Darwin is the author of Darwin’s Money where he takes an evolutionary approach to money. In this rapidly changing world, there are always new opportunities to save money, make more money and expand your horizons.

If you’re anything like me, you’re constantly thinking about different business ideas and models that could work out. Through either addressing an unmet need or making something better or inventing the next Facebook, you could be deriving a nice side-income outside your routine day job and have an eventual payday down the road when you want to quit or move on to the next thing. I just watched The Social Network the other night and it put me in the mood to start thinking more about business startups again. I’ve split out a few ideas and ventures I’m involved in by “Old Economy” and “New Economy”. They can both earn you a handsome income and even turn into a full-time gig. The New Economy ventures tend to be more “Scalable” though.

Old Economy Side Businesses

Real Estate - This is one of the most common side-gigs people employ to diversify their assets and income. We all know someone who owns rental real estate somewhere. Some of my co-workers just own a single dwelling, while another friend of mine has blown up into multiple apartment complexes on a college campus. It’s worked out quite well for him since the competition is limited, price increases are virtually guaranteed and protected from recessions, and he pays a property management company to handle everything from tenants to repairs.

One of my financial regrets is that I’ve never gotten around to buying a rental property. I entertained it a few times, but always became distracted or it was a bad time. If something landed in my lap and I had the liquid cash, I’d consider it. For now, I’m focusing my time on some of the new economy ventures below.

MLM – You’ve probably heard the jokes about Amway, or you’ve been approached by a friend or co-worker with an “incredible business opportunity” to get in on the ground floor of a revolutionary new business model. This is called multi-level marketing where one sucker has to sign up more suckers beneath them in order to keep the pyramid going. In some cases, they’re actually selling something with some value, albeit at an inflated price (to pay associates and run money up the pyramid).

I’ve known probably a dozen people now that have joined the likes of ACN, ShopToEarn, Amway and other outfits. To date, none of them are active any more. The income dried up and I suspect they grew tired of harassing their friends and family to sign up for scammy conferences at the local Howard Johnson. We do have one friend who sells jewelry through Lia Sophia. She actually makes a few grand a month. She pretty much hosts shows every weekend and is constantly trying to sign new people up and book new shows. She works hhard at it – selling overpriced fake jewelry. I’d have to say she’s the only “success” story of the bunch. But she seems to be the exception rather than the rule. I dunno. I could never do it. If you have it in you to make selling a scammy product or service your life, then more power to ya. MLMs have been around for decades and they always will be. But like drug-dealers and musicians, there are millions chasing the big-time, but only a couple ever make it to the top.

You’ve Got Skills - Surely, over your lifetime you’ve accumulated some sort of trade or skills that could earn you extra money on the side, right? This could be anything from playing piano at weddings to photography to computer repair. This isn’t an optimal, scalable way to make money on the side since your income will ALWAYS be proportional to the amount of your personal time you spend on jobs. But if you need additional income, it’s a means to an end.

New Economy Side Businesses

Blogging – You’re Already Doing It! Just about everyone’s blogging these days. You might not even know it. By simply using your Facebook profile to share your opinions and life experiences, you’re micro-blogging. Sometimes, I see people using their Facebook profile to share tips and links like a Hot Groupon deal or pushing their scammy MLM business (argh). Now they’re monetizing. The next phase is what I do – blogging routinely via a formal blogging platform like WordPress. My blogs have led to some freelance gigs and now I have friends referring me to help others out with starting a website and SEO. See that progression? What might have seemed like a “nobody makes any money” boring blogging venture has fanned out into all sorts of additional income opportunities. My primary constraint really, is just time!

Outsourcing - With US costs at 5-10 times what developing world costing is for equivalent quality and talent, why would anyone pay US wages unless they really had to? Companies are moving more and more in this direction and the web has virtually guaranteed all services will eventually be sourced to the most efficient locale. The problems have often been time zones, poor quality, lack of visibility and complacency. But companies are under pressure now to continually reduce costs.

