We all want to know the secrets of the rich, right? Well, this is one of them: Incorporate. Becoming a corporate entity has many advantages financially. The first advantage is you pay many of your bills before being taxed on that money. The way most of us do it, we work, pay taxes, and pay bills with what’s left.
You can’t pay all of your bills that way, of course. You can’t deduct your mortgage or your kids’ tuition, it has to relate to the corporation. But it doesn’t have to relate solely to the corporation. I know you’ve heard of those big execs who write off a family vacation. It’s not fair, is it? The people who have most of the money might pay less in taxes than you do! Certainly most of them pay a lower percentage. It just sounds wrong!
It is, however, entirely legal. And let’s be honest. As much as it pisses you off that rich people get out of paying their fair share of taxes with things like that, wouldn’t you if you could?
Well, you can. In fact, Sandy Botkin, author of Lower Your Taxes Big Time, encourages everyone to do that, if they can legitimately incorporate themselves. And there are many more ways to do that than you are probably aware of. Check out his book to figure out how you can incorporate yourself.
If you’re an entrepreneur, you MUST incorporate, say Sandy and Aaron Young, Ceo of Laughlin USA. And not just for the tax advantages. For the protection. Ever heard of the corporate veil? Basically, it’s separates the company’s assets from your personal assets. That is, if someone sues your company, they cannot touch your personal fortune, no matter how large it may be. They can only get the company’s assets. This is how business entities can go bankrupt while the CEOs and owners are still wealthy. Every heard of piercing the corporate veil? If you can do that with a corporation you’re suing, then you have access to the individual’s assets, as well.
The trick is to make your corporate veil nearly impossible to pierce. The problem is, almost on one know how to do that. Most business lawyers don’t even know how to do that. And when you hear how many things you have to keep track of and to do strictly by the book, you will despair of ever being able to do it right!
Aaron says it gets a little schizophrenic. For instance, say you want to change anything about the way you do business, which amounts to changing one of the corporate bylaws. First, you have to send out notice of a board meeting, then hold the meeting at the scheduled time, and take and record minutes. And this is true even if you’re a 1-man-shop. Yes! You have to send a message to yourself to attend the meeting! That’s what Laughlin does for business owners. So, read Sandy Botkins’ book, figure out how you can incorporate. And if you want to know more about keeping the corporate veil in place, click here and listen to Aaron talk about it.
Now you can use one of the secrets of the rich! Yeah!