Financial Business Basics Made Simple With Hilary Hendershott & Stefanie Gass

Hey Friend!

This is an interview I did with Hilary Hendershott of Hendershott Wealth Management. You’re going to love her.

We went over how to get started in business on the right financial footing. I know how confusing setting up your business can be. Do you have questions?

• What do you need to have in place before starting your business?
• What is an LLC? S-Corp? C-Corp?
• Does a business owner pay themselves?
• Should I do my bookkeeping or hire someone?
• How do I maximize the tax benefits of owning a business?

We covered all of these questions so grab your notebook and pen and dive into all the financial basics to make it super simple.

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How Did Stef Gass and Hilary Hendershott Meet?

Stef: Hello, my beautiful friend, Hilary. I’m so excited you’re on the podcast today! Welcome!

Hilary: Hi! It’s been great meeting you and getting to know you. First, it was great having you on my show, and now it’s great to have you on your show. It’s just great!

Stef: Yes! I met you back in February at a mastermind and with my crazy in-your-face self, you had to learn to love me very quickly!

Hilary: There was nothing to do but to love you. It feels like so much has happened since then.

Stef: One of the incredible gifts you bring to the table is that you are a financial powerhouse—an absolute expert. You can talk about beginner and advanced financial topics, including wealth-building.

Who is Hilary Hendershott?

Stef: Tell us who you are and tell us your money story.

Hilary: I’m the owner and founder of Hendershott Wealth Management. When we started, we focused on serving women, but now 40% of our clients are men. We serve our clients with feminine-based principles of compassion, empathy, and humility.

About eight years into my career, I advised millionaires and multi-millionaires on building their portfolios. I have degrees and professional certifications yet I went home nightly to a stack of bills I couldn’t pay.

I was a massive overspender, earning $100,000/year while spending $120,000. After a couple of years, I had dug myself into a big mess. At my financial worst, I had about $150,000 of combined debt between student loans, auto loans, and credit cards.

I drove a convertible BMW but couldn’t afford to put gas in it. I had $420,000 in mortgage debt, and my condo, which in 2008 fell to $190,000 in appraised value, was also in debt.

My parents had to bail me out—one time my boyfriend had to write me a check for $1,500. I needed the money but felt like I was in the worst kind of failure. I was so ashamed.

At this moment, I could see into the future. I could see that it was filled with more and different versions of the same kind of mess. I couldn’t let that happen, so I decided that whatever it took, I would turn it around.

What was the difference between me and other people? We all want financial health, but they’re winning and I’m failing. It comes from behavior and behavior comes from psychology. I have a degree in economics and am a certified financial manager, but nobody has ever talked to me about money psychology.

How Did Hilary Turn Her Financial Situation Around?

Hilary: I became a student of behavioral finance, money psychology, and neuropsychology and studied the impact of the words we use about money. The words we use about money come from our childhood experiences and are very impactful.

When I grew up, I thought there was never enough money. I would find out later that my mom was a good saver and a fiscal conservative, but I couldn’t have brand-name stuff or things I wanted.

At some point, I learned that if people think I’m financially successful, they’ll like me.

I twisted the emblems of wealth with the realities of wealth and played a destructive game, throwing good money after bad and buying approval. Meanwhile, my bank accounts were empty, and my FICO score was in the 400s.

I got entirely financially transparent. Whatever my natural inclination was, I did the opposite. I lived on an $8-a-day food budget and didn’t go to a coffee shop for two years.

After a few years, I paid off the debt, rebuilt my retirement savings, and was on my way to a downpayment on a home.

I’m a graduate of the money school of hard knocks, which gives me compassion and understanding. No matter where you are financially, I’ve either been there myself or know someone who has.

The money mindset requires almost as much attention as the money tactics. I have a textbook education in the tactics, plus real-world experience in the mindset.

What Does Hilary Hendershott Do Now?

