Cosmos:

Welcome back to the show, my fellow extraordinary Americans. Our guest today is Roger Pearson. For over 50 years, Roger has created, sold, or managed many small businesses. 

But in 2001, he switched course and began working as a master tax advisor, IRS enrolled agent. In that time, he has watched hundreds of small business owners lose thousands of dollars needlessly. 

So recently, he made it his mission to provide entrepreneurs with the knowledge to build a solid foundation for their businesses, keep more money in their pockets, and give less to the government. Rogers Seagull Technologies is dedicated to helping small businesses succeed in building the great American dream. 

They do this by providing business education ranging from free basic business concepts courses to paid college-level courses, as well as consulting services for those wanting a more personal, individualized approach. He’s an extraordinary American, and I’m glad to have him on the show. Roger, thank you so much for taking the time to be here.

Roger Pearson: 

Thank you for inviting me.

Cosmos:

No, thank you so much, Roger.

Roger, can you tell me a little bit more about yourself, your background, and your story?

Roger Pearson: 

Well, I’ve always known that I wanted to be in business since I was 20 years old. And I’ve tried a lot of things. Of course, as you know, there’s not much business education in our public-school systems. 

And I had to learn it by the school of hard knocks, as they say. And I’ve certainly made a lot of mistakes. But I really, you know, it’s one of those things that said, God, if I knew then what I know now about business, I could have probably been ten times more successful. That’s for sure. But that’s not the way life works. So, I’ve come to a point in my life, and a lot of people are asking, “Well, why do I go to all this trouble of trying to educate people?” 

And I’ve come to the point where my life, where I believe at the end of your days, it’s not what you’ve amassed, it’s not what you’ve done yourself. What’s important is how many people’s lives you’ve improved along the way. And so that’s my mission. But I prefer to do it in the business world and the business education field because I feel that’s really an underserved community, and it’s one of the greatest needs in this country, given that so many entrepreneurs fail every year. And if I can even help just one, not fail by providing them with the knowledge they need to build their business on a solid foundation, then I’ve succeeded.

Cosmos:

No, for sure. Roger.

I think business education is so important, and I know you specialize in helping people save money on taxes. What do you think people do not know about taxes that they should know?

Roger Pearson:

A lot of people, well, they just, you know, they just figure out, well, what’s my net profit and how much do I owe? They don’t understand why they owe it or how to mitigate it. And many people don’t understand that. 

There are, I say, three pillars of knowledge that every business is built on. I don’t care if you’re a small one-person entrepreneur or a major corporation. There are three aspects of business that everybody is built on. The first one is legal formats. And we have many legal formats. We have sole proprietorships, LLCs, partnerships, S corporations, C corporations, and so forth, and depending. 

The second one is how you basically. Paperwork. People hate paperwork. I know that; I’m not crazy about it myself. If you’re serious about managing businesses, you know how it works, and you have to know how to organize it. The third aspect, the third pillar, is really taxes. What most people don’t know, especially when they’re starting, is that taxes are probably the number one most expensive thing that you’re going to pay out of your pocket every single year. And you need this knowledge. Now, the thing is, the legal format you have will affect how much tax you pay, right? 

And how you keep your paperwork will determine how well you can use the tax laws in your favor to mitigate taxes. I mean, these large corporations, you hear about these large corporations and rich people, while they don’t pay any taxes. It’s not that they don’t try to cheat or anything; they just have a lot of accountants and tax professionals that they’ve hired who know what they’re doing, and that’s probably an exception to every rule out there. 

And it’s the tax preparer that knows the exceptions to the law that is the one you want to hire because they know how to take that and get it and get your tax liability reduced, which is all profit. That’s profit that you’re giving away to the government, and they waste it, you know. And the more you know about that, the better. 

A lot of people I talk to say, “Well, I’ll just hire an accountant and a tax professional, and I don’t have to worry about any of that.” I don’t have to spend my time learning about it. That, and I asked them, okay, if you owned a plumbing company and you were going to hire a plumber, would you know how to? Unless you were also a plumber and knew what the plumbing game is, so that you could interview them properly. 

And so, you know, as your company grows, you absolutely bring on a good tax professional and probably an accountant, and to your team. And they don’t necessarily have to be the same person. And most of the time, the companies aren’t the same person because they each specialize in something different, and they can double-check each other that way also. 

