There are two things certain in this world, and that’s death and taxes. Until we find a way to become immortal, we can focus on making our money immortal. One way to do that is to find creative ways to reduce taxes and keep as much of you income as possible through a business entity.
If you didn’t know already, the tax code is designed for entrepreneurs, not employees. Businesses aren’t taxed the same way as individuals; individuals are taxed on how much they make, and businesses are taxed on how much they net. See the graphic below.
The advantages are clear, you want to ensure that you’re protecting the wealth that you’re building and guaranteeing its security for generations to come; You do that by incorporating your family. Now you can’t just incorporate you family as a business without having an actual business, so that would be step one.
Decide what business your family will be in, it could be any one thing, or several things. Any legal entrepreneurial endeavor will do.
How does all of this benefit me and my family?
Because you’re a small business, and because much of what you do in your everyday life will probably be tied to the business in one way or another, what you do is a legitimate business expense. If you’re in business with a spouse, date night can be written off as a business expense as long as you spend some time talking about business.
You can also employ your children to work for you. I know you’re thinking, “my 4yr old couldn’t possibly be an employee in my business”; If your 4yr old can work a smartphone or tablet, your 4yr old can shred some paper. Pay them a small salary (like $20/mon) and make sure they’re taxed appropriately as employees; Thats $20 less you’re spending on taxes.
What if my business isn’t making money?
Taking a loss, as much as we all would prefer not to, can be advantageous to your tax return. That loss can be applied to other taxes that would need to be paid through your corporation. Don’t take too many L’s though, that will raise red flags with the IRS and you could lose your corporate status. Ideally you want to make money and build substantial wealth for your family.
How do I manage all of this money being made?
Learn more about that here.
Now Go Forth And Build Wealth!
Recommended Reading
Grab A Copy Here