the bossbabe podcast - 262. BBS: Structuring Your Business And Maximizing Your Tax Deduction with Tommy Thornborough

Episode Date: November 29, 2022

Tax season have you feeling overwhelmed? We’ve been there. What if this year you were finally able to unlock the business + financial secrets you’ve been missing to put more of your hard earned money back into your pockets? Bossbabe’s own tax partner Tommy Thornburgh, President of Prime Corporate Services, is here to bring you actionable advice on exactly how to structure your business, track expenses + file your taxes to get the most from your tax return (+ maybe even have your dream car pay for itself!). If you’re ready to stop treating your side hustle like an expensive hobby or are looking to save money straight away, then this episode is for you. Get your FREE business consultation by visiting primecorporateservices.com/boss-babe. Highlights: Why it PAYS to know your 250 deductible tax expenses. Your need-to-know financial + tax advice for entrepreneurs. Can you really write off a G-Wagon? Listen to find out how! Links: Get your FREE business consultation by visiting primecorporateservices.com/boss-babe Track your mileage — mileiq.com/calculator Follow: PCS: @primecorporateservices bossbabe: @bossbabe.inc Danielle Canty: @daniellecanty

A Boss Babe is unapologetically ambitious and paves the way for herself and other women to rise, keep going and fighting on. She is on a mission to be her best self in all areas. It's just believing in yourself, confidently stepping outside her comfort zone to create her own vision of success. Welcome back to another episode of the Boss Babe podcast with myself, Danielle Canty. Now, as you guys know, we have started doing Boss Babe business school episodes where we are giving away specific actual content that will actually help you start and grow your businesses. And you're going to get it all for free. Now, quite often we are sharing invaluable,

priceless information in these episodes, and this one is no different, but I do have a special treat for you guys, because if you stay till the end of this, not only are you going to be able to learn how you could be saving money straight away, but also I'm going to give you a special link to a call where you are going to get an hour's consultation. You can have your entity set up and a tax call all for free. It's valued at $1,500, but you need to stay to the end to find out the link for that. Like I said to you, I always love to share everything that I know about building businesses, the ups, the downs, and most importantly, my favorite people who have helped me on this journey. And here at Boss Babe, we've been working with Prime Corporate Services for many years right now. They helped us set up many of our businesses. They help us with our taxes. They help us with

all our financial planning. And I want to invite Tommy on today to give you guys advice about what you should be doing if you're at the beginning of your journey, or even if you're in the middle of the journey, ensuring that you are setting yourself up for success. So welcome to the Boss Babe Show, Tommy. Of course. Thank you so much for having me. I'm excited to be here and excited about the opportunity. We love this community. So it's an honor, right? I appreciate you having us on. As you know, you've been supporting our community for several years now, and everyone raves about you guys. So this is the first time you've been on the podcast. So I'm really excited to dive right in about why, how, and what the next steps are that

people should be doing if they need to form an entity in their business. So one of the questions that we get asked a lot in society is, what is the first step people should take when they are starting a business? Like, what should they do? They have their idea, but what are the next practical things that they should be doing? I love it. And I'm happy that we're doing this podcast a couple of years, like you said, after we've been working with the community, because this is one of the most common questions that we get as well is, when should I structure my business? How should I structure my business?

What if I don't have a clear vision of where I'm going to go with my business? This is a very, very common question. So what I would say to everybody that is in that position, or even if you're just getting started, show yourself as a business. The IRS wants to see the intent to treat and operate as a business. So keep that in mind. The intent can be time, energy, effort, investments that have financially been made. So if you treat something like a hobby, oftentimes it costs you money like a hobby, right? But if you treat something like

a business, you really reap the rewards of what businesses have to offer. So those of you that are in the U.S., we oftentimes recommend starting as an LLC, a limited liability company. And those of you that are international, sole traders, limited corporations, but I recommend everyone legitimize themselves as a business, not only for the protection, not only for the tax benefits, but psychologically what that does when you truly commit to being a business owner. Oh my goodness. I love the psychological aspect of that because it's so, so true. As soon as you are like, right, I'm a business, you look at things completely differently and you're automatically setting yourself up for future and further success. So you just mentioned a couple of reasons why people should like legitimize themselves and

why they should form an entity. I want to talk about the deductions that you mentioned, because this is a part of business and having an entity that a lot of people don't actually realize that even before you start selling, you can actually start some deductions as well. So let's talk about how that works. I want to ask you a question as well. I mean, when we talk tax, you as a successful business owner, what's one of the largest, most painful expenses that you had as a business owner? Oh my goodness. I felt like I could rattle off a ton of those. A lot of those become business-related expenses and you've probably been able to take more risks as a business owner, understanding the tax side of how that really impacts you. So for all the

