Wealth-Building & Tax Saving Strategies for Ecommerce Store Owners and Entrepreneurs in USA & Canada

Hello everyone, Guillaume Lazzarato here, host of the E-Commerce Wizards podcast, where I feature leaders in e-commerce and business. Today’s guest is Chase Insogna. He’s a CPA, so Certified Public Accountant, and today he’s going to tell us some pretty awesome tips about saving money.

Of course, tech tips. This is for e-commerce store owners and business owners in general in the US. If I know the Canadian equivalent, I’ll let you know.

All right, Chase, thanks for being here today. Thank you for having me. So can you tell me a little bit about your background as a CPA, like how long you’ve been doing this and you’ve built your own firm as well? Yeah, that’s correct.

I’ve been a CPA since 2009. I have my company here since 2011. I mean, I started it from scratch.

 I didn’t pay myself for two years. So I’ve been there if you’re starting up and just getting it going. And then,  I’ve grown it.

I have 20 employees today currently.  we’ve grown double digits annually and been fortunate for that. And we have a huge vertical in the online seller Amazon space.

We work with a lot of clients there. And so we have a dedicated accounting team,  helping monthly reconciliation, helping daily transactions. We have a house controller doing advisory and tax planning.

And then we have a tax team obviously helping with that stuff too. So,  we have a kind of a year-round relationship with our clients and we’re just looking to add value and make sure they’re saving as much as possible every year on their taxes. Alright, so a classic self-startup, suffer a few years, hopefully start making big in a few years down the road.

Good job there. Alright, let’s get right to it. So for e-commerce store’s owner, what kind of tip, what can they do to try to save especially tax? Yeah, so on our website, we kind of have a white paper and some deliverables,  kind of what I’ve learned over the last decade plus, there’s kind of four stages online seller Amazon clients go through.

And so,  the first phase is,  up to 100 or 250,000 gross revenue,  probably selling out of your house or apartment or garage,  and arbitraging products maybe, or you have your own brand you’re starting up,  those kind of just general steps is make sure you have an LLC to start out with an EIN number. So you don’t have to,  change that with Amazon, especially in the future. Once you bring in starts building out and your items start selling and with reviews, you don’t want to have to change that.

And then that kind of,  scales in,  do we need to make an S-Corp election with your LLC or not, depending on your net profits. Our general advice is 50, 60,000 minimum after expenses. And that includes mileage and home office and cell phone and things like that, too.

So,  doesn’t need to be an S-Corp. Maybe, maybe not in the first phase. Second phase, probably so,  you have to like 500k-ish and maybe 500, 750,  probably growing outside of, if you’re,  getting products into your house, you’re probably getting up there where you need to start getting a commercial space into phase three.

So that becomes,  phase two is a little more tax planning, reasonable salary, and we have a third party test to determine what that needs to be.  making sure you don’t pay as much FICA tax as you need to. You’re probably looking to hire an employee or two to help you in the phase two process.

So HR and just kind of tax planning, probably doing some forecasting,  starting to pave down if you’re borrowing money, pay down those, pay down your lenders and hopefully get to the point where you’re lending to yourself. And then phase three,  looking to scale that into like 750 over a million.  definitely requires more tax planning, cash flow forecasting, because now you’ve probably got a commercial space or a warehouse that you’re,  moving product in and out of and more than likely have an employee or three or more.

And then phase four is obviously kind of,  legacy growth. And you’re just, you have enough volume where you’re selling,  to maintain your lifestyle and you’re continuing to grow a business. And it’s just kind of on autopilot at that point from a base level.

And,  the sky’s the limit from there. So obviously there’s larger tax planning,  are we paying your spouse, paying your kids?  do we need to look at other structures potentially, depending on how much money you’re making? But we’ve got clients in the,  starting out in the $50,000 range up to,  eight-figure gross revenue range for Amazon, online seller clients. So work with all of them for us.

