calling that.
We're the one bank out herethat's actually gonna do
something about this.
And because you've got this lowinterest rate and we want to get
it off our books, and we'regonna call the loan new.
What do you what do you do?
Deed it back in your personalname.
It's kind of like what the bankdoes when you don't make a
payment.
They have to send you notice,give you an opportunity to cure
and pay.
They can't just foreclose.
(08:57):
So if that happened, you stillhave the ability to just deed it
back in your personal name.
SPEAKER_00 (09:01):
And banks are not, people.
Let me just repeat this.
Banks are not across the countrytrying to uh exercise due on
sale clauses for people thattransfer to LLCs who are still
paying their mortgages.
It is not worth two points ofinterest.
Three, four, it's not the costto foreclose and just exercise a
(09:23):
due on sale is astronomicalcompared to the increased
interest they would get.
Maybe it's stupid.
It is not happening.
Whoever is out there saying thison the airwaves, back it up
because I am not seeing it atall, and we are helping
thousands of clowns, thousandsof clients every day with this
(09:44):
situation.
All right.
Okay, this is it's ride in solow.
It's ride in so low.
Where do people come up withthese?
I don't have the coolest handleat all.
I do not.
Okay.
So uh what is your handle?
Mark.
It's pretty creative.
Yeah.
I put an exclamation pointbehind it once in a while.
(10:06):
Okay.
Mark.
You know, that's okay.
Uh all right.
This is in the uh tax strategyuh category.
Uh does having mineral rights onyour property count as a small
business in the trifecta beforeroyalties start?
I'm two weeks out from signing acontract that has a one-time
payout of 200K.
(10:27):
Woo! Boy, Beverly Hill Billy,someone went out with a shovel
and hit some oil in theirbackyard with the possibility of
12 to 20K a month in royaltiesif they drill on or under my
property.
I love this.
So uh, if you've watched themovie Landman, this is in the
last episode, and this is theguy standing by the trunk, and
(10:50):
Billy Bob Thornton's uh son isout there schmoozing people,
saying, Sign here, I will hookyou up.
And so this is very, very commonfor those of you in certain
states, i.e.
Oklahoma, Texas, maybe South orNorth Dakota, that have mineral
right opportunities.
You're in that lane or thatfairway.
All right, I'll get to theanswer.
(11:10):
No, it is not a business, it ispassive income.
And I know what you're trying todo.
Try to find a way to write offsomething against this royalty
payment.
And it's a it's a it's a uhadvanced royalty payment, is
what you're receiving.
And it's passive income.
Count yourself lucky andblessed.
It's not subject toself-employment tax, but you
(11:30):
cannot take a write-off againstit.
It's similar to a dividend orinterest income because you're
making income off your property.
Um, you're not going out andworking or creating labor to
sell sales, uh, services orproducts.
But um, man, exciting.
SPEAKER_01 (11:45):
Yeah, the nice thing is it's already taxed at a
preferential rate in that you'renot having to pay
self-employment tax on it, butit is still your regular rate of
income.
So, but it's like that's likerental income, you know, in that
sense, um, although you can'ttake expenses there.
Okay, great question there.
Um, this one's from CW Clark.
Um says, Hi guys, I recentlyfound your videos on YouTube and
(12:06):
can't get enough of them.
Entertaining and informative.
Woo! I'm in the process ofstarting my own business,
originally planning on justgoing with an LLC.
After watching some of yourvideos, you suggest switching to
an S-Corp from the LLC at the50K mark.
I understand the benefits of theS-Corp and I'm considering that
right out of the gate.
But what is the significance ofusing 50K at the time to change?
(12:27):
I've not seen a good explanationof that reasoning yet.
Well, stay tuned, CW Clark,because we're gonna give you
that good explanation right now.
Um, all right.
Now, first off, I like whereyou're going, starting a new
business, gonna go with an LLC.
Now you can just do anS-election to that.
Keep in mind you don't have tochange the LLC to a corporation.
You can just elect for Scorporation tax treatment with
(12:50):
the IRS.
Our office does this all thetime.
It's a filing you simply make tothe IRS.
But with the state, you're stilljust Vandalay Industries LLC.
Okay, you're you're still justan LLC.
You just made the tax election.
Now, the reason the 50K mark isimportant is the strategy of the
S corporation is we're gonnatake some of the income coming
out of the LLC taxes and S Corpor the S-Corp, and we're gonna
(13:13):
pay salary, which you payself-employment tax on.
