Secrets of the Rich _ 02

Secret 02

Corporations Use a Different Set of Rules than Individuals

This is where being financially literate changes the reality in which you live.

To be financially literate means that you understand that there are different rules for different entities and are able to apply these for your personal gain.

In this day and age, not understanding money is a handicap!

To drive this point across in the simplest form possible here’s an example:

As an employee, you earn money when you get paid, right?

Out of the amount you earn, 20 to 30% gets taken away in taxes by the government. You’re left with 50% of what you earn, which goes towards living expenses and whatever else you want to spend money on.

Here’s what most people don’t know!

When a corporation or business earns money, they don’t get taxed right away as you do, the employee, instead they are given the option to spend some of that money first – usually by reinvesting it in the business – and get taxed on what is left after all those expenses.

If a business chooses to reinvest all the money it has generated in the current fiscal year, the government has no profit to tax, thus paying 0 taxes.

The good news is, setting up a corporation for yourself is incredibly easy, doesn’t cost much and you don’t need any employees to get it done. You can start a corporation just to optimize your own expenses and it’s completely acceptable from both a legal and moral stand-point.