5.3 | To LLC Or To S Corp, That Is The Question with Brandon Trammell

Waking Up Wealthy is the podcast for visionaries and rebels

>> Isha Vela: Welcome to Waking Up Wealthy, the podcast for visionaries and rebels who are ready to revolutionize their relationship with money and create powerful collective ripples with the money they make. I’m your host, Ishavela, trauma psychologist, somatic practitioner, financial professional and minimalist, bringing you practical money tools, unconventional wealth perspectives and Aquarian era business strategy to guide you in building wealth that’s aligned, ethical and empowering. Let’s wake up to the true meaning of wealth together. Should you form an llc, an S corp, a C corp? And how does the entity you choose help you pay fewer taxes? I’ve asked myself those questions. A lot of people ask me that question. And that’s why I invited Brandon Trammelll, who’s an author, podcast host of Leave It Better, and he’s also a financial advisor insurance agent, to speak on the pros and cons of each. Brandon has been in financial services for over 15 plus years and his firm, Purpose Financial and Insurance Services, was born out of a desire to serve in a way that seemed to be missing from the industry. Really wanting to empower community members with critical knowledge so that they could take charge of their financial lives. So in this episode, I want you to grab a pen and paper to take notes. You’re going to learn what questions to ask yourself as you’re deciding how you want to structure your business financially.

Isha: How did you get into banking? Brandon: Serendipity

Hey Brandon, thank you so much for coming ono the podcast M. I’m really excited to dive into this topic today.

>> Brandon Trammell: Yeah, thank you for having me. I mean this is a conversation that I have often, and also that I love so very much. So very close to my heart.

>> Isha Vela: Awesome. So I would love for the, you know, for the folks listening to get to know you a little bit and yeah, maybe share like how you. I know you started with banking, but how did you even get into banking? Like, start like, you know, what has your money journey been like since,

>> Brandon Trammell: Before banking back to the, back to the backpack, to the beginning? well, I mean, out of know if we go in the wayback machine, honestly, I’ve always had this kind of like love hate relationship with numbers. I’m really, really good at them and with them. And as a student, all throughout my schooling career, I just had this friction, with math. but I was always really good at it. I had this like insane thing for remembering numbers. and so I think that’s kind of the root of it all. But, if we fast forward a bit, because we only have so much time, I was after, while I was in college, and after college I worked in the wine industry. I a tasting room manager. And one of my club members who was there frequently, you know, was like, Brandon, you’re really, really good at this job and you know, when you want to move on and you know, make a career move, make some adult money, let me know and you know, I’ll get you an interview. And he was some district something or other, with Wells Fargo. And so, you know, I did some interviews with Wells Fargo and just, I don’t know, the vibe of the branches, it just never really, never really landed for me and just something just didn’t feel right. So I set that aside for the moment. But as it turned out, very close to my apartment at the time was a very small savings and loan. I literally looked at the back of the building from my apartment. So, as I was walking, by one day I was like, well you know what, maybe I’ll walk in. And the district manager happened to be in the branch at that time. The teller that I asked about whether they had any positions open said, well, yes, and actually you should probably meet someone. So.

>> Isha Vela: Wow, incredible.

>> Brandon Trammell: Yeah. So serendipity found its way.

>> Isha Vela: Yes, yes. And then you worked in banking for quite a long time.

>> Brandon Trammell: Yeah, I started in banking 2007, as I said, you know, before. Perfect timing to enter the banking industry 2007, right before a complete meltdown. so that was fun. Lots, of learning and just thrown straight into the fire. but we learn a lot about ourselves, about our skills, abilities, thresholds, you know, when we’re under fire. and I learned a lot about banking, and myself and my skills and people, through that period. And we were eventually, bought out by a larger regional bank, US Bank. And that kind of opened up the possibilities of what is available as far as, different divisions where the bank that I was working at, Savings Al Loan, just didn’t have that opportunity. So oay, it opened a lot of doors for me. so 2007 I started and then worked in banking until 2014. And I just, I wanted a way to have a more profound impact on the lives of the people that were my clients and investments. Insurance, financial planning. Right, these are areas that just offer a great deal of opportunity for that positive impact. And so, I found my way, into this sector, if you will, of the finance industry.