listeners, most of you are going to be considered a self-employed home-based entrepreneur, right? Regardless of what avenue you travel, you are a self-employed home-based entrepreneur. Some of you may have business offices and everything else, but with that title, there's over 250 different deductible expenses. So things like your phone, your phone bill, right? Your internet bill, your power bill, those of you that may have a designated home office, portions of your rent or your mortgage. So a lot of expenses or things that we consider bills in everyday society that could be business related expenses that you're able to write off and either receive a larger tax return or allow you the ability to pay less in taxes. So not only are they the large marketing expenses and as you grow, obviously those expenses

will increase, but a lot of them are just everyday expenses you're going to pay regardless. And let's talk about that person who is setting up from home right now and they have to, let's say, buy a new laptop. They might have to buy a printer. They might have to buy business cards. Are those all legitimate expenses that they can be writing off if they have an entity? Absolutely. First and foremost, yes. Track all of those expenses. If you invest into a course or if you invest into education, those are things that can be tax-deductible expenses as well. But laptops, printers, those are all things that you absolutely need to run this type

of business. So track those expenses. If I gave anyone two pieces of advice from a tax filing standpoint, number one would be track anything that you believe is ordinary or necessary for your business, right? Danielle, if we were to go to lunch, obviously we're going to talk about business. So that's not necessary for us to go to a business lunch, but it's absolutely ordinary. And if you have that doubt, track those expenses is my number one recommendation. Number two, have a professional that can look through them with you and can help you understand how to keep yourself out of any tax trouble, but still maximize on your deductions. It's good that you said that too, because I had one of our students on here

for an interview the other week, and she said the exact same thing. The first year she spent so much, like several thousand in taxes. And then the second year, cause she was doing them herself. The second year she got support on her, even though she earned more, her taxes were actually less because she then understood what was actually a deduction and that she didn't need to be paying taxes on. So I also think this is just a really, really important point to become financially literate on what can be written off and what doesn't need to be written off in your businesses. Because I think it just makes you a better, stronger businesswoman when you understand these aspects as well. That you say, create an

entity because you are addressing it like a business versus a hobby. It's also great to have these understandings and start asking these questions because it does further you as a businesswoman as well. So as we start heading into Q4, which we are right now, I just want to ask, what are some of the changes in the tax code that could affect business owners as we near the end of 2023? No, 2022. What year are we in? 2022. Just lost a year for everyone. I do know we're in the fourth quarter, so you hit that on the day. I know, right? That's a true business woman. Business owner answer of all time. We're in the fourth quarter. What year is it? I love that. But the fourth quarter oftentimes can feel like a business shopping spree, right? As you generate more revenue and more income,

obviously that tax bill increases. So it's funny, I laugh when I hear you mention the fourth quarter, because now's the time where you can invest into more of your marketing. You can invest more money into your business to write it off for this calendar year and allow yourself the ability to grow and scale over the next couple of years, right? So the more that you plan on a monthly, a quarterly, and then an annual basis, the easier it is. But back to your question, what are some tax code changes? The tax code is meant to impact behavior.

Every year they come out with different tax code changes because they want us to act a certain way. So for the last two years, business meals went from 50% deductible to 100% deductible, right? A lot of entrepreneurs, especially when you're first getting started, insurance is a big one and a big reason that a lot of people will hold on to their jobs for the insurance benefits. But if you can write off the insurance, you can write off and set up health savings accounts. Those are amounts that change on an annual basis. How can you write off your vehicle? They just increased the mileage deduction from 58.5 cents a mile to 62.5 keep those changes in front of you, you understand what behavioral changes the IRS tax code is asking for that allow you to maximize from a tax standpoint. So stay ahead of those changes. So powerful to know these things because I have friends who have bought bigger cars because they actually, the bigger the car, there's something to do with how much you can tow or weight or

something. This is the beauty of it. You don't actually need to know all these details. Your accountant doesn't even tell you, but they bought bigger cars because then they could write off that car as a business expense as well, right? Yeah. Section 179 of the tax code, it's a 6,000 pound weight limit. So you hit it right on the nail. You are absolutely right. You go to YouTube University and you'll see the G-wagons, the Range Rovers, the Teslas, but work trucks, Suburbans, right? The last three vehicles that I've owned, I've made money on them because of the tax deductibility that I was able to take based off of the weight limit.

