Andrew:	This course is about what every startup founder needs to know about taxes. It's led by Cameron King, a certified public accountant, and resident mentor and advisor at a number of New York Cities co-working spaces such as New Work City, Grind Spaces, We Create, Green Spaces and Hubatat? Hoobatat.

Cameron:	Yeah, Hubatat

Andrew:	Hubatat. All right. What is Hubatat by the way? It's a new co-working space, right?

Cameron:	Yeah, it's a new co-working space by Tex Stores mentor. It's supposed to be a mixture of an incubator (?). So he's trying to bring (?) into the facility as well. So I think he's got like four so far, so.

Andrew:	All right, so you're the guy that entrepreneurs are introduced to so they can understand how to structure their businesses. But you also weren't an entrepreneur earlier on in your career and you needed to get, I think you said, 10,000 dollars to launch this business. Can you tell people just a little bit about where you got that money to give them an understanding of how taxes can impact their business?

Cameron:	Sure. I mean, it's very easy, honestly. When I first started I didn't know much myself. So back before I was an accountant I figured a way where I could get NOL's or losses in my company or business from prior years. And I used that loss to go back and then you know, get a refund from the IRS, which everybody's always terrified of. But you know, you can get them to help you get C-Fund. That's what I did.

Andrew:	Okay. And we're going to go into more depth on that tactic later on in the program. But basically you went back to the government, got a refund for taxes that he paid in previous years, and you're going to find out how to do that. Let's start off with the first tactic that you and I talked about before this session started. What's the first thing you'd like to teach our audience here today?

Cameron:	Sure. The first thing I want to talk about is avoiding sales tax. A lot of, especially Mixergy's audience, is online tech software. So this day and age, tax law and online software has a huge disconnect. Only recently if you like the New York State Amazon law, which California is trying to copy on to, have they really started trying to come after online companies. And you know, they only go after retailers so most other companies don't have anything to worry about, because under the current laws we're fully protected. 

So the best example I can give you is Quick Bids. So I don't know if everybody knows Quick Bids. But Quick Bids is an online penny auction website. And what they do is they sell you these bid packages and then you use those bids to buy or bid on specific items. And whoever wins gets the item. Now this is really smart because I had a person who was contacting me who was scared shitless. 

And literally they were terrified they were going to have to pay sales tax. Because think about it. If you're selling iPads, all these Apple products and all these other things, you're paying millions of dollars out in product. So your sales tax is going to be millions, too. He was really scared because he was thinking he was going to owe the state governments and sales tax about six million because of back taxes and all these other things. So he was literally shitting bricks. And I explained to him very simply. If you are online, you know, and you're selling stuff. You have to understand, sales tax works on physical products. 

So number one, when you go to a store, like a Wal-Mart or some kind of Staples, and you're buying that copy of Quick Books or Turbo Tax, you know, do you understand what you're really buying? Because most people don't. What you're buying is not the software, the IP. You're actually buying that physical CD. That circular plastic disc, it's worth nothing. But because you're saying that it's worth $50 you're paying sales tax on a piece of plastic worth $50. Now in reality people don't realize it has nothing to do with the software. So let's say this then. Throw away the CD, no more CD, and just literally let them download it, you know. And if you let them download it, there's no physical product.

Andrew:	If you're selling a download, no physical product, no taxes is what you're telling us.

Cameron:	Exactly.

Andrew:	Okay. So first of all, let me just dig into the story that you just told us here. Quick Bids is not your client. You can't or you won't mention your client's name. But you did have a client that was in a similar business. So we'll talk a little bit about Quick Bids and we'll understand that this would apply to your client to.

Cameron:	Perfect.

Andrew:	sorry. Perfect.

Cameron:	Sounds perfect.

Andrew:	If what they did was, instead of saying you're buying a collection of credits and you're going to get them digitally via e-mail and available to you on the web. If, instead of that, they said you're going to have all that and we're going to ship you a card that represents the number of credits that you have, they would have to pay taxes, because sales tax. 

Cameron:	They'd be screwed. 

Andrew:	They would have to collect sales taxes. 

Cameron:	Absolutely.

Andrew:	I see. The reason a lot of times entrepreneurs who sell digital goods want to sell a DVD, or want to give people a card that represents what they just bought online, or sell a CD, is often they want to communicate value by giving people physical products. You're saying, "Yeah, you're communicating value, but what you're also doing is you're saying you want your product to be taxed. Then you're going to have to collect and then turn over sales tax in all the different places where you're selling within the U.S." That's why you're saying, "Stick with digital." 

Cameron:	Exactly.

Andrew:	Find another way to communicate value instead of handing over something. 

Cameron:	Exactly. 

Andrew:	OK. 

Cameron:	That's absolutely what I'm saying. I'm going to give you another example real quick. Old school companies, like SAP, and all these other companies, what they actually started doing is, you know, they have really big packages for products, so they actually did up a whole new way of selling it. Instead of just giving you these CDs themselves, they call it the drop and drop, so the drop and carry. They will actually come to your office and install the program with their CDs and leave with them. So, you don't sell your products, they just give you the software. You're still getting the CD, technically. That's what they're using. That was their way around it, originally. 

Andrew:	That's fantastic. Right, because their selling really high-end software, very expensive. If they had to pay sales tax just because of those CDs, it would be outrageous. 

Cameron:	Yep.

Andrew:	Instead, they're getting around it by installing software. I sometimes feel like it's only young entrepreneurs, young start-ups, that are hustlers. I love how even bigger companies know how to hustle. I love how they have their own way of dealing with the environment, as crazy as it is. 

Okay. So, that's the first tactic. Let's take a look at the second tactic. 

Cameron:	Sure. The second tactic is a little crazier. It comes down to this, I'm not trying to be self-serving, or anything, but I'm just telling the fact, there's an old saying, "You need to have an accountant and a lawyer." Realistically, an accountant is more important because they deal with you on a day-to-day basis. Every year you have to see your accountant. You only see your lawyer when you get sued. So realistically, you're going to hate your accountant three times more than your lawyer. 

Having an accountant is important because he's your adviser. You're busy getting your top line, you're income, as high as possible. There's no way that you can really focus on your taxes, the back end, or the paperwork of your bureaucracy. It's not your job. You know, the tail shouldn't wag the dog. 

So, when you do get an accountant, and if you do choose to get one, make sure that he's an accountant adviser, and not a compliance monkey. You don't need a monkey because you can just literally go to the IRS website and find the instructions to follow them yourself, if all they're going to do is fill in numbers to boxes. 

To give you an example of how you find an accountant that's really good for you, it's number one, the gut check. If you're talking to someone, if you feel that they're trustworthy, and you can talk to them comfortably, they're not making you feel like a dipshit, honestly, for lack of a better word . . . A lot of accountants, they're going to use big words and all this other BS, but that's them showing that they're actually crappy accountants. If you can't make a complicated idea really basic and simple within probably five sentences, you probably suck. That's what it comes down to. 

Number two, your accountant, if he's not teaching you, he sucks. You should always be learning something. What I just taught you right now, about sales tax, he should be teaching you that on a daily basis. When you have a conversation with him and he's listening to you, he should actively say, "Stop. You have X, Y and Z. This is what you should know. Learn this." It's a constant teaching. That's what, really, accountants should be doing, constantly teaching you and advising you for the future, even without you asking. If he is not doing that from the get go, he's probably not going to ever do that. 

Number three, just because he has a legal license - like my name has alphabet soup under it, it's got a CPA, EA - and it's all, to me bullshit. I don't care, because at the end of the day, it's about, "Do you know your information or not?" 

A CPA is the best example. A CPA is actually broken into two parts. One is tax, and the other is audit. So, the audit only matters if you're like a huge Fortune 500 company where you need to have financial standards like Google. If you're a small business, you know, you're starting off and you're under, let's say, $50 million, $10 million in net worth, that's all your company has, you don't really need to go file financial statements (?). 

So, you need a tax accountant. Ask them, number one, "Did you work at a firm, and if so which firm?" It matters. If you're in a Big Four, top four firms in major ones, they are literally huge. In comparison, the fifth largest firm, you can multiply that by 20, and it still isn't as big as any of the Big Four. Any firm smaller than the fifth firm, you can put them all together into one, and they'd still be smaller than the fifth size firm. 

