Show Summary
In this episode we interview John Lee Dumas. For years we’ve been explaining how to become profitable. In this episode we discuss what happens when you achieve those profits. What if your financial wealth and personal achievements get to the level that you’ve always dreamed? Well it happened for John Lee Dumas. As a result, a whole new set of challenges presented themselves. He found a way to reduce his extraordinary tax consequences and gain some other benefits by moving himself and his business to…well you’ll find out. Welcome to episode 146 of the Profit First Podcast!
Our Guest
John Lee Dumas is the host of EOFire, an award winning Podcast where he interviews today’s most successful Entrepreneurs 7-days a week. JLD has grown EOFire into a multi-million dollar a year business with over 1500 interviews and 1.5 million monthly listens. He’s the author of The Freedom Journal and The Mastery Journal, two of the most funded publishing campaigns of all time on Kickstarter. All the magic happens at EOFire.com!
Guest Links
Website: http://www.EOFire.com/
Website: http://TheFreedomJournal.com
Website: http://TheMasteryJournal.com
Corporate Partners
Receipt-Bank – Software and service to make the gathering, storage & processing of bills, receipts and invoices as easy and as cost effective as possible for businesses.
Nextiva – VOIP phone providers for small businesses.
Fundera – Single source online funding for entrepreneurs. Also offers an adviser program for CPAs, bookkeepers and business coaches.
Fundbox – The simplest and fastest way to fix your cash flow by advancing payments for your outstanding invoices.
Xero– Accounting software with all the time-saving tools you need to grow your business. Xero is always secure and reliable and our experts are here to support you 24/7.
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Really enjoyed being a guest on your show Mike! Thanks for the great opportunity!!
Hey loved hearing my buddy JLD on your show. His move to Puerto Rico has lots of us considering some new options.
I just wanted to throw in a few comments related to taxes in the US that could be overlooked when listening to this podcast.
I do first want to say that saving a million dollars per year is very compelling. And in a half hour show it’s really hard to understand the try motivation of JLD, so I don’t want to go down the road of questioning his reasons.
From a tax standpoint, moving to Puerto Rico to enjoy a 4% tax savings only works for virtual businesses. If you have a physical store, or a physical office head quarters in the US, you would still have to pay US tax on it. Meaning, foreigners who own US businesses, still pay US tax on the money earned in the US. The tax code refers to this as “nexus”. The physical location gives you connection to the US and the US taxes all income earned inside its borders. To complicate the matter even more, if this puerto rican business hires independent contractors that live in the US to perform work, they run the risk of giving themselves “nexus” in the state the US independent contractor lives. And by risk, I mean the IRS could come across this business, find out they have a US independent contractor providing services. IRS would then attempt to tie a revenue stream of the business to the work of the independent contractor to justify having that income taxed in the US. I’m not saying that is right; I’m just saying that is what the IRS does.
Another point I wanted to make is there are a few strategies I know of off the top of my head that would reduce JLD’s US taxes pretty drastically. So in the examples he shared on the podcast, he probably wouldn’t save 1.3 million on the strategies, but it would probably saving him at least half a million in taxes and potentially closer to a million. I obviously can’t speak for JLD, but the 300k difference is enough for me to want to stay in the US.
The last point about taxes I wanted to make is, why would any business owner live in the state of CA? CA needs to fix their economic policies, with an emphasis on the tax rates that need to be fixed. They charge a franchise tax on corporations (including S Corps) and then they still make the individuals pay income tax on top of it. A simple solution would be to move to a state with lower state taxes or a state with no income taxes.
Anyway, those are my thoughts about the tax side of the Puerto Rico tax strategy. I just wanted people to know there are still tax strategies out there that don’t involve moving to Puerto Rico.