financial

Fact checked by Vikki Velasquez
Reviewed by Andy Smith

What Are Real Estate Syndicates?

A real estate syndicate is a partnership where investors pool their money to buy and manage properties. Typically, a sponsor (sometimes called a syndicator) scouts for prospects, raises capital, and manages the assets, while passive investors deliver much of the equity for the syndicate. Investing in property through syndication allows you to get in on deals that may otherwise be inaccessible. Syndicates can be a more hands-off investment, with professionals overseeing the day-to-day management.

Key Takeaways

• Real estate syndication offers investors the opportunity to pool their funds and invest in larger properties.
• Investing in real estate syndicates can supply passive income and potential tax benefits.
• It is important to research and evaluate the track record and credibility thoroughly of the syndicate’s sponsors before investing.
• Real estate syndication has risks, including illiquidity, dependence on the syndicate’s performance, and conflicts of interest.
• Investors should consider alternative investment options, such as real estate investment trusts (REITs) and direct property ownership, before deciding on real estate syndication.

Factors to Consider Before Investing in Real Estate Syndicates

Conducting careful due diligence is crucial before handing over hard-earned money in any investment, including a real estate syndicate. Failing to research key elements of any deal can lead to subpar or even negative investments. Here are some important aspects to evaluate:

Track Record of Sponsors

The experience, credentials, and past performance of the sponsors of the syndication need to be examined closely. Review their background to understand their investing experience, education, industry connections, and previous results. More experienced sponsors tend to perform better over time and have done so through good and bad market cycles.

Request the background on previous projects to evaluate actual net returns to investors after fees. Verify claimed returns with independent audits or directly contacting past investors. Sponsors with a strong history of achieving projected internal rates of return show more trustworthiness; they also don’t need to worry about giving you the information you need. Records, not promises, are the coin of the realm here.

Investment Strategy and Financial Projections

Understand the specific business plan and underwriting assumptions for the project. Carefully review projected costs, revenues, appreciation rates, capitalization rates, debt terms, occupancy rates, and other financial projections to determine if they are reasonable. Stress test assumptions to account for economic fluctuations. What would be the worst-case scenario? How devastating would it be for your investment? Ensure the sponsors have a sound method for their projections.

Be wary of sponsors making unrealistic projections since their goal may be collecting large fees, not the long-term health of the syndicate. Experienced syndicators tend to outline conservative growth estimates and focus more on downside protection than maximizing projected returns.

Property Fundamentals

Research all details available on the property being considered: location, asset class (e.g., multifamily, retail, office, etc.), history of tenancy, occupancy rates, debt levels, cap rates, and net operating income. Evaluate current leases to determine revenue stability. Analyze the industries of the tenants to account for economic risks; diversification among the tenants, if possible, is a plus.

Generally, properties with higher occupancy rates in growing metro areas make safer investments. Territories experiencing population and job growth and solid market fundamentals will be more likely to have sustainable rental demand and better appreciation over the investment term.

Fees

Syndicates can charge fees for services like acquisition, asset management, property disposition, refinancing coordination, tenant coordination, audit preparation, and capital raising. Carefully analyze the fee structure to determine the overall costs so that the sponsors’ incentives are properly aligned with yours.

Note

Reputable sponsors focus more on the success of the investment over quick profits from excessive fees. The fee terms should be clearly explained in the offering documents.

Benefits of Investing in Real Estate Syndications

Access to Institutional-Grade Properties

Real estate syndication can enable the pooling of capital for single high-quality properties worth potentially $10 million to $100+ million, sums out of reach for most individual investors.

Top sponsors leverage extensive networks and industry expertise to source exclusive off-market prospects before they hit the listings. Pooling funds gives you a seat at the table for investing in class A institutional properties, usually only accessible to large institutions or REITs.

Potential for Leveraged Returns

Professionally managed real estate syndicates can have strong leveraged returns. Cash-on-cash yields from rental income and back-end appreciation tend to increase over time.

When leverage is strategically employed, annual returns can be doubled or tripled. The ability to employ leverage to enhance equity returns is a key benefit driving investors to commercial real estate investing.

Tax Benefits

Commercial real estate investments can increase after-tax returns through depreciation shields, deferred capital gains, and cost recovery deductions. Capital gains taxes can also be deferred through 1031 exchanges when there’s a sale of the new property.

Important

For assets held until death, heirs can typically inherit properties at a stepped-up cost basis, greatly reducing tax exposure. Savvy syndicate sponsors structure deals to maximize your after-tax cash flow and returns.

Diversification

Investing in real estate helps to diversify your portfolio, and its returns fluctuate according to their own rhythm. Their returns don’t necessarily correlate with those of stocks and bonds.

In addition, property values and rent tend to rise with inflation over time. This provides a potential hedge when rising prices are affecting traditional securities. Hence, diversifying into private real estate investments can lower a portfolio’s risk-adjusted returns.

Passive Income Generation

Most real estate syndicates only need you to invest your capital if you’re a limited partner. There are ordinarily no further obligations. Thus, you can passively earn attractive property yields without personally sourcing or managing assets.

Risks and Challenges of Investing in Real Estate Syndicates

Illiquidity of Investments

The illiquid nature of private real estate investments is perhaps their biggest drawback. Most syndicates have a projected hold period of five to seven years or more. Your investment, then, will likely remain locked up for the entire duration with little opportunity to exit early.

Nevertheless, events in your life may mean that you need your funds sooner. Without a secondary market, the only option would be finding a buyer to take over the remaining stake—a difficult task. Thus, you have to calculate this as part of your risk and be comfortable with your money being out of reach during the period of the syndicate deal.

Reliance on Sponsor Credibility and Performance

Investors depend wholly on the skill and experience of the syndication sponsor for their returns. Even with the best due diligence, sponsors may fail to execute business plans after unforeseen events.

Subpar operators could mismanage properties, and soon, they will be over-leveraged, have high vacancies, or require unexpected capital infusions. Transparency and clear, consistent communication about property operations will be key. In addition, ill-equipped sponsors can spread themselves too thin across many projects. Alternatively, there’s the chance of fraud.

Assessing the sponsor’s character and competence takes significant due diligence. It would be best to analyze past deals, speak with industry references, and verify all background claims. Look for key signs of integrity: strict adherence to Securities and Exchange Commission (SEC) guidelines, transparent reporting, aligned incentives, and testimonials from previous investors. If the sponsor isn’t fully transparent or if you find reasons to think the sponsor isn’t fully trustworthy, walk away. There are many investment vehicles available that won’t leave you with misgivings at the start.

Despite your best efforts, newer syndicators can still be difficult to evaluate until they have finished a few successful projects. As such, the risk of a problem sponsor is another reason why it’s important to diversify across different syndicates or other investment vehicles as part of a long-term, prudent investment plan.

Conflicts of Interest

Syndication fees can pose conflicts of interest regarding how the sponsor is compensated. Sponsors may choose to flip properties prematurely instead of doing what’s best for the asset over the long term. Alternatively, they may over-leverage properties by pulling out cash, leading to a greater risk of default.

Also, the sponsor may decide to act as a broker on both the buying and selling sides, drawing commissions from both transactions. Look for fee terms to ensure a fair alignment between your interests and those of the sponsors with incentives like profit splits.

Structuring a Real Estate Syndicate

Limited Liability Companies (LLCs)

Limited liability companies (LLCs) are favored for their simplicity and flexibility in managing and protecting against personal liability. In an LLC, there are generally two key roles: the general partner (GP) or syndicator, who manages the investment, and the limited partners (LPs), the investors. The GP handles acquiring, managing, and eventually selling the property, while LPs provide capital and share in the profits, usually without participating in day-to-day management.

All members of the LLC have an ownership interest in the company and enjoy limited liability protection. This means that your personal assets are generally protected from the company’s liabilities.

Limited Partnerships (LPs)

LPs are like LLCs, but some legal and tax differences exist. In a limited partnership, there are still GPs and LPs. However, GPs have unlimited liability and are responsible for managing the partnership, while LPs have limited liability and typically don’t participate in management.

LPs can offer more favorable treatment for passive losses, which can be particularly beneficial in some real estate investments. As an LP, you may be able to use passive activity losses to offset passive income, a benefit that can be more restricted in LLCs. Moreover, income distributed to LPs is typically not subject to self-employment tax, though LLC members may be liable for this tax for their share of the LLC’s income. This difference can result in significant tax savings for LPs.

Corporations

Corporations are less common in real estate syndication but can offer more structure, with shareholders, directors, and officers. As an investor, you’ll become a shareholder with a stake in the corporation. Directors make major decisions, while officers handle daily operations. This structure offers liability protection but can be less tax-efficient and more complex for real estate investments.

Trusts

Trusts are used in specific scenarios, like estate planning or when specific legal protections are desired. In these cases, the trustee manages the property held in the trust, while the beneficiaries (investors) receive income generated by the trust’s assets.

Types of Real Estate Syndicates

Real estate syndicates come in several forms, each with unique risks and rewards in particular circumstances. Understanding these differences is key to choosing the right investment path.

Debt Syndicate

In debt (mortgage) syndication, investors essentially act as lenders. They pool their money to offer loans for real estate projects. The borrower could be a property owner or a developer. The investment is secured by the property itself, much like a residential mortgage. Investors earn money from the interest paid on the loan.

The risk with debt investing is generally lower compared with equity syndications since creditors are prioritized in repayments. In equity investments, the profit potential can be higher. However, the potential returns are usually capped at the agreed-upon interest rate.

Equity Real Estate Syndicate

Equity syndicates are the most common, involving direct fractional ownership in an investment property. Investors receive periodic income distributions and back-end proceeds from the eventual sale of the asset.

Returns depend on how well the property performs and the appreciation of its value over time. Investors receive returns as rental income and a share of the property’s sale price once sold. The syndicator usually manages the property and deals with tenants, maintenance, and other operational details.

