But there’s still another important benefit for you. By incorporating, you can greatly reduce the self employment tax. That’s because if you do business as a sole proprietor, you pay self employment tax from the first dollar you make. That’s not so for corporations. This simple strategy is overlooked by about 90% of small business owners.
Yet by shifting into the other, more favorable tax system, you can reduce your taxes into the teens or even into single digits. Yes, that means you could be paying only 5%-15% by knowing and using some simple strategies. Strategies that the wealthiest people in America have been using for decades. This can save you $10,000 – $50,000 per year in cold, hard cash.
Taking a close look at these tables is very revealing. For example, a corporation with a $50, 000 net income pays only 15% tax. Yet, an individual making the same $50,000 has to pay 25% tax. If you think about it, that’s a double whammy because they get almost no deductions, plus they pay a higher rate.
Next, business owners have hundreds of deductions available to them instead of the relative handful for W-2 employees. In fact, we have identified over 300 individual expenses you can write off (most of them are 100% deductible). Again, fully utilizing these deductions can put thousands of dollars in your pocket.