Full Transcript
https://www.youtube.com/watch?v=H7NRFSTAzP8
[00:00] hey guys Toby matthys here and today I'm going to talk about the steps required to set up your trading business.
[00:06] so I'm just going to jump right on in first off if you don't know what a Trader is let's just talk about stock trading in general.
[00:11] if you're somebody who's trading in the stock market there is no code provision that says you are a Trader and you're able to take business deductions against your income and uh creating losses and things like that.
[00:26] there's nothing in the code that talks about it you have to go to a publication you have to go to court cases and they're going to say what a Trader actually is.
[00:34] but before we get there I'm going to break this down what a Trader is is someone whose level of activity in the stock market Rises to the level of a Trader business.
[00:48] is it allows you to do what's called a section 162 expense otherwise you're limited to investment expenses and what a 160 two expenses ordinary and necessary business.
[01:02] expenses ordinary and necessary business expenses so things like your computer.
[01:04] expenses so things like your computer your cell phone data feeds traveling uh.
[01:07] your cell phone data feeds traveling uh going and meeting clubs and learning about trading uh those are all expenses.
[01:13] about trading uh those are all expenses that would be deductible under here but.
[01:15] that would be deductible under here but they are not deductible if you are an investor.
[01:18] they are not deductible if you are an investor so that led the IRS to start contesting these cases people were writing off their expenses on Schedule C.
[01:28] writing off their expenses on Schedule C and they would have a negative amount so they would always have losses because there's no trade or business income.
[01:34] there's no trade or business income the income would be picked up on their schedule D.
[01:40] income would be picked up on their schedule D so I should say this is really their expense.
[01:46] expense so they're grabbing their expense on Schedule C their schedule D is where they're showing their income.
[01:53] is where they're showing their income what could go wrong right you're basically saying please audit the heck out of me because when you see a Schedule C that has nothing but loss on it year after year you have something.
[02:02] it year after year you have something called The Hobby loss rule that gets called The Hobby loss rule that gets triggered where the IRS almost always is triggered where the IRS almost always is going to scrutinize it and that's what's going to scrutinize it and that's what's what I've seen I've been doing this for what I've seen I've been doing this for 27 years and this has been an issue for 27 years and this has been an issue for as long as I've been practicing and I as long as I've been practicing and I just notice over and over again that just notice over and over again that these folks are just putting a bullseye these folks are just putting a bullseye right on their back and they get nuked right on their back and they get nuked because they end up going to a court and because they end up going to a court and we used to have a joke what do you call we used to have a joke what do you call an i an attorney with an IQ over 70 your an i an attorney with an IQ over 70 your honor right you're going to a tax Court honor right you're going to a tax Court I'm just joking I'm an attorney I can I'm just joking I'm an attorney I can make fun of my own my own kind but the make fun of my own my own kind but the whole idea is we don't want to have to whole idea is we don't want to have to go to a tax Court where they start doing go to a tax Court where they start doing this is it a regular activity is it this is it a regular activity is it extensive is it substantial enough and extensive is it substantial enough and that's really what they're measuring that's really what they're measuring they're looking at are you in and out of they're looking at are you in and out of the market on a daily uh on a daily the market on a daily uh on a daily basis and what we come up with is that basis and what we come up with is that there are hard rules if you a Trader and there are hard rules if you a Trader and then I'll show you the exception to get then I'll show you the exception to get around this there are hard rules as to around this there are hard rules as to whether you're going to qualify and I'm
[03:03] whether you're going to qualify and I'm just going to write it up there and say.
[03:04] just going to write it up there and say 800 trades a year.
[03:11] they're under 30 days it's substantial you got to have.
[03:15] days it's substantial you got to have over.
[03:18] $50,000 and you got to be trading on at.
[03:23] $50,000 and you got to be trading on at least 75% of the trade days.
[03:25] which is right around 100 what is that.
[03:31] which is right around 100 what is that probably 180 days right.
[03:33] they IRS and the tax court has kind of given us these as.
[03:37] tax court has kind of given us these as our basis that we can use as kind of our.
