The 21st Century has been Hectic.

The 21st Century started off with an explosive bang on when the twin towers were were taken down by a couple of passenger planes causing $13 billion of damages & a loss of 3000 lives.

Subprime Crisis
Huffpo & the GAO reported that the Subprime Crisis cost the nation $22 trillion dollars, and the lingering effects are still being felt. in 2008 the national debt was $9 trillion. In 2012 it was $16 trillion. Today it’s over $28 trillion.

But by far the greatest impact came from the 2020 Covid crisis & the lockdowns & election shenanigans that Covid precipitated. Small businesses are dying by the thousands — and no one is tracking the carnage. Let’s pause for a moment and take stock.

Yelp Inc., the online revi

The 21st Century started off with an explosive bang on when the twin towers were were taken down by a couple of passenger planes causing $13 billion of damages & a loss of 3000 lives.

Subprime Crisis
Huffpo & the GAO reported that the Subprime Crisis cost the nation $22 trillion dollars, and the lingering effects are still being felt. in 2008 the national debt was $9 trillion. In 2012 it was $16 trillion. Today it’s over $28 trillion.

But by far the greatest impact came from the 2020 Covid crisis & the lockdowns & election shenanigans that Covid precipitated. Small businesses are dying by the thousands — and no one is tracking the carnage. Let’s pause for a moment and take stock.

Yelp Inc., the online reviewer, has data showing more than 80,000 permanently shuttered from March 1 to July 25. About 60,000 were local businesses, or firms with fewer than five locations. About 800 small businesses did indeed file for Chapter 11 bankruptcy from mid-February to July 31, according to the American Bankruptcy Institute, and the trade group expects the 2020 total could be up 36% from last year.

More than 20 million people have lost their jobs.

Businesses will need to be the best they can be to survive the turmoil. They will need better tax, accounting & advisory professionals than they have now. They will need someone like us.

ewer, has data showing more than 80,000 permanently shuttered from March 1 to July 25. About 60,000 were local businesses, or firms with fewer than five locations. About 800 small businesses did indeed file for Chapter 11 bankruptcy from mid-February to July 31, according to the American Bankruptcy Institute, and the trade group expects the 2020 total could be up 36% from last year.

More than 20 million people have lost their jobs.

Businesses will need to be the best they can be to survive the turmoil. They will need better tax, accounting & advisory professionals than they have now. They will need someone like Ellis CPA.


Everything about America is in play this election. There is talk about getting rid of the tax system, our energy grid, the constitution, the Supreme Court, the rule of law, law enforcement & virtually everything else. We already rid ourselves of much of our history, statutes, individual businesses, downtown business districts and probably many things I didn’t think of. Once great cities are now mere shadows of their former greatness. Residents are abandoning them for safer cities.

 If the new regime decides to change the U.S. tax system to a European or other system, that will be a dire mistake that could stifle the marketplace for years or damage it irretrievably. Out tax code is probably one of the reasons the U.S. economy outperforms every other economy in the world. It certainly isn’t luck.

THE 16th AMENDMENT created two separate tax systems in the US. One for businesses & their owners, and one for everyone else. By mistake, not intention. There was some concern people wouldn’t vote for the amendment so Congress advertised in newspapers throughout the country, they would tax only ‘profits’. This became part of the amendment’s legislative history which made it a fundamental part of the amendment itself. The Supreme Court affirmed it in Glenshaw Glass in 1954, and Congress codified it in section 172 the same year. Ordinary taxpayers can deduct a few things, like mortgage interest & charitable contributions, which are a gift from Congress and can be repealed by an act of law. But Section 172, District Court cases & the Supreme Court make it clear that, for businesses, anything is deductible as long as it is ordinary, necessary & reasonable in pursuit of profits by a legitimate business, has economic substance & a valid business purpose. Absolutely nothing can be excluded if you meet those requirements. And who determines that? The taxpayer.

The courts added valid business purposes and economic substance to attack giant tax frauds, such as BOSS & SON OF BOSS. Even when Congress intends to prohibit a deduction, such as health club dues, it can still be legally deducted by re-characterizing it to advertising. Of course you have to prove valid business purpose.