My friend and I recognized this need. He’s a Civil Engineer with a PE and I can run a site and attract traffic. He happens to have cousins overseas who actually do great CAD work (Computer Aided Design). So we brainstormed and came up with what we feel is a brilliant business model. We’ve started a CAD Outsourcing venture. Basically, instead of paying $50-$70 to a US-based engineer, simple CAD services can be sourced through our outfit for a fraction of the price – around $12 starting. Everyone wins! They get to work through a licenses professional engineer in the US to get the job quoted, we then send the info to our group of engineers in the Philippines, they do the work, we provide the content back tot he customer and everyone wins! The engineers are making more with us than they were at their old jobs, the US firms are paying a quarter or less for their services, and we collect the spread between our costs and income.

These same concepts could be applied to dozens of business ideas that are probably spinning around in your head right now.

What’s Your New Biz Venture?

For many couples who want to start families, it’s getting increasingly harder to do so without sacrificing a lot financially.  Education costs for kids are soaring and it now takes two incomes to afford a home in many big cities rather than just one 30+ years ago.

The nagging question on a lot of couple’s minds is, “Can we afford to have one person stay at home to raise the kid(s)?”  An equally common question is, “Can we afford to have kids at all?“  It’s kind of sad that many well-educated and well-paid couples have these thoughts.  Part of the reason why I’m working so diligently on building up Financial Samurai and Yakezie.com is because my spouse or I would like to have something to do if one of us decides to one day stay at home and raise a family.

After a couple of years blogging, I know that making money online is possible.  Not only that, it gives the stay-at-home spouse something exciting to do for several hours a day, in addition to raising the kids.  Working from home while being able to raise a family is an enormously attractive proposition and I’m excited to present another way to do so!

A KILLER PRODUCT TO HELP GET US THERE

So many people have said you don’t make money from your blog, you make money from a product.  Well, that’s not entirely true, since you clearly can make good money from advertising from your blog, especially if you are in a niche such as personal finance.  That said, I do believe that having a product to sell is definitely necessary to take your online income stream one step higher.  A blog + a product is a winning combination.

Steve Chou, Yakezie Beta Class Member, blogger at My Wife Quit Her Job has created a fantastic step-by-step course on How to Start a Profitable Online Store today! I’ve followed Steve’s blog for a couple years now, and what Steve and his wife have done is exactly what I and many couples want to do: have one spouse work at home to take care of the baby and create an online business that is automated and replicates one’s entire day job income!

I have always wondered how the Chou’s were able to create an on-line wedding store and make over $100,000/year after only one year, and now I know.  Thanks to their new guide, Steve goes into step-by-step detail of finding your niche, setting up a legal business entity, marketing, and SEO to name a few.  Some of my favorite sections were how to determine the best pricing for your products, understanding the market place, and how to create a shopping cart on your site with a great explanation of all the different options available today.

There’s a LIVE Telecast with Steve tonight at 7pm!

When: March 2, 2011 from 7-8pm PST

Where: The Profitable Online Store Classroom

Why you should tune in: Steve will provide some easy to follow introductions on the key benefits of the course.  He’s there to answer any of your questions and help you get started.

ABOUT THE COURSE

What you will learn:

• Why It’s Easier Than Ever To Start An Online Store
• Why There’s Very Little Monetary Risk Involved In Starting An Online Business
• Dispelling The Myths Of Business Ownership
• Why Setting Up A Website Is Easy Even If You Have No Technical Knowledge
• How The Create A Profitable Online Store Course Will Help You Run A Successful Business

Course Tiers:

Deluxe Package @ $299

• Membership to the course
• The course materials in PDF format which includes 9 modules and over 75 lessons
• Live webinars and telecasts where I will present the course materials and answer your questions in real time
• 24/7 access to all archived webinars so you can review the materials at your own pace
• Spreadsheets to determine your profit potential
• Worksheets to apply what you’ve learned
• Checklists to make sure you don’t miss any details prior to launch
• Questionnaires to you help you make the hard decisions

Basic Package @ $199

• The course materials in PDF format which includes 9 modules and over 75 lessons
• Supporting materials

SUPPORT GROUP TO HELP US SUCCEED

I’m really pumped about what Steve has to offer and will be implementing his instructions over the coming year to build yet another income stream to my portfolio.  Even if you don’t plan to be a stay at home parent, wouldn’t it be nice to build another solid stream of income on the side?  I’ve currently got 5 active income streams as you read earlier and I cant wait to build one more.

