Building Blocks of Business: Entity Structures, Credit Mastery & Tax-Smart Strategies | The Growth Booth #96

 ​Aidan 

Welcome to episode number 96 of The Growth Booth where today we're talking about how you can remove a lot of the hassle, remove a lot of stress, and make sure you are taking advantage of the opportunities that you've got at your disposal as a business owner.

Now, I've worked with a guy called Tommy, who I'm going to introduce you to in just a moment, he's really going to be the star of the show today because he knows a lot more about this than I do. But I've been working with Tommy and group called Prime Corporate Services for several years now. They are a company that specialize in things including entity structure, tax savings that you can leverage, business credit, and much, much more. They've been really quite influential and helping a lot of our subscribers navigate the minefield and make sure they're leveraging the advantages that I've just been mentioning here.

Tommy, we were on a call, which feels like yesterday, I had a look back at the records, and it was almost two years ago that you were on The Growth Booth, way back in episode number 11. It's a pleasure to have you here to get some of your time out of your day. So thanks for joining us, man.

Tommy 

Of course, thank you for having me. Congratulations on 96 episodes. That's pretty amazing. I couldn't believe when you said it was two years ago, because like you said it felt like yesterday. So thank you to you and all you do, and thanks for having me back.

Aidan 

Well, yeah, it's crazy how time flies. So look, there's lots of ways that we could start this today. I want to dive right in. Where do we begin here? I feel like it's a jigsaw puzzle. Where do you recommend we start off?

Tommy 

Yeah, I love it. When we started Prime Corporate, we're going on 12 years now with Prime Corporate Services. Whenever we have a consultation with a business owner, or a potential business owner, we really consider and look at the foundation of their business as the business structure, the business entity. So I think that if we start with how to set up your business, when is the right time to set up your business, I think that's the best place to really set the foundation for the home, if you will, or the business that you're looking to grow and scale over time.

Aidan 

Yeah, sounds good. Where do we go, then? Where should we set things up? How do we set things up? I should also add in here that I think this is something that's applicable for people all over the world. A lot of our subscribers run businesses in the United States, so although you know, we've got an international audience, a good majority of them actually run businesses in the USA. So if you're listening to this and you're wondering if this is something that's applicable, I'll tell you that I think it's absolutely applicable. We can dive into some more of the details here. So where do we begin then with an entity? Why is it important? Why might someone want to set up an entity for their business?

Tommy 

Yeah, this is great. So one of the things that we've really hung our hats on over the last 12 years, our goal and our mission is to help clients plan, profit, and protect their businesses. A lot of times when you're first getting into these business ventures, either you don't have the resources for the high-power CPA or the high-power attorneys, or you don't know what questions to ask. It makes the legal and the financial world extremely difficult to navigate. When we have consultations with our clients, what we will tell them, and I think this is a major takeaway for any of you that are brand new, or considering entrepreneurship, but it's not about how much money you make. It's about how much you're able to keep in your corner. If you're aware of that you now have the ability to reinvest back into your business, to be able to put more money into your own retirement or whatever it is that you choose – I joke: throw the money off the bridge – I don't care what you do, I just want you to be able to make that decision right.

There's no tax code that says you have to be good at business to have a business. I say that because no one would be in business. It's hard. If it was easy, everybody would do it. But there is a tax code that says if you have the intent to treat and operate as a business to generate income, you can now take business-related deductions. As soon as you have the intent, I would argue that if you're listening to this recording, then you have the intent to be a business owner or are already a business owner.

So three things that I asked you and I challenge you to take into consideration: Number one, how do you give yourself privacy and protection? How much privacy do you want? I don't want my address listed on my business documents, even if I'm the only owner. How much protection do you need? What are your tax benefits? Good or bad profit or loss? How do you put yourself in the best position possible? And then number three is credibility. What I mean by that is show your potential prospects or clientele that you are a legitimate business by being a business owner. I think the psychology behind committing to being a business owner is much more impactful than people give it credit. Also, for banks and lenders, one of the things that we can talk about and maybe even transition into is how can you build a separate credit profile for your business that long term, you can use business credit, let the business pay for itself, and then pay yourself from there.

I know we have a worldwide audience. For those of you that are in the US, is it an LLC or some sort of a corporation? If it's internationally, is it a sole trader, sole proprietorship, incorporated or limited corporation? Talking to a professional is going to be very, very important, and hopefully, we can help bridge that gap, understanding the business model, understanding that we have clients with multiple streams of income. Hopefully, we can help bridge that gap and give you some clarity on what roadmap or what direction to head.

