Q&A: Selling a Business for $2.8M, $2K of Side Hustles in 3 Weeks, & How to Structure Your LLCs

25:21You know, I always tell people you don't need as much as you think. You just need to make sure you understand what you need. And that's one of the critical thinking moments in your life, especially for those of you that are younger. getting ahead of it is the greatest thing you can do for your later self because then you're not going to be panicked at 55 or 65 years old because you have to always hope that you can take care of yourself because you don't always know if others are going to be there for you so this is a great episode and a great question because i love to talk about this to help people think ahead in tens of years and decades rather than in months as an investment strategy because the best thing you can do is set yourself up for later.

26:03100%. Now, with that being said, I need you to listen up to what I'm saying. It's incredibly important. Time could be running out to lock in that 6 % or higher yield on public.com. You need to go lock in that 6 % or higher yield with a bond account at public.com. Remember, your yield is not locked in until the time of purchase. So you might want to act fast. Lock in a 6 % or higher yield with a diversified portfolio of high yield and investment grade corporate bonds only at public.com forward slash rich habits. That is public.com forward slash rich habits. So our next question comes from Cindy F.

26:41Cindy says, Hi guys, my husband and I have owned a construction company for 30 years and we're finally selling. I'm 52 and my husband is 53. We currently have$50 ,000 in our high yield savings account,$150 ,000 in silver and gold,$40 ,000 each in a precious metal traditional IRA, and we also own a piece of property in a downtown area that was recently appraised at$671 ,000 that we own outright. We're going to receive$2 ,850 ,000 at closing. We'll have a note in the amount of$1 ,570 ,000 that will bear interest at 6 % per year and will be payable in 30 equal quarterly payments of principal and interest with the first payment due 24 months after closing.

27:29There will be an earn out up to$750 ,000 as well. We've never invested in the stock market, so we really want advice on how to make our money grow so we can retire by the age of 60. Robert, what a cool situation. I'll let you take the one first, but man, I'm just so pumped that people are able to spend 10, 20, 30 years, I don't know how long they've had this company for, but build it and work hard and just build into something so meaningful and then have this awesome payday at the end of it. It's just so, so cool. I'm just so pumped. So Robert, take it away. Yeah, you always hear me talk that I think owning a small business, whether it's a service-based business or you invent a product or whatever it is, but I think it's the best way to wealth because not only are you paying yourself along the way, but you get this big, beautiful payday at the end as long as you understand having a succession plan in place and how to sell that business.

28:23And so this is just a really, really cool question by Cindy and her husband. And I love it. First and foremost, what I would do before that money hits the bank accounts, get some opinions from people that you trust, but get two to three opinions and make sure what you don't do is go to a friend of a friend that you didn't vet. You don't understand the numbers. You don't understand their fees and just really find someone you feel good with and that you trust because you wanna make sure that this money is put out there in a way that matches your risk tolerance, but also that you understand what they're doing with the money.

29:00Because at the end of the day, this is a lot of money. You're coming up on retirement, so it's not just about how much you have, it's how much you keep and what your gains are, but also setting up the structure properly. Because when you have this much money, structure is important because you wanna have the right tax strategies. You want to have the right retirement strategies. All these things come into play. So certainly get multiple opinions, go with someone you're comfortable with. You could even split the money up and go with a couple different people if you wanted to. Sometimes people do that so you can keep people accountable for the performance.

29:35So that's what I would do first and foremost. That would be a lot of heavy lifting for you to try to take it all on your own. As much as we would love to help you, I think you need a professional with this much money to assist you and just really get you off on the right track. Totally. I will jump in and do all the nitty gritty though. So 2.85 million. And you mentioned that you have this note of 1.57. So I'm assuming then that they're giving you cash of about 1.3 million. So that's 1.3 million in cash. I'm assuming that will be taxed as a long-term capital gain because you're selling a business and it's not like earned income.

30:13So just meet with the CPA to ensure that my assumption there is correct. and understand what the tax liability looks like first and foremost on that$1.3 million sale of your business. Assuming, let's call it, you know, 20 % long-term capital gains there, you'll be paying about a quarter million in taxes, which will bring your, you know, after-tax money deposited to your account to about a million dollars. So let's just set that to a side, right? You have a million dollars sitting over here. You mentioned that there's a$1.57 million note on the business, so owner's financing at 6 % interest. If I did my math correctly, that should come out to about about$72 ,000 paid to you every quarter for the next 32 quarters.