Remember, action is what makes things happen, not day dreaming.  $199 or $299 is nothing compared to the thousands of dollars you could make over the coming years.  Buy the product here and let’s start getting busy!   I’m a proud affiliate of this product having spent the past two weeks reviewing all the material.

I’m a firm believer in doing things together so we can regularly push each other and hold ourselves accountable.  I’ve created our own support group in the Yakezie Forums for those who’ve purchased from here or via Yakezie.com.  I think it will be a lot of fun and will raise the probability of success as we help each other succeed!  Furthermore, since Steve is a member of the Yakezie Beta class, I am sure he will be more than happy to help us answer any questions we may have as well.

Remember, to check out the live telecast at 7pm PST on Wed, March 2.  You can buy the product beforehand so you can get a head start and ask Steve some questions at 7pm PST.  Or, you can wait until after the telecast and then buy.

Cheers,

Sam

According to the dictionary, “entrepreneur” is a term applied to a person who is willing to launch a new venture or enterprise and accept full responsibility for the outcome.  What the hell does that mean?  We all start things and accept responsibility for the outcomes, unless of course we don’t because we expect handouts if things don’t work out.

As far as I can tell, many of us want to be entrepreneurs because it sounds so sexy.  We dream of starting the next multi-million dollar company, get recognized by Entrepreneur Magazine, and earn a fortune in the process.  Yet, this type of success is unlikely for many of us.  We don’t have a great business plan, we run out of capital, we don’t have charisma, and we lack the perseverance to keep on going.

THE PROBLEMATIC ISSUE

Perhaps one of the biggest problems we have is that we think in an “all or nothing mentality“.  If we don’t have instant, incredible success we call ourselves a failure.  On the flip side, there are many online entrepreneurs who claim they are killing it, and that you too can make a fortune online if you just buy their eBook.  I love that circular pitch of selling information products that teach you how to sell information products so you can make money online.  It’s brilliant, because people keep buying it, otherwise there wouldn’t be these types of products flooding the market if people didn’t.

Making money off of the minimalist movement is particularly peculiar.  Can you believe that people actually pay money to buy a product on how to lead a minimalist lifestyle?  Seriously, just sell all your belongings, live as sparsely as possible, and you are a minimalist!  Online entrepreneurship is great, but without transparency of income and expenses, it’s hard to take anybody seriously.

I really want you guys to be careful when following the advice of an online entrepreneur who shows no transparency.  There is a reason for such opaqueness.  The reason is because they are making a laughably minuscule amount of income.  You know what I’m talking about.  The guy who makes $30,000 a year by teaching you how to sell something to make $100,000 a year.  If you can trick enough people to subscribe or pay, you will get there!

SOME SAY IT’S A STATE OF MIND

Many of us are all entrepreneurs based on the official definition of the word.  Yet, how many of us are “real entrepreneurs”? Some say being an entrepreneur is a state of mind.  An entrepreneur has conquered insecurity and plans to stick it to the man.  That’s nice.   Whenever you have someone who thinks their way is superior, you know there’s a problem.

If you’ve actually built something from nothing and depend on the venture as your main source of income, then I say you are a real entrepreneur. However, there’s one tiny thing that is important to point out.  If you aren’t making any money and heaven forbid, lose a lot of money over the years, maybe you aren’t a real entrepreneur?

All of us can do absolutely nothing and make no money, hence you are no different from any of us who do nothing!  In fact, if you are a loss making entrepreneur for an extended period of time you might be much worse than anybody who does nothing!  Oh, I can feel the annoyance of this fine logic now.

