AskPat 787 Episode Transcript
Pat Flynn: Hey, what's up everyone? Pat Flynn here, and welcome to Episode 787 of AskPat. Thank you so much for joining me today. As always I'm here to help you by answering your online business questions, five days a week.
All right, now here's today's question from Jacob.
Jacob: Hey Pat, my name is Jacob. I'm in Louisville, Kentucky, and first of all, thank you so much for all you do. I greatly appreciate the trust that you build through your transparency in running your business and being the “crash test dummy” for the internet marketing, or internet businesses, and by the way, my wife and I are big fans. If you're ever in the Louisville area, you're always welcome to come by for dinner. We'd love to have you, but my question to you today is . . . I know you have several businesses . . . FoodTruckr, and then the Green Academy, and so forth, and I know you have Flynndustries, LLC. Do you recommend having all of these businesses under one LLC, and if you were to go into a space that was outside of internet marketing, would you create another LLC separate for that? Or would you pull it also underneath the LLC. I'm curious if that creates accounting issues or not. So thanks again for all your help, and again, I appreciate everything. Bye bye.
Pat Flynn: Hey Jacob, thank you so much for the question. I really appreciate it. Let me go through the history of my business structures, and kind of my thinking behind all of it, and the recommendations that I've gotten and stuff. Now, obviously, your situation may be different than mine, and you definitely want to consult with an expert. You know, an attorney or somebody who can help you with managing your structures in the way that is best for you, and what's important to you and the kind of businesses that you have, and if you have partnerships, and obviously there's tax implications and all that stuff, and you know, depending what state you're in, you may want to make different decisions. So on and so forth.
So anyway, that was just sort of my disclaimer there. Now, I started out as a sole proprietor. So it was just me, and this was when I was transitioning between architecture and entrepreneurship, with www.InTheLeed.com which later became www.GreenExamAcademy.com, but I started www.InTheLeed.com in late 2007, and it was just a blog to hold my notes and stuff, and I started to turn it into a business in . . . sort of the summer of 2008 or after March actually. No, in the summer, and that was after I had learned I was going to get let go.
I still wasn't even thinking about business structures. I didn't even know I had to. I was still pretty young, and I didn't know what I was doing, but after I had built the website out and started to gain some authority there, and built trust, I had also begun to sell a study guide in October of 2008. I was still a sole proprietor at that point, but it was when I started to do my taxes that I realized that there were going to be some benefits to me to actually having . . . you know, getting incorporated, and most of all . . . the advice that I got from my tax guy that I hired was, “Hey, you should protect yourself and your business and keep it separate from your personal stuff. That way if anybody were to sue you, it'd be separate than your personal stuff,” and all those things. Plus there are different ways to go about it.
But initially, I had set up an LLC, and that was called Flynndustries, LLC. I thought that was kind of clever. Flynndustries . . . like Flynn and industries. Although, I will say that five times out of ten, when I tell people the name, when they write it down they always write “Flynn Industries” instead of “Flynndustries,” which makes cashing those checks every once in a while interesting.
But anyway, Flynndustries is still around, and that is where www.GreenExamAcademy.com lived, and then also www.SmartPassiveIncome.com was under the Flynndustries brand too. www.SecurityGuardTraininghq.com also was under Flynndustries, and all my little side projects and small niche sites were under Flynndustries.
I also, at the time, had a separate LLC which was a partnership with a buddy of mine from high school, when we created an app company for building apps and putting them on Apple to have people download them, and we made quite a bit of money at that point, but that company has since been folded because we just were so busy with other things, and you know, the income from the apps that were there, which were making money for us for about 5 or 6 years, finally started to get to a point where it just wasn't worth keeping it up there anymore. So that company died out, but that was partnership, and that was also an LLC, which we were told was the right structure for us so that we can have the income pass through into our personal incomes for tax purposes and whatnot. And then instead of doing salaries, we would just pull out from our business accounts whenever we kind of felt like it at that point.
Then what happened was I (I’m trying to get detailed here), www.GreenExamAcademy.com and also www.SecurityGuardTraininghq.com, when those got pretty successful, I did keep them under Flynndustries LLC, however we did do DBAs for them, or “Doing Business As,” and I just simply set those up through Legal Zoom. That way we could do business as different names, and register under those particular names, but it would all be under the Flynndustries umbrella.