Aidan 

Now, I'm just picking up the one thing you mentioned a moment ago, related to expenditure and so on and so forth. What is an example or what are some examples that someone who's an online business owner can start thinking about claiming potentially as expenditure for their business? I mean, there are some that are probably quite obvious, like if someone is running an online business, maybe they're paying for internet to be able to run their business, and that might be a business expense. But what are some of the other ideas that are out there?

Tommy 

One of my favorite things about what we consider self-employed, home-based entrepreneurs, content creation, work-from-home aspects, consulting, marketing, online ventures, your personal life and your business life continue to intermingle. That's a really good problem to have. The reason for that is the more successful you become, the more problems that you have. They're bigger problems, but they're oftentimes great problems, right? I'll tell people, "Let's welcome those problems with open arms. Let's give those a big old hug and embrace those." Because more money more problems is a real thing. I think that if more people took the time to understand their tax benefit and their tax situation, understanding it's not what you make, it's what you keep becomes much more relative. So to answer your question directly, phone bills, internet bills, power bills, portions of your rent or your mortgage, for those of you that have designated home offices, ask yourself if it's ordinary or necessary to the business. Is it helpful or useful for you to be able to generate income? 

Looking at your video, for anyone that's watching the visual on this, all of the artwork, all of the shelving, that beautiful plant behind you, that headphones, the lighting, the microphone, all of those are directly correlating to generating income. That goes for everybody that's watching this. There's over 250 different deductible expenses for self-employed, home-based entrepreneurs. The beautiful thing is a lot of them are bills, or anyways expenses, bills that you're going to pay regardless, that can now be business-related to get you a larger tax return, or allow you the ability to pay less in tax. I love this business model, and as you said, we've been working with your clients for years. I can tell you right now, oftentimes, there's thousands of dollars in tax savings by just understanding what you can and cannot write off.

Aidan 

Right. If someone does want to go ahead and set up a consultation with you to learn about more, I'll just make sure we get that link in there right now. That's thegrowthbooth.com/prime, and we will include a link to that in all the places that this show is published.

Now, a couple of things that come to mind before we move on to the next sort of segment here is if you are someone who invests any money in upskilling yourself, in any form of consultation, investing in education, then that's something that could be potentially a business expense as well. I think that's something that a lot of us do online. If there's software that you use, to help you run the business, that could be a business expense. If there's travel that you need to make to attend a conference, or to do something else, that could potentially be a business expense, as well. So I think, as a first step, it's really handy to understand the rules of the game, so to speak, because that gives you a lot more power, and will ultimately allow you to keep more money in your pocket. There are probably a bunch of expenses that you're incurring right now that you're not claiming any tax benefits on. If you want to find out specifically about how this applies to you, then take the opportunity to jump on a free consultation. There's no strings attached or anything like that, you can jump on the call with the guys over Prime Corporate Services and they'll help talk to you about your specific situation.

We've touched on a little bit about entity structure, just to wrap that part up. Is there a rule of thumb for what type of entity people should normally go in? Or is it on a personalized basis, depending on different circumstances? What's your take on that?

Tommy 

I'm going to start by saying that it is very personalized, everyone is in a different situation. Some of you are married, some of you have kids, some of you have multiple businesses, that is going to change your overall picture. But working with your clientele for as long as I have and understanding what the goals are and what you're looking to accomplish, I can tell you that there are some generic answers that I can provide you with for clarity as well.

Oftentimes, if clients are in the US, we recommend starting with an LLC, a limited liability company, because it gives you some protection. It has the ability to give you some privacy, profit or loss good or bad, it puts you in a better position from a tax standpoint, shows the intent, and then it allows you the ability to start to build business credit and corporate funding even if you're just getting started, even if you haven't generated any income. So to your point, some of you that have been in this game for years, may have had an accountant or a CPA that said, "You invested into education, I can't write that off for you because it's not an accredited university," but I can tell you, those things are ordinary, necessary, useful, helpful, consulting advisory to better yourself to better your business. There are ways to make those deductible expenses.

