Personal Spending - good or bad idea? - BarterPay Canada | Trading Made Simple

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Personal Spending - good or bad idea?

Personal Spending - Tradebank

 

Personal purchases work two ways:


1) the owner doesn't care if his personal income goes up. 

In this case, the business earns TRADEdollars and then the owner uses the TRADEdollars personally.  The owner would then have to claim the TRADEdollars as personal income through his shareholder account, dividends or just general wages etc.  This would be considered taxable personal income.

2) the owner doesn't want to increase personal income.

In this case, the business earns TRADEdollars and then the owner uses the TRADEdollars personally. But, instead of the owner adding the use of the TRADEdollars to personal income, the owner pays back the company an equal amount in personal CDN dollars.

Why is this beneficial?  Well, lets say the owner of the cleaning company was going to be buying $3000 worth of flowers for their upcoming wedding. Without this creative trading maneuver, the owner would be paying $3000 in after-tax CDN dollars to the flower shop and the deal ends there. It's not like the flower shop is obligated to spend $3000 CDN back with the cleaning company...once the cash is gone, it's gone. And what's even worse? The flower shop may even have your competitor cleaning their shop.

Instead, it makes a lot more sense for the owner of the cleaning company to let BarterPay send them $3000 worth of NEW trade business.  Then, they spend the TRADEdollars on flowers for the wedding. Finally, the owner of the cleaning company takes the same $3000 CDN (that it was about to give the flower shop) and writes a cheque back to their own company thereby negating any personal gain.

In each scenario, the owner is still down $3k in personal after tax CDN dollars. But, In scenario 1, the cash is sitting in the flower shop's bank account and no new sales were generated for the cleaning company. 

Conversely, in scenario 2, the cash is sitting in the owners cleaning company and at the same time they received $3000 in new business from the Barterpay network!!!

Such an easy thing to do, but takes a mental shift.

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