How to File Taxes from Taiwan

How to File Your US Taxes from Taiwan

If you have moved abroad to start a business or teach English then you might be tempted to forget about all the bureaucracy in the US and not file your taxes.  While this probably won’t matter much in the short term, in the long term your unfiled taxes could come back to haunt you.

Filing keeps Uncle Sam happy and you should still file even if you don’t make or owe any money.  Another benefit is that if you select direct deposit for your refund, then you will get your refund AND stimulus checks fast.  I didn’t even know the latest House Bill had completely passed and I already had the $600.00 stimulus check automatically deposited into my bank account.

Get US Stimulus Check in Taiwan

How to File Taxes as an Employee or English Teacher in Taiwan

If you are working in Taiwan as an employee of a company or an English teacher then your employer should take care of your Taiwan taxes for you.  You will also be paying some tax in Taiwan depending on how much you make and how many days you stay in the country so you will not owe any US taxes on this amount (unless you make more than $107,600 USD/year). 

This is due to the Foreign Earned Income Exclusion which allows your to “exclude” up to $107,600 USD in income from your taxes (updated for 2020).

 

File Your Taxes For Free with E-FILE

 

 

How to File Taxes for Freelancers or Business Owners in Taiwan

Things get a little bit more complicated when you are not an employee and you are living abroad but don’t lose hope yet!  If you are in this situation then it is even more important that you file your taxes and declare all of your income (and in some cases your bank accounts).  This is because self-employed people generally need to self report their taxes and are sometimes held under greater scrutiny by the IRS because it is easier to under report your taxes if you are self employed.

The first thing to make sure of is that you qualify for the Foreign Earned Income Exclusion,

You can do this through either the Bona Fide Residence Test OR the Physical Presence Test.

Bona-Fine Residence Test:  This basically means that you are a resident (not citizen) of the foreign country you are staying in.  So in Taiwan this means that you will have an ARC (Alien Resident Certificate).  If you are running a business and living in Taiwan, then opening a Branch Office (Representative’s Office) in Taiwan is the easiest and cost effective way to do this.  I’ve been doing this for 4 years and it has helped me save on both my US taxes Taiwan taxes and has given me access to Taiwan’s National Health Insurance, contact me here to learn more.

Bona Fide Residence Test Taiwan

Physical Presence Test:  This means that you have been physically present in a foreign country or foreign countries (other than the US) for at least 330 full days during a 12 consecutive month period.  The 330 days do not have to be consecutive but time spent traveling (flying between countries) does not count so you really need to double check your travel itinerary and make sure that you don’t spend too many days back in the US.

Physical Presence Test Taiwan

Remember, you only need to qualify for 1 of these tests.  So if you are a Bona Fide Resident, you don’t need to qualify for the Physical Presence Test and you have some more leeway with your travel plans and time spent back in the US.

 

If you don’t qualify this year then just file your taxes as a regular US Citizen.

Because as far as the IRS is concerned, you are still living there and need to file taxes. 

You Can File for Free Here

If you do qualify for the Foreign Earned Income Exclusion then you will need to make sure that you fill out Form 2555 so that you can declare your foreign earned income.  

You will be able to deduct up to $107,600 USD of foreign earned income for this years taxes (2020) and it usually goes up by a few thousand dollars a year to keep up with inflation.

Bona Fide Residence Test Taiwan

There are two common mistakes people make when filing the Foreign Earned Income Exclusion:

The first is forgetting about the “earned” part.  This means that you need to be doing work to “earn” your wages.  You can still do this as a business owner but it cannot be through passive investments.

The second is not paying self-employment tax.  If you are an English teacher or employee of a Taiwanese company who derives all of their income from their employer, then you shouldn’t have to worry to about this.  But if you are a business owner then you will most likely need to pay self employment taxes.

Filing Your Taxes from Taiwan

No matter if you are a digital nomad with no income or a business owner running a seven figure FBA business, filing your taxes will keep the IRS happy, helps you get your stimulus checks faster and can benifit you if you ever decide to move back to the US.  Filing can also be done for free and if you’re an employee then it should be pretty quick and relatively straight forward.  

