{"version":"1.0.0","segments":[{"startTime":4.98,"endTime":5.73,"body":"Welcome back everyone."},{"startTime":5.73,"endTime":9.74,"body":"To episode two of taxes made simple dive"},{"startTime":5.73,"endTime":9.74,"body":"into critically important tax details"},{"startTime":9.74,"endTime":13.64,"body":"for small businesses and individuals"},{"startTime":9.74,"endTime":13.64,"body":"in terms that the average person will"},{"startTime":13.64,"endTime":18.29,"body":"understand with us today is chase Berkey,"},{"startTime":13.64,"endTime":18.29,"body":"CEO of dark core CPAs, as well as a"},{"startTime":18.29,"endTime":22.7,"body":"guest speaker, Eric Hegsted who runs"},{"startTime":18.29,"endTime":22.7,"body":"our dark horse office out of Colorado."},{"startTime":23.445,"endTime":25.605,"body":"Eric is actually going to give us a"},{"startTime":23.445,"endTime":25.605,"body":"little overview on the most common"},{"startTime":25.605,"endTime":29.685,"body":"types of small business entities"},{"startTime":25.605,"endTime":29.685,"body":"that most entrepreneurs can choose"},{"startTime":29.685,"endTime":31.575,"body":"from when formalizing their business."},{"startTime":31.814,"endTime":35.175,"body":"So we're going to go into some of"},{"startTime":31.814,"endTime":35.175,"body":"the pros and cons and let's dive in."},{"startTime":35.55,"endTime":38.07,"body":"So chase, give us a lower view of"},{"startTime":35.55,"endTime":38.07,"body":"what we're going to talk about."},{"startTime":38.4,"endTime":38.61,"body":"Yeah."},{"startTime":38.61,"endTime":43.07,"body":"So this is actually that I'm pretty"},{"startTime":38.61,"endTime":43.07,"body":"excited about because all entrepreneurs,"},{"startTime":43.31,"endTime":47.75,"body":"at some point along the line asked"},{"startTime":43.31,"endTime":47.75,"body":"this very same question, um, and"},{"startTime":47.75,"endTime":50.57,"body":"you know, may ask it multiple times"},{"startTime":47.75,"endTime":50.57,"body":"as they have multiple businesses."},{"startTime":50.96,"endTime":55.07,"body":"And you know, that question is what type"},{"startTime":50.96,"endTime":55.07,"body":"of entity should I be for this venture?"},{"startTime":55.489,"endTime":58.91,"body":"Um, and so as Darcor CPAs,"},{"startTime":55.489,"endTime":58.91,"body":"we're working with small"},{"startTime":58.91,"endTime":60.68,"body":"businesses, you know, really from."},{"startTime":60.88,"endTime":65.26,"body":"Start to, uh, that point where they're,"},{"startTime":60.88,"endTime":65.26,"body":"you know, really scaling beyond about"},{"startTime":65.26,"endTime":70.39,"body":"50 employees, you know, so we're in"},{"startTime":65.26,"endTime":70.39,"body":"this conversation often and it's one"},{"startTime":70.39,"endTime":74.59,"body":"that is invaluable because you want"},{"startTime":70.39,"endTime":74.59,"body":"to get started on the right foot."},{"startTime":74.8,"endTime":76.36,"body":"You want to make sure you understand."},{"startTime":76.76,"endTime":80.84,"body":"Uh, you know, what type of entity"},{"startTime":76.76,"endTime":80.84,"body":"is right for your situation, which"},{"startTime":80.84,"endTime":84.17,"body":"you might have to put away some of"},{"startTime":80.84,"endTime":84.17,"body":"the tax considerations to look at"},{"startTime":84.17,"endTime":87.2,"body":"some of the other considerations,"},{"startTime":84.17,"endTime":87.2,"body":"like, you know, investment."},{"startTime":87.5,"endTime":91.25,"body":"Uh, so, you know, there's just a"},{"startTime":87.5,"endTime":91.25,"body":"lot, you know, that really needs"},{"startTime":91.25,"endTime":93.14,"body":"to be, uh, talked about here."},{"startTime":93.2,"endTime":97.07,"body":"And Justin, you know, I know that we"},{"startTime":93.2,"endTime":97.07,"body":"specifically had this conversation with"},{"startTime":97.07,"endTime":101.93,"body":"you, you know, so it's a one that's"},{"startTime":97.07,"endTime":101.93,"body":"definitely a familiar for you as well."},{"startTime":102.265,"endTime":104.575,"body":"Um, and you know, it was just"},{"startTime":102.265,"endTime":104.575,"body":"one of those things you want"},{"startTime":104.575,"endTime":105.685,"body":"to get right from the start."},{"startTime":106.045,"endTime":109.795,"body":"Uh, so there's no better time to"},{"startTime":106.045,"endTime":109.795,"body":"start thinking about it than now."},{"startTime":110.325,"endTime":110.625,"body":"Yeah."},{"startTime":110.655,"endTime":112.695,"body":"I mean, I remember when we had,"},{"startTime":110.655,"endTime":112.695,"body":"like, I mean, that was four years ago"},{"startTime":112.695,"endTime":114.705,"body":"now, and that was pretty important."},{"startTime":114.705,"endTime":117.765,"body":"I mean, I was just jumping into"},{"startTime":114.705,"endTime":117.765,"body":"starting my business and I had no"},{"startTime":117.765,"endTime":120.555,"body":"concept of what I was supposed to do"},{"startTime":117.765,"endTime":120.555,"body":"and how I was supposed to set it up."},{"startTime":120.825,"endTime":124.634,"body":"And so, yeah, that, that was"},{"startTime":120.825,"endTime":124.634,"body":"critical in my business's success."},{"startTime":124.634,"endTime":126.795,"body":"And I'm sure there's a lot of people out"},{"startTime":124.634,"endTime":126.795,"body":"there that were saying the same thing,"},{"startTime":126.975,"endTime":128.865,"body":"you know, am I set up for success?"},{"startTime":128.895,"endTime":130.905,"body":"If I'm going to start this venture, it's."},{"startTime":131.295,"endTime":134.475,"body":"It's one of the first things"},{"startTime":131.295,"endTime":134.475,"body":"that could make or break right."},{"startTime":134.475,"endTime":136.035,"body":"Your longterm success."},{"startTime":136.365,"endTime":136.815,"body":"So."},{"startTime":137.339,"endTime":137.609,"body":"Right."},{"startTime":137.63,"endTime":141.54,"body":"100%, you know, so, and there are,"},{"startTime":137.63,"endTime":141.54,"body":"you know, a lot of instances where you"},{"startTime":141.54,"endTime":144.779,"body":"start off one way, because it makes"},{"startTime":141.54,"endTime":144.779,"body":"sense when you're small, you know,"},{"startTime":144.779,"endTime":147.57,"body":"and then you scale to a certain point"},{"startTime":144.779,"endTime":147.57,"body":"where it's like, you know, maybe that"},{"startTime":147.57,"endTime":152.16,"body":"S-corporation, doesn't make as much sense,"},{"startTime":147.57,"endTime":152.16,"body":"you know, because you've got investors"},{"startTime":152.16,"endTime":154.589,"body":"that can't invest in an S corporation."},{"startTime":154.92,"endTime":159.45,"body":"Um, you know, or you just have, uh,"},{"startTime":154.92,"endTime":159.45,"body":"investors that don't want to  right."},{"startTime":159.45,"endTime":162.15,"body":"So there's, there's things that enter"},{"startTime":159.45,"endTime":162.15,"body":"the equation, but you want to get started"},{"startTime":162.15,"endTime":165.84,"body":"on the right foot, you know, so that you"},{"startTime":162.15,"endTime":165.84,"body":"can, you know, have the best foundation"},{"startTime":165.84,"endTime":170.76,"body":"to grow that business, you know, and then"},{"startTime":165.84,"endTime":170.76,"body":"be able to pivot if need be, you know,"},{"startTime":170.76,"endTime":172.53,"body":"once you have that level of success."},{"startTime":172.53,"endTime":176.69,"body":"So, you know, without giving away"},{"startTime":172.53,"endTime":176.69,"body":"too much, uh, of what Eric's going"},{"startTime":176.69,"endTime":180.35,"body":"to talk about, uh, Eric, we're very"},{"startTime":176.69,"endTime":180.35,"body":"happy to have you, how's it going?"},{"startTime":180.839,"endTime":182.76,"body":"It's going well, thanks for having me."},{"startTime":183.269,"endTime":183.72,"body":"Good."},{"startTime":183.799,"endTime":185.899,"body":"So let's kick it off here."},{"startTime":185.899,"endTime":187.13,"body":"Let's get right into it."},{"startTime":187.429,"endTime":191.6,"body":"Uh, tell us a little bit about what"},{"startTime":187.429,"endTime":191.6,"body":"your experience has been with clients"},{"startTime":191.6,"endTime":194.63,"body":"when it comes to entity selection,"},{"startTime":191.6,"endTime":194.63,"body":"you know, are there any common"},{"startTime":194.63,"endTime":196.429,"body":"misconceptions that people typically have?"},{"startTime":197.685,"endTime":201.615,"body":"Yeah, I've had quite a bit of"},{"startTime":197.685,"endTime":201.615,"body":"experience everything from, you"},{"startTime":201.615,"endTime":205.845,"body":"know, a sole proprietor up to, up"},{"startTime":201.615,"endTime":205.845,"body":"to the corporate level entities,"},{"startTime":205.875,"endTime":209.415,"body":"um, helping people along the way,"},{"startTime":205.875,"endTime":209.415,"body":"kind of finding what's the best fit."},{"startTime":209.685,"endTime":211.875,"body":"What makes the most sense for them?"},{"startTime":212.025,"endTime":213.555,"body":"Um, which like you mentioned, will."},{"startTime":213.885,"endTime":219.045,"body":"Potentially change as time goes by over"},{"startTime":213.885,"endTime":219.045,"body":"the years, um, some to reevaluate and come"},{"startTime":219.045,"endTime":223.485,"body":"back to and, and, and kind of check in"},{"startTime":219.045,"endTime":223.485,"body":"and see where they're at and what, what,"},{"startTime":223.545,"endTime":225.435,"body":"what the best option is going forward."},{"startTime":225.645,"endTime":228.705,"body":"Um, some of the misconceptions there's."},{"startTime":229.015,"endTime":231.895,"body":"You know, some people think, you know,"},{"startTime":229.015,"endTime":231.895,"body":"starting out of the Gates that they"},{"startTime":232.045,"endTime":235.315,"body":"need all the bells and whistles and"},{"startTime":232.045,"endTime":235.315,"body":"they need to go full blown with their"},{"startTime":235.315,"endTime":238.465,"body":"entity when it may not be the case."