30:52So that's$72 ,000. I don't know how that's taxed. I'm not going to pretend like I do. So again, make sure you get with a CPA and understand, do you need to be setting that money aside for taxes there? Or is that like, I don't know, right? Maybe the 6 % interest is what's taxed. Just get with a CPA to understand exactly. I think again, that's the most important thing here that could go wrong is you get this windfall and you immediately go, you know, deploy it elsewhere or put it in different accounts or with other people and professionals. And then you see a tax bill of$300 ,092. And you're like, yo, what's going on?

31:25I did my math wrong, right? So the biggest surprise, in my opinion, that might come your way is the looming tax bill, not just on this million three, but also the quarterly payments that get paid out to you for the next eight years, 32 equal quarterly payments, this comes out to eight years. The next thing I want to address is the 150 ,000 you guys have in silver and gold and then 80 ,000 you have combined. So it's 150 plus 80, it's$230 ,000 invested in silver and gold. That's really cool. I'm not mad at that, right? Silver and gold have done incredibly well over the last call it 1824 months, even outperforming the stock market.

32:00So congratulations on picking the right commodities. But again, they're commodities, you know, they don't have earnings, they don't have profits, they don't have dividends, they don't have CEOs and management teams that can, you know, make better products, you're investing and speculating on a commodity. I'm not saying to get rid of your investments in silver and gold. I'm not saying that at all. I have investments myself. But with this newfound fortune, right, let's call it a million dollars after taxes, and this may be a quarter million a year that you're going to get paid now with this newfound fortune, maybe it's time to, you know, sit down and really begin to invest in the stock market for the first time in your life.

32:35You guys are in your early 50s. You have easily another 20 years of investing ahead of you. So, you know, don't think that you need to preserve capital. I mean, you have 20 more years of investing. If I were you, I would absolutely put all of this money to work in the stock market. That might be in index funds. That might be in ETFs. That might be in maybe a public bond account as well, right? You can diversify the pot in such a way that allows you to have upside exposure in a meaningful way, right? Again, the S &P is up 25 % this year. It was up 28 % last year. Like that is a quarter million dollars a year that you're growing against this million investment there that we had alluded to.

33:12So you definitely want to have that. But on the same token, it seems like you guys are very risk averse, right? You're gold bugs. You're people who think the world might be going down. And that's why you have the silver and the gold. And I'm super empathetic to that. So maybe there's a way where you can craft this portfolio to have a big slice in your silver and gold and another slice in a diversified basket of stocks and maybe another slice in some treasuries and maybe a slice in real estate. Maybe you guys wanna get into some hard assets that you can look at and see and say, wow, this house or this duplex is making me, you know, 3 ,000 a month in cashflow.

33:43You guys are very good at running a business. So what I'm saying is you're very analytical, you're forward thinking, and you're super, super on top of it when it comes to money. Now it's time to be the same, you know, analytical and on top of it with investing. Don't let someone come in and say, hey, give me your million dollars, I'll invest it for you, don't worry about it. you want to learn what's going on. You want to know what they're investing into, why they're investing into it. They sat down with you and maybe they, you know, want to have that conversation about what is your biggest goals over the next 10, 20 years as you inch toward retirement and how are they deploying your capital in such a way to help you achieve those goals.

34:17So I know it's a little long-winded, but I mean, you guys now are sitting on what could be over a million dollars after taxes and you're in your fifties and it's time to, for the first time, take that leap of faith into investing into American capitalism, hard assets and things that make you feel comfortable. And you are absolutely on your way to be fully retired if you want to right now, but super duper retired with millions in your retirement accounts over the next 7, 10, 15 years. I just really enjoy seeing people win and follow along the podcast and we can go from our experience, give people all we've got to try and help them figure out, you know, how to live their best lives.

34:53And it's just really, really exciting when we see stories like this. And congratulations again, Cindy, and you and your husband, I'm sure, worked so hard to build this business over the last several years, if not decades. And this was your retirement, right? A lot of people think like, oh, you know, my retirement, I got to invest and do this and do that. Other people's retirements are building a business or owning a diversified portfolio of real estate, or, you know, there's a bunch of different ways to define retirement, which goes back to what Robert was talking about in a previous question.

35:19A lot of people don't know what they don't know, and they need to understand and have a plan of where they want to go. It's okay to have an untraditional retirement strategy like Cindy and her husband here. You just have to know what that begins to shape up as over a longer period of time. Now, our next question comes from Lucas L. Lucas says, hey, Austin and Robert, my name's Lucas and I'm 19 years old. I'm a college student doing online classes and I started listening to your podcast about a month ago. Since then, you guys have completely changed my money habits. You guys inspired me. I opened up a Roth IRA.