Now there are a couple other businesses that I have that are in separate entities. The first on that happened was actually fairly recently, once the Smart Podcast Player started to do very well. That is a software tool that I had built, and I had built it initially for Smart Passive Income only, but it actually was something that a lot of people wanted. So it ended up turning into it's own little software project that's being distributed now at www.SmartPodcastPlayer.com which you can check out there.
My project manager, or sort of executive producer who works with me on Smart Passive Income, his name is Matt Gartland. He's awesome. He and I decided to have the software umbrella, or leg or branch, of Smart Passive Income, become it's own separate entity, and the reason for that is because he and I have a lot of great ideas that we want for software that's going to serve not only the Smart Passive Income audience, but many other audiences as well.
And so, in planning for the future, we decided to branch out, and we have a partnership, a separate LLC called SPI Labs which is specifically for the software stuff that we both work on. Now we have come up with a number of different agreements, and we have a certain percentage that we split on the profits of that company, but it's a separate company, separate business accounts, and stuff which makes it really easy to organize. However, it does add a little bit of a headache to the tax stuff, you know, because it's not under Flynndustries, but the reason why I wanted to separate it out is because I have this partnership with Matt, and now it's he and I on this thing. I don't expect him to do anything wrong or anything like that, but if he were to actually do something that, for example, would get us in trouble, it would be separate from all the Flynndustries stuff that's going on. It would be separate from www.smartpassiveincome.com, and it would just be kind of our own problem on the SPI Labs.
And the other thing is we also thought of potentially selling a lot of the things that we end up creating, which would make it easier for us if it was in the separate entity as well, but it does have a little bit of implications on the tax stuff, because he is actually in Ohio, and I am in California. So we have to register in both states, and you know, there's a whole headache there, but that's an issue. But it was worth it, and we're doing really well with SPI Labs. That also is where the Studio Press theme, that lives on Studio press . . . for those of you who are on WordPress, you can check out the theme. It's called the SPI Pro Theme that's being sold there. That actually . . . That income gets distributed into SPI Labs as well, because that's software related. And we have a number of other projects coming up in the future too.
Now, the last thing I want to talk about is FoodTruckr. FoodTruckr is a niche site that was under the Flynndustries LLC brand, but then after a couple years it was kind of sitting there making decent money through the ebooks that were being sold, but then I got approached by another company who wanted to partner with me on FoodTruckr, and it made sense for us to work together under another company: FoodTruckr LLC. So FoodTruckr LLC is its own thing. It kind of broke away from Flynndustries, and it's now its own thing, and I can see that kind of being the rhythm in the future, you know, creating something on either SPI Labs or Flynndustries LLC to a point where other people can help take over, or just get sold, but with this other company, we're splitting the profits and the workload on FoodTruckr LLC, and again, that's because we want to keep it separate. But again, it adds another layer of, okay, tax stuff. So we need to get the K1s and all these things for the tax forms and, you know, it's a lot.
So I'm very thankful to be working with Dave over at www.ProfitWiseAccounting.com here in San Diego who's helped me out in sort of keeping track of all this stuff, and it is a lot, but it's manageable. It's definitely manageable.
So that is, in total, three LLCs right now. Two partnerships. One is SPI Labs, one is FoodTruckr LLC, then Flynndustries LLC is sort of my own thing that has a few sub/niche websites, including Smart Passive Income in there.
So hopefully that helps, and the one thing that I can also say that has recently changed, it's made a massive effect on a lot of the money and tax stuff, is that we are taxed as an S Corp instead of an LLC. So we are an LLC, but we are taxed as an S Corp, which I'm not even going to dive into what that means, but it's just something for you to keep in mind in terms of how money is passed through, and taxes are taken care of and stuff.
So yeah, whew! A lot of information there, but that's the history of the entities under what I've been working on. Thank you, Jacob, I appreciate this. I haven't really talked about this before, but thank you for the question, and I want to send you an AskPat t-shirt for having your question featured here on the show, and for those of you who are listening who have a question that you'd love featured here on the show as well, just head on over to www.AskPat.com, and you can ask right there on that page.
And lastly, here's a quote to finish off the day by Abraham Lincoln. And that quote is, “I'm a slow walker, but I never walk back.”
Awesome. Take care, and I'll see you in the next episode of AskPat. Bye.