Small Business / Personal Investing

[MitchCraft]

I have been reading the blog and lurking the forums for some time now, and honestly am still unsure of what strategy is best for me to invest and start the path to financial independence.  I recently started a small business 1 year ago (LLC), and am starting to get a good picture of my profits, but am still unsure how to actually start this investing train.

The bigger picture:

- 28 years old
- no debt of any kind
- annual spending for myself and my partner is about $15k total
- expected income of approx. $60-80k per year or so.
- never had any sort of retirement accounts, IRAs, etc etc. (whoops)
- not sure where to START!


I hear about IRAs, 401k, index funds, taxable accounts, tax deferred accounts, etc, and even though I know I don't have to have one of everything, I get overwhelmed and just save it for a rainy day (it doesn't rain much here though).  A friend of mine told me about having an IRA through his LLC where he is the "employee" maxing out his IRA, and also can act as the "employer" and match the same amount, thus doubling it.

After reading enough MMM, I generally connect with the "throw-it-all-in-an-index-fund-and-forget-about-it" message, because I don't know much about it all.  But I also hear that I am foolish for now having an IRA maxed out, and then investing the rest.  And apparently it can all happen through one company like Vanguard?  Oh, the confusion...

My goals:

- Save and invest my savings of $50k+ per year
- Retire as soon a freaking possible (on $20-25k per year, for some travel + wiggle room)
- Have my money available to me for when I FIRE, not having to wait until age 60 or whatever
- Don't have too many assets to stress me out with managing everything
- Having to keep the taxes at the minimum they have to be
- Keep things SIMPLE

What I am looking for is some good, tried and true advice, on what I could do to achieve my goals.  Should I look into investing through my LLC, or just forget it and stick to personal investments? Are there any obvious face-punching things I should do tomorrow?  Thanks in advance for helping me with my situation.  I just don't want to procrastinate anymore!

[aaron3719]

you're off to a good start there, no debts at all? no house? apartment? 50K is a lot to be able to save, not a lot of people can do that. Maybe look into real estate too?

[protostache]

Your LLC can sponsor a variety of retirement plans. Do you have any employees besides yourself, or do you plan to hire soon? If not, a solo 401k is a great idea and would let you save a large amount pre-tax. Specifically, $18k plus ~20% of your profits, capped at $53k. An SEP-IRA is very slightly simpler to set up and run but only allows the 20% contribution. Vanguard can help you set either of these up for free. Here is their page comparing their options. Fidelity offer simiar options as well.

[Wings]

Hi.  Is your LLC a partnership, or a sole prop?  The LLC is just for the state, in the eyes of the IRS it doesn't change your filing status.
When I was a sole LLC, I had IRA with Vanguard and Betterment.  After joining businesses with a friend, our 2 LLC now make a partnership and we started a 401k through Betterment.  We tried Vanguard and it was just very cumbersome, at least for us.
Over the years I also had a SEP IRA. 

We talked to the Betterment for Business folks, and they were awesome.  The small fee they charge more than makes up for the service, and their admin fees for the 401k are very low.  Vanguard is great, I have some personal accounts with them.

But my biz partner and I both love Betterment, from the employer and the employee side.  The other thing I like, and this is possibly just a personal preference, is that when we did the set up, we got to deal with the same person from beginning to end and email them directly if we have any questions or issues with payroll uploads, etc.  In calling Vanguard, we got a different person each time, they all told us something different, and it became such a hassle we never did get the 401k set up, which is when we switched to Betterment and it has been really easy, and everyone loves it. 

I know some folks won't pay the fees, but it's nominal compared to my hassle factor time, and since I am still running a business and writing (it's only "work" if you'd rather be doing something else, in my opinion ;) and I would rather focus on doing what I love, that I'm good at, that is bringing in more business and cash flow, but I'm just more wired for that.  I think I have a trauma response to excel spreadsheets ;)

So, you'll get all kinds of advice over your lifetime about "what's best," and I think for me, it always comes back to what feeds my soul, aligns with my values and spreads good vibes.  Doing it this way works for us and our business, and it's totally worth the fees for a fiduciary to handle it and make it so simple for us.  The business side has been great, they offer a 401k Roth option along with it, and we couldn't be happier.   I still have some personal accounts with Vanguard and they are great for that, but the Betterment platform is so nimble on their website, so easy to employer uploads of payroll, so easy to track on the employee side, and no complaints from anyone-- win-win as far as we are concerned.

FYI, they also have a SEP IRA, so if you are flying solo, that might be a better option.  Won't cost you anything to get the info, and then you can decide between Betterment and Vanguard, of all your options out there, I for sure thing those are my favorites. 

Hope that helps!

[everettcook]

I'm in a similar position as the OP, small business owner, no debts, etc.

So am i right in saying the consensus is to be using pre-tax investing to maximize the savings/investing?
And then from there it's about finding the right program of sep-ira, roth 401k, etc?

[Proud Foot]

The previous posters gave good information on tax advantaged accounts.  For tax purposes having the LLC hold taxable investments is no different than you holding taxable investments.  But having the LLC hold the taxable investments would leave them open to any lawsuits and judgments against the LLC.  They would be better protected from lawsuit if they were held outside of the LLC.