[03:40] our basis that we can use as kind of our our our our our safe Rule now I'm going.
[03:43] our our our our our safe Rule now I'm going to throw one else one other in there.
[03:46] to throw one else one other in there what I see coming up which is if you.
[03:47] what I see coming up which is if you have a W2 job you're going to have a lot.
[03:49] have a W2 job you're going to have a lot of.
[03:51] of trouble so here's this in a nutshell.
[03:52] trouble so here's this in a nutshell Trader is not defined in the tax code.
[03:55] Trader is not defined in the tax code it's not like you could sit here and say.
[03:57] it's not like you could sit here and say if I do this I'm entitled to these.
[03:59] if I do this I'm entitled to these deductions what they say is I can give.
[04:04] deductions what they say is I can give you some golden rules that seems like you some golden rules that seems like you're going to have recipe for success but it seems really risky your.
[04:11] success but it seems really risky your audit rate we already know for soul proprietors is about 800% more than its brethren s corpse c corps.
[04:19] it's significantly higher than just a regular taxpayer so I'm not really excited about having you classify yourself as a sole proprietor for expense purposes.
[04:30] proprietor for expense purposes and to be a Trader for uh for your activity purposes just seems to be a recipe for audit and decimation so I want to avoid that if at all humanly possible.
[04:41] possible so what's our you know what's our option well we know what a Trader is and by the way I'm just going to put a caveat because some of you guys may qualify as a Trader and then you're saying what happens to my losses.
[04:55] your losses are still Capital losses if they're on scheduled deep the one way you can make your losses into ordinary and by the way if you have Capital.
[05:04] and by the way if you have Capital losses they only offset capital gain
[05:07] losses they only offset capital gain with one exception you can write off
[05:09] with one exception you can write off $33,000 a year against your other income
[05:11] $33,000 a year against your other income so your W2 income I'm making $100,000 a year
[05:14] I lose $10,000 in the stock market
[05:18] I can only write off 3,000 of it against my 100,000 and I do that for three years
[05:24] going into the fourth year I get that extra thousand right so if I have $10,000 of loss it's going to take me four years to write it off
[05:29] that's why the stock market and capital losses can be mind-numbingly unfair
[05:33] you have one year where you make a bunch of money and the next year you lose it
[05:37] so I made 100,000 bucks as a Trader one year I lose $100,000 the next year
[05:38] the $1,000's ordinary income because I'm trading shortterm so it's going to be ordinary income taxed at my highest levels of my bracket
[05:48] so I could be at 37% the next year I lose $ 100,000 I don't get a $100,000 loss unless I make a mark to Market election
[05:52] so I'm just going to throw that down here and I
[06:04] just going to throw that down here and I have to make it the year prior timely.
[06:07] have to make it the year prior timely election then I can treat my losses as uh ordinary loss and offset my my other income but again I don't like that Mark the market.
[06:17] I've seen people get burned multiple times on Mark the market it's treated as though you're liquidating your account on December 31st but a lot of times we have a runup at the end of the year and if you're sitting there holding a position and for tax purposes it's treated as though you sold it even if you only held it for 20 days.
[06:36] if you cross that magic December 31st to January 1st timeline boom those gains are locked in even if it drops in the following weeks and I've seen that happen on more than one occasion.
[06:46] I saw it happen in a big way uh for folks I still remember this Qualcomm ran up crazy at the end of the year I think it was a 1999 and you had people that were even when they sold it it wouldn't cover the tax bill they had Mark to Market election and I didn't like that.
[07:00] I just looked and said you have an artificial rule not a big fan so they're trying to get that ordinary loss here's a hint if
[07:05] get that ordinary loss here's a hint if you're losing money in the stock market.
[07:07] you're losing money in the stock market try a different profession right it's.
[07:10] try a different profession right it's not good don't lose large amounts of.
[07:12] not good don't lose large amounts of money in the market if you are if it's.
[07:15] money in the market if you are if it's Capital then at least you have capital.
[07:18] Capital then at least you have capital gain that you're going to be a to offset.
[07:19] gain that you're going to be a to offset and if you do it long enough and you.
