The potential for unlimited income
One of the most common investment advantages cited for having your own business, is the potential to earn unlimited income. As well worn this cliché is, it is nonetheless true.
While it is possible to earn millions of dollars from a 9-5 job, the thick competition for the corner office will keep the number of people at this income level to an absolute minimum. As a result, most people who hold jobs will, at best, rise to the top of their job classifications.
When you run your own business, you can earn as much money as your talents, ambition and energy levels will allow. And in theory, you can even create an entirely new industry. Plus the fact that you are at the forefront, will almost guarantee an unusually high income.
Greater career security than most traditional jobs
With the death of labor unions and the now common view of employees as commodities, the job and career security that most workers once relied on has now largely disappeared. Most people will hold several jobs during their careers, and that may be punctuated by periods of unemployment.
When you run your own business, you may never face unemployment. Of course there may be times when your income is low, but you’ll usually have compensation options for this as well. In the meantime, you will have a level of career security that is unknown in most traditional jobs.
Get more write-offs and pay less taxes
When you’re self-employed you can take more deductions, which means you won't be susceptible to such a high tax bill. You can write-off certain ordinary expenses for business purposes — such as business use of a home office, vehicle, cell phone, internet, computer, and many entertainment expenses as well.
This is very different from writing off allowable deductions on Schedule A, because business deductions also reduce your income for Social Security tax purposes.
Numerous retirement contribution options
When you work for someone else, your retirement contributions will be limited to the amount that your employer allows. Depending upon your income, you may or may not be able supplement your retirement contributions through an individual IRA. When you’re self-employed, you can establish retirement plans that have much more generous contribution limits.
For example, while your employer may limit your 401(k) contributions to 10 percent of your income, a self-employed retirement plan such as a SEP-IRA will allow you to contribute up to twenty percent. It’s not hard to understand the impact that will have on your retirement planning.
Greater rewards for higher risks
Let’s say you work for company then discover and develop The Next Big Thing — no doubt they will make sure you are well compensated for your contribution, but the really big profits will (naturally) go your employer.
Now let’s say you make this discovery while working for yourself, you get to keep the profits — all of them. Of course, it’s a bit more complicated than that, but there’s no question you will generally get greater rewards for any innovation when you work for yourself.
The chance to do work you truly love
When people enter a job or new career, they often do so in an attempt to find one that pays better, offers the best combination of security and benefits, or that matches their skill set. But when you work for yourself, there’s a higher chance you will be doing work that you truly love.
That’s one of the primary reasons why people start businesses in the first place.
Job satisfaction is certainly a benefit here, but more significant is the fact that if you’re doing work you enjoy, you will be more likely to do it well, and in turn, earn more money.
Investment in your best asset: yourself
In a very real way, when you create your own business, you are investing in yourself. Oh sure, you may be putting money into property, inventory, equipment, software, and supplies, but ultimately these are tools that will enable you to better run your business.
Creating your own work capacity is one of the best investments you can make.
Over your lifetime, you will undoubtedly earn more money from your occupation, than you will from any investment you will make. In the process, you will be building a tangible asset, one that opens up other to limitless possibilities and opportunities.
Collect a big windfall
When you own a business, you’ll likely have the opportunity to sell it when you are ready to quit and move on — this is especially true for entrepreneurs. Many businesses sell for millions of dollars, and having one of your own will offer the chance to collect a huge windfall — something that will not come around if you’re working for someone else.
That windfall can open up all kinds of possibilities, whether you convert it into an investment portfolio, invest in another business or just take a few years off to decide what your next move will be.
A shot at early retirement
As you can see, having your own business offers a better opportunity for early retirement than a traditional job. The problem with retiring early from a job, is that there is no career related asset to sell in order to help you retire.
You will of course have your 401(k) and any other retirement provisions you've made, but if you are self-employed you will have your retirement provisions and the proceeds from the sale of your business.