Natali Morris Blog

October 16, 2015

How To Save Money On Taxes By Incorporating Your Family

There is one reason that you should at least consider incorporating your family:


In 2013, my husband and I had the rudest of awakenings with our federal tax bill: $40,007.90. To be exact.

I nearly went into labor and I was not pregnant. We had to sell off stock to pay this bill.

Then we decided to stop effing around with our tax strategy!

My husband heard a podcast featuring Tom Wheelwright, the tax advisor to the famous investor Robert Kiyosaki. He had me listen and I immediately bought Wheelwright’s book, Tax-Free Wealth. Cannot recommend this book highly enough! EYE! OPENING!!! Start with the podcast if you don’t believe me.

One of the most valuable lessons I learned was this: The tax code is written for entrepreneurs. Everyone else can bend over.

Did you know that the government takes every cent you earn from January through May each year? What you make from June-December is what you actually see in your bank account. It sucks.

For businesses, it does not work this way. Businesses are not taxed on what they make. They are taxed on what they net. To illustrate, I made the purple and red graphic below. Allow me to explain:

Corp vs Ind Tax

Why this disparity? The government wants businesses reinvesting money to grow our economy. There are big tax perks for doing so.

What do you mean by incorporating my family?   

I mean that you submit a business filing with your state as an LLC, S-Corp, C-Corp, or whichever suits your needs. This is super easy and I’ll discuss below.

Your business could be anything: selling crocheted socks on Etsy, dog walking, hair cutting, art selling, consulting, babysitting, music lessons, lap dancing… What? It’s legal. Any legal entrepreneurial corporation qualifies you for the tax rules above.

In my house, we have three corporations:

  1. Natali Morris LLC. I am a freelance broadcaster, speaker, and host. If I ask my gigs to pay me, Natali Morris the lady, not only do I miss the chance to deduct expenses, I also have to pay an extra self-employment tax of 15% of what I make. So I get paid in the LLC and pay fewer taxes on what I make.
  2. ReadQuick LLC. This is the speed reading app my husband designed, for sale now on iTunes.
  3. We also have a real estate investing LLC where we own rental properties. Our rentals are owned by the LLC for two reasons:
    • Limited liability: If something were to happen to those properties that the insurance did not cover, we are not personally responsible. We cannot lose any more than what the LLC owns. This is a safety measure as well as a tax strategy.
    • We also don’t want to pay tax on the entire rental income. We want to be able to deduct all expenses related to those properties and only pay tax on what we net.

What are the other benefits of having an LLC? 

Because we are small business owners, and because my husband and I are in business together, much of what we do is a legitimate business expense. We do not eye-wink the IRS and try to sneak past expenses. We can make a legitimate case for these expenses as business-related. I learned this from Wheelwright! The guy is genius!

This may sound unromantic, but even some of our date nights are write-offs because we legitimately talk about growing our business every time we go out. We can’t talk business in a house with a 3 and 5 year-old interrupting every half sentence. Date nights are strategy meetings. We’ve even planned family corporate retreats where we strategize next steps. We’ve made really big breakthroughs on these retreats! We recently figured out how to pay off a rental property so that it is free-and-clear based on one of these times away. It is not a gimmick. Gimmicks get you in deep doodoo with the IRS.

Also, we employ our children in our LLC. If you have not read my post about paying the children for administrative work through the LLC, which qualifies them for an IRA, please read it! This alone is another reason to consider incorporating in your house.

What if my family business doesn’t make money? 

A loss is a good thing on a tax return! You can apply that loss to other taxes that you would have otherwise had to pay as the owner of the LLC. But let’s stick to the spirit of entrepreneurship here: You eventually want to make money in your corporation! If you don’t, you raise suspicion with the IRS and could eventually lose your corporate status.

How do I incorporate then? 

You submit a business filing with your state and then apply for an Employer Identification Number (EIN) with the IRS. This takes about 10 minutes on your state’s website. If you do not want to do all of this yourself, there are services like LegalZoom and Clerky but they cost nearly twice what it would cost to do it yourself. Seriously this is easy. My 62 year-old mother-in-law did it.

