The Entrepreneur DNA: Episode 37 - The Ultimate Tax and Asset Protection Plan for Entrepreneurs with Tommy Thornburgh
Release Date: September 16, 2024
Host: Justin Colby, Bleav
Guest: Tommy Thornburgh
1. Urgency of New Tax Filing Requirements
Justin Colby opens the conversation by highlighting a critical and time-sensitive tax filing requirement facing entrepreneurs. He shares his personal experience of narrowly avoiding severe penalties thanks to Tommy Thornburgh’s expertise.
Justin Colby [01:34]: "What the hell is up with this $500 a day fine that we're looking at as entrepreneurs?"
Tommy Thornburgh responds by clarifying the legal landscape, emphasizing the importance of compliance to avoid hefty fines and potential jail time.
Tommy Thornburgh [02:03]: "If you set up a business before January 1st, you have to file this report by January 1st, 2025... they're threatening $500 a day fines and even up to two years in jail."
2. Common Mistakes Entrepreneurs Make in Tax Management
Tommy delves into the prevalent mistakes entrepreneurs make, particularly the lack of tracking profit and loss statements.
Tommy Thornburgh [00:46]: "The most important thing from a tax standpoint, do you know your profit and loss? Our clients that track their expenses save an average of over $9,000 a year."
He underscores the necessity of distinguishing between active and passive income to facilitate diversification and tax efficiency.
3. Strategies for Tax Savings and Asset Protection
a. Health Savings Accounts (HSA)
Tommy recommends leveraging Health Savings Accounts as a triple-deductible tool for reducing taxable income.
Tommy Thornburgh [10:04]: "If you're single, you can put 4,000 in some change... HSAs are great."
b. Augusta Rule
He introduces the Augusta Rule, a lesser-known tax strategy that allows business owners to rent out their personal residences for business purposes without declaring the income, provided it meets specific criteria.
Tommy Thornburgh [11:14]: "On the 5th of every month, my business rents out my house... you don't have to claim the income."
c. Entity Structure and Separate Liabilities
Tommy emphasizes the importance of structuring business entities to separate liabilities and maximize tax benefits.
Tommy Thornburgh [30:06]: "Separate out your liabilities based off of industry, based off of risk."
He outlines three critical considerations when setting up a business entity:
- Privacy and Protection
- Tax Benefits
- Credibility
4. Real Estate as a Tax Strategy
Both hosts discuss the profound tax benefits of investing in real estate. Tommy shares his personal involvement, owning multiple properties that, despite current losses, offer significant tax depreciation benefits.
Tommy Thornburgh [14:13]: "My mama says you can't choose your family and it's a tax write-off."
Justin reinforces the idea by sharing his experience of offsetting high tax bills through strategic real estate investments.
Justin Colby [08:35]: "I'm a real estate guy... I'm going to counteract that with a big commercial purchase."
5. Estate Planning Importance for Entrepreneurs
Tommy demystifies estate planning, asserting it's not exclusively for the affluent but essential for anyone owning assets.
Tommy Thornburgh [21:11]: "Estate planning in general is not just for the rich... If you have a business, if you own your house, a car."
He shares a poignant personal story about his uncle’s unexpected passing, highlighting the chaos that ensues without proper estate planning.
Tommy Thornburgh [23:07]: "End of last year, my uncle unexpectedly passed away... imagine how much you have that your family doesn't know about."
6. Setting Up Business Entities
Justin and Tommy discuss the strategic placement of business entities to optimize tax benefits and protect personal assets.
Tommy Thornburgh [29:34]: "Separate out your liabilities based off of industry, based off of risk."
Justin emphasizes the customization required in entity structuring based on individual business goals.
Justin Colby [32:08]: "There's going to be accountants or lawyers that will say this is the best way... if they don't know the nuance of what you do... they're not going to treat it the same way."
7. Practical Advice for Entrepreneurs
Tommy offers actionable steps for entrepreneurs to enhance their tax and asset protection strategies:
- Track Expenses Rigorously: Implement systems to monitor profit and loss continuously.
- Leverage HSAs and Other Deductions: Utilize available accounts and deductions to minimize taxable income.
- Optimize Business Entity Structures: Regularly assess and adjust your business structures to align with evolving financial goals and tax laws.
- Engage in Proactive Estate Planning: Ensure all assets are protected and wills/trusts are in place to prevent familial disputes and financial loss.
8. Real-World Success Stories
Both hosts share success stories illustrating the impact of effective tax and asset management. Tommy recounts assisting a client in restructuring from an LLC to an S Corp, resulting in significant tax savings.
Tommy Thornburgh [16:37]: "We wrote off 5,000 in startup expenses... and he saved $5,400 in his taxes."
Justin adds his own narrative of avoiding hefty IRS payments through strategic investments, reinforcing the podcast’s core message of proactive financial planning.
9. Conclusion and Call to Action
Justin and Tommy conclude by urging entrepreneurs to take immediate action to secure their financial future. They recommend reaching out to Prime Corporate Services (PCS) for expert guidance.
Justin Colby [37:11]: "Go book a call. Because do not mistake this for a joke... make sure you do it. It takes two minutes."
Tommy Thornburgh [40:34]: "That really allows you to not only protect yourself but save a ton of money in taxes."
Key Takeaways
- Timely Compliance: Entrepreneurs must adhere to new tax filing requirements to avoid severe penalties.
- Expense Tracking: Regular monitoring of profit and loss statements can lead to substantial tax savings.
- Strategic Tax Planning: Utilizing tools like HSAs and the Augusta Rule can optimize tax liabilities.
- Entity Structuring: Proper business entity setup is crucial for privacy, tax benefits, and credibility.
- Real Estate Investments: Investing in real estate offers significant tax depreciation advantages.
- Estate Planning: Essential for all entrepreneurs to protect assets and ensure smooth succession.
- Professional Guidance: Engaging with experts like PCS can help tailor strategies to individual business needs.
Notable Quotes
- Tommy Thornburgh [00:46]: "Our clients that track their expenses save an average of over $9,000 a year."
- Justin Colby [01:34]: "What the hell is up with this $500 a day fine that we're looking at as entrepreneurs?"
- Tommy Thornburgh [10:04]: "HSAs are great."
- Justin Colby [08:35]: "I'm a real estate guy... I'm going to counteract that with a big commercial purchase."
- Tommy Thornburgh [21:11]: "Estate planning in general is not just for the rich."
- Justin Colby [37:11]: "Go book a call. Because do not mistake this for a joke."
Final Thoughts
Episode 37 of The Entrepreneur DNA with Tommy Thornburgh offers invaluable insights into tax optimization and asset protection tailored for entrepreneurs. By implementing the strategies discussed, business owners can safeguard their financial well-being and focus on scaling their ventures with confidence.
For personalized assistance, visit PrimeCorporateServices.com or follow Tommy Thornburgh and Justin Colby on their social media platforms.
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