Andrew:	Are you telling us that we do want someone who has this big firm background?

Cameron:	You would want to note if they do have that experience, because if they do, you need to understand that if they are from a big firm they are very myopic. Their focus is very, very strong in one pursuit, one thing. That's good if it's exactly what you have. So, for example, if they are in a big four, a major firm, they've only done software in your industry, beautiful. They know everything inside and out of your industry. That's all you want. That's all you care about. 

If they are from a smaller firm, they are very well rounded. They are very broad in what they can do and what they have done. The perfect example is, if they were in a big four and all they did was real estate, and that means all they know is real estate. If you ask them questions about sales tax, they don't really understand that stuff. They don't know other [??]. So that's how you want to understand that. But more importantly, you want to make sure were they actually doing taxes or not. It's a big question. People don't ask that, but you need to. 

Number one, did you actually work in a tax-side of the firm, because just because you are a CPA you know nothing. I've seen CPAs who knew less than they really should be legally allowed to. It's kind of embarrassing on my part, but it's true. So ask them do they have experience in your industry. It's very, very important. It doesn't matter if they just have tax knowledge, but do they have knowledge in your specific need? Once you know all that information, those top three questions, in your mind, you can have a very good feeling of whether or not you like this person. Because if you don't like them, you're not going to work [??]. So it's very important that you do. 

And then after that, even if you like this person, go shop around. Never stop at your first [??]. When someone meets me, I always, always, always tell them, even if they like me and want to hire me right away, I say, "No." Very simply because I want them to go talk to other people. Number one, I know when they talk to other people, they are going to see my value as greater, because I spend the time to teach them and to help them in that personal experience. Other people don't mainly because they charge lesser rates and then when they do, they really don't want to talk to you. They want you to get out the door. So, that's what I would really say.

Andrew:	Okay.

Cameron:	Always shop around, always look for that right [field], and obviously, only pay what you are comfortable with, because if you can't afford then it's not going to be a good choice for you.

Andrew:	Okay. I don't want to get too deep into what you did for this guy you're calling "Bob." Bob is obviously not his real name and you're not going to give us his company information, but you do want to illustrate to us what having someone who has an understanding of taxes and has the time to understand your business can do for an entrepreneur. So can you tell us, what was Bob like before you met him and then afterwards? What did you do for him?

Cameron:	Okay, so Bob was a software company and he basically had a really well-established company. He was doing a lot of content, a lot of SASS software service online and then he was basically [??] American who had an S Corp, no tax planning, no nothing. The problem with that is, when you have an S Corp, all of that income goes straight to you as an individual. 

So that means that you are paying 35 percent tax individually for federal and then he was a New Yorker so he was paying another 14 percent and that's 49 percent taxes right there and then if you add sales tax and property tax and all these other things, it goes up to around 60 to 70 percent he's paying on taxes every day. So it's real expensive. He met me through a mutual friend or a client of mine and then he really couldn't believe that tax planning was legal. 

A lot of times people assume that if you're planning it's automatically illegal, but it's not. I stay within the law because I'm scared to go outside of it, because then I'd lose my license. So what I did for him was very simple. To break it down, the first thing is, I saved him money at the federal level and then the state. I saved him money at the federal level because what I did was real estate is obviously a very old school [tech] industry which helps you generate a lot of losses or savings because even though you get income from the real estate, the depreciation of a real expensive building is a lot more than your income usually. So what I did was, I did a variation.

Andrew:	The depreciation of real estate is what?

Cameron:	The depreciation of real estate is, usually speaking, a really good source of creating losses, because it is a very large property, right? A lot of income. So, for example, the property is $100 million. Depreciation of $100 million is really sick. It's a lot. So that helps you generate a lot of deductions and losses against your income.

Andrew:	So basically, if you own a building that, what was the number that you used? If you owned a building that's worth 100, let's say, a million dollars.

Cameron:	$100 million.

Andrew:	You'd take a portion of that every year and you'd expense it. It's as if a portion of that building is going to waste and so you get to take that off your income statement and that's why real estate is so good for counter-balancing revenues. Okay, so you understood that for him. What did you do next?

Cameron:	After I did that for him that offset his income for Federal a lot. And then at the state level he was doing a lot of business in Texas and in Texas it's one of those states that's really weird. So, normally you would think that you would pay taxes on income, but in Texas you don't. You pay taxes on your gross sales. So, let's say, for example, that you have $2,000,000 gross sales, but you lost $5,000,000. Now, normally speaking, you wouldn't owe any taxes. But Texas, because it has a gross margin tax, you still owe taxes on that $2,000,000. So it's really unfair for some people, like him and others. So what I did was, state taxes is 100% gain, so it's a huge pie, and you want to separate that pie as much away from Texas as possible. 

So, he has a lot of contractors, and all I had to do was basically hire an employee in Nevada and rent an office there. Because he's an online company, he really doesn't have an office or anything, it's just kind of like contractors spread out. So we were able to say that instead of being focused in Texas primarily, by having that employee and office in Nevada, he was 80% in Nevada and only 20% in Texas. So we save a lot of money that way. So his taxes went from $5,000,000 all the way down to a $200,000.

Andrew:	From five million to a $100,000 is what you reduced his taxes?

Cameron:	$200,000.

Andrew:	$200,000 

Cameron:	I can be more exact, but I don't want you know if you want me to.

Andrew:	You didn't physically move his whole company. It's a software company, so it doesn't really matter where is. You just hired an employee, put him in Nevada and said now the company is running from here. All his other people were contractors so they weren't employees so they could continue to work from Texas.

Cameron:	Exactly.

Andrew:	I don't want to get into the depth of Bob's situation, but the big picture message that you're communicating here, is get someone that understands this and understand your business. You can actually save money. It's not just about filling out forms and getting your taxes done. It's about understanding your business and reducing your taxes. And that's what you're suggesting that you do. 

Cameron:	Legally, that is.

Andrew:	What's the next tactic? What's the next thing you want to teach people?

Cameron:	The next thing I wanted talk about is research and development - tech companies. I had a client where . . . Let me give you a short background. Only recently was this actually a great option for people like us, developers, etc. Previously, like in 2007, before they changed the law, this was really for companies like Pfizer, and manufacturing companies like Apple, because they had huge factories and a lot of moving parts, really physical labor. 

But in 2007 they changed the rules, where it was opened up into the mainstream businesses. So software companies today, should really be taking advantage of this. The best example is, I have a client [??] business for a long time, and what happened was, he was developing this online software, and he spent hundreds of thousands of dollars annually. And he never ever took this benefit before, so he effectively lost, I think, about $20,000 a year. That is basically for four years that I know of that he did this. He lost $80,000.

Andrew:	What's the benefit? I'm sorry I'm not following this. What's the benefit? Where response to be doing with R&D?

Cameron:	Sure, so basically when you pay a developer to develop something, that is automatically development cost R&D. The fact that he's a developer, he's developing. So his wage, the fact that you're paying him a salary at all, is automatically considered research and development, because you're creating a new product. Now, let me clarify something. A lot of people always ask me, 'But I'm not creating something new. I'm just creating a variation.', or 'I'm reproducing the wheel.' I don't care. Is it new to you? If it's yes, then it's R&D. It doesn't have to be new to the world, just need your company. Because you can't go to somebody else's company and take their item. You're going to make your own. 

So, in that aspect, even though you're creating the exact same product, a clone, the best example is a Facebook clone. If you create a Facebook clone, that still an R&D expense. So you can still take a credit for it. Now, once you pay that income [??], you still deduct. The only difference is that when you file your taxes, you file one extra page. That extra page is yours in R&D credit form, and then you say I paid $100,000. 

Depending on what type of contractor you hired, it could be 100% credible or only a portion of it a credible. It goes for 100% to about 65%. After that you multiply it out. I'm not going to go into paperwork because that's what your accountant is supposed to do. He saved about $20,000 a year, simply because he had these expenses and he never took it before. So he lost $80,000 after four years, and that's cash. Luckily, I went back and I got him back $20,000 from last year's goal. So I could go back for one year for him.

