Being a business owner is different from being self-employed in that as a business owner you hire employees to do the work. That is not to say that the business owner does not work in the business also, but it means that they are getting paid for their effort as an employee in the business PLUS for being an investor in the business.
Business owners can scale up their business, which is not possible for the self-employed. As the business hires more and more employees a fraction of each employee’s bill-rate is the owner’s return on investment for the start-up capital, as well as for undertaking the additional risk of business ownership. As the business grows it generates more and more wealth for the owner. Like being self-employed, as a business owner you have several bosses or customers, but you are also the boss of your employees.
Business owners own systems that allow the owner to be absent for long periods and still generate income. Income diversification and taxes for business owners are similar to those of the self-employed. However, if the business is a corporation (S-Corp or C-Corp), not all income is subjected to the combined 15.3% FICA contribution, as is the case for the self-employed. Wages from working in the business are subject to FICA. The profit that is left after all expenses and salaries are paid is not subject to FICA.
Since being a business owner is where a majority of the rich make their money, what are your plans to generate more income from this quadrant?
- Cash Flow Quadrant
- Employee – Cash Flow Quadrant
- Self-Employed – Cash Flow Quadrant
- Business Owner – Cash Flow Quadrant
- Investor – Cash Flow Quadrant
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