1 00:00:02,530 --> 00:00:07,260 This is the Wealth and Law Podcast at podcast about the intersection of personal 2 00:00:07,260 --> 00:00:11,140 wealth and the legal landscape. We'll take a deep dive into relevant topics. 3 00:00:11,140 --> 00:00:15,300 We'll basically teach you what we know and we'll engage with guests with deep 4 00:00:15,300 --> 00:00:16,700 expertise in their field. 5 00:00:16,750 --> 00:00:19,540 We hope that you'll enjoy this episode in many more episodes. 6 00:00:19,830 --> 00:00:23,340 So please join us on this journey as we try to bring you relevant information 7 00:00:23,340 --> 00:00:28,180 that is both timely and important for you to know in order to engage in this 8 00:00:28,180 --> 00:00:32,940 area of the world. Welcome to the Wealth in Law. 9 00:00:32,940 --> 00:00:36,620 Podcast. I am Brent Nelson. And sometimes, uh, 10 00:00:36,620 --> 00:00:40,380 people or your clients or your friends or your family members are wanting to 11 00:00:40,500 --> 00:00:43,020 start a business and they don't really know where to go. 12 00:00:43,210 --> 00:00:47,500 They may go on social media and get quote unquote advice, uh, 13 00:00:47,500 --> 00:00:51,580 but to ensure that they don't always have to rely on bad advice. Uh, 14 00:00:51,580 --> 00:00:55,060 we're gonna talk about it today. And to help me is Toby Mathis. Toby, 15 00:00:55,060 --> 00:00:55,893 thank you for joining me. 16 00:00:55,960 --> 00:00:58,900 Hey, thanks for having me, Brent. Should be fun. Yeah. 17 00:00:58,900 --> 00:01:03,180 Yeah. I mean, obviously this is something that you and I see a lot of. Um, 18 00:01:03,180 --> 00:01:06,780 I don't know if everybody listening to this will be as familiar with some of the 19 00:01:06,780 --> 00:01:08,940 traves of these types of, uh, 20 00:01:09,180 --> 00:01:11,860 decisions right up front when you're trying to form a business. 21 00:01:11,880 --> 00:01:13,860 But to set the stage for people, 22 00:01:13,860 --> 00:01:17,500 you wanna maybe give us your high level so people know who you are and why 23 00:01:17,500 --> 00:01:17,970 you're here. 24 00:01:17,970 --> 00:01:22,820 Yeah. So I'm a, I'm pretty much a tax attorney. Been doing this for 25 years. 25 00:01:23,010 --> 00:01:26,260 I think it's 25 years. Yeah. 25 years now. Um, 26 00:01:26,260 --> 00:01:31,060 specializing just in small business asset protection, uh, tax, ton of tax, 27 00:01:31,080 --> 00:01:33,700 and they all go together and estate planning, uh, 28 00:01:33,700 --> 00:01:38,260 they all kind of are three keys of accord that if you, uh, ignore one, 29 00:01:38,270 --> 00:01:42,860 it sounds off. Right. So you Yeah. And some people are really good at one key, 30 00:01:43,030 --> 00:01:45,820 so you're always trying to, Hey, let's even that out a. 31 00:01:45,820 --> 00:01:47,540 Little. Yeah. Oh man. That's so true. 32 00:01:47,540 --> 00:01:51,740 And it's funny you mention all those together because I get questions from 33 00:01:51,740 --> 00:01:55,340 clients who have businesses and they'll say, you know, do you, 34 00:01:55,340 --> 00:01:58,500 do you help people with their businesses say, Well, yeah, of course. 35 00:01:58,500 --> 00:02:01,460 Cuz my clients tend to be rich and they have businesses. 36 00:02:01,460 --> 00:02:04,740 That's how they make their money. Um, and then they'll say, Well, 37 00:02:04,740 --> 00:02:07,820 do you think I need to do a trust? That's not even a question. Like, 38 00:02:07,820 --> 00:02:10,780 that's almost a necessity because there's a human involved, 39 00:02:10,830 --> 00:02:14,060 so you have to do estate planning. Surprise. 40 00:02:14,380 --> 00:02:18,940 Isn't it weird? But I still get push back. I still, like all the time, 41 00:02:18,940 --> 00:02:22,260 I'll have people like, Oh no probate. It's easy in my state. And you're like, 42 00:02:22,260 --> 00:02:23,380 Well, okay, 43 00:02:23,650 --> 00:02:27,980 that's great if you wanna shut down the business and have like an interruption. 44 00:02:28,240 --> 00:02:31,460 But otherwise you probably want to have that ironed out. 45 00:02:31,460 --> 00:02:35,580 We just give this as real life. We just had a client, uh, 46 00:02:35,580 --> 00:02:38,780 passed away last week, last Friday. He was hit on a, 47 00:02:38,780 --> 00:02:41,900 on his motorcycle by a drunk driver. And you know, 48 00:02:41,900 --> 00:02:45,620 here it is a construction company. He worked with his, uh, spouse, 49 00:02:45,620 --> 00:02:50,220 They were newly married, married for 104 days total. And the, 50 00:02:50,400 --> 00:02:52,860 you know, we had tightened it up pretty quick. 51 00:02:52,860 --> 00:02:55,820 Had his trust before he was married, trust after he was married. 52 00:02:56,000 --> 00:02:58,860 But that would've been a, just about, just think of that, 53 00:02:58,970 --> 00:03:03,610 that situation before they were married with no estate plan, no trust, 54 00:03:03,820 --> 00:03:07,650 no document. How does that business carry on? Does the, 55 00:03:08,020 --> 00:03:12,290 at the time fiance have any rights at all to the business? You know, 56 00:03:12,290 --> 00:03:15,170 she was working in the business for several years, What would've occurred? 57 00:03:15,430 --> 00:03:18,770 And then you look at it and say, even in this circumstance, 58 00:03:18,870 --> 00:03:21,530 how do they continue on? And it was a licensed business. 59 00:03:21,530 --> 00:03:24,170 So like you have to have a principal or somebody that has, 60 00:03:24,170 --> 00:03:26,730 carries a certain type of licensing and, uh, 61 00:03:26,730 --> 00:03:30,250 just how difficult that is when you don't have a written plan. 62 00:03:30,310 --> 00:03:33,610 And I always am shocked that people kind of just do the, well, I did a will. 63 00:03:33,610 --> 00:03:36,690 Right. Got it on legal dom or something like that. I make fun of. Right. 64 00:03:36,690 --> 00:03:38,330 You know, hey, I, I, you know, my, 65 00:03:38,330 --> 00:03:42,570 my brother Ned has this guy and he does wills for $99. So I did one of those. 66 00:03:42,570 --> 00:03:45,850 You know, like Okay, that's great. Yeah. Not gonna do anything for you, but, Mm. 67 00:03:45,850 --> 00:03:46,683 Good. Yeah. 68 00:03:46,960 --> 00:03:49,170 I mean, I, I, yeah, I, I have, 69 00:03:49,640 --> 00:03:53,970 I have similar frustrations and I try to even it out with, uh, 70 00:03:53,970 --> 00:03:56,970 empathy for people because I think, you know, 71 00:03:56,970 --> 00:03:58,810 when you start talking about trusts, 72 00:03:59,000 --> 00:04:01,930 even among lawyers and accountants and financial advisors, 73 00:04:02,320 --> 00:04:07,090 a huge portion of those people, let alone say regular people. Yep. 74 00:04:07,100 --> 00:04:10,530 Uh, they don't even understand trust. So when you start talking about trust, 75 00:04:10,530 --> 00:04:13,410 it's like you're, you might as well be talking about fantasy land. 76 00:04:13,600 --> 00:04:17,450 Yeah. I, and it's so, I mean, I always think of 'em as really simple, Hey, 77 00:04:17,450 --> 00:04:20,130 it's contract. Yeah. And because you have this contract, 78 00:04:20,230 --> 00:04:23,690 you don't need a judge to tell you who gets it. And if you don't need a judge, 79 00:04:23,690 --> 00:04:26,410 it means you don't have to go to court. And if you don't have to go to court, 80 00:04:26,410 --> 00:04:31,330 that's a good thing. Courts are all those lawyers hang out, no offense to the. 81 00:04:31,330 --> 00:04:36,090 Lawyer, real lawyers, Toby, real lawyers, not, not weird lawyers like us. Yeah. 82 00:04:36,090 --> 00:04:37,170 That's exactly right. I, 83 00:04:37,170 --> 00:04:40,690 I look at myself as kind of an anti lawyer cuz I'm like the last place I ever 84 00:04:40,690 --> 00:04:44,170 want go as a courthouse. Like, let's just never go there . 