Steering Towards Profitability: Building Support Teams and Maximizing Tax Deductions for Your Painting Business

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It's a little bit more humid and it rains in the afternoon a little bit , but so it's not terrible , even though it's the worst part of the year . So we'll have a little bit more of that and then we start seeing more sunshine in later November , december . So I can't complain too much .

But yeah , today we're going to talk about building your support team in your painting business while reducing your taxes .

You know people celebrate different things , but we tend to come together as families more , and this is something that's very applicable because , you know , some of your greatest support is going to come from your family . You know your spouse is probably your number one cheerleader when it comes to running your business . You're getting good advice from your parents .

You're getting good advice from your friends usually , and we don't really think too much about just how valuable that is because it's kind of informal , right . We get around the dinner table and we pitch ideas at them and they give us some good advice , some straight talk .

But if we were so today , I think we're going to talk about how we can kind of make this a little bit more of a formal arrangement and how we can use the advice that we're already getting from our friends and family to benefit us in our business and possibly save some money on taxes .

You know maybe friends we've met in the industry events that we're going to around this time of year , so you're getting advice all the time on what to do in the business , how to grow your business , get it to the next level .

But often , like you said , that informal advice is great that you're getting , but if you formalize it a little bit , you can actually get some cool benefits out of that , which we'll talk about here in a second .

If we are a sole proprietorship or a multi-member LLC Taxes a partnership , we have a board of advisors . The only difference between the advisors and the directors is the name . It's kind of a little bit of a legal thing , but both these boards serve as our trusted advisors who give us that helpful advice .

They have a board of advisors who advise management on how to run the day-to-day operations , but they're not actually doing any of the things in the business . They're not doing marketing , sales counting , they're just giving advice . And so the board of directors is a formalized thing in big corporations .

But small businesses often don't have this formalized , even though they essentially do have a board of directors or board of advisors . But they don't have it formalized , so they're not getting any kind of benefit in a legal or tax sense .

They're the ones who are going to help you set your vision and your goals for the company . So if you're going to turn your small company into a big company , you definitely need a board of advisors to help you do that . Daniel , you made a really good point that this board are not employees of a company .

They are there for you as the manager of this company , and so they would not have any kind of liability to the company . They would not be under the control of the company . They would not be taking paychecks from the company . They are there for you , the manager . And who do you trust more ?

We kind of mentioned it earlier , but who should be on your board of advisors ? Well , definitely your spouse . If you're married , they're going to be the ones who probably know you best and who have the least qualms about telling you and you have a bad idea . Also , your parents , if you trust them , and they can offer that advice .

If you have older children , could you involve them as well ? I'm sure that they would love to tell you what they think of your ideas , but it also gets them involved in your family business and it gives them a stake in the business , so that would be a great thing to do .

Other professionals , successful business owners who are mentors to you they could certainly be on your board as well . So really , anyone who can give you good advice and who you can trust .

Once a year , once a quarter , you know we're going to have some sort of events for the business , so it could be you know one of your peers at one of these events that you often see . You know at the PCA event or whatever .

Probably the , in my opinion , the most important reason has to do with the fact that it makes you a better business owner . Right , these people on your board are going to give you the encouragement , they're going to follow up on the things you said and they're going to hold you accountable .

It's so easy for us to have great ideas and then life gets in the way . It's hard to follow through and we need someone to kind of hold our feet to the fire and say , hey , how are you doing on that idea you had last quarter ? Oh , you kind of hit a roadblock . Well , let's talk it through .

You know these are people who are going to give you straight answers , but they're not going to beat you up or , you know , or make you feel bad when you make mistakes . Yeah , so yeah the idea being that you will be a better business owner for doing this .

The other big thing would be asset protection . So when you actually take these events , these board of director meetings , and put them in your minutes or put this formalized in your operating agreement , this will actually build the case .

So if you're ever challenged in court on whether your LLC or your corporation is a separate entity from you , you'll have these documented formal events that kind of reinforce the idea that this corporation or this LLC is a separate entity from you .

How powerful would it be to open up your business logbook and show that every quarter we held a board of advisors or board of director meeting to discuss company business . And here it is documented . That's gonna go a long way to show that , yeah , you ran this company as its own separate entity .

