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The Godfather

tax free business strategies

If It’s Free, It’s for Me: Tax Free Business Strategies

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.

Angel Investing

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

and

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.

blood is a big expense

Blood is a Big Expense – But So are Taxes

Blood is a Big Expense – But So are Taxes

If I asked you what your biggest expense is for your business you would probably say people or products.  But what about for you personally?  For most successful business owners, taxes are probably your biggest expense, unless you are actively planning and working to reduce or eliminate your taxes.

This is true for your income but also for your wealth as you build more valuable businesses and even if you are squirreling money away in tax deferred vehicles like 401Ks and IRAs.  As it relates to your wealth, while you may not be paying taxes  each year, you may be growing a huge future tax liability.

There are four basic ways to hold and build your wealth from a tax perspective:

  1. Cash or Cash Equivalents
  2. Taxable Investments
  3. Tax Deferred Investments
  4. Tax Free Investments

For most business owners, their business assets would fall into the Taxable Investment category.  The most underutilized strategy to hold and build wealth is as a tax free investment.

Other than for the most civic minded of you, maximizing your tax free assets makes the most sense particularly as it relates to your wealth.  I understand one of the beauties of our humanity is we don’t need to be logical, however, developing Tax Free Strategies can help you get more benefit with little extra effort from the wealth you have developed as a business owner.

Before you can benefit from Tax Free Strategies, you need to position your assets in a tax free vehicle: either a Roth 401K or a Roth IRA.  The two basic positioning strategies are Contributions and Conversions.

Contributions

On an Annual basis everyone can contribute up to $18,000 after tax dollars in a Roth 401K provided that you make at least $18,000.  Additionally for those of you over 50, you can contribute up to $24,000 after tax dollars into a Roth 401K.  Plus your employer (you if it is a single owner company) can also contribute up to 25% of your earned income each year up to a combined $53,000 combined between your contributions and your employers contributions.  There are some special calculation rules for single owner companies so your maximum number may be lower depending on how much you make.  For more information, see https://www.irs.gov/Retirement-Plans/One-Participant-401(k)-Plans

Another bonus for those of us over 50, we can contribute $6500 per year and the rest of you under 50 can contribute $5500 per year after tax dollars into a Roth IRA.  By combining these strategies over a four to five year period you can position over $100,000 to be used for your Tax Free Strategies and even more for your Tax Deferred Strategies.

If you don’t meet the income limits for direct contribution to a Roth IRA, you can contribute these amounts to a traditional IRA with after tax dollars and build up your basis in this strategy.  You can then convert your traditional IRA into a Roth IRA at a later date.

Conversions

There is currently no restriction on converting tax deferred assets into tax free assets.  The reason is that this conversion is a taxable event to the extent that your converted assets exceed your basis in the tax deferred assets.  If you have been building up tax deferred assets with after tax dollars, there is not tax on what you have contributed – only on the gains that you have made in the meantime.

Once you have your wealth positioned in a tax free basis you can start developing your Tax Free Strategies.  I understand that there are many analyses that demonstrate if you use a passive, low-yield strategy used by traditional financial services you will net out about the same amount.  But our goal as business owners is not to use Tax Free assets in passive, low-yield strategies but in finding high yield wealth and income strategies

Our next post will outline some high-yield, Tax Free Strategies.

Business for themselves

Everyone is in Business for Themselves

After Michael Corleone survived the attack on his home in The Godfather Part II movie, he explained to Tom that everyone in their business was an independent business person looking out for their own self interest which was why no one could be trusted at that moment.

The same discussion occurred when Tessio betrayed Michael instead of Clemenza – betrayal was perceived as the smart business move to outsiders who did not understand the preparation and planning that had been done to ensure strategic success for the Godfather.

In your business, you need to provide enough opportunity for your team so they are not distracted by looking for better opportunities elsewhere or by maneuvering to take your opportunities.  Your energy and focus on your strategic direction will give your team the confidence that investing time with you will provide them with long term pride and success.  People love to be part of a winner.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Click Here to Buy The Book

Consider Every Angle of Your Strategy

Consider Every Angle of Your Strategy

Consider Every Angle of Your Strategy

Michael Corleone sitting in the garden with his father planning and preparing their response to how the Five Families will come after them demonstrates how developing strategies and examining every angle is how business owners should be spending most of their time as Active Investors in their business if you want more effective long term results. You must consider every angle of your strategy.

