Welcome to The Accelerated Investor Podcast with Josh Cantwell, if you love entrepreneurship and investing in real estate then you are in the right place. Josh is the CEO of Freeland Ventures Real Estate Private Equity and has personally invested in well over 500 properties all across the country. He’s also made hundreds of private lender loans and owns over 1,000 units of apartments. Josh is an expert at raising private money for deals and he prides himself on never having had a boss in his entire adult life. Josh and his team also mentor investors and entrepreneurs from all over the world. He doesn’t dream about doing deals, he actually does them and so do his listeners and students. Now sit back, listen, learn, and accelerate your business, your life, and you’re investing with The Accelerated Investor Podcast.

Josh: So Hey, welcome back. This is Josh Cantwell. Welcome back to the Accelerated Investor podcast, an interview series. Excited to be with all of you. And today we’re talking with and interviewing a good friend of mine, his name is Tommy. He’s the president at Prime Corporate Services. And whether you’re a real estate investor, you own an ECOM company, whether you want an Amazon business, a brick and mortar store, or you’re a marketing agency. You run, we all run into the same challenges, which is one, how do we keep more of the profits that we make from our business? So we’re going to talk today with Tommy about tax planning and a lot of the changes to the tax code that the Trump Administration. You know, this is the first time we’ve gone through our first official tax season, which closed back on April 15th of 2019.

Josh: So we’ll talk a little bit more about tax planning with Tommy. We’ll also talk a little bit more about entity structuring, to set up your business the right way and make the proper elections to take advantage of the new tax code. We’ll also talk for those of you that have intermediate or advanced businesses about estate planning and how to pass along more of your business to the people that you love and the people that you care for, how to avoid probate and properly pass along your company and your profits, your businesses, your assets to your heirs. And finally, every business needs funding every business needs business credit or corporate funding. So we’ll talk with a lot more with my guests about what services they provide for business funding and all four of these kind of pillars of building a successful business.

Josh: So, hey guys, welcome back. This is Josh Cantwell again, welcome back to Accelerated Investor, happy to be with all of you and really excited today to be having a conversation with a business advisory company that we use that a lot of my clients and students use to really get the logistics of their business up and running. Everything from corporate planning, LLC formation to tax planning, estate planning, as well as building business credit. So it doesn’t matter if your own an ECOM company, if you’re an investor in the markets, whether it’s real estate investing, stock, bond, mutual fund, whether you’re investing in Crypto, cannabis, oil and gas, whatever it is that you’re investing in, whatever it is that your business is.

Josh: If you’re an entrepreneur and you’re looking to pay less taxes, if you’re looking to have a better business plan, if you’re looking for more business credit to fund your receivables, to fund your down payments on your real estate investments, you know, fund maybe earnest money deposits or buy more inventory, you’re in the right place. This is going to be a really fun conversation. I’m here today talking with Tommy Thornburgh. He’s the president of Prime Corporate Services and they provide a tremendous amount of horsepower for businesses to be able to accomplish their goals with all the things that I just mentioned. So Tommy thanks for joining me today, man. How are you?

Tommy: Thank you. I’m doing very well. Thank you for the intro and it’s an honor to be here. Thanks for having me.

Josh: Yeah, you bet, Tommy. So I know that you provide a lot of different type of legal and accounting and business advisory services for small to medium size businesses. So before we jump into some of the guts and some of the logistics about exactly what some of the benefits are of working with you guys and some of the things business owners should look out for, why don’t you just give us a quick rundown if some of my audience doesn’t know who you are, what Prime Corporate is and how you guys were founded and how you’ve grown your business. Just give us the two minute background. Give us some color, some foundation about you and your company.

Tommy: Absolutely. So I guess just to start kind of our motto and what we live day to day by is, it’s not how much money you make, it’s all about how much money you’re able to keep in your pocket and treat it like a hobby, it will cost you like a hobby. Treat it like a business, reap the rewards of a business. So, like you said, I mean, we focus on business in general, whether it’s real estate investing, stock investors, online businesses. We’ve been in business for about nine years now and like you said, we’ve worked with a lot of your clients and actually been to a couple of your events. And for the clients that I’ve worked with that are listening, I’ve enjoyed working with them and it’s exciting seeing them build and grow. So we’re in it for more the long term and for the tax savings and the entity set up and just the proper foundation to be able to build and grow your business from.

Josh: Yeah, you bet. So think about it this way, guys Prime Corporate provides really four key services for businesses of all kinds, including real estate investing. So initial LLC formation. So if you’re just getting your business up and running and maybe you’ve never done a real estate transaction or you’ve never, you know, you don’t have your ECOM business set up yet, LLC formation, business formation is part of it. Then as you make profits, tax planning becomes the second part of it.

Josh: And then if you’re having a successful business or you’re looking to do a lot of deals, you’re going to want to leverage yourself. Meaning you’re going to want credit, you’re going to want a loan. You’re going to want some sort of revolving business credit. So that’s the third piece. And then finally, as you build your business and make millions and millions of dollars, you’re going to want to successfully do your estate planning to pass along more of what you make to your heirs, to your spouse, to your partner, to your kids, or to whoever you’re passing along your business proceeds to down the road.