>> Isha Vela: Yes. And you now run your own, you know, your own, Firm Purpose Financial and maybe Share a little bit about what your, what your vibe is all about in that work.

>> Brandon Trammell: Yeah, well, I mean, you know, this was the seed, right, that I, that I just spoke of. This was the seed, that, that really kind of led me to a place of working for, you know, a big box finance company, a very solid company M. As far as large financial firms go, the one that I, was an agent with is among the best. it really is. But ultimately, as I kind of made my way through my career, I came to a point where there was just frictions that I didn’t want present. because ultimately, as I said before, I really have this very deep, connection to helping people and to educating people. And so I sort of started doing that within my practice at that firm, but eventually came to a place where in 2018 I decided I was going to start a DBA. Right. Purpose Financial and Insurance Services. And I started working in that and really creating the processes and the pathways, in the service sets to help people at a higher level that was aligned with my values and the values that I think the areas that I believe are really important and are often missed, not paid attention to, within the industry. Yeah. So Purpose Financial and Insurance Services. I became, fully independent, in 2021 after some of those struggles that we all went through, with pandemic lockdowns and the world melting around us as we saw it. and that really opened a, floodgate, right, for me to really be able to homee in on the areas that were really most important for people that they had the most questions and to really lean into a mode of guidance and education, ah, that I wasn’t really able to lean into when I was under a corporate umbrella. and so I found a great deal of value there for myself. But also the feedback that I’ve gotten from my clients in my model, has just been reaffirming. the feedback has been very positive and the impact on their lives has been very positive. So that’s where we’re at today.

>> Isha Vela: That’s great. That’s great.

Shishavela: Most people who ask questions about business structures are mid-stage

And so you, have you mentioned a lot of conversations about LLC vs. C Corp vs. S Corp. And you know, like, when people come to you with that question, what size is their business? Are these like huge businesses? Are they usually small businesses? Where in the stage of business are folks who typically want to have that conversation with you?

>> Brandon Trammell: You know, it’s interesting. I’ll say, generally speaking, most folks who have a lot of those questions around what structures should I Have, are sort of, they’ve, you know, they’ve maybe had some success in their business, and have come to realize like, oh shit, I’m paying a ton in taxes, am I doing this right? You know, and so, you know, folks who are a little farther along on that business journey tend to have already asked those questions maybe right around, at least around the tax election status for their entity. Right. For their business itself. Those folks have different higher level, more complex questions usually. And where I step in, into kind of support and guide them is it often is. What other structures do I need to have to go to that next level and ensure that my assets are protected? Right. So that tends to be more around like trusts and foundations or philanthropic endeavors. Right. At that level. But the folks that are asking questions like should I be an llc, should I be an S corp, should I be a C corp? Are sort of that mid road. Right. a lot of times that’s a generalization. Right. But certainly outliers, but a lot of times medium sized business, they’ve been successful, they’ve been in business for maybe a few years. and they’ve found some success in that and they want to make sure that, that they’ve got their T’s crossed and their ies dotted. Right?

>> Isha Vela: Yeah, yeah. No, indefinitely. Like when you’ve paid taxes for a couple years, you’re like, ouch.

>> Brandon Trammell: Hold on, wait a second.

>> Isha Vela: Is there any way we can reduce this just a little bit?

>> Brandon Trammell: Exactly.

>> Isha Vela: Do you want to stay connected? Go to my website, wwwishavela.com and download Prosper, my three part money course that dissolves money shame and dives into the five most common unconscious beliefs that get in the way of making more of it. You can also sign up for a free financial strategy session where someone on my team will guide you through the six steps of financial independence and provide you with a tailored holistic plan to build wealth ethically. All of those links and more are in the show notes.

>> Brandon Trammell: Yes, exactly. And that’s the fun part for me. Right. That’s where I find so much joy because you know, these are folks. Ah. A lot of times the folks that are attracted to working with me are folks that are, are really purpose driven, are really values aligned and they want to have positive impact. and they want to know the best way to really kind of structure their personal economy and their business so that they can lean more into that. How can I give back more in a more meaningful way?