In addition, our legislative form of government means a couple hundred people spend a considerable amount of their time proposing and passing new tax legislation every year, and every few years the president does the same. Major changes to the tax code are referred to as the 1939 tax code, the 1954 code, the 1986 code, and the 2016 code.

US TAX LAW IS A BLITHERING MAZE OF COMPLEXITY THAT CHANGES CONSTANTLY: The tax code is reportedly 77,000 pages long, and growing. Add in Regs, Rev Procs & litigated results, and it becomes quarter of a million pages. Which is a lot for a guy to handle. Most states have based their state tax code on the Internal Revenue Code. But, in the midst of all that clutter, the U.S. tax system is the best in the world.

No one can learn the tax code inside & out. These primary sources are tax law authorities that must be followed and include: the Internal Revenue Code, U.S. Treasury Regulations, Revenue Rulings, and Revenue Procedures. Primary judicial sources include: the Supreme Court of the United States, Courts of Appeal, District Courts, and the U.S. Tax Court. Add in 50 states and 172 countries and tax law that professionals have to abide by grows to unimaginable size, perhaps as much as 25 to 50 million pages.

I’m a mensan with a genius IQ and I cannot fully know tax law. The best I can do is get a grasp of the overall body of tax law.

To complicate all of that, is tax savings lie in playing one part of the tax code against another part.

Different from the criminal code.

But that’s not a bad thing for business taxpayers. Savings are hiding in the complexity.

As I said at the outset, the U.S. tax code is spectacular, by mistake. The U.S. is the only country in the world with a system that gives business taxpayers a measure of self defense against a government that does not always treat taxpayers with respect. A recent administration actually put the IRS to work auditing their opponents.

In progress. Still being written.

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Strategy vs. Goals & Plans

Strategy is a nebulous term that has never been adequately defined. It’s not just planning, but it involves goals & planning.

For instance, the way I normally describe the difference is this. The goal in WWWII was to conquer Germany. But it required a strategy, which involved goals, each of which was individually planned.

Looking back, their first goal was to drive Germany & Rommel’s North Afrika Korps. out of North Africa. The 2nd goal was to cross the Mediterranean Ocean & invade Italy. The third goal was to fight their way up the boot of Italy to draw attention & support away from the Russian Army invading from the North and from the West coast of Europe where the allies planned another invasion. All of these goals required individual planing, which resulting in catching Germany in a pincer action winning the war.

 Conquering Germany was the strategy, involving individual goals which were individually planned.

The accompanying article is another reasonable take on strategy.

MY STORY, briefly


After graduating from college with highest grades, I joined the biggest & best CPA firm in the world where I audited, advised & prepared tax returns for the largest companies in the world. After that, I joined the Fortune 500 where I held C Suite positions w/ 2 Fortune 500’s & led the team that introduced mag stripe cards to the marketplace, initiating the digital economy & revolutionizing the way the world does business, attempted LBO, ran for Congress, founded the first cloud based CPA firm in the country & built it to 7 figures. Clients in 46 states & 5 countries.

POWERFUL INTELLECT – Mensan • Genius IQ • Polymath • Creative • Innovative • Thought leader • Exponential experience.

Accountants, CPA’s

According to Google, there are 654,375 CPA’s, 29,000 attorneys, 210,190 CPA’s, 213 enrolled actuaries, 57,805 enrolled agents, 642 enrolled retirement plan agents and 60,463 people with other qualifications.Total tax preparers – For a total of 952,303 credentialed preparers. 155.8 million tax returns filed. Average tax returns, 164 per preparer.

Big 4
312,000 people work at Deloitte
219,281 people work at KPMG
270,000 people work at EY
276,000 people work at PWC.
1,077,281 Total

Fortune 500
The population of Fortune 500 companies is too diverse to come up with even a reasonable estimated average. Small Fortune 500’s have at least 500 accountants working for them. Larger Fortune 500’s have at least 10.000 accountants. For the entire Fortune 500 that average’s 5000 each.

Since the need for accountants is so great in Global companies, accountants & CPA’s are highly sought after.


The term CPA is a riddlewrapped in a mystery, inside an enigma.

The term has always troubled me.