The other portion we're gonnapay out is dividend or net
income profit, and that is notsubject to self-employment tax,
which is where the tax savingsis.
Now, if you only have 30,000 ofincome there, the tax savings on
that isn't gonna cover the costof having to do an S-corporation
(13:33):
tax return now.
It's quarterly payroll.
The additional work of the Scorporation, which is a separate
corporate return.
If you're just an LLC, just you,it's just falling onto Schedule
C on your personal return.
It's not an additional corporatereturn.
You do not necessarily have todo quarterly payroll.
But once you elect S-corporationtreatment, oh, you got to do
(13:53):
payroll now.
Oh, you got to issue a W-2 atthe end of the year.
Oh, we want an 1120 S taxreturn.
So you're gonna need an engagingaccountant.
Do not do this on your own.
You would be a fool to do that.
Focus on making more money inyour business, unless you are an
accountant.
But um, I don't know, I had tothrow that in there.
I love it.
(14:14):
There's always an exceptionhere, so I got to be the lawyer.
Um, so that's the reasoning hereis is the juice worth the
squeeze?
It's not worth the squeeze untilyou hit 50k of net income.
SPEAKER_00 (14:24):
Yep, I'm with you.
Well said, my friend.
All right, our next questionhere is from AJ, and I want this
out on social media as wellbecause it's so important.
He says, I do a fair amount oftrading.
I'm familiar with trader taxstatus, so that's day trader
status, and certain that I don'twant that.
Good move.
And I probably also don't wantto make the market-to-market
election.
(14:44):
Good move, AJ.
So he says, I'd like to writeoff expenses for home office,
data services, trading tools, etcetera.
Here's what I'd like to do.
Tell me if I'm nuts.
Okay, AJ, you asked for it, soyou're gonna get it.
Option A.
I'm gonna set up an LLC andtake, make an S election, then
open a brokerage account in thename of the LLC and trade in
that account and then deduct allmy ordinary and necessary
expenses.
(15:04):
Uh not allowed.
You are still trying to writeoff trading expenses for a
trading practice that is not abusiness.
Trading is not a business.
And you do not want to makethese elections and to have day
trader status.
You already know that.
Setting up an entity and makingan S election does not somehow
morph you into the ability towrite off these expenses.
(15:27):
It's not a business, whetherit's in an LLC or an S-corp,
before or after you set up anentity.
And I know someone is trying tosell you this strategy.
They are crooks, they arescammers, they're not the ones
signing your tax return, andthey're wrong.
And I'll stand by it every dayof the week and on Sunday.
You got me?
Yep.
You're clicking on five, baby.
Yeah.
But you want to hear, he's gotan option B.
(15:47):
Oh, option B.
I think this will be worse.
Okay, okay.
Okay, I'll let you riff on this.
Two LLCs, a management companyand a holding company.
One owns the brokerage account,the other is likely a Wyoming
LLC.
Oh, that's gonna solve it.
I didn't know I needed a WyomingLLC.
All you freaking scammers outthere selling Wyoming LLCs right
and left.
(16:08):
I'm so glad you're saving thisguy's life tax-wise.
You're you're amazing.
Thank you so much.
I didn't know you could set up aWyoming LLC and all of a sudden
manufacture write-offs forsomething that's not even a
business anyway.
But that's his idea.
And AJ, you asked for it.
Okay.
He said 80% owned by me, 20% bythe management company.
(16:28):
It's also gonna be an LC, butI'm gonna use C Corp status.
Oh, if you go from an S-corp toa C Corp, it unlocks all of
this.
It somehow morphs trading intobusiness.
Um, no, I'm sorry.
I don't uh I and I don't want tosteal your thunder.
He goes on and on, and blessyour heart, separate accounting,
a separate management fee, and aC Corp, and I've got to take a
(16:49):
salary and the la la.
And here's the sad part.
AJ goes, I no longer have a W-2.
I pay for my own healthinsurance, my own medical costs,
I've got all these expenses.
I want to write them off.
I want the HSA, I want all ofthis, but I'm a trader and
you're a successful trader.
That's great.
AJ, start a business on theside, become a consultant, do
(17:11):
something that's a freakingbusiness.
Trading will not get you there.
But Matt, this option B, youthink it works?
You know?
SPEAKER_01 (17:17):
Well, he started with tell me if I'm nuts.
And I don't know that you'renuts, but whoever's giving you
this advice, and maybe this ischat GPT, maybe this is some
ridiculous seminar you went toat a holiday in last night.
I don't know what it is, butsee, you have to keep in mind
what are you doing?
What is the income you'recreating?
It's the same for real estateinvestors and everybody else.
We don't just put it in anentity, and now it changes the
(17:39):
nature of it, and I can getdifferent write-offs.
The yes corporation has aspecific strategy here for
self-employment tax savings, butit doesn't change the nature of
the income that you're making.
So you have to start at the verybeginning, which is how you
phrased it.
Am I a trader or not?
Are you taking that status ornot?
It doesn't matter what entityyou set it up in, doesn't matter
(17:59):
what state you set it up in,doesn't matter the gymnastics
you try to go through, it willnot work.
SPEAKER_00 (18:04):
One last example, because we just had a caller
with this question.
They found mineral rights wereunder their land in Oklahoma,
and they're gonna pay themroyalties.
And they would love to take atax write-off for receiving
royalties for oil and gas.
Is that a business?
No.
Oh, well, I'll I'll open an LLCto receive the oil and gas
(18:24):
royalties.
Now I can write them up.
No, it's still royalties for oiland gas.
See the point?
You have to go look at the heartof what you're really doing.
And trading stock is not abusiness.
It's a passive activity.
Enjoy your short-term and caplong-term capital gain and go
start a consulting business onthe side.
Where's my pen?
I'll just draw it.
SPEAKER_01 (18:44):
I love that.
By the way, that's the creativestrategy at the end of the day
is start a consulting businesson the side.
You're good.
If you're someone at trading andyou're good at it, start writing
about it, start talking aboutit, start consulting other
people about it.
Maybe do a training or educationprogram.
Now all the stuff you're doingto learn about trading and be
better at trading now can becomean expense because you have a
business and ordinary incomecoming in.
(19:05):
Same thing with someone with theroyalty income.
Maybe you're gonna teach otherpeople how to discover mineral
rights under their property andoptimize it.
Maybe you're gonna create awebsite that creates income
about it.
I don't know what you're gonnado.
Maybe you're gonna sell coolt-shirts that said I hit oil.
You know, I don't know.
Let's do something with someordinary income that's gonna
give us a write-off.
SPEAKER_00 (19:22):
Now you're here's a warning because I know where
you're gonna go next.
Well, I'll start managing otherpeople's money, and they'll just
give me access to their bankaccount or their wallet or their
this or their that and theirtrading account, and I'll start
managing their money because I'mso good at it.
Now you're going to jail unlessyou want to go get licensed
under the SEC.
So you can't start managingother people's money unless you
(19:42):
get licensed to do that.
So you're in this weird spacewhere you get to be a
consultant, an educator, atrainer, a coach, a great guy,
and charge for it.
But that's trading's not thebusiness.
That's the business.
AJ, thank you.
SPEAKER_01 (20:00):
All right.
Next question was from corecouchmen.
I don't know what these titlesdescribe.
SPEAKER_00 (20:06):
What could that mean?
That's half the equation.
You're like, I'm on a couch orI'm a core couch man that at my
core.
I like being on the couch.
SPEAKER_01 (20:15):
All right.
Well, let's roll with thisquestion.
I says, I just started my newsmall business LLC in Colorado,
an advertising agency.
Three questions.
One person.
You sucked his ass.
He says about three questions.
All right.
Thanks for the heads up.
When can I file my escortelection?
The Form 2553 is confusing whereit states it will not be
(20:36):
considered if submitted beforeNovember 8th.
Am I reading that correctly?
Uh no.
All right.
So you can have an effectivedate on the 2553 of when you
want an effective, but also youcan go back in time with what's
called a RevProc, which our teamknows how to file, or you can go
back in time.
Let's say this is January of2026, and you want to go back in
(21:00):
time.
You can even elect that as longas your LLC was set up before
that time or the entity was setup.
We can go back in time to createthat.
So now maybe this is talkingabout forward looking.
I don't know this instructionwhere this November 8th date is
confusing you, or if this is astate form that goes along on
the state side of the 2553, butum don't worry about that.
If it's confusing you, that canbe effective when you set up the
(21:23):
entity from day one, or it canbe effective at a future date.
Um, or we can go back in time.
Uh so that's question one.
SPEAKER_00 (21:32):
Is there a second question in there?
SPEAKER_01 (21:34):
That's question one.
