What does this diagram from Robert Kiyosaki about corporations mean?
It looks like RK is encouraging tax fraud. Suggesting that one have their business cover personal expenses sounds like the advice that got Leona Helmsley in hot water. "These types of diagrams appear all throughout Kiyosaki's Rich Dad, Poor Dad book.  The arrows in the diagrams represent cash flow. For example, the first two diagrams of this type in the book are:  The idea being presented here is that an asset generates income, and a liability generates expenses.  According to the book, rich people spend their money buying assets, while middle class people buy liabilities. The diagram you posted above does not appear in the edition of the book I have (Warner Books Edition, printed in 2000).  However, the following similar diagram appears in the chapter titled ""The History of Taxes and the Power of Corporations"":  The idea behind this diagram is to demonstrate what the author considers the tax advantages of a personal corporation: using a corporation to pay for certain expenses with pre-tax dollars.  Here is a quote from this chapter: Employees earn and get taxed and they try to live on what is left.  A corporation earns, spends everything it can, and is taxed on anything that is left.  It's one of the biggest legal tax loopholes that the rich use.  They're easy to set up and are not expensive if you own investments that are producing good cash flow.  For example; by owning your own corporation - vacations are board meetings in Hawaii.  Car payments, insurance, repairs are company expenses.  Health club membership is a company expense.  Most restaurant meals are partial expenses.  And on and on - but do it legally with pre-tax dollars. This piece of advice, like so much of the book, may contain a small amount of truth, but is oversimplified and potentially dangerous if taken a face value.  There are many examples, as JoeTaxpayer mentioned, of people who tried to deduct too many expenses and failed to make a business case for them that would satisfy the IRS."
"That ain't nothing.  It's really easy to get ""whipped up"" into a sense of entitlement, and forget to be grateful for what you do have.  If this house doesn't exist, what would his costs of housing be elsewhere?  Realistically.  Would landlords rent to him? Would other bankers lend him money to buy a house? Would those costs really be any better?  What about the intangible benefits like not having any landlord hassles or having a good relationship with the neighbors?  It's entirely possible he has a sweet deal here, and just doesn't make enough money.  If your credit rating is poor, your housing options really suck.  Banks won't lend you money for a house unless you have a huge ton of upfront cash.  Most landlords won't rent to you at all, because they are going to automated scoring systems to avoid accusations of racism.  In this day and age, there are lots of ways to make money with a property you own.  In fact, I believe very firmly in Robert Allen's doctrine: Never sell.  That way you avoid the tens of thousands of dollars of overhead costs you bear with every sale. That's pure profit gone up in smoke.  Keep the property forever, keep it working for you.  If he doesn't know how, learn.  To ""get bootstrapped"" he can put it up on AirBnB or other services. Or do ""housemate shares"".  When your house is not show-condition, just be very honest and relatable about the condition.  Don't oversell it, tell them exactly what they're going to get.  People like honesty in the social sharing economy.  And here's the important part: Don't booze away the new income, invest it back into the property to make it a better money-maker - better at AirBnB, better at housemate shares, better as a month-to-month renter. So it's too big - Is there a way to subdivide the unit to make it a better renter or AirBnB?  Can he carve out an ""in-law unit"" that would be a good size for him alone? If he can keep turning the money back into the property like that, he could do alright.  This is what the new sharing economy is all about.  Of course, sister might show up with her hand out, wanting half the revenue since it's half her house.  Tell her hell no, this pays the mortgage and you don't!  She deserves nothing, yet is getting half the equity from those mortgage payments, and that's enough, doggone it!  And if she wants to go to court, get a judge to tell her that.  Not that he's going to sell it, but it's a huge deal. He needs to know how much of his payments on the house are turning into real equity that belongs to him.   ""Owning it on paper"" doesn't mean you own it.  There's a mortgage on it, which means you don't own all of it.  The amount you own is the value of the house minus the mortgage owed.   This is called your equity.   Of course a sale also MINUS the costs of bringing the house up to mandatory code requirements,  MINUS the cost of cosmetically making the house presentable.   But when you actually sell, there's also the 6% Realtors' commission and other closing costs.  This is where the mortgage is more than the house is worth.  This is a dangerous situation.  If you keep the house and keep paying the mortgage all right, that is stable, and can be cheaper than the intense disruption and credit-rating shock of a foreclosure or short sale.  If sister is half owner, she'll get a credit burn also. That may be why she doesn't want to sell.  And that is leverage he has over her.  I imagine a ""Winter's bone"" (great movie) situation where the family is hanging on by a thread and hasn't told the bank the parents died.  That could get very complex especially if the brother/sister are not creditworthy, because that means the bank would simply call the loan and force a sale.   The upside is this won't result in a credit-rating burn or bankruptcy for the children, because they are not owners of the house and children do not inherit parents' debt." I understand where you're coming from but you're mostly just quoting the plaintiff's attorney. That's not going to be the source of unbiased information. Furthermore, I don't trust general news sources when it comes to complex financial reporting. I don't really even trust business journals as they are mostly filled with j degrees without real experience. Bankruptcy cases can get very complex and unpredictable because judge's have significant leeway; you really need to read the case opinion to see what really went down. I work in finance and deal with bankruptcies on a semi-regular case. I am on the buy side (the side that would be screwed in cases like this) so my inherent bias goes your way against poor management.   If this guy actually moved assets from company 1 to company 2 at a non-arms length transaction then that is misconduct and assets can be recovered from company 2 usually. If Learning Annex was pari passu with Robert and he pulled dividends out to himself, that is misconduct that will be punished by a bankruptcy court. If he did these things they are not smart business practices, and will be punished.  Your condescension does not help your case. I most likely know far more about this topic than you, as I have seen the nuances corporate bankruptcies take on in the real world. I just don't trust grossly oversimplified reporting in a case that is ongoing. "The fact that some asset (in this case corporate bonds) has positive correlation with some other asset (equity) doesn't mean buying both isn't a good idea.  Unless they are perfectly correlated, the best risk/reward portfolio will include both assets as they will sometimes move in opposite directions and cancel out each other's risk.  So yes, you should buy corporate bonds.  Short-term government bonds are essentially the risk-free asset.  You will want to include that as well if you are very risk averse, otherwise you may not.  Long-term government bonds may be default free but they are not risk free.  They will make money if interest rates fall and lose if interest rates rise.  Because of that risk, they also pay you a premium, albeit a small one, and should be in your portfolio. So yes, a passive portfolio (actually, any reasonable portfolio) should strive to reduce risk by diversifying into all assets that it reasonably can.  If you believe the capital asset pricing model, the weights on portfolio assets should correspond to market weights (more money in bonds than stocks).  Otherwise you will need to choose your weights.  Unfortunately we are not able to estimate the true expected returns of risky assets, so no one can really agree on what the true optimal weights should be.  That's why there are so many rules of thumb and so much disagreement on the subject.  But there is little or no disagreement on the fact that the optimal portfolio does include risky bonds including long-term treasuries. To answer your follow-up question about an ""anchor,"" if by that you mean a risk-free asset then the answer is not really.  Any risk-free asset is paying approximately zero right now.  Some assets with very little risk will earn a very little bit more than short term treasuries, but overall there's nowhere to hide--the time value of money is extremely low at short horizons.  You want expected returns, you must take risk." "&gt;10,000 dollars more, on average, across 12 million employees, bro. That adds up.  That's about 5 dollars an hour more.  Not much. But the upward mobility in government jobs is severely lacking, so I'm not sure if that $5.00 an hour makes up for their inability to get raises.  I do hope you have proof for that number, however.  I call monopolized (or psuedo-monopolized) corporations, and high end CEOs rent seekers, because they seek to make FAR more than they need to even thrive.  The government doesn't make far more than it needs to thrive.  It does, however, mishandle funds and delivers them to . . . CORPORATIONS that lobby them!  Corporations are beholden to only their shareholders.  If I were to let corporations run the roads, you can be sure that only the most profitable areas would have roads, and most roads would have tolls.  Those without the means or without big corporations nearby would have to do with trails.  The gateway to success that Big Government is supposedly closing down with subsidies would ACTUALLY be closed down because private industry would control your methods of transportation, communication, education, and survival itself.  To reduce competition, they would keep you low, and suck off your funds.  They would call it fair because you CHOSE to live where you do, and not work hard enough, neglecting their own part in establishing the high wall that you cannot get over.  What do YOU think would happen if Big Government was sent away and our basic necessities were privatized?    Do you have illusions of ""free market"" dancing in your dreams?  Where companies compete rather than collude?    Do you imagine roads to the far reaches of the nation being kept up, or just the roads important for goods and people with money?  I want to know what you imagine the endgame will look like." Can you explain this to me? I'm under the impression that the CEO is generally hired by the board because he/she is supposed to be the expert, and the board provides broad guidance as to where the business should go. There is no one really above the CEO in the traditional sense as I understand it, but I would like to see what you mean if you don't mind explaining. yeah i totally agree with the title.  but unions are nearly management there, germany really started the idea of [co-determination.](http://en.wikipedia.org/wiki/Co-determination), if your corp has over 500 people, 1/3 to 1/2 the seats on board have to be saved for labor. Let's take your argument to its logical conclusion. Let's say there is a company that uses infrastructure of UK, Germany, France, US, Japan, Italy and Spain (because it's a global multinational). Corporate taxes in these countries are 19%, 29.65%, 33% (for large companies), 35%, 32.1%, 27.9% and 25%. Now according to your logic, each of these countries should tax the company's profits. Such a company in your world would pay more in taxes than it makes in profits (tax rate &gt; 100%). In the case you mentioned, where a private company owners will take debt with the purpose of  buying out other owners, is this done through a share repurchases program (I understand private companies issue them, even though it's rare)? Thank you for the insights.