Wes Carter (attorney at law) answers the 7 most common legal questions from the Thrive Nation including: Do you need a business license? Can I use my personal assets for my business? What is the best way to implement “Golden Handcuffs”?
FUN FACT: David Robinson –
Spurs 2004 Value – $283 mil – 1.88% = $5 million
Spurs 2018 Value – $1.6 billion – 1.88% = $5 million x 5.65 = $28.25 Million
Speaker 1:
You have questions. America’s number one business coach has answers. It’s your brought up from Minnesota. Here’s another edition of ask clay. Anything on the thrive time business coach radio show
Speaker 2:
[Inaudible].
Speaker 3:
Yes, yes. And Wes, welcome onto the thrive time show. My name is clay Clark. That’s one Cal bell for you to cow bells for you again. Three cow bell Z. No one gets three cow bells, but West Carter gets three cowbell hits and then this thing he gets the cow bell shuffle. Is that the shuffle Butte West is, that’s kind of the passive aggressive behavior that we’re going to tolerate on the show. I am. I think I there with, Oh wow. See I muted him. Z. Why would you mute him? Scourge is passive, passive aggressive and I want him, I want to level the playing field. If you’re sure at any moment like check this out. I could ask us a question and I can hit the button and he knows it. Oh, he knows. So what it allows me to do is allows me to have just a little sense like he isn’t intimidated.
Speaker 3:
It’s a posturing move. It’s a, it’s a potluck. A good debater would start off by asking a hit Slack. You put six dogs out in the field, they’re going to position themselves for the lead dog. You just asserted yourself as the lead dog in the man. Do you remember when Trump walked out to debate there and Ben Carson was there and Ben Carson was who I was going to vote for. Ben’s out there, Trump’s out there and Jeb bushes there and he is either greeting, they’re doing their pleasantries and Ben asks a question and Trump looks over at him and says, Ben, thank you for waking up. Appreciate that. That’s great. Good to hear from you. And like the way he did it, you could sell Ben like was like, Oh, that’s what I was trying to do by mute him. Z. There you go. Well, I’ll get them all right. Yeah. Okay. Very well. I was going to vote for him and now I’m probably gonna vote for you. See, well, I did it to compensate. I don’t have it. I don’t have a degree. I’m not a lawyer. He is. And all these questions on today’s show are legal questions. Oh, so they’re all for Wes. So here we go. Okay. Question number one. Yes, West Carter. Do I need a business license? The thriver rights? Do I need a business license?
Wes Carter:
Generally? No. Let let you know. Let us give our general disclaimer here. If you’re listening, please find your own competent attorney and get actual legal advice. Our radio show is not a substitute for a good attorney, a legal zoom substitute for good attorney, though they’re not attorneys at all. Zoom is not a substitute. No. And neither is your uncle. And just cause you listen to the radio show doesn’t mean you’re my client. Just so we’re all clear on that. So
Speaker 3:
Wow, my good man, he’s wow. Talk about passive aggressive. I think, man, I’ll tell you what. No, but in all seriousness,
Wes Carter:
You don’t need a business license. Just to open a general business in most States, varies state, city, County. I mean they all can have a finger in licensing, but they do license specific occupations. So it depends on what kind of business you’re going to offer it.
Speaker 3:
Let’s get very polarized. Z, let’s get into hyperbole. Let’s get to some hyperbole. So let’s say you’re out in California in California recently. Tell me if I’m incorrect. Talk to me about the paid time off rules, rulings that are coming down from the powers that be in California.
Wes Carter:
Yeah. So many States are instituting laws where you require paid family leave for your employees. There’s been discussions of this at the federal level too. I think this is one of Ivanka Trump’s kind of program. She’s touting but at the state level now there are separate
Speaker 3:
Roughly like if I’m a plumber, I’m in California, I have four employees total, myself, my wife, my son and a dude, four of us. And dude says, dude says, here’s the deal. I have some personal family stuff going on. I know there’s a lot of toilets that need to be cleaned, but I need to go home cause I’ve got a personal problem with my toilet and I also am feeling emotionally blocked in O clogged and I’m going to be out for a couple of days. Who pays for him?
Wes Carter:
Are the employee pays or the employer will pay for it? In most instances a, well it depends on the state. Federal level. Right now if you have over a certain number of employees, there’s something called the family medical leave act, which they get up to 12 weeks unpaid. How many employees? 50 up to 50 if you have 50 or more employees and you’re subject to something called the family medical leave back, which is a federal law that would apply after 50. Yes and, but States are now instituting paid, not unpaid family leave but paid family leave paid. So if I have a baby I can take paternal leave or a mother, a new mother or we adopt a baby or I have a serious illness, different qualifying events or I can take paid leave businesses afford to make that pay for that paid leave. Why? It depends on the, some States are trying to do some sort of insurance to cover that. So I’ve looked into a risk pool, but eventually the employer pays for it. I mean even if it’s through an insurance program, somebody’s got to pay an insurance premium.
Speaker 3:
So here we go. Here’s the polarity. That’s the, that’s the rule. You’re just a messenger. Yep. That’s what’s happening. Z, what are your thoughts on this? This is a great way to stimulate the economy.
