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TRUMP UNIVERSITY WEALTH BUILDING 101

tax rate and, in addition, the full 15.3 percent self-employment tax when you
start or buy your own business. Obviously, that is not a preferred status. If
you’re content with your current tax situation, stop reading here; if not, keep
reading.

General Partner

If you are a general partner, you have the same tax status as an individual tax-
payer, which means that you will pay full income tax in whatever bracket you
are in, and, in addition, the full 15.3 percent self-employment tax. Merely
going into business with others does not help you save taxes on the income
generated from the business.
As an example, let’s assume you took your W-2 to your accountant to
prepare your taxes. The W-2 reports that you earned $30,000. You work
hard, you pay your bills, but no one would consider you rich. When your
accountant finishes taking deductions for you and your family, the odds are

that you owe no income taxes and receive back all the income tax you paid.
Now assume you have your own business. You bring your accountant all

of your income and expense receipts, and when they finish calculating deduc-
tions, your net income from the business is $30,000, which means you will
owe no income taxes. You can’t, however, deduct expenses such as mortgage
interest and charitable contributions, and you will have to pay 15.3 percent,
or $4,500 in self-employment taxes, on the entire net income of $30,000. Is
$4,500 a big deal to someone who earns $30,000 a year? I’d say so. My guess

is you’re reading this book because you want to make significantly more than
$30,000. Hopefully, this spells out the problem. Let’s start to fi nd some
solutions.

Limited Partner

A limited partner is invested, but not involved, in a business. Their share of
income is based on his or her investment, not their personal services, so they
don’t pay self-employment tax. We could spend hours discussing the different
ways to use limited partnerships, but they are very complicated. For our pur-
poses here, it’s enough for you to realize that the use of limited partnerships

can significantly reduce your self-employment taxes.
S Corporation Shareholders

An S corporation shareholder is another type of taxpayer defined in the Inter-
nal Revenue Code, and it is extremely popular for small businesses where the

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