R. Shawn McBride interviewed with Holly Signorelli, CPA (also known as The Money Therapist — www.moneytherapist.com) about Things You Need to Know for Your Business in 2017.
You can find the full interview here: https://www.facebook.com/DoYouKnowWhereYourMoneyIs
Holly: Hi everyone, it is Holly the Money Therapist, and this is my good friend and attorney Shawn McBride. I can say this.
Shawn: Nice to see you
Holly: We are here to talk to you guys about 2017, and some really basic and simple things that you need to know for your business. Some of them may seem obvious, but many people ask me these same questions. Thanks for coming today, Shawn
Shawn: Excellent, well I am glad to be here. I think there is some stuff that is excellent for people to know, and just things that we can help them know more about.
Holly: What would you start than with that? What is the most important thing that somebody needs to do at the beginning of the year?
Shawn: The beginning of the year is a great time to go back and revisit whom you are, and what you are doing, and what the business is all about. I think the very important thing is, did we do the basic blocking and tackling? Many people probably had a strong 2016s. It was a good year financially that happened. Did you make sure you setup your LLC when you formed your company? If you have a business partner involved, did you have a partnership agreement with that partner? Then longer term, have you already thought about your exit? Have you thought about what day you are going to do something different from what you are doing with your business? If you have not thought about these basic things now’s a great time to go back and shore up that footing and set yourself up for the future.
Holly: We have talked about this before, but I do not think enough people actually know this, is when you set up your LLC you have to decide what kind of LLC you are going to be. For most small businesses, the best choice is an S Corp. It is one of the few things that the IRS has for small business to save a significant amount of taxes. We do not want to get into too technical stuff right now, but most of the time for small business that is the S Corp that saves you money. Unless you are doing real estate, investing and then typically it would be a partnership at least that is what I have seen. What do you think about that?
Shawn: I mean it depends on the circumstances, but yes, we definitely see S Corporations very common. What we will often do is set up somebody with an LLC with an S Corp election because now with the check-in-the-box regulations that have been around for quite some time now we can blend the two. Many people like the flexibility and freedom of an LLC.
Corporations tend to be very formulaic, boards of directors, have to have meetings, and this is just not, what a small business owner wants to be messing around with. They want to run the business and the LLC. If you set your LLC agreement up correctly, you can rather avoid that issue of, “Do I have to have more resolutions? Do I have to have meetings for this?” We can authorize a lot of stuff within the LLC agreement, so we often marry the LLC with the S Corporation taxation. Then when we start seeing stuff like real estate or other things we may have to have specific of what’s going on in that deal.
Holly: I love what you say about the exit plan. Some people think that is as if you are making something negative happen, but it is really the other way around. When you have an exit plan then when things go wrong, because they always do, or you have problems with partners, or you are fighting about something, at least you know what is going to happen if you do dissolve the partnership. Then you know what the exit plan is.
Holly: When you do not know what is going to happen, that is when the fear sets in and then there is kind of like that dark cloud over your head. Then you have a fight with your partner, or you are just not on the same page anymore, and then you start worrying about what is going to happen with the assets and the money? How is this going to be distributed? Then that is when things get nasty and more attorneys get involved, and lots of money goes out the door.
Shawn: That is one of the goals here is to avoid these problems before they happen. We are all going to exit our business in one way or another, right? Regardless of what we are thinking, at some point, we are going to die and walk out of our business. At some point, we are going to leave our businesses, right? We have to face reality. When we have a partnership, we have multiple people involved with this. It is rare that we are going to exit at the same time.
What I urge all business owners- partnership, individually owned, single owner companies, does not matter- you need to start thinking at some point, at least five years before you exit your business, maybe even more, thinking about what that will look like. What would be your exit scenario, how would that happen? Then you can start putting all the documentation together and doing the things, you need to do in order to make a smooth, quiet exit that works.
This is going to be simple stuff. Going back and revisiting your contracts. These all get reviewed as part of an acquisition. If you sell, your business to somebody is going to come in and look and read all your contracts. Do you have the right provisions in there? Are they transferrable to the new owner? Are you going to have to renegotiate some contracts? These are things that can really influence the value of the business, but they are very simple to do if you do it in enough advance of the exit.