Equity syndicates carry a higher risk than debt but benefit from leverage and upside potential. The risk in equity syndicates is typically higher since returns depend on the property’s performance, which is related to conditions in the market. However, the potential for higher returns is significant, especially if the property increases in value.

Commercial vs. Residential Real Estate Syndication

Commercial syndication involves apartments, office buildings, retail centers, self-storage, and other income-generating properties. These assets depend on business activity, which can fluctuate in line with the economy. However, the longer-term leases generally used for these properties can add income stability.

Residential syndicates focus more on home rentals, single-family houses, or small multifamily buildings. Residential investments can have higher vacancy rates and expenses without commercial lease contracts, making underwriting more complex.

Land Syndicate

Land syndication is the purchasing of vacant land for future development or farming. Investors in these syndicates anticipate that the land will increase in value as the demand for housing, commercial space, or agriculture grows. Given the unpredictability of correctly speculating on land value, these investments are a higher risk.

Affordable Housing Syndicate

Some sponsors specialize in affordable housing apartment communities that qualify for tax credits or other government subsidies. These investments support socially responsible objectives around accessible housing and come with downside protection and stable, capped returns. What you get in exchange is less in potential profits.

Opportunity Zone Syndicate

These investments target economically distressed areas designated as qualified opportunity zones, which use compelling tax incentives to bring in investors. Capital gains can be deferred until 2026 and potentially exempt from 15% of the gains if held for seven years. Opportunity zone deals can provide outsized returns, but they have potentially greater risks in unproven markets.

Evaluating Sponsor Credibility and Track Record

Conducting thorough sponsor due diligence is important before your involvement in a syndication. Warning signs like exaggerated return claims, frequent missteps, or lack of transparency should raise red flags.

Here are signs of sponsor credibility:

• Five or more years of real estate investing experience across several market cycles
• Strong industry reputation with references from investors, brokers, and partners
• Adherence to securities regulations and accredited investor requirements
• Willingness to share documents like past financial reports, projections, and private placement memorandums (PPM)
• Evidence of successful exits and realized returns from previous projects

Verify sponsor backgrounds on the Financial Industry Regulatory Authority’s (FINRA’s) BrokerCheck and confirm SEC-registered investment advisor status. Trustworthy sponsors, careful with their reputation, will focus more on long-term returns than quickly racking up fees.

Reviewing Investment Strategy and Projections

The syndicate’s business plan and projections should demonstrate a deep knowledge of the market and focus on achievable targets. Here are key areas to evaluate:

• Conservative revenue and expense growth assumptions
• Detailed explanations justifying all projection line items
• An analysis testing diverse economic scenarios
• Leverage levels below 50% loan-to-value (LTV) ratio
• Minimum five-year hold period for suitable asset appreciation

Request examples of underwriting for past investments. Note, however, that sponsors may have proprietary models not shared publicly. Nevertheless, the methodology and care taken should reflect experience and expertise. Reviewing strategy and forecasts prevents speculation risk and builds trust around return goals.

Joining a Syndicate

Once satisfied with your due diligence, you can start with a few key steps.

For most syndicates, you must have accredited investor status. If so, confirm that you qualify as an accredited investor: You have had a minimum of $200,000 in individual income for the past two years or $300,000 in household income, and there’s an expectation that you can maintain it. Or you have a net worth of over $1 million, excluding your primary residence (with a spouse or partner). For entities, $5 million in assets also clears the eligibility bar. Meeting SEC accreditation standards makes investors automatically considered “sophisticated” enough to evaluate complex deals.

Next, request access to the PPM, which has comprehensive details on offering terms, property and market characteristics, risks, sponsor backgrounds, and more. Legal disclaimers are also given that emphasize how the investment is speculative, illiquid, and only suitable for those willing to accept high risk for higher returns.

Once you’re agreeable to the proposed terms and have carefully reviewed them with a financial advisor or lawyer (preferably both), you can sign the required paperwork. Subscriptions are typically filled on a first-come basis once investment capital minimums are met, usually $50,000 to $250,000 for individual investors. Partners with active syndicate roles may put in more given their added responsibilities.

Finally, fund your investment commitment when required by the syndicators, which is once the deal becomes fully subscribed. Consider diversifying across several syndicates at appropriate allocation sizes to mitigate isolated property risk.

Syndication vs. Other Real Estate Investments

Real Estate Investment Trusts (REITs)

REITs are companies that own and operate real estate assets and trade like stocks on public exchanges. Investors can buy shares in REITs to participate in portfolios of very different property types, with many REIT shares listed and traded on major stock exchanges. REITs are legally required to pay investors 90% of their operating income in the form of dividends each year.

• Pros: Higher liquidity; lower investment minimums; professional management; stable cash flow
• Cons: No influence on assets; vulnerable to market swings; lower returns

Direct Rental Property Ownership

You might also choose to acquire rental properties yourself, picking among single-family homes, apartments, retail store locations, and more. You would own these assets and manage them without any fund sponsor involvement. Returns depend greatly on location, asset selection, and management skills, either yours or a property manager that you hire.

• Pros: Greater control; all gains realized; pride in ownership
• Cons: Hands-on management; unlimited liability; smaller properties

Real Estate Crowdfunding

A newer option, real estate crowdfunding, essentially enables syndication sponsorship roles to be re-created by an online platform company. These are often open to non-accredited investors. Sponsors use crowdfunding platforms to source deals, raise capital, and manage regulatory paperwork. Returns may be higher given the added risk from less seasoned operators or projects that couldn’t find more traditional lending sources.

• Pros: Low investment minimums (can be as low as $1,000); online access and ease of selection; pre-vetted deals
• Cons: Potentially untested or poorly vetted sponsors and platforms; fees can be higher; offerings may be more speculative or high risk

Example of Real Estate Syndicate

The Dental Real Estate Syndicate specializes in acquiring and managing high-quality, geographically diversified dental real estate. They handle all aspects of property management and maintenance while overseeing financial operations, including the distribution of tax-advantaged quarterly dividends to investors. In 2025, Dental announced it would expand into the Southeastern and Southern Sunbelt regions.

In February 2025, the company published a survey of dentists who own dental real estate. The survey was sent to 2,000 dentists, with 431 respondents (22%) participating. Most respondents indicated that they acquired real estate to maintain control over their practice location and financial future. However, 81% stated they were unlikely to acquire additional dental real estate, reflecting concerns about management complexity, financial risks, and market uncertainties. For this reason, syndicates like Dental can exist to not only help alleviate the financial burden of acquiring real estate but oversee operational functions as well.

What Are the Potential Tax Benefits of Real Estate Syndication?

The main tax benefits are depreciation deductions that lower your taxable income and deferred capital gains tax when properties are sold. You can also conduct 1031 exchanges to defer taxes after sales by reinvesting proceeds into another property. Under certain conditions, investors in real estate syndicates may be eligible for a pass-through tax deduction, allowing you to deduct up to 20% of your business income.

What Happens If I Need to Sell My Stake in a Real Estate Syndicate?

Liquidity is very limited since most syndications have five- to seven-year timelines. Trying to sell shares before the end of that period would be extremely difficult without a buyer lined up. This is one of the tradeoffs with this kind of investment, so you’ll have to be comfortable with your capital being unusable for the syndication period. In certain cases, a syndicate might refinance the property, providing a partial cash-out option for you.

Can Anyone Invest in a Real Estate Syndicate?

No. Current SEC regulations generally require investors to be accredited ($200,000 individual income, $300,000 joint income, or $1 million net worth) before buying shares in riskier, illiquid private real estate offerings. This is because of their more complex structure and illiquidity. Non-accredited investors can explore some private offerings in real estate; they also have options like REITs and crowdfunding.

The Bottom Line

Real estate syndicates allow investors to pool resources and access larger properties, providing the potential for passive income and significant tax benefits, such as depreciation and pass-through deductions. Meanwhile, the property would be managed by professional syndicators who handle all aspects except for your initial capital investment. Nevertheless, you should be clear about the risks involved, including the illiquidity of these investments, reliance on the syndicate’s performance, and possible conflicts of interest.

To make an informed decision, conducting thorough due diligence is key. This includes scrutinizing the syndication sponsors’ track record and credibility, understanding the property fundamentals, and evaluating the investment strategy and fee structure. While real estate syndicates offer the potential for attractive returns and portfolio diversification, they require a commitment to long-term investment and an understanding of their complex nature, making them more suited to investors prepared for a hands-off yet significant commitment in real estate.

Native Americans are subject to federal income taxes, while tribes set their own sales taxes

Fact checked by Suzanne Kvilhaug
Reviewed by Andy Smith

Some forms of taxation can work differently for Native American people because of their unique status within the United States.

Tribes, as sovereign governments, are exempt from taxes. But, in general, individuals are expected to submit the same income taxes as others living in the U.S. However, there are exceptions to this general rule.

For example, lands held in trust by the government for the benefit of Native Americans are spared from taxes. Native Americans who own some of this land don’t have to pay property taxes on it.

Key Takeaways

• As sovereign governments, tribes set their own sales taxes.
• Individuals, in contrast, are required to pay federal taxes to the U.S. government.
• Revenue from lands held in trust is not taxed by the U.S. government.

Individuals and Tribes

Native Americans are expected to pay taxes to the federal government.

In the eyes of the U.S. government, all members of tribes were recognized as citizens beginning in 1924 with the passage of the Indian Citizenship Act. That law means Native Americans are expected to pay federal income tax.

But there’s an exception. Notably, tribal members do not pay taxes on income from lands held in trust, where the title is held by the U.S. Department of the Interior on behalf of tribes or individuals.

The U.S. holds around 55 million surface acres and 59 million acres of subsurface mineral estate in trust. The money that this land generates is intended to benefit Native Americans, and it is not taxed. This means that if a tribe operates a casino on trust land, it doesn’t pay taxes on that land or the proceeds.

