Hacking Capitalism 301x: How to Steal from Banks, Rich People, and the Government

“Dad, Uncle Joe – you’re right. I should take my future seriously — that’s why I’m incorporating a business, selling a service/stuff, and applying for business credit and venture capital. Then, when my business declares bankruptcy in a few years, I can keep the money, declare a loss and pay less taxes — just like the President! Isn’t this great time in leadership for our country!? Want to invest in my company?” — you, at Thanksgiving with your right-wing family.

Usually I like to talk about regular small-business tactics, but here I share an especially pernicious tactic: how to straight up rip off banks and the government.  No, it’s not just an anarchist life goal: it’s the way business is done. Not only is this method perfectly legal, it’s celebrated. Our current president and plenty of other business owners do it. You, if you want to pay less taxes and bird off banks in the upcoming years may do it, too. Here’s how.

VERSION 1: How to steal from the government.

Start a business. For this version, any format of business will do: a sole proprietor, a partnership, or an LLC or incorporation.

Next, actually run the business. Try to grow it. Charge people money for goods or services.

It won’t be all business lunches and golf courses – I mean make some damn money and run your business. It kind of doesn’t matter what you do, but you’ll need to generate income and track it cleanly so as not to look shady and get audited (more likely when you make over 200k annually).

In the course of doing business, you’ll need things. Things that life might have had you needing anyway: a cell phone, internet, supplies, entertainment and networking leading you to have to travel and go out. Keep all your receipts, and pay for things only using your business account.

Often, you need to buy things for your business that you also need for life–a bonus! Here’s a list of all the things the IRS is ok with you claiming are for a business: https://www.irs.gov/publications/p334/ch08.html

HACKING CAPITALISM WIN #1: When you pay for things you use for a business purpose, you don’t pay taxes on the money you used to buy them. This means you pay less tax overall on your money that comes in. If your business spends small amounts (a few grand), the savings are small. If your business is a fancy project, your spend — and your tax savings — are large.

When tax season comes, if you spend more than you make, your business has a loss. You as an owner of this business will have a loss. This goes on your taxes as a negative, thereby reducing your income more. If you lose enough money, you can spread the loss over several years of taxes. If you REALLY lose a lot of money, you could potentially pay no tax for years, all while living on money you hustled and potentially having really nice things around you.

This can save you a LOT of money. And, this can also ensure that you aren’t sharing back via taxes. Taxes fund wars. Taxes build roads and schools and fund social security. No matter what you think of any of this, if you made $100k but have an $80k deductible spend, you’re only paying taxes on $20k this year.

VERSION 2: How to steal from banks and people

Don’t start your business any old way: For graduate-level hacking, it needs to be an LLC or a C-Corp or S-Corp.

As our friends at NOLO Legal point out, “When you incorporate your business or form an LLC, it becomes a separate legal entity” (from you).

As a distasteful side note, the origin of the ability of an incorporated business to be its own entity resides in the 14th constitutional amendment. Yes, the same one that abolished slavery.

Now, your job is to get access to money that’s not yours and not in your name, but rather is in the business name:

  1. Get investors if possible. Think of a plan to “disrupt” some existing business model with technology and go for VC. Whatever.
  2. Get a business line of credit or credit card. This might take a few years, but you’ll want to end up with a line of credit or card that you don’t co-sign on or put collateral up to get. Essentially, you want only the business to own the debt, not you. Learn about the difference here.

Buy a lot of things that are specifically for the biz, like say fancy carpets or fixtures or electronics or consultants. Spend more than you make. Here, you can go with spending money you made otherwise from a different job or business, but ideally the investor’s money or on a business credit card is fine.

So far so good–capitalism! Don’t forget about the part where you’re spending money on your business and tracking it and getting your tax game on. Because…

ADVANCED VERSION OF HACK 1+2: Steal from fucking everyone

Now: your legitimate business you’ve run for a couple years is in the red. You can’t declare a loss for years on end, generally only up to 3. At some point, you can consider business bankruptcy. Just like for individuals, Chapter 7 clears all the debts and Chapter 11 creates a payment plan.

If you’ve set it up right: used incorporation, have borrowed money that you haven’t personally cosigned for – this is also not your bankruptcy. It’s your business’s. Paid yourself (an employee) a hefty salary last year and need to declare this year? Oh well. Taxes are very tied to a calendar cycle.

Borrowed and the business can’t repay? Doesn’t matter if you personally could: the individual entity that is the business cannot and that’s what matters. You have to do this cleanly–that’s the part of running the business like you meant to run one.

And here’s the rub: the people you borrowed from, the banks? They just put the money they don’t get back on their loss line, and it reduces their business income and therefore taxes.

It’s all a game, people.

A game some folks are really good at, right or wrong.

This tactic, friends, like all my work, is not limited to political allegiance. Anyone can take these ideas and do well for themselves with them —  and, folks who strategically start businesses and then declare bankruptcy already have.