35:48I've got my brokerage account and I started two side hustles. I listened to your side hustles for busy people episode and I started walking dogs and house sitting. I made over$2 ,000 in the last three weeks alone. Thank you so much for the inspiration and because of my living situation, I can invest nearly all of this money. My question is, since I don't have a registered business or claim this money from dog walking as W2 income, am I safe putting it inside of a Roth IRA? At what point do I need to claim this money as income and how does that work? Thanks for everything you do. And you truly are creating a new generation of financially literate individuals.

36:26Man, I just get goosebumps. I get so excited. Let's go Lucas. Let's go everyone else who's sending questions and is taking notes. This is so cool, man. All right. So Lucas, let's dive in. Lucas asks this question of like, hey, I made this money over here. Is it safe to put in the Roth IRA? Because your Roth IRA, the money you put into that has to be earned income as a sense like you have to pay taxes on the money before you put it in. There's no ifs, ands, or buts about that. The money you make has to already have taxes paid on it before you can put it in the Roth IRA and invest it. And so Lucas is saying, I'm earning this money dog walking.

37:00I'm earning this money house sitting. I'm doing these things in such a way that I am not exactly paying taxes on the money I'm making. Now, either one or two things are happening. One, Lucas is using an app like Rover or Wag or one of these other, you know, dog walking apps where he's finding new clients, going on the walks, doing all the stuff, and then he's getting paid through the app. If that's the case, you're going to get a tax form early 2025 that's going to say, hey, I'm Rover. Hey, I'm Wag, whatever. You are Lucas. We paid Lucas in 2024 X amount of thousands of dollars through our app as a service, right?

37:38He's a gig economy worker. So we paid him. you know, 1099. And you know, you'll owe taxes on that money. Therefore, you can use that money for the Roth IRA contributions. Now the flip side of that is Lucas may be found inside of a Facebook group said, Hey, I'm Lucas, I'll walk your dog for cash, don't have to pay taxes. It's all fun and games. That gets a little bit trickier. I don't believe that you could take the money that you did not pay taxes on and invest it in the Roth IRA. And so here's what I want you to think about, When you file taxes via Cash App or TurboTax or whatever else, there's a line on your tax form that says, my name's Lucas and I made this much money in taxable income in 2024.

38:18If that number of taxable income is zero, then no, you cannot take money and put it in your Roth IRA. But if that number is like$4 ,000, then you can take up to$4 ,000 and put it in your Roth IRA. If that number is 7 ,000, you can do up to 7 ,000, right? Whatever that number might be, but you can't do more than what you actually paid taxes on as an earned income type individual there. So just make sure you know, you know, when you file your taxes, what that looks like. And the good news is you will know what that looks like early 2025, because that's when sort of these tax forms begin to get sent to you from these WAGs and rovers and other things, which gives you time to retroactively contribute to 2024 Roth IRA.

38:59For everyone listening, you can contribute and invest money toward your Roth IRA for the calendar year of 2024 until April 15 of 2025, right? You'll get a better understanding of what your tax liability looks like, your taxable income, things like that, allowing you to say, wait a second, I actually did earn some money. I can go do that, right? That's totally normal. I've done it myself. It's pretty unique there. But that's my hot take. And, Lucas, you're crushing it, man. Seriously. Yeah, and I would say just understand the tax man is your friend. You know, everyone is always trying to, I get people every day, hey, can you pay me under the table?

39:33Hey, can you pay me in cash? Hey, can you not report this? And the answer is always no. I have no reason to cheat the tax man. And I have no reason because I understand the tax code. My team understands the tax code. And I'm going to make sure to follow the law. And it's the same whether you're doing Rover or whatever. There's no need to try and hide that money from the tax man because you want to be able to utilize it to build your future. and trying to hide it and find ways around paying taxes on it just normally doesn't end well for people. So just understand that. And the only other piece of advice I have, Lucas, you're 19 years old.

40:07When I was 19, 20, 21, 22, I had to do taxes for the first time. It was so overwhelming. I use TurboTax, super easy. I think it's like 40, 50, 60 bucks to file your taxes with them. Super reasonable, in my opinion, of a price. And they make it step by step. And they have your records of your taxes. So you can like log back in and see all these forms and things. But on the flip side, my girlfriend actually used Cash App in 2023 for her taxes. And it was completely free and done all in the app. So like there's a bunch of different ways that you can file your taxes very cheap or for free. You just got to be tech savvy.

