Don't Setup an LLC Until You Watch This Video (Time Sensitive)

welcome back to fact is made simple i'm your host carlton dennis and in today's video i want to cover the five most important things to focus on as a new business owner i speak with a ton of new business owners on a daily basis and many new business owners have the similar questions that i see come up carlton how much should i be paying myself does it make sense to start out as an llc or should i stay a sole proprietorship should i consider an s corporation early on what type of items can i deduct for my business is things different from my business than some other person's business that i'm seeing online i want to be able to answer those questions for you and be able to give you the things that would make the best sense to focus on as a new business owner so let's dive in all right guys first thing i want to say is i'm glad that you're here if you're a new business owner that's been following my channel for a while welcome on back but if you're new to my channel i want to say thank you for being here take it upon yourself to subscribe to this channel and dive through some of the videos that are going to teach you about llc's tax education how to take basic deductions that's what this channel is for a place where you can learn taxes in a simple place but what i want to do today is i want to speak to new business owners i want to more importantly speak to business owners who are trying to figure out if it makes sense to hire a tax professional or a tax strategist like myself many business owners are on the cusp of starting something really great and they have a lot of questions and they are trying to decide if it makes best sense to invest in setting up a consultation with a tax firm or with a tax strategist maybe these questions could be answered in some of the videos i have or maybe it could be answered today just by understanding what you need to focus on as a small based business owner so i plan to solve that for you what we're going to do is we're going to solve the five most important things that every business owner should be focused on within the first six months of being in business i'm gonna put it in order for you and it's my order that i feel is important that i would want someone to share it to me let's dive in now part of the reason why i'm sharing this with you guys is because i've seen business owners who've started out with literally negative dollars i'm talking about they're in the hole they're putting in their own personal income they've already maxed out some credit cards to get their business started and they're not profitable yet and i've seen some business owners who've dug themselves out of holes and are now making six and seven figures i have literally seen it all i've seen the people that have said carlton i started out homeless and now they're rocking the rolls-royce and i have clients who have started out already successful and have figured out a way to just completely tank their businesses you don't want to be the client that is taking their business because you didn't have the right information what we're going to do is we're going to make sure that we're starting out our business strong and on the right foot the number one thing that we should be focused on as new business owners is income burst not structure that's correct as a new business owner you should be more concerned with making income not your structure there is no one who is better at making income in your business than you business owner and there is no one who is better at structuring your business than someone else other than you so rather than making the focus early on in your business to be about setting up the correct entity structure your focus early on in business should be about becoming an income producing business that means establishing marketing and sales processes that are going to allow for you to eat and be fed and the people around you that you plan to hire to be eat and to be fed because once you solve this income problem next comes the tax problem and that's when we start to look at the structure but too many business owners get analysis paralysis by spending time on google and wikipedia trying to figure out if they need to set up an llc an escort a parent company a wyoming company nevada delaware if they need to move to costa rica if you're trying to become successful you will not spend time on trying to figure out your structure initially and you will first focus on trying to become a real business a real business has systems and process a real business has income and cash flow coming in and once you establish income and cash flow the next problem to solve is number two establishing your structure this is one of the most important things that i look to solve for the everyday business owner on my youtube channel why because many business owners cut past step number one and already want to jump to step number two of carlton what should i be or they're speaking with their cpa and their cpa doesn't tell them what structure that they should have been and so they go on google and try to figure out okay how do i avoid taxes and they find out that they should have been in a different structure this is once you've become income producing that's the type of taxpayer that goes to the internet to figure out what type of structure they should be and once you do become income producing you're going to want to move on to step number two what type of structure are you going to be does it make sense for you to be a sole proprietorship most business owners start out as sole proprietorships but why am i not a fan of them i personally have never liked sole proprietorships part of the reason why is because when i think about how many irs audits i've seen the majority of them have been with schedule c sole proprietor businesses business owners who file tax returns in the same tax return with their personal income that means everything's all in one place but the irs audits you they are auditing your personal return and your business return and they have access to see everything not to mention when you're filing a tax return that's a schedule