Josh: So really the entire life cycle of an investor from formation to building to credit to tax planning and to estate planning, that’s what Tommy and his company does. So tell me, let’s start with the end, right? So I’m more interested in the tax planning and estate planning part of it. Let’s start with the end and then work our way back to LLC and business formation. We’ve got a lot of clients who are already successful that already own apartments, that already own self storage. They’re private lenders, they’re worth hundreds of thousands or millions, they’re six, seven and eight figure investors. And of course they’re all thinking, how do I pay less in taxes and how I protect more of my assets in an estate planning scenario. So tell us just a little bit more about that, what you guys do, what you specialize in and how you can help them in that perspective.

Tommy: Absolutely. Yeah, that’s a good question as well just as far as the long term and the longevity of protecting your legacy. That’s what we’re working day to day for is to build passive active and all these other types of income. Real estate investors especially, it’s recommended to update your estate plans, trust, wills, living wills, power of attorneys every three to five years. And for some investors that are much more active, like you’re talking about on the more advanced scale, that could even shorten that span.

Tommy: So backwards to forwards, like you said, starting with the estate plan, most estate plans are going to be made up of four components. So a will, a trust, a living will and a power of attorney. I won’t get into a lot of the ins and outs of those components just because depending on your situation, depending on the state that you live in, our attorney’s going to tell you different recommendations of what really works best for your situation. So, but I can tell you that the trust is going to be the most important component because in most states that’s going to be the one that’s going to help avoid probate, especially as you’re building and growing more of a residual income and a longterm legacy for your family, which is usually the ultimate goal.

Josh: Yeah. So it’s interesting we’re having this conversation now because, you know, I’ve been working with attorneys and built my estate plan years ago, long time before you and I met Tommy years ago. But we’re in the process of updating some of those things now because you know, from my own perspective, like we have a will, right. So if I pass away, you know, all this stuff goes to my wife and if my wife passes away, it comes back to me. But if we’re both gone, then all this stuff goes into our trust and the trust is really designed to protect all these assets for the benefit of our children. And then, you know, we have to nominate a trustee and somebody that’s going to take care of the assets, well for a long time it was my father. And as many of you know, my father has Parkinson’s and so, you know, my dad is a really, really smart businessman, but he was diagnosed with Parkinson’s a couple of years ago.

Josh: So we’re going through the process now of switching to a new trustee and making that happen. And you know, we don’t have, like a lot of people will pick a family member to be their trustee for a lot of elderly parents. They pick, you know, maybe their oldest son or their oldest daughter, whoever’s maybe the most financially astute because they want to avoid paying a legal service to be the trustee because legal services obviously charge a monthly or an hourly rate. So for us, you know, we don’t have, you know, that one sort of person, my kids are not old enough, you know, that’s going to be a trustee. So we’re going through that process of really thinking through like who’s our trustee going to be and we’ve ultimately settled on using a law firm, using an attorney to settle our state.

Josh: And in healthcare power of attorney, of course, you know, without going into too much detail, and again, it’s different for each person, different legally state by state, but you know, if something were to happen to you, how do you want to be cared for when you can’t make those decisions for yourself? You know, how do you want to be cared for in a hospital situation, a hospice situation, in a situation where you might be on a fulltime respirator life support essentially. How do want to be cared for?

Josh: So my wife and I have made all those decisions if really, really important to get that stuff planned out. Because listen, as a pancreatic cancer survivor, somebody that’s been through the proverbial dumpster fire of life and why this isn’t, this stuff never comes up when it’s convenient, right Tommy? Like this is all stuff unfortunately that you have to prepare for in advance that you have to kind of have ready in advance in the future case that you need to have this planning done. So why don’t you just talk to that for a second time and this is not convenient planning. It’s something that you have to have some foresight to do in advance.

Tommy: Yeah, I’m happy your in the middle of it because this will just help kind of help you understand what to do as far as what you want as well. Because in your previous podcasts, I’ve heard you talk and it’s obvious how much you care about your kids and your wife and the ups and downs and the trials that obviously everyone has to go through on a daily and a life basis. But you work your whole life to have your kids love each other and to want to be best friends and to carry on like you did with your brothers and like you’ve mentioned previously. But the last thing you want to do is have a strain there over your legacy and over the finances you’ve worked so hard to break up a relationship.

Tommy: Everyone knows someone that either fights with no longer talks to or has a terrible relationship that’s ruined over either money or assets. And you working as hard as you are, I know the last thing that you want to do is have your kids fight and argue over what you worked hard for when you’re raising them to love each other and be best friends. So it’s this is the, I’m happy we’re starting here because this is the least exciting part to talk about. I feel like an insurance agent when I’m discussing estate plans.

Josh: It’s being an insurance agent Tommy. Don’t talk down about good insurance guys.

Tommy: Yeah, no, no, no insurance guys are great. It just, it pulls at your heartstrings every which way you go, however you want to look at it. But if you simplify it and realize it’s life, things happen and if we can button things up and have additional protections as well. There’s areas of trusts where I know for your big time real estate investors and probably yourself, land trusts are huge, especially when you have as many doors as a lot of your clients do. And protect the legacy that you work day to day and keep in mind the emotional side of it. Trying to eliminate as much as much as you can from the generations after you.

Josh: Yeah. So tell me if you ever seen that movie Gran Torino with Clint Eastwood?

Tommy: Yes.