85 00:04:44,200 --> 00:04:46,370 I don't want you to go there as a defendant. 86 00:04:46,370 --> 00:04:47,850 I don't want you to go there as a plaintiff. 87 00:04:47,850 --> 00:04:51,010 And I definitely don't want your family to have to go there if, 88 00:04:51,020 --> 00:04:53,130 if you pass away, let's assume avoid it. 89 00:04:53,130 --> 00:04:56,170 So that a little written agreement that says, Hey, we don't want go to court. 90 00:04:56,170 --> 00:04:59,650 That's really all it is, is fairly simple. And if you wanna create a legacy, 91 00:04:59,770 --> 00:05:01,410 it's the only option. Like the, 92 00:05:01,520 --> 00:05:04,930 I guess you could do foundations and you could create your legacy that way, 93 00:05:04,930 --> 00:05:06,570 but you're always gonna die with something. 94 00:05:06,570 --> 00:05:10,890 You may as well have a written plan for it and not just a die and distribute 95 00:05:10,890 --> 00:05:12,570 like a will does. It's like, hey, 96 00:05:12,570 --> 00:05:15,970 let's actually think about it and create something. Uh, I always tell clients, 97 00:05:15,970 --> 00:05:19,650 Hey, think 200 years in the future, what kind of values do you wanna pass down? 98 00:05:19,650 --> 00:05:23,010 What does that estate look like? And they look at you funny and you go, No, no, 99 00:05:23,010 --> 00:05:25,930 seriously, you're, you're a human being. You're, you're creating this thing. 100 00:05:25,930 --> 00:05:27,730 You know, you're, you've started your business, 101 00:05:27,800 --> 00:05:30,610 What does it look like in 200 years? And it's kind of funny, 102 00:05:30,610 --> 00:05:33,090 you give 'em permission to actually future trip a. 103 00:05:33,090 --> 00:05:36,010 Little. Yeah. That's really interesting. You know, I kind of teed this up as, 104 00:05:36,010 --> 00:05:38,930 um, creating businesses and we've gone straight to the very, 105 00:05:38,930 --> 00:05:42,050 very top of the organizational chart at the human level. 106 00:05:42,050 --> 00:05:45,850 But I think actually that's probably the right place to start. Cuz you know, 107 00:05:45,850 --> 00:05:50,530 what you're describing would be something where the business or the assets 108 00:05:50,530 --> 00:05:54,890 would, would end up in Yeah. What we, what we might call an irrevocable trust. 109 00:05:54,890 --> 00:05:57,280 We might say a dynasty trust or if you Googled it, 110 00:05:57,280 --> 00:05:59,040 you might find dynasty trust or whatever. 111 00:05:59,040 --> 00:06:00,680 It doesn't really matter what name you give it. 112 00:06:01,020 --> 00:06:05,240 And I have clients sometimes when I, we sort of are talking about this concept, 113 00:06:05,240 --> 00:06:08,480 they'll say something like, Yeah, but you know, I just wanna give it to my kids. 114 00:06:08,480 --> 00:06:10,880 Cuz they're, they're responsible and they can handle things. 115 00:06:10,880 --> 00:06:13,080 And I'm sure you hear that too. And I'm curious to hear, I hear. 116 00:06:13,080 --> 00:06:13,560 That. How. 117 00:06:13,560 --> 00:06:14,393 Do you respond to that? 118 00:06:14,670 --> 00:06:17,600 I I always say, that's great, but uh, you know, 119 00:06:17,600 --> 00:06:19,840 your kids might be absolutely fantastic, 120 00:06:19,840 --> 00:06:23,480 but we don't know what their life circumstances are gonna be in 10, 10 years. 121 00:06:23,480 --> 00:06:25,240 We don't know in 10 days. Uh, 122 00:06:25,240 --> 00:06:29,200 so we probably shouldn't just hand them something that they may not be in a 123 00:06:29,400 --> 00:06:32,800 position to handle at the time. Uh, again, when nobody has a crystal ball. 124 00:06:33,060 --> 00:06:36,760 And what happens if something happens to the child before you, you know, 125 00:06:36,760 --> 00:06:39,840 are you, are you landing this on a grandchild's lap? 126 00:06:40,020 --> 00:06:42,840 And then we don't know who that person is. 127 00:06:42,840 --> 00:06:47,120 We've seen people harm themselves irrevocably, since you used that term, 128 00:06:47,690 --> 00:06:51,960 uh, by getting, uh, an asset that they weren't prepared for. I, I had a guy, uh, 129 00:06:51,960 --> 00:06:56,080 early on, he said, Hey, Toby, uh, hold this coffee. He gave me a cup of coffee. 130 00:06:56,080 --> 00:06:58,960 He goes, Is that heavy? And I said, No. And he goes, 131 00:06:58,960 --> 00:07:01,680 Now put it at the end of your arm and put your arm straight out in front of you 132 00:07:01,980 --> 00:07:05,040 and, uh, I'm gonna come back in five minutes and ask you the same question. 133 00:07:05,040 --> 00:07:08,640 And I go, Well, okay. And it is getting really heavy, like my arm. I like, 134 00:07:08,640 --> 00:07:12,160 can I put it down? And he goes, No, no. That's the point. It wasn't heavy, 135 00:07:12,160 --> 00:07:16,000 was it? It seemed like it was not that big of an issue. 136 00:07:16,000 --> 00:07:19,400 And then you put it out there and you hold onto it for a little while and it 137 00:07:19,400 --> 00:07:22,240 gets heavier and heavier and heavier and eventually you just have to put it 138 00:07:22,240 --> 00:07:26,000 down. And that's kind of the way, uh, he said, that's, that's money. He goes, 139 00:07:26,130 --> 00:07:28,400 It needs a place to go. You need a place to put it. 140 00:07:28,420 --> 00:07:31,040 And if you don't have something solid to put it on, it's, you know, 141 00:07:31,240 --> 00:07:33,920 somebody's gonna walk up and you're gonna hand it to him because you're just, 142 00:07:33,920 --> 00:07:35,200 you don't know what else to do. 143 00:07:35,200 --> 00:07:39,680 And I think we see that with lottery winners or people that get newfound wealth 144 00:07:39,680 --> 00:07:43,560 and they usually have a few bruises and you just gotta decide, Hey, 145 00:07:43,560 --> 00:07:47,440 do I wanna do that to somebody? Yeah. Or do I wanna say, Hey, you know what, uh, 146 00:07:47,440 --> 00:07:50,760 I, I have a really cool, one of my favorite ones was these, 147 00:07:50,760 --> 00:07:53,920 this couple that I was working with, and they love to travel. And they said, 148 00:07:53,920 --> 00:07:57,360 You know what, everybody I know that travels internationally is pretty cool. 149 00:07:57,590 --> 00:08:02,360 Like, they, they end up getting a worldly view. They're not just, you know, 150 00:08:02,360 --> 00:08:05,640 pounding their chest about this country, that country or whatever mm-hmm. 151 00:08:05,680 --> 00:08:07,120 . But they tend to be nicer people. 