Keep it Simple and Strategic

There Are Several Keys To
Handling Your Business Record Keeping…

* The first is keeping complete and accurate records.
* The second is separating the business from your personal finances.

Let’s start with this part first..
Some people make the mistake of running their business from their personal check book. This is a mistake for two reasons:

1) From a tax planning perspective it’s too easy to lose valuable business deductions when you lump all your finances together.

2) From an asset protection standpoint, it leaves the door open for a creditor to claim that you and the business were in fact one entity, not two. This gives them the opportunity to “pierce the corporate veil” and make claims against your personal assets.

That’s very bad and also completely unnecessary.

Here’s What I Suggest:
Open A Business Checking Account

Here’s what I suggest: first, open a business checking account at your favorite bank. If you’re doing business as a sole proprietor (perish the thought) you can file a d.b.a. (doing business as) certificate, giving the business its own name. That name should appear on the account and on your business checks.

Buy Bookkeeping Software

Next, run to the nearest computer store and buy Quicken or QuickBooks. There is other bookkeeping software available, but these are the most commonly used. They are easy to learn, and most accounting firms are familiar with them. You probably don’t need the latest version or the one with all the super duper features. Buy last year’s version and save yourself $50. You can upgrade later, if necessary.

What’s the difference between Quicken and QuickBooks? In a nutshell, Quicken is an electronic checkbook. It allows you to print checks, add deposits and balance your check book. It can even provide you with simple reports. QuickBooks is a complete bookkeeping package. It does everything that Quicken does, plus provides full financial statements. It has lots of components and add-on modules to handle more complex accounting. It’s got everything you need and more.

That doesn’t mean it’s more difficult to use or learn. I think it’s just as easy, and the added features are there for you or your accountant to use when you want. For that reason, I’d take the plunge and buy a one or two year old version of QuickBooks to get started. It will save you many, many hours or tedious work, and by using the system of your choice you’ve taken a big step in the right direction in terms of record keeping. Yet, there are still a couple of more things to do.

Organize Yourself With Folders

Each year, my bookkeeper sets up folders for each type or expense the business has. There’s a folder for utilities, auto expenses, rent, travel, etc. The folders follow the chart of accounts pretty closely. Each time she gets a bill; she pays it, writes the check number and date on the written invoice, and files it in the appropriate folder. For example auto expenses: at the end of the year, she has every auto expense we paid that year in one place, one folder. At the end of the year, she sets up new folders and starts over again.

Bank Statements and Cancelled Checks

I keep the monthly bank statements for each checking and savings account in separate folders. After the account is reconciled each month, I file the statement in the appropriate folder and keep the checks in numerical order (depending on the number of checks you write per year, the stack can get quite high!)

Audit Proofing Your Records
There are just two more steps you must take
to audit-proof your records.

1) The first is to notate your receipts and keep them.
2) The second is to enter certain types of receipts into a tax log or diary. For example, expenses like travel, meals, entertainment, and auto expenses, while deductible, require an extra step.

Here’s what I do. If I take a customer out to lunch and we discuss business, the cost is fifty percent deductible. The key is to log the answers to those critical five distinct questions, remember? Who? What? When? Where? How Much?

I pay for the meal by my business credit card, and make a notation on the receipt something like “Ted T. regarding Jacksonville seminar.” Three of the questions are answered on the pre-printed receipt; the other two are in my note. When I return, I give the receipt to Mary (I hate paper work and she’s a great organizer) and she transcribes it into a tax log. It looks something like this:

Who, What, When, Where, How Much

My accountant has actually set it up in a color-coded excel spreadsheet, but you can use a table like the one above, a ledger book, or a yellow pad. It doesn’t have to be fancy it just has to be accurate. This certainly isn’t meant to be the definitive guide to corporate books and records. However, it’s a great starting point and if you follow the guidelines I’ve laid out for you, you will be off to a great start and your accountant and bookkeeper will have what they need to make the necessary adjustments as you move forward and grow your business.

What is the Smartest Way to Pay for My Fun?

In his best selling book, “Rich Dad, Poor Dad“, Robert Kiyosaki warns people against the dangers of buying what he calls “doodads” – you know, junk, spur of the moment items. Those things that you didn’t know existed until you read about them in an in-flight shopping catalogue and now that you know about them: you just can’t live with out one.

Many people have basements that are packed with such items as electric pet feeders, remote-controlled shoulder massagers, barely-used camping equipment, fishing poles, baby toys and clothes etc. These are the same items you see being sold at garage sales just a short time later, for about 5% of the original purchase price.

Some people take this to mean that the only way to become financially free is to stop spending money. That’s simply not true. The trick, however is to manage your spending by focusing on buying more assets (things that put money in your pocket) and less liabilities (things that take one out of your pocket).

This Begs The Question:
“What is the smartest way to pay for my fun?”
The first way is to make your fun tax deductible whenever possible.

Did you know that things like season tickets and tickets to concerts can be tax deductible? Same thing with country club memberships!