Wes Carter:
No, it’s not really. Yeah, come on. Does it apply? If you get a new puppy, can you, how much time are we talking about? Like what’s the, what? Where are the extremes? Did you’ve heard like I’m sure California, probably the most California they’ve actually get, I’m not certain on this, but I think it’s a shorter than the federal Weaver. I think we’re talking about a six week timeframe, somewhere in that neighborhood. So the paid leaves are on a shorter, shorter timeframe and then make them extend it. You can take even longer, but then it’s unpaid after the paid period. I think some of that’s just been good, good employer. I mean, I do that with my, my, someone has a baby. I pay him for six weeks to stay home and take care of that baby. And what you would do that? I do that. I do that. I do that now. Anyway, six weeks is kind of the number. So this is kind of a state system where the state does some sort of governmental insurance, almost like you would mandate worker’s comp insurance. Everybody pays into it and then it’s supposed to help offset the cost to the small employers. But again, we all know eventually the cost gets borne by someone.
Speaker 3:
Yeah, I don’t like it. I don’t like that component of it because, no, no, it was sitting down. We have to hire the people to manage it. I’ll come into the money. He’s not going where. I mean we all need more red tape guys. Listen, this is something you got one of these days. You guys are going to accept the business coaching advice that I’m going to give you on this subject cause I know. Here’s the deal. Government never, never wastes money. That’s, that’s tip number one. I’ll tell you that’s tip number one right now. Tip number eight, tip number eight. Tip number eight is probably my best tip is tip number eight. Always keep bags of your own poop collected throughout your stay and just have it ready. No, no tip. Divert. Ready? No. Tip number nine is because government never waste money. We should give them more control. Absolutely. You know what I mean? They do such a good job with the money they have. Let’s give them more. Okay, so the question, the real question here is do I need a business license? That’s a state to state thing
Wes Carter:
Or city? City. It can vary to city as well. So if you’re out in the rural area where there’s not a municipality, it’s less likely you go and do a large metropolitan city and they license more and more things. You hear those stories about a kid getting their Rose stay in shutdown or
Speaker 3:
Down the roaster. The problem with America today
Wes Carter:
Because they don’t have a business license for that. You know, or you see these green people doing the all natural cow milk and then they get shut down cause they don’t have their proper business licenses. And you know,
Speaker 3:
I went to Nebraska, I was asked to speak in Nebraska. We’re going back about 10 years ago. The governor of Nebraska at the time, whose name I shall not remember right now. It’ll come to me. Hopefully he asked me to speak at the Cattleman’s association thing. The governor of Nebraska was there and they were, there was, there was federal regulations being discussed that were banning dust is created by the trucks. The dust. Wow, okay. And were also banning your child, being able to work with your dad, like the child working with you on the farm and almost all those farms are supported by the kids working with the dad. And so there’s all, it’s, it’s a murky place out there. I would just say if you’re a doctor, a dentist, a West, a professional, if you’re a professional, you gotta even if you’re a bro Fashional if you’re on the verge of starting a company, this isn’t wise to reach out to an attorney and to look at that specific niche and that specific state and look and say, do I need a business license attorney? Or even if
Wes Carter:
Do it yourself, which we always suggest competent legal counsel, but if you’re just doing some research, call your city or call your County. A lot of times there’s someone there that can help you talk to you about required permits and business licenses for the type of business that you would operate.
Speaker 3:
Ah, okay. Now the next question isn’t, and by the way, Josh, with living water irrigation as a show sponsor, he’s here on the show to ask some great questions because when you’re a show sponsor, when you see when you put money where our mouth is, you get to, you get to have a mic, we give you a mic. Can we give you a mic? And when you are an attorney who I pay a lot of money to, you also get a mic. All right? Yes. So that’s how that works. So here we go. So can our next question is, can I use my personal assets for my business as an example, this microphone here, this microphone and this shoe. Have you seen my shoe in the microphone? I have not seen your kicks. Okay. This shoe, this shoe was given to me by Colton Dixon. I’m fine.
Speaker 3:
I’ve been working with top 40 Christian music artists now signed to Atlantic records, has the same agent as Jason Morales now, and ed Sheeran working on an awesome album. He said, thank you man for helping me. Here’s a shoe, and they sent me their pairs. He gives me their shoes, two shoes, he shoes. These are the, the Kanye to easy TV, the zebra edition. Unbelievable. Then he sent me a slate mic. Now this mic here is the hot industry standard. Mike right now. This Mike. So nice Barry. It picks up any noise though. So I don’t use it a lot for the show because it picks up all on Beyonce. It’s an unbelievable Mike looks fan. It’s a personal gift. Can I use it for my professional business? You can,
Wes Carter:
But you need to be very careful about it. So when you say my personal assets first, my face touches mine, right? So let’s first let’s talk about your cash. Don’t just stick your personal cash into the business without a paper trail. I mean, part of the reason we have a business that we want to keep our personal stuff separate from our business stuff. So if you’re going to put money in, because businesses run out of money, I need to pay bills. You need to record it as a capital contribution or some sort of, you know, fancy way of describing putting money into a business and have a paper trail. Because again, we want to avoid the argument later on that the business is just an alter ego of you personally and that the court shouldn’t, should just ignore the business and make you personally liable.
Wes Carter:
So you want to have a paper trail and find a formal way to put that in. With assets, equipment, furniture, property. I still would suggest not intermingling them any more than absolutely necessary. I don’t think anyone’s going to lose a court battle over your fancy microphone, but at the same time, you want to have a paper trail, whether it’s an arms length transaction, look clay, the individual is going to lease all this wonderful Avy equipment to clay business, hence fall. We have a contract there that shows a separation between you, the individual, and you the business.
