The Best Strategies for Navigating Financial Management Challenges with Emil Abedian

Summary

Podcast Summary: Maximum Lawyer Episode: The Best Strategies for Navigating Financial Management Challenges with Emil Abadian
Host: Tyson Mutrux
Guest: Emil Abadian
Release Date: March 4, 2025

---

Introduction to Emil Abadian

The episode kicks off with host Tyson Mutrix welcoming Emil Abadian to the show at [01:29]. Emil shares his multicultural background, highlighting his Armenian heritage, birth in Iran during a tumultuous period, and subsequent immigration to Sweden as a child. Despite not fitting the stereotypical Swedish image, Emil emphasizes how growing up in a diverse Swedish community instilled in him the resilience and work ethic necessary for entrepreneurial success.

Emil Abadian [02:38]: "I think growing up in Sweden really helped me. Being an immigrant, even though I was very young, taught me to work harder and adapt to different environments."

Transition to the United States and Entrepreneurial Journey

Emil recounts his move to California in 2007, driven by a desire to explore new opportunities and reconnect with his siblings who had migrated earlier. Landing a job at a large firm in Woodland, Emil quickly immersed himself in the local business scene. However, the financial crisis of 2009 led to a sudden layoff, prompting him to take a bold step—starting his own accounting firm with no initial paying clients.

Emil Abadian [09:50]: "I rented a space for just $300 a month and began taking on any type of client to keep the business afloat, even if it meant working 70 to 80 hours a week."

Building and Restructuring the Firm

Over three years, Emil's firm grew by handling diverse clients without a strategic focus, which eventually led to a merger with a retiring CPA, Varus Totlian, in [11:00] 2013. This merger exposed Emil to the challenges of integrating different business practices, leading to a significant restructuring where they reduced their client base from approximately 800 to less than 500 to better serve quality clients.

Emil Abadian [11:50]: "It was not painful, but it was scary. Once we streamlined our client base, I had more time to serve clients who truly appreciated our services."

Specializing in Legal Firms

Recognizing the inefficiencies of a generalized approach, Emil transitioned to specializing in serving law firms, particularly attorneys. This decision was influenced by networking within the Swedish American Chamber of Commerce and joining the Provisors group, which connected him with numerous legal professionals needing specialized accounting services.

Emil Abadian [29:00]: "Specializing in attorneys significantly standardized my operations. I could anticipate their needs and provide tailored solutions, unlike handling a diverse client base."

Financial Management Strategies for Law Firms

Emil delves into specific financial management strategies tailored for law firms, emphasizing the importance of trust accounting compliance. He discusses the impact of high-profile cases, like Tom Girardi's fraud, which led to stricter state bar regulations and increased demand for specialized accounting services.

Emil Abadian [32:07]: "California's implementation of random trust account audits has made attorneys more cautious, thereby increasing the need for specialized accounting services that ensure compliance."

Tax Planning and Payroll Management

A significant portion of the discussion centers on effective tax planning strategies for attorneys. Emil highlights the necessity of paying a reasonable salary to S corporation owners to comply with IRS guidelines and avoid reclassification of profits as wages.

Emil Abadian [50:39]: "A major red flag is seeing zero payroll in an S corporation with substantial profits. Ensuring reasonable payroll not only complies with IRS regulations but also stabilizes cash flow."

He also touches on the "Profit First" methodology, appreciating its focus on payroll but critiquing its administrative complexity for smaller firms.

Emil Abadian [53:21]: "I like the overall idea of Profit First, especially the emphasis on payroll. However, the detailed bucket system can create excessive administrative work, making it impractical for many firms."

Hiring and Promoting Within the Firm

Emil advocates for promoting from within the organization, citing the success of elevating senior accountants who are familiar with the firm's processes and culture. This approach fosters motivation and loyalty among employees.

Emil Abadian [19:51]: "Promoting internally ensures that your managers understand your systems and culture, which is essential for maintaining consistent service quality."

Incorporating Family into the Business

Emil shares his personal approach to involving his children in the business, emphasizing the importance of teaching them about money management from an early age. He allows his kids to perform simple tasks like shredding paper, fostering responsibility and financial literacy.

Emil Abadian [25:22]: "I want my kids to learn about money early on, even if it means assigning them small tasks like shredding paper. It's about building their financial understanding from a young age."

Upcoming Firm Merger and Future Plans

Towards the end of the episode, Emil reveals that his firm is in the process of merging with a larger company, expanding its workforce to 30-35 employees. This strategic move aims to enhance service offerings and streamline operations.

Emil Abadian [26:18]: "We're signing the merger documents today to join a larger firm. This isn't a sale but a strategic expansion to better serve our clients and grow our operations."

Conclusion and Key Takeaways

Emil concludes by emphasizing the importance of specialization, robust financial processes, and strategic hiring practices in building a successful accounting firm tailored to the legal industry. His experiences underscore the value of adapting to market changes, such as those brought by the COVID-19 pandemic, and leveraging technology to stay ahead.

Emil Abadian [48:01]: "In business, it's crucial to stick to what you do best. Specializing allows you to provide exceptional value without diluting your expertise across multiple industries."

Notable Quotes

• Emil Abadian [04:37]: "Diversity and community interactions in Sweden taught me a lot about dealing with different kinds of people, which has been incredibly helpful in LA's diverse environment."
• Emil Abadian [16:39]: "Putting processes and hiring the right people are fundamental—you have to go through the pain to establish solid systems."
• Emil Abadian [35:36]: "Tax planning is where CPAs can provide immense value beyond just bookkeeping; it's about leveraging your knowledge to save clients money and optimize their financial strategies."

---

Additional Resources

For those interested in implementing the strategies discussed, Emil is currently finalizing his book, Council to Counsel, which delves deeper into his journey and the best practices for accounting firms servicing legal practices. Additionally, the Maximum Lawyer Mastermind event in Maui, scheduled for April 10th and 11th, offers law firm owners an opportunity to reset, refocus, and recharge with high-impact business training and personalized strategies.

---

This comprehensive discussion between Tyson Mutrix and Emil Abadian offers invaluable insights for law firm owners navigating the complexities of financial management, emphasizing the importance of specialization, strategic hiring, and proactive tax planning to achieve sustainable growth and compliance.

Transcript

[Tyson Mutrix]

Are you tired of the marketing guessing game? Does your website feel more like a digital billboard than a client magnet? If you're nodding along, you're not alone. And it's time to stop the uncertainty and start getting real results. Let's talk about your marketing spend. Are you just shelling out money every month and crossing your fingers? Do you ever wonder what impact your marketing is really having on your revenue? Well, it's time to take the guesswork out of the equation with Rise Up Media. We've been working with them for over a year and, and the feedback from our fellow members has been fantastic. Rise Up Media is here to take your marketing to the next level. They'll even perform a full audit of your online presence, giving you the good, the bad, and even let you in on what your competition is up to that you're missing out on. And the best part, there's no obligation, no catch, no pressure. If you decide to work with them, their contracts are month to month. That's right. No long term commitments tying you down. So what are you waiting for? To learn more about how Rise Up Media can transform your firms, visit riseup media.com max law and rise is spelled with a Z. Riseupmedia.com max law.

[Emil Abadian]

This is Maximum Lawyer with your host, Tyson Mutrix.

[Tyson Mutrix]

Emil, welcome to the show.

[Emil Abadian]

Thank you so much, Tyson. Appreciate it.

[Tyson Mutrix]

So it was good. We got to chat a little bit before and I want to start with the Swedish part. As you said, you don't look Swedish. I don't think you sound Swedish. So explain the connection to Sweden.

[Emil Abadian]

I don't look Swedish. I don't sound Swedish, but I think I am pretty much Swedish. But I was not born in Sweden. We moved to Sweden when I was a baby. I was born, I'm Armenian originally, born in Iran, 1980, right after the Iranian revolution. So my parents took us. I'm the youngest of three kids. So they took us to Sweden. Because of the Iran Iraq war, the revolution happened. So I grew up, I spent most of my life in Sweden. I graduated there, I went to university there. I worked Ernst and Young there a couple of years before I decided to move to California. 2007. So I got here, my siblings were moved out here way before me. So I just came out here to see what's happening, applied for a job. I got a job at the larger firm. So you know what, why not? And I met my wife at that time and the next thing you know, you're married, you have babies and the firm was created and there's no Going back to Sweden? Yeah.

