Reflection 4: Chapter 4

RICH DAD POOR DAD FOR TEENS

The Secrets About Money - That You Don't Learn in School
Chapter 4: The History of Taxes and the Power of Corporations
In this chapter, Kiyosaki explains how the rich employ big corporations to protect and
increase their holdings, while the poor allow giant corporations to manipulate them. For
example, the wealthy have the advantage of using corporations to produce money, spend it all,
and only be taxed on the remainder. The author also suggests that people improve their financial
IQ by learning about investment, accounting, legal, and market analysis.
It's vital to remember that Kiyosaki authored Rich Dad Poor Dad as a motivating book,
not to provide expert financial or tax advice, when reading this chapter. For example, Kiyosaki
describes how he purchased a Porsche as a company expense and paid for it with pre-tax cash.
Purchasing a high-end luxury car when a much less expensive make and model will do could
lead to an IRS audit. But, ignoring the Porsche, the suggestions given in this chapter outline how
to play the investing game wisely. The wealthy are well aware of the power of corporate
structures and the tax system, and they employ every legal tools at their disposal to reduce their
tax burden.
Compare how most people pay taxes to how company owners and investors with
corporations such as C Corps, S Corps, or LLCs pay taxes:
Corporate-structured business owners:
1. Earn
2. Spend
3. Taxes must be paid.
4. Employees who work for businesses include:
5. Earn
6. Taxes must be paid.
7. Spend
Employees who work for someone else spend their money after taxes, whereas business
owners earn and spend money before taxes. Accounting, Investment Strategy, Market Law, and
Law are all covered in Chapter 4 of the book, which Kiyosaki refers to as his "Financial IQ."
Understanding the legal and tax advantages can help you generate long-term wealth, as
Rich Dad Poor Dad points out:
"For example, a business can pay expenses before paying taxes, whereas an employee is
taxed first and must try to cover expenses with the remaining funds”. Corporations also provide
legal defense in the event of a legal action. When someone sues a wealthy person, they are
frequently greeted with layers of legal defenses, and they frequently discover that the affluent
person owns nothing [in their own name]. They have complete power over everything, but they
have no personal assets."