I adore being a freelancer under my own corporation exactly for that reason — all the tax breaks and in some cases, tons of write offs.

It really helps lower your taxable income for the year.

Even better, is that I just take out $20,000 net as dividends from my company each fiscal year, and pay NO taxes on those dividends, and just live off it.

I keep the rest of the $$ in the business and take out another $20,000 next fiscal year, and so on

Kind of like a savings account.

Eventually, I will have to drain the account when we move to the States, but that’s what we’re doing for now.
.-= FB @ FabulouslyBroke.com´s last blog ..How to score free food at McDonald’s … French-style =-.

This is an odd example but I am traveling on contract now. So my corporation pays for my food, living expenses and whatnot. That all deducts from my taxable income and whatever I want to buy for the company — new laptop, etc.. all comes out of the account as well, and I don’t pay the taxes (sales tax, or income tax, as it’s an expense)
.-= FB @ FabulouslyBroke.com´s last blog ..How to score free food at McDonald’s … French-style =-.

But what about the trader in Morgan Stanley who has been racking in $5mm a year (let’s just use this as an example). Sure he will pay perhaps close to 40+%, but he will still net out better than “business owners and self employed who do not earn as much”!

Every CEO of a fortune 500 company pays taxes as employees (yes they do have stock options etc). Bet they are smarter than many “self employed”.

Just as you can make use of the advantages in taxes, it can be overcome by simply making a lot of money as an employee.

Uh, I was trying to be practical.

Here’s another easy way to get rich: be a Major League Baseball player. (There, wasn’t that helpful?) However, MLB only has about 800 openings. Add that to the 500 Fortune 500 CEO jobs, and that still leaves hundreds of millions of us unaccounted for. And it’s those of us remaining who have to maximize whatever situation we’re in.

“Just as you can make use of the advantages in taxes, it can be overcome by simply making a lot of money as an employee.” I don’t know what adverb I would have used in your sentence, but it wouldn’t have been “simply.”

I’m advocating a full-on lifestyle change for people who are already on the fence about staying in their current positions, and wouldn’t mind hearing a little more about some of entrepreneurship’s quiet and immediate benefits.

It’s not just MLB players or being a CEO. It is about being the best in your profession, whether one is a surgeon, attorney, chef or whatever.

Someone who is making say $300,000 a year as an employee is financially better off than a person who does not have the skills to run his or her business and taking home only (say) $60,000 after all the tax advantages. Who is smarter? Plus, most businesses fail after 5 years anyway?

There is no doubt that there are tax advantages to owning a business. But to say that business owners are smarter than employees (am not so sure).

Nice post. Thanks for the information.

According to the research supporting the book The Millionaire Next Door, someone is four times more likely to become a millionaire if they are self-employed.

I have a questions about incorporating out of state. Do you have to file income taxes in both states?
.-= Bret @ Hope to Prosper´s last blog ..Investing in a Shaky Market =-.