The Lucky Titan

Leveraging Cash For Financial Freedom With Scott Smith

December 03, 2020 Josh Tapp
The Lucky Titan
Leveraging Cash For Financial Freedom With Scott Smith
Chapters
The Lucky Titan
Leveraging Cash For Financial Freedom With Scott Smith
Dec 03, 2020
Josh Tapp


Scott Smith, Esq., Founder and CEO of Royal Legal Solutions, is a dynamic podcast guest who prides himself in successfully conveying the essentials in asset protection to audiences nationwide. Scott is no stranger to high stakes litigation and has spent his career deconstructing asset protection structures and developing strategies that serve both to protect what you own, as well as leverage your income and maximize your tax savings. With experience in entrepreneurship, starting several successful companies and owning real estate in 10 states, Scott will pull from his expertise as a lawyer to put a new and valuable perspective on business ownership for your audience. 

 https://royallegalsolutions.com/media

Show Notes Transcript


Scott Smith, Esq., Founder and CEO of Royal Legal Solutions, is a dynamic podcast guest who prides himself in successfully conveying the essentials in asset protection to audiences nationwide. Scott is no stranger to high stakes litigation and has spent his career deconstructing asset protection structures and developing strategies that serve both to protect what you own, as well as leverage your income and maximize your tax savings. With experience in entrepreneurship, starting several successful companies and owning real estate in 10 states, Scott will pull from his expertise as a lawyer to put a new and valuable perspective on business ownership for your audience. 

 https://royallegalsolutions.com/media

Josh: What’s up everybody, Josh Tapp here again and welcome back to The Lucky Titan Podcast and today we are here with Scott Smith and we are here to talk about protecting your assets. And Scott is the founder of Royal Legal solution, really, really a great guy to learn really bad the end of your tax strategy the end of your asset protecting strategy and that’s were the order here to talk about with Scott. So, Scott say what’s up to everybody and let’s hop in.
Scott: Hello. What’s up everybody. My name is Scott Role Smith. I’m an attorney but I’m also an entrepreneur. Hm. Actually about my first business was I was at the law school and put it to graduate in law school and taught me that the real estate investing and I’ve been an entrepreneur for a long time in company with about 30 employees and helping people across the country and really start to be here with Josh, you know I have the opportunity to share everything that I’ve learned you know for helping entrepreneur and other people achieve financial freedom.
Josh: Love that. We’ll Scott we do appreciate you coming on because this is the topic that I won’t lie I’m pretty dumb I really don’t know a lot of this stuff. One of my partners the reason I broke him on that he could cover a lot of this stuff and for me it’s really really important to understand how are the pieces fit together not how to do them all yourself but knowing where your money is going. How to protect your assets. And what really intriguing is about your pre-recording interview is that your whole premises about building a business but making sure along the way you’re removing risk from the calculation and that something that most people can’t do on the business all around. So, lets dwell on some kind of strategies for helping to protect your assets.
Scott: Yeah, absolutely, I think fundamentally, while I’m starting royal legal solutions, 6years ago was based upon the idea that you know actually all of us can intrigue to be like real estate investor or starting our businesses or marketers, right? Because you know, we see somebody else doing it and like hey this is the quick way to get a lot of money and you’re gonna make a ton of money so we dive into it and you know like we’re successful right like some miracle we happen to be able to be successful doing this but then we suddenly realized there’s actually a ton more that goes behind the scene. Right? That’s why we prepare like the infrastructures that needed to be able to build hmm to build lasting and durable financial freedom. Right? I think all of us have felt it from time to time more’s like you can feel that a shoe could trap you know? And the shoe could trap and you know and then what’s gonna happen to me? Right? And I think on that places would actually a fear base place. And the great news is that we don’t have to live in that place. Right? There’s way to be able to build a proper infrastructures to ensure that you have durable financial freedom which is I think ultimately what we’re all looking for because when you have financial freedom you will able to make all the different kinds of choices with your life without worrying what’s gonna happen with the economy or what’s gonna happen with that client or what’s gonna happen with that you know certain employee that I’m really depending on or I think I’m depending on.  And So Royal Legal Solutions was founded with the idea the people needs somebody to hold their hand they’re like coming for really consultative approach and then be like great we’re here how can partner together to help grow because you wanna focus on the business, we want to focus on the infrastructure that produces you know financial freedom over time and I wanna bet that you listen to this podcast you’re absolutely killer when it comes to how topline revenue right? Like you know how to make money. Right? You built your six-figure business and you probably haven’t really focus on how to make sure that you keep that money. Right? We’ll keeping it, protecting it from lawsuit, right? Which could pop up in any given time and more immediately, this time of the year which like protecting you from taxes. And great part about that is you accomplish both of those things with one cost. Right? So, you’re gonna two pair but putting it on the right legal structures to be able to do that.
Josh: Yeah. It’s really funny that you talk about that because what’s really interesting in the marketing space is we do focus super on heavily on the top lines and how I create marketing strategies how to bring more business into my business and I was talking to a guy yesterday actually he just have to, he live in California which is a bad idea if you do a business right? But he ended up like 8 and a half million-dollar tax bill and the end of the year and he was like I didn’t gonna keep everything after I have done. It was really interesting just to sit with you know with that backdrop to this conversation because what you’re talking about is like hey how do you keep more of that not just avoiding taxes but how you protect that so that somebody can’t sew that away from you. 
Scott: yeah, I mean we say it all the time like I’ve seen people lose million of dollars from lawsuits like easily than protect them from I have a friend of mine lose a 3 million dollars from single lawsuit and he had tons of insurance in place and he just didn’t realize how lawsuit works and how insurance company are profit seeking corporations and they’re protecting their own interest and not yours you know if something goes wrong. Right? While legal people are blown away that we’re saving 50 hundred thousand dollars in taxes over and over and over again just using the best practices of what tax strategies that people should be using. Right? I’m blowing away by how simple some of these things are I want you understand how they link together and I think the problem is you ever run of these before is that you listen to ton of podcast and read a bunch of article, you’re getting a ton of like little pieces of map revealed like you have little bright spot but you can’t see the whole map and that’s really make sense that you ever feel you’re not in that position that what you need to start partnering with the professional because they little once know the map and can show you how to navigate very quickly and so that’s quick and easy process you know that gonna drag you for and that somebody else is watching it and that you don’t have to. Right? And this where today like the major things that people are really get blown away we’re talking about S corporation we’re gonna talk about C corporation and how can we use of those and also the things that solo for one. I don’t know what’s on the top of the mind for you where do you think we could start.

Josh: Let’s definitely start with the S Corp. Right? Because, we’re recording this in December and people and say December 1st is next. In December 1st is how we recorded this but I mean I think that’s going to help people to decide you know what’s the next step for the next year. Should they be changing to an S Corp or what have you.
Scott: Yeah, absolutely. So, S Corporation are fantastic entities, right? So typically, when we’re ever talking about someone come’s up to a street. Hey, I have a marketing company right. And actually, doing everything in my own name. Like oh my God. Amazing for you’re so successful without taking about all these other pieces that come into. So fantastic, way to go. Right, and the first thing that tell people is great but we atleast need two entities. We need two L O C put in place. We’re gonna have one LOC that gonna own everything you own. So, like your website, your domain, all of your branding materials, assets that you have, your cash and stocks all the goes on LOC. Josh, should know everything that you know. Right? Rich People, don’t know in stock, you should be own everything, your LOC should own everything that you have and the work. Right? You buy a yacht, your LOC should have a yacht, you don’t have the yacht. Your second LOC is what we call an operating LOC and this is the thing that actually trends in the business with everybody has in the world. Its wants to expose all your liabilities because it’s the one that sending email, it’s the one that pushing out any messaging, it’s the one that signing contract so that basically our fall guy. It doesn’t own everything but it does everything. Right? I mean other LOC own everything but it doesn’t do anything. Right, you’re doing stuff that turn your legal liability. So that our first step, two LOC, one own everything and one that does everything. Right? The One that does everything is gonna bring all the cash. Right? Because that’s the one doing all the business transactions. And what we’re gonna do is that do something with that we’re gonna file an S corporation tax selection. So just in S LOC, it simple to maintain every year, it’s very very affordable to be able to set up. And what we’re checking a box that says hey I arrest work one who allows to work one with an LOC tax S corporation, what allows us to do is to be able to avoid the over self-employment tax. Right? That’s about 15%, right? Just buy this one strategy alone, you should be saving yourself 15% in taxes because you’re gonna be able to avoid self-employment tax. And the way that you do that is that the S corporation. Right? This is the magic. The S corporation is having you as the sole employee of that S corporation. Right? And what that means is know you can take out all of your wages and spit your wages between employee wages and dividend income from the company. So, you’ll pay a little bit more and you fight attacks but you’re gonna avoid those self-employment tax and comes with it. And then this employee income means you’re gonnabe able to effectively save about 8% per year on all your taxes. So, if you’re not doing it right now there’s one strategy alone that just save your 8% on all your taxes.

Josh: That’s absolute gold, I hope people will think about that talk to their account and their lawyers to determine if that’s the best thing for their company. I mean Scott, that’s awesome and 8%, I mean saving 8% is hard. That’s crazy, across the board you’re saving 8%.
Scott: Yeah, every year, Right? So that’s what we’re talking about like when we bring people in and we’re doing the initial analysis like hey how will you paying taxes is looks like is what current tax strategy. We’re looking at these things and say like great. It is a no brainer and you’re won. But if will look at the lifetime value of savings by being able to put it just by one strategy. I mean theROI how many types of investment when especially when it comes to expense saving is incredible. And as an entrepreneur, the real magic in not your topline income, from what I see, from working with about 2000 real-estate investors and entrepreneurs across the country. It’s how you minimize your tax and expense. And that’s people will really really make it, right? So, I hope everybody like grabs that concept, you know and like if everybody is excited as I am by It. Because there really is no better investment like, you can’t invest your money in the stock market or anything else that gives you’re a better ROI than you can in saving tax.
Josh: yeah, Love that, and for anybody I’m gonna put that into numeric because most people watching the show are kept the 7-figure point, I mean that 80,000 dollars extra that you wouldn’t have had. Right? I mean, that’s more than the rate of the average person in the US right now. So, you’re thinking about that for your company is how could you, you know save at least 8%. Let along all the strategies that you could have implement and we’re gonna be talking about here about how could you take that 8% and reinvestment back in your company and with help you and your family life or what have you, I know a lot of people, we’re talking about lot of people who made 7 figures and they say man, I passed the million dollar, I should be making more money right? They feel like I thought I still making less than my job I was working before and it’s because of not paying attention to the strategies. So, Scott, we’re be talking about the S LOC, the S Corp, the Spending time and actually classify yourself in classification, right? To protect yourself from taxes.  You also talked about the sole of 4oKconcept so I like to kinda dwell in to that little bit.
Scott: yeah, absolutely, we’re will be looking for you know when we first start this conversation. Right? Hey listen, came up to this tree you don’t know everything so well you need atleast two companies. One company that owns everything, your asset owning company. Second, separate company is offering company does everything, takes all the cash and does the contract. So let’s use that as S corporation. So, we can help avoid that self-employment tax using that entity structure and then we’re gonna make sure that you and you and your spouse are the sole employees of that S corporation. Now if you have other company that have bunch of employees, wherever wherever, Great! Well just make sure, in that company structure the way your paid is like your S Corp. and then your S corp is where were you and your Spouse is the sole employees. Right? If you structure it that way, and that what you’re able to do is to establish a sole 4o1K underneath your own company structure. So,its just you and your sole entrepreneur fantastic. You don’t have to do with any complications, right? But its available to everybody, if you do structuring correctly. Great part of the sole-4ok though, mind-blowing stuff right there. You can put up to $57,000 each year into your own sole- 4o1K. Right? This allows you to do is not pay tax in any of that $57,000 right. If its your merit, you got to double that and push all of that now inside of your sole-4o1K. And with that solo 4o1K. You can go, you can self-direct meaning you can go up and make any investment you want with that money. You can buy real-estate with it, you go ahead and you can actually loan money to other people and be able to charge them with interest on it if you wanted to. and here’s a crazy part you can actually loan your self-money up to half of the value of the sole-4o1K. So, you can think of this as your tax-free piggy bank. Right? You take your money, you have it in, you don’t wanna pay taxes. Okay push, let’s go push on sole-4o1K, I’ll make some investments with it and I’ll tell you if I need the money. I can always pull out that of myself 4o1K. Loan it to myself and I have 5-years to repay it. Right? And I have paid an interest like 5% on that money and by paying interest to my own retirement account. And at that time, I can pay back my retirement account and reloan it to myself, so you just have it ever revolving tax redoor just like your tax-free slash fund. Now this is wild, right? Now run the number real quick, at in your 30% affective tax rate, now if you’re in that club, we’re talking about that 6, 7 to your club, you’re in that 30%, 30% of $57,000 is like about 17grand right, in tax savings. So each year, you push money into your sole-4o1k. You’re saving additional $17,000 for paying that out to the government, right? And if look at this overtime, it’s a J curve, with what your actual investment actually look like cause of the tax saving you’re giving. Again, you don’t have even do anything and that your ROI is much better than you do than paying tax on something and then reinvesting inside the market or other investments.
