3 Reasons Why You Need a Business

three reasons why you absolutely need to have a small business everyone whether you have a job you don't have a job you need a small business in this video is gonna share with you three incredibly powerful reasons why reason number one is what I call pre-tax power so when you have a small business you are able to purchase certain things for your business and that is done before income taxes are calculated now this is where it gets very important that you understand the math behind what we mean by pre-tax so let's say for example that a portion of your income or when you combine you and your spouse's income is at the twenty five percent federal income tax level and then you may have some additional state income taxes as well so at twenty-five percent if you for example have to commute to work with your vehicle every day that vehicle you purchased after you had already paid your twenty five percent in income taxes because in this example you are a w-2 employee well the problem with that is you just technically paid 25 percent more for that vehicle and I know you probably got a loan but still calculates a big number right or what if we're talking about something smaller and simpler maybe it's a brand new Microsoft Surface laptop okay and you just spent $1,200 on it you would have bought that what I would call post-tax because you would first pay 25% and income taxes and what the money you had left over is what you bought that computer with now let's look at the difference if you bought that laptop for your business that would have been pre-tax you literally notice that the exact math you literally would have saved right around 25 percent many of you are bargain hunters right you try to go after the sales and you try to find a great deal and when you purchase something well if you are able to buy something at the pre-tax level you instantly save what could be whatever your tax bracket is 25 five percent or more right at the top where there's a sale or not now that is what pre-tax power is all about and so there are many items that you are purchasing right now that ultimately could be at the pre-tax power level I'll give you an example I own a bunch of vacation rentals those vacation rentals have Netflix accounts Hulu accounts things of that nature now Disney Plus right and so those are the types of subscriptions that your business could pay for and if you know maybe there's eight or ten seats available in that account maybe you know ones on your personal cell phone I'm not telling you to do anything that is against the tax code by the way I want you to fulfill and follow the laws my point is there are legitimate things that you are purchasing in your life that as if you're a w-2 employee you could put that in your business and you would get a huge savings on the purchase because you would have what's called pre-tax power the second reason why you need a small business is because of the deductions this is not that complicated of a subject I think it gets over complicated sometimes but you need to hear what deductions can really do for you the first is this there are deductions that you can take that don't cost you any money they just give you a deduction an example would be a home office deduction and with a home office deduction you're deducting a certain square footage and there's a certain calculation for that it's not a huge deduction but it is one right and you're you're able to take it just because you have a small business you have to spend any money for it you already you already have a home you're living in your they have a place you're living in so deductions can be in the form of a home office another thing to consider is this earlier we were talking about the pre-tax power if this was a vehicle you purchased and it was the right type of vehicle and again you'd have to talk to your accountant all that great stuff let's say for example you got a loan on that vehicle well you wouldn't have had to pay all cash out of your pocket with the purchase now the purchase would have already had this but what's so nice is you get a deduction on the entire purchase for certain vehicles so now all of a sudden you have a huge deduction in your personal income taxes and it's a tool that you need you know you need it because you have to drive back and forth to whatever work you're doing but see if you're a w-2 employee you don't get that benefit right you have to go back and forth to work but you don't get to deduct that vehicle so first we love deductions such as a home office or a vehicle but there's yet another if I know it's a big if if your small business actually makes a little bit of money but we hope it does and I'm a bit biased I'm gonna argue that real estate investing is the absolute best small business on the planet can't be beaten but regardless of the type of a small business if it makes money there is a qualified business income deduction that now exists thanks to the latest tax updates here the United States and it's a 20% discount on any income now to go back a step for a very long time accountants and bookkeepers are argued well the problem with owning a small business especially if it's an LLC and it's taxed as a sole proprietorship or as a partnership which by the way if you want to learn more about what an LLC is and why it's so helpful and powerful I've got a great video on that it's the perfect entity for real estate investing and it's not just real estate investing I'm gonna argue you want to set up an LLC for whatever business you set up and you could always tax it there as a sole proprietorship partnership or you can do it taxed as an S corporation so definitely use an LLC when you're setting up your small business but the argument that that accountants have made is this that when you tax it as a sole proprietorship or partnership you have to pay self-employment taxes on the on the earnings which is above and beyond your your federal income tax and that's true however now that we have this 20% deduction that pretty much negates that extra cost not completely but pretty much so that's really really exciting it's it's it's leveled the playing field and in fact if your employer is giving you the option of either being a w-2 employee or a 1099 independent contractor you want to be 1099 and you want your money to go to your LLC to your entity so that you not only can take care of take advantage of this deduction and potentially get in the vehicle deduction and you know let's say for example laptop reduction but you can take this 20% deduction too this is a big deal right here this has really changed the fabric of small business in my opinion and it's been out for a few years right now so deductions is the second powerful reason why you absolutely have to have a small business I know you're asking the question but Phil what if my small business doesn't make any money that's okay you may not be able to take advantage of that but you can take advantage of some of these others and you'll also be able to take advantage of the third incredibly powerful reason - the third reason why you need a small business again whether or not it makes any money you still need it and that is the retirement plans that come available for you these are plans that are not available for people that are not small business owners my favorite one the one I've talked about many times and I have an amazing video on right here is the solo 401k solo 401k do you have just so a 401k set up if not why not it's the best retirement plan going you can borrow up to 50 thousand out of it at any time kinda how much is in there you you have checkbook control you could invest in anything including a real estate which gives you a lot higher returns and simply buying something such as an index fund or mutual fund or stock so the solo 401k is the best retirement plan going and it's only available for small business owners but there's one more I want to mention to you as well and it's reasons like what I'm about to share with you as to why you watch my videos because I share with you wisdom and insight you'll hear nowhere else and that is an addition is what's called a defined benefit plan defined benefit plan so this would be in addition to this you do both a defined benefit plan allows you to sock away even more money it was designed for people that had fallen behind on the retirement and they had to play catch-up and maybe that's you right so you can do some real estate deals make a bunch of money and then just sock a lot of it away in an ear find a benefit plan it's not as flexible as a solo 401k doesn't allow you all the great tools as this one does but this one has a max on how much you can put in it's still a lot higher max than than your typical employer sponsored 401k so it's still better but it's not but if you really want to go high power on this you can do both is what I mean and these things are only available to those with small businesses I have more details on this stuff of course if you go down below here the link that takes texture to my website on this piece of content so you can learn more about the defined benefit plan he'll this is huge you really need to take full advantage because it's right out in front of you ok so whether you have a job or not no matter where you are what your circumstances are you need to be taking advantage of this and if you already have a small business my goodness you should be taking advantage of all three of these huge reasons all right well I'm Phil oski by the way of freedom mentor.com and if you have questions comments put them down below here I try to carve out time on my schedule to answer those if you're first getting started in business and in real estate I suggest you read my book if you haven't already how to be a real estate investor I give it away for free in these videos dive into that and if you're serious about becoming a first-class market-leading real estate professional consider my apprentice program where my team and I we guide and mentor people and we turn them into money-making machine so that might need to be you right there and then lastly is I was talking about this solo 401k I want to make sure you watch that video and how to set that up it's a no-brainer you need to set up a solo 401k alright you all want Phil puse DLC again thanks so much for watching this video I'll see on the next one

Channel: Phil Pustejovsky

Views: 22,998

Rating: 4.9477553 out of 5

Keywords: Small Business, Limited Liability Company, Solo 401K, Defined Benefit Plan, LLC, Individual 401K

Id: QqsijwYQtc8

Length: 10min 11sec (611 seconds)

Published: Fri Jan 31 2020