How Eric Pierre Saved His Client Over Half A Million Dollars Through Tax Planning

[00:00:00] On today's episode of The Exit Plan, I talk to Eric Pierre, who is the CEO of Pierre Accounting, who shares his journey from being a corporate employee to a successful entrepreneur specializing in tax planning for high net worth individuals. We talk about the importance of tax mitigation strategies, his involvement in M&A deals and the challenges that are faced when dealing with the good old IRS. Hope you enjoy today's conversation.

[00:00:27] Hi, my name is Eric Pierre, and I am the owner and CEO of Pierre Accounting. And my primary focus is on tax planning and mitigation, particularly for high net worth individuals and families. I'm also a bestselling author on Amazon for my most recent book, The Great Tax Escape, Why Making More Money Doesn't Mean You Have to Pay More in Taxes.

[00:00:53] Okay, very interesting. Lots to dig in there. But can you just give me a little bit of your background and how you have ended up doing what you're doing? It's a great, it's a great question. Thank you for asking. You know, growing up, I was into sports, you know, I started out with soccer and then baseball and I got too tall for the strike zone.

[00:01:14] But then unfortunately, I see guys my height. I'm 6'8", Aaron Judge, this contract. My dad actually thinks I was better. He believes to this day I was better in baseball than basketball. But I wanted to be like Michael Jordan's playing basketball in my backyard. In high school one day, my dad pulls me aside as his son. You're a junior. I've not gotten letters from, you know, North Carolina, UCLA. David Stern hasn't called saying you're a lottery pig.

[00:01:43] So just in case that this basketball thing doesn't work out, you might want to have a plan B. So my dad is a CPA, a high public accountant. He's retired now. And so I looked up his profession and I saw that, oh, it's recession proof and I guess I'm good with numbers, so I'll do that. And so I went to Stephen F. Austin, got a bachelor master's degree. I interned with Deloitte.

[00:02:14] Then I worked for them after college. Then I worked for large companies at Dermot. I worked for Abbott Laboratories and traveled the world. And then I started my own practice full time in 2016 and haven't looked back. And I grew my practice in Southern California, relocated back to Texas in Austin five years ago. Can't believe it's already been that long.

[00:02:41] And I just recently personally relocated to Houston. But today we have our headquarters here in Houston where I'm sitting. We have a good size office in Austin. And then we have locations in San Diego and Los Angeles. Wow. So it sounds like it is. It's going pretty well. But talk to me a little bit about that leap from, you know, being an employee to saying, I'm going to set up my own shop. I'm going to go out there and find my own clients. What gave you the motivation to do that?

[00:03:13] You know, my last corporate job, I got tired. I felt like LeBron with Cleveland having to do everything and other people around me were getting raises off the work off my back. And then I had to work with people that I didn't like. I had to go travel to places I didn't care to go to. Like, for instance, I was supposed to be on assignment in Australia.

[00:03:38] I get yanked off and I have to go to some obscure town in Louisiana instead. You know, I had earned that trip. And so I wanted a I want a different reality. But with power comes responsibility. But I was willing to take that on because there had to be better life and I was not paying my worth.

[00:04:03] And while ninety four thousand dollars a year was a good salary at that time in 2015, 2016, I knew that I could do better and also get to choose who I get to work with. And how did you go about finding your first few clients? Because that's always the biggest challenge, isn't it? You know, you quit your job, you set up your laptop and your desk and you print your business cards. And then, you know, then what?

[00:04:29] Well, in the beginning, I went to a lot of networking events and I did some online advertising and then also through referrals. That's how I got started. That took a while because I learned quickly how saturated the accounting and tax profession is. And it's considered a commodity. So, you know, most people accept there's different types of doctors. Most people accept there are different types of attorneys. But when it comes to accountants, they think we're all the same.

[00:04:58] We all can do the same thing. And that's not true. So how so you sounds like you've written a few books. Where did I've written one? I've done one. OK, OK. It's my first one. OK, congratulations. I mean, it's a big achievement to get a book out. Thank you. Yeah. What was the what was the sort of inspiration behind sitting down and writing down some of your knowledge? You know, I.

[00:05:20] I've been blessed to work with some really influential, powerful people in this country and the change that I'm blessed to help facilitate in their financial future. What I wanted to share that without giving away the secret sauce, especially learning recently that, you know, every year in the United States, there are now 500000 new millionaires.

[00:05:47] And of all the millionaires in the United States over, I think, 67 percent. I may not have the statistic correct, but far more than half our first time millionaire. So there are a lot of people come into money that don't know. When I say manage it, they don't know how to manage the biggest expense, which is taxes.

[00:06:07] Depending on what state you live between federal and state, the governments could end up being 50 to 52 percent business partner in your personal affairs without investing much into your business. And that just seems a little unfair. OK, so that was that was the kind of motivation. And then and then. How long did it take you? Like, how did you did you go about researching it? Like, what was your process?