If your business is starting to pick up steam, you had a good 2016, good 2015, now beginning of 2017 great time to sit down and say, “What is my exit plan? When might I exit?” Now you can start doing very little things incrementally over the next several years, which are going to have a huge impact on the potential value of your business when you exit.
Holly: Exactly, Many times new businesses have to have some kind of loan or capital because if they try to use their own money that can be very stressful too like you are watching your bank account go down and it is kind of a psychological thing.
If you do have a loan, then you want to have that as part of your exit plan too. It is easier to sell your business if you do not have debt. I have seen a lot of times, and I have seen this very recently too when you do have much debt then you will do not get the sale price that you want because it is just like anything else when it comes to money. The value of money to someone else is based on their perception of the situation. If they are looking at you like, “Oh, this person has all this debt,” they are going to offer you less money.
Holly: It is not always that, “Oh, okay this is the value. Someone’s going to buy it for this.” Not if they see that, you may have some cash flow problems and things like that.
Shawn: Little things like that. Interestingly, I was working with some people on a partnership scenario, one of the partners was looking at potentially leaving the business, and of course, there are guarantees on the loans, so that is a problem. If that partner leaves, they exit the business, and that is great they are out potentially from liability depending on what is in the LLC agreement, there could be some gotchas there. That partner might be out on that level but then if that loan goes bad and the personal guarantee gets triggered that partner might be in for a big surprise.
We need to think very carefully about how these things happen, exiting when there’s a loan involved. Ideal world: no loans at all. If there is a loan involved make, sure you are getting yourself out from underneath those personal guarantees. You do not want that thing to show up later and demand money.
Holly: It is like student loans. You do not want it following you around for the rest of your life.
Holly: Think about that kind of stuff.
Holly: Let us switch gears a little bit. There are many things that I think, again, may seem basic but many people do not know. One of them is about the home office deduction. Some people are afraid to actually take the deduction because they think when they go to sell their house that they are going to have to pay some capital gains, but that has not happened for a long time.
Back in the day, people that had a home office would also depreciate it so they were taking an extra deduction against the house itself and then when they sold the house they would have to pay a capital gain on there. That makes no sense now because now if you are married, you can have a $500,000 gain, and you do not have to pay tax on it, or $250,000 gain, so it is rare that anybody even has to pay that.
Having a home office is really important as long as you do not have another office. You can have a home office and another office, but you cannot take the home office deduction. Many people do not realize that. If your home office is your only office, then you can start your miles from there, and many entrepreneurs are in their car a lot.
Holly: Do you see that?
Shawn: Oh yeah, that is part this day of the small business world. Obviously, people are traveling around, and in person, despite all the technology, we are speaking face to face over the Internet right here and people watching us, and it is great stuff, but many times, it is better actually to get together in person, review to eyeballs. Yeah, people are using many miles to out to see other people.
Shawn: Keep track of that and having that there and knowing when and where to stop that meter, very, very important stuff.
Holly: Yeah, it is important. I actually, last year, started using the Miles app and it is on my wall if anybody is watching this or at the Money Therapist because there is a 20% discount. It is an inexpensive app, and there are many miles apps. You can use any one that you want. If you pull it up on your phone, you will see lots of different apps, but Miles IQ I love because everything is satellite and when you are in your car, you can swipe whether it is personal or business. Then you can actually make some notes for like whom you were doing business with. In addition, it is intuitive, so if you are going to the same places sometimes, certain clients, it is going to remember that, and it just gets easier.
What is important is the IRS lets you have 53 and a half cents, I love it, 53 and a half cents per mile for 2017. If you use an app like that, you are going to get more miles because when people try to do it manually, they do not get as many miles as they do when they use an app. You can get a large deduction. It is on my wall, but if you have 10,000 miles, which is not a lot for an entrepreneur that is networking a lot and meeting with clients, then you would get a $5,300 deduction or a $5,350 deduction.
Shawn: There you go. That adds up when you do 10,000 miles.
Holly: With some of these people in construction or realtors, they put 20,000 miles on their car, so it is important to navigate between whether it is business or personal. Many people, they do not have those apps, or even anything did manually at the end of the year, and then it is difficult to get the deduction that you should be able to get.
Shawn: Right, exactly. Yeah, that is the kind of thing where thinking now at the beginning of the year makes a big difference. You wait a little bit too long. So many of the things we’ve hit upon are just really checking a box and getting something started now, whether it’s starting that expense tracking now or LLC updates now, thinking about that exit plan now. The time is now for a lot of this stuff to go ahead and start putting things in place, so you have a smooth year.