Is incorporation for everyone?

No. Not everyone can be entrepreneurial and for those families, a paycheck is what they live on and that’s it. I get that. I don’t judge or disparage people with those tough choices but I will just remind you that sadly the tax code does not favor them. It’s not fair. Not by a long shot. But this is the system we play and as CHOs, we play it the best we possibly can.

What else do I need with an LLC? 

You need a bank account to deposit the money you make on behalf of the LLC. You take your incorporation paperwork to your bank to do that and then you try your damndest to pay your expenses out of that bank account. As many as you can legitimately quantify!

How you manage that money is a subject for another post. As you can imagine, I have A LOT to say about that too. Click above!

Can you stop now? You’re overwhelming me and I think I might go into labor too? 

Yes okay I’ll stop. This is a lot for a Chief Home Officer to digest, I know. But I want you to have all the information that I have to rock the system we live in.

So what are your thoughts? Questions? Concerns? I’m all ears!

And as always, click below to join my mailing list for updates!

69 responses to “How To Save Money On Taxes By Incorporating Your Family”

  1. Sami Pitts says:

    I have a sole proprietor business and I know I should move away from that like some have like becoming an LLC but can you tell me what the differences are between LLC and a Corp? Is a Corp still the better way to go? I know the up front expenses can be in the thousands for all the paperwork.

    • Natali Morris says:

      This is a tough one for me! I read the book Inc Yourself and still was a little fuzzy on why you would choose an S-Corp. This might help you a little?

      I wish I were better informed on this but sadly I must admit my limitations to you here and refer you to someone who knows the difference better. I HIGHLY recommend you listen to the podcast that I link to above though. Wheelwright talks about how most tax accountants will push back because they don’t know the tax code like an A-student. Most of them are C-students, he says. Take a listen and lmk what you think and then maybe you can find someone to give you A-student advice on type of corporation. My point here is that you should be incorporated so well done on that front!!

      • Derek Beck says:

        I can speak a little to the differences between the Sole Proprietorship, LLC, C-Corp and S-Corp. The two major considerations in play are liability and taxes.

        The first difference between the Sole Proprietorship and the LLC is that the Sole Proprietorships carry unlimited liability. If you get sued, you’ll be defending all personal assets. With and LLC, “they” can only come after the assets owned by the LLC. That same limited liability extends to C-Corps and S-Corps.

        The LLC and S-Corp share the convenience of reporting income to be taxed on your personal income tax report. C-Corps are taxed separately at the corporate tax rate, and then whatever you pay yourself is taxed at your state/federal income tax rates (basically, you get hit with double taxation, which is why C-corps don’t make a lot of sense for most entrepreneurs and small businesses).

        C-Corps and S-Corps both require certain other things to be met (like required board meetings throughout the year and other corporate paperwork to be filed…but you can read that online through SBA or get the info from your attorney(s)/accountant(s).) The HUGE benefit, tax-wise, is that C- and S-Corps allow you to pay yourself and “employees” a “reasonable income” and the rest can be distributed as a “qualified dividend” to you as, say, the sole owner with 100% equity stake in your company. Depending on your income tax bracket that could be as low as 0% and as high as, I think, 20%….But even a 20% tax rate is better than 39%. Just sayin’.

        Usually, the LLC is the most beneficial method of incorporation as it is the most tax efficient for most entrepreneurs and least costly to establish. If you’re business is making a LOT of money, it would be more beneficial to become an S-Corp because of the ability to distribute earnings as qualified dividends. S-Corps, through the ability to raise money by selling shares, distribute qualified dividends, and avoiding corporate taxation, are probably the second best method for most people, and the best method for businesses making enough money to make sense.

        C-Corps (and S-Corps) are generally more beneficial for businesses that intend to grow very large and may need to raise money through investors, and are easier to file for IPOs.

        The best thing to do is talk to your attorney and accountant to see which one is most beneficial for you.