},{"startTime":238.525,"endTime":241.975,"body":"And then on the other side of the"},{"startTime":238.525,"endTime":241.975,"body":"spectrum, there's others who think,"},{"startTime":242.455,"endTime":246.385,"body":"you know, I'm just, I'm just a small, a"},{"startTime":242.455,"endTime":246.385,"body":"small business, a small little venture."},{"startTime":246.385,"endTime":248.545,"body":"I don't, I don't need to set up an LLC."},{"startTime":248.545,"endTime":249.775,"body":"I don't need, you know, to."},{"startTime":250.03,"endTime":252.16,"body":"To go, go down those roads."},{"startTime":252.7,"endTime":257.769,"body":"Um, so really, I mean, overall, it's just"},{"startTime":252.7,"endTime":257.769,"body":"helping people know what they don't know"},{"startTime":257.769,"endTime":262.69,"body":"and, and educating them along the way for"},{"startTime":257.769,"endTime":262.69,"body":"everything from taxation to, you know,"},{"startTime":262.719,"endTime":265.54,"body":"potentially raising money down the road."},{"startTime":266.46,"endTime":270.81,"body":"So how exactly have you gone about"},{"startTime":266.46,"endTime":270.81,"body":"figuring out which entity type"},{"startTime":271.17,"endTime":273.93,"body":"that you're going to recommend to"},{"startTime":271.17,"endTime":273.93,"body":"a client based on their situation?"},{"startTime":275.385,"endTime":275.765,"body":"Well, yeah."},{"startTime":275.835,"endTime":279.435,"body":"Like to learn, you know, what, what"},{"startTime":275.835,"endTime":279.435,"body":"their industry is, what they're doing."},{"startTime":279.675,"endTime":284.655,"body":"Um, there are certain restrictions,"},{"startTime":279.675,"endTime":284.655,"body":"certain professional organizations,"},{"startTime":284.685,"endTime":287.235,"body":"um, have restrictions on the"},{"startTime":284.685,"endTime":287.235,"body":"entity type that they can choose."},{"startTime":287.235,"endTime":290.715,"body":"But then you kind of look at how"},{"startTime":287.235,"endTime":290.715,"body":"many people are involved, work, that"},{"startTime":290.715,"endTime":295.365,"body":"what their income levels at, um,"},{"startTime":290.715,"endTime":295.365,"body":"how, how big a goals do they have?"},{"startTime":295.905,"endTime":298.175,"body":"Are they going to be needing to"},{"startTime":295.905,"endTime":298.175,"body":"raise a lot of money in the future?"},{"startTime":298.185,"endTime":300.585,"body":"Is it a closely held entity?"},{"startTime":300.765,"endTime":305.49,"body":"Um, Just kind of evaluating all those"},{"startTime":300.765,"endTime":305.49,"body":"things and getting the full picture"},{"startTime":305.49,"endTime":309.6,"body":"of where they're at now and where"},{"startTime":305.49,"endTime":309.6,"body":"they plan to go in the future kind"},{"startTime":309.6,"endTime":313.62,"body":"of helps paint that initial picture"},{"startTime":309.6,"endTime":313.62,"body":"of, of what the best route is."},{"startTime":314.57,"endTime":314.9,"body":"Awesome."},{"startTime":314.9,"endTime":317.75,"body":"So what if a client has already created."},{"startTime":318.135,"endTime":321.555,"body":"You know, an LLC or corporation,"},{"startTime":318.135,"endTime":321.555,"body":"you know, cause they just needed to"},{"startTime":321.555,"endTime":325.275,"body":"get started, you know, get that big"},{"startTime":321.555,"endTime":325.275,"body":"account, get the EIN and all that."},{"startTime":325.275,"endTime":330.465,"body":"And then they come to you after the fact,"},{"startTime":325.275,"endTime":330.465,"body":"um, you know, what do you do or what"},{"startTime":330.465,"endTime":334.935,"body":"can you do, uh, after the fact when the"},{"startTime":330.465,"endTime":334.935,"body":"entities already been created, uh, to help"},{"startTime":334.935,"endTime":336.135,"body":"make sure they're in the right vehicle."},{"startTime":337.125,"endTime":337.455,"body":"Yeah."},{"startTime":337.455,"endTime":341.715,"body":"Sometimes, um, you know, they've"},{"startTime":337.455,"endTime":341.715,"body":"been operating for a few a few years"},{"startTime":341.715,"endTime":343.395,"body":"and they're, and they're going well."},{"startTime":343.395,"endTime":348.495,"body":"And that's usually a place where we can"},{"startTime":343.395,"endTime":348.495,"body":"provide some value in looking at does"},{"startTime":348.495,"endTime":350.655,"body":"make an an S selection makes sense."},{"startTime":350.685,"endTime":353.865,"body":"Um, you know, if they have an S"},{"startTime":350.685,"endTime":353.865,"body":"selection, you know, revoking that"},{"startTime":353.865,"endTime":357.375,"body":"and going go into the corporate route,"},{"startTime":353.865,"endTime":357.375,"body":"does that, does that make sense?"},{"startTime":357.735,"endTime":361.845,"body":"Um, or maybe get it treated like"},{"startTime":357.735,"endTime":361.845,"body":"a partnership, um, and sometimes"},{"startTime":361.845,"endTime":363.645,"body":"there's situations where."},{"startTime":363.78,"endTime":367.11,"body":"You kind of look at where they're at"},{"startTime":363.78,"endTime":367.11,"body":"and what's going on and think it might"},{"startTime":367.11,"endTime":369.96,"body":"just make more sense just to start over."},{"startTime":370.05,"endTime":374.61,"body":"I mean, there might be a quick and easy"},{"startTime":370.05,"endTime":374.61,"body":"exit strategy there and start scratch,"},{"startTime":374.64,"endTime":378.72,"body":"start from scratch and, and, and build"},{"startTime":374.64,"endTime":378.72,"body":"it up again with the right, you know,"},{"startTime":378.72,"endTime":382.5,"body":"the right footing, the right entity"},{"startTime":378.72,"endTime":382.5,"body":"structure to accomplish their goals."},{"startTime":383.525,"endTime":384.065,"body":"Yeah, totally."},{"startTime":384.065,"endTime":387.575,"body":"I mean, I absolutely, uh, you"},{"startTime":384.065,"endTime":387.575,"body":"know, uh, agree with that."},{"startTime":387.575,"endTime":390.215,"body":"And you know, one of the things that"},{"startTime":387.575,"endTime":390.215,"body":"I've told clients before is, you know,"},{"startTime":390.215,"endTime":393.155,"body":"if you have the LLC, if that's what you"},{"startTime":390.215,"endTime":393.155,"body":"started with, cause that's usually the"},{"startTime":393.155,"endTime":397.925,"body":"easiest to form the most flexible, you"},{"startTime":393.155,"endTime":397.925,"body":"know, we might just kind of wait right."},{"startTime":397.955,"endTime":401.765,"body":"To see what your numbers start"},{"startTime":397.955,"endTime":401.765,"body":"looking like, because you might"},{"startTime":401.765,"endTime":403.085,"body":"want to make the selection."},{"startTime":403.085,"endTime":406.985,"body":"If you get to a certain, uh,"},{"startTime":403.085,"endTime":406.985,"body":"you know, net income number."},{"startTime":407.195,"endTime":407.284,"body":"Okay."},{"startTime":407.344,"endTime":410.135,"body":"Uh, but you may not know that"},{"startTime":407.344,"endTime":410.135,"body":"because you're just starting out and"},{"startTime":410.135,"endTime":411.635,"body":"there's a lot of unknowns out there."},{"startTime":411.635,"endTime":415.175,"body":"But as long as we're tackling that"},{"startTime":411.635,"endTime":415.175,"body":"before year end, you know, we can run"},{"startTime":415.175,"endTime":418.385,"body":"the payroll needed to make a retroactive"},{"startTime":415.175,"endTime":418.385,"body":"S election, all that sort of stuff."},{"startTime":418.385,"endTime":423.215,"body":"So there's definitely some fluidity in"},{"startTime":418.385,"endTime":423.215,"body":"this, you know, that, I think it's, uh,"},{"startTime":423.245,"endTime":428.075,"body":"good for, uh, entrepreneurs to understand"},{"startTime":423.245,"endTime":428.075,"body":"that it's not just a static decision"},{"startTime":428.075,"endTime":432.515,"body":"you make once that you're done with,"},{"startTime":428.075,"endTime":432.515,"body":"uh, it can be more of a fluid situation."},{"startTime":432.905,"endTime":434.284,"body":"Um, but yeah."},{"startTime":434.364,"endTime":438.715,"body":"Putting that aside, you know, what"},{"startTime":434.364,"endTime":438.715,"body":"are the main types of entities out"},{"startTime":438.715,"endTime":442.885,"body":"there that our listeners should be"},{"startTime":438.715,"endTime":442.885,"body":"aware of, specifically entrepreneurs?"},{"startTime":443.245,"endTime":445.555,"body":"What entity types should"},{"startTime":443.245,"endTime":445.555,"body":"they be looking at?"},{"startTime":447.195,"endTime":451.395,"body":"So the few that we're going to focus"},{"startTime":447.195,"endTime":451.395,"body":"on are the sole proprietor, uh, the"},{"startTime":451.395,"endTime":457.034,"body":"partnership, both limited partnership"},{"startTime":451.395,"endTime":457.034,"body":"and general partnerships, um, LLCs"},{"startTime":457.094,"endTime":459.495,"body":"escorts, all the way up to C corpse."},{"startTime":460.05,"endTime":463.05,"body":"Well, let's start with maybe"},{"startTime":460.05,"endTime":463.05,"body":"the lowest hanging fruit."},{"startTime":463.05,"endTime":463.89,"body":"The easiest one here."},{"startTime":463.92,"endTime":465.81,"body":"Tell us about a sole proprietorship."},{"startTime":466.32,"endTime":468.24,"body":"How does one go about"},{"startTime":466.32,"endTime":468.24,"body":"setting one of these up?"},{"startTime":469.37,"endTime":470.21,"body":"Very simple."},{"startTime":470.42,"endTime":473.57,"body":"All you do is go out and start a business."