Changing Your Expenses Into Gains Using a Company?

Once you have registered a company, and you have started business operations, this is the best time you convert all your losses or expenses into gains through the operations of your company.

To start with, you need to understand how the financial accounting of a company is handled.

Most companies operate to make profit, but before determining whether a company has made profit or loss, the Accountant or Auditor will sum up the entire income or earnings of the company for the year, and also sum up the entire expenses or losses of the company for the year.

In simple language, the income or earnings of a company are the operations of the company that brings money or income into the company’s bank account. Income includes monies received from sales, payments received for services rendered, etc.

On the other hand, a company’s losses or expenses are the operations of the company that take money away or from the company’s bank account. Expenses include monies spent on repairs, salaries paid to workers, allowances paid to workers, monies paid as rent, monies used to make purchases for the company, etc.

The Accountant will then deduct the total expenses from the total earnings, and the remaining balance will be the company’s profit. If there is no remaining balance, then the company made no profits for the year. Taxes are then paid on the company’s profits. In effect, when the company does not make any profit in a year, then the company does not pay tax in that year.

With this knowledge, this is the opportunity for you to shift all your expenses to your company as expenses of the company, so that you can get your expenses back as your company’s expenses before its profit is determined for tax purposes.

This is what you do:
1. You rent a room as a shareholder and worker of your company, you capture that as rent allowance paid by your company to its workers;
2. You buy your car in the name of your company, and you capture that as a purchase expense;
3. Anytime you buy fuel for the car, you insist on receipts so you capture them as fuel expenses of the company;
4. You buy clothes for yourself and you capture that as clothing allowance given to your company’s workers;
And it goes on and on.

You need to seek professional advice from a tax legal expert for a comprehensive list of what expenses to shift and what not to shift as company’s expenses. This is important because, when you are successful in doing all these you will soon realise in the end, that everything you own is actually owned by your company; which is okay once your company is booming, but when the company falls into bankruptcy, that is the end of your ‘life’ because those properties may be sold to settle all liabilities of the company should that become necessary.