Holly: Yeah, and just everybody remembers out there, there is a lot of stuff that you do not know that you need to know, so it is important to talk to somebody and to get with an attorney. I have always used my attorney for any contract or anything, and it has always helped me. He has never let me down. There are things that they tell you and ask you about that you are not even cannot. Even if you are doing a will or some kind of a buy/sell agreement for your company, or even just contracts for your employees or your contractors, you want to go ahead and take the time to find out what you do not actually know because that’s what can really hurt you nowadays.
Shawn: Yep, that makes perfect sense; that is where the gotcha is. Most of the time when clients come to me it’s, “I wish I had known that. I wish I had thought about that.” The proactive clients get here early, and the ones we love to work with, but not everybody realizes something and the ones that run up the bigger legal bills unfortunately often wait a little too long. They thought their LegalZoom form would be perfect, that contract they copied and pasted off the internet would get them there, and a problem happened with that internet contract or whatever.
Holly: Yeah, I see that a lot too where somebody does that themselves. If you understand it that is fine, I know you want to save a little a bit of money, but many times I end up having to fix something, clean it up.
Shawn: Exactly Right.
Holly: Yeah, Then it’s just so much more complicated the second time when you are trying to fix it than just doing it right the first time.
Holly: At least if you are going to do it yourself out there still talk to … Like, have a consultation with Shawn or someone like Shawn because they will give you the advice. Again, they are going to ask you questions that you were not even thinking of so that at least if you are going to do something on your own, then you will have the advice. I do that sometimes when somebody has an easy tax return, and they just want to get some advice on how to do it and it is something that they can do on TurboTax, but they just need a little bit of guidance so that they do not forget something.
Shawn: Yeah, Just that little tips with the mileage app. I mean if you pick up an extra thousand or two thousand miles in a year because you have that better tracking system versus writing it down on paper or trying to use your memory that pays back that bill right there and avoids a problem down the road.
Holly: Exactly, I think the app’s only like $40 anyway and again it just, yeah, pays for itself. For a while, I was putting stuff on my phone, like with the calendar, but that is a real pain in the ass. Let’s be honest. That just takes too much time, and then you have to remember to start and stop the miles. That is why I am a big fan of it now. I think little stuff like that can save you a lot of money and a lot of grief. Nobody feels like they have enough time anymore, so anything we can do to save time is good.
Shawn: Yeah, exactly Time is a very valuable asset when you are running a business. You are usually trading time or money all the time.
Shawn: That is your main resources of a business owner, particularly a small business owner.
Holly: Yeah, That is the other thing too, when it comes to time, is do not be afraid to get an assistant. You do not have to have a full-time assistant; there are virtual assistants. In addition, if you have another friend that has a business and you each just need like 10 hours a week then you could share an assistant. I see this where people are just trying to do everything, and then they are just really strung out all the time. I am here to tell you; you are going to make more money when you delegate more. Then you can also have more time, and then you will get back to your clients faster and better, and you will not be strung out, so you will be present when you are with them.
Shawn: Absolutely this is something I talk about a lot when I am speaking is getting that help. It’s basic economics. Do what we are best at rather than try to do everything. We are going to add more economic value. It is part of the entrepreneurial journey. I think we are all at different degrees and are not great at this early. It’s something I have built up over time, but more and more I get focused on doing the things I am best at and add the most value, and do less and less of those things that don’t add as much value.
Shawn: I think we all need to be on that same journey. I will tell you, just what you said. Business owners, when you start focusing on what you are great at and letting other people do the things that you do not add as much value at or within their wheelhouse, that is when you are really going to start picking up steam.
Holly: Yeah, It is true. I know last year I tried to learn a lot of technology, and I am pretty techie, but there are some things that I am just not good at. I was like, “Oh, I can learn this,” and I was just spending so much time doing it, versus just paying somebody to do those things. We do have to keep up with technology definitely, but it does not mean. I mean there’s something new every week so let somebody else do that so that you can do whatever it is that you do best that made you want to have your own business, to begin with.
Shawn: Exactly. At one point we were rolling out some video and some other technology, I went to my camera guy, and I said, “What do I buy?” For him, it did not cost me anything because he was already working with me on other video projects; I was already paying him for that, so he threw it in as a freebie. What would have taken me hours and hours of research, reading articles and I probably would have got the wrong answer, he can answer in a minute because he knows, he’s in that market.