>> Isha Vela: Exactly, exactly. Yeah.

>> Brandon Trammell: So that’s, that’s the Joy for me.

>> Isha Vela: Yeah. You know, when I talk about keeping more of the money you make, it’s not so that you hoard it, it’s that you can do more things with it. Right, yeah.

There’s a difference between the corporate entity and then the taxation piece

So one of the questions that I wanted to ask you, so one of the things that I, I wanted to make sure that people understood was that there’s a difference between the corporate entity and then the taxation piece. Because oftentimes we think that, oh, S Corp gets taxed like this, LLC gets tax. And that’s not actually. Right. It’s a lot deeper than that. So can you maybe introduce us for the folks that are new to wr, what all of these pieces mean?

>> Brandon Trammell: Yeah, so I mean we’re kind of, we have this this thing where a lot of times, the tax election is conflated with legal structure. and so let’s clear that water up a little bit. llc, limited liability company is a pass through entity. S Corp is the same thing. So what does that mean, pass through entity? That just is a complex way of saying all of the taxation on the revenue boils down to me as an individual or this set of individuals that are ownership. Right. As people. so a C Corp has its own tax structure or its own tax rates as an entity versus the S Corp and the LLC election having really it just passes through down to the individuals that own that company. And so, but let’s clear the air a little bit. The LLC as a structure, as an entity, that’s a legal structure. But the tax election can be S Corp or C Corp. Right. So the way that that entity, that LLC is taxed depends on your election. It can remain just an LLC and you’ll file as an LLC pass through or an S Corp or a C Corp. So that’s the tax status. Right. Or the tax filing tax classification of that entity. All three of those entity types have a, legal structure to them as well. Limited liability company. Right. Which indicates to us its main legal benefit which is to separate ourselves as individuals from the liability, both financial and otherwise, of the business itself. Right. So that’s the legal structure that is the same really across all three. Right. It gives us an arms length separation from the liability of that company. And if something happens and the company is sued, it separates us as individuals and our assets as individuals from that lawsuit or that, that liability.

>> Isha Vela: Very important.

>> Brandon Trammell: But that’s very different than the tax status of it or the tax filing status. And so, you know, ultimately I think it’s important for us to understand that you know, there are two components to that, that business structure.

>> Isha Vela: Yeah. Okay, that’s helpful to understand.

How does one organize your business to be efficient with taxation

And so with regard to like just thinking about the tax piece and you know, I know that you are in California, I’m about to establish residency in California and California has a high tax rate. And so I’m wondering like, just for my own understanding, like, how does one. Obviously there’s tax write offs and whatever you’re spending on your business, you can get creative your account and can help you with that. But just in terms of how to organize your business, how does one conserve on taxation, how does, how can you be efficient with taxation?

>> Brandon Trammell: So here’s a really important thing to understand. Right. Because a lot of people is they’re asking that question, of llcs Corp, C Corp whatever, Re they’re usually going to be operating as a sole proprietorship.

>> Isha Vela: Yeah.

>> Brandon Trammell: Right. Which is basically like me running a business. Right. There’s no umbrella, if you will.

>> Isha Vela: Right.

>> Brandon Trammell: And so that doesn’t allow for. And I should qualify all of this by saying that I am not a tax professional, I’m not a CPA and I’m not an attorney. Right. And so it’s important to take the guidance or the learning that you have going on and ask those questions of tax professionals and legal professional.

>> Isha Vela: Yes.

