Start Your Own Corporation. Garrett Sutton

ones who failed?” I asked.

      “Yes, the ones who failed,” said rich dad. “In school they teach you about the successful explorers or the famous explorers. There were many more explorers who were not successful and not famous whom we have never heard about, nor will we ever hear about them.”

      “Why is studying about the explorers who failed so important?” I asked.

      “Because you need to know how the owners and the investors in those failed voyages protected themselves against the repercussions from such failures,” said rich dad.

      “Repercussions?” I asked. “What kind of repercussions?”

      “Such things as the loss of life,” said rich dad. “The owners and investors wanted to protect themselves and their fortunes from the families of the explorer and his crew in the event there was a loss of life on the voyage.”

      “You mean the men on the ship risked and sometimes lost their lives, and all the owners and investors on land wanted to do was protect themselves from losing money? That’s one of the repercussions you’re talking about?”

      Rich dad nodded his head. He then began to tell me about the Dutch East India Company and the British East India Company, two of the more powerful and famous corporations behind some of those explorers. Some of these corporations even had their own navy and army to control access to their nation’s overseas wealth. He told me how these corporations in many ways took over whole countries, such as New Zealand, Hawaii, Australia, Malaysia, Indonesia, South Africa, and other parts of the world. One of those countries was one day to become the United States of America. Rich dad pointed out to me that the flag of the United States was originally the flag of the British East India Company, reportedly modified by Betsy Ross. While England may have lost control over its colonies, the British East India Company simply changed its name—a simple d.b.a.—and kept on trading.

      The more rich dad told me about the corporations behind these great explorers and how they shaped world history, the more interested I became in global business and doing business through a corporation. When I was sixteen, I began applying for a congressional appointment to the U.S. Merchant Marine Academy, the federal military school that trains young men to sail ships of the merchant marine. Kings Point, which the school is also known as, continues to train young people to replace the great seafaring explorers. Only two students from Hawaii are admitted to this little known federal academy each year, so I felt fortunate to be accepted after passing rigorous exams and interviews. At age eighteen, I began sailing as a student onboard ships carrying cargo along the same trade routes established by Ferdinand Magellan and Captain James Cook. I quickly realized that although the early explorers are gone, some of those corporations rich dad talked about still exist today, and the U.S. government funds the education of these corporations’ leaders. I began to understand why rich dad told me years ago, “Don’t just study the explorer and his ships, study the power of the corporations behind the explorer and his ships.”

      747 Replaces Cargo Ships

      Today I travel by 747 rather than by cargo ship. Although my mode of transportation has changed, I have heeded rich dad’s advice and learned my lessons well. Today I travel as a representative of several corporations—the difference is that I control those corporations rather than simply work for them.

      As I stated in Rich Dad Poor Dad, my poor dad thought it was a good idea to be a good employee and climb the corporate ladder, while my rich dad said, “Don’t climb the corporate ladder, why not own the corporate ladder?” Rich dad also said, “The problem with climbing the corporate ladder is that when you look up, you see somebody’s big fat butt above you.” On a more serious note, he said, “The two main reasons you need to Start Your Own Corporation are for protection against lawsuits and against excessive taxes, yet there are many other reasons and other strategies. The point is, if you are serious about being rich and keeping your wealth, understanding corporations and other legal structures is an important part of your ongoing financial education.”

      Introducing Garrett Sutton

      I am pleased to introduce Garrett Sutton to you. Often in my classes, students ask me questions about corporations and legal structures. My standard reply is, “I did not go to law school and I am not an attorney, so I do not give advice on that subject. I suggest you do as I do: Find a good attorney and use him or her as your advisor on this very important subject.” I am pleased to introduce to you my advisor in these matters, Garrett Sutton. He is a pleasure to work with, and he is more than a great advisor, he is a great teacher. As rich dad said to me years ago, “If you are serious about being rich and keeping your wealth, understanding corporations and other legal structures is an important part of your ongoing financial education.”

Introduction

      Congratulations. You are about to undertake a powerful and enlightening journey. By reading this book you will learn quickly and easily the legal secrets and strategies that the rich have used to run their businesses, hold their real estate and protect their assets. In short order you will clearly understand exactly how certain entities—corporations, limited liability companies, and limited partnerships—can not only save you thousands and thousands of dollars in taxes but can also save your house and savings and family assets from the attacks of creditors. And because real estate is an important component of your wealth strategy we have included information on using good entities to protect your real estate holdings from attack.

      These are the same lessons that Robert Kiyosaki’s rich dad taught him. Own nothing and control everything. Use the techniques of the rich to improve your financial standing and protect your family. And above all, work smarter instead of harder.

      This is the third edition of this book, and we have changed the title from “Own Your Own Corporation” to “Start Your Own Corporation.” In discussions with readers there is a great deal of interest in knowing what to do once your entity is formed. To that end, a companion book to this one will be available entitled “Run Your Own Corporation.” As well, we have updated “Start Your Own Corporation” to include new strategies for maximum results.

      As such, by the time you finish this book you will have the legal savvy of an experienced entrepreneur and the knowledge necessary to immediately implement your own custom legal strategy.

      Let’s begin…

Chapter One

       Your Entity Menu

      Welcome to the world of asset protection and entity formation. As you gain knowledge of the strategies and advantages (and you will, in this book) you will come to appreciate your six main menu choices:

       • C corporation

       • S corporation

       • Limited Liability Company (LLC)

       • Limited Partnership (LP)

       • General Partnership

       • Sole Proprietorship

      As legal business systems and traditions have developed over the last five hundred years, several structures for running a business have evolved. Each structure or entity, has its own benefits and drawbacks, which we will explore.

      First off: What does the word ‘entity’ mean? It refers to an organization (be it a business or governmental unit) which has a legal identity separate from its members. It is derived from the Latin word ‘ens,’ meaning an existing or real thing. So an entity is a real thing, distinguishable and apart from its owners. (Two of the six choices aren’t really real things, which, as you will learn, is not a good thing.)

      As a frame