The main difference between a company (or business owner) and employees in terms of cash flow:
- Employees pay taxes from their income first; then, they pay their expenses.
- Business owners pay expenses first from their income; then, they pay taxes.
- Employees pay the government and everyone else first, while business owners pay themselves first, then the rest.
While learning accounting, finance and investment, the biggest eye-opener for me was the above truth. I didn’t notice the difference. Now, I’m looking for ways to pay taxes before I earn money. Real estate, bonds, and stocks are a few ways to do that. I learned that you can deduct the interest rate of your loan from the taxes you pay. If, in Germany, one buys an apartment to rent it to others, the interest rate, the yearly expenses, and deferred value are tax deductible. The exact calculation is a little complicated. There is still a social contribution you pay from your salary.
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