Accounting and taxes are the same. It’s just where you’re at in the spectrum of it and what that advice looks like. Okay.

So to help you guide us in the conversation, let’s focus on the $1 million and up kind of game. So for sure this stuff for every ranges, but let’s say, okay, let’s start with,  what do you think of like B Corp,  the benefit corporation versus like S Corp? Is there any tax impact whatsoever? I don’t know anyone that’s recommending a B Corp for what online sellers are doing here in the U.S. I mean, the S Corp structure makes sense,  if you’re looking to reduce taxes because,  it flows down to your 1040. Yeah.

I mean, the more you make, the more your tax bill gets. But,  currently here in the U.S., we’re in an ultra historically low tax rate environment through 2025. So my philosophy and what we’ve been advising clients is,  yeah, the number is big and nobody likes to pay the IRS.

But,  generally your effective rate,  if you’re over a million in sales, you’re probably effectively paying. And this is a non-tax state. Obviously, we’re in Texas based out of Texas.

But,  you’re going to range 22 to 28 percent. If you’re in a taxable state,  you’re anywhere from probably 25 to 40 percent. But,  effectively, we’re still in an ultra low tax rate environment.

And if you’re paying around 25, 30 percent, you invest that money properly or,  invest it back in your business for growth, you’ll likely make that back in,  three to five years at 25 percentage. So,  trying to put it in a structure where it’s kind of pigeonholed and up in here in this,  account where it’s not liquid is not something we recommend, especially if you’re even at a million dollars, you’re still dealing with cash flow. And,  maybe you got a line of credit.

The ultimate goal for us is to get our clients out of borrowing money and leveraging to buy inventory.  we want our clients to get to borrowing against themselves and paying off credit cards every month. All right.

So I’m asking because it’s becoming very popular either if it’s like a real B Corp or just like the certification of B Corp, which is not the same thing at all.  people want to have an impact in the world, want to feel like, OK, how is my product different from somebody else’s product? Like maybe there’s a more social angle or some kind of cause to try to rally people to. So I’ve seen a lot of interest in B Corp.

Is there any negative point from like a tax point of view of using a B Corp? To be honest, I’m not familiar enough with them to answer that. Yeah, it’s fairly new stuff. Yeah.

And for anybody else, the main thing from what I understand is that, well, with all the traditional corporation, you sort of have to maximize profit. And if you had like in a public setting could even be sued for not maximizing profit for making a charitable decision to some degree,  while the B Corp will have actually a stated purpose such as our goal is to whatever help the ocean and we’re also running a business, by the way. So anytime you put money toward that, it’s acceptable.

You’re not going to get sued for like lowering the profit or dividend payout in a reasonable way because you’re pursuing the mission of the business. So there’s a lot of,  interest in this right now. Anyway, OK.

I mean, you can always,  take an S Corp and move your profits,  and into a donor advice fund or a charitable remainder trust for yourself.  you’re getting the tax deduction in that year and then you can choose to pay out that money over time to whatever charity or,  nonprofits you want to pay it to. So don’t necessarily have to do it through a B Corp.

 you could still have an S Corp and then have another set up on the side with,  donor advice fund or charitable remainder trust to achieve that goal too. OK, and you were talking about like larger tax planning, like paying your spouse, your kid or some other structure. Let’s say one million and up.

Is there anything specific that you could see someone do? Maybe even in the eight-figure range, like is there any kind of game plan that you would say is generically big and good? I mean, everybody’s tax situation is different, so you can’t really say,  one thing for everybody. But,  ultimately the goal is to make sure you’re not borrowing money and especially in today’s rate,  these lines of credits are getting into the six, seven, eight plus range with banks and interest rates climbing. So,  a million plus,  some people are still,  even if you’re around the million to five million range, you’re still kind of borrowing to buy inventory in Q4.