>> Brandon Trammell: O. But with that said, it’s sort of like, if you’sole proprietorship, not only you’re open to the liability side of things, but, from a tax deductibility standpoint, you don’t have the same benefits as an llcs corp or C Corp. Right. And so the way a corporation runs is they take in revenue from their services. They expend that revenue on business operations and that’ all the bills and all the payroll and all of those, ordinary and necessary, components or expenses. Right. For operating that business. And then they have what’s left over, which is taxable revenue, if you will. Right. So the deductions that happen right above the line or before taxes are paid. Right. That’s the major benefit or I’ll say the advantage, that we have when we elect a certain status or establish an entity with its own tax id. Right. Which is an llc, S Corp or C Corp. So state taxes obviously very different than, than federal taxes. Each state has their own, particular situation there. And well, you hit that nail on the head. California has some of the highest, if not the highest in the nation for state taxes. Right. I feel that every year. Feel that every year. So prepare yourself. but really it’s about kind of gaining an understanding through experience of what. And I said a key word here, which every tax professional who’s worth their weight we’ll say is ordinary and necessary. So m. That’s a key phrase in IR’s code. Ordinary and necessary. These are things that are critical to the operation of the business. Those are deductible at what level and what percentage, really, that depends on what the expense is. But organizing our mind is the way that we then can lead to organizing our personal economy or, our business economy. Right. So thinking about what are the things that I absolutely need to have in order to run this business and having an accounting practice, whether that’s internal or you contract someone to do that for you, is really critically important. But it all starts with us understanding that ordinary and necessary sort of category, if you will.

>> Isha Vela: Yes.

>> Brandon Trammell: So that gives us the ability then to, as we’ve elected our status of llc, S Corp or C Corp, to deduct those expenses from our operating revenue, from our gross revenue down to more of a net revenue place. Right.

>> Isha Vela: Okay. what would be like, would there be a different way that you would deduct those expenses? You know, whether you’re, if you’re In An LLC vs. An S Corp. Is there a different way of deducting?

>> Brandon Trammell: Nope, those are the same.

>> Isha Vela: Okay.

>> Brandon Trammell: Yeah, those are the same. Now, you know, a C corp has again, its own, you know, its own tax brackets and its own tax rates. And so the way that that operates is. Is just different because the corporation is going to pay its taxes and the individuals who are paid W2RE income got from that corporation are going to pay their own tax rates. So, that gets into a water where you really want to have a CPA accountant, bookkeeper. Right. That, And those are different, right?

>> Isha Vela: Those are two different level stuff.

>> Brandon Trammell: Right?

>> Isha Vela: Yeah.

>> Brandon Trammell: And you’ve got shares, know different classes of shares. With a C Corp where with an S Corp, you have one class of shares. So. Okay, that’s a more complex conversation that I think, you know, is probably own its own podcast.

>> Isha Vela: Yeah, that’s a whole lot other episode.

>> Brandon Trammell: Yep. Y.

With LLC and then S Corp, you have the ability to have payroll

>> Isha Vela: So with the LLC and then S Corp, I remember hearing that with an S Corp, you. I mean, with an LLC you can have a team as well, but with an S Corp, you have the ability to have payroll. I mean, there’s something about the S Corp that. Where, there’s room for bigger growth. Or. Can you share a little bit about that piece?

>> Brandon Trammell: Yeah, I mean, if re. If you’re a one person show you’re running your business on your own. And you know, much like myself, Right. Where you don’t have employees per se.

>> Isha Vela: Yes.

>> Brandon Trammell: Then LLC is perfectly fine.

>> Isha Vela: Okay.

>> Brandon Trammell: But if I have 10 employees. Right. So I’m a contractor and I have, you know, I have various employees that go out and do work on those projects. and then internal office staff. I’m going to want to have a payroll system that allows me to pay those employees through that payroll system and maybe even myself depending. But the deductibility of that payroll happens with that S corp election. And so of you’re paying out in a different way. Right. You’re paying a W2 employee versus a 1099 income to myself. Right, Right. So those things operate differently. And when we’re doing that right. When we have payroll, we also have payroll taxes that we have to pay. Right. So that S Corp is going to be responsible for those payroll taxes or that LLC with an S Corp tax filing election. Right. same thing. So when I do a 1099 distribution to myself, I don’t have payroll taxes.

>> Isha Vela: Okay.

>> Brandon Trammell: The S Corp it again.

>> Isha Vela: Can you say it again?

>> Brandon Trammell: When I’m paying 1099 or doing a distribution to myself as the individual owner of the company, sole employee, I don’t have payroll taxes. Have self employment taxes at the end of the day. Right. when I go to file, but I don’t have payroll taxes.

