Does your business structure still fit your plans?

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If you're paying a million dollars a year in tax, you're already a philanthropist. If you have a business and you sell it and you're going to pay tax on it because the government's your partner, why not control the goods you're doing with at least a portion of that? We had a client uh just 2 years ago sell a business for $43 million and saved him just over $4.5 million in taxes on what would have been a $7.5 million tax bill. I would say construction left and right construction owners pay more taxes than everybody. They're leaving the most on the table. You have a lot more control and a lot more choices than you realize you have. Tax planning doesn't have to be a series of unpleasant decisions. It can be a series of transformational decisions. And when the government raises taxes to pay down all this debt, and that's coming, that's coming. So, welcome to Beyond the Bottom Line. I'm Joey. This is where we pull back the curtain on how the ultra wealthy actually

protect and grow their money without the complexity or the gatekeeping. So each week I sit down with the elite financial experts to uncover strategies that business owners can use right now so that they can keep more of what they earn and pay less in taxes legally. So today I'm joined with Mr. Carlos Loenberg, a tax and financial strategist, author of the Wealth on Purpose series, and founder of the Loenberg Group. Carlos has appeared on CNBC, Fox, and Forbes, and his work has been featured in the Wall Street Journal and Smart Money. So, for decades, Carlos has helped business owners uncover six figure tax savings, build bulletproof exit plans, and even use philanthropy as a tool for preserving and protecting wealth. So, if you're an American business owner watching this, you're going to want to sit through that one. We're going to break down why CPAs miss these opportunities, how the ultra wealthy design their strategies differently, and the most powerful move any sevenfigure business owner can do to stop overpaying in taxes. Welcome to the

show, Carlos. Thank you. Thank you, Joey. That was a nice introduction. Awesome, Carlos. So, let's start with that one. You've seen firsthand, right, how often business owners have huge savings on the table with a plethora of reasons why, right? Can you walk us back to the first time that you've realized just how widespread this problem was for business owners, specifically in the United States, and what that moment taught you about the current system? Yeah, you know, it was it was back during the estate planning when I was first getting involved in estate planning for business owners where we were trying to do what we could to eliminate estate taxes. Right. Yeah. So, you have a 60-year-old business owner. He's going to live till he's 85 and you're going to try to get rid of five or $10 million of estate plan estate taxes. Yep. Um, and I realized that there was so much, you know, if you would just save some of the income taxes, you would create more than the savings you're trying to

produce. And so I was like, you know, maybe it makes sense to talk about taxes now versus taxes in 25 years. Yeah. And and that was that was when I realized, you know, there there's some overlooked uh stuff out there, whether it was philanthropic planning or whether it was um how their entities were structured or um even in even some some kinds of retirement plans that were just being overlooked that could be tax savings vehicles now. Um so that that was really and this was in the 90s and early 2000s. So was it was it realizing that when you were doing that work people was often getting at it too late and it was not that many strategies to put in place at that 60 70 years old when it's time to do that or what was that moment? It was it was more like um I mean yeah people don't people don't plan early enough in the year if you know but early enough period I mean they they've paid 30 40% uh of

their income and income taxes and more if they're in different states than Texas. Texas is a low tax state right? So yeah, um you know it was it was that they didn't have a strategy to manage taxes. they had a business. If they're successful, normally they did that one thing really well, whatever that was in their business, construction or manufacturing or but but um they didn't realize that that with tax planning they could add, you know, as much as a year's profit to their to their bottom line in many cases over two or three years, right? Because if a third of their money is going to taxes. Yeah. And sometimes more. So, um planning, you know, planning became the key there. sitting down and thinking about the next three to five years of taxes. No, we're going to definitely dive into that. Um, why do you think because all business owners have CPAs, right? Um, why do you think CPAs missed those opportunities so much? So, it used to be that um we would go,

okay, they're going to run this idea by their CPA. And we would sit there and cross our fingers and go, I hope the CPA sees what we're doing here and and and is open-minded. And sometimes they were and sometimes they weren't. But a lot of times it's because the CPA is dealing with uh a ton of complexities. The law has changed now to where it's almost basically it's automatic that everybody files their taxes in October personally and their business taxes in September. So I mean you don't have a lot of time. I you're looking back nine months by the time the CPA does their taxes in October and then takes their twoe vacation which they deserve. Yeah. It's December and it's too late. So there's no strategy. Secondly, CPAs, how do I say this? More CPAs think of their business as a compliance business. Yeah. Than a strategic business. So what they want to make sure and do uh is make sure that the client they have is complying with the tax code and the

facts and everything line up. And so that job is and it can be very big for wealthy individuals. you know, tax returns can be two, three, four inches thick. So, um, that's really the issue. Uh, the big issue u, most CPAs who are good on the compliance side have so much compliance work they're not doing any strategic work. Mhm. So, it's it's a matter of how they run their business and um, most CPAs are not strategic. Do you think most business owners rely on their CPA for tax advice? I I think they think they're getting tax advice from their CPA and often are surprised to find that they're not and that their CPA sometimes are surprised to find that the client wanted tax advice from them. Yeah. Um on anything going forward and then they they give them tax advice on backwards on the past. Yeah. But nothing going forward. So sort of uh you know CPAs drive around looking in the rearview mirror because that's where their compliance work is. Yeah. No, that's so