[Tyson Mutrix]

No, yeah, definitely not.

[Emil Abadian]

But yeah, that you have a point. Anytime I say I'm from Sweden, I have to explain this because they look at me like, what the hell? Don't lie, man. You're short, you're the dark hair. You don't look anything like Swedish.

[Tyson Mutrix]

It's funny because I had to clarify because there's some things in their insight brief about you, I'm thinking like, well, I don't know if that makes sense.

[Emil Abadian]

This guy lying already to us.

[Tyson Mutrix]

No, not that you were lying. I thought maybe that I had, I had done the research and gotten it wrong. But do you think anything about your background? Because you're very entrepreneurial, it seems you've got. You own two companies or at least a part of one company and then you own the other one outright. Anything about your background, you think that gives you an advantage over competition?

[Emil Abadian]

I think growing up in Sweden really helped me. Because you coming to new country as an immigrant, even though I was very young, I was not a baby. I was like 2 or 3 years old when we moved to Sweden. I spent most of my time in Sweden, most of my life. But my parents are still immigrants or I was an immigrant also, but they came at a later age and I saw them struggling. My dad used to have a restaurant back then in Sweden. My mom was working with three kids and I saw their struggle and I don't know, it may be that really helped me to really work even harder. But it's not only about working harder, it's. I saw my dad with his business, really uneducated. I think he stopped school at sixth grade and when we moved to Sweden, he didn't know the language, he didn't know anything. It was a brand new country. And he like six months or a year in, he opened up the business, the restaurant. So I think that has taught me a lot. But also in the area, area in Sweden where we lived, there's a lot of immigrants. We interacted with a lot of, lot of different kind of people, Swedes, you name it, Arabs, Somalians, from millions of places. I think that taught me a lot from. With diversity, being able to deal with different kind of people and living in la, as you know, it's a very diverse, diverse place. And I think that, I think that's been really, really helpful for me.

[Tyson Mutrix]

So that's interesting. And I mean, whenever I heard that, I heard community is kind of what I heard, you know, you. And obviously diversity is important too. But it did seem like more of the community part of the community aspect of it was pretty important. And I do wonder if, because you've moved or you've moved to the States and you've, you've got two established businesses, how much does the community have an effect on, I guess, the success of your business or your success in general?

[Emil Abadian]

So where I live right now, I live in la, in, in Glendale. Glendale area where there are a lot of. Lot of Armenians that live in Glendale. Originally I'm Armenian, Armenian from Iran, raised in Sweden and there's not many Armenians in Sweden. So when I first moved to. Moved to Glendale, I was kind of in shock. What the hell? Where are all these Armenians coming from? But Glendale has been very helpful for me, obviously, because first of all, as you mentioned, in the community, people want to work with people they feel comfortable with. That's one portion. But pretty quickly I got involved with the Swedish American Chamber of Commerce, which got me a lot bigger connection because there are a lot of Swedes here in la, specifically in LA area that are doing business and very successful Swedes are moving out to California. And by being part of the Swedish American Chamber, I get in contact with them regularly. And that's really, really been helpful for, for my, my growth of the operation. Definitely.

[Tyson Mutrix]

It seems like you've, I mean, proactively sought out membership and groups or whatever. But I mean, is that part of your recipe for success is because I will tell you, like whenever I. You came in, you know, we talked to each other briefly and then when I came in, we chat like, you're very approachable. And I do wonder if just proactively, you know, reaching out to people, proactively, being involved in communities, like, I guess, what, what role does that have in your success?

[Emil Abadian]

I don't think it's honestly like the Swedish American chain was just a coincidence that happened by. I used to work with a bookkeeper who used to send me tax work back in the days when I first started. And he called me one day and he didn't even know that I was from Sweden. Called me, oh, Emil, I have a tax client here. He's a foreigner. I have no clue what to do. Can you talk to him? So, yeah, sure. Where is he from? He's from Sweden. Are you kidding me, man? I'm from Sweden. Oh, no way. So I talked to him. So he became my client and then he started referring me another Swedish client who is still, by the way, part of the Swedish American Chamber. So you know what? You got to come and see us. So that portion was just a coincidence. But I like talking to people, that's for sure. That's the part of my job that I really like, that talking to people to see what could be done, filing a return or doing bookkeeping. That's not the sexy part in what we do. So is it intentional? No. But is it helpful? I think definitely, yeah, it definitely helps.

[Tyson Mutrix]

So I want to. I want to shift gears a little bit and I want to talk about the two businesses just for a second, because I want to. I want to make sure people have a better understanding as to what you're. What you do. And then I want to dig into some more of the details. Talk to me about the two different companies and the differences between the two.

[Emil Abadian]

So when I first started, this is back in 2009, and if we go back a little bit. So I moved out to California from Sweden in 2007, and I got a job at the larger firm in Woodland, dlc, California. I started working there and I had already met my future wife. My wife. Today. We were getting married in the summer of 2009, April of 2009, I got laid off for my job. This is during the financial crisis. And about 20 to 30 people at that time got laid off the same day.

[Tyson Mutrix]

I was in law school at the time, and it seemed like a bloodbath.

[Emil Abadian]

Yeah, it was not fun. And at that time, I was here less than for two years. So I didn't know lot of people. I didn't have connections. I said, what the hell am I doing? I'm getting married in a month or two. It was the weekend before my wife's wedding shower. So I started applying for jobs, obviously, as anybody would do, but I didn't want to go into the private industry. I got a lot of offers as an accounting manager or other positions at private firms, but I always wanted to have my own firm eventually, even though at that time was too early for me, sure. But there was no opportunities. So I say, you know what? The hell with this. I'm just going to open up my firm. It is what it is. Whatever happens, happens. And if I don't do it now, I might never do it. So we went to Sweden and Paris for our honeymoon and came back July of 2009. I just opened up my own firm with zero clients. Zero paying clients. I had clients, but none of them were paying because they were brothers, sister, cousins. And then I was working with zero clients. I was still working 70 to 80 hours a week. At the point where my wife was getting worried. At one point where we just got married. Are you cheating on me or what's happening here? Yeah, say no. Honey, don't worry. This is, this is what it takes for me to just get, get up and run.

[Tyson Mutrix]

Did you work on the honeymoon? I gotta ask you that because like.

[Emil Abadian]

I didn't know because I opened it up after I came back.

[Tyson Mutrix]

Okay, gotcha. Okay.

[Emil Abadian]

I didn't do anything.

[Tyson Mutrix]

I didn't know if you were trying to like put together a business plan while you're in Paris.

[Emil Abadian]

I didn't have a business.

[Tyson Mutrix]

Most people don't.

[Emil Abadian]

I just came back and then I got introduced to another accountant who had an office. So I just rented a space from him. My first rent was 300 bucks.

[Tyson Mutrix]

Pretty good. So especially in LA.

[Emil Abadian]

Yeah, it was fantastic. It couldn't be any better. So as I just started and I didn't know any people. My point, why I'm going back that far is I took on any type of clients. I remember going into the office on a Sunday for 100 buck tax return. Client.

[Tyson Mutrix]

Sure.

[Emil Abadian]

I had to. Like I didn't have any source of income. Looking back, would I do it again? Probably not.

[Tyson Mutrix]

I was going to ask you that because I was curious about, like, was that a mistake?

[Emil Abadian]

It was a mistake. Yeah, it was a mistake. But at that time I felt like I didn't have any option because I didn't have connections. I didn't. I didn't really know what to do this. I was new to the country, my English, yeah, I was speaking English, but it was still a lot worse than what it is now. Even now, it's not great now either. So would I do it again? No, I would be a lot more strategic with what kind of client I was taking. So growing that firm, I grew it for three years, took on any type of client. And three years later I merged with a retired retiring cpa who by the way, still is with the company. He's 78, 79 years old. He comes in and reads the newsletter newspaper.

[Tyson Mutrix]

He comes and has fun.

[Emil Abadian]

Don't tell him that.

[Tyson Mutrix]

It's a social. It's a social group.

