Have Fun, Make more Money, and Pay fewer Taxes
You may be able to pay less in taxes while making extra money
Disclaimer: The following is our understanding of taxes based on what we learned when we were active in
the investment world and is presented here for the purpose of educating and enlightening you. Please DO NOT make any tax related
decisions based on this information. You should always solicit the opinion of a trained tax individual who is up-to-date with
the most current laws, ordinances, and regulations.
The benefits of owning a business
Despite all that governments get wrong regarding the economy, taxes, etc., they know that business growth is the lifeblood
of the economy, so our tax laws treat business income more favorably than that work income, as seen below:
Tax Code 1: (W-2 employee)
- You earn money
- You pay taxes on what you earn
- You spend what is left
Tax Code 2: (businesses)
- Business earns money
- The business covers its expenses
- The business pays taxes on what's left over (profits)
For example: We had a business convention that required us to travel from Tucson, AZ to
Louisville, Kentucky. Since two of our children that are involved with the business, we made a small detour
through Colorado Springs, CO, and Quincy, IL to meet and talk business with them. We then proceeded on to
New Albany, IN, where we stayed with a son while we attended the convention.
The total round-trip was about 4,000 miles and involved two nights in hotels. However, since this was based
on a LEGITIMATE business and because we did legitimate business along the way, we were able to deduct 53.5 cents
per mile (about $2,140), the two hotel stays, and part of the cost of our food on our tax return!
The cost of doing businesses
While it makes financial sense to have a legitimate business, it can be very expensive to start or acquire one.
For example - buying a franchise like McDonald's will cost at least a million dollars, plus you'll also need
$750,000 in liquid capital.
Starting your own brick and mortar business is going to require the acquisition of a building (purchased or rented),
materials or inventory, utilities, fees, etc. - which typically represents tens or even hundreds of thousands of
dollars.
Working as a independent tradesman, such as an auto mechanic, plumber, or hair stylist requires an investment of
thousands of dollars in tools and equipment.
Starting a home-based business is typically cheaper, but the business needs to be legitimate enough that the IRS won't
take an interest in you. Even in a home-based business, you will have to invest in some kind of product or materials and
you will probably need a computer and to pay for various programs and services.
There is a class of legitimate businesses, typically home-based, that have relatively low startup costs. They tend to
have a simple approach to hiring and firing "employees", payroll, taxes, and other HR issues that, in our opinion, is
genius. This is because everyone working with the business is actually a 1099-contractor, which means that they end up
building a team of sub-contractors instead of employees.
These businesses are typically known as Multi-level, Pyramid, Network, Referral, or Direct Marketing businesses amd
they have a bad reputation!!
The Good, the Bad, and the Ugly of Multi-level, Pyramid, Network, Referral, and Direct Marketing Businesses
Like just about everyone else, we had a bad opinion about this class of businesses, which have earned their bad reputation for good
reasons because a multitude of bad actors have found this particular structure amenable to enticing people into their "home-base"
business with all kinds of promises and then taking advantage of them. You may even know someone who has had this experience.
However, when we took the time to think about it, we realized that there are individuals in
EVERY kind of business and
profession that have taken unfair advantage of their "employees" and customers. We began to wonder if this business model was as
bad as we had presumed it to be.
We realized that the general reputation of lawyers, mechanics, car salesmen, insurance salesmen, and politicians are as bad as
that of MLM's. Isn't it true that every type of business and profession has had its share of cheats and scammers?
Then we realized that we personally know people in all of these professions who are ethical and honest. So, is it fair to say
that
EVERY lawyer, mechanic, car salesman, insurance salesman, politician, or Direct Marketer is trying to scam us just because
others have? Therefore, it would seem to be illogical to assume that there are no viable Direct Marketing companies through which you
can economically and legitimately take advantage of Tax Code 2.
We have found more than one. So, just like you need to do your research before buying a car or hiring a lawyer, you need to do your
research before joining a Direct Marketing company.
(If you're interested, contact us up above and we'll give you the name of the best one that we found.)
