Welcome the Money in Wealth with John Hobriyant, a production of the Black Effect Podcast Network and iHeartRadio. Hey, Hey, Hey, it's John Hobriant, and this is money and Wealth, and I'm dealing with a trending topic. There's a young lady mother who is in the store with her child who really wants a toy. It appears and he wants her to buy it. And he's smart enough to know that Mom uses well her credit card. It appears all the time, and it's durable. You have to look at the clip.
The kid is very, very smart and says, Mommy, whyt't you follow with your credit card? And she says, this is very telling. I don't have anything any room on any of my credit cards. Now, this is the state of America. Really. Credit card debt was just under a trillion dollars in twenty twenty two, I think that's right. By twenty twenty three, it was one point one trillion, actually one point one two nine trillion. Credit Card debt went up one hundred billion plus in the course of
a year and in a quarter. In one quarter of a year, it went from one point zero seven nine trillion to one point one two nine trillion, which is, in short form, a lot of money. And why did it go up literally one hundred billion dollars in a quarter because people got used to the stimulus money. And I thought that was that party was going to live forever. And it's one of the reasons I bought I wrote the book which is now bestseller. Thank you very much.
Why I wrote the book Financial Literacy for all, and why I want everybody to buy it and read it is and say it at your kitchen table and have a conversation with your children so they understand that, Hello, credit cards are not cash. It's not your money. You got to pay it back. You know, credit cards were only created in the later part of the twentieth century, MasterCard, Visa, Discover, etc. Etc.
Those were so the pioneers and created the first credit cards was actually created as an offshoot of Bank of America. But it's not cash, you got to pay it back. And this was a teachable moment with the parent and the child. The mother missed an opportunity to educate her child that hey, baby, credit cards aren't cash. It is not my money, and I'm tapped out, like we can't
live on credit cards and have a conversation. Actually open up your financial books and records, pull out the credit cards and show the kid kids obviously very smart, show the kid like, you know what happens if you're just paying interest? And how much interests are you paying on
each credit card? And explain once versus needs and then let the kid make a decision with her about you know, do they want to buy some food and save for a vacation or something the kid would really want and pay for it six months or a year from now, or do you want this little toy right now? So go on your credit cards going to explode mom's budget, stress mom out and put mom in debt and the
family and have a family conversation about it. I just think there was a moment, Like rainbows only follow storms. You cannot have a rainbow without a storm first. You can't growth without legitimate suffering. There was a moment. There was an opportunity here to turn the kid's turmoil in torture and not getting a toy into a teachable moment. Make the kid and a co investor in his own future and compassionate to mom and understanding of how hard
mom's working. But this credit card debt is really a big deal, and we you know, it can't keep going up like this. It's approaching the level of student loan debt. It's dangerous. It will not go away. And it's super you know, well dangerous because you can swipe it, you know, in your pocket, and you tend to swipe it at times when you shouldn't because maybe you're depressed or angry or frustrated and you're doing shop therapy, shopping therapy to
feel better for a moment. And if you're at a you know, a department store at shiny, credit card may have a twenty five twenty eight percent interest rate on it. So anyway, the point was that we came out of the pandemic. There's all the stimulus money. We adjusted our lifestyle, some of us for the stimulus money. We thought that was an income. It was not. It was temporary stimulus to try to you know, level set your loss of income and so on and so forth during that period of time.
But some people thought, well, I'm rich now or whatever, and they just decided to live it up. And they're still trying to live it up. But you're living it up now because there's no stimulus money coming there's no stimulus money coming and not trying to live it up on borrowed time credit cards. And a Bastijung has this great quote to live in a system of free enterprise and not to understand the rules of free enterprise must be the very definition of slavery. At some point, you
got to pay this stuff back. I've been there before. I know the feeling. It's easy to swipe and charge you know, three hundred bucks, and it's really hard to pay it off twenty five dollars minimum payment at a time when most of that twenty five dollars is going to interest. Okay, anyway, that's the trending topic for the moment. Let me know what you think. Let's have a conversation
with family and friends. This was a moment for the mother to have an educational moment with her child about how much does it cost to run a household and she's tapped out. She was very brave of her to actually say I don't have any any limit left on any of my cards, which is going to also tank her credit score, by the way, because the most damaging part of your credit card sort of the most volatile part of your credit score is the part that's tied
to consumer debt credit cards. The it's not about the limit being higher, it's the balance against that limit. So it doesn't matter whether you have one hundred thousand dollars limit or a thousand dollars limit. In fact, if you have a thousand dollars limit and you're using two hundred dollars of it, you're actually in much better shape than if you have one hundred thousand dollars limit and you're using ninety thousand dollars of it. I hope that that
made some sense. All right, is John O? And this is a trending topic of the week. Okay, So I'm an entrepreneur and a business owner, and I'm gonna break something down that people, I'm sure are just curious about. They're people are most people are just too ashamed to say, I don't know. I don't understand the difference between a for profit corporation and a nonprofit entity and the rules
that apply to that. I just talked to a very sophisticated, very successful friend recently and had to really advise him to like separate his for profit and nonprofit activities that you don't own the nonprofit of getting ahead of myself. But like you know, you're going to go to jail if you keep doing it. Doesn't matter if you have good intentions. If you mixing and mingling your for profit and your nonprofit entity, the story's going to end bad.
I realized after talking to this very sophisticated, very successful person who was about to make a really bad mistake, I realized that I had to really lay out in some detail and very calmly, you know, not calmly, very simply the basics of corporate structure. This is one of these things of how stuff works right, And there's no shame in your game. There's no reason why you should be feeling bad because you don't understand this. Who taught you?
Like who taught you how this stuff works. The bank that was charted to teach free slaves about money, the Freedman's Bank. If you're African American, this applies to you. That bank was gained by a guy named Henry Cook in eighteen sixty five ish after Lincoln's assassination. He went in and took three million dollars in money that wasn't his white man and well connected politically white man in Washington, DC.
It could have been of any race, but in particularly case, he was a Caucasian man trying to run a black or a bank that was trying to teach black slaves formally enslaved people about money. Made it sort of a double insult, and he robbed the folks at three million dollars a bank. When bus Frederick Dunlas tried to run the bank and tried to keep it alive with even an investment of his own money, it failed on his watch. That's another podcast for another time. But interestingly enough, that
was a corporation. People thought it was a government It wasn't. It was a privately chartered bank that had a state charter for the District of Columbia, which district is not technically a state, but you get what I was saying. It was chartered for the District of Columbia. And because the border directors it appears, were financially illiterate or corrupt or both. And the border directors was a group of
mainstream i e. White overseers. So this you know, you can be successful and still be successful in mainstream and top of the market. Still missed everything around the facts. These folks ran this state chartered bank as if it was a national bank. It had offices ultimately, and I think it was seventeen states thirty eight offices, if I have that right by memory. But it really was not life and it was sort of the inference was that it was a government bank. It wasn't. It was a bank
that was not insured by the federal government. It was inspired by the federal government and chartered by Congress, but not licensed in several states and not backed by as banks are today, the full faith and credit of the federal government through the FDIC and FDIC insurance. Let me know, by the way, if you want me to break down these bank terms and all these fancy terms, and I'll do that as a separate podcast. So let me tell
you about the six type of corporate entities. And I don't care what your education level, your income level, your exposure level. Don't feel bad if you're sitting there with a piece of paper. I didn't know what I'm about to tell you. I had to figure it out as I went, and I now have had hundreds of corporate entities. And I'll tell you why. As an entrepreneur, I've had hundreds of corporate entities even though I've only created about
fifty businesses recently, like real businesses. But I've had hundreds of entities, so that should strike you as odd. I'll explain to you how and why in this special podcast Safe series. Tell your friends that come up to the radio or talk to your phone and pull up a chair or sit on the couch or sit on the porch, pull out your pad and paper and write this down,
because this is how we learn. God give you, as Quincy Jones told me, God give you two ears in one mouth, so you listen twice as much as you talk. It's time to be nosy about everything. Another Quincy Jones quote, learn, learn, learn, It's time to time to figure this out. There's a difference difference between business and business. So corporate entity, corporate approach, corporate entity number one, write this down now is a
sole proprietor. This is what most people do. So there it's about unless my check, thirty plus million corporations in America, I mean, like real businesses operating entities. About ten percent of that so three point one million are African American businesses, and ninety six percent of those are sole proprietorships, which means you don't have any employees. It's I call it a self employment project. So the simplest form of business is a sole proprietorship and it's owned and operated by
one person. There is no distribution between the business and the owner because it's the same thing. All profits and liabilities are personally attributed to the owner. And that's why I obsessed on your credit score, because you're going to get in a sole proprietorship your credit and the word credit comes from the Latin route word credit though, which means credibility, so credit has nothing to do with money.