Josh: You know like the end of it, right? So he, the whole final scene happens and he gets, he gets murdered and killed by those that gang of gang of people. And but he’s sitting in front of the attorney is sitting in front of the family and he’s given away his Grand Torino and the way he structures his will and some of the language is absolutely hilarious.

Josh: But that’s what I think about is his capacity to control his money and his legacy through those documents where there’s no question about what’s supposed to happen with the money and where it’s supposed to go. That’s always what comes to my mind to make the morbid seem kind of fun right, is that last seems if you haven’t seen it, if you’re one of our members who listen to this, checkout Gran Torino and the last 10 minutes is amazing. Also Tommy, that movie, The Mule, which just came out also with Clint Eastwood is amazing, if any of you…

Tommy: Yeah, I haven’t seen that yet. I love Clint Eastwood, so I’ll have to thrown on the to do list.

Josh: Oh man, it’s based on a true story and it’s just an amazing, amazing and Clint Eastwood is just an awesome actor and awesome director. So Tommy, back to business as far as land trusts. So for those people that haven’t learned about land trusts, aren’t aware and how they can help from a financial planning and estate planning perspective and asset protection perspective, just talk for a second. What are land trusts and how are they beneficial?

Tommy: Yeah. And once again, this is going to vary based off of the state in a lot of cases, but just land trust and we’ll get into the entity side of things of what the recommendation is as far as how many doors inside of each entity how those are going to be split up. But land trusts are a phenomenal way to separate larger properties and even smaller properties depending on whether you still have a loan on the property or if they’re paid and you’re just cash flowing from them. But it’s a great way to separate from it other assets in case something were to happen to try and eliminate some of your liability and just mitigate the risk you have with particular properties.

Josh: Got it yeah. So people can understand the land trust. You can deed the property into a trust and nominate a trustee of that trust. But then the sort of the property, whether it’s an apartment building or whether it’s a bunch of single family doors get basically transferred into that trust. So the assets in the trust, the trust now is basically it’s own entity and whoever the beneficiary of that trust is, has the benefit of the assets in the trust. So we used to use land trusts years ago when we were doing short sales and short sell flips.

Josh: We would have the owner deed the property into a land trust and then they would transfer the benefit, the beneficiary of that into the property into the trust than we would become the beneficiary. So if we wholesaled and flip the property, we would then be able to profit from that property being sold through a short sale situation and it was very beneficial. But they can be used in many different states to protect assets, separate assets. You can maintain the benefit of that by being the beneficiary of that land trust, so really cool stuff. Tommy you guys help with that kind of planning, right?

Tommy: Absolutely yeah. And there’s a lot of different, I mean revocable irrevocable there’s a lot of different types of trusts and there’s a lot of different options when it comes to power of attorneys and living wills for instance, if something just happens to you, if it happens to you and your wife together. I mean, once again, a lot of unfortunate things that happen in life in general, but a lot of different things that you can do to make sure that if one A happens, one B takes place, if one B happens with one A then one C is going to come into play. So we kind of level it that way as well.

Tommy: One other thing, the Gran Torino was excellent, but if we’ve got some Prince fans in here, which I’m sure we do, he’s got a craziest estate story. Obviously his worth was millions and millions of dollars and he didn’t have a great relationship with his family. And there’s a pretty crazy story about when he passed unexpectedly he didn’t have any of these things in place and a family member that he was not fond of at all ended up receiving his entire fortune. So you have some time it’s an interesting story to look into.

Josh: Yeah. So if you didn’t catch that, because I almost missed it, Tommy was talking about Prince, the music star, and for those of you millennial’s out there, and maybe you don’t know who Prince is, but you know, we grew up with Michael Jackson and Prince being like the competition for who was the king of Pop, who was the most popular music star of the 80s. And Prince and Michael Jackson, man, what a battle that was back in back in my teenage years just phenomenal musicians.

Josh: And yeah, I’ve heard that Prince’s estate went to someone that he was not fond of because he didn’t have any of these things in place. So it’s a bitch for someone to work all this time and build such a massive fortune, whether it’s in real estate, whether it’s in music, whether it’s an ECOM, whether it’s an Amazon, whether you have a brick and mortar store. I mean, isn’t that what we’re looking for all working for is really legacy wealth and legacy means that you’re leaving a legacy to the people that you want, not the people that you don’t.

Josh: And the beautiful thing about these different trusts and things is that you can, these can all be customized. They’re essentially contracts if you will, between you and your future heirs that you can split that thing up a million different ways. So a really good attorney can place those assets really wherever you want. They can be as custom as complicated as you want or as simple as you want. And Tommy’s company, you know, takes care of all that stuff. So definitely, definitely look into that. So Tommy backing up then into the next thing, really the tax planning, right. So you’ve got a business, the business is making money, six figure, seven figure eight figure business. Tell us a little bit more about what Prime does Prime Corporate does in the tax planning perspective and that part of somebody’s business life.

Tommy: Absolutely. So we put together an excellent team of CPA’s that it’s one of those things that it’s the more the merrier. A lot of times when there’s firms that are just one CPA or a couple of CPA’s that don’t interact very much, there’s so many tax changes that are constantly evolving and the reality is it’s a very exciting time for us and for entrepreneurs in general because of these tax changes that are not only constantly evolving but have recently been passed by Congress and the Trump Administration. And regardless of what you think him, the reality is as an entrepreneur, it’s a great time to either take risks or have businesses that profit or loss, make sure that you’re not leaving money on the table and you’re utilizing those deductions.

