Asset protection and real estate

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Mr. Sutton, esq., wrote a very nice article in "The Real Book of Real Estate" about asset protection. I will go into a tiny bit of that. Please keep in mind, he is the attorney, I am not. So this is NOT legal advice. And to read the whole thing, you need to get that book (there's a link at the end to Amazon.com). However, here's a taste, just a tiny bit.

So what do you need to know about asset protection when it comes to real-estate? A lot, and the earlier you know the better. Basically, it is to setup a 'separate you' to own the properties, so that what happens to 'separate you' will not wipe you out, and vice versa.

First of all, asset protection is an overall strategy, one that starts when you invest, not something tacked onto it much later. You should have the entities that you will use setup before you invest. After all, a corporation is just a few pieces of paper and some annual paperwork. You can have it setup way ahead of time.

Creating an unexpected niche

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Those of you who visit Radio Shack or electronic stores could not have failed to notice a new buzzword: "netbooks". Basically, they are tiny portable computers, with a 9 or 10 inch screen (most laptops are now 15 inch screens) with correspondingly tiny keyboards and everything else, and they cost $200-250, with refurbished ones as low as $125, compared to a decent notebook at $500 or so. When closed, they are not much bigger than some people's portable executio folios in which they keep their Day-Timers (tm) and such.
The problem is they are lowest of the low-end. Even though they are x86 compatible (i.e. it will run Windows, even Vista and the upcoming Windows 7), they run VERY VERY slowly. They are good for netsurfing, word processing, e-mail, basically stuff that doesn't require much computing power.

So why am I telling you all this? Almost all the netbooks now on the market uses Intel's Atom series CPU. However, that was NOT the intended purpose of the CPU. Intel had originally planned them to be used in high-end cellphones, i.e. SmartPhones. However, the netbook was created to fill a niche that didn't exist before, and that is what's important.

How to start a small business

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Starting a small business is a major investment, not merely of money, but also of your time. So you'd want to do it right. Do you know ALL the issues that is involved in starting a small business?

I answer a lot questions on Yahoo Answers! and a lot of the questions seem to be "how do I start a business?"  So here's a summary, with a bit of help from Nolo Books... (Buy them!)

A. Evaluating your business idea 

B. What ownership structure will you choose? (SP, GP, LP, CC, SC, LLC)

C. Choose a name and register the name

D. Prepare the ownership structure paperwork

E. Find a business location and meet legal requirements

F. Apply for necessary licenses and permits

G. Get insurance

H. Setup Tax reporting and accounting

I.  Hire employees and know the relevant laws

Credit, and how it affects you

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If you live in the US of A, you will be affected by "credit". When you get a credit card, you have credit, but nowadays, even applying to rent an apartment will trigger a credit check, or even applying for a job. Thus, it is necessary to know about what exactly is credit, and how you can check them.

So what exactly IS your credit score? Your credit score is a standardized system on how your credit history, how much debt you owe and to whom, how well you pay them back, and other factors are reduced to a number. The Fair Issacs Corporation, aka FICO, is the first to create such a system. In the FICO system, the lowest possible score is 300, and highest possible is 850.

FICO has licensed this algorithm to the three credit bureaus: Equifax, Experian, and TransUnion, who then modified it slightly to suit their own needs. Thus they each maintain their own version of your credit history, and as such, you have three different scores, one at each bureau. And their scores can vary a little. We will just call it "credit score".

What is your effective tax rate?

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Most people know their income tax rate, but have they considered their EFFECTIVE tax rate?

For people who are single, their effective tax rate is probably nearly the same as their real tax rate. However, for families, esp. those with children, the effective tax rate can be MUCH higher than the real tax rate. Why? It's because of our strange tax system and various income-based incentives in life, such as financial aid for schools, and in recent years, loan modification.

For example, here's a family. Father is working and earning a nice chunk of salary, and as kids are heading for college mother is contemplating going back to work. If she lands a local part-time teacher's position, which pays 35000, she will have to pay 15000 in taxes (income and payroll), lose 10000 of need-based financial aid of her kids (husband earns a lot), leaving her only 10000 ahead. In other words, her effective tax rate is not 35%, not 43%, but actually 71%.

No, the numbers are NOT made up. These are real numbers as published in a Forbes Magazine article (October 5, 2009) called "When Work Doesn't Pay". And this is hardly an anomoly.

Psychology of Money

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Did you know how psychology affects money? You may be surprised to find how much psychology dominates thinking about money. It even trumps logic. How? Let me illustrate.

One of the experiments economists and psychologists play on people is known as the ultimatum game. The rules are simple: you need two subjects, let's call them A, and B.

Experimenter gives A $100, and tells A, and B, that A needs to share with B. If B rejects the offer, than experimenter gets all $100 back, so neither A nor B gets anything. Both A and B should think about the amount, and come up with a strategy to maximize one's own gain. So, what should A do? And what should B do?

Logically speaking, B should accept WHATEVER A offers, because it's better than nothing. If he says no, he gets nothing. So he should ALWAYS say yes. By the same logic A should offer as little as possible, in order to maximize his gains.