Now, as you start to become more profitable, we can look at changing the LLC so that there's an S corp element that allows you to pay a salary or a distribution, allows you to avoid half of a self-employment tax. And then for those of you that are international, is it easier to start with an LLC, and eventually convert over to a C Corp? I know I'm going through these things very quickly and for some of you listening to this, you're like "This is over my head," schedule a consultation and make sure that you really get into the weeds on what is best for your circumstance. Why? Because it is generic. I joke that if you ask 10 attorneys the same question, you oftentimes will leave with 15 different answers. That doesn't help. That's what makes this world so difficult to navigate. So hopefully, with this longstanding relationship, if we can offer you that free consultation to give you more guidance on the roadmap ahead and give you a blueprint on where you are now. It's more about where you're going to be in one year, three years, five years, and we want to help you understand that so that it's easier to really achieve those goals.

Aidan 

I'll also add in here a couple of things from my own personal story. I think we started working with you guys a few years ago. Many times I've thought, if I had had access to advisors, to people who could help point me in the right direction when I was getting started way back in 2005, I would be in a different position today because I was trying to figure this stuff out on my own, but the reality is you need to have a lot of experience and education specific to this to be able to understand each individual situation. So if this is sounding complex, and you're hearing these things like S Corp, LLC, this expense, this deduction, and so on and so forth, the good news is that from an entrepreneur standpoint, you don't have to know all about this stuff. That's the whole reason why you get people who are much more clued up, much more experienced in this specific topic than you, and then you can just focus on building the business and doing what you're good at. I'm pretty happy personally, to be able to hand off a lot of these discussions and decisions to people far more qualified than me.

Anyway, so exporting a little bit out into the structure. You mentioned business credit, what's the story with business credit?

Tommy 

I'm going to start business credit by saying I've never met an entrepreneur that says "I wish I had less money." I think that's important to start that because that's never happened for a reason. The more successful you become, and the more money that you make, it creates a lot of these good problems to have. I'll give everyone a visual. Everyone has a legal name, everyone has a social security number or some sort of personal identification number, and then everyone also has a personal credit profile. This building business credit is more for the US-based clients. There's ways to do it internationally, it oftentimes just takes a little bit longer, which is okay, but we want to do the same thing for the business. Let's make sure you have a legitimate business name. Let's make sure you have an EIN, Employer Identification Number, we call it, or an identification number for your business. And then you can also build and develop a credit profile for your business.

I believe the reason that this is so beneficial for any business owner is they say that the opportunity of a lifetime comes across your desk once or twice a year, and a lot of times people aren't able to really take in that opportunity of a lifetime due to financial restraint. With that being said, everyone has problems. I've said it several times. If you have problems personally, having more money or having good credit oftentimes makes those problems easier to resolve. It's very similar with your business, having good business revenues and having good business credit profiles makes the business problems easier to resolve. If you can open the doors for additional funding opportunities, whether it be marketing, whether it be products, whether it be any business decision that requires financial commitment, using business credit, letting the business pay for itself, now you're keeping yourself organized from a tax standpoint, and then paying yourself from there, if you are just getting started, remember that it's not about where you are right now. It's where you're going to be in one year, three years, five years, 10 years, and I think having more funding options will benefit you at some point somehow, even if you don't know what those are right now.

Aidan 

It always gives you more flexibility. I can remember someone who I worked with once upon a time saying that if you've got a problem in your business or your life and you can solve that problem with money, and you've got money, then you don't really have a problem. You can you can solve it. So definitely applies to the business sense there for sure. I like what you said about thinking about not just today in the here and now but looking at your business and your life through a little bit longer of a lens.

We know from experience that sometimes, a year goes by in the blink of an eye it seems, and it's certainly the case with online business. Instead of thinking just about what you're doing today, there's pretty good reason I think in my mind to look at it through a bit of a longer lens. If you're just starting out, then there are reasons why it may be beneficial for you to look at getting the structure right from the get-go even if you can't reap all of the rewards like having credit available today, because that credit, they can start building itself up over time.

Another thing that a lot of people start businesses for the tax savings. What's your take or what do you share with entrepreneurs when they start thinking about tax savings, Tommy?

Tommy 

Yeah, tax savings is interesting because, this is a very biased opinion obviously, but I firmly believe that everyone should be self-employed to some extent, whether it's a side hustle or a side business or full time self-employment. The reason that that biased opinion comes into play here is because the tax code is oftentimes set up for that to be the case. I'm based in the US so I'm going to talk tax strategy from a US standpoint right now, but a lot of tax codes internationally and in the US, it's kind of set up with this use-it-or-lose-it type policy. If you don't invest into yourself, if you don't invest into your business, you are going to pay more in taxes.