        • nmorris says:

          This is an awesome summation!! I read the book Inc Yourself and was still foggy on all of this! I wonder, is it easy to switch from an LLC to an S Corp if, like you say, your business starts to make a lot of money? And what do you mean by “a lot of money”?

          I recently hired ProVision to do our taxes and I have a lot of questions about paying ourselves and whether or not we should issue dividends. The more you learn, the more you need to learn!!

          • Yamaris says:

            HI Natali. I really enjoyed your article. I am a CPA and agree the above explanation was excellent. It is actually fairly simple to switch from LLC to S corp. You can have the best of both worlds. Legally you remain an LLC but for tax purposes you can submit form 2553 to the IRS and elect for your LLC to be taxed as an S corp.

          • Thank you for this note! A belated thank you but thank you! I believe we did switch some of our LLCs to LLCs taxed as an S Corp. I did not do that myself! Too risky and too easy to just check the wrong box! 🙂

          • A late reply but I wanted to say thank you!! Our lawyers recently helped us with this and we were able to remain an LLC taxed as an S Corp. I’m 110% sure that if I tried to accomplish this myself I would have screwed it up royally. Thank goodness for people like you!

      • Vlarg says:

        This was a good response. There are some other minor differences that might be major for some entrepreneurs as well. One example: 50% of child care expenses being deductible if you are a C-Corp (last I checked, always do the proper research first!).

        One significance of the pass-through entities (LLC and S-Corp) vs non-pass through (C-Corp) that very very few attorneys or tax advisers will mention. Often, you’ll want to reinvest a large portion (or even all!) of the profit back into the company for growth. These reinvested profits don’t always show as an expense. Maybe you need to save up over a year or two for a big expense or investment, or you are purchasing inventory which isn’t an expense until it’s sold, etc.. A HUGE problem can occur if you personally are required to make payments based on a percentage of your gross income with the pass-through entities. Think school loan repayments, child support payments, alimony, etc…

  2. Brian C says:

    So if I am employed by a company and then I tell them I am now an LLC, how do they pay me, give me benefits, etc? This approach only works for people who are otherwise independent contractors, right?

    • Natali Morris says:

      Exactly Brian, this won’t work for full-time employees of a company. This is for a business you run out of your home. If you are a full-time/paycheck employee, you can’t be paid as an LLC. If you are an independent contractor, however, you can.

  3. Brent Ward says:


    I’m a good ol corporate twice a month paycheck kind of guy, but my wife is self employed. We’ve kind of been winging it these last few months just getting things stabilized and consistent with how the money is flowing in, but I’m trying to figure out how to run kind of a hybrid house. TBH, her earning potential over time I think is probably greater than mine, and I don’t want to see $$$ wasted that could have been saved or used to benefit us. Technically, I’m working with her to help with admin type stuff, where all of this kind of stuff falls…I just feel lost.

    • Natali Morris says:

      Do you have any kind of incorporation? If she is self employed she definitely should incorporate! If you are helping her out, you can be a co-owner of her business and follow similar rules above.

  4. Jen Grimes says:

    Natali, thanks for posting this! I think this totally applies to Doug and I. I am going to look into this because it seems like a smart move for our family. Thanks for doing your homework on this and sharing.

  5. Linh says:

    Isn’t there a danger in continually reporting losses, though?

    • Natali Morris says:

      Oh big time! You don’t want to always report a loss. An expert on my Facebook page pointed out that continued losses will trigger the IRS to audit you and they will ask for a business plan. If you don’t have one, they’ll call your business a hobby and ask for back taxes. Best to take this seriously!

  6. A Lopez says:

    So you have income property both in the LLC and your IRA? How do you determine which goes where? I’m confused by this part of the financial strategy. Seems like the benefits of the LLC are missing in the self directed IRA owned property.
    Thanks for the awesome info.

    • Natali Morris says:

      Good catch! You’re really paying attention! We do have property in the LLC and in the IRA. The protective benefits of the LLC are definitely missing inside the IRA but the profits don’t need tax protection because they are Roth accounts.