But,  the ultimate goal is to pay that down and start borrowing against yourself in future years. So we still advise to keep building up liquidity in a savings account and then get to that point where you’re using your own money. Once you’re beyond that, then sure,  we can look at maxing out 401ks.

 do you have employees? Sometimes that gets,  interesting, like how to max it out. But,  if you have a spouse that isn’t working, for example,  we would pay them a small salary to max out a 401k. If you have kids, our general age is over five, unless you can prove like a marketing point and they’re in photos and,  on Amazon in photos.

But generally, if it’s not marketing related, then age five is kind of our general minimum, where we recommend,  creating a job description, having them work in the business. We pay them a net 6k annually. So that is earned income to contribute to a child Roth IRA to grow tax-free, which here in the U.S. is for education, medical expenses, purchase of a first home or retirement.

 kids are going to have one of those four. If they choose not to go to college, it’s still flexible. And it’s money you can deduct in your business along the way.

I don’t know much about the U.S. stuff, but I have one for Canadian businesses. There is the exemption of capital gain on the first one million dollar when you sell your business here in Canada. And this is where it can be interesting to have a family trust.

So you can add your kids and your spouse in there and then you can use everybody’s one million exemption here, spread it across. For you and your partner, it would be really the one million you both get a net in your pocket. For the kids, it will be half-half and there’s no way of messing around.

The kid will really get half and you have zero say or control over it. So it’s a gift that because you’re burning their lifetime one million dollar exemption, they cannot use it later in their life. But at the same time they have like half a million right now as a have a nice life to get started,  your package.

So half is theirs, half is yours. So the moment you get around what would be a one million dollar valuation of a business here in Canada, it’s a good time to get a professional evaluator there to give you an official evaluation of your company. So you can like freeze and prove to the revenue agency that, hey, this was the valuation of business at that date.

We have the certified professional doing that. And because also any kind of value that your business goes above before you freeze that value, you will pay it in taxes if you sell your business one day. So you want to freeze it as close as possible to what a one million dollar range because otherwise you would pay taxes on more.

Let’s say you wait for your business to be worth ten million dollar before you do this process and create the family trust and all that. Well, guess what? You sell your business for whatever twenty million, then the first ten million here, you just have one million that is not taxed. You’ll pay tax on the full nine million and then because you’ve done this freezing of value at ten million before transferring everything with the family trust, then the next ten million will start to be distributed and you’ll save three more there.

But you can start saving a lot more on taxes in case of a sale of business. This has to be sale of shares. Sometimes another way of doing this is don’t need to necessarily sell the whole business.

You can sell division or you can start a second business just to flip it and then you can do this kind of thing. So that’s one very interesting thing when you get around the one million dollar range in business valuation in Canada important to try to maximize this one. Sounds like I need to be adopted as a child for some of these business owners in Canada, you know.

Get a million. Yeah, start getting my trust money. Exactly, get half now.

No, that structure doesn’t exist in the U.S.  a lot of questions we get though kind of related to that is,  is it better to be a C Corp here in the U.S. from a tax perspective?  and our position is generally no. Again, because we’re in an ultra low, historically, historically low rate environment right now. Tax wise,  C Corps don’t make sense because the only way to get money out is to payroll yourself and pay 15.3 Medicare and Social Security tax as the employee employer and dividends, which are,  23.8 percent.

You’ve got 20 percent capital gain, plus 3.8 percent net investment tax on passive income. So,  between those two,  to get money out of a C Corp, you’re running around 38, 40 percent on average in a non-tax state. If you’re in a taxable state, that’s even more versus the S Corp.

 you’re going to run 22 to 28 in a non-tax and probably around 32 to 40 in a taxable. So you definitely save money as an S Corp or C Corp in most cases. And you’re talking about like tax state, non-stack state.

Would your strategy change depending on where you’re located in the U.S.? No.  again, it comes down, boils down to everybody’s situation.  what is their personal tax return look like?  would it make sense to shelter money in a C Corp or not?  if they’re,  a lot of startups, a lot of tech companies, obviously are C Corps because they have shares and they’re looking to exit.