Speaker 3:
Now some of the listeners out there know that my wife handles the accounting and legal aspects of, of our businesses. So she works with you on a, on a daily basis? Yes. Josh, who in your business helps you with the legal and accounting aspects of living? Water? Irrigation. So the accounting aspects, my wife, the legal aspects, nobody. Oh, you guys should meet each other. I did not know that was not like a, a baited question there. I did not know that. So anyway, now that you guys have met each other, unfortunately seen they were standing next to each other and you pay him a lot of money, I kind of get the residual osmosis effect of here. He’s the best. So I’m going to ask, I’m going to ask you as you grow living water irrigation. Yes sir. What legal questions do you have that you’d like to ask Mr. West on today’s show? Because you, my friend are a real business owner. You’ve really grown your company quite a bit recently. What questions do you have for West the Carter? Where’s the cut? Whew.
Speaker 1:
Keep your mouth close. Okay. The biggest, most pressing that we have at this very moment. So we are looking at like a golden handcuffs thing for a key manager. Okay. How or what or what is the proper pronoun there? What’s the best method by which to
Speaker 3:
Give him some air? Can I go to Z and into West? Yeah. So let’s go a Z for the strategy and then West for the legal. Can we do that? Is that cool? So the question is, Z, you’ve got a top manager, somebody you want to keep on your team for a decade. Yes. And you want to do a win win. It’s where they kind of lock them into a deal where they’re going to make a lot of money if they stay with you, if they stay loyal, right? You’re going to keep them loyal so they don’t spoil strategy. Talk to me about it.
Speaker 1:
Well, if they’re that kind of a quality person and you, and you’re thinking about sharing some equity with them, is that what you’re thinking Josh? Yes, sir. Okay, so what you want to do is you want me to do over time and that’s way it doesn’t vest or they don’t actually receive it until a certain amount of time. And if they leave before that amount of time, then then the vest exempt. They don’t get anything. So everything I’ve seen so far, dr Z, just good old Google. Thank you. Google is they meet certain benchmark requirements that we lay out on a list of expectations. Then once they reach that, then they take over the ownership aspect. That’s one, that’s one formula. Another one, you could use a straight time. You know, a lot of times if you’re, if they’re not in charge of everything it, you know, it’s sometimes the fact they didn’t hit a number that you set out there isn’t their fault, you know?
Speaker 1:
You know what I’m saying? So sometimes it’s like, Hey, you just, you already say, listen, you recognize this person as a key person when keep them around for a long time. So then you, you get in that little carrot out there and I always use time. You know, in five years you’ll be vested and you can earn a percentage of the company each year, year-round. And then five years they vest, you actually receive that. Now it’s yours to do it as you want. You can sell it, you can keep it. You’re now one of your hats you wear as a business owner, you know, and this is a partner, but he’ll never own the majority of it. And, and you know, you can also put it in there too, that if he gets fired from his job after that, then then they can do a business evaluation.
Speaker 1:
You have the first right to buy that 5% back if you’d like. I mean, you, nobody wants to a partner that doesn’t want to be a partner with them. Right, right. So there’s several different things West you want to pile on. I think that’s a perfect segue because one of my biggest problems with golden handcuffs is the divorce aspect. Yes. And so I always try to steer clients away from giving away equity because equity sounds good. So most people like, Ooh, I want to own some business. But the reality is they’re never going to have a controlling interest. So they’re going to be a silent equity owner. What they really want is the money. And so if we can figure out a way to financially reward them in a similar fashion without giving away equity and then having to worry about how we get our ownership back, if we have a bad separation, I prefer that.
Speaker 1:
And you can do that through very similar structured with either a bonus structure or something called a Phantom stock plan where they basically get imaginary equity, but then they get paid the value of how much that would have gone up. So if I give you a hundred shares today, they’re worth $100. I can give you a hundred Phantom shares. Two years they were $200. You’ve made $100 per share, you just never actually own any shares. Now that gets into a more regulated, you know, kind of deferred compensation and you get into all these other technical areas. But really what we’re talking about for the most part, unless someone is really stuck on it being, you know, having ownership interest is they want to be financially rewarded. And so before you go down the equity road, I would pursue some sort of bonus structure that you could use.
Speaker 1:
Yeah. Excellent point West. Cause cause I have, for years I had young doctors coming join my practice that always be like, Hey, what can I be an owner? And I go, no, no you can’t. One, we could have a hundred people evaluate the business and we’re going to have a hundred different valuations of the business. So what surprise is that you’re buying into it. I’m going to pay you. There’s a lot of places out there you can go invest your money. Walmart, Amazon, Google, Apple. You can invest your money and own a piece of those businesses. Right? And it’d be the same thing as here. You’re never going to have a controlling interest. I’d always build a buy you out and it’d be a buy sale deal. So Richard about how much money I can pay you and then what you do with that money. But the idea that you never owned a piece of this, don’t let that be a hindrance to coming to work for me because you’re never going to have a controlling interest in it anyway.
Speaker 1:
You know, I’ll always have a controlling interest in it. Even Fiona, a few shares here are a few shares there. I mean it’s kind of cute by some Walmart shots stock. You’re not gonna show up at a shareholders meeting and go, Hey, fire the CEO. Oh you know, I’m in charge now. I own 12 shares. You know, it’s not going to happen. So you kind of get that through their head and so many people come out and I think ownership is the end all the end all but ownership without any control. But that didn’t voice. He’s really not an ownership at all. You know, it’s really just a profit sharing mechanism. And I love the fandom sheriffs options. Did you have to word that? Like the white half mask when you do that? Like the did black robe, the black robe kid, the opera.