interesting to me because again like I think when you I'm a business owner myself, right? When you get into business, you know, you got to get a CPA, right, to help you with your books, to help you with your filing your taxes, with all that stuff. But I just don't understand why. Well, now that I'm more in that world of speaking with people like you, like I understand even more the value even more than a CPA to have a tax planner, a financial planner, someone that has knowledge with uh that can help you with strategy uh as much if not more than a CPA. But why do you think it's such I don't want to say taboo, but as less less common than yeah, you got to get a CPA, but you also got to get a planner. You also got to get a financial planner. Why do you think there's that dichotomy between the CPA and the planner? You know, I had a business coach uh last year and we were talking about tax

planning and she was and she's she's very successful and she was like, you know, in a call with like 20 other people on a Zoom call. She goes, you know, tax planning and all that tax stuff, that's a little shady to me. And I was like, wow, you're super successful. you know, her coach is Tony Robbins and she's she's all and I'm like, you're saying that? You know, that's interesting that there so there's one perception that that you know, if we do do something to lower your taxes, you're somehow maybe doing something that's that's not um right or not. You know, I think the second the second thing and and that and that's obviously false. I mean, there's thousands of pages of I mean, the tax law is written to help you do things for yourself, for your employees, for your community. It's written to promote uh the building of capital and the sharing of wealth with others. That's what the tax law does. If you don't want to do any of those things, you

get to pay maximum tax. Okay? But if you'll do those things, set up retirement plan for your family, yourself, your key people, your your your people, set up philanthropic plans, you get to help community and help yourself. So the tax law is a reward system. It and it's been that way for a long time. And and it's that mind that's a that's a mental shift, if you will, that can make it uh much more exciting to do tax planning than just sort of making a series of, you know, decisions that maybe don't feel good, trying to optimize your situation, right? It's all about really transforming into seeing the tax law on your side. That's so interesting because we hear that so often from business owners that they don't want to mess with those tax strategies because they think it's illegal. That's why do you think that is? Why do you think people are so scared of doing a wrong move? Is it with what's out there? Like there's so many people trying to advertise that

or whatever. Like what do you think is that reason? Well, there are some wrong moves, right? I mean there are some things that out there that don't that don't work or used to work and don't not work. And there's some things the IRS is looking at abuse. What the IRS is really looking at is abusive situations. Yeah. But the the the thing is um people have taken things a few steps too far in many cases trying to make you know trying to squeeze the every last dollar out of a tax strategy. and you and and and when a tax strategy saves you 30% of your taxes or 40% of your taxes, going to 45 or 50 may not be worth it in that particular strategy or trying to you know trying to squeeze a a round uh peg into a square hole as I say there's just certain tax strategies that are meant to do a certain thing. Yeah. And so um and it's generally the coordination of two or three tax strategies that give

you a big result. And there there are firms out there who are marketing, you know, one sort of this track tax strategy does it all. And um and charging fees for that. And you see some of those come back. In the 90s, there was a lot more of that than there is now. I I'll give you another u reason too. The IRS uh plants articles around tax time in the Wall Street Journal and different places. Yeah. in order to discourage people from doing from not filing their taxes or from uh not being taxes. Yeah. Yeah. It's very interesting. I mean, the government's always been in the PR business, you know. So, so um there's there's that as well. And really, that's that that's a scare tactic. Um and it it it really it it does scare some people away from doing just sort of normal everyday tax planning. Yeah. So, you said that um the IRS or I don't know who you were saying, the PR firms are actually during the time to file taxes,

they put some stuff to scare business owners or just the regular people. It used to be every April or so, you could count on an article in the Wall Street Journal about somebody who didn't file their taxes or who filed their taxes wrong or who did something that was not legal tax- wise. Yeah. Um, and it's it's always got a it's always a bad story, uh, with bad, you know, a bad situation and a couple of brothers took advantage of a situation they shouldn't have, whatever, whatever it is, right? And and it's it's and what I was saying is that the that the IRS has either they have a PR firm or they have a PR entity that does that um, as part of their quote unquote education to the public uh, programs, you know. So, so there is that and I see that less now because I think those papers and things like that are less are less read than they used to be. Yeah. Uh everybody gets news at different places now, but

um it used to be very common you'd see uh um somebody going down who did something wrong tax- wise. Yeah. No. Well, it makes sense, right? Because at the end of the day, it is a a big revenue stream for the country. So, yeah. And and I mean um the IRS doesn't like certain laws. I mean there there are laws on the books or loopholes some in some cases. Yeah. Um that the IRS doesn't like and would like to challenge and has challenged them and lost many times and sometimes they've won or sometimes they've said look this is not what the law was supposed to do. In the 90s, we were doing a type of charitable planning technique and the law was supposed to not the law that was in place that we were using was not meant for that purpose, but but it was sort of a loophole. So, and the IRS challenged it and lost. So they petitioned, you know, through the process of making a bill and a law and all that

