Contracts and Taxes

forty five minutes or so. This was inspired in part by the artist Jailly Roll and a clip that he did on social media, which I then turned into a piece of my straight Talk Live series on my platforms where he talked about contracts in the music business and he broke down how artists get in a bad spot. I'm not going to say taken advantage of, because as I will describe here, in most cases, they're not being actively taken advantage of. They're just not actively paying attention

to the thing that matters most. It's the music business. In that example, it's the business of music, and to think about it in any other ways is not to understand what you're doing. Or to quote my dear friend, my duty departed friend, Quincy Jones, he says, if you think you're in the music business, and you don't own music rights, publishing rights, licensing rights, some kind of rights, writing rights. You're actually not in the music business. You're

a temporary performer. Drop the mic. Statement by Quincy Jones. Jelly Row goes into this thing, and you can look at the foot clip on mind, social media platforms, at John Brian everywhere wherever you platform you Tuesday to focus on Instagram is probably easier. I break this down in great detail, but the key part of this is he explains that when you owe a million dollars, you've been given in advance. Make this clear. You've been given an

advance for a million dollars. You don't realize that you owe that money back. It's not a payment and you know, oh, that's all good. Next item. It is an advance against revenue. And the way that works is you you extract things that give it a million dollars. It's supposed to pay for productions of your albums and your videos and your

business expenses. Oftentimes people go start raving mad and start spending money on stuff, you know, cars for their friends and jewelry and travel and all of that, and then they run out of money. And they go back and they may ask for some more and that's you know, they think they're getting some more money in payment. Really you really just increasing your internal credit line. And the way that the record company gets a back is they've got a contract with you in this example and in

his example was seventy thirty. He thought that was a really great deal. Some artists are eighty twenty. Some artists are ninety five to five mean meaning the record company in this example. And don't get mad. Then business as a capitalist is just a it's just not emotional. Business is a gladiator sport. It's a non emotional situation. It's not meant for it to be personal. They just it is what it is. So again, be careful of the contracts that you signed. But and this is in fair

exchange is no robbery. So in this example, he owned thirty percent of his revenue. They owned seventy percent of every dollar that was made until he paid the advance back. Let's use a million dollars as an easy number. So until so they got for every dollar of new album sales. To make this easy, the record company got seventy cents

and he got thirty cents. Are paid back at the rate of the deal, which means that out of his thirty cents, the million dollars he was advanced gets paid back, and he keeps paying that million dollars back from his thirty percent while the record company is getting there seventy percent until he repays the million dollars in total, in which case he then starts recouping thirty percent to his pocket paid back at the rate of the deal, which

means that the record company, the fancier, the venture capitalist, the one who's backing you here, the one who's taking the most risk, may earn a million dollars before you even get your first cens of your thirty cents. In fact, they will make earn a million dollars the're gonna earn. They're gonn get their million dollars back, but they may own it, earn another million dollars or seven hundred thousand dollars or you know, it depends on how this gets calculated.

But they may earn a million dollars back on top of your on top of your your million that you re imburse them before you make a dime, because they're making a seventy thirty split. It's actually they can actually do better than that in an example, and fair exchange is no robbery. So just just watch the contracts you signed, because if it's a ninety five to five contract, which

some artists do sign, I mean, that's really painful. They make ninety five cents of every dollar that comes in, you make five cents, and you're going to pay them out of your five cents the million dollars back, right, And yeah, we don't want to do that calculation. So let's get into the positives here, because these contracts don't have to be ankles around your weights, around your angle or and you know, some kind of a negative situation that can be quite empowering. They've been for me in

most of my business experience. But actually I've had some bad experiences too. I've written some bad countures, I've had some bad agreements. I've had run ins with the irs and franchise tax board in California. We'll get into that. But let's let's talk about contracts in taxes as a

foundation for your financial success. Let's now start with my own personal story, and I described this in my book Financial Literacy for All, which is a bestseller, been a bestseller for the last year encourage you to go get your copy. And when I was in business, I wasn't paying attention to paying taxes because my view was the company wasn't making money, so why should I worry about it? And I worry about it when I become profitable. I actually made two mistakes. I hadn't paid I hadn't filed

personal tax returns for about six years in a row. Yes, me, this is one of my teens. I was homeless during the time. I was homeless six months of my life, So I guess you'll understand some of that. I was just rolling really fast, trying to hustle. You can all relate to that. But no excuses I should have filed my taxes. Well, that wasn't the worst part, the fact that I hadn't paid my taxes, because that was not I didn't filed taxes or I didn't know any taxes,

but I hadn't filed them. So once I did file them, I owe penalties. And the IRS is an extraordinarily punitive lender, so you don't you want to owe money to anybody but the IRS. And they didn't come after me, they didn't threaten me. I was a small fish not making a lot of money at the time. But I finally filed them all at one time before they came up to me. I came to them, which I'm encouraging you to do, and I just paid the penalty through a

payment agreement over time. That way they hit me was later on, when I was making a little money through the business. Well, the business was not profitable. I had a lot of cash flowing through the business. I had employees I was paying. I was not paying with holdings out of the employees paycheck. So you when your employees are a W two employee, they're a salary or hourly employee, You've got to pay with holdings out of that. Well, again,