},{"startTime":473.57,"endTime":478.91,"body":"Start generating revenue, start selling,"},{"startTime":473.57,"endTime":478.91,"body":"widgets, start consulting or coaching"},{"startTime":478.91,"endTime":480.92,"body":"or whatever, whatever it might be."},{"startTime":481.04,"endTime":484.13,"body":"Um, there's no, there's"},{"startTime":481.04,"endTime":484.13,"body":"no formality to it."},{"startTime":484.13,"endTime":484.97,"body":"As soon as you."},{"startTime":485.265,"endTime":487.275,"body":"You know, go out and"},{"startTime":485.265,"endTime":487.275,"body":"start generating revenue."},{"startTime":487.365,"endTime":490.665,"body":"You've essentially become a sole"},{"startTime":487.365,"endTime":490.665,"body":"proprietor and you've you've"},{"startTime":490.665,"endTime":492.345,"body":"started, started a business."},{"startTime":493.025,"endTime":496.385,"body":"So who would you typically"},{"startTime":493.025,"endTime":496.385,"body":"recommend this entity type to?"},{"startTime":498.005,"endTime":499.055,"body":"A lot of times it's."},{"startTime":499.085,"endTime":503.195,"body":"I mean, nowadays you see a lot of"},{"startTime":499.085,"endTime":503.195,"body":"folks who are doing stuff online,"},{"startTime":503.195,"endTime":506.825,"body":"whether it's selling, selling"},{"startTime":503.195,"endTime":506.825,"body":"widgets, like I mentioned, or, um,"},{"startTime":506.915,"endTime":510.905,"body":"you know, maybe it's somebody who"},{"startTime":506.915,"endTime":510.905,"body":"has a, you know, a day job and they"},{"startTime":510.905,"endTime":512.495,"body":"start doing something on the side."},{"startTime":512.615,"endTime":514.055,"body":"Um, whether that is."},{"startTime":515.25,"endTime":520.49,"body":"Consulting type type work or advising or"},{"startTime":515.25,"endTime":520.49,"body":"something or physically selling something."},{"startTime":520.49,"endTime":523.1,"body":"But they're not really sure"},{"startTime":520.49,"endTime":523.1,"body":"if it it's a real business."},{"startTime":523.58,"endTime":526.64,"body":"Um, and they're not sure how it's"},{"startTime":523.58,"endTime":526.64,"body":"gonna, how it's gonna take off."},{"startTime":526.67,"endTime":531.83,"body":"They just had an idea and they acted on"},{"startTime":526.67,"endTime":531.83,"body":"it and they started making some money."},{"startTime":532.22,"endTime":535.61,"body":"Um, those are, those are kind of"},{"startTime":532.22,"endTime":535.61,"body":"the ideal people who would fall"},{"startTime":535.61,"endTime":537.23,"body":"into this sole proprietor realm."},{"startTime":537.63,"endTime":541.4,"body":"And so it's probably safe to say too,"},{"startTime":537.63,"endTime":541.4,"body":"that this might be an area where you"},{"startTime":541.4,"endTime":545.36,"body":"want to get an attorney involved to"},{"startTime":541.4,"endTime":545.36,"body":"really see if there's any exposure,"},{"startTime":545.689,"endTime":549.68,"body":"you know, liability-wise for whatever"},{"startTime":545.689,"endTime":549.68,"body":"business they're in to make sure that"},{"startTime":549.68,"endTime":553.939,"body":"they're not totally unprotected and"},{"startTime":549.68,"endTime":553.939,"body":"unshielded from their personal assets."},{"startTime":554.0,"endTime":554.99,"body":"Is that, would you say that's fair?"},{"startTime":555.76,"endTime":556.81,"body":"Yeah, I would agree."},{"startTime":556.9,"endTime":560.469,"body":"Um, one of the things you generally"},{"startTime":556.9,"endTime":560.469,"body":"recommend is at least some sort of"},{"startTime":560.469,"endTime":565.99,"body":"umbrella insurance policy to help out, um,"},{"startTime":560.469,"endTime":565.99,"body":"just to protect their own personal assets."},{"startTime":566.46,"endTime":566.91,"body":"Right."},{"startTime":567.03,"endTime":572.07,"body":"So dovetailing into, you know, that"},{"startTime":567.03,"endTime":572.07,"body":"liability, uh, discussion, you know, what"},{"startTime":572.07,"endTime":576.36,"body":"are some of the pros and cons of being"},{"startTime":572.07,"endTime":576.36,"body":"a sole proprietorship and, you know,"},{"startTime":576.39,"endTime":580.95,"body":"really, as it relates to, you know, how it"},{"startTime":576.39,"endTime":580.95,"body":"compares to other entity types out there?"},{"startTime":581.63,"endTime":585.62,"body":"Well, like I mentioned, the pros, one"},{"startTime":581.63,"endTime":585.62,"body":"of the pros is that it's easy to set up."},{"startTime":585.62,"endTime":588.83,"body":"You just go out and you start, you"},{"startTime":585.62,"endTime":588.83,"body":"start generating revenue, you start"},{"startTime":588.83,"endTime":593.06,"body":"doing business and, um, you get a"},{"startTime":588.83,"endTime":593.06,"body":"hundred percent of that revenue, right?"},{"startTime":593.19,"endTime":596.28,"body":"Uh, you also get to make all the"},{"startTime":593.19,"endTime":596.28,"body":"decisions and you know, when you are"},{"startTime":596.52,"endTime":602.31,"body":"100% in charge of what's going on,"},{"startTime":596.52,"endTime":602.31,"body":"um, the cons with being a hundred"},{"startTime":602.31,"endTime":603.93,"body":"percent in charge, you are on your own."},{"startTime":603.93,"endTime":607.92,"body":"So sometimes, you know, you don't"},{"startTime":603.93,"endTime":607.92,"body":"have partners to lean on and, and,"},{"startTime":608.07,"endTime":611.49,"body":"and people to go to when you, when you"},{"startTime":608.07,"endTime":611.49,"body":"have questions within the business."},{"startTime":612.0,"endTime":615.84,"body":"Um, and also you being taxed at,"},{"startTime":612.0,"endTime":615.84,"body":"at an individual rate, which can"},{"startTime":615.84,"endTime":617.7,"body":"get above that corporate rate."},{"startTime":618.21,"endTime":622.02,"body":"Um, sometimes it's, it's hard"},{"startTime":618.21,"endTime":622.02,"body":"to find funding and loans."},{"startTime":622.32,"endTime":626.52,"body":"People aren't going to invest necessarily"},{"startTime":622.32,"endTime":626.52,"body":"in a, in a sole proprietor, like"},{"startTime":626.52,"endTime":628.17,"body":"they would in, in a corporation."},{"startTime":628.26,"endTime":633.45,"body":"And sometimes banks can be a little"},{"startTime":628.26,"endTime":633.45,"body":"leery of lending to a sole proprietor."},{"startTime":634.11,"endTime":638.85,"body":"Um, there's really no separation"},{"startTime":634.11,"endTime":638.85,"body":"between you and the business, which,"},{"startTime":638.88,"endTime":642.69,"body":"which can be a con if, if, if things"},{"startTime":638.88,"endTime":642.69,"body":"were to go, where to go South."},{"startTime":644.325,"endTime":644.745,"body":"Gotcha."},{"startTime":644.745,"endTime":648.045,"body":"So really, you know, because"},{"startTime":644.745,"endTime":648.045,"body":"there is no separation there."},{"startTime":648.045,"endTime":651.735,"body":"If it goes South, you've got"},{"startTime":648.045,"endTime":651.735,"body":"no legal entity shielding"},{"startTime":651.735,"endTime":653.565,"body":"you from liability, correct?"},{"startTime":653.955,"endTime":654.195,"body":"Yep."},{"startTime":654.675,"endTime":655.065,"body":"Gotcha."},{"startTime":655.095,"endTime":659.715,"body":"And so what are some of the common"},{"startTime":655.095,"endTime":659.715,"body":"recommendations that you have"},{"startTime":659.715,"endTime":661.695,"body":"for your sole proprietor clients?"},{"startTime":662.805,"endTime":667.395,"body":"One of the things is I would, I would"},{"startTime":662.805,"endTime":667.395,"body":"at least set up a DBA, which is doing"},{"startTime":667.395,"endTime":672.135,"body":"business as, um, some sort of name"},{"startTime":667.395,"endTime":672.135,"body":"that you can, that you can go buy."},{"startTime":672.165,"endTime":676.185,"body":"It just, it just comes off better if"},{"startTime":672.165,"endTime":676.185,"body":"you are, if you're able to do that,"},{"startTime":676.425,"endTime":678.824,"body":"um, I'd also go ahead and get an EIN."},{"startTime":679.454,"endTime":682.905,"body":"So you don't have to give out your social"},{"startTime":679.454,"endTime":682.905,"body":"security number, uh, when you're working"},{"startTime":682.905,"endTime":686.93,"body":"with people and, you know, Getting"},{"startTime":682.905,"endTime":686.93,"body":"payments, making payments, stuff like"},{"startTime":686.93,"endTime":688.7,"body":"that, just having that EIN makes it."},{"startTime":688.7,"endTime":692.51,"body":"So you're not floating your social"},{"startTime":688.7,"endTime":692.51,"body":"security number around there."},{"startTime":693.02,"endTime":695.45,"body":"Um, that's kind of the main stuff."},{"startTime":695.48,"endTime":698.36,"body":"And, and the other thing is the"},{"startTime":695.48,"endTime":698.36,"body":"insurance that umbrella policy is,"},{"startTime":698.4,"endTime":702.65,"body":"is something at the very least I"},{"startTime":698.4,"endTime":702.65,"body":"would recommend having awesome."},{"startTime":702.83,"endTime":704.12,"body":"Justin, are you taking notes here?"},{"startTime":705.35,"endTime":705.56,"body":"Yeah."},{"startTime":705.62,"endTime":708.88,"body":"I mean, obviously this is, this"},{"startTime":705.62,"endTime":708.88,"body":"is stuff that's way over my head."},{"startTime":708.88,"endTime":710.29,"body":"No, I'm not a sole provider right now."},{"startTime":710.65,"endTime":713.68,"body":"I'm, I'm, I'm more focused on the LLC"},{"startTime":710.65,"endTime":713.68,"body":"route because that's obviously what."},{"startTime":714.39,"endTime":715.23,"body":"You guys recommended?"},{"startTime":715.23,"endTime":717.18,"body":"I would, I should be set up as."},{"startTime":717.78,"endTime":717.99,"body":"Right."