Andrew:	Okay, so let me make sure that I understand this. I hire a developer and I say I need a brand new shopping car for my website. I know there are shopping carts all over the internet but I have this customer shopping cart that I want you to build for me. I'm going to pay you $100,000 this year to build it and to keep growing this shopping cart feature by feature as I think of it and need you to implement it. I pay him $100,000. I deduct the $100,000 that year from my income because that's an expensive of having to pay a salary. You say in addition to that I file, what, and what do I get? I file that one piece of paper and I get, what?

Cameron:	Well that one schedule, that one schedule is the R&D credit schedule. And then it says that, okay, I spent $100,000. Assuming that you paid it to, let's say, a 100% deductible company. It is then multiplied by a certain percentage. Your first year it's multiplied by 3%. And then you can get $3,000 back, something like that. And that is a direct cash benefit. It's not like a deduction, it's cash. So that three grand is cash money in your pocket.

Andrew:	I see, encouragement to do. It's there to encourage companies to invest in research and development. And if you're already hiring a developer, you should be aware that you are making an investment in the research and development of this country and the way that the government wants to reward you is by giving you money back. And what we need to do is when we're showing our income statement to our accountant, we can't just list out all our employees. We should say, look, this guy and that guy over there and that girl over there, are all specifically developing new software for me. They're different from the person who is answering my phones. Go and get me the R&D credit schedule. And that's what you're telling us we should do.

Cameron:	Exactly. And just to tie back to the first point, the point before about hiring a good accountant. Your accountant shouldn't have to ask these questions even. He should be looking at your expenses and know off the bat. If he seen, I see developer costs, automatically should be like, oh, you know I should take this credit right? I'm just letting you know, blah blah blah. Ask a few questions, teach you, tell you, then just do it. So the whole point is he teaches you and tells you and then he just goes and do it. You know. That's it. He just does it and you know about it. That's all that should happen.

Andrew:	Got it.

Cameron:	And he should tell you right off the bat.

Andrew:	Okay, all right. And we're not telling the audience this so that they could do their own taxes based on what you're teaching here today. You just want to make them aware of what they should be asking for and how they should be thinking about their business in relation to taxes and accounting. Alright, I love this one. What's the next tactic? Sorry?

Cameron:	Oh sure, just before I go on I want to say it like this. The best way to think about is kind of like Google ad words. When you pay Google ad words you're paying a little money now to save or make more later. Same idea. That's really how it should be. If you're going to do it yourself obviously get some help, read up on it or something. But I wouldn't suggest it if you're going to do something crazy. But the next idea I'm going to talk about is incorporations. One thing I constantly get is, should I incorporate. And more often then now I'm going to say no. 

As an accountant, I'm going to be honest, it's better for me if you do incorporate because then you've got to pay me more. But it hurts you. So I don't really give a crap about the extra couple hundred or a few thousand dollars here and there. Because in the long run I'm going to be (?) of you in your business. So to incorporate it's a big deal. It's not just creating a company, oh I'm sexy now. I have this crazy nice sexy corporate name and all these other things. There's a lot of work behind it and there's a lot of risk behind it. It's not just protecting your liability, but it adds liability at the same time. Most people forget. 

So the best example is, some people should or shouldn't. When you do want to incorporate you should go through this idea chart that I have. The first question is simple. You know there's three questions. A, do you have substantial liability? You know, if you're in construction somebody's going to get hurt, that's just how it is. So if that's the case you need to incorporate to protect yourself. Number two, are you getting investments. If you're getting investment you have no choice but to incorporate because they're going to force you into it. 

To give you an example, Y corporations. Corporations are the only legal entity that allow you to have different types of stock. You can have Class A, Class B, Class C. So every time you hear about that Series A, Series B or all those different Series funding, those series are actually directly related to a Class A, B, C as well, So that's why they're like that. So, that's why you incorporate, if you had funding. And then lastly, did you actually make money? Why are you going to spend money when you don't make money? You might as well just not do that and save it and then reinvest it into the company and make money. So if you say yes to any of these questions, then great. 

Now it's time to consider whether or not you want to incorporate. If not, go for a DBA, which is a Doing Business As, very easy. What it let's you do is, it let's you say that, okay I am not a corporation but I'm going to call myself Cameron King Consulting. You can give yourself a business name. And it's really cheap usually. You can go to your county clerk. Every state has a county. You go to the county clerk and you tell them, I want to file a piece of paper. Usually it's a single sheet or two, max. And then they get it notarized for free right there because they're legally required to give you a free notary. And then once you file that piece of paper you can go to the bank and open a bank account under that name. You can even get an EIN number or a Federal Employment Identification number, so that you don't have to use your social security number. So you have all of these sheep's clothing of a real business, of a real corporation, and without paying more bean. You know what I mean? 

So once you do make more money, at least a minimum of 50 to 100 thousand dollars a year, then it makes sense to incorporate. Now when you do incorporate obviously there is the LLC, the series LLC, the LP S Corp. Usually if you're a small business you want to go for the LLC or the S Corp. Because they're going to be the ones that save you the most money. Series LLC means you never use it because you're (?). It only really exists in Delaware. LLCs are great because they're flexible and great to do things with. LP's are only really used by old school business, mostly financial. To give you a quick reason why. Hedge funds love LP's, because LP's let their partners avoid paying employment taxes which is FICA and Medicare, which is 15.3%, very, very expensive. So that's why they still use it. But normally speaking you wouldn't do it, because you'd be working and that is not good.

Andrew:	Can you talk a little bit about the...

Cameron:	And then if you follow the chart, it shows you the rest.

Andrew:	And we will be giving people this chart with the program so that they can download it and look at it on their own computers in a way that's easier to see I bet then even in this video. But, can you talk a little bit about the difference between Limited Liability Company and a Corporation?

Cameron:	Oh sure. A Limited Liability Company is basically an LLC. So LLCs are very different. They got really hot in the early 90's, and the mid-90's, because of the M&A craze, right. So the reason why they got so hot is because during the 90's companies like Microsoft, these big Fortune 500 companies were realizing, you know what we can do? Oh this is awesome. We can go buy a shitty company with losses, merge it with mine who has billions of income, and then guess what? I save money. By literally saying this. 

You take a crappy company who has 10 billion dollars in losses, right. Now that company has no value at all. But you know what? That NOL, that loss, is actually a value. So they will sell their company based upon their NOL's. So if your tax rate is 30%, you're willing to pay 20 cents on the dollar for every dollar of NOL they have. So you'd be willing to pay, let's say, 200 million. So companies were doing that and using those companies to basically create those savings. So LLCs is simply a flexible entity that can allow you to be either a partnership in tax, or a corporation. So that's why they're good. Problem is you always pay self employment tax on them, period.

A Corporation is different because it's an actual regular corporation. The good thing about it is, you can file for an S-corp. Yes?

Andrew:	In an S-Corp, you only pay taxes once, the company doesn't pay taxes and then force you to pay taxes again when you take money out of it. But Limited Liability Company, what's the advantage for say a startup that might be listening to us right now?

Cameron:	The advantage of an LLC for an S-Corp is that because you're always going to be pivoting, LLC is going to be able to pivot with. So if a situation occurs where your LLC needs to change its tax strategy, your LLC can pivot at the same moment, same date. A Corporation can't. The moment you create it, it stays dead. There's no way to fix it. So that's the real reason why an LLC is really good.

Andrew:	Like, what kind of tax changes would you want to make that an LLC would enable you to do?

Cameron:	Sure, I mean, you can number one, you can choose to either file as a corporation or a partnership. For example, if you're a partnership all your money flows up. So if you're only member in a partnership, and it's as if you're a single member, so that's not really helpful to you sometimes. Maybe you want to stop that money from coming to you, because you don't want to pay a lot of high taxes this year. So if you want to stop that money from coming to you, the only way to do it is to elect to be a corporation. So all you can do is check a box, boom, money stops right there. So that's one way of basically (?) pivoted.

Andrew:	I see. So if I don't want to count the money that's coming in from the LLC as my personal salary this year because something else is going on outside of the company, I can do that with an LLC. And if I want to restart it the next year, I can do that also with an LLC, that's what you're saying?

Cameron:	Exactly.