And the word capital comes from the Latin root word copyitass knowledge in the head and banks of trust business. So get back to this credibility. Your credit comes from a sol proprietorship, from your personal credibility, which is why your personal credit score is so videly important because you're going to be accessing in our likelihood capital or access to capital through your personal financial profile, not your business profile. And or put another way, your business profile with the
sole proprietorship is in our likelihood your personal profile. So your personal balance sheet, your personal income statement, where do you make your money, where your assets, your personal liabilities, how do you pay your bills are all reflections or will be reflected upon, how much opportunity that business gets
until the business grows in size in space. So most black businesses ninety six percent of SOL proprietorships no employees, which we need to change, by the way, because you make money during the day, and hopefully you start to finish the sentences that I'm telling you now, you make money during the day. But as my friend Tommy Restler reminded me two hundredth richest men in the world, you build wealth in your sleep. Okay, so number one, SOB
proprietorships Number two. Partnerships. This involves two or more people who agree to share the profits or losses of a business, and there are several kinds of partnerships. Is a general partnership often referred to as a GP. I'm involved with several general partnerships. Each partner is equally involved in the operation in the business and equally liable for debts, by the way, except unless you have a side agreement. I
had a business, one of my businesses I sold. I was the principal owner, I was the general partner, and I had limited partners and at closing, I was one hundred percent owner of the entity. But when I sold it into a joint venture entity, I ended up with new partners and we all became general partners in the new entity where I am, you know, a large the
largest shareholder amongst other shareholders. But you know, I can't just make decisions on my own like I did before, because a cameo is a sort of a horse design by committee. You have several voices that you've got to respect. So general partnerships are a very common term, and I want you to understand when people say GP, that's what they mean shorthand for general partnership. Limited partnerships includes both general partners who manage the business and have unlimited libility,
and limited partners who are investors with limited liability. Really important distinctioneer that if you go into a business with somebody, they want you to invest. If they're operating the business, and you are running your dental office or running your broker's firm, or you are a nurse, or you are a teacher, you have an occupation, but you have some investable money funds that you can invest into an enterprise, you in our likelihood, are a limited partner. In all
likelihood they will know. They are the general partner, they're responsible, they have unlimited liability, as it should be. They're going to get a return for their sweat equity, if you will, their energy, and they're responsible for making this thing successful. And you're sort of a long for the ride. But because you're not running that business, you shouldn't have complete liability. That's why you should have limited liability in your ability.
Your liability, in my opinion, you should be limited to the money that you put into the enterprise with all the stuff. You want to get your own legal counsel in an accountant to sort of look over this stuff before you sign on anybody's dot ed line. Limited liability partnerships LPs not to be confused with an LLC. That's my favorite entity. I'll come to that in a minute. A limited liability partnership is similar to an LP, but
it offers all partners protection from certain liabilities and debts. Okay, we've made it to number two in the structure of corporations. I hope the.
Pen or the iPad or the iPhone or the digital note taking app is really going here because this is really important stuff.
