Let’s explore together.
An Opportunity to Apply Own Ideas and Concepts to Contribute to Humankind’s Effort
More people than we imagine have had an idea that could change others’ lives (including their own) in a positive way if they followed through, believed in themselves, or found the necessary support. One could argue that to convince anyone, the dreamer obviously would have to value it first, right? That sounds logic. The worst in such a situation relates to any thought that has ever been kept in those individuals’ minds.
On the other hand, there are the risk takers, those who can gather enough courage to add to their self-confidence to accomplish their project. While many consider entrepreneurship as a fulfilling path in their lives, it also is one way to do their part in the world with positive actions. Let’s think about several impacts that entrepreneurship makes as part of the humankind effort.
The entrepreneur creates work for himself. That is one less person who depends on others to provide for him. That is one more person who decides to be productive instead of waiting passively for circumstances to turn the way he wishes as if they would alone. Actions must be part of plans or immediately follow when anyone means business. This is a literal statement (smile).
The entrepreneur may create jobs for others whether his family members, or people in his community, and even remotely as these days people collaborate while they are apart. Branches of the same company operate in various locations, too.
The entrepreneur might be the person who creates a solution out of frustration for not having found a service or a product. The best part of this situation is that when this happens, it also is a relief for others around and far. One of the best business ideas ever is to solve a problem for many. Isn’t that one perfect opportunity to apply own ideas and concepts to contribute to humankind’s effort!
Tax Advantages as Long as the Accounting is Properly Done
It does not matter in which country or which accounting system that gets adopted, the rule remains the same. What happens with taxes when we are in businesses? Well, the way to think about them goes beyond having to pay dues to the government on profits that the business generates. It is better to make taxes an ally because it is better to have money and having to pay taxes, than not having money at all. Which one would you choose? Enough talking. Here is the reasoning about tax advantages that business owners benefit from. The situation for this category of people is different to that of an employee who sees taxes taken out of their paycheck so he can receive the net amount, not having to worry about paying taxes to the government (theoretically). Let’s compare so it be clear what the perspective on the matter is.
When an employee, say, earns 100 dollars. On every 100 there is an amount taken out for the government as taxes. We call that a percentage (on every hundred, there is a fixed amount). We are going to choose easy numbers so we can do mental calculations as we read. If the employee’s tax rate is 10%, every time he earns 100 dollars, he pays 10 dollars as taxes. Then, the amount of his check is 90 dollars. This is one very simple way of looking at tax payment directly from the gross amount of a paycheck (without considering here, any other type of direct contribution at all). So, employee earns 100 dollars gross amount, and pays 10 dollars from the gross amount of his salary. He gets 90 dollars net to spend.
When the business man sells any service or product and that on 100 dollars, he has to pay a 10% tax rate, how and when does he pay? This is very different, indeed. The business man does not pay his taxes right away, or even before coming in contact with the money that he earns. He does receive the full 100-dollar amount. He may use part of this money recently earned to spend on operating expenses such as electricity, internet, telephone, ink, paper, employee wages, magazine subscriptions that help with his trade or profession, marketing, legal fees, accounting, etc. If the total is 70 dollars on every 100 dollars revenue, then, and only after that he counts his profit (the money left from spending for the business), which equals 30 dollars in this example. The profit, 30 dollars, is the margin that the business records after spending 70 dollars from the revenue, 100 dollars. The gross (gross because it the amount before tax payment) profit amount, or 30 dollars, is the amount the businessman uses to calculate the 10% tax amount he owes the tax department. Here is a rough calculation we can use to find out how much the businessman will pay. 30 dollars * 10% = 3 dollars, tax amount to pay. The net profit of the business will be 30 dollars – 3 dollars = 27 dollars. If the business is a start-up and that the businessman takes a salary at this stage (to be sure he gets paid, it is best that he makes his own salary an expense to the company just as he would have to pay his employees no matter what, he also must get paid), then the whole net profit of 27 dollars belongs to the business. How the businessman allocates the net profit of the company is another topic completely beyond the scope of our current reasoning.
Let’s compare both individuals’ amount earned, taxes paid, and net revenue knowing they earned the same gross amount and are in the same tax bracket. Click here to see a table that illustrates revenue, tax, and spending for an employee and a business owner comparatively.
Your Company can Take Care of You, your Family, and your Community
It has a much broader reach than you could ever dream of by yourself. You company can expand, exist in many places at once, last a much longer time through decades and centuries beyond generations if you set it up so it be that solid and flexible at the same time.
How can your company expand? Once, it attract enough business deals or sell any products to require that you hire people to help around. You should never grow too fast, meaning that you should give yourself the means to become an employer when you have the necessary system in place for people to be able to replicate processes and produce results for your customers that go beyond acceptability. Whether you are ready to open your business with employees from day one, or that you must start as a solopreneur, it is okay, as long as your control system is in place and that you are ready to manage people, besides orders and the business itself. Of course, you hire to make more money. Your numerous employees should bring in each more money and together, too, otherwise, you hired too many, which is why it is good to know what your numbers are like and consider your accountant to be your friend. You have one so you can a good handle on your business finances. Use that professional service extensively. Besides, you need to let your accountant know your plans so he can tell you what he notices, what areas are really profitable, why you should not have one or two big customers you rely on too heavily, etc. You do not just expand because you want to or feel that you should. You must plan the expansion of your company, remembering, that along with hiring employees, another way to expand is by opening new physical locations or new virtual selling points.
The way a company can take care of you, your family and your community is because it has a high chance of existing a very long time through decades and centuries beyond generations if you set it up, so it be that solid and flexible. In other words, a company does not have to close because of retirement or death. One of the advantages of founding a moral entity gives the business owner a chance to invest in an entity that exist independently. Companies that are moral entities and separate from their owners are also considered moral persons (they do not have a biological body or a mind of their own) but they do have the rights to invest, own assets, employ people. They also have their own bank accounts, and many other privileges. As a different person from the owner, the company that is a moral entity can take care of its owner, its owner’s family, and its owner’s community because it can become a source of wealth creation, of jobs for people, and outlast most through centuries. How to make a company solid and flexible is a broad topic in itself and will not be touched upon in this blog. However, remember how important it is to make your company a solid one, from the beginning, that can adapt in the future.