stuff and the and the the government, the Congress changed the law and we stopped doing that particular kind of planning and and that happens from time to time. There's nothing, you know, weird about that. I mean, it's kind of like changing the speed limit on the highway. You used to drive 80 miles an hour, 75, and they lowered it or raised it in many cases, you know, so things change. That's so interesting. Um because people often think, myself included, that like all those laws and everything like that, it's all to benefit the people that create them, right? Which in that case is the government. But it's not the case, right? In in a it's it's it's like an agreement. In agreement, it needs to be beneficial for both parties. So if you're able to find the people that can help you out with that, well, you can find what are those clauses that are beneficial to you. And that exists, right? That does exist. Well, I mean, yeah, the the laws, the tax laws and

other laws. I mean, there's this is in healthcare, too, right? The government's trying to deal with issues in society, you know. So, right now, you're seeing some tax law move in the direction of helping people's long-term health. Yeah. You're seeing some new deductions and things that now are available that weren't available, say, five or 10 years ago. the government's rec recognizes some uh societal um challenges and and and makes uh sometimes tweaks to the tax law to help address those because to help people either become more uh responsible for themselves or responsible for others uh in their businesses or whatever it might be. Yeah, you you were saying that we were talking about some uh some tax laws that are actually beneficial for the regular for the population, right? Yeah. I mean, yeah, the the the the tax law is a way to encourage people to do certain things, to encourage people to put more money away for their own healthcare, for instance. There's lots of things happening there. Uh new deductions or new things

that are deductible. Um and of course, a lot of financial services pro I mean, think about the retirement industry. The retirement industry uh was sort of a a three-way a three-way um benefit situation, right? So the the the retirement industry lobbyed the Congress. They said, you know, people aren't putting enough money away for retirement. They're going to they're going to be on the government, this be on government shoulders in the future. So they they created the IRA laws and the 401k laws and all the pension laws so that people would take care of themselves. Um that's tax that's tax stuff right there. I mean, there's a lot in that in that in those sections, 401 and so on. So uh 409 even and things like that. Hm. One one thing that uh you made me think of is uh again myself a business owner trying to always optimize that stuff. Um there's so many titles that people have. Financial planner, financial advisors, there's insurance agents, there's tax planners, tax strategists. Who should someone turn to

to get the proper advice? So, I think I mean we're we're a we're a fiduciary, financial advisor, um asset manager, registered investment adviser, and I am the investment advisory rep for my firm that I own. Yeah. So, um but that doesn't mean because I have those qualifications that I know taxes, right? Um, so I think part of it is going to a financial advisor, a financial consultant and understanding, hey, are you are you holistic in your approach uh to my wealth? Um, or is it is it a matter of you're an asset management person, which is fine, or you're an insurance person, and and both asset managers and insurance people know something about the taxes around their situations. Um, you the more holistic someone can be, the better. So, you really you really need uh a financial adviser who's got uh all all of the uh knowledge, not maybe not to the degree that a CPA might have or a tax attorney might have, but but has got the experience in putting together plans that

achieve everything. Plans that only achieve a tax benefit are looked at more than the by the IRS than plans that do something else and also achieve a tax benefit. This is really critical. Yeah. You know, um we talk a lot about C corps for instance. Yeah. And how how they can be, you know, well, what's what's the purpose of a CC corp? Why does a CC corp have a lower tax bracket? It's not just because um it makes sense for big companies to have lower tax brackets. It's so that people can accumulate capital. Okay. CPS are for accumulating capital. S Corps are for distributing capital. Yeah, sometimes that's what you want. But if you want to accumulate capital, you want to have a CC corp, especially if it's for business purposes. And there's rules around how much capital you can accumulate. So a CC corp is already a tax advantaged you know uh a tax advantaged uh entity that's for accumulating capital and that c some of that capital can be set aside for instance

for retirement of the owner or into some of the plans that that that you know we talk about with our you know the kinds of meetings that your firm sets up uh definitely um needs to be part of the planning um and so somebody who knows corporate structure uh we're specialist in corporate structure and and business owner taxation and financial advising. Other people are really good with helping only people who are high in high high up employees with Google and and different people like you know it's a different it's a little different market you know their situation. No, exactly. Yeah. The W2s, the high income W2s, the business owners. I think what you said was really good of of if if you find someone that trying to that can just do one thing and push you that one thing, there might be something behind it, right, that might not be the best thing for you. So just right away, right off the bat, if that person's not trying to push you a product and try

to push you one strategy and actually looks at your whole strategy, your whole situation, and then from there, it's a sequencing, right? It's never one thing. It's not a silver bullet. It's a it's a thousand golden BBs. That's right. That's right. And there's a and that's a good way to say it. There's a there's a plan in place to implement things over time. Yeah. That make sense for that for that client. And if and if you know if you're a one-trick pony, we come say if you're if you're a hammer, then every problem looks like a nail. Yeah. So, you know, it's better to be a whole set a whole toolbox, right? Yeah. No, that's great. And you talk about the LLC, CC Corp, S Corp. Um, obviously the the most common one that we've seen for small business owners specifically, it's LLC's, right? A lot of them have open up an LLC and oftent times once they hit a certain level, a certain plateau, it makes sense for them to look at the structure

and from what I understood, you can correct me there, but the the a switch or change in structure might be the number one move or one of the first moves you can do to be more tax efficient. When when does that time come and when should an LLC um modify their structure in order to be more tax efficient? So LLC's are great uh until you start making money. That's a great great way to put it. Um and then when you start making money um moving to an escorp at some point. So, I mean, I would almost say anytime you're having consistent profits in the six um six figures, you know, moving to to an S corp and definitely in the seven figures, you know, moving from an LLC to an S corp and then as you raise from there, maybe having an additional company that might be a C a CC corp. Um, and that really, you know, uh, the ideal structure would be having all three entities, an LLC wrapped inside of an S