Hilary: I share this part so people know my fundamental transformation: I own homes in California and Puerto Rico. My account balances are such that I could retire right now. I work because I want to, not because I have to. 

No matter how much money has gone for you, you can have an abundance in the future. I’m living proof. It gives me a purpose because so many struggle with money. I intend to shorten your learning curve. 

Stef: That’s interesting. Our trials and what we walk through are clues to our calling. What does it look like when you meet with clients and what services do you provide?

Hilary: The first thing we offer is traditional, comprehensive, fiduciary wealth management, where we manage people’s money on their behalf. We include what insurance to buy, what kinds of accounts to have, and how much to save.

We help with budgeting, discuss income tax, and do tax estimates, but we don’t prepare returns. Once you’ve extracted money from your business accounts, paid taxes, and deposited it, it’s time to grow your nest egg or personal net worth.

I only sell my advice; I don’t sell any products. That’s important because your financial advisor’s advice lines your pocket, not hers. 

We also have a Fractional CFO offer for business owners. We are Profit First certified professionals. It’s a year-long container where we engage neuroplasticity to change your money mind while teaching you everything you need to know about managing money.

Lastly, we have a low-cost money coaching offer; live money coaching to discuss these things.

Understanding the Financial Basics

Stef: Amazing! My listeners come with the heart to start a new business or are new. They have just started or are about to start their podcast, and I teach coaching or online courses to monetize the show. 

I find that they’re most confused about the financial basics. I want to hear your thoughts about the basics so people know it’s not as complicated as it seems. I will spitfire these questions at you so you can help us understand the basics.

Financial Basics #1: Getting Started

Stef: What are some things a person should put in place before they start their business?

Hilary: Initially, you need separate bank accounts: business and personal. You want an intuitive interface and a mobile app to log in to your portal. You want to have a firewall between your business and personal money.

This will make it much easier to do your taxes and bookkeeping at the end of the year. Keeping those accounts together means you’ll have to separate the transactions manually. 

Anything you spend on your business is a tax deduction, meaning it comes off your top-line revenue. It’s the equivalent of saving 25-30% on every transaction.

I carry only one personal and one business credit card in my wallet. You should use your credit cards as long as you can pay them off at the end of the month. That business credit card will still be in your name unless you own a warehouse with expensive equipment.

You won’t get credit in your business’ name because a company isn’t an entity. A business cannot pay bills without a human being to pay those bills.

It’s also a good idea to set yourself up on payroll, but you’re probably not for the first 12-24 months. Eventually, the IRS wants to see you on payroll and paying payroll taxes.

When you transfer money from your business account to your personal account, you pay yourself as the business owner. You’re going to owe income taxes on that amount. You want to be cautious, careful, and conservative about when and how much you do that.

Financial Basics #2: Incorporating

Stef: Does it matter if you’re profitable?

Hilary: No. You won’t know if you’re profitable until the end of the year. Side Note: Instagram financial advice is almost always bunk.

The idea of being an S-Corp or a C-Corp is something to contact your tax planner about because it has to do with the construction of your business. It’s a tax thing.

Then there’s an LLC – Limited Liability Company. That’s a legal protection.

S-Corp and C-Corp are tax-related; LLC is legal. You would have an LLC if you are in a litigious business, such as finances, cyber security, child care, etc. For the most part, your clients aren’t likely to be sued.

Stef: Some are health-related or counseling-related. For those, I would consider it. I formed an LLC because I didn’t see why not, and then an S-Corp. It isn’t expensive, at least where I live.

Financial Basics #3: LLCs

Stef: Hilary, we are not lawyers, but can you explain why an LLC protects someone’s assets in their business more than in their personal life?

Hilary: It is sort of like a cloak of protection around your business. It separates the business legally from you as a human being. If you are a parent and have written a trust document tying the mortgage to that trust, then you default on a credit card, your creditors can’t come after your house.