      As far as which goes which, we just choose based on what we can afford in each account. If we find a good deal and have some room the IRA, we purchase there. If we have some funds in the LLC, we purchase there.

      Thanks for asking!

  7. Kyle says:

    It should be added that can you only do this if you Freelance. You can’t do this if you are an employee of a company.

  8. Jan says:

    More accurately, you want to be taxed like a partnership or sole proprietorship, not like a corporation.

    Converting personal events into "business" events will be easy targets in an audit. It might be best at least to have some "date nights" that are not deducted – or only deduct part of each. If the IRS can argue an expense is personal, they will — and a fight with the IRS may be a loss even if it ends up a win.

  9. Rob Red says:


    An LLC provides no tax benefit (or detriment), only a liability benefit. An individual can still expense the costs of income property against the rents received on a Schd E. Some states do charge a franchise tax on LLC’s (California for one).

    An S corp can relieve some tax burden but you are required to pay yourself a reasonable wage which is subject to medicare, social security etc.

    A ‘C’ corp has the benefit/detriment of income splitting so if the profits are split, the corp pays tax on some and the shareholders pay some – it’s double taxation but if it’s done well each entity is in a lower tax bracket.

  10. Jan says:

    The tax benefit of an LLC is that it is taxed as a partnership/sole propietorship – and has the limited liability of a corporation. Same for LLPs.

  11. T DC says:

    Wow, This is some Great info. As your own Dad, I thought I had most of the answers.
    I need to engage more of these strategy sessions, or at least document them & get reimbursed!

  12. Marc says:

    My wife has a construction business that she runs out of our home and I am an employee of a consulting firm. Can we write off the mortgage and utilities or just the "office space?"

    • Natali Morris says:

      Some utilities count such as house cleaning, phone, and broadband. Heating and cooling can count partially. You have to be careful about mixing them up. The mortgage doesn’t count BUT you can pay yourself rent out of the business account and write off that rent payment! It has to be the standard office space rent rate but it counts!

      • Marie says:

        Hey Natali

        My partner and I are both freelancers (filing separately) and are thinking about creating 2 LLCs for our separate incomes. My question is, how do you handle family expenses. Do you have a third LLC for the family? Do we each contribute a certain amount from our separate LLCs (i.e. Biz bank accounts) to the personal joint family account and try to incur any expenses in either of our business accounts/LLCs OR do we form a third LLC for the family and contribute money into that and incur expenses under that company. We could probably figure out a way to generate some income for the “family” LLC. Thanks for any insight!

  13. Marie says:

    Oh, forgot to ask: what’s a good resource for figuring out what can be deducted and what cannot?

  14. […] money into the HELOC. ALL OF IT! Pay all of your family’s expenses out of the HELOC – the ones you cannot pay out of your small business, that is. The key is to spend LESS than you MAKE. The leftover money will build back up the HELOC until you […]

  15. Cathy says:

    Thank you for writing this. You are easier to understand for one with a total lack of business sense! Both my husband and I have full time work with employers. We want to rent out our “mother-in-law” section of our house that is attached but private. I am wondering if we are eligible to incorporate and if so which would be the best, LLC, S Corp, or something else I’m not aware of. The reasons would be the tax benefits but also a way to protect our personal assets. Thanks for any advise!

    • nmorris says:

      Yes! If you rent out part of your home, you have an investment business. I’m not sure if an S-Corp or LLC would be better. I’m thinking LLC but there are better minds than mine for discerning which is which. Nevertheless, there are expenses associated with that rental: insurance, utilities, management, etc. Those can ABSOLUTELY come from a real estate investment company that you own!

