Homeless veteran here, I watch all of your videos and you give me hope. In a hard spot like everyone else but its temporary. Started a couple of different businesses, and I look forward to working with you in the future. This is not how the story ends for me. I wish everyone success while pursuing their dreams.
@RavBarring my position got eliminated from my company, took a 50% reduction in pay, my transmission stopped working. Had to get a vehicle, saving money living in a car, and started some businesses with the extra money I make on side hustles because my jobs not cutting it. So I'm just not relying on my job anymore, and I've lost everything already so it's not like it can get much worse. Maybe a blessing in disguise...
My accountant talked me into being Taxed as an S-Corp but she didn’t explain it this clearly. I’m not complaining because it saved me money, but I feel like I understand the benefits much better now. I’m going to have to schedule a board meeting to notify the board of the exciting news.
Net worth snowballs after $1M! Keep investing regularly and you'll be blown away how much it can change in a few short years. Here's to $1 million and to more!
I've saved a ton on FICA but your social security check, for what it's worth, will be much lower because of your low salary. I think I'll collect 1900 at 67 versus 3200. You're saving about 7,500 a year in taxes for a 100,000 gross income less deductions. But you're giving up $16,000 SS benefits per year in retirement. So this only works if you have a very profitable S Corp.
You can compensate for this deficit but utilizing qualified retirement plans to accumulate for future retirement income (ex: SEP IRAs, Cash Balance Plans, etc.)
@@danielleon5074 Yes of course and we do. But the benefit of the S corporation election is not so clear. I think the decision should be made on some chart data instead of verbal advice.
Ditto - sent to business owners I had suggested this strategy to previously, but still have not done it...thought it was well laid out in a way that should convince them where I failed to
I’ve been operating as an S-Corp for the last 12 years it was a game changer. But this takes it to a whole new level especially # 2 and # 3 genius!!! Thanks for this you are awesome!
Another overlooked advantage of the corporation structure is your customers don't have to send you a 1099 and you are explicitly an independent contractor. I dont like the LLC construct, although simpler, because the laws for LLCs are not uniform across the country. Board members are supposed to be independent. Use family members only if they have business relevant talents. Who wants to have their company sued and the plaintiff hauls all your kids into court? Stuffing profit into a 401k is the best plan ever!
so after i do this strategy and go to collect social security i don’t have many social security credits, i now have to pay for S corporation tax return preparation and a payroll preparation company. most landscapers love piles paperwork. brilliant advice. also your reasonable compensation sounds aggressive.
Payroll company is cheap I pay 30per math and 7 bucks per employee, I do my own taxes because if you're not your a fool if your business is less than 5 million a year. My bookkeeping takes 5 to 10 min each work day and 30 min or less 1x each weekend and 2hrs at the end of the year. I don't use double entry. I use an expense ledger, a revenue ledger and a single entry hybrid system. I own multiple businesses with employees never owed taxes on an audit and they loved my bookkeeping method since it's fast and easy to cross check everything fast.
@@JuanGelogoyou don't get any credits unless you pay fica taxes. This hairbrained scheme to avoid fica taxes is a sure fire way to find yourself Ubering or living in an RV in your golden years.
As an accountant myself, I was going to mention this. If you pay yourself W2- income, there is state withholding, and federal withholding and quarterly reports that need to be done. You will most likely have to pay someone like myself to do that. Then you have to pay FUTA and in some states ,not all SUTA, that's federal and state unemployment insurance. Its not as clear cut as he is making it. Then if you want to ever buy a house, your income will be "understated" the pass through portion is not considered "earned Income".
So let's say I'm an LLC+s-corp... Things like paying myself and partners a salary, "plowing" money into a 401k, putting money into investment vessels, having a board of directors where there are hundreds of ways to have things written-off... How much would my business need to gross to allow for all of this? I hope that question makes sense...
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
The Cash Balance Defined Benefit Plan is a great tool for business owners to defer hundreds of thousands of dollars in income pre-tax generating massive tax savings. You took the words out of my mouth, I was going to comment the same thing.
The Ignorance has a price, don't blame politicians for your wasted hours watching TV, Netflix, etc. The IRS has all the information free to the public, so the people do not study the United States tax code is not the fault of the government or the politicians, it is your fault.
@@DeviaNZewhat an absurd statement. They waste literal trillions of dollars, and the big tax companies lobby every year to keep the tax code complicated to force average people to use their services. We’re getting screwed on every turn. Taxation is theft. Abolish the IRS, end the Fed.
Far better off leveraging those profits into commercial real estate, doing tax free cash out refis then 1031 the gains upon sale. Not to mention meeting the real estate professional definition which unlocks your spouses W2 income. Thoughts?