So with that being said, if you're listening to this, and you have a W2 or a 9-to-5 type job, you go to work, exchange your time for money, they take taxes out of your check, give you what's left, and then you pay taxes or hopefully get a tax return. The difference being self-employed, which sometimes takes a little bit of a psychological shift, you go generate your own income, you then reinvest back into your business, to better your situation and better your business, and then pay taxes on what's left. When you flip that upside down, it kind of gives you more control to do what you want with your money. Every year in the month of December, the most real estate is bought and sold. Why? Because people with money know that if they buy more real estate, they're able to depreciate and take more of a loss while creating residual income. 

Aidan 

Yeah, that's crazy. Just to jump in on there, two episodes ago, episode number 94, I was on with a real estate broker who I've done a lot of real estate deals with in Manhattan. We mentioned briefly depreciation, and if you think about it for a moment, a property could devalue by hundreds of thousands, even millions of dollars, and that's just the way that the tax law is set up. I don't know if I would call it a loophole. It's just the way it is, and it's the way it's been for a long time. But that's what is happening to every single property, and my property qualifies for depreciation benefits as well, then it's just a no-brainer. I guess, similar things, maybe not property depreciation necessarily, although maybe it is depending on your personal situation, but there are a lot of similar things that you can use to your advantage. I kind of feel like if these are things that Uncle Sam makes available to us, wherever you are in the world, then at minimum, you should know what they are because you'd be crazy not to.

Tommy 

No one cares about your money more than you do. I have had financial planners telling me otherwise – that was not the case. So I completely agree. I think that in a lot of ways the tax code has turned into a game. It's over 70,000 pages, it's ridiculous. The more that you're aware of what you can and cannot do from a tax saving standpoint, even in the very, very beginning, it makes it a whole lot easier to make calculated decisions on what is best for you and why. I love that, I completely agree with that. Writing off even depreciation on a smaller scale of depreciating: computers, cameras, headphones, vehicles, more money, more problems, but more decisions that you can make. If you break your year up into calendar quarters, I know it's different everywhere. Once again, I'll use the U.S.: January, February, March quarter one; April, May, June quarter two; so on and so forth, going into the fourth quarter of a tax year. If you don't treat this like a business and if you treat it like a hobby, it's going to cost you money like a hobby. But if you treat it like a business, you reap the rewards of what businesses have to offer. What could you invest in to help growing and scaling your business into the next year that you wouldn't have otherwise, if you didn't plan proactively as opposed to reactively in the game of taxes? I think it's a great example.

Aidan 

What about the mindset? You've worked with so many different clients, many of our subscribers are now working with you. What have you seen in dealing with so many different people about the mindset that it takes to really build and run a successful business from the standpoint of someone who deals with specifically entity set-up, business credit, tax savings, anything else that we've spoken about here today? Is there something that stands out to you about mindset?

Tommy 

Yes, absolutely. I'm going to repeat myself as well on what I just mentioned with that statement of, when you're just getting started, if you treat something like a hobby, it will cost you money like a hobby. That's just the reality. Once you make the commitment and the mental adjustment to treat something like a business, you really reap the rewards of what businesses have to offer. We've been doing this now for over 11 years, we've helped structure over 150,000 businesses, so what I can tell you is, there's oftentimes, if we were to bucket everyone into two different buckets: visionaries and integrators. One of my favorite books is Rocket Fuel by Gino Wickman.

Aidan 

Here somewhere, actually. So yeah, I love that book as well.

Tommy 

I think it's amazing because it really helps people understand what bucket they are more aligned with: visionary or integrator. Visionaries oftentimes make money out of thin air, they have these big thoughts, and for whatever reason, they can go execute them. Our CEO, Steve Harward, is the ultimate definition of a visionary. I joke with him that sometimes his ideas are five or 10 years down the road, we need to live in the now. I'm like the string to his balloon. He's got these big ideas. And it's like, "Down, boy! Down!"  But the other side of this is integrators. Sometimes integrators, I would classify as overthinkers – you're scared to take the next step because you don't know if you're going to cross the t or dot the i. That's okay, but giving yourself asset protection, I think, is beneficial. Integrators are oftentimes willing to roll up their sleeves and put in more of the work. 

So understanding your strengths and hiring out your weaknesses, is that more beneficial to the longevity of your business and to your goals? Whether you're a visionary or an integrator, what can you lean into that you're good at? What can you either get better at or hire out that you're not good at? Thinking bigger is something that is always talked about and always told, but how do you do it? How do you think bigger? You either hire out what you're not good at, or you get better at it. And from a mindset standpoint, I would say just that: commit to being a business owner, commit to what your goals are, and focus on what you're good at, while either hiring out or getting better at what you're not so good at. Acknowledging those things is very important.