[Emil Abadian]

Yeah. So we merged our practices and he wanted to slow down. So I took over the practice and started running the practice at that time. But that was not as helpful because he had been running his firm the way I had been running it in the past three years. He helped anybody who knocked on the door, anything the client wanted, the way the client wanted. There's no rigless systems or processes in place. So we went through massive, massive change after that. Not directly because it took Me a while to settle in with a new practice. But his firm was about three or four times bigger than mine at that time. So two or three years in, we went through massive change. We fired a lot of clients. I think we went from 7,50,800 clients to less than 500 clients.

[Tyson Mutrix]

How painful was that?

[Emil Abadian]

It was not painful at all, actually. It was just scary.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

At the beginning was scary. I was shit scared. What the hell? What is going to happen? But once it was done, it was the best thing I ever done because those were the clients that took most of my time. And that opened up so much more time for me to do to serve the clients that really wanted the service, that really appreciated the service.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

So it was not painful, but it was scary.

[Tyson Mutrix]

Well, I wonder if there's a lesson in the fact that you end up partnering with someone that was pretty much just like you and how you ran the firm.

[Emil Abadian]

I would not do it again. I was just lucky with the partner.

[Tyson Mutrix]

Sure.

[Emil Abadian]

Varus Totlian. If it was any other person, this transaction would have been a disaster. He was, and he still is, very, very helpful. And he really wanted to make sure he helped me. He was not in it to make more money than he had had done in the past. He was in it to help me to kind of make sure the practice could continue and in a good way. But the clienteles were not really great.

[Tyson Mutrix]

Sure.

[Emil Abadian]

So a lesson from that was I would probably not buy another practice.

[Tyson Mutrix]

Not at all.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

Really? Because I was going to ask you if you thought that would be a wise. No strategy.

[Emil Abadian]

Because any practice you buy, you got to have good and bad clients.

[Tyson Mutrix]

Sure.

[Emil Abadian]

That's the reality. There's. It would be impossible to. Not impossible, that, but very, very difficult to find a practice where all your. All the clients are matching your ideal. Ideal client. And there are plenty of clients out there, especially in our industry as an accountant, there's lack of accountants. So why not just spend the marketing dollars instead of all the headache and the transition and all that and just try to get your own client and the client you want to work with and that appreciates you. So I would not buy another practice. No.

[Tyson Mutrix]

Interesting.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

All right. So eventually, though, you kind of worked your way. You're not. You're still involved in that. That part of the business.

[Emil Abadian]

Right.

[Tyson Mutrix]

But you're. You of a lesser role. So how did that take place?

[Emil Abadian]

So we changed, evolved throughout. And then pretty much right after the merger, we hired a senior accountant at that time who really stepped in and put the sweat into the company. And about six years, five or six years in, we made her partner. So totly on step back, not a partner anymore. And we made Cybele, who is now running Abadian and Totlian, the partner.

[Tyson Mutrix]

Sure.

[Emil Abadian]

And the idea, obviously she deserves it first of all, because she really put in her hard work. She had two young kids at that time and she did what it needed to be done. And gradually she grew her responsibilities and the role in the company. And now she's running Abadian and Totlian. And Totlian is Varu, the old OG partner. We kept his name still and until last year I was still involved. We were. I was still running Abedian and Totten until last year, where I decided that I only want to work with lawyers now.

[Tyson Mutrix]

How did you get the firm to a point where it was running without you?

[Emil Abadian]

It's about the people, and it starts with Sibel, my partner, and downwards. And it's impossible to run a firm yourself doing everything yourself, obviously. So it's about the processes and the people, as we discussed a little bit earlier, just before we got on here, here. So you got to have the processes in place and it's painful. To put the processes in place is not easy. For the longest time I wanted to find a shortcut to get the process in place. I want to buy them, I want to hire people to do it for me. Yes, you can hire people to help you, but the processes have to come from you, in my opinion. You have to be involved putting the processes together. At least the idea of the processes can hire people who can put them together and draft them and write a muck and all of that. But for the process portion, I don't think there's any shortcuts, in my opinion.

[Tyson Mutrix]

Yeah, I agree that what I see quite a bit is people will have someone build the processes out for them, but they don't understand them, so they don't know what they are. And that's a massive problem. If you don't understand fundamentally, if you don't understand your processes, you fundamentally don't understand your business 100%.

[Emil Abadian]

And so there are two kind of people that could write your processes, like the external people, coaches and business advisors, and internal people, such as your business partners, managers, whoever. I believe more in your internal people doing it for you. But you still need to be involved, your firm, you need to come up with your. The way you and your firm want to work. So bottom line is there are no shortcuts. You have to go through the pain to put the Processing systems and processes place. And then the second portion is hiring. You got to hire and you will fail. You will fail many, many times. I don't know. In the best, if we go back one step after. Right after Covid, our business boomed significantly.

[Tyson Mutrix]

I bet it did. Yeah.

[Emil Abadian]

It was just crazy. Different reasons. A lot of businesses needed more advice and help. They were scared. But also a lot of older CPAs decided to just retire.

[Tyson Mutrix]

Oh, interesting. I wouldn't have thought that was an element of it, but that.

[Emil Abadian]

Yeah, interesting because everything changed.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

Now instead of doing in person meetings, they had to learn to do meetings over zoom. You need to use their technology more.

[Tyson Mutrix]

E contracts, everything.

[Emil Abadian]

Exactly. Say, you know what? I'm gonna do it for another couple of years. To hell with it. I'm just gonna finish the thing that.

[Tyson Mutrix]

Frustrated me the most about COVID or one of the most. Obviously it was a terrible time, but I felt we had a massive advantage electronically because we've been doing it for several years at that point, and it forced everybody else into that age and it drew that. That part frustrated me the most because now we did. I don't think we had lawyers. I don't think we had a lot of people leave the industry. We obviously did have some, but it doesn't seem like as many as the CPAs did.

[Emil Abadian]

The reason for CPAs is I don't have the statistic on it, but they're big portion of CPAs that are in older ages, like retirement age. And CPAs typically don't retire at the age of 65 or 67. They work late until 70, 75 or whatever. So there are a lot of older CPAs, and those are the ones that really left. Not all of them, obviously, but a big portion and not enough CPAs are getting into accounting. So there's a big gap in between there because it's not sexy. No accountant who want to go to the bar and say, I'm an accountant.

[Tyson Mutrix]

Well, you know, I think. I think that that is the perception that is put out there on movies and things like that. I doubt it's really like that. I. I'm sure there's. It's a lot more exciting than that. But that's great for you because, I mean, you're going to have an advantage over the next two decades, at least.

[Emil Abadian]

At least.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

The only challenge here is the hiring portion. If you can find as a firm and same same for lawyers. It's not much different if you can find a formula for hiring people, whether it's offshoring, outsourcing, or internally, your. Your business going to thrive. And I think that's. That's the same for law firms also, because there's going to be a lot of. Lot a lot of business. And the more the tax code and the business world gets complicated, the more advice businesses need. So there's a lot of opportunities, for sure.

[Tyson Mutrix]

I think the. One of the coolest things that, like in our firm is when we get to the point where we were hiring for positions from within, where people were being promoted from within, and we had one where we had. It was we wanted to move up four different people into different roles so they were all getting promoted. And then we're going to hire a new person, but they're all contingent on each other. So we had to go like one person at a time. Are you interested in this role? We think you'd be perfect for it. Great. Next one. Next. And. And all four ended up saying, yeah, we want these positions. And they all got moved up. It was the coolest thing. We had to announce, you know, four promotions at the same time and then hiring a new person. So it was like that to me. That's one of the coolest things we've done as a firm.

[Emil Abadian]

I've tried that. And that in my opinion, at least, that's the best way of hiring and just promote within. I tried hiring at manager levels from outside instead of promoting seniors to managers. It's nowhere close to being as successful as hiring internally.

[Tyson Mutrix]

Why do you think that is?

[Emil Abadian]

First of all, the people, let's say seniors being promoted to manager, they've been with you for a few years. They know your systems, they know your processes, they know your business idea. So it's. They know you and your operation. And I think they get more motivated. You motivate your team members by promoting them. Who wants to stay where they are for the rest of their life like that? That's not motivating. Sooner or later, they believe you.