When you're structuring your business. You've got to get this right. Number three corporations includes a C corp. It is probably the most common areas to assume all corporations, once you get into the corporate structure, are the same. They're not. There's a C corp. It is the first one to describe, and it's a complex business structure with shareholders, directors, and a director is a board member, and officers an officer, not an officer the military, and an officer of the
corporation is somebody who runs the company. In the prior example, it would have been the general partner, So it's one. You know. Officers are people who hold an office, so the president, the CEO, the chief financial officer, the chief administrative officer, chief technology officer, general counsel, et cetera, teram. These are officers, but they may not be and in all likelihood will not be board members. Okay, hello, and probably or not whether they may be shareholders depending on
what kind of compensation agreement they have. But the CEA corporation is the first level of a true entity that is its own person. Okay, I hope I'm not freaking you out now, But a corporation is a person. It's not a breathing human being. But it is a person. It is treated as it has a personality, it has a identity. It breeds, not human breasts, but it breeds. In fact, the first structure in America, in America was
not government, It was a corporation. That's what started America was trading corporations, which ultimately ended up trading slaves, by the way, the whole another conversation, But they traded you know, grain and all kinds of other things. But these trading posts, these trading corporations were the first entities. And that's where we got our governance from our government structures. Is that you would take votes, and you would have opinions, and
you would have interests that need to be protected. Into property rights, well back then it was just individual property rights. That was where it all came from. So America, that's why keep saying America is a capitalist democracy. Back to the structure. Okay, So the third structure that i've covered Number one sole proprietorship. Right that down, I covered number two partnerships right that down. I then went into the sub partnership structures that I just now have covered. Our
covering structure. Number three corporation C corp a complex business structure with shareholders, directors, and officers. It is legally separate from its owners, providing limited liability protection, and has an independent life separate from its shareholders. Remember right now, I showed you or I said to you, it is a living into these sort of a freaky thing to think about. But a corporation has life and has hello rights. That's right. Corporations have their own you want to call it civil
rights in that deep all right. Corporation Number four is an S corporation. This is the one you probably heard the most about. An S corp for in shorthand. It's similar to a C corp, but designed for smaller businesses. So a C corp is really you know, fortune five hundred companies. A lot of them are C corps. Okay, we have not got to my favorite structure yet, so hold on. But an ES corp is really a big business for small business and it's similar to a C corp,
but designed for smaller businesses. Profit and losses can be passed through to shareholders personal tax returns, avoiding double taxation. It has restrictions on the number of shareholders, so see there. It's it's similar to a c corp. But the es corp it has ability to sort of slide entity inside of an entity. It's sort of like a parent in the child living the you know, the child being in the womb. Kids get a little freaky, maybe we should say that. But this is less of a totally bulky,
strong structured entity as the Sea corp is. It still has a lot of the features, but you can pass through with an escorp. You can pass through some of the profits and loss benefits directly to shareholders, personal tax returns, making it easier to file taxes and all that kind of stuff, and again avoiding double taxation. You have a sea corporation. It has a life, and it has a tax tax life, and everybody else has a life. It
has a tax life. So you may be paying double taxes in that situation, but you're making so much money in that situation the way it cares. But it does have an austritional number of shareholders and all that kind of stuff escort because it wasn't designed to be this big Harriet audacious think. Okay, Number five is probably my favorite structure. You might surprise because number six is the nonprofit corporate structure that is not my favorite, but it
is more probably the most interesting. And I've run by the way all of these in my business life, and I do so in many cases today and again I still explain to you why I have hundreds of corporate entities, and I'll explain that because that's sort of interesting and fascinating. Number five is a limited liability corporation in the LLC, my absolute fan favorite. It combines a limited liability protection of a corporation with the tax benefits and operational flexibility
of a partnership. Hello, it's very nimble. Owners are called members, and profits and losses can be passed through to their personal tax returns. See how elegant that is. And I love an LLC for many, many, many many reasons, not least in which you can wrap an LLC around almost anything. And it's perfect for, in my opinion, a single investment property. I had this entity that I owned as a general partner, the sole general partner for a period of time, and
it became a joint venture. But let's stay focused on the relevancy of an LLC here. And I owned seven hundred homes, just under seven hundred homes. I was, and I believe still remain the largest minority owner of single family rental homes in America, and it was worth a couple hundred million dollars at some point, and sold the principal part of the company into a joint venture, which
I'm now part of that joint venture. But at the time when I owned the company, I had to protect myself because these were separate in assets sprinkled all over a region of the If I just had a multifamily apartment building that I owned, there, maybe there'd be two or three l c's. Uh let's say, let's say it's
a three hundred unit apartment building. Just for the sake of conversation, for you know, uh there maybe maybe there's a maintenance company, a management or maintenance company within that that would have been in the l C. Maybe there'd be a little cafe or restaurant within the apartment building that being its own limited liability corporation. Uh, maybe there was a janitorial service that would be its own limited liability corporation.