Important

In contrast to individual tribal members, federally recognized tribes are sovereign and therefore are immune from tax obligations. This means that the tribes themselves do not pay federal or state taxes.

The tribal tax base is typically the consequence of agreements made with states and local governments. Because their lands are held in trust, tribes do not levy property taxes. This leaves them without the usual sources of tax revenue for a government. As a result, many tribes have turned to sales and excise taxes.

Due to the high levels of poverty and unemployment on tribal lands, advocates argue that these sources of tax revenue are inadequate to fund basic tribal government services. In practice, different tribes have different policies, meaning that some Indigenous people are released from obligations like sales taxes for purchases that occur on reservations, though for transactions outside of reservations, they would still pay local and state sales taxes.

Federal Income Taxes

For the most part, income taxes for Native Americans are the same as for other U.S. citizens.

The major exception is for income derived from a specific trust or treaty. The United States holds land as trust assets for tribes, which can be leased out to corporations. Federal taxes are not levied on income from such business arrangements, though interest income, capital gain income, and some royalties are subject to federal and state taxes.

State Taxes

As with federal taxes, tribes do not have to pay state taxes. By law, without explicit permission from Congress, states cannot impose taxes on tribes.

But just like the federal government, a state can individually tax Native Americans who live within the state’s territory, rather than on a reservation.

Sales Taxes

Tribes themselves are exempt from sales taxes for purchases on reservation land.

However, states can collect sales tax from transactions with nontribal members even when the point of purchase occurs on tribal land. But the tribal government doesn’t have responsibility for collecting the tax.

Some have argued that these taxes represent “the latest variation on centuries of wealth extraction” because the collection of these taxes by states discourages tribal governments from levying their own tax for fear of scaring away economic activity. Instead, many tribes have struck revenue-sharing agreements with state governments. Each year, these practices siphon hundreds of millions of dollars away from tribal governments, according to an estimate from The Center for Public Integrity, an investigative reporting organization.

Property Taxes

Real estate taxes rest on the same criteria as other forms of tax liability.

Native American lands held in trust are considered immune from taxation. However, since it is the trust or sovereignty status that establishes the immunity, Native Americans would be expected to pay property taxes on lands not held in trust or on reservations. 

Tribal Casinos

Tribal casinos are a significant revenue stream for a number of tribes.

Tribal casinos are likewise free from U.S. taxes. However, for the right to operate, tribal casinos sometimes pay “gaming exclusivity fees” based on profits. These can be significant sums.

For example, Oklahoma collected over $210 million in fees for tribal gaming exclusivity rights for fiscal year 2024. Those fees came from $3.47 billion in revenue, according to an estimate from the state of Oklahoma.

Do Native Americans Pay Property Taxes on a Reservation?

Native Americans living on reservations are exempt from U.S. property taxes. These lands are usually held in tax-exempt trusts.

Do Native Americans Pay Taxes on Cars?

If the sale of a car takes place in Indian Country, then the Native American will not need to pay tax on the vehicle. But even on reservation land, Native Americans have to pay fuel taxes in most states.

Do Native Americans File Tax Returns?

Yes, Native Americans have to file tax returns. The Internal Revenue Service (IRS) notes that “As a general rule, Native Americans are subject to federal income tax just like every other American.”

Could Native American Tax Statuses Change in 2025?

President Donald Trump’s administration could have a number of impacts on Native Americans. Tax issues include the status of tribally chartered corporations and clarification of the Tribal General Welfare Exclusion Act of 2014.

The Bottom Line

U.S. recognition of tribal sovereignty presents a potentially confusing tax situation. In general, though, tribal members are expected to pay federal tax, despite some exemptions—such as sales taxes for interactions on tribal land, or income from land held in trust. Tribal governments, on the other hand, cannot be taxed by either states or the federal government.

Fact checked by Vikki Velasquez
Reviewed by Samantha Silberstein

Many traditional gender roles have disappeared but one gender-based distinction remains: the wage gap. Women earned about 84 cents in 2023 for every dollar men earned as reported by the U.S. Bureau of Labor Statistics. 

The Investopedia and REAL SIMPLE 2024 Her Money Mindset survey found that 54% of women surveyed said they were struggling to cover at least one monthly expense and 44% said they had just $250 or less after covering bills each month. Sixty percent of women had never asked for a raise and fewer than one in four women who had talked with their friends about money were transparent about how much they earned.

Women can take control of their incomes, however, and they can support other women who are doing the same. Individual actions can build barrier-busting wealth.

Key Takeaways

• The wage gap refers to the disparity in earnings between men and women in the workplace.
• Societal factors play a significant role in perpetuating the wage gap.
• Negotiation skills are crucial for women to achieve fair compensation and benefits.
• Skills development and education can help bridge the wage gap.
• Pay equity depends on improving workplace policies and practices.

Understanding the Gender Wage Gap

The gender wage gap is the difference between what men and women earn. The most common way to analyze and express the gap is to measure the difference in median earnings of women versus men.

Congress and state governments have passed several laws to address the gap. The Equal Pay Act of 1963 prohibits employers from paying men and women different wages for performing similar duties under similar conditions. The gender pay gap persists despite these efforts.

Women earned 71 cents for every dollar earned by men in the United States in 2023, according to a 2025 report released by the National Women’s Law Center. The difference varies widely by region, however. California and Vermont have the smallest gaps where women earn 85 cents or more for every dollar earned by men. Women in Louisiana and Utah lag far behind, earning 71 and 73 cents respectively.

Societal Factors

Society has come a long way in treating men and women fairly but biases take generations to entirely disappear and women still face numerous challenges.

Gender Discrimination

Women generally have to work harder to gain equal recognition and women who advocate for more compensation or better treatment are often cast as troublesome or unaccommodating.

Racial Discrimination

The wage gap is worse for many women of color than it is for White women. Black and Latina women earn median weekly pay of $978 and $844 respectively as of the fourth quarter of 2024, according to racial wage gap data from the U.S. Bureau of Labor Statistics. This compared with median weekly earnings of $1,094 for white women and $1,321 for white men.

Motherhood

Having a baby also has a significant impact on a woman’s earnings. Research from the U.S. Census Bureau indicates that the gender pay gap within a couple doubles between two years before a child’s birth and one year after. The wage gap continues to grow until the child is 10 years old, representing a massive loss of income over the mother’s career.

Occupational Segregation

Unequal compensation for equal work is a core issue but access to equal work is also a primary driver. The National Partnership for Women and Families found that women made up 63.6% of the workforce in the 20 lowest-paying jobs in 2023 compared to only 30% of the workforce in the 20 highest-paying jobs.

Unpaid Family Care

Women are more likely than men to take career breaks to care for aging or sick family members. Long breaks in employment can raise questions with prospective employers or cause women to lag behind industry trends and new skills, further depressing wages.

Impact of Workplace Policies

Many federal and state laws prohibit discrimination in pay but certain workplace conditions persist to prevent the gender wage gap from shrinking.

Salary History

Some states prohibit employers from asking prospective employees about their salary history and research has found that this ban has helped narrow the wage gap. Many companies work around this by asking applicants for pay expectations, however. This can lead to a perpetuation of women being underpaid if they don’t feel comfortable asking for a higher salary.

Pay Transparency

The historical secrecy of salaries and its taboo nature as a topic of discussion have frequently left women in the dark about how large the gender wage gap is. The National Bureau of Economic Research found that pay transparency laws reduced the gap by 20% to 40%.

Individual vs. Group Salary Negotiations

Data also shows that women fare better with collectively negotiated compensation. Women in unions earn an average of 89.6% of their male counterparts’ wages compared to non-unionized women earning 82% of their male counterparts’ wages.

Note

The gender wage gap doesn’t just lead to a smaller paycheck for women every two weeks. It has lifelong consequences. Female workers amass less wealth than their male counterparts and have less financial stability as they earn less during any given period.

Talk About What You Earn

Reducing the gender wage gap is a complex problem but there are some ways in which women can help themselves and each other to reach wage parity with men.

The Investopedia and REAL SIMPLE 2024 Her Money Mindset survey found that only 15% of the women who talk about money with their friends will mention if they’re asking for a raise or promotion and only 24% discuss how much they earn.

Discussing raises and salaries can be very beneficial for all parties involved and it can be a powerful tool. You can learn a lot by comparing notes: how often and how much people are negotiating in raises, what sort of salary and bonus structures are out there, and whether you’re making less than market standards.

Note

Thirty-one percent of women who took the Her Money Mindset survey said they think it’s important for women to talk to their friends about money.

The hardest part may be breaking the ice but you can bring up the issue by casually incorporating a financial topic into a conversation to get a pulse for how your friends feel. It also can be helpful to set ground rules such as agreeing to confidentiality.

Negotiate Higher Compensation

The 2024 Her Money Mindset survey found that 60% of women have never asked for a raise and 69% have never requested a promotion. Women with higher household income levels were more likely to have asked for a raise or promotion.

“I don’t think people realize the impact that the gender wealth gap can have on our lifetime earnings,” says Gloria Carcia Cisneros, a certified financial planner and wealth manager at Lourd Murray. “When you start with a lower base salary, it means that for all the subsequent pay increases, you are getting less than someone who is getting the same percentage increase but has negotiated higher pay from the beginning.” 

She also notes that companies expect candidates to negotiate. “The earlier the better. Make sure you start negotiating in your 20s and 30s to take advantage of the exponential growth.”  

Note

Investopedia and REAL SIMPLE’s survey found that 30% of women in the millennial generation and younger have a goal to get a raise and/or promotion in the next three years.

One negotiating tip from Michelle Kruger, certified financial planner and senior financial planner at Gratus Capital, is using benefits as a tool for negotiating salary. “Bring cost differences like an increased health insurance premium or a lower 401(k) match to your potential new employer’s attention,” Kruger says. “Calculate the value of the lost benefits to you and ask for a commensurate increase in the offer.”