[Tyson Mutrix]

Okay, so I do want to ask you about the new company. Let's talk about that for a little bit. Because you like you obviously you've. You've been drawn to lawyers, right? And so you started the new company that's. That's focusing just on lawyers. What's. What was the reason for that?

[Emil Abadian]

Again, I think it was a coincidence that it was just lawyers and not any other industry. But pretty quickly I decided that I want to be specialized, even though it took me many years until I got to that point. But. But when all this mess with the merger and I was getting clients and doing everything for them. And I was just working day and night. The merger happened in 2013, January 1st of 2013. And my first child, son was born January 31st of 2013. So the first six to 12 months I didn't see him. And that kind of was a wake up call like, Emil, you cannot do this. This is just the first kid in. Even though we got stuck on the second one. We only have two. We don't have more. It sounds like I have a lot more. But you can't do this because I had gone through that with my dad. My dad worked as long as I can remember. He was working like seven days a week, 9 to 10am in the morning, to 11:12 at night, because he had a restaurant. So I didn't want to do that mistake. But I was there at that point.

[Tyson Mutrix]

Sure.

[Emil Abadian]

So I need to change this to create a business that fits my lifestyle. And how can I do that? I can't do that by taking on any kind of client like satisfying anybody who needs help. It's not just not doable. Let's specialize. And what can I specialize? It's not about just saying I'm specializing in entertainment industry or dentist. Okay, what do you do for them? You got to be able to provide the value that not many other accountants are doing.

[Tyson Mutrix]

Before you go further, it sounds like you had an issue though, early on, though. Where, where? And I wonder how much of it had to do with you seeing your dad working so many hours, which sounds like early on you were working so much that it had an effect on your marriage. Would you say that because you said your wife was asking, hey, you started to question, you're working so much. Do you think that you carried some of that, seeing what your dad was doing into the business early on?

[Emil Abadian]

I think so because I was a little bit younger when I moved to California compared to when he moved from Iran to Sweden. He was probably late 30s, I was late 20s. But I don't know, it might be that immigrant mentality that you're in a new country, you got to make it like no one's going to help you and you just step up or get, get back to where you came from. So that made me work harder, definitely. But yeah, I think seeing growing up and seeing that from my family, that hard work is part of our life, that probably is part of what. Why I started doing what I was doing.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

But I'm glad that I realized that that's not the only solution. Like you could be successful. You could run a Firm, you could have a restaurant. I'm not specializing in restaurants, but comparing to my dad, without having to work seven, seven days a week, 12 hours a day, you don't have to do that.

[Tyson Mutrix]

Different world.

[Emil Abadian]

It's a different world.

[Tyson Mutrix]

Yeah. That's. When you, when you mentioned that your dad ran a restaurant, I was thinking, man, that's a tough life. Because that's, I don't, I don't think people realize how hard it is to run a restaurant. So when you go to a restaurant and you complain. Listen, sometimes I just suck it up because I, I, that's. It's tough running a restaurant. Restaurant life is different. It's just a different.

[Emil Abadian]

Probably one of the toughest, toughest industries out there.

[Tyson Mutrix]

Yeah. It's funny because, like, sometimes, and I don't know if you do this because you lived it right. My parents didn't run a restaurant, but I've worked as a dishwasher in one before. And I saw the effect on the owners, how it's. So it's a tough life. Like, there are times where, like, I will just. If I have a bad experience, especially at a small restaurant, if it's like, if it was like a chain, I don't care as much. But if it's like a mom and pop shop, if I have a bad experience, I. Sometimes I'll just like, you know what? I'm. Chalk that up as they had a bad day because that stuff.

[Emil Abadian]

And I appreciate that. And that's the reality. My dad didn't have a huge restaurant. It was a mom and pop there. To two partners running around an operation, he was a pretty successful business, but. And yeah, I didn't have to go work somewhere else because I had, I had a job there. And he wanted me to work for him because that was the only time we really could spend time together.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

So I remember growing up. Anyway, anyways, from 8, 9 years old, every Sunday, or as many Sundays as possible, I was spending time with him at the restaurant. We're going in together, working together, having lunch together. That was our kind of bonding time.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

But, yeah, I think that that has really built, Built my character when it comes to working hard. Yeah, but is it the right way? Is it you. Do you have to really work super, super hard? I don't know. I think it's. Yes, you do. It's a lie to say that you won't, you don't have to work hard when you open up your own business or your law firm. But it's more important to taste today's society work smarter because there are so many resources that we didn't have 30, 40 years ago with the technology, with the offshoring, with. Everything is available, you name it. If we can think about it, it's out there.

[Tyson Mutrix]

Do you incorporate your kids into the business at all, where you bring them to work and let them do things?

[Emil Abadian]

Yeah, they're still young. My youngest one is 8. Oldest one is 11. He's turning 12 soon. And it's hard for them to do accounting work, obviously, but they come in, they do shredding. They shred paper, sure. Even though we have a shredding company come pick up the. The papers. But I put aside a bunch for him. When they come in, I got them a small shredder. So, yeah, I want them to learn and I talk about it. And remember growing up, my dad didn't talk too much about money or actually business, but I don't care. I don't mind. I want them to learn at the early stage about money because it's a big part of our lives and I share most of the thing with them, like what revenue is. What is it? We're going through a transition right now, actually, that is not official yet, but it will be official by the time we air, so maybe we can talk about it.

[Tyson Mutrix]

Yeah, let's talk about it.

[Emil Abadian]

So the Abadian and Tottenham portion is actually merging again.

[Tyson Mutrix]

Interesting. As of today, Breaking news. Okay.

[Emil Abadian]

As of today, actually, we're signing the documents later today.

[Tyson Mutrix]

Oh, my gosh.

[Emil Abadian]

So we're merging with a larger firm, about 30, 35 employees. So we're talking about that merger, for example. I talk to my kids about that merger. What's happening? Why are we doing it? Because they wonder that this is. You've been running this firm for 15 years. Like, don't sell it, don't merge. They think I'm selling it. It's not a sell. And I explained to them why we're doing it, so they can learn. And I want to share with them. So I think it's important.

[Tyson Mutrix]

I think that's. I think that's important, too. I've got kids the same ages, so they're not exact, but in the same range. So 13, 9 and 8. So they're. We're. Our kids are.

[Emil Abadian]

Right.

[Tyson Mutrix]

Same. Same realm. And we. So we are. We are always trying to explain why we're doing certain things. For example, like we're out here on work, but we brought them out and so we talk about that. And so today's a work day for daddy, you know, and we brought them out. I don't know if you saw them whenever you.

[Emil Abadian]

Yeah, we had them.

[Tyson Mutrix]

We had them here for a little bit, but my wife felt more comfortable kind of taking them and not. Not letting them make a bunch of noise. But I think getting them involved in all this, it's a good learning experience at the. At the least. It doesn't mean they have to start a firm or anything like that, but I think it's a good experience for them.

[Emil Abadian]

No school will ever teach them this. No, no school will ever teach them the podcast portion of the dad's business, for example.

[Tyson Mutrix]

Right.

[Emil Abadian]

And especially today with. It's relatively easy for kids nowadays compared to when our parents grew up and even when we grew up. So seeing that, for them to only see the good side of this world, everything is easy. Yeah, we live in a good area, we have good, nice cars, we travel. But that's not the reality always. That's not always what the life is about. And if we don't talk about it, they don't see dad's hard work. Because you work hard. I'm sure you work very, very hard. You fly across the country to do this kind of events and masterminds. It's good for them to see that we do this traveling, we do this, we do that because there's hard work behind it. So please learn it and so don't take it for granted.

[Tyson Mutrix]

I'm laughing because you're right. I think that that is 100% spot on. But I'm laughing because one of the first things my oldest son said when we got out, he's like, you have this much time to hang out whenever you come to these things. And I said, well, because we came out a few days early, I was like, no, we don't normally have this much time to hang out. We came out early because of you all. That's. That's why we have so much time.

[Emil Abadian]

Just because of that comment. He need to work harder.

[Tyson Mutrix]

Exactly right.

[Emil Abadian]

Put him to work.