For a business that has unpredictable income, we sometimes don't have the ability to do salary on a regular basis. So you are suggesting that we do a quarterly review and then pay out salary accordingly? Are there any tax disadvantages with larger payroll checks quarterly versus having a smaller check on a monthly basis?
Great question. We talk about his issue with some frequency in Mark's Main Street Tax Advisor Network. In our weekly meetings, we have discussed this very topic. However, each case can be different, as you demonstrate here. Your best course of action is to book a free client interview with one of us Main Street Tax Advisors. This will begin the process of open the door to apply these wonderful tax strategies in your life, which have been shown to reduce taxes and increase your wealth generating opportunities.
I had heard of S-Corps but never understood the operation of them? Thanks, I’ll be investigating a home business just due to the growth potential. You RULE!!!
I’m a CPA. He’s making it sound much easier than it is. Most will need a CPA to do this for them. This works if you’re making much more than 100,000 gross
I’ve done this for years. He didn’t mention you can pay your kids and invest that money in a custodial Roth IRA which after 40+ years of compounding will be well over 1M for their retirement. The FICA savings is overblown however, depending on what is a reasonable salary of your profession. It caps at 168k, so if you’re a physician for instance, it’s hard to justify paying much less than that so it’s a wash. Everything else in the video is a big savings though. I have never set up a formal board of directors, but my wife and I are the only owners so a yearly business meeting/ vacation is legit. There are other expenses that flow through the Scorp that could likely also flow through an LLC such as phones, computers, health club dues etc.
It's all cool, but (1) that is 401k, you can't take it tax-free anyways, you could also pass it to Roth IRA, (2) those strategies seem to be kind of ok for $70-200k businesses and (3) it will likely cost 3-5k a year to support this legal entity (tax-deductible, but still).
Check up on your information. The IRS has released guidance and is saying that they’re gonna start coming after people on this issue… It is not worth having your pants down on this. They may go after you retroactively.
It would be nice to see an example or two of the how an LLC with a given amount of revenue, would end up paying out in taxes when maxing out a SEP-IRA and QBI vs S-Corp with 401k contributions, matching and profit sharing. Especially for finding the sweet spot where the company owner has personal expenses that are at different levels ( to be compared to the revenue of the business.. e.g. how much additional could you contribute to retirement because you have money left over after all is said and done for personal costs of living etc. what the ultimate bottom line is. I imagine there are some cases where the LLC and SEP-IRA path still comes out on top. ( particularly if you can’t afford to save anything about the 25% contribution limit )
Strategy 3 is a recipe for being audited every year. Ask yourself if business related expenses he is suggesting as legitimate and are reasonable. If not, you will have more paperwork and have to spend more money on penalties and audit defense.
Thank you for sharing your knowledge! I'm a recently retired veteran and about to purchase a franchise. Having a tax plan that leverages AND includes your life is immensely important! I'm doing a lot of learning - does your team specialize in franchise planning?
I am part of Mark's tax advisory network and am have experience with franchising. Send me a message if you would like to schedule a discovery call or tax consult.
Thank you Mark! This is incredibly valuable insight and clearly explained. Yes, some comments indeed point out that social security benefits may be significantly lower (I didn’t catch that in your video) but others also write valid comments on how likely it will be to actually receive full (expected) ss benefits after 2030-ish… Nonetheless, great structure and time proven concept. I might need to get in touch with you and your office soon!
WOW! 🤩 I saved, liked and shared this video. You thank us in this video, but I actually want to THANK YOU for creating this amazing informative video. By the way, I subscribed to your channel 🥰
I’d like to dive in deeper on the reasonable comp talk. I’m no expert, but I think it would be hard to justify paying an owner that works more than full time hours less than you would pay a lawn maintenance worker. I am having trouble seeing how that’s a reasonable compensation.
Hey mark! My dog walking LLC is defining going to make over 50k this year. I want to switch over to an scorp and also set up a self funded 401k. Is the best way to get started booking a consult for $1k???
Mark as put together a Network of Advisors that he has personally trained to bridge the gap between these videos and applying them to your situation. A personalized strategy. However, this is not a set price, so feel free to find the Advisor that's the right fit for you. Main Street Tax Advisor Network.
I thought the max contribution for a 401k was about $23,000? But you mention 30k here is this accurate? And if so lets say I still have a corporate job in addition to my business, would my max contribution be 30k in total or 30k + 23k for the 401k my corporate job offers?