Second question.
I have my first paying clientwhen distributing a fair salary
wage to myself versus thedividend distribution.
What percentage should bedistributed?
How to remain in line with taxesand paying the least?
Okay.
Last question.
What are all the things to beaware of?
(21:56):
What are all the things to beaware of?
How can we have world peace ordoing before the end of the year
for my small business andlooking ahead to next year?
SPEAKER_00 (22:05):
I'll take the world peace question.
SPEAKER_01 (22:06):
I'm gonna like the last one for Mark.
All right.
And um, you know, this thisquestion, I mean, we could, you
know, that's we'll get to thatone.
All right.
This is a good question, though.
Is you've got some income now,and now you're talking about
paying yourself.
And what am I gonna distributeto myself?
Well, keep in mind the firstthing we're gonna look at is
have you been doing yourbookkeeping?
(22:27):
Do you know what expenses youhave versus this income that's
coming in?
Now you've got some income topay yourself.
Um now maybe this is just goinginto the bank account, I don't
know.
But you're gonna start takingsome payment out of here.
Now, wouldn't it be nice ifthere was like a matrix or
something?
Have you ever ran across like amatrix that says what you're
making and how much salary youpay versus the dividend?
SPEAKER_00 (22:49):
If only there was a maybe even a Kohler payroll
matrix.
Oh, if Mark Kohler did one, thatwould that would be freaking
awesome.
That would be great.
SPEAKER_01 (22:57):
Yeah, well, if you get lucky, like like maybe like
a CPA and a tax lawyer, likethat did one.
SPEAKER_00 (23:02):
Yeah.
So uh that's out there, CoreCouchman.
Uh, I've created a matrixthat'll tell you what to pay
yourself on paper to satisfy thetax planning strategy here.
But I like what Matt said.
Get your bookkeeping done, makesome money, take money out.
Just call the draw.
Just start making money.
Get proof of product.
You're doing it, you're going.
(23:22):
And when you start taking homemore than five grand a month
after your expenses, call yourmom, tell her she'll be so proud
of you, and then call us.
And we'll tell you how to gonext step, next level.
Do not make this a selection, myfine sir or woman.
Please do not do that.
Just start making money.
SPEAKER_01 (23:42):
Yes, yes.
And what I would say too on thisquestion is when you start doing
that salary dividend split,whatever we want to call it
here, remember you're not likecutting yourself a salary check
and then taking a separate checkout that's like your dividend or
profit out of the business.
This is like an after-the-factpayroll where you're looking
back at the quarter and you'resaying, All right, I took 30
(24:04):
grand out of the business thisquarter.
I'm gonna say 10,000 of that wassalary, and 30,000 of that was
dividend or profit out of thebusiness.
And then you do a payroll reportfor 10,000 for the quarter.
Okay.
So don't think you gotta likewrite yourself multiple checks
here and everything.
You're really looking at thisquarterly after the fact.
SPEAKER_00 (24:22):
And your final question is and I and by the
way, thank you for submitting aquestion.
We're not trying to shame ordemean you in any way.
We have been a little feistytoday.
We've been feisty today, but um,I'm glad you're contacting us
about this.
And your last question is isthere anything else I should
know?
Yes, a ton.
And I would encourage youstrongly, please continue to
(24:43):
binge on our podcast, binge onmy YouTube channel, Matt's
YouTube channel.
We have our 360 event here inNovember.
You can catch it virtually orcome to Phoenix.
It's a three-day event with 20different classes or more.
And immerse yourself in this.
It will make you money.
It will make you better.
It is going to save you money.
You are on to something here.
(25:04):
People, the number one cost inyour life is taxes.
And when you can get organizedand dialed in, the universe will
bless you with success.
Good bookkeeping, understandingwhat you're trying to do, and
saving on taxes makes you a moresuccessful business owner.
And I know that resonates withyou.
It just feels right.
And it's scary, and you're like,I don't know where to start, and
(25:25):
I don't know what to do, and I'mnot that smart, and it this is
hard.
It's not that hard.
You are smart enough.
We our our special sauce, ourclaim to fame, is that we make
tax and legal easy tounderstand.
And yeah, you can dive deep andget technical.
And we train accountants andlawyers and all that too when
you want to go deep.
But really, it's about proof ofproduct, get out and market,
(25:47):
collect your money, pay yourbills.
Let's do the bookkeeping, seewhere you're at, take it home,
and keep learning, keep beinghere.
