Every hard working American needs to have their own small business. You're about to discover 3 powerful reasons why this is true. And it doesn't even matter if the business makes any money or if you work hard at it or not at all! What you'll find is that the key is simply having one. While I would argue that real estate investing is the best small business in America, you're not even restricted by that, either. Here are the 3 reasons why you absolutely need to have a business:
Reason #1: Pre-Tax Power
When you are able to purchase items for your small business, they are paid before you pay income taxes, making it a "pre-tax" purchase. Think of your federal and state income tax rates as the amount of savings you get when you can buy something "pre-tax". Take full advantage of your business write-offs, whether that be a Netflix account for a vacation rental, a laptop that you use for work, or a vehicle you use to commute to work. By adopting this pre-tax mindset, you will be saving yourself so much money!
As YouTube subscriber, Bryce Matheson, commented in regards to this, "Biggest thing I own real estate are for all the business write-offs. Tools, miles, meals -- literally almost anything can be an expense."
I am not encouraging you to go against tax codes, but look at the purchases you make in your life that as a W-2 employee, you can apply to your business to save yourself money every year.
Reason #2: Deductions
The second reason you that you absolutely need a small business is the deductions that can come from it. From a home office deduction to the new 20% Qualified Business Income Deduction, there are several ways to reduce your taxable income because you are a small business owner.
Reason #3: Retirement Plans
Third, there are retirement plans exclusively available to small business owners! Here are some of the plans that you will have access to once you own a small business.
Solo 401Ks: The solo or individual 401K is the greatest retirement plan that currently exists and it is only available for small business owners. You can learn more about it in this detailed training on the subject Solo 401K Real Estate Investing. Just like everyone should have a business, everyone should have a solo 401K.
Defined Benefit Plans: Designed for high income earning small business owners to "catch up" on their retirement, a Defined Benefit Plan can be a great addition to your existing retirement plans, once you have maxed out your Solo 401K contributions. The best resource on this subject that we have found is Dedication Defined Benefit Services. There website can answer most of the questions you would have on this.
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If I am 1099 and not making that much right now, is it worth it to set up an LLC or Corp. The fees and costs to do so in CA are about $1000 per year. My wife has income and I have rental property
Can I move cash into the Solo 401k as a holding vehicle. THanks Phiil great info
Definitely set up an LLC for your self employed business. Also, your rental property should be owned in a separate LLC. Lastly, you should have a Solo 401K but as for moving all your cash into that; I wouldn’t recommend it; only move pre tax earnings in there and save your after-tax cash for investing outside of the Solo 401K
Phil, do you have a video of you, whether `pay-acting` or actual, of you giving your pre-foreclosure/subject-to, presentation to folks ? I know that there are questions or scenarios that I could learn to sharpen my skills. Thanks for all you do !
Here: Connecting with Pre Foreclosures
Hi Phil, I have question ? A small business owner can be any nationality or just the US citizens to gain
Tax benefits and etc.
God Bless
This training was based on US tax laws.
Hi,
I have an LLC for home inspection, taken the class, I do not have my license yet. Can I use the expenses, equipment, home office etc.. the different that I buy to put my business together on my tax?
This is a perfect question for your CPA!
This is great information!
I am in Canada, how could you help me here please?
I have a cleaning business and I would like to have advantage of the define benefit plan.
Canada may not have the same Defined Benefit plans as are available in the US but you might check in to Canadian RRSP or Registered Retirement Savings Plans.
amen
Good morning! I want to say thank you, Phil! This is great information and it is very helpful.
Have an amazing day
I love all your videos! They are informative as well as very educational. I have been watching your videos for a long time now. Thank you for your advice; these information will definitely help a lot of beginners that are interested in becoming real estate investors.
Love your videos. So much good Information in each of them.
Thank you this is life changing information.
All the best to you Phil!
I have bought a few homes, starting in 2009, 2010 and 2013 and sold them and am now debt free. Kinda of?
With the money from my last sale , I purchased another home and have it rented and in the process of buying another. I don’t have a large retirement 401 k but at the age of 66 and am pulling money from my recently started 401k to purchase this last property. I woul like to learn more about buying distressed properties. I buy in the Port St Lucie area and ,up to now been pretty lucky.
I am still working, contribute 26 percent of my income to the 401k and my employer matches 50 percent , up to $5000.00 per year. I would like to learn more about your classes and specifically about distressed properties. I had a bankruptcy in which I paid payments for 5 years and that has been paid off now for two years. Having to pay a higher interest rate to get mortgages. My plan it to try and save enough money to purchase distressed properties, flip them , so that I can build up my cash , to purchase more homes to rent.
Port St Lucie is a fantastic market for real estate investing.
Thanks nice to know
56 with no retirement savings
Thanks Phil, as helpful as ever … I have been receiving your emails for a long time, I can say … They are good, valuable and helpful …
Hey Phil, I have a Benefit for all and that is keep watching your videos to learn more great ideas. Really you have the best ideas. Thanks from your neighbour up north.
Great information, I would like to start my own business, but constantly I have some doubts, I need to learn a lot. Your video prompted me to start this sooner, I am getting older and this retirement plan would be very helpful in later life.
GraciS por su intrucciones