},{"startTime":718.02,"endTime":719.64,"body":"So that's a perfect segue."},{"startTime":719.64,"endTime":723.72,"body":"So let's talk about partnerships, which"},{"startTime":719.64,"endTime":723.72,"body":"an LLC is a form of a partnership."},{"startTime":724.08,"endTime":728.28,"body":"So some of the common, uh, partnerships"},{"startTime":724.08,"endTime":728.28,"body":"out there are the GP, which stands for"},{"startTime":728.28,"endTime":733.29,"body":"general partnership and LP, which stands"},{"startTime":728.28,"endTime":733.29,"body":"for limited partnership, LLP, which"},{"startTime":733.29,"endTime":735.15,"body":"is a limited liability partnership."},{"startTime":735.51,"endTime":740.43,"body":"And as you mentioned, Justin, the LLC,"},{"startTime":735.51,"endTime":740.43,"body":"which is a limited liability company, all"},{"startTime":740.43,"endTime":745.08,"body":"of these entity types, and there are more"},{"startTime":740.43,"endTime":745.08,"body":"of these, but they're all partnerships."},{"startTime":745.38,"endTime":746.67,"body":"Um, and so they're all."},{"startTime":746.875,"endTime":748.405,"body":"Pass through entities."},{"startTime":748.795,"endTime":753.895,"body":"Um, so which partnership types is it most"},{"startTime":748.795,"endTime":753.895,"body":"important for our listeners to understand?"},{"startTime":755.324,"endTime":760.035,"body":"So a general partnership, a GP,"},{"startTime":755.324,"endTime":760.035,"body":"um, basically, you know, it's"},{"startTime":760.035,"endTime":761.175,"body":"kind of like a sole proprietor."},{"startTime":761.175,"endTime":764.355,"body":"It's unincorporated, but there's two"},{"startTime":761.175,"endTime":764.355,"body":"people they're out there on equal"},{"startTime":764.355,"endTime":769.605,"body":"footing, um, that they equally share"},{"startTime":764.355,"endTime":769.605,"body":"the, the income and they're responsible"},{"startTime":769.605,"endTime":771.584,"body":"for the liabilities and the debts."},{"startTime":771.584,"endTime":776.235,"body":"Both of them are going to be"},{"startTime":771.584,"endTime":776.235,"body":"active in the, in the partnership."},{"startTime":777.105,"endTime":781.155,"body":"As opposed to an LP, a limited"},{"startTime":777.105,"endTime":781.155,"body":"partnership, um, usually"},{"startTime":781.155,"endTime":782.595,"body":"have a silent partner there."},{"startTime":782.595,"endTime":787.064,"body":"So maybe somebody who, you know,"},{"startTime":782.595,"endTime":787.064,"body":"has contributed capital cap into the"},{"startTime":787.095,"endTime":791.415,"body":"partnership and a general partner in"},{"startTime":787.095,"endTime":791.415,"body":"there who is more active as far as"},{"startTime":791.415,"endTime":793.334,"body":"day to day and running the business."},{"startTime":793.875,"endTime":797.745,"body":"Um, the limited partner is limited and"},{"startTime":793.875,"endTime":797.745,"body":"you know, they're responsible and their"},{"startTime":797.745,"endTime":800.444,"body":"share of the debts and the liabilities."},{"startTime":801.045,"endTime":806.115,"body":"Um, So, if that were to go South, they"},{"startTime":801.045,"endTime":806.115,"body":"kind of have kind of have an out there."},{"startTime":807.045,"endTime":813.405,"body":"Um, and then the LLC is, you know,"},{"startTime":807.045,"endTime":813.405,"body":"there's more work upfront to set this up."},{"startTime":813.405,"endTime":814.545,"body":"It is a legal entity."},{"startTime":814.964,"endTime":817.785,"body":"I mean, you go ahead and you create a"},{"startTime":814.964,"endTime":817.785,"body":"legal name that you file the articles"},{"startTime":817.785,"endTime":819.314,"body":"of organization with the state."},{"startTime":819.435,"endTime":821.385,"body":"Um, have an operating agreement."},{"startTime":821.805,"endTime":824.775,"body":"There's some annual periodic"},{"startTime":821.805,"endTime":824.775,"body":"reports that are required."},{"startTime":825.135,"endTime":828.405,"body":"Usually you want to get an attorney"},{"startTime":825.135,"endTime":828.405,"body":"involved when you're setting up an"},{"startTime":828.405,"endTime":830.655,"body":"LLC, just because it is more formal."},{"startTime":832.395,"endTime":836.565,"body":"This is for the folks that"},{"startTime":832.395,"endTime":836.565,"body":"have that idea and they've."},{"startTime":837.03,"endTime":839.64,"body":"They've grown the business"},{"startTime":837.03,"endTime":839.64,"body":"and it is going well."},{"startTime":839.64,"endTime":842.43,"body":"And they just want to get a"},{"startTime":839.64,"endTime":842.43,"body":"little bit more protection."},{"startTime":842.43,"endTime":844.29,"body":"Like the name says limited liability."},{"startTime":844.29,"endTime":848.37,"body":"There's, there's more protection for"},{"startTime":844.29,"endTime":848.37,"body":"them personally and their assets,"},{"startTime":848.939,"endTime":850.89,"body":"um, while running their business."},{"startTime":851.84,"endTime":856.189,"body":"So outside of the initial formation,"},{"startTime":851.84,"endTime":856.189,"body":"you know, some of the formalities"},{"startTime":856.189,"endTime":858.77,"body":"that go along with that, and some of"},{"startTime":856.189,"endTime":858.77,"body":"the things you have to do that, you"},{"startTime":858.77,"endTime":860.9,"body":"know, may cost you time and or money."},{"startTime":861.35,"endTime":865.24,"body":"Um, Why would someone choose"},{"startTime":861.35,"endTime":865.24,"body":"to be a general or a limited"},{"startTime":865.24,"endTime":867.67,"body":"partnership as opposed to an LLC?"},{"startTime":869.13,"endTime":872.31,"body":"I think they would, they would stick"},{"startTime":869.13,"endTime":872.31,"body":"in that general or limited partnership"},{"startTime":872.34,"endTime":877.59,"body":"realm because they're not, not quite"},{"startTime":872.34,"endTime":877.59,"body":"worried about things going South."},{"startTime":877.59,"endTime":880.68,"body":"I mean, maybe it is just a venture"},{"startTime":877.59,"endTime":880.68,"body":"and they're seeing how it's going."},{"startTime":880.68,"endTime":883.5,"body":"And if things do go"},{"startTime":880.68,"endTime":883.5,"body":"South, they say, Oh, okay."},{"startTime":883.62,"endTime":886.35,"body":"I lost my money and they're"},{"startTime":883.62,"endTime":886.35,"body":"not necessarily worried about"},{"startTime":886.35,"endTime":887.91,"body":"someone on the outside coming in."},{"startTime":888.18,"endTime":890.7,"body":"So that liability protection of an LLC."},{"startTime":891.165,"endTime":897.195,"body":"Is is something that, that is beneficial"},{"startTime":891.165,"endTime":897.195,"body":"for, for setting up an LLC, right."},{"startTime":897.575,"endTime":900.425,"body":"And also, you know, in certain"},{"startTime":897.575,"endTime":900.425,"body":"States, California being one of them,"},{"startTime":900.695,"endTime":905.225,"body":"an LLC has got to pay that minimum"},{"startTime":900.695,"endTime":905.225,"body":"franchise tax of $800, which every"},{"startTime":905.225,"endTime":906.935,"body":"entrepreneur in California loves."},{"startTime":907.385,"endTime":910.775,"body":"Um, whereas, you know, at"},{"startTime":907.385,"endTime":910.775,"body":"least the general partnership,"},{"startTime":911.015,"endTime":912.425,"body":"uh, does not have that."},{"startTime":912.425,"endTime":914.735,"body":"So there are, you know, some things"},{"startTime":912.425,"endTime":914.735,"body":"too, and I think it goes to your"},{"startTime":914.735,"endTime":917.545,"body":"point about, you know, how serious"},{"startTime":914.735,"endTime":917.545,"body":"they are about the business and"},{"startTime":917.545,"endTime":918.365,"body":"where they're trying to take it."},{"startTime":918.974,"endTime":923.594,"body":"So talk to me a bit about"},{"startTime":918.974,"endTime":923.594,"body":"pass through income."},{"startTime":923.805,"endTime":927.494,"body":"How does it work and how do"},{"startTime":923.805,"endTime":927.494,"body":"distributions of cash from the"},{"startTime":927.494,"endTime":929.535,"body":"partnership factor into all of this?"},{"startTime":931.025,"endTime":936.454,"body":"So pass through income is the, the"},{"startTime":931.025,"endTime":936.454,"body":"income that flows from the business"},{"startTime":936.454,"endTime":938.645,"body":"to the individuals for tax purposes."},{"startTime":938.645,"endTime":945.214,"body":"So, I mean, if you have an LLC, um, and"},{"startTime":938.645,"endTime":945.214,"body":"you generate generate revenue, ultimately"},{"startTime":945.334,"endTime":947.854,"body":"the LLC is not taxed and that revenue."},{"startTime":948.375,"endTime":952.365,"body":"And that income ends up being"},{"startTime":948.375,"endTime":952.365,"body":"taxed at the individual level."},{"startTime":952.484,"endTime":955.305,"body":"So for example, you"},{"startTime":952.484,"endTime":955.305,"body":"have a partnership LLC."},{"startTime":955.305,"endTime":959.145,"body":"In the first year of operations, they"},{"startTime":955.305,"endTime":959.145,"body":"have taxable income say a hundred"},{"startTime":959.145,"endTime":961.515,"body":"thousand and there's two partners."},{"startTime":961.635,"endTime":967.844,"body":"Um, one 60% owner, one's a 40% owner,"},{"startTime":961.635,"endTime":967.844,"body":"regardless of the distributions."},{"startTime":967.844,"endTime":972.314,"body":"One partner's gonna end up with"},{"startTime":967.844,"endTime":972.314,"body":"$60,000 of taxable income and the other"},{"startTime":972.314,"endTime":974.775,"body":"will have $40,000 of taxable income."},{"startTime":975.39,"endTime":978.12,"body":"And that's going to flow through"},{"startTime":975.39,"endTime":978.12,"body":"their personal return and that's"},{"startTime":978.12,"endTime":979.32,"body":"where they're going to pay the tax."