You can only contribute the max between all accounts, but your company can match or supplement on top of that, as long as it's equal among all employees
Max for solo401k without catch up is 66k in 2024. 23k employee which can be roth and 25% of employee comp as employer contribution. Employer contribution is always pretax. This means you need to pay yourself 174k to get the full 66k into your solo401k. 23k you could roth and 46k trad. Double that if your spouse is included in your company. 138k, 46k into a roth every year.
Very solid explanation! I’m doing everything he mentioned, except the solo 401(k). I will max that thing out by the end of the year. October is usually a good time to buy stocks. I normally wait until tax loss harvesting season.
In the Landscaping example, if you use the $50k to fund a retirement plan, how do you feed your family? Most of the time, the company barely makes enough to take home, after expenses. Is this strategy only for when your company earns discretionary income?
Hi, love the information in this video! I’m in the process of studying to be an accountant and would like to learn more about your strategies and company. Also are there any other videos you can suggest to get me started?
Mark, Excellent video! Just a clarification and a quick question if you don’t mind. You say LLCs don’t save on tax, and I understand it how you explained it - but can’t you avoid tax by holding back on S Corp. distributions by using an LLC? I guess my question is whatever profits go into the LLC don’t have to be distributed like an S Corp and could be reinvested elsewhere, hence avoiding tax?
This is great if you want to show income for loans, but if you don't need loans you can easily show next to nothing as a regular llc and pay almost nothing in taxes, if you take a salary you will have to pay unemployment and payroll taxes which can be the same or more
Social Security has a terrible IRR, and it only gets worse the more you make. If you’d saved and invested every penny you saved in tax you would be WAY ahead. Sounds like maybe you spent it instead?
@@ThePurpleSnork Absolutely spend it, you are going to spend it anyway why pay tax on it before you do? And you can get a mortgage or loan using bank statements anyway
For the Landscaper example, don’t you want to make a certain amount of money before entertaining an S-Corp? With all of the filing and processing to create a proper S-Corp, shouldn’t your business make an x-amount of money before filing as an S-Corp? And if so, what is that number? I personally own a handful of raw land that I would love to create into Glamping and/or mid-term rental projects out of them. How much ROI or net-profit after operating cost should I make in order for it to make sense to file as an S-Corp?
@NickMirro good point to consider. Some people have also worked w2 jobs so have padded social security prior to or even while owning a business. Each individual situation is different.
@@ENVISIONISTLLC Yes there are several companies that specialize in that. Google "Self Directed IRA." Instead of stocks you can put your money in real estate rental property, gold, etc. Just about anything! That being said if you are just getting started building assets you might want to consider stocks for simplicity and liquidity. You can always sell the stocks later once you have several hundred thousand invested.
He was kind of wrong on the solo 401k, particularly about the employee max and employer max contributions. Meanwhile, having a manager for the 401k is best bc of all the compliance. The thing he didn't mention is that 401k are pre tax, so they reduce your taxable income
Don't trust this guy. His comments on the Board won't pass an audit. Meanwhile, you only get tax write offs if there is an expense. And all the fun travel he mentions needs to be justified and entire trips cannot be expensed if the trip wasn't primarily for business. This guy is a hack
Form the LLC first. Get an EIN (Employer Identification Tax Number). Then fill out an IRS from 2553 electing to make your LLC a "Sub-Chapter S Corp LLC." Details from IRS website: In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
Let’s not forget that every single write off paid for with company profits. So if you are using money that you otherwise would, then fine. But if you are simply looking for write offs, they you have a barely profitable company.
Awesome video. Serious question, if I take my board meeting to Greece for 3 weeks, how many days of that trip can I write off? What parts can I write off? And how many board meetings can we have a year? Thank you.
The C-Corp is a very different beast, and if you don't fall with a few specific needs, then you are more likely to increase your tax burden than to decrease it. However, you might fall into those few specific issues. To get the best strategy for you, then please contact one of us, Mark J Kohler, Certified Main Street Tax Advisor. You can find us on his website under Services/Tax Advisor Network.
Mark has a great explanation as to why. Let me give you a hint. It has to do with Roth conversions. I was at Mark's Tax & Legal 360 event in Utah this year and there was a class that spoke on this very topic.