152 00:08:07,660 --> 00:08:12,400 And they wanted to create a trust that allowed their descendants to all 153 00:08:12,400 --> 00:08:15,960 travel internationally at least once a year. And that was it. And I was like, 154 00:08:16,100 --> 00:08:16,520 Hey, 155 00:08:16,520 --> 00:08:19,680 that would be pretty cool if grandma and grandpa had set up a trust that said, 156 00:08:19,680 --> 00:08:23,200 Hey Toby, uh, or you know, any of my brothers or cetera, Hey, 157 00:08:23,200 --> 00:08:25,640 you guys can leave the country. I'll pay for it. You wanna go to Paris? 158 00:08:25,640 --> 00:08:30,280 Here you go. You know, seven days, 14 days, talk to the trustee. You know? 159 00:08:30,690 --> 00:08:33,320 Uh, and I always think of that situation where I'm like, 160 00:08:33,320 --> 00:08:34,400 That would be really cool. 161 00:08:34,400 --> 00:08:38,360 I would've really liked that somebody done that for me. And, uh, 162 00:08:38,360 --> 00:08:39,920 and I can't help but think, yeah, 163 00:08:39,920 --> 00:08:43,400 you could do really neat things with your state or if you love mission work, 164 00:08:43,400 --> 00:08:43,640 Hey, 165 00:08:43,640 --> 00:08:46,840 I want you to travel and be able to go do mission work or fill in the blank. 166 00:08:46,840 --> 00:08:47,840 I want you to be able to go to college. 167 00:08:47,840 --> 00:08:49,520 It's really important that everybody goes to college. 168 00:08:49,750 --> 00:08:52,160 It's when you create these things and actually give 'em a purpose, 169 00:08:52,270 --> 00:08:54,120 people will remember you, you know, 170 00:08:54,120 --> 00:08:55,840 and it's not that we're doing it it for vanity, 171 00:08:55,840 --> 00:08:59,760 but if you want your grandkids to know your name, your great grandkids, 172 00:08:59,760 --> 00:09:03,720 your great great grandkids, people that come after you, it's kind of, 173 00:09:03,720 --> 00:09:06,440 you gotta put, here's my values, here's what I thought was important, 174 00:09:06,580 --> 00:09:10,800 and create a vehicle for it. And when you start at that point, then it's, 175 00:09:10,800 --> 00:09:13,920 it makes our life a lot easier when we're deciding what type of business 176 00:09:14,080 --> 00:09:16,800 structure we're gonna put in place. Yeah. And, uh, and and, 177 00:09:16,800 --> 00:09:18,920 and why we're doing what we're doing in the first place. 178 00:09:18,920 --> 00:09:19,800 Like what's our purpose? 179 00:09:19,880 --> 00:09:23,600 Right. Yeah. No, that's really well sit said and you know, 180 00:09:23,600 --> 00:09:26,160 it just sort of turns out that if you want to, 181 00:09:26,560 --> 00:09:29,440 we'll say control that's probably a little too strong a term, 182 00:09:29,440 --> 00:09:32,040 but control things after you die, 183 00:09:32,090 --> 00:09:35,560 there's really only one legal mechanism to do it. And it's a trust. 184 00:09:35,780 --> 00:09:38,160 The trust just owns stuff. But it can, 185 00:09:38,160 --> 00:09:41,920 you can put your values into the trust and then it exists beyond your life. 186 00:09:41,920 --> 00:09:43,680 Everything else terminates when you die. 187 00:09:44,230 --> 00:09:48,960 I would say that. And a non-profit. Yeah. Either an operating, 188 00:09:49,230 --> 00:09:53,680 a private operating or a just a private foundation. Even if you just wanna be, 189 00:09:53,680 --> 00:09:57,440 hey, uh, just want give money away to these organization, that's great. 190 00:09:57,440 --> 00:10:00,840 But if you actually set one up, like I always crack up that IKEA as a charity, 191 00:10:00,840 --> 00:10:03,600 you know, I'm like, , ikea, like, it's like the most, 192 00:10:03,660 --> 00:10:07,960 the furniture that's, that's, that's made into a puzzle so it can frustrate you. 193 00:10:07,960 --> 00:10:08,520 Right. But it's, 194 00:10:08,520 --> 00:10:12,480 it's actually a charitable organization and I always use that as an examples. 195 00:10:12,480 --> 00:10:12,520 Like, 196 00:10:12,520 --> 00:10:17,120 you can create something that's important to you that we'll never die if you 197 00:10:17,120 --> 00:10:19,040 fund it. Right. You know, and we can go back to, 198 00:10:19,040 --> 00:10:22,040 there's a great case of Milton Hershey who set up the Milton Hershey School. 199 00:10:22,310 --> 00:10:25,400 It's still educating people. I think he set it up in 1905. 200 00:10:25,400 --> 00:10:28,600 He didn't have any kids. He and his wife died, uh, childless. 201 00:10:28,600 --> 00:10:31,840 And it was there to help, uh, orphan boys learn agriculture. 202 00:10:31,840 --> 00:10:35,520 Now it's morphed into this, the, the Milton Hershey School. And uh, 203 00:10:35,520 --> 00:10:38,080 over a hundred years later, the thing has so much funding, 204 00:10:38,080 --> 00:10:41,920 I think it's got 12.6 billion in it cuz it doesn't pay tax. 205 00:10:41,920 --> 00:10:44,040 And it just keeps educating these kids. 206 00:10:44,040 --> 00:10:46,600 And I think it's 2000 kids a year that go through that. 207 00:10:46,660 --> 00:10:47,840 And I always think is like, 208 00:10:47,840 --> 00:10:50,920 I wonder if Milton was actually thinking that when he set it up, it's like, oh, 209 00:10:50,920 --> 00:10:53,560 in a hundred years this is gonna be like a really good school. 210 00:10:53,900 --> 00:10:56,920 I'm sure he was just like, Hey, there's a low prom, uh, 211 00:10:56,920 --> 00:11:01,640 like we wanna help society out and we don't want these kids to end up being, 212 00:11:01,730 --> 00:11:04,240 uh, blight to society. We want to be productive members. 213 00:11:04,250 --> 00:11:05,560 So here's my little part. 214 00:11:05,700 --> 00:11:09,520 And you create something that's so small in the beginning and then it ends up 215 00:11:09,520 --> 00:11:12,400 being this big thing in the end. And I always look at your, 216 00:11:12,630 --> 00:11:16,480 your options as being, Hey, I can do that. You can do that with a trust. Yeah. 217 00:11:16,480 --> 00:11:18,840 You can do that with, uh, with a nonprofit. 218 00:11:18,840 --> 00:11:22,520 But what you can't do that with is you own it all and then you die and give it 219 00:11:22,520 --> 00:11:22,880 to. 220 00:11:22,880 --> 00:11:26,920 Somebody . Right, right. Yeah, it's such a good point. Yeah. I, you know, 221 00:11:26,920 --> 00:11:30,600 I was curious cuz I, I think about that a lot on the nonprofit side where, 222 00:11:30,780 --> 00:11:34,520 you know, how, uh, you know, a lot of financial advisors and, 223 00:11:34,520 --> 00:11:38,800 and sort of supposed gurus, those sort of be talking about, uh, you know, 224 00:11:39,080 --> 00:11:41,680 compounding interests. You know, how much money you could accumulate. And we, 225 00:11:41,680 --> 00:11:43,800 you know, we run those sorts of projections and trust too. 226 00:11:43,940 --> 00:11:47,520 But it's rare that I hear somebody say, 227 00:11:47,740 --> 00:11:52,080 and just imagine with, with even just a, a small, 228 00:11:52,080 --> 00:11:55,480 relatively small investment on the charitable side, 229 00:11:55,480 --> 00:11:59,200 how big that can get and how much of an impact that can have down the road. 230 00:11:59,200 --> 00:12:00,200 And I think you're probably right, 231 00:12:00,200 --> 00:12:03,440 most people that that do it initially are not thinking that, well, 232 00:12:03,440 --> 00:12:04,800 if this thing is properly managed, 233 00:12:04,800 --> 00:12:07,360 it could grow into something massive and really have a huge impact. 234 00:12:07,360 --> 00:12:10,560 But that's the reality. I mean, if it's properly managed, it can, it. 235 00:12:10,560 --> 00:12:11,400 Will just continue. 236 00:12:11,400 --> 00:12:14,480 Like that's why you look at Harvard and these big institutions mm-hmm. 237 00:12:14,520 --> 00:12:15,520 and they kind of joke, you know, 238 00:12:15,520 --> 00:12:18,160 it's a institution a tied to an endowment. Right. 239 00:12:18,160 --> 00:12:21,440 The endowment's getting so massive they can't even get away from the snowball 240 00:12:21,440 --> 00:12:22,273 effect. 241 00:12:22,510 --> 00:12:23,140 Yeah. 242 00:12:23,140 --> 00:12:23,560 Yep. 243 00:12:23,560 --> 00:12:24,400 Very interesting. 244 00:12:24,400 --> 00:12:25,680 Those are nonprofits. 245 00:12:25,680 --> 00:12:29,480 Those are just 5 0 1 c three s that are educational institutions. Um, 246 00:12:29,620 --> 00:12:34,080 and guess what? You can make one too . It's not that hard. Yeah. Yeah. 247 00:12:34,080 --> 00:12:37,920 And, uh, you set one up and this is the, this is the part that always gets me, 248 00:12:37,920 --> 00:12:39,760 I don't know whether you ever encounter this, 249 00:12:39,760 --> 00:12:42,240 but you'll have somebody come in your office and they said, 250 00:12:42,240 --> 00:12:45,400 I talked to an attorney and I was gonna do an estate plan. And they said, 251 00:12:45,400 --> 00:12:48,240 Trust her for rich people, that I didn't have enough assets. 252 00:12:48,340 --> 00:12:50,040 And I always think of, uh, 253 00:12:50,250 --> 00:12:54,120 if you called up a d t or like some company saying, 254 00:12:54,120 --> 00:12:55,760 I want an alarm system for my house. 255 00:12:55,760 --> 00:12:58,680 And they walked into your house and they looked around your house and they said, 256 00:12:58,680 --> 00:13:00,120 You don't need an alarm system. In fact, 257 00:13:00,120 --> 00:13:01,480 you should probably leave your door open. 258 00:13:01,480 --> 00:13:05,440 Maybe somebody will steal some of that crappy furniture you got . 259 00:13:05,440 --> 00:13:08,400 You know, they would never do that. They would just say, Hey, 260 00:13:08,400 --> 00:13:11,600 here's something that might be appropriate in our profession. 261 00:13:11,690 --> 00:13:16,520 They'll literally just say, No, that's not for you. And I look at it going, 262 00:13:16,520 --> 00:13:18,880 Wait a second. If I ensure somebody, 263 00:13:18,880 --> 00:13:23,200 I could buy really cheap term and I could create a vehicle very simple so that 264 00:13:23,200 --> 00:13:27,960 if they pass away that it's funded with that money and now you have a 265 00:13:27,960 --> 00:13:31,280 substantial asset for future generations or whatever, 266 00:13:31,280 --> 00:13:33,800 even for organizations that you care about, you know, 267 00:13:33,800 --> 00:13:36,960 maybe you like dogs or cats, you know, it could still be going to, 268 00:13:36,960 --> 00:13:40,760 that you could create a private foundation and fund it with a term policy. Yes. 269 00:13:40,780 --> 00:13:44,200 And then, hey, we're gonna give away money every year to my favorite, you know, 270 00:13:44,250 --> 00:13:47,560 my, my my favorite cat organization. Right. You could, you could do that. 271 00:13:47,560 --> 00:13:52,120 That's, that's not difficult. But they just immediately say, Ah, yeah, yeah, 272 00:13:52,120 --> 00:13:54,960 this is for people that are worth more than 5 million. And I'm like, 273 00:13:54,960 --> 00:13:55,840 where's that written? 274 00:13:56,030 --> 00:13:57,080 Yeah, yeah. 275 00:13:57,080 --> 00:14:01,080 Yeah. Probate suck. Probate is horrible for, for poor people. 276 00:14:01,080 --> 00:14:05,160 Probate is horrible, for rich people. I just think probate's pretty horrible. 277 00:14:05,180 --> 00:14:09,120 And, you know, and the attorney might say, Well, this isn't so bad. But, uh, 278 00:14:09,120 --> 00:14:13,600 I think it just forces people to act in their worst behavior on their worst day. 279 00:14:13,860 --> 00:14:18,480 And the, the outcome is quite often catastrophic for the family. Emotionally. 280 00:14:18,480 --> 00:14:21,200 I usually get fights over plates. Right. And like that. 281 00:14:21,200 --> 00:14:23,840 And you just wanna minimize that. So just put a little thought to it. 282 00:14:23,880 --> 00:14:26,520 Let's not leave these people to, to that. 283 00:14:26,520 --> 00:14:27,720 Situation. Yeah. And I, I mean, 284 00:14:27,720 --> 00:14:32,240 I kind of feel if I'm sort of being more philosophical about it from a 285 00:14:32,240 --> 00:14:35,400 professional standpoint, you know, as a, as a lawyer, 286 00:14:35,470 --> 00:14:40,200 very technically you're an officer of the court and you are supposed to act in 287 00:14:40,200 --> 00:14:42,640 the best interests of the court and justice, et cetera. 288 00:14:42,640 --> 00:14:44,280 Which of course I believe in all of that stuff. 289 00:14:44,280 --> 00:14:46,560 I'm not trying to diminish it mm-hmm. . But if that's true, 290 00:14:46,780 --> 00:14:50,600 and I know that simply by setting up a, a pretty straightforward, 291 00:14:50,600 --> 00:14:53,000 doesn't have to be complicated, but a pretty straightforward structure. 292 00:14:53,510 --> 00:14:56,680 I can eliminate something that's gonna end up on the court's docket in the 293 00:14:56,680 --> 00:14:58,640 future. And the court has plenty of things to do. 294 00:14:58,640 --> 00:15:00,600 It's not like they're hurting for cases a hundred percent. 295 00:15:00,860 --> 00:15:02,120 Why would I not do that? 296 00:15:02,240 --> 00:15:06,720 Isn't it sort of my professional duty to help the court out and eliminate things 297 00:15:06,720 --> 00:15:08,400 off of its docket that are unnecessary. 298 00:15:08,490 --> 00:15:13,080 Because I was taught to do wills and then they'll contact me when they die. 299 00:15:13,190 --> 00:15:16,760 Yeah. And I will probate it and then when, if I sell my practice, 300 00:15:16,760 --> 00:15:21,320 I'm selling all these, you know, these files that I created over my life. No, I, 301 00:15:21,370 --> 00:15:23,520 my, one of my partners, uh, his, 302 00:15:23,520 --> 00:15:27,280 his grandfather was a probate attorney and that was the asset that he sold. 303 00:15:27,620 --> 00:15:30,640 And so when he came to, he was, he was talking to, it was Clint. 304 00:15:30,640 --> 00:15:34,680 He was talking to him saying, Hey, you need to do this. And we just, it, 305 00:15:34,680 --> 00:15:37,040 since the very beginning we kind of looked, Yeah. 306 00:15:37,490 --> 00:15:41,280 Knowing what we know just a little bit when we were brand new lawyers, 307 00:15:41,280 --> 00:15:42,840 You're looking at it going, i, i, 308 00:15:42,910 --> 00:15:46,320 I think it's better if people don't go through a court process when they're 309 00:15:46,320 --> 00:15:46,670 grieving, 310 00:15:46,670 --> 00:15:51,560 just logically thinking you probably wanna minimize big things from 311 00:15:51,560 --> 00:15:55,440 happening while people are in a bad space. You know? Right. Like, it's like, 312 00:15:55,760 --> 00:15:58,080 let's, let's see if we can't minimize it and oh, 313 00:15:58,080 --> 00:16:01,400 there's a convenient thing that eliminates it and it's pretty cheap. Yeah. 314 00:16:01,400 --> 00:16:04,280 It's a lot cheaper than the actual pro probate costs. 315 00:16:04,300 --> 00:16:09,000 And I come from a family where we had assets in a state from my grandmother 316 00:16:09,150 --> 00:16:13,440 that it was too expensive to, like, it was just some lots in Alabama and it was, 317 00:16:13,530 --> 00:16:16,360 we just let 'em go, let 'em go to the state because it was, 318 00:16:16,360 --> 00:16:20,000 they weren't worth much. And the attorney wanted more than the, than the lot. 319 00:16:20,000 --> 00:16:22,600 So I remember that as a young, young person. And I was like, 320 00:16:22,670 --> 00:16:23,880 well that kind of sucks. 321 00:16:23,950 --> 00:16:27,800 I don't think grandma really wanted those lots to go to the state, but okay. 322 00:16:27,930 --> 00:16:29,800 Because again, it was a, 323 00:16:29,890 --> 00:16:34,040 it was a remote probate in a jurisdiction where nobody lived. 324 00:16:34,290 --> 00:16:38,200 So the cost of probating it was gonna be more than the lots were worth. 325 00:16:38,200 --> 00:16:40,840 And okay, we'll just let 'em go back to the state that, again, 326 00:16:40,840 --> 00:16:44,360 I just look at it going, Boy, it's so easy to avoid that situation. 327 00:16:44,360 --> 00:16:46,480 I'm sure you're looking at it going, Why did she do that? 328 00:16:46,480 --> 00:16:49,000 Trust would've been really easy, Would've avoided. 329 00:16:49,000 --> 00:16:52,200 It very simply would've been a lot less expensive than a plane ticket. Why? 330 00:16:52,200 --> 00:16:55,840 You know, why didn't we just do that? And now I have that same question. So. 331 00:16:55,840 --> 00:16:57,720 Yeah. Uh, I I, well I, 332 00:16:57,720 --> 00:17:02,240 I know these family type questions cuz the as clo the closer somebody gets to 333 00:17:02,240 --> 00:17:04,680 you, famili, the less they listen to you. 334 00:17:04,680 --> 00:17:09,120 So I I understand how that works. Um, well, 335 00:17:09,120 --> 00:17:11,040 they keep our promise here. Um, 336 00:17:11,040 --> 00:17:14,760 let's talk a little bit about kind of entity selection. I think we've, 337 00:17:14,760 --> 00:17:18,400 we've probably clarified for people that at the very top of the structure really 338 00:17:18,400 --> 00:17:20,560 needs to be a trust for a whole host of reasons. Yes. 339 00:17:20,560 --> 00:17:21,920 You should think about that strongly. 340 00:17:22,330 --> 00:17:26,800 So when people are trying to pick entities, you know, oftentimes they're one, 341 00:17:26,800 --> 00:17:27,400 they're confused. 342 00:17:27,400 --> 00:17:31,840 Cause nobody understands the difference between an LLC and an LP and an LL P and 343 00:17:31,840 --> 00:17:35,000 an LL p and a corpor. So, you know, 344 00:17:35,000 --> 00:17:37,440 help us walk through that just a little bit. If you were, 345 00:17:37,440 --> 00:17:39,680 if you had somebody who said, I got this great idea, it's gonna be, 346 00:17:39,680 --> 00:17:41,520 it's gonna be a big business. We've got, 347 00:17:41,730 --> 00:17:44,800 we got some traction now we need to formalize it. What what should I do? 348 00:17:44,800 --> 00:17:45,800 What would you tell that person? 349 00:17:45,990 --> 00:17:49,320 I I would, I would say, Hey, we gotta sit down and actually chat about what, 350 00:17:49,320 --> 00:17:52,240 what's your exit gonna be like, Hey, is this something where I'm creating it? 351 00:17:52,240 --> 00:17:55,240 I got something that's gonna be worth something and I'm gonna sell it. 352 00:17:55,240 --> 00:17:58,280 Because then you have to worry about 1202 stock. Uh, 353 00:17:58,280 --> 00:18:01,680 is this something where I want to depreciate and I'm gonna have a bunch of 354 00:18:01,680 --> 00:18:05,320 expenses in the beginning and I, and I'm, you know, my spouse has, you know, 355 00:18:05,320 --> 00:18:09,440 a lot of income and I wanna offset that income with losses. You know, I, 356 00:18:09,440 --> 00:18:13,400 I would try to get to know a little bit about the situation and say that at a 357 00:18:13,400 --> 00:18:16,680 minimum you need a box around that business. I always say like, 358 00:18:16,680 --> 00:18:20,080 what's the worst thing that can happen? Well, in the business you could, 359 00:18:20,080 --> 00:18:23,960 let's say you discriminate against an employee and they sue the hell outta you. 360 00:18:23,960 --> 00:18:26,000 Right? That's the worst thing that could happen. Or you, 361 00:18:26,030 --> 00:18:29,720 you're a plumber and you flood somebody's house and you don't have an adequate 362 00:18:29,720 --> 00:18:32,680 insurance and they come after you. So let's put a box around that. 363 00:18:32,680 --> 00:18:34,600 Let's just try to isolate that liability. 364 00:18:34,700 --> 00:18:38,080 And then also you look at your business and say, Hey, I build a business. 365 00:18:38,230 --> 00:18:41,160 What's the worst that could happen if I did something like, 366 00:18:41,160 --> 00:18:43,240 let's say I get into a car accident, or better yet, 367 00:18:43,240 --> 00:18:46,560 let's say one of your kids gets into a car accident and they come after your 368 00:18:46,800 --> 00:18:50,240 business. How can I isolate the business for me and me from the business? 369 00:18:50,420 --> 00:18:53,680 And that leads us to really simply, we need a, 370 00:18:53,680 --> 00:18:55,840 some sort of limited liability entity. 371 00:18:55,840 --> 00:19:00,840 So that net narrows our focused really to ll you know, to LLCs, LPs, 372 00:19:00,840 --> 00:19:04,960 corporations, and realistically we're talking LLCs and corpse for the, 373 00:19:04,960 --> 00:19:07,440 for the vast majority. You know, you look at licensing, 374 00:19:07,440 --> 00:19:10,720 are there any restrictions depending on what type of license they have? 375 00:19:10,940 --> 00:19:14,240 And then you look at it and say, Hey, all right, we can isolate the liability. 376 00:19:14,420 --> 00:19:18,560 Now let's look at taxes. And from a tax standpoint, there's two different world. 377 00:19:18,560 --> 00:19:19,920 There's the, Hey, 378 00:19:19,920 --> 00:19:24,560 I'm a sole proprietor and I enjoy paying world because sole proprietors get 379 00:19:24,560 --> 00:19:27,640 audited. What, 800% to 16? 380 00:19:27,640 --> 00:19:32,280 I think what the last time I saw it was table 17 B on publication 381 00:19:32,280 --> 00:19:36,840 55 is this IRS data book. The last time they published it, I think was in 2020. 382 00:19:37,300 --> 00:19:38,840 And it is when if you're, 383 00:19:38,840 --> 00:19:41,000 you have a client who's making a hundred thousand dollars a year, 384 00:19:41,200 --> 00:19:45,480 quite literally the audit rate is about 1600% higher if they're a sole 385 00:19:45,480 --> 00:19:50,280 proprietor. And they lose 94 to 95% of the time. So I'm like, 386 00:19:50,340 --> 00:19:53,840 Hey, you know what, let's not get nailed by the government. 387 00:19:53,930 --> 00:19:55,680 So let's not be that, 388 00:19:56,060 --> 00:20:00,520 and all of a sudden we're limited to an LLC taxed as an S corp, 389 00:20:00,610 --> 00:20:05,320 an LLC taxed as a C corp or just your traditional S corp or C corp. 390 00:20:05,460 --> 00:20:09,800 And then we just look at, uh, hey, do we, or you know, might we have losses? 391 00:20:09,800 --> 00:20:10,880 Is this risky? 392 00:20:11,170 --> 00:20:14,200 Do we want them on our individual return or do we wanna leave them in the 393 00:20:14,200 --> 00:20:16,120 company? It, you know, 394 00:20:16,120 --> 00:20:18,720 is this thing gonna be something that could be worth something someday? 395 00:20:19,350 --> 00:20:23,760 I just had a client who exited a very lucrative company and had, you know, 396 00:20:23,760 --> 00:20:28,480 the zero capital gains under the 1202 and saved himself, uh, 397 00:20:28,480 --> 00:20:30,800 quite literally about 2 million bucks, uh, 398 00:20:30,800 --> 00:20:32,600 because there was no capital gains on it. You know, 399 00:20:32,600 --> 00:20:36,400 so you ask those little questions and you come to a very, like, 400 00:20:36,400 --> 00:20:40,720 usually it's two taxable entities that you're really looking at s and C corps 401 00:20:40,940 --> 00:20:44,600 and whether that can be an LLC or just whether it needs to be properly a, 402 00:20:45,070 --> 00:20:47,000 a a corporation. Yeah. 403 00:20:47,430 --> 00:20:49,440 I, I love all of that. And I think you're, 404 00:20:49,440 --> 00:20:53,560 you're exactly right that the starting place is actually the ending and then you 405 00:20:53,560 --> 00:20:57,400 work backwards. Um, and so people, so, so many people, I think it's, 406 00:20:57,400 --> 00:21:02,000 they get hung up on where to begin and they don't spend enough time thinking 407 00:21:02,000 --> 00:21:03,920 about where am I gonna end? Uh. 408 00:21:03,920 --> 00:21:08,560 And the, the the beautiful thing is on any of those, it's not you. 409 00:21:08,780 --> 00:21:12,760 You could die and somebody else walks right into your shoes and continues to 410 00:21:12,760 --> 00:21:16,040 operate the business. You're the sole proprietor. I'm sorry that thing's toast. 411 00:21:16,040 --> 00:21:18,520 It's not gonna make it died with you. Right. 412 00:21:18,520 --> 00:21:21,560 And so I'm always kind of shocked that I think it's 70%, 413 00:21:21,560 --> 00:21:25,400 last time I saw 70% of new businesses are still sole proprietors. 414 00:21:25,590 --> 00:21:28,920 I think it's because accountants say it's easier and, 415 00:21:29,100 --> 00:21:33,160 and corporations are more formal. And I look at it and go, Hey, 416 00:21:33,160 --> 00:21:36,120 the IRS doesn't distinguish. They just say a business. 417 00:21:36,120 --> 00:21:39,120 You have to keep books and records. Nobody ever says, Oh, 418 00:21:39,120 --> 00:21:42,520 but you have to keep extra records if you're an S corp or a C corp. Right. 419 00:21:42,520 --> 00:21:45,280 If you're an llc, boy, you have to even keep more records. 420 00:21:45,380 --> 00:21:49,840 And there's nothing that says LLCs don't have formalities. They always say, Oh, 421 00:21:49,840 --> 00:21:54,760 the formalities of an SRC corporate more than an llc. Not really. 422 00:21:54,810 --> 00:21:57,440 They're pretty much the same. Well, 423 00:21:57,540 --> 00:22:02,280 the taxes are more complicated and I put up a schedule c a so proprietorship 424 00:22:02,280 --> 00:22:04,920 return versus an S corp return. And I'm like, No, 425 00:22:05,360 --> 00:22:09,680 actually they're pretty much identical. So what else do you got? Yeah. You know, 426 00:22:09,680 --> 00:22:13,200 And then by the way, if you structure it as a corp, 427 00:22:13,200 --> 00:22:15,040 you're probably gonna pay a lot less tax. 428 00:22:15,040 --> 00:22:18,000 You're gonna have something called an accountable plan that's available to you. 429 00:22:18,190 --> 00:22:19,240 You're gonna be like, 430 00:22:19,240 --> 00:22:22,480 if you're an S corp and you make a hundred grand a year as a sole proprietor, 431 00:22:22,550 --> 00:22:27,080 you're gonna probably save somewhere around $10,000 a year on self-employment 432 00:22:27,080 --> 00:22:30,120 tax. If you do it right, uh, you're gonna have, 433 00:22:30,290 --> 00:22:35,280 instead of having to do this horrible home office, you know, depreciation, 434 00:22:35,360 --> 00:22:36,720 recapture, nonsense, 435 00:22:37,070 --> 00:22:41,160 I can just do a reimbursement for an administra administrative office in the 436 00:22:41,160 --> 00:22:43,280 home and I can, I don't have to report it anywhere. Like, 437 00:22:43,280 --> 00:22:46,720 there's just so many other little benefit. And I'm still, I just, 438 00:22:46,830 --> 00:22:51,040 I I scratch my head as to why so many people are still so proprietors. Maybe, 439 00:22:51,040 --> 00:22:53,440 uh, maybe I'm weird, but I just look at it going, 440 00:22:53,580 --> 00:22:55,880 Why would you do that to yourself? You're pretty much, 441 00:22:56,030 --> 00:22:59,840 it's not gonna be pleasant if any, any of these things happen. And by the way, 442 00:23:00,050 --> 00:23:02,560 at least one of them is a hundred percent likelihood. Right. 443 00:23:02,560 --> 00:23:05,160 You're gonna pass away. Yeah. That not gonna make it, 444 00:23:05,160 --> 00:23:08,920 You're just building something on, It's like you're building it on a, 445 00:23:09,090 --> 00:23:11,880 on on sand or you're, you're building it on thin ice, 446 00:23:11,910 --> 00:23:14,440 eventually it's gonna sink. Why would you do that? 447 00:23:14,470 --> 00:23:18,240 Yeah. It's a, it's a strange phenomenon. I agree. 448 00:23:18,240 --> 00:23:21,560 And I think the , anybody who has, 449 00:23:21,900 --> 00:23:26,800 has worked with Schedule C would probably agree that Schedule C 450 00:23:26,800 --> 00:23:31,760 is actually less organized than the C return or the C corp return. I mean, they, 451 00:23:31,760 --> 00:23:36,120 they just are and they're messy that you look through 'em and they don't make a 452 00:23:36,120 --> 00:23:38,920 lot of sense. It's just why they get audited all the time and. 453 00:23:38,920 --> 00:23:39,660 They lose. 454 00:23:39,660 --> 00:23:40,493 And you lose. 455 00:23:40,630 --> 00:23:44,040 5% Of the time. Like you just look at it go, Why do they lose so much? 456 00:23:44,040 --> 00:23:47,440 It's cuz some accountant told him, Oh, the formalities aren't as bad. 457 00:23:47,440 --> 00:23:49,600 So the guy says, Oh great, I don't have to keep records. 458 00:23:49,610 --> 00:23:54,400 Exactly. Exactly. Right. Yeah, I think you're right. It, it lure, it, uh, 459 00:23:54,400 --> 00:23:57,720 lures people into a false sense of complacency. A hundred percent. 460 00:23:57,720 --> 00:24:00,280 Cause they feel like, well, I'm just a so proprietor, I'm just schedule C, 461 00:24:00,280 --> 00:24:03,120 so I don't need all this backup. And guess what? 462 00:24:03,280 --> 00:24:06,000 The IRS cares about all the backup. That's all they care. 463 00:24:06,000 --> 00:24:07,280 About it. You know what I, 464 00:24:07,280 --> 00:24:10,720 I used to clerk for a judge and she said it's the interpretation of the 465 00:24:10,720 --> 00:24:12,600 presentation. She'd always say that to me. 466 00:24:12,600 --> 00:24:14,240 It's the interpretation of the presentation. 467 00:24:14,240 --> 00:24:18,680 So make sure you're presenting it right. And so the IRS wants to look abc, 468 00:24:18,680 --> 00:24:19,440 right? Yeah. 469 00:24:19,440 --> 00:24:22,440 And you walk in there and you're sole proprietor and you just give 'em a, 470 00:24:22,460 --> 00:24:25,760 the whole alphabet all on a big, you know, plate cuz hey, 471 00:24:25,760 --> 00:24:29,520 I don't have to organize that. And they're like, But we want to see abc. 472 00:24:29,790 --> 00:24:33,600 Well it's in there. My accountant said I didn't have to separate it out. Okay. 473 00:24:34,020 --> 00:24:38,000 You lose next. Yeah. Yeah. And, and I always, you know, 474 00:24:38,000 --> 00:24:40,000 I think of that kind of stuff cause you know, 475 00:24:40,010 --> 00:24:43,320 respect people and it sticks in your head, but I can't help us saying, 476 00:24:43,320 --> 00:24:47,520 all we wanna do is make the business look the way the IRS wants to see it and 477 00:24:47,520 --> 00:24:50,960 they tell us exactly how they wanna see it cuz they do these beautiful audit 478 00:24:50,960 --> 00:24:54,840 guides and stuff and you can see exactly what they wanna see. And I don't know, 479 00:24:54,840 --> 00:24:57,880 it's like, it doesn't say only if it's a sole proprietor, 480 00:24:57,880 --> 00:25:01,040 you don't have to do this. I never saw that in anywhere. Right. 481 00:25:01,040 --> 00:25:03,080 It doesn't exist. They always say, if you're a business, 482 00:25:03,080 --> 00:25:06,680 here's what we need to see. I don't care whether it's an S corp C Corp llc, 483 00:25:06,680 --> 00:25:10,560 taxes and S corp, lp, LL P L L L P, it doesn't matter. 484 00:25:10,620 --> 00:25:14,600 You still have to do those, those basic who, what, where, when, and why. 485 00:25:14,600 --> 00:25:17,160 You still have to have some records. And it's, 486 00:25:17,430 --> 00:25:20,040 it's such a benefit to you to learn how to do it. Right? Like, 487 00:25:20,040 --> 00:25:23,400 I don't know how you run a business if you don't have some idea what your 488 00:25:23,400 --> 00:25:23,970 numbers are. 489 00:25:23,970 --> 00:25:28,120 It, it tends to be challenging or, or less, uh, 490 00:25:28,120 --> 00:25:32,120 less filled with successes. How about that? Uh, at, at least in my experience, 491 00:25:32,120 --> 00:25:34,240 I know about yours, but there's a, 492 00:25:34,240 --> 00:25:37,440 there's an interesting other phenomenon that I do that I do see from time to 493 00:25:37,440 --> 00:25:41,080 time where, you know, the, particularly in the real estate industry, 494 00:25:41,120 --> 00:25:43,200 which I think you're in Vegas, was, you know, 495 00:25:43,200 --> 00:25:46,000 there's heavy real estate economy there, 496 00:25:46,080 --> 00:25:50,040 heavy real estate economy here where the, there's this debate about like, well, 497 00:25:50,040 --> 00:25:53,760 should we be a partnership versus say an S corp? And it's like, 498 00:25:53,760 --> 00:25:55,760 well that's a false dichotomy to begin with. Yeah. 499 00:25:55,760 --> 00:25:59,720 Because you're talking about completely different sides of your business and one 500 00:25:59,720 --> 00:26:03,640 will serve one side and the other will not. So you, you know, but it's just, 501 00:26:03,710 --> 00:26:08,520 I think people have a hard time conceptualizing that their business itself could 502 00:26:08,520 --> 00:26:10,360 have separate components to it. 503 00:26:10,360 --> 00:26:14,200 Where one structure for one component will be extremely advantageous and a 504 00:26:14,200 --> 00:26:18,160 different structure for a different component will be equally advantageous. Y. 505 00:26:18,180 --> 00:26:20,520 You know, what you, what you're saying, we, 506 00:26:20,520 --> 00:26:24,600 we just saw this with a residential assisted living and they had an S corp, 507 00:26:24,600 --> 00:26:27,520 they had the residential assisted living, uh, 508 00:26:27,520 --> 00:26:31,320 operating business inside it as well as their building and it was in California 509 00:26:31,340 --> 00:26:35,160 and it had appreciated significantly. And so they have the question, 510 00:26:35,160 --> 00:26:38,920 how do I get the real estate out of the escort ? And I'm like, well, 511 00:26:38,920 --> 00:26:42,600 it's gonna be a taxable event, you know, it's a sale liquidation. No, 512 00:26:42,770 --> 00:26:47,000 my accountant never said that. Whoop. Yeah, they probably didn't. 513 00:26:47,000 --> 00:26:50,360 How about this, Did nobody ever told you don't own real estate in a corporation? 514 00:26:50,650 --> 00:26:52,080 No, I've never heard that. Okay. 515 00:26:52,080 --> 00:26:55,400 Well now you're gonna hear it and this is why you're gonna live it. Yeah, yeah, 516 00:26:55,400 --> 00:26:56,760 yeah. It's just, uh, it's, 517 00:26:56,760 --> 00:27:00,120 it's a little bit frustrating when you see those and you well intended people 518 00:27:00,660 --> 00:27:04,080 and they were trying to sell one side of the business, you know, 519 00:27:04,080 --> 00:27:05,080 the operating business, 520 00:27:05,080 --> 00:27:07,600 and they were trying to figure out how they could sell the whole business and 521 00:27:07,600 --> 00:27:10,240 keep the real estate like, Oh my God, this person, 522 00:27:10,240 --> 00:27:12,560 because they had bad advice in the very beginning, 523 00:27:12,560 --> 00:27:15,560 built this whole thing on a false premise and they're gonna have a negative 524 00:27:15,560 --> 00:27:19,360 consequence. Like they'll, they'll survive, but it'll be a, they'll still be a, 525 00:27:19,570 --> 00:27:22,040 an ouch via a little bit of a tax. 526 00:27:22,040 --> 00:27:26,640 Hit. Right. And there are, you know, if you're trying to comp service providers, 527 00:27:26,640 --> 00:27:29,400 you know, sometimes it's better to have a partnership versus, uh, 528 00:27:29,670 --> 00:27:32,280 a corporation depending on how fancy you wanna be with things. 529 00:27:32,280 --> 00:27:35,680 But it gets to your, it gets to your point initially, which is the great point, 530 00:27:35,680 --> 00:27:38,680 which is where do you wanna end up? And, you know, 531 00:27:38,680 --> 00:27:42,280 you kind of have to be able to see the whole road and then build backwards. 532 00:27:42,740 --> 00:27:45,280 And one other thing that you mentioned, um, 533 00:27:45,630 --> 00:27:49,360 I just wanna chat about here just for a second before we we drop off, is, um, 534 00:27:49,500 --> 00:27:51,520 you mentioned 1202, a couple of times, 535 00:27:51,520 --> 00:27:54,960 1202 is qualified small business stock for anybody who doesn't read the internal 536 00:27:54,960 --> 00:27:59,480 Revenue code and the qualified small business stock, among other things, 537 00:27:59,810 --> 00:28:04,080 um, has to be a quote unquote domestic C corporation. So it can't be Yes, 538 00:28:04,190 --> 00:28:08,120 a corporation from Canada, for example, Sorry Canadians. Um, but the, 539 00:28:08,120 --> 00:28:10,080 the advice I think that most people get is, Oh no, 540 00:28:10,080 --> 00:28:12,360 you would never want a C corporation. Of course that's false. 541 00:28:12,590 --> 00:28:14,960 That you just hit the nail in the head. 542 00:28:15,050 --> 00:28:18,920 We still are heavy on C CORs in our, in my, in my company, 543 00:28:18,940 --> 00:28:22,880 and we get a lot of heat from accountants. Whoa, it's double tax. It's this, 544 00:28:22,880 --> 00:28:26,600 it's that. I'm like, well actually you can write off the $50,000, uh, 545 00:28:26,600 --> 00:28:30,440 loss if it, if it's not successful, this is startup, you know, blah, blah, blah. 546 00:28:30,440 --> 00:28:33,840 We can control a lot of the income into it, but also there might be value here. 547 00:28:33,840 --> 00:28:37,080 We might be selling it. They still don't get it. They always repeat the mantra, 548 00:28:37,430 --> 00:28:41,320 it's double tax. And I said, So what, what if it's double tax? You know, a, 549 00:28:41,320 --> 00:28:42,440 you're in control of that. 550 00:28:42,440 --> 00:28:46,320 I've never seen anybody pay a double tax that didn't want to pay the right, 551 00:28:46,320 --> 00:28:47,920 they just Right. They could retain it. 552 00:28:47,920 --> 00:28:50,560 There's a million reasons why you could retain it. Um, 553 00:28:50,620 --> 00:28:54,120 but also when you crunch the numbers, it's not that bad. You're gonna have, 554 00:28:54,120 --> 00:28:58,160 you know, sometimes it's zero tax on the dividends. Oh, you paid 21%. Big whoop. 555 00:28:58,200 --> 00:29:01,920 Right? Uh, you know, I, but again, it's, it's, it's, 556 00:29:01,920 --> 00:29:04,400 it's that little get your pencil out and crunch the numbers. 557 00:29:04,480 --> 00:29:06,640 And a lot of times people have a knee-jerk reaction thing. 558 00:29:06,640 --> 00:29:10,200 No C CORs are bad or S corp. So they're more complicated. Hey, 559 00:29:10,200 --> 00:29:12,480 we should always be a sole proprietor. And I just say, 560 00:29:12,480 --> 00:29:14,200 people do better dig into it, 561 00:29:14,200 --> 00:29:17,480 understand it a little bit more because it's not just like there's the asset 562 00:29:17,480 --> 00:29:20,920 protection side. There's the how will a bank treat it? 563 00:29:21,020 --> 00:29:25,160 How will a court treat it? How will a, you know, a lender treat it? 564 00:29:25,160 --> 00:29:28,280 How will an angel treat it? You know, if you have somebody that's gonna be bed, 565 00:29:28,280 --> 00:29:30,280 they're gonna wanna see it in a particular way. 566 00:29:30,280 --> 00:29:33,560 And then we look at the IRS and say, And how does, how is it gonna be taxed? 567 00:29:33,650 --> 00:29:36,640 So set it up with the state. What is that gonna look like? Well, 568 00:29:36,640 --> 00:29:38,680 who are you dealing with? Are you, you, 569 00:29:38,680 --> 00:29:41,080 you mentioned something and I don't wanna go too long, but it, 570 00:29:41,280 --> 00:29:44,680 real estate for example, we can get most people to zero. Like if, 571 00:29:44,680 --> 00:29:46,880 if we wanna wipe out your income and you're, you're, 572 00:29:46,880 --> 00:29:49,520 you're significantly involved in real estate, you could do that, 573 00:29:49,620 --> 00:29:53,200 but it's really tough to get loans when you have, when you show no income. 574 00:29:53,200 --> 00:29:55,360 And so you're having a conversation with people that are like, 575 00:29:55,360 --> 00:29:56,840 I wanna pay no tax. And like, 576 00:29:56,840 --> 00:30:01,720 but you need to show how much income to qualify for loans to continue to buy 577 00:30:01,720 --> 00:30:03,000 your real estate. Uhhuh, 578 00:30:03,000 --> 00:30:05,200 they go to the mortgage guy and the mar got mortgage guy says, 579 00:30:05,200 --> 00:30:07,960 you need to show a hundred thousand or whatever the number is. 580 00:30:07,960 --> 00:30:10,720 And they come back and they go, Well I have to show this much income. 581 00:30:10,720 --> 00:30:13,760 And I'm like, I thought you wanted to be zero. Right. You know? Yeah. 582 00:30:13,760 --> 00:30:16,760 It's like you better figure out what it is you're trying to accomplish and who 583 00:30:16,760 --> 00:30:21,680 you're gonna be interacting with before you just make a kneejerk reaction and 584 00:30:21,680 --> 00:30:26,240 go, you know, this entity, this, this is the best. I saw this on tv. Right. You. 585 00:30:26,240 --> 00:30:30,640 Know? Right, right. Uh, that's such a good, that's a very, that's a long, 586 00:30:30,910 --> 00:30:33,960 very interesting behavioral, psychological, uh, 587 00:30:33,960 --> 00:30:36,120 conversation that we'll have to have another day. 588 00:30:36,140 --> 00:30:39,440 But yes is the answer to that all the time. . 589 00:30:41,090 --> 00:30:43,480 Um, Toby, I'm so glad that we could do this. Uh, 590 00:30:43,480 --> 00:30:45,720 if people are trying to connect with you, 591 00:30:45,720 --> 00:30:47,880 what is the best way for them to connect with you? 592 00:30:48,090 --> 00:30:51,920 Uh, just type in my name and the internet. Toby Mathis. I have a, uh, 593 00:30:51,980 --> 00:30:55,680 I'm on YouTube all over the place. You could actually go to toby mathis.com. 594 00:30:55,950 --> 00:31:00,120 I work with Anderson, uh, business advisors. You go to anderson advisors.com. 595 00:31:00,120 --> 00:31:03,880 But it's actually just simple. Type in my name, you'll find me. 596 00:31:04,020 --> 00:31:08,160 Yep. The internet knows that you exist. That's the perfect place. 597 00:31:08,490 --> 00:31:11,720 We like the internet. It's a great place to share information. 598 00:31:11,720 --> 00:31:15,880 It doesn't exist in a boring, old, dusty book and somebody's basement anymore. 599 00:31:15,880 --> 00:31:17,920 You can get the information with a couple clicks. 600 00:31:17,920 --> 00:31:21,560 It's pretty nice. Yep. Well, Toby, as I say, thank you very much. 601 00:31:21,720 --> 00:31:24,080 I'm humbled you could spend some time with me. Thanks. Hey. 602 00:31:24,080 --> 00:31:24,913 Anytime. 603 00:31:26,260 --> 00:31:28,560 Hey listeners, thanks again for joining me on the podcast. 604 00:31:28,560 --> 00:31:31,240 It's fun to do it for you. If you're enjoying it, please subscribe. 605 00:31:31,560 --> 00:31:33,680 Apple Podcast or wherever you get your podcast. 606 00:31:34,680 --> 00:31:39,480 Subscribe to my wealth and follow on social media and 607 00:31:39,750 --> 00:31:40,440 I'll see you.