Tommy: So to answer your question as far as these six figure plus investors, a lot of that goes into how are you structured? How are your entities set up? How are you logging and keeping track of your expenses and as you’re making your expenses, are you aware of the categories that these can be tied to make them either deductible or make them what the IRS would deem ordinary or necessary. Part of the changes are section 212 being suspended ordinary….

Josh: So tell us more about that Tommy. Like what are some of , we just went through the first official close of the taxes and of course a lot of people including me, file extensions and, you know, our taxes are not due until October 15th but for the majority of the folks that are either self employed or have a W2 income or even businesses that try to wrap up, obviously April 15th that was a couple of weeks ago. So what was that like? What was it like for you? What changes did you see? Are there two or three things that stuck out that were frequently asked questions or certain changes in the tax law that you saw people taking advantage of or things that entrepreneurs didn’t know that your firm was able to educate them on? What was that whole close April 15th like? And what were some of the common themes that you saw?

Tommy: Yeah, absolutely. I mean, throughout the entire year of 2018 we’re constantly getting asked with the new standard deduction, the standard deduction has raised, whether you’re single or married between $12,000 and $25,000 so you have your standard deduction as an individual, which is great, but a lot of people were actually concerned that is that going to limit my itemized deductions as an entrepreneur, as a business? So after lengthy conversations and research with our teams of CPA’s, that answer’s no.

Tommy: I mean, not only are you still going to get your standard deductions, but assuming that you’re structured properly and assuming that you’re itemizing these deductions and there necessary for the business and we’re able to show that, we can separate it, but we got to make sure that the business is in place, you’re set up properly so that you not only get your standard deductions as an individual, but you can come in and you can take these additional itemized deductions as a business as well. So it’s exciting whether you’re running a jewelry business out of a room in your house or if you are a six figure seven eight figure real estate investor.

Josh: Fantastic. So everybody knows the standard deduction is just you get a deduction no matter what, right? You know, your wife, your partner, your kids, etc. There’s a standard deduction that was raised. The itemized deductions is really just all of your items. If you think about in your business, that are on your profit and loss, all the different itemized, different deductions that you get for business, expenses for owning real estate, assets, depreciation, all of these different things are itemized. And there was some fear that while the standard deduction went up, so I’m not going to be able to itemize these other expenses and deduct those. And what they were able to do is if you’re set up properly, is take both the standard deduction and the itemized deduction, which means you’ve got to take more deductions in general and you’re able to pay less taxes. That’s the end result.

Josh: And so you see a lot of things on pop news, uh, about, well, you know, the Trump Administration came in and they said there was going to be all these tax breaks, but I didn’t really get as big of a check. And this is where you’re working with an expert CPA firm and an expert sort of financial planning type of firm is really important because if you just do your own taxes or you hire a basic, let’s call it a brick and mortar firm to just do your taxes, they’re just going to do them, they’re going to throw them on your, your 1040, and they’re going to throw them on your tax forms and you’re just going to end up paying whatever you pay. You know, you basically, my point is you get what you pay for.

Josh: Is it going to be a little bit of more of an investment to have an expert from like Tommy’s to help you navigate this? Yes. Does it cost a little bit more money? Yes. Is it a little bit investment? Yes. But every time I’ve invested in, whether it was attorneys or accountants to help me understand what I’m doing, I always get a larger deduction. I always find tax breaks, real estate breaks, depreciation breaks, interest breaks, itemized breaks that more than pays for what that investment in the firm was. That’s the trade off. You get what you pay for. So really, really important. So Tommy, anything else that you saw? Any other recurring frequently asked questions or themes around the filing that was relative to the new tax laws?

Tommy: Yeah, just to, I mean, just to expand on what you just mentioned as well as you got over 72,000 pages, of a tax code.

Josh: Who reads that stuff?

Tommy: If you tried, they change it halfway through anyway. So it’s not necessarily a bad unless you’re relying on the knowledge that you’ve had two years ago, five years ago, God forbid, 10 years ago. There’s so much change that’s constantly happening and even the standard deductions have gone from four and a half, five pages to a half page with some industries. Obviously every industry and every business is different and has different deductions. But if you’re treating this like a hobby and you’re just trying to do some research until you’re ready, then yeah, it will probably hurt you from a tax standpoint.

Tommy: But for most of us that are probably listening to this and involved with this, that are treating and operating these things as a business, I sure hope that you felt and reaped the rewards of the tax changes because there definitely set up for entrepreneurs and business owners more than more than individuals, which is where a lot of that news is coming from is just from individuals that are hurting from it.

Josh: So, yeah, I mean, look our economy is changing quickly. Our world, the world economy is changing quickly and you know, you have all these big massive businesses that, you know, people dominate. Like, you know, Bernie Sanders talks a lot about, you know, whether you like them or not, I’m not taking a political perspective here, but you know, they should pay their fair share. And of course they should, right. Of course he should. What I’m getting at and the point I want to make here is that small businesses turn into medium size businesses which turn into big businesses. Every big business that’s on Wall Street today was at one time a small business. And it’s important that those small businesses have the opportunity to grow, pay as little taxes as possible because they’re ultimately the ones they’re trying to build their payroll, build their, team build their staff to become a medium sized company to a large company.