[07:20] and if you do it long enough and you actually.
[07:21] actually invest and you're doing trading you'll.
[07:24] invest and you're doing trading you'll be able to offset your capital gains.
[07:26] be able to offset your capital gains from those Investments with the losses.
[07:29] from those Investments with the losses that you're generating on a shortterm or.
[07:30] that you're generating on a shortterm or a long-term basis you'll be able to use.
[07:32] a long-term basis you'll be able to use those Capital losses period going.
[07:34] those Capital losses period going forward what I don't like is folks that.
[07:36] forward what I don't like is folks that are just stock day Traders uh just.
[07:39] are just stock day Traders uh just statistically it's not good for you.
[07:41] statistically it's not good for you folks uh there's those of you guys who.
[07:43] folks uh there's those of you guys who defy the averages which is about 95%.
[07:45] defy the averages which is about 95% lose money depending on what study you.
[07:47] lose money depending on what study you look at and so there's always that 5%.
[07:49] look at and so there's always that 5% that's killing it and they're saying.
[07:51] that's killing it and they're saying that that's the exception not the rule.
[07:52] that that's the exception not the rule what we see is my experience is about.
[07:55] what we see is my experience is about 80% uh of legitimate like people that.
[07:58] 80% uh of legitimate like people that are really trying and spending a lot of.
[08:00] are really trying and spending a lot of time and energy and effort at it about.
[08:02] time and energy and effort at it about 80% uh lose money still when they're.
[08:05] 80% uh lose money still when they're trying to be a day trader that's that's.
[08:06] trying to be a day trader that's that's just my experience so you know take it for what it's worth.
[08:08] one guy one guy's idea so here's how we avoid it.
[08:10] what we're going to do is we're going to go over here and we are going to use entities.
[08:20] and what we're going to do is we're going to actually structure very deliberately a family office that incorporates using trading as a business.
[08:29] and what we do is we create a business that's a management company.
[08:36] this is almost always going to be taxed as a C Corp and I'm just going to pause right there.
[08:40] it's taxed as a C Corp doesn't mean it has to be a C Corp it could be an LLC.
[08:43] so this could actually be for example if if you follow our Channel and you know that we like Wyoming.
[08:50] this could actually be a Wyoming LLC tax is a C Corp from a tax standpoint.
[08:54] it's a CP and the reason we're doing that is because we want you to be an employee of it.
[08:56] we want you to be a director an officer of that organization and we want this to be your
[09:06] organization and we want this to be your family office it's not just for trading.
[09:09] family office it's not just for trading this is for structuring your affairs.
[09:12] this is for structuring your affairs from a state planning standpoint from a.
[09:14] from a state planning standpoint from a business standpoint from a legacy.
[09:16] business standpoint from a legacy standpoint we want to create a central.
[09:19] standpoint we want to create a central management company for your various.
[09:22] management company for your various activities one of those activities is.
[09:24] activities one of those activities is going to be your.
[09:27] going to be your stocks and we're going to set that up.
[09:30] stocks and we're going to set that up as an LLC as well but it's going to be a.
[09:34] as an LLC as well but it's going to be a partnership so I'm going to put.
[09:36] partnership so I'm going to put 1065 what you need to know is that means.
[09:39] 1065 what you need to know is that means partnership the corporation is going to.
[09:42] partnership the corporation is going to be an owner and you down here are going.
[09:46] be an owner and you down here are going to be an owner you're probably going to.
[09:48] to be an owner you're probably going to be let's just say default I'm just going.
[09:50] be let's just say default I'm just going to say 80% and the corporation might be.
[09:53] to say 80% and the corporation might be 20% why are we doing that we're doing.
[09:56] that because we want the corporation to.
[09:59] be making money we don't have to pay it.
[10:02] management fee we can we don't have to.
[10:05] pay it guaranteed payments to Partners.
[10:07] pay it guaranteed payments to Partners but we can and what we really want is.
[10:10] but we can and what we really want is hey if we make $50,000 we want 10,000 of it to flow up.