corp that's also got a management company to the side that's that's doing management work and capital. Um, you know, that's where the CC corp might be pulling in more capital with management fees. Understood. That's really tactical. That's very good. Um, I know that we've, uh, we've talked a little bit behind the scenes and stuff. Is there any is there any case that you can remember that you discovered the biggest amount of like hidden savings through tax strategy that you would be willing to kind of share how you discovered that? What was the strategy implemented and how much were you able to save for that specific business owner? Oh yeah. Yeah. This I mean I would I would think about two different uh cases. One is um client making about $8 million a year. Um and uh they were they were an LLC well they were LLC but they began to be taxed as a CC corp and so um and he was paying himself a salary of about four now you know so keeping four

million inside and paying himself four as a salary which you know that that was the escort may have been a better deal there for his salary part and the CC corp. It would be nice if they split. But what we figured out was that for that particular year um the best thing for him to do what you know with his goals in mind was to give a small part of that corp away. Okay. Uh to charity. So the corp uh was probably worth about $60 million at the time. Okay. Okay. And so what we did So what we did is we had him go ahead and bonus himself out most of the profit the next few years, but we attached that to a a $6 million charitable gift. Okay. That went into a trust that allowed him to um to buy back little bits of that CC Corp over the next 25 years uh with excess cash flow. But that the the the the $6 million, he got a $6 million tax deduction. Yeah. Which

he which he couldn't use the first year. He couldn't use all of it. He could only use about$2 million a year. But he was able to pull $6 million out of his company the next three years. Um I'm sorry, $8 million out of his company the next three years, but only pay tax on six with that one strategy. So it that saved him about a million dollar a year in taxes. It's crazy. Um, so three year $3 million of of taxes plus that little bit of the company that was in the in the charity, uh, the charitable trust was paying out to his family's foundation. So, as he was buying that back at like 60 or $70,000 a year, not not not a lot, um, that money was going into his family's foundation, which uh was doing things that he wanted to do in the community. So that was kind of an interesting um plan and and we coordinate that with his estate plan so that at estate tax time his trust would buy back

that charitable piece of the business with some life insurance he had in trust and um the charity would be totally funded. And so um pretty attractive to give away you know about 10% of your business to to save about 30 or 40% of your taxes for several years. and we did that twice for him and um and that's a business that he's passing down to his kids. The other big place we've saved money, we had a client uh just two years ago sell a business for $43 million and we did a structure sort of like this where we used a charitable trust. We put 23 million of the 43 million in a charitable in into three charitable trusts actually. Yeah. And saved him uh just just over $4.5 million in taxes on what would have been a $7.5 million tax tax bill. So, he still played three. Um, and we dealt with that other ways. We chipped away at that with other plans, but but the the big one was that charitable trust. And now

he's in control of all $40 million, you know, as opposed to just being in control of 35 million. So, um, makes a huge difference in what you uh and what you can achieve. I just I was just um featured in an article in USA Today where I talk about some of the planning uh like this and it just came out about two weeks ago and we show some of the the math behind planning like that and how much more wealth it can add to a family uh and and their heirs of course. That's so interesting. By the way, send me that link. I'm going to put it in the description so people can watch it after this uh after this interview. But that's so interesting and I think that's where you talk about using philanthropy um obviously for for the right reasons for the right thing but if you do it the properly it's you're you're able to chop off so so much so much tax savings from that. But why why is that the

case? Why why is the IRS putting so much emphasis on philanthropy and letting you save a lot of taxes on that? So the the the philanthropic laws have been here basically like they are now since 1969. I mean there was laws before that. I don't know them but but but I think that they they limited some of the gifting basically in 1969. Yeah. And um and there are people that think you can make a terrible trust donation and not pay any tax. And that's not true. That's not true. Uh but you can cut your taxes down by half generally if you've got high income. And um the reason that I mean this country is sort of founded on the on the idea and all western countries really have this baked into their tax codes now on the idea that if you'll help society we call that social capital. If you'll defer or direct some of your social capital to helping less fortunate or helping things that the government wants help whether it's build hospitals. We

we've had clients build hospitals. We've had clients start food banks. We've had clients, you know, do things for emergency situations all over the world. Um the the government wants more hospitals across the country. The government wants better care for its citizens and isn't going to pay for all of it. So that's why phil philanthropy is is part of the part of the the core of our of our tax laws. Yeah. And and um the way we think about it is we think about look you you've got an opportunity if if you're paying a million dollars a year in tax. You're already a philanthropist. You're you're some other things too. You're you are paying helping to pay for wars and other things too. But you're doing some good with that million dollars a year in tax. And uh how much good is a a political debate, right? But but you're doing some good. Yeah. Why not control the good you're doing with at least a portion of that? And so we're repositioning taxes that social capital

