Amanda Northcutt (00:00)
Hello, you're listening to the Level Up Creators podcast. Amanda Northcutt here, founder and CEO. We help creators and digital thought leaders like you turn your knowledge and experience into rock solid recurring revenue businesses. And we're so glad you're here. Welcome. Today, my special guest is Jonathan Finiak, attorney, entrepreneur and the legal mind behind LLC [attorney.com](http://attorney.com/). Jonathan helps entrepreneurs protect themselves and their assets by demystifying the legal side of business ownership.

With a unique ability to make complex legal concepts approachable, he's helped thousands of founders form their businesses the right way while avoiding common and costly pitfalls. Welcome, Jonathan.

Jonathan Feniak MBA Esq (00:36)
Hey, thank you so much, Amanda. really am super excited. ⁓ Your audience is composed of all the people I speak with or the people I speak with on a daily basis. So super excited to answer the questions. You know your audience and we can bring this knowledge from me, get it right into their ears. So super excited.

Amanda Northcutt (00:57)
Yeah, we got a lot of value we're going to lay down today, which is exciting. And I've not yet had a guest from Puerto Rico. So welcome all the way from Puerto Rico. I know it is a nice warm sunny day for you and a nice cool day here in Fort Collins, Colorado. So wonderful to be together.

Jonathan Feniak MBA Esq (01:05)
Thank you.

Awesome. Thank you. Yeah, beautiful. Almost always, unless it's raining and there's always a beautiful day though.

Amanda Northcutt (01:16)
Right.

Awesome. Well, you and I were introduced recently by a mutual friend and quickly realized, you know, we have a lot in common and have a lot of complementary skills, especially around helping entrepreneurs truly simplify and protect their businesses from day one, from the very start. So we have, again, a lot of value and information to unpack today. But before we get longery and tactical and all those things that are very important, let us know a little bit more about who you are and your own journey as an entrepreneur and how you got where we are today.

Jonathan Feniak MBA Esq (01:45)
Yeah, I actually started my first company. was thinking about this the other day. I was, was 13 years old. I was a skateboarder and I was buying skateboard blanks, like a square and going to the skate shop, copying the shape and then selling them to my friends for half the price. And so that was my first entrepreneurial experience. ⁓ And actually went ⁓ undergrad English, worked in transportation logistics, really high, ⁓ high operational need type businesses within margins.

got an nb a went into finance have sales experience as well as ⁓ raise money for private investment funds finding investments are private investment funds and then financial advisor ⁓ after that managing high net worth clients ⁓ and then ⁓ didn't go to law school and i think i was forty five ⁓ yesh showing my age here but ⁓ took all of that prior knowledge and experience as an entrepreneur

as a business owner, not just the one when I was 13, but others along the way, and ⁓ take that and became, know, I knew these things, had hired a lot of lawyers over the years, and ⁓ one of the missing pieces was how do we democratize ⁓ the legal services and things like forming an LLC and getting it to people in a way that's gonna make them compliant, easily digestible, and inexpensive, and so.

you know that that that's been my journey and member you know we're delivering on it with llc attorney dot com

Amanda Northcutt (03:18)
Awesome, well I really appreciate your entrepreneurial background and your diversity of experience, know, bringing a lot of finance in as well. ⁓ Because I mean, our audience certainly is high net worth individuals, 40 to 65 year old entrepreneurs who are thought leaders and subject matter experts and are writing books and speaking on stages. And so definitely appreciate your ability to kind of see from their perspective and you've walked many days in their shoes. So I certainly.

like that and appreciate what you're bringing to the table, not just a lawyer's perspective from coming straight out of university to go get their JD and then just having a legal career. So a very unique and invaluable mix of experience. So thank you for sharing that. That's awesome. I love that you had a, you were flipping skateboards at age 13. That's awesome.

Jonathan Feniak MBA Esq (04:02)
You I had to keep buying new sneakers because you wear them out when you're a skateboarder. My mom cut me off.

Amanda Northcutt (04:08)
Good for your mom and look what that started. I love it. I like your mom already. Yeah.

Jonathan Feniak MBA Esq (04:10)
We could have did. Thanks mom.

I'm a big fan of hers too. ⁓

Amanda Northcutt (04:16)
Awesome. All right, well, let's talk about privacy. So something creators and business owners often overlook until it's a little bit too late, which is not good. We're trying to like preempt and prevent problems here. So what are some of the biggest privacy risks entrepreneurs face when they're registering their business?

Jonathan Feniak MBA Esq (04:25)
Mm-hmm.

