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Lessons from my first exit

(mtlynch.io)
410 points saeedesmaili | 9 comments | 14 Nov 24 07:32 UTC | HN request time: 0.679s | source | bottom
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ffjffsfr ◴[14 Nov 24 12:19 UTC] No.42135513[source]▶
great write up.

> $920k over four years

so this gives an average yearly salary of 230k. Very close to FAANG senior salary with much more risk, effort and (probably) worse life-work balance. OP quit from google in 2018 and ran some other business, and this is his biggest sale so far. I think it shows how hard it is to make better money outside FAANG even when extremely talented and lucky like OP. But it's probably more about lifestyle choices.

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tempworkac ◴[14 Nov 24 12:32 UTC] No.42135591[source]▶
interesting to reconcile this with calls to tax the rich. maybe we should be rewarding such effort after all? think about the tens of thousands of jobs created from people working at Google who'd make L3 or less at Google working twice as much...
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qzw ◴[14 Nov 24 14:30 UTC] No.42136431[source]▶
Speaking as a small business owner/entrepreneur myself, there are lots of tax deductions available to people like me that aren’t to some collecting a salary. And that’s without doing any of the borderline or outright illegal stuff that I see many other business owners do, such as taking fancy vacations, leasing luxury cars, or buying real estate for personal use but writing them off as business expenses. The IRS basically now lacks the resources to go after most such cases, and even if they’re caught, the penalty often just amounts to paying back the avoided taxes. There’s really very little incentive to play by the rules. I’ve had CPAs tell me outright that I’m leaving money on the table by not using some of these so-called tax minimization strategies. Anyway, it’s all kind of beside the point because “tax the rich” as policy covers so much ground that it’s impossible to discuss the pros and cons without specifying what specific proposal we’re talking about. My point is simply that business ownership and entrepreneurial activity are already quite well incentivized/rewarded by the current tax code.
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1. hartator ◴[14 Nov 24 15:26 UTC] No.42137108[source]▶
What are these miraculous tax deductions you are talking about?

Writing personal expenses as business expenses is tax fraud, not tax optimization. CPA suggesting this should be fired.

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2. hash872 ◴[14 Nov 24 15:43 UTC] No.42137320[source]▶
1. The Trump era automatic 20% deduction for LLC or corporate income. Totally unjustifiable, it's 20% off your revenue for everyone with a company for no public policy reason that I know of 2. You can mostly avoid paying into SS/Medicare by taking the large majority of your compensation via distributions, not salaried income

Just off the top of my head

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3. hartator ◴[14 Nov 24 15:57 UTC] No.42137490[source]▶
You mean QBI? To apply, it needs to be matched with W-2 wages so you won't escape SS/Medicare, and it's not against revenue but profit.
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4. schmidtleonard ◴[14 Nov 24 17:41 UTC] No.42138811[source]▶
Should be but won't be.

I can also attest that in my local small business community I have been met with puzzlement and suspicion for not engaging in expense fraud and PPP fraud. Deviation is almost completely normalized.

5. qzw ◴[14 Nov 24 18:48 UTC] No.42139687[source]▶
Of course it’s against the law, and so is not obeying the speed limit. And both are being done every day widely and more or less blatantly with little to no chance for consequence. In fact you’re probably more likely to get a speeding ticket than to be audited. Hence the CPAs who would recommend some of these “strategies” as long as there’s even the slightest plausible justification, because in their experience there’s very little risk for pushing the envelope.
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6. stanford_labrat ◴[14 Nov 24 19:10 UTC] No.42139957[source]▶
my very first exposure to this was paying for parking. i worked at a large private university which had a beautiful but very big campus. ofc for some reason the institution decided that employee's had to pay for their own parking, which i disagreed with on moral grounds and the fact that parking was so far away it was like a 20 minute walk just to get to my work space...so i did an experiment where i basically never paid for parking in my entire 4 years there.

it would have cost me about 2 grand to diligently pay for parking. the actual expense from tickets? about 100 bucks maybe 200. and some of them got automatically thrown out just by challenging them. now towards the end of my time there i did see a guy get towed as he was walking up to his car. i started paying for parking then.

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7. qzw ◴[14 Nov 24 19:21 UTC] No.42140067{3}[source]▶
It encourages paying more wages, but it’s still a 20% giveaway to the business owners for paying themselves. I know that my own effective tax rate went down a couple percent when QBI took effect. If the idea behind the requirement to pay reasonable wages is to get more SS/Medicare tax revenue, then QBI more than offsets any gains. Plus the business owner can tweak their own numbers to determine what’s the most advantageous mix of W-2 vs K-1 income. It’s another advantage not available to regular wage earners.
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8. rurp ◴[14 Nov 24 22:30 UTC] No.42141897{3}[source]▶
Interesting, I had the exact opposite experience as a student at a public university in California. There were meter maids patrolling the parking lots constantly, and it was common for people to be ticketed within minutes. It must have been a huge revenue driver for the school. The enforcers were so zealous I received multiple tickets despite having a valid annual pass displayed clearly in my window, which I then had to burn time fighting to get dismissed.
9. disgruntledphd2 ◴[15 Nov 24 11:49 UTC] No.42146071{4}[source]▶
Yeah, in general the big tax advantages from a limited company mostly relate to the ability to be flexible with how you get your compensation, as there are a bunch of ways to minimise tax paid/get government support.

The millionaire farmer near us (in Ireland) got state support for sending all his kids to university because of this kind of flexibility, while my parents (wage earning suckers) didn't.