Many say start a side business and then when it makes as much or more money than your day job, then quit. I say phooey! This advice mainly comes from people who like to “play it safe”. I am not condoning going into work tomorrow and quitting, but I do want you to think outside the box a little. I have a couple activities I used to consider being hobbies that are now more than that. Ironically, they are also two of the most expensive items you will ever purchase in your lifetime. One is a house and the other is a car. I will start with cars since that is my bread and butter.
I got my Occupational License from the California DMV the middle of last year. It gives me the ability to buy from anywhere, but can only sell in the state the license was issued from. I always wanted to become an automotive dealer, but didn’t know how. After talking to a friend that did it I am glad I went through with the training! It requires taking a two day, six hour class, filling out a plethora of forms, and passing an exam. Very much like getting a Real Estate license (also an OL). The hardest part was filing out the forms correctly! The next hardest part was waiting six months to receiving the documents! Our state governments require us to get these licenses since it shows our intent to hold the utmost moral and legal standards in the industry we choose to do business in.
At the very least I now have a dealer plate to drive my inventory with which can be used for both business and personal use. Even if you don’t aspire to own a retail dealer lot that can hold a hundred cars at a time, buying cars from auction at wholesale pricing is a no-brainer. You can even help your friends and family by brokering the deal. I pay roughly $200 a year to to the DMV to maintain my license plus $300 for the required bond so about $500 total. There are other fees involved like commercial insurance, also known as liability and garage coverage, but I don’t do enough volume to maintain that coverage so I usually put it under my personal insurance.
Real estate is another money maker that also requires class and to pass an exam to prove proficiency. I have not done this yet, but that hasn’t stopped me from acquiring two rental properties so far. The benefit here is being able to represent yourself in buying or selling transactions so you may cut the cut that normally an agent that works for you would get. An RE agent can also make a decent living being strictly a listing agent for REO’s (Real Estate Owned) properties and doing BPO’s (Broker Pricing Opinions). This is what I plan to study for next when time permits.
So why start a business?
There are couple reasons. One is for tax breaks and the other is to shelter income. Take this example. As an employee of a company, you receive a W-2 from the company you work for. All the money you make that year gets passed on to your personal taxes. If you were to instead start an LLC (Limited Liability Company) with at least two managing members, then only 50% of the money (unless a different percentage was agreed upon in the operating agreement) made through your company will be passed through which means you will only be responsible for half the taxable income. This doesn’t even touch on the additional benefits of filing as an LLC that is considered a Subchapter S corporation for tax purposes.
Do you own a business too? Sound off in the comments below with the industry it is in and how you came about starting it. Contractors count too as that is a form of self-proprietorship!