[Tyson Mutrix]

Exactly right. But I want to go back to lawyers specifically. Why you. Why you focus on them? Because I think that that's smart. You. You started a niche down. You started to attract the clients that you wanted and not the ones that you. That you don't. So how has that helped you in your business? Or has it. Maybe it hasn't.

[Emil Abadian]

Has significantly. So I joined this group, Provisors. It's a country, it's nationwide.

[Tyson Mutrix]

Yeah, I know about.

[Emil Abadian]

It's huge in California, but it's part of their. Part of most of the most of the country and provisors are. It's a networking group for accountants, lawyers, financial advisors and some other. Some other professionals, but mainly those three professionals. So there are a lot of attorneys there and getting in there. One started a firm, a client, and they, they saw that we're doing a good job and the next thing we know, we have a bunch of attorneys in our book. And that was again, not intentional. It just happened. Yeah, the networking portion was intentional. I wanted to do networking because I didn't know a lot of people. So I needed to get to know people. So I noticed lawyers really need this help because typically they're fantastic lawyers. They're good in courtroom, they're good drafting agreement, they're good, they sell cases, they're aggressive. But when you talk to them about accounting and financials, it's like they don't understand a word of what you're saying. And that was a surprise to me actually, because you would think lawyers, you know, they're. They would understand it, but majority of lawyers don't, which is fine.

[Tyson Mutrix]

Sure.

[Emil Abadian]

Later on I realized that's actually fine. That's not a problem because they're great at what they do. Let them do what they do. Why do we have to spread this thin? So we got in more and more into attorneys and attorney accounting. Attorney's accounting is a little bit different, as you know. You have the trust accounting specifically in California. I don't know if you're familiar with the Tom Girardi's case in California. No, talk about it, hotshot. The PI attorney committed a lot of fraud. Stole. Stole clients funds.

[Tyson Mutrix]

I think I do know about this case. It was a ton of money.

[Emil Abadian]

Like, I don't know, hundreds of millions.

[Tyson Mutrix]

Yeah, it was, it was an amount that I was. This was what, five years ago?

[Emil Abadian]

About five years ago. Four or five years ago. And he's still, he's still in court right now. I think he just in the days during this days getting sentenced 14 or 16 years, something like that. Don't quote me on it. So after that, after Tom Girardi's case, and that became a huge case by the way, he was married to Beverly Hills housewives, one of these younger, younger girls. So it became even more, more, more a bigger case. So after that, the California state bar re ramped their entire trust accounting rules, which made it a lot more stricter for lawyers. So that was another trigger. Now we started getting just. The state bar was doing free marketing for us basically because the attorneys were scared. And now they have to sign off with their license renewal that their trust accounting is correct.

[Tyson Mutrix]

I think that most states have that requirement, don't they?

[Emil Abadian]

Yes, but there's an additional layer right now where I don't know exactly the wording of it, but they made it a lot more complicated and you have to sign off and it's a lot more stricter. And starting February, well, in a few weeks already they will do random audits of trustees.

[Tyson Mutrix]

I was does random audits too where like they go through. That's. I think that that's important.

[Emil Abadian]

Oh, they do that. So California didn't have that.

[Tyson Mutrix]

So I would. I know Iowa doesn't now. Missouri does not do it. Illinois does not do it.

[Emil Abadian]

There you go. Okay. So some states have it already.

[Tyson Mutrix]

Exactly. Yeah.

[Emil Abadian]

So California did not have that. And they tried to implement it for many, many years, but they never had the politicians kind of support for it until the Tom Girardi's case where. Where they push it through. So starting next month it will be random audits. And now attorneys are even more scared.

[Tyson Mutrix]

Sure.

[Emil Abadian]

So that led us to get into more and more into attorneys up to now where we do the trust accounting. Very, very good. So we got our name out there as the law firm specialist accountants. And the way it helped my firm is it standardized my firm a lot more. Yes. Attorneys. There are million difference of attorneys. You have PI, you have immigration, you have workers comp, you have business attorneys, estate estate planning attorneys. But we understand their issues. That's how it really helped me. When I get a lead calling me, I'm talking to them before even. They tell me what they want 85% of the time I know what they're looking for. I know what their issues are. So I need to listen to them, just confirm my understanding and then give them a solution. Whereas if I do everything, if I do doctors, dentists, architects, restaurants, lawyers, you name it, manufacturing companies, Every single company or industry will have its own issues and its own complications where I will have to sit down and learn it every time. Where it obviously will take a lot more time from me and my team to do that. So doing one thing and doing good helped me from my perspective. But also it helps me provide value to my law firms because now I can help them. I'm not only doing their bookkeeping and tax filing and call it a day. We are Clio consultants. You familiar with that? So I love Clio. I wish there was something like that in the accounting industry.

[Tyson Mutrix]

I am curious because I think this will be helpful for people. What do you like so much about Clio.

[Emil Abadian]

It's so organized and it's. It's so correct. And it's not good for PI attorneys.

[Tyson Mutrix]

No. As well. That's why I was wondering.

[Emil Abadian]

Okay, so it's not yet. Even though they came out with a PI part of it, it's still growing. We're not using Clio for personal injury attorneys, but for hourly billing cases, it's fantastic because it's. The setup is right and it's easy to use and it's does so much than just billing. So as a Clio consultants, we run Clio for our clients if they want us to do that. So that's another layer of value that we want to provide. We do the billing for them, we do the collections for them. We. If they want to, we pay their bills.

[Tyson Mutrix]

Collections is big.

[Emil Abadian]

That's huge collection. Let me clarify that. So collection is not in form of collection agency.

[Tyson Mutrix]

Okay.

[Emil Abadian]

More of just following up to make sure they get paid.

[Tyson Mutrix]

Okay, gotcha. Well, that's still. That's still crucial.

[Emil Abadian]

It's. I think that's even more important than the collection agency part because 99%, if not more, we collect.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

But it takes time.

[Tyson Mutrix]

Yeah. Because you don't want to get to the collection agency.

[Emil Abadian]

Exactly.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

So as a lawyer, especially if you're solo or just a couple of partners, firm, you've done the work, they don't want to run after the client to collect. They don't feel that it's right to do that.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

So they just throw us in the. In the mix. And we do that on their behalf. So we do that for clients. And also the trust accounting, obviously, it's huge. What we do with helping them be in compliance with the state bar regulations. And then we wrap up the year with very involved tax planning, which I think it's. For me, that's the most fun part. That's when I get involved with most of my clients. Because the.

[Tyson Mutrix]

Is that the most overlooked part, you think?

[Emil Abadian]

I think so, Yeah. I think so.

[Tyson Mutrix]

By lawyers is what I mean by.

[Emil Abadian]

By any. But really by any CPA really providing services. Because majority of CPAs are doing their bookkeeping. They don't see the clients, they prepare to return February, March, they see the client, they sign the return, and they don't see them until next year again. Which is, in my opinion, waste of knowledge, waste of experience. Because CPAs sit on so much information. Because I see my clients numbers every year. Every month, really. We do it monthly basis. I talk to them. I know so much about them. Sometimes I feel Like, I'm more a therapist than an accountant. So for me to not utilize that knowledge that I have about the client, the experience I have with other law firms and help my client, I would feel like it's waste of, waste of knowledge and waste of time. So a lot of CPAs are not doing it. They prepare a return. And I think that's where the biggest, biggest lack is for, for clients getting the value from CPAs. See them get the advice. Because the fee you will pay your cpa, if it's the right cpa, if they help you provide you the value, you will save multiple of that. It's not even a question of how much the CPA can help you. So we put a lot of effort right after October 15 deadline, we, for the tax deadline, October 15 through end of December, we spend a lot of time talking to our clients. Several times during those two and a half months, probably three, four, maybe five, six times, we do the projection based on current situation. Say, okay, Tyson, if you don't do, if we don't make any changes, we don't implement any strategies, your liability will be 200,000, let's say. Sure, but we have these strategies for you. Let's do this kind of things. And there are millions of things you can do anywhere from low hanging fruit, from hiring your kids, for example, which is a good strategy from tax perspective. But in my opinion, I use that for teaching my, my kids about money. Okay, we go back to that.

[Tyson Mutrix]

But I do, I do want to come back to that because I've heard, I've heard both sides of the story on that.

[Emil Abadian]

So let's come back to that.