that doesn't I mean if you have a business and you sell it and you'll experience this one day and you're an American citizen, you're going to pay tax on it because the government's your partner. Yeah. And I think it'd be more rewarding for a charity, maybe your family foundation to be your partner or at least one of your partners, right? Well, let's let's let's diminish the government side of the partnership and increase your family side of the partnership. That's really what's happening because every dollar you make, you've got a partner in. And when the government raises taxes, uh which they will in the future to pay down all this debt, that means they're going to be a bigger partner in your financial life. And that's coming. That's coming, right? So, um let's direct that and control that. That's so good. Yeah. Because you're already giving that money away. It's just a reason for you to kind of choose at least a portion of that where you want to where you want to put it the

causes that you actually care about and not just let that in the government and knowing that the government is actually okay with that right with tax laws. Well, I mean it's it's something to definitely explore. That's right. What what's the level that a business owner should start exploring that? Is it once they making a million dollars profit a year, 10 million profit a year, 100k? What are the levels? You know, it you know, making $3 million a year in New York City is different than making $3 million a year in a little town in Texas. Yeah. Okay. So, uh but it but it it it this article that that I'll send you um deals with this a little bit, you know, because a lot of people worth 20, 30, $40 million think they'll they'll ask me, "Am am I rich enough to be doing this philanthropy stuff?" I'm like, "Oh my gosh." You know, because all you see is billionaires everywhere, right, anymore, right? It's it's it's the billionaire class is five times the size

it was 10 or 15 years ago. So it seems like they're everywhere and those guy those are the people that this is all for. Yeah. You know that's not true. It's not true. It really makes sense for anybody who's paying more t so so two things two things that have to be the case. One is they're paying more taxes than they'd like to be. They they'd like to control some of that social capital and direct it. Number two they're not spending everything they're making. Yeah. You know, so like if you're making a million dollars a year and your uh your personal expenses and lifestyle are a million one, philanthropy is going to be tough on you. Might still work, but but you're not going to get ahead uh as easily. But if you're living on 500,000 and you're making a million then definitely. Or if you're living on 200,000, you're making 400,000, you know, then then you're paying a lot of tax on money you're not spending. Yeah. And so, uh, tax planning makes sense.

Philanthropic planning makes sense, but tax planning makes sense. But if you're spending more than you're making, tax planning is tough and philanthropic planning is the level tougher. Yeah, for sure. No, it's what we said. I think I was with Russ Russell. We were talking with him on one of the episodes. There's there's the top line, there's the bottom line, right? And where we want to take the show beyond the bottom line, which is what you get to keep, right? I think at the end of the day, that's what's the most important. It's whether you make a million dollars, if you make if you spend a one one, well, you're still poor, right? And you cannot do anything with that. So, it's what you keep. And the more that spread is high between what you make and what you get to keep, well, the more taxes you're going to pay. So, how can you decide where that social capital go? I think that's very very interesting what you're talking about. Um I'm I'm curious to know

again because we've seen obviously there's such there's different industries there's different types of business owners uh different special uh specialties from I know you've dealt with multiple industries over your decades of experience. What types of businesses or industries from what you've seen leave the most money on the table with those proactive tax planning strategies? So I think if you're saying the what's the question is which which companies which what types of businesses or industries leave the most money on the table. Yeah. I would have to say construction. Construction. I would say construction. Um left and right construction owners more taxes than everybody. Well I think you knowve I've I've thought about this. I mean, um I I really think it's because construction businesses leverage manpower. Yeah. And then some debt, but really they especially larger construction companies, they leverage manpower and they leverage capital. So I, in fact, I was on a call yesterday with a client's in his construction company and he's we're trying, we're working out a sale to his one of his

key people of the business. Yeah. And he was like, I know I've got a lot of mill and I know I keep millions of dollars and you saw that on my balance sheet in the business, but sometimes I need that. Here's why. And he kind of went through this explanation. He goes, I I can't, you know, part with that or put it somewhere where I may not be able to access it for a for something I'm doing for the city or for this uh for this uh mini hospital we're building or whatever it is. And so, um, they need capital and they need capital for their for their projects, but they also need capital often times for their, um, bonding. Um, so if you're familiar with bonding, but uh, basically, yeah, bond, so bonding is a type of insurance basically that if you're a big-time construction company and you're doing big- time work, building highways and big buildings, the the the developers of that need you to be bonded, meaning that they need to have

a guarantee that if something happens to you as a company or you as a person, they're going to get the money to to keep doing the project. Yeah. Or they're going to have that project. That project sort of guarant Yeah. It's sort of like a guarantee that you'll finish the project. It's a bond and they go out and b buy bond insurance. So, they got to be bondable. Bond insurance company wants to know that you've got plenty of capital. So, they're looking at your finances and things like that and and uh your reputation of course and all those things as well, but but capital is the big one. You know, do you have millions of dollars that that's going to back you up as a business for this project? Because we all know projects don't go the way they're supposed to go. Yeah. So, that's part of it. So, yeah. So, it's construction companies. So, they're they're they're less willing to do uh strategic planning because they're they're so tactical. But if they would do

strategic planning, tax planning, they'd have more bondable capital. They'd actually have more capital. But it it takes a thoughtful approach and and they're they're they're uh maybe the mindset's just not there. That's what I see. That's the construction industry because they do it's so the industries that needs a lot of capital and needed needs it quick are most oftentimes the one that would suffer more from that. Um do you think though it's a limiting belief on their end? Can they change that or is it just the industry's harder? No, it's definitely a limiting belief. I mean, um, you know, it it's it's just that it's it's, uh, because it's a it's a pervasive belief across the industry. Um, construction companies tend to do what other construction companies do. Yeah. Yeah. Yeah, you know, cuz they all talk to each other, working together, you know, you got a a general contractor and a subcontractor and those two people know each other and you know, so it's it's uh it's generally like that and it and and