  16. […] want to pay individual income taxes on that money as a salary from the LLC. Also, we want to funnel our family expenses through the business to maximize tax savings. You do have to take a regular salary from the business, however, or the IRS will call foul on your […]

  17. PeaceWon says:

    Honestly, I am looking to turn an extended family into a corp/ LLC / business or what have you. We do have self employed, artists and part time freelance workers. Some of us do have regular jobs as well as our start up work. It is more or less to make sure all parties have access to all the financial tools needed. We are even thinking of getting a major joint residence and want joint ownership. Does an LLC help in this type of situation? We want to do this in order to pool resources and increase financial power, as well as get the tax benefits and breaks needed for freelancers to grow? We actually have a business plan!! There would be four adults, or three households converging. this is so tricky. Sounds more like an online guild doesn’t it? hahaha but I really feel like we need some direction legally to expand to. I worry that since we all kind of have our little niches it is too scattered or chaotic. But we can market it more like a hostel / artisian enclave and really cover all the things we do. Just not too sure how it all works out since we want ONE head or one umbrella for all of this.

  18. Sheena says:

    This is such great info! Thank you so much for sharing your knowledge! I plan to buy my first investment property soon, should I get an LLC prior to purchase or can I purchase in my name and get an LLC later?

  19. Federico says:

    Thanks Natali for all the information, also to “Listen Money Matters” as I know you through that podcast. Get to the point I am planning to create an LLC in CA with my wife. So from the pure taxation point of view:

    1) A husband and wife owning an LLC may elect to be treated as a partnership or a disregarded entity. Which one is better?
    2) Should I Elect to Have My LLC Taxed as a Corporation?

    Thanks in advance!

    • nmorris says:

      Federico, do you see this comment from Derek? He’s spot on about your question. As for husband/wife ownership, I’m not sure what you mean by a disregarded entity. May be above my pay grade? As for electing to have your LLC taxed as a corporation, can you clarify that question too?

  20. Derek Beck says:

    Great info Natali!

    I am FINALLY wrapping up my business degree in Entrepreneurship and Business Management as I am just 25 days from retiring from the Navy (it is really, really difficult to finish a college education when you deploy a lot LOL), and I only just realized all of this info just a few weeks ago. It was like a huge light bulb turning on. The clouds parted, the sun came out, birds started chirping, music was playing…You get the hint. Anyway, I suddenly realized how people like Warren Buffet are getting away with paying an overall tax rate of just 17%.

    The only thing I would recommend for anybody looking at doing this is to take a business/entrepreneurship course (or multiple courses) through a local community college or Small Business Development Center (SBDC). They are usually free courses. The reason I recommend this is because, like you and some of your readers have pointed out, you have to run it all like a legitimate, profit-seeking business. Otherwise the IRS will not be happy and it will all backfire as a scheme devised just to avoid paying taxes.

    On another personal finance topic, have you heard of or given any thought to personal banking? I’m not sure if that’s the most correct term, but the idea is to borrow from yourself, and then pay yourself back at a an interest rate acceptable to you on an amortization schedule. It takes discipline, but if taken seriously it can be pretty awesome.

    • nmorris says:

      Hi Derek, congratulations on graduation! Amazing!

      As for personal banking, I have actually interviewed a few banks that do this but I’m still a little unclear on the whole thing. I heard a guy on a podcast and thought it sounded neat but I’m still a little weary. Maybe I can find a book to explain it to me! I did not take small business courses. I’m a DIY with a library card! 🙂

  21. Matthew Taggett says:

    I’ve noticed several comments pointing towards the idea that wage-earners need not apply, and others that state that wage-earners could take part in this as well should they have a side job as well.

    The question is this; since the company will invariably require an investment from someone in order to establish capital to operate, wouldn’t a wage-earner be eligible to invest at their own discretion in their own business? Would the investor/wage-earner be able to deduct this from their own taxes if the company is incapable of turning a profit in the first year or two?

    This may seem obvious to most, but I’m just getting my feet wet to this concept.

    • nmorris says:

      Matthew, what you are asking about is called “contributed capital,” or money that someone contributes to a new business. You should ask a tax accountant about this because I was just having this talk with my father, a successful small business owner, and he insists that contributed capital is not a deductible expense. I’m not clear on why. I just hired ProVision to take over our tax planning and this is something I will be asking them about when we meet next week. I’m not sure I answered your question at all but this is what I know…

  22. Hailey says:

    I was wondering if you currently already have a business, an LLC that my husband and I both run, does funneling our personal expenses apply to what you are saying? Or do we create a completely separate LLC for this?

