Focus On Money: Leveraging Tax Strategies for Business Success with Roger Pearson

💡 In this episode of Pathways, Amber welcomes Roger Pearson, a man with over 50 years of experience working with businesses. Roger shares his unique insights on the importance for business owners to understand taxes, money, and finance at a foundational level.

🤝 While most entrepreneurs prefer to outsource accounting and tax preparation, Roger emphasizes the need to carefully interview and select the right professionals for your business. He provides tips on what to look for when hiring a CPA or tax advisor.

📊 Roger also discusses the three pillars that underpin every successful business:

1) Understanding legal business structures

2) Properly organizing financial paperwork

3) Knowing the tax consequences of business decisions

📈 While you don't need to be a financial expert, Roger believes gaining a working knowledge in these areas is crucial for entrepreneurs. It allows you to recognize opportunities, make smarter decisions, and achieve your business and personal goals.

📻 Tune in as Roger shares his experience and wisdom to help you navigate the financial side of running a business. He provides practical advice to empower you in managing your business finances and taxes with confidence.

🔗 Resources & Links:

Download a free report on the three pillars of business success at:

www.SeagullTechnologies.com/free

To learn more about Roger Pearson please visit:

🌱 Website: www.seagulltechnologies.com

🌱 YouTube: https://www.youtube.com/@BusinessBuildingBlocks

🌱 LinkedIn: https://www.linkedin.com/in/Roger-Pearson

🌱 Facebook: https://web.facebook.com/jlsegull/?_rdc=1&_rdr

To learn more about Amber Stitt please visit:

🌱 LinkedIn: https://www.linkedin.com/in/amber-stitt-acp-chfc%C2%AE-cltc%C2%AE-clu%C2%AE-gallup%C2%AE-1b186821/

🌱 Instagram: https://www.instagram.com/amberstitt_

#AmberStitt #RogerPearson #PathwaysPodcast #SeagullTechnologies #TaxConsulting #TaxPrep #TaxCodeBusinessSuccess 

Transcript

Amber Stitt [00:00:00]:
Hello and welcome to Pathways. I am your host, Amber Stitt. And today we welcome Roger Pearson, a man who's been working with businesses for over 50 years. Welcome to the show, Roger.

Roger Pearson [00:00:11]:
Well, thanks for having me.

Amber Stitt [00:00:13]:
Now, I think that working with businesses, it sounds a little more glamorous than working within, maybe some of the money and tax talk. What do you think? Does anyone ever poke fun at the change in the direction of wanting to get nitty gritty with dealing with IRS codes and rules and taxes? What do you think?

Roger Pearson [00:00:29]:
Well, that's something most people would prefer not to do. I mean, most business people, when they're starting out in the first year or two, they're finding out what all they have to do themselves and what they don't know. They just prefer to hire it out. But then you have to be very careful who you hire it out to.

Amber Stitt [00:00:47]:
Basically, I'm giving you respect for doing this role because of all the experience you've had. Was there a point in your life where you said, "Because of all of the businesses I've worked with sold..." I think there was quite a few things in your history that brought you to this point that you wanted to help other people be smarter with their money. Can you talk about that a bit?

Roger Pearson [00:01:06]:
Well, I mean, I've tried all kinds of different businesses on my own. I mean, since I was 20 years old, I knew I wanted to be an entrepreneur of some sort. And I spent a lot of years learning what I didn't like to do, that's for sure. I mean, I tried a landscaping business and decided, no, after a couple years of working in 103 degree temperatures outside, that's not quite for me. So I sold that and went on. And I've tried custodial businesses. I've tried all the MLM's out there and found out that they're designed for failure.

Roger Pearson [00:01:37]:
And then I decided, "Well, let me do something different for a while." So in the nineties, I got back into management in the corporate world. I did software support for IBM for a while and did document management things. But the nineties were the years of downsizing and companies reducing. And for three different companies in the nineties, I was downsized out. So come to 2000, I said, "Well, I don't know what I want to do anymore." And somebody talked me into taking a tax class. So I went.