I figured the business wasn't profitable. I wasn't profitable. Why should I do that. I just write them a straight check for what I owe them. The Franchise Tax Board the State of California out a wind of that, and they literally put up a cash register in my lobby

and they wanted their pound of flesh. They would take every receipt, every check that came in that front door until they got their paid paid back the taxes plus the penalties and interest that I owed them from the from the employee with holdings that I stole from them. I didn't steal it, but I I burrowed it. And and it was very painful. We're talking about you know, it was, as I recalled, bout forty thousand dollars in total. And and back then that was a that was a

that was a death nail for me. And I had to hustle and take care of them and take care of my responsibility at the same time. And I learned a very valuable lesson from that experience. Uh, those two experiences, which is just just treat the irs as your business partner and file your tax returns. Look, you cannot on your life without you know, this whole country runs on taxes being paid. Your police are being paid by taxes,

Your schools are being paid by taxes. Your the roads and gutters and the maintenance, the building of bridges, uh lights, street lights, sanitation services. I mean, all the infrastructure for the city you live in and the country you live in is paid through taxes or as a to pay this really plane, even if you want to distribute money like a socialist, you have to first collect it like a capitalist. All this is connected and folks as well I don't you know, I don't want to be a capitalist.

I want to work for nonprofit. Where nonprofits money comes from, and it's in this case the government in the government gets that money and money from taxes or if you get in your money from charitable contributions from wealthy individuals, those individuals are getting a tax break because of making a charitable contribution to you, which affects Hello, they're taxes.

Al Capone, the famed gangster, did not get taken into prison, arrested, and then put ultimately into prison because of great murder mayhem, all of which he on some level was guilty of but was never convicted and dieded but never convicted. He just got away with it all. But when the IRS came up to him for tech, when the federal government came up to him for tax evasion, boom like. They're

like the government was gangster. They're like, you can make all this money illegally if you want to, and we can't prove you made it illegally, but your lifestyle and such that you can't do that without making X kind of money and you didn't pay taxes on that, so it's ill gotten gains. We want to share, and they put him and they locked him up and he died a very painful death. After that, it was over. So pay your taxes. So you're going to understand the basis

of contracts. In taxes, you're going to learn how to protect themselves, yourselves from unscrupulous people, and protect your businesses. You're going to get best practices for wealth safety and well building wealth safely and legally and sustaining it retaining it. Okay, So a contract is just simply an agreement, right to start with the basics. A contract is simply in agreement. But it's only as good as as it's enforceability, and it's only as good as a people. I might also

add who are signing the contracts. If you have two unethical people on two sides of a signing of a contract, the contract is useless because it's only as good as a full faith and ability of the people signing it. But let's assume that people are honorable. So every major deal, partnership, or investment should have a contract. I love limited liability contracts. LLC's are simple or elegant, and they're easy for anybody

to understand. I have a ton of LLC agreements. When I had the Promise Homes company, I since sold most of the company, But when I had that company, we had just I mean, I think it was hundreds of LLC agreements. The ideal situation, we owned seven hundred homes. Just under that, the ideal situation, which would have been to have each one of the seven hundred homes in its own limited liability corporation, its own LLC. I think we bought the homes in bunches, so we would have

a group of homes in one limited liability corporation. So if somebody tripped fail of fake injury or whatever on a house, or wanted to sue because they realized I owned it, or whatever, you could only sue the asset or assets that are in that bucket of assets in

that LLC Limited about ability corporation. You couldn't punch through the LLC and get to me or my family or you know, my other companies are all that kind of stuff, because you're greedy and unethical in that situation, not suggesting somebody's greedy and unethical, but limited liability for alcs really help in that regard. So key contract clauses in what they mean payment terms avoid getting paid late or being paid not at all by having payment terms. What's the

scope of work? It prevents misunderstandings about the responsibilities that you have in a contract or someone else. What's a termination clause is what happens if things don't work out in an agreement. So so how do you basically how you get out of the agreement? By the way, I must just throw one in here. In perpetuity, right, that means that I just I love that frame. I was with Cam and Cam Newton, the NFL star, We did

a podcast together on his show Funky Fridays. You'll be hearing that soon and it's a great, great interview with him. He's a great guy. And he learned the phrase in his contract negotiations in perpetuity in negotiating on his media company after his football crew career. He learned that lesson and it's stuck in his head. That means it goes on forever. Right, Whatever you're signing in perpetuity means you're

giving rights forever in perpetuity. These things really matter. What's a non compete and confidentiality it's protecting your ideas and your businesses. Essentially, noncompete agreement and accomplished reality. Agree. Let me talk to you about a lesson I learned in a contract I had done a deal with. Well, let me tell you a bad situation first, and I'll take

you a good one. So when I was coming up in business, Brian Group Companies, I believe it was w You know, if you got the name of the end of the evening, it was Brian New Companies and WCC

