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corporation would not only have its own expenses to deduct but could end its fiscal year at any time during the year
so as to defer some of those tax obligations.
In addition, to increase the revenue generated from her Cash Machine, Kerry was considering adding some
product (for example, human resources training manuals) to her revenue model. The C corporation could also
manage the manufacturing, marketing, operations, fulfillment, and administration of these products.
The Importance of Entities

If you want to be a millionaire, you need to act like one. Most wealthy people I know have multiple corporations and
trusts, as well as charities: for example, the Bill and Melinda Gates Foundation. The purpose of these entities is to

1. Maximize tax strategies
2. Create liability protection
3. Ensure asset protection
4. Keep wealth accelerating through multiple streams of revenue
5. Optimize opportunities

It is imperative that you understand the available legal entities and their tax implications. By some estimates there
are 60,000 pages in the tax code, yet most CPAs in this country use only 50 to 100 of them in serving their clients.
That’s probably why on April 15, 2005, Americans overpaid billions in taxes. It is your obligation to find a CPA or
financial planner who knows how to support your plan. They exist—just ask around. Your mentors are a terrific
source for recommendations, and there are several other resources available. If you can’t find them, check the
Resources section at the back of this book. A good CPA will prove to be one of the most important members of your
wealth-building, and more important, your wealth-sustaining, team.
As we move forward to eliminate debt and build your Wealth Cycle, we are going to structure your life as if you
are already wealthy. We are creating the structure into which you will welcome your wealth. Money will not come
to chaos, so we need to build a house to welcome and protect your wealth. There are several advantages to keeping
your money in entities rather than in your personal bank account. The biggest is that you secure proper asset
protection and minimize your risk, giving yourself every opportunity to increase and sustain the asset base and, as a
result, your wealth. At the very least, you will protect your assets—the businesses, real estate, intellectual property,
and any proprietary technology, processes, services, or products you develop. In addition, you protect yourself from
personal liability, create privacy for your wealth, separate your wealth from the commotion of your personal world,
and maximize tax strategies within the legal rights prescribed in the tax code.
There are two primary tax structures under U.S. law: one for employees and one for corporations. As you know,
employees are taxed on what they earn, and usually these taxes are withheld from employees’ paychecks.
Corporations, on the other hand, manage their own taxes; this management includes deducting appropriate business
expenses. In the United States, there are a number of legal structures that may be used by individuals to hold and
protect wealth. These are separate and distinct from the taxpayers who own them, each with its own Employer
Identification Number (EIN) unrelated to any individual’s Social Security number. The legal protections, tax
implications, and personal responsibilities and liabilities differ for each of these entities. How a person structures his
or her investments and uses these vehicles can have enormous tax and legal implications.
The following is a brief explanation of entities that are commonly used by the wealthy, and which, with advice
from a lawyer or accountant, you must consider if you are going to build a Wealth Cycle. Because each state
annually changes the regulations for entity structures, the continued advice of an attorney or a CPA is important in
order to stay current. Again, take the time to find a good lawyer and a good accountant, because these people will be
an integral factor in your ability to succeed. The examples below are available in the United States, and equivalents
exist and operate similarly in many countries around the world.

C Corporations
This is a standard business corporation and represents the most typical structure for a for-profit entity that pays taxes
on the income it generates. The C refers to Subchapter C of the IRS code, under which this corporation is taxed.
When you form a C corporation, you’ve created a legal entity separate from yourself, and shareholders have no
personal liability for the corporation’s debts or actions. It acts on its own authority, it files its own taxes, and it can