um and and that's they're leaving the most on the table and and and there there's not um you know there there's no reason for that. It's just I I understand their concerns, but we could create more capital on the balance sheet if that's what they they wanted with some structure and some tax planning. um and the use of the kinds of products that we sell. What are the top three blind spots that you see with traditional tax prep that cost business owners the most amount of money? Um I would say okay so we talked about one this look overlooking philanthropy. Yeah. You know that's number one. Number two, overlooking uh the the types of benefit plans that are available to themselves, to their key people, and to their companies at large. Um you know, uh if you ask a business owner, hey, if I could show you how to put $200,000 away for yourself, but you got to put $30,000 away for the rest of your employees, would you do it? They'll go, yeah, of

course I would. Yeah. Tax deductibly. They're not doing it. Mhm. And you would think that their CPA brought them that idea or some retirement plan person expert or whatever, but they but they haven't. So they they overlook those things or you know if I could put a plan together for you and your key people uh to retain them long term, your key people especially um and it was deductible or it basically cost you nothing because of the tax benefits. Would you want to explore that? Of course they do. Of course. Yeah. But they're overlooking that. And then I think the third thing uh that they're overlooking is all the all the the little gimmies, you know, from the the government. Like I have a client in Colorado who uh basically rewards his employees in many cases with they go get to stay at his second home in the mountains. Okay. And um that costs something. and that second home is a nice I mean it's a nice place, right? Well, he could use the Augusta

rule, for instance. I'm sure you've heard of the Augusta rule, the 14-day rental thing, and be getting a write off for that. Yeah. Um uh for that benefit he's providing and and those things are overlooked. I mean, you know, there there there's all these little uh benefits like that that are, but they probably put another 20 to 20 to $40,000 in someone's pocket. But that's that's all right, you know. Yeah, I know. So, it's is I think those are the three. If I had to, you know, if I thought about this a lot longer, I'd probably think of a better answer for you, but that's that's what I think. That's often what we see, right? It's it's philanthropy. That's that's definitely something new that I have learned today and I hope a lot of people learned as well. But often times it's it's you don't know what you don't know. And I think it's even more true in this tax world in the United States. Things change. Um and it's often those little rules specifically

to your situation depending on your on your profits levels, your revenue levels, your industry. There's there's a way to make it work, right? And there's a definitely a way that you can um you can pay less than what you're currently paying right now. um if you haven't worked with a proper tax planner, proper financial planner or someone like you that could help them with that. Yeah. H how does the the the discovery process looks like whenever you meet a new business owner that that that that wants to things are overpaying in taxes, right? They want to pay taxes because they want to be in total legality, but they might think that they could pay a bit less, right? What's what's your typical process and like how long does it take before you can see significant savings? Um I mean we we generally get significant savings in the first year because we'll introduce things that are that are that are big uh um in the first year that we work with them, you know. Um and

then and then we'll do structure like if we meet somebody right now, we can get work done by the end of the year that will save taxes. and then we'll put structure in place as sort of an ongoing tax savings uh through the course of the future years. Um our discovery process is kind of twofold. I mean so you want to save taxes. Great. For what? I mean I I know it sounds like a weird question. Of course I want to pay less to the government, right? Yeah. But what do you what are you really trying to achieve long term? I mean, when you look back on today and in the next three to five years, um, and we we put an extra million dollars in your pocket, what's it for? What do you want to do with it? Yeah. Yeah. What's it for? You know, um, is it so you can retire early earlier than you plan? Is it so that you can pass more to charity? Is it so you could give more

to your kids? Is you got something you want to fund? Um, you know, what is it? you know, um, and so that's that's really it's really to to try to to try to isolate the owner's per, you know, self-defined purpose. Why is that important? That second layer of knowing why what you want to do with those savings because then we can begin to build something that's transformational. Um, meaning that the business owner, let me back up a little bit. the the issue with tax planning or like estate planning I was talking about at the beginning of this conversation is that it's a series of unpleasant decisions made to minimize the damage you know like okay and that's what tax planning has become too like let's do this and do this and complicate my life a little bit so that I pay less taxes and man and some guys just like man I don't want to do that well the reality is you're using a set of tools you haven't used before and if you think

about it like that um then this can be transformational. This can be really positive. Let's go do some good for yourself, for your employees and family or whatever is next on the priority list and for community because the tax law doesn't have to be your enemy. It doesn't have to be a series of unpleasant decisions. It can be a series of transformational decisions that that let you control more that give you more wealth, give you more control, give you more satisfaction and give you more impact on the things you want to impact. So that's why that question is important. I'm I I'm I'm dedicated to transformation and if somebody doesn't if I talk to somebody and they're not they're not on that same page or don't want to get on that same page, it's not going to work. It's not going to work. We're not the guys for them. H understood. No, that's really good. So, I think tactical advice there. It's it's everybody wants to save taxes, but do that extra work to see