The Godfather book discussed how Michael uses Al Neary and Rocco Lampone to develop a new grassroots organization to support the Corleone family’s move against the Five Families.  Patience and planning allow the Godfather to position his family for success.

Too often, business owners are caught up in the tyranny of the mundane and fail to give themselves the opportunity to develop strategies for their long term well being as an Active Investor.  Even if a business owner has developed a strategy, they are often not fully thought out and not implemented as effectively as they could be.  This is why you need to fully commit to convert from being an Owner-Operator to an Active Investor in your business.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Putting People First - Screen capture from The Godfather Horse Head scene.

Putting People First

Putting People First

The Godfather never asks a second favor after being denied the first time.  Wolz put his love of his accomplishments, his wealth and his horse ahead of a request from the Godfather.  Success relies on putting people first over your own self image.

On the other hand, one of the challenges for business owners is they can’t do pure power plays with their people or soon they will have no one to manage.  One of my managers came in yesterday to discuss someone that worked for him that was stating that he would be unavailable to work the schedule he had committed to – on his first week on the job.  We discussed that the appropriate response was to expect the someone to fulfill their commitment and no other action was acceptable.  Today the worker re-committed to their schedule commitments.

Like Wolz, the someone indicated they did not hold respect for their new position and may not be a long term solution for their role.  One day, like Wolz, they may wake up to an unpleasant reality – only not as messy.

As a business owner, you need to understand when people’s actions and words demonstrate a lack of loyalty and commitment to you and your business and take action once your new team is set.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Buy the Book

Business is personal image still

Your Business is Always Personal

Your Business is Always Personal

One of the most misinterpreted themes from the Godfather is when Michael tells Sonny his desire to kill Captain McCluskey and Solozzo was not personal but is strictly business.  People take that statement at face value and think they are being like the Godfather when they make an impersonal decision and hide behind it being “strictly business.”  The reality is Michael’s actions are extremely personal as he is getting revenge on those who attacked his father, endangered his family and punched him in the face.  

Your business is extremely personal to you.  Your business defines you and the impact you make in the world around you.  Build a business you and your family can be proud of.  Make decisions that will benefit you, your family and your legacy.

While every business owner starts a business with great enthusiasm, over time many business owner lose this enthusiasm because their relationship with their business has not lived up to their high expectations or they entered the business without proper planning.  Michael had to run away to Sicily for a year and have several strings pulled for him to return.  In fact he got lucky to be able to return.

The Business Godfather Treatment e-book will help you develop a healthier relationship with your business and show you how to get more out of your business and show you how to get more out of your life than you previously imagined possible.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Image still from the film the GodfatherImage still from the film the Godfather

The Business Godfather Treatment

Johnny Fontaine, the famous heartthrob singer, was considered a son by the Godfather.  As a celebrity, Johnny was treated as a conquering hero.  All the women swooned.  Johnny was considered an outrageous success by everyone in the neighborhood.  But Johnny felt like his business was falling apart and he could not tell anyone except for his trusted Godfather.

Johnny received a special audience with his Godfather because he had given up hope.  He was in despair about his career and felt he needed a lucky break or a grand slam to save himself.  He broke down in tears as his frustrations flowed out with his feelings of powerlessness.

And his Godfather did the one thing he needed.  He gave him the Godfather Treatment.

He grabbed him by the lapels. Gave him a shake. Asked him “Whassamata with you” and gave him a slap.

Because the Godfather knew, we are never powerless in the face of challenges.  Especially as a business owner.

Sometimes business owners need the same treatment from their Business Godfather.  Business owners put on a brave front to their customers, their employees and their colleagues.  But there are times when their frustration bubble over and prevent them from taking productive action.

That’s why I wrote the Business Godfather Treatment.  There are times when business owners need to be given the Business Godfather Treatment.  In the book I demonstrate how you can give yourself the Business Godfather Treatment and build more wealth for you.  The Business Godfather Treatment is available on Amazon as an e-book.  Please read it and provide a review on Amazon so I can improve the book for a second release later in the year.  Enjoy!

Buy the book here