Owning your own business will make your taxes a little more complicated but you can still file for free or enlist the help of a CPA.

I have paid accountants in the past but have filed my own taxes with E-file the past couple of years.  E-file is authorized by the IRS and free for the basic option.

Start Filing Your 2020 Taxes Here

Disclaimer:

I am not a certified public accountant and the opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific tax strategies. It is only intended to provide education so always do your own research and consult with a certified public accountant.

Best Schwab Index Fund Portfolios

Best Schwab Index Fund Portfolios

Best Schwab Index Fund Portfolios

Schwab DIY Portfolios

The internet has liberated the individual investor and companies like Vanguard and Charles Schwab have made it easy to set up an DIY Index Fund Portfolio.  In about 10 minutes you can set everything up and you’ll be able to rebalance your account once a year for about another hour of work.  This is a great option for those who want to have more control over their investments, but if you prefer a completely hands off approach then you might want to consider a Robo-advisor and you can read more about the pros and cons here – Robo-Advisors vs DIY Index Fund Investing.

Robo-Advisor vs Index Funds

Schwab Mutual Funds vs ETFs

You have two ways to get access to Index Funds with Schwab, either through their Mutual funds or ETFs.  Both have their pros and cons but ultimately I chose to use mutual funds because they allow automatic investing and you can also buy a set amount (e.g. $100.00).

ETFs (Exchange Traded Funds)

Pros:

  • Can buy and sell anytime during trading hours
  • Order filled immediately (when the market is open)

Cons:

  • Can NOT buy in a set amount (e.g. $100.00)
  • No automatic investing 

Mutual Funds

Pros:

  • Automatic Investing
  • Can buy in a set amount (e.g. $100.00)

Cons:

  • Orders are only filled at the end of the day
  • Orders filled at the “market” rate

 

When I first started DIY investing I was using ETFs.  I liked the fact that I could buy and sell them whenever I wanted and didn’t have to wait until the end of the trading day for my orders to be filled like with mutual funds.  But this proved to be a double edged sword.

When you have the opportunity to buy and sell whenever you want, emotion can easily get the best of you.  You might hear some news about how fiscal stimulus talks are stalling out in congress and how it’s going to tank the market and then sell all of your shares.  Only to have the stock market rally because on vaccine hopes.

It is imposisble to predict what is going to happen in the market and you are better off creating a consistent strategy and sticking to it.  An automatic investing plan is the best way to do that and mutual funds still allow you to sell or buy shares at the end of the trading day if you want to.

 

 

The Best Schwab 1 Fund Portfolio

 

Schwab 1 Fund Portfolio

If you are just getting started or have been putting off investing, you can start with this super simple 1 Fund Portfolio:

100% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

Includes about 3,741 US stocks that trade on the U.S. stock exchanges; it includes large, mid, small and micro cap companies.

You can set up an automatic investing plan with a minimum of $100.00 and this can be done on a monthly, bi-monthly or quarterly basis.

If you have been hesitating getting started, simply starting with $100.00/month into this index fund is a great way to get started.

 

 

The Best Schwab 2 Fund Portfolio

 

Schwab 2 Fund Portfolio

The 2 Fund Portfolio adds a bond fund to the Total Stock Market Fund in the 1 Fund Portfolio:

75% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

25% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

Conventional investing wisdom says that you should be more heavily invested in stocks when you’re younger and slowly buy more bonds over time.  Using your age as the percentage of bonds is a good place to start.  So if you are 25 years old, then a Portfolio of 25% Bonds and 75% Stocks makes sense.

The most stocks you have, the more volatile your portfolio will be, but it will also have a larger potential for gains.

You can set up automatic investing for $400.00/month:

$300.00 – SWTSX – Schwab Total Stock Market Index Fund

$100.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

 

 

The Best Schwab 3 Fund Portfolio

 

Schwab 3 Fund Portfolio

The 3 Fund Portfolio adds SWISX,  The Schwab International Index which includes common stocks of the 350 largest publicly traded companies from selected countries outside the United States.  This provides more exposure to global markets and further diversification.

50% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

20% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

 

You can set up automatic investing for $500.00/month:

$250.00 – SWTSX – Schwab Total Stock Market Index Fund

$150.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

 

 

The Best Schwab 4 Fund Portfolio

 

Schwab 4 Fund Portfolio

The 4 Fund Portfolio adds a Real Estate fund for even more diversification.

50% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

10% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

10% – SFREX – Schwab Fundamental Global Real Estate Index Fund – Net Expense Ratio 0.390%

 

You can set up automatic investing for $1,000.00/month:

$500.00 – SWTSX – Schwab Total Stock Market Index Fund

$300.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

$100.00 – SFREX – Schwab Fundamental Global Real Estate Index Fund – OR – SFENX Schwab Fundamental Emerging Market Large Companies Index

 

 

The Best Schwab 5 Fund Portfolio

 

Schwab 5 Fund Portfolio

The 5 Fund Portfolio includes both the Emerging Market Fund and the Real Estate Fund for even more diversification.

With this portfolio, you get exposure to the large, mid and small cap US Stocks.  Large and mid cap international stock, the global real estate market and is balanced out by 30% aggregate bonds.  

40% – SWTSX – Schwab Total Stock Market Index Fund – Net Expense Ratio 0.030%

30% – SWAGX – Schwab Us Aggregate Bond Index Fund – Net Expense Ratio 0.040%

10% – SWISX – Schwab Big International Companies Index Fund – Net Expense Ratio 0.06%

10% – SFREX – Schwab Fundamental Global Real Estate Index Fund – Net Expense Ratio 0.390%

10% – SFENX – Schwab Fundamental Emerging Market Large Companies Index  – Net Expense Ratio 0.390%

 

You can set up automatic investing for $1,000.00/month:

$400.00 – SWTSX – Schwab Total Stock Market Index Fund

$300.00 – SWAGX – Schwab Us Aggregate Bond Index Fund

$100.00 – SWISX Schwab Big International Companies Index Fund

$100.00 – SFENX – Schwab Fundamental Emerging Market Large Companies Index

$100.00 – SFREX – Schwab Fundamental Global Real Estate Index Fund

 

Index Fund Allocations

The allocations above are not set in stone and are meant to be a starting point.  You can increase or decrease your precentage in bonds or other funds to match your personal risk tollerance.  Generally speaking bonds are a safer investment and the older you are the more bonds you should have.  The easiest way to allocate bonds is to use your age as the percentage (a 25 year old with 25% bonds).

Proper-Asset-Allocation-Stocks-Bonds-CONVENTIONAL

 

How to Set Up Mutual Fund Automatic Investing 

In order to set up automatic investing you will need to buy at least $1.00 worth of shares.  First log into your Schwab account click on Trade and then Mutual Funds.

Type in the Mutual Fund that you want to buy and click buy.

How to Buy Schwab Mutual Funds

Review your order and make sure that you select “Reinvest Dividends and Capital Gains”.

Once you have all of your funds, click on Automatic Investing and pick how much and how often you want to invest.

schwab automatic investing

Disclaimer:

I am not a certified financial planner and the opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry.  Always do your own research and invest at your own risk.

Robo-Advisors vs DIY Index Funds

 Robo-Advisors vs DIY Index Funds

Robo-Advisor vs Index Funds

Robo-Advisors have become extremely popular in the last few years with companies like Wealthfront and Betterment making up most of the market share.  These companies essentially create and manage a portfolio of low cost index funds for a .25% annual fee.  This is a much cheaper option than giving your money to a hedge fund manager, but also more expensive than simply doing it yourself with a simple portfolio of index funds.  So which one is right for you, Robo-Advisors or DIY Index Fund Investing?

 

Robo-Advisors

Compared to traditional money manager or hedge funds that charge 1% (or more) a year to, to “manage” your investments,  Robo-advisors are a much cheaper alternative.  You will be able to get a diversified portfolio that is automatically rebalanced and offers tax loss harvesting for about a quarter of a percent.