>> Isha Vela: Okay.

>> Brandon Trammell: So you’re going to have you know, when we set up that S corp and we’re processing payroll, we have to do withholdings for each of those employees. State know. So fica, and state taxes, right?

>> Isha Vela: Yeah.

>> Brandon Trammell: or Medicare, and payroll, taxes in those things.

>> Brandon Trammell: Right. M. So those are just different processes and whether that’s suitable for your business is really dependent on the size of that business and how many employees you have.

>> Isha Vela: Yeah. Okay. Okay, great. And what would you suggest? Like you know a m. Lot of people don’t stay on top of their taxes. It’s kind of like they kind of like let it fall by the wayside and then they get hit with a bill and it’s like oh, oh wow, I’t that I don’t have that amount right now. And then they have to do monthly payments and do all of that back taxes payment. How do you suggest people stay on top of this and stay organized with their taxes in addition to having a good accountant but just personal business organization type of thing?

>> Brandon Trammell: Well, I think I’ll share my personal experience and hopefully folks can glean something from.

>> Isha Vela: That’s defly the way to go.

>> Brandon Trammell: when I first set out, I was that person you were just talking about. Right. I wasn’t really setting aside any taxes because it was like, man, I need this income. I need this income so that I can pay my bills. And there’s nothing left after that or there’s very little left after that. and I learned this lesson the hard way within the first couple of years, which was really getting hit with a $15,000 tax bill. 15,000 plus because I hadn’t been setting anything aside. It was like how am I supposed to pay that? Right. Well, yeah, it was that, it was that payment plan.

>> Isha Vela: Yeah.

>> Brandon Trammell: not a suggest way to go about operating, financially operating your business. I don’t recommend it. It’s very anxiety inducing as I’m sure folks who are listening to this who are in that situation or have been can feel that. Right. that anxiety come back.

>> Isha Vela: Yeah. I, in that situation too. But there not from a perspective of business.

>> Brandon Trammell: But yeah, personal and, and this is not to shame or guilt. Right. I mean look, we do the best we can at any given time and that’s all we can do.

>> Isha Vela: Yeah.

>> Brandon Trammell: what I learned was through learning, through listening, through reading and through practicing is pay estimated quarterl, set that money aside, take whatever it is to 20% is the number that I like to use because I’ve found through experience over the years that my effective tax rate is usually somewhere between 13 and 17%. So I take 20 because I want to make sure that all bases are covered. It gives me a nice bufferah. I take that 20% before I spend anything. I take that 20% and I put it into an account that is not connected to my operating account. Can’t get to it from my operating accounts.

>> Brandon Trammell: It’s great if it’s interest bearing, but honestly it’s so temporary that interest is nominal and it’s not really necessary. Right. But I have it in that account so that it’s sitting there and I can’t just grab it and put it in my checking account and spend it. Okay. Then every quarter when those quarterly taxes, those quarterly estimated taxes become due, I pay them. I take that money and I put it in the IR’s cost. Okay. It’s out of my hands. I made the payment.

Practice makes perfect. And if I do that every quarter, what I come to find

Right. And if I do that every quarter, what I come to find through my experience and practice is that when I file the taxes, there’s very little if any due at that Point. And a lot of times, most times after my deductions and all of the things deductible, expenses and all of that are taken off, I’m actually getting a refund.

>> Isha Vela: That’s great.

>> Brandon Trammell: That feels a whole lot better than hey, Mr. Trammel, here’s your bill. T. I don’t like bills. T want. I don’t want to have to pay those bills. Right. I would rather have deducted that all along the way and then be, you know, pleasantly surprised with. Well, you gave us too much.

>> Isha Vela: Yeah.

>> Brandon Trammell: You know, now you can refine that practice. And I suggest doing this because what I also beyond bills, what I also don’t like is interest free loans to the government. I don’t want to give them more money than I have to. Right. Or than is required by the income that I generated. So I refine. Right. And through practice we start to see pattern. Right. We see patterns in okay, that 20% was too much by at least 3% every single year, if not 5. Okay. So then I’m going to take that. I’ll leave that extra amount, that 3 to 5%. I’ll leave that in the savings account and I’ll make that 15 or 17%.