Andrew:	Okay. All right, what you're telling us also, to non-incorporate is untraditional. I think most CPA's, most advisors would say, incorporate, get that protection, and you're saying, you have a different point of view. You think most entrepreneurs don't need that protection that they think they need. They just need the paperwork and the confidence of saying that they're running a company or an LLC and have that Inc. at the end of their name or the LLC and you're saying it's just not worth it. Focus on your business first. When you need it then go do and you've got a flow chart here to explain to people when they need it. 

Cameron:	I'm a big believer in bootstrapping. Don't spend money that you don't have, that's my personal belief. When I'm doing business and I still do it today, that's how I operate. I will not spend money that I don't have. That doesn't make sense. Why throw good money after bad? 

When accounts tell you to go and incorporate every day they're doing it because it's just an easy answer to give and they want you to pay more money anyway, so that's the real reason behind it, but if you think about it, what real benefit does it have to you? A tangible benefit. If you go through these three steps and you haven't answered yes to any of them there is no tangible benefit. 

Even if someone should sue you, what's there to sue? There's no liability there in the first place. You open up like a hair salon. Oh, I'm sorry, I gave you a bad hair day. Is that a legal liability? I don't think so. 

Andrew:	I see. You know what? In my mind I always worry that it would be. That some little thing that I do is going to get someone to sue me, but you're right, in many cases they're not going to come and sue me for the little things that I'm doing when I'm launching a business. Let's look at the next point. By the way, thanks for installing PowerPoint so that we can have visuals here.

Cameron:	No problem. Actually, I was going to show you this thing. This is a person. It's really funny, Hacker News, before I move on, emailed me this. I didn't know about this article that popped up. This guy who was called Doug from Entinum [SP] Online, he created a website, which most people on Hacker News do and it was generating income. Not a lot, it was only a couple of dollars and he was only generating enough to pay for the server cost and to give you an example how many people use this, Google and dictionary.com actually contracts it to use his database to show how the origin of words are created or found. 

He was doing this out of the goodness of his heart. He was a teacher for God's sake, a professor. The IRS hit him literally I think December, right before Christmas, with a $46,000 bill. That's not a lot of money for most people, but honestly speaking at the same time, $46,000 for a teacher right before Christmas, he literally had to cancel Christmas because he can't afford it anymore. He didn't incorporate when he should have, so this is just kind of like story tell. 

Andrew:	So in this case, you're saying that he would've been better off incorporating? 

Cameron:	Exactly.

Andrew:	OK.

Cameron:	The reason why is he was making money. That's the key. He was making money. If you're making money, yes incorporate. If he was losing money then don't, don't incorporate. It's really funny, but messed up at the same time. If you're making money the IRS wants you to be a business because then you have to pay self-employment tax, 15.3%. If you're losing money they don't want you to be a business because then you can use that money to get a refund, so then they want you to be a hobby because then that hobby income or loss is no longer deductible against your income, so they want the best of both worlds and you'd have nothing so that's how that works. 

Andrew:	I see. 

Cameron:	I just wanted to show that because he has income, that's all. 

Andrew:	OK. So you're saying when you do have income start filing and so you're not against obviously incorporating ever, you're just saying don't make that the first step like a lot of entrepreneurs do. OK. Let's take a look then at the next tactic.

Cameron:	Sure. I have this situation where once you incorporate people think that I'm done. There's no more to do. I'm good. No, no. You have to understand, when you incorporate you're taking on a shit ton of legal liability, not just protecting yourself, but also hurting yourself. If you don't respect that company as a separate legal entity, completely and separate to yourself, then you don't have that legal liability of protection. The best way I describe it is a marriage. 

I know you were married recently. If you don't respect that marriage obviously, she's going to kill you and divorce you at the same time. This is a very similar situation. If you don't respect that relationship with the company, the company will also kill you and divorce you. It's called piercing the corporate veil, which we always hear about. If you don't respect the company you pierce that veil and then you are now personally liable for anything the company does. 

The best example I can give you is this. I had a client, he was this old school douchey, Sicilian restaurateur and he was such a douche, I can't even explain to you how much of a douche he was. What happened was he was so crazy in his aggressive tax planning that he treated the company not as a company, but as his little cookie jar. He would just dip his hand in every day. Why do I talk about hookers? Because in an actual quote I will tell you is that he said to me, specifically, I was like, what are meals and entertainment? He's like, in the thickest disgusting Sicilian accent, he's like, oh, I'm sorry. I needed hookers because I had inflammation in my groin. Like he would actually gesture to his crotch describing his needs for hookers. And he would actually make it to me, explain that it was a medical expense, he actually miscategorized it as meals and entertainment. So it should be fully deductible instead of being ....

Andrew:	Ah, so he's trying to get you to even expense, first of all he's going to a hooker and second he's paying with credit cards or checks, and second he's trying to get you to expense it. Now that's a clear violation on many levels. Most people, I can't imagine anyone who is listening to us is going to be doing that. But there are other things that are more common that people do that pierce the corporate veil. And by that we mean, makes them lose the whole protection. If you don't treat your company like a separate entity, the government's not going to treat it like a separate entity. The IRS won't treat it like a separate entity. And the whole purpose of setting it up is gone. So what are some more common things that people do.

Cameron:	Sure, the first thing you got to do is keep a book, a record of all your stuff. That basically means you need an accountant. If you don't have a set of accounting records that means you never respect your (?). Because how do you know if it's our money or not if you don't even keep track of it? So that's first. You don't have books and records I guarantee you you'll automatically lose all credibility. 

On number two. If you're a corporation, corporations are very, very nit picky. They're kind of annoying. They're like that nagging wife. Because every year you have to file your Mit's, your corporate meetings, you have to have a board of directors. These are real things that you must keep records of every year. Every month. You know, if you stop then that means you don't have that protection anymore. That means that you aren't treating the business as a business. There's no like management. It's just you doing whatever you want. You know. So, that is also very important.

Other things, for example, is one thing that is very innocent that can be very damaging to you is for example this. You're having a rough patch right, and you know your company's making money, so you take money out. alright. Now that is not money that you really want to be your income. So you just take it and you borrow it. But you don't say anything, you just kind of take it out, you know keep (?) of it.  That hurts you. Now, a lot of times when you take money out, if you don't want to pay tax on it, one way of getting around it, legally speaking. And you know you're not really trying to be cheating or anything. 

You're saying, all right, I'm going to take money out because I need it. That's a shareholder loan. A shareholder loan, a member loan or a partner loan, is fine. That just means the company is lending you money and you're going to pay it back. So if in between you're using money from the company, fine. At the very minimum call it a loan from the company and you're safe. 

Now, you know it's something so simple and minor that if you just did that one step, it would save you all this heartache. So that's one thing I would definitely recommend. If you are going to take money out of the company, and it's not income, it's not something you're going to pay taxes on. At the very least, please, call it a shareholder loan or owner loan, you know. And then give it back later when you do have the money, that's all.

Andrew:	Okay, if I'm out say with my friends, and I need to use my company card. Or I'm going on vacation with my wife and I need to use some money that happens to be in the company but not in my own personal account. You're saying, make it into a loan, don't just use it and expect that you're going to pay back in the future. Or don't use it and don't expect never to pay back, because after all it's your company and you're the only shareholder, no. If it's personal, make it a loan. Make it, take it away from the company before you go and use it. 

Cameron:	Exactly. Again, I know it's annoying. And it's really a pain in the ass. But it's those little things that at the end of the day when you need it the most, it can really save you. Because you can always go to the court, always go to the person and go, you know what? I was all on the up and up. you know, look, even this $20 purchase which, really I didn't need to keep track of, I did. you know, I did the right thing and I was trying my best. They can't get you for fraud and they can't get you for anything else. There's no corporate bill, you know. Because you're not worrying about it. You are doing it the right way. 

And just to give you an example of how scary it gets. This Sicilian guy who, he's a very, very well known restaurateur. He's international. He's everywhere, literally. You've probably eaten at his restaurant. So this guy he got to the point where the IRS said you're so untrustworthy that we're not only going to penalize you with penalties and interest, we're going to assign you a legal chaperone. 