Consider these key strategies when asking for a raise:

1. Prepare in advance: Collect data for comparable jobs at your company and in your industry. Plan the key points you want to make and be ready for pushback.
2. Be assertive: Treat your boss with respect but ensure that it’s mutual and advocate for yourself.
3. Practice: Ask a friend to roleplay your boss and rehearse your talking points. Make sure they throw you some curveball questions.
4. Negotiate: Bosses often have budget constraints that limit how flexible they can be. Push for your desired salary but be ready to make concessions elsewhere such as additional paid time off or other benefits.
5. Time your request: Set yourself up for success by asking for a raise when it’s likely you’ll get a positive reaction. You’ll face more resistance if your company just went through a round of layoffs or the economy is trending down.

Enhance Your Skills and Education

The next step is to bolster what you can do at work by enhancing your skills or seeking further education. Learning new skills can help break down occupational segregation in many cases.

Office managers and executive assistants are often women, many of whom have extensive business experience and a wide range of abilities. They end up pigeonholed in administrative jobs, however, limiting their earning potential. They can advance their careers and shrink the wage gap by developing specialized skills in accounting, human resources, or project management.

Women have a range of options for building their skills and resumes:

• Professional certifications: Professional certifications offer a concrete way to increase earning potential by demonstrating specific skills and qualifications to prospective employers.
• Company-sponsored development: Many companies cover some or all of the costs of professional development courses. Everyone benefits because employees learn more skills and employers gain access to those skills.
• Returning to school: Going back to college might seem daunting but ongoing education can fit any schedule with the proliferation of online learning. Finishing a degree or getting a new one can open up opportunities to earn more.

Build Wealth by Investing

Setting money aside for investments can be hard when you’re juggling multiple financial goals or just trying to make ends meet. Investing helps women close the wage gap in several ways, however.

It allows women more freedom to make career choices as they amass more wealth. Women can explore more lucrative opportunities and advance professionally when they’re not tied to a job just to keep bills paid,

Many types of investments don’t just grow over time. They also generate income. Passive income can supplement wages from employment and increase overall wealth whether it’s dividends from stocks or rent earned from real estate.

A high-yield savings account can be a good option if you’re just starting out. You’ll see compounding gains from interest as time goes on. The money is FDIC-insured so there’s no risk of loss. And it’s easy to access if an emergency comes up and you need the funds. You can diversify into other investments as time goes on:

• Index funds spread your money across groups of different stocks, insulating you from the risk of one company hurting your portfolio.
• Individual stocks can perform well but require more research and active management.
• Bonds are a relatively stable investment but they have smaller payoffs and take time to mature.
• Crypto has the potential for large gains but the lack of regulation introduces significant risk.
• Real estate often has a high cost of entry but it generates income over time.

Financial advisors generally recommend a diverse portfolio based on the investor’s age. Younger investors can afford more risk. Older investors tend to move toward more stable choices like bonds.

Support Women in Leadership

Women made up 46.9% of the American workforce in 2024 but they remain underrepresented in the upper echelons of business. Only 10.6% of CEOs and 30.4% of board members at Fortune 500 companies are female. Breaking through the glass ceiling isn’t easy, but it has an immense payoff.

Elise Awwad serves as DeVry University’s president and CEO. She started her career with the company as an admissions advisor. Awwad says that while working her way up in the company, “I recognized the need to support other women in the workplace…The male-dominated culture is still prevalent in many tech companies and can make women feel like they don’t belong.” 

She established EDGE (Empowerment, Diversity, Growth, and Excellence) in 2019, a network of leadership scholars and professionals who promote the enhanced career experience and advancement of women in leadership roles at DeVry and in the broader community. She also spearheaded DeVry’s Women+Tech Scholars program, created to “empower women through mentorship, job search resources, credentialing, and scholarships, encouraging them to take the first step toward a tech-focused career.”

Debbie Sanders, COO of Visory Health, also notes the importance of advocacy and support for career advancement. “Look for a mentor and look for positions and jobs where you feel supported and will be respected and compensated for the great ideas and hard work you put forth,” Sanders says. “Getting places in your career usually means not only do you need to excel at what you do but also have someone in an executive position to support you as internal politics increase.” 

What Countries Have the Highest Gender Wage Gap?

Not every country provides reliable wage data but Korea had the highest gender pay gap at 31.2% in 2022. The only other country above 25% was Israel at 25.4%, according to the Organisation for Economic Cooperation and Development (OECD).

Which Countries Have the Lowest Gender Wage Gap?

Belgium’s gender wage gap of 1.2% was the smallest in the world in 2022 based on the same OECD data. It’s joined by four other countries under 5%: Costa Rica at 1.4%, Colombia at 1.9%, Bulgaria at 2.5%, and Norway at 4.5%.

How Has the Gender Pay Gap Changed Over Time?

Women made significant gains in the later part of the 20th century. Pew Research found that women’s earnings relative to men’s rose from 65% to 80% between 1982 and 2002. The gap remained relatively stable, hovering between 80% and 85%, over the next 20 years, however.

Researchers haven’t found evidence of any single factor causing the stagnation.

The Bottom Line

There’s no quick solution to closing the gender wage gap and much of the struggle unfortunately involves deeply rooted cultural biases. Every woman has to advocate for herself by negotiating higher pay and building personal wealth. Women can fight collectively to empower their peers in leadership and lift each other up.

Systemic change takes years but we can build a workforce where our daughters and granddaughters receive equal pay with our sons and grandsons through continued efforts for equality.

It looks promising but existing AI applications still require human oversight

Fact checked by Vikki Velasquez
Reviewed by JeFreda R. Brown

Artificial intelligence (AI) technology is making a big impact on businesses in many respects, including the preparation and filing of business taxes.

The Internal Revenue Service (IRS) is evaluating AI’s potential applications for tax administration while considering how to minimize any associated risks.

The technology promises businesses easier tax prep and filing, while streamlined tax administration could mean shorter customer wait times and more efficient services.

However, AI in business tax applications has its limitations and concerns some professionals. Human expertise and oversight are still necessary.

Key Takeaways

• AI is setting up to play a significant future role in streamlining the tax preparation process for businesses.
• It may help to ensure tax compliance and identify potential tax risks and errors.
• AI does help improve the accuracy and efficiency of categorizing transactions and data processing.
• But AI’s ability to analyze and interpret complex business tax scenarios is limited, so human oversight and expertise remain crucial.
• There are several tax prep software options available on the market that incorporate AI, with more startups and solutions on the horizon.

How AI Can Help Tax Preparation and Filing

AI-powered call bots and online chatbots, such as those used by the IRS and H&R Block, offer to assist business taxpayers with answers to frequently asked questions and other routine tax prep queries.

With the goal of facilitating and enhancing 24/7 customer service, they’re used to shorten taxpayer wait times and free human agents to focus on more complex cases.

Automation enabled by artificial intelligence is also speeding up the delivery of taxpayer refunds by the IRS. Since 2022, the agency has used AI to digitize paper tax returns and accelerate their processing.

AI-Based Tax Preparation Software

Many tax software products incorporate AI to streamline the tax preparation process for business taxpayers.

However, due to the often complex nature of business taxes, most tax software uses AI only as a virtual assistant or for specific applications. It does not use it to make tax calculations.

Furthermore, some of those involved in business tax prep and filing have concluded that AI can’t interpret data effectively or make useful recommendations yet.

There’s no doubt that ongoing, powerful advances in AI will drive greater and better use of it in tax prep software.

Examples

Intuit Assist, an AI assistant in certain TurboTax and Quickbooks software packages, uses traditional and generative AI that answers tax questions, analyzes data to find deductions and credits, and checks for mistakes in tax returns.

H&R Block, offers AI Tax Assist, which provides AI-generative chat at any stage of the tax preparation process.

Reconcile is software with AI-powered tools for entrepreneurs and individuals who manage multiple income streams. It offers tax assistance and broader financial assistance. Its chatbot answers questions and provides custom recommendations.

FlyFin is an AI- and CPA-powered tax filing product aimed at self-employed individuals and business owners. The AI tool categorizes expenses, uncovers tax deductions, and answers questions.

One AI business tax assistant with more to offer is TaxGPT. It handles time consuming tax research to update you on regulatory changes and ensure tax compliance, analyzes your business tax documents, and secures them for document management.

TaxGPT creates customized content for internal emails or IRS communications and produces tax documents and reports for your business. It helps you to respond to inquiries from clients, vendors, and other business contacts quickly and efficiently.

AI-Powered Business Tax Software
Software	Plans and Pricing	Target User	Overview
Intuit Assist	Varies by software and pricing package	Self-employed individuals and small business owners	AI assistant included in select TurboTax and QuickBooks plans
H&R Block AI Tax Assist	Included in $55 Deluxe Online package and higher	Self-employed individuals and small business owners	AI assistant that provides 24/7 real-time tax preparation support
Reconcile	Monthly fee of $30	Entrepreneurs and individuals managing multiple income streams	AI tax assistant, automated bookkeeping, and AI-powered financial analysis
FlyFin	Pricing information available in the app	Freelancers, self-employed individuals, and business owners	AI-powered tax tools plus review and tax filing by a CPA
TaxGPT	Contact sales team for pricing	Small, mid-market, and enterprise businesses	AI-powered tax support for research, document management, and communications

Tax Compliance

AI-driven analysis and automated transaction categorization can help businesses with tax compliance and to file their taxes on time.

TaxJar is software that aims to help small to midsized ecommerce businesses manage their sales tax compliance across jurisdictions. It automatically calculates sales tax rates, classifies products, and does multistate filing.

It can also integrate with different ecommerce and enterprise resource planning (ERP) platforms.

AI that’s able to process and analyze vast amounts of data will also be able to keep track of changing regulations and tax requirements to ensure that businesses are in compliance.

