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Own a business, or invest in super?

My father-in-law has been in his own business most of his working life and thinks owning a small business is better than investing and superannuation. What do you think?

I have two views on your father-in-law’s advice. First, I think owning and growing a small business can be very rewarding, but it isn’t a cakewalk. Comparing a business to an investment fund can be done on the basis of the 10-year return to a typical return for a business. Good funds average around 10-12 per cent, but plenty do worse. Business owners are happy with 30 per cent profit but a hell of a lot don’t come up with these results.

Of course, if a business gives you a wage and a profit it could be a better option than a job and a super fund. A super fund is great because it is only taxed at 15 per cent on employer’s contributions, where a company is taxed at 30 per cent – but there are a whole lot of different circumstances of extra contributions through your work income and outside work your income that can affect the comparison.

Even if you start a business, I like super because it is taxed nicely and if your business goes broke your creditors can’t get at your money. Many business owners have gone broke and lost everything.

Also, many business owners have believed that they would sell their business and this would be their retirement nest egg, like super. However, their business was not worth much because it depended too heavily on the key person in the business.

My advice is to research and do a business plan for any business you want to start or buy. Make sure you are going to be better off, at least in the medium-term and remember you will probably work longer hours in your own business, so make sure it is worth it. Good luck.

For advice you can trust book a complimentary first appointment with Switzer Financial Services today.

Important information:This content has been prepared without taking account of the objectives, financial situation or needs of any particular individual. It does not constitute formal advice. For this reason, any individual should, before acting, consider the appropriateness of the information, having regard to the individual’s objectives, financial situation and needs and, if necessary, seek appropriate professional advice. 


Published on: Monday, December 07, 2009

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