Josh: And so a lot of things you see in pop culture, TV and pop news is, you know, the individuals that, you know, we’re not business owners that did not incorporate that, did not have an LLC. Maybe they paid the same amount of tax or even pay more because all the benefits are really around small businesses. And you know, just about everybody that I know, even my own staff, even my boy Ramy, my AV director that’s sitting here helping us record this, has his own other side businesses. He’s got a marketing agency and a video agency that does work outside of his work with me. My chief marketing officer who works for me full time also has a separate agency where he works with other clients in the evenings and the weekends. So everybody has a side hustle, right? That’s what I’m getting at and they should, I love that entrepreneurial spirit, the side hustle, right?

Josh: But looking back to you know, 25 years ago or 20 years ago when I first read Rich Dad, Poor Dad, what was that entire book built around? It was really built around taking your passion, turning it into a side hustle, incorporating your side hustle into a business so that you can now deduct all the things that you’re going to buy anyway. Things like cell phone, computers, you know, this AV equipment, your car, all of these different things into an entrepreneurial business and these things become necessary expenses.

Josh: This is not anything new this is years and years and years ago, but the current administration is very pro business. It’s very pro entrepreneur, and they finally incorporated tax benefits that allows the entrepreneur to keep more of the, it’s the risk reward scenario, right? The more risk they take, the more the reward should be if they’re successful in running their company. If the market tells them, look, your, your business sucks, the market’s going to tell them because they’re going to make less profits or no or they’re going to lose money.

Josh: But if they’re willing to take the risk and run a good business, they should keep more in order to reinvest in their company because they’ve taken the risk, they’ve taken the risk. And that’s really what I think our administration gets more than any administration in the past is the risk reward scenario. And so whether you like them, hate them, whether you’re left, whether you’re right, doesn’t matter, you should start a business and you should use that business to make more profits for yourself and keep more because of the risks that you’ve taken. That’s ultimately the point here. So Tommy, kind of pivoting then into, you talked about, hey, the tax planning, the estate planning is all about getting set up properly, right? It’s all about the entity formation, the business formation at the beginning and to give you guys, you know, a little bit of background here, right?

Josh: So I started my first LLC in I think it was 2001, 2003, 2004 created some more, 2006 start a software company, sold that 2007 Incorporated Strategic Real Estate Coach. A lot of those were set up as LLCs and then we elected subchapter S in an LLC, some of them were partnerships, some of them are sole proprietors. Then we started a C corporation, which was essentially an employee type of holding company. Then we started, you know, flipping more properties. Then we started a private equity fund. Like, look, I probably started opened, closed and still run about 30 different entities. So a lot of our new students, I’m talking specifically to our new people that come and say, well, what entity should I have?

Josh: So the first piece of advice I want to give you is yes, you should have the right type of entity and Tommy’s going to talk about that in a second, but just because you set it up one time doesn’t mean you’re married to that LLC forever, okay. I am sure that Facebook, Uber, Google, they’ve changed reformatted their entity structure multiple times. And we’ve certainly opened one LLC closed it set up a new LLC or a new C Corp because we needed to do that. So business changes is my point. What you’re doing today is going to be different than what you’re doing three to five years from now. So you got to make the best decision you can on entity formation and structure today. But don’t be married to that structure three to five years from now when your needs change, right?

Josh: So, Tommy, let’s talk a little bit about that. You know, certainly guys, listen, if you want to do a deep dive on any of this stuff, we’re going to put some notes in the show notes in YouTube and an iTunes for you to be able to, you know, Tommy’s company information reach out to them. Definitely touch base with them, use their services, we use them, we highly promote them. It’s fantastic, but we’re not going to it to cover everything today in this quick interview series. So Tommy what is right now for a lot of business owners based on the new tax code, what is a favorite structure? What is some of the things that you’re seeing a lot of business owners do and why are they doing that?

Tommy: Yeah, good question. I think expand on that a little bit as well and let’s keep in mind here, everyone’s situation is different. Every state has got something that’s a little bit different. So we’re happy to break those down, like you said, and I think you have a link if not, we’ll get you another one to add. But I think getting off the ground is one of the most exciting feelings as an entrepreneur. A lot of experts, us with Prime Corporate, and I’m sure a lot of the listeners can say going from a small business to a medium business is one of the most challenging feats and in business in general. And it certainly was for us. I mean what takes you from getting off the ground, a small business, and that small business to medium business. And I like to think at the end of the day a lot of it is how much money are you able to utilize and keep in your business to be able to reinvest.

Tommy: So if you are structured properly from the very beginning and you’re aware of some of these tax changes and some of the entities setups that may feel like they’re premature when they’re just getting started or may feel like you have everything you need when you are a seasoned veteran, times and entities change and benefits change and if you’re not keeping up on them, it’s when you’re going to realize that should of, could of, would have, I wish I did this five years ago. I wish I did this 10 years ago so.

Tommy: With that being said, I mean, when you’re first getting started, a lot of times our first recommendation is setting up an LLC. And the reason for that is there’s ways that you can amend and change the LLC as you experience this growth or even the defeat factor of business in general. But it flows through it keeps things simple it keeps them easy. You still get your personal deduction. It allows you to take additional itemized deductions and they’re going to flow through to one return. What I love about the LLC, and I believe one of your coaches, actually, I believe it’s DK when I was at your event, said a general rule of thumb is once you’re making around $70,000 or more, then we look at the LLC being taxed as a sub chapter S, or even looking at the options of, of an s corporation so.