Funding Corporation. I was like nineteen twenty one years old, and I ran this business in La Los Angeles, and we were in an office building, the Westwood gave Way Complex at Santa Monica in Los Yenaga, and my assistant now my chief of staff, Rachel daff I'd ask her to go downstairs every day pretty much and get myself a sandwich or whatever, and I would just work through lunch.

And I was so focused on working and hustling whatever that I created my own terms for how I was going to pay that bill, I guess, and I had failed to pay the cafe bill downstairs. It wasn't much, it was eight hundred bucks or something, but even work, and that guy sued me. I have never been sued by anything important like no, no, anything important. I've taken care of all my big deals, all mortgages, contracts. My credit score is like cool, it's all. But this one situation,

these small ones, I let these things slip. I didn't sign, I didn't have a contract with the cafe owner. They let me slide basically on you know, having an informal situation, and they took me to court, small claims court, and it was very easy for them to get a judgment against me. In that case, I didn't show up, so the judge hit me with a default judgment. It was a default judgment because you I didn't show up, So if you don't show up for court, you will get

a default judgment against you. And it's very painful because there's a one sided conversation and you can't argue about it. And I ended up owing this guy. It wasn't a lot much with eight hundred thousand dollars, but back then there was a lot of money for me and the more painful ones. I had a guy, Jimmy was his name, and it was Jimmy's car detailing. I remember Jimmy and Jimmy would wash my car and it was a Mercedes.

I think four to twenty sl Sel and I love the car, and he would have washed the car once a week. And Jimmy had a contract. Jimmy didn't have have a high school education, right, Jimmy didn't have good teach but Jimmy had a good sense. And Jimmy on his bill that I or my assistant would sign every time he finished the washing a car, we'd sign an invoice it said at the bottom ten percent fee compounded with penalties for all unpaid balances, where this whole thing

was an unpaid balance. And this dude ultimately took me to court. I thought he was a friend. He was like, no, I'm I'm a businessman, or as as jay Z would say, I'm not a business man. I'm a business man. And Homeboy took Homeboy with no teeth oldofsiss who I thought was my buddy who was washing my car, oh and returning back to the hood while I was at Westwood Gateway Complex in West la and that marble office building

trying to be important. He took me to court in one because he had contract agreement with me and I didn't pay attention, and he was right. He had me my signature and all these invoices, and it said clear as day that I would pay a ten percent feet on the unpaid balance. It was all an unpaid balance, and I'd paid penalties and interest on the top of that. I had no choice but to pay him, and I was honored to do it. He earned it all that, and I actually felt very bad about it. Lesson learned

later on and later on, meaning like recently I signed. Recently, last ten years, I signed a major contract with a couple of friends to start a business. And it was a general partnership, and I had a majority of ownership, and my two partners investors had They owned forty percent and I owned sixty percent. And there was different kinds of shares. I had essentially common shares, and they had

preferred shares. And it is what it sounds like. Their shares were preferred at a preferred position and a preferred in rights right than my shares, my common shares were as it sounds common and like I didn't have common sense to pay attention to this. It turned out just fine, by the way, there were great guys. But I thought I assumed because I owned sixty percent of the company that that just meant I had a majority vote, a majority of view, I'd run in the way I wanted

want to. And I was naive because these were the money guys, and they knew what the heck they were talking about. I was a thousand there, but they were billionaires at least one hundred millionaires. And well I wasn't a thousand aire, but you get the point. I was outmatched on the finance understanding side of this equation. These

guys were geniuses and in what they do. And even though I own a majority, their attorney explained to me one day when I was pushing a narrative, pushing what I wanted to do, John, you don't you own a majority of the ownership, but they control a majority of the company through their preferred shares. I'm gonna go off with a tangent here just time. I tell you. There are things like there's poison pills you can put in

a stock agreement. Like I believe Mark Zuckerberg, who I know at Facebook now Meta, has a poison pill that no matter how much the stock gets deluded, he controls the company. There are there are founders who put these

poison pills in there. I don't know that to be the absl case from that met up, but I'm pretty sure it is these contracts where they found a company and they will structure it through the goverferance agreement and the rights where their their shock their stock has outside weight to other shareholders irrespective of how much they get diluted. De looted means uh as deluted is the opposite of concentrated. Concentrated a strong and rigid and intense, and diluted is