So you, number one is you can't unring the bell, right? If you don't have privacy from the start and you formed your LLC, your name is in the Secretary of State records, you're serving as your own registered agent, your home address is there, you change it, it's still there. It's like the chain of title with real estate. It's gonna be in that record forever. And there's companies that either buy the data from the Secretaries of State or scrape it through some mechanism and it goes into their database. And I've seen them, there's,

Like, and I have any problem with them, right? You just have to be prepared for it. Open corporates or others, where you go in and you could say, okay, type in this person's name and you could see all the LLCs that they're associated with or corporations. And there's some that even do a diagram. And so if privacy is important to you, you need to get it right from the start. And if it is important to you and you didn't get it right from the start, I sort of view it, I love watching spy movies and like Jason Bourne and he'll like, someone will see him and he's like, we're burned.

And he never goes back to the apartment, maybe blows it up or whatever. That's sort of what you need to do. You may need to burn down your existing company and start again with privacy in mind. so that is the first step is to sort of evaluate where you are with your privacy now.

Amanda Northcutt (05:54)
Okay, so I think what you're saying is a lot of us have our home addresses associated with our LLCs or business entities that are stored in public record and that that is not something to be aware of and not necessarily the best, ⁓ from a privacy perspective at least, way to approach starting your

Jonathan Feniak MBA Esq (06:10)
No,

and the problem is, right, so anytime if you're a public speaker, I actually I'm more of a libertarian. I believe that everyone should have the right to say whatever they want, right? And so if you're up there on the stage, though, and you're talking and you have videos out, someone is not going to agree with what you say, I can guarantee it. And if they don't agree with you, do they seek you out?

Do they dox you, right? Where they put your address up or do they swat you or whatever the heck these things are, send someone to your house, come to your house, maybe cause some real harm to you and your family. That's something you need to be aware of when you're in the public eye. We're not selling widgets here behind a company's name. We are face of companies, faces of our brands. So how can we get that information that's already out there out of the public space? Sometimes it's not gonna be possible to.

Right. There's already too many connections, but then there's additional steps we could take and we'll talk about it when part of your life needs to be publicly ⁓ exposed. Right. You are the face of the brand. But other parts of your financial life, your investments and the things where you're buying real estate or investing in other businesses, that's not associated with your brand. So we can protect those assets if somebody wants to go and, they really don't like you. So they're going to go pick it in front of your

car wash business that has nothing to do just because you're an owner and go and disrupt that in some way. So isolating, compartmentalizing, and if we do need to be, if we're the face of the brand, we do need to be associated with that brand, keeping our information private with all the other areas of our life.

Amanda Northcutt (07:51)
Hmm. Yeah. That makes a lot of sense. mean, the bigger you get, the more of an issue this is. And obviously you're speaking to, you know, an outlier case, you know, someone potentially like coming to your house or sending someone to your house. But, you know, yeah, it does happen. And I think information is power and it's good to know where your home address may or may not be listed in terms of government records. So, okay, that's helpful. And then ⁓ what is a registered agent service and how does using one help protect business owners personal information like their home address?

Jonathan Feniak MBA Esq (08:20)
So a limited liability company or corporation is created by the state to foster entrepreneurship. They want businesses to be formed and they say, here's the deal. You can form a company and whatever you put into that company or assets it has are going to be at risk. But we're going to limit it to the assets that are there. The trade off is it needs to be easy to sue that company. That's the trade off.

With a person, if you want to sue them, you got to find them, right? And there's people who hiding from people who trying to give a lawsuit to them. We've seen that in movies and otherwise. With a company, it's not possible. That's the trade-off. So you have to have a registered agent who is there, business hours, nine to five, five days a week, able to accept that legal document. That's the trade-off. And so legally, you must maintain a registered agent. You can have yourself as your registered agent.

If you got an office, right, and you're actually there nine to five, then okay. Some people put their house down or they put a virtual office. You're not actually complying with the law. No one's checking it, but it could be a problem. The other problem with that though, is if you're serving as your own registered agent, then someone could show up at your house and maybe your partner is not as business savvy as you and doesn't realize that litigation happens.

litigation gets served and it's to your kids or to your spouse who accept it. And that makes them very nervous. It could also happen if you do have a business location and a process server complaint comes in, your employees can be like, ⁓ man, we're getting sued, check this out. And they can be like, I don't want to work here. I don't want be part of litigation. And they leave. And so if you've got a professional registered agent, they accept that. They identify it as service of process. And then they privately notify you like, hey, your company's been sued.

you will then be able to take action privately and only let those people know who are on a sort of a need to know basis. So that's sort of the foundation. All 50 states, you have to have a registered agent. The foundation of the LLC attorney process formation is we serve as the registered agent in all 50 states.

Amanda Northcutt (10:31)
Okay, cool. So you've mentioned compliance a couple of times and that you may not be compliant, you may not know it. We'll see if someone checks or not. So tell us a little bit more about the balance between staying compliant and protecting your privacy as a business owner. how do we strike the right balance here?