[Tyson Mutrix]

Yeah, come back to it. Yeah.

[Emil Abadian]

So anywhere from low hanging fruit, really, you put kids on, on payroll, you save 3, 4, $5,000 per kid. Yes, it's great, but it's not going to change your life. But to a lot more complicated strategies from retirement plan implementation to even more complicated strategies such as investment tax, tax incentive investments that you can invest and get deductions at the same time.

[Tyson Mutrix]

So let's stay, let's stay on this, this topic then. And that's the, the end of year that tax planning, the things that lawyers can do to really shift it where they're not having to pay a big nut or just reshaping things in their advantage. Let's start with the kids. So what is the right way of doing it? Because, and I think that the, and by the way, I've seen the other side of it is the things I've seen like on, like YouTube shorts and like TikToks where people are saying, oh, don't do this because X, Y and Z. I'm sure there's a right way of doing it.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

So if you're going to hire your kids, what's the right way of doing it?

[Emil Abadian]

So each state have its own rules for how old the kids can be and how many hours they can work. So each state, we got to be specific with each state, but just ignore the fact of how many hours and all that. But let's say my son is 11, turning 12. I'm paying, I think seven or 800 bucks a month for him. He comes in maybe once, sometimes even twice summers, he comes in more often. He helps me with shredding, he helps us with the mail, he makes coffee. He just goes around and help anybody that wants and can't do bookkeeping, obviously. But whatever, anything else, administration work. And I think I can justify 7, 800 bucks a month for what he does. The important thing is to be able to justify the rate you're paying your kids. Like, I can't pay him $20,000 a year. Like, what is he doing for $20,000? But for seven, $8,000 a year for what he does, I can justify it. And when you do that, you're able to deduct, deduct the pay what you're paying to your kid from your business income. So that goes down with, let's say, $10,000. If you pay your kid 10,000, your income goes down with $10,000. If you're in a 40% bracket, that will save you $4,000 in taxes. Your kid does not need to pay tax, income tax for up to 14,000 and change. So you could pay them up to 14,000 with them paying zero tax, but you saved 40% tax on whatever you pay them. But if you have an entity, if you have a corporation or an LLC or as a part tax, as a partnership, they have to pay Social Security Medicare tax on it, which is 15, roughly 15% for employer, employee. So employer is you, as a company employee is the kid. Obviously, you still 25% savings in the bracket there. You could structure it. If you have a sole proprietor, your spouse and kids don't need to pay Social Security Medicare taxes. So it depends on what structure you have. I would not create a sole proprietorship just for this purpose, but if you are already a sole proprietor, then you save a little bit more compared to if you're a corporation.

[Tyson Mutrix]

So I've heard of people putting kids in, like marketing materials and Things like that and, you know, paying them a set amount. Is that, is that a strategy that.

[Emil Abadian]

You could use if they're really in marketing? Yeah. With our other operation, not, not law firm operation, the general practice, we have a kind of a cooking show business. They do, they do, similar to podcasts, but it's for chefs and they have cooking shows. So what they do, this owner's kids, is actually part of the market. They're part of the marketing. It's on the flyers on the website. So if IRS comes in and questions it, there's legit proof that this guy, this kid is on, is on our marketing material. But in a law firm, how would you. I'm just thinking right now, how would I use my kid for my CPA for his marketing?

[Tyson Mutrix]

Right.

[Emil Abadian]

I don't. That doesn't make sense.

[Tyson Mutrix]

I got, I've got an idea as to how you could do it. And we didn't pay our kids to do this, so this isn't a, this is an example you could use. But we did some videos. It was during COVID and we were, we asked. We had our kids do some videos about what I do for a living. And we, and we had them talk about some other different things. I could see a scenario where you have. It was fun. People liked it and they, the kids loved it too. Like we had to post them up and we posted it and all that where I could see something like that you could do, but you'd have to do it on like on a regular basis. So there's ways of doing it. But you're right, I mean, it would have to be like a regular social media campaign, almost like, like people do with animals, like on Instagram and stuff. I have like a. I think you could do something similar to that. I don't know. I don't feel super. I like that.

[Emil Abadian]

I didn't, I didn't think about that.

[Tyson Mutrix]

So I think you could do it. It's just a. You have to do it. It's got to be a plan. It's going to be planned. It can't just be some willy nilly.

[Emil Abadian]

A couple posts a year as any other business expense. When clients ask me what can I deduct? You can deduct anything that we can justify as a business expense. Like really a car might not be deduction for me, but might be deduction for you, because I'm not driving for my business, for example. Right, but you're driving a lot for your business, so that's a deduction for you, but not for me. Same with the kids. Like my kids might not be deductible, but yours might because you do a lot of social media and they help you and they put it up. They might not, not even be in on camera. They might be behind the scene. Let's say they're 15, 16 year old. They actually shooting the, the movies or the films.

[Tyson Mutrix]

What are some of the most clever things you've seen that people have deducted that have had a justification for it?

[Emil Abadian]

Clever things we had one year they deducted. I didn't take this deduction though, by the way. So they bought a car and it was not for the purpose of a car. So it was more like a marketing cost because personal injury firm bought this car to test the damages that it caused. It was a Tesla.

[Tyson Mutrix]

Sure.

[Emil Abadian]

So they wanted to sue Tesla.

[Tyson Mutrix]

Oh, interesting.

[Emil Abadian]

Okay, so we were not able to take that because they never actually crashed it or did anything with it. Yeah, but I can imagine if they actually buy it and let's say they crash it to test the seat belts or whatever the seats or whatever, the braking system, that could possibly be a good, good deduction. But not as a car, but more as a research or marketing or some other.

[Tyson Mutrix]

What if they disassembled it? Yeah, yeah, but okay, so then, then I've got like all these follow up questions because yeah, let's say you disassemble it and then you have the mechanics put it back together and then, then can you then use it? I mean that's one of the things like. Or do you have to then turn around and sell it?

[Emil Abadian]

Well, if you sell it then it's point pointless because if you sell it then you got to recapture, you capture the deduction. So there's no point doing that. But disassemble it. It's hard to say. It comes back to each, each specific case and what the justification is.

[Tyson Mutrix]

Sound like a lawyer? Depends.

[Emil Abadian]

Yeah, you know I work with, I work with lawyers. Yeah, I learned from that. It's very. No, seriously, it's very difficult and it might be deductible for one person, but not the next person.

[Tyson Mutrix]

Right.

[Emil Abadian]

So we, our tax planning is a very, very custom, custom made. We don't. Bookkeeping is a lot easier to scale and kind of standardize versus tax planning because tax planning is very, very personalized. I talk to each client specifically about their plan, about the implementation. Whereas bookkeeping we can standardized a lot more obviously. So it's difficult. There's no clear answer to what could be or what's not deductible. But One answer that I always give my clients is, can we justify this? If IRS knocks on the door, ask about this deduction, do we have a reasoning or did we just pick it from, from the above and just put it in the tax return?

[Tyson Mutrix]

You know what I find interesting about bookkeeping is because we had to interview a lot of different bookkeepers for our injury firm. And the number that don't understand how personal injury works, how, you know, we pay out the money and then we get reimbursed at the end. It just, it was, it was fascinating how few accountants and bookkeepers did not understand how personal injury attorneys, how their business works. And so like we would ask. It was funny because we would ask the, you know, do you understand how personal injury litigation works? All that. Oh, yeah, we could, we could completely help you. Okay, walk me through it. They. And they couldn't walk. They, they had no clue. And I always try to analogize it in a way to like a construction company where, like if you're building a building in your construction company, you're going to front a bunch of costs, even though a lot of them finance it. But we'll set that aside, you know, so you, you, you finance it and then after you sell the house, you're going to get the money back. I try to get, like, explain to them and sometimes they would understand it. But why do you think so few bookkeepers understand like, what. And I'm specifically talking about injury lawyers, like why they just don't understand how injury lawyers work and how they operate.

