How to Start a Small Business or Side Hustle in 2025 Mark Kohler's Secrets!

A tax lawyer and small-business adviser argues that side hustles and small businesses can lower an owner’s effective tax rate—not by “loopholes,” but by using ordinary deductions and retirement-account rules correctly. The core message is practical: start (or expand) a business purposefully, reinvest or reserve cash based on the business phase, and then deploy profits through tax-advantaged structures so more of the money stays in the owner’s pocket.

Mark Kohler frames business growth in four phases—startup, optimization/systemization, scaling/saving money, and exit—and says tax and legal strategy should match the phase. In early stages, the common failure is starving the business by pulling too much cash out too soon. Kohler describes it as suffocating a “toddler” business: owners quit stable income before the venture can mature, then make short-term bill-paying decisions instead of reinvesting in growth. The fix is to keep a safety net while the business develops, then scale later when the operation is stable.

In later stages, the mistake flips. When a business is systemized and ready to scale, Kohler warns against dumping every dollar back into the company and letting overhead balloon. He cites a cautionary example of a pizza-flipping entrepreneur whose business grew to a very large operation with hundreds of employees and major fixed costs; the company ultimately collapsed because reserves were never built and spending stayed permanently high. The underlying principle is balance: reinvest to grow, but also peel off profit and diversify so the owner isn’t “business rich, cash poor.”

On taxes, Kohler pushes back on a common misconception: forming an LLC or corporation is not required to get deductions. The ability to write off expenses depends on having a real business purpose and generating income, not on the paperwork. He gives a concrete example using a W2 earner making $100,000 and paying roughly a 30% combined federal/state effective rate. Adding a side hustle (for instance, consulting via Upwork) can create additional income and deductions—auto, meals, a laptop, home office, cell phone, and other “personal conversion expenses”—that reduce taxable income and therefore lower the effective tax rate. He emphasizes that the relevant number is what people actually pay after deductions, not the headline tax bracket.

Kohler also recommends retirement-account strategies for business owners who are scaling and generating meaningful profits. He highlights the “Mega Backdoor Roth” approach and argues that high-income earners can still fund Roth accounts through backdoor mechanics, provided they follow the rules. He further promotes self-directed retirement accounts (including directed IRAs and health savings accounts) as a way to invest retirement money into alternative assets such as real estate, private investments, and other nontraditional holdings—positioning these as tax-free or tax-deferred growth vehicles when structured correctly.

Overall, the advice ties together cash-flow discipline, phase-appropriate business building, and tax planning that treats deductions and retirement structures as wealth-building tools designed by the tax code—so owners can reduce taxes legally and invest the difference into their businesses and future independence.