Jonathan Feniak MBA Esq (10:45)
Yeah.

Those two things usually aren't at odds, right? Privacy, if you form with LLC attorney, we form your companies privately. And sometimes there's states where you can't ⁓ form privately. There's a requirement to list the members. Like Florida is one of those states. But the way that you can form a company privately in Florida is you form a Wyoming company that then owns

Amanda Northcutt (10:57)
we've learned these types. Sometimes they...

Jonathan Feniak MBA Esq (11:14)
the subsidiary in Florida and that allows you to, you can put the name of the Wyoming company which is private in Florida. So ⁓ compliance though and privacy are really not at odds with each other. ⁓ Privacy is undermined usually by the actions of the owner of the company. They put their smiling face on LinkedIn and say I am the founder of these five LLCs, well everyone knows now, right? They put their, you know, if it's assets, they're putting them in the,

their smiling faces on the website or something like that. ⁓ When it comes to compliance, what ultimately we the LLC to do is to limit our liability to what's inside the LLC. And there's mechanisms in the courts to pierce the veil, to break through the LLC or eliminate that protection. And if you're not compliant, then it makes it easier for ⁓ someone, plaintiff to hold you.

personally accountable for the company's liabilities. And compliance is, it's a, you know, the journey of a thousand miles begins with one step. The day you form the company is the first step. Having a bank account for the company is another step. Making sure that the income that comes in is not going into your personal bank account. It goes into the business bank account, making sure the expenses are being paid by the business through the business credit card or the business, whatever, the business bank accounts.

vendors and contractors, are making it absolutely clear, Jonathan is not hiring you, LLC is hiring you, and you're signing documents not as Jonathan, but as LLC, Jonathan as manager, those sorts of things, as well as ⁓ record keeping and tax compliance, right? We say, what is the biggest liability many of us have? Well, 30 or 50 % of your income, you're liable to pay the IRS or state. ⁓

or states for it, that's a pretty big liability. And if you mess up, interest and penalties are incredibly compounding. So making sure you're compliant in that way to limit that risk. And then just good record keeping, right? If money's going into or out of your company, right, to you or from you, there should be something that documents that. Your accountant will love you. This was a distribution. This was a contribution. This was a loan. There's a record of what it is. Then the final part.

that is often overlooked and this is a, sort of the three hallmarks here are money in, money out, or can you get sued? And if you're taking an action that could potentially get you sued, I would like everyone to create meeting minutes, some document that ⁓ explains the decision making process. It was not done, I didn't hire this person because they're my friend, I hired them because.

hiring this contractor to do X, Y, Z, because I think they're the best in the world, and their license-bonded insured with the state Better Business Bureau ranking or rating is all A's, right? Something like that. Because then you've got something, you're protected by something called the business judgment rule. We make bad decisions in business, right? It's a reality. If you make a bad decision that leads to litigation, and you can't establish that it was made.

in the interest of the company, that the company's interests were taken to heart, then you could be held personally liable for that bad decision. We want the company to be fully responsible and that limited liability shield to completely hold. it's what's going on on a daily basis, not daily basis, on a recurring basis, you are thinking about the integrity and the separateness of your LLC and respecting it.

Amanda Northcutt (14:53)
Yeah, think just kind of keeping your receipts, your paper trail, if you will, is really, really important to ensure that you're staying in between the lines and that you are protecting your personal assets. That's also right, it's really important to not operate as a sole proprietor because then you're kind of wide open ⁓ in terms of risk because you're getting sued personally, not your LLC. So we want to make sure that that shield is fully protecting you, that you're in compliance, you understand where your address and your name are. And I mean, for those of us who the...

vast majority, if not every single person who is listening to this podcast, is a founder of a founder-led brand. And so our faces are out there and our business names are out there in some way or another. ⁓ let's talk about the risk that comes along with that. mean, is my business and these types of businesses or other specific industries, ⁓ do they face bigger risks than others?

Jonathan Feniak MBA Esq (15:47)
Well, we have seen ⁓ people in this industry where, know, whether it's defamation or sometimes it's they've got a sponsorship and they don't fully execute on the terms of the sponsorship agreement or they do something to harm the company that they're sponsoring. ⁓ There's intellectual property issues. Are you copying someone else's format? Are you copying their, you know, their brand in some way that kind of litigation can come? And it's important to

You know, even though many of the companies and your followers are single member LLCs, they're the only one there. That makes it even more important to establish these. You know, it feels like you're pushing paper, but you got to make sure that you are respecting the integrity of the company. And there is the on camera you and then there is the other you right. Your personal you and that it's clearly distinguished because

a lawsuit if it happens would be against almost without question you as an individual plus your LLC and then it's going to be up to you to establish that everything that Amanda or Jonathan did was in furtherance and approved by the company itself, right? You're just an employee, right? Or you're the owner, but at the end of the day, that's how you want it to be, how you want it to be treated. And then we think about there is going to be some potential liability that falls on your shoulders. So

How do we protect what else you have? And this is where you're an investor in real estate as well as doing what you're doing now. That real estate portfolio and those real estate holdings should be held privately. Keep those very, very tightly controlled. And with a Wyoming LLC, with subsidiary companies and states in which like with the properties located.

You wind up with something they call, Wyoming has the strongest form of this, of any state, it's called charging order protection. And so even if there's a judgment against Amanda, they sit down and they ask, Amanda, what assets do you have? You could legally and truthfully say, I own a Wyoming LLC. And that stops them in their tracks because they can't break into the Wyoming LLC.

They can't foreclose on your membership interest. They can't disturb the Wyoming LLC and everything else it owns because of that super strong charging order protection. So by protecting your assets, and that is, know, people talk about, I'm gonna have an offshore trust, or I'm gonna have, you know, an asset protection trust in Wyoming or South Dakota or Nevada or somewhere else. If you get to a certain level of net worth, that's sort of the next step. But those usually, you know, for the domestic asset protection trust, super private, right?

hard to work with in reality, really five to 10 million plus is where they make sense. And then offshore trust, there's a lot of snake oil. You really don't have the, I don't think you're getting what you think you're getting. And those really are, I view that as like in case of emergency break glass, where if it becomes, you just can't even breathe anymore in the US, you could leave and go join your money in the Cook Islands or something like that. from the.

the privacy standpoint, you are all going to be exposed, limit your exposure to veil piercing and then keeping the other assets you have underneath that Wyoming LLC. Or if you're hitting those net worth numbers above and into an asset protection trust that then owns that whole structure, not your operating business, not your brand business, because that's where you're going to get sued and you can't cover with insurance. It's difficult to cover with insurance, I would assume. ⁓ So that would be sort of your two silos.

This one, I realize it's almost a sacrificial entity, right? Because I'm named and it could get sued and then, you you can go from there and build all this wealth outside of

Amanda Northcutt (19:42)
Yeah. So it sounds like the name of the game is get good advice from a lawyer. assume you all, this is exactly what you do at LLC from LLC [attorney.com](http://attorney.com/), right? And it sounds like the Wyoming LLC is a really smart play. I've heard a lot about Wyoming LLCs. know Delaware LLCs are big with Stripe Atlas, but you did not mention Delaware. That was interesting. But the, what I'm hearing is the higher your net worth, the more sort of

Jonathan Feniak MBA Esq (19:48)
No, you don't need advice from a lawyer. That's the whole point of it. Right.

Amanda Northcutt (20:09)
buckets you need to put your assets in to keep them separate from one another so that you can't dig into one piggy bank if you get sued in the other and then separating yourself as an individual ⁓ from those other business assets. Am I hearing that right?

Jonathan Feniak MBA Esq (20:25)
You absolutely nailed it. And Delaware, you know, I've done, I've talked about this at length, and there's things on the website about it. You you've got a number of jurisdictions that are for people who don't need to be in a specific jurisdiction. A lot of people think, well, I live in North Carolina, I need a North Carolina LLC. Generally not. There's like doing business rules. Are you doing business in North Carolina? And you could look at what the rules are.

typically just being the member or manager, owner of an LLC from another state. Now, California is a weird one in this regard, but in most cases, you can form in one of the premier states and then don't need to register it or qualify to do business in some other state. Delaware, Wyoming, we'll say Nevada, maybe New Mexico are sort of four that are in my mind alternatives. And Delaware is expensive, it's complicated, it's slow.

That's the problem with Delaware. Delaware is appropriate if you're going to be raising capital from investors, private equity, venture capital, the like. They want Delaware because there's a court of chancery that has a very predictable set of, or you're going to have predictable outcomes in the courts if there's a problem. And they want to have all of their portfolio companies in that jurisdiction. Wyoming, and there's been a bit of an arms race between Wyoming and Nevada for supremacy and protection ⁓ for the LLCs and their laws.

In Wyoming, I'm a bit biased. I'm not licensed in Nevada. I'm licensed in, just so we know, Wyoming and Colorado. ⁓ Wyoming, I think, is superior because they have something called a close LLC. When they started, they're called kitchen table companies, is what the legislature was, how they were referring to them. And there's single member LLCs or siblings or family members, close friends. And there's extra protection statutorily built in there. And then you've got that, as well as the privacy in Wyoming.

and then you've got lower costs than Nevada. New Mexico is, the protection's not as good, but privacy is strong, and they're really cheap. Because ⁓ most states have an annual renewal cost, right? There's an annual report you need to file. That's not required in New Mexico. You just need to maintain a registered agent in New Mexico, and there is no annual state fee. So that becomes sort of the, for privacy it's good, for asset protection not.

confident in New Mexico. ⁓ that my primary choice would be Wyoming unless there's a reason to be somewhere else.

Amanda Northcutt (22:54)
Okay, that's great to know. So not all state LLCs are created equal. So educating yourself on that side is very, very important. There's a long tail of implications depending on what state your LLC is formed in. So on that note, let's shift gears and let's start talking about business a little bit. So most of us start out maybe in our corporate careers and then there's a little bit of a bridge where we're still have one foot in the door on the corporate career and we've got some consulting or advisory clients over here on the other side.

but when it's time to fully step into, you the side hustle has evolved into the full-time business, we're ready to decouple from our corporate career, what are the most important legal steps entrepreneurs should take at that juncture?

Jonathan Feniak MBA Esq (23:36)
⁓

Well, it was interesting because you had said you need a lawyer to do this. that's the whole point. want to make sure. LLC attorney is not a law firm. I am a lawyer. I'm the lead attorney. And I, along with other attorneys, have designed everything we offer. And so we stand behind it. But it is not a law firm. We do offer. There are attorneys you can speak with, myself included, if you want to schedule time with me through my law firm. So the place where we will, for people who are just getting started.

Your agreements are your first line of defense, right? You got to get a good agreement in place because that is going to really limit your liability in those contractual relationships and contractual relationships. The overwhelming majority of the time, a litigation is going to be based on some contract dispute. You were supposed to do this. You didn't do it. We didn't pay. We're not happy. We want a refund. da da da. What? How much can you get hurt by that?

And I'm typically not that concerned about contractual ⁓ obligations because they're pretty limited, right? What harm, how much did you pay me? As long as I've got the right limitations of liability and say, no, you know, consequential incidental ⁓ or whatever damages, ⁓ then I would just be limited to the amount they paid. If they're not happy, here's a refund, right? ⁓ So having that agreement or contract in place ⁓ is very important. If you're offering things through a website,

than having terms of service. There are companies out there, without mentioning any names, I don't recommend hiring an attorney for your terms of service. You're not that special, honestly, right? Your ⁓ terms of service can be pretty boilerplate as long as they're sort of ticking boxes, and there's providers out there on subscription basis or other. And then things like your privacy policy, making sure that space cookie policy, there's litigation for, if you're prominent,

They're attorneys who are sort of trolls. They find a plaintiff, they say they go to your website and that you didn't have the appropriate cookie policy, and then there's like a California invasion of privacy law that they claim you violated and therefore you owe them $5,000. There's other things too that those things are a death by a thousand cuts, right? And so getting those things squared away, how are you protecting yourself from these

smaller type claims is sort of the first thing to get figured out. Then go with you don't need an attorney, I'm telling you, you don't need an attorney to form your LLC. ⁓ We got great resources and we've got a quiz, what stage should I form in? What type of entity should I form? ⁓ And then having a good accountant on top of that and I think you're gonna be all set. You should have an operating agreement.

You know, you're going to make sure your articles of organization are filed correctly. You're going to get your registered agent. You're going to get all of those things with with LLC attorney. And don't don't even like if at some point this business gets massive. Right. And you're you're hiring staff and you're doing all of these other things at those points in time. The business has been proven out and you've got a lot of cash to play with. It's always a bit, you know, I'm bit frustrated by people who want to build something incredibly complex.

when they're just getting started. Start simple, see how it goes, reinvest in the business. Maybe you need to update your contracts at that point in time, using a template sort of form contract you got from somewhere. I wouldn't say chat GPT or that. think there's better places to get them. ⁓ One of the cool things, okay, so your listeners are speakers, right? They're being hired to speak and things like that, Amanda?

Amanda Northcutt (27:27)
Yeah, absolutely.

Jonathan Feniak MBA Esq (27:29)
One of the things you do is there's a speaker who you know is getting paid a lot of money. Try to get a hold of their contract, what their speaker contract looks like. And plagiarism is completely fine in the world of law. You're like, this person probably paid an attorney $25,000, $50,000 to draft this thing. Take that, right? Take that ⁓ thing from them and then ⁓ use it. ⁓ protecting yourself within LLC, respecting all those things we've already talked about.

litigation in this space, I think is going to be fairly rare, but getting the privacy right from the start and then having that limited liability shield if something terrible happens and then just making sure there's not death by a thousand cuts.

Amanda Northcutt (28:13)
Yeah, okay, that's great. And then let's talk about, you're talking about starting simple. think starting simple probably looks like single member LLC, and then we've got LLC filing as an S-Corp, and then we've got a C-Corp. So give us just a very quick kind of masterclass on how to choose the right structure and maybe some key differences between the different business entity structures.

Jonathan Feniak MBA Esq (28:32)
Awesome. some confusion people have. LLCs and corporations are entities at the state level, creatures of state law. Tax classification is a creature of IRS. And so a single member LLC by default is a disregarded entity for tax purposes. Two or more member LLC by default partnership needs to file a partnership return. I didn't say disregarded entity. Everything goes onto a schedule of your personal tax return.

You can also then elect one, two members. You can elect to be an S Corp or a C Corp. S Corp allows you to reduce your self-employment tax or FICA tax liability because you set a reasonable salary and then the amount above the reasonable salary is not subject to the FICA tax. You wind up with an S Corp getting a W2 and a K1, the K1 not subject to the FICA tax. With people who are, they are the business, one of the

Problems you can have is setting that reasonable salary. It's a bit of a landmine ⁓ So if for a lawyer, let's say right a lawyer charges an hourly rate if I try to say that you know And let's say that the lawyer is making half a million dollars a year if the lawyer says well I'm gonna set a reasonable salary of a hundred thousand dollars. The IRS will come back and be like, how is that possible? You're a single-member firm. You have no technology of no employees. There's nothing no leverage basically you are

was trying to shield $400,000 and they will, you know, sort of crush that. So with some businesses, it's easy. You know, if somebody's setting up a web design business and they just came from somewhere where they were doing web design as a W-2, but now they're hanging out their own shingle, they can say, well, my old salary was $75,000 a year. I'm doing the exact same thing, but I'm taking business risk with fluctuations in clients and I've got other things I'm doing. So they could comfortably set their salary at $75,000.

for professionals, for speakers, for attorneys, for accountants, where you are the business, it's somewhat challenging to do. there's rules out there, there's 50 % or 75%, depending on the industry, you can sort of look stuff up as to what you should set as your S-Corp salary. But it is a math problem, right? Your limited liability protection is not affected one way or another. And I usually recommend you start your business as if it's single member disregarded entity.

And then at year end, evaluate. Would I have, based on my reasonable salary that I feel comfortable charging doing my research, would I have saved any money? Because it's not a free lunch, right? The disregarded entity, everything goes on your tax return, your personal return. There's no separate return to file. And S-corp needs to file an 1120 return, 1120S return, which you can get charged 500 to 1,000 bucks to do. Plus you've got to set up your...

your withholding accounts and you're going to issue W-2s and so on and so forth. you know, hypothetically, ⁓ well, so and FICA taxes also do not go on forever. ⁓ They go to a current tax year about one hundred seventy five thousand and they're fifteen point three percent. Above that, they're only somewhere between two point nine and three point eight percent. And so depending on what you set your reasonable salary at and how much gap there is to the full amount of earnings.

Amanda Northcutt (31:41)
Yep.

Jonathan Feniak MBA Esq (31:47)
the benefit may not be that much. here's the good news. Wait, do not form a corporation. You would form an LLC with disregarded entity tax classification, and then you would evaluate at year end and say, would I have benefited from making an S-corp election? And you can go backwards in time. You can make a late election as long as you haven't filed a return yet, make a late election back to the date when the company started for that year. The next year,

you can do the same thing, right? And so you're having a great year.

So the next year, you do the same thing. And you say, wait a minute, I would have saved money. I say this, it's silly. If the math's math, and then do it. And so you can just reevaluate or evaluate each calendar year and then make a late election back to the first day of that year. You technically can go back two or three years, but that's more problematic because you likely have already reported the income somewhere else.

Amanda Northcutt (32:43)
Yeah, definitely. So key here is have a really skilled CPA that is going to guide you and help you with all the math and ensure you're being steered in the right direction. But that's all good to know that you can come back and.

Jonathan Feniak MBA Esq (32:53)
Yeah. So that's

actually something that's pretty easy for AI to do. And honestly, you say, you know, I have this company, I live in the state of Texas, my total income was Y. And, you know, would I benefit from making an S-corp election and paying myself a reasonable salary of this, assuming $1,000 in administrative expense? It'll do the math. And I found it to be, I've done the math myself. I've got it. And I've run it back and forth. Your experience may vary.

Amanda Northcutt (32:59)
now.

Jonathan Feniak MBA Esq (33:21)
but it's going to be in the ballpark, right? Check the math. Does the math make sense to you? If it does, boy, that's pretty compelling. And then tell your accountant, I want to make an S-corp election. Your accountant should be doing this. And I think if your accountant's not having the discussion, then it's something to maybe get a new accountant. But I find that accountants jump the gun. They want you to do S-corp election day one because they're a bit biased. They want to get that S-corp return and get their fee for it. Let's evaluate at year end.

Amanda Northcutt (33:48)
Yep. Yep.

Jonathan Feniak MBA Esq (33:51)
You actually have time that late election can go back in the past as long as you haven't filed a return for a long time.

Amanda Northcutt (33:59)
Awesome. Well, talk to me about common mistakes that entrepreneurs make when they're in growth mode and then how can you avoid them? Could you give us maybe top three?

Jonathan Feniak MBA Esq (34:07)
⁓ They don't have time for the little things, right? And the little things, the record keeping requirements, paying the taxes is a big one I see. They're not ⁓ really accurately making ⁓ their quarterly tax payments because they're not sure what's going on. And I want to see ⁓ items on your calendar that you view as sacrosanct that you will make that quarterly tax payment.

And I use Relay Financial is actually the banking partner for LLC attorney. And what you can do with that, other banks have this as well, got your income account, and then automatically it transfers. I set up rules to transfer from that income account, my withholding tax, the income tax, other things that I need, reserves. And then I know that amount that's in my reserve or the tax accounts, I just send it, right? Because the math was done for me.

And so having systems in place that you set up to make sure those things aren't done and then putting things on your calendar like once a month, what decisions that I make this month that could get me sued and inside the LLC attorney client portal, you can do meeting minutes. It takes about three minutes to do. Put in a couple of things. What's the date of the meeting? Buh-buh-buh gives you something. Boom, throw it in a file. You're probably never going to need it, but better to have it not need it than need it and not have it. So that's one.

⁓ Another one is going to be that they are too burdened with administrative tasks to actually focus on growing the business. And I think part of this is sort of, you call it analysis paralysis, or there's a ⁓ tendency to not want to do the hard things and do the easy things. So if you are comfortable with administrative tasks and you set up a very complex structure with a lot of entities and a lot of things going on, then you would put time into that instead of putting time into growing your business, getting the new

customers and so on and so forth. And then the third thing I would say is be wary of anyone trying to sell you anything related to your business. Whether it's people saying, you you need to do a trademark, right? Right off the bat. You need to pay for this very expensive operating agreement. You need to buy this S Corp, right? Or have an S Corp or you need to hire this consultant who is, you know, XYZ PDQ, all these other things.

Be very careful with who you're partnering with. Make sure they're a trusted partner and ⁓ checking on their credentials. So making sure that you are not going to be throwing money away. Because lot of the people are praying and other formation companies, and that's really one of the focuses of LLC attorney, they sort of prey on people and sell you something that you don't need or that really has no real purpose.

Amanda Northcutt (36:57)
Yes, the amount of very official looking mail that you receive when you register your LLC or when you file for a trademark application or anything like that. All manner of things are going to come to your house or your PO box or your digital mailbox, whatever the case may be that appear real. So yeah, do your homework and make sure you understand the incentive on the other side of the table. So make sure your incentives are actually aligned and you're working with people who want what's best for you. So yeah, that's great advice. Thanks.

And then how should entrepreneurs approach contracts and legal agreements when hiring employees or freelancers? We talked about agreements with our clients earlier, but like, what about W2s and 1099s?

Jonathan Feniak MBA Esq (37:38)
Yeah, so ⁓ if you don't need to hire W-2s, I would suggest not hiring W-2s. ⁓ Instead, use independent contractors in the early stages of your company. Definitely having an independent contractor agreement in place, that's actually one of the things very common you need. And inside the [LLCattorney.com](http://llcattorney.com/) client portal, you get a, it's not just a template. There's questions that myself and other attorneys we created asking you about.

the nature of the relationship. And so it creates this customized agreement, independent contract agreement that actually reflects the relationship you have and is compliant in all 50 states. So if you have an agreement, if you have an independent contractor, which I prefer in the early stages, make sure there's an agreement in place. Make sure you collect their W9 or if they are a company or their W4 so that you are issuing them a 1099.

You can't take the deduction if you don't issue the 1099, you might have a problem with it. And then ⁓ in if you are bringing on W2 employees, there are great tools out there. There's Xero zero, there's QuickBooks payroll, there's Rippling and others. That's not a good use of your time.

Right. You can get the employee manual there, the onboarding process, the background check, the this, the that, the other thing, the proper qualifications, proper tax payments deducted, social security, I should say unemployment insurance, so on and so forth. That's a good that's a good spend. Right. And it's by employees. So it winds up being very inexpensive. ⁓ If you are in California and may so maybe some folks in California bringing on independent contractors, my base level advice is do not bring on any individual on that license in California.

Don't bring on any individual as an independent contractor. Only work with other businesses. And if you're like, well, I don't have a business, great. Go to [LLCAttorney.com](http://llcattorney.com/), tell them I'll credit you 300 bucks, go form your own company. And then business to business, you are much less likely to have a wage and hour ⁓ or improper classification issue in a state like California. Department of Labor has sort of changed its rules so there's less risk there. ⁓ But ⁓ reluctantly hire.

And if you do hire, don't do it yourself.

Amanda Northcutt (39:57)
Yeah, have a go between. That's great. Well, let's talk a little bit about the why behind [LLCAttorney.com](http://llcattorney.com/). So what inspired the creation of [LLCAttorney.com](http://llcattorney.com/) and how does it solve problems that traditional law firms and other DIY legal platforms don't? What's your differentiator?

Jonathan Feniak MBA Esq (40:15)
Other legal platforms, you're not sure whether you need something or not. We go through it, you do secret shopping, right? And go through other entity formation companies or registry agent companies, this thing, extra, you know, $100 or this thing and other, then you're like, man, I don't, I really don't know. And that's not a trusted partner, right? And then they have things like, one of the things was, which is crazy, in some States, there's only one way to file. And the one way to file is usually going to be instantaneous filing.

with the state. they have some of the other providers, actually most of them will have standard, which is included on that headline price they have on their website. Then they've got an expedited, which is an extra $100 more. And then they've got same day, which is an extra $300. They are lying to you. There's only one way to do it. They have all your information. They could file it today or they could sit on it for 30 days. And it's dishonest, right? And so

We are, again, we're not a law firm. We are honest with you and give you what you need and offer you what you actually need. There's not other fluff in here, things that you don't need on [LLCAttorney.com](http://llcattorney.com/). What we offer has been designed by attorneys and then we use our tech team to create things that are super efficient so we can have very good pricing. It's not law firm prices. We're super competitive on prices. But it is when you go in, if you're being offered it, you

need it or you should at least consider whether you need it or not. The other great thing about us is every company gets an operating agreement. It is not an upsell. It's not a yes, I want it. I want to pay $100. I see that all the time. So we want you to be compliant. We want your limited liability protection to hold. And so we give you the tools to easily be able to do that through the LLC attorney platform. And our tech team is

really great and we have something in there I've never seen anywhere else, huge differentiator. Sophisticated people have multi-level structures. They got a holding company and then they've got your real estate, something like that, holding company and then subsidiaries. We actually have a button. No one else has it. It says subsidiary company plus. You press that button, it says what's the parent company, what state you're forming in. It's like two minutes to form up a wholly owned subsidiary privately in any of the 50 states. So there's some cool tools in there.

We can be a agent for any company anywhere, but it's no BS. What you see is something you may need today or it's likely you're going to need it in the future, not a bunch of snake oil confusion.

Amanda Northcutt (42:55)
What is the one piece of advice you'd give to entrepreneurs who are feeling really overwhelmed on the legal side of starting their business?

Jonathan Feniak MBA Esq (43:03)
⁓ Don't worry about it. Like calm down, get an LLC in place and then just it's going to be good enough, right? Get a contract. Plagiarize someone else's contract. Don't sweat this stuff. Your chance of being sued is going to be low. Deliver what you promise. Don't try to harm anyone and then as you start making money. Reinvest, reexamine, get the better upgrade your CPA.

You can book a time with an attorney through LLC attorney, every, every client, and even non-clients. You can book a time with me, 30 minutes, 200 bucks. Let's talk about your issues. Talk about what you're concerned about. Send them on their way and hand them over to the business success team. So just so we're clear, I have a law firm. I'm providing that service to the law firm. And then LLC attorney, we hand it over to a business success team there with this is what Amanda needs. Help her place the order.

And not just myself, there's intellectual property attorneys, ⁓ international tax guidance, and other things available through the website. we are going to make it easy. But don't delay and start creating liability in your personal name. The best time to do it is get that LLC started, do it privately, and enter into your first contract with the LLC as the counterparty on it. And then examine, re-examine the 1,000-step journey.

thousand mile journey.

Amanda Northcutt (44:26)
Nice.

Yeah. Find a trusted partner, work iteratively. Don't bite off more than you could chew. Awesome. Great. Well, thank you so much, Jonathan. I'm glad for your time today. I appreciate the advice that you shared. Do you have a quick parting shot and where can our listeners find you online?

Jonathan Feniak MBA Esq (44:42)
⁓ LLC [attorney.com](http://attorney.com/). the quick parting shot is I love talking to entrepreneurs. did, ⁓ over 700 calls with, ⁓ customers, clients last year. And there are so many ways to get rich and be successful. I love hearing about how people are doing it. And I want you to keep it. That's what I do. That's what [LLCattorney.com](http://attorney.com/) does.

help you keep what you've earned.

Amanda Northcutt (45:14)
Nice. Thank you so much. I appreciate it. And to our listeners, we know that your time is precious. We're grateful you spent some of yours with us today. If you're a subject matter expert or a thought leader looking to build a fully customized business in a box with a five figure MRR guarantee, head over to

to learn more and jump on the wait list. And follow me, Amanda Northcutt on LinkedIn for daily consulting insights. That's it for today. We'll see you next time on the Level Up Creators Podcast.