Small Businesses on the Path to FI

Since we’ve set up Mrs. Wow’s company, I’ve had several discussions with people about how it was set up and what we did with retirement plans, accounting, expenses and all the rest of it.

There’s a lot of literature out there about starting a company.  Like a shit ton. 273MM results!!!

And there’s also a whole lot about retirement accounts.  Another shit ton.  2.7MM results!

But I never really found anything that laid out how owning a small business can affect someone on the path to FIRE.  This is my attempt at addressing some of these topics.

I want you to know that I am not an attorney or a CPA.  I welcome anyone that can add to this, please do.  Just leave a comment explaining anything that might need clarification.  Please include reference material, so that we can all benefit and I will adjust this material accordingly.

This is a super complex topic, and there are a multitude of ways to navigate it.  There are also all sorts of different requirements and nuances to each state’s laws.  And while I may know some things, I do not know all of them.  I want to arm you with enough information that you can ask the right questions to a tax or legal professional.  From there, they will be able to give you answers based on your specific state and situation.

Basically, you should read this as you should read any other financial article:

Actionable takeaways should be rare. Why read something if it doesn’t lead to an actionable takeaway? I’ll tell you why: Because the person writing the article has no idea who you are, what your goals are, what your situation is, or how it will affect you.

As a writer, you add the most value acknowledging that you don’t know your reader. As a reader, you gain the most by remembering that the writer has no idea who you are.

Got it?  Good!

That being said, this will be a multi-part series about what we’ve learned through setting up all the various processes that are required of small business.  This is what we have done, so that’s what I know and understand.

For the purposes of this series I’m going to pretend like we are in a lovely no state income tax state like Texas, Washington or Florida.  Not the golden state of California, with it’s glorious income tax rate of 9.3%.  This simplifies things for explanation and makes the math a little easier to understand.

We’re also going to make the assumption through this that you are taking the standard deduction.   There might be some drastic differences if you start itemizing, etc.

I also want to make it clear that we are fortunate enough to have both a small business and a W-2 income at the time of writing.  What makes this nice is that we can really play games with the cash flow through the business, while maintaining a standard income and benefits from an employer.  This allows us a little more flexibility than someone whose only income is the small business.

Enough with the BS… on with it!!

Here are links to the articles that are included in this series:

Part 1 – Types of Businesses and Advantages of Owning One
Part 2 – Different Types of Retirement Plans Available
Part 3 – WTH is a Distribution?
Part 4 – Setting Up a Big Boy 401k Plan
Part 5 – Executing a Mega Backdoor Roth

***Disclaimer ***
This is written for educational purposes.  I am writing to explain my understanding of these principles.  Please, do your own research and talk to a licensed professional before putting this into practice.  The intent of this article is to aid in understanding, point you in the right direction, and to allow you to ask good questions to a licensed professional that may pertain to your individual situation.  If you see something wrong, please let me know , including documentation, so that I can adjust and get all the information as correct as possible.


  • Mrs. Picky Pincher January 22, 2018 at 6:37 am

    Oooooh thank you for sharing this!! I’ve been wanting to strike out on my own with a business but it’s pretty scary. Can’t wait to learn from y’all!
    Mrs. Picky Pincher recently posted…What A Frugal Weekend! January 21

    • Mr WoW January 22, 2018 at 2:47 pm

      That’s exactly why we wanted to put this together. A lot of questions on what and how. So we wanted a place to point people.

  • FIRECracker January 22, 2018 at 7:18 am

    Thanks for sharing all this info on how to set up a business! We might need to do in the near future, so will be following along and picking your brain.
    FIRECracker recently posted…How To Stay in Europe For More Than 90 Days – Part 2

    • Mr WoW January 22, 2018 at 2:49 pm

      Please do. Hopefully this will be helpful, don’t know much about Canadian law. But again. It’s to ask good question to an expert, not to have all the answers.

  • tawcan January 22, 2018 at 7:41 pm

    That’s a lot of great info, gotta check out more, even despite the difference between US and Canada.

    • Mr WoW January 23, 2018 at 5:42 am

      Sure thing i hope its helpful. Well be doing them sporadically over the next few weeks.

  • Indexia February 5, 2018 at 9:31 pm

    Great piece of advice.thanks for sharing it with all of us.
    hope to inculcate those points in future for business purposes.

    • Mr WoW February 5, 2018 at 9:51 pm

      Thanks hope it helps!

  • frank August 27, 2018 at 11:06 am

    hello MR wow
    really great blog and so much to learn an informative
    keep up the good work best of luck with your blogging

  • simon baldwin September 1, 2018 at 7:41 am

    Thanks for sharing this post with us. I am little bit interested to get more information about race options. I like to share my opinion on Race options.As with most races in the United States, New York races are divided into separate fields based on the United States Cycling Federation category system.

  • Shake Up Your Career with a Center Hustle - The Frugal Freeway July 1, 2019 at 7:29 pm

    […] Taxes: There may be significant tax benefits to operating your career as a business entity instead of as a W-2 employee. I can’t do justice to the subject here, but if you’re interested in this topic, check out Waffles on Wednesday’s excellent series on small businesses and financial independence. […]


Leave a Comment

CommentLuv badge
%d bloggers like this: