I was never an entrepreneur

Lately I’d been gobbling up the My First Million podcast. The entrepreneurship stories are just fascinating to hear. Of course, Sam and Shaan delivers it well with their usual back and forth banter. What started out as listening to content to help me shift my identity to a marketer is also shaping how I see myself as a entrepreneur.

And here’s the poignant realisation: I was never one before, even if I was self-employed, had a company registration, and called myself an entrepreneur. I was more like a self-employer freelancer, a sole proprietor.

Because there’s so much behind being an entrepreneur that I’d never touched or wanted to touch.

Capital gains and allocation.

Investing as a company to scale profits beyond a solo bootstrapper

Here’s the mindblowing kicker of a tweet by the @levelsio

Instead of hiring a team of 10 people for 5 years at $120,000/y for your startup: You could automate instead + invest that in ETFs (as a company) and at average returns [of 10% historically] after 5 years you’ll have $7,656,124. You could keep investing that $7,656,124 and take out 4% (Google for Safe Withdrawal Rate), and make $306,244/y forever. Then take part of that out as a salary and expense the rest on company, like office rent etc. I’d argue this is the most important tweet I ever wrote but compounding interest doesn’t go viral.

This is how entrepreneurs should be thinking. The real job of an entrepreneur is about capital gain and allocation. Not just running business process (that’s employee thinking, even if an entrepreneur should be familiar with it).

That’s pretty intriguing. I’d only recently heard about investing through your company instead of personal capital, and this details out how one does it. It also fits with my overall philosophy of not wanting to ever hire anyone. If you’re a solo bootstrapper, how would you scale your profits beyond your 24h every day? For me, what happens after I hit $5k MRR? Investing is one good way. It can be ETFs, it can be real estate.

Why invest as a company over personal?

Why invest as a company though? I’d always thought about investing as coming from personal capital. What might be the benefits?

If you keep money in the company you pay corporate tax and lower capital gains tax, then can take that money out as salary or dividends but over a much longer time reducing your personal income tax.

Guess what: in Singapore, there’s no capital gains tax! Never knew.

That’s make complete sense now.

How to invest as a company

Reading through the thread, there’s a few ways to invest as a company. First the company structure. This is one way to structure it:

• Holding co.
• Consulting/Product co.
• Investment co.

Transfer profits from Consulting/Product co. to Holding co. as dividends tax-free, then transfer to Investment Co. Open a broker account in your Investment Co.'s name and invest through company trading account. Of course, this assumes you paid the usual corporate tax on profits from your Holding co. In Singapore that’s 0-17%.

Lesson

I was never a real entrepreneur.

But learning this and applying it will be my next step in becoming one. First, register companies! Open broker account. And start invest however little.