Shawn: That frees me up three, four hours on that little tiny project right there that I now can spend talking to my best clients, or speaking somewhere.
Shawn: Letting people know who I am, doing the things that I am good at, that people enjoy, that people get value from, rather than reading a bunch of technology blogs.
Holly: Yeah, speaking of that, do you have another book in you for 2017?
Shawn: You know my 3 Laws of Empowerment book is nearing completion. It is based on my signature keynote and really gets that theme out there of building plans that you love and really how to do it. Planning is scary, and there is a lot of inertia around planning, people do not want to get into planning. The 3 Laws of Empowerment is a simple process we came upon to allow people to do the planning and to make it digestible. To make it something that can be done. The 3 Laws of Empowerment book is based on that has the principles with a lot more detail and depth than what I can give in an hour-long keynote speech, which I am brought in to speak about. Looking forward to getting the 3 Laws of Empowerment book out there. I have shown the advanced draft to a handful of people, and several of them have come back and said that they made major life decisions based on it. They embodied the principles and thought about where they were in life and where they were going.
Holly: Oh, that is … Wow.
Shawn: I think it is a real powerhouse because it is going to help people clarify their decision making, clarify their values and where they are going in life. I am really looking forward to having the book out there. I am hoping we will get that out this year. It is just a matter of the frugality of speaking and other events going on throughout the year.
Shawn: It is something we are working on.
Holly: Excellent I was talking to somebody the other day about my book Do You Know Where Your Money Is? I realized it is not necessarily going to compliment it, but actually be the opposite of what makes people abundant. I really felt like I had to write that book because so many people make emotional decisions and that is real.
Holly: We want to replace those with uplifting thoughts about money and success and just overall prosperity. Prosperity is not just money it’s having time and not being stressed out and doing something that you love and being surrounded with people, whether they’re contractors or employees or whoever, that you enjoy being with.
Holly: Because you are working with these people on a regular basis, whether they are friends, contractors or employees; you want to hire the right people. That is all part of the abundance factor.
Shawn: I love the notion. I cannot remember the exact phrase, but it was something about you could not get rich just managing expenses. You cannot just expect to make big money. You do have to do something greater, which is going to involve some investment of some sort, whether it is time or money or some combination thereof.
Shawn: We look through that lens of, “Yes, I want to control my expenses. I do not want to waste money.” Greater value added. How do I help other people do something great with my unique skills that are so powerful that they want to pay me to do it?
Holly: The other thing too is we live in a different energy now, and things change so quickly, technology’s changed, things go overseas, people lose their jobs, so really to me for any biz owner, you want to have multiple income streams just because you never know what’s going to happen tomorrow with any kind of technology. Even things like editing that used to be very expensive now many people can do themselves on an app. Not me, however. I cannot do that.
Holly: It is like things that we thought were complicated have become very simple with the technologies these days. I think it is important not just to hone in on one thing in your business but also to do different things with it. Whatever it is that you are doing there are all kinds of spin-offs that you can do. Alternatively, even different things that still fall under the same category and give you multiple income streams for sure.
Shawn: I love the idea.
Holly: Well, excellent. Thank you so much for coming back onto the show. I always love your information, and I cannot wait for your book to come out. We will have your book signing.
Shawn: I am looking forward to it.
Holly: All right excellent. Have a wonderful day everyone. I will put all the links up for you guys to get in touch with us.
Shawn: Talk to you later.
Holly: Have a great day.
Shawn: Okay, Bye
This posting is intended to be a tool to familiarize readers with some of the issues discussed herein. This is not meant to be a comprehensive discussion, and additional details should be discussed with your attorneys, accountants, consultants, bankers and other business planners who can provide advice for your circumstances. This article should not be treated as legal advice to any person or entity. Freeimages.com/photographer Kimberly Vohsen.
About the Author
- Shawn McBride is the Chief Innovation Officer at McBride For Business, LLC. His signature keynote, The 3 Laws of Empowerment(rshawnmcbridelive.com), gives audiences an entertaining look at how they can prepare, plan and protect themselves. You can reach R. Shawn McBride at firstname.lastname@example.org or (214) 418-0258.
Get Shawn’s latest book: www.mcbridebook.com
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