Aidan 

This has been fantastic. And I mean, the whole idea of this episode that we're filming here today is to get people thinking about this. This is not a podcast episode where you're going to come on and you're going to come away with 100 answers. In fact, if you came away with all the answers, I think it would be doing you a bit of a disservice because the answers are different to every single person.

The best thing that you can do today, in my opinion, let's go ahead and take advantage of the No Strings Attached free consultation with Prime Corporate Services. Again, you can do that by going to thegrowthbooth.com/prime. If you want to work with these guys, then you can talk about what that looks like.

A few final thoughts from me here. You mentioned this a few times, Tommy, and I just think it's worth repeating. This is about being smart. It's about making calculated decisions. It's about getting advisors in your corner. Now I started working with tax advisors probably around about 10 years ago. It's been the best thing that I've ever done from a business standpoint. From a personal standpoint, because instead of me trying to figure all this stuff out, I finally had people and a team of people do a lot of that hard work and heavy lifting and thinking for me. It just works out so much better in every way. In fact, good advisors will end up saving you so much more money than what you end up paying them.

For me, I feel like when I work with advisors like Prime Corporate Services, it feels like I've almost got like a free employee, someone who's on my team who is a specialist, and I feel like they're always in my corner, they're always looking out for what's best for me. I think that's the relationship that you want to strive to have with anyone who performs any kind of specialized work, bookkeeping, accounting, advising you on your taxes. And, again, Tommy also mentioned, it's not what you make, it's what you keep. So if you're working with specialists like Prime Corporate Services, then their whole reason for existing is really to help you out with that and the way that they've been able to help so many customers… how many did you say there was? Like 150,000?

Tommy 

Over 150,000 businesses that we've structured since the start of Prime Corporate Services.

Aidan 

That's mind boggling, and did you say 12 years ago Prime Corporate Services kicked off?

Tommy 

Well, 12 years, we started with four people. We now have over 200 employees. Once again, I tell you: think bigger, because that was something that I didn't do in the beginning. I never in a million years thought that we would have the company and the organization that we do. And it was a downfall, I think, that if I thought a little bit bigger, and the work ethic was there, the idea was there, the need for service was there, but the mindset held me back a little bit, so it's easy for me to tell you not to do it.

Aidan 

The point that I was making was that is the only way that a business like Prime Corporate Services can succeed is by helping its clients to either relieve pain or to save the money or help them make more money. I'll sign up for any one of those three things and, again, jump on a call with Tommy's team, and you'll find out about how this can be applied to your specific situation. I think the best time to do this was yesterday, actually. It's one of those things that you can keep kicking down the line, but ultimately, the longer you leave it, the more you're potentially missing out from.

The last thing that I want to leave everyone with here today before we wrap up, and this is something that Tommy said earlier, you need to think about planning. You need to think about profits and protecting your business, and if you've got advisors in your corner who can help you with that, then I think only good can come from that.

So Tommy, thank you so much for taking some time out of your busy day to be with us here today. I know that I speak for the hundreds and hundreds of our subscribers who have gone over and, and used your services. I say thank you on behalf of all of us for everything that you've been able to do. I look forward to jumping on another call with you, hopefully soon. We can dive deeper into one of these areas. Hopefully, it won't be another 100 episodes from now.

Tommy 

I'm more down. We can go down to entity, business credit, tax, I could talk about these things all day, that's so impactful. Thank you for having me. Thank you for all the current clients. 

One thing that I'll just end with as well, from my standpoint, is when you schedule that call, know that it's for you, this long-term relationship has been created because if you're brand new, tell us you're brand new, and tell us you want us to talk to you like a third grader. If you said "Tommy bored me half to death, and I really need to get into the higher level tax strategy," let us know how we could benefit you and better your business so that you get the most out of that one-on-one call. That's what it's all about.

So thank you, Aidan, thank you to the entire team. I appreciate you having me back.

Aidan 

Well, that's a wrap guys. You can find out more by going to thegrowthbooth.com/prime. You can set up your one-on-one consultation. And as always, you can find the video version of this episode over at thegrowthbooth.com, go to episode number 96. You can also find us on YouTube just by searching for The Growth Booth, and you can listen to the podcast wherever it is that you like to listen to your podcast. We'll make sure that we include links and show notes over at thegrowthbooth.com. So that's a wrap. We'll see you on the next episode of The Growth Booth. Bye for now.