},{"startTime":980.115,"endTime":985.965,"body":"Um, so if they both took $50,000 in"},{"startTime":980.115,"endTime":985.965,"body":"distributions, then the 60% partner"},{"startTime":985.965,"endTime":990.645,"body":"would end up having 10,000 left in"},{"startTime":985.965,"endTime":990.645,"body":"their after tax account known as their"},{"startTime":990.645,"endTime":997.605,"body":"basis in the company to pull out in,"},{"startTime":990.645,"endTime":997.605,"body":"in later years tax-free and the 40%"},{"startTime":997.605,"endTime":1001.475,"body":"partner then would have exceeded their"},{"startTime":997.605,"endTime":1001.475,"body":"basis by 10,000, which would mean they"},{"startTime":1001.475,"endTime":1005.675,"body":"would actually have a $10,000 capital"},{"startTime":1001.475,"endTime":1005.675,"body":"gain that they would have to recognize"},{"startTime":1005.765,"endTime":1008.555,"body":"beyond the 40,000 that we just mentioned."},{"startTime":1009.589,"endTime":1010.189,"body":"Gotcha."},{"startTime":1011.03,"endTime":1011.599,"body":"Quick question."},{"startTime":1011.66,"endTime":1012.689,"body":"Quick question on that."},{"startTime":1013.37,"endTime":1019.849,"body":"So in that situation, the PR the,"},{"startTime":1013.37,"endTime":1019.849,"body":"the fit, uh, the 60% owner that got"},{"startTime":1019.849,"endTime":1030.02,"body":"50 grand, he's actually paying taxes"},{"startTime":1019.849,"endTime":1030.02,"body":"that year on his 60% ownership."},{"startTime":1030.26,"endTime":1030.8,"body":"Is that correct?"},{"startTime":1030.8,"endTime":1034.31,"body":"Even though he only was"},{"startTime":1030.8,"endTime":1034.31,"body":"distributed 50,000, correct."},{"startTime":1034.97,"endTime":1035.42,"body":"Got it."},{"startTime":1037.02,"endTime":1039.41,"body":"And so this can, you know, be a"},{"startTime":1037.02,"endTime":1039.41,"body":"little bit of a thorn for people."},{"startTime":1039.41,"endTime":1043.34,"body":"Like I didn't get that money, you"},{"startTime":1039.41,"endTime":1043.34,"body":"know, and why should I pay tax on it?"},{"startTime":1043.55,"endTime":1046.22,"body":"Unfortunately, that's just how it works."},{"startTime":1046.22,"endTime":1051.38,"body":"But there is something called a"},{"startTime":1046.22,"endTime":1051.38,"body":"guaranteed payment, which can kind"},{"startTime":1051.38,"endTime":1056.09,"body":"of help work around some of these"},{"startTime":1051.38,"endTime":1056.09,"body":"inconsistencies between, uh, the income,"},{"startTime":1056.09,"endTime":1059.78,"body":"your tax on versus the money that you"},{"startTime":1056.09,"endTime":1059.78,"body":"actually receive from the partnership."},{"startTime":1060.17,"endTime":1062.39,"body":"So Eric, how exactly."},{"startTime":1062.58,"endTime":1065.34,"body":"Do these differ, you know,"},{"startTime":1062.58,"endTime":1065.34,"body":"these guaranteed payments"},{"startTime":1065.34,"endTime":1066.99,"body":"differ from distributions."},{"startTime":1067.29,"endTime":1070.08,"body":"And also how might the partners"},{"startTime":1067.29,"endTime":1070.08,"body":"in the previous example have used"},{"startTime":1070.08,"endTime":1073.35,"body":"guaranteed payments, devoid having"},{"startTime":1070.08,"endTime":1073.35,"body":"their capital accounts diverted."},{"startTime":1075.17,"endTime":1075.62,"body":"Right?"},{"startTime":1075.89,"endTime":1076.73,"body":"Um, yeah."},{"startTime":1076.73,"endTime":1082.4,"body":"So guaranteed payments are different than"},{"startTime":1076.73,"endTime":1082.4,"body":"distributions would diff distributions"},{"startTime":1082.4,"endTime":1087.95,"body":"are, you know, Earnings that the company"},{"startTime":1082.4,"endTime":1087.95,"body":"has, that are distributed out tax free"},{"startTime":1088.55,"endTime":1094.85,"body":"to the partners or distribution or"},{"startTime":1088.55,"endTime":1094.85,"body":"excuse me, guaranteed payments are, you"},{"startTime":1094.85,"endTime":1096.17,"body":"know, something they've agreed upon."},{"startTime":1096.17,"endTime":1098.51,"body":"Whether it's somebody who's"},{"startTime":1096.17,"endTime":1098.51,"body":"in there actively work."},{"startTime":1098.51,"endTime":1102.29,"body":"And, and, uh, there's, they're"},{"startTime":1098.51,"endTime":1102.29,"body":"saying we're going to guarantee"},{"startTime":1102.29,"endTime":1103.76,"body":"you this amount of money."},{"startTime":1104.36,"endTime":1108.2,"body":"Um, regardless if we make money"},{"startTime":1104.36,"endTime":1108.2,"body":"this year, if we lose money this"},{"startTime":1108.2,"endTime":1112.55,"body":"year, and then that guaranteed"},{"startTime":1108.2,"endTime":1112.55,"body":"payment is treated as an expense."},{"startTime":1112.939,"endTime":1114.409,"body":"On the business side."},{"startTime":1114.919,"endTime":1116.57,"body":"So it reduces the income."},{"startTime":1117.08,"endTime":1121.699,"body":"And then on the individual side,"},{"startTime":1117.08,"endTime":1121.699,"body":"they, they will have income based"},{"startTime":1121.699,"endTime":1123.02,"body":"on that payment coming to them."},{"startTime":1123.979,"endTime":1124.34,"body":"Right."},{"startTime":1124.929,"endTime":1128.959,"body":"I think it bears mentioning that"},{"startTime":1124.929,"endTime":1128.959,"body":"guaranteed payments are really the"},{"startTime":1128.959,"endTime":1134.32,"body":"only one way to take salary, uh, from"},{"startTime":1128.959,"endTime":1134.32,"body":"a partnership, um, you know, as opposed"},{"startTime":1134.32,"endTime":1140.439,"body":"to a W2 or 10 99, if you are an owner"},{"startTime":1134.32,"endTime":1140.439,"body":"providing services for the company."},{"startTime":1140.86,"endTime":1144.25,"body":"Uh, I think a lot of people, uh, get"},{"startTime":1140.86,"endTime":1144.25,"body":"tripped up on this and they think,"},{"startTime":1144.34,"endTime":1148.84,"body":"well, I should just be paying myself"},{"startTime":1144.34,"endTime":1148.84,"body":"via W2, but if you're an owner,"},{"startTime":1149.11,"endTime":1152.29,"body":"uh, of that partnership, you're"},{"startTime":1149.11,"endTime":1152.29,"body":"actually not supposed to do that."},{"startTime":1152.825,"endTime":1157.235,"body":"I mean, what's the downside of taking"},{"startTime":1152.825,"endTime":1157.235,"body":"money via guaranteed payments as"},{"startTime":1157.235,"endTime":1158.735,"body":"opposed to just taking distributes."},{"startTime":1161.005,"endTime":1166.795,"body":"So one of the main downsides is it's"},{"startTime":1161.005,"endTime":1166.795,"body":"going to reduce your qualified business"},{"startTime":1166.795,"endTime":1170.575,"body":"income deduction, QBD, um, that goes down."},{"startTime":1170.575,"endTime":1174.325,"body":"So in that previous example where"},{"startTime":1170.575,"endTime":1174.325,"body":"you had a hundred thousand dollars"},{"startTime":1174.325,"endTime":1176.995,"body":"of income, um, if you were to take."},{"startTime":1177.89,"endTime":1181.76,"body":"You know, those $50,000 distributions"},{"startTime":1177.89,"endTime":1181.76,"body":"and make them guaranteed payments."},{"startTime":1181.79,"endTime":1184.76,"body":"Now, all of a sudden your income is zero."},{"startTime":1185.3,"endTime":1189.68,"body":"Um, and your QBI deduction"},{"startTime":1185.3,"endTime":1189.68,"body":"would be zero as well because"},{"startTime":1189.68,"endTime":1191.57,"body":"you didn't have any income."},{"startTime":1191.66,"endTime":1195.86,"body":"And he think about QBI"},{"startTime":1191.66,"endTime":1195.86,"body":"and the deduction 20%."},{"startTime":1196.34,"endTime":1200.9,"body":"Um, that's I mean, granted, you have to"},{"startTime":1196.34,"endTime":1200.9,"body":"have income, which is going to be taxable,"},{"startTime":1200.9,"endTime":1203.48,"body":"but getting that deduction is beneficial."},{"startTime":1204.32,"endTime":1205.01,"body":"100%."},{"startTime":1205.01,"endTime":1205.159,"body":"Yeah."},{"startTime":1205.159,"endTime":1209.689,"body":"I mean, we actually have had a number of"},{"startTime":1205.159,"endTime":1209.689,"body":"taxpayers, uh, restate their operating"},{"startTime":1209.689,"endTime":1215.12,"body":"agreement, you know, to get rid of that,"},{"startTime":1209.689,"endTime":1215.12,"body":"uh, guaranteed payment aspect and, um, you"},{"startTime":1215.12,"endTime":1218.649,"body":"know, make sure that their compensation"},{"startTime":1215.12,"endTime":1218.649,"body":"is coming in the form of profits"},{"startTime":1218.649,"endTime":1221.32,"body":"distributions for that exact reason."},{"startTime":1221.409,"endTime":1226.12,"body":"So, uh, you know, when people talk"},{"startTime":1221.409,"endTime":1226.12,"body":"about attacks, distribution from"},{"startTime":1226.12,"endTime":1229.929,"body":"their partnership, what are they"},{"startTime":1226.12,"endTime":1229.929,"body":"referring to and why is this a good"},{"startTime":1229.929,"endTime":1231.49,"body":"provision for companies to consider."},{"startTime":1232.835,"endTime":1237.755,"body":"A tax distribution from the partnership"},{"startTime":1232.835,"endTime":1237.755,"body":"is when the partnership kind of has an"},{"startTime":1237.755,"endTime":1243.665,"body":"agreement that says, you know, you're"},{"startTime":1237.755,"endTime":1243.665,"body":"gonna get a K one that shows this amount"},{"startTime":1243.665,"endTime":1247.985,"body":"of income, and you're going to have a"},{"startTime":1243.665,"endTime":1247.985,"body":"personal tax liability based on that."},{"startTime":1247.985,"endTime":1252.185,"body":"And regardless if you see cash or"},{"startTime":1247.985,"endTime":1252.185,"body":"not to help cover that liability."