What that means is, you are no longer allowed to make tax decisions for your company. If you want to do something you tell that guy, you ask him please. And then if he says no, you don't do it. So literally, my accounting firm was assigned to him. And anytime he wants to even check a box differently, he has to get a whole written opinion which costs around I think $30,000 on average for him, minimum, in order for him to check box.

Andrew:	This guy was your client?

Cameron:	He was not my direct client but he was a client I worked on so if he was my client, I would have dropped him like awhile ago.

Andrew:	At what firm did you work in?

Cameron:	I worked personally in PWC [SP], KPNG [SP] and a mid-size firm. I can't really say which firm it is because...

Andrew:	Well, that's okay. So you did work at the big firm?

Cameron:	Oh yeah. I started off my career at PWC in the real estate group. I later on moved into KPNG to do financial [??] services for [??] and [??] Bank UBS. When I was at [??] UBC, I worked on [??] sliders and a few other [??]. It's a really large field [??]. Later on then I went to the State Local group at KPNG where I practiced a lot of interesting taxes. A class I [??] there, which, this is off record so I can say this, so that's why. I worked on Heineken, Pfizer, and all these other things. It was real interesting working with Pfizer because you start dealing with terms like keggers. You kind of [??] states, you would be like 'all right.' Due to these keggers, I am sorry. I don't think I should owe you tax on these keggers, and that becomes a really common term that you start using which is kind of awkward.

Andrew:	What's a Kegger?

Cameron:	You know those kegs, when you buy these giant barrels and gallons of beer. You get that metal barrel that actually holds the beer. That's actually always owned by the distilling brewery. So that is always property by the company. So you have to go put a deposit down on that kegger and then later on, if that kegger is actually not returned, then you lose the money. But that's always their property until you tell them that you lost it, which is actually very dangerous because - think of it this way. If you have a keg out in the world, just one keg, is that going to be a problem? Is that going to cause you taxes? Do you have property in the state? 

Let's be honest. No, right? But what happens when you have literally a hundred million dollars worth of keggers all over the world and at any given moment, any second, every day, you have at least one million dollars worth of property in the form of kegs in every state. Then you kind of have a situation there don't you? So, when you scale up, I will say these little ideas become really weird when you scale up. 

Andrew:	All right. Let's scale right back down to our audience and what's the next tactic that a new entrepreneur or any start-up entrepreneur would need to know?

Cameron:	Sure. Next tactic is filing your taxes, as basic as that sounds. Let me put it into perspective. At any given time, there is very easily around twenty different taxes you have to worry about. What I mean is tax forms, so if you are a partnership, you have to file your 1065 and you have to file your K-1's which is the letters that you sent out to your partners, the owners of the company, and it's one for each partner. So usually that can be like, I've seen [??] with thousands of partners. I've also seen partners with just one partner, so it depends on that. There's also sales tax returns. Sales tax returns is an annual sales tax return. There's a quarterly return. There's employment tax returns. There's your 1099's. It goes on and on and on. 

So obviously it's really scary. To give you an example of a really common story that I have is Danny. So Danny Boy, he had a partner where he was a designer, a really good designer. He worked with very big firms. He worked as a junior creator, that kind of role. He had another guy who was basically the business dude, like the [??]. His job was obviously to handle the business. Long story short, Danny did his job. He did great design. They were really popular.

Andrew:	Great.

Cameron:	The other guy did shit, did nothing, literally. Made no sales, did nothing. He was basically your pro-typical situation where this guy was useless. You know when you talk to your developers and you say my co-founder is a [??] guy, and he did shit, that's the kind of idea you should have in your mind. But of all things he did, he only did one thing, and the one thing he did was the wrong thing. It cost him $6,000 by doing that one wrong thing. 

So basically what he did was, he had a corporation and he filed an S-Corporation. Now if he didn't file the S-Corporation, he didn't file his taxes. His penalty would have only been a couple of hundred dollars max, but because he filed an S-Corporation and then did nothing else after that, for each partner today, every month that you don't file it, it's a $200 penalty. So there are two partners. That's $400 per month and then he didn't file for a bunch of months. 

So at the end of it, he owed the Federal government, I don't know what it was. I think it was like six grand and then he owed the State government another three. So he actually owed almost $10,000, and the kicker is he spent, I think, $200 in expenses for the entire company for the whole year and he lost money because he never made a single sale, so no income, very little expenses, losses, and he owes $10,000 to the IRS and State government. I was able to basically talk to them. 

Out of professional courtesy, they were able to forgive him on the Federal level, but I will give you a warning. If you are ever dealing with any State, they will never be nice. States are not nice because they're poor. They are really mean and agitated. They're kind of like rabid dogs that don't let go once they bite you so he had to pay it back and then we got that done. The key and moral of the story is, file your taxes. Even if you have no income and you think that you don't owe money, still file. Just because you don't file, all of a sudden you have this $10,000 penalty, so whether you make money, lose money, don't do shit for the year, just file it, out of peace of mind, [??] to your God, just file that return. That's the most basic, simple advice I could possibly give for filing your taxes.

Andrew:	You know, you curse a lot. One of the reasons why we invited you here is because I was concerned that if we had an old school, camera-ready accountant to talk about this, people would be bored to tears and they would feel like 'this just doesn't relate to me. I'll hire someone else to do it', and we said well Cameron's [SP] going to be a guy who's going to talk like our audience. They may sometimes be agitated by some of this stuff, but they'll relate to it and then, of course, they can go and talk to their old school accountant if they want to. But you talk like this even with your clients?

Cameron:	Yeah. My clients love it because I'm just talking to them as if I was talking to anybody else. It's really funny because, as much as you think your accountant is really old school and conservative, behind closed doors we are a bunch of drunken bastards, literally, no joke. Every time we go to a conference, it's literally booze-fest 2000 and whatever, so yeah. Think of it this way. When you're dealing with the IRS on a consistent basis and you're constantly dealing with tax forms, you have to curse. Otherwise you will lose yourself out of frustration and end up with angina chest pain. 

Actually it's become to the point where I actually don't notice. I'm sorry. It's funny though because I actually teach tax courses. I teach at a few private institutions in New York City and the students love me because I do curse, because it's personal for them and also my most popular and most famous example that they love is actually my Pimp and Ho's case. I literally take every tax case and explain it through the perspective of a pimp and ho, literally, consistently for about three months straight. It works for me.

Andrew:	It gives them something to pay attention to.

Cameron:	Just by using more [??].

Andrew:	What is the next tactic? I know we've got a whole bunch here in this session.

Cameron:	The next tactic is just saving your 15.3% on FICA and Medicare. It's a real kicker so one clear example, you make a million dollars right, and you have to pay your 35% taxes on it, so I'm assuming that rate just as a guess, just for no reason. So after you pay that tax on that 35%, you don't pay that 15.3% later. No, you pay that 35% and then another 15.3% on top of that 35. So at the Federal level alone, if you have to pay A, individual income tax and then another 15.3% for your Medicare and Social Security, that's already at what.

Andrew:	Are you saying 35 plus 15 is 50%. Are you saying we would be paying 50% in taxes?

Cameron:	Exactly. 

Andrew:	Okay.

Cameron:	No joke. That's exactly, and that's just Federal level. Then we have to add back into it the 14% from New York State. 

Andrew:	Okay.

Cameron:	So after just those three taxes alone, you will have paid 65% [??] in taxes, which is really scary right? So to go back to my point, how do you avoid doing this? Well, remember when we talked about corporations, why you would use S-Corporations and a LLC? So LLCs and S-Corporations are the two most common types of incorporation for a small, young business and the reason why is because an S-Corporation and the LLC gives you single pass-thru taxation so you only pay tax once, which is great. But the S-Corporation, unlike the LLC, has a way for you to avoid paying your Social Security tax, alright. Not all of it but most of it, if you make money. 

A perfect example is this. A scenario is you make one million dollars, right? If you're an LLC, no matter how you cut it, you're always going to be paying that 15.3%. At the end of the day you're going to pay 65% taxes, right. If you're an S-corp you are different. You can avoid paying that 15.3%. Why? Because. When you're an S-corporation you are still a corporation, right? There's nothing that says you're not. Legally speaking you are 100% a corporation. Now the legal theory behind it is very simple. 

