What Can We Use For A “Bank”?? Let’s look at some options
Grandma’s Feather Bed Safe: More or Less Liquid: Very ROR: Nope
Certificate of Deposit Can You Bank On It? Safe: FDIC Liquid: Penalties ROR: Small
Real Estate Money In YourWalls Safe: Less and Less Liquid: Not Very ROR: Hmm!
“Personal Bank” This type of account offers the following: Tax Deferred Growth TAX FREE income Access to the money (liquidity, use and control) Safety Unlimited Contributions (no IRS involvement) Competitive rate of return Creditor Proof Passive Income (for the Golden Years) Ease of transfer at death No Probate Earns money even when loaned…..this is HUGE! Stock Market Presentation
A product as old as dirt! InterestBearing Dividendpaying Permanent Whole life Insurance
Business Owners The banking system is wonderful for personal use, but for business owners it even gets better. Reduce taxable income Reposition money from the business to personal on a tax advantaged basis It may be better than a qualified plan i.e. IRA, 401(k), profit sharing plan and so forth. Recapturing ALL the costs and interest associated with purchases used for your business. All without dramatically changing what you normally do in business!
Business loan: Let’s look at a business loan for your business. You loan your business $100,000 at 12% interest. You are in a 35% tax bracket. This is an interest only loan for ease of illustration
LOAN REPAYMENT Business Your “Cash Cow” LLC Sub-S YOUR BANK (INSURANCE POLICY) YOUR Family LOAN $ @ 12 % Loan $ @ 6%
Tax Reduction Strategy – Interest ONLY Loan YOUR BANK (Insurance Policy) Family Bank Business LLC S-Corp $100,000 @ 12% interest = $12,000 per year in interest $12 K $6 K Schedule B $ 12,000 Investment income With IBC K – 1 is reduced by ($12,000) Increase taxes ($4200) $6,000 Interest Paid To YOUR BANK (Insurance Company) Schedule A ($6,000) interest expense Taxes reduce by ($4200) Tax Deduction ($2,100) “Opportunity Funds” $ 2,100.00 tax savings +$12,000.00 paid from LLC $14,100.00 Deposited into your bank(s) Effect on 1040 ($2100) Tax Reduction
Paying Cash Many business owners pay cash for equipment to avoid finance charges, which is the best alternative until the IBC method is understood. Question: If I was going to sell you stock in a company at $100.00 per share and then guarantee you that in 5 years it would be worth $40.00 per share, HOW MANY SHARES WOULD YOU BUY?
Paying Cash Paying cash for depreciating equipment is like buying stock that is guaranteed to go down. Not only does paying cash take away opportunity, but in addition the equipment will go down in value……guaranteed!
Your Family Bank The Alternative… BE THE BANK: Recapture the total purchase price Recapture and pay yourself the interest Deduct and depreciate the equipment Reduce your overall taxes Use the funds over and over again Redirect funds for retirement use Creditor proof your assets Be in control
Two Businesses You should be involved in TWO businesses…..
Two Businesses You should be involved in TWO businesses….. Whatever it is you do for a living….AND….
Two Businesses You should be involved in TWO businesses….. FINANCING whatever it is you do for a living!
Two Businesses You should be involved in TWO businesses….. And of two the banking is the most important to understand! “The key to wealth is the Banking business.”
Again…..Do exactly What you would normally do in the course of Business But add the twist….. this time Be the Bank!