Speaker 3:
You have to be tenor or soprano for that. That’s a good question. Josh. I want to give the listeners an example of a golden handcuffs that worked out very well for all the parties involved. David Robinson who was a player for the spurs for years. Yes. A lot of people who are familiar with the NBA might know this story and for those who you are, those of you who aren’t, I think you’ll find this to be fascinating. David, when he went to college was like six foot three, six foot four and he grew to be seven foot feet tall. He grew, I mean no one grows that much in college. So he gets out of the military Academy, the Naval Academy, and he is seven foot one. Now the rules are in the Navy. You, you have to serve for the active duty for a year after you get out, you have to, as part of the Naval Academy agreement.
Speaker 3:
So David gets drafted, number one NBA draft. He’s a top draft pick but he can’t play. Yeah. So he sits out for a year and he can’t play. The military realizes this is going to be a PR machine. Let’s go ahead and let the guy out. And he’s like, no, I want to serve a year. But long story short, he’s drafted by the spurs. He can’t play there. The spurs bring them on the organization a year after being drafted and he shows up at the Alamo dome. Now the Alamo dome, they’ve since moved to a different Rubina, but the Alamo dome was massive. You guys remember watching games in the Alamodome like 70,000 people or some crazy number, 60,000 people. And that thing was empty. I mean it was like you could hear individual booze from individual people. It was like the one on one interaction if you had, if you had seats on the third row is like you’re on the first row.
Speaker 3:
The players could hear you. It was, I mean it was serious. They had record low attendance. So the spurs pulled him aside and said, David, here’s the deal. And he talks about this on our thrive time show. If you go to our online school, thrive time show.com as hundreds and hundreds of people do this all the time. It’s discovering it for the first time. It’s just $19 a month. You can watch these videos. It’s crazy. And David explains, he says they told him, we need you to drive around San Antonio in a vehicle and introduce yourself to business owners. So you’re going to show up. Hi, I’m David Robinson. This would be like Russell Westbrook going to Tulsa businesses showing up, saying, hi, I’m Russell Westbrook and I would like to invite you out to a game in here. Here are your free tickets. So this is what David would do in exchange for, as he said, some sort of golden handcuffs in the future. The ability to buy ownership of the team after he retires. Let me maybe clarify something too, and we’re trying to explain this to employees. Golden hand and
Wes Carter:
Cuffs are really for the employer’s benefit. A golden handcuff of means I’m going to financially incentivize you not to leave because the vesting schedule, if you leave before the five year period, you get nada, nada. So there’s also a golden parachute, which means that benefits the employee. If you kicked me out of here, I’m leaving with a sweet deal. Okay. So the golden handcuffs, when an employee comes to you asking for that, it’s like me coming to you and asking you to punch me in the face. Okay. It’s because they’re designed to keep you there and taking it back. I don’t know if the football current events here, I saw a interview with Mike Tomlin, I think it was yesterday asking about Antonio Brown. Everybody want to know Antonio Brown’s gone now. And they said I can’t do this with hostages. Okay. Cause he didn’t want to be here. So if you’re golden handcuffs work, you’ve got a hostage employee that may not be really wanting to be there in the first place, that you’re keeping their, cause they can’t afford or don’t want to turn down the money if they there for another few years.
Speaker 1:
So you have to put all this into the big picture too, that it’s a lot of moving parts on both sides. What the cost benefits are.
Speaker 3:
Well, David Robinson was a, a set of you. If you stick with the spurs and you help promote the team and you get that attendance up, we’re gonna let you buy in later. So in 2004 he bought five per, or 1.8% of the spurs, 1.88% of the spurs for $5 million, which at the time the team was worth $283 million seat. So he bought, you know, think about that. So we bought $5 million. Now the company, the value of the spurs has gone up now dramatically. And so now today, his investment, because in the ownership of the team, the value of the team has 1.6 billion. So now that investment of 5.6 5 million or five or $5 million has increased 5.65 times. So he now has an investment that’s worth two 28.2 $5 million. Now that was a pretty good deal for David Robinson. That’s not bad. And what happens is, is there are people, and I just want to really get to the core of this issue, there are people out there called entrepreneurs.
Speaker 3:
There are wantrepreneurs and there are intrepreneurs as I see it, an entrepreneur is somebody who really went out there and solved the problem. Bet the farm did it. I want, boom. Yes, that’s crazy person. That’s me. Okay. And once your preneurs says, I want it,Z , Z, I want to do it, I want it, but I just not this year. And they do that for their whole life. That person’s dangerous to me. I want you to put it out. I don’t want them in my organization cause that’s one foot in, one foot out. So you know that person there, there’s, Oh yeah, it makes me crazy. Now the, the, the, the favorite person I like is the, is the intrepreneur they say, I’m going to have, I’m going to be creative, I’m going to solve problems. But I like the security of being here and I want to be a part of this team longterm. And so you as an employer want to make a wind wind where you say you sticking around being loyal, cause loyal loyalty, man, that’s powerful. You can build some with loyalty. You’re saying I want to make a win win for you over time, but if you have someone on your team who’s watching your house get bigger and bigger and you’re selling more and more stuff and you’re not giving them any type of compensation packages, they might not say something but you are creating a problem.