Roger Pearson [00:02:05]:
"You can make some extra money until you decide what you want to do." And what I found is that I really, really enjoyed it. And as I gravitated through the years because I've been doing it for 22 years now. And so as I gravitated through it, I found with my business background that I really enjoyed educating small business people because I've always been a teacher. When I went to college, I even majored in education until I did some teaching and found out that I'd be fired every year because the way the public school systems in this country run, they're not about teaching. So I've taught in the corporate world a lot, and now I teach in a couple different ways at the tax desk, of course, with my personal clients. And in the last year or so, I'm gravitating to using our modern technologies and trying to educate through the websites and online courses that I have this vital information that small business people need.

Amber Stitt [00:03:02]:
That's wonderful. And I know I've told you that when it comes to finances, understanding money, taxes, we really have to have a good advisor. And we're saying tax advisor. And I also work with a lot of physician clients and business owners and I let them know who's handling the taxes. A lot of them, if they're working for a healthcare system, they will have a W-2 maybe just one. They say, "You know, I'll handle some of these things on my own." And then I have some others that are more 1099, or they have some passive income. They're becoming more successful and building wealth.

Amber Stitt [00:03:31]:
And they'll say, "My CPA is...," and it's not that all CPA's don't, but many don't study tax law, taxes.

Roger Pearson [00:03:39]:
That's true. And that's one of the biggest misconceptions out there in the marketplace, is that I have so many people that I've met and they said, "Well, I'll just take it to a CPA because they can take care of the accounting, and so forth." The problem here is that for many accounting firms, the tax part of it is just a side business. That's not their main bread and butter. They just do that for extra money once a year. And the other thing that a lot of people don't realize, I mean, to become a CPA, of course you have to take a lot of education paths, a lot of tests, but you only have to take one or two basic tax courses to achieve your CPA certification. And after that point, even though every single year you have to take continuing education classes, none of them are required to be in taxes. So one of the things that I teach people in my classes and in my consulting is that you have to interview your tax accountant and your accountant and your tax professional.

Roger Pearson [00:04:32]:
You have to interview them the same you would as employee. I mean, if you owned a plumbing business and you were going to hire a plumber, would you do it without interviewing them to see if they knew what they were talking about? And the same is true to anybody else you bring on your team, and by all means, as you grow your business, it would be to your benefit to bring on an accountant, to bring on a tax professional, because you don't have time to deal with those things. Normally, you're busy building your business, but...

Amber Stitt [00:04:57]:
You don't want to wing.

Roger Pearson [00:04:58]:
Yeah. The problem, I find, is that our educational system does not teach small business foundational principles. They don't teach legal format. They don't teach how to organize your paperwork. They don't teach the tax consequences of your decisions. And this is an education that is sorely needed, which is what I've gotten into. And the thing about it is, and people say, "Oh, I don't need to take the time and learn all that stuff. I'll just hire somebody to do it."

Roger Pearson [00:05:25]:
But you don't know who you're hiring unless you learn the stuff first, so you know how to interview it. You know how to bring the right person on your team, because if you don't, they could cost you thousands of dollars.

Amber Stitt [00:05:36]:
What do you recommend when you ask questions, interviewing some of these experts advisors? Do you have any tips there?

Roger Pearson [00:05:43]:
Well, the first thing, if you're going to hire a CPA, the first thing, there's two basic things that I always tell people. Number one, how many of your continuing education hours are in the subject of tax and tax updates each year? That's off the top. The other thing that I tell people when they're choosing a CPA, if you got a CPA that says, "Drop the stuff off, I'll call you when it's done," walk the other way, because this person doesn't care about you. They don't care about your business.

Amber Stitt [00:06:08]:
They haven't asked any questions.

