I realize this may sound cliché or even crazy, but the FIRST Step I have learned over my 18 years as an Attorney and CPA, is that if someone REALLY wants to build wealth and save taxes, they need to Start a Small Home Based Business.
Please hear me out for those of you that work a ‘regular job’ and DON’T want a small business.
Now, I’m not asking you to quit your ‘day job’, I’m just asking you to at least have a small business ‘on the side’. Read this article on ‘Why Quitting Your Day Job May Not Be a Good Idea”.
HOWEVER, there are so many good reasons to have a small project brewing on the back burner, and very few reasons not to. Some say it is too ‘risky’ in today’s economy to start a business. I say it is too risky NOT to start a small business!!
Obviously, there is a reason why YOU may start your own small business, but let me give some suggestions as to why you may take this leap of faith:
- How about having another source of income to fall back on?
- Embarking on a project you love
- Turning your hobby into a business that actually make’s money
- How would it be to have the independence to run a business the way you think it should be ran?
- The ability to hire your own family members to pass on a legacy AND to save taxes
- One of the biggest reasons to start a small business and one dear to my heart: Save taxes
- and the MOST important reason in my opinion: A way to build more wealth
Wealth building…yes…my number one reason! Not saving taxes (I know that may shock you). But, I propose that when you think long and hard about it, many of you would agree that it is very very difficult to build significant, self-sustaining wealth when working exclusively for someone else. When you exclusively work for someone else, you are building their wealth.
Notice I used the word ‘exclusively’ in the preceding sentence. I’m not saying you can’t have BOTH a ‘day job’ AND a small business…in fact…I often times encourage you have both. With a small business your potential can be unlimited. With a day job you can have security and benefits. Together, you aren’t limited in your income, but you also have a safety net.
With that said, please allow me to just mention “Tax savings” as my second most powerful reason to start a small business. As many new small business owners quickly discover, the small business will allow you to legitimately convert otherwise personal expenses to valid business expenses. When you have a small business, there are expenses such as travel, home office, dining, entertainment, cell phones, computers and all sorts of expenses that you can write-off legitimately with a small business purpose.
Of course, I’m not proposing setting up any sort of business to simply lose money for tax write-offs, but to build a business that allows you to make more money, paying less tax and driving down your effective tax rate on your cash flow.
On a cautionary note, before you get started, please know there are obvious risks and A LOT to learn about the proper way to start and operate a small business. Let me mention a few important steps along the way:
- Build a business plan for every idea you have…some business plans will indicate you should NOT start the business
- Don’t give up on your education. Learn all you can about small business and real estate…they go hand in hand
- Start small and don’t quit your day job or put your life savings into the business
- Test your idea and product…build a focus group over and over again until you get the right product and price point
- and finally, don’t give up…remember it takes time.
AGAIN, I’m not asking you to quit your career, job or the trade or skill you have been cultivating for years, but please at least start building a project on the side that can give you additional income to invest in the market, buy real estate or simply build equity in the business itself.
PLEASE Don’t give up on this concept of “Starting a Small Business” and let it simmer, you may find it could just be your ‘cup of tea’.
Mark J. Kohler is a CPA, Attorney, co-host of the Radio Show “Refresh Your Wealth” and author of the new book “The Business Owner’s Guide to Financial Freedom- What Wall Street isn’t Telling You” and, “The Tax and Legal Playbook- Game Changing Solutions For Your Small Business Questions”. He is also a partner at the law firm Kyler Kohler Ostermiller & Sorensen, LLP and the accounting firm K&E CPAs, LLP.