[Emil Abadian]

And it's not only for injury lawyers, by the way, it's for many different practice areas where they have trust accounting. Accountants are not. They don't know trust accounting. Majority of them, there's a lot of them who know something, but majority don't know trust accounting. They don't understand. And it comes back to what we discussed a little bit earlier about specialization. It's not only that it simplified my operation with processes and systems and doing things the same way, but it helped me, as you said, provide the knowledge and experience to my law firms because not many CPAs are doing it. And it comes back to specialization. Like, I don't know all the ins and outs of the manufacturing industries, the industry. I haven't done it. We might have had a couple of smaller ones in the past. So I don't take on manufacturing businesses because that's not my specialty. Why would I get into manufacturing when there's millions of law firms out there that need my help? Like, just take, take whatever it's whatever. I know. Actually, that's a, that's some. A good friend of mine, attorney, she's a trust attorney, state planning attorney in, in California. She keeps telling me that the human being are trying to do. Learn things that we don't know. But why, why don't we just do things that we do good and improve that and become specialists in that and let other people do what we don't do instead of wasting time trying to learn? That's not working everywhere. Obviously we want to develop our brain and we want to learn new things, but in business, I think that's very relevant.

[Tyson Mutrix]

I agree. I think we should clip that part of it. And that's a post because I 100% agree with you. That's. I'm a bit of a tinkerer too. I do. I like learning new things and all that. So to a fault sometimes I'll do that. But you're 100% right. In reality, we should just say, okay, I don't know how to do this. I'm going to go, I know someone who does a meal, does this really well. Let's hire a meal to do it. I don't have to worry. I don't have to waste the time to learn any of that and do it the wrong way anyways, because I'm going to make a ton of mistakes learning it anyways.

[Emil Abadian]

Unless you really want to learn it for your own sake and that, that's perfectly fine that you want to learn to play piano, then you got to learn to play piano, obviously. But in business, I think, I think you just stick to what you do best. And to answer your question about why so many accountants don't know it, they just never learned it. And which is fine, but they should not try to get law firm clients.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

Because that creates more problem because that law firm is not going to stay with them. They're going to spend a lot of time trying to learn it, trying to help the client. Six months in, the lawyer will realize that this CPA doesn't know what they're doing, so they will start looking for someone else. This wasted the money, they wasted their time, and they're back to square one.

[Tyson Mutrix]

All right, I've got a silly question. I think so. You know, I've seen like, I think it's QuickBooks or who, who does the accounting software that you can. QuickBooks is like the one that, like, they do the tax returns.

[Emil Abadian]

Is that turbotax.

[Tyson Mutrix]

Turbotax. All right, so you seem like, okay, we, we tell you whether or not you're going to the likelihood of getting audited or something like that. I wish I thought that was kind of. I think it's kind of funny when you see something if you look at a tax return are there certain things that you see you're like oh that's a red flag because I wonder if like you have your own human gauge to determine whether or not this is going to get audited. 100% what are some of those things that people know to look for to make sure that they're not doing number.

[Emil Abadian]

One thing typically by the way typically most of lawyers are S corporations. Smaller law firms whether they're LLPs and then they have an S corporation in between the LLP and them personally but majority of S corp and as an S corp you're required to take a reasonable salary from your company. That's an IRS guideline because if you don't you cheating the IRS about 15% because the earnings from your S corp is not subject to self employment taxes. So that's why IRS requires owners of S corp to take reasonable salary compared to your industry and what you do for the business to pay the payroll taxes on the payroll portion and they can save on the other. One big red flag is when I see return $3 million revenue let's say $1.2 million net profit, zero payroll.

[Tyson Mutrix]

Yeah.

[Emil Abadian]

And that that line item is the first expense item on your tax return on an S corporation return. So that's the number one thing I do correct your payroll because if you don't sooner or later they're going to knock on your door and instead of doing maybe 110, 120,000 payroll iris will reclassify your entire profit profit to payroll. If you don't have reasonable payroll.

[Tyson Mutrix]

Wow.

[Emil Abadian]

So that's a major thing that I would recommend all escort owners to be really careful with with their reasonable salary.

[Tyson Mutrix]

So we have a lawyer on the hot seat a lot of times what we'll I'll do. One of my first questions is if I especially if I sense that there's a cash flow problem is is I'll say do you are you paying yourself a salary? And it it's not because of that. It's just because usually they don't they're not paying themselves a salary to they're just sucking everything out of the business every time they get paid they just take it and that's caus that causes a bunch of cash flow problems. So I think it's interesting how to me a red flag is you're for different reasons is that you're, you're not, you're not paying yourself a salary because you're causing yourself a bunch of cash flow problems. But it. So then there might be a double whammy. So you have not taken a salary and so you've got massive swings in cash flow, which causes a bunch of problems. But then you get popped by the IRS because you got your, your earnings got reclassified as, as, As, I guess as wages. As wages.

[Emil Abadian]

As wages.

[Tyson Mutrix]

And then you get, you get a.

[Emil Abadian]

Double whammy at the end, plus penalties and interest. It's going to cost. I seen pretty bad situations where they don't take payroll. So that's the first thing we fix when we get a new client. One of the first things that we fix that you got to get on payroll.

[Tyson Mutrix]

Is there a certain percentage that you recommend? Because I've heard a lot of different things. Should you be at a certain percentage of overall revenues or profits or how.

[Emil Abadian]

So depending on the profit. Again, depending. Yeah, sure, but, but let's say if you make $200,000 in profit or in profit.

[Tyson Mutrix]

Profit.

[Emil Abadian]

Profit, yeah. In net profit. When it comes to payroll, I'm just looking at the profit because you can make $3 million revenue and, you know.

[Tyson Mutrix]

That'S why I call it an ego number. Revenue is an ego number.

[Emil Abadian]

Exactly.

[Tyson Mutrix]

Yeah. That's all it is.

[Emil Abadian]

So let's say 200,000. Then probably about 50% of that is reasonable. But if you make $2 million profit, then you don't need to take 50% payroll. I typically max out the Social Security limit, which is about 165, $170,000. If you make those numbers, a couple of million dollars and then the rest is profit distribution because there's nothing else for the IRS to get. The majority of benefit is in the Social Security that the IRS takes from you. The remaining amount is just Medicare and which is like 2.9%. So they don't typically go look at it once you max out your Social Security limit.

[Tyson Mutrix]

Gotcha. Have you ever heard of profit first?

[Emil Abadian]

Yeah, I wanted to actually mention that when you started talking about the payroll.

[Tyson Mutrix]

Yeah, yeah. So what are your. What are your thoughts on profit first?

[Emil Abadian]

I like part of it, but not everything from it.

[Tyson Mutrix]

Interesting. I want to hear about the.

[Emil Abadian]

I like him. I like Mike, by the way. Mike McCallow.

[Tyson Mutrix]

Mike.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

What do you, what do you not like?

[Emil Abadian]

You know, especially for smaller firms, whatever he's talking about. Because he talks about buckets, right? He talks about your, your income bucket, tax bucket, investment bucket. He Talks about all this bucket and specific specifically for smaller firms. It will create so much administration work. If you make 100,000 or 200,000 profit, first of all, you need to take about 100,000, I'm assuming depending on what part of the country you live. But I'm assuming around 100,000 is fair for a lawyer to make at least as a payroll. The rest could come to the you as a profit. And then you have another 100,000 left. You got to split those up in so many different buckets, the administration becomes a lot more difficult instead. What I like is I like the payroll portion because that's a key. First of all from IRS requires it. But from cash flow management perspective also, I need 100,000 to survive. Okay. I take that out from the company. Whatever is left, end of the year, we pay out in bonuses or distribution. The remaining amount. I think you have to have a floating kind of plan because your goals are 100% different from mine. I might be. I'm not younger than you, but if I'm younger than you, I'm looking to buy a house. Then my investment bucket would be a lot bigger than my, I don't know, travel bucket or my tax bucket or whatever buckets that out there. So we need to look at each individual person's goals and customate it. That's part of the tax planning.

[Tyson Mutrix]

Sure.

[Emil Abadian]

But I like the idea as a whole. But some of the details are, in my opinion, a little bit too detailed, to be frank.

[Tyson Mutrix]

Okay. Where we kind of drew the line was I'm not setting up an outside bank account to then transfer the funds into for like the tax planning. Like, I. I'm just not doing that. I'm keeping it in that. Because I understand the ideas you keep. You're. It's out of sight, out of mind. You're not. Look. But I'm not just. That's just another. It's a. It's more administrative work.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

I'm just not going to do like. We're just.

