Entrepreneurship is the American dream—why give all your hard-earned money to the IRS?
Small Business Owners Deserve this 15% Tax Break
Finally realizing that the perfect job does not exist will either drive you to drink or ignite a fire in you to set your own destiny. We prefer the latter. More than 28.8 million people have launched small businesses across the US, and oddly enough, only a small percent survive.
Call us idealistic, but determination, ambition and strategic planning define your chances of success. Get after it with everything you have.
Signs you’re built for this:
- You chose to pursue a career that uses your talents and skills. Rather than just getting by Monday through Friday, you’ve embraced your dreams and your full potential.
- You didn’t quit your 9 to 5 without researching first. You weighed the pros and cons, because you want to do this the right way.
- You want to keep learning. Making the right business decisions, like the tax tips I share here, can either make or break you.
Small biz owners spend the majority of the day at work, but sometimes it feels like we’re working for the IRS.
A growing number of small businesses (I’m talking to you, LLCs) pay the mandatory 25% in income taxes, based on income earned throughout the year. On top of that, your salary is also subjected to the standard 15% in self-employment taxes. That’s a total of 40% of your income handed directly to the IRS.
The average entrepreneur earned $49,204 in 2014. To think that $12,301 was paid in income taxes and another $7,380.60 was paid in self-employment taxes, that left them with just $29,522.40 in their bank account. Factor in operating expenses, permits, licenses, equipment and insurance, and the net profit diminishes even more.
One inexpensive change to help alleviate the financial headache of entrepreneurship is to have your business taxed as an S-Corporation (S-Corp). This tax savings cuts your taxes by 15% because you pay self-employment tax only on your salary income and not on your business income. At tax time, you’ll file a business and personal return, and the profits of your business will not be subjected to that 15% tax.