Throughout the past couple weeks I have been blogging to all of you my viewers on the importance of financial literacy. Now with the foundation I have provided for you, we are able to take it to the next step. What do you really need to know when starting a business? Well first you need to decided what type of business you would like to run here are the following types:
Sole Proprietorship : This form of business is usually deemed the "simplest form." Having a sole proprietorship is saying that you and the buisness are one of the same entity, meaning that all your personal assets and or liabilities are all of the same with the business. There are no legal distinctions between the two. If the owner dies, so does the business with them.
General Partnership: This form of business is usually two or more parties creating a buisness in order to generate profit. You can have a silent partner of the business of which they are usually just a cash flow, or a general partner which would share the liabilities and assets with you as a whole. Like a sole proprietorship both partners in a partnership are one with the business there is no legal distinction. When one of the partners die, so does the business.
Corporation: A corporation is different from both sole proprietorship and general partnership, because a corporation is a seperate legal entitity , it is a business made up of shareholders. Having an incorperated business would mean that your personal assets and liabilities are none of the same with your business. A corporation has unlimited life, and its own assets. If the company were to be sued , you yourself would not be personally liable but the company as a whole.
A corportaion is usually broken down into two types of stocks:
Common Stocks: Investment into a company with voting rights in relation to the board of directors
Preferred Stocks: Investment into a company with no voting rights , most have divedend rates while common stocks do not.
I would like to leave you all with the idea of how can you generate income for your business? Once you have decided what and how your going to create your business, the next step is always the cash flow, think of some ways you can generate cash flow for your business.
Showing posts with label 90/10. Show all posts
Showing posts with label 90/10. Show all posts
Friday, March 1, 2013
Monday, February 18, 2013
90/10
I would like to start off this post with a blank Income Statement and Balance Sheet.
(This image was taken from Rich Dad's Poor Dad's Guide to Investing by Robert. T Kioysaki)
The 90/10 rule is " 10 percent of the investors makes 90 percent of the money."(Kiyosaki,2013)
This concept is extremely important, because there is no wrong answer. It takes a lot of education and experience in becomming a investor, but it is the way an investor thinks that will differ oneself from being part of that 10 percent who makes all the money. The trick of investing is not luck, you may find a lucky investment once, but how will you keep it a float? Investing is all about creating an investment from something, another investor cannot see.
Let me give you an example: For many people building their own business is a dream, so we will use that concept. Your business you've created it, you never purchased your business it was your own idea that you put together and turned into an Asset. Your buisness now , whatever it may be has bloomed off, not enough to make you rich but enough to keep you comfortable. (As a side note, please remember the difference between Secure, Rich and Comfortable, and why it is important to set yourself up for all three plans.) This business is now generating an income, you have done what is needed to do, you have hired trusting employee's so the business does not demand so much of your Time another valuable asset. Now that your busines is creating an income it is paying off yourself while putting money in your income statement. Asset--> Income . Now with the business generating enough excess cash, you have done some research on a piece of land you wanted to invest in for years, you've done your fair amount of research and you pay for it with your business line of credit. The land ends up being a worthy investment like you believed, and you build a motel on it, which one day generates enough income to become a hotel, then a resort. This example would take tons of time, but it is just one way that you can use an asset to pay for another asset, you never had to take the money out yourself, you never had to pay for it yourself. You simple used your buisness, made your business pay it off, and created a new business within it that eventuall put you in the 10 percent making 90 percent of the money.
The concept I would like to leave you with today is how would you fill your asset colum? Think outside the box, think of ways you can earn money without spending money, using your assets to generate a cash flow to pay other assets off ultimately creating a rich life for yourself.
The 90/10 rule is " 10 percent of the investors makes 90 percent of the money."(Kiyosaki,2013)
Why is this? What is the difference between one investor and another , in order for only 10 percent of them to make 90 percent of the money.
The answer is how you look at the picture above, and fill those colums. The question to ask yourself is how do you fill your asset colum, without ever having to purchase that asset? In my earlier postings I enduldged you in the concept that your assests pay off your assests which is why we studied the Three E's , and our goal of accumulating Excess cash was only possible because at that time our assests were paying eachother off , ultimately gereating more income, while having a stable excess cash flow. But how does someone manage to create excess cash , and fill one's asset colum up without paying for the asset, how can you start with nothing and end with something?
This concept is extremely important, because there is no wrong answer. It takes a lot of education and experience in becomming a investor, but it is the way an investor thinks that will differ oneself from being part of that 10 percent who makes all the money. The trick of investing is not luck, you may find a lucky investment once, but how will you keep it a float? Investing is all about creating an investment from something, another investor cannot see.
Let me give you an example: For many people building their own business is a dream, so we will use that concept. Your business you've created it, you never purchased your business it was your own idea that you put together and turned into an Asset. Your buisness now , whatever it may be has bloomed off, not enough to make you rich but enough to keep you comfortable. (As a side note, please remember the difference between Secure, Rich and Comfortable, and why it is important to set yourself up for all three plans.) This business is now generating an income, you have done what is needed to do, you have hired trusting employee's so the business does not demand so much of your Time another valuable asset. Now that your busines is creating an income it is paying off yourself while putting money in your income statement. Asset--> Income . Now with the business generating enough excess cash, you have done some research on a piece of land you wanted to invest in for years, you've done your fair amount of research and you pay for it with your business line of credit. The land ends up being a worthy investment like you believed, and you build a motel on it, which one day generates enough income to become a hotel, then a resort. This example would take tons of time, but it is just one way that you can use an asset to pay for another asset, you never had to take the money out yourself, you never had to pay for it yourself. You simple used your buisness, made your business pay it off, and created a new business within it that eventuall put you in the 10 percent making 90 percent of the money.
The concept I would like to leave you with today is how would you fill your asset colum? Think outside the box, think of ways you can earn money without spending money, using your assets to generate a cash flow to pay other assets off ultimately creating a rich life for yourself.
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