If your business were to get sued, the attachable assets would be the current bank accounts and future income of the business only, not you personally. But it’s not 100%. There’s a thing called Piercing the Corporate Veil, which is beyond the scope of this conversation. What I’m saying is that it’s not bulletproof.

I want to encourage people. I see them not selling and not starting a business out of confusion. Look: your business is the income earned by the business. So, not starting the business because you don’t know if you need an LLC or an S-Corp is silly.

Start your business. At the end of the year, consult with your tax person. You can always become an LLC during your business. It’s not a reason to not earn money.

Stef: Yes, there are layers and levels to this. What we’re saying is, “Get started!”

I didn’t know that the LLC was on the legal side and the S-Corp and C-Corp are on the tax side. So we will have separate bank accounts and credit cards; using them only as long as we can pay them off monthly.

Financial Basics #4: Business Expenses

Stef: You touched on payroll. Let’s say someone got started and has their first five coaching clients. They are pulling in $1,000 a month. Talking about paying ourselves gets very confusing. What does paying yourself look like? What’s the threshold to decide if it’s worth pulling that thousand out?

Hilary: Money earned by your business is in your business account. That’s not your money.

Can you spend that money on gas if you’re traveling around for business? Yes. It’s a business expense—the same thing for your office rent.

Once you’ve paid your overhead, the money you would put into your personal account for groceries, new shoes, tuition, etc., are not business expenses. You have to pay yourself to do that.

Don’t pay personal expenses from your business account. Move it to your account first. You will owe income tax on that amount.

Financial Basics #5: Payroll

Hilary: The right time to start thinking about payroll is when you bring on employees. Some of you are terrified of having employees or don’t need them and want to go with 1099 contractors. That can work for a while, but it gets into subjective conversations about what works best for your business.

If your business takes in $250,000 a year and you are not on payroll, you might be flagging yourself for an audit. Payroll forces you to pay payroll taxes – employer/employee taxes you owe the government. Every time money changes hands, the IRS taxes it – sales tax, gift tax, income tax, etc.

Payroll also allows you to maximize your deferrals into a 401 (k). You can start a 401 (k) when you have employees. It is expensive, and we’re jumping the gun a bit because there are other startup accounts I’d begin to before that.

If you’re making $1,000 a month that works for your family, you may never have to go on payroll. Keep it simple.

Stef: We didn’t start until we became an S-Corp and were probably close to a half-million dollar company then. I became an employee and moved one of my contractors into an employee. Crossing the bridge when I came to it instead of panicking about all these things before I needed to do them was incredible.

Financial Basics #6: Outsourcing 

Stef: How long should you do things yourself before hiring someone to help you? At what levels should those hires take place?

Hilary: I’ve always had a business coach, and as a certified financial planner, I’ve never written my own books. 

It’s time to delegate when you don’t have time to do the things that are making you money. In the beginning, you’re likely wearing all the hats. QuickBooks isn’t that hard to figure out for ten transactions a week. You may not set it up right, but it’s also not that hard for a professional to go back and fix it a year later.

You need to know how many selling activities you need to be doing, and the minute one gets invaded, it’s time to delegate or outsource. Bookkeepers are not expensive, and the same goes for tax prep.

If you have a wage income and own a home, you might be able to use TurboTax just fine, but the minute you have a business, a good tax person is worth their weight in silver. Tax prep is backward-looking; tax strategy is forward-looking.

The most frequent complaint I hear is that someone’s tax guy didn’t tell them what to do for the following year. Those are two different services.

Tax strategy involves examining your life, family, and business operations. You might be able to hire your kids as models and pay them from the business, but I’d need to figure that out. However, my team doesn’t do tax strategy.

Financial Basics #7: Tax Prep vs. Tax Strategy

Stef: Ask the questions. “What do you think about next year? If I’m making this money, what should I think about?” If they don’t have answers to these questions and hand you your return, you might want to shop around a little bit.