Closing the Tax Gap

While AI has improved the efficiency of customer service and data retrieval for businesses, it’s also helping the IRS combat fraud and close the gap between businesses that pay the taxes that they owe and those that do not. The agency uses AI to pinpoint large partnership returns—particularly difficult to assess due to their complexities—for audits.

Benefits and Limitations of AI for Business Taxes

Benefits

AI can improve the tax preparation and filing process for businesses in several ways:

• Streamlining data: AI-powered business tax software tools can import and analyze financial or sales data from other sources, including customer relationship management (CRM), ERP, and ecommerce platforms.
• Increasing accuracy: AI can keep up to date on changing regulations and is a useful tool for confirming regulatory compliance in relevant jurisdictions and filing years for things like sales tax and specific tax provisions.
• Driving efficiency: Data entry and organization tasks such as categorizing expenses and sales can be automated with AI to save businesses time.

Limitations

However, AI technology also presents potential issues and raises concern:

• Potential to present false information: AI has generated errors and nonsensical information (referred to as AI hallucination), which can have serious implications for business tax filing.
• Limited ability to analyze and interpret: Generative AI models are limited in their ability to analyze tax regulations and interpret context or relationships between tax code sections that might override one another. As such, they are not a substitute for consulting a trained tax expert, particularly for a complex tax situation.

Important

Business taxpayers should not rely exclusively on AI to prepare or file their taxes.

The Future of AI for Business Taxes

As AI technology continues to advance, some trends are emerging for AI-powered business tax applications.

For one, more and more tax agencies are using AI virtual assistants to cut down on customer queries so that their human agents can focus their attention on addressing more complex cases.

However, there is a lot of room for improvement, as many AI tools generate incorrect or irrelevant answers to straightforward tax queries.

Second, there are also more AI startups looking to harness AI for business tax preparation. One example is april, a company offering embeddable tax filing software to the fintech, financial services, and employee benefits industries.

Third, the potential impact that AI could have on reducing the effort and expense for businesses of tax preparation and filing could be huge.

The Taxpayer Advocate Service (TAS) estimated that the average small business spent roughly 82 hours and $2,900 on tax compliance in the 2022 financial year, while business entities in the U.S. spent a cumulative 1.14 billion hours and $48.3 billion on tax preparation.

In 2024, the IRS estimated that it took a business 105 hours on average to complete Form 1120, the tax return for corporations. Small corporations spent 55 hours working on it while large corporations took 830 hours (more than 20 weeks) to get it done.

And as for what businesses had to spend, according to the Tax Foundation, “The compliance cost of business (corporate) income tax returns is nearly $119 billion. Their quarterly tax filings cost $44.7 billion to comply with while depreciation schedules cost another $25 billion.”

As such, ongoing AI improvements in accuracy and efficiency could have a major material impact on the day-to-day operations and budgets of businesses.

What Are the Benefits of AI-Based Tax Software Over Regular Tax Software?

AI promises benefits such as increased efficiency and accuracy for tax filing, as well as the streamlined processing of financial and sales data. But, AI’s reliability in tax software is still a work in progress. Be sure to maintain human oversight when preparing your business taxes and consult an expert when needed.

What Is the Most Popular AI-Based Tax Preparation Software?

Popular tax preparation software tools like TurboTax and H&R Block have introduced AI assistants within some of their packages. Other business tax preparation software tools include Reconcile, FlyFin, and TaxGPT.

Will AI Replace Accountants?

Not any time soon. A 2023 survey of tax and accounting professionals revealed that, while ChatGPT may prove useful for basic research applications, it cannot replace the judgment of experienced professionals needed for complex tax scenarios. And a 2024 review of TurboTax and H&R Block’s AI tools revealed that they often gave wrong or irrelevant answers to basic tax questions.

The Bottom Line

As more AI startups enter the tax software space and AI technology continues to develop, taxpayers and tax agencies alike may be able to take advantage of the increased efficiency, data analysis capabilities, automated workflows, and more that AI has to offer.

Even the IRS is looking to AI to identify “compliance threats” and reduce the number of unnecessary audits it conducts.

While AI has been implemented in several tax software products and offers promising future applications for business taxes, the complex nature of tax preparation and filing warrants continued human oversight and interpretation.

Typically no, but there are some exceptions

Fact checked by Suzanne Kvilhaug
Reviewed by Andrew Schmidt

Home improvements can add value, style, and safety to your home but do they also add to your tax deductions? Generally, no, but some home improvements are tax deductible. They include capital improvements, energy efficiency improvements, and improvements that are related to medical care.  

Key Takeaways

• Homeowners can benefit from tax deductions that are related to select, eligible home improvements.
• Not all home improvements are tax deductible and it’s essential to understand the criteria for eligibility.
• Capital improvements that make permanent structural or restoration changes to the home, necessary medical-related improvements, and select home office changes may qualify for tax breaks.
• Energy-efficient home improvements may also qualify for tax credits and provide additional financial incentives for homeowners.

Can You Write Off Home Improvements?

Homeowners can take a tax deduction for specific home improvements if they meet the minimum criteria of the Internal Revenue Service (IRS). Home improvements that homeowners can deduct are referred to as capital improvements. They include any addition of a permanent structural change or the restoration of some aspect of a property.  

The IRS details the three criteria for classifying a home improvement as a capital improvement or a tax-deductible home improvement. It must enhance the property’s overall value, prolong its useful life, and adapt it to new uses.

A home improvement is tax deductible when it meets all these conditions. , it is tax deductible. A tax-deductible expense means the homeowner can reduce their adjusted gross income (the amount they pay taxes on) by the home improvement expense. 

Homeowners do not reduce their taxable income by the entire amount of the capital improvements in one year. Instead, these capital improvement expenses are depreciated over time (usually 27.5 years), so the full cost of the home improvements divided by the time is the tax-deductible amount each year.  

Important

An example of a home improvement project meeting all of these criteria is replacing the siding of a house rather than making a few repairs to cracks. If replacing the siding is $27,500, then $27,500 divided by 27.5 means that $1,000 is tax deductible each year for 27.5 years.

Improvements vs. Repairs

According to the IRS, there is a big difference between home improvements and home repairs. Home repairs are modifications made that keep your home in “an ordinary, efficient operating condition,” and these are not tax deductible unless they are part of a larger home improvement project.

Home improvements are tax deductible if they meet the three qualifying criteria:

1. Betterment: Amounts paid to repair something that will increase the value of the home or to add a feature that increases the value of the home
2. Adaptation: Amounts paid to change a property into a new or different use
3. Restoration: Amounts paid to repair or restore a significant component or substantial part of the property to its original condition

Other Tax Breaks for Homeowners

Energy-Efficient Home Improvements

Energy-efficient home improvements like replacing leaky doors and windows, equipping your home with solar panels, or installing better insulation all deserve a high-five from Mother Nature, but does the IRS feel the same way?

These home improvements are not tax deductible, meaning the expenses do not reduce a homeowner’s adjusted gross income. However, they still provide tax breaks for enterprising homeowners looking to make their homes more energy efficient. Energy-efficient home improvements offer tax credits that reduce tax bills dollar for dollar.

Homeowners can receive credit for 30% of the expense up to the maximum allowable credit each year. The yearly limits are:

• Up to $1,200 for energy-efficient home improvements in total. Each door has a limit of $250 per door ($500 total per year). Windows have a limit of $600 per year. Home energy audit limits are $150 per year.
• Homeowners may receive a $2,000-per-year credit for heat pumps, biomass stoves, and biomass boilers.
• These limits are each year with no cap on the amount of credit received in a lifetime.

Medically Necessary Home Improvements

A green cabinet color may make you feel sick, but you will still need more evidence for the IRS to allow you to write off your home improvements for medical purposes. Specific, necessary medical home improvements are tax deductible, though. Home improvements or special equipment explicitly needed for the medical care of you, your spouse, or your dependent are all deductible from your adjusted gross income.

The way these medical home improvements are qualified for tax deduction purposes is a bit murkier, though. The nuance comes from whether the home improvements that you need for medical care increase the value of your home or not.

If the improvements increase the value of your home, they are considered capital improvements and are tax deductible. If the home improvements do not improve the value of your home, then they are not tax deductible.  

Homeowners needing more information about what qualifies as a medically necessary tax-deductible home improvement can visit the IRS website. 

Home Office Improvements 

Homeowners and renters alike are eligible for home office tax deductions for simply running all or a portion of their business from their home, as long as the business is the principal place of their business and the working area of their home is used exclusively for business.

Anyone spending hours a week in their home office might be considering upgrading their space. The IRS allows for home office improvements to be tax deductible if they meet a few criteria. The home improvements or repairs must be made exclusively to the office space to deduct the whole amount. One example of a tax-deductible home improvement is repairing a broken window.

Repairs or home improvements that benefit your entire home and home office can be deducted as a percentage of the overall cost based on what percentage of your home is used for a home office.

For example, repainting your entire home for $1,000 does not mean you may write off the whole $1,000. If you only use 10% of your home exclusively for your business, then you may only write off $100 of the repainting cost.

Tips for Proper Documentation and Record Keeping

Documentation is critical to ensuring you bring receipts for your tax deductions. The IRS provides a worksheet to help homeowners track expenses that they think might be tax deductible.

Whether homeowners decide to use the IRS’s worksheet or keep their records in another way, they should keep any receipts, canceled checks, money orders, contracts, or other documents related to the home improvements for three years from the date of filing or two years from the date of the taxes paid.  

Considering renovations to personalize your home or boost property value? Check out our guide—Owning It: Investing in Your Home—to learn more about how to plan and pay for your project.

What’s the Difference Between a Tax Deduction and a Tax Credit?

Tax credits and deductions both mean taxpayers will owe less. The difference is in how they reduce that amount. Tax credits reduce what you owe dollar for dollar, while tax deductions reduce your adjusted gross income, meaning you pay taxes on a smaller amount.

Are Rental Property Renovations Tax Deductible?