So either over 6,000 pounds, you could depreciate it in full if it's for the business. But keep in mind, you don't have to go buy a G-Wagon or a Range Rover. If your vehicle is under that weight limit, you can still take the mileage deduction. So everyone's situation is different. We just want to help you understand how your situation varies in comparison to everyone else. Let's take a quick pause to talk about my new favorite all-in-one platform, Kajabi. You know I've been singing their praises lately because they have helped our business run so much smoother and with way less complexity which I love. Not to mention our team couldn't be happier because now everything is in one place so it makes collecting data, creating pages, collecting payment, all the

things so much simpler. One of our mottos at Boss Babe is simplify to amplify and Kajabi has really helped us do that this year. So of course I needed to share it here with you. It's the perfect time of year to do a bit of spring cleaning in your business, you know, get rid of the complexity and instead really focus on getting organized and making things as smooth as possible. I definitely recommend Kajabi to all of my clients and students. So if you're listening and haven't checked out Kajabi yet now is the perfect time to do so because they are offering boss babe listeners a 30-day free trial go to kajabi.com slash boss babe to claim your 30-day free trial that's kajabi.com slash boss babe exactly and get

that bespoke advice so that you can make the right informed decisions. Okay, so what should people start doing? As we said, we're in Q4 of 2022. What should people start doing as they think about filing their taxes right now? What are things that people should be doing to prepare? Yeah, great question. I think first and foremost, make sure that you're structured as a business, right? It's not about how much money you make or how much money you've invested. It's how much money you're able to keep in your corner and keep in your pocket as a business owner. So I think first and foremost, make sure you're structured and make sure you have the proper type of business structure in place. If you had a phenomenal year and you're

still operating as an LLC, it may be time for us to look at changing that to an S corporation. So be aware of your type of entity and make sure you're structured, number one. Number two, have a system to track your expenses, right? Whether that's an Excel spreadsheet, QuickBooks, one designated business credit card that you track all your expenses. The more that you can track those throughout the year, the easier it is and the more that those are going to add up to be able to write those off and keep that income in your pocket. And I will say, now this is not advice and tell me maybe if I'm doing the right thing or wrong thing.

But I actually have an American Express credit card that's in my own personal name because it was really important for me to improve my credit score moving from the UK to the US. And I put everything on my personal credit card, but my business pays off because I effectively utilize that as my business credit card in a way, but it's in my name to help my credit score. Yeah. So there's two things. I mean, obviously not everyone's coming from the UK and looking to boost their credit profile, but let's break this down for what's best for you. At the end of the day, everyone either has a legal name, a social security number, a personal identification number, and a personal credit score, right? Personal is personal, business is business. I love the way that you're doing it because I know you keep it organized with your business expenses so that even though the business is paying it off and it's building

your personal credit, we want to give you the opportunity to do the same thing with the business. Let's make sure you have a business name. Let's get you an EIN number, an employer identification number. It's like the social security number for your business. And then you can also build a separate credit profile for your business called a Paydex score. And then you can focus on whatever's more valuable to you based off of your circumstance. If you're coming from the UK and need credit, we can still organize the business-related expenses. But if you already have good personal credit, or maybe you have bad personal credit and want to build your business credit, that's going to vary, right? And the beauty of being a business

owner is it's a long-term play. Having good personal credit, having good personal income makes your life easier. Everyone has problems. A lot of times those problems are easier to solve with good credit and financial stability. If we can do that with the business as well, and you can impact both areas of your life, naturally, it's a no-brainer and it's going to make sure to set you up for greater success long-term. What I keep coming back to in this interview is how bespoke this is and why it's so important to have an advisor because everyone's situation is different. And I think there's so many things to learn in this call that you can start thinking about. But one of the biggest things to take away is definitely

advice is worth its weight in gold in this kind of realm as well, because you don't want to be doing anything you shouldn't be doing either. So one question as well that we get asked a lot, I'm not saying the one question, there's a ton of questions on the subject, as you can tell, but well, how do you recommend people track their expenses? Are there apps that people should be utilizing? How do people do this? This is such a good question. And I can tell you right now that I've downloaded just about every tax app and every tax software there is to try and answer this question the best I can for everybody. Let's start with mileage. If you're looking to track your mileage on your vehicle,

mile IQ is one that I've really enjoyed. But as far as personal expenses, it really varies per person. And here's why I say it. I think it's more important for you to like what you're doing and for you to be able to commit to tracking your expenses. And everyone's personality is different. Some of you are going to take the time and be more detail-oriented with a QuickBooks or an Excel spreadsheet. If you're a detail-oriented person, I think having something like those spreadsheets is going to give you more comfort.