When a corporation gives you money, what do you call that? A dividend. A corporate distribution. Regardless of how it comes out, it's still by definition of law a corporate distribution. Now if you're getting corporate distribution, and then you're paying self-employment tax, how do you tax earned income from a dividend. A dividend by definition of law is passive income, it's not earned. It's just money that is coming to you from investments that you've already made.

So by a legal definition it's illegal for the IRS or any type of taxing authority to tax you on that income for 15.3%. 

Andrew:	Okay. so now that you understand the legal law or the idea behind it, how do you do it?

Cameron:	Very simple. When you file your taxes, right, there is a portion where you have to include as wages. So let's say for example in the company your role is manager, okay? And you're making one million dollars. The average salary by market for a manager is about let's say 150,000 dollars, right? So you pay yourself 150,000 dollars. You pay 15.3% on 150,000 dollars. But what happens that that 850,000 dollars? You now distribute that as a dividend and guess what? You've now saved x amount of dollars from 15.3% simply by understanding the law and applying it correctly. Most companies, I can say probably 80% of the time that I have seen that have S-corporations never do this, never. Okay. They don't have to do anything. All they have to do is file the form, correctly. Because they're filing incorrectly by doing that.

Andrew:	So if I understand you right. Let me sum up my understanding right now. First of all, this only applies to S-corp, not to limited liability companies, not to LLCs true?

Cameron:	Yes.

Andrew:	Okay. The big idea here is if you take money out as a salary you have to pay FICA. If you take money out as a dividend, you do not have to pay FICA. So the difference is saving the 15.3% or not. So you're telling us, take dividends where possible instead of salary. Now of course there's, you can't take all dividends or else the government is saying, hey you're robbing us. So you have to take a reasonable salary. And anything above the reasonable salary you're saying, take it out as a dividend. Don't be self-impressed by taking a bigger and bigger salary every year. Take a salary that makes sense, but no more. The rest should come out as dividends if you're going to do it. That's how you're going to save us 15.3% with a little bit of extra work, but a big understanding of the system. Limited Liability companies, do they have anything like this?

Cameron:	Yes. Their way of doing it is, remember when I told you, you can elect to be a corporation, by tax law?

Andrew:	Right.

Cameron:	So if you elect to be a corporation then you can elect to be an S-corp. So by becoming an S-corp in tax law, you can still do it.

Andrew:	I see.

Cameron:	So basically you're taking the long road around. You can still do it but you're taking the long road.

Andrew:	Okay, I got it. So now you're saying limited liabilities can do it. They just have to understand that they need to have themselves treated like an S-corp and this is an understanding of when it would make sense for them. Okay.

Cameron:	And to give an example of how drastic this could get. I had a client who literally, her business is very interesting. She's a psychiatrist and her client's health is sexual offenders. So I went to Binghamton University. And I don't know if you ever looked at a map of Binghamton University. Like if you looked at sexual offenders, entire city's like one giant red dot. Like the entire like city is glowing. The reason why is the state likes to concentrate their sexual offenders in certain areas. And Binghamton happens to be one of them. so her business is very simple. She doesn't worry about getting clients. The court appoints them to her. so she has a constant stream of revenue right there. 

So her business is a $10 million minimum business. Her work share is $10 million. So she was paying herself completely in salary, right. Straight up W-2. So obviously you're paying about 1.53 million just in that. So I explained to her the situation and literally she dropped to the floor. Now, considering she deals with sexual offenders all day she's still like, you know, she's pretty sensitive. So when she heard this she literally kind of like lost feelings in her legs. Because how would you feel if you found out that you've been overpaying 1.5 million for the last like four years.

Andrew:	Oh wow.

Cameron:	I think everybody would drop. It's kind of devastating because she had a CPA. That's a good point, she had a CPA. He didn't do his job well though, but had a CPA. So just going back to a point to show you how devastating these things can be, you know. By simply doing a few number tweaks here and there, it can literally mean millions. It's kind of scary. Especially when you compound the years together.

Andrew:	Wow. Alright, let's look at the next tactic. The next one is what we alluded to in the beginning of this session, right? This is the net operating loss and how to treat it.

Cameron:	So this is my story. It's really embarrassing kind of, and kind of stupid, but it is my story. I was, my background is this. When I was fourteen, so besides me being at eight a sweatshop worker, at fourteen I was a wholesale distributor of tapioca goods. So what happened was, I would be going out making sales care to all these little (?) shops in the city. And then I would sell them little tapioca ball packets. The sugar, the tea packets and all these. I had a really good connection with them but I stopped doing it after like less than a year. Because I made money but it was really, really exhausting. Because sales is just, it's kind of like a constant battering of your ego. I got used to it, I didn't mind it. But I just felt the time sink was too much for the cost.

So every day what you had to do was you just go out there and say, do you want to sell, do you want to sell? And you keep harassing the same people over and over again until they buy from you. Because you have no choice. That's just how, especially Asians are.

Andrew:	And at seventeen this is how you were making your living. Not living but this is how you were earning money.

Cameron:	No, that was at fourteen.

Andrew:	Fourteen, okay.

Cameron:	So, I was doing that and I was making money but it just wasn't worth the time. So I stopped. But later on years later, it got so hot. The tapioca business for some reason became this gold mine. It was kind of scary. I didn't understand it, but I wanted to get into it. So when I was seventeen I was working night shifts at a hotel as a front desk guy during the night, and going to school during the day. And I really needed money. so what I did was I googled the word, scam. And after I googled the word scam looking for money, because I was desperate for capital, I had actually had stumbled upon the IRS website for Anna Wells, how to basically get money legitly, without lying to anyone.

Andrew:	Basically the IRS said, you don't need to scam, there are ways that we're here to work for you. They were saying that they are not a confiscatory agency, they're here to help. Alright, and so they said, don't need to scam. And what did you discover when you searched that?

Cameron:	Let me just clarify one thing real quick. This is before I ever became an accountant. This is when I was seventeen years old, so I don't know shit about anything in tax. All I know is I need money. So anybody can do this, literally. I want to make sure that's very democratic.

Andrew:	Not only that, but I've got to tell you, that this was huge. What you're about to tell us was huge for my company. We obviously had ups and downs in the business. I didn't recognize that in the downs you can benefit from what happened in the ups, as you'll tell us. You're introducing it in a way that I think is shocking and gets attention, but this is a very legitimate way of doing business, but I didn't know about it. As much as I'd studied accounting, and loved accounting. As much as I loved having conversations about taxes and figuring out what I need to do.. This is something that I just never read about, never was exposed to. And of course it works. And you're explaining it in your own unique way which is cool and getting people's attention. But I want to reassure them, we've gone through this at my company, at Bradford and Reed, we actually were audited and it was completely fine. We were audited, I don't know why, but we were audited. It had nothing to do with this. And at the end of this they saw this process, there was no question about it. But, go ahead and explain this.

Cameron:	Just to add to what you were saying, actually. People complain about GE a lot, General Electric.

Andrew:	They complain about it, you said? What do they do with General Electric?

Cameron:	GE, so basically they don't pay taxes. The reason why is because they had a lot of losses in the past. So they also had a lot of NOL's. So in the last year we keep seeing people complain about them, saying, oh they're not paying any taxes. Well, it's because he lost money too, you know. They had losses in the past and they're going to bring it to the future to not pay taxes this year. So they're doing exactly what you're doing. So....

Andrew:	Absolutely. Take this to your accounting professor, take this to your accountant, they'll all agree. But explain the general idea of the concept because I just interrupted you to say, hey, wait, Cameron's telling this in a funny way that's designed to get your attention. But this is regular business practice. So what is it?

Cameron:	So what happens. If you lose money today, you can use that loss that you generate today, right, and then take it back to prior years in your tax return and say, "OK. I made money last year, but I lost money this year. So, I can say I lost X number of dollars, amend my prior returns, ask the IRS for last year's money back, which I paid taxes on, and get a refund. So that means I can fund my own business again this year. Again, I had about $30,000 in losses, I amended my return from the prior year and claimed those losses against my income from last year, then pulled back about $10,000 of taxes I paid last year. 

