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Without a doubt, I feel that business ownership has some inherent benefits over being employed. I have praised and discussed at length the value of autonomy and work-life balance, but I think the finances also heavily favor business ownership. There are very unique tax advantages that being a small business ownership enables.
While the security of a steady paycheck and employee benefits may seem comforting and sometimes necessary, venturing into the realm of small business ownership brings forth a myriad of advantages that can lead to personal fulfillment, financial independence, and professional growth. Let’s explore some of the key advantages of being a small business owner compared to a W-2 employee:
#1 Business Ownership Affords Freedom and Autonomy
As a small business owner, you are the captain of your ship. You have the freedom to quickly steer your business in the direction you desire, making decisions that align with your vision and values.
Do you want to start a Saturday clinic? You absolutely can.
Do you want to take every Friday off? Done. You just have to ask yourself.
Do you want to add a social media intern to your practice? Great. You just make the decision. I did this. That’s for another post, but it has been fun.
This freedom to control your environment from your work home decor, the team you surround yourself with, and even the patients you do business with allows for intangible benefits that are life changing.
Unlike W-2 employees who often have to abide by company policies and procedures, small business owners have the autonomy to innovate, adapt, and pivot as needed to capitalize on emerging opportunities. At my old job, I seriously didn’t even have the flexibility to stop Saturday clinic. It was “company policy.” You guys probably have read my post on work-life balance, but to me, my “time” is my most valuable commodity. I value my time off to spend with my family.
#2 Business Ownership Allows for a High Income Potential
While W-2 employees typically receive a fixed salary or hourly wage, small business owners have the potential to earn unlimited income.
As the architect of your business, you have the ability to scale operations, attract new clients, and increase profitability.
The tax incentives of small business ownership superb in comparison to what is available to a high income W-2 earner. In the IRS world as of 2024, the most valuable tax deduction is a Business Deduction, while the most valuable tax gain is a Long-Term Capital Gain. This right here is the real difference maker. I always recommend consultation with a tax attorney, but there are many legal rules in place that allow you to significantly minimize your tax burden.
Odds are, you and I have paid more in federal taxes than Donald Trump. And you know what, regardless of your political stances, other billionaires (thanks to business ownership and the tax laws), pay less taxes than W-2 employees. There are many ways that individuals lower their tax burden, and many of these are limited to those who have business ownership.
Let’s simplify this: As a small business owner, you are getting paid in THREE different modalities.
1. Equity Building (This will eventually be considered long term capital gains),
2. Your Salary as a producing provider,
3. Your Entrepreneurial Profit, or the remaining gains after overhead, which can be legitimately re-invested into the business to exponentially grow it even further.
As a W-2 earn, you are paid, taxes are withheld, and then able to spend what is remaining.
As a business owner, you are paid, are able to spend, and then are taxed on what is remaining. The switching of orders of when you are taxed is an astronomical financial advantage.
#3 With autonomy, Business Ownership Enables Work-Life Balance:
One of the most appealing aspects of small business ownership is the flexibility it affords. Unlike traditional 9-to-5 jobs, entrepreneurs can set their own schedules and create a work-life balance that suits their individual needs.
For me (Jeffrey Tran), I chose to work a light schedule. I have 2 kids under 4, and I value my time with them. For my co-author (Danny Nguyen), he values growth of his dental practice, so he choses a more traditional 40 hour work week. It was not possible for me to scale back at my old W-2 job. Now as a business owner, I can call the shots.
My goal in life to accumulate experiences. I want to see the world, I want to travel, I want to watch my kids at every golf tournament, be at every soccer match, listen to every piano recital, or just simply be there at every playground playdates.
In contrast, my co-author Danny wishes to retire quickly. Again, small business ownership affords us the luxury of carving our own career path. A small business owner will have the ability to win their time back, either through strong systems or financial independence
Small business ownership provides a platform for creative expression and innovation.
#4 Business Ownership Allows For Innovation
For me to grow my practice, I am tapping in social media – whether its YouTube, TikTok, and focusing on google reviews. I think its fun finding ways to grow my practice. As always, word of mouth is key still.
In our future posts, I will mention a few ways business owners have unique tax benefits. Remember, for something like this – always talk to your tax attorney.