40:44And I mean, if Lucas, you're making$2 ,000 in three weeks, you're pretty savvy to begin with, man. Right. Right. I love this story because it just goes to show with modern technology in the society we live in, you can go out there and make really good money if you put in the work. So many people just have this lack mentality that, oh, well, I lost my job or I'm getting laid off. What am I going to do? Go out and find something. You can do exactly what Lucas is doing, following the blueprints that we put out each and every week, taking action, and the money will come. It's just there. It's all around us.

41:19You just have to want to go get it. 1 ,000%. and you take that money and you spend the time, hours, days, weeks, years working hard to build up a nest egg that then gets invested into the S &P 500 that will then grow for you over time passively. And the money you earn passively with this portfolio income will eventually be more every year than what you're actually trading time for money for at your job or your side hustle doing, right? I mean, again, we talk about building your base and how important that is. $100 ,000 invested at the beginning of this year is now worth$125 ,000. That's$25 ,000 that those people didn't have to spend any time, any effort, anything to earn because they invested their money properly and they sacrificed time, pleasure, vacations, all the things they can afford to set aside extra money and put that into the markets.

42:11And that's going to continue to grow for them over time. But it's the coolest feeling like, and you think about our 30-year age gap, You're crushing it, Austin. You're way ahead of the curve. You're really good at all this. I've been doing it for 30 additional years. And the best feeling on earth is waking up almost every day and making that money while I sleep. And it's greater than most CEOs make a year while I sleep and do nothing additional because I set myself up a long time ago. And that is the key of everything we're doing is to get everyone to understand the sooner you start, the more time you let compound interest do its job and the better off you're going to be because we want to make sure everyone gets to live this wonderful, beautiful experience in retirement.

42:54That's what drives me every single day. Dude, I'm right there with you. Now let's hear from our last question from Elijah A. Elijah says, hey Austin and Robert, I love the podcast and I listen to every episode on my way to work on Monday and Thursday morning. I've been very excited to start investing more into Bitcoin, but I haven't built my base yet and make auto investments to about 5-15 % of what's in my Roth 401k and Roth IRA combined. I'm young and I wanted to get into crypto early. I'd like your guys' opinion on the idea of increasing my dollar cost averaging into Bitcoin, even without my base being built, since I believe in Bitcoin and I'm excited to see where it goes in the future.

43:32For context, I'm 24 years old and my wife is also 24 and we have a 16-month-old daughter. I make$73 ,000 a year as an early career engineer and my wife will be working again in a few weeks as a student nurse tech making about$750 a month. I have$5 ,000 in my Roth 401k, 1 ,500 in my Roth IRA, 650 in Bitcoin, and 6 ,000 in our emergency fund. Our rent is$2 ,000 a month, and we have an auto loan of$457 a month at 11.5 % interest. Let me take a first stab at this, Robert, because I think there's a best of both worlds here. I'm all for you investing in Bitcoin before building your base. I'm cool with that.

44:11And a really easy way that I think you can do it in a risk adjusted manner that's not too risky at a young age is allocating 10 maybe 15 percent of your Roth IRA portfolio into IBIT and that new money that you invest into your Roth IRA could have some of that Bitcoin exposure so you have 650 right now in Bitcoin you have 1500 in your Roth IRA let's assume you max that out every year so now you're talking about you know a thousand maybe $1 ,200 a year invested into Bitcoin over there. You add that now to your$650, we're closing in on$2 ,000 a year invested into Bitcoin. And over a long period of time, because you want to have this long term mentality with Bitcoin, I'm sure that'll grow exponentially, and you're going to be just fine.

44:56Right? The mistake I think people make, and I see my friends do it all the time, is they open up a Robinhood account, they get their paycheck, and they go deposit$500 into Robinhood. And they put it all into Bitcoin or Dogecoin or whatever coin is the coin of the month here, it goes to 300. And they think, oh, man, I got to win it back by putting it into something more risky. And then it goes up, but then it would sell in time. Now it goes back down to 100. Now you're out 500 bucks, dude. So you absolutely can add Bitcoin. In my humble opinion, you're young, just do it in a way that is, you know, sort of risk adjusted returns by putting it into the Roth IRA.

45:29So you're going to have that long term mentality regardless. And again, IBIT or BTCI are two really cool ETFs that allow you to have some Bitcoin exposure. I love that. And I think absolutely, Elijah should get some money into Bitcoin if he's following along and he loves the crypto space. He sees the future of it. I'm OK with it as well. And I don't think the base is necessary in this instance because I believe Bitcoin, it has outperformed pretty much everything for the last 10 years. I think it'll continue doing that for another five years and then it'll start to kind of level out and be like a traditional investment.

46:05So I love that. And like Austin said, you can get the exposure through these ETFs. And I think it's a great idea to get some of your money in there in Bitcoin, even if it's only 100 bucks or 200 bucks a month, like Austin said, because as Bitcoin grows and the crypto space grows, you're going to be right there inside of it. And you're going to feel good about it because you own a piece of it now while it's still early on. Now, here's what I don't like. Well, first off, you know, congrats, you guys have achieved a lot by 24 years old, like you guys are doing a great job, 73 ,000. I mean, you are making some awesome money and your wife is going to be making some awesome money here too.

46:42But I'm skeptical of only a$6 ,000 emergency fund, your rents 2000 a month, your auto loan is another 500. I'm assuming you guys are probably spending 4000 to 6000 a month, just living life. And like, I mean, that's what you have to budget every month, it's called$5 ,000, you should have at least a three-month emergency fund, which puts you much closer to the$10 ,000,$12 ,000,$15 ,000 range versus just$6 ,000. Maybe before you get really, really excited about adding Bitcoin to your portfolio, it's probably a better idea to beef up your emergency fund a lot closer to that$10 ,000,$12 ,000,$15 ,000 range, really putting a good buffer between you and life versus just$6 ,000.

47:21I just think that's a little too low. And then over time, you know, maybe you guys by 30 have a goal of buying a house. And so now you got to think about, you know, the down payment of that and saving money and putting that aside. So there's a lot to get excited about. You guys are very young, but don't fall victim to this idea that you have to be, you know, levered up to your eyeballs and trying to buy this and do that and invest in that. Like stay focused, stay disciplined. You guys are very young. There's always going to be the next big thing to invest in. There's always going to be people that make more money than you at your age that invested into something cool and now they're on a yacht like it's cool i just i want to really really emphasize you guys are crushing it and you guys are going to do so so well with your money over the next 10 15 25 years well thank you all for following along the rich habits podcast each and every week we are so excited for 2025 and beyond and we're just really stoked about the rich habits network and all of the amazing questions you all submit each and every week.

48:19Thank you so much for the support. We hope that we bring you max value all the time and that you're constantly taking notes and taking action because we want to see you all on the beach as well, sipping those Mai Tais and having a good time. Now don't forget, we have the Rich Habits newsletter that just came out this morning. This is our weekly newsletter where we break down the biggest and most important topics as it relates to the stock market, the economy, and everything in between. That's a completely free newsletter. There is literally no dollars that come out of your account to go read that and check it out.

48:50That's the Rich Habits newsletter. You can Google it. It'll pop right up. We have the Rich Habits Network, which is our sort of private community where we now have nearly 500 people that are a part of it. They join our weekly live streams. They get their questions answered both via DMs and inside the community itself. We have four and a half hours of video coursework that walks everyone through how to build wealth. I mean, there's a lot of really cool things in there. And then finally, I want to remind y 'all, The holiday seasons are coming up, right? We've got Thanksgiving travel. We've got December travel, all this stuff.

49:20Do not forget to budget for that. We have the honest budget. It's our template. We have it linked in the show notes below. But do not be the person that swipes the credit card. You go into$6 ,000 of credit card debt, and now you're spending the next, you know, January, February, March trying to crawl out of it. So you had to stop investing. All these things. Do not fall victim to that. If you can't afford to get someone a present, don't feel bad about it. If you can't afford to go travel somewhere because you're trying to pay off your high interest debt, have that conversation with that family member.

49:47Let them know, hey, listen, I'm working toward this goal. I can't do it this year, but I can't wait to see you guys next year, right? Have those honest conversations. Be an adult. Children do what feel good in the moment. Adults devise a plan. They stick to it, and they conquer that plan. You all are adults. We're excited for you, and we'll see you. Lemo, Lemo! And Doug. Here we have the Lemo, Emu. In its natural habitat, helping people customize their car insurance and save hundreds with Liberty Mutual. Fascinating. It's accompanied by his natural ally, Doug. Uh, Lemo? Is that guy with the binoculars watching us?

50:23Cut the camera! They see us! Only pay for what you need at libertymutual.com. Liberty, Liberty, Liberty, Liberty. Savings vary. Underwritten by Liberty Mutual Insurance Company and affiliates. Excludes Massachusetts. Rinse takes your laundry and hand delivers it to your door, expertly cleaned and folded. So you could take the time once spent folding and sorting and waiting to finally pursue a whole new version of you. Like tea time you. Mmm. Or this tea time you. Or even this tea time you. So did you hear about Dave? Or even tea time, tea time, tea time you. Mmm. So update on Dave. It's up to you.

50:59We'll take the laundry. Rinse. It's time to be great. We'll see you all on Monday.