So there'd be businesses within businesses, and that would be set up as its own limited liability corporation, so that what happened in the restaurant didn't make you liable as the owner of the of the apartment building. You may have had other investors in the apartment building had nothing
to do with the restaurant. What happened in the management company might be separate investors and they don't have they you know, the owners of the apartment building of the restaurant shouldn't be held liable for what the property management company does, even though it's all part of a central investment. So that's why you might have in that example, limited liability corporations. I had hundreds of entities because I would buy sometimes one home at a time, it would be
a separate LLC. I might buy twenty five or one hundred homes at a time through portfolio acquisitions. Write that down portfolio acquisitions a purchase of a portfolio of homes. All right, you have an investment portfolio in your stock account. Maybe you have an investment portfofolio in your mutual fund account. Maybe well, I had an investment portfolio of homes that I'd buy, and I might buy those as separate entities, separate homes or as a bucket in one LLC. Right,
because maybe we're on the same block or whatever. Protected by that ONELC or I might have twenty five LC's. I remember sitting in several offices across the country having to sign you know, hundreds of grant deeds, trust deeds, and mortgages, individual transactions for all these individual homes and
LLC's tied to same limited liability corporations. So that's why even though I only have fifty or sixty businesses that I stood up in my adult life, including my nonprofit businesses by the way, but I had hundreds of limited liability corporations that I had at one time for that reason, because I had these individual assets that had to have a life protections, investments, ins and outs. But whatever happened
to that property stated that property. You couldn't trip and fall that property and then try to punch through that and get to me or my partners to you know, try to sue us for a zillion dollars just because oh, you know, John O'Brien owns that. So I'm coming up even though I just you know, my toe cost me one thousand dollars to get bandaged up, I'm willing to go after you know, five hundred million dollars whatever the number is, because well, I can just sue him into
the chickens roosts or you know, end of time. No limited limited liability corporations are exactly as they sound there. They limit the liability of the asset owner. Uh okay, so now let's go to uh so that was a fifth end. That's my favorite. The LLC, you know, it's the most flexible, is the most I think useful. It's fairly inexpensive to get into. It's typically a couple of pages. It is very elegant, it's very flexible. Already mentioned that,
and it has a lot of usefulness in US. Is the sixth kind of corporation is a nonprofit corporation, and most of you know me from that vantage point. It is my nonprofit, my lead one, although I have several nonprofits. Operation Hope, which is the largest financial literacy coaching organization in America, three hundred offices serving one thousand locations and forty plus states, with hundreds of funded and thousands of
nonprofit partners. We've been in four thousand schools. We've invested through our operation over four and a half billion dollars, channeling our partner's capital and underserved communities. As you can tell from me talking about it. I'm so proud of it. But that's a five oh one C three nonprofit corporation. This is really important. By the way, there's a John Hope, Brian and Shaker Bryant Family Foundation. That's not what's called,
but that's the function of it is. There are other nonprofits that have funds for my mother wanted to Smith, got rest her soul and Johnny Smith funds that come through the family Foundation. As people pass on, we create entities to honor them and that goes through the family Foundation. That's separate from the nonprofit Operation Hope. Okay, and also Operation Hope has nothing to do with my for profit activities at Brian Group Ventures. You have to keep these
things separate unless you want to go to jail. You cannot mix these things together. So this is a really important point. Now, a nonprofit is a corporation, Yes, it is. It is a corporation like any other corporation right organized for public or charitable purposes. These entities don't pay income tax on money they earn related to their nonprofit purpose. They must adhere to specific management and reporting requirements. But please know, a nonprofit corporation is a corporation. Okay, it
has shareholders. That shareholder is an American public it's not private shareholders. You don't own it. I control operation, hope, I found it as long as I'm working operating it ethically and within the limits of the law, and I don't or is an S corporation numbers five is an LLC My favorite structure of doing something in business because of it's so flexible and has so many things you can do with it, and it's inexpensive, and it's easy to start and you can wrap a lot of things around it,
