If It’s Free, It’s for Me: Tax Free Business Strategies
Once you have your money positioned for Tax Free Business Strategies as we discussed in our last post, you then want to identify potential high yield strategies for your Tax Free Wealth Assets. These are high risk, high reward strategies so you need to limit this to an appropriate portion of your overall financial assets. These strategies will provide tax free wealth and income for you after you achieve the age of 59 ½. In order to implement these strategies you will need to break free from the financial services 401Ks and IRAs and have tax free vehicles which allow you to hold these specific types of assets.
Think of the power of having an explosive startup and then not having to pay tax on the capital gains when you cash out. Pretty cool.
Many business owners engage in Angel Investing in startups that hopefully have high potential. We discuss how to identify high potential opportunities in The Business Godfather Treatment. Angel Investing is definitely an area where you want to diversify across five or ten companies with investment amounts of between $10,000 and $100,000. The basic rule of thumb for good angel investors is 2 out of 10 hit it big, 2 out of 10 provide some positive return and 6 out of 10 result in total losses. If you are not good, it could be worse.
You can not pull a salary from these companies but you can serve as a Director and receive dividends from the company on a tax free basis.
Legacy Appreciation Corporation for Tax Free Retirement Income
I made up the Legacy Appreciation Corporation name but this strategy provides you with tax free income in retirement and a tax free business that you can hand down to your heirs. This is less risky than the Angel Investing Tax Free Strategy and provides you the opportunity to leave a legacy for your family.
To make this work, you need a business that generates cash flow without your day-to-day involvement. You can not pull a salary from these companies but you can serve as a Director and receive dividends from the company on a tax free basis. Think of a convenience store franchise or some similar tested model that should stand the test of time.
Cash flow from the business can be used to invest in other businesses or can be distributed to you as Tax Free Income as beneficiary of the IRA once you are 59 ½. You can then pass this on to an heir who can also be building up Tax Free Wealth that can provide them with a Tax Free Income stream when they reach 59 ½. This is why I call it the Legacy Appreciation Corporation. You will be leaving a legacy that your heirs really appreciate. Who knows, they might build a statue to you or throw a parade every year on your birthday.
For specific guidance on the mechanisms, join the Business Godfather LLC Family or review Swanson v Commissioner 106 T.C. 76 https://scholar.google.com/scholar_case?case=15277963416926279130&hl=en&as_sdt=6&as_vis=1&oi=scholarr
IRS Field Service Advice Number: 200128011 http://www.irafinancialgroup.com/IRAFinancialGroupFSA200128011.pdf
Real Estate Development and Improvement
Real Estate Development and Improvement has built a lot of wealth over the years. While generally holding rental real estate is preferable as a Taxable Investment due to the many deductions associated with rental real estate, if you are developing real estate or fixing and flipping real estate this can be used for Tax Free Wealth and Tax Free Income.
You will be restricted from directly benefitting from the real estate so no vacation homes or stuff like that. You will not be able to draw a salary from your efforts either. You will be able to pull out dividends and profits from the account once you are 59 ½.
Complementary Tax Free Income Strategies
Tax Free Income Strategies that can complement any of the three Tax Free Strategies listed above include medium risk, medium return strategies including Convertible Notes, Real Estate Tax Liens and Secured Commercial Lending. Convertible Notes can be used to fund Angel Investments. Real Estate Tax Liens can provide a cost effective way to generate income and acquire new properties. Secured Commercial Lending can support any of the three strategies.
Harness the Power of Tax Free Wealth and Tax Free Income
Start harnessing the power of Tax Free Wealth and Tax Free Income Strategies. The US government says you can do this. No need to ask permission. Just proper planning and preparation. Please let me know other areas you are interested in learning more about to build more valuable businesses for you and your legacy.