Now, here are some fun questions for you to get your mind thinking.

Are you trying to get into shape and wondering how to pay for it all? Answer: You can deduct the cost of a personal trainer and your corporate gym.

Or how about taking the family on that terrific vacation they so deserve: simply make it part of your annual meeting and let Uncle Sam underwrite the cost!

How about new furniture, ski equipment or golf clubs? Would you like to learn to cook, fly or meditate? Or, would you like to have your own swimming pool and health spa? No problem!

All of these things can be done with pre-tax dollars with a
HUGE net savings to you.

“S” Corporations and TAX DEDUCTIONS

U.S. Supreme Court wants you to SAVE TAXES

The next biggest obstacle we have is taxes.  We’ve already established the fact that we are paying somewhere in the neighbourhood of 50% in taxes between State, Federal and FICA.  Guess how much the big boys are paying in taxes?  About 4% – 5%!

 

The work that we do and the things we’re about to teach you comes from two U.S Supreme Court decisions.  This isn’t stuff that we’ve made up; they are backed by the U.S. Supreme Court.

The first decision says that it is your constitutional right to set yourself up so that your taxes are minimized and you are paying the least amount of taxes possible.  How many people got a call from your CPA or accountant saying “Did you know that you can legally minimize your taxes?”  I never got that call.  And it was because of that, that I got so infuriated and motivated that I decided to do something about that.  I decided that I had to teach myself how to save a bucket of money because I know that there are people out there that are paying a lot less tax than I am.  The point is that these strategies have been around for decades but our accountants and CPAs aren’t teaching them to us.

The other US Supreme Court decision says that there are two tax systems – one for the educated and one for the uneducated and you get to pick which one you are in. 

The first system works like this:

Income

 - Taxes

Spend what’s left

This is the system for the uneducated.

At the very same time there is another tax system operating right along side the first one that is completely legal, that has the endorsement of Congress, and the IRS and it works like this:

Income

 - Spend

Pay Taxes on what is left

Which system do you want to be in?

You’re saying, “Wow I get to spend all the money that I want first and then pay taxes on what’s left.  That sounds pretty good.”  What do we call that spending?  Business expenses, business write-offs, and business deductions.  The problem is that you aren’t taking but about 10% of the deductions available to you.  The most sophisticated and savvy investors and businessmen that come into our program are not taking but 10% of the deductions available to them.  And where do you think the other 90% goes?  Right down the toilet.

How to PROTECT YOUR ASSETS – VIDEO

How To PROTECT YOUR ASSETS – TaxSavingsTools.com

Two asset protection power tools are Limited Partnerships (LPs), and Limited Liability Companies (LLCs).  I could go on for days about why we use them and the distinctions between them and about why you’d use one versus another but I’d like to make one point at the start.  Did you notice I did not mention “C” Corporations or “S” corporations for asset protection?  Some of you are holding real estate in an “S” Corps. and that can be a fatal mistake. “S” Corps and “C” Corps., while they do provide some asset protection do not provide nearly the protection that these other ones do.

There is a magic tool that comes along with LPs and LLCs and it’s called: “Charging Order”.  This is your new best friend.  Charging order is a legal concept that was developed and applies only to Limited Partnerships and Limited Liability Companies.  It does not apply to “S” Corps, “C” Corps, Sole Proprietorships, and Partnerships.  If your lawyer has not told you about Charging Order and the benefit of it and why you have to have one of these two entities somewhere in your asset protection structure, he/she has done you a terrific disservice.

Here is what a charging order does.  Number 1 it says: “You can not reach that asset”.  Imagine you have a million-dollar building sitting inside an LLC or LP.  Can the bad guy get at the million-dollar building?  No, he cannot.  But what it will do is open up the door for the bad guy to get at the profits.  Let’s pretend there is $100,000 in profits.  The bad guy can’t get at the building but at first glance it seems like he can get at the $100,000.  But we’re not going to stop there.  You see when we work together we’re going to set up more than one of these entities and one of them is going to be a management company.

If there’s $100,000 in your LLC that is subject to attachment and we have a management company over here that is going to manage, in a better way, our million-dollar building, do you think that management company should be allowed to charge a fee for that service?  Of course!  And how much do you think they will charge?  The answer:  about $100,000.  Now how much money is left for the bad guy to get?  ZERO!!

So far we have protected the million-dollar asset and shifted our profits to another company so that the bad guy cannot get it.  This is where the Charging Order steps in and introduces you to your new best friend and partner – the IRS.  Let’s say the bad guy gets $100,000 in income.  Do you think that income will be taxed?  Absolutely!  The bad guy is left standing with his hands in the air saying: “But Judge, these guys were working with Drew Miles!  I didn’t see a nickel of that income because they did this thing where they shifted the income out of the company!”  Guess what the IRS would say to that:  “TOO BAD.  You are going to pay tax on that money because we are going to impute the income to you!”

And now the bad guy is left in the position where he has to pay about $50,000 in tax on MONEY HE NEVER GOT.  How’s that for asset protection