what you will do with that, right? If it's if it's for selfish reasons, and it's for selfish reasons, right? Everybody would like to keep more money in their pockets. But knowing what that is, selfish to because you're going to do I mean, the tax law generally is going to promote you being unselfish. It's just we're just redirecting money that's going to go to taxes. Yeah. To some of your favorite causes, even if that favorite cause is your family. Yeah. Yeah. Which most of the time is, right, for most business owners. Yeah. That's so good. I'm just thinking about what you said about that. That was so good what you the the the IRS doing PR during the times of taxes tax season to scare people away. It makes so much sense, right? And that's that's and that's what oftent times create that whole skepticism around being all good and and and making sure we're all uh we're all doing the right thing. Um h how do you ensure that like the the strategies that that

you implement remain IRS compliant and audit proof while still being able to get those maximum savings? Almost everything we do is codified meaning that it's a law. It's in the code. It's in the fact it's in the code. Right. Yeah. So, um, uh, the issue isn't doing it or not doing it, it's doing it wrong, you know, and yeah, but there, so there's steps you put in place. If you're doing a charitable trust, you need to value what's going into the trust, you know, have a certified valuation. What's going in the trust? If you're doing retirement plans or um deductible, you know, uh, pension type plans and those kind of things, well, there's there's a lot of checks and balances that that go in place. They're actuarial and everything else. And there's firms that we we partner with some of the best firms in the country in all these different areas. Um, and it's really not it's really not uh that difficult to stay in compliance. Um, you got to have a you got to

have a good CPA. I mean, there there are plenty of CPAs who this this is not their Bailey Wick, you know, this is not where they should be practicing or aren't practicing. Yeah. um a a good set of tax attorneys, but um the legal field is is so the the CPA world is is sort of going through some really tough challenges right now as a as as businesses. You know, it's really a hard business. The the deadlines are mismatched and everything else. But the legal world AI is changing that to be something that is much more affordable, doable, uh attainable by, you know, everyday business owners. So, um there's a lot there that that's that's a big a big part of it. It's just getting the right team. Yeah. Uh involved. I think you know that. Yeah. Like if it's in the code, if it's in the law book, then it's good, right? You know, it's good. And it's it's it's only now doing it right. and execute the execution that has to be right.

So looking at someone's accolade, looking at someone's experience, looking at some case studies, some past uh results, then there's really no fear that should that should be there to implement that that type of stuff, right? I mean, you know, when I was first in business, 401ks were controversial. That's how long I've been in business. Okay? They're like, "You can't do that." I'm like, "Yeah." And CPAs were telling us, "You can't do those." I'm like, "Yeah, yeah, you can." But not that I was trying to push 401ks at the time, but I'm like, this is it's it's just it was new in 1978 and still in the early 90s, people weren't quite sure it was doable. You know, just this last few months, you know, we've had CPAs tell us you can't do pension plans for 2024. You got to have everything signed in 2024. Well, that changed during CO, right? But they didn't know. They weren't up to date on the tax laws. The tax law says you can decide right up to the last

minute to do a pension for, you know, up until you file your taxes for the the previous year. Now, don't wait till the last day because you need you need a few weeks to but but really, you know, that's the case. So, so not everybody's up to speed on on on everything, certainly. And and um can't fault them. It's a it's a complex and moving growing body of work, the tax law. How do you stay updated with all that stuff? Is it your team? Do you research that? Um, so I that's my job is is research and thinking about things and that's that's my first job. My second job is to implement it. And so that's the way I see it. I don't see the I don't see it the other way around. Um, and and I've always told people, you know, look, I want to have the sharpest axe before I go cut down that tree. It it'll it'll be easier when we do. And so I do a lot of research. The second

thing is I'm in a specialized area. Like I I couldn't like we talked about other markets, you know, that have W2 and and are maybe high W2 and maybe have stock uh RSUs or or stock options or whatever warrants with, you know, the kinds of tech companies that are around here right now. That's not my clientele and hasn't ever been. And so we really know the the bit of the tax law that corresponds to our client's issues. So our client our clients are the in two 2% of the population is in our client potentially in our clientele and basically 1%. Yeah. Um and um and then out of that 1% only half or maybe less than that 1% are actually uh big big enough to work with us long term. So, it's a very we're really a specialist in a very small part of the population and their issues and so I don't have to know everything. I have to know everything about them. About them. Yeah. It's being niche into that uh like the

customer you serve. Um yeah, that's really good. Let's say I'm a I'm a business owner making between a million to 10 million, right? So, seven figure uh bottom line. Okay. So, profit. How do I how can I self- audit for miss savings? Um and and where should I start if I'm if if I know I can do better. Where do I start into self- auditing? Okay. Like what are the places that I could save money on taxes? So are you most business owners that you described in that are are giving some money away actually. They're they're doing a little bit of charity. They're probably not getting to write it off because it's not the right they're not doing it the right way. the right way or the right or the right um structure. So that's number one. Number two, if you've only got one entity that's doing all that income, uh you're missing out. Okay? It's because the use of more than one entity as a structure that could save you money. Um so a

