The 2 Worst Business Structures Are...

All right, you understand that If you want to reduce your taxes and get control over your money and your life you need to have your own business.

You know that having a business allows you to buy things for the business that you need to produce income. But you also get to personally use those things so you can raise your standard of living without raising your income.

You also know that annual meetings at distant exotic resorts, corporate jets and boats and business held real estate are some of the perks of having a business. And you want some of that too.

Know the question is: How do I form that business?

“People” will tell you many things about setting up a business depending on their own personal background, training (if any), study, and experience.

It’s easy to do. Just raise your hand and say: I’m in business.

It’s really as simple as that and at that point you now have a Sole Proprietorship that files a schedule C with your personal tax return.

When I got started in my early days, I filed 8 different schedule C businesses one year. I was younger then and had more energy than brains.

For the folks that want to get fancy, you can go online and form a single person LLC or Limited Liability Company for under $500.

And that's an okay way to start for the first year. However for the long term, not so much.

The problem with BOTH of those structures is that they both report the income and expenses on your personal tax return using schedule C.

Now, here’s the just 3 of the problems with a Sole Proprietorship and single member LLC

1 Your business has no privacy. Anyone or any time someone looks at your personal tax return, they also get to look at the details of your business.

2 When you have a profit from that business, it has a 15% Self Employment Tax on that profit. That tax is added to your regular income tax that you would also pay on that profit.

3 Schedule C is THE most audited form the IRS has because it’s easy pickings for them.

So, when you start your business ALWAYS use a multi member entity because those entities always file a separate business tax return and only show up on your return as a one line entry in most cases.

And just in case you were concerned, most business entities can be formed online for well under 1K.

Are you ready to start your business now?

Dr Fred "focused for retirement" Rouse, CFP Emeritus

The REAL Money Doctor

PS: Tt's not too late enjoy your retirement sooner. If you want help with that let me know. Go to DrRouseNow.com