>> Isha Vela: Okay, great.

>> Brandon Trammell: Okay.

>> Isha Vela: So it actually is interest bearing. Then you have a little.

>> Brandon Trammell: Yeah. You got a little something to keep off the top. Right? Yeah. Instead of giving it to them so they can do that.

>> Isha Vela: Yeah. Okay, great. Yeah.

The key question to really ask yourself is what’s your vision for your business

And do you have any, any feel like I’d love for you to offer like best practices like what you just did? Just around questions people can be asking themselves when making decisions about structures and taxation. Yeah. What are some of the questions people can be asking themselves about how theynna move forward with that type of thing?

>> Brandon Trammell: I think that the key question to really ask yourself at the beginning of that research is, what’s my vision for this business?

>> Brandon Trammell: Right. What is the future? What do I want the future of this business to be? Do I want IT to be 10 employees and 5 million in revenue or am I just, am I going to continue operating the way that I’m offerating? Maybe I’ll, I’ll bring in an assistant or something to that effect. Right. But what do I want the future of this business to look like? And feasibly, what could it look like?

>> Brandon Trammell: You got to start there. Because I think the most sage advice that I’ve ever gotten in life. Right. As it applies to businesses, begin with the end in mind. What do I want that destination to be? And reverse engineer the course as Much as possible.

>> Isha Vela: Yeah. Okay.

>> Brandon Trammell: And that’s the key, Right. Because then what other questions are important for us to ask and what other research is important for us to do? Sort of reveals itself. Right. As we reverse engineer that and seek guidance. Seek guidance from people that you can trust and that are experienced and can share that experience with you. Right. So that you can glean from it what you need to glean from it for your situation.

>> Brandon Trammell: Stay away from sound bitite financial advice or business advice. Because it’s rampant. It’s everywhere.

>> Isha Vela: Yeah. Everybody’s got an opinion.

>> Brandon Trammell: It’s so conf. It creates confusion, which is, you know, we all know that what a confused mind does.

>> Isha Vela: Yes.

>> Brandon Trammell: It does nothing.

>> Isha Vela: Does nothing. And it gets overwhelmed.

>> Brandon Trammell: Correct. Yeah.

>> Isha Vela: Ah.

>> Brandon Trammell: And so, you know, find advisors, or I’ll say mentors. Right. Teachers, people who can teach you based on their experience how to find the right path for you.

>> Brandon Trammell: It’s just really, really important. it’s the only reason I am where I am is because I had great teachers, great advisors, great mentors.

>> Isha Vela: Yeah.

Each property ought to have its own LLC for the purposes of legal separation

Awesome. And when we, when we spoke last week, you talked about real estate. And I’d love to just kind of like go into like, o. Okay. Different types of businesses, like you mentioned with a real estate. With a. A real estate business that you would want to have. Like each property has its own LLC or is its own llc. And I’d love for you to talk for a moment about that.

>> Brandon Trammell: Yeah. I mean, property investment. Right.

>> Isha Vela: Is.

>> Brandon Trammell: I mean, you talk about advice being everywhere. Right. I mean, it’s all over. Every social media platform is like, this is how you’re going to get rich. Right? well, maybe. also it’s how you’re going to spend a whole lot of money. but that aside, if you’re a property investor, you’re someone. Even if that’s sort of like your side hustle, right. Is to acquire property, rent it out. there’s a lot of liability in that. There’s a lot of liability in that. And so it is very. I think it’s important for us to really learn how to separate our personal assets and our ourselves from those liabilities. Right. We can protect against them with insurance and that’s a necessary component. But also the legal structure. Right. So it may be depending on how many properties you have and what the renter situation is.

>> Isha Vela: Let’s say it’s just, like an Airbnb. Yes, just Airbnb.

>> Brandon Trammell: Yeah. It needs. Each property ought to have its own LLC for the purposes of legal separation and financial liability separation. Because if someone gets hurt in one of those properties, one of your guests gets hurt, which happens, right. Their kid or, you know, if you’re at the Airbnb and everybody’s partying and you’re on vacation. Right. Things. Things happen. And so it adds a layer of complexity, Right. Because you have to file for that llc, you have to pay for the, you know, the entity itself every year. And so it adds layers of complexity in your economy.

>> Brandon Trammell: But it separates you from the liability of things happening. Right. And then your assets being able to be sought through litigation. Right. Personal assets. And so if each property is its own llc. Now see, this is where we kind of those conversations I was talking about, right? Those folks who might be at those more advanced levels of their company or their business. This is one of those places, right. Where each property has its own LLC filing its own taxes. Right. We have a master entity as well, which is sort of, the management company. Right.

>> Isha Vela: Okay.

>> Brandon Trammell: And each of those LLCs then roll up to that. Now we can get super complex with how we arrange those things. Right. That management company at the top, family management company out to the side. Right. There are different ways to structure these things to maximize the benefits that we can experience right through that business endeavor. But at very, very least, having each of those properties its own LLC allows it to be separated from any of the other properties.

>> Isha Vela: Y. That’s right.

>> Brandon Trammell: Okay, so somebody falls at property A and is hospitalized and they sue you. Property B, CD E and Infinitely on are not a part of that consideration. They are their own separate entities.

>> Isha Vela: Got.

>> Brandon Trammell: Right. And so this is where we get attorneys involved, obviously. Right. Because we want to make sure that these legal structures are in place in the right way and that we’re setting things up so that we are protected and that each of those properties is also siloed and protected from any potential litigation. On, on the other makes lotse. And then it also allows us to create an accounting structure for that property, which makes the accounting much easier because its expenses are its ownes and they’re not muddled in with the operating revenues of the other properties, which may or may not be as financially sound or beneficial as, this one.

>> Isha Vela: Right.

>> Brandon Trammell: And so then it really, that separation allows for us, you know, above and beyond the legal and liability protections, financial protections to, to really home in on, how am I operating this property at its best. Right. HYAT S and highest and best. Is this a property that I should retain or maybe I should sell it this market isn’t good or, you know, whatever the.

>> Isha Vela: Exactly. So lets you assess proper profitability, how well that business is running. Okay.

>> Brandon Trammell: Yes. So each one is its own entity, its own business, its own cost center, if you will. Right. and it allows for us to get a little more meticulous in our accounting of it and an assessment of, you know, it’s financial viability.

>> Isha Vela: Yeah. Okay, that’s really great. That’s helpful.

Brandon, what’s the difference between a foundation and a nonoit

And one other thing that I was thinking about, Brandon, was, you know, if somebody wanted to have a very different business, like for example, you mentioned at the very beginning, like a foundation or like, you know, what’s the difference between like something that’s more of a foundation versus a nonoit. Like what, what do you get into there?

>> Brandon Trammell: Yeah, see, now we’re getting into the stuff that like this is, I really am affirm that this is a part of my purpose. Right. Is to expand the philanthropic endeavors. Right. The venture philanthropy, of folks who are business minded. Right. And want to do good with some of the money that they generate. Right. So when we get into that, that nonprofit. Right. Or the tax exemption, status of an entity. Right. there, there’s sort of a couple of. There’s a few different ways to go.

>> Isha Vela: Oay.

>> Brandon Trammell: one is a private foundation. Now just like that name would sort of suggest, it’s funded privately. Okay. So one or maybe two sole sources of the money that goes into that entity. privately run has a tax exemption, just like a public charity. But it’s sort of like the other side of the coin. Right. Of a public charity, a private foundation. This is sort of an operating 501. 3 is a public charity. Right. It has programs, and people who it benefits. Right. A private foundation is sort of the other side of that. It is a non operating 501 seats. Which means that technically speaking for that kind of categorization or structure, you’re not necessarily offering public programs per se through that entity. now you can fund programs and you can fund organizations and people and even invest in businesses, but really it’s not designed for, for public facing programs or operating programs.

>> Isha Vela: Okay, that’s really helpful. Yeah.

>> Brandon Trammell: So there’s a key distinction.

>> Isha Vela: Yeah.

>> Brandon Trammell: both of them have the same tax exemption. Right. so all of their revenue, is tax exempt. Right?

>> Isha Vela: Yeah.

>> Brandon Trammell: but they really serve different purposes. They serve very different purposes. however, then you have something called an FBO or a faith based organization. Okay, you’re going to hear some of this once now that it’s on Your radar, Right. It’s kind of like you don’t see gas stations until you need gas. Right. So now that’s going to start coming on to folks radar to your radar. Right. There’re going to be FBO and then, then they’re going to start hearing about it. Right. But so it is, you think churches, right. Or faith based groups. Right. Doesn’t necessarily mean a church, but it is a faith based organization, whatever that faith might be. And they have tax exemptions, the same way or in a similar way. Right. as the 501C 3S oay we can build these structures or contain our businesses or our philanthropic giving within these structures so that we experience a higher level of tax benefit. Right. Now if at the end of the year I have a taxable revenue, right. My tax liability is based on the profit the entity. Right. Now, instead of taking all that money and giving it to the government or the state, maybe I would rather do some good with that money and maybe I would rather my company donate that money to a private foundation which removes that taxable, that profit and it puts it into a coffer that is not taxable. That donation I get the deduction or company gets the deduction for. Right. We remove that profit from our balance sheet and we donate it to the private foundation or you know, the, whatever the public charity or the fbo, whatever the case might be. Then if I happen to be the principal or the executive director of that organization, then we get to leverage all of those donations and that money that’s in that coff offer to do some good. So that’s our philanthropic arm.

>> Isha Vela: Yeah.

>> Brandon Trammell: Right. and how we operate that private foundation or that public charity. Look, I mean if you can operate a business and a public charity at the same time, you’re superhuman. I don’t suggest it necessarily. Right. Which is why that private foundation allows us to get the deduction right for the donation to the entity and then fund those organizations or entities that are out there doing the good that is values aligned or mission aligned for our private foundation. Rightay. And this is something that I talk about and go in depth in my book, which is sort of the first level of people going, wait, what? I want to know more about that. Right. And so it really is one of those areas where there’s a lot for people to learn and there’s a lot to know, but we can start to learn and start to enter that phase where we can really get down to doing some real good and funding those good Endeavors that are out there, that are really supporting our community and really be hyper localcal with our philanthropy.

Brandon Trammell has a podcast and a book on business taxes

>> Isha Vela: I really love that. Thank you so much for. I feel like we got, we got a good overview of all of the different pieces here. And obviously, you know, for the person listening, get mentorship, get support in, you know, setting things up. yeah. So where can people find you, like, for if they want to seek your financial services? But also you have a podcast and you have a book like you’ve mentioned.

>> Brandon Trammell: well, you’re going to find, you’re going to find a pattern here. The podcast is called Leave It Better with Brandon Trammell. the book is called Leave it Better. here. I probably should have prepared myself and put it on the desk so I didn’t have to yank my computer and my earphones out. But it’s, Leave It Better a financial blueprint. Right? How the savvy business owner leverages the tax code for success, and to grow a lasting legacy. So you can find me on my website, brandandramml.com do it will lead you to all the pathways. Right. if you want to buy the book, it’s available, you can find it on Amazon. You can find it, in that way and through my website. So the podcast, you can find it on YouTube. It’s also. The video versions of the episodes are on my YouTube channel, but also you can listen to it everywhere. podcasts are available. Spotify, Apple, really, anywhere.

>> Isha Vela: Great. Thank you again for, for coming in, for sharing your wisdom and expertise and life experience so that people can make good decisions about their business structures and taxes. So, thank you again for being here.

>> Brandon Trammell: Well, it was an honor. Thank you for having me, every chance I get to share my experience, and my skills and gifts, I believe that’s what I’m here for. So thanks for having me on.

>> Isha Vela: Thank you for listening to today’s episode. Remember to hit the subscribe button to get notified of new episodes dropping on the new and full moons of each month. And if you haven’t already, leave us a five star review on itunes to make sure that everyone who needs this transmission receives it. Until the next episode, I’m sending you fierce, fierce love.