},{"startTime":1252.695,"endTime":1256.145,"body":"So the tax distribution comes in"},{"startTime":1252.695,"endTime":1256.145,"body":"and they say, well, look at that."},{"startTime":1256.145,"endTime":1260.419,"body":"And maybe that's, you know,"},{"startTime":1256.145,"endTime":1260.419,"body":"30 35% of what that income is."},{"startTime":1260.419,"endTime":1265.07,"body":"We'll distribute that cash out to you"},{"startTime":1260.419,"endTime":1265.07,"body":"just to help cover that tax liability."},{"startTime":1266.29,"endTime":1266.679,"body":"Gotcha."},{"startTime":1266.679,"endTime":1270.399,"body":"And so at least from what I've seen,"},{"startTime":1266.679,"endTime":1270.399,"body":"you know, that's, that's a provision"},{"startTime":1270.399,"endTime":1273.97,"body":"for companies that are trying to keep"},{"startTime":1270.399,"endTime":1273.97,"body":"as much, you know, capital within the"},{"startTime":1273.97,"endTime":1278.649,"body":"company as possible, but you know, just"},{"startTime":1273.97,"endTime":1278.649,"body":"don't want to, uh, put their, their"},{"startTime":1278.649,"endTime":1281.11,"body":"investors in an adverse tax situation."},{"startTime":1281.679,"endTime":1285.31,"body":"Hey, this is chase Berkey,"},{"startTime":1281.679,"endTime":1285.31,"body":"CEO of dark horse CPAs."},{"startTime":1285.575,"endTime":1290.105,"body":"If you're an entrepreneur and investor,"},{"startTime":1285.575,"endTime":1290.105,"body":"a co-founder or someone who just has a"},{"startTime":1290.105,"endTime":1294.335,"body":"complicated tax situation, you should"},{"startTime":1290.105,"endTime":1294.335,"body":"absolutely consider reaching out to"},{"startTime":1294.335,"endTime":1296.675,"body":"a dark horse CPA like Eric KCStat."},{"startTime":1297.155,"endTime":1300.26,"body":"In fact, if you like what Eric's"},{"startTime":1297.155,"endTime":1300.26,"body":"talking about today, You can"},{"startTime":1300.26,"endTime":1305.36,"body":"actually reach out to him directly"},{"startTime":1300.26,"endTime":1305.36,"body":"at Eric at dark horse dot CPA."},{"startTime":1305.54,"endTime":1309.65,"body":"And that's Eric with a K unlike most"},{"startTime":1305.54,"endTime":1309.65,"body":"firms where you'd end up working"},{"startTime":1309.65,"endTime":1311.36,"body":"with lower level staff members."},{"startTime":1311.69,"endTime":1316.73,"body":"If you engage with Eric, he will be"},{"startTime":1311.69,"endTime":1316.73,"body":"your CPA, the one you call, email"},{"startTime":1317.0,"endTime":1319.1,"body":"and meet with for all of your taxes."},{"startTime":1319.73,"endTime":1322.64,"body":"And you can find your very"},{"startTime":1319.73,"endTime":1322.64,"body":"own Darcor CPA on our website."},{"startTime":1323.03,"endTime":1325.7,"body":"We'll be able to see"},{"startTime":1323.03,"endTime":1325.7,"body":"their areas of expertise."},{"startTime":1326.18,"endTime":1329.72,"body":"Just go to dark horse dot CPA slash team."},{"startTime":1329.96,"endTime":1335.03,"body":"And once again, that's Darkhorse"},{"startTime":1329.96,"endTime":1335.03,"body":"dot CPA slash team to find a CPA"},{"startTime":1335.03,"endTime":1338.75,"body":"that will help you understand your"},{"startTime":1335.03,"endTime":1338.75,"body":"taxes and how to minimize them."},{"startTime":1339.97,"endTime":1343.54,"body":"I'd like to talk about, you know,"},{"startTime":1339.97,"endTime":1343.54,"body":"the entity type that is probably most"},{"startTime":1343.54,"endTime":1346.21,"body":"entrepreneurs favorite and any type."},{"startTime":1346.6,"endTime":1349.69,"body":"Um, at least maybe the most"},{"startTime":1346.6,"endTime":1349.69,"body":"popular one that we see."},{"startTime":1350.11,"endTime":1351.94,"body":"Uh, and that is the S-corporation."},{"startTime":1352.33,"endTime":1355.36,"body":"So why exactly is this"},{"startTime":1352.33,"endTime":1355.36,"body":"entity type so popular?"},{"startTime":1356.54,"endTime":1361.7,"body":"The S corporation, uh, offers more asset"},{"startTime":1356.54,"endTime":1361.7,"body":"protection similar to, uh, the, the C"},{"startTime":1361.7,"endTime":1366.95,"body":"Corp, um, but still provides the pass"},{"startTime":1361.7,"endTime":1366.95,"body":"through income, um, that, that people"},{"startTime":1366.95,"endTime":1371.81,"body":"like while avoiding that double taxation"},{"startTime":1366.95,"endTime":1371.81,"body":"situation that the C Corp is get into."},{"startTime":1372.56,"endTime":1377.24,"body":"Um, they can, you know, they can sell"},{"startTime":1372.56,"endTime":1377.24,"body":"stocks so they can easily attract"},{"startTime":1377.27,"endTime":1383.18,"body":"shareholders and, uh, up to a hundred,"},{"startTime":1377.27,"endTime":1383.18,"body":"um, and one big difference between a"},{"startTime":1383.18,"endTime":1387.14,"body":"partnership and that, and the S-corp"},{"startTime":1383.18,"endTime":1387.14,"body":"is that they're not subject to the"},{"startTime":1387.14,"endTime":1389.18,"body":"se tax, the self-employment tax."},{"startTime":1390.19,"endTime":1390.49,"body":"Gotcha."},{"startTime":1390.49,"endTime":1393.16,"body":"And that's just on the pass"},{"startTime":1390.49,"endTime":1393.16,"body":"through income portion, correct?"},{"startTime":1393.58,"endTime":1394.12,"body":"Correct."},{"startTime":1395.02,"endTime":1395.44,"body":"Gotcha."},{"startTime":1395.47,"endTime":1401.05,"body":"So, uh, does a business form an S"},{"startTime":1395.47,"endTime":1401.05,"body":"corporation with their secretary of state?"},{"startTime":1402.23,"endTime":1406.82,"body":"No, you make an S selection, um,"},{"startTime":1402.23,"endTime":1406.82,"body":"through the IRS, there's a form"},{"startTime":1406.85,"endTime":1411.11,"body":"25 53 that's that's filed with"},{"startTime":1406.85,"endTime":1411.11,"body":"the IRS to make that selection."},{"startTime":1411.79,"endTime":1412.18,"body":"Gotcha."},{"startTime":1412.21,"endTime":1416.05,"body":"So what if someone wants to make"},{"startTime":1412.21,"endTime":1416.05,"body":"an S election after they've created"},{"startTime":1416.05,"endTime":1417.97,"body":"their corporation or their LLC?"},{"startTime":1418.82,"endTime":1419.899,"body":"That's totally fine."},{"startTime":1420.05,"endTime":1424.34,"body":"Um, we see that quite, quite a bit,"},{"startTime":1420.05,"endTime":1424.34,"body":"um, where they have an LLC that's been"},{"startTime":1424.34,"endTime":1428.93,"body":"operating for a few years and you know,"},{"startTime":1424.34,"endTime":1428.93,"body":"we'll sit down and work with them and say,"},{"startTime":1428.93,"endTime":1432.71,"body":"if you were to make this selection, this"},{"startTime":1428.93,"endTime":1432.71,"body":"is what your tax situation looks like."},{"startTime":1432.71,"endTime":1435.74,"body":"If you keep going as you are,"},{"startTime":1432.71,"endTime":1435.74,"body":"this is what it looks like and"},{"startTime":1435.74,"endTime":1438.2,"body":"kind of evaluate that situation."},{"startTime":1438.2,"endTime":1442.37,"body":"And it's not something that needs to be"},{"startTime":1438.2,"endTime":1442.37,"body":"done upfront or else it's lost forever."},{"startTime":1442.37,"endTime":1446.18,"body":"You can, you can revisit that and"},{"startTime":1442.37,"endTime":1446.18,"body":"make an S election down the road."},{"startTime":1446.815,"endTime":1447.175,"body":"Right."},{"startTime":1447.595,"endTime":1447.745,"body":"Yeah."},{"startTime":1447.745,"endTime":1452.575,"body":"I mean, so long as they don't file as a"},{"startTime":1447.745,"endTime":1452.575,"body":"different entity type, um, you know, then"},{"startTime":1452.575,"endTime":1456.145,"body":"typically they'd be precluded from making"},{"startTime":1452.575,"endTime":1456.145,"body":"that election, at least for that tax year."},{"startTime":1456.175,"endTime":1460.345,"body":"But if they haven't filed returns,"},{"startTime":1456.175,"endTime":1460.345,"body":"then that is definitely open to them."},{"startTime":1460.345,"endTime":1467.035,"body":"So how exactly is an S-corporation"},{"startTime":1460.345,"endTime":1467.035,"body":"similar and different to a partnership?"},{"startTime":1468.649,"endTime":1469.7,"body":"Well, they're similar."},{"startTime":1469.7,"endTime":1473.3,"body":"They both have that pass through"},{"startTime":1469.7,"endTime":1473.3,"body":"income to the owners and they, they"},{"startTime":1473.3,"endTime":1478.939,"body":"both get the QBI deduction, deduction,"},{"startTime":1473.3,"endTime":1478.939,"body":"qualified business income deduction."},{"startTime":1479.899,"endTime":1483.59,"body":"Um, Well, the difference is,"},{"startTime":1479.899,"endTime":1483.59,"body":"is like I mentioned, the no"},{"startTime":1483.59,"endTime":1487.94,"body":"self-employment tax, which can be,"},{"startTime":1483.59,"endTime":1487.94,"body":"which can be very advantageous."},{"startTime":1488.36,"endTime":1493.22,"body":"Um, as an escort, the distributions"},{"startTime":1488.36,"endTime":1493.22,"body":"out to the partners must be pro-rata."},{"startTime":1493.639,"endTime":1497.75,"body":"So you can't just kind of decide"},{"startTime":1493.639,"endTime":1497.75,"body":"to, you know, give one partner this"},{"startTime":1497.75,"endTime":1501.08,"body":"amount and then another partner, a"},{"startTime":1497.75,"endTime":1501.08,"body":"different amount that's not in line"},{"startTime":1501.08,"endTime":1503.2,"body":"with, with our operating agreement."},{"startTime":1503.889,"endTime":1509.63,"body":"Um, And, you know, you have"},{"startTime":1503.889,"endTime":1509.63,"body":"to pay yourself wages as a,"},{"startTime":1509.63,"endTime":1511.43,"body":"as a, the owner of the S-corp."},{"startTime":1511.43,"endTime":1512.25,"body":"You have to pay yourself."},{"startTime":1512.69,"endTime":1514.73,"body":"What's referred to as a reasonable wage."