You can have both solo 401 k and sep ira, but you only fund one of them each year. The sep can only be 25% of your net earnings, but you make the math for yourself and see which one is worth funding each year according to your earnings
Doubt you find anything cheaper than that. Focus on growing/scaling and bringing more in now. You can’t save your way to wealth by trying to cut expenses to nothing
Mark, I really enjoyed this video. Question, I have a small business and I’m an S-Corp and I W2 myself. I don’t have a 401K but I take $ from my profits and put it in a ESOP account. It’s my understanding I cant do both. Your response would be greatly appreciated. Thank you
So is the pass-through income not taxed? How is that possible? I people who have to pay quarterly taxes that are filing s-corp. What is that about? I am an s corp as well and have never paid quarterly taxes and only paid $1700 in taxes and I grossed 260k. I have no idea why, please help lol
@@TheRealKimJong-Il yep, and it isn't counted as earned income, so you can miss out on some tax credits, also if you ever want to buy a house, not sure if you can figure that into the income calculation.
Homeless veteran here, I watch all of your videos and you give me hope. In a hard spot like everyone else but its temporary. Started a couple of different businesses, and I look forward to working with you in the future. This is not how the story ends for me. I wish everyone success while pursuing their dreams.
With that mindset you will find your abundance ❤
Cheering you on! Never give up and become an inspiration.
Keep your chin up and stay strong my man!
How do you see yourself out of the situation you are in?
@RavBarring my position got eliminated from my company, took a 50% reduction in pay, my transmission stopped working. Had to get a vehicle, saving money living in a car, and started some businesses with the extra money I make on side hustles because my jobs not cutting it. So I'm just not relying on my job anymore, and I've lost everything already so it's not like it can get much worse. Maybe a blessing in disguise...
My accountant talked me into being Taxed as an S-Corp but she didn’t explain it this clearly. I’m not complaining because it saved me money, but I feel like I understand the benefits much better now. I’m going to have to schedule a board meeting to notify the board of the exciting news.
I have 2 C corps and 1 S corp and its based off the income and the advantages of being taxed......so your probably doing good 👍
😅
Great news. What business and industry are u in?
Net worth snowballs after $1M! Keep investing regularly and you'll be blown away how much it can change in a few short years. Here's to $1 million and to more!
Sure hope it snowballs before that too not all of us have 1m
This lowly potter was an S-corp for 35 years. I retired at 54 and have lived abroad ever since. Thanks for telling this. Anyone can have a s-corp.
I've saved a ton on FICA but your social security check, for what it's worth, will be much lower because of your low salary. I think I'll collect 1900 at 67 versus 3200. You're saving about 7,500 a year in taxes for a 100,000 gross income less deductions. But you're giving up $16,000 SS benefits per year in retirement.
So this only works if you have a very profitable S Corp.
Ss is a scam. You can do so much more with that money now vs what the government can do with it. If there even is anything left.
@@erezjr very slowly explain how you do that
You can compensate for this deficit but utilizing qualified retirement plans to accumulate for future retirement income (ex: SEP IRAs, Cash Balance Plans, etc.)
@@danielleon5074 Yes of course and we do. But the benefit of the S corporation election is not so clear. I think the decision should be made on some chart data instead of verbal advice.
Throw it in something that will grow. stocks with dividends, growing assets, IRAs...
This is the best explanation I've heard. Thank you, Thank you
Ditto - sent to business owners I had suggested this strategy to previously, but still have not done it...thought it was well laid out in a way that should convince them where I failed to
I’ve been operating as an S-Corp for the last 12 years it was a game changer. But this takes it to a whole new level especially # 2 and # 3 genius!!! Thanks for this you are awesome!
In the beginning you should invest in your business not in 401k. You need a healthy, viable business first. Imo.
"welcome back" + background music playing at medium volume = infomercial.
this becomes really explosive after irs audits
Protect this man.
How do I contact your team?
Another overlooked advantage of the corporation structure is your customers don't have to send you a 1099 and you are explicitly an independent contractor.
I dont like the LLC construct, although simpler, because the laws for LLCs are not uniform across the country.
Board members are supposed to be independent. Use family members only if they have business relevant talents. Who wants to have their company sued and the plaintiff hauls all your kids into court?
Stuffing profit into a 401k is the best plan ever!
so after i do this strategy and go to collect social security i don’t have many social security credits, i now have to pay for S corporation tax return preparation and a payroll preparation company. most landscapers love piles paperwork. brilliant advice. also your reasonable compensation sounds aggressive.
Payroll company is cheap I pay 30per math and 7 bucks per employee, I do my own taxes because if you're not your a fool if your business is less than 5 million a year. My bookkeeping takes 5 to 10 min each work day and 30 min or less 1x each weekend and 2hrs at the end of the year. I don't use double entry. I use an expense ledger, a revenue ledger and a single entry hybrid system. I own multiple businesses with employees never owed taxes on an audit and they loved my bookkeeping method since it's fast and easy to cross check everything fast.
Also you get full credits each year from very little income so doesn't take much payroll to earn maximum credits each year
@@JuanGelogoyou don't get any credits unless you pay fica taxes.
