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Lesson 3: Reduce Taxes Through Corporations

(Shortform caveat: we consider this the worst chapter in the book. He doesn’t explain the advice clearly enough to be useful. The advice doesn’t apply to most people’s situations. And taken incorrectly, it could get you into trouble.

Treat none of this as actual tax advice; seek a tax attorney for real advice, and executing some of this too liberally is illegal.)

Why Taxation is Bad

In Rich Dad, Poor Dad, Robert Kiyosaki is clearly strongly against taxation, saying things like:

• Most people work from January to May just for the government.
• The Social Security tax is an insidiously large tax, at 15% of wages.
• Originally in England/early US, taxes were only levied against the rich. They were then extended to middle and lower classes to support a growing government appetite for money, and eventually taxation disproportionately punishes the poor.
• The biggest bully isn’t your employer or your manager, but the tax man. “The tax man will always take more if you let him.”

Whatever your philosophical bent on taxation, the practical point is that the rich find ways to minimize their tax burden, sometimes paying a lower % of their income than lower tax brackets.

Forming a Corporation

Robert Kiyosaki’s solution? Form your own corporation. Here are its benefits:

Deductions for Expenses

You can pay legitimate business expenses from pre-tax money, rather than post-tax money.

Say you have a business that buys and sells real estate. To travel to see new properties, you can pay for a car. You have business dinners that you can partially expense. You can have board meetings in exotic locations you would have vacationed anyway.