},{"startTime":1515.56,"endTime":1515.98,"body":"Right."},{"startTime":1516.47,"endTime":1519.37,"body":"We see people get both of"},{"startTime":1516.47,"endTime":1519.37,"body":"those items wrong all the time."},{"startTime":1519.61,"endTime":1522.64,"body":"You know, when it comes to the pro-rata"},{"startTime":1519.61,"endTime":1522.64,"body":"distributions, they might be given"},{"startTime":1522.64,"endTime":1525.88,"body":"the main shareholder, a distribution,"},{"startTime":1522.64,"endTime":1525.88,"body":"and then, you know, screwing up with"},{"startTime":1525.88,"endTime":1527.92,"body":"the math to catch everyone else up."},{"startTime":1528.25,"endTime":1530.71,"body":"Uh, so we see a lot of"},{"startTime":1528.25,"endTime":1530.71,"body":"people run a foul there."},{"startTime":1531.08,"endTime":1534.889,"body":"Um, and also, yeah, with that officer"},{"startTime":1531.08,"endTime":1534.889,"body":"compensation, you know, that salary"},{"startTime":1534.889,"endTime":1540.8,"body":"that you need to pay, uh, the, you know,"},{"startTime":1534.889,"endTime":1540.8,"body":"officer, the owner operator, a lot of"},{"startTime":1540.8,"endTime":1544.31,"body":"people get that wrong, you know, because,"},{"startTime":1540.8,"endTime":1544.31,"body":"uh, you know, a lot of people have"},{"startTime":1544.31,"endTime":1547.22,"body":"been told, well, if you do 50% of your."},{"startTime":1547.605,"endTime":1548.595,"body":"Taxable income."},{"startTime":1548.895,"endTime":1550.365,"body":"Uh, and you run that through his W2."},{"startTime":1550.365,"endTime":1550.845,"body":"You're good."},{"startTime":1550.875,"endTime":1553.095,"body":"And that's unfortunately too simplistic."},{"startTime":1553.095,"endTime":1556.605,"body":"There's many more variables that"},{"startTime":1553.095,"endTime":1556.605,"body":"the IRS would consider, uh, in"},{"startTime":1556.605,"endTime":1559.515,"body":"terms of whether you met that"},{"startTime":1556.605,"endTime":1559.515,"body":"provision, but what's the downside."},{"startTime":1559.515,"endTime":1565.085,"body":"If they're not following, uh, you know,"},{"startTime":1559.515,"endTime":1565.085,"body":"some of these requirements, well, yeah,"},{"startTime":1565.085,"endTime":1569.855,"body":"they could lose their S election and then"},{"startTime":1565.085,"endTime":1569.855,"body":"they would revert back to, you know, the,"},{"startTime":1570.095,"endTime":1571.895,"body":"the entity structure that they had before."},{"startTime":1572.855,"endTime":1573.395,"body":"Right."},{"startTime":1574.115,"endTime":1580.64,"body":"So, How exactly then does an"},{"startTime":1574.115,"endTime":1580.64,"body":"S-corporation compared to a C corporation."},{"startTime":1582.43,"endTime":1584.8,"body":"So I can compare it to a C Corp."},{"startTime":1584.83,"endTime":1586.75,"body":"They're both separate legal entities."},{"startTime":1586.86,"endTime":1589.75,"body":"The liability protection is greater there."},{"startTime":1589.81,"endTime":1593.77,"body":"So shareholders aren't personally"},{"startTime":1589.81,"endTime":1593.77,"body":"liable for the debts of the company."},{"startTime":1594.37,"endTime":1599.86,"body":"Um, a lot of times the both have"},{"startTime":1594.37,"endTime":1599.86,"body":"directors and officers, um, one of the."},{"startTime":1600.274,"endTime":1605.524,"body":"Differences with a C Corp is they"},{"startTime":1600.274,"endTime":1605.524,"body":"don't have that limit on the number"},{"startTime":1605.524,"endTime":1606.935,"body":"of shareholders at a hundred."},{"startTime":1607.475,"endTime":1612.754,"body":"Um, they can have different classes"},{"startTime":1607.475,"endTime":1612.754,"body":"of stock, which you see a lot where,"},{"startTime":1612.814,"endTime":1616.054,"body":"you know, different maybe with the"},{"startTime":1612.814,"endTime":1616.054,"body":"court, different rounds of investors"},{"startTime":1616.054,"endTime":1618.095,"body":"they'll have different classes of stock."},{"startTime":1618.665,"endTime":1623.135,"body":"Um, and then, like I mentioned"},{"startTime":1618.665,"endTime":1623.135,"body":"before, the, the double taxation that"},{"startTime":1623.495,"endTime":1626.524,"body":"the C Corp and sort of faced with"},{"startTime":1623.495,"endTime":1626.524,"body":"isn't, isn't there for the escorts."},{"startTime":1627.095,"endTime":1627.515,"body":"Right."},{"startTime":1627.605,"endTime":1633.965,"body":"So if you're going to get double taxed"},{"startTime":1627.605,"endTime":1633.965,"body":"as a C corporation, you know, why would"},{"startTime":1634.055,"endTime":1638.225,"body":"a company opt to be a C corporation?"},{"startTime":1638.255,"endTime":1641.195,"body":"If it could otherwise"},{"startTime":1638.255,"endTime":1641.195,"body":"qualify as an S Corp?"},{"startTime":1642.485,"endTime":1645.515,"body":"The main reason is, you know,"},{"startTime":1642.485,"endTime":1645.515,"body":"the number of investors you can."},{"startTime":1645.545,"endTime":1650.735,"body":"I mean, the capital that you can"},{"startTime":1645.545,"endTime":1650.735,"body":"raise and is much greater when you"},{"startTime":1650.735,"endTime":1655.955,"body":"go the C Corp route, just because"},{"startTime":1650.735,"endTime":1655.955,"body":"there's, there's not a limit on, uh,"},{"startTime":1656.015,"endTime":1657.665,"body":"on, you know, a hundred shareholders."},{"startTime":1657.665,"endTime":1659.915,"body":"So you can, you can"},{"startTime":1657.665,"endTime":1659.915,"body":"really expand and grow."},{"startTime":1659.915,"endTime":1663.305,"body":"And ultimately if you, if you"},{"startTime":1659.915,"endTime":1663.305,"body":"wanted to go public, that would"},{"startTime":1663.305,"endTime":1664.475,"body":"be the route you need to go."},{"startTime":1665.765,"endTime":1666.215,"body":"Right."},{"startTime":1666.275,"endTime":1669.305,"body":"And there's also an argument to"},{"startTime":1666.275,"endTime":1669.305,"body":"at least under our current tax"},{"startTime":1669.305,"endTime":1670.775,"body":"code, which could be changing."},{"startTime":1671.075,"endTime":1675.275,"body":"Uh, we can reference episode one of"},{"startTime":1671.075,"endTime":1675.275,"body":"the podcasts talking about Biden's tax"},{"startTime":1675.275,"endTime":1680.195,"body":"plan on that one, but currently at 21%"},{"startTime":1675.275,"endTime":1680.195,"body":"maximum corporate tax rate, you know,"},{"startTime":1680.195,"endTime":1683.255,"body":"the argument could also be made that if"},{"startTime":1680.195,"endTime":1683.255,"body":"you're just trying to reinvest profits"},{"startTime":1683.555,"endTime":1686.885,"body":"back into the company, uh, that the."},{"startTime":1686.985,"endTime":1690.855,"body":"Most advantageous vehicle to do that"},{"startTime":1686.985,"endTime":1690.855,"body":"is a C Corp, uh, because you don't"},{"startTime":1690.855,"endTime":1695.804,"body":"have that potentially much higher level"},{"startTime":1690.855,"endTime":1695.804,"body":"of tax, uh, at the individual level."},{"startTime":1697.055,"endTime":1699.185,"body":"And, you know, I think the other"},{"startTime":1697.055,"endTime":1699.185,"body":"thing that our listeners really should"},{"startTime":1699.185,"endTime":1702.455,"body":"take into account is what happens to"},{"startTime":1699.185,"endTime":1702.455,"body":"the state level, you know, cause the"},{"startTime":1702.455,"endTime":1707.555,"body":"California, they're going to tax an"},{"startTime":1702.455,"endTime":1707.555,"body":"LLC, an S-corp a C Corp differently."},{"startTime":1707.885,"endTime":1709.895,"body":"Uh, so you need to take that"},{"startTime":1707.885,"endTime":1709.895,"body":"into consideration here."},{"startTime":1709.895,"endTime":1713.015,"body":"So an LLC, you're going to pay"},{"startTime":1709.895,"endTime":1713.015,"body":"taxes on your gross receipts."},{"startTime":1713.525,"endTime":1719.555,"body":"I'm an S corporation you're going to pay"},{"startTime":1713.525,"endTime":1719.555,"body":"tax on 1.5% of your net taxable income."},{"startTime":1720.085,"endTime":1727.225,"body":"And the C corporation is going to pay, you"},{"startTime":1720.085,"endTime":1727.225,"body":"know, about 8.8%, uh, tax to California."},{"startTime":1727.225,"endTime":1731.665,"body":"So there are some pretty significant"},{"startTime":1727.225,"endTime":1731.665,"body":"differences, you know, in terms"},{"startTime":1731.695,"endTime":1735.385,"body":"of, uh, how the state can tax"},{"startTime":1731.695,"endTime":1735.385,"body":"these different entity types."},{"startTime":1735.385,"endTime":1740.755,"body":"So specifically with California, if you're"},{"startTime":1735.385,"endTime":1740.755,"body":"a high revenue business, low margin, you"},{"startTime":1740.755,"endTime":1743.995,"body":"know, you're probably going to want to"},{"startTime":1740.755,"endTime":1743.995,"body":"be either an S or a C Corp, you know, to"},{"startTime":1743.995,"endTime":1747.445,"body":"lower your taxes there because the LLC"},{"startTime":1743.995,"endTime":1747.445,"body":"is going to tax you business, your gross"},{"startTime":1747.445,"endTime":1752.775,"body":"receipts, which in California, That can"},{"startTime":1747.445,"endTime":1752.775,"body":"get up to, you know, North of $12,000."},{"startTime":1753.705,"endTime":1757.335,"body":"Uh, whereas, you know, if you have"},{"startTime":1753.705,"endTime":1757.335,"body":"low margins and S-corporation,"},{"startTime":1757.335,"endTime":1762.165,"body":"you're going to pay 1.5% tax"},{"startTime":1757.335,"endTime":1762.165,"body":"California, you're going to pay 8.84%."},{"startTime":1762.705,"endTime":1766.695,"body":"So, you know, ultimately that"},{"startTime":1762.705,"endTime":1766.695,"body":"is a huge consideration that"},{"startTime":1766.695,"endTime":1767.865,"body":"everyone needs to take account."