It’s easy to look down upon the 9-to-5 community as an entrepreneur because in their eyes, 9-to-5ers don’t take enough risks.  Sometimes, they forget that 9-to-5ers might like a steady paycheck, health care, and security.  Perhaps one is taking plenty of risks with their career within their organization?  That doesn’t matter to the entrepreneur, because anything other than complete risk-taking is frowned upon.  That’ OK with me.  What we need to understand is that it’s very difficult to become a successful, real entrepreneur.  Hence, let them vent their frustration.

THE HURDLE RATE TO BECOME A REAL ENTREPRENEUR

There’s too much cream puff fluff.  I don’t consider anybody a real entrepreneur if they cannot make the average per capita income of their state within 3 years.  That’s right.  If you live in California and make less than $42,000 a year from your entrepreneurial activities, you aren’t a real entrepreneur.  The hurdle is $46,000 in New York, but only $30,000 in Mississippi.  If you live outside of America, use the per capita income of your country as a benchmark.  Seriously, this is the bare minimum of what can be considered an entrepreneur, especially given all the taxes, healthcare benefits and other expenses you must provide for.

You can be an entrepreneur in the making, but after at most 3 years, if you are not making the average per capita income of your state, you may want to give up and get a day job.  And while working at your day job, if you still have the entrepreneurial itch, do both!

You aren’t doing your future any favors by spinning your wheels and keeping a failed business alive for a prolonged period of time.  So many of us online think we’re entrepreneurs.  In reality, we’re just hobbyists doing things on the side and collecting an allowance.

Readers, what do you think is the definition of a real entrepreneur?  What is the definition of a successfully entrepreneur (no cream puff answers please)?  Is there an income level that should be reached before one can consider themselves an entrepreneur?  Do entrepreneurs need to be profitable?  If not, then aren’t we all entrepreneurs?

Regards,

Sam – “Slicing Through Our Delusions“

I can’t help it.  I just have to wake up by 6:15am every morning because life just feels too darn exciting!  In fact, I woke up this morning at 4:30am, but that was thanks to my thumping pet rabbit.  Do you remember the feeling during Christmas eve as a kid, when you were so excited you couldn’t sleep?  As a result, you’d sneak down and wait in the middle of the night to see if Santa is coming?  You even tried getting a sneak peak by pealing back a corner of the present to see what you’ve got!  That was me growing up, the constant rascal.

Somewhere in the middle of adolescence and adult hood, I lost that excitement.  Perhaps it was the constant pressure of trying to get good grades so I could get a real job and not have to go back to McDonald’s.  I recall dreading my 8am multi-variable Calculus class during college.  Surprise, surprise, I dropped the class and signed up for Golf III (advanced level baby) instead!  That was when I began to rekindle my excitement as a kid again.  I was learning something I just loved, and couldn’t get enough.

FINDING THAT DESIRE

As soon as I wake up, I can’t wait to check my e-mails and see what’s going on in the world.  Part of the reason why I’m looking to meet more people internationally is because they are up when the East Coast is sleeping.  As a result, I’ll get to interact more with people in the evenings, which is my free time.

There’s very little that makes me happier than building relationships.  In fact, dare I say nothing makes me happier than the relationships we have with our family and friends?  Money is nice, but money is even better when we can spend it on others to help make them happy.

Just the other day, I spent hours painting, caulking, and cleaning our rental apartment.  I went out and bought a new shower head, fixed some fixtures, and even got the carpets professionally cleaned.  All was worth it when my tenant came in and said, “Wow!”  She was smiling from ear to ear, and commented on how sparkly everything looked.  Now that’s gratifying!  We got to talking about her life and her aspirations.   Relationships with clients can be wonderful.

MORE TIME CAN HELP YOU SUCCEED

One of my stretch goals is to try and wake up the same time everybody wakes up on the East Coast (8am EST assumption = 5am PST), and go to bed three hours after them (assumption 12pm PST/3am EST).  In essence, I’m trying to build in 3 more hours of time into my day.  All else being equal, if you have three more hours a day than your competitors, you will undoubtedly win and run circles around them frankly.