Hilary: You want to ask them, “Will you offer tax strategy or tax planning?” They may require additional payment for that. It’s a separate engagement. Tax returns cost X, and tax strategy costs X + Y.

Stef: Because I was making money in the business and was able to sell the things, I was able to get a package deal with the bookkeeping, strategy, and filing for a monthly fee. That’s something you can grow into as you grow.

Financial Basics #8: Tax Benefits of Business Ownership

Stef: How can you maximize the tax benefits of owning a business?

Hilary: Our biggest tax deduction is probably the mortgage interest deduction. If you can own a house with a mortgage, that’s a great tax deduction.

The next most significant deduction is the 401 (k). There are other versions, like the SEP (Simplified Employee Pension), which is a lower-cost but also lower-tax-deduction version of the 401 (k).

As soon as I could, I set up a complete 401 (k) with matching for my employees. In three years, I’ll be allowed to deduct $30,000 per year, plus my Safe Harbor match, which is an additional $5,000 yearly on top of my income.

I’m taking money away from Uncle Sam and giving it to myself. I get to keep those tax savings until I turn 59.5, until I pay myself and owe it back, but I earn compound returns that grow—and grow fast.

That’s the benefit of saving in a 401 (k) plan. A SEP is also compounding.

If you can take advantage of those two things, they will do you favors.

Financial Basics #9: 401Ks and SEPs

Stef: Do you have to be an LLC or S-Corp to set up and invest in your own 401 (k)?

Hilary: No. You can start a solo 401 (k) if you don’t have employees, and you can change that as soon as you do. I started with a solo and then changed it to an SEP when I had employees. With an SEP, you do have to allow employees to contribute, but you do not have to match their contributions. 

Your contributions to your SEP are limited to 25% of your profits. To put $5,000 into your SEP, you must show $25,000 in profits. With a solo 401 (k), you can put in almost $20,000 with no profits. It’s not limited by the profits you’re showing on your P&L.

The right one depends on your business, profits, and household income. If your spouse is making enough money to pay the bills, then you can save almost all of your business income for your future, which may be appropriate for your financial planning.

Stef: What would you say to those asking where or how to set these up? 

Hilary: Most custodians—places where you can have investment accounts—will allow you to have a solo 401K. I use Gusto for my payroll and my 401 (k). You’re looking for low cost and a great portal.

They’ll be able to tell you right away if they allow a solo 401 (k) or SEPs. Do a Google search for solo 401K to find companies that will enable this.

Wrapping Up Our Financial Conversation

Stef: Is there anything else that comes to mind, Hilary, that would set someone up for success who is new in their business? Maybe a last word on savings or anything you think we’ve missed.

Hilary: I’ve seen too many business owners get distracted by the busyness of running a business. They forget that the whole purpose is to capture the value you create for yourself and your family.

I agree with a ramp-up phase in the first 12 months or so. You’re not typically able to pay yourself or save money. You want to plan in your business to have your prices and sales high enough so you can pay yourself and save for your future. Saving money consistently is the quickest way to compound returns.

Until you hire someone as your VP of Sales, you are it. 

On Monday and Tuesday, I work on selling activities. I ensure that’s handled early on or my North Star is off. I don’t have a VP of Sales; I’m it. However you set that up for yourself, this kind of thing is the lynchpin to having enough money to pay the tax bill when it comes, and when you need to pay a contractor, like a bookkeeper, it’s there. 

In your personal life, it’s more about maximizing what you get for what you have; keeping your expenses low, and saving the rest. It’s about filling those coffers and monitoring your ROI (Return on Investment) for your business.

Finding Hilary Hendershott

Stef: That’s such good advice. This has been amazing! Thank you, Hilary Hendershott, for pouring out your knowledge and helping us understand these seemingly scary concepts that can, in reality, be simplified. 

Where can everyone come to listen to your show and learn more about what you offer?

Hilary: My website has everything about my business. In your podcast player, look for Love Your Money with Hilary Hendershott.

I pray this blesses you!

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