The same IRS stipulations apply whether the home you are making improvements to is your primary residence or a rental property. Home improvements that meet the criteria for capital improvement, necessary medical alterations, or energy-efficient upgrades are eligible for tax benefits.

What Documentation Do I Need to Support My Home Improvement Deductions?

Homeowners should keep any receipts, canceled checks, money orders, contracts, or other documents related to the home improvements for three years from the date of filing or two years from the date of the taxes paid.

The Bottom Line

Some home improvement projects that make necessary modifications for medical needs, upgrades for energy efficiency, or improvements for the home’s value are tax deductible or offer tax credits.

These tax credits or tax deductions are only available in certain situations and with the proper documentation. Homeowners hoping to recoup some cheddar from their home improvement projects should chat with a tax professional before knocking down any walls.

Learn how tying the knot impacts benefits, too

Fact checked by Suzanne Kvilhaug
Reviewed by Samantha Silberstein

Marriage is about so much more than a wedding. While you daydream about your future home, family, and trips, it’s also a great time to discuss what you want your retirement to look like and how you will achieve that vision.

According to the U.S. Census Bureau, the median age for a first marriage is 30.5 for men and 28.6 for women. This data means that many of today’s couples are entering wedded life with some working years under their belts and perhaps some prior retirement savings and/or debt.

Given these realities and your desires to realize your dreams, it’s important to consider how the financial changes accompanying marriage may affect your retirement planning. 

Key Takeaways

• Marriage can significantly impact existing retirement plans, eligibility for survivor benefits, and access to spousal retirement benefits.
• It’s crucial to manage retirement savings as a married couple, because joint financial planning and shared expenses can affect retirement savings goals.
• It’s best to regularly review and update your retirement plans after marriage and any other life changes it might bring.
• Divorce can affect the division of retirement assets, based on how much you contributed to your accounts while married.

Marriage’s Impact on Retirement Savings

Combining finances is one of the most complex parts of joining lives with a significant other, especially, as ICOM Advisors’ Erin Willcutt said, “…a lot of couples today bring debt to the marriage. That puts automatic strain on the relationship.”

Navigating this past and current strain while keeping an eye on the future is where things can get complicated. But there are ways to make the transition to combined finances easier, and it starts with talking openly and honestly with each other.

“Communication remains a key aspect of a solid partnership,” says Jenica Bertalan, a financial advisor at Edward Jones. “That doesn’t change after saying ‘I do.'”

Couples should discuss their current financial status, future financial goals, and general attitudes toward money before walking down the aisle.  Opening these lines of communication early lays a solid groundwork for future conversations and keeps them from feeling awkward, according to Bertalan.

Important

If you haven’t been having these conversations regularly, now is the time to start.

Some of the biggest hurdles couples face in retirement planning are accurately considering their budget, spending habits, individual risk tolerances, and overall goals. It is tough to make a plan you can stick with as a couple if one of you is a saver and the other is a spender, or if you disagree on how to spend your money. Budgets are a great starting point for opening those lines of financial communication with your spouse.

“Many couples have never made a household budget, so when they combine accounts and start paying bills, much of the nonessential spending comes to light,” Willcutt says. Reducing nonessential spending can help you redirect money to future retirement savings. Still, it’s a good idea for each spouse to retain some nonessential spending money, Willcutt says, as that’s likely to help make the budget stick.

It’s also critical to discuss how having children, if that’s your intention, will alter your financial planning. Will one of you be willing to step away from a career to stay at home if child care expenses are prohibitively expensive or there are other needs? Doing so would reduce your working income as a couple, and the unemployed spouse couldn’t contribute to an employer plan. You’ll also need to figure out how to balance saving for college vs. saving for retirement.

Again, openly discussing these subjects will help you, as a married team, to get on the same page. If you need help starting this conversation, a financial advisor can help you.

Questions to Ask Your Future or Current Spouse About Retirement

• At what age would you like to retire, and what does your retirement look like?
• Do you have any current retirement savings through an employer-sponsored plan, an individual retirement plan, or both?
• What are your attitudes toward spending vs. saving?
• What are your savings priorities?
• Are you open to including a financial advisor in our retirement planning?

Marriage’s Impact on Social Security and Survivor Benefits

One of the first things married couples should do after signing on the dotted line is update beneficiaries on their current retirement accounts, whether those are work accounts, individual accounts held at a broker-dealer, or both.

Marriage has little impact on your own Social Security benefits. You will not need to halve your benefits with your spouse or wait longer to receive benefits when you reach retirement age.

As long as you have enough credits to qualify for Social Security benefits, your wage and employment history alone determine your Social Security benefit.

Still, married people have more options when it comes to applying for benefits. For example, if one spouse earned more, and therefore will get a higher benefit, the other spouse can receive benefits up to 50% of that higher amount, if it’s more than their own. Also, spouses without enough credits to qualify for Social Security benefits can get up to half of their spouse’s benefit, starting at age 62.

Defined benefit plans or pensions are just one example of retirement plans that typically have a spousal benefit. 401(k)s, defined contribution plans, and other retirement plans have survivors benefits, too.

Note

Federal law requires that a spouse be the primary beneficiary on any employer-sponsored plans, which ensures that the funds existing in your retirement plan get paid to your spouse upon your death.

Divorce and Retirement Plans

Any retirement contributions you made before marriage are yours and yours alone in the event of a divorce. However, contributions you make during your marriage, even to an individual account, are considered marital assets.

Matching funds that your employer contributes to your 401(k) as part of your overall compensation are marital assets, too. During divorce proceedings, a judge will decide how much, if any, of your retirement assets acquired after marriage are split.

If you’re not yet married and have considerable assets, you might consider a prenuptial agreement. Any legal agreements made before the marriage about the division of assets and property, even those acquired during a marriage, can prevent a judge from later ruling to split those assets.

Fortunately, divorce has no impact on your Social Security benefit unless, as noted above, it is less than your ex-spouse’s benefit.

A marriage lasting 10 years or more entitles an ex-spouse who is age 62 or older, hasn’t remarried, and will receive a lower benefit than you to file for Social Security benefits under their former spouse’s record. However, even if the Social Security Administration (SSA) awards benefits to an ex-spouse, there is no impact on the amount of your benefits.

If you are considering divorce, meet with a financial advisor right away if possible. Planning to move forward financially after divorce is a process best started early.

Updating Retirement Plans 

Retirement plans are not a set-it-and-forget-it endeavor. Each new baby, new job, new house, and new dream can affect how much you’ll need in retirement, when you’ll need it, and how you plan to use it. Finance professionals are the right people to help you make a plan, stick to it, and update it when necessary.

Most financial advisors want to see clients at least once a year to check in with them, Willcutt says. Doing so will help you see your whole financial picture and get the most bang for your buck. A good financial advisor will want to make sure you can meet your goals while considering all of your available assets.

If there is a change in your marital status, your financial advisor is the expert to walk you through any financial adjustments to make. And your employer’s human resources department should be able to put you in contact with the person or organization that updates information on your work retirement plan.

Unless you plan to change your name, there is no requirement to tell the Social Security Administration about your marriage or divorce unless you are actively receiving benefits. When you are ready to file for Social Security benefits or need to apply for disability benefits, contact the SSA with the appropriate information, and they will take it from there.

If you’re a millennial with your eyes on retirement, there are many resources that can help you plan your financial future.

How Does Marriage Affect Retirement Benefits?

Marriage will not reduce Social Security benefits but could improve your retirement income overall. Even if spouses do not have enough credit to qualify on their own, they may be eligible to receive benefits if they’re receiving disability or retirement benefits. These benefits won’t impact your benefits but may increase retirement income and help you decide when retirement is right for you.

Does My Ex-Spouse Still Get Half of My Retirement if They Remarry?

It depends on your marriage and divorce conditions, your state’s laws, and the judge’s ruling regarding your retirement accounts and plans.

How Many Years Do You Have to Be Married to Get Your Spouse’s Pension?

It depends on the type of pension, how long you have been married (and/or divorced), state laws, your income, and much more. It’s best to speak to an attorney or financial advisor familiar with pension plan laws.

The Bottom Line

Marriage is an exciting milestone that brings two people together to form a family and intertwines financial futures. Couples should consider marriage’s impact on retirement benefits and any future assets. It is also important, though far less fun, to discuss what happens to retirement assets in the event of a divorce or death.

Couples should continue openly and honestly discussing their financial goals, spending habits, and retirement plans. Plans change, and financial advisors can help keep couples focused on the bigger picture and work together toward their shared dreams.

Payhip makes money by collecting subscription and transaction fees

Fact checked by Vikki Velasquez
Reviewed by Katie Miller

Payhip is an ecommerce platform specifically targeted at digital content creators. It enables users to sell digital downloads, online courses, coaching, memberships, and physical products. It makes money from subscription and transaction fees, which vary by plan.

Payhip has a free plan that charges 5% transaction fees on each sale; a mid-tier plan that charges $29 per month with a 2% transaction fee; and a premium plan that charges $99 per month with no transaction fees.

Key Takeaways

• Payhip is an ecommerce website that enables users to create online storefronts.
• Payhip’s platform is designed with digital content creators in mind, and its users sell products like digital downloads, coaching services, online courses, memberships, and physical merchandise.
• Payhip has three pricing plans: Its free plan has no monthly cost but charges 5% transaction fees on each sale; its mid-tier plan is $29 per month with a 2% transaction fee; and its premium plan is $99 per month with no transaction fees.

Payhip’s Industry

Payhip is an ecommerce marketplace specializing in digital services like downloads, online courses, memberships, physical products, and coaching. It allows users to sell or purchase physical products online, manage inventory, fulfill orders, run promotions, collect reviews, and more. Payhip features a customizable store website builder, and users can connect their own custom domains or embed a checkout on their existing websites.

Payhip targets small- and medium-sized businesses and claims to have a user base of over 130,000 creators.