This hairbrained scheme to avoid fica taxes is a sure fire way to find yourself Ubering or living in an RV in your golden years.
As an accountant myself, I was going to mention this. If you pay yourself W2- income, there is state withholding, and federal withholding and quarterly reports that need to be done. You will most likely have to pay someone like myself to do that. Then you have to pay FUTA and in some states ,not all SUTA, that's federal and state unemployment insurance. Its not as clear cut as he is making it. Then if you want to ever buy a house, your income will be "understated" the pass through portion is not considered "earned Income".
So let's say I'm an LLC+s-corp... Things like paying myself and partners a salary, "plowing" money into a 401k, putting money into investment vessels, having a board of directors where there are hundreds of ways to have things written-off... How much would my business need to gross to allow for all of this? I hope that question makes sense...
I just switched up my Roth IRA to 50% SCHD, 25% SCHX, 25% SCHG, and my Roth 401k is 70% vanguard S&P 500 index, 20% vanguard growth index, and 10% vanguard international index. Seeking best possible ways to grow $350k into $1m+ before retirement, I'm 55.
Those sound like great picks! consider financial advisory so you don’t keep switching it up, top 3 payers for the month were $OHI, $KMI, and $EDP... not bad for 350k
You have a very valid point, I started investing on my own and for a long time, the market was really ripping me off. I decided to hire a CFA, even though I was skeptical at first, and I beat the market by more than 14.3%. I thought it was a fluke until it happened two years in a row, and so I’ve been sticking to investing via an advisor.
Impressive can you share more info?
Certainly, there are a handful of experts in the field. I've experimented with a few over the past years, but I've stuck with ‘’Aileen Gertrude Tippy” for about five years now, and her performance has been consistently impressive.She’s quite known in her field, look-her up.
Thanks a lot for this suggestion. I needed this myself, I looked her up, and I have sent her an email. I hope she gets back to me soon.
Just as seeds need time to grow into trees, investments need time to grow into wealth.
Patience is key in investing, just as it is in gardening. Watch your wealth grow over time!
Mark, you should do a show on funding a Defined Benefit Pension Plan from a single-shareholder S-corp.
The Cash Balance Defined Benefit Plan is a great tool for business owners to defer hundreds of thousands of dollars in income pre-tax generating massive tax savings. You took the words out of my mouth, I was going to comment the same thing.
The cash balance db plan really should be criminal, if you’re a high earner you can defer literally hundreds of thousands of dollars a year
This is gold. So much info here.
This is a phenomenal explanation of this strategy
Politicians have made the tax structure so complicated because they don’t want you to know how much of your money they are wasting.
The Ignorance has a price, don't blame politicians for your wasted hours watching TV, Netflix, etc. The IRS has all the information free to the public, so the people do not study the United States tax code is not the fault of the government or the politicians, it is your fault.
@@DeviaNZe Oh, I don’t pay a penny more in taxes than required by law, but I’m not most people. My comment stands.
This isn’t true. The complicated tax code is caused by a mix of special interest and attempts to close loopholes
@@DeviaNZewhat an absurd statement. They waste literal trillions of dollars, and the big tax companies lobby every year to keep the tax code complicated to force average people to use their services. We’re getting screwed on every turn. Taxation is theft. Abolish the IRS, end the Fed.
@@gangsta8929 Ross Perot said it decades ago. He was right then and it’s still true today.
Far better off leveraging those profits into commercial real estate, doing tax free cash out refis then 1031 the gains upon sale. Not to mention meeting the real estate professional definition which unlocks your spouses W2 income. Thoughts?
For a business that has unpredictable income, we sometimes don't have the ability to do salary on a regular basis. So you are suggesting that we do a quarterly review and then pay out salary accordingly? Are there any tax disadvantages with larger payroll checks quarterly versus having a smaller check on a monthly basis?
Great question. We talk about his issue with some frequency in Mark's Main Street Tax Advisor Network. In our weekly meetings, we have discussed this very topic. However, each case can be different, as you demonstrate here. Your best course of action is to book a free client interview with one of us Main Street Tax Advisors. This will begin the process of open the door to apply these wonderful tax strategies in your life, which have been shown to reduce taxes and increase your wealth generating opportunities.
My understanding is this is all about accounting: take what money you need when you need it, aggregate what you took once every quarter as a dividend.
Do a distribution, I think 1065 is easier for that reason
I had heard of S-Corps but never understood the operation of them? Thanks, I’ll be investigating a home business just due to the growth potential. You RULE!!!