Josh: And the S advantage there being taxed as an S versus a C, I know the big part about it is when you get taxed as an s you can then avoid paying self employment tax, is a big part of it. And in an exchange for that, the government really wants you to take a certain portion of your income as a W-2 wage. So you take, you know, it could be a $50,000, $100,000 thousand. Really the rule of thumb is up to about $200,000. Give or take of a W2 wage. You take the W2 wage obviously then defer a big chunk of that W2 wage into retirement plans like a simple IRA or a 401K or something like along those lines you defer a lot of the income, but now you’re saving. What a lot of people don’t realize is that in a lot of cases, Tommy, that the self-employment tax can be more than the federal income tax. And so that’s a big, big reason for it, right? Isn’t that what you’re seeing? And that’s definitely some of the things that I’ve seen about it when I was getting my companies off the ground.

Tommy: Yeah, just to elaborate a little bit further on that self-employment tax. That’s obviously Medicare and Social Security. About 15.23% total. So you’re not able to avoid all of it, you’re able to avoid half of it. So if you could take that half and either reinvest it or to give you an example, I mean my sister is a financial planner, so I’d rather keep those different types of funds in my corner, put them into my own retirement that I can tax defer or I can set myself up. I like to think I could make more money off of my money than just relying on Social Security and Medicare to be there. It’s good and people, it’s crazy. Sometimes I’ll have people say, but I want to pay those things and if you want to pay them, trust me, they’ll take it. But I’d like to think that if you can keep that in your corner and you can bet on yourself and you could put it into your own retirement accounts, you should be able to make more money off of your money.

Josh: Yeah. Yeah. You’ve got, you know, when I was talking with Kevin O’Leary, Kevin’s been on our podcast and it has also, you know, spoke at our live events and, and Kevin and I were talking about how, you know, from basically zero to $5 million in sales is basically sprint mode. As an entrepreneur you’re just hustling. You’re putting in the 60, 70, 80 hour work weeks. You’re trying to get your business off the ground. You’re doing everything, you’re wearing every hat. And for a lot of businesses, just off of pure muscle, off the pure grind, off a pure just extra hours, they can get a business off the ground and make it profitable. So that’s what I would consider a small business, right? And out of that $5 million in sales, you know, maybe there’s a 10% margin and the owner’s keeping a half a million dollars.

Josh: And then we were talking about how the next phase of the medium sized business from the 5 million, 10 million is really the absolute hardest part of growing a company. Because that’s where as an entrepreneur and as a leader, as a CEO, you have to realize that now delegation, the art of delegation becomes a whole new skill set that the CEO, the visionary, the startup must have. Because you can’t go from 5 to 10 or 5 to 20 million unless you have amazing leadership team an amazing culture and amazing vision of where you’re going and everybody’s in the same boat rowing the same direction. But you have to be able to delegate because now there’s only amount of, you know, even if you’re willing to work 80 hours a week, even if you’re willing to work from 5 in the morning until you know, 11 o’clock at night and only sleep four hours and then take the other two hours for your personal life and you’re willing to grind it out 16, 18 hours a day, there’s still a finite amount of time.

Josh: And so that part of now growing that business, that medium sized company becomes crucial to delegation. And that point, you know, you have a real business that has real legs and at that point you’re going to wish that you had talked to Prime Corporate and Tommy and make sure you had your business entity set up right. Because now as a business owner, your personal income is approaching that million dollar range or even more. And that over 10 million, it really now becomes really your executive level team, your C suite and your vice presidents are essentially running your company for you.

Josh: And as the owner, you’re really focused on culture. You’re focused on branding, you’re focused on selling your company and you’re focused on raising capital. And so that brings me Tommy to our last discussion point, which is, which is credit, which is business capital, that really just having enough money to bootstrap your business, getting business credit, having access to funds. And you guys also do that for business owners, small, medium and large companies. So tell us a little bit more about the process. What is business credit or corporate credit and how is that different than personal credit?

Tommy: Yeah, so that’s, I mean, everyone’s heard it and the IRS will come out and say it that 70%, 80% of businesses fail in the first two years. And a lot of the reason is lack of capital for reinvestment. You know, and a lot of them are restaurants. If you just think about anyone, the area you’re in and how many restaurants come and go and if you just think about a restaurant in general, the amount of money that goes into it. So let’s set restaurants aside, real estate, investor, ECOM stores, Amazon. Business credit and corporate funding can be an excellent tool to build and expand your business. Getting started, most investors, we have to start with personal funds, retirement accounts, personal credit. The list goes on and on.

Josh: Friends and family, mom’s retirement, your retirement, whatever it takes, right? To get your business off the ground. It’s very, very risky. It takes a lot of work. But that’s where like the friends and family, like there maybe the only people that believe in you and you know, you have to be, you know, at this point in my career, Tommy, like when we talk about often in our weekly basis in our, in our company meetings is, is how do we protect our investors capital, right? And that investor capital could be bank funding, it could be corporate funding, it could be personal credit cards, it could be friends and family. It could be, you know, we have over 200 investors in our private equity fund. That really becomes the number one goal is in the past it was like, let’s just build a big business and let’s keep it all to ourselves.