So that’s a different story than just owning a business and holding it for 10, 20 plus years and exiting.  right now, capital gains are favorable. But again, after 2025, my expectation is those rates are going up.

OK. So anything else for a sort of $1 million range or just a little bit above the $1 million range? Are you just hitting seven figures?  definitely if you’re not forecasting cash flow, I definitely recommend,  doing that or working with a professional to do that.  making sure you’re on track for the year.

A lot of what we see is,  everybody just running through their bank account,  and see how much money they have to spend. But when most of your income in general comes from Q4,  how does the rest of the year need to be planned out,  in a rolling 12-month forecast for planning and analysis in the next year? So that’s what we work on a larger clients with. There’s a lot more forecasting on a weekly, monthly basis for a lot of our larger clients.

And,  we use software to do that, too. Right. Well, if somebody is just going to check out the bank account to see if they can spend something, for sure, at least implement profit first.

Do check that out, Mike Michello. It’s a great, great thing. Very easy.

Like, you can read a whole book or you can just create yourself additional saving accounts. And then you put profit away first. That’s it.

Profit first. Big revelation. That’s the spoiler of the book.

And then you would budget your other expenses with just savings accounts like this. So you can do this once or twice a month and you just do transfers between those accounts. And then anything that’s left in the checking account.

Well, guess what? That is what you can truly spend. So that is the cash flow management point of view. Of course, it’s far better to go with accrual.

I’m not sure if I’m pronouncing it correctly in English.  accounting rather than cash-based accounting. But they’re both useful because accrual can say that everything is amazing, but actually your bank account is dry and about to go bankrupt from lack of cash flow.

And cash-based, well, it doesn’t give you at all the big picture. So I do believe they’re both useful even though the full company should run efficiently in accrual. This episode is brought to you by Mage Montreal.

If a business wants a powerful e-commerce online store that will increase their sales or to move piled-up inventory to free up cash reserves or to automate business processes to reduce human processing errors, our company, Mage Montreal, can do that. We’ve been helping e-commerce stores for over a decade. Here’s the catch.

We’re specialized and only work on the Adobe Magento e-commerce platform, also known as Adobe Commerce. We’re among only a handful of certified companies in Canada. We do everything Magento-related.

If you know someone who needs design, support, training, maintenance, or a new e-commerce website, email our team at support at MageMontreal.com or go to MageMontreal.com. That’s M-A-G-E-Montreal.com. Okay, so we’ve covered 1 million, the low 7-figure range. Let’s go to the 8-figure range. Any specific advice, something that just becomes— that makes sense at 8-figure, becomes an 8-figure plan? I mean, it’s pretty much the same advice in 7-8 figures.

I mean, obviously, you might get into some estate planning.  we don’t specifically do that.  we refer it out, but you probably look at some estate planning.

A lot of our clients have real estate.  you don’t want to really— you want to make sure and have liability protection so it doesn’t affect your 8-figure business. Make sure you separate those out liability-wise.

But,  really, it’s just kind of— I mean, there’s no huge tax difference in advice. It’s just mainly, like, life planning at that point and what you want to do with your money. And when you’re saying to put, like, liability, would you put everything that is, like, car, truck, boat, whatever in a separate, like, corporation just in terms of being protecting versus being sued or something like that? If you have business vehicles, yes.

I mean, personal, no. That’s not necessary. I mean, your personal house and your vehicle is usually excluded from liability and bankruptcy here in the U.S., in most states.

So you don’t— you don’t have to do that here in the U.S. But,  if you have rental property,  you probably want to set up separate LLC or,  LLC for each one depending on what you have. I mean, I have 15 rentals myself currently. So,  we do a lot of real estate here, too.

But,  again, everybody’s situation is different. But,  have umbrella insurance. Talk to your insurance agent.

 make sure the business is covered. But also make sure your personal liability is covered, too. A lot of people are underinsured,  when they start getting up there in the more wealthier range.