I’m a CPA. He’s making it sound much easier than it is. Most will need a CPA to do this for them. This works if you’re making much more than 100,000 gross
I’ve done this for years. He didn’t mention you can pay your kids and invest that money in a custodial Roth IRA which after 40+ years of compounding will be well over 1M for their retirement. The FICA savings is overblown however, depending on what is a reasonable salary of your profession. It caps at 168k, so if you’re a physician for instance, it’s hard to justify paying much less than that so it’s a wash. Everything else in the video is a big savings though. I have never set up a formal board of directors, but my wife and I are the only owners so a yearly business meeting/ vacation is legit. There are other expenses that flow through the Scorp that could likely also flow through an LLC such as phones, computers, health club dues etc.
Listened passively once. I'm going to come back and watch when I have a chance to actively listen and focus. Thanks
It's all cool, but (1) that is 401k, you can't take it tax-free anyways, you could also pass it to Roth IRA, (2) those strategies seem to be kind of ok for $70-200k businesses and (3) it will likely cost 3-5k a year to support this legal entity (tax-deductible, but still).
S Corps are sold by accountants to small biz so they would need them more, just make LLC and you are golden.
Excellent video. I'm also a CPA and tax attorney, I agree with you regarding the reasonable comp issue.
Agreed! 15 years at 24K a year with no issues.
I teach this at work and thought this video was great. We always do a bit higher comp but our clients are wealthy.
Check up on your information. The IRS has released guidance and is saying that they’re gonna start coming after people on this issue… It is not worth having your pants down on this. They may go after you retroactively.
I don't think he mentioned S-Corps with employees and how that affects reasonable salary scrutiny.
It would be nice to see an example or two of the how an LLC with a given amount of revenue, would end up paying out in taxes when maxing out a SEP-IRA and QBI vs S-Corp with 401k contributions, matching and profit sharing.
Especially for finding the sweet spot where the company owner has personal expenses that are at different levels ( to be compared to the revenue of the business.. e.g. how much additional could you contribute to retirement because you have money left over after all is said and done for personal costs of living etc.
what the ultimate bottom line is. I imagine there are some cases where the LLC and SEP-IRA path still comes out on top. ( particularly if you can’t afford to save anything about the 25% contribution limit )
Strategy 3 is a recipe for being audited every year. Ask yourself if business related expenses he is suggesting as legitimate and are reasonable. If not, you will have more paperwork and have to spend more money on penalties and audit defense.
Thank you for sharing your knowledge!
I'm a recently retired veteran and about to purchase a franchise. Having a tax plan that leverages AND includes your life is immensely important! I'm doing a lot of learning - does your team specialize in franchise planning?
I am part of Mark's tax advisory network and am have experience with franchising. Send me a message if you would like to schedule a discovery call or tax consult.
Hello. I would like to schedule a meeting with one of your tax consultants to set all of this up for my business.
Bravo 👏🏽 Excellent explanation ! Makes so much sense. Thank you!
Thank you Mark! This is incredibly valuable insight and clearly explained. Yes, some comments indeed point out that social security benefits may be significantly lower (I didn’t catch that in your video) but others also write valid comments on how likely it will be to actually receive full (expected) ss benefits after 2030-ish… Nonetheless, great structure and time proven concept. I might need to get in touch with you and your office soon!
Fantastic content/video! so much value, thank you Mark!
Let get this man to a 1m subs 🎉🎉🎉 always good info
Thanks for the great explanation!
WOW! 🤩 I saved, liked and shared this video. You thank us in this video, but I actually want to THANK YOU for creating this amazing informative video. By the way, I subscribed to your channel 🥰
I’d like to dive in deeper on the reasonable comp talk. I’m no expert, but I think it would be hard to justify paying an owner that works more than full time hours less than you would pay a lawn maintenance worker. I am having trouble seeing how that’s a reasonable compensation.
Holy shit!! So glad this showed up this morning
And keep in mind the exit/cap gains strategy & implications of S vs. C. Great video!
Hey mark! My dog walking LLC is defining going to make over 50k this year. I want to switch over to an scorp and also set up a self funded 401k. Is the best way to get started booking a consult for $1k???
Mark as put together a Network of Advisors that he has personally trained to bridge the gap between these videos and applying them to your situation. A personalized strategy. However, this is not a set price, so feel free to find the Advisor that's the right fit for you. Main Street Tax Advisor Network.
Thank you for sharing this with us
Thanks Mark, great eye opening topic. I needed to see this video and understand why it’s importance.
I thought the max contribution for a 401k was about $23,000? But you mention 30k here is this accurate? And if so lets say I still have a corporate job in addition to my business, would my max contribution be 30k in total or 30k + 23k for the 401k my corporate job offers?
