to run my own corporation, legally.
I like this book because Garrett keeps things simple using simple real life stories and real life situations.
WHY THIS BOOK IS IMPORTANT
This book is important if you are planning on becoming rich...and especially so if you are not rich today.
As the economy changes and the gap between the rich and the rest of the world grows wider, more people will attempt to steal from the rich. This is why this book is important.
Over the years, as I grew wealthier, I was surprised to find out who my real friends were and were not. When the economy split, I was shocked to have a number of “friends” come after my wealth after they lost their wealth. This is why this book is important.
As I grew wealthier, I found that just having corporate entities was not enough for asset protection. As I grew wealthier, I had to get smarter at running my corporations as well as protecting my wealth. This is why this book is important.
As you grow wealthier, you will need to become better at maintaining your corporate veil, running your business and protecting your assets. Just having basic asset protection is not enough. The thieves of the world are getting smarter. So should you. Master how to keep your corporate veil strong, and a shield against thieves. This is why this book is important.
Robert Kiyosaki
Congratulations. By reading Run Your Own Corporation you are going to learn the strategies the rich have used to maintain and run their corporations, limited liability companies and other limited liability entities to maximum benefit.
Perhaps you have read the first book in this set, Start Your Own Corporation. In that book we illustrated the advantages and strategies for setting up a corporation, limited liability company (“LLC”) or limited partnership (“LP”). Now we are going to discuss and review the necessary steps to properly run your entity in order to achieve asset protection, tax benefits and peace of mind.
The book is set up chronologically according to the life of your entity. As we learned in Start Your Own Corporation an entity is a separate legal being chartered by a state government which provides protection for the individual. And so when we refer to ‘entity’ we mean a corporation, LLC or LP set up for limited liability protection. In some cases we use the term ‘corporation’ in a way that is applicable to all these entities. We will start with issues to consider before incorporating and then issues to deal with on your first day, first week and so on through the fifth year.
Of course, some of the issues apply from day one and throughout your entity’s duration. For example, employee issues and writing contracts apply right along. But we have chosen to include them in the fourth day and first week chapters, respectively, to even out the book. So please don’t view the chapter contents as rigid. Much of the information contained throughout the book applies throughout your entity’s existence. Or, to put it another way, you will want to read what happens at year one before your first year is up.
In the B.C. (Before Corporation) section, we include a discussion of the always important topic on choosing the right entity. If you have previously read Start Your Own Corporation or already know which entity you will use, feel free to skip over this section. (But please read the three cases as they carry through the book. What happens at the start will affect their endings.)
Running your own corporation, LLC or LP in a manner that protects you on an ongoing basis is one of the smartest (and, as you will learn, easiest) things an entrepreneur can do.
With that, let’s begin...
Control
There are many things we cannot control. Economic cycles, accidents and natural disasters, among others, are all beyond our individual grasp and control.
We also can’t control our customers and clients. Some may be dissatisfied over one matter while others will never be satisfied with anything. We must appreciate this fact as we run our business and manage our real estate.
In the face of this lack of control, we must be ever more vigilant to properly control our own entity. Choosing the right entity is a start – a foundation for growth and protection. But as Robert Kiyosaki mentioned in the Foreword, basic asset protection isn’t enough anymore. You need to take the next steps for better protection. Forming an entity is your foundation. Then you must follow the corporate formalities and tax laws. These are your building materials. You want to do it right using brick and not straw, and thus be protected. Your entity is a structure, and the more solid the foundation and building materials are, the more protection and control you will have.
Corporate Veil
You will be reading a great deal about the “corporate veil” and the piercing of a corporate veil in this book. Your corporate veil is the shield that protects your personal assets from creditor attacks. The strength of your corporate veil is determined by how well you follow the laws, regulations and requirements of your corporation. Piercing the corporate veil sounds painful, and it is! When the corporate veil is pierced, the entity’s veil of limited liability is lifted and your personal assets are exposed to a creditor’s claims.
So you want to focus on the separation between your entity and the owners of that entity, which we shall discuss throughout the book.
Know that one of the reasons to incorporate is to create that veil, so that you are not liable for the actions of the business – the debts, the mistakes and the liabilities of the corporation. The moment your corporate veil is breached, you are personally at risk.
Of course, the reason that anyone would attempt to pierce a corporate veil is because the corporation itself does not have enough assets to satisfy the claim. The creditor sees that the shareholders do have money, and seeks to get beyond the corporation to reach the individual’s personal assets. A recent study found that piercing the veil was successful 48% of the time. That is a huge success rate, and it points out that far too few entrepreneurs and investors are taking the necessary steps to protect themselves.
The advice in this book is designed so that you may set up your business (or hold your real estate or other assets) in its own entity, separate from you and avoid a piercing of the veil. Understand that we are dealing with a veil. Not a wall, not a mirror, not a net. It’s a veil – a sheer division where you can see the effect of what is happening, but you can’t actually touch it, and it can’t touch you. Unless it is pierced. Your corporation as a distinct entity is responsible for corporate duties and liabilities, and is entitled to credit and profit. If you set it up correctly, it will be a separate, compartmentalized entity, with limits and boundaries, all of which will benefit you. If not, all you have is a legal fiction. And obviously a fiction isn’t going to help you in a courtroom reality.
Taxes
Although it may not be pleasant (and certainly not riveting) you will also be reading about taxes. One of the surest ways to protect your assets and to keep your corporate veil intact