Speaker 1:
Well what are the other things that I did, Josh, that’s kind of fun and that is is that when I had a an a plus employee and, and they were really working well and things were going, going great and I started a new business, I would then pull a few of them aside and say, listen, if you want to get on the ground floor of this new business, there’s no guarantees. We’re auto shipping soap. We’re, we’re trying to find dirty people and shipped them soap and say the startup cost is going to be $100,000 just for round numbers and, and I’ll let you buy in up to 10% or 15% if you want to take $10,000 and $15,000 of your money and put it, put it with mine and whoever else wants it, wants to play in this arena, then we can rock up with this rock out.
Speaker 1:
And I’ve had several of my doctors do this over the years and they actually are making money on the investments they’ve made with me in the other businesses and their other salary being an optometrist for me, I pay them very well. So you know, it’s another thing to, as you, as you grow, that’s a little carrot that I kind of hang out in front of people. I go, listen, I’ll know the costs of that startup business because the cost is a cost, right? And then we may have to do a capital call, we may have to put some more money in. We may not. And here’s the plan. Here’s what’s going to happen. Here’s gonna run it. Here’s, here’s, here’s the view. And so but it’s also interesting too, because one of my businesses, I, the guy that ran it was a brother of mine.
Speaker 1:
True story. And so he was around buying lunches for a lot of doctors. And after a while it kicked into where now he owns 10% of the business. Got it. Okay. Vested and did his time, did his hard work, took a little bit of a reduced salary, you know, knowing that that was going to be on the back because we’re a startup, you know, and so we didn’t want to bleed the company and so they didn’t have to, all of a sudden he goes, Oh man, that’s a, I tell you what, I’m some high end restaurant that said, but they’re not going to be happy with this. And I go, Oh really? Why? And he goes, well, I used to go by and spend $100 on lunch to take to doctor’s so-and-so’s office. Now I’m just spending 50 bucks and ordering pizzas because 10 of that dollars is now mine. And so now I’m only having to give up $5 I want, I want to say rascal dude, it’s so easy to spend your money. You know so easy for your employees to spend your money. Josh, you know there is something magical about them all of a sudden getting on the hook with you. It’s about the profit sharing of of the equation.
Speaker 3:
I get this question asked a lot at conferences. People want a short answer. It’s a bigger question. They want a short answer and I always tell them, I said this, my answer to this question, they say, this is it. This is the question. The question is how do I ensure legal compliance? That’s the question in some way, shape or form. How do I know that I’m legally in the right? How do I ensure legal compliance? Well, this is what I would say and I want Wes to get your feedback on this. I would say you need to go to an attorney who knows what the heck they’re talking about and they’re going to go through a checklist is usually what I’ve seen. You know, people like West will go through and go, do you have workman’s comp? Do you have your documents filed? Are you actually an LLC?
Speaker 3:
Do you have your operating agreement? Do you have your letters? You know, your, your dissolution agreement? Do you have, and you have like a checklist of, you know, 50 things you need to make sure you’re looking at. Are you licensing your things properly? Are you trademarking? Are you, is your, can you use your name? Can you, there’s so many things you need to look for. And I think I didn’t do an illegal audit for every listener out there is what I would recommend. So two part question for you. If someone did want to do a legal audit, let’s say they’ve never met with an attorney and they have no freaking clue. I mean, how crazy is it Z? When someone finds out they can’t use the name of their company? That just happened to a guy in Houston this week. A person, literally a huge company called them and said, Hey, you’re using my name. Stop. I mean, that’s not good. So how much would a legal audit costs to sit down with you and you’re a member of your team at winters and King and to really figure out, you know, are we in the right here?
Wes Carter:
Well, I mean we can usually keep it pretty cost effective because a lot of that we can discuss so we can sit down for a couple of hours and discuss it, identify potential issues and then how much it costs to fix the issues. Depends on how bad the issues are, but I mean just a couple of hours a time. You can get through a lot of information and dig up potential issues or say, okay, that sounds good. It looks like you’re in good shape here and here, but you need to focus on this. Part two to that I would say no matter how good of an attorney you find, attorneys are reactive. A lot of times, you know the nature of the businesses. You come to me with a problem, I will solve your problem, but I don’t know what I don’t know. And so to the entrepreneur, to the listener.
Wes Carter:
Part of this is going to be educating yourself to some degree, not get a law degree. What I tell my clients or my students when I teach is that you want to know enough to know when to ask your attorney. That’s your goal. Not to know the answer, but to know enough when to ask the question to identify the red flags. Otherwise, if your attorney never knows the issue, they can’t fix it for you. If your accountant that know the issue, they can’t fix it for you. So you have to educate yourself to some degree. Just so you enough where you can identify, Hey, Oh, maybe we should ask somebody about this here.
Speaker 3:
Now this is my next part here. How dangerous is it to not ever ask you to attorney? Look it up. Ever do the research into whether you can use your name or your logo or your, your your cause. I think most people never check with an attorney until they get in trouble. How your mind, how dangerous is it to operate without having at least checked with an attorney about whether you can use that name or not?
Wes Carter:
Well, if we have a trademark infringement claim, so that’s what it would be. Hey, I own the trademark rights. That means I use the exclusive rights. I have exclusive rights to use that name in connection with Sally these goods and services. The remedy, the penalty for that is I get to disgorge you of all of your profits, which means all the money that you’ve made from that name, you can now get to pay me. Plus I’m going to be able to get my actual damages of what you’ve cost to be. Plus maybe I’m going to make you pay my attorney’s fees and on top of all that, you’re going to have to completely rebrand your entire organization. New domain name, new literature, new signs, and I’ve, I’ve gone through this and it’s easily even for a small business, just thinking about signs, t-shirts, car, raft. I mean it could be a couple of hundred grand. Easy. Yeah. Without even talking about legal fees and what you’re going to pay you at a party.