Three hours more a day is 90 hours more a month to work on your projects, be them personal projects or work projects.  Let’s say you can only stay awake for one more hour a day.  Don’t you think you can still do amazing things with 30 extra hours a month?  You bet your buns of steel you can!

There’s a large group of people out there who just love to sleep in, myself included!  There’s something so special about hearing the alarm clock, and knowing it’s Saturday and you don’t have to get up.  What I’m saying is that if you find something you just absolutely love to do everyday, you won’t need that alarm clock and will bounce right out of bed every single morning.

LOOK FOR THAT SOMETHING THAT HAPPENS WHILE YOU SLEEP

Practice waking up earlier for one hour a day, everyday for the next month.  You might feel a little groggy in the beginning, but that will start to fade as you focus that extra hour on doing whatever it is you love.  When you start seeing progress in your activity, you’ll discover that waking up early gets easier and easier until you just automatically get up!  Trust me on this folks, you can move mountains with just one hour extra a day for the rest of your life.

Have a fantastic Christmas and Happy Holidays!

Regards,

Sam

Over poker one night, we got to talking about what we always talk about: entrepreneurship.   Out of a table of 10, four work at start-ups, three are at Google, one is a high-tech lawyer, one works as a medical correspondent for CNN, and then there’s me, a hybrid.  I had just got done working on Yakezie.com for three hours after working an 11 hour day, and needless to say, I was a little bit tired.

I love going to Friday night poker mainly because I get to bounce ideas off of really smart and incredibly hard working people.  When I hear stories of one start-up player working from 7am to 3am every night for two weeks straight to launch a product offering, I get pumped.  When the Venture Capitalist player recounts his firm rejecting a pitch by Tim Westergren, Pandora’s founder in 2008, I wince, but daydream in amazement.

THE QUESTION

Down about $185 for the evening, I started lamenting what the money will cost in side hustling.  A couple hours of work at least, I thought.  How depressing, thanks to my opponent’s King on the river against my pocket Queens!  I quickly shifted to more pleasant thoughts about the future of start-ups and posed this question in between hands to my fellow sharks:

Would you rather make $15-000-$30,000 a month and “work” only 2-4 hours a day?  Or, would you rather make minimum wage working 12-18 hours a day for two years with a 25% chance of selling your business for $100 million dollars and netting yourself a cool $25 million?  If you don’t, all you are left with are your experiences.

I purposefully left the question open-ended to see what the various responses would be.  Already, one was doing math equations of what the capitalized value of $15,000-$30,000 a month would be based on an expected life expectancy compared to the expected value of the big payout.  After all, we calculate expected value all the time in poker.  Instead, I encouraged my fellow players to stop calculating and go with their gut.

Surprisingly, or perhaps not to be unexpected, every single one of them chose option 2: the big potential payout.  A couple of the entrepreneurs have a $100 million dollar buyout goal in mind, which I find somewhat delusional, but maybe not with Zynga, Youtube, and a host of other companies getting valued in the billions!

As the night wore on, I finally heard someone take the other side after losing $690 in a $2,600 4-way pot when his straight got flushed out.

“Well, $30,000 a month for working only a couple hours a day isn’t so bad.  I think I’ll go with that.”

Readers, what path would you choose?  Go with your gut!

Regards,

Sam

I’ve been recently thinking about incorporating a business and wondered what steps I should take to make it happen.  Conveniently, Greg McFarlane from Control Your Cash wrote a terrific guest post on being an entrepreneur and advice on what type of business classification one should choose.

At the end of the post, I’d love to hear your thoughts on which type of incorporation is best and how much you spent registering your business and so forth.  Hope this post helps those who plan on pursuing their entrepreneurial dreams!  Cheers, Sam

If you’re about to go out on your own and create a business, congratulations. Once you’re here, on the side of the entrepreneurs and others who make the economic engine run, you’ll wonder why you didn’t start sooner. Salaried employment is great for some people, less so for others.

But if you’re going to do it, do it right. There’s more to creating a business than buying a license (you do know you have to buy a license, right?) and creating a website.

Most general contractors, plumbers, electricians, gardeners and graphic designers who set up shop don’t even think about what legal form their new business is going to take. (That’s legal “form” as in “organization or arrangement.” We’re not talking about a piece of paper you have to fill out, at least not directly.)

Making the wrong decision about legal form can cost you serious money even before the first sale. While you might have learned the terms “sole proprietorship” and “corporation” in high school, back when they meant nothing to you, now would be a good time to determine what they do mean and how organizing your business under one or the other can hurt or hinder you.

Don’t Go The Default Route

Unless you specify otherwise, your new business will operate as what’s called a “sole proprietorship” – meaning there’s no practical distinction between you and the business itself.  The “advantage” to a sole proprietorship is that it costs nothing to start, aside from the aforementioned business license and related fees. Kind of like how it’s an “advantage” to not have auto insurance, because of all that money you’ll save by not paying a premium.

You don’t want to do business as a sole proprietor. Maybe 150 years ago you did, if you made horseshoes and paid your apprentice under the table. Since there’s no legal difference between you and the business under a sole proprietorship, you’re on the hook for everything. Everything. If a customer sues an employee, whether it’s justified or not, you could be legally responsible for far more money than your company’s worth.

You want to spend a little money before opening and incorporate. Before you hesitate at incurring upfront out-of-pocket expenses, understand that it’s forward thinking like this that separates the successful from the merely busy. And once you incorporate, you’re not just a business owner, you’re a corporate shareholder with all the rights that affords.

Incorporate

To incorporate, you have to spend money filing with a state. Not “your” state”, “a” state.  Just because you’re headquartered in New Hampshire, that doesn’t mean you can’t incorporate in Montana.

Ever wonder why the catchphrase “a Delaware limited liability company” found its way into the vernacular? Not “some”, nor “many”, but most American publicly traded corporations are incorporated in The First State.

There’s a good reason for this. Under U.S. law, your corporation operates under the laws of the state in which you’re incorporated. This makes sense, otherwise you could be subject to 50 different sets of state laws, which isn’t exactly efficient. Delaware protects shareholders (you’re a shareholder, remember?) more than other states do. Some states require your corporation to have multiple officers and directors – Delaware lets you get by with just one. You don’t even have to be a citizen. You don’t even have to live in the U.S. You don’t even have to publicly disclose your name.

For a small corporation whose sole shareholder is also its manager, incorporating in Nevada might make more sense. Should a director of a Delaware corporation commit “gross negligence”, that can still lead to personal liability. Maybe that’s morally sound, pending a trial, but from a financial perspective it tilts the scales toward incorporating in Nevada if you want to avoid legal hassles that can derive from baseless accusations.

Wyoming and Alaska are popular states for incorporating, too.  On the other hand, incorporating in California or New York sucks on wheels. California’s laws are tilted disproportionately in favor of employees, customers, people who slip and fall on the sidewalk outside your retail location…basically anyone but you. New York’s aren’t much better. (The diaspora of businesses from each of those states is purely coincidental to this, by the way.)

But there’s so much paperwork.  Oh, stop it. Yes, paperwork sucks. It’s tiresome, and counterproductive, and exists largely to satisfy the government bureaucrats who make their living by creating byzantine regulations and getting people to adhere to them.

But if you’re sufficiently disposed, paperwork still beats the hell out of working for someone else.

Three Types Of Corporations

In the United States, there are three major types of corporation – the C corporation, the S corporation and the limited liability company (which is technically not a corporation, but close enough for our discussion.) C and S corporations are named after the particular subchapter of Chapter 1 of the Internal Revenue Code.

Most major corporations are C, most smaller firms S. The big difference between the two is that C corporation shareholders are subject to double taxation: the government taxes the company’s income at corporate rates, and taxes the dividends after the corporation distributes them to the shareholders.

Dividends?

Yeah, that’s what you call money when it filters through to the shareholders in a corporation. Dividends in this case serve the same purpose that wages and salaries do for ordinary employees in ordinary jobs.

But if you’re an S corporation, that’s not an issue. Also, you can pay yourself a salary and the government won’t subject it to self-employment tax. S corporations are designed for small companies, which yours will presumably start out as.