Roger Pearson [00:06:10]:
They assume that whatever you presented, you presented to them is correct. And that's not true. It usually takes me...I interview all of my clients, or I let them interview me at the same time. It should be a two way process. If I'm going to do a good job for somebody that owns a paint company, I need to learn how to run a paint company. If I've got a landscape person in front of me, I need to know how a landscape company works, because unless I do, I'm not going to be able to do the best job for them. And so it takes sometimes two to three years to get the full scope to where we have a good working relationship and we can start finishing each other's statements.

Roger Pearson [00:06:48]:
It's like I had a guy that owned a paint company. He wanted to buy a particular house. But to do that when you're in business for yourself, I mean, the first thing they're going to ask for is three years worth of taxes. And depending on the type of loan you have, you have to have your income within a certain range. So we actually sit down and I worked with him over a course of four different years to produce three different years of tax returns that fit into the qualifications. And we did things like shifting depreciation to future years, prior years, things like that. And this is what a good tax professional could do for you.

Amber Stitt [00:07:19]:
It's working within the rules.

Roger Pearson [00:07:22]:
Working within the rules, exactly. Knowing what the rules are and adapting them to your situation so that you pay the least amount of taxes and can accomplish all the personal goals that you have.

Amber Stitt [00:07:32]:
How frequently should people be working with their advisor for those reasons you've mentioned? I mean, not because of a house purchase, just in general, getting the lay of the land for future opportunities as well.

Roger Pearson [00:07:42]:
Well, and that's the thing I always recommend that people don't just talk to them once a year. You should have a plan, ideally quarterly meetings with your accountant, or tax professional. Because, for instance, I have so many new people, they come in and they don't know if they made a profit until they sit down and do their taxes. And I tell them how much money they've lost and how much they owe the government. Because a lot of people going in that start as a sole proprietor don't realize that you're going to pay a minimum of 27% tax, of your net profit right off the top. And in some states it can be as high as 50%. Wow. When you figure in state tax and so forth in the different brackets, it's amazing.

Roger Pearson [00:08:21]:
So on paper, by the time they end up paying the government, we didn't make any money. And so you need to be able to sit down with a good tax professional, or accountant, ideally quarterly, at least twice a year. You're gonna do it once during tax season, probably March or April, but you should be also sitting down with them at least in October, November to go over all of the year to date. So that if, for instance, you may have to send in some additional taxes, estimated tax payments in there, because if you don't do at least 90% of what you owe, you get penalized. So you need to be looking at those things towards the end of the year to make sure that you've got enough money prepaid so that you're not penalized when you do your taxes. These are the type of things that you have to look at. So it's just not a once and done thing a year.

Amber Stitt [00:09:08]:
There are benefits of using tax laws. They've been around for, I don't know, you tell me, hundreds of years where there are solutions through tax law, trust planning, and other things, but you need help and an expert to be able to look at these things globally. So there are safe ways to use the tax laws to help you save money, reduce taxes. And it's our legitimate right to do that. But we need experts in that arena. Would you agree?

Roger Pearson [00:09:31]:
That's absolutely true. You know, small businesses can use the same type of things that large businesses use, just on a smaller scale. And that's the difference between a good tax professional and a not so good tax professional, is they know how to use all of those things the big boys use on a smaller scale.

Amber Stitt [00:09:51]:
I feel that sometimes people, if they are not proficient in accounting, mathematics, I know that I have felt I wasn't smart enough up to a certain point to own a business because of my grades in that regard. But I'm more of a wordsmith. I like english contracts and other things. Do you think that understanding money and finance to the core of potentially, like a profit and loss statement you've mentioned running your business and knowing how everything works. Can't that turn around, let's say, the financial competency. You don't have to be educated in finance to be able to be competent in money. Do you agree that you could use an advisor to get really money smart? I know that's not probably grammatically correct, but couldn't anyone, if they spent the time personally, to invest in this moment, to understand the taxes, working through their profit and loss, working with their advisor, isn't that ultimately the goal of a lot of successful people to really get into the inner workings of their business and how the money flows in and out?

Roger Pearson [00:10:48]:
I think to be really successful with your business, you have to learn that, because the people that refuse to learn that don't stay in business long, they really don't. They depend too much on other people making decisions for them. And those people don't have skin in the game, as they say, whether you survive or not, you're a paycheck to them. So if you're going to be in business, then you need to learn business, and that means all this nitty gritty little stuff that most people prefer not to learn, and I teach people the things they don't want to know.

Amber Stitt [00:11:19]:
Thank you for sharing that because I feel that sometimes people might have the fear, be intimidated because they might not have come from some large educational background. You could truly, if you spend the time and study this a bit, there are ways that people can be in business for themselves. But I do believe they need to have the right advisory council. And you have to pay for that.

Roger Pearson [00:11:39]:
You do have to pay for that. You have to make the investment not only in money, but of time. And time is probably the most precious for small business people because anybody that says they want to go into business to have more freedom, you actually have less freedom than you will working for somebody else because you end up working a lot of twelve hour days sometimes to do everything that has to be done, especially when you're starting out.

Amber Stitt [00:12:02]:
So Roger, you talk about self-employed people using strategies, understanding taxes and money. You also talk about why potentially as an employee, there are some benefits of diving into the details and learning more.

Roger Pearson [00:12:15]:
There absolutely is. Especially people that are in the management track. I managed quite a few different types of different businesses also for other people, and my knowledge of the business world and how businesses worked really helped in that way also. In fact, I probably in some instances, moved up the ladder a little faster because I understood what they were talking about and I understand how it worked. And I was able to make myself more valuable to that employer because of it. And the other thing is that life presents us opportunities. They're there if you look for them and they come along, and sometimes you don't recognize them. But knowing how the underpinnings of how a business works is going to also allow you to see more opportunities when they come your way.

Roger Pearson [00:12:59]:
And that's an important part of life, too.

Amber Stitt [00:13:02]:
I think that's a great thing to consider is that leverage. What can you bring to the table?

Roger Pearson [00:13:07]:
Absolutely. So this basic knowledge of business is going to just benefit you no matter what road you're going online.

Amber Stitt [00:13:14]:
So let's talk about how you can help people. I know that you have the ability through your site to offer some education, and the foundational part of the education, really to prepare for being successful, having your own money smarts your own way, based upon your personality type. I talk about that a lot. When people build their businesses based upon something that they love to do, they then need to get into the mathematics or the finance behind it. But you don't have to be a scholar to get there. Let's talk about some of the foundational elements that you teach.

Roger Pearson [00:13:43]:
Well, I say that there's three pillars that people need to know that underpin every single business. And the first one is legal format from sole proprietor up to C Corporation. And not only know them all, but there are certain times in your business that one is better than another. Most people start as a sole proprietorship, or a multi-member partnership, and then they progress. And when they start making profits above a certain amount, and they need to look at being taxed as an S corporation to shield some of their profits from the 15.3% employment tax. And so that has to be known. The other thing a lot of people, I find a lot of people get into trouble with is the friend comes over and says, "Hey, I found a great opportunity, let's go into business together and take care of it." And one of the first things I asked the partnership is, where's your partnership agreement?

Amber Stitt [00:14:32]:
Right!

Roger Pearson [00:14:32]:
And they said, "What partnership? What's that?" And so this is something I get into also, because a partnership agreement is like a prenup in marriage. It's what happens if you want to leave the partnership, what happens if the partnership dissolves? Because even a husband and wife partnership needs to have one of these things, because I've seen some nasty arguments and divorces and things in that case, which is a shame, but I've seen a lot of breakups of partnerships where one's blanking the other, and if you have it all down in paper, that's the proper way to do it. So there's a lot of things to know besides just the legal formats, but how each one works. The second thing that I teach is how to organize your paperwork, not how to do accounting. I think accounting would be the most boring job in the world. Even though I work with numbers every day. The numbers I work with is how do I use the us tax law to win for my clients? I use the government's own tax laws against them, basically. But you need to know how to keep the paperwork properly.

Roger Pearson [00:15:33]:
You know, you don't commingle funds, and you don't use your checking account as an accounting system, and you don't throw anything in a box and give it to somebody at the end of the year. So how to organize them, how to keep track of things separate that have to be depreciated and so forth. You need to know all that stuff so that the person you hire can do the best job for you. You're giving them the resources they need. And the third part is knowing the tax consequences of each type of legal format that you're in and how one is an advantage over another so that you can be in the right legal format and the right tax format at each stage of your business. And you need to learn all three of those things. If you don't want to do it yourself, that's fine. You'll know enough to hire the proper person for you that does know those things and likes to do them every day.

Amber Stitt [00:16:20]:
Your first pillar reminds me of the financial planning world, and I do insurance planning and have strategic partners. For the financial plan part, I think sometimes people think that once I do it once, then it's done. "Great, I've set some goals!" Life changes, life evolves, and if you're successful, hopefully, if that's happening, there's more complexity and you want to be able to set things up properly. So I think it's an ever moving target which reiterates the need to be meeting more often than what we kind of are pre-programmed to think.

Roger Pearson [00:16:48]:
Correct.

Amber Stitt [00:16:49]:
The second part I talk a lot about, for me personally, is having resilience in life by being very proactive. Take action today when you're talking about organizing your receipts, how to handle those accounts. What I tend to want for people is to have this game plan where everything's set up in case something like an obstacle comes your way. Chronic illness, whatever, it could be taxes. But if you are using a very neutral, agnostic process in advance, when life gets a little tough, the program's already set, and that's a better story you can tell your advisor because you're not having them guess and dig around in a mess, just like life. I don't think you should leave that for your family and your legacy, but also in your business, having that properly, that story there, and I think that's crucial.

Roger Pearson [00:17:32]:
That's very wise advice there. It really is.

Amber Stitt [00:17:34]:
Yeah.

Roger Pearson [00:17:35]:
You know, all three of these pillars work together, and the secret is learning how they work together. And this is what I've tried to do with my courses, is that I've tried to take things and describe things that they aren't written in IRS-ese, IR-ese, that's what I call it, and in complicated financial terms and everything, but to bring it down and to teach people these things in everyday terms, that anybody can understand that can be easily understood. There's a lot of data there, and sometimes you have to read it a couple of times to really absorb all of it because it's a large subject. But I've tried to do it in a way that it is easy to learn, that you can learn it well enough to talk to other people about it.

Amber Stitt [00:18:15]:
Well, I appreciate you giving the information out. Lots to think about, and people can find you over at Seagull Technologies, correct?

Roger Pearson [00:18:22]:
www.SeagullTechnologies.com is my main website. Got a lot of free stuff out there, but there's also links to the paid courses for people that want some advanced knowledge. I also have a free report. If you go to www.SeagullTechnologies.com/free, you can download a free report that goes into the three pillars that I've been talking to and get a better understanding of what we've been talking about here. And there's links there if they want more information also.

Amber Stitt [00:18:46]:
Well, Roger, you've been a pleasure. I love helping people take action, and in the form of having the ability to understand money and have more money and more opportunity for themselves and their families is so important. And I know you're an advocate for that. And so I really appreciate you giving us some steps. But you have more on your website, too, that people can study. But it's not just a one time thing. Once that deadline hits: April, it's coming!

Amber Stitt [00:19:09]:
I think it's way before that. It's throughout the year that you have to be practicing and personally investing in your own future by staying on top of things.

Roger Pearson [00:19:17]:
Absolutely.

Amber Stitt [00:19:17]:
Well, thank you so much for being on the show today. I really appreciate it.

Roger Pearson [00:19:20]:
Well, I sure appreciate you inviting me, and I've enjoyed the conversation.

Amber Stitt [00:19:25]:
Thank you. Thank you for joining us on this episode of Pathways. For more information about the podcast, books, articles, the blog, and so much more, please visit my website at www.AmberStitt.com And remember, let's take action today! Thank you for listening!