How does Robert Kiyosaki do this?

[pacificfame]

I was reading Rich Dad Poor Dad, and came to this....

"I want to pay myself first. The reason I minimize my income is because I don't want to pay it to the government. That is why, for those of you who have watched the video The Secrets of the Rich, my income comes from my asset column, through a Nevada corporation. If I work for money, the government takes it."

What exactly is he saying here. I understand it for the most part, I just think some of you might have a stronger grip on it.

Thanks

[radreality]

As I understand it....in IRS terms.....instead of W2 income, you want to make K1 income. Although, the IRS usually requires some W2 income to be dispersed if a K1 is issued; but there is nothing wrong with having your K1 income be more than your W2 income as long as it is still following the IRS guidelines; this is why its smart to have a regular accountant AND a cpa.

W2 income = whatever your tax bracket is plus employment taxes
K1 income = a flat 15% dividend tax

Thats how I understand it at least.

[nordicnomad]

I was reading Rich Dad Poor Dad, and came to this....

"I want to pay myself first. The reason I minimize my income is because I don't want to pay it to the government. That is why, for those of you who have watched the video The Secrets of the Rich, my income comes from my asset column, through a Nevada corporation. If I work for money, the government takes it."

What exactly is he saying here. I understand it for the most part, I just think some of you might have a stronger grip on it.

Thanks

What this is in reference to is the different kinds of income.

Earned Income; which comes from a job or other direct labor and is taxed highly.

Portfolio Income; Which comes from dividends, capital gains, etc. which is taxed less than earned income.

Passive Income; Which comes from real estate, royalties, etc. that you don't work for and is taxed the least.

Not only do you pay less taxes on your income as you convert it from earned to portfolio to passive, you also have to work less and less for that money. This conversion is normally done through saving earned income to the point where you can buy productive assets like rental property, businesses, or other investments. That's all he's referring to, though it is an important concept to learn.

[sspoldir]

Simply put... Businesses pay expenses first and are taxed on whats leftover. An individual is first taxed on what they are paid and have to pay expenses with whats leftover.

-SS

[TheCompany]

Let's also not forget the important and crucial fact that under the state of Nevada tax law a LLC (Limited Liable Company)

-No corporate income tax
-No taxes on corporate shares
-No franchise tax in Nevada, unlike Delaware
-No personal income tax
-No I.R.S. Information Sharing Agreement
-Nominal annual fees
-Minimal reporting and disclosure requirements
-Stockholders are not public record, and directors need not be stockholders
-Stockholders, directors and officers need not live or hold meetings in Nevada, or even be U.S. Citizens
-Officers and directors of a Nevada corporation can be protected from personal liability for lawful acts of the corporation

Lots of benefits if this is the type of business model your interested in. If you have any other questions PM me.

[radreality]

Let's also not forget the important and crucial fact that under the state of Nevada tax law a LLC (Limited Liable Company)

-No corporate income tax
-No taxes on corporate shares
-No franchise tax in Nevada, unlike Delaware
-No personal income tax
-No I.R.S. Information Sharing Agreement
-Nominal annual fees
-Minimal reporting and disclosure requirements
-Stockholders are not public record, and directors need not be stockholders
-Stockholders, directors and officers need not live or hold meetings in Nevada, or even be U.S. Citizens
-Officers and directors of a Nevada corporation can be protected from personal liability for lawful acts of the corporation

Lots of benefits if this is the type of business model your interested in. If you have any other questions PM me.

That is true for the state taxes of Nevada, but no matter what state you live in you can't escape the IRS. And Robert Kiyosaki has most of his non real estate companies structured as C-corps, which pay corporate tax to the IRS; he even talks about this in some of his material.

[turbooo]

haha no wonder! ...recently i had incorporated with legalzoom and the rep over the phone was informing me that im lucky to be incorporating in nevada and that most people who incorp. wishes they can be here in nevada to do so because of the benefits here. Didn't bother asking him in detail but now i get the jist of it.

[pacificfame]

Wow, Nevada has a lot of benefits. Later in my life I would like to move to Vegas, just because I like the warm weather and San Diego will be to expensive with all the taxes and costs out there. So starting business out there would have great benefits.

However, I thought Robert lived in Scottsdale, Arizona?

[cocaine]

Later on in the book he says he pays him self first, e.g. at the first of the month as at the end he will have to pay taxes which he can't escape, so then he will try looking to alternative ways of paying for them taxes.

E.G. say he gets paid 10,000 a month and he will have to pay 1000 tax, he will need to pay all his expenses such as food etc which may add up to 6000, then he will have 4000 left over - minus taxes, from this he may then take out 3500 for him self, meaning he will have to raise 500 to pay the taxes, motivational thing more i think

well this is what i can remember, will have to read the book again