Speaker 3:
Okay. Now this is, I have two final questions I want to ask and see. I want to, I want you to see, feel free. Pretty go off if you need to. Okay. I want you to go on, I’m sorry. I’m ready. This is what I hear a lot and I know there’s, I know there’s some accountants right now who already are ready to fight me. I can just sense it. Here it comes. I met with the client the other day. Someone I know fairly well. I won’t mention what city they’re in. They’re not in Tulsa and they had an accountant who’s not based in Tulsa. So I’m just, it’s very, it’s nobody we know directly, but there are, this is what they’re, this is what their account and their advice, their accountant gave up. They have a business that does the about 800 grand a year of gross revenue.
Speaker 3:
Okay? And we know that as profit wise, they do about 25% profit. It’s like 23% okay? So we’re talking a couple hundred thousand bucks. Yeah. Their accountant said, you tell me if you just want to get your thoughts, their accountant said, just take a salary of two grand a month, two grand a month, and then just take distributions for the other one 180,000 and then run a lot of expenses through the business. That way you don’t have to pay more than your fair share. Now again, $800,000 of revenue on a profit of about 250,000 after paying it all the employees and the advice from the accountant, who by the way will not have to deal with the, the accountants by the way, don’t go to jail, don’t have to pay back Texas. They love to have you. Accountants can go, well, I mean I didn’t tell you that. So Z, talk to me about this idea of taking every ridiculous, really low salary and then trying to avoid all taxation and give us the balance on what kind of taxation you believe. Somebody who’s, how they should pay themselves. If they do make 200 grand a year of profit, how should someone pay themselves in your mind?
Speaker 1:
Well, there there’s, there’s two different things that, excellent point number one, they should take part of it as a W2 salary. They should take part of it as distributions. Okay. How much of you and your mind, well, it depends on the industry. It depends on the industry standard. It depends on what’s arguable to an IRS agent. It’s fair and reasonable. What’s fair and reasonable compensation, reasonable compensation for what they are doing. If two grand a month ask us, it’s two grand a month. Reasonable. It depends. It could be a passive owner that could be doing nothing.
Speaker 3:
The case is set up all the scenarios. I want to get your take on this. In this case, this particular situation, this person works about 10 hours a week and is the manager of the thing. They, they, they hire all the employees, hold them accountable 10 hours a week. They’re not in the store, in the VA, in the business. 50 hours a week or 40
Speaker 1:
Well, three and 10 hours a week. Let’s do the math on it. They were in 40 hours a week. They’d be four times of money. That would be four times 2000 and be 8,000 a month. Okay. Eight times 12 is what? A hundred and a 1296 I think. Yeah. 90 $96,000 50 bucks an hour. It’s still, I mean, I don’t, I don’t know if that’s too far off, is it? I don’t, I don’t know that it is. It may not be. I mean, again, now you could argue it that way, right? If you’re an MD, you know, a brain surgeon that’s too low. If you’re a roofer, that may be reasonable. Yeah. And you’re not driving a nail and you’re just kind of like you said, 10 hours a week.
Speaker 3:
So you’re saying, I’m just make sure I’m getting this. You would look at what you would normally spend a pay someone to do that job,
Speaker 1:
Correct? Yep. And that’s where the argument, there’s your arguable position now. Then you could, you could go a little bit lower than that. It’s going to be more aggressive. You get a little bit higher than that. It’s going be a little safer. But I think that’s the, that’s the threshold that an IRS agent would look at. And now also too, what’s up with the new tax changes with with Donald Trump is, is that there is like I was taking
Wes Carter:
From, from some of my businesses, I was taking Debbie too, out of, out of, out of a lot of them. Yeah. But now I’ve pared that down some and taking it more as a distribution because of tax, because the new tax coach, so that’s not,
Speaker 3:
I just agreed that this is the thing that makes me crazy. This is what part is the accountants who advise these people. I see it all the time is they say, well I don’t want to tell you what to do, but, and everyone kind of dances around that, but no one will give this guy direct advice. So I’m saying you can’t give them tax advice cause you’re not an accountant. You can’t give them tax advice because you don’t know the situation. But somebody’s got to give these people advice. And when I see what I see on my end, I see the, I see it three years later and they go, there’s a guy in Wisconsin I just talked to who’s literally paying back like four years of taxes cause he was taking a salary of like $1,500 a month and taking the whole thing, his distributions.
Speaker 3:
And he goes, I, I’m currently in a bind because I’m paying hundreds of thousands back. And I’m like, are you being ton of a hundred percent honest with me? You definitely did pay taxes on your pay. And he’s, yeah. And he says, but they said, because I, this is my only job, my only income source. It wasn’t reasonable for me to be paying $1,500 a month to myself to manage this operation and now I’m paying it back. And so what advice do you have? And I’m going, I’m not an accountant, I just wish the accountants could come out and it’d be like a hard, you know what I mean? I think people want to do the right thing.
Wes Carter:
Accountant, CPAs and they are there is a standard that they are held accountable for aren’t they? Yes. I mean there is, I mean if they’re stamping, if they’re filing your your increments and that’s why, I mean you see this with attorneys sometimes too. They don’t want to give you a definitive answer. They say, well probably it’s this, it could be this. Cause if they’re wrong, they don’t want an email or a letter coming back to them three for a malpractice claim. Right. You were wrong. You caused me damage. Right. And it’s important to know too, this answer changes depending on what kind of entity you have. A single member LLC, a multiple member LLC, an S Corp, a C Corp, those all have different rules on how you pay yourself. So you know, it is important to find a good CPA. You know, if they’re being squirrely with you, go to CPA’s out their CPA and some of them will be willing to give you a straight answer. Okay. They get call our, one of our sponsors, Paul Hood, you should
Speaker 3:
Give him a call hood, cpas.com hood cpas.com. Now. Greg, here is my, my next and final question from the thrive nation. This one hits home. This is a tough one here. Okay, here we go. There’s a member of the thrive nation who about a year ago, came to a conference and met them. I shook their hand and this person builds big homes. That’s all. Just leave it there. They build big homes and they asked me to say, clay, could you review the contract that my attorney gave me just to see your thoughts on it, so I’m not an attorney. I would love to look at it and see. Yeah, and I looked at it and know this is what, this is what I do. I’d probably XE, I’m probably a bad guy, but I got out pen. There’s no doubt about it. I got my pin, I queued up some music just so the listeners can kind of re-enact what I did here.
Speaker 3:
I got out my, this is how I read documents and everyone has their own flow, their own way. I’m just telling you, this is literally how I did it, how I, how I would do it. I would keep the last samurai soundtrack, let me get it going. And then I’m going to sit there and read this thing cause I can’t read quiet. I can’t read it. The office, I’ve got to sit down and I’m reading and I read, I come and I, I after reading I go, no, no, no, surely not. So I take out my pin and I circle and I continue and I re and I circle circle and I go through and there are grammatical errors everywhere and it’s crazy. The camel casing is wrong. So it’s like, you know, if you were talking about a movie and the movie was like the Phantom of the opera, those capitalized piece capitalize the Phantom of not capitalized.
Speaker 3:
The opera is the, the these not capitalized. Oh is that they did capital kit. The capitalization was wonky everywhere. That’s what caught my eye right away. Yeah. And then the date, like the year was wrong. The year was wrong, like vastly wrong. Like not in the last year or two. It’s like template and then there’s like and oars but like the and slash or they’re on top of each other without spacing and that kind of alerted me to like we might have some problems here. So then as I really dove into it, I am not kidding guys, it was probably an Andrew see me do this before in our meetings, like 50 airs all in red pins. So I gave back to the client, scan it to him, sent it to them and I said, I just talked to him about all of the grammatical errors and then also the substantive errors like the law, like the, I worry about the letter of the law, but this, the spirit of it seems to be jacked up to if you have a contract that you get from your attorney that is filled with grammatical errors. The question is should you be worried
Wes Carter:
We, I mean yeah, you’d definitely be worried. One. I will admit from my profession, we are susceptible to using templates and copy and paste and it’s a common error you see from an attorney’s office and it’s a sign that the attorneys rushed through it. To be honest with you, I know when it’s happened to me on occasion, it’s because I didn’t take the time to proofread. And if they can’t take the time to proofread a document that’s important to you, then they’re too busy or they’re lazy.
Speaker 3:
And you’ve told me a lot, this is what West does to me. West goes, I will get that document to you. Today’s Friday. Yeah, I’m going to get two and 14 days from now because I want to prove it and I want to, I want to, you know, and I, and I go, that’s great. I’ve had attorneys in the past, they’re like, I’ll get it to you tomorrow. Yeah, 30 minutes. I’ll have it 30 minutes, I’ll use you. And so does that mean, cause again, is it possible to actually graduate from law school and not know how to write a contract? Is that possible?
Wes Carter:
There’s, there’s good and bad attorneys. Just like there’s good, good and bad everyone to teach you how to write a contract in law school. I mean you teach, you learn theory. In law school, I’m still learning, writing, you know, after practicing for a decade, picking up tips here and there that you don’t, nobody teaches you unless you come from an English background. So that’s one thing. But the other important thing is grammatical errors matter. The addition or deletion of a single letter can matter. I mean, I’ve seen multimillion dollar lawsuits turn on one word. Yeah. And so those matters
Speaker 1:
An a instead of an ad, right? Yeah, it was. I got it. I got a legal question before you wrap up the show today. That is, let’s say hypothetically you hire an attorney and through a series of not get anything done. Yeah. You change attorneys. I know you never fire attorney. I’ve learned you substitute attorneys. So you substitute the attorney and they’re in the subsequent timeframe. After that you get a bill in the mail from the first attorney. Right. And the bill has a lot of, it’s a big bill or these are all theoretical circumstances bigger than you think it probably should be because of the lack of stuff that got done and on this has broken down all these, which I almost think are like silly things, you know, reviewed the files, reviewed and this has only happened to me Z about five times. Right. What is as for me but what is, what is my legal recourse in that? I mean it seems like all the hammers are in your hand. Well there are, cause you guys made the rules exactly
Wes Carter:
Where I would point someone as we’re bound, each state has a bar association and that that maintains a set of professional ethical codes that we have to follow. And your recourse is to file a bar complaint if they’re not going to handle your concerns cause we’re, we are bound in the way we bill what has to be reasonable and proper. Okay. So if I’m billing new excessively or unfairly or things that are without your knowledge, you didn’t get the work done, you know, there was no quid pro quo there. Then that’s where, that’s where Barca plates happen and to attorneys out there. That’s why you should make good on those do the right thing.
