Bookkeeping is often an overlooked, underappreciated part of business for new investors. However, if you don’t understand your books and your business entity you are probably losing a lot of money, and not only during tax time.
John Hyre is an Attorney, Accountant and Real Estate Investor, (in that order according to him), and he was kind enough to join me on the podcast to talk about choosing and maintaining a business entity and the importance of keeping your books the right way. John even has a class on both topics, and the two can be purchased together for just $499: www.themichaelblank.com/hyre.
The information packed into this episode can save you a lot of pain, suffering and money.
[3:10] Biggest mistake that business owners make is the failure to document. If you can’t prove it, you can’t claim it.
[4:35] Use Quickbooks instead of Quicken. Reason; Real estate investing is a balance sheet intensive business and Quickbooks is better suited for that than Quicken.
[5:45] Doing your books the right way saves you money on the front and back end. It lowers your overall tax bill and saves your accountant time, and therefore you money.
[6:07] The books tell you how the business is doing. If you’re not keeping them correctly, you probably don’t know how your business is actually doing.
[6:42] You can delegate bookkeeping, but you need to know about what goes into the books and what you should see to know that whoever is doing it, is doing them correctly.
[9:03] The best insurance against an IRS audit is the bookkeeping and record keeping.
[10:01] Pay your kids to do work for you like scanning receipts. It’s a tax write-off and the money stays in the family. (More on this later in the episode).
[12:03] An LCC is like life insurance. You want it if you need it, but you want to keep the probability of needing it as low as possible.
[13:50] You can avoid a lot of lawsuits by being nice to people.
[14:41] Entities are like children; Fun and easy to make but a lot of work once you got one.
[15:00] The #1 way to destroy an entity is to co-mingle money.
[16:40] Generally the best entity to use for apartment building investing is an LLC
[20:08] Once you involve someone who you are not married to as a partner, you will want a lawyer to write a customized operating agreement. Don’t use a template.
[27:28] If you want a court to treat your LLC like a business, you need to treat it like a business.
[28:18] Rules & guidelines for paying your kids.
[46:32] Trust law is much more complicated than entity law.
Connect with John
You can connect with John by visiting his web site at Iralawer.com.