Nothing says you have to build it from the ground up. Having a business—even a home-based one is key to being able to take advantage of the tax code. You have to understand that taxes were written by the rich for the rich and it’s part of how you gain wealth. I know that last part may not have made sense considering how most people feel about taxes. The reason you get hammered at tax time is because of how you make your money. You pay the most taxes as a W2 employee, because you depend on a salary gained by working in someone else’s company. I guarantee you the owner of the company and those who make their money as investors don’t pay anywhere near what you pay. You should be putting things in place that generate the monthly income you want. So if you want a raise, buy it.
Business credit is key to having access to an endless pool of money you can use to make yourself rich. But you have to be strategic about it. For this, we don’t have to reinvent the game—just copy it. You use good personal credit to get business credit then use the business credit to buy income producing assets that not only pay back the business credit but also makes you the monthly income you want. That’s the play. Now run that play again and again, rinse and repeat until you hit your goals.
The beauty of business credit vs personal credit is that your limits can be 5-10x the amount of your personal credit. It also doesn’t show on your personal consumer report unless you don’t make your monthly minimum payments. This is critical. You have to be responsible and have your business make the payments each month. Your business isn’t limited to a set number of credit cards but each new inquiry will appear on your consumer report so be strategic. Every 3 months or so, you can call and request a credit increase—preferably with just a soft pull that doesn’t trigger another inquiry. If you do this right, you can create readily available funding (personally, I call it my plastic syndicate) for your business purposes. Depending on your needs and usage, you can grow this business credit funding anywhere from $50,000 to $500,000 and beyond.
Your business starts out like a baby heavily depending on your credit to establish itself. It gets its own credit score (called a paydex score) and through use, you build up your score above 80 and future business funding won’t require a personal guarantee from you and your business then stands by itself. This means your business can borrow more credit all by itself. In this scenario even if something goes horribly wrong and your business fails, creditors can’t come after you—only the assets of the business. But that may be too much too soon. For now, focus on fixing your credit as it’s the foundation to getting access to use other people’s money (OPM) for building your wealth.
Credit is a right but the game requires you to play by a set of rules. You’ll need to master those rules if you want to change your situation. You also need to establish yourself as a limited liability company (LLC) not a sole proprietor and operate as a legit business going forward. Even a home-base business gets more deductions than you get as an individual. That means you can write off a lot more of your expenses and reclaim more of your money back at tax time. Learn to do what the IRS wants you to do. It’s the best way to build wealth since it means you get to keep more of your money.