I took my first CPA exam while still an undergraduate at my professor’s insistence, but I never got my score so apparently undergraduate scores didn’t count. I passed the exam soon after I graduated with half an hour in the AA&Co library to learn governmental accounting. I got my certificate nine months later when I satisfied the experience requirement.


The CPA exam was a popular topic of discussion among AA&Co staff, half or more of whom had not passed the exam. Other than that, it wasn’t discussed at all. It was just the price of entry to the accounting profession. Without it you could not very well practice accounting. For those who hadn’t passed it, it was like Damocles sword hanging over their heads.


My career progressed into Fortune 500’s, where they didn’t care whether you were a CPA or not. In fact, I never heard it mentioned. Two of my accounting bosses at two different Fortune 500’s did not have their certificate. As my career progressed into the C suite, the subject never came up. And to be perfectly honest, I began to see it as a bit of an impediment, that somehow it pulled me down to their level & degraded me.


Later after attempting to buy my Fortune 500 employer, attempting an LBO and running for Congress, the CPA designation came back into focus when I decided to open an accounting practice of my own. I suddenly found myself in an environment where the CPA designation was talked about a lot. In fact it separated the top echelon from the wannabes. If you had a CPA certificate the other CPA thought you walked on water.


I had a staff person one time who passed the exam while working for me. He immediately walked into my office and quit to open his own firm. I told him he probably didn’t have enough experience to go out on his own, but that just mad because he had always heard just the opposite. He joined an office sharing arrangement and then just disappeared. That experience had a big influence on my attitude about the CPA designation and on the general intelligence of CPA’s.


Over time I dropped the CPA & began calling my company simply ‘Ellis’, rather than the legal title ECPA PC or Ellis CPA Firm PC.


But the deciding factor hit yesterday while watching a Youtube video by Dan Pena about creating deal flow. Pena’s tagline is “the Fifty Trillion Dollar man” so he does have some influence and is worth listening to. Pena ridiculed the CPA designation. “People who call themselves CPA’s are doing business out of their bedrooms.” and “Deloitte doesn’t call itself CPA. Ernst & Young doesn’t call itself CPA. PWC doesn’t call itself CPA. Peat Marwick doesn’t call itself CPA.” In fact, out of 2019’s top 100 accounting firms, only four included the term CPA in the name.


That brought back memories of a magazine I subscribed to when I first started my practice. The Practical Accountant ran a monthly article of demeaning published comments about CPA’s, who were apparently widely ridiculed across society. The magazine ceased publication years ago, but apparently the attitude they wrote about is still prevalent.


So … This morning, I texted the person working on a new logo for Ellis to brand around and told her to nix the CPA. Not that I include it in our online name, but I was going to include it on my updated landing page, but I decided other wise.

It’s very likely that the CPA designation is a net negative in the real world.

Spending CPA Marketing Dollars

I read something in the book ‘Corporate Cancer’ that opened my eyes. After years of trying to advertise my way to fame & fortune, I recently wrote a post on LinkedIn saying advertising for new clients simply doesn’t work. You get a few new clients, just enough to keep you pouring money into advertising, but at the best, fees on new clients barely pay the marketing costs. I still believe that. But now, I know what does work.

Corporate Cancer is well written and easily held my interest, but it has nothing to do with marketing.  I didn’t expect to find any marketing revelations in the book, but I did. I got definitive proof in my mind that the best way to spend your marketing dollars is to establish your brand.

The author,  Vox Day, spent a couple chapters building the case that converged companies overrun by social justice warriors push positions that are deeply rejected by most of their customers. But SJW warriors hold positions that are low enough in the organization that most SJW activities escape the attention of Senior Management. The remarkable thing that caught my eye is this. Although many (most?) of their customers aggressively dislike or even hate the company’s public positions, most of them hang around because of the Brand. They are more attracted to a well established brand than they dislike how the company actively pushes an agenda they basically hate. While these companies are losing customers, they aren’t bleeding them as you would normally expect, for that reason alone.

If brands are powerful enough to work that kind of magic & keep customers who genuinely dislike a company’s SJW policies from switching to another supplier, then they are very powerful indeed. Imagine what could happen if the company actively pursued their customers’ business instead of ignoring them.

I had already decided to devote my marketing dollars to developing my brand. But now I am doubly convinced, because all of this makes sense.


Going Virtual & Other Experiences

When the Pandemic hit, we were already paperless & cloud based. We weren’t trying to be PAPERLESS. Nor were we trying to be REMOTE.  We were just trying to stay on the cutting edge of technology.

The first computer I ever saw was at the offices of my Big 5 accounting firm. It was a paper tape job. The second computer I ever saw, I actually mistook for a railroad freight car somehow misplaced into the basement of the high rise my Fortune 500 #254 employer had offices in.  It turned out to be a Burroughs mainframe computer. Burroughs was the big dog in mainframes in those days, but I was disappointed it wasn’t an IBM, the only computer company I had ever heard of. Your watch probably has more computing power than that behemoth. I’m still not certain whether the railroad car housed the computer, or if the railroad car WAS the computer. In any event, every month when the financial statements were printed, all the C Suite executives met in the basement to get the first P&L’s off the printing press. So as a young executive I was hob-nobbing with the CEO, CFO and all the CXO’s of a Fortune 500, about 15 of us in all. Actually, it struck me as foolish to require the entire C Suite (not called that in those days) stand around and watch a dot-matrix printer slowly crank out printed pages. But that’s what we did.

 IBM 360

Later when I was in the C suite of a bankcard company, we had dual IBM 360’s (probably the most successful computer IBM ever built) and later an IBM 370, which didn’t work out as well for us. The computers were sequestered behind glass walls on elevated floors to facilitate air conditioning necessary to keep those powerful computers from melting down to a puddle of plastic & metal.

After leaving the corporate world in the dust and running for Congress, I started my own accounting firm, where I bought two IBM System 3 computers. (My LinkedIn profile provides more info if interested.

it took all night to process & print one tax return. If you made a mistake, it took another day. Bookkeeping was more efficient, so we used them for bookkeeping, but we were actually just trying to stay on the front lines of technology innovation. We were certainly the first CPA firm in our city that used computers in any way. As a general rule, the CPA profession did not take quickly to automation. Two decades later I knew CPA’s who were still paper based and using adding machines (I still miss my adding machine.) and shipping off tax returns to be processed at processing centers. To this day, the largest CPA firm in the city I am now located in still provides paper copies of tax returns and charges extra for a digital PDF copy. They bought a building on a major street to increase walk-in traffic.

Today, the software is setting the pace, not the machinery, and certainly not your location. We have clients situated right next door to a CPA firm that uploads everything to us, half way across the country, for us to do their returns.

Everyone in our practice has a computer and two screens, but it’s the software where we outdistance our competitors. When the pandemic hit, we had 12 or 14 computers working with a server. When we got the stay at home order, it took us a day to move everything to Microsoft One Drive, and our server went the way of the horse & buggy. We added Textus & Microsoft Teams and that was it. But we could have done just as well without those new programs. Texting on our phones kept us connected. We hit the ground running & never stopped. When PPP came along. it gave us a boost in work load, but we were so efficient we pumped them all out like we’d been doing them for years. It disappointed us that it took the government quite a long time to decide how to tax them & the terms of forgiveness. If Chinese tanks pulled in front of their building, it would take them two weeks to decide what to do.

The biggest problem we had as dealing with 10-15 people scattered around the country without just walking down the hall and asking. It wasn’t that we weren’t communicating, it was that we were communicating too much. Everyone could text & call everyone else. We also had text groups for the Tax Team, The accounting & payroll team and the entire Ellis Team. Every time a message comes in I get a beep to alert me. Textus & Microsoft Teams also alert you to incoming messages. I remember one morning sitting in my home office listening to the messages come in. It sounded like a machine gun going off, and I knew I had to read every single one of them.

Our biggest problem was the communication was too efficient. Who would have thought? We may be unique, but everyone was closely connected and missed everyone, so they communicated back & forth about everything.

That’s our story, but we know for a fact, that was not everyone’s story. I have a family member that works for Spectrum, a local wifi provider. He said they were busy setting up offices at home for CPA’s. I have also stumbled across things on the web here and there about how CPA’s did not do well in the Pandemic. There were a lot of businesses that failed during pandemic, fortunately none of our clients. Those failures came from someone’s practice. But no one of them is willing to say, “We fell apart during pandemic.”