and it applies to most every place. And then of course the most noble of them is the nonprofit corporation, which is still a corporation. Is just the public is the shareholder, and I think you have a heightened responsibility. In fact, if you're running a nonprofit, you're running a public entity like it was like going public on Wall Street. All right, Okay, so that's that, and I hope you've enjoyed this. This is John O'Briant and this is the
Money and Wealth series on the Black Effect Network. This is my podcast on the six types of corporate entities and the thousands, well hundreds of Kennedys that I have corporated these. I have run almost a thousand edies actually, and the purpose and reasons for each one of them, and hopefully took a lot of notes and hopefully you're smarter as a result of it. Let's make smart sexy. We've been making dumb sexy even way too long. We've dumbed down and celebrated. It is time to make smart
sexy again. I'm out from Mike. And the question is what does it take to get over the fear of failure and the fear of success to push yourself to the next level. God bless you, Mike. That's a great question and it really ties into the purpose of life. You know, this is very going to be a very spiritual answer. Really, faith is what you do when you don't have all the facts, and success is going from failure to failure without loss of enthusiasm. And I take
no for vitamins. I mean, I just get over and around it, through it. I'm going to get to it. No one's going to stop me from getting to where I want to be in my destiny. That God gave everybody their own fingerprints, no one has the fringer prints that you have. I'm God's child and there's a destiny for me. There's a meaning and a purpose of me, and I'm going to go find it. And I say in my book Love Leadership. I just wrote my sixth book, Financial Literacy for All, which is the bestseller and you
should get it. It deals with a lot of issues of sort of ingrained confidence or acquire confidence. But my first book, I remember writing about courage and culture. I remember saying that courage is nothing more than your faith reaching through your fear, displaying it selfish action in your life. I talk a lot about self esteem on this podcast, and that wealth is a mindset, right, And there's three types of mindset. There's a surviving mindset, there's a thriving mindset,
and there's a winning mindset, right, and winners are builders. Well. A surviving mindset means you're an expert at what you're against, not what you're for. Right, And you've got to closed fists versus an open hand, that you want to fight the shoulders down versus the neck up. And you're depressed probably, and you got to get your mind right. You got
to start fighting from the neck up. You got to start being smart and you have to have self esteem, and so it's a journey in becoming over time just sort of comfortable, reasonably comfortable in your own skin and conquering your fears. The first play to cocker your fields is them that you've got them. And so while you just answering this question is very courageous and I'm very proud of you because that's the start. You got to acknowledge that you have fears, that you have insecurities, You
got things to solve. There's three ways to live the suicide. Die physically, or you can die spiritually. You can be alive and dead. The most dangerous person is a person with no hope. Right. And then there's which is most people are doing. And then there's healing. And the fairy fact that you're asking this question says suggest that you're on a route to healing. Go to my instagram. I believe it was I did it on my Instagram where I talk about this comedian who was teased and harassed
by people in his neighborhood. He grew up in a poor neighborhood and whenever he went there, it's just successful people who you think you are. You're trying to be white whatever that means, or you know, just sort of talk him down to him. But whenever he was on drugs or screwing up or falling down, all of a sudden, everybody wants to be his friend. They want to oh, yo, man, I got you, brother, We're gonna come up and get because they can relate to his failures, but they can't
relate to his successes. Right, So everybody wants to get to heaven. Nobody wants to die to get there. People will admire eagles, but they also resent them. And the eagles don't fly in packs. You've never seen a flock of eagles, but you've seen buzzards. Buzzerds are low altitude birds, all shooting at eagles. And Turkey's got wings and can't fly. Okay, So you gotta watch your hang around and watch the
toxicity that you allow yourself to be around. And remember, if you hang around nine broke people, you'll be the tenth. So everybody, you can't take everybody with you. You might find that when you become successful, you are alone. I often say that as my world has gotten bigger, my circle has gotten smaller. I've over answered the question, but it's a good one. Uh, just stay up might and stay on your stay on your grind, and stay focused and let and let the world come to you because
they will. You've never seen an ugly billion there. People tease me when I was coming up. They're not teasing me anymore. They're asking me for jobs and contracts. Okay, John O'Brien. I'm out 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.