},{"startTime":1768.225,"endTime":1771.225,"body":"Uh, you know, when you're deciding on"},{"startTime":1768.225,"endTime":1771.225,"body":"your entity type, because the state"},{"startTime":1771.225,"endTime":1772.875,"body":"taxes are still very real thing."},{"startTime":1773.555,"endTime":1776.975,"body":"So chase, as we're wrapping up here, I"},{"startTime":1773.555,"endTime":1776.975,"body":"had a question as you guys were talking,"},{"startTime":1777.005,"endTime":1778.175,"body":"you know, I've heard that a lot of."},{"startTime":1778.745,"endTime":1783.245,"body":"C corpse, our Delaware C corpse,"},{"startTime":1778.745,"endTime":1783.245,"body":"you know, w w what does that mean?"},{"startTime":1783.245,"endTime":1786.425,"body":"Why, why does so many companies"},{"startTime":1783.245,"endTime":1786.425,"body":"choose to, to create their business"},{"startTime":1786.425,"endTime":1789.125,"body":"entity in Delaware, as opposed"},{"startTime":1786.425,"endTime":1789.125,"body":"to some other state, or even the"},{"startTime":1789.125,"endTime":1790.324,"body":"state that they're operating in?"},{"startTime":1790.774,"endTime":1791.045,"body":"Right."},{"startTime":1791.045,"endTime":1793.085,"body":"I mean, some people"},{"startTime":1791.045,"endTime":1793.085,"body":"think it's a tax reasons."},{"startTime":1793.085,"endTime":1797.254,"body":"Like if I'm a California entity and"},{"startTime":1793.085,"endTime":1797.254,"body":"I register or create my entity in"},{"startTime":1797.254,"endTime":1800.495,"body":"Delaware, you know, do I get to skip"},{"startTime":1797.254,"endTime":1800.495,"body":"out on some of the franchise tax?"},{"startTime":1800.825,"endTime":1803.075,"body":"Uh, the answer is no, you"},{"startTime":1800.825,"endTime":1803.075,"body":"still have to register as a"},{"startTime":1803.075,"endTime":1804.365,"body":"foreign entity in California."},{"startTime":1804.635,"endTime":1806.855,"body":"However, you know, the real reason that."},{"startTime":1806.879,"endTime":1811.949,"body":"Delaware corporations are so popular"},{"startTime":1806.879,"endTime":1811.949,"body":"is really because of the amount"},{"startTime":1811.949,"endTime":1813.449,"body":"of case law that's out there."},{"startTime":1813.719,"endTime":1818.399,"body":"Uh, you know, specifically just the"},{"startTime":1813.719,"endTime":1818.399,"body":"laws, uh, surrounding, uh, you know,"},{"startTime":1818.399,"endTime":1822.36,"body":"investors' rights and just how the"},{"startTime":1818.399,"endTime":1822.36,"body":"business operates, uh, you know,"},{"startTime":1822.36,"endTime":1823.62,"body":"from a shareholder perspective."},{"startTime":1823.62,"endTime":1827.55,"body":"So when it comes, you know, to a"},{"startTime":1823.62,"endTime":1827.55,"body":"investor, you know, investing in a"},{"startTime":1827.55,"endTime":1831.81,"body":"company, you know, especially serial"},{"startTime":1827.55,"endTime":1831.81,"body":"investors, uh, you know, they're gonna."},{"startTime":1832.025,"endTime":1835.475,"body":"Have a preference to invest in a"},{"startTime":1832.025,"endTime":1835.475,"body":"Delaware entity because they are"},{"startTime":1835.475,"endTime":1837.965,"body":"familiar with how the law works there."},{"startTime":1838.145,"endTime":1839.405,"body":"They know what their protections are."},{"startTime":1839.645,"endTime":1843.125,"body":"They aren't going to be, you"},{"startTime":1839.645,"endTime":1843.125,"body":"know, blindsided by some, you"},{"startTime":1843.125,"endTime":1846.185,"body":"know, state specific, nuanced law"},{"startTime":1843.125,"endTime":1846.185,"body":"that they weren't aware of that"},{"startTime":1846.185,"endTime":1847.535,"body":"puts them in an adverse position."},{"startTime":1847.535,"endTime":1852.455,"body":"So really it's just about uniformity of,"},{"startTime":1847.535,"endTime":1852.455,"body":"you know, law, you know, it's ultimately"},{"startTime":1852.455,"endTime":1853.655,"body":"going to protect their investment."},{"startTime":1854.525,"endTime":1855.005,"body":"Got it."},{"startTime":1855.245,"endTime":1855.755,"body":"Okay."},{"startTime":1857.03,"endTime":1858.98,"body":"Well, that was a good,"},{"startTime":1857.03,"endTime":1858.98,"body":"good little podcast."},{"startTime":1858.98,"endTime":1860.45,"body":"Ton of info there, right?"},{"startTime":1860.48,"endTime":1860.96,"body":"Oh man."},{"startTime":1861.75,"endTime":1862.879,"body":"Now, how do you guys feel?"},{"startTime":1863.48,"endTime":1867.59,"body":"I mean, I feel like I just got"},{"startTime":1863.48,"endTime":1867.59,"body":"knowledge dumped on me and I also"},{"startTime":1867.59,"endTime":1870.379,"body":"feel very fortunate that I'm working"},{"startTime":1867.59,"endTime":1870.379,"body":"with you guys because I would"},{"startTime":1870.379,"endTime":1874.37,"body":"have gone, you know, into a spiral"},{"startTime":1870.379,"endTime":1874.37,"body":"trying to figure this out on my own."},{"startTime":1875.0,"endTime":1878.96,"body":"And I know I'm a small, small business"},{"startTime":1875.0,"endTime":1878.96,"body":"and you know, I'm not, I'm not qualified"},{"startTime":1878.96,"endTime":1883.16,"body":"yet to figure out whether or not I need"},{"startTime":1878.96,"endTime":1883.16,"body":"to be a C Corp, but it sounds like most,"},{"startTime":1883.19,"endTime":1885.56,"body":"most small businesses as a default."},{"startTime":1885.965,"endTime":1889.025,"body":"If you're kind of operating on a, on a"},{"startTime":1885.965,"endTime":1889.025,"body":"smaller scale, especially if you're an"},{"startTime":1889.025,"endTime":1893.795,"body":"army of one, like me, you know, LLC taxed"},{"startTime":1889.025,"endTime":1893.795,"body":"as an S Corp is kind of the way to go."},{"startTime":1893.795,"endTime":1896.315,"body":"If you can, if you can manage it, if"},{"startTime":1893.795,"endTime":1896.315,"body":"you're a bigger company that needs to"},{"startTime":1896.315,"endTime":1900.545,"body":"get larger investors coming in over time,"},{"startTime":1896.315,"endTime":1900.545,"body":"it sounds like it's more of a C Corp."},{"startTime":1902.02,"endTime":1902.429,"body":"Yeah."},{"startTime":1902.76,"endTime":1903.09,"body":"Yeah."},{"startTime":1903.26,"endTime":1906.86,"body":"So, I mean, you know, really when we"},{"startTime":1903.26,"endTime":1906.86,"body":"see people start as a C Corp, it's, you"},{"startTime":1906.86,"endTime":1911.419,"body":"know, they are immediately looking to"},{"startTime":1906.86,"endTime":1911.419,"body":"attract significant capital, uh, you"},{"startTime":1911.419,"endTime":1916.1,"body":"know, but I would say the lion share of"},{"startTime":1911.419,"endTime":1916.1,"body":"small businesses out there are like yours,"},{"startTime":1916.31,"endTime":1917.959,"body":"where, you know, you start off with."},{"startTime":1918.22,"endTime":1921.04,"body":"You know, just an owner-operator"},{"startTime":1918.22,"endTime":1921.04,"body":"maybe a handful of employees."},{"startTime":1921.34,"endTime":1926.65,"body":"Um, you know, and you're just trying"},{"startTime":1921.34,"endTime":1926.65,"body":"to find the most tax advantageous, uh,"},{"startTime":1926.68,"endTime":1930.82,"body":"vehicle, you know, uh, until you grow"},{"startTime":1926.68,"endTime":1930.82,"body":"to a point where you need to consider"},{"startTime":1930.82,"endTime":1933.4,"body":"some other things and cross that"},{"startTime":1930.82,"endTime":1933.4,"body":"bridge when you, when you get there."},{"startTime":1933.76,"endTime":1937.77,"body":"Um, yeah, but I mean, Ultimately, you"},{"startTime":1933.76,"endTime":1937.77,"body":"know, it's just really about what your"},{"startTime":1937.77,"endTime":1941.37,"body":"trajectory is and kind of where you're,"},{"startTime":1937.77,"endTime":1941.37,"body":"where you're at at this moment in time."},{"startTime":1941.37,"endTime":1944.82,"body":"And like I was mentioning earlier,"},{"startTime":1941.37,"endTime":1944.82,"body":"you know, S corporations are really"},{"startTime":1944.82,"endTime":1949.32,"body":"just the, lion's share of a lot of"},{"startTime":1944.82,"endTime":1949.32,"body":"small businesses, uh, because of that"},{"startTime":1949.32,"endTime":1951.75,"body":"self-employment tax, uh, element there."},{"startTime":1951.75,"endTime":1952.649,"body":"So, yeah."},{"startTime":1952.879,"endTime":1956.27,"body":"Anyways, um, Eric, thank you very much."},{"startTime":1956.57,"endTime":1961.61,"body":"Um, and as mentioned on our"},{"startTime":1956.57,"endTime":1961.61,"body":"commercial, if you want to get"},{"startTime":1961.61,"endTime":1963.77,"body":"in touch with Eric, uh, for your."},{"startTime":1963.985,"endTime":1968.754,"body":"Tax services, tax advisory, tax"},{"startTime":1963.985,"endTime":1968.754,"body":"preparation, tax resolution, you name it."},{"startTime":1969.055,"endTime":1970.195,"body":"He is available."},{"startTime":1970.225,"endTime":1976.465,"body":"His email is Eric and that's Eric"},{"startTime":1970.225,"endTime":1976.465,"body":"with a K at dark horse dot CPA."},{"startTime":1978.615,"endTime":1982.905,"body":"And now for the disclaimer, the content"},{"startTime":1978.615,"endTime":1982.905,"body":"in the proceeding podcast should not in"},{"startTime":1982.905,"endTime":1984.945,"body":"any way be construed to be tax advice."},{"startTime":1985.335,"endTime":1987.105,"body":"All tax laws are nuanced in."},{"startTime":1987.105,"endTime":1989.805,"body":"Those are applied to each"},{"startTime":1987.105,"endTime":1989.805,"body":"unique situation differently."},{"startTime":1990.11,"endTime":1991.909,"body":"There'll be a dummy higher CPA."},{"startTime":1992.36,"endTime":1994.01,"body":"Preferably a darker CPA."}]}