It’s been almost two years since I started Hale Financial Solutions. What an incredible journey I’ve had as a business owner! Owning a business certainly comes with its challenges, but there are some incredible benefits as well. You might liken it to Charles Dickens’ token phrase from A Tale of Two Cities: “It was the best of times, it was the worst of times.”
But I must admit, the good times feel really good when running your own company. Here are a few thoughts on what I love about being a business owner. If you’re a business owner you’ll likely share some of these sentiments. If you’re considering starting a business, perhaps these points will give you some extra perspective as you think about taking the leap.
1. I set my own schedule
Setting your own schedule is one of the biggest benefits to owning your own business. If I need to get to work late, I do. If I want to go home early, that’s just fine. In fact, there is no “late or early” since I’m the only employee who matters.
For some people this means the business never sleeps and they think it will have them stressed out and up all night. I haven’t found this to be the case, rather, since I’m doing something I truly love each and every day, I don’t feel “exhausted” from my work nearly as often as I did in the corporate world. Breaks and vacations are still mandatory for me, but once they’re done I’m more energized and eager to jump back into my work.
If I need a midday pick me up, I might go exercise, play with my daughter for a little bit, or just take a nap on the floor (I’m not ashamed of it!)
2. It’s my business and no one else’s
I can craft and adjust my business any way I want to. This is crucial in the early stages, since one’s original “business plan” is never right--not even after several attempts. I’ve rather found that I need to test, pivot, test, pivot…until I get things right.
Since starting Hale Financial Solutions, I’ve made several large business “pivots.” When working for a large company, these strategic changes are like making a u-turn in a cruise ship--painfully slow and time consuming. For my business, I might develop a new strategy during a Saturday morning brainstorm session and I’m off to work on Monday with a different focus. A u-turn on a jet ski, you might say.
3. The tax code works “harder” for me as a business owner
The tax code is the business owners’ friend. Whether you’re a sole proprietor or established as an LLC or Corporation, the government understands that you’re in the business of creating something that will (eventually...hopefully) make money. And they stack the tax incentives in your favor to do so.
To illustrate this, start by looking at the standard IRS form: Form 1040. This is what you use to file your annual tax return. The government wants to know how much you’ve earned for tax purposes, but there are lots of ways to lower your taxable income through deductions. Page 1 of IRS Form 1040 shows some of the “Above the Line” deductions available.
Notice that several of these are targeted directly at business owners:
- Deductible portion of self-employment taxes
- Self-employed retirement plan contributions
- Self-employed health insurance deductions
- Domestic production activities deduction
Many business owners also complete Schedule C, where your business reports its income or losses. A similar principle applies to businesses using Schedule C as individuals using Form 1040. The government wants to collect their taxes, but they allow businesses to offset business income with eligible business expenses, kind of like deductions on the personal side.
The list for businesses, however, is huge and contains far more deductible expenses. Here’s a snapshot.
As an individual, you can’t buy a laptop, fly to a conference, buy a car, and pay for other necessary expenses and expect a tax break. The IRS sets different rules for businesses. They understand that business owners are trying to create something, so the IRS provides a whole swath of possible deductible expenses to help owners get their businesses off the ground.
The government wants your business to succeed. It means more jobs, more production for the country, (and more taxes down the road for the IRS). :) The tax code works hard for your business.
4. Every dollar I earn exists because I earned it
I don’t want this to sound "braggy." I really don’t earn a dime unless my clients say I do, so ultimately it’s up to them. But when I get paid I know that every dollar in that check is a reflection of effort I put in to grow my business and make my clients better off.
In February I took my first paycheck from Hale Financial Solutions. This was an incredible feeling. I knew that every dollar in that check was earned by my own work.
I’ve had too many jobs where I felt like I was paid too much for too little work. Getting paid for doing nothing sounded great as a college graduate, but it’s not a great feeling after a while. At Hale Financial Solutions I love what I do and it feels even better when I get paid for it...paid for actually helping people and growing my business.
5. Greater retirement saving flexibility
Retirement planning options abound for small business owners. Besides the typical IRA and Roth IRA options, there are other tools including SEP IRAs, SIMPLE IRAs, Solo 401k plans, and many more.
There are some great things about these plans. First, contribution limits are higher with these plans than regular IRA accounts. In a SIMPLE IRA employees can contribute up to $12,500 in 2018, with a catch-up contribution of an additional $3,000 after age 50. Solo 401k users can contribute up to $18,500 in 2018, with a $6,000 catch-up contribution.
Second, the employer makes a contribution as well. That’s YOUR business! And yes, it’s a deductible business expense. This means your business can reduce its taxable income while also making a contribution to your own retirement savings. Win-win!
A word of caution. Once your small business has full-time employees, the IRS requires them to be eligible participants in most retirement plans. This means you’ll need to “pitch in” to their savings as well as your own, otherwise your contributions could lose their tax deductible status.
I hope this article has given you a valuable look into the benefits of being a business owner. If you’ve ever considered starting a business, I’d encourage you to give it some additional thought in light of this article.
To remain objective, next month I'll discuss some of the downsides of being a business owner. Ownership is great, but it’s not always a picnic.