The Millionaire Maker by Loral Langemeier

Author:Loral Langemeier
Language: eng
Format: epub
Publisher: McGraw Hill LLC
Published: 2006-01-15T00:00:00+00:00

The Importance of Entities

If you want to be a millionaire, you need to act like one. Most wealthy people I know have multiple corporations and trusts, as well as charities: for example, the Bill and Melinda Gates Foundation. The purpose of these entities is to

1. Maximize tax strategies

2. Create liability protection

3. Ensure asset protection

4. Keep wealth accelerating through multiple streams of revenue

5. Optimize opportunities

It is imperative that you understand the available legal entities and their tax implications. By some estimates there are 60,000 pages in the tax code, yet most CPAs in this country use only 50 to 100 of them in serving their clients. That’s probably why on April 15, 2005, Americans overpaid billions in taxes. It is your obligation to find a CPA or financial planner who knows how to support your plan. They exist—just ask around. Your mentors are a terrific source for recommendations, and there are several other resources available. If you can’t find them, check the Resources section at the back of this book. A good CPA will prove to be one of the most important members of your wealth-building, and more important, your wealth-sustaining, team.

As we move forward to eliminate debt and build your Wealth Cycle, we are going to structure your life as if you are already wealthy. We are creating the structure into which you will welcome your wealth. Money will not come to chaos, so we need to build a house to welcome and protect your wealth. There are several advantages to keeping your money in entities rather than in your personal bank account. The biggest is that you secure proper asset protection and minimize your risk, giving yourself every opportunity to increase and sustain the asset base and, as a result, your wealth. At the very least, you will protect your assets—the businesses, real estate, intellectual property, and any proprietary technology, processes, services, or products you develop. In addition, you protect yourself from personal liability, create privacy for your wealth, separate your wealth from the commotion of your personal world, and maximize tax strategies within the legal rights prescribed in the tax code.

There are two primary tax structures under U.S. law: one for employees and one for corporations. As you know, employees are taxed on what they earn, and usually these taxes are withheld from employees’ paychecks. Corporations, on the other hand, manage their own taxes; this management includes deducting appropriate business expenses. In the United States, there are a number of legal structures that may be used by individuals to hold and protect wealth. These are separate and distinct from the taxpayers who own them, each with its own Employer Identification Number (EIN) unrelated to any individual’s Social Security number. The legal protections, tax implications, and personal responsibilities and liabilities differ for each of these entities. How a person structures his or her investments and uses these vehicles can have enormous tax and legal implications.

The following is a brief explanation of entities that are commonly used by the wealthy,

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