[10:14] $50,000 we want 10,000 of it to flow up into that Corporation to then be able to be expensed at the corporate level for anything and everything that we can come up with.
[10:20] it might be running another business you may have a side gig out here for all I know.
[10:32] it could be be managing a real estate LLC over here like you're actually going to structure this to do other activities but from a stock standpoint we are not going to try to sit here and claim on our tax return that we are a Trader.
[10:45] what we are going to let happen is we're going to get a K1 from this partnership return and you're going to show your share of the capital gains and that's all you're doing.
[10:59] well what about all my expenses it's not your expenses corporation's going to incur all the expenses okay well how is it going to pay for it it's an
[11:07] going to pay for it it's an owner well what if I have more expenses.
[11:10] owner well what if I have more expenses what if I have other activities okay it.
[11:12] what if I have other activities okay it can make money in other ways it could.
[11:13] can make money in other ways it could make money as a side gig it could be.
[11:15] make money as a side gig it could be doing other activities it could be you.
[11:17] doing other activities it could be you know whatever you do it could be.
[11:18] know whatever you do it could be wholesaling if you're into real estate.
[11:20] wholesaling if you're into real estate it could be uh you know doing a side.
[11:22] it could be uh you know doing a side business on the internet you could be.
[11:24] business on the internet you could be running a website it could be managing a.
[11:27] running a website it could be managing a your real estate and getting paid that.
[11:29] your real estate and getting paid that way and it could also be paid as a.
[11:31] way and it could also be paid as a guaranteed payment to partner to manage.
[11:33] guaranteed payment to partner to manage your.
[11:34] your LLC but what we aren't going to do is.
[11:36] LLC but what we aren't going to do is say hey I want to qualify my Corporation.
[11:39] say hey I want to qualify my Corporation as a Trader no it's a management entity.
[11:42] as a Trader no it's a management entity managing different llc's for your.
[11:45] managing different llc's for your portfolio from a stock standpoint this.
[11:47] portfolio from a stock standpoint this makes it pretty simple it can still.
[11:50] makes it pretty simple it can still incur all those expenses but it's not.
[11:52] incur all those expenses but it's not you you're not incurring these expenses.
[11:55] you you're not incurring these expenses you aren't going to sit here and try to.
[11:57] you aren't going to sit here and try to qualify under here here as a Trader.
[12:00] qualify under here here as a Trader don't want that for you too much.
[12:02] don't want that for you too much scrutiny the courts are all over the.
[12:04] scrutiny the courts are all over the place there's cases where somebody.
[12:05] place there's cases where somebody traded $15 million a year wasn't a.
[12:08] traded $15 million a year wasn't a Trader there's cases where somebody
[12:09] Trader there's cases where somebody traded hundreds of Trades a year and
[12:12] traded hundreds of Trades a year and made money but because they took six
[12:15] made money but because they took six months off when the market was going
[12:17] months off when the market was going nuts or because they made so much money
[12:19] nuts or because they made so much money in a short period of time the court said
[12:21] in a short period of time the court said oh that's not regular activity you don't
[12:23] oh that's not regular activity you don't get your expenses just just dumb right
[12:26] it just defies logic don't do that right
[12:30] my advice to you is do this instead and
[12:34] even if you qualify as a Trader and you
[12:36] would all day long I still say this
[12:39] because the audit rates are
[12:40] significantly lower and we do tens of
[12:43] thousands of returns uh I've been doing
[12:46] this for 27 years and I could count on
[12:48] probably both my hands how many times
[12:50] we've seen audits come up on
[12:52] Partnerships or S Corps or C Corps it's
[12:55] almost never it's very very rare I think
[12:57] they have a0 0 1% chance it's a fraction
[13:01] of 1% that Partnerships even get audited
[13:04] nowadays it's really low and even if we
[13:07] are we have our ducks in a row because
[13:09] are we have our ducks in a row because we are not sitting here trying to follow.
[13:12] we are not sitting here trying to follow this we're not going to play this game.
[13:13] this we're not going to play this game we're not going to try to ride off a.
[13:15] we're not going to try to ride off a bunch of personal expenses and put it on.
