In this guide, we’ll walk you through the steps to set your child on the path to becoming a millionaire and securing a bright future by setting up a limited liability company (LLC).
Let’s take a look at how you can take advantage of various financial strategies that will help your child accumulate substantial wealth over the years.
Step One: Own or Start an LLC
Establishing or owning an LLC is the first crucial step in this financial plan. This legal structure provides numerous benefits for your business and, as we’ll see, for your child’s financial future as well.
Step Two: Put Your Children on Payroll
By placing your children on the payroll of your LLC, you can take advantage of a tax-free benefit. Up to $12,000 a year can be allocated to your children, provided they engage in actual work for your business.
Step Three: Issue Them a W2 at Year End
Ensuring proper documentation is key. At the end of each year, issue a W2 form to your children, reflecting their income from the work they performed for the business.
Step Four: Open up a Custodial IRA
Take advantage of tax-free growth opportunities by opening a custodial Individual Retirement Account (IRA) for your child. This step sets the stage for long-term financial growth.
Step Five: Invest in an Index Fund
Maximize the growth potential of your child’s money by investing it in an index fund. This strategic move aligns with the goal of accumulating substantial wealth over time.
Now, here’s where the magic happens. Starting this process at the age of 7 can result in your child having $450,000 by the age of 19. The power lies in the eighth wonder of the world – compounding. Wages paid to your child are deductible, and you can receive a tax write-off for compensating them.
Get Started With doola
If you have a child and want to pave the way for them to become a millionaire, now is the time to act. Seize the opportunity to give your child a bright future and make them a millionaire by forming an LLC with the guidance of doola’s experts.
A beginner-friendly guide on the basics of LLCs. Learn about formation, banking, and taxes.
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