He said you can have multiple 401ks.
You can only contribute the max between all accounts, but your company can match or supplement on top of that, as long as it's equal among all employees
You can contribute an extra $7,500 per year if you’re 50 or older
Max for solo401k without catch up is 66k in 2024. 23k employee which can be roth and 25% of employee comp as employer contribution. Employer contribution is always pretax. This means you need to pay yourself 174k to get the full 66k into your solo401k. 23k you could roth and 46k trad. Double that if your spouse is included in your company. 138k, 46k into a roth every year.
Very solid explanation! I’m doing everything he mentioned, except the solo 401(k). I will max that thing out by the end of the year. October is usually a good time to buy stocks. I normally wait until tax loss harvesting season.
I’m glad I came across this video! Very informative .TY
Fantastic video!!!!
When you form a Board of Directors with your home state, where else do you have to file on the Federal level to be compliant?
I had an ad right before the video started. The next ad started at 1:08. UA-cam is going bananas with advertising 😂
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Wouldn't you be paying more taxes on that deferred income later when making more money?
Great video thanks
In the Landscaping example, if you use the $50k to fund a retirement plan, how do you feed your family? Most of the time, the company barely makes enough to take home, after expenses. Is this strategy only for when your company earns discretionary income?
It’s a hypothetical example. Literally made up numbers for an example.
You can still do the fica savings part..
Hi, love the information in this video! I’m in the process of studying to be an accountant and would like to learn more about your strategies and company. Also are there any other videos you can suggest to get me started?
Mark, Excellent video! Just a clarification and a quick question if you don’t mind. You say LLCs don’t save on tax, and I understand it how you explained it - but can’t you avoid tax by holding back on S Corp. distributions by using an LLC? I guess my question is whatever profits go into the LLC don’t have to be distributed like an S Corp and could be reinvested elsewhere, hence avoiding tax?
Thank you so much for your information!
This is great if you want to show income for loans, but if you don't need loans you can easily show next to nothing as a regular llc and pay almost nothing in taxes, if you take a salary you will have to pay unemployment and payroll taxes which can be the same or more
Social Security has a terrible IRR, and it only gets worse the more you make. If you’d saved and invested every penny you saved in tax you would be WAY ahead. Sounds like maybe you spent it instead?
@@ThePurpleSnork Absolutely spend it, you are going to spend it anyway why pay tax on it before you do? And you can get a mortgage or loan using bank statements anyway
I am an S Corp and my first employee (non-owner) starts next week. When they start can I still have a SOLO401k? I have been told no.
In general you are correct. You can still have a 401K but it would have to be offered to your employees including the match.
Excellent break down definately a game changer
For the Landscaper example, don’t you want to make a certain amount of money before entertaining an S-Corp?
With all of the filing and processing to create a proper S-Corp, shouldn’t your business make an x-amount of money before filing as an S-Corp? And if so, what is that number?
I personally own a handful of raw land that I would love to create into Glamping and/or mid-term rental projects out of them. How much ROI or net-profit after operating cost should I make in order for it to make sense to file as an S-Corp?
My tax pro told me any business earning north of 40k yearly, is when he recommends S-Corp consideration
Remember if you're only declaring 24,000 a year in income, your social security at retirement will be pretty small.
@NickMirro good point to consider. Some people have also worked w2 jobs so have padded social security prior to or even while owning a business. Each individual situation is different.
They all say different but if you do the math around 70k minimum is better due to the cost of maintaining a S-Corp with payroll
@@wiregrassveteranrealtor I own an S Corp with no current employees. So even lower if you're a one man band. 🙂
lol, pray you won't get audited 😂
Don't expense vacation travels with you "board of directors" until it is really small % of your tax obligation...
With an Llc you fund the 401k first and don’t get taxed on it either
Oh wow!! im so glad i watched your video .... thank you.
Can you invest in real estate instead of the 401k?
To my understanding, you can use the money from your 401k to invest in real estate, crypto etc.. 9:37
@@ENVISIONISTLLC Yes there are several companies that specialize in that. Google "Self Directed IRA." Instead of stocks you can put your money in real estate rental property, gold, etc. Just about anything!
That being said if you are just getting started building assets you might want to consider stocks for simplicity and liquidity. You can always sell the stocks later once you have several hundred thousand invested.
Great video - Liked and Subscribed!
Question: We have a C Corp as we are not US Citizens, does this same rules apply?
