Blog | Entrepreneurship, Real Estate

How to be Truly Merry

The power of the corporation to protect you from Robin Hoods

When I was a young boy, my teacher told us the story of Robin Hood and his merry men. She thought it was a wonderful story about a romantic hero who stole from the rich and gave to the poor. My rich dad didn't think that Robin Hood was a hero. He thought that Robin Hood was a crook.

Though the story of Robin Hood depicts him and his band as happy-go-lucky thieves helping the poor, we must remember that it's just a story. In real life, the story of Robin Hood comes alive through the taxman. And if you've looked at your pay stub lately, you know that being part of the taxman's merry band doesn't make you merry at all. It makes you miserable.

The Robin Hood fantasy of taking from the rich and giving to the poor in the form of taxes has caused the most pain for the poor and the middle class.

This is because, though income taxes were originally intended only for the rich, once the government got a taste of money, it couldn't be satisfied. Eventually, the middle class and poor were taxed too.

Today, the middle class and the poor pay the most in taxes. This is because the rich understand how money works and have discovered ways to use the tax system to their advantage. Today, the poor and the middle class are miserable and the rich are merry.

If you want to be merry, you must learn to think like the rich and act like the rich

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The biggest secret the rich have when it comes to using taxes to their advantage is the corporation.

As a young boy, my poor dad always encouraged me to get a good job with a strong corporation. He spoke of the virtues of working my way up the corporate ladder. For him, a corporation was a big, confusing entity that only rich people owned. He didn't understand that it was the corporation itself that allowed people to get rich. And he didn't understand that telling me to work for a corporation and rely on a paycheck was setting me up to be poor.

When I told my rich dad about my father's advice to find a good job and climb the corporate ladder, he only chuckled. "Why not own the ladder?" was all he said.

The rich use corporations to protect and keep their money from Robin Hoods

Most people’s biggest misconception is that a corporation is a big company owned by fat cats. While this is true at times, many corporations are small, or at least start small, and are the vehicle for becoming rich and staying rich.

I started my first corporation while I was working as a salesman at Xerox. As I excelled at sales, my income went up, but so did my taxes. Dismayed, I started a corporation on the side for my real-estate investments. As money built up in my corporation, I was motivated to work harder at Xerox so that I could invest more money in my corporation, make more money, and pay less in taxes.

Soon the cash flow from my corporation was higher than the money I made at Xerox, and I bought my first Porsche. My fellow Xerox employees thought I was spending my commissions, but I was instead investing my commissions in my assets and reaping the benefits of my cash-flowing investments. My money was working hard to make me more money.

How do corporations make you rich?

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All of this was possible for me because my rich dad gave me strong, financial knowledge through financial education. Without this financial education, my road to independence would have been much more difficult, if not impossible, because I would have had a low, financial IQ. Thanks to rich dad, I gained a high, financial IQ.

Financial IQ is made up of knowledge from four broad areas:

1. Accounting
   Accounting is financial literacy, or the ability to read numbers. This is a vital skill if you want to become rich. The more money you are responsible for, the more accuracy is required, or the house comes tumbling down. By learning to read financial statements, you can identify the strengths and weaknesses of any business.
2. Investing
   Investing is the science of “money making money.” This involves strategies and formulas that use the creative right-brain.
3. Understanding markets
   Understanding markets is the science of supply and demand. You need to know the technical aspects of the market, which are emotion-driven, in addition to the fundamental or economic aspects of an investment. Does an investment make sense or does it not make sense based on current, market conditions?
4. The law
   A corporation wrapped around the technical skills of accounting, investing and markets can contribute to explosive growth. A person who understands the tax advantages and protections provided by a corporation can get rich so much faster than someone who is an employee or a small-business sole proprietor.
   • Tax advantages
     A corporation can do many things that an employee cannot, like pay expenses before paying taxes. Employees earn and get taxed, and they try to live on what is left. A corporation earns, spends everything it can and is taxed on what is left. This is one of the biggest tax loopholes that the rich exploit through corporations.
   • Protection from lawsuits
     We live in a litigious society. Everybody wants a piece of your action. The rich hide much of their wealth in corporations to protect their assets from creditors. When someone sues a wealthy individual, they are often met with layers of legal protection and often find that the wealthy person actually owns nothing.

Start being merry today

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Though it's not the purpose of this post to go into the specifics of owning a corporation, I will say that starting one is not hard, and if you have any legitimate assets, I'd strongly encourage you to learn more and do so—as soon as possible.

In today's world, there are many Robin Hoods angling to get your money. Instead of miserably handing it over, I encourage you to merrily protect it through the power of the corporation.

How are you going to increase your financial literacy today?

To find out more, check out our free, financial education community here.

If you want to learn more about how to best protect your assets, follow my good friend and Rich Dad Advisor, Garrett Sutton, Esq. here.