    • nmorris says:

      Yes Hailey, that is exactly it! You funnel expenses through your current LLC. You can’t create a new one just for expenses because it won’t qualify as a legitimate business. The point is to legitimately live your expenses through your business. Make sense?

  23. Laura says:


    My husband and I already own a rental property. Are we able to transfer it to an LLC created for real estate investing? I’m not sure what the next step is if we already own property in our own names.


    • nmorris says:

      Yes Laura you can. You ask a title company to do what is called a Quit Claim where you quit your personal claim on the property in your own name and transfer it to your LLC. I have done this and it cost about $100. It’s a pretty simple process actually if you have a good title person.

  24. Annie says:

    Thanks for your post, though I’m a bit confused. You say as an individual, you can’t deduct expenses? If you are filing as sole proprietor of a business, you can absolutely deduct your expenses. Just trying to understand your post and the benefits of possibly incorporating!

    • You’re right, that is a bit confusing. Let me clarify. As a corporation, you deduct expenses and are taxed on what is left over. As an individual, you can deduct expenses but you are still taxed on the full amount of what you made. It has to do with how much money you are taxed ON and what tax rate you are taxed AT. Make sense?

  25. RJ says:

    Great post. I have been in the same boat as you for several years. I work on a low base, high commission role, and come tax time, I am forking over 30-40k besides the $ the IRS already took from my paycheck. So basically, I am trying to think outside the box.

    I am a full time W2 guy and my wife is a stay at home mom. We plan to buy our first real estate rental property.

    Should we incorporate a company under both of our names?
    How do you buy RE under an LLC when you are personally co-signing on the loan?

    Since we only plan to have 1-2 rental properties in a year, does it make sense for my wife to get a RE Professional status or is that something we should do in the future?

    Thanks for your time!

    • Thanks RJ! I would incorporate in both of your names, yes. As for the loan, it depends on the type of loan. Some lenders require that you buy in an LLC but major banks might not allow it. That is why we look for lenders that focus on real estate. The interest rates are a bit higher but the products favor investors in other ways. Have you considered private money?

      As for becoming a real estate professional, I have my license and it hasn’t really proven to be much of an advantage as an investor but you do learn a lot in real estate school and I’m glad I went. I’m not sure that answers your questions?

  26. Jorge says:

    We have purchased our first investment property and looking to buy the second one. However, we are unsure about starting to use a LLC or to use a liability insurance. Do you have any thoughts on this?


  27. Jo says:

    Natali, Great article! So well written and you REALLY know your stuff! I filed a Single member LLC last year (woohoo!). Is that different than LLC that you’re talking about?

    Also, do you have the link to the podcast? The link I clicked on went to another page but i can’t find the podcast. Thanks so much!

    • Jo, I would read a book called Inc Yourself as well as Tom Wheelwright’s book Tax-Free Wealth. It explains the different types of incorporation far better than I can! As for the podcast, try this:

      That may or may not be the episode I was referring to here but we have interviewed Tom Wheelwright tons on our podcast. You can seek those out too! Thanks!

  28. Jo says:

    I also wanted to ask… if we are not married yet, would you still recommend incorporating and hiring family members?

