High Earner to Business Owner: Why Owning a Small Business Could Be Your Next Best Move
For workers in the U.S., a six-figure income is enough to land you in the top 10 percent of wage earners.1 Looking even higher, the top 5 percent earns an average of $340,000 per year, while the top 1 percent earns an average of $820,000 annually.
Some high earners have conquered the rat race but they also generally enjoy being in the workforce. But they also may find it increasingly difficult to stay motivated and challenged. They may also chafe under a rigid schedule that doesn't allow them as much freedom as they anticipated to enjoy the cash they’ve earned. Read on for several reasons why high earners may be able to benefit from starting their own business.
Wealth Creation
If your skills can command a high salary, they can also be leveraged into the creation of a successful enterprise. You may be able to easily pivot from being a firm's subject-matter expert (SME) to consulting, putting you in control of the fruits of your labor.
Working for someone else at the beginning of your career has plenty of benefits — you'll have access to on-the-job training and infrastructure that lets you learn the ropes without paying the cost of beginner's mistakes.
But working for yourself can make good financial sense once you're mid-career or have picked up the skills you need to offer your services.
Tax Advantages
Business owners enjoy a variety of tax advantages that can help lower their overall tax rate. These include deducting business expenses and claiming tax credits and deductions available to small businesses. You can also take advantage of tax-deferred retirement accounts and other tax-efficient strategies to shield a significant amount of your income from federal or state taxes.
Income Diversification
You don't necessarily have to quit your day job to start a business — and by cultivating multiple income streams, you can provide stability and resilience against unemployment, economic downturns, or other challenges. A business can also help you pivot into full-time entrepreneurship if you eventually decide you'd like to leave the 9-to-5.
Control, Autonomy, and Work-Life Balance
Entrepreneurship provides high earners with far greater control over their day-to-day schedule. Instead of taking orders from someone else or checking your boss's calendar before scheduling a meeting, you can set your own hours to work around your personal and family commitments. You'll also be able to control your workload, whether this means cultivating a client list or focusing your services on what interests you the most.
All in all, starting a new business can be a lucrative and personally rewarding endeavor for high earners.
Important Disclosures:
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.
This information is not intended to be a substitute for specific individualized tax advice. We suggest that you discuss your specific tax issues with a qualified tax advisor.
All information is believed to be from reliable sources; however, LPL Financial makes no representation as to its completeness or accuracy.
This article was prepared by WriterAccess.
LPL Tracking # 552909
Footnotes:
1 “How Much Income Puts You in the Top 1, 5, or 10 Percent,” Unbiased, https://www.unbiased.com/discover/banking/how-much-income-puts-you-in-the-top-1-5-or-10