[00:06:35] You know, I worked with I work with Toni Marie. She was my coach. And so we got together every week during the summer. I took a little break and wait. You know, he had a general outline, but then I selected what cases I had done. And in the book, I did change some of the facts. So actually, some of the savings, actually, all the savings are actually greater than what I disclosed.

[00:07:04] I just wanted to give examples of different types of clientele, whether you're half a mil or a few mil or 100 mil. And to show that it's possible that you don't have to be, you know, Donald Trump or Elon Musk or Jeff Bezos. They know. I'm talking about their wealth. You know, I just realized that's why it wasn't the best thing.

[00:07:28] You know, Bezos or Damon John or Mark Cuban or Steve Ballmer, Richard Branson, you know, who's you don't have to be at that level to implement their strategies. And unfortunately, and I say this, I know I'm going to catch some venom from some of the larger firms, but I know this to be true. A lot of larger firms, they don't necessarily offer that to the millionaire clients unless they're ultra, ultra, ultra, ultra, ultra wealthy.

[00:07:57] So I won't name who I'm talking about specifically, but it's been told to me by some of my clients that left the much larger firms to work with me and my team on saving on tax. Okay. So, okay. So, so the, so the, this podcast is kind of focused around creative agency owners who are looking, looking to sell their business at some point.

[00:08:26] And I'm just kind of thinking about like your experience and, and how involved you get in the M&A process or do you kind of pick up with people after they've had an exit or talk to me a bit about how, what some of your clients and how you work. Okay. So it's funny. You mentioned that I'm actually involved in two M&A deals right now. I'm involved in it from the beginning. So I can't say what those deals are. If they get done, they'll be announced. Then you'll be like, wow, Eric, I don't know you're involved in that.

[00:08:55] You know, one of them I've been praying about for three years. So in an ideal world, I like to get involved in the beginning of an exit or an acquisition, right? Well, it's going to be, well, if you buy somebody for once and exit once and acquisition. So it depends on which side of the aisle I'm at.

[00:09:14] But it's good to get involved in the beginning before the letter of intent is signed because some of the tax strategies, the IRS requires that the planning starts before there's a letter of intent signed. And also with proper planning, you have time to also see, depending on the size of the transaction. So, for instance, an exit that's $100,000 versus $100 million, those require a lot. There are a lot more options.

[00:09:44] But either way, you can still, you know, mitigate on tax and figure out where to invest the money for to get multiples to save on that. Because it also depends on where you live, too. Because in California, you know, since I mentioned that business out there, any capital appreciation, whether it's a business or real estate, they automatically tack on a 13.3% capital gain tax or 14.

[00:10:14] So even though that the federal is 20 here in the United States, in California, you're already looking at a third of your gain gone if you don't plan properly. And are you, okay, so you, are your clients the individuals or are you engaged by the business? It depends on the arrangement. Some are engaged by partnerships.

[00:10:38] A lot of my high network clients tend to be, they have larger businesses, but they're just, they have sole control or vast majority control of their entity. Yeah. So with the, with the kind of deals, I know you can't talk specifics, but what kind, like what type of businesses are there and what sort of like tax issues are you advising on? I mean, you have sales of service businesses. That's what I'm advising.

[00:11:07] There's some on fundraising for certain, well, actually most of them are service based. I also have gotten involved in asset transactions, such as large real estate. And so typically people are worried because the people, the seller like, oh my gosh, Eric, what's my, you know, what's my basis?

[00:11:29] A lot, they need to know their basis because your taxable gain is not necessarily your, you know, what you started with in the sale price. Right. So they didn't know that for some people, you know, some business, particularly if you're selling a commercial building, a lot of times their basis is negative, negative because of refinancing. You're taking equity out.

[00:11:52] And so I didn't do this deal, but there I've heard stories from colleagues where they've had to advise people where they, you know, had a $20 million. They thought they only had a $20 million gain, but because of excess distribution, they actually had a $30 to $40 million gain and their tax bill would have been much bigger if that colleague didn't do the planning. You know, it's a wide spectrum. Yeah.

[00:12:17] So with these service businesses, can you talk to me a bit about a kind of a share purchase versus an asset purchase and how, what impact that has on the individual that owns that business? Yes. So a share, so an asset purchase. So if you do a share purchase, you're basically buying the entity asset. Let's say I have peer accounting and asset purchase means I still keep the entity. They're owning the assets. Now assets are defined.

[00:12:47] So my business service business, the assets are going to be my clients more likely. Okay. And, um, you know, a hard asset business will be the fit, you know, sometimes a business still exists, but they dump some assets like trucks, warehouses. So if you're buying shares, you're buying equity into the company. Now there are some data it's the share may include assets.

[00:13:11] So no deal is the same, but if it's an asset, the entity is lacking to still be existence. If it shuts down, the owners decide to close it down. If it shares you're buying into the company. Yeah. So, so for the individual that's selling, for example, you know, if, if a buyer comes along and says, you know, I would like to buy the assets of this business because I think it's cleaner. And I don't know if there are any skeletons in the closet and I'd like to do it that way.

[00:13:37] I guess typically the person selling the business would be pushing for a share purchase because that would be better for them from a tax perspective. It's going to depend on the situation because, you know, again, I can understand where you're coming from, but everybody's situation is, is different. If you do, you know, cause you have to remember when there's an ask, you know, if you're doing an asset purchase, you also have to factor into good.

[00:14:01] Um, good, you have to make sure that there's goodwill because particularly when it comes to service, like, you know, buying a real estate brokerage or an accounting firm, um, or even some of the tech companies where there's, you're buying digital assets. There there's goodwill and reputation and that needs to be accounted for. So in some instances might be better just to do the share purchase. It actually may be cheaper and you're just taking over the company and rename it wherever you want.

[00:14:30] So also consult with the M&A attorney before you do these things too, because I can only tell it tax wise. Yeah. But I, you know, but there are certain industries that there are certain rules about acquisitions and every state has different rules as well. So also consult consult with the M&A attorney before you do these deals. Of course. Of course. So talk to me about some sort of tax mitigations and tax planning that you've done for, for a client where you've been kind of been able to save them a bunch of money and how, how were you able to do that? Okay.

[00:14:59] Is there a particular example? Otherwise I'm going to come up with one. Just, you know, just, you know, I guess just a client where you're, you're sort of, you're happy with the work that you're able to do for them because you, you know, you, yeah. Yeah. Help really help them out. Yeah. So I had a client, I have a client. He made a few million dollars last, last year. He exited his business to start a startup.

[00:15:26] And so what I was so proud about this transaction is that he had some employee stock and he was on the fence of cash. And so we did an analysis and we showed him that if you cash out an extra 400,000, it'll raise your income. However, he will, he wound up saving more cash for the IRS and we were to save him over half a million dollars of cash.

[00:15:53] So basically the tax savings paid for stock redemption were proper planning. So, so they, so he was offered stock in, in the new, in the startup. No, no, no. Well, it's his startup, but the company is a ployer. He has some stock options that he has windows to cash out. I see. We did an analysis that he was able to cash an extra, let's just say half a million. I'm just going to round it up.

[00:16:21] And it put him at a higher income number. I see. But because we were getting ahead of it, he wound up paying far less tax because as your income goes higher here, when you're married, your income tax income, your dollar per above four 50 is 37%. So the higher you go, all that is taxed to that number.

[00:16:47] But with the planning tactics that we use, we actually save you more money. The arbitrage of savings because that much greater. And so we showed the math and he saved half a million dollars. So basically his tax savings paid for that stock redemption. Right. Okay. Yeah. And I guess he would not, he would not have known that and would not have done that. Correct. It took a while because he's a very, you know, he's a very smart guy.

[00:17:15] So we went back and forth, back and forth, back and forth. But, you know, I failed. And he was happy at the end. So, which is the most important part. But yeah, it took a while. And what have your sort of dealings with the IRS been like? Quite a lot of the listeners, I don't really know where they are, but I guess it's primarily UK and US. Yeah, we obviously have a different tax system here. But what, yeah, what have your experience has been of dealing with the IRS?

[00:17:43] Ooh, let me try not to swear on this channel. I don't, I want to make sure you're not recording Blue Streak 2. Honestly, they've not been that great. The, you know, the IRS is under a lot of pressure. They've hired a lot of inexperienced agents. And so communication with them is difficult. They're overwhelmed. They don't even understand their own rules. At times, some agents, you can actually email documents. Some, you have to do fax. I mean, who? E-fax, yeah, E-fax.

[00:18:12] I know, it's embarrassing. I know, I'm surprised I don't use AOL with them. You know? Yeah, no. The, because I did work on the employee retention credit. And the IRS has taken an aggressive stance of just doing blanket denials, even when clients have qualified under significant gross decline. What's the employee retention? Was that the COVID?

[00:18:41] Was that COVID credit? Yeah, yeah, yeah, yeah. It was a COVID credit. Yeah. Yeah. And so, you know, a previous commissioner put a moratorium and it caused problems. You know, I have a case that is under audit and the client actually had a government order here in the state of Texas. They're in the hospital, they're in the medical industry. They could not service clients because the hospitals had to prioritize COVID patients.