And,  because generally they have other assets than just the business. And you want to make sure you’re just protected in the event,  somebody falls in your warehouse or has an accident and,  insurance doesn’t cover all of it. And they try to sue the business and then sue you personally.

 a cheap umbrella policy for a million plus can cover most of that. Good advice. Okay.

Anything else in that range, eight-figure range? No, not specifically. I mean, obviously,  working with a licensed professional,  is what we always recommend just for all ranges. But,  make sure you’re working with a CPA or chartered accountant outside the U.S., certified public accountants here in the U.S. And,  the reason why I started my business was there’s always a bookkeeper and always a tax person, and those two were never incentivized to talk to each other.

So that was the original kind of plan to bridge that gap when I started my business 11 years ago. And so that’s what we recommend with clients today and why we do the transactional work. But we also help with the planning and forecasting because now we have it all in-house, we have all the data, and it allows us to advise the owners more quickly than if it was totally separate and we were just doing taxes for somebody.

So definitely work with a licensed individual,  unlicensed people, there’s no recourse. So,  if you’re running your business with a bookkeeper that’s unlicensed,  anything can happen in life. That bookkeeper could disappear, they could get in an accident.

You have no control over your data and,  there’s not a state board like a CPA to figure out and go into the office of the CPA to get your data for you. That’s what the recourse allows for in a licensed CPA on any state board as well as the AICPA has groups of people internally to help with CPAs that die or disappear and clients are stuck.  always make sure you’re protected.

Sounds good. And now since we’re talking the age figure, you’re usually accumulating interesting personal wealth as well. So what you do, what is totally your choice, you speak with professionals about this, you put in stock.

What do you do? Real estate is often an option that comes up a lot, not everybody, but,  it’s more stable. Sometimes some of those web-based businesses can be a little bit more volatile. Lots of risk, high risk, high reward.

It’s awesome. But real estate tends to often be a selected choice with a lot of people in the web entrepreneurs that I’ve spoken to. Anything top of mind, like fun techniques that somebody should know about if they decide to put some of their money into real estate? It’s a good question.

I mean,  it really depends on your personal goals. I mean, I would say if you’re,  you have a retirement place in mind or you visit a place often and,  you want to have a property there, then that makes sense to do it. I mean, I have a beach condo five hours from my house.

So,  we get a chance to go down there when we want, we rent it out,  the rest of the year.  I mean, from what I’ve learned in 15, 20 plus years of real estate on my own is single family homes are a lot of work. And,  generally the cash flow, at least if you’re borrowing the money,  and not paying full cash for it, the cash flow generally isn’t there because you’ll have a good year, you’ll have a down year,  you have move outs, you have three months, no rent, you’ve got a release fee, blah, blah, blah, repairs, things happen, make ready fees.

The only money that I at least have experienced in single family homes is when you sell it, the capital gain is there for sure. But over the course of all those years,  you don’t, I haven’t really seen,  if you got a one-off single family home here and there, the cash flow is difficult. Now, if you’re concentrating, let’s say in one city of,  10, 15 plus single family homes, that’s different because then you can scale, you can,  scale your people that rehab it and people that lease it and people that manage it maybe, that’s a little bit different.

But if you’re just buying a house here and there, that’s generally been my experience. So, and,  for people that hear about real estate and like, yeah, I want to buy one house,  and rent it out. I mean, usually short-term rentals are more profitable than long-term from my experience.

But also,  at least today, this is November 2022,  you can invest that same money in the market in REITs and potentially,  keep your money liquid and make 8 to 12% returns annually and get paid a dividend every month or quarter from those companies without the hassles. And,  if you want that monthly check coming in consistently, that,  is maybe a better option for you. But if you’re just looking to hold it and,  a capital gain in the future,  again, you’ve either got tax on the money you pay it when you sell it or you 1031 exchange it into another property or more properties at the time.