c the schedule c shows me all your income and all your expenses all broken down nice and neat for me so i can see if anything looks out of the ordinary if i'm if i'm an irs auditor so sole proprietors are definitely under higher irs scrutiny just for the simple fact of the way that they filed their tax returns not to mention if i'm a sole proprietor i'm considered a disregarded entity for irs purposes they don't even view me as a legal entity structure i'm considered disregarded still a business but i'm disregarded doesn't sound right it doesn't feel right actually but when i'm a disregarded entity i don't have liability protection in the event that something happens i am personally liable for the debts and liabilities inside of my business and that is one of the biggest turn offs to me about being a sole proprietorship why would i want to be personally liable if something detrimental happens i'm trying to make a impact and a difference in this world and something goes south i have to be personally impacted for everything maybe you want a layer of protection and that's when you'll look to setting up an llc or some type of entity structure but then of course the questions start to arise do i need an llc what's a pllc a professional llc is that something that i'm gonna need are there steps to set up an llc that i should know about or should i just pay one of these companies online and trust that they're doing it right am i supposed to have something written down around what i'm doing for my company inside of my operating agreement snap maybe i should hire an attorney to set all this up but wait a minute how much is it gonna cost me to hire an attorney i heard they cost a lot and they charge by the hour maybe i should call a tax professional for wait a second let me go to google now i'm on youtube and now i'm on a video of carlton's that's the order of operations i see all the time guys and don't fault me if i'm if i'm quoting what you're taking the steps that you're absolutely taking right now and there's nothing wrong with that there's no class on llcs in college i didn't take one i personally did not take a class on whether or not i should have an llc or not in in college or in high school okay so welcome to tax alchemy university welcome to carlton dennis's page and now you're learning a little bit more about why these questions are arising in your head these are questions that every other taxpayer is having too do i need to establish an llc well you're solving one thing you're solving something that the sole proprietor couldn't solve you're establishing liability protection but you're still filing tax returns just like a sole proprietor if you have a single member llc everything gets filed inside of your individual tax return everything is shown in the event of an irs audit all on the personal tax returns so then you might be thinking okay well then should i set up a partnership well are you in partnership because if you're not in partnership you can't have a partnership if you're not in partnership right so this is when we start to look at the s corporation you'll see on my channel i talk all about s corporations when to switch to an escort how much you should pay yourself as an escort what's reasonable compensation because the s corporation is the correct entity structure if you have ordinary income and you're making over a certain amount of money to where you can draw a payroll you can pay yourself out of your own business that's when you start to save money on taxes that's when you start to get a deduction for paying yourself so the second most important thing for all business owners to focus on after they figured out how to make income is how to structure themselves correctly sole proprietorship the llc the s corporation c corporation normally comes last unless you are trying to go public and you're raising capital from the start that is exactly how i've seen other business owners have had success if you're going to be a publicly traded company you're going to be a c corporation doesn't mean you have to start off as a c corp not necessarily but maybe you want to okay but just knowing this information right now about structures sole proprietorship llcs corporation c corp gives you the direction you need when you're starting out the third most important thing that business owners need to focus on early on in business is their tracking system what does that mean you need to have a system to account for income coming into your business and expenses coming back out of your business i don't know how you're currently tracking your income and expenses but most of the time when taxpayers get on the phone with me they try to act like they have already been tracking their income and expenses in some type of program i could hear the ones who are doing it correctly because they can rattle off numbers to me very quickly oh yeah this is how much i made net income this is how much i grossed and then i can hear the ones that are trying to tell me that they've been tracking stuff i think i did i think i made a round i don't like a whole lot of thinking going on when i'm on the phone with people like certainty because you want to know certainly how much money i can save you when you're on the phone with me believe me when you get on the phone with me you're going to want to know by the time you get off how much i can save you why would you give me numbers that are ballparks wouldn't you rather have the exact numbers wouldn't you be able to make decisions in real time if you had exact numbers because in the game of taxes you can miss out on a deduction by a dollar you can miss out on a tax credit by a dollar because you weren't on your mark you weren't on top of your numbers you didn't have a profit and loss statement what is a profit and loss statement welcome to the bookkeeping game now we have to understand what is bookkeeping carlton do i need a bookkeeper maybe maybe not maybe you're a taxpayer that has the time to track your income that comes into your bank account and the expenses that are coming out of your bank account maybe you've taken it upon yourself to look at the tax form called a schedule