Speaker 3:
There is a, a young lady who I know very well who’s recently was going through a divorce and she called this divorce journey to get his feedback on how to proceed, not to engage, but to proceed to, to see, so she met him for a consultation and the, she talked for about an hour. She said, I just really generous with his time, like this is a single woman who’s divorced with a kid. He’d go, I guess the dude flicked out disappeared, and so she’s like, he was very generous and I remember just saying the office, I’m like, how generous she was. He was like, dear, if I could probably closer to two hours. I’m like, okay, you get a bill. She said, no, this is the first, it’s the first half hour consultation, and I said, Oh, and
Speaker 1:
They’ve got a pretty big,
Speaker 3:
Oh, now I can say this. Honest to God, Wes always tells me, he says, if I were to do this, I’ll be clear. This is what I’m going to charge. Yeah. And he always has that discussion. He says, do I have to move forward? He does that all the time. Yeah, that’s lovely. That, but it should. But I have yet to deal with an attorney except for you and Larry Taylor who operates that way. So Larry Taylor and you are the only two attorneys I’ve dealt with that do that. The other ones are like, Oh well tell me more about this. And they’ll actually call them. I’ve had one guy called me to check in and then bill me and it’s like a quarter of an hour.
Wes Carter:
Yeah. And the other thing we don’t do, we don’t bill for legal research, copying postage. You know, you see itemized [inaudible].
Speaker 1:
It’s crazy. I feel for my time and part of that building for those that get done build on for things to get done. Not the idea that you’re sitting back thinking about it every day. The shower, the billing me, you know what I mean?
Wes Carter:
The other move I love is when an attorney will send you that final bill. And then let’s say I’m the new attorney. I say, Hey, you know, John DOE, Esquire is, he’s hired me to take over this case. Could you kindly forward me the file? Oh, as soon as, as soon as soon as he pays his bill, I’ll give you all this records. And you know,
Speaker 1:
That’s just so tacky. It’s just a, it’s so tacky and comes back to doing business the right way. Yeah. And, and you know, and so it’s kind of like when you look at the stuff and you go, that can’t be the case because if you spent that much time researching and reviewing and doing all this, we would have, the ball would have at least gotten off the gold line down the, down the field a little bit.
Speaker 3:
Do you notice he’s got a little bonus? Sneak with motor city. I want to say, make sure the shit show always stays relevant. Okay. Fox news, CNN, a lot of our listeners go there occasionally. They wasn’t an am radio. They get it. Trump tastic the Russians. What’s your legal take on what’s going on? Trump tastic the Russians. Was he involved? Was he not involved? What’s going on? Cause we’re business people, we don’t get into this stuff. Just give us enough surface level surface level epidermis knowledge so that we can see we want to stay topically relevant.
Wes Carter:
So it’s interesting because now we have a two year investigation. We have an attorney on my sat costs, we have an attorney general that has summarized a two year investigation of four pages and said, here you go. This is good enough for what you need to know. And we have both sides, you know, to some degree unhappy.
Speaker 1:
Which means it’s probably a pretty good result. Right? It’s usually a good compromise.
Wes Carter:
The Democrats are still going to push for full disclosure of the entire report. I think the ProPublica ones are probably going to push back against that to some degree. I think there’s gonna be a lot of confidential top secret, you know, sources and methods kinds of information. The report that’ll have to redact it. I doubt we ever see the full report. But it, it, the issue will not go away. They have now pivoted the, when I say they, the Democrats have pivoted from, okay, well there’s no collusion, but we’re going to go after obstruction now and we’ll keep pursuing investigations on obstruction. So I think it’s a very interesting, the other recent turn of events, which is interesting from a legal standpoint as an attorney is Michael, I can never say his last name, right. Avid. Naughty. Naughty has now been Illuminati criminally indicted for making a demand on Nike. He said, Hey, you’re about to have your earnings call. And I’ve got this guy that knows some stuff allegedly about some wrong doing pain athletes. Pay me about $30 million or I’m going to crash your stock. This is the same magic Mike who did what? This was the same gentleman that represented stormy Daniels,
Speaker 3:
The incredible actress. Right? It’s incredible. [inaudible] Okay, I’ll wait for you to like real, real off. So if you’re out there, if you’re out there that’s a hot topic right now. Well, it is. And the fact that [inaudible]
Wes Carter:
You can get criminally indicted for making a legal demand the wrong way. It crossed a line. The, you know, the feds are say cross into extortion and so it’s an interest.
Speaker 3:
Oh, you guys do. Where do you guys draw it? Come on, attorneys. It’s all about legal extortion does, it might smell. I should have been an attorney. I can extort more money. Z, I have porn. Start extorting money out of you. I’m going to do it legally though. I’ll tell you what. I’ll tell you what, man, we have a great relationship with West Carter because he’s always a great attorney, but we can’t say we can’t, we can’t say on this show. We can’t say he’s the best in the world. We can’t even say like, you should use him. We could say his website factually is winter’s King. Yes. We can’t say that. And we could say, we’d go on the record and say he’s an attorney and you could go on the record and say you’re using them. They’ve been very happy with the results. Can I say that West?
Wes Carter:
You can, but you know that your results aren’t indicative of what I might be able to do for some [inaudible].
Speaker 3:
Great. What.