[13:17] bunch of personal expenses and put it on Schedule C instead we're going to allow.
[13:20] Schedule C instead we're going to allow the expenses to be at the corporate.
[13:21] the expenses to be at the corporate level where they should be where is.
[13:23] level where they should be where is normal and it's pretty regular when you.
[13:25] normal and it's pretty regular when you see a family office hey they're running.
[13:27] see a family office hey they're running their expenses for operating their.
[13:28] their expenses for operating their business business they got other.
[13:30] business business they got other businesses that they're doing in there.
[13:32] businesses that they're doing in there they're building up their Investments.
[13:33] they're building up their Investments but it works so much cleaner from a.
[13:37] but it works so much cleaner from a stock trading standpoint so what do you.
[13:39] stock trading standpoint so what do you have to do well I'm going to break it.
[13:40] have to do well I'm going to break it down for you first off you got to set up.
[13:43] down for you first off you got to set up the entity structure so you're setting.
[13:45] the entity structure so you're setting up two entities generally speaking.
[13:47] up two entities generally speaking you're setting up an LLC that's going to.
[13:48] you're setting up an LLC that's going to be taxed as a partnership and you're.
[13:50] setting up an LLC that's going to be taxed as a corporation so the next.
[13:51] taxed as a corporation so the next question is where should I set that up.
[13:53] question is where should I set that up there's a lot of reasons of why you.
[13:55] there's a lot of reasons of why you would set up the L C in Wyoming because.
[13:58] would set up the L C in Wyoming because nobody can see it and nobody can take it.
[14:00] nobody can see it and nobody can take it so you have a a high degree of asset.
[14:02] so you have a a high degree of asset protection we're not just setting this.
[14:05] protection we're not just setting this up for tax no taxes is a benefit by.
[14:09] up for tax no taxes is a benefit by having a management company but it is.
[14:11] having a management company but it is managing entities that's what we want.
[14:13] managing entities that's what we want its business to be we want it to be a.
[14:15] its business to be we want it to be a family office for you to manage your.
[14:17] family office for you to manage your various entities from an asset.
[14:19] various entities from an asset protection standpoint from a legacy.
[14:21] protection standpoint from a legacy standpoint from a business.
[14:23] standpoint from a business standpoint creating separation between you and your.
[14:27] creating separation between you and your family from the inv ments is actually a.
[14:30] family from the inv ments is actually a good thing from an asset protection.
[14:32] good thing from an asset protection standpoint from an estate planning.
[14:33] standpoint from an estate planning standpoint and from a business.
[14:35] standpoint and from a business standpoint it'll eventually be walking.
[14:36] standpoint it'll eventually be walking around on its own without you because.
[14:39] around on its own without you because it'll outlive you because these things.
[14:40] it'll outlive you because these things don't die and it'll be part of your.
[14:42] don't die and it'll be part of your estate and hopefully it's part of your.
[14:44] estate and hopefully it's part of your legacy plan hundreds of years from now.
[14:46] legacy plan hundreds of years from now you may still have that management.
[14:47] you may still have that management company going you still have that LLC.
[14:50] company going you still have that LLC going so when we set these up we're.
[14:52] going so when we set these up we're looking at it through those lenses we.
[14:55] looking at it through those lenses we sometimes call it the four-legged stool.
[14:56] sometimes call it the four-legged stool you're looking at it from an asset.
[14:57] you're looking at it from an asset protection standpoint ATT ta standpoint.
[15:00] protection standpoint ATT ta standpoint a legacy or a state planning standpoint.
[15:01] a legacy or a state planning standpoint a business standpoint we want it to be.
[15:03] a business standpoint we want it to be able to stand on its own it might get.
[15:04] able to stand on its own it might get separate credit it might do other.
[15:06] separate credit it might do other activities it might do other businesses.
[15:08] activities it might do other businesses it may employ other family members and.
[15:10] it may employ other family members and do a lot of other things and you create
[15:11] do a lot of other things and you create a family Council that's looking over
[15:13] a family Council that's looking over your wealth those are all good things
[15:15] your wealth those are all good things that it can do but you're setting those
[15:17] that it can do but you're setting those you're setting the stage to allow those
[15:19] you're setting the stage to allow those things to happen so you have to decide
[15:21] things to happen so you have to decide what are the entities llc's probably two
[15:24] what are the entities llc's probably two llc's probably Wyoming the corporation
[15:27] llc's probably Wyoming the corporation could be in your home state I'd still
[15:29] could be in your home state I'd still probably set it up as an LLC in the
[15:31] probably set it up as an LLC in the state of Wyoming and register it in your
[15:33] state of Wyoming and register it in your local jurisdiction if you're going to
[15:34] local jurisdiction if you're going to pay taxes out of it if you're going to
[15:37] pay taxes out of it if you're going to take payroll and do things like that
[15:39] take payroll and do things like that otherwise I might just leave it in
[15:41] otherwise I might just leave it in Wyoming it it's interstate commerce when
[15:43] Wyoming it it's interstate commerce when you're doing stock so it's not a
[15:45] you're doing stock so it's not a horrible thing just to leave it there um
[15:47] horrible thing just to leave it there um you're going to make sure that it's
[15:48] you're going to make sure that it's registered you're going to make sure
[15:49] registered you're going to make sure that it has its proper operating
[15:51] that it has its proper operating agreements that allows us to have what
[15:54] agreements that allows us to have what we need from a formality standpoint to
[15:56] we need from a formality standpoint to back this up the proper tax selection
[15:59] back this up the proper tax selection it's going to make its proper tax
[16:00] it's going to make its proper tax selections with its ss4 which is called
[16:03] selections with its ss4 which is called employer identification number so we're
[16:04] employer identification number so we're going have a partnership and a C
[16:06] going have a partnership and a C corporation more likely than not from a
[16:09] corporation more likely than not from a tax standpoint you're going to open up
[16:11] tax standpoint you're going to open up brokerage account inside that puppy.
[16:14] some brokerage account inside that puppy.
[16:16] some people are like well but my brokerage account might say that I'm a professional.
[16:17] okay if you run into weird issues where somebody's being an outlier.
[16:19] and they say oh we think that this LLC is a business and that you're a broker.
[16:22] okay then set it up as a we set up what we what we do here is we just set up a personal property trust to hold the brokerage account.
[16:26] make the beneficiary the LLC it's the same thing but it makes them happier for some reason.
[16:34] every now and again it's like one out of a hundred where we have to we have to do that.
[16:40] but otherwise you're just setting up the brokerage account.
[16:42] and I and I do this myself so I have multiple accounts and multiple institutions where I have this an LLC that same LLC.
[16:45] multiple institutions multiple different types of investing accounts so I know it could be done because I do it.
[16:50] and we've done this with tens of thousands of folks so we know what could do it.
[16:58] so that so you know it's going to fall on tough ears when somebody says oh you're on brokage account this that or the other.
[17:02] you know I'm sorry it's not how it works if you're dealing with somebody who knows what they're doing.