So, in the current year, I got a refund of $10,000. That was enough for me to go buy my [sounds like] yoca, which I ultimately lost my shirt on. & was again. Just to give you the finished story on that. I didn't realize that I had come in at the peak of the market so my contact selected me but they didn't want to spend money because they were cheap. So, I, basically, I had to liquidate my inventory for about $.25 on the dollar. So, I lost my shirt. But, this is a very legitimate business practice.

Andrew:	Here's the general idea, here. You're doing well in business. Year one, year two and year three, you're paying taxes but in year four, you have a big loss. You can go back to the government and say, "Hey, I lost a whole lot of money this year. You now how I paid you money last year, when I made money? I'd like some of that back". The question of how much you get back and what the percentages are and how it works we'll leave to your account, but the overall understanding [is that] if you don't know this, your account may not suggest it. My accountant, didn't suggest it. Thankfully, we had a good chief financial officer who understood it and said, "Oh. Wait. This is what we need to do. We're having a down year. This is the way to resuscitate or there is a way to benefit from it".

The thing that I found, as an entrepreneur going through this, is when you have that down year, you beat your self up like mad and you're not looking for opportunities, sometimes. You're thinking to yourself, "How could I let this happen?" And the one big opportunity, you think you're discovering, is that "At least I won't have to pay real taxes, [that is], a lot of taxes, because we lost money this year". You're not thinking, "Wait. There's something bigger here that's available. You used it to find your business but we used it to just get a check and it was part of our business. I remember a, actually, going to the bank with the check for the IRS, with the amount that we got back and hearing, "Wow. You must have a great accountant". And I thought, "Really? The credit should go to the CFO".

So, that's what we need to explain to people. Just remember the three words, "net operating loss, NOL". If you have this issue come up you'll understand that it's an option on your menu as a business owner and to be able to go to your account and ask how you can make it work.

Finally, [our] last point is what? What is the last big tactic that were going to share with the audience here?

Cameron:	[As regards] deferring your taxes, [I'll] give you an example of how you can, basically, defer your taxes. When you're doing taxes, 80% of the game is not avoiding paying them, but simply pushing them into the future. My biggest job is to, basically, push your taxes into the future, and when it becomes that future, I'm going to push them again, indefinitely. So, there's no way to get rid of them, but you just keep pushing them.

I don't know if most people know this but IKEA is a nonprofit, the world's largest nonprofit. The Bill and Melinda Gates Foundation is about $63 billion, but they're about 66 or $68 billion. So, they're, literally, the largest foundation in the world. But, unlike the Bill and Melinda Gates Foundation, their purpose is to bring design into the world, which is pretty [much] BS. To give you an example of how BS it is, they have $68 billion, but they've given away less than .1% of their entire net worth, to any type of donation or charitable contribution.

Andrew:	IKEA has, because essentially they are a nonprofit that is not there to distribute cash. They're a nonprofit in structure, is what you're saying.

Cameron:	Exactly. So in the 1980s, Ingbar Compbrad [SP], an ex-Nazi guy, and that's proven, decided, "I want to protect my company"...

Andrew:	This came out years later, where, it turned out that he [had], I forget what, connection to the Nazis. I think he apologized for it, but it's true. He came out, and he did acknowledge it afterwards.

Cameron:	Here's a good story though. My friend who's an attorney [and I] spoke to his son and his son was really funny. He was a genuinely nice guy, not a Nazi at all. He was disgusted by that. But, at a dinner party one day he actually said to the lawyer, my friend, "Oh. This is so embarrassing but I want to show you this". He took him to the attic and pulled out this photo album [which had a photo of] his uncle and his father in full Nazi regalia and brown shirts. And he thought, "What the hell is this?" My attorney friend, actually, is Jewish. So it was very awkward, but funny at the same time. So, yeah.

Andrew:	But that was just shocking. So this is the guy that is Mr. Ikea, all right, and you're just adding color to his story by telling us about his past. Sorry, go ahead.

Cameron:	But yeah, so, what they're doing here it's very simple. What he said is, I'm going to throw everything into the foundation. And that is right here the red, in the middle. And then once everything is in the foundation I'm then going to go to every country and create the exact same model where I will have the company have a distribution channel. That's one company. Property channel, which holds the (?), and then the retail channel which is the actual company that is generating the income. (inaudible). 

If you look at the last line here at the bottom, Ikea Property, Ikea Distribution, Ikea Retail. So what happens is, Ikea Property is going to be charging everybody else property rent basically. And they do this because you can basically double your deductions for rent due to this strategy. Wal-Mart does it as well. They recently got hammered because things went bad. Distribution is basically their trucks and stuff. And then there's Ikea Retail. Ikea Retail says that all the income that comes in is going to be going through this company and then going up into the foundation. So because the ultimate owner is a foundation, none of them really pay taxes at all on any level. 

So what happened is I found out about this because I was working as a staff accountant back in the day at one of the major accounting firms. And I was really annoyed because I was dealing with this tax return that fell on my desk. And it had this really benign name, Interactive Transaction Five. And what I found out was when I was drunk at the bar after tax season, my managers told me, oh you realize like you were working Ikea, right? I was like, what the hell is that, why is it Ikea? It was Interactive Transaction Five. It's like, no, this is part of a series of corporate entities that roll up into one of these Ikea corporations. And I was like, that's fucked up. So he told me, he gave me the whole...

Andrew:	So, you were working for Interactive Transaction Five and you didn't know that you were basically working for Ikea. This was just one of their ...

Cameron:	Yeah, I had no idea.

Andrew:....entity names. I see. 

Cameron:	Because that's how it is. You know, all these companies. They have literally hundreds of companies that you, they just have like very boring names, very vanilla. And you don't know what they are until you (inaudible) into the actual name of the company. So, I found out after the fact that what happens is the money rolls up and up and up, and then because it goes to this non-profit they don't pay any taxes. They have zero taxes. They get away with it because Ikea is the single one, the single greatest employers in Sweden. So one thing you'll hear every single Swedish person say is, like Ingvar Kamprad, he's such a douche, but he made jobs. So, the government really doesn't bother him either. So the really...yes?

Andrew:	I'm sorry, you go ahead. You go ahead, I don't want to interrupt.

Cameron:	The really scary thing about this though is how does he defer taxes? Very simply. Because it's going to a non-profit it's deferred indefinitely. The money stays in non-profit, it just gets (?) into the future forever (?). So how do you get the money out of non-profit? Very simply. If you look on the bottom dotted line. This is a very benign contract where it says 3% franchise fee for all sales. So what happens is, 3% of every single dollar that they sell from Ikea is going to go to this separate company in The Netherlands called Inter Ikea Systems BB. And they hold all of the intellectual property trademarks, designs, from Ikea. So you're paying for those designs in the IP. But then rolls up into a company in Luxembourg to finally Netherland/Antilles, and into Ikea Holding.

What does all that mean? Very simple. It goes from the European countries into the Cayman Island. Netherland/Antilles is a Cayman Island. Cayman Islands has a flat tax about like 15 grand. And you don't pay anything after that. So what happens is he literally pays 15 grand a year and then takes a couple billion home, free. So that's how he defers his taxes.

Andrew:	All right, before I ask my follow up question, let me ask you this. Do you have, are there articles that you want to show us from Wal-Mart or Google or anything else or should I just ask at this point?

Cameron:	You know what, I'll leave those links in the bottom. So I've written articles that explain to you the transactions of how Wal-mart saves money, how Google saves money. I break it down into the simple parts. I draw diagrams like this. I drew this myself to kind of help people understand it. So I will give those links on the bottom as well.

Andrew:	Okay, so we'll give people the articles for Wal-mart and Google. But, let me ask you this then. The person who's listening to us right now is not going to go and create a company in the Netherlands that feeds the company in Luxembourg that feeds to a company in the Cayman Islands, Netherlands/Antilles, I can't read it even. What can they do based on this? What can the person who's listening to us do now based on what you just told us here about deferring taxes?

Cameron:	So, a simple way of deferring taxes is things like taking advantage of Section 179. Section 179 is a situation where the law allows you to, let's say, if you buy a bunch of computers or capital assets, you can literally take that deduction today instead of in the future. So, you're not deferring your taxes or your tax benefit you're taking today; you're going to push that over to the future. So that's one thing you can do. But luckily, Obama recently enacted a law that said that you have 100% bonus appreciation, so, normally speaking, under Section 179, there's all these rules you have to worry about, but because of bonus appreciation, there are no rules. Everything you buy this year and next year is 100% deductible, no matter what [??] appreciation. So that's one very, very, basic, simple . . .

Andrew:	So, we're talking about 2011 and 2012, you buy a computer right now you get to deduct it all at once.

Cameron:	Exactly. No questions asked.

Andrew:	OK. So, in the past what would happen is, say you bought a computer for $1000, you couldn't take the expense for $1000. You would take the expense for a percentage of it, and another percentage the following year, until the thing was over. And you're saying now, you write the whole thing off. So it's a good opportunity to go buy equipment, or if you all are already buying it, make sure that you write it off.

Cameron:	Exactly. Normally a computer is a five year asset, so you'd appreciate it over five years. Basically, the way appreciation works in the U.S. is that it is top heavy. The first year you take a large chunk of it, so later on you start taking less and less and less. That's how it usually works. It's kind of like a curve where it goes high to low.

Andrew:	OK. It's this way on our screen because it reflects. For some reason the video that we have here is sometimes backwards. It's kind of odd. Let's see if we can test it out. See look. Backwards? 

Cameron:	I see it straight.

Andrew:	You see it straight, so it reverses it for you but not for me. 

Cameron:	I wonder why they did that?

Andrew:	It was kind of odd because I had Nancy Duarte on, and I wanted her to hold her books up all proudly, and I'm sure on her side it looked OK, but for the audience it look like I was holding up these backward books.

Cameron:	Wow.

Andrew:	The big picture there though is defer your taxes. Wherever possible push the tax payments into the future, and then you're saying, even push them further out once they're due. Where possible take expenses early and push taxes into the future. Alright, let's go over what we've talked about here, and let me see if I can sum this up. The first thing we talked about is selling digital products as opposed to physical products. We get excited about physical products because they feel real, but really, those will force you to collect and turn over sales tax. 

We also talked about getting a specialized accountant that's not just going to be a compliance monkey. We talked about filing papers for R and D, if you have a developer, if you have someone who's basically doing development make sure that you get the benefit for it and that you don't treat them and those expenses as regular expenses. We talked about when and why to incorporate and other options, including DBA, doing business as, and an LLC. We talked about keeping business transactions separate from personal. You don't appear slowly corporate veil, and you have that picture of a hooker up on the screen. We talked about making sure that your filing all of your taxes properly, and in our notes before the session, you said there are over 20 plus different taxes or tax paperwork that a person listening to us is going to have to be aware of. 

Just know that you going to have to file it, and this is one of the big takeaways, even if you didn't make money this year you'll still have to file something. We talked about taking distribution instead of a salary to save 15.3% on taxes. We talked about the net operating loss, and how it helped you start your business, which unfortunately didn't go so well. And finally, we talked about the need to defer your taxes to save money today. All right, can you bring up that first slide that you had up on your screen at the beginning of the session? Let's tell people how they can contact you. There it is. This is your personal e-mail address. And why did you put your phone number up here? 

So basically I made a promise to a friend last year that I've been able to keep sometimes. I made a promise to a friend that I made on Hack[SP] news, that I would try to officially, monthly at best, to basically offer some help to people. So basically, every so often, I'll put my name out there, do my e-mail and personal information, and people literally just call me up. You'd be surprised how many people do actually use the phone number. I was, actually. I didn't think people were actually going to call. 

Andrew:	I wouldn't think.

Cameron:	I did it like just a whim, to see how it worked. Well yeah, so that is my personal cell phone. I will not be able to pick it up, so anybody that does call me within the next like 30 days. I'm in Asia right now working on a project with Derek Sivers on Entrepreneurship in Asia. So I won't be able to pick up that phone. So if I did it would just kill me in fees, so. The number is off for now. But if you e-mail me, I promise I will get back to you.

Andrew:	Don't make that promise. Say you will do your best. Don't promise something that if you're going to be in Asia that you might not be able to live up to. Let me suggest this to the audience. As always, if the first thing you do is say, Hey Cameron just told me that I can call him up or e-mail him and I'm outside the 30 day period where he's out of the country so I can call him and he'll be there. I'm going to ask him for all the tax advice that I possibly can. If you do that, you're being generous and you're saying that you will help out. I think that's a terrible way to start a conversation and start a relationship. The first thing I would do is just shoot you a quick e-mail saying, hey, just watch the whole thing. I dig your attitude, I like that you curse. Or I watched the whole thing and one of the ideas that you gave me really stuck with me and it's something that I hope to use in the future, thanks for putting it out there.

Even better I would find your website and I would find a way to give you some feedback on it or offer to help you. And then after you build that relationship, either by saying thank you or offering some kind of help, then it becomes easier to ask for help in return. And that's what I suggest. But Cameron is being very generous. He's got his contact information up on the screen and you can take it any way that you like and approach it any way that you think is best.

Aright, Cameron, thanks for walking us through all this. I really appreciate it.

Cameron:	Sure, one last thing. I do have two e-books that I made. One is for employment tax, which is something that people get really scared about. That's the one tax that you can't avoid no matter what. So even if you have a company they can actually directly skip over your company and take money out of your bank account. So if you ever do get audited, I did write an e-book to help you guys with that. I also wrote e-book if you are lucky enough to be that small percentage of people who can sell your company, there is a mergers/acquistions books that I wrote. It was very quick. It gives you a good pointer overall. A friend recently just sold their company for like, for I think like 50 or 85 million dollars. So he just experienced it himself and it was pretty rough so.

Andrew:	Where do we get them?

Cameron:	I'm going to basically give it to you and then you can just put it up and let them download it.

Andrew:	You're just going to give it to the audience.

Cameron:	Yeah.

Andrew:	All right, well I really appreciate this. I know the amount of work that you put into this program. I've got the notes here to show how much work you put into it. I appreciate that you're being so generous with the audience. Again, if you found this valuable I always say, don't be in the audience of life and just passively watch life as it happens, or as other people do it. Find a way to get on the field. 

And the way to get on the field is to just at least connect with the person who you're watching, and to say thank you. I'm going to say thank you to Cameron. I'm also going to say thank you to you for watching this. If you got anything out of this and you want to report back to me. Even if you're not ready for me to ever talk about it publicly, I urge you to do it. I want to always get feedback from you guys on what you've done with what you've learned. 

So come back to Mixergy.com/contact and let me know. Cameron thanks for doing this session. Everyone else, thank you all for watching.

Cameron:	Oh, I just want to say that I want to thank Andrew, too. Because I've been a big fan of Mixergy. I actually just purchased the Mixergy Premium, and it's been great, so.

Andrew:	Thank you.

Cameron:	That's actually how I started contacting Andrew, so, I just want to say thanks, too.

Andrew:	Thank you, thank you. I'm really glad that I got to meet you. And Derek Sivers, the guy's interview that he did on Mixergy helped me see things in such a great way, like, he reminded me of the power of systemizing. He went back and forth with me on the philosophy of business which sometimes helps you rethink the way that you've been looking at the world. You really, he's lucky to be working with you and you're lucky to be working with him and I'm looking forward to seeing your book with Derek Sivers. He's one of my all-time favorite entrepreneurs.

Cameron:	Definitely, definitely.

Andrew:	Thank you. I'm sorry, go ahead. I keep interrupting you, go ahead.

Cameron:	It's okay, I'm sorry, I swear to god my last word. Just a funny thing. When I first spoke to Derek Stivers in person he actually kind of scared me because, he's a really nice guy, but it was scary how nice he was because I'm from New York. Because he was so nice I was actually a little terrified. I was like, this is so not normal. I was like on paranoia. I'll just say that. But, that's it, I'm done.

Andrew:	I'm from New York too and I feel the same way. My wife is not and I actually went to school in Brooklyn. And because of it I feel like I've just been scarred for life. I can never leave a bag anywhere without watching it, I always lock every door.

Cameron:	Exactly.

Andrew:	All right, thank you for doing this. Thank you all for real. Bye.