We work with a lot of entrepreneurs and here is the deal:
If you are an entrepreneur you might be wasting money right now.
I'm amazed when I meet with entrepreneurs and see how much money is consistently being given away. A lot of entrepreneurs are missing out on their taxes they don't even know about. But, I'm distracted before I even get started.
As an entrepreneur, hiring an employee changes a lot in regards to taxes and retirement planning.
Without an employee, entrepreneurs can open a solo 401k and can make a full $18,000 contribution and the company can contribute an additional $34,000 (totallying $52,000 to put away towards retirement - BIG ADVANTAGE if you can afford that lifestyle.)
When you hire someone you can no longer use a solo 401k and you have to transition to a traditional 401k. (NOTE: if the employee is full-time.)
In short, if you are an entrepreneur and are thinking about hiring a full time employee, note that there may be dramatic changes to your retirement strategy. However, don't scrap your business model just yet! You can still win by having a plan that accounts for the change in structure, while maximizing the benefits of being and entrepreneur.
Be sure you're taking advantage of all the tax savings you can as an entrepreneur experiencing growth!