It wasn't just a slush fund for tax avoidance , it wasn't just a hobby , but you were serious about this . We can't guarantee how things are gonna go . There's a lot more to it than just having these meetings , but I think that would go a long way to legitimizing your corporation .

So instead of getting just informal advice from all these people from your spouse , your family , your friends , peers in the industry instead of just like getting it informally , if you formalize it , documented appropriately , you can actually get tax deductions where you before would not have been able to do this .

It's hard to get away and really discuss the direction of the company . So they might go to a nice steakhouse , have a meal , talk business . They might go to a spa and rent a room and talk business and then get massages or spa treatments afterwards . It needs to be something that is ordinary and necessary .

It needs to be something that is useful and helpful to the business . If one of your board members lives in a different country well , different , not country , but possibly country , but state maybe it is useful to travel to them . Maybe you have someone who lives in Las Vegas or Orlando and it makes sense to go to them to have this meeting .

The expenses involved with all of this are legitimate tax deductions for your board meeting . The travel expenses , the meal expenses maybe not the couples massage might have to pay for that out of pocket , but staying at the resort for this one to two day event would certainly be appropriate and necessary .

So with a little bit of creativity you could probably have a very enjoyable board meeting and enjoy some tax savings on travel or recreation that you were planning on doing anyway .

That's the simplest way to do it . If you want to get a little bit more fancy , you could get a lawyer involved to draw up the documents , but really , you know , all that's really necessary is that you've written it down . Find a place where you guys can feel comfortable and talk business .

Maybe it's a halfway decent steakhouse and if it happens to be around , you know Thanksgiving or Christmas and you might have been planning on getting together anyway . Well , that's fine too .

Make sure that you actually talk business , pitch your ideas , talk about your challenges , get the advice from your board , jot down in your record book some of the main ideas and some of the things you decided on , and enjoy a really nice meal and drink some good wine and have a great time with your board . That entire meal is a tax deduction , I would say .

You know , this is probably one of the more simpler ways of implementing this . We could take it to another level and by adding in appropriate and necessary travel , like we talked about , maybe going you know someplace quiet like a spa , or traveling to another city where your board members live .

Or you might take it to the next level by taking advantage of what's commonly known as the Augusta Rule , and that is where you can rent your personal residence for up to 14 days a year and not pay taxes on it . So how that would look is maybe you know another business owner , a similar situation as you .

You need to have a board meeting and he needs to have a board meeting . You don't want to do it in your own home . It's too noisy there , kids are too chaotic . So you agree to rent each other's homes for the day . You pay fair market value , you do it at arm's length transaction and that rental is a tax deduction to your company .

And when you receive the money from your friend's rental , you don't have to pay taxes on that because of the Augusta Rule , as long as it's less than 14 days a year .

So that could be a great way to stay local , have your board meeting , get some peace and quiet and kind of shift some money from your company that would normally be taxed at your ordinary rate over to being tax-free yeah that's awesome .

You got to make sure you have you identify who your board is , document that in your operating agreement or in your minutes or both , and then from there it's just updating your minutes , as you have these quarterly or annually , with who was there , what was talked about , and then you should be able to deduct these meal costs and travel costs .

Is that sum it up ? Anything I'm missing .

When you are forming your corporation , you can put their names in the corporate documents , or when you're forming your LLC , you can put their names in the operating agreement . If you didn't do that when you first started , you can do it really at any time .

Each year , you're going to be updating these documents anyway , adding the dendym to your operating agreement or your corporate docs showing this Board of Directors , and this is how we do it legally . You don't need to get a lawyer involved if you don't want to . You could if you wanted to be a little bit fancier .

But yeah , you can pretty much do this at any time . Like you said , daniel , just make sure that it's put down and writing and everything is documented and you're good to go .

The advice that you get from people who care about you is incredibly valuable , and if it's not formalized , we can miss out on it .

And so even if you don't go to a restaurant , even if you just do it , simply you know , get that advice , become a better business leader , and you know if you can show your your , your friends and family how much you value them by buying them a nice dinner and getting a tax write off for in the process , that's a nice bonus .