Some of its competitors are:

• Gumroad
• Sellfy
• Samcart
• Teachable
• Kajabi
• Wix
• Squarespace

Payhip’s Fundraising and Financials

As of March 2025 (using 2023 data), the company had not conducted any fund-raising rounds and has fewer than 10 employees:

• Net Assets (2023): £631,276
• Total Assets (2023): £855,866
• Total Liabilities (2023): £224,592

History and Leadership

Payhip was launched in 2011 by two entrepreneurial developers, Kahin Farah and Abs Farah. They previously founded Get Fractal, a service that converted HTML and CSS webpages to email client-friendly HTML and CSS.

Is Payhip.com a Legitimate Site?

Payhip is an e-commerce platform registered in the United Kingdom as a limited liability corporation. The website was operational as of March 2025.

What Are the Disadvantages of Payhip?

A few of Payhip’s disadvantages are the limited payment options of Paypal and Stripe and no SEO tools that help attract traffic.

What Is Payhip Used For?

Payhip provides an e-commerce platform that connects digital content creators to customers.

The Bottom Line

Payhip is an ecommerce platform targeted at creators who want to sell digital content, with the option to sell physical merchandise. Its many features address various digital applications involved in selling content, such as digital downloads, courses, coaching, and memberships. 

The platform is designed to be easy enough to use that sellers do not require any technical knowledge to set up a shop, but customizable enough that it can integrate into existing brands, businesses, platforms, and marketing strategies.

There Are Plenty of Options to Boost Efficiency and Productivity

Fact checked by Vikki Velasquez
Reviewed by JeFreda R. Brown

Artificial intelligence (AI) tools promise many benefits for small businesses, including increased efficiency, cost savings, better customer service, and growth opportunities.

These applications can help a small business owner automate business processes for greater efficiency, and analyze information for better planning. Others can enhance communication with customers.

Better yet, some of these tools, like ChatGPT and Google Docs, are free.

According to the Small Business and Entrepreneurship Council’s 2023 Small Business AI Adoption Survey, 83% of small business owners plan to use AI in the next year.

Key Takeaways

• Small businesses can use AI tools to assist in accounting, customer service, marketing, security, and recruitment.
• To smoothly implement AI, identify areas that need improvement, select the right tools, and train employees on their proper use.
• Don’t overlook the need to capture the information that AI is providing and incorporate the benefits into your business.

AI Tools to Consider

Choosing the right artificial intelligence tool from the many that are available will come down to the requirements of the small business and its day-to-day activities. Here is an overview of some of the applications and business areas that AI tools can support.

Accounting

AI can make accounting processes more efficient, offering categorization recommendations for transactions based on historical data.

Some AI tools can assist with data analysis for cash flow forecasting, accounts payable, and accounts receivable processing. They can even catch errors or irregularities in transaction data that indicate possible fraud or security risks.

Chatbots

A chatbot is an app that simulates human conversation through text or voice interactions. Added to a company website, it can field common questions and requests from customers.

That frees up the team to address more complex issues and extends customer service coverage to 24 hours.

Many chatbots also learn as they capture data, and can be connected to customer relationship management (CRM) software to integrate information on customer interactions.

Siri Is AI

Apple’s virtual assistant Siri is an example of AI. Siri uses machine learning, natural language processing, and voice recognition to respond to users.

Customer Relationship Management (CRM)

AI-enabled CRM software can help drive sales or identify marketing opportunities based on its learnings from customer behavior and data. For example, it can offer incentives based on a customer’s order value and frequency.

It can also predict future customer behavior, providing suggestions and insights into trends.

Customer Service Automation

Chatbots are one way to automate customer service. Many phone systems use voice-enabled AI to answer questions and direct calls, while tools like voice search can be helpful to direct customer calls.

As with chatbots, tools like these can extend customer service center hours without the need to hire around-the-clock support.

Cybersecurity

Small business owners looking to protect their business and customer data can use AI-powered cybersecurity tools to scan for data irregularities or patterns of unusual activity and receive alert notifications.

Marketing and Advertising

Generative AI tools such as ChatGPT, Midjourney, and Adobe Firefly can help with content creation for marketing and advertising applications from blog posts to social media captions, graphics, and emails.

Tools like Grammarly can help review or edit the content. Other AI tools can be used to schedule, post, or send content, and track the performance of campaigns, tests, or posts according to set metrics.

Recruiting

Reviewing resumes is a time-consuming task, and AI-powered software can take some of the load off recruiting. AI-powered tools can screen resumes and applications, and narrow down the candidate pool.

Translation and Transcription

AI translation tools provide a quick and easy way to translate text into other languages.

AI recording and transcription tools can be used to capture meeting notes or record follow-up tasks.

Benefits of Using AI Tools for Small Businesses

Small businesses can gain many advantages by incorporating AI tools into their operations:

• Improved efficiency: AI can increase employee productivity by reducing time spent on rote or recurring tasks.
• Cost savings: AI software can alert you to potential threats or errors (such as duplicate payments) by identifying irregularities in data, saving money, and reducing risk.
• Enhanced customer experience: AI chatbots and automated customer interactions can reduce the volume of calls and queries, freeing your team to focus on more complex customer interactions. They also extend the hours that your business can offer customer service. AI can assist in personalizing content to offer customers a unique engagement with the brand.
• Increased growth opportunities: Many AI programs incorporate machine learning algorithms, which can offer a greater understanding of customer behavior via pattern recognition that improves over time. This can lead to better sales and revenue growth.
• Better decision-making: AI can provide and interpret analytics on large volumes of key business data to enhance problem-solving.

Best Practices for Implementing AI

To maximize the effectiveness of any AI tool, think of it like any other process or technology being introduced to the business. Here are some steps to consider:

1. Assess current processes. Identify areas or systems that could benefit from automation or increased efficiency through the use of an AI tool.
2. Do your research. It’s a crowded field. Comparative research on features and pricing can ensure you choose the right AI tool for the application and outcome. Check to make sure that the tool can be integrated with current systems and scaled according to the needs of the business as it grows.
3. Give your team a heads-up. Let any relevant team members know in advance that you’re introducing the tool, and answer any questions they may have.
4. Undergo and provide training. Ensure that anyone using the AI tool fully understands what it’s being used for and how to use it.
5. Monitor, maintain, and update. Keep the software maintained with any updates, and monitor its performance and usefulness.
6. Leverage insights or improvements. Understand how the tool plugs into the bigger picture of your business to ensure that you capture and incorporate the benefits it’s providing.
7. Continue to learn and adapt. Make time to reflect and solicit feedback on how the tool is working for the business and its employees, and take advantage of any machine learning capabilities that the tool can provide over time.

Challenges to Incorporating AI Tools

Small businesses need to take several factors into consideration when adopting AI tools. These include:

• Incorrect or inaccurate results: AI tools are limited by the amount or type of data they are trained on, and they can generate misleading or nonsensical results (referred to, aptly, as “hallucinations”). This is the case with many generative AI tools, whose outputs might need to be reviewed or fact-checked by a human to ensure their validity, relevance, and accuracy.
• Data privacy and security: The legal landscape around AI data privacy is still evolving. As AI models require data to train their algorithms, there are urgent concerns about the use and security of personal data. Any user of AI needs to stay alert to developments in this area.
• Bias and ethical considerations: Many AI models are designed to recognize patterns. They have been shown to reproduce existing patterns of discrimination. This was the case with an experimental AI recruiting software developed by Amazon. Trained on 10 years of resumes submitted to the company, it demonstrated significant bias against women, reflecting an existing gender gap in tech workers.
• Employee training: Because of the speed at which AI technology is evolving, it can be challenging to keep up with developments and changes and train employees accordingly.
• Potential job displacement: In 2023, Goldman Sachs predicted that AI could replace “the equivalent of 300 million full-time jobs,” replacing between a quarter and half of the workload of exposed occupations.

Future Trends in Small Business AI Tools

Advancements in AI tools hold many promising applications for small businesses.

The ability to increasingly personalize customer experiences by capitalizing on historical data, for instance, can offer small businesses a competitive edge.

As natural language processing models keep evolving, generative AI tools will become more powerful and more accurate. Tools are being developed to adapt this technology for more industries and specialized uses.

AI tools can also enable predictive analytics, providing valuable insights to decision-makers based on current and historical data. This can be particularly powerful in applications such as financial forecasting and inventory management.

What Are Some Free AI Tools for Small Businesses?

Many software suites are incorporating AI functionality. For example, Google Workspace Labs introduced AI-assisted capabilities to Google Docs, Sheets, and Slides.

Free tools like ChatGPT, Dall-E, Canva, and Grammarly can assist with content generation. Software like Fireflies and Otter can help with transcription and meeting notes.

How Can I Use an AI Chatbot in My Business?

Adding an AI chatbot to a business website can help address common customer inquiries, reducing the volume of calls or emails that staff members have to resolve.

Chatbots can also provide businesses with valuable insight about customer engagement and behavior.

Which AI Tools Are Best for Solo Entrepreneurs?

AI tools that offer automation or increased efficiency can be especially valuable for solo entrepreneurs with limited time and resources. Generative AI tools can assist with time-consuming or repetitive tasks such as writing captions or product descriptions. Recording technology can take meeting notes and provide call transcriptions. AI accounting tools can reduce the workload on those who can’t hire a dedicated bookkeeper.

The Bottom Line

AI tools can have a big impact on the success of a small business. However, it’s important to consider their uses thoughtfully and implement them well to capitalize on their benefits and guard against their drawbacks. In the wrong hands, AI can create issues in terms of privacy, security, accuracy, and bias.

Building an effective business launch plan

Fact checked by Vikki Velasquez
Reviewed by Samantha Silberstein

Starting a business in the United States involves a number of different steps spanning legal considerations, market research, creating a business plan, securing funding, and developing a marketing strategy. It also requires decisions about a business’ location, structure, name, taxation, and registration.

Here are the key steps involved in starting a business, as well as important aspects of the process for entrepreneurs to consider.

Key Takeaways

• Entrepreneurs should start by conducting market research to understand their industry space, competition, and target customers.
• The next step is to write a comprehensive business plan, outlining the company’s structure, vision, and strategy.
• Securing funding in the form of grants, loans, venture capital, and/or crowdfunded money is crucial if you’re not self-funding.
• When choosing a venue, be aware of local regulations and requirements.
• Design your business structure with an eye to legal aspects, such as taxation and registration.
• Make a strategic marketing plan that addresses the specifics of the business, industry, and target market.

Conducting Market Research

Before starting a business, entrepreneurs should conduct market research to determine their target audience, competition, and market trends. The U.S. Small Business Administration (SBA) breaks down common market considerations as follows:

• Demand: Is there a need for this product or service?
• Market size: How many people might be interested?
• Economic indicators: What are the income, employment rate, and spending habits of potential customers?
• Location: Are the target market and business well situated for each other?
• Competition: What is the market saturation? Who and how many are you going up against?
• Pricing: What might a customer be willing to pay?

Market research should also include an analysis of market opportunities, barriers to market entry, and industry trends, as well as the competition’s strengths, weaknesses, and market share.

There are various methods for conducting market research, and these will vary depending on the nature of the industry and potential business. Data can come from a variety of places, including statistical agencies, economic and financial institutions, and industry sources, as well as direct consumer research through focus groups, interviews, surveys, and questionnaires.

Crafting a Business Plan

A comprehensive business plan is like a blueprint. It lays the foundation for business development and affects decision making, day-to-day operations, and growth. Potential investors or partners may want to review and assess it in advance of agreeing to work together. Financial institutions often request business plans as part of an application for a loan or other forms of capital.

Business plans will differ according to the needs and nature of the company and should only include what makes sense for the business in question. As such, they can vary in length and structure. They can generally be divided into two formats: traditional and lean startup. The latter is less common and more useful for simple businesses or those that expect to rework their traditional business plan frequently. It provides a vivid snapshot of the company through a small number of elements.

Reviewing Funding Options

The process of funding a business depends on its needs and the vision and financial situation of its owner.  The first step is to calculate the startup costs. Identify a list of expenses and put a dollar amount to each of them through research and requesting quotes. The SBA has a startup costs calculator for small businesses that includes common types of business expenses.

The next step is to determine how to get the money. Common methods include:

• Self-funding, also known as bootstrapping
• Finding investors willing to contribute to your venture capital
• Raising money online by crowdfunding
• Securing a business loan from a bank, an online lender, or a credit union
• Winning a business grant from a donor, usually a government, foundation, charity, or corporation

Different methods suit different businesses, and it’s important to consider the obligations associated with any avenue of funding. For example, investors generally want a degree of control for their money, while self-funding puts business owners fully in charge. Of course, investors also mitigate risk; self-funding does not.

Availability is another consideration. Loans are easier to get than grants, which don’t have to be paid back. Additionally, the federal government doesn’t provide grants for the purposes of starting or growing a business, although private organizations may. However, the SBA does guarantee several categories of loans, accessing capital that may not be available through traditional lenders. No matter the funding method(s), it’s essential to detail how the money will be used and lay out a future financial plan for the business, including sales projections and loan repayments.

Understanding Legal Requirements

Businesses operating in the U.S. are legally subject to regulations at the local, county, state, and federal levels involving taxation, business IDs, registrations, and permits.

Choosing a Business Location

Where a business operates will dictate such things as taxes, zoning laws (for brick-and-mortar locations), licenses, and permits. Other considerations when choosing a location might include:

• Human factors: These include target audience and the preferences of business owners and partners regarding convenience, knowledge of the area, and commuting distance.
• Regulations: Government at every level will assert its authority.
• Regionally specific expenses: Examples are average salaries (including required minimum wages), property or rental prices, insurance rates, utilities, and government fees and licensing.
• The tax and financial environment: Tax types include income, sales, corporate, and property, as well as tax credits; available investment incentives and loan programs may also be geographically determined.

Picking a Business Structure

The structure of a business should reflect the desired number of owners, liability characteristics, and tax status. Because these have legal and tax compliance implications, it’s important to understand them fully. If necessary, consult a business counselor, a lawyer, and/or an accountant.

Common business structures include:

• Sole proprietorship: A sole proprietorship is an unincorporated business that has just one owner, who pays personal income tax on its profits.
• Partnership: Partnership options include a limited partnership (LP) and a limited liability partnership (LLP).
• Limited liability company (LLC): An LLC protects its owners from personal responsibility for the company’s debts and liabilities.
• Corporation: The different types of corporations include B corp, C corp, S corp, closed corporation, and nonprofit.

Getting a Tax ID Number

A tax ID number is the equivalent of a Social Security number for a business. Whether or not a state and/or federal tax ID number is required will depend on the nature of the business and the location in which it’s registered.

A federal tax ID, also known as an employer identification number (EIN), is required if a business:

• Operates as a corporation or partnership
• Pays federal taxes
• Has employees
• Files employment, excise, alcohol, tobacco, or firearms tax returns
• Has a Keogh plan
• Withholds taxes on nonwage income to nonresident aliens
• Is involved with certain types of organizations, including trusts, estates, real estate mortgage investment conduits, nonprofits, farmers’ cooperatives, and plan administrators

An EIN can also be useful if you want to open a business bank account, offer an employer-sponsored retirement plan, or apply for federal business licenses and permits. You can get one online from the Internal Revenue Service (IRS). State websites will do the same for a state tax ID.

Registering a Business

How you register a business will depend on its location, nature, size, and business structure.  For example, a small business may not require any steps beyond registering its business name with local and state governments, and business owners whose business name is their own legal name might not need to register at all.

That said, registration can provide personal liability protection, tax-exempt status, and trademark protection, so it can be beneficial even if it’s not strictly required. Overall registration requirements, costs, and documentation will vary depending on the governing jurisdictions and business structure.

Most LLCs, corporations, partnerships, and nonprofits are required to register at the state level and will need a registered agent to file on their behalf. Determining which state to register with can depend on factors such as:

• Whether the business has a physical presence in the state
• If the business often conducts in-person client meetings in the state
• If a large portion of business revenue comes from the state
• Whether the business has employees working in the state

If a business operates in more than one state, it may need to file for foreign qualification in other states in which it conducts business. In this case, the business would register in the state in which it was formed (this would be considered the domestic state) and file for foreign qualification in any additional states.

Obtaining Permits

Filing for the applicable government licenses and permits will depend on the industry and nature of the business and might include submitting an application to a federal agency, state, county, and/or city. The SBA lists federally regulated business activities alongside the corresponding license-issuing agency, while state, county, and city regulations can be found on the official government websites for each region.

Implementing Marketing Strategies

Every business should have a marketing plan that outlines an overall strategy and the day-to-day tactics used to execute it. A successful marketing plan will lay out tactics for how to connect with customers and convince them to buy what the company is selling.

Marketing plans will vary according to the specifics of the industry, target market, and business, but they should aim to include descriptions of and strategies for the following:

• A target customer: Including market size, demographics, traits, and relevant trends
• Value propositions or business differentiators: An overview of the company’s competitive advantage with regard to employees, certifications, and offerings
• A sales and marketing plan: Including methods, channels, and a customer’s journey through interacting with the business
• Goals: Should cover different aspects of the marketing and sales strategy, such as social media follower growth, public relations opportunities, and sales targets
• An execution plan: Should detail tactics and break down higher-level goals into specific actions
• A budget: Detailing how much different marketing projects and activities will cost

How Much Does It Cost to Start a Business?

Business startup costs will vary depending on the industry, business activity, and product or service offered. Home-based online businesses will usually cost less than those that require an office setting to meet with customers. The estimated cost can be calculated by first identifying a list of expenses and then researching and requesting quotes for each one. Use the SBA’s startup costs calculator for common types of expenses associated with starting a small business.

What Should I Do Before Starting a Business?

Entrepreneurs seeking to start their own business should fully research and understand all the legal and funding considerations involved, conduct market research, and create marketing and business plans. They will also need to secure any necessary permits, licenses, funding, and business bank accounts.

What Types of Funding Are Available to Start a Business?

Startup capital can come in the form of loans, grants, crowdfunding, venture capital, or self-funding. Note that the federal government does not provide grant funding for starting a business, although some private sources do.

Do You Need to Write a Business Plan?

Business plans are comprehensive documents that lay out the most important information about a business. They reference its growth, development, and decision-making processes, and financial institutions and potential investors and partners generally request to review them in advance of agreeing to provide funding or to collaborate.

Is 2025 a Good Time to Start a Business?

Yes, according to the SBA. “According to research, the majority of small business owners are optimistic about America’s economy,” the SBA states. “That optimism, paired with a well-informed small business strategy, could mean plenty of success.”

The SBA identifies five trends to consider in business planning for 2025:

• Ecommerce: Online sales are expected to continue growing as a percentage of all retail sales.
• Online marketing: Almost three out of four small businesses have a website, and many employ social media.
• Artificial intelligence: More than half of small businesses use chatbots and virtual assistants powered by AI, which can help streamline processes, limit human error, and improve employee productivity and focus.
• Cybersecurity: Data security and privacy remain a top concern for consumers, so business owners should consider best practices, network security, up-to-date software, and multifactor authentication in preventing cybercrime.
• Customer experience: An interpersonal touch should be prioritized, from research to point of sale, to create happy customers.

The Bottom Line

Starting a business is no easy feat, but research and preparation can help smooth the way. Having a firm understanding of your target market, competition, industry, goals, company structure, funding requirements, legal regulations, and marketing strategy, as well as conducting research and consulting experts where necessary, are all things that entrepreneurs can do to set themselves up for success.

Reviewed by Robert C. Kelly

SolarCity and First Solar were two major players in the solar power industry, each taking distinct approaