How to Hide Business Profits and Avoid Paying Taxes (Legally)
Attention entrepreneurs. Today, I’m going to teach you how to hide business profits and avoid paying taxes! If they find me dead, it’ll be because of this video. I’m also going to show you exactly how multi-million and billion dollar companies are able to make these insane amounts of money and pay little to no taxes. Stay where you are because the information I’m about to reveal could impact your future.
You are now tuned in to leonard innovation, where the focus is on entrepreneurs who don’t come from wealth, but have the potential to be great. My name is Justin Leonard. Before we begin, let me give you an interesting fact: In the United States, Bimbo Bakeries USA is currently the largest bread maker. Bimbo is actually the American arm of the Mexican owned manufacturer, Grupo Bimbo. Some of their popular brands include Thomas, Entenmanns, Lenders, Oroweat, and Sara Lee… Now, back to today’s topic… on how to hide business profits and avoid paying taxes to the IRS. And there is one thing I forgot to mention: every strategy I’m going to teach you today… is legal. If you’re like me, you might have experienced a tax bill nightmare because you didn’t know what you were doing in your first few years of business. Or maybe you are getting ready to inherit a lot of money, and you’re wondering how to hide it from the IRS and avoid paying taxes... I’ll start with the basic strategy. At the end of the year, you only want to break even or have a small profit. If there’s too much profit, you will owe more in taxes. So, we want our profit to be the smallest number possible. How do you do it? Right now, I’m going to show you seven ways to hide business profits and avoid paying taxes. Let’s look at strategy number one:
The first thing you can do is pay yourself a bonus. You can also pay any employees a bonus. And it should be noted that pretty much all of the strategies I touch on today will require some level of input from a CPA. So, with this strategy, the company was profitable, but there was enough profit to share. In this case, you can pay a bonus to yourself or employees for a job well done.
The second thing you can do to hide business profits and avoid paying taxes is donate money to a good cause. This will lower your tax burden. I should note that the tax deduction only works if the organization is a registered non-profit. If it’s not a 501c, then your contribution basically gets classified as an advertising expense. Now, the interesting thing is a non-profit donation can sometimes have the effect of generating even more money; as if it were an advertisement. You will sometimes see this when a non-profit organization promotes you in some way, after a donation has been made. This might be through advertisements, maybe newsletters, and sometimes even naming a building or event after the donor.
Another way to hide business profits and avoid paying taxes, legally, is to buy something toward the end of the year. Yes, you basically get to go shopping. But, you are going to shop only for things you need, that will ultimately help the business grow. So, you would buy things like equipment. You can buy vehicles. New machinery. You can fix or upgrade things. You can spend money on advertising. And again, you want to do this before the end of the year. Ironically, when you have excess profit, one solution to the problem is to take on debt. This is why business owners should never listen to the book authors who teach you that debt is bad. That advice is for ordinary people and not business owners. In fact, whenever you make a purchase on behalf of a business, you are going into debt. But the debt ends up being used for leverage and growing the business. By the way, the list of things you can do with excess profit is astronomical… Did you know that a business can have a brokerage account? Did you know they can buy things like bonds or even real estate? Talk to your CPA.
The fourth strategy you can use to hide business profits and avoid a big tax bill is to pay down inevitable expenditures in advance. For certain expenses, you might even be able to pay them off. So, again, if the business did great, you would have a lot of profit. You speak to your CPA. And they say, you are projected to have 60K in profit by December 31st. But we don’t want to pay taxes on 60K. It’s too much. Well, what you can do is pay rent in advance, if you can. Maybe pay your cell phone bill in advance. Maybe pay for leased vehicles in advance. So, you can pay for future expenses to eliminate taxes. And what it does is get rid of the money for that tax year, which is going to lower, or maybe even eliminate, what you would otherwise have to pay to the IRS.
Strategy number five is to put excess profits into a retirement account. This is going to be related to strategy number one, paying yourself a bonus. But it’s quite different because a regular bonus is going to have taxes come out as if it were payroll. In comparison, when you put money into your retirement account, there is no tax. The caveat is you can’t really touch it until what is considered retirement age or your late fifties. But it is possible that the profits… from the business, into your retirement account, can make you a millionaire before age 60, because of compounding interest. Directing business profits into a retirement account is a Justin Leonard approved investment strategy.
Once again, we are working our way through How to Hide Business Profits and Avoid Paying Taxes… legally of course. And strategy number six is to check to see if you have obsolete, stale, defective, or damaged inventory. Many businesses will occasionally encounter items that can’t be sold for various reasons related to quality. If you have unsellable inventory, determine the monetary value of the loss and inform your CPA. This will reduce your tax burden. In some cases, there are new trends. And what was in style five years ago is no longer in style. So, these can actually be written off on taxes. In some cases, the inventory can be donated to charity, used for parts, or destroyed.
Strategy number seven affects businesses who deal in inventory: retailers. And to lower your tax burden, you want to eliminate as much inventory as possible. One way to do this is to have a sale. Some of you have already seen the video I did on why there is no such thing as a holiday sale. The markdowns you see around November or December have more to do with the U.S. tax code. The IRS treats excess inventory as money in the bank that has yet to be realized. So, to avoid paying taxes, we need to get rid of excess inventory… by having a sale. And much of the inventory needs to be liquidated before the year ends. Now, once the sale has completed, we essentially traded physical goods for dollars, and we probably still made a profit. So, what happens with the new infusion of cash? Well, you can now do any of the strategies I discussed earlier. The best option I think is to strategically take on debt by buying new inventory… and we want that expense to take place in the current year that is ending. And we don’t want to take possession of any new goods until the following year.
We have reached the end. I have given you seven strategies for how to Hide Business Profits and Avoid Paying Taxes the Legal way. Once again, here are the seven ways: Number one is bonuses. Number two is donations. Number three is to go shopping, just before the year ends. Number four is to pay down inevitable expenses in advance. Number five is to make a contribution into a retirement account. And there are limits on how much you can contribute. So, talk to your CPA. Number six is to write off unsellable inventory. And number seven is to have a sale to get rid of excess inventory. Then use those proceeds to invest in things that are going to be needed the following year… And I’ll leave you with an additional word of wisdom: One huge mistake that business owners make is incurring huge sums of money right before the end of the year. If you come into a large amount of cash in December, and you have a plan to invest it in such a way that it lowers your tax burden, then you’re good. But generally speaking, you don’t want to do any big money deals at the end of the year because it’s difficult to get rid of large sums of money by December 31st. You are working against the clock. If you inherit four hundred thousand dollars, for example, in December, you will incur a massive tax bill, assuming you did nothing with the money before December 31st. But if we delay the transaction and take the money at the beginning of the year, it’s easier to plan and make prudent investments so that we end the year showing minimal profit… Lastly, if you enjoyed this presentation, the next one will be even better. And for more high value content, leonard innovation dot com is the place for free entrepreneur resources like the 90-day online launch guide, free online courses, and more. To learn how to start or grow your business, visit leonard innovation dot com today. And you can now find the audio version of leonard innovation streaming on podcast services like pandora, AMAZON music, audible, google, apple, and spotify. And if you found this information helpful, please share it with a friend. Thanks again for tuning in.