So the same thing is: you need to interview an accountant and a tax professional to find the right person. You know, if you go to one of these CPA firms, they tell you to drop your stuff off and say, “I’ll give you a call when it’s finished,” then you want to take your stuff and run away real fast because they don’t care about you. You’re just a number to them. You know, your tax professional should be sitting down with you at least twice a year to go over your books. Where you’re sitting, you know, the first is during tax season, the second comes in October or November, to see if you need to make any changes before the year ends that would save you money. That’s the way it’s properly done. Unfortunately, most small businesses do not do that, and it’s really, really a shame. 

So this is what I teach. I mean, this is why I spent two years writing a book that goes into all the legal formats, how to organize your paperwork and your figures so you can take advantage of depreciation laws, section 179s, and all the other little tidbits out there you can use. 

And, the third part, of course, is all the taxes, so that you know, when you’re talking to your tax guy, what he’s talking about, you know, depending on what legal format you’re at now. The other reason you need legal is that you need to really take a look at legal formats. You not only have to look at what your business is today, but also at where you want to be in five years. 

You know, for instance, if you’re building a company that you want to be in a position to sell and walk away with a profit, which a lot of the tech companies have done. If you want to build a company that will end up on the stock exchange or something, you need to be a C corporation, because only a C corporation can sell the entire entity as one unit. Every other legal format requires selling each part of the business separately, which is a nightmare. And so, you know, and the thing, the other thing is that, well, why would I need to know about partnerships? 

Well, you know, life is kind of funny. And every once in a while, an opportunity comes along that somebody may say to you, I got this great business idea. Would you like to come in with me? Well, if you had studied partnerships and what they entail, you would know the red flags to look out for. You would know how to write a partnership agreement, which I call a prenuptial, a business prenuptial, because it basically says, what’s going to happen if you have a fight and you decide to break up the partnership? 

Because it can be pretty nasty otherwise, but you would be prepared with that knowledge just a bit. You don’t have to be an expert at any of this, but you need to have a basic knowledge of all of this if you’re really successful. And it’s not just business owners; if you’re managing other businesses, you make yourself more valuable to your employer. And the more valuable you make yourself to your employer, the better chances you’re going to get the promotion that requires that knowledge. 

And I’ve always gone up in the ranks pretty fast in management. Anytime I work for another company, it’s simply because the company we’re not supposed to run. And that knowledge has done me very well. Unfortunately, I’ve worked for a few managers. I wish they had had that knowledge. We probably all have at one time or another. So that’s basically where I’m coming from, why I’m doing what I’m doing, and why I’m trying to educate people.

Cosmos:

Roger, this is so relevant, right? 

Because a lot of people, a lot of people, like, they don’t really go and try to understand these things. But my question is: when it comes to an LLC, right, a lot of people just go for an LLC. But how do, how should somebody figure out whether they should create an LLC, an S corp, a C corp, or something like that?

Roger Pearson: 

One thing is, for many people who don’t understand LLCs, LLC stands for Limited Liability Company. And they think it’s a corporation. And it’s not before the LLCs. And the LLC is something at the state level. The federal government doesn’t recognize it in any of its tax classifications. But what it did was before that. 

And it took about 10 years for all 50 states to finally pass their own versions of limited liability companies. But before that, if you owned a sole proprietorship or you owned a general partnership and somebody sued that business, then they could attach your personal assets to satisfy it. What the LLC does is if you put that on top of your sole proprietorship or you put that on top of your general partnership, it gives you limited liability protection, the same way as corporations have, so that you don’t have to have all the overhead of a corporation and still get the liability protection of a corporation. That’s the purpose of the llc. 

Now, should you go with one or the other? I say it varies for most businesses. It’s over 70% of businesses in this country that are sole proprietorships. And that’s probably the easiest thing to start, other than a partnership. And that’s why most people do it. The thing about corporations is that they have overhead. There’s overhead to partnerships because you have to file separate returns, for instance, tax returns. It’s probably going to cost you $1,000 a year in extra added cost, by the time you pay for the licenses. And in some states, it’s very expensive. You go to California, it’s like $800 a year to have a corporation or an S corporation out there. It’s ridiculous. 

Otherwise, in Florida, it’s only 150. So it depends on where you live as well. But there’s that added cost there that you have. Technically, corporations are supposed to have a board of directors meeting. Even if it’s just you and me, you have to put together corporate meetings and things like this. 

And there are other things, other costs involved. So first, most people start as a sole proprietorship, and I agree with this. And it’s basically a proof of concept: will this business work? And once you find it works, then it’s time. Okay, I can stay at an LLC at the state level, but I can apply Section C as a corporation to shield part of my net profit from taxes. 

And because you have to pay yourself. The other thing is that if you’re an S Corporation, for instance, you have to pay yourself a W-2. If you’re making money, you have to. That’s a requirement because. And Social Security and Medicare come out of that. The rest of the profit coming down the K1 is like dividends, you know, you don’t have to pay that 15.3% payroll tax on that, which is a humongous amount. 

A couple of years ago, I had a lady who became a home chef. She was remarkably successful. In her first year, she made a net profit of $100,000. And that’s pretty good for the first year. And she came to me, and she, as a sole proprietorship. And she came to me early in the, enough in the year. I could use the exceptions to the rule, so to speak. 

And so instead of her owing $6,000 as a sole proprietor, I got her reclassified into an S corporation because at that point, it made more sense for her to pay the extra money to become an S Corporation. But what it did was, instead of her owing $6,000, she actually got a $2,000 refund when she and her husband filed that year. It’s remarkable the difference. This is why you need to know this stuff. But at that $100,000 net profit point, then it would make more sense to change your legal format at the federal level as far as taxes go. 

And these are the things, these are the type of conversations you should be having with your tax professional. You know, if you have a good one, they’re going to sit down, and they’re going to talk to you about these things. But if you know about them, how they work, and you’ve educated yourself, then you can have a good conversation with that tax professional, number one. And number two, you’re going to see if they know what they’re talking about because there are a lot of them that don’t.

Cosmos:

Which brings me to the next question, Roger: how do you hire a proper accountant or a track professional? And how do you go about looking for such an ideal, like an ideal candidate?

Roger Pearson: 

Well, as I mentioned before, you need to be able to hire and interview them. Just don’t hire the first person Uncle Joe says, “Hey, this is a good person.” I know somebody. And a lot of people do that. They just know somebody who knows somebody. And so that’s where they go. And since they’ve hired an accountant to handle their books, which is fine. They just have that person do their taxes also. But did you also interview that person to see if they’re good at taxes? 

You know, did they sit down and have a long talk with you? Did they, did they try to learn how your business works, where you’re going not only this year, but where you’re planning to go in the future? These are the kind of conversations you should be having with the people that you hire. You want somebody who cares about you. You know, I mean, every single business that I take on, I have to learn their business to do a proper job for them. You know, for painters, I’ve learned the painting business, the landscaping business, the plumbing business, the electrical business. I’ve had to learn all of those and how they work internally to do the best job, give them the best advice, and teach them how to properly keep their paperwork, so I can use every legal way I can to reduce their taxes. 

You need to be able to sit down and interview them and find somebody who really cares about your success. You want a partner. You just don’t want to hire somebody. You want to hire a partner. And that’s the attitude that you have to go in there when you go in to interview somebody.

Cosmos:

The reason I’m asking is that a lot of times, like, people hire people, and then they’re good accountants, but then there are some people that, like, the big corporations hire, and then they turn out to be great accountants who save a lot more money. 

And so the difference between good and great could be. It could come down to that, you know.

Roger Pearson: 

Absolutely, absolutely.

Cosmos:

So, Roger, from your perspective, what are, like, some of the tax laws that you can use to reduce business taxes? Are there any specific laws in particular that come to your mind about this?

Roger Pearson: 

I think probably one of the greatest things out there is the use of depreciation. Now, what depreciation is: the tax law says that if you buy equipment with a useful life of more than one year, you have to. You can’t write the whole thing off unless it’s under $2,500. There’s an exception for that. You have to. 

For instance, if you buy a computer system, you’re supposed to write it off over five years. If you buy office furniture, you’re supposed to write it off over seven years, and that’s fine. And that may be great. But there are exceptions to those rules where you can write part of it, the entire thing, on the first day that you have. But what I do is sit down and talk to people and say, “Well, what are your plans this year?” Are you going to make more money next year than you made this year? Did you make more money this year than you projected to go down next year? In the next two or three years? What do you see as far as your income, and what state is your business in? Because if you need more deductions this year, I can appreciate some of that. And if you’re going to need more deductions in the next year, it’s good. You’ve got to get a big contract coming up, or something, then we need to take that and use the appreciation tables, pushing as much as we can into future years when you’re going to need the deductions more. I mean, that’s just one example of how you can use the tax laws to your advantage. This is what the big corporations do, and this is how they reduce their taxes so much.

Cosmos:

I think that’s pretty relevant because a lot of times people say that, hey, the big corporations are not paying any taxes, but they’re actually finding the relevant tax laws, and that’s how they’re saving money. 

And many people starting these small businesses need to know about these things so they can incorporate them into their own tax strategy. So I’m glad that you’re actually sharing this with us.

Roger Pearson: 

Yeah, and that’s true. I mean, you can use the same laws that the big guys use, just on a smaller scale. Why not? They’re there. Let’s use them.

Cosmos:

No, for sure.

And, Roger, like, what do you think are some of the biggest mistakes that people make when it comes to starting a business?

Roger Pearson: 

One of the biggest mistakes is not keeping track of your money. I mean, it’s, it’s, it’s amazing, what some people do. I had one gentleman many years ago who had a friend who said, well, would you like to help me with this business? Buying and selling energy? I guess it’s different, you know, electric companies buy and sell energy between each other and things like that. He was a wild, successful businessman or salesman. 

He made a quarter of a million dollars in commissions in the first year. And he came to me, and he was a sole proprietorship. I said, you can’t put a quarter million dollars through a sole proprietorship, you’re going to the IRS, which is just going to flag that, you know, because it’s just not done. You need to be set up as at least an S corp, if not a C corp, or at least an S corp, you know, to run it through. You’re a traveling salesman, you need to have mileage logs. He didn’t keep any of that. You need separate accounts for your businesses. He was commingling everything in his personal and business accounts. You know, that’s another red flag. It’s just. And I sit down, and I spend a whole lot of time with him saying, ” You’ve got to need to do this and this and this and this and this and this if you’re going to, can make this type of money, or you’re going to be audited. 

So he came to me the second year. The only thing he had done was open a business checking account, and he didn’t keep track of his mileage. He was using his checking account as his accounting system, his bank statements. You can’t do that. I mean, if you can have a charge there from Walmart, but who’s to say it was personal or business unless you had the actual receipt showing what was bought? You just can’t do things like that. And, I say no. I went through everything again. Well, about six months later, he got his first audit letter. And he was audited for both those years. 

The third year he came to see me, I guess he thought I was serious because he’d formed some S corporations to handle all of this. And he’d hired an accountant to keep track of the books for him since he wasn’t any good at it. But he had to lose thousands and thousands of dollars before he would learn his lesson. Whether he would educate himself or allow somebody else to educate him, you know, it’s serious. It’s serious. You can lose your shirt if you don’t pay attention to all this stuff.

Cosmos:

So, Roger, from your perspective, when you see somebody getting audited, like, what is the experience like for this person? If you could give a general idea of this, that would be great.

Roger Pearson: 

If you get an audit letter, don’t go to the audit. Hire an enrolled agent (IRS enrolled agent). Find one. Go to HR Block or someplace and find a good enrolled agent who specializes in business, and have them represent you. Because every audit I’ve been on where the taxpayers insisted on being there, they open their mouths, say things they shouldn’t, and just provoke more questions from the auditor and get themselves deeper in trouble. So don’t ever do that. Hire somebody. Just like you hire a lawyer to represent you in court, you hire an enrolled agent to represent you on an audit. It’s the best money you’ll ever spend.

Cosmos:

I’m asking because many people are afraid of audits. And so, just, just, just, what should they do in this case is so necessary for them to know.

Roger Pearson: 

Yeah. And I. Most audits nowadays, they don’t have that many in-person audits. I’ve been quite a few over the last 25 years. And I don’t like going to them most of the time. 91st, 95% of audits are correspondence audits. Here’s the weird thing about the IRS and most of the tax authorities in this country. They don’t care about the money. They couldn’t care less about the money. 

They love their paperwork. As long as their paperwork is okay, then you’re okay with them. But you screw up the paperwork, you don’t send them the right paperwork, you don’t send it the right way, they’re going to be on your tail until they get the paperwork right. That’s the way the government works. 

And whether it’s state, local, or federal, especially the IRS, they love their paperwork. And so spend some money to get some expert advice in this area. If you’ve got that problem, it will pay you back many times over.

Cosmos:

So, Roger, you have decades of experience, not just in taxes but also in business. 

So if someone’s listening to this and wants the right business education, how would you advise them to get it? Because, obviously, the traditional education we have in universities isn’t really working out these days.

Roger Pearson: 

Well, that’s why I put together the book I did and why I have an online course. It teaches the basic things like this. And I also do personal consulting, with many people who just sit down and have conversations with me and learn things. You have to find a mentor. 

Basically, if you really, really. Since they won’t teach it to you in school, you need to find a mentor. And that’s one of the things I touch on in the book, too: how to go about finding a mentor who can help you with these. Because the resources are out there if you know where to look, they really are.

Cosmos:

Roger, can you tell the audience a little bit more about your book, what it’s about, and how you got to writing this book?

Roger Pearson: 

It’s kind of wild because the first thing I did was create the online course. And I’m not really good at marketing, I’ll be honest. I’m good at what I do. I’m good at giving advice, I’m good at taxes and all this stuff, but I’m not really good at marketing, so I don’t pretend to be. And so it didn’t sell. I say this bothers me because I need to help these people. I need to get this message out there. 

So I sat down and wrote for over two years. I wrote about it, and the book is called Mastering Business Basics. The legal, logistical, and tax considerations of starting a small business are the subtitle. And for $25, you can give yourself an education that’ll be worth thousands, you know. And that’s what I’m trying to get the word out to also, because it can help a lot of people. Everybody who’s read it and got back to me so far is just amazed at what they’ve learned. 

And that’s a lot of satisfaction right there. I don’t ever plan to become a millionaire, anything from writing a book, certainly not a New York bestseller, or anything. But I just want to help as many people as I can, you know, succeed in their business because I don’t think there’s anything better in the world than running your own business. I mean, it’s just the satisfaction you get from doing it and doing it correctly and doing it successfully. There’s nothing like it in the world. And I want people to experience that if that’s what they want.

Cosmos:

The reason I would want people to look into your book more is that it’s not only about the foundations of proper business education but also about taxes and how to combine them. 

Because a lot of times, people do great in business, but then they don’t save enough on taxes because they don’t have the right accountants or tax professionals. So, like, maybe they might get some knowledge that is actually pretty good for them.

Roger Pearson: 

Absolutely. Yeah. Yeah. You can’t. If you’re going to, you can hire somebody else to do the jobs, but unless you know what they do, how they do it, and why they do it, you don’t know if they’re doing it right. 

I’ve inherited so many clients from accountants and tax preparers who have retired. And the mistakes I have found, it’s just. It’s. It’s disheartening. It really, really is. You know, but there are some people who, I mean, it’s just, especially when they get close to retirement. 

They go through the motions, you know, they quit caring. They just go through the motions, and it’s hard to find the person who really cares about you and your business. But it’s worth the search.

Cosmos:

No, for sure, Roger.

And Roger, I wanted to ask: what does the American dream mean to you personally? And, when. When you hear, have you heard about the American dream? Like, what does that mean to you?

Roger Pearson: 

Well, you. Well, everybody you ask is going to give you an answer. A lot of people in America own their homes, having a sexual business. Everybody’s is different. mine is. That’s how I leave my mark on the world, basically. 

I’ll never be rich. Don’t care about that. That’s just worldly things. But I want to leave a mark on the world that I was here and I did something good for the rest of the world. That’s. That’s my dream.

Cosmos:

That, that’s amazing, Roger, because like, when, when a lot of people like you ask them what the American dream is, it’s about either the celebrity culture or mansions, or it’s like something else. But this is actually pretty simple, like leaving your legacy and your mark, and like helping other people. Because that’s what, that’s what we need more of in this world.

Roger Pearson: 

Absolutely, absolutely.

Cosmos:

So, Roger, can you tell me a little more about Seagull Technologies and what it is and does?

Roger Pearson:

 Ah, Seagull Technologies. I’ve had that name, Seagull, since 19. 74, in one form or another. It’s gone through landscaping and custodial companies and all kinds of other things. Basically, back in 74, I read a book called Jonathan Livingston Seagull. I don’t know if you’ve heard of it, but it’s an amazing little book. 

And I said, ” That describes me so well, the way I’m thinking and everything else, because Jonathan Livingston was kind of an outcast in the seagull flock, you know. After all, he wanted to go his own way, do it his own way, and achieve things; he didn’t want to be part of the flock. And I’ve never been part of the flock either, for that matter. 

So I’ve used that moniker in various ways throughout my life, across different businesses, and so forth. I actually wrote an Autobiography of the Seagull, which I posted on my corporate site. It’s what shows all the different things I’ve done with it, from landscaping to everything else I’ve tried. 

And right now, the main site, the main corporate site, just has links to everything I do, all the products I have, and all the ways I help people. There’s a ton of stuff out there I keep adding to it.

Cosmos:

So that’s amazing.

And Roger, I wanted to ask this one question. Right. So, like, in all your decades of experience in business and in taxes and all that, what was the greatest revelation you had with regards to business taxes in life?

Roger Pearson: 

Wow, that’s an interesting question. I didn’t know how much. I didn’t know until I did.

You know, it’s just that, for the last couple of decades, as I’ve been helping other people with their businesses, I’ve also learned all the mistakes I made in mine. And it’s been quite a journey in that respect. It really has. I’ve kind of enjoyed that journey just as much as helping other people learn what I did wrong and what I did right. And to be able to analyze my life through that lens has been kind of an interesting journey. Also, like

Cosmos:

Roger, do you think that most people have, like, the illusion of knowledge that they know most of what there is, but in reality, they don’t know as much because that’s. That’s something many people like during their journey in business. They eventually come to realize that the more they know, the more there is to learn.

Roger Pearson: 

Oh, I think that’s absolutely true. That’s absolutely true. I mean, the more you learn and see how it interacts with the other aspects of your business, the more it opens up entirely new sightlines for what you need to look at and learn. 

Absolutely. I mean, the more you know, the more you realize that you don’t know it all. And I think that’s an excellent realization when you come to that point, because the person who thinks they know it all is usually the person who’s going to fail.

Cosmos:

Yeah, but that requires a lot of humility, though. 

It’s one of the things that, like, in my own personal journey, I realized that, like, humility is a big part of, like, being successful, because that’s how you get, like, you have to go through the failures, and you have to get the data of, like, what you got to do. Right. And that requires a lot of introspection. At least that’s what I realized.

Roger Pearson: 

It does. It does. And that’s. Yeah, that’s. Yeah, exactly. That’s what I’ve gone through, a lot of introspection. Yeah. And it’s been interesting. I just, like I said at the beginning, he says, God, if I knew then what I know now, it would have been a very interesting life. 

And I could probably have done even more amazing things. But I did it the hard way, and that’s all right as long as I get there in the end.

Cosmos:

I mean, but you’re helping a lot of people, Roger, so you’re. You’re doing a lot of things well, which brings me to the final thing. Like, if somebody wants to connect with you from the audience and they want to, like, get to know you and more of your work, and they want to reach out to you for tax consulting, how do they go about doing so?

Roger Pearson: 

Just go to my main website. It’s seagulltechnologies.com, and I have links to everything. I have a lot of free classes there. I have blogs. I have linked to my books, my podcast, my online course, and consulting. The links are all there, and I’d be glad to answer any, any. If you have any problems, just shoot me an email. You know, just click on support and it’ll. It’ll contact, form will come up, so you can just shoot me a message. I’d be glad to respond to you.

Cosmos:

No, for sure. Roger and Roger, thank you so much for taking the time to come on this podcast and, like, basically educating us on taxes and saving money, because this is something that a lot of us need to know, and it’s just relevant. And I do hope that you take the time to come back to the show at a later date.

Roger Pearson: 

I’d enjoy that. Thank you.

Cosmos:

I mean, thank you, Roger. And, Roger, I. I really appreciate everything. Right. And I want to conclude this episode by letting my fellow extraordinary Americans know that there’s an extraordinary within each of us. It’s our duty to awaken it and unleash it. Until next time, bye for now.