Author Topic: Investment Strategy Optimization Group Thread: Solo Self-Employed Group  (Read 5266 times)

Money Stoic

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Master Investment Strategy Optimization Thread

Grouping:  Solo Self-Employed


This thread will focus on seeking and updating the optimized financial, investment and tax strategy for the solo self-employed board users. 

Granted, every has a unique situation, however by grouping each individual into an optimization thread where the top post of the thread is updated with optimized practices (as discovered), we can reduce the time needed to gather information and act.  Here is the thread for one such group.

(?) = Optimization for specific headings in the thread are seeking group consensus or more input. 


The Strategy

-Entity:Self-Employed with LLC Business (S-Corp Election)?
                       Why: Business revenues minus business expenses = profit.  Profit is passed through to
                        business owner for taxation.  With an S-Corp election,  business owner must pay themselves a
                        "reasonable salary" tied to industry norms while also paying payroll expenses like federal taxes
                         and FICA. 

                        The tax advantage is found when it comes to excess profits, known as distributions. Any
                        remaining profits from the company can be distributed to the owner as dividends, which are
                        taxed at a lower rate than income with no FICA. FICA is around 14-17% (?). 

-Pre-Tax Business Expenses:  (?) 
                                What?  The name of the game is getting revenue high, expenses low and passing   
                                 through the profits to your personal investments and personal bank account. 
                               
                                 Make sure you track all legitimate business expenses.  These include the obvious such as   
                                 supplies and office rent (if needed), but also include miles driven (.575 cents a mile if   
                                 your personal car is used), business meals (50% deduction?), business trips...
                                 What else? 
                                 Link to a business deduction link coming.
                                 
                                I hired a CPA / book-keeper who keeps track of what is a business expense deduction vs
                                what should be capitalized and depreciated (and to watch out for what should be a
                                personal expense).  They also help me determine what to send in for FICA, what
                                to send in for estimated quarterly taxes and keep me updated with a monthly profit and
                                loss statement (P&L). 
                                I did try and keep track of this myself at one point.  I found I would rather outsource this
                                and spend my time building my company and spending time with my family.
                                How much are you paying for a CPA/Book keeper a  month? 

                         

-Health (Insurance) Plan: (?)  A new twist to the money puzzle as a self-employed U.S. resident is the
                                                          Affordable Care Act and Federal Exchange health insurance policies.   
                                                          The less pass through income you
                                                          have to report, the less you will pay out of pocket for your health
                                                          insurance policy.
 
                                                          For a family policy, if you can show less than $50,000 of earned income,
                                                          you will see a significant up front tax credit to help off set some of your
                                                          policy cost.

                                                          So, my strategy is to put some business earnings into a tax advantaged
                                                          investment account before they become taxable income. 
                                                             

-Pre-Tax Investing (?)             Individual-401k: 
                                                           Where:  Vanguard https://investor.vanguard.com/what-we-offer/small-business/compare-plans?Link=facet

                                                             Why?: 
                                                                       Your Contribution (as Employee of your business)
                                                             •$18,000 for the 2015 tax year ($24,000 for employees age 50 or         
                                                                older).  FICA taxes must be paid on this. 
                                                             •Can't exceed 100% of compensation.

                                                                        Contribution from your business:
                                                             •For the 2015 tax year, overall employer plus employee contribution
                                                              limit is 100% of compensation with a maximum of $53,000 ($59,000
                                                              if the employee is age 50 or older).
                                                             •Maximum tax deductible employer contribution is 25% of
                                                               compensation.
                                                             •Contributions are deductible as a business expense and aren't
                                                               required every year.  Does this mean FICA tax does not apply?


                                                           -What if you need the money before age 55 - 59.5?  I have seen a     
                                                           number of articles on rolling the 401k to a traditional IRA and then
                                                           rolling it into a Roth IRA to minimize the tax impact.  Post your thoughts
                                                           on this or link to the optimized strategy below. 

-Post tax personal dollar investing (?)
                    -Order: 
                             -Roth IRA:  Invest Max $5500 for you and Max $5,550 for spouse

                                                Where? 
                                                -TD-Ameri-Trade offers over 100, $0 trade cost ultra low cost ETF Funds.  This   
                                                 allows you to dollar cost average your investment money into the funds over
                                                 time. (thread on this being developed). 
                                                -Self Directed Roth IRA:  For diversifying out of the market - (thread on this   
                                                 being developed).

                              -Taxable Investments: If you have additional money to invest that has passed through 
                                from your business to your personal assets and you have maxed out your pre-tax
                                investments and post tax Roth IRA accounts: 
                                               Where:
                                                -Vanguard investment account to put money in low cost index / ETF funds such           
                                                  as...
                                                -Robo Investor account such as Betterment or Wealthfront 

                                        Diversifying out of the market:  Since 1945, in 20 year segments, the S&P 500             
                                        Index has returned an average of 10-12%
https://books.google.com/books?id=HIdOGhPlKvEC&pg=PA142&lpg=PA142&dq=the+stock+market+has+returned+how+much+since+1945+on+average&source=bl&ots=OY2mbYmyKU&sig=kc4dM4Mkw3MAK9seS764OdAMOls&hl=en&sa=X&ei=OYp0VazdN8SyggSioYTABw&ved=0CEkQ6AEwBg#v=onepage&q=the%20stock%20market%20has%20returned%20how%20much%20since%201945%20on%20average&f=false
                                                 However, investing at unknown market peaks, seeing a significant correction
                                                 lower and the resulting time period needed to recover may delay your financial
                                                 independence past the point of being able to physically and mentally enjoy it.

                                                 So, I have diversified into the following: 

                                                -Real Estate:  Rental properties that earn money from bringing in more rent
                                                 than expenses (including having someone else pay the mortgage) and could 
                                                 go up in value over time. 
                                                 -Private Equity Investing: Link to this coming. 
                                                 -Peer to peer lending with without and with collateral (such as a real
                                                  estate lien)

What else needs to be added? (?)

                                                -Comment below to add to and suggest corrections below so that I can
                                                 curate the optimized strategy by editing this post over time.
 
                                             
           
                   
         
« Last Edit: June 07, 2015, 12:40:08 PM by Money Stoic »

CabinetGuy

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Following.  Really appreciate you putting this all together (sorry I don't have much to add right now.)

Jon

Edit:  just thought of one!  How would/could an HSA figure into this?
« Last Edit: June 07, 2015, 01:04:24 PM by JCH cabinets »

mangofish

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This is great information for me. I'm just starting out as self employed and don't have anything set up yet. This helps a lot.

Rpesek6904

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Great idea for this thread!

I'm an LLC with S-Corp election. 5 total employees including myself and my wife.

I definitely pay as little as possible based on my "reasonable" salary. I'm an attorney and I use a public salary figure from a government attorney about the same age.

After that I created a 401K plan. The first year I gave myself a full match + maxed my wife. The ability to use a spouse in the business 401k to double the 401k options is a good wrinkle. I wish I knew the exact part of the code for more details. I just know my CPA says it is good.

After I got a few employees, I can't do a full company match for my entire 18k. I have to offer the same to everyone in the company. This has something to do with "Safe Harbor"rules. I'm a little unclear of the exact rules, sorry. If you have a small business with employees and you want to offer a 401k to your employees we use  https://www.myubiquity.com/. It is relatively cheap and automates a huge amount of the work- thereby saving labor from an employee or cost to a CPA. We were able to select Vanguard funds!

As for health insurance, I suggest "medical bill sharing" as an option. I got killed on Obamacare because my AGI was too high even with all the deductions. The plans are much cheaper but they exclude coverage for "sinful" activities. So, don't expect to get your herpes treatment or your out-of-wedlock birth covered. I totally understand these plans are not for everyone, but they are a possibility to significantly lower costs. Also, I had a child while covered by medical bill sharing and it was MUCH cheaper than having a child while on a BC/BS plan.

As for the CPA expense, I am lucky my wife does the books on Quickbooks. She has a CPA degree, although she never got the actual license. She worked as an auditor for Deloitte. However, we pay a CPA to review the end of year tax documents and basically to train my wife in Quickbooks for a small business. If you have an office administrator you could create a CPA/Administrator relationship to take care of the regular bookwork. We end up paying $2,100 a year for his services.

For the Post Tax Dollar investing, it is worth noting that you can't use those if your AGI is over 181k. Unless I'm wrong???

I think using business only credit cards and checks helps to track deductible business expenses pretty much covers that. We do deduct our cell phones, home internet (because my wife only works from home), the health insurance and any computers even if used at home.

FICA is 15.3%. See, http://www.accountingcoach.com/blog/what-is-the-self-employed-persons-fica-tax-rate-for-2015

I always tell people, "If you declare $15,000 as distribution instead of salary you now have a free CPA to do your books all year" because $15,000 *15.3% is approximately $2,300 in saved taxes.  This is a HUGE advantage. This one thing saves me $20,000+ in taxes annually. Other small business owners don't do it and I've never understood why.
« Last Edit: June 10, 2015, 08:43:51 PM by Rpesek6904 »

Insanity

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I am currently an LLC, though not an S-Corp.  I use the solo 401K option and contribute not the max, but a good bit.

WorkingToBeFIREd

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Great thread!

I'm setup as an LLC and moved to taxation as an S-corp for TY15, which should help reduce tax liability, especially in the great state of "Tax York".  Rpesek6904's notes about moving to an S-corp align with what my tax person said...take the lowest possible reasonable salary and have the remaining profits taxed as distributions versus income.  I had to file two one-page forms to be taxed as an S-corp and got confirmation in the mail within a few weeks.  IIRC, it does need to be done either prior to the start of the next tax year, or very soon after the start.  I filed the paperwork in October-ish of last year for TY15.

Ubiquity looks like a good option for 401k plans with employees, and even their solo plan might be interesting if you can access Vanguard funds.  At $215/year for a solo plan irrespective of assets, it's more expensive than some of the free options, but looks like they can do reverse rollovers from IRAs, Roth 401k, etc.  I wonder if this plan might be able to do a "mega backdoor Roth" conversion?  If so, the $215 would be well-spent.  I'm half-tempted to postpone my meeting with Fidelity this morning to research this further!

Another option for self-employed 401k (good for you and your spouse, no employees) is Fidelity.  I was all set to use the Vanguard product and have been consolidating all my investments there, including rolling over a 401k from a prior employer into an IRA.  Unfortunately, Vanguard's self-employed 401k has two areas where it falls short.  First, they don't allow money to be transferred in from IRAs (only transfers from other 401k plans), which means you can't do usual backdoor Roth conversions without a lot of math (assuming you still have the rollover IRA with a balance).  Second, they don't allow access to Admiral shares, only Investor shares....still great offerings, but at a slightly higher expense.  You can get Spartan Advantage shares (as well as a bunch of other comparable funds) on the Fidelity platform.  There are no ongoing costs for the Fidelity product outside of usual fund ERs- no asset fees, no maintenance fees, etc. - but if you close out/terminate the account (close or leave the business), there is a $50 account termination fee.

Hope this helps....

RequiemforEnnui

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One factor to consider in the salary vs. disbursement calculus, is the impact of that decision on your ability to max out your Solo 401k. Since the Employer portion of the contribution is maxed at 25% of Salary, that means that your ability to max out your 401k is dependent on how much you allocate to Salary vs. Disbursement. You will likely be paying more in combined income / self employment taxes, but end up with a far higher 401k balance. If your goal is to maximize your retirement account contributions, that may be a factor.

That said... since the maximum personal contribution is $18k regardless of income level, then perhaps the optimal strategy is to set your salary at a level to allow you to contribute exactly $18k in personal contributions leaving $0 in salary remaining. Since you have to pay the employer portion on the salary you pay yourself regardless, you'd have to allocate at least $19200 as salary to enable $18k in contributions. As you can contribute up to 25% of that salary as an employer contribution, that would put your annual 401k allocation at about $24k total.  Anything over that could be done as a distribution instead, saving your self employment tax, and you should be able to contribute to a tIRA or Roth IRA at that point.

Embok

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Great thread!  I'm majority owner in an LLP, so some of this works, some doesn't, but thanks for laying it out in one post.

Rpesek6904

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One factor to consider in the salary vs. disbursement calculus, is the impact of that decision on your ability to max out your Solo 401k. Since the Employer portion of the contribution is maxed at 25% of Salary, that means that your ability to max out your 401k is dependent on how much you allocate to Salary vs. Disbursement. You will likely be paying more in combined income / self employment taxes, but end up with a far higher 401k balance. If your goal is to maximize your retirement account contributions, that may be a factor.

That said... since the maximum personal contribution is $18k regardless of income level, then perhaps the optimal strategy is to set your salary at a level to allow you to contribute exactly $18k in personal contributions leaving $0 in salary remaining. Since you have to pay the employer portion on the salary you pay yourself regardless, you'd have to allocate at least $19200 as salary to enable $18k in contributions. As you can contribute up to 25% of that salary as an employer contribution, that would put your annual 401k allocation at about $24k total.  Anything over that could be done as a distribution instead, saving your self employment tax, and you should be able to contribute to a tIRA or Roth IRA at that point.

This is what we do for my wife as an employee. It has the double benefit of putting more into 401k and lowing your AGI so the difference between your salary and distributions is not as large.

DavidAnnArbor

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WorkingToBeFIREd

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One factor to consider in the salary vs. disbursement calculus, is the impact of that decision on your ability to max out your Solo 401k. Since the Employer portion of the contribution is maxed at 25% of Salary, that means that your ability to max out your 401k is dependent on how much you allocate to Salary vs. Disbursement. You will likely be paying more in combined income / self employment taxes, but end up with a far higher 401k balance. If your goal is to maximize your retirement account contributions, that may be a factor.

That said... since the maximum personal contribution is $18k regardless of income level, then perhaps the optimal strategy is to set your salary at a level to allow you to contribute exactly $18k in personal contributions leaving $0 in salary remaining. Since you have to pay the employer portion on the salary you pay yourself regardless, you'd have to allocate at least $19200 as salary to enable $18k in contributions. As you can contribute up to 25% of that salary as an employer contribution, that would put your annual 401k allocation at about $24k total.  Anything over that could be done as a distribution instead, saving your self employment tax, and you should be able to contribute to a tIRA or Roth IRA at that point.

This is what we do for my wife as an employee. It has the double benefit of putting more into 401k and lowering your AGI so the difference between your salary and distributions is not as large.

Signed up with Fidelity yesterday to migrate my non-Mustachian SE 401k over to their more Mustachian platform. 

Currently, my wife is not on the books, although she definitely helps all the time.  I'd love to make employer contributions to the 401k plan for her, but believe it's contingent on her drawing a salary, and the contribution would be 25% percentage of that (same as mine).  She already maxes out a 403b at her day job, so she can't do employee contributions, which means paying the salary would increase our AGI and income tax (versus distribution).  I'm assuming there's no workaround here?  Can't do employee contributions due to other plan to reduce her salary to zero, and if I want to do an employee contribution, it would be 25% of whatever salary I put her on, which increases our AGI.

Thanks....

dandarc

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Signed up with Fidelity yesterday to migrate my non-Mustachian SE 401k over to their more Mustachian platform. 

Currently, my wife is not on the books, although she definitely helps all the time.  I'd love to make employer contributions to the 401k plan for her, but believe it's contingent on her drawing a salary, and the contribution would be 25% percentage of that (same as mine).  She already maxes out a 403b at her day job, so she can't do employee contributions, which means paying the salary would increase our AGI and income tax (versus distribution).  I'm assuming there's no workaround here?  Can't do employee contributions due to other plan to reduce her salary to zero, and if I want to do an employee contribution, it would be 25% of whatever salary I put her on, which increases our AGI.

Thanks....
It would also reduce your business' income - paying an employee is an expense, so the net for income-tax purposes should be about the same.  Actually a little less - you would have to pay FICA on her earnings, so that should reduce your joint AGI a bit.

Aphalite

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After I got a few employees, I can't do a full company match for my entire 18k. I have to offer the same to everyone in the company. This has something to do with "Safe Harbor"rules.

Rpesek, why not structure it so that your employees are contractors? That gets you around the safe harbor rules and you can continue to match 100% for you and your wife (I believe, check with your CPA). You can up their salary for any benefits they may lose to compensate

Re: Post Tax Investing - you can also set up a brokerage account that's held by your company to invest any retained earnings so you don't have to distribute them as salary (I'm unclear on if this would help you if you structure as an S corp, would think not since it's a pass through structure). Do be aware that this means future interest, rents, and dividends from the investments are taxed at the corporate level instead of the individual, generally corporate taxes are higher than individual, but you do save on any tax on the initial distribution (classified as salary to the individual)
« Last Edit: June 12, 2015, 08:34:00 AM by Aphalite »

BlueHouse

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Nice idea for this thread.  Thanks for creating it.
Would you consider adding sections such as recommended financial systems ?
I bought Quickbooks when I first incorporated, but didn't really need that much detail and frankly couldn't be bothered to learn it.  I've been using Quicken for my personal financial tracking for years and just created a separate file for my business needs and it works just fine for my needs. 

Maybe a section on banking and business credit cards?  It's important to keep a business accounts separate from personal (IMO). 

Another section that might be helpful would be to list dates that taxes are due. 
Corp taxes are due 3/15 vs. 4/15. 
Estimated taxes (for those who take distributions in addition to W-2 salary) are due April 15, Jun 15, Sept 15, Dec 15
And some states also tax S-Corps (DC does)

Rpesek6904

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After I got a few employees, I can't do a full company match for my entire 18k. I have to offer the same to everyone in the company. This has something to do with "Safe Harbor"rules.

Rpesek, why not structure it so that your employees are contractors? That gets you around the safe harbor rules and you can continue to match 100% for you and your wife (I believe, check with your CPA). You can up their salary for any benefits they may lose to compensate

Re: Post Tax Investing - you can also set up a brokerage account that's held by your company to invest any retained earnings so you don't have to distribute them as salary (I'm unclear on if this would help you if you structure as an S corp, would think not since it's a pass through structure). Do be aware that this means future interest, rents, and dividends from the investments are taxed at the corporate level instead of the individual, generally corporate taxes are higher than individual, but you do save on any tax on the initial distribution (classified as salary to the individual)

You know, that is a good point. I'll be sure to raise it with my CPA. My business is a law firm, the employees are basically office assistants/para-legals. So, in lots of ways they are the classic "employee," I'm sure that is what my CPA will say. The other thing is that we currently offer them the 401k. I think that increases their stability and idea of working for me as a "good job." We'll see though. I definitely appreciate the suggestion.

I have thought about the brokerage account idea for distributed profits. As a sort of thought experiment, would it be worth it to leave the money undistributed and in a Vanguard Investment account? You would lower your AGI immediately and, after FIRE, start to distribute it at lower tax brackets. I probably won't ever FIRE like MMM, but I will likely take my foot of the gas pedal and earn less, vacation more. If the corporate tax issue is the big drawback, I wonder if betterments tax-loss harvesting strategies would mitigate the problem?

You know, there has to be some Mustachian CPA's. How do we get them over here?

One of you was asking about the Ubiqty/online 401k - as far as I know the back door roth is not allowed. Although, I am going to really investigate this year though. Last year was our first with the 401k.

Aphalite

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The other thing is that we currently offer them the 401k. I think that increases their stability and idea of working for me as a "good job." We'll see though. I definitely appreciate the suggestion.

I have thought about the brokerage account idea for distributed profits. As a sort of thought experiment, would it be worth it to leave the money undistributed and in a Vanguard Investment account? You would lower your AGI immediately and, after FIRE, start to distribute it at lower tax brackets. I probably won't ever FIRE like MMM, but I will likely take my foot of the gas pedal and earn less, vacation more. If the corporate tax issue is the big drawback, I wonder if betterments tax-loss harvesting strategies would mitigate the problem?

The way I see it, you can raise their pay a little since they are now not getting benefits, and then you can give them the information so they can set up their own 401k - admin costs are minimal so they would really only set it up if they truly wanted to - if not then they would just spend the money like most Americans - another example of the free market at work

On the brokerage account, if the profits are undistributed, it would be taxed initially at the corporate level and not at the personal level, then, gains and earnings on the investments are taxed at the corporate level on a go forward basis. In this way, you can manage your effective tax rate how you want in order to take advantage of any gaps in the tax brackets between personal and corporate - would be a conversation with your CPA ( after all, if you keep your AGI below the threshold for additional 0.9% medicare tax and 3.8% investment returns surtax - 250k, that might be worth it in itself if you already have a lot of taxable investments, or, if your profits are over 335k, the corporate marginal tax rate of 34% is below the MFJ tax rate of 39.6%)
« Last Edit: June 13, 2015, 06:53:28 PM by Aphalite »

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Yes, I am a numb nut and not post savvy. Someone tell me how you quote parts of someone's post and then comment below?? In the meantime, I have tried to respond doing it the old fashioned way with cut/paste. My comments in caps...

The Strategy

-Entity:Self-Employed with LLC Business (S-Corp Election)?
                       Why: Business revenues minus business expenses = profit.  Profit is passed through to
                        business owner for taxation.  With an S-Corp election,  business owner must pay themselves a
                        "reasonable salary" tied to industry norms while also paying payroll expenses like federal taxes
                         and FICA. 

                        The tax advantage is found when it comes to excess profits, known as distributions. Any
                        remaining profits from the company can be distributed to the owner as dividends, which are
                        taxed at a lower rate than income with no FICA. FICA is around 14-17% (?). 
I HAVE BEEN SELF EMPLOYED FOR 28 YRS, 1099, NO LLC/S-CORP/OTHER. BASED ON DISCUSSIONS WITH MY CPA AND BEEING PRIMARILY A SINGLE SOMETIMES 2 PERSON OPERATION, THERE WAS NO REAL ADVANTAGE TO CREATING AN ALTERNATIVE ENTITY. THIS COULD OBVIOUSLY BE DIFFERRENT FOR OTHERS DEPENDING UPON YOUR BUSINESS, STRUCTURE, NUMBER OF EMPLOYEES. I PLAN TO FIRE IN 4 - 5 YRS.


-Pre-Tax Business Expenses:  (?) 
                                What?  The name of the game is getting revenue high, expenses low and passing   
                                 through the profits to your personal investments and personal bank account. 
                               
                                 Make sure you track all legitimate business expenses.  These include the obvious such as   
                                 supplies and office rent (if needed), but also include miles driven (.575 cents a mile if   
                                 your personal car is used), business meals (50% deduction?), business trips...
                                 What else? 
                                 Link to a business deduction link coming.
                                 
                                I hired a CPA / book-keeper who keeps track of what is a business expense deduction vs
                                what should be capitalized and depreciated (and to watch out for what should be a
                                personal expense).  They also help me determine what to send in for FICA, what
                                to send in for estimated quarterly taxes and keep me updated with a monthly profit and
                                loss statement (P&L). 
                                I did try and keep track of this myself at one point.  I found I would rather outsource this
                                and spend my time building my company and spending time with my family.
                                How much are you paying for a CPA/Book keeper a  month? 
AS A PRIMARILY SINGLE PERSON SOLE PROPRIORTISHIP, I TRACK MY EXPENSES MYSELF, PAY MY QUATERLY TAXES, AND MEET WITH MY CPA ONCE A YR TO DO MY TAXES.
                         

-Health (Insurance) Plan: (?)  A new twist to the money puzzle as a self-employed U.S. resident is the
                                                          Affordable Care Act and Federal Exchange health insurance policies.   
                                                          The less pass through income you
                                                          have to report, the less you will pay out of pocket for your health
                                                          insurance policy.
 
                                                          For a family policy, if you can show less than $50,000 of earned income,
                                                          you will see a significant up front tax credit to help off set some of your
                                                          policy cost.

                                                          So, my strategy is to put some business earnings into a tax advantaged
                                                          investment account before they become taxable income. 
THIS IS EVER CHANGING AS I AM CURRENTLY ON A PPO THRU BCBS, HOWEVER, I HAVE BEEN TOLD MY POLICY IS GOING AWAY BY END OF YR SO I AM BACK TO HUNTING A NEW POLICY OR SOME SORT OF OBAMA CARE SOLUTION TBD. I HAVE A STAY AT HOME WIFE AND HAVE 4 KIDS, ALTHOUGH 2 OF THEM ARE EFFECTIVLY ON THEIR OWN POLICIES NOW. WE ARE ALL HEALTHY PEOPLE SO I HAVE ALWAYS SUBSCRIBED TO THE HIGH DEDUCTABLE POLICYS EFFECTIVELY SELF INSURING THE FIRST $7500/PERSON/YR OTHER THAN CO-PAY VISITS. MY INCOME IS TOO HIGH FOR SOME OF THE OTHER TAX ADVANTAGE PLANS.
                                                             

-Pre-Tax Investing (?)             Individual-401k: 
                                                           Where:  Vanguard https://investor.vanguard.com/what-we-offer/small-business/compare-plans?Link=facet

                                                             Why?: 
                                                                       Your Contribution (as Employee of your business)
                                                             •$18,000 for the 2015 tax year ($24,000 for employees age 50 or         
                                                                older).  FICA taxes must be paid on this. 
                                                             •Can't exceed 100% of compensation.

                                                                        Contribution from your business:
                                                             •For the 2015 tax year, overall employer plus employee contribution
                                                              limit is 100% of compensation with a maximum of $53,000 ($59,000
                                                              if the employee is age 50 or older).
                                                             •Maximum tax deductible employer contribution is 25% of
                                                               compensation.
                                                             •Contributions are deductible as a business expense and aren't
                                                               required every year.  Does this mean FICA tax does not apply?


                                                           -What if you need the money before age 55 - 59.5?  I have seen a     
                                                           number of articles on rolling the 401k to a traditional IRA and then
                                                           rolling it into a Roth IRA to minimize the tax impact.  Post your thoughts
                                                           on this or link to the optimized strategy below. 
INITIALLY, I USED A SEP WHICH WAS THE BEST OPTION FOR SELF-EMPLOYEED PEOPLE I COULD FIND AND MAXIMIZED IT EVERY YEAR. ABOUT 10+ YRS AGO I WAS INTRODUCED TO A DEFINED BENEFIT PLAN WHICH BASED ON A COMPLICATED FORMULA WOULD ALLOW M TO LITTERALLY PUT AWAY $200K - $300K/YR IN MANY YRS AND TAKE IT AS A DEDUCTION ON MY TAX RETURN. THIS PROVIDES A DOUBLE BENEFIT... LARGE TAX DEDUCTION AND LARGE TAX DIFFERRED CONTRIBUTION. NO PLANS TO TOUCH ANY OF MY TAX DIFFERRED ACCTS UNTIL AFTER 59.5. I HAVE OTHER INVESTMENTS SUCH AS RE AND TAXABLE ACCTS TO ADDRESS MY INCOME NEEDS WHEN I FIRE AROUND 55.

-Post tax personal dollar investing (?)
                    -Order: 
                             -Roth IRA:  Invest Max $5500 for you and Max $5,550 for spouse
                                                Where? 
                                                -TD-Ameri-Trade offers over 100, $0 trade cost ultra low cost ETF Funds.  This   
                                                 allows you to dollar cost average your investment money into the funds over
                                                 time. (thread on this being developed). 
                                                -Self Directed Roth IRA:  For diversifying out of the market - (thread on this   
                                                 being developed).

                              -Taxable Investments: If you have additional money to invest that has passed through 
                                from your business to your personal assets and you have maxed out your pre-tax
                                investments and post tax Roth IRA accounts: 
                                               Where:
                                                -Vanguard investment account to put money in low cost index / ETF funds such           
                                                  as...
                                                -Robo Investor account such as Betterment or Wealthfront 

                                        Diversifying out of the market:  Since 1945, in 20 year segments, the S&P 500             
                                        Index has returned an average of 10-12%
https://books.google.com/books?id=HIdOGhPlKvEC&pg=PA142&lpg=PA142&dq=the+stock+market+has+returned+how+much+since+1945+on+average&source=bl&ots=OY2mbYmyKU&sig=kc4dM4Mkw3MAK9seS764OdAMOls&hl=en&sa=X&ei=OYp0VazdN8SyggSioYTABw&ved=0CEkQ6AEwBg#v=onepage&q=the%20stock%20market%20has%20returned%20how%20much%20since%201945%20on%20average&f=false
                                                 However, investing at unknown market peaks, seeing a significant correction
                                                 lower and the resulting time period needed to recover may delay your financial
                                                 independence past the point of being able to physically and mentally enjoy it.

                                                 So, I have diversified into the following: 

                                                -Real Estate:  Rental properties that earn money from bringing in more rent
                                                 than expenses (including having someone else pay the mortgage) and could 
                                                 go up in value over time. 
                                                 -Private Equity Investing: Link to this coming. 
                                                 -Peer to peer lending with without and with collateral (such as a real
                                                  estate lien)
I HAVE SIZABLE TAXABLE ACCTS, TAX DIFFERRED ACCTS, AND VARIOUS REAL ESTATE PROPERTIES MAKING UP MY PRIMARY ASSETS. MY AA IS CURRENTLY AROUND 80/20.