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Have Fun, Make more Money, and Pay fewer Taxes

You may be able to pay less in taxes while making more 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 rules.

The benefit of owning a business

Because Governments know that business growth is the lifeblood of the economy, tax laws treat business income more favorably than that from employment as seen below:

Tax Code 1: (W-2 employee)
  1. You earn money
  2. You pay taxes on what you earn
  3. You spend what is left

Tax Code 2: (businesses)
  1. Money is earned
  2. The business covers its expenses
  3. Taxes are only paid on the profits

For example: We had a business convention that required us to travel from Tucson, AZ to Louisville, Kentucky. Since we have two 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 all for 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 is 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 often 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. You may also need a computer and to pay for various programs and services.

The good news is that there is a class of legitimate businesses that have relatively low startup costs. They have an approach to hiring and firing "employees", payroll, taxes, and other HR issues that is genius. This is because everyone working with the business is actually a 1099-contractor, which means that you end up building a team of contractors instead of hiring employees.

These businesses are typically known as Multi-level, Pyramid, Network, Referral, or Direct Marketing businesses.

Multi-level, Pyramid, Network, Referral, and Direct Marketing Businesses

Unfortunately, this class of businesses typically has a bad reputation because there have been companies that have used this particular structure to entice people into a home-base business that took advantage of them. You may even know someone who has had this experience.

However, it can be said that there are individuals in every kind of business and profession that take unfair advantage of people. Isn't the general reputation of lawyers, mechanics, car salesmen, insurance salesmen, and politicians that of dishonesty? Isn't it true that every type of business and profession has had its share of cheats and scammers?

Isn't it also true that you personally know someone in at least one of these professions who is ethical and honest? Is it fair to say that every lawyer, mechanic, car salesman, insurance salesman, politician, or Direct Marketer has to be trying to scam you 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.

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.

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