[17:07] we make sure it gets
[17:12] what they're doing we make sure it gets gets done so you open up the the
[17:13] gets done so you open up the the accounts and then you're going to pay
[17:16] accounts and then you're going to pay generally you're going to reimburse
[17:17] generally you're going to reimburse yourself for expenses that you're
[17:19] yourself for expenses that you're incurring but realistically we want to
[17:20] incurring but realistically we want to get a a credit card maybe get an AMX in
[17:23] get a a credit card maybe get an AMX in that in that company and if you're doing
[17:25] that in that company and if you're doing data feeds and other things start having
[17:28] data feeds and other things start having them incurred by that C Corp that's what
[17:30] them incurred by that C Corp that's what we want we want the C Corp to be
[17:32] we want we want the C Corp to be incurring the expenses if there
[17:34] incurring the expenses if there computers if you bought it you can
[17:36] computers if you bought it you can reimburse yourself out of the
[17:37] reimburse yourself out of the corporation how does it get its money
[17:39] corporation how does it get its money that 20% or you're doing what's called a
[17:42] that 20% or you're doing what's called a guaranteed payment to partner and you're
[17:44] guaranteed payment to partner and you're paying the corporation a set amount it
[17:46] paying the corporation a set amount it can't be based on profit has to be a set
[17:49] can't be based on profit has to be a set amount that you're saying this is what
[17:51] amount that you're saying this is what I'm going to pay that Corporation to be
[17:52] I'm going to pay that Corporation to be the manager and manage and manage my
[17:56] the manager and manage and manage my portfolio and it could be multiple uh
[17:59] portfolio and it could be multiple uh entities that that it's operating but
[18:01] entities that that it's operating but again talk to folks like us because
[18:03] again talk to folks like us because we'll show you exactly how to set it up
[18:05] we'll show you exactly how to set it up we'll make sure the paperwork is is done
[18:08] we'll make sure the paperwork is is done appropriately so you can get a bunch of
[18:11] appropriately so you can get a bunch of tax benefits and you can get all the
[18:13] tax benefits and you can get all the benefits from an asset protection benefits from an asset protection standpoint.
[18:16] you get all the benefits from a business standpoint and then most importantly all of this is a nice capsule from an estate planning standpoint.
[18:22] if you have a living trust around this whole thing and something happens to you whether you're incapacitated this keeps running or you pass away this keeps running.
[18:33] now the living trust might say here's how you distribute the monies that it generates you could always do that but this is a very very easy vehicle from an estate planning standpoint to pass on works like a charm.
[18:46] now what are the tax benefits you get I could write off things like an administrative office in my home computers cell phone all those things over here I'm having to track and I'm having to say what portion is business bus use what portion is personal.
[19:01] don't have to do that over here because an accountable plan with the corporation has different rules than you as a sole proprietor so I guess I'll leave it like this avoid that schedule C avoid it.
[19:14] this avoid that schedule C avoid it I get that some of you guys would actually
[19:16] get that some of you guys would actually qualify but there are other reasons
[19:19] qualify but there are other reasons besides just tax that we're that we're
[19:22] besides just tax that we're that we're looking at here from an asset protection
[19:24] looking at here from an asset protection standpoint and you want to remove these
[19:26] standpoint and you want to remove these are low-lying assets that any plainist
[19:28] are low-lying assets that any plainist attorney would love to garnish and would
[19:30] attorney would love to garnish and would love to grab if you're sitting over here
[19:32] love to grab if you're sitting over here it's easy for them just to take them
[19:33] it's easy for them just to take them away from you car accident kid gets in a
[19:36] away from you car accident kid gets in a car accident you get into a fight with a
[19:37] car accident you get into a fight with a neighbor whatever somebody makes false
[19:39] neighbor whatever somebody makes false claims against you or you run a business
[19:42] claims against you or you run a business and you have discrimination or some sort
[19:44] and you have discrimination or some sort of crazy suit those are the assets that
[19:47] of crazy suit those are the assets that they can take not so over here so we
[19:49] they can take not so over here so we like it from an asset protection
[19:51] like it from an asset protection standpoint something happens to me and
[19:53] standpoint something happens to me and I'm over here and I have that account in
[19:55] I'm over here and I have that account in my name I'm probating it may not be the
[19:58] my name I'm probating it may not be the most difficult probate in the whole
[20:00] most difficult probate in the whole world but you could be looking at 6
[20:02] world but you could be looking at 6 months and a lot of pay and statutory
[20:04] months and a lot of pay and statutory fees for example in California it's 8%
[20:06] fees for example in California it's 8% right off the top depending on the value
[20:08] right off the top depending on the value of that account that could be going to
[20:10] of that account that could be going to the attorney and to the personal
[20:11] the attorney and to the personal representative so we want to avoid that
[20:13] representative so we want to avoid that if humanly possible by using a structure
[20:16] if humanly possible by using a structure and keeping yourself away from uh having
[20:20] and keeping yourself away from uh having to go through a court process from a
[20:21] to go through a court process from a business standpoint this guy can stand
[20:23] business standpoint this guy can stand on its own do other activities and this
[20:26] on its own do other activities and this is really critical if you want to
[20:27] is really critical if you want to actually have uating wealth in a legacy
[20:30] actually have uating wealth in a legacy in your family then it helps to have a
[20:33] in your family then it helps to have a board and you're bringing them on and
[20:34] board and you're bringing them on and they're learning how to run these things
[20:36] they're learning how to run these things during your lifetime rather than just
[20:37] during your lifetime rather than just giving it to them when you're after
[20:39] giving it to them when you're after you've passed but there's a lot of
[20:41] you've passed but there's a lot of different reasons why we're setting this
[20:42] different reasons why we're setting this up from a tax standpoint this one makes
[20:45] up from a tax standpoint this one makes sense avoid this one too much scrutiny
[20:49] sense avoid this one too much scrutiny and uh basically it's not that great of
[20:51] and uh basically it's not that great of a benefit anyway you're not getting the
[20:54] a benefit anyway you're not getting the the most out of it we want an
[20:55] the most out of it we want an accountable plan there's a huge
[20:57] accountable plan there's a huge difference in the treatment of
[20:59] difference in the treatment of Corporations from a from a uh
[21:02] Corporations from a from a uh accountable plan standpoint when you're
[21:03] accountable plan standpoint when you're an employee versus if you're trying to
[21:05] an employee versus if you're trying to do this schedule schedule C and what
[21:07] do this schedule schedule C and what you're actually able to write off is
[21:09] you're actually able to write off is quite often shocking when you realize
[21:11] quite often shocking when you realize wait a second I have to keep a call log
[21:13] wait a second I have to keep a call log and what I use myself cell phone for and
[21:15] and what I use myself cell phone for and I can only write off the business usage
[21:17] I can only write off the business usage are you kidding me oh we only need a
[21:19] are you kidding me oh we only need a sample we only need three months yeah
[21:21] sample we only need three months yeah everybody does that yeah nobody does
[21:23] everybody does that yeah nobody does that so they always lose so 94 to 95% of
[21:26] that so they always lose so 94 to 95% of soulle Proprietors lose their audits
[21:28] soulle Proprietors lose their audits that's been our experience we try to
[21:30] that's been our experience we try to avoid it like the plague we always try
[21:31] avoid it like the plague we always try to put people into a structure you've
[21:33] to put people into a structure you've set this thing up you have the expenses
[21:35] set this thing up you have the expenses run through here you start quit doing
[21:38] run through here you start quit doing things as an individual when you're
[21:39] things as an individual when you're talking about your trading and instead
[21:41] talking about your trading and instead do it through a structure works like a
[21:43] do it through a structure works like a charm tons of benefits and uh and at the
[21:46] charm tons of benefits and uh and at the end of the day then you get to keep more
[21:50] end of the day then you get to keep more of your money because you're getting all
[21:51] of your money because you're getting all the tax benefits that for some reason we
[21:54] the tax benefits that for some reason we still can't Congress just hasn't taken
[21:56] still can't Congress just hasn't taken it maybe one day they will and they'll
[21:57] it maybe one day they will and they'll say hey here's you need to do to qualify
[21:59] say hey here's you need to do to qualify as a Trader until that day I'm going to
[22:01] as a Trader until that day I'm going to continue to do do it this way guys if
[22:03] continue to do do it this way guys if this is beneficial to you please like
[22:05] this is beneficial to you please like And subscribe in the comment section if
[22:08] And subscribe in the comment section if you could tell me any other uh
[22:10] you could tell me any other uh clarifying questions you have or if you
[22:11] clarifying questions you have or if you want to call me an idiot you could do
[22:13] want to call me an idiot you could do that too uh but you could put in there
[22:15] that too uh but you could put in there other topics you want me to address
[22:17] other topics you want me to address that'd be great and if you know somebody
[22:19] that'd be great and if you know somebody who has been battling with what is a
[22:21] who has been battling with what is a traiter versus is there a better way
[22:23] traiter versus is there a better way then by all means share this with them
[22:26] then by all means share this with them and good luck and and God bless