One of the best parts about robo-advisors is that you basically just set it and forget it.  You can pick an amount that you want to invest on a monthly basis and then the robo-advisor does the rest.  Automatically buying your new index funds and rebalancing ones that have either over or underperformed.

For someone who wants a completely hands-off approach, choosing a Robo-advisor is one of the easiest ways to automate your investing and build long term wealth.

Get Your First $5,000 Managed for Free with Wealthfront

Wealthfront vs Index Funds

DIY Index Fund Investing

I started out by investing in low cost ETFs with Charles Schwab.  I wanted to learn more about investing and thought that I could manage it myself and I also had fun doing in (while the market was going up).  I quickly realized that I wasn’t able to look at my investments objectively and trying to rebalance them myself every month became a chore.

I became my own worst enemy and tried to “time” the market.  This worked out sometimes and I was able to sell before a correction but would then miss the buying opportunity.  More often than not, I would have been better off leaving the entire amount in and forgetting about it.  Every experienced investor will tell you that you can’t time the market, but every novice investor still wants to try.

 

Every experienced investor will tell you that you can’t time the market, but every novice investor still wants to try.

Around this time I started hearing more and more about Robo-Advisors and decided to give Wealthfront a try.  The best thing about it was that it was completely automated.  A certain amount was deducted from my checking account every month and I never had to even think about it.  It was also in a separate account from my checking account so I barely ever looked at the short term fluctuations.

But I couldn’t help but think about the 0.25% yearly fee that I was paying.  It sounds like a small amount but this is charged every year and I plan on keeping the majority of my money invested.  As my investment grew, the amount I was paying really started to add up.

 

Robo-Advisor Fees:

$10,000.00 = $25.00 Yearly Fee

$50,000.00 = $125.00 Yearly Fee

$500,000.00 = $1,250.00 Yearly Fee

$1,000,000.00 = $2,500.00 Yearly Fee

 

I decided to find another automated way of investing.  I didn’t want to sit down every month and buy ETFs but I also didn’t want to pay for something I could easily do myself.  That lead me to Automatic Mutual Fund Investing with Charles Schwab.

 

Automatic Mutual Fund Investing

To me, this is the best of both worlds.  The funds are automatically withdrawn from my checking account and invested into a low cost index fund portfolio.  I no longer need to pay the 0.25% fee for a robo-advisor and I don’t need to manually buy ETFs like I was doing in the past.  My investment strategy is now completely automated and has the lowest possible cost.

schwab automatic investing

Learn How to Build Your Own Index Fund Portfoilo Here!

Disclaimer:

I am not a certified financial planner and the opinions expressed in the Blog are for general informational purposes only and are not intended to provide specific advice or recommendations for any individual or on any specific security or investment product. It is only intended to provide education about the financial industry.  Always do your own research and invest at your own risk.

How to Migrate from Godaddy to Cloudways Hosting

How to Migrate Hosting from Godaddy to Cloudways

Migrate Goaddy to Cloudways

Why migrate from GoDaddy to Cloudways?

I used GoDaddy hosting for years and this was mainly because Godaddy is where I registered my first domain name.  This was about 10 years ago and I didn’t really have any idea what I was doing or what website hosting even was.  In the end, Godaddy served it’s purpose and is not a terrible option for beginners and they do actually offer decent customer support.

But once my sites started getting bigger and more complicated, GoDaddy’s Shared Servers just weren’t able to handle the work load.  Using WordPress and Woocommerce really slowed down my sites and after spending hours trying to optimize them and speed them up, I realized that the one thing I could never optimize was the server response time.  This is determined solely by your hosting provider and GoDaddy has shared hosting with many other sites on the same server which ultimately slows down your site.

Here’s a comparison of the response times of my site with Godaddy and Cloudways.  You can see that the files are the same size and it takes Godaddy almost .7 seconds to respond while it takes Cloudways about .2 seconds.  .5 seconds might not seem like a lot of time but it can really make a difference when users are on your site.

 

Cloudways Server Response Time

After spending days trying to optimize my site and speaking to experts, I was led to Cloudways which uses Digital Ocean Servers.

I switched over to their servers with a 7 day free trial and tested out the speeds once I migrated my site.  My site was instantly with their plan that cost $22.00/month and I was paying $49.99/month. 

 

Click Here for a Free Cloudways Trial and Free Migration

The largest improvement was actually on the backend.  Using Godaddy and WordPress made adding pictures and modifying products/posts a tedious experience where I could only do one thing at a time while I waited for the site to respond.  Switching to Cloudways made a huge difference and now I can edit and optimize my site at my speed instead of waiting for Godaddy’s servers to respond to my requests.

In short, Cloudways is cheaper and faster.  

But you don’t have to just take my word for it, you can try out their servers for free for 7 days to test it out for yourself.

 

How to Migrate Hosting from Godaddy to Cloudways

The first thing to do is go to Cloudways and use the free demo server (Free 7 Day Trial).  No credit card required.

Verify the email that they send you.

At Cloudways, click on Add Server and pick your Application type (website); WordPress, WordPress/Woocommerce, Majento etc.

Name your website and server.

Pick your server – Digital Ocean

Pick your server size, you can start at $10.00 or $22.00/month  with no contract and you can add multiple websites(applications) to the server.

Pick the server location that is closest to your audience or customers.

Click Launch Now!

 

Set Up Cloudways Server

 

Now Your Free 7 Day Trial Server Has Been Launched!

It’s time to migrate your site to Cloudways:

Your server will take about 7 minutes to launch.

Once it has launched, click on Applications and then Add Application (applications are basically just websites).

*Launching the application takes about 2 minutes 

Log into Your WordPress Site:

While the application is being added, log into your wordpress site /wp-admin/ and install the Cloudways WordPress Migrator Plug-in

 

Back to Cloudways:

Once your application (website) has launched, you will see your access details:

Application Access Details

Put these details into the Cloudways WordPress Migrator Plug-in

Your destination URL is the one on the new Cloudways Server and will be something like this:

wordpress-4323579-176454.cloudwaysapps.com

Create your application credentials for SFTP on Cloudways and use that for the SFTP Username and Password.

Start Migrating

Once all your data is in, click on Migrate.

*Don’t worry, your original site is still live in the original location, this is moving a copy of your site to the Cloudways server.

Migrating takes up to 4 hours and you can close the window without interrupting the process.  They will email you when it has finished and this will not affect your current site.

 

 

Once the Migration is Complete, Test your website with Cloudways Hosting:

Now you have a version of your site on the Cloudways servers.  You can test out the speed and log into wordpress and see if you notice a speed difference.

Your site is still with your old hosting provider so if you want to continue with the migration, now it’s time to point your url (domain name) to your Cloudways server.

 

How to point your url to your Cloudways server: 

First go to Cloudways – Domain Management – add primary domain – input your website url. 

Cloudways add primary domain

Change A (IP Address) Records:

First, access your Cloudways Account to get your New IP Address.  This is the same Public IP Address that we used for the Migrator Plug-in.  

Application Access Details

Now in Godaddy, click on Domains and then DNS Management.

Change the IP Address in the A Records to your NEW Cloudways IP Address.

Edit Godaddy A Records

The process is the same for any domain registrar, here’s an example of Name Cheap A Records:

Go to Domain List, Advanced DNS and Input Your New Cloudways IP Address:

Name Cheap Change A Record

Now Your Site is Pointing to Cloudways Hosting!

You will need to wait for the new changes to take effect and this process can take upto 24 hours but will usually start working in just a few hours.

Go to https://www.whatsmydns.net/ to make sure the new Cloudways IP Address is listed.

**This usually takes a few hours so don’t panick if it isn’t showing right away**

 

Click Here for a Free Cloudways Trial and Free Migration

How to Build Your First Niche Website

How to Build Your First Niche Website

How to build your first niche website

When people are first getting started with internet marketing or e-commerce there can be an overload of information.  One friend tells you about how he knows a girl who’s killing it with affiliate marketing, another one has a cousin who does FBA and another has a brother in-law who does drop shipping.