Finally, there are LLCs. The most important difference between them and S corporations is how the IRS treats excess profits, or in IRS jargon, “distributions”. If you own and operate an S Corporation and pay yourself a “reasonable” salary out of the profits, the remaining profit is “distributed” to you at the end of the year and isn’t subject to self-employment tax. Not so with an LLC. (But you can tell the IRS you want your LLC to be treated like an S Corporation for tax purposes. Just file Form 2553 before “the 16th day of the 3rd month of the tax year.”)

LLCs require less paperwork than S corporations, but with one big tradeoff: your LLC has to issue you a K-1 statement, which lists your share of the LLC’s income and expenses, to be transferred to your 1040. It’s not that different than paying regular old income taxes.

For a typical one-person S corporation, the paperwork consists of little more than this:

-every month, returning a letter to the state department of taxation. Takes about 30 seconds, costs the price of a stamp.

-every quarter, paying taxes. A lot easier when you save receipts as a matter of course. If you want, hire an accountant.

You’ll almost sound grown up when you run an S corporation: you get to elect a board of directors and everything.

A board of directors? My head is spinning.

You know who your directors and officers are? You, and whomever you want to appoint, assuming you want to appoint someone. In Delaware, remember (and in Nevada), you don’t even have to do that. You do have to hold an annual meeting, though. You can do this in your bedroom, and maybe one day, in your pool. (One point in favor of LLCs is that they don’t have directors’ meetings, or even directors.)

And we haven’t even gotten to the best part: tax writeoffs, which deserve a post of their own. As wonderful as they are, they’re yet another indication of how our tax code, flawed and labyrinthine as it is, exists to punish employees at the expense of business owners. While you might not like the system, the opportunity is there to take advantage of it.

Greg McFarlane is an advertising copywriter who lives in Las Vegas and Lahaina – testament to the power of entrepreneurship. He recently wrote >Control Your Cash: Making Money Make Sense, a financial primer for people in their 20s and 30s who know nothing about money.

The Bay Area is full of entrepreneurs.  There’s something in the air that creates an almost godly electric spirit that causes people to work hard and innovate.  As 2011 nears, more and more I hear about how small business owners are clamping down in preparation for next year’s tax hikes.  Clamping down is generally not a good term to use if you are a politician who wants to create job growth.

Let’s say you make roughly $3 million in annual gross revenue from your internet business like my friend Zach does.  Not bad, but not exactly big money if you take into account his cost structure.  If his pre-tax operating profit margin is 25% after he pays the salaries of all his employees, the rent, and so on, Zach is left with roughly $750,000 subject to taxes.  If his tax rate goes up from 36% to 39.6%, for every dollar he makes over $375,000, he will pay roughly $25,000 more in taxes a year in 2011.

Well guess what?  My friend is letting go of one of his junior programmers who makes roughly $85,000 to pay for next year’s $25,000-$35,000 tax increase!  My friend feels bad letting his 2006 college graduate employee go, but he has no choice since revenue has declined since 2007, and the government is tightening the screws.  Zach believes that 2011 revenue will be worse next year than this year, and is budgeting a decline.  Thank goodness for 99 weeks of unemployment insurance!  And no, it’s not reasonable for the junior programmer to just go work in fast food after only several weeks of looking.

DON’T LISTEN TO THEIR LIES.  THEY AREN’T IN IT FOR YOU.

I’m trying hard to understand why the Obama administration wants to keep unemployment levels high?  Small businesses make up 90%+ of all employers, and 75% of the net new jobs in our economy.  Why doesn’t the Federal Government realize that punishing small business is bad for good people?

The reason why the government want to raise taxes on others is because they want more power.   By raising taxes on the majority of people who employ others, the government takes away the power of freedom and creativity.  Think about it for a bit.  Let’s say taxes are at 100% i.e the government owns you. In this 100% taxation environment, you become a zombie with no spirit.  As soon as the government announces they will lower taxes to 95%, the masses start stirring and productivity increases.  But, as soon as taxation goes to 0%, the people will do as they please, develop their own power, and in the minds of politicians overthrow the government!