Josh: That’s awesome, now is that a tax deferred investment or is that tax free.
Scott: It’s gonna be tax deferred. Right. We can talk about how will you be able to use that to ultimately make it tax free. Right? It comes into more complicated strategy, that’s actually a layer in real-estate strategy, bonus appreciation and other thing to be able to drag down, your affective tax rate. And if you’re looking for that kind of advice, you need to come to a Royal Legal Solution and then get an appointment with an adviser and we can walk you through and how it actually work.  Right? Now, just a sole-4o1K is a tax deferred on at the end of the year, and you’re gonna say, great! Let me start pulling money out, and at that time, when you’re pulling money out, your retirement account so you gonna pulling out weigh less money than your making now, so your affective tax rate is so much lower. And then the meantime, what you’ve been able to do is actually compound all of your growth because you have more capital to keep investing in all the investment. Right? What really matters is not really your how your effective return most of the time, right? There must be a 10 and 12 percent return isn’t that big, right? And what happens you know what your affective rate is. But a difference and like a third more capital in put in, okay. That’s a big difference. Right? So, my strategy is like great, let’s have much money as we can, let’s make safe investment so know we don’t have to worry about, why? Because the focus of my business, let’s grow that overtime, and tell the fact that I know that I’m going to retire and the meantime that I need the cash I can pull it out. When I hit retirement age, my affective income is a lot lower than it is right now, right? Because I’m in retirement at that point, and now my affective tax is gonna be lower and I’m moving Florida, Arizona, where I’m not gonna have much tax anyway. It’s gonna come with it, right? So, the point is, this type of planning that comes with what gonna make the most sincere. 
Josh: wow! Yeah! That is incredible. And so, I mean I’m not like you said, this is all contingent upon you personal strategy but for you, you like to invest in real-estate, that’s kind of the direction you like, to take that money right? Like, you would say invest that $57,000 a year and to that sole 4o1K and that we’re gonna roll that money in by kind of lending it to yourself in a sense. So, investing it to multiproperty.
Scott: Oh for sure, there’s you know, one of the things that great with having you know couple thousand clients you know all of the country, with all real-estate investors entrepreneur is that I got to see, what are the best people doing. I get to see their income statement; I get to see what strategies they’re doing. Like, cool. I get to pick to pick from those. You know, what type of deals people are doing, Oh cool, I’m gonna do that too. These guys are way smarter that me. You know, right? And what they actually do is that make a ton of sense, is that they take extra money that they have and they push that money into the type of real-estate that cash flowing real-estate property. Or syndication deal, like somebody else is put together idea where you can place some money inside those deals operators that embedded you know that are solid people, you know the reason that I do that is because with those type of investment you can actually pretty, consistently get a ton of 15% return every single year but you can also get out of that is all kind of appreciation benefit. So, your appreciation benefit is actually fall throughout the tax up for you. So, in your certain type of assets, like the commercial properties are Parma complexes, you can take 30 year of depreciation and condensed it down to 3 years of depreciation, it’s called accelerated appreciation which you know Trump actually was able to get through with that tax bill. And what that means is that you can actually ox a lot of your income and given a lot of factors being in places well to, right? So, there’s all type of nuances to these strategies that you can start layering in that you really need to tie in together. Okay, what is my protection look like. How do I save money on taxes from my entity structuring. Now, great! What type of investment are gonna actually lot me further save on taxes welcoming there are trends looking at and how I use my retirement account to tie that all together. And if that sounds confusing to you, like oh my God, this is so far above my head, I have no idea what you’re talking about for this sounds really really cool. Don’t worry about it, that’s why we built this whole company, it’s really to just be able to train people to be able to walk people just like you through the process. So you can get the map and you can start on that path, you know where do you get to at the end of the rainbow.