[Emil Abadian]

So you just keep it in the.

[Tyson Mutrix]

We keep in our main. Not in the same. Not the main account. We have a separate bucket inside of our main account at bank of America because I shouldn't tell people which bank I bank at. But the. I'm not. We did initially set up an outside local bank to transfer the funds into. And we just were like, we're not doing this anymore. This is just. We're not doing it.

[Emil Abadian]

That's what I'm talking about. It creates so much more work. And after a While people stop doing it because they get busy with other things. So the idea is great. I like Mike Mikalovich. It's. It's that one. And then he did the clockwork. Clockwork didn't do the. The pumpkin. Pumpkin patch.

[Tyson Mutrix]

Yes. I have not read that one.

[Emil Abadian]

Yeah, it's good.

[Tyson Mutrix]

It's a good.

[Emil Abadian]

Yeah, I read that very early. That was one of the triggers for when I switch gears in my operation, start firing clients that we didn't like. So, yeah, he's awesome.

[Tyson Mutrix]

So what are some other. I want to make sure we hit some other red flags. Some things that people to lawyers do that it's a no, no. And obviously, I'm not talking about the obvious ones, like shouldn't be taking client money. You know, shouldn't commingle funds, all that stuff. But are there some that are not as commonly known?

[Emil Abadian]

So the biggest issue that we see is commingling with trust accounting. Yeah, that's, first of all a problem from IRS perspective, because if you don't move funds from your trust account to your opera to your operating account when it's earned, it means you're not recognizing it as income, because trust money is not your money. And you're not. It's kind of two buckets. When we do accounting for our clients, we have two sets of classes. One trust account, one operating account. It's still in the same QuickBooks or accounting software. But if you don't move that over to your operating account, you cheated irs. You deferred income. What I see December settlements. A big settlement comes in December. You know, let's forget about this until January. You can't do that. Like, you gotta move it over to your operating account as soon as possible after it's earned. So that's the biggest issue that I can see, both from IRS perspective, but also from the state bars issue.

[Tyson Mutrix]

So just because I know I'm gonna get a bunch of questions about this, can you still claim it, let's say, for 24, 25. Right. So let's say you had some. Some settlements that came through the checks, came in late in the year, like on the 27th, 28th. Do they need to rush by the 31st to make sure they transfer that money over, or can they just claim it on 24 and move it over in early 25? Is that. Is that still possible?

[Emil Abadian]

No, I would not do that. Two, three days, I think is very reasonable to keep it in the. In the trust account. So two, three days. I'm not worried. It's been. It's longer than 15 days? 10, 15 days. You got the settlement 15th of December and accidentally you forgot to move the funds over until January 2nd. That's a no. No. But you got the funds December 27th, 28th, right before Christmas or right after Christmas, before New Year's. I'm not pushing it that much because it's, it's so close. Like it's going to be reasonable. So what IRS is looking at is this reasonable? 15 days is more than reasonable to say that you had the time to move the money two, three days. It's not as reasonable.

[Tyson Mutrix]

Gotcha. Especially for, for companies or the states where they're auditing too. Where is, I mean, they're gonna be, hey, what's going on here? That's, that's a big one. I do, from a business standpoint, I do wonder, and I want you to look, thinking from the lawyer standpoint, what do you, what are your thoughts on the auditing though? Because with irs, they're going to audit you if you are. If they see issues. Right. With a random audit. I know of a firm in Iowa. That's why, that's how I know that they have this auditing rule. It was like a three, four week process where they were like in it for like three, four weeks. It was a big deal. They, they passed with flying colors, no issues at all. But it was just a lot of time and effort from them. It was extremely stressful. So I do wonder, from a, from a business standpoint, like, what do you, what are your thoughts on.

[Emil Abadian]

So it was this an IRS audit or.

[Tyson Mutrix]

It was, it was a state bar audit.

[Emil Abadian]

State bar audit. Okay. So I haven't seen state bar audits yet because California is not mandating until, it's not implementing until next month. But I started my career as an auditor. So back in Sweden, in Stockholm, I started as an auditor, not as in tax. And we were going into companies and they were hiring us. So it was not a random audit. Obviously they hire us for bank purpose and all that. We were digging into the details, man. We were looking at every single thing that we could and I was frustrating from clients. And that was not even random audit. They hired us to do that and I, you could feel the frustration because they were spending so much time working with us, providing us a document. So I can just imagine how this state bar audits will be. First of all, you're not welcome to get there for firms don't want you to be there as an auditor. And they're there, they're trying to dig out, they're trying to find mistakes, find issues. So I can see that being a huge, huge issue and frustration. And just from business perspective, it's gonna suck. Suck your time and resources for sure.

[Tyson Mutrix]

Quick timeout.

[Emil Abadian]

Yeah.

[Tyson Mutrix]

So I want to ask you about counsel to counsel. Tell me about this. What's the point behind it? What was the why? What made you want to write the book?

[Emil Abadian]

Yeah, it's been one of my goals for longest time. I never got to it until last year when I actually started writing it. But it's been back on my mind. I've been planning it, I've been drafting it. Come ideas what I want to write about. And the kind of the outline has been there for many years. And the reason is I want to show my. My story. I want to write about my firm. But I'm comparing it to a law firm. So Council. Council is. Council is basically the title comes From Council Council CPAs, us being a council providing service to Council, which is lawyers. And I want to compare those two. CPA firm, Emil's CPA firm, counsel CPAs to a law firm. What I've done, mistakes I've done growing to where I am right now. Even though I have a long way to go to where I want to be. But I've taken a few steps and show. And we're. I'm showing examples from live client examples of mistakes that I've seen, but also success stories. So my clients and whoever reads it, whoever want to read it, can see that first of all, if I'm doing these mistakes, there are better ways of doing it, but also get motivated by the ones that did it right. I love telling this story and I know we're running out of time, but it's about this law firm client of mine and they give permission to me to talk about it. So west coast trailers in California. So one of the partners, Alan, called me up, this is 10 years ago, probably called me up to this office in downtown la, said Emil. I knew him from a different partnership. He used to be have another firm which they split up and he partnered up with Nima instead. He called me up, Emil, can you come to our new office? We want to talk to you, see how he can help us. This is way before COVID where people were actually going into offices at that time. I walked into this beautiful office downtown LA, huge high rise, I don't know, 4,5000 square feet. And I knew that they had just opened up. So I was a little bit surprised even before walking in, opening up the door. The office was set up for, I don't know, 40, 50 people. I don't know how many people was it? All the desks were set up. Everything was set up. Beautifully done. But nothing was there. Like no people, nothing. And this was a weekday. Another say, Alan, what's going on? Like, what is this? This your office? Yeah, this is our office. So where are the people? What's happening? Don't worry about the people. They will come. Just tell us how you can help us, what you can do for us. Because we want to grow. That was really motivating because I saw that they started this operation, their law firm, as a business. They had put their investor hat on from day one even without having any employees. So I think that's a very good learning, learning experience that we're talking about a little bit about council to council that. And not everybody can do that. Obviously it's about financials and you know, you got to have the resources to do that. But if you can and you believe in yourself, I think you need to put your investor hat on from day one and not try to put on five, 10 years after you open up the practice because you will get used to old habits, which is not impossible to change, by the way. You can always change and make it better. But anyway, this was a motivating story that I usually like to share when we talk about firms and investors.

[Tyson Mutrix]

I really like that. I'm tempted to want to end it there just because that is a great lesson for everyone. This spring, we're taking the Maximum Lawyer Mastermind to Maui. The perfect setting to reset, refocus and recharge. April is a pivotal time to assess your law firm's progress and fine tune your strategies to ensure 2025 is a year of unparalleled growth. Our Maui Mastermind is designed to help you identify opportunities, overcome challenges and take bold steps forward. This two day event blends high impact business training with transformative hot seats. On day one, you'll gain insights and tools to propel your firm's success. While day two is dedicated to Mastermind hot seats where you'll receive personalized advice and strategies tailored to your goals. You'll leave Maui with a clear, actionable plan and the confidence to to implement it immediately. Don't miss this opportunity to mastermind with us in paradise on April 10th and 11th. To learn more about this event and grab your ticket, head to maxlawevents.com.