c to see the categories of expenses that the government has for you such as advertising licensing rents legal professional fees auto gas these are all expenses that you will find on a schedule c or on any profit or loss statement when you decide to do your bookkeeping so the next thing that you have to do as a taxpayer is establish a tracking system to track the ex the income that comes into your business and the expenses that you're occurring so you can categorize the expenses according to what the expense is something that's marketing for your business may not be marketing for my business though it's up to you to make sure you learn how to track your expenses and how to categorize your expenses according to what it is that is the most important thing quickbooks and programs like quickbooks will help you with income and expense tracking it'll allow for you to populate all your income and all your expenses by attaching your bank account and then your transactions populate into the program and then it's up to you to categorize those transactions and to create rules so you don't have to come back next month and re-categorize the same type of transactions again if you're going to starbucks and that's a meal for you you should create that rule so every time you spend money at starbucks it automatically counts it as a meal the most important thing that you can do number three is establishing your tracking system so that you can make decisions in real time and so that you're not living in fear of filing your tax returns the number four thing that you need to establish is establishing how much money you need to save as a business owner this is one that i feel like business owners do last because business owners are in a place where they earn income first spend money second and pay taxes third which is a great thing by being a business owner because the w-2 taxpayer earns money pays taxes second and then gets to spend whatever's left third that's the difference between taxpayers who are w2 versus 1099. 1099 taxpayers have time which means they can leverage expenses but if you're just spending money because you're a business owner and you think it's okay to just spend money you're going to hurt yourself in the long run trust me i have been there business owner i want you to know how to do this the right way the right way is to not spend money until you know exactly how much you can spend personally how are you going to know that well you first need to have an estimate of how much you're expected to make for the year can you ball park it can you get close enough to ballpark and or can you run the numbers based on the income you've already earned from january february march april and quantify out with the remaining months in the year what your estimated income is going to look like that's a number that's so important to a tax strategist and is the number that should be important to a business owner because that number can let you know exactly how much you're expected to owe exactly how much you might even be expected back in a refund if you're making estimated tax payments but if you know how much you are going to make then you can do math to figure out how much you're going to owe from there you can now decide how much money do i want to set aside for reinvesting how much money do i want to set aside for taxes and how much money do i want to set aside to pay mwah myself that is the order of operations that we need to take as taxpayers and as business owners who are trying to be savvy we cannot just spend money because there's money in the business bank account it does not work like that guys if you're trying to be successful trust me i see the business owners who don't worry and i see the business owners who stress out the ones who stress out just are just trying to spend money the ones who don't worry have a plan on how to spend the money that's simple the last thing that i can leave you is number five and i put this strategically as the last one formulated tax plan after you have gone through the steps of becoming an income producing business after you've gone through the steps of figuring out what entity to structure yourself in after you have gone through the steps of forming your tracking system after you've gone through the steps of figuring out how much money you should be saving and how much you should be putting aside for reinvesting and paying yourself you're at a place where you can have some fun now with the tax code because you know things your money's good tracking is good i don't have to worry about becoming my own book here i already have my bookkeeping dialed or i've outsourced it i have my business bank accounts established i have my entity structure i have my liability protection and i know how much i'm saving and how much i'm keeping now i can play the tax game now i'm in a place where i can leverage tax strategies now i can put the home office into play now i can leverage the vehicle deduction now i can think about setting up retirement planning for myself now i might even think about a management company or a parent company now i might think about the augusta rule that carlton talks about so much on here now you can start to have fun but if you haven't covered one through four you're not going to be able to get to number five which is the phone call with the tax strategist where you're having fun leveraging the tax go to the fullest extent who wouldn't want to be on the phone leveraging the tax code to the fullest extent learning how to write off all these different things that they weren't able to write off of course you want to be there have you handled one through four yet i'm here to help you my name is carlton dennis you're on my channel right now love you to do something for me like comment subscribe i'm here to help and i look forward to seeing you on the next video where i will help you grow your wealth see you soon [Music]

Channel: Karlton Dennis

Views: 338,916

Keywords: taxes, tax help, business, small business, small business help, llc, s-corp, c-corp, top 5, 5 best, how to make money

Id: AMmIsIJ0gyk

Length: 16min 6sec (966 seconds)

Published: Mon May 02 2022