Power is intoxicating, and I don’t blame politicians for craving power.  After all, their whole job is about creating attention, popularity and gaining power.  It’s just important for people to realize that not everything is what it seems.  Don’t listen to politicians who tell you that they want to promote economic growth and job creation. It’s just not true.   If they did, they wouldn’t be raising taxes in a weak economic environment.  What politicians want to do is to create the worst economic environment possible so that they can give themselves a low hurdle.  If you are at the bottom, there’s only one way to go but up, and they hope to capture all the glory when things eventually start to turn.

So to all the faithful liberal-voting small business owners who are pro tax increases and big government spending, listen to your leaders and fire your workers.  Feed their egos and feed their hunger for power.  You are doing the right thing as a citizen of the United States of America!  Go USA!

Readers, why do you think politicians want to disincentivize small business owners?  Do you think there is this cure for power lust?  If so, what would you suggest?

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our E-mail or RSS feed.

Well, well, well.  Not everyday does a $300 million dollar mega yacht stop by the San Francisco Bay Area!  The creatively named “A” yacht is owned by 38 year old Russian billionaire Andrey Melnichenko and his lovely supermodel wife Aleksandra!  Andrey made his money in fertilizer, banking, and energy and is worth a reported $4.4 billion dollars.  Interest alone on $4.4 billion at 4% is over $178 million a year!

The “A” looks like something out of a James Bond movie.  Can you imagine all the crazy parties on this bad boy?  Wow!  I rode my bike to the very north end of San Francisco to take a look and boy oh boy is it big.

Some nice mouth watering yacht stats for all you billionaire wannabes out there!

* 25,000 square feet of total living space

* 2,500 square foot master bedroom suite

* 160 foot long main hallway

* 62 feet wide

* 6 cabins in addition to the owner’s master bedroom suite

* 3 speed boats

* 3 mini swimming pools

* A crew of 37 and staff of 5

* Can outrun pirates (or the Russian IRS) with a top speed of 24 knots

* Costs $500,000 to fill up the tank of gas

* Costs $20 million a year to operate

* A secret escape pod to outrun the pirates or the Russian IRS

* A secret “nookie” room for indiscretions with other super models

TOTAL INSPIRATION

Some people might say this $300 million yacht is an absolute monstrosity and that $300 million could have been spent helping save the world.  Yes, Andrey could have spent the $300 million on someone else, but shouldn’t he have the right to occasionally indulge?  Andrey already donates millions of dollars a year to charity and he’s living the dream because he can.

I used to drive to the toniest of neighborhoods in San Francisco and walk around the neighborhood just admiring the mansions.  Whenever I felt down and out, these mansions would pick me up.  If you happen to be in San Francisco, tell the cab driver to drop you off at Broadway St. and Lyon.  Bring your running shoes too as you’ll arrive at one of San Francisco’s most popular workout routine.

The street is littered with $25-50 million houses and I just gawk in amazement.  Do I envy these mega millionaires?  Not at all.  They give me inspiration to work harder and make it on my own.

YOU KNOW YOU WOULD TO

I don’t know about you, but if I was worth $4.4 billion dollars I’d happily own this mega yacht as well.  Furthermore, I’d probably own 20 different properties around the world where I’d sail to for 6 months of the year.  Of course, for the other 6 months of the year I’d be building my online blogging endeavors so I can diversify my income stream (I kid)!

Oh yeah, I forgot one thing.  If I were a billionaire and owned this mega yacht, I’d immediately fly over all the members of The Yakezie Network and party it up all weekend long!  OK, all month long!

Readers, if you were a billionaire, what kind of indulgences would you splurge on?  What are some of the things the rich do to inspire you?  To look at more pictures of the “A” yacht, check out the WSJ’s feature!

Regards,

Sam @ Financial Samurai – “Slicing Through Money’s Mysteries”

Follow on Twitter @FinancialSamura and subscribe to our RSS or E-mail feed.