Starting a Business While Working Full-Time – 3 Reasons Why We Did!

Did you know that the majority of the population make their money doing a job either Part-Time or Full-Time?

It’s not surprising as that is the expected path taught in life for most of the world population.

We go to school, learn skills, get a job, get married, buy a house, have kids, and keep working until retirement while our kids repeat the same cycle.

There is nothing wrong with that. We’ve done it for 20 something years ourselves.

There are benefits to having a job.

Paid vacations, dental and medical plans, and paid sick leave are some of the benefits that many employers will provide to their employees.

If you do your job as expected you get paid on a regular basis and hopefully have a regular increase to match inflation.

Having a job appears to have many benefits, right?

So why would you want to change over to starting a business you might ask?

One of the issues with working at a job is that you are always trading your time for money.

If you don’t work you don’t get paid.

If you want to keep making money you have to keep working, day after day, year after year.

Then if you plan well and put enough money aside you can retire with an ongoing income, most times much less than what you were making when you were working.

Now if you want to earn more money from your job, you really only have two options.

1. Get a pay raise
2. Work more hours.

There will always be a limit to how much you can make with both options.

A business or organization can only pay people a certain amount and they will never pay you more than your boss gets paid.

There are only 24hrs in a day, even if you work 24/7 your income is capped for those hours.

Even if you do climb the corporate ladder and become the CEO of a large company you’re still at the mercy of investors and the board of directors.

In summary, with a job, you will always have a limit of how much you can make and your boss will always decide how much you make.

This is where starting your own business can have huge benefits over only working at the job.

We’re not saying quit your job and start a business without any plan or testing, that would be crazy!

What we have been doing and also recommend to others is to start a small side-business while still working your full-time job.

It does mean a huge sacrifice of your free time.
Remember at the beginning I said it will take short-term sacrifice?

You will need to spend a lot of time after your work hours working at making your business successful.

Eventually, if you plan correctly, you will no longer use your time for money but your business should be able to make you money while you sleep.

Reason #1

Passive Income

This is the first reason we suggest starting a small side-business. The opportunity to make something that is called passive income.

You may be saying, “Hey Paul and Brenda, I’m sure there is a “BUT” in there somewhere.”

You would be correct.

Your business will not start off by making you money while you sleep.

You’ll be lucky if you make any money at first, if anything you will likely lose money in the beginning as you invest back into your business.


So why would you want to start a side-business you ask?

Well, it was said by Warren Buffett, if you don’t make money while you sleep, you will work until you die!

That’s why it is important to make investments and if you can start a business.

It’s really important to diversify your income.

Having multiple income streams will help buffer any through low periods as your not relying on one source of income.

Reason #2 

Build Equity

The next reason for starting a small business is that you’re not just working to make money for the company.

You get to work on building your business, get your business to make you money, and you get to build a business that will have a value that you can later sell or pass on to your family.

When you work at a job, all the hours, hard work, creativity all belong to your employer. Once you leave your job you do not get to benefit from your hard work.

Sure you may have to get bonuses or a pension but it will never amount to the benefits you get from having your own business at the end.

If you put all that hard work you did into your own business for the same amount of time as your job, your business could be on auto-drive. Making you money while you sleep.

The opportunity to make money from your business is also very tax efficient.

Reason #3  

Tax Benefits

This brings us to our next reason for starting a business, huge tax benefits!

In Canada, different streams of income are taxed differently.

Taxes from employment income is the worse.

The taxes you pay from a job is taxed more heavily than what you make from investments or owning a business.

With a job, you are taxed before you get paid. Before you can pay bills or make investments with your pay, you must pay income tax.

That means you are taxed on your full or gross income.

In reality, we know that our net income is much less.
If we take an example of someone making $200,000 / year, they may need to pay over $50,000 on expenses like mortgage, car payments, food, and all other living expenses.

This leaves you with a $150,000 net income.

The government doesn’t look at it that way, they will tax you on the full $200,000 leaving you with less money to pay for living expenses and lowering your actual net income.

All those expenses don’t provide any tax benefits, they are useless in helping you keep more of your money with the current Canadian tax laws.

Businesses are taxed differently. If you have a business you don’t get taxed on the full/gross income, you are only taxed on your NET income.

That’s right, you get to claim your expenses so that you are only taxed on your NET income.
You can claim all types of expenses for your business. It can include food, rent, part of your mortgage payments, phone bills, legal fees, car expenses, and so on.

These are expenses that everyone has but if you only have a job all those expenses are useless for saving on taxes.

If we use the same $200,000 income but this time from a business. If the expenses are the same at $50,000 then you are only taxed on the remaining net or profit of $150,000.

Note: What you can claim for business expenses will be different than what you can claim for work income. Your net business income will include the cost of producing a product or to provide a service. These expenses would not be part of the expenses you would need to consider as an employee. On the plus side you can claim portions of your home's heat, hydro, property tax, internet and other business related expenses if running your business from home.

Being taxed on $150,00 instead of $200,00 will save you thousands on taxes with a lower tax rate compared with a job and similar type of expenses.

Doesn’t that sound amazing!?

Conclusion

Why wouldn't you start a small business now that you see the 3 reasons why we started a business while working full-time?

Starting a business provides you the opportunity to create a passive income flow, create a business entity that can have a monetary value or can be passed on to family, and you get to save on taxes by claiming household expenses that you have to pay whether your working or running a business.

We hope this blog provides you with the inspiration to start your business today!

Let us know below what you think and if you started a business what is your experience. We would love to hear from you.

Cheers

Paul and Brenda

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