He was kind of wrong on the solo 401k, particularly about the employee max and employer max contributions. Meanwhile, having a manager for the 401k is best bc of all the compliance. The thing he didn't mention is that 401k are pre tax, so they reduce your taxable income
Don't trust this guy. His comments on the Board won't pass an audit. Meanwhile, you only get tax write offs if there is an expense. And all the fun travel he mentions needs to be justified and entire trips cannot be expensed if the trip wasn't primarily for business.
This guy is a hack
Can you do anything for Canadians ?
Used to have one. The college was very confused when I applied for student aide
You want the SCorp to be owned by the llc for asset protection
Is it best to keep the LLC and tax it as an S-corp, or go ahead and convert it to an S-corp?
Form the LLC first. Get an EIN (Employer Identification Tax Number). Then fill out an IRS from 2553 electing to make your LLC a "Sub-Chapter S Corp LLC."
Details from IRS website: In order to become an S corporation, the corporation must submit Form 2553, Election by a Small Business Corporation signed by all the shareholders. See the Instructions for Form 2553 PDF for all required information and to determine where to file the form.
IUL’s are the best to fund. That’s Generational wealth.
Strategy 2, wouldn't it be tax when you when you take it out from the 401k?
Very good video.
Do we get one meeting for 1k ?
Great video. I stop telling people these things. And just send them these videos. Let them learn on their own merit
Thank you very helpful
Let’s not forget that every single write off paid for with company profits. So if you are using money that you otherwise would, then fine. But if you are simply looking for write offs, they you have a barely profitable company.
Awesome video. Serious question, if I take my board meeting to Greece for 3 weeks, how many days of that trip can I write off? What parts can I write off? And how many board meetings can we have a year? Thank you.
If you can afford to do that, you should pay a CPA or attorney to answer your questions.
@@davidwood3315 lol. Touché
You can also invest that money and move to Greece later.
Beautiful; I get it!!!
Excellent advice
What did you do with K1 profit from S Corp?
I Love your knowledge. Thank you.
You're right I always thought 🤔 s-corpse was better
Do you have direct knowledge and understanding of Act 60 of Puerto Rico and can talk on the good, bad, and realism of the program?
Wish I had this when I ran my Turo fleet.....
I’m just starting out. All of this is crazy over my head.
Please realize that most of your is not needed. You need to figure out a good business that stands on its own. Don't worry about tax savings.
Thanks bro
1065 with distributions avoiding all the w2’s. You also have Sep IRA, which you can even purchase physical gold with custodian.
Natural salesman
I love that suit. Bravo! It's gorgeous.
making family board members with no real duties is pathetic, the tax law needs to be reformed.
Can this strategy work with a C Corp?
The C-Corp is a very different beast, and if you don't fall with a few specific needs, then you are more likely to increase your tax burden than to decrease it. However, you might fall into those few specific issues. To get the best strategy for you, then please contact one of us, Mark J Kohler, Certified Main Street Tax Advisor. You can find us on his website under Services/Tax Advisor Network.
You are SOOO APPRECIATED!!!!! ❤️🙏🏼👏🏼😍
Mark, why a Solo 401k versus a SIMPLE or SEP? (I’ve heard 401ks are expensive.)
Mark has a great explanation as to why. Let me give you a hint. It has to do with Roth conversions. I was at Mark's Tax & Legal 360 event in Utah this year and there was a class that spoke on this very topic.
You can have both solo 401 k and sep ira, but you only fund one of them each year. The sep can only be 25% of your net earnings, but you make the math for yourself and see which one is worth funding each year according to your earnings
Brilliant!
How do you suggest running payroll? Cheapest I found is like $60 a month.. so $720 a year. That is 1% in your 75k example. Any way to do it cheaper?
Doubt you find anything cheaper than that. Focus on growing/scaling and bringing more in now. You can’t save your way to wealth by trying to cut expenses to nothing
Great video
As long as you are cash positive and not in debt, as it seems to be the trend
Mark, I really enjoyed this video. Question, I have a small business and I’m an S-Corp and I W2 myself. I don’t have a 401K but I take $ from my profits and put it in a ESOP account. It’s my understanding I cant do both. Your response would be greatly appreciated. Thank you
So is the pass-through income not taxed? How is that possible? I people who have to pay quarterly taxes that are filing s-corp. What is that about? I am an s corp as well and have never paid quarterly taxes and only paid $1700 in taxes and I grossed 260k. I have no idea why, please help lol
What happens to the 50K passthrough funds?
It gets taxed as regular income at the personal tax rate and brackets on your personal tax return
@@TheRealKimJong-Il yep, and it isn't counted as earned income, so you can miss out on some tax credits, also if you ever want to buy a house, not sure if you can figure that into the income calculation.