second struct it's time to look at second structures as as as a tax saving vehicle, but also as it does some asset protection work for you. it does some, you know, you can do some management stuff for you. You get other types of deductions that you can't get in your LLC or your S corp that you're probably in. Um, the third kind of area to self audit is, um, have I professionalized? Have I done the things for my key people and my val my most valued employees? Am I getting deductions for helping them build wealth? Um, and there's there's there's all kinds of things from non-qualified plans to qualified plans that can be geared towards sort of the most important people in the business, including yourself as the owner. Yeah. And then another area that I would audit is um, you know, we mentioned this, where are all the little gimmies from the government that that I know I get? You know, like setting up a 401k, which is, you know, gives you $1,000 per

employee in credit, tax credit. Yeah. So, if you got 40 employees and you got $3 million bottom line, you know, you can get a $40,000 hit, right? I mean, just, you know, it's free money. Government's giving free money in many cases that people are just missing. And so, um, because they don't think that that, uh, it'll be wellreceived or whatever the case is, doesn't matter. And you don't know. Uh, so there's there's certain things that are that are like that that are just, you know, the a the Augusta rule we talked about. You know, there's always little things like that that, you know, really you don't need a professional tax planner to come in and tell you about, but you need somebody to give you a road map on. You know, we give all of our clients free. Hey, here's three things you can do that will save your taxes, even if we never talk talk again. The Augusta rule, how to use it, what you're doing in pension plans, and structure. and we give

some value weight there because really that's what they need. Just just a little checklist and a operations pamphlet on how to do that. There are some people out there charging, you know, $4,000 a month as tax planners and doing that and it's really just a it's really just a handout a handoff. Yeah, it's really all all it is. No, that's amazing. That's amazing because again I think all the information is out there especially with AI chat GPT all that stuff. It's out there. But the value is in the implementation and and it's the likelihood of achievement, right? What's the likelihood of achievement? And you get that through proper road map and someone explain explaining to you the exact steps in order to take to make sure you don't screw up and you don't do something wrong because that's the risk of that is is trying to do it yourself and then something happens or doing with someone that maybe doesn't have a certification and that's where you can get in trouble. So getting with someone

that has actually has a a track record and gives you the road map just implementing that stuff. That's the easy part. Yeah, that's right. That's right. If you could give one action step to a business owner watching this right now to stop overpaying taxes, like one one step, what would it be? Besides call me, beside calling you. That's the easy one. That's the easy one, right? Um, I would say, uh, go back to your vision for why you started this business and the impact that you wanted to have on yourself, on your people, on your family and community, and why this was important in the first place. and see if you can align your financial wherewithal, your financial world planning and tax planning with that purpose. Because if you've been in business for five or 10 years and it's it's business is hard and um you kind of lose sight sometimes of why you got into it in the first place. Yeah. Yeah. And so that's I I know that's a big first step, but

that begins to bring you back to having some it builds the vision. It it makes it complexity is generally comp complex because there things you don't want to do. Yeah. The things that you want to do are very simple. They're very simple. And so because the energy is there and um so things need to be simple and if you don't want to do it, it's not going to be simple. Yeah. If you don't want to do tax planning and you're doing tax planning just because you want to save some dollars, it's not going to be simple. Going to hate it. Yeah. Yeah. That's really good. That's the biggest takeaway I got from this conversation is even for myself, I'm going to do that right after this call or this weekend, but really find some time to really understand the reason why, right? like why do you want to do this? Why do you want to what do you want to do with that extra money, right? Because okay, it sounds nice to save some money

on taxes and but what are you going to do with it? Right? And I think getting aligned with that northstar not only help obviously with those tax strategies, but in your business in general, right? Because I've been in business for five years as well and oftentimes like you said, you're in the day-to-day, you forget about the reason why there's problems every every day that comes up. It's like ah what's that northstar again? And sometimes that north star changes, right? at 20 years old, at 40 years old, you have different goals, you have different responsibilities. So, I think that's a very great tactical step that any business owner should do if it's not clear what's that northstar. I think that guides everything else, that compass for where they want to go. Yeah. Yeah, that's exactly right. That's amazing. That's great. Well, Carlos, going to ask you the the final question, which is the recurring segment. We call it the legacy question, which is if this episode outlives you, right, in uh hopefully multiple decades, what's the

one lesson that about building and protecting wealth and saving on taxes that you would like every business owner to remember from this episode? That's a good question. Um, I I think it's it's that you have a lot more control and a lot more choices than you realize you have. And even when you hire someone as good as us at this, there are still more choices and control. And because of you have the choices and control like you've demonstrated by building this business. Um, and because the tax laws were written uh for people like you as a business owner to do good in the world, meaning family, employees, and community. Um, that gives you a a an ar array of choices that most people don't have and a a chance at impact that very few people have. And so, um, I don't say this as a weight on your shoulders. I say this as as motivation, as um, as uh, a clear and present why to go forward and to enjoy it because helping people, everybody

we talk to who's a business owner, I mean, I love my clients, they want to help people. Yeah. Period. And so, um, you can do that. You have the choice. And and, um, and it can be it can be the impact is so rewarding. Not because I think I'm not trying to compel them to be that like that they have to. I'm like, no, this is your choice. But that's my point. It's your choice. That's a beautiful answer. Carlos, thank you for your time. That was an amazing episode. Um, if you're a business owner watching this and you found this conversation valuable, all I'm asking is that you subscribe to the channel, comment what was your biggest takeaway, and there's going to be a new strategy packed episode every Monday. So, make sure you guys chime in and you're here for the next one.