To this day, months into this thing, most businesses are not back to full staff.  Some of them still won’t let customers in their business. Every business that does is much less crowded than they used to be. Their business has to be off by half, or more. Nor are they stocked as well. Where I live, nearly every used car lot has gone out of business, and many restaurants. Before all this is over, more will fail. This is contrary to our experience. Our business actually increased during pandemic. What is everyone else not doing that we did?

Overall, the marketplace is moving backward, not forward. There is still a movement not to reopen schools, and I just got a notice on my phone that Sam’s is going to require masks again starting next week. My supermarket required masks two days ago. And where I live, nothing out of the ordinary going on.

Just between you & me, this is completely bullxxit. There are a lot of states reporting increased infections, but the fatality rate is lower than the ordinary flu. Plus there’s apparently some fraudulent reporting. In my opinion, this entire cluster-flux was politically motivated. If we can ever prove that, hundreds or thousands will go to the guillotine. I can’t wait.


Here is a summary of the entities most commonly used in business. There are actually something like 30 entities people can operate businesses in. These are five are commonly used.


1-Schedule C self-employed with no credit protection. Owners can be sued individually.


2-Partnership with no credit protection. Owners can be sued individually. Those have been around since the time of Christ.


3-Corporation with limited liability. Widely known as a C corp because it‘s taxed according to Chapter C of the Internal Revenue code. Owners cannot be sued for unpaid business costs. This came on the scene in 1700 when investors had a need for liability limits to raise large amounts of money. The initial purpose was to create the East India Company that governed India & half of China for two centuries. This was by far the biggest & most profitable economic enterprise ever. The corporation is the only entity that pays income tax directly to the government.


3-S Corporation with limited Liability. A C corporation which elects to be taxed as a flow though organization that pushes out profits & losses to be reported on the owner’s tax returns. Commonly known as an S corp. Taxed under subchapter S of the Internal Revenue Code. Profits & losses flow through to the owners and are reported on their tax personal tax returns. That’s why you will sometimes hear the terminology “flow through companies” for entities that don’t pay tax directly to the government. Corporations & LLC’s commonly elect to be taxed as an S corp. This does not affect their legal protection. S corps are limited to 100 owners. That’s why all the big companies such as General Motors and Amazon are C corps. After 300 years all states have come to agreement on how to tax corporations & S corporations.


4-LLC with limited liability. This came on the scene in 1971. Owners cannot be sued individually as long as there are two or more owners. There is still disagreement on how LLC’s should be taxed by states. Wyoming created the LLC in 1977 to satisfy a demand for a partnership with limited liability. It has the same structure as a partnership and files taxes on the same tax return, but it has limited liability as long as there are two or more members. Owners are referred to as partners in a partnership, & as members in an LLC. LLC’s commonly elect to be taxed as an S corporation. It is a toss-up whether S corp’s or an LLC’s are the most popular business form in the U.S.


5-C Corporations with limited liability. Corporations have been around since 1700 and the law is basically settled. In every state corporations are treated essentially identically. LLC’s are relatively new (50 years) and the states have not yet come to agreement how they will be treated. In some states they are treated well, and in other states they are not a good alternative. We create most new LLC’s under WY law, South Dakota or Nevada because those state have charging orders that make an LLC almost bullet proof against lawsuit or collection activity of any kind.  Nevada also has charging orders for corporations.


For most small businesses an S corp or an LLC with an election to be taxed as an S corp are the best entities. Each of these four entities are subject to different tax treatment and can deduct different expenses on their tax returns.


The state you organize is also extremely important. Wyoming, Nevada & South Dakota are probably the three best states to organize in, but the type of entity also plays a determining role in the selection. Also, there is kind of a civil war among states competing for being the Delaware for pirvately owned businesses. Every year someone drops a delightful goodie in our lap. But, remember this … you should never just organize in the state where you are located. But, as you can tell, that’s a post for another time.


A significant part of our practice is determining the proper combination to use to incur the least amount of tax.