Josh: What we realized over time, very rarely does a business grow without corporate credit or bank financing or friends and family or some sort of investors coming in. So just from a psychological and a philosophy perspective, I want everybody to understand that as they build their business, it becomes less about you and more and more about, you know, how do we pay our investors back? That becomes the first priority. How do we pay them back the interest or the profits that we promise them and pay back their principal? But it’s got to be a combination of personal credit and personal investment when you start then going into corporate and business credit and then actually having investors in your business that invest with you passively for the long haul. So how specifically, Tommy does Prime Corporate work with business owners to get business credit or corporate funding?

Tommy: We have an excellent team of credit advisors that we’ve put together. A couple of them in particular have got 30 40 years experience in just lending and business credit and corporate funding. In the 90s, one of our advisors, if you took out a small business loan, there was about a 30% chance that he saw it come through. So their experience and the relationship that they have gained over the years is phenomenal and we’re lucky to have them.

Tommy: But what they do is they actually teach and show you how to build and develop a separate credit profile with your business, whether it’s an LLC, an S Corp or whatever entity we decide to structure, they’ll take you through a process of building that separate credit profile. So that one, you’re separating your financial liability that much more personal is personal business is business and if we could do it from a financial standpoint as well, it’s going to be very beneficial for you as an investor and for your as a business owner.

Tommy: So I’d say that’s the first part is just building that and understanding what it is. The second part is understanding how to locate funds. And I know that this is something that you’ve spent years and years doing from a capital standpoint. It’s the same concept from a business credit stand point. There’s good rates and there’s bad rates. If we can help you understand what to look for and what banks and what vendors are willing to work with your type of business, it’s going to be beneficial so that you know the key factors of what to look for. So you’re locking lower rates, which is ultimately keeping more money in your pocket. Like I’ve preached. And then longterm for real estate, if you’re going in and remodeling a kitchen, remodeling a bathroom, if you are building a website and your marketing that website, if you’re investing into your business, bottom line, I’d like to think the reality is you’d much rather utilize business credit, corporate funding, let the business pay for itself and then pay you as an investor from there. Keeping things separate.

Josh: Absolutely Tommy. I mean, I can’t even tell you how many times I’ve talked to primarily real estate investors, but also guys that have ECOM companies and they just, they keep saying why keep reinvesting all the profits. And that’s a fancy way of saying I don’t have any outside funding. You know, I don’t have outside funding. So if I make a half a million dollars in profit or a million or $2 million in profit, but I’m pouring it back in the business, it means that your company is growing and expanding, which is fine, but you’re taking profits that, you know, maybe a bank would fund of some or all of that corporate funding. You know, and you’re able to not only have the personal income that comes from your business, but also not have to bootstrap it, you know.

Josh: When I got to the point where my business could not only make a profit, but I can take money off the table every Friday, every other Friday, and then pay out bonuses to myself and my other business partners, you know, once a quarter. I mean, that was an amazing time. And also the reason why that was able to happen is because we had outside funding for our business. I didn’t have to take every nickel I made and put it back in the company back in the company. And so Tommy, I know you guys do a great job of kind of working with our students that we already have that are working with you guys to find, you know, what’s their sweet spot? How much money are they making? Can we get them business credit, build a business profile so they can get a funding outside of their personal funding, which is fantastic.

Josh: So guys, you know, we’ve been talking a lot about these four different, very important parts of the business. And you know, in some ways this is a long winded commercial, if you will, for Tommy and for his companies. And it sort of is because we really believe in what they do. And we also believe that they can help not only real estate investors but all the different students that we have that are in other areas. We’ve got a lot of people that follow us that are in ECOM or there other types of investing and they, they, they make profits in those companies and then they invest the profits that, you know, whether it’s a windfall of cash or net free cash flow, they invest those in real estate for more passive income. So Tommy, the last piece of it is obviously we recommend you guys 150%.

Josh: So if you’re interested in learning more, you know, check out the show notes, check out the links. But Tommy, I’m interested to know more about your entrepreneurial journey, right? When I have somebody come on that has a service or a business, which is great that we can talk a little bit more about that will help our students and our members, which is awesome. But I’m also interested to know about your entrepreneurial journey. Like what got you into getting away from, you know, a 9 to 5 job or a W2 income. What kind of risks did you take? What was your story in growing your business? Tell us a little about some of the challenges that you’ve had and why you decided to go the entrepreneurial route.

Tommy: Yes, absolutely. So I like to think that I’m still young obviously and certainly feel that way, but I’m going to take you all the way back to three years old actually. So three years old, my parents split and I’m obviously a life changing event right off the bat. Some things that I don’t even remember and some things that I don’t even realize we’re shaping who I’ve become to this point. With my parents, splitting both of them being entrepreneurs and being self employed as a kid, you don’t realize how much that’s really impacting you as you’re, as you’re growing up by.

Tommy: My mom tells this story constantly about she was a real estate agent. My dad owned a real estate company. So from the very beginning all I’m looking at and all I’m thinking about is real estate and open houses and I’m driving by this property that’s for sale by owner and I say, mom, stop the car. I think I’m five, six years old she says. I say, don’t you know that X amount of percent of for sale by owners are the next client that you’re going to get. So my mom pulled over, she ends up getting this for sale by owner and listed it. And I’ve heard that story about 800 times and I think I’ve told it about 300 now so. You become what you’re around in a lot of senses I think. So just seeing my mom as a real estate agent, as personable as she was and grind, get up grinds day in and day out, and then to see on the other hand my dad owned a real estate company in Las Vegas and to see it expand and to see it grow like it did.