Josh: Love that, I do have to reiterate that because one of the biggest lessons to learn as entrepreneur, instead of trying to learn how to do everything. Let’s just find somebody who can do it for you, I mean you should be focusing on being the right maker of your company right? You should be the person whose focusing on that top of line, and pay somebody else or work somebody else who can help you build that bottom line and help you to grow that. That’s been a big lesson for us because I know, I did my entry graduate degree in finance and I learned how the pieces work but to I to be honest, I really don’t like that doing it myself. I thought I would but then obviously that didn’t work out, right? But we adapt, I adapt finding out pretty quickly that instead of trying to do it myself and find ways to why not else bring somebody else to do it for me. So, I would recommend so where can people, connect with you Scott in order to see where your Royal Legal Solution.
Scott: Yeah, the best thing to do is to go at royallegalsolution.com and then we have a quiz page at the top, so you see at the very top of the royallegalsolution.com that says take a quiz. I’m on there. Just fill out that quiz, I know a lot of questions on that quiz if you’re an entrepreneur you don’t need to a real-estate so why they ask me so many real-estate kinds of questions associated with it right?Well because of the majority of the people that we work with are investing in real-estate, why? Because, entrepreneurs understand that oh once I make more money on topline income, I need assets that are incredibly safe, secured and consistent overtime because they don’t pull mental intuition away from them. Real-Estate, you need fit decision to be able to that along with giving you a ton of tax benefits. That’s why we married those two together, so don’t let that throw you off. Just go to royallegalsolution.com, take the quiz, at the top of the page, click that, fill out that quiz, and that’s our best opportunity to be able to get the information we need to have a productive first conversation with you. After that 1st conversation, we’ll be able to see hey, are we actually a good fit. Do we think that we actually, that its make sense for you to move forward to talking to a senior adviser with my company? And that senior adviser will be able to walking you through like the types of legal structuring that we’re gonna need to put in place. And if appropriate, come talk to us in house NCPA and starts meeting more the team as it makes sense for you. Right? But the first thing you have to do is go the royallegalsolution.com, take the quiz at the top of the page and have that first conversation.
Josh: Yeah, and I’m gonna recommend that for everybody especially, were in this episode at the end of the year so that you can thinking about this and get that interview before the end of the year. Find the time to sit down with these guys because that’s going to help you guys to set yourself up for the next year. You know lot of people been complaining about how bad their year has been. Kick 2021 off, with fire. Right? Sit down with these guys.
Scott: Yeah, you can get it and like if you here this episode like hey, we’re mid-December, whenever the case would be.  It’s still reaches out, reach out immediately because there might be things that we can do with setting you up like a sole-4o1K that helps you to save taxes in this year. Even if we can’t do something for next year. There’s also some things that we can do with C Corporation where we change with tax deadline for the C Corporation setting a tax in the year has a tax in December so we can do some income shifting to be able to help you not have to pay any tax come April and we can shift some money around and there’s some great stuff that we can do with that. Right? So never too early to have that conversation, because it’s very very likely if there’s thing we can put in place immediately to be able to help you, and our worst-case scenario Is that we can set you up with game plan for 2021, to kill 2021 on your taxes and financial freedom plan. 

Josh: Love that! So, everybody, once again you can check that out royallegalsolutions.com. And Scott, before we sign off, can you give us one final parting piece of guidance. So, if you can say there’s one thing you can help people get out of this interview, what that be?

Scott: Number 1, the thing I’d say is, partner with the right people. You know, find somebody else that can take a whole such your life and your brain. Off of the plate. Now, you can just refer if ever to them and meet with them once a month to be able to ensure that whole section in your life is running well so you can focus on the one thing that has a key driver in your life. Time and time again what I see is the more you can hone down on the one thing that you really good at that really drives resultand partner with really good people that a lot that you can trust to be able to handle part of your process. Now, take your eyes to ball completely and just focus on that one thing that a guarantee passes success.