what it sounds like. You delute a drink at a club. You know what that means, right, they gave you some cheap drinks. You dilute your interests, You have less power. So so that's an aside. If you want me to go into that, put that in comments when you see this online. I'm happy to go into greater detail and explain what the poison pills and all that kind of stanf some means means and stands for. But I want to get through a lot of content here in a

very short period of time. So back to the basic premise that I had basically synthetic equity at common shares, and they had preferred shares with rights and privileges that were brilliantly crafted and they didn't do me no wrong. It was all there for me to view. I was casual about it because I knew them, and although probably would have changed much. Actually they but the attorney explained to me, because they put up the money, they had more rights and they were right, and so I could

not just do as I like. We ended up working it out where I did as I preferred, but I had to consult with my partners. I did not have the contractual right to do that. They had to give me the right to do that, and over time, as I proved myself, they loosened the grip on the contractual rights, and at the end of the term, at the end of the day, I was actually running exactly the way I wanted to. But I honored my agreement with my partners,

and they left that deal very happy. We tell you about negotiations, which is not part of a contract per se. But if you leave a slight every good negotiation means you leave the negotiation, but everybody in it leaves slightly irritated. Okay, if you have a good negotiation, you leave the table. Everybody slightly irritated, slightly annoyed because no one got everything. They wanted, but you got what you needed. Let me tell you some high profile entertainers and athletes who signed

bad contracts. Some examples. There's a group TLC love their music, they sign an unfair deal or some people some people might call an unfair deal with the Face Records. Now, I'm saying this in particular because there's a lot of people running around talking about my Jewish brothers and sisters and how somehow they've ruined the music business. And I don't know why people are picking on Jews. There are black people. This is in the Face Records, there's with

Motown Records. There's a bunch of black people in music. There's a bunch of white people in music. There's a bunch of Asian people in music, a bunch of you know, everybody in music. I don't know either picking on one group. But it's just wrong to point out that, oh, this contract is unethical. No, the contract is a legal contract. You just don't like it because you don't like the terms and how they got better a better negotiation to you because they are paying attention to the dollars and

you're paying attention to the music notes. And in this one example, it's the face wreck souse. We need to like knock that off, Like we need to stop all this hater aid and you know, hate his hate. We just need to stop it. And we need to stop blaming people because they're successful or more successful for us. Maybe we're jealous, and maybe we don't understand. Don't don't hate somebody. Try to learn from somebody. Try to understand how they've mastered the game, and you can master it too.

They want to be a great singer, a great dancer in this example, and you are a great whatever ball player or whatever, and you want to be a better business person. Michael Jordan Michael Jordan's Magic Johnson used to use his celebrity status to go approach the folks on the front row of the basketball games at the Lakers and go to lunch with them. These are the people who bought the best seats, and he wanted to trade lunch for business knowledge. Really smart. What is Magic Johnson today?

Not just an NBA great, He's a great businessman. So TLC signed a bad deal with the Face Records. They thought it was a bad deal. I wasn't in it. I'm sure the Face Record thought it was a great deal when they wrote it, and I'm sure they'd say whether people didn't pay attention, just like everybody else would

say people didn't pay attention. And there by the way in a negotiation, at the table is the bartering place, and one person is trying to extract as much from you as they can while paying you the least, right, that's their job. The other person's job is to give you the least value and while getting the most money. So both folks in that example are getting what are

doing their job. One person's trying to extract while giving you the least, the other person is trying to give you the lease while getting the most, and that is caught a negotiation. Hello, So capitalism is a glad eator sport. As I said, don't take it personal, which is business. Don't get mad, just get smart. And so with it's a face deal. They paid them only a fraction of album sales. So the lesson here is always understand your royalty structure and seek legal advice before signing a contract.

Don't be cheap, and don't think that contracts don't matter. Contracts absolutely do matter, and I don't want you finding out the wrong way that they matter the most. In these situations is against the music business. In this example, Meghani Stallion filed a legal battle with fifteen oh one Entertainment over a restrictive contract. The lesson here is a new artist should get an independent legal counsel, not just

a label provided lawyer. So if the lawyer that given you a from the label, they probably have an interest. Or as my friend President Bill Clinton would say, it's hard to get somebody to agree to the truth when the lie is paying their paycheck. Hello, I'll repeat that again. President Bill Clinton said, it's hard to get someone to agree to the truth when the lie is paying their paycheck. Or as I would say, to rationalize is to tell

rational lies. So if you are getting paid by the record label to be an attorney, guess whose interests you're most interested in. It's not the artist that you're in the room with, it's the person that you're aligned with. Said, I did a deal recently where and I knew what was going on. I did deal recently where I had contracts.

I let my partner draw up contracts, and it was sort of two against one, so to speak, And I knew that the contract would be imbalanced, as I would say, But I made sure that things that were most important to me were handled, and I let them get away with the things that were less important than me, because I didn't want to win the battle and lose the war or the spirit of that partnership and where we were going next was more important to me than fighting

over the details that they were fighting over. That's another conversation as a more sophisticated situation. In order to play that game, you know the game you're playing, it's got to be chess and not. You know, some people are paying chess, some people are changing checkers. I'm playing chess. Lo Wayne. He struggled with the cash money records deal for years. The lesson was always have an exit clause and dispute resolution terms in your contract. Is easy to

get married, it's hard to get divorced. Scottie Pippen, the NBA signed a long term deal with the Chicago Bulls that severely undervalued him. In his opinion, I sort of agree, but again, it's just business. That is not to Chicago Bulls job to pay you top dollar, pay you every dollar they can pay you. Their job is not to give you, to empty their pockets to give you everything they got their job is to give you at least that they can that they can get away with getting

you with having without having you be unhappy. So what's the lesson here? Consider how contracts evolve over time and inflation is a factor in a long term contract, and consider all that before locking in long term deal terms. You can do contracts and phases or have them have renewal clauses and have you know, sort of check in points in a contract. So the best practice for smart smart contract and get it in writing. A handshake is not a contract. Hello, Hello, Hello. People are like, I

don't remember that you remember that? I don't know. I don't know if people get get amnesia when they don't like a situation, right, uh, and read before you sign what is the fine print? And if you don't like fine print, get somebody with glasses who's an accountant and a lawyer who love fine print. By the way, you're a counting your lawyers should not be at the club hanging out with your people. If folks, if your if your professionals are hanging out with you the club, then

may be the wrong people you want, boring people. You want people who don't want to go to bed at eight o'clock two, theoclock at night. Right, you know, if you want whose evening starts at one in the morning talking about the attorney, they are lawyer, they your account

That is just not my suggestion. You want left brain analytical people who are absolutely is obsessed with accounting and numbers and all that stuff, as you're assessed with music and notes and all that stuff if you're in the music business, so the fine print is really really important. They can get you on the fine print, and somebody can get you on the interpretation of five words that

look common sense to you. But an attorney will understand uh uh that gets you know that needs to be uh that that needs to be treated in a very special way. But only attorney would know that. Hire an attorney when it when it when it's serious. Don't do a d I Y contract when the stakes are high. In other words, don't do a do it yourself contract when the stakes are right. I mean going to YouTube talking about I'm a lawyer now, because I watched the

YouTube video, you get clocked. So common mistakes that can cost you not defining clear payment terms, signing something without understanding all the terms. This is a common mistake. In the music business, not having a contract at all. Verbal agreements equal risk. Okay, how to play the game and win, right, And let's now talk about the tax system. Uh, tax laws favorite business owners and investors over employees. Uh, it's

just the way a t I is. You know, tax business owners like me and investors have lobbyists, right, and they spent a lifetime in Washington, d C. Trying to get terms that benefit them. So don't don't get mad. The game is, understand it. But also business owners and investors take more risks and employees. So there you go, and an employee as a W two relationship, so the chances in sort of taxes are sort of pre defined in that situation. So you know, as long as you

understand it, you should be. Okay, it's more dynamic for business owner entrepreneur like me, but understanding your tax strategy can help you legally and contractually more than more than you can truly appreciate. For instance, Warren Buffett said famously a secretary, he pays more taxes than I do. People got all upset about that. Well, it's true because Warren Buffett is not a W two employee, meaning he doesn't take a salary, or he doesn't a paycheck. He doesn't.

If you don't have a paycheck every week, every month, then you don't have taxes taken out of it. His secretary was a W two employee. Warren Buffett was compensated through capital gains when he sold stock, when he sold a business, when he liquidated a business, then he got capital gains, a capital gains tax obligation. And the taxes from W two's are thirty thirty five, fty percent sometimes

depending on federal state taxes and so forth. But capital gains taxes is twenty one percent, twenty percent, depending on where you are. Hello, So I love capital gains, and that's what happens when you take more risk and you you sell some real estate, or you sell a business, or you sell some stock. That's a capital gain, a gain on your capital. It's a different tax structure. So one Buffet paid out crapload of taxes. He doesn't pay any income tax. He paid capital gains tax. He didn't

pay traditional income tax. Most of the taxes actually paid this country paid by the wealthy. So anybody no need to hate it on the wealthy. Y'all not paying your taxes. They do. We I guess we do pay the majority of taxes in this country, so feel good about that.

It's just a different kind of taxes. And maybe I'll come to do another if you want me to do another video on this, sorry, another podcast on this, to go deeper, I will be happy to just just just tell me in the comments when you see this on a video roll or on a social media clip, and I'll be happy to take note of that. And let me tell you some high profile entertainers and athletes who struggled with taxes. Wesley Snipes, actor, Sir time federal time for tax evasion. Yes,

went to prison, the movie star. What's the lesson? Always file your taxes, even if you dispute the amount. A friend of mine called me recently because he was about to have his taxes, his income tax, of his income, his paycheck taken from him because the federal government had reached in his bank was an employer and garnished it.

And he was days away from having a paycheck go from you know, twenty thousand dollars or ten thousand dollars whatever, it was down to literally one hundred and fifty bucks, he told me. And I was able to make a phone call get him connected with some folks and he was able to make payment arrangements with the irs. And you know, they don't want you to go to prison, and they don't want to take your money, want their money. So they made a painting arrangements and it was It

was a fair changes, no robbery. Both people walked away slightly irritated but happy. Some entertainers, some creative people, don't think that taxes are legal or whatever. Look, don't don't make that. Don't do that. Don't do that. Don't start fighting with the federal government after you've made a lot of money talking about the federal government's not a real tax in structure is not real. No, no, no, that's

a philosophical argument. You will lose it. Right again. I'd rather owe money to my mother, god, rest of a soul than the federal government. Pay your taxes, file your returns. If you wanted to fight a legal battle or philosophical battle, separate from that. Knock yourself out. But not after you owe some money, after you made some money, and then you decide you don't want to pay it. That is a bad move. Lauryn Hill, the singer when to prison for unpaid taxes. Did you hear me? Hello? Hello? Yeah?

Lauren Hill and Wesley Snipes went to prison for unpaid taxes. Lesson, never ignore irs notices, work out a payment plan if needed, give them the respect of a partner of a general partner. Alan Irison NBA star blew through millions was saved by a trust fund. Lesson set aside money for taxes and long term security. Fat Joe the Rapper face jail time for failing to pay millions in taxes. Lesson, have a

trusted CPA or tax attorney to keep you compliant. I have a tax pro here in Atlanta, one of the big four firms here in Atlanta, Big six firms Aprio. I use them. I think they're fantastic. And I have a I have a let me see. I have a accountant, I have a bookkeeper. I have a controller, I have a chief financial officer. I have an auditor, and I'm a chief accountant outside of countant, and then I have an auditor. All have different functions. I made sure that

I take that. I make sure to make that money straight. I was born at night, not last night. You never kid me, catch me slipping, and if I can at all afford it. Avoid it. When you pay your taxes, by the way, you pay attention to public services. I was I paid thousand dollars in the state taxes one year in Georgia. Yes, the total tax bill was much much larger. And I drove down the street and ran

over a pothole. Do you know I would like went back home and wrote a letter to the mayor and the city council people, and the county officials and the and the state transportation officials and the governor's office. Hey, you need to pay you need to fix these potholes like a meet Like I just paid eight hundred thousand of dollars in the state taxes. This is I'm literally that's literally my business. Right. You know they paid it paid? Do you know they they filled that pothole and quick.

I'm a taxpayer. And conversely, nobody washes rental cars. Hello, if you drive a rental car around, you don't own it, what do you do? You drive it until the wheels fall off? The dirty is all all get up in two weeks, take it back. It's filthy. You can be a saint and you don't wash the car. It's a very rare person that washes a rental car because you

don't own it. There is something that happens when you when you own something, when you own a house, it's amazing that when you rent the house, the lawn is up to your eyeballs. When you own the house, well, the lawn gets cut somehow. DMX the wrapper he owed millions to the irs. Lesson taxes are not optional. If you earn money, plan for what you owe. Understanding the basics income tax versus capital gains tax. So you know, as I've said, investments are taxed differently and you're taking

more risk. It's a more complicated explanation, but essentially capital gains is a better deal if you ever get to a point where but you're again you're taking risk and lose everything. There's no guarantee with an investment that's going to pay off, and you're not getting a regular paycheck.

So the American capitalist system rewards you a little bit by charging you a reduced tax amount, but it's still a lot of money if you're making If you're talking about over a million dollars somebot ten fifty million dollars, twenty percent a lot of money. Right write offs and deductions, the government wants businesses to reinvest, so use that to your advantage. If you have a business expense, a proper legitimate business expense, you can write it off. Check with

your tax prone what those look like. Talk to my Hope financial coaches. They'll walk you through that. I'm going to just take a moment here just talk about earned income tax credit. If you have a tax pro or if you don't, I want you to look into the earned income tax credit. I've said this a million times. I'll say it again. Now, you make less than sixty five thousand dollars a year, the government owes you a check for working. It's not a handout, it's it's a

bonus for working. You get a bonus on Wall Street from your employer. At the end of the day after a good year, you get a bonus from the government. This is bipartisan legislation. This has been around since the seventies. I believe it's the Earned Income Tax Credit is EIITC twenty billion dollars goes back to the federal government every year. Because we don't ask for the money that we're owed. Don't jump with some free games. Jay Z would say, I'm giving you a million dollars with a game of

nine to ninety nine. This is no ninety nine because you're not even paying for the subscription of this podcast. So, if you're making less than sixty five thousand dollars a year and you earn money legitimately, the government owes you a check. Now I'm gonna do it, sweet spot. Here, you make thirty eight thousand dollars a year, you have three children, the government owes you approximately sixty five hundred

seventy five hundred dollars, give or take. And if you never file or eiitc if you have no idea what I'm talking about, congratulations is retroactive for three years. So if you make thirty eight thousand dollars a year and you get a check for three times seven thousand dollars just doing average, that's about, give or take twenty thousand dollars. That's more money than you'd ever see at one time in your life. Pay off your car note, pay down

your credit cards and pay them off. Put it down, payment for your a house, start a business, start an investment account. There's no restrictions on the money. It's your money, and it's not a tax break. It's a check. Like you get it wired to you when you modify or file your tax returns. Say and this is transformational in your life. So check with my people to obreas shop about the earned income tax credit. Back to understanding the

basics LLC's, S corps and ten ninety nine income. And by the way, I talk about corporate entities on my season one podcast for a Money and for Money and Wealth, So go back and watch or listen to that podcast.

Structuring yourself properly to minimize taxes is tied to which kind of entity you you select, So limited reliability corporations and S corpor C corp, all these different corporations, and ten ninety nine income, which is contract income versus W two income which is salary UH employee former employee income. I'm not going too fast, which covering a lot of time, and I've always hid in nine ninety nine. I will try to wrap like Jay z in one in one podcast,

try and get a lot in in an hour. I said it's gonna be forty five minutes, but this is going to go over a little bit so I can cover everything. Keep your records. This is top top tax strategies for individuals and entrepreneurs. Keep receipts and track expenses right. This is why I book keeping really matters. Right and understand and understanding proper terms. My people at Operation can

help you with this. I remember it was a farmer drug dealer who came to Operation no starting a restaurant and he'd already brought up the restaurant equipment, at least a building, all this stuff, and he came to us for some business coaching and I ran into him and I said, well, can you show me a balance sheet? And he said, what's that? He was a smart guy, but no one ever taught him the basics about a balance sheet and income statement and network statement. A budget.

Everybody needs a budget. I have a budget. Everybody needs a budget. That's a different podcast for another day. I'll go through budgets for you, by the way. Tell me the topics that you want me to break down, and I'll be happy to break those down too. Keep receipts and track expenses. Use business deductions wisely what the I

use basically get only what the IRS allows. If you overreach, if you play games, the IRS is going to slap you upside the head and it won't be nice and they'll hit you with penalties, so just use proper business deductions. By the way, if you have an office in your house, as I do, you can deduct expenses tied to that office. Hello, but talk to your tax pro about that. You can't deduct the whole house, just the part that you use

for business. Plan for tax payments. Avoid the April surprise by setting aside money quarterly or at least have a plan for how you're going to pay these taxes or work out a payment arrangement. But just don't ignore it. Common tax pitfalls and how to avoid them. Not filing taxes on time is just the Again, that was my mistake, and penalties add up fast. I mean, the IRS charge is an incredible extruciating amount of interest because they don't

want you owing them money. They want you to get out of debt from them as soon as you can, as fast as you can, and they don't care who you are. One of my famous friends, the womantioned his name, but he called me and he had this problem with the IRS, and he was a household name, and I called for him and got him connected with people, and it took

months to get that. Such situation. There was this lady who made you know, I don't know, sixty two thousand dollars a year, who was completely in control of this guy's life, and she didn't care for his confidence, and she made it extraordinarily painful for him. But she was in charge of everything. We finally got her moved out of the way after months and months and months. But this guy couldn't sleep for a while because she basically

could have She could have ruined his whole life. And so, you know, just be just do it right the first time. So following time, mixing personal and business expenses a no no. Get separate accounts, separate accounts for business, separate accounts for personal in my opinion, Ignoring tax planning another no no. The wealthy used tax strategies before tax season, not after, including me. I'm working on my tax strategy all year round.

Here's some takeaways. Contracts are about protection. Never enter a business or a financial agreement without a contract. Someone in my life, a loved one, wanted to borrow some money recently for a business. People in my family not I had to come to John Brian sideways asking for money. I covered this with Cam again, Cam Newton when I was with him on my podcast with him. We had a lot of fun together talking about family coming to

us asking us crazy stuff. People don't come to me asking crazy stuff anymore because they know I'm going to respond, so they're prepared. So somebody had a business idea and they knew the revenue was coming in, so they knew they could say, Hey, this money, this check's coming in, it's just delayed. Can I get can you basically factor this? Can you, as they call it, factory, can you bridge this for me? So I gave them a small loan and they were going to pay me back in thirty days.

They signed a contract. It was a simple contract, one pager, but they signed it. And I know these people very well. I love them, but this is business and they needed a thirty day extension, which I gave them. But I got my money. Hello, people get amnesia, particularly with it. You know them. They're really nice when they want to borrow the money. When you want to back Wait, what you sweating me about that for? Because it's my money and you wanted you weren't pay You know, an attitude

when you borrow the money from me? Right, People were funny. Okay. Taxes are part of the game. People learn how to play it legally and to maximize your wealth. Be proactive, not reactive. By the way, I had one investment that wasn't paying off for me the way I thought, and I was sort of upset about that until those losses from that investment help to defer a tax obligation. Turn a tax obligation to a tax refund. So even though I lost money on the business on revenue. There's two

ways to make money, make more or spend less. And again, once you gain some wealth, gain some traction, you're going to have a tax obligation every year, and legitimate business expenses and legitimate tax write offs all qualify you have a commercial real estate building. This doesn't work for your primary residence or commercial real estate as an example, or income producing real estate. You can have depreciation, which is

a tax write off a tax benefit. Anyway, I want you to learn all this stuff, but step by step, be proactive, not react. Of a smart contract and tax strategies can save you money stress and legal trouble and jail time. Wealth is not just about making money, it's

about keeping it and protecting it. Take a step today, review a contract you've got, talk to a tax professional that you know, find a pro, find build a team right and set up a financial system for your future like get quick Quicken or quick books, or get an Excel spreadsheet or money. I think I think Apple calls it mac iOS calls there is money or numbers. I think they call it numbers, which is the and Mac and Microsoft calls and Excel, use a use a spreadsheet,

or use a financial app. There's no excuse in this technology world not to get it right right. And I want you to follow me on money and wealth and tell your friends to do the same, and get the book Financial Literacy for All and tell go to Operation

Hope and tell them I sent you. They'll give you because I sent you, they'll give you a one thousand dollars financial coaching and scholarship and Operation Hope good for a year to help you get through your credit score and get through your initial budgeting and review where you are on all your books and your records, and talk to them about textas and talk to them about your contracting.

And then and then from there you might graduate to our business courses and in a more detailed financial coaching opportunity through Operational But we're going to give you this thousand dollars scholarship on me for coaching and counseling. That's the value of it. It be does you listen to money and wealth and you're part of the silver rights movement? From civil rights to silver rights, from the streets to cutting deals in the suites, from protesting in the suites

to getting a seat in the business suite. This is the new movement. This is real world transformational change. Because you get in game, you are gaining your financial literacy, which I believe is a silver rights issue of degeneration. Actually think it's a civil rights issue of degeneration. I think that AI literacy is a silver rights issue degeneration. And I want you to follow all of Operation Hope's work, follow all of John O'Briant my work on all accounts.

Get the book Financial Literacy for All. Tell your friends to listen to this podcast, have a meeting with your friends, meeting with your family. On contract. By the way, I hate to break this to you, but marriage is a form of a contract. You don't think it's a contract. Try to get divorced and see what happens. Right in California's a community property state, which is different from Georgia. That's a fairness state. And you know, you got to

know all this stuff because it affects you. Like seriously, I was talking to Cam Newton and he he was like, do you realize that when you're working for the NFL, you're an employee. You're a W two employee, So you can't be signing though talking about I want to just pay me and pay my ALLC and I'll pay my own taxes. You are an employee. They're giving you health and benefits and they're taking the entrepreneurial risk, and you pay taxes per game, per city, per state if you're

in the NFL. Now get that one, all right? This is dropping the mic with John O'Brien. I hope you love the light. I hope you saw the light. I hope that you get some light and don't think light and think lightly of this and end up having to stare down the desk of an IRS agent who is

not so friendly. I want you, or a legal contractor a court because you didn't pay attention to a contract you sign, or arguing with somebody over who got you good because they've paid attention to a contract and you didn't. And again don't be emotional about this. This is just business. Capitalism is a gladiator sport, and you can master it. You've been doing so much with so little for so long. You can almost do anything with nothing. God made you

to succeed. He made you great. Now go find your greatness. This is John O'Brien, and this has been money and Wealth. Money and Wealth with John O'Brien is a production of the Black Effect Podcast Network. For more podcasts from the Black Effect Podcast Network, visit the iHeartRadio app, Apple Podcasts, or wherever you listen to your favorite shows.