These are all viable ways to make an income online as a Location Independent Entrepreneur and if you’re just starting out then you don’t actually need to worry about it as much as you might think.

I started building websites 10 years ago and my first websites have long since been abandoned.  I had no idea what I was doing and when I think back to my approach, I see now that my first few sites never would have worked.  But after building a few sites I became proficient not only in WordPress but also in understanding what people want online and how I can help them get it.

Now my largest site is a 6 figure e-commerce business that is 7 years old and started off as a blog.  When I made it I didn’t have any plans to monetize it, I was just writing about a subject that I had specialized knowledge in and the rest followed naturally.

If this is your first time making a niche website then I suggest not overthinking it and just getting started.  Website domains and hosting are cheaper than ever and within a few hours you can have your very first website up and running!

 

What You Need to Build Your First Niche Website:

 

An Idea or Niche

Website Hosting and a Domain Name

WordPress

A Theme and Plugins

 

Step 1: Your Idea

While Niche Selection can be one of the most important parts of a successful Niche Website, if this is your first site then this should be thought of more as a learning experience.  The reason I say that is because there is a big learning curve and the sooner you get started the better.

 

The Second Best Time to Make a Website is Today

“The second best time to plant a tree (make a website), is today”

I’ve met hundreds of people with “great ideas” who have never done anything with them and I’m sure you have too.  They practically get you to sign an NDA at the bar before they unveil their genius idea.

Then you have the people who are waiting around for the perfect idea.  They would get started but first they need this magical idea to come to them from a burning bush, then everything will fall into place.

The problem with both of these strategies is that neither person does anything.  They talk about it for years while their youth is sucked away by a cubicle.

Think of your first site as a practice website where you can make all your newbie mistakes so that your next site is even better.

Free Niche Selection Guide

 

Step 2: Hosting

All websites need to be “hosted” by someone.  This basically just means that they are on a server somewhere so that they can be connected to the internet.

We use BlueHost which offers cheap website hosting, a free domain name and a free SSL Certificate.

 

Step 3: Domain Name

BlueHost gives you a free domain with their hosting and you can either set that up right away or you can do it later.

This is going to be similar to Niche Selection.  For your first website, don’t overthink it.  Pick something you’re interested in or make it a personal blog.

 

Step 4: Install WordPress

Once your site is active then it’s time to install WordPress.  WordPress is free and can be used for making blogs, e-commerce sites and everything in-between.

You can sign up below to get the free tutorial:

Free Website Tutorial!

Why I’m Not Selling My Business

Why I’m not selling my business

I have this dream lingering in the back of my mind about selling my business and sitting on a beach somewhere drinking endless San Miguel Lights or Tiger Bacs.  All without a care in the world and doing this while living off $20,000 USD/year afforded to me by using the 4% rule.  But after doing some calculations and re-evaluating my business I decided to keep it.  

I realized that what I actually wanted more than retiring on a beach somewhere was freedom and stability and this could be accomplished not despite my business but because of it.

 

The 4% Rule vs The 40% Rule

4% is the safe withdrawal rate where you can theoretically withdraw 4% of an invested sum of money a year without lowering the principal.  So if you have $500,000 invested in index funds you should be able to withdraw 4% or $20,000 a year forever.

This is basically the principle behind FIRE (Financial Independence Retire Early), which is arguably much better than the old model of Retire Old and Try Not to Die but not without it’s faults.

The 40% rule (which I first heard on the TMBA Podcast) basically says that instead of investing in traditional markets to get the 4% rule, you can invest in a website and with a little work and time you can get a 40% return.  By owning a business you are essentially using the 40% rule.

 

Problems with Retirement

The first problem with retirement is that it is probably pretty boring.  How many people retire only to take up a part-time job as a Wal-Mart Greeter or volunteer as a crossing guard at a local elementary school.  People need to have a purpose in their life and sitting on a beach doesn’t usually accomplish that.