  29. Bronson says:

    Aloha! I have been reading so many of your posts and have built up the courage to contact you! I am so new to “starting a business” it is quite overwhelming, but am willing to learn. Reading many of your posts has already been so helpful! I am a sole proprietor with a General Excise Tax License with the State of Hawaii. Is this tax license enough for tax purposes? Next year will be my first time filing taxes with no W2s from any employers, just myself! I am starting my own small construction business, but honestly do not the know where to begin. I am starting completely with $0. I have no investors in my company and everything I am paying for now is strictly coming out of my personal savings which I hope to change soon! My tax guy told me to just keep receipts of all jobs that I bill clients for and keep all receipts for every expense (tools, materials, gas, etc) which is what I have been doing… but I am wondering, when tax time comes around next year, will I get the most out of it? In fact, HOW do I get the most out of it? I know its more than just reporting income and reporting expenses!? I printed the disbursement calculator you had posted, with the 4 bank accounts. I am going to give this a shot, its easy for me to understand. I am looking at hopefully making (profit?) at least $25,000 – $30,000 in 2017 for starting out so fresh on my own! Can the owner’s pay account and profit account be the same account? What do you recommend for someone starting completely fresh, clueless, and blind to the small business world???

    • Aloha Bronson! Thank you for this note! Good luck with the new business! So great!

      Okay a few things I want to make sure I respond to: Make sure your accountant understands the difference of being taxed as a corporation and being taxed as a person. Make sure he will get you to the lowest tax rate based on these expenses. That is important.

      And as for using the profit account as your owner pay account, NO! You can’t do that. You have to put your pay in an account that is in your name only. All the business money has to go in an account that is in the business name with the business EIN. If you mix that up, it is co-mingling and a very expensive mistake if you are caught. This is because you cannot spend money that you have not reported on your personal taxes. The government wants to be able to tax it all at the appropriate rate. Does that make sense?

      Thank you for writing and good luck!!!

  30. Great article and blog! It’s awesome to see that you are still responding to it years later!

    I am a freelance web designer in CA, and I’ve been considering forming an LLC to handle income from my clients – but I also have Stock market investment income and I’m about to branch into Real Estate rental investments.

    My question is: Should I use one single LLC to manage my Web, Investing, and Rental endeavors? I realize a lawyer would best be suited to help set me up, but you seem to have a similar lifestyle and I’d love to hear any advice or suggestions!

    • Well you’re right, I’m not a lawyer but what I have learned in my own experience is that separate LLCs are better for each endeavor. Your LLCs that own real estate will be liable to their own risks and so will your Web business. You want to keep those things separate for several reasons: risk, write offs, expenses allocated to each, etc. I hope that helps! Good luck with all! Thanks for the comment!

  31. Rich Rolyn says:

    Great blog. Very helpful and informative!
    Quick question:
    Do you remember the exact title of the podcast you referred to above?

  32. Jo says:

    Hi Natali, this is really great info for starting an LLC. Do you use your address or a registered agent, or a friend’s address for the LLC? Don’t know if I should pay a registered agent or use my home address? I can’t use my employer’s address, I already asked them. Thanks.

  33. Q says:

    Great info!

    You stated that when filing taxes they’re going to tax you on the money that is left over from expenses. So does this mean you only report the net? or the whole amount?

    • This is actually something my accountant does so I’m not sure how it is represented on the tax return but it is my assumption that we report the gross amount because we have 1099s from the companies we made the money from. Then you have to account for expenses and be ready and willing to prove them all if needed.

      • ChadH says:

        If you did your own taxes you would see that you can deduct all expenses per rental property from revenue and pay taxes only on net income/profit. Same is true for self employment. The diagram showing that an individual is taxed on earnings regardless of expenses vs a corp being taxed after expenses is misleading. It is really employee income vs non-employee income. Incorporation does make it easier to expand some expenses from partial to full. For example, if you personally buy a car you can track percent business usage and deduct that portion, but if the corp buys it and provides for the employee to use for business purposes then it’s easier to “ignore” the personal use tax that you should be paying and just take the 100% expense on the corp side. Kiyosaki’s main point in Rich Dad Poor Dad is simply that it is better to be self employed than to just get a job working for someone else. Real estate is the easiest way to do that because it doesn’t require any special skill and it doesn’t matter that someone “already thought of it”.

        • Yes but you pay a self employment tax in addition to all of these points. Have you read Tax-Free Wealth? My points here are from Tom Wheelwright. May be better to parse out his points? My goal here was a simplistic overview of the favorability of corporate taxes vs individual taxes. Thanks for your feedback though!!

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