The term 'corporation' often brings to mind industry giants like Microsoft, Dell Computers, and Exxon, multi-billion dollar conglomerates that dominate their respective markets. However, these corporations didn't start as billion-dollar entities. They began as small ventures that leveraged the power of the corporate structure to protect their assets and generate wealth. This article explores how small business owners and internet marketers can use corporations to create their own wealth empires.
Corporations are the lifeblood of big business. However, small businesses and internet marketers can also harness this business structure to build their own empires. The primary advantage of using a corporate entity is tax reduction. Remember, the golden rule of money isn't about how much you earn, but how much you keep.
For instance, as a corporation, you can establish a tax-deferred retirement or pension plan (403b) for yourself. You can contribute up to 17% of your corporate income to this plan. The real advantage comes when you make a tax-free loan to yourself from this plan to purchase a real estate property. You can then rent out this property, using the tenant's rent to repay the loan to your retirement or pension plan. This strategy allows you to make a tax-free loan to yourself, have someone else repay it, and acquire a new asset that generates a positive cash flow and provides a tax break.
Moreover, you can set up your family's medical and dependent care plan under your corporate entity, making it tax-deductible. If you're concerned that your business isn't generating enough income to leverage these benefits, don't worry. Forming a corporation may not be suitable for everyone initially. It's advisable to consult with a tax attorney experienced in forming and managing corporations to explore your options based on your company's size.
However, owning a corporation isn't without its drawbacks. The primary disadvantage for small business owners is double taxation. The salary you allocate to yourself is taxable at the corporate rate and is taxed again when you declare this income on your personal income tax return. Therefore, you need to weigh the pros and cons of forming a corporation.
To delve deeper into the subject of corporations, consider reading the following books:
These books can be purchased at discounted rates from various online retailers such as Amazon.
This article merely scratches the surface of the potential of corporations. To fully understand the possibilities, conduct further research, read the recommended books, and consult with a tax attorney experienced in forming corporations. If you have any questions, feel free to reach out to us anytime.