So, it really depends on your goals and how much,  I try to tell you how much work do you want to do in retirement because,  real estate can get out of hand if you got a bunch of properties to manage when you’re looking to retire. So, yeah, I have a different advice for everybody. Right.

So, you were mentioning, was that retirement, was that like an index fund you were talking about? Yeah, Real Estate Investment Trust, just a stock you can buy on the stock market. Something like SPG, for example,  is a Starwood Property Group, owns a bunch of malls. Not recommending that specifically, full disclosure.

But,  it’s just an example of a REIT. Yeah, so that instead of owning real estate, you could buy stock into a real estate group that gives you the benefits sort of. Yeah, so that can be interesting too.

Of course, if you have the skill set, do it yourself. It will generally be way more profitable because even though they have like economy of scale, they still have like managers and all those layers of bureaucracy going on. So, the real estate can be extremely profitable.

I have the same experience as you that renting short-term for houses is more profitable. The risk is you may have a month or two that has nobody there. So, you have to be more solid financially.

Also, the banks here, at least in Canada, they don’t like it. Like if you say, I want to build more, a larger real estate portfolio and you have like short-term rentals, they will want here in Canada to see most banks at least two years of history to show that you don’t have like downturns during the holidays or whatever. So, if you go with single-family short-terms, you will most likely be blocked for two years in your ability to buy more real estate.

That might be fine with you, but it’s good to know in advance before I get into this. Otherwise, the long-term lease will allow you to, again, go buy something else as soon as you have the cash down for the next one as well. So, more scalable like this.

Typically, I prefer duplex and up. Yeah, for sure. Yeah, I’ve discovered like,  even like a duplex is good, but fourplex is kind of where you,  you got two renting, two not, and you kind of break even there, have a small loss maybe cash flow-wise.

But four and up,  is where you really can scale and have consistent income because you can leverage more renters, individual renters in the same complex and have move-in and move-out to not really affect your cash flow usually. Yeah, and it’s a minor thing. But if we’re talking like small purchases like this, like the smaller units, if every tenant has his home door directly outdoor and you don’t need to maintain a central place with like stairs and all, that’s a little less trouble, you know.

So, that’s a minor benefit, but something to think about it when we’re in a small number of units,  upside and downside when comparing two buildings. And it does make a lot of difference in my experience of buying a more recent building versus an older one. You say, duh, it’s obvious, but like in a major way in my experience in terms of how much 

upkeep each building will need and how much of your time this will consume. So it’s way more scalable usually to have more recent buildings, even though they’re more expensive, a lot less trouble. So you can own more without necessarily putting in place a full management team.

Anyway, okay, anything else on real estate or we’re closing this little side venture here? No? Okay, oh good. Let’s go back to the startup guys because we’ve covered seven, eight figures, zero to 250K. You talked about, well, make sure to register an LLC or a EIN number.

It would be a good idea to have,  a professional doing your books. So,  you have things in order. Anything else? On the,  when you’re starting out, the biggest thing we see and clients run into is inventory count.

 we’ve seen returns where they’re just expensing everything they buy. That’s completely wrong. The IRS, Internal Revenue Service doesn’t require you or doesn’t allow you to expense inventory you have not sold yet.

And,  that’s a big mistake we see on some returns. So keeping track of that is,  when you’re selling 50, 100K, you can do, yeah, you can do it in Excel. But the problem is these businesses usually scale to the second and third level very quickly over the course of a few years.

And once you’re in,  750, 800 plus running that much inventory in and out, it becomes very difficult to institute a inventory platform and get everything on there and then switch, like flip a switch from day one to day two when you’re running that much volume consistently. So,  we recommend on a very early on considering an inventory platform. A lot of clients use Inventory Labs to start.

There’s a number of them on Shopify too that track inventory. But be looking at operationally, how should I more efficiently keep track of inventory? Because it will become an issue down the road for you. Right.

Okay, cool. Then I guess we’re at the next phase. Was there anything else to start with guys here with the 250K? I mean, I think you’re just looking at,  cash flow forecasting a little bit,  making sure you’re on track to pay taxes and not use the cash to buy more inventory.

 probably looking at like paying yourself a reasonable salary, probably that S Corp election. Yeah, we generally don’t advise doing retirement savings until you’ve built up enough reserve. So maybe not there yet.

Maybe so, maybe you have a spouse that makes a bunch of money. So that’s okay there. But every situation is different.

But in general, you’re looking at kind of, I would say mindsets looking at what the next phase looks like. And,  okay, do I need to start looking for commercial space?  because that can take some time to find the right spot.  do I need to look at someone because at some point it just becomes unsustainable for you to do it all?  what are those roles in your org chart look like in the next kind of step as you continue scaling out? Right.

And you did talk about like being careful with cash flow and just buying more inventory. This is a very key concern for lots of merchants, especially in the 250K to 750K range and for everybody else also, but there may be even more so because maybe your sales are starting to pick up now and then you don’t have a lot of reserve inventory. And perhaps you’re getting that stuff from like China and it’s going to be like one month on the water.

And then you have to go through custom and get it shipped to you. And maybe you have a two, three months, three to six months lead time, depending on what you’re buying, of course. So like any advice for merchants to not stretch themselves too thin because they try to maximize their sale.

Like if you don’t have stock, Amazon will not like you. And if it’s on your own website, well, kind of the same, you cannot sell anymore, so you cannot make profits. So they try to not, merchants try to not run out of inventory, but at the same time, there’s a cash problem because if you have $100,000 in the range we’re talking here, that’s sort of reserved over C and then that doesn’t generate profit for many months.

It can be a problem for a business of that size, below a million. Any tips to help them out? I mean, generally that’s where a line of credit can help facilitate that. I mean, obviously as a CPA, we like to be conservative and make sure you don’t spend your tax due money, but a lot of people are borrowing against that kind of quote reserve and the savings accounts.

And that can get tricky because come April, do you have the money to pay the tax bill? But a line of credit comes into place, then I think it’s just making sure you’re forecasting what that looks like, your borrowing costs, your monthly payments versus what you’re taking in, especially in the low seasons. Can you afford the debt service while you wait for your high seasons to sell the product? Just really forecasting it to make sure you’re on track. So never use your tax due money.

This one, I’m going to highlight it, underline it, put a spotlight on it, do not do that, period. No matter how tempting it is, don’t do that because you never know what’s going to come next. I’m speaking from personal experience when I was starting out saying, wow, I have all that money here.

I could use it. I’m going to grow and then we’re just going to make it back. And guess what? Something unexpected happened, why it’s called unexpected.

And when the April comes, you don’t have the money. And then you have to take an arrangement with your revenue agency. And I was also misinformed my first year starting up like that.

Say, oh, well, their interest rate is like 6%. Actually it’s cheaper than credit card. I want this.

It’s like, no, at least in Quebec here, there’s a 10% penalty on top of the 6%. Like, ouch, okay, that starts to hurt 16%. And then it’s not just that.

You have a payment agreement. Let’s say it’s $2,000 a month, your payment agreement that you were behind. Then the next year, any payment you make like this, because you’re in a startup situation from nothing, this $2,000 is not a deductible expense.

It has to come out of your profit. So you can dig yourself into an infernal loop that you barely cannot get out of unless you suddenly raise your game a lot. And that this $2,000 per month becomes a small number for you.

And then you can exit that loop, but it can put you in a very dangerous, negative place. Never ever use your tax money. See that like the mob’s money, because that is one of the trap to avoid.

You put in the savings account and you absolutely don’t touch it. That’s for sure. Anything else? When it comes to saving for taxes, I think that’s where a licensed professional can, and somebody keeping track of your stuff monthly becomes very important because are you a Schedule C sole proprietor filing? That’s a little bit different tax planning than S Corp.

What does that look like? But with our clients, in our customized dashboard, we have their effective rate from last year, and we’re estimating what they’re going to owe every month going forward. So our clients are clearly seeing what their tax bill is going to look like and how much they need to have in savings. Maybe they’re borrowing against that for the first six months to buy inventory, but the next six in Q4, they can pay that back.

But you just got to be careful because you’re right. A lot of people do get into trouble. They think, oh, I’ll just take a loan from the IRS, but you got penalties and interest on top of the interest rate.

And then you’re using next year’s cash flow to pay down prior year debt. And you need to save for current year tax bill. It can be very cumbersome very quickly.

Yes. And the tax bill goes on your credit report. So when you’re in a loan situation from the IRS, so trying to then borrow a line of credit becomes almost virtually impossible.

Yeah. Same here in Canada. It’s one of the few things that the bank actually does care about.

Do you owe money to the revenue agency? Yes or no. And you want to be able to always say no. They ask the official report.

You have to go download it from the website. But you really cannot count on this. This is like one step before bankruptcy that your startup almost just died, basically.

So it’s that kind of mistake to avoid. Yeah, big time. Anything else that comes to mind? One of the things we kind of add value to our clients too that most people don’t bring up, and I track personally as I’m a huge points and miles person.

So we try to help our clients. We recommend the right cards for the right businesses and based off what you’re spending. And it’s kind of one of the quote values we can help build for you.

If that’s important, at least some people just like the cashback. I personally love travel. So I travel nothing but first in business class and five-star hotels, all paid with points around the world.

And that’s what I enjoy doing. But if you have a flexible card here in the US, Chase, Amex, and kind of Capital One are the top three. There’s also Citi too.

Those are the big four where it’s a pool of points that you are flexible to then do other things. That’s what we recommend looking at to start out. Especially if you’re arbitraging products.

I mean, there’s no reason you shouldn’t be using a credit card and paying it off every month if you’re already using cash. I mean, that’s a lot of points and miles or a lot of potential cashback that you can get just from points and miles. And then another caveat is if it’s a business card, that cashback is a reduction on your, or it’s added back to your P&L.

If it’s a personal card, it’s not. So keep that in mind. Important distinction because that’s why I don’t like the cashback on a business card because then it just becomes income, taxable incomes.

So let’s say a 1.5% just becomes 0.75. Not that cool. But if you’re into travel stuff, my mom is into travel hacking, so all the points and whatever. So flytrippers.com and milesopedia.com, those two places have all the information you can possibly need about that topic.

If you’re outside of the US, especially, it becomes interesting to have a credit card with no exchange rate cost on it. Because if you’re buying something from Canada that is in USD, you’ll have a 2.5% currency conversion fee on your credit card. And so regardless if you pay it every month or whatever, it says that transaction has 2.5% added to it.

So if you can save that 2.5% plus get, let’s say, 1% or 1.5% return, it’s interesting. You’re getting now a 4% return when you’re buying in foreign currency versus other cards. So keep that in mind.

There’s a few of them out there that have no foreign exchange fees. So that’s a pretty cool thing. Yeah.

Very good point. Yeah. And I’m a big proponent of bookkeeping and keeping everything up to date.

Here, our bookkeeping or accounting is done to the day. My data is maximum 24 hours out of date. It takes years to get to that level.

You don’t need that when you’re in the startup phase. But I cannot imagine running my business with the level of spending we have per day and per week without this kind of data. And it also gives amazing history for your company.

If every day you get investors or maybe one day you sell your business, whatever, you have amazing history there of everything that has happened in the company. So very important. All right.

So I think we have a good episode here. Lots of tax tips, business tips. To conclude, any last thoughts? Yeah.

I mean, I appreciate you having me. And just, again, always look for a licensed professional that you have recourse and you know your information is being done accurately. And that’s our biggest recommendation is make sure you work with the right people.

All right. Thank you, Chase. Thanks for being here.

Thank you for having me. Please visit our website at insognacpa.com. I love to talk to you if you’re looking for help and see how we can help you.