Walt and Jesse decide to start their own little empire with the help of Jesse's friends: Skinny Pete, Combo, and Badger. Meanwhile, Hank tries to pull himself together after his encounter with Tuco.
After Skinny Pete gets ripped off, Walt makes Jesse go get the money. Meanwhile, Walt's cover story on how Elliott and Gretchen are paying for his medical treatment is on the verge of collapsing.
Rumor is spreading that Jesse killed the man that ripped Skinny Pete off. Walt uses this to his advantage on expanding their territory. Meanwhile, Hank has been promoted to the El Paso office. But it's not all he hoped it would be.
Walt and Skyler have a baby girl. Now that Jesse is hooked on heroin, Walt refuses to give him his money until he gets clean. Meanwhile, as an excuse for his money, Walt decides to donate the money to himself through his son's new website.