[00:19:08] Their business is in elective procedures. We had the data that's shown why their business went down. The IRS disallowed it, said it was voluntary, even though the Texas Hospital Association made it clear they interpreted it as a requirement and that the hospitals took a deep financial impact. And so we're appealing to that and we have several, there've been several lawsuits filed

[00:19:34] against the IRS because the problem I have with them is that they exceed their authority that if there's a tax law that's written by Congress, they have to go by that. They cannot interpret their own law. And every time they've been challenged, they have lost badly. So, you know, the most recent case, you know, the CARES Act was written vaguely to allow businesses to get relief during the COVID time.

[00:20:02] And the IRS even said that their rules aren't authoritative, but yeah, they're denying people even though their own tax court has said that they can't do that. So I actually wrote that in my case and we actually met the criteria for a nominal impact. And you can tell the agent was furious when I signed a case law. I can tell in her notes. Unfortunately, it's not been the best of relationships.

[00:20:31] One time I cussed the agent out at the beginning of my career, I got hung up on. I don't do that anymore. You didn't? Huh? Yeah, I've cussed the IRS agent out before. Yeah. Irish? Yeah. Twice. Once they hung up and then once they called me back and apologized because one was so unprofessional. I made her apologize to me. Yeah, I did. Wow. Yeah. Great. Tell me a bit more about your firm. So you have offices in various locations. How many employees have you got?

[00:20:59] And are you the sort of sole founder and owner? Yeah, yes. I'm the sole founder. I have about seven and set employees depending on the time of year. We have a very diverse workforce. And I'm proud of that because that allows us to serve, you know, the various demographics we have in this multiple part we call United States. Yeah, that's great.

[00:21:27] And what for you kind of what's the sort of ideal client who what kind of what kind of people are you looking to work with? My ideal client is somebody that makes $500,000 or more of income and has a and that they also have, you know, a few million dollars net worth. Because we also do asset protection.

[00:21:51] And there's so many things we can do to protect their assets that don't cost them hardly anything. So what do you talk to me a bit about that? What do you mean by asset protection? So for clients, if you have $200,000 or more income, we have access to provide clients with an insurance policy that's a three to four year term. They only have to pay $100 out of pocket one time fee. And it can be up to 10 times the net worth.

[00:22:20] So Barnaby, if your net worth is $10 million, theoretically, we could get you $100 million term policy. Roll it three to four years. It only cost you $100 out of pocket because of your net worth. Right. Right. Okay. Okay. So that's sort of an additional service that you can offer. Right. Yeah.

[00:22:38] And I just want to add that the policy is held in an irrevocable life insurance trust, which means that the death benefit does not count against your estate. Yeah. Okay. That protects you from any estate taxes, federally, state, and a smooth distribution to your beneficiary should something ever happen to you. Okay.

[00:23:02] So if I'm, you know, an agency owner, I'm thinking I have a service business and I'm thinking about selling one day, what kind of things do I need to be thinking about now? What kind of steps should I be taking to prepare myself? First thing you should do, make sure your books and records are in order because a buyer will be doing some serious due diligence. And so I remember a few years ago out in North San Diego in Poway, there was a lady that had a very successful nail salon.

[00:23:33] So successful, she even had an ATM machine in the middle of the floor, which I thought that was comical. She had contacted me wanting me to clean up her books. So we gave her a quote. She thought I was too expensive. I said, well, that's going to be your problem if you don't do this. So she found somebody that was a third of the price. Her business should have sold for one and a half million dollars cash out. She only got half.

[00:24:02] So to save $14,000, she basically lost $750,000. Yeah, okay. Because her books and records weren't reliable, even though the acquirer knew it was viable because of tips like the ATM machine on the floor. But they were able to say, look, we can't rely on your records. We don't know if you've actually inflated your numbers or not. This is the best offer.

[00:24:27] And she got a good amount of money, but she lost close to half her value because of being cheap on records. Yeah, no, I think that's good advice. It's always worth paying for good advice in these situations. Yeah. Yeah. Great. And what's 2025 looking like for you and your business? Well, this year we're looking to work with an additional 50 to 100 high network clients.

[00:24:55] I'm looking to issue another 20 to 50 of those policies that I've given you. I described to you earlier, excuse me. I'm also looking to do some more speaking about my book. I will be speaking at an event at TPC Sawgrass on April 5. And so just to be able to, you know, network and on a personal level, just continue my health journeys. Brilliant.

[00:25:25] All right. Well, that's a great place to leave it. So thank you. Thank you very much for joining. Thank you for having me, Barnaby. And I hope you all had a great time listening. I hope I didn't put your audience to sleep talking about taxes, man. Thank you very much for listening to the Exit Plan podcast. If you enjoyed it, please leave us a review to help other people find us. If you would like your question answered in M&A Q&A or are wondering what's next for you and your business and want to chat about an exit plan, drop me an email on barnaby

[00:25:55] at foxcogroup.com or get in touch with me on LinkedIn.