The second problem is that 4% on an investment sucks.  Okay, I know that this is the “safe” withdrawal rate and the stock market has averaged 7-10% over the last hundred years so you could potentially end up with a lot more money.  But you don’t really have any control over this and you could also end up with less if the markets don’t preform the same in the 21st Century as they did in the 20th Century.

 

What would happen if I did sell my business?

Online businesses typically sell for a multiple of 25-35x monthly profit.

I’ve had my business for 5 years and the past 36 months it has made an average $6,000/month profit.  If I get a 30x multiple on the site then that is $6,000 x 30 = $180,000.

$180,000 USD – Website Sale for 30 x Multiple

-$21,600  – Brokerage fees –  10-15% brokerage fees, we’ll say 12.5%

$158,400

-$17,854  – Taxes  – $158,400 – $39,375 (0% cap gains tax) = 119,025 x 15% (capital gains tax) = $17,854.00

$140,546 in my bank account after the sale

So if I take this $140,546 and invest it in index funds it yields me a whopping $5,622 each year using the 4% rule.  Or I could keep my business running at it’s current level of $72,000/year and this would come out to be a 51% return on a $140,000 investment!  So instead of selling my business I am treating it like it is a business that I bought as an investment.

 

What would I do after I sold my business?

This question is often overlooked by people wanting to sell their business and thanks to books like Before the Exit by Dan Andrews I have the luxury to contemplate it before actually selling my business.

Over the years, for better or worse, my identity, self-worth and purpose have been derived from my business.  Selling it would most likely create a void which many previous owners are faced to deal with.

 

Why I wanted to sell my business:

To dig further into this, I want to look at WHY I wanted to sell my business in the first place.  The main reason is that running a business is stressful.  I have an e-commerce business that deals with physical products so there are customers I need to deal with, supplier relationships needed to maintain, SEO needed to be done to drive traffic, Google Algorithm Updates to avoid so I don’t lose the traffic, etc.

But instead of throwing out the business with the bathwater, I started outsourcing the things I didn’t want to do anymore.

The first step was to get a VA which I hired off up Upwork for $6.00/hour (which I think is high but extremely low compared to what my hourly rate should be).

Now all of my email inquires go to the VA first and then (when the customer is further down in the sales cycle) to my email inbox.  This has cut my email time in half.  They also do customer check-ins, order processing and tracking and I hired freelance writers for content.  All of this has brought down my total amount of work to about 13 hours a week.

 

Running your own business is easier than running someone else’s.

This shouldn’t come as a shock but I know my business better than anyone in the world.  I know what works and what doesn’t, what products to add to it, how to deal with customers and after 5 years I am only getting better and more efficient.

If I sold my business I would be starting from scratch and having to learn a whole new business.

 

Online businesses are tax efficient.

Remember the $17,854 I had to pay in taxes, that was mostly from long term capital gains which would be about 15% (you can exclude the first $39,375 assuming you don’t already exclude that using the Foreign Earned Income Exclusion).

Foreign Earned Income Exclusion (FEIE)

The FEIE allows US citizens living abroad to be exempt from paying federal income tax on their first $105,000 of earned income as long as they pass either the physical presence or bona fide resident test.

Since I am a US citizen living in Taiwan and I’m a bona fide resident of Taiwan I can claim the FEIE and I don’t have to pay federal income tax on the $72,000 I earn annually (however this is still subject to self employment tax).

One of the biggest areas of confusion with the FEIE is the “earned” part.  When you sell an asset, that money is not earned so it doesn’t qualify for the FEIE which is why I would have to pay 15% taxes on it.  But if I “earn” the money by working in the business then it does qualify for the FEIE.

There are also many small business deductions to take all of which make running a business much more tax efficient than selling one.

 

Final Thoughts

Treating my business as an asset and investment has given me a lot of mental space and clarity and while it is ultimately a better decision for me to keep my business than sell it, it certainly doesn’t mean that’s the best choice for everyone.

I’m going to focus on outsourcing as much of the business as I can and keeping it as part of a portfolio of businesses.