You are in a safe place.
We are not selling you some$20,000 boot camp or a Wyoming
LLC to be a part of this plan,to be a part of the American
dream.
So keep listening and thank youfor being here.
Amen.
(26:08):
All right, Jean Marie says, Ifor two and a half years, we've
owned a vacation rental inHawaii.
Wow, good luck.
You got around all the vacationrental law issues.
Hawaii has been tenacious withthe Airbnb short-term rental
rules.
Um, last year we purchased a carto alleviate renting a car when
we were there working on thecondo.
(26:30):
I love those keywords.
Condo starts to make me a littlenervous.
You're gonna work on a condo.
Boy, that's like saying I have aleased vehicle with repairs.
Really?
You do?
I can work on a house.
I got you know, things to dowith a house, landscaping, all
sorts of good things.
A condo?
What are you gonna go in andlike tighten up the sink and
(26:51):
paint the bathroom for the 38thtime?
Okay, but whatever.
So we which we combine with daysof vacationing.
So we record all meals and foodand mileage and travel, and
however, we missed the bonusdepreciation on the car, a
Subaru cross-track.
It hurt me with the Subaru.
Okay, just the fact you chose aSubaru, no offense.
(27:11):
Okay, last year, according toour tax preparer, we should have
done bonus.
This year we need to buy andinstall a new window and
purchase a new sofa bed, whichwill take you a half a day at
IKEA, but that's okay.
Is this the best year to do it?
And should we both should we buyboth in the same year?
We are both retired, no debt,small farm in Illinois.
(27:33):
Oh, I love that.
Live in California, ouch, moveto Illinois.
So I would say this, and thanks,Jean.
I'm being a little feisty.
Um you've got a vacation rentalin Hawaii.
Love it.
It's going on a schedule E as anecho.
It's on your tax return, you'rewriting off your expenses to get
there.
You're gonna have fix-up days,you're gonna keep a good log of
(27:54):
what you're working on.
Again, be careful and not tooaggressive with the condo.
I just don't know how much realwork you're gonna be doing
there.
And then you're gonna write offa vehicle while you're there.
By the way, you can onlydepreciate it if it's used 50%
or more in a business.
And uh you're you're you gottahave a decent log to show that
you're there 50% or more of thetime working on this thing.
(28:17):
How many days are you spendingvacationing there?
So it's it it appears.
Um I like the strategy.
You're gonna take write-offswhen you go there.
Love it.
And you're checking on it andyou're working on it.
Just I uh tongue in cheek here,how much work is really
happening?
Be careful not being tooaggressive with the write-offs.
That's all I'm saying.
(28:38):
Um, and the last question weneed to buy and install a new
window and purchase a new sofabed.
Do it! If it okay, we want tomake money with this STR
short-term rental.
If it needs a new sofa bed, ifit needs a new window, do it and
write it off.
By the way, you can write it alloff in the same damn year.
A write-off today is better thana write-off a year from now.
And an STR with a new sofa bedis better today than a year from
(29:00):
now.
Make money, make this STR rock.
Get in there and do what ittakes to make it the best STR in
the neighborhood or whateveryou're trying to do to optimize
it.
A little shout out to DanielRustin.
Airbnb Profit Book is amazing.
Go get it on Amazon, everyone.
But this is a question aboutfinancial decisions, not tax
(29:20):
decisions.
Do what's best for the propertyand don't be too aggressive on
your write-offs with a condo andprobably limited repairs.
So man, just go hang out in thatfarm in Illinois.
Just I I dream of that.
Okay, thank you.
SPEAKER_01 (29:36):
Yeah, I was probably the number one pizza advice.
Yeah, you're probably double.
Get out in California.
I know you love the sunshine,uh, but from a tax standpoint,
uh I don't know, Illinois is notthat great either, but yeah.
Yeah, it's true.
Um Muggs338.
Uh Mugs 338 says, I have a W 2job in the public sector.
(29:57):
I have a 457 plan that I max.
Out.
My wife is self-employed and hasa 401k that she offers to
employees.
All right, she's got a 401k withemployees.
What is the max amount of taxdeferral for deduction purposes
we can do as we are marriedfiling joint?
All right, great question,Muggs.
This really comes down to bothof you individually.
(30:18):
Doesn't really matter thatyou're married filing joint so
much.
Well, let's break it down here.
Now, on a 457, this is like anemployer plan government
sponsored, similar to a 401kthat you might have in the
public sector that your wifeactually has with her company.
So for you, you can do$23,500 asan employee that you can put
(30:39):
into the 457 of your money andtake a tax deduction.
Now you could do Roth and nottake a tax deduction, but you
said you want deductions.
So I'm presuming we're going todo traditional here.
Now, the amount of match you'regoing to get that the employer's
going to put in on your 457depends on the plan.
You don't get a dictate that.
All right.
Now your spouse has a 401k andshe owns the business that she
(31:00):
offers to herself as she's anemployee in the business and to
her employees.
So she can also do$23,500 inthat.
She can put is an employeecontribution.
Now, if you are$50 or older, oryour spouse, you can do$7,500 on
top of that, which would bringyou to$31,000.
Okay.
(31:20):
And by the way, this is 2025numbers here.
That$31,000 will be deductibledollars.
So between the two of you, Iknow you can at least get in
$62,000.
Now, for those of you that havea$401 at a job where you work,
you may be able to do the megabackdoor Roth and do additional
(31:41):
after-tax contributions as anemployee to get up to$70,000 a
year into it.
However, there are a couplecategories of people that can't
do the mega backdoor Roth whereyou can get more money in.
Now keep in mind, these would beRoth contributions.
You're not getting a deduction,but it could be more retirement
plan dollars.
The reason I note that is itwill not work for your spouse
(32:06):
because she owns a business withemployees.
Me, our 401k plan and our lawfirm, F-Directed IRA, I'm an
owner in the business.
Mark's not in the business.
I can't do the mega backdoorRoth, even though I'd want to.
So who can do the mega backdoorRoth?
If you have a solo 401k with noemployees, you can.
Or if you're an employee at acompany that you don't own, you
(32:26):
can do the mega backdoor Roth.
There's an ownership issue rulewhere it just doesn't work.
But I don't know that matteredfor you, Muggs, but bottom line,
you can do 62K each at aminimum.
This is an addition.
On top of that, you can havematching from the companies.
That's determined based on theplan and what the employer
offers.
Now your wife could adjust thatin the business, but if she's
(32:46):
matching more for herself, she'sgonna be matching more for her
employees.
But keep in mind, on top ofthis, you can do a backdoor Roth
IRA.
I assume you guys are highincome if you're trying to max
out retirement accounts here.
So I presume you're high income.
You can't just do a regular RothIRA.
You actually can't even do atraditional IRA and get
deductions because you're highincome here and you're
(33:07):
contributing to 401k plans, butyou can do a backdoor Roth IRA,
which can get you another 7,000in each, which could that's
another 14 grand.
So now we're up to$76,000 intoretirement accounts in the year.
And we're not even including thematch that could come from the
457 or from the 401k.
So there you have it, Muggs.
(33:29):
I think that's a lot of moneyyou can get in each year.
Uh hopefully that was helpful.
SPEAKER_00 (33:33):
I love it.
Well, I think we'll wrap up theday with one or I'll do my last
question.
Yeah.
Once you finish it.
I'd like to transition to theIRA conversation.
This is great uh points Mattjust made there.
This is from uh L.
McCoy.
My self-directed IRA owns anLLC.
(33:54):
Okay, and that LLC is part of ajoint venture with another
company.
So we have an LLC owned by anIRA, 100%.
And then it owns part of anotherLLC with another company that is
not a self-directed IRA LLC.
So that's kind of like my IRAowns an LLC that partnered with
Matt in an LLC, but just Matt.
(34:15):
There's no other IRA on theother side.
Okay, so that's the facts.
Does any property the JV, sothat's the partnership LLC, get
with a loan still have to benon-recourse or a non-recourse
loan?
Probably, but I don't haveenough facts.
It would depend on yourownership percentage in the JV
(34:37):
partnership.
Now let's just assume you're50-50.
Yes.
It would have to be anon-recourse loan if they want
you to sign as a guarantor.
If you do not sign as aguarantor, but someone on the
other side's willing to do it,that's cool.
You just cannot sign as aguarantor.
So theoretically, it would haveto be a non-recourse loan to
(35:00):
you, but someone else could signon it and be just fine.
But that's again assuming you're50-50.
If you're just a 10% owner inthis deal or 20% owner, and this
is where we get the shades ofgray, from 50 to 0% ownership, I
think you're gonna be better offto stay away from a recourse
loan, period.
(35:21):
Um, but ownership percentagecould play a role.
Yeah.
SPEAKER_01 (35:24):
But usually if in that structure, if you're doing
it right, the J there's gonna bea new LLC that's a JV.
Are they not doing a J V?
SPEAKER_00 (35:33):
No, it's her LLC, it's a single member LLC with
her IRA with a in a JV LLC.
But the other partner is not anIRA.
SPEAKER_01 (35:40):
But there's a J V LLC, so the partnership LLC will
be the borrower on the loan.
SPEAKER_00 (35:46):
Yeah.
SPEAKER_01 (35:46):
So what recourse does the bank have?
Well, they only have recourse tothe LLC.
So I don't for me, I'm like, aslong as that LLC is the
borrower, not you, not your IRA,it can be recourse.
But like Mark said, don't beguaranteeing it.
That's what's the problem.
Most of those banks are going tobe like, anybody that's a 20% or
more, you know, underlying ownerhere has to sign a guarantee.
(36:10):
So so you want to make sure aslong as the loan is done just to
the LLC, that is effectivelynon-recourse.
Um your partners could sign acase.
Um with a but you need to sign apersonal guarantee, that's where
you'll get jobs.
SPEAKER_00 (36:24):
Yeah, but your partners could, is what I'm
saying.
Exactly.
Your partner could.
Yeah.
Now the second question was canI do some business functions
like book work and get a fee?
Oof, and but have the fee go tomy self-directed IRA LLC.
Oh my gosh, where did you gowith this, Al McCoy?
You were like doing so well.
You understood the non-recourseloan and you said, Can I do some
(36:45):
business functions like bookwork?
Okay.
Oh, you're going you want to getpaid.
Oh, no, you don't even want toget paid.
You want your IRA to get paid.
Uh, bless your heart.
Um, it's a slippery slope tohell, isn't it?
Um, just joking.
Okay.
Right.
So the answer is yes, you coulddo some basic LLC management of
(37:07):
your own IRA LLC as in thisstate of bookkeeping would be
fine and things like that.
But you cannot get, okay, andthis is again where we need more
facts.
Percentage of ownership couldplay a big role here.
If you only own 10% with yourIRA LLC of this JV partnership
where non-family members,non-related parties own 90% of
(37:31):
the LLC, and you only own 10%,then you would be allowed to
take a fee, but it's got to goto you, not your IRA.
Your IRA cannot do human work.
So they cannot get paid for yourwork.
So you could work for the JV LLCif your ownership percentage was
in a minority position, but it'snot going to your IRA.
SPEAKER_01 (37:52):
So keep in mind, any like bookkeeping, administrative
tasks, you can do anyways forthe LLC.
You just not get getting paidfor or compensated for it, nor
is your IRA.
The IRS wants you to be keepingtrack of the records and what's
going on and the bookkeeping andeverything like that.
And that's just good managementthat anybody should have for any
of their investments.
And so that's okay to bedealing.
I'd recommend you do that, butyou're not getting any special
(38:15):
payment or benefit personally,nor should your IRA.
SPEAKER_00 (38:18):
Yeah.
All right.
Well, are we wrapping it uptoday?
SPEAKER_01 (38:21):
Yeah, I just want to say thanks everyone for the
questions.
Despite Mark and I's littleangstiness on some of these, we
are so grateful for those of yousubmitted questions.
I don't want to discourage you.
Yeah.
And it's okay if you got to dosome, you know, secret screen
names like Muggs338, whateveryou got to do, you know, to just
you know be a little incognito.
That's okay.
We do like at least a first nameand what state you're from.
SPEAKER_00 (38:41):
Or if you're male or female, just so we can say you,
he, she, whatever.
But anyway, but thank you,everyone.
And we are going to be hereevery week, and we'd love your
questions.
And please don't give up on theAmerican dream next week.
Well, by the time you hear this,you could be right on top of
you.
And that is the Alt AssetSummit.
Get over to Altassetsummit.com.
You can watch virtually, and weare going to be parading all
(39:04):
sorts of investment ideas andstrategies from third parties
that are bringing it to your IRAor 401k.
And you get to just watch andlisten and learn.
I think you would love it.
Get to altassetsummit.com.
And then in November, we haveour tax and legal and finance
and business wealth buildingMain Street 360 event.
So get to mainstreet360.com tocheck that out as well.
(39:27):
Thanks, everybody, and we'll seeyou next week.
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