But some of you that are more visual and some of you that are more big thinkers, I oftentimes see that having a designated credit card, Daniel, I'm just going to use you as the example because I know you, you're not going to log into an Excel spreadsheet and track whether or not it was a business lunch. No. But you're going to make sure to use your business credit card to build your credit and to use your points. So based off of your personality, I think that that answer varies. And I think that's okay. We're all unique and we're all different for that reason. So have a system that you can get behind and that you can

make sure that you're comfortable with, whether that's a designated credit card or a QuickBooks or an Excel spreadsheet. Exactly. You're right though. I carry two credit cards with me. One is the one I use for my personal expenses. The other one is the one I use for my business expenses. And then I can make informed decisions when I'm out. And I also know things like Uber, et cetera, have started making easier. You can actually put in the app, whether it's a business expense or a personal expense as well. So a lot of the apps that people use are not tax apps, but they're also making this easier for people to track as well, which is also worth keeping an eye out. So I feel like when I first moved to the US in 2020, I was so overwhelmed with all of this. Like I remember being like, what is an LLC?

What is an S Corp? What is a C Corp? What is all of these fricking differences? So confused, not even to mention that. And then I've got federal and then state. And I'm like, wait, what? What's the difference? So anyone who's listening to this being like, okay, now I feel confused. I feel overwhelmed. And I'm like, what the hell am I supposed to do?

Don't worry, because I was exactly like that. And if I can get my head around it, you can too. But the most important thing is that you have the right people in your corner. So we've teamed up for the last few years. And this is the first ever time we were telling you guys on the podcast about it. And so this, we ever time we were telling you guys on the podcast about it. And so this, we don't know how long this offer is actually going to be out here for in the podcast. So I want you to take advantage of this as we head into Q4. And we have teamed up with Prime Corporate Services to offer you guys a free one hour consultation. And if you need to have an S-Corp, a C-Corp, an LLC set up, they will advise you which one and

they will cover the entity setup costs for you. On top of that, you are also going to get a tax call and all of this is worth over $1,500. And you guys are literally getting it for free because you are part of our community. We've worked with, like I said, Prime Corporate Services for so long, Tommy, the team, Steve, we have such a great relationship and we wanted to partner together and bring you this. So what you need to do to claim this,

you need to head to www. Wait, do people still say www. still? PrimeCorporateServices.com slash boss hyphen babe. Okay, so PrimeCorporateServices.com forward slash boss hyphen babe. Okay. So primecorporateservices.com forward slash boss hyphen babe. I'm going to put it in the show notes as well. So you can grab that and that's going to take you to a page where you can book that call today, tomorrow, this week, but just make sure you take some action because this stuff is like, first of all, you don't want to get it wrong.

And second of all, it's crazy. Like you're effectively earning more money when you can write stuff off. It pays for itself and you're not even paying. So crazy not to take some action on this. Tommy, tell me a little bit more about what they can expect when they come to this call as well. Yes. Thank you for that. I really want to under-promise and over-deliver as much as I can right now as well, because that consultation, like Danielle said, is absolutely free, no cost. And that's just for being a part of the community and the society, right? 45 minutes to an hour, let's break down what your situation is. Everyone's situation's different and that's okay as well. What's your income look like? What's the W-2 situation? Share as much or as

little as you want to share with us. The more the merrier as far as us making sure it's specific to what fits your needs. Now, the entity structure, you will have to pay the state and the filing fees. I love all of you, but you will have to pay the hard cost of what you'd have to pay anyways. But the consultation itself is no cost. And we'll talk to you about how to structure your business, the right way to structure your business. We'll also talk to you about how to build business credit and corporate funding on a separate credit profile. And then if you have additional questions around tax preparation, tax filing, and even estate planning, trust, wills, living wills, power of attorneys, those are the areas that we specialize in. So what I encourage everybody going into that call

to say is if you're brand new, just let us know you're brand new. Say, talk to me like a third grader if you need that, if you want it to really understand it. Some of you though, I know have been in business for a long time. And I know that you have multiple streams of income, but know that this free call is for you. So let us know what you want to take from it from an entity structure standpoint, from a business credit, tax protection. Let us know what's important to you. And if you don't know, just let us know you're brand new so that you can take the most from that phone call when you take advantage of it. I love that. Thank you so much. And like we said, we'll put the link in the description. And this is for US citizens only, or sorry, US residents only. Unfortunately, we're not able to do it outside

of the US just yet, but we are working on it. Don't you worry about that. We're definitely working on it. But right now, this is just for the US residents. But Tommy, thank you again for so much information and value. I know we have a workshop call within the society really soon as well. So I'm really excited for us to see you in there and give even more advice to our society people as well. Thanks so much, Tommy. Thank you. Thank you so much for listening.

And if you enjoyed this episode on the Boss Babe podcast, then I'd absolutely love it if you leave us a review. As a thank you, we'll send you our side hustle success kit, your simple no BS guide to keeping track of everything that you need to do to start and grow your business. To access this freebie, all you need to do is leave us a review, then share a screenshot of your review with contact at bossbabe.com and we'll send this must-have kit straight to your inbox. Bye.