Tommy: I get through high school. I turned 18 years old and I enroll into my first semester of college and I’m thinking, I’m just going to go and I’m going to go out and get a job and I’m not going to have the chaos that I grew up with that my parents were involved with. My first semester, one of my teachers, I’m asked to make a scrapbook or something in one of my classes. And I’m thinking, oh my word, I don’t know if I can make a scrapbook for college I’m out of here. So I packed up and went out to North Carolina, in Salt Lake City, Utah. That’s where I grew up. So I packed up and I went out to North Carolina and hit the pavement, started selling as a self-employed contractor door to door, selling pest control. So it started there and once I got back I knew that wasn’t something I wanted to do long term.

Tommy: So I jumped right into it. I mean, I’ve been working here at Prime for eight years and I’m 30 years old. So I kind of went back and forth with the whole sales thing and just went the sales route and went back to school and went that route. And now it’s a matter of building and growing what we’ve done here. And then since I’ve been here tried to build up the passive income between a rental property and I’ve been doing a lot of crypto currency, day trading and longterm trading with crypto currency, which I’ve absolutely loved. I’ll tell you, it’s not for everyone.

Tommy: And over the last couple of years it’s been very, very exciting. And over the last year it’s been very depressing. So take the good with the bad and here we are. I mean, I’ve enjoyed building and growing this company. We started with three or four of us and we’re up to 60 or 70 of us. So it’s been a, a fun ride. And like you said, we’ve turned the corner of let’s make this happen to how can we continue to inform and how can we continue to save more dollars for our clientele? Which has been an exciting change.

Josh: Yeah, it’s great to have a mission that is really all about other people, right? Serving other people. That’s what, at this point in my career, it’s all about, you know, educating the market, educating people about where they can park their money, where they can invest in real estate passively and invest with me. I like to invest passively where they can get such a larger, better, more safe, more secured return than they can in the markets. You know, there’s 79 million retirement accounts and only about 3% of those are self directed, meaning they’re self directed into alternative assets like real estate, crypto, cannabis, oil and gas, apartment buildings, all these kinds of things. Most people in the United States invest in a very traditional way in stocks, bonds, and mutual funds. And it’s a hell of a ride. I mean people have been, you know, up and down and up and down and up and down.

Josh: And the thing I refer back to is, you know, Dow Bar, which is the independent research firm that kind of oversees the financial services industry. If you look at the period from 1985 to 2015, the S and P 500 was up 10 and a half percent every year on average over that time period. But the average investor only netted 3.66%. That’s not my research that’s from an independent research firm, the number one research firm in the country. Your average investor only got basically three and a half percent when the market actually performed at 10 and a half. Because people are getting in and out at the wrong time. They’re buying high, selling low. It’s kind of a herd mentality and Wall Street buys, buys, buys pushes the values and then Wall Street exit a position and that’s when your average investor is getting in and then the position goes down in value.

Josh: And so, you know, it’s nice to have that sort of service mentality and building your business. I very much feel the same way of trying to educate people to have a bigger, better lifestyle simply by making better financial decisions. Yours is a lot of ways is protection, less taxes, easier way to pass their estate along. Mine is really the growth phase of growing their position, so it works well together. So listen Tommy, I really appreciated having you on today. Is there any kind of final parting shots, words of advice that you would leave our audience before you take off today?

Tommy: Of course. No, thank you so much for having me. It’s been a good time and I, I look forward to speaking with a lot of the clients. I mean the reality is if you have questions, don’t guess or assume and don’t put it off. I think that if you really want to make something longterm and if it already is longterm and you don’t understand what you’re making investments in or why you’re making investments, that could be tax deductible expenses or how can I protect this from an asset protection standpoint? Ask a professional, even if it isn’t us, ask a professional and make sure that you as an investor have that peace of mind of making sure that you understand what you’re doing and you’re doing things the right way.

Josh: Got It. Awesome. Tell me, appreciate your time today and if you’ve been enjoying this interview, let us know. Share this on your social platforms. Share this, leave us a comment, leave us a review or rating just push the word out and of course we’ll have Tommy’s contact information in the show notes. You can check that out in YouTube and iTunes and the other platforms that we’re on. And you can definitely reach out to them through those links to check out their services, highly recommend them. We’ve got hundreds of clients that use them already and having an amazing experience. So appreciate your time today. Thanks so much for joining us today, guys on the Accelerated Investor Podcast. We’ll talk to you soon. Take care.

You’ve been listening to Josh Cantwell and the Accelerated Investor Podcast. Leave a comment on our iTunes channel and let us know what you want to learn next, or who you’d like Josh to interview. While you’re there, give us some five star rating and make sure to subscribe so you can be the first to hear new episodes. Follow Josh Cantwell and his companies, the Strategic Real Estate Coach and Freeland Ventures on all social media platforms now and stay up to date on new training and investment opportunities to start your journey toward the lifestyle you’ve always dreamed of. Apply for coaching at JoshCantwellCoaching.com.