Corporate Reorganization

Business reorganizing or restructuring is an action taken by businesses to significantly modify the structure or the operations of the company. This usually happens when a company is facing significant problems and is in financial jeopardy. But it often happens to enhance it’s competitive position, to protect its assets or to get out in front of a problem. It’s another tool in their tool box. Some examples of Global 500 companies:

Global 500 Re-orgs

  1. Forbes announced, Jeff Bezos is unloading a billion dollars of Amazon stock.
  2. In 2015 Caterpillar announced restructuring and cost cutting plans right before they were hit with a $2 billion penalty for tax fraud.
  3. In 2018 John Deere announced realignment of leadership responsibilities.
  4. Humana’s CEO-founder had twice before had shifted the company’s course to a brand-new industry.
  5. Chase Manhattan Bank and Chemical Bank used their merger as an opportunity to both reduce operating costs and achieve an important strategic objective.
  6. Scott Paper‘s chief executive officer (CEO) decided to implement the layoffs quickly—in less than a year—to minimize workplace disruptions and gain credibility with the capital market.

We’ll probably never know why they reorganized. What matters is they reorganized for some reason. Despite the massive size of Global 500 companies, and despite the difficulties presented by re-organizing a massive company, they are not afraid of re-orgs.

Privately owned business re-orgs

Privately owned businesses seldom re-organize.  It’s just not one of the clubs in their bag. They’ll ride their present structure right into the ground even when the company is collapsing around them.

Never fall in love with your company. You can fall in love with your business. A business has value because that’s how you make money. A company is a legal creation for operating a business. Nothing more & nothing less. Most people don’t think this through well enough and get the two confused. A few years of operating your company like it was your business can put you in vulnerable position.

If most companies lose a lawsuit, they could lose everything they’ve been building all their lives. If they win, the litigant can strip your company bare. We plug that hole through business re-org by removing everything of value from their operating company and putting it in an LLC that does no business what-so-ever. It never does anything to get itself sued. If everything of value is in the LLC, and the mothership loses a lawsuit, you can just shutter the doors and start over again with a new company the very next day with everything of value behind an impenetrable LLC barrier. The LLC just needs to license it to your new company, and you’re good to go. Since you own both of them, there are no barriers.

Business restructuring and reorganization is one of our strengths. I personally have been involved in two Fortune 500 re-orgs & countless re-orgs of private companies.  Not all of them have followed the approach we describe in this post. There are many ways to re-org and many things a business wants to accomplish. Every private re-org I was involved with succeeded without repercussion. We re-org our clients frequently for tax purposes. We have significant expertise in this area.

An actual example.

A few months ago I got a call from a client who was being sued by a marketing company. They had entered into a contract and the marketing business failed to perform, so my client quit paying the marketer. But there was a contract, and the contractor sued the company, but not the individuals. There was no way to sue the individuals. Their lawyer was vigorously defending the suit. He warned them it could cost several thousand dollars to defend suit. He also warned them, they could lose the suit.

For some reason they called me.

  1. I questioned them and discovered they hadn’t recorded any business assets. Their company was basically a vacant shell. There were assets, but no assets had been recorded in the company. They were still owned by the owners.
  2. I advised them to abandon the company.
  3. I also advised them to simultaneously form two new companies, an LLC to hold company assets, and a corporation to operate the business.
  4. I then advised them to legally transfer all the business assets into the first new company (an LLC), including web sites, trade names, trade secrets, and everything essential to carrying on businesses. Since they had never trademarked their name, I suggested the do that in the name of the LLC.
  5. Simultaneously again. I advised them to open new bank accounts in the name of the new corporation and begin conducting business in the new corporation.
  6. I also advised them to run this past their lawyer. He said it would work. The only thing he suggested is to file bankruptcy on the old company that had failed. That was a good final touch.
  7. It did work. The marketing company, rightly or wrongly, was got nothing but legal fees.

Tax savings

This methodology is one of my favorite re-orgs. It is used to protect vital assets and to change the character of earnings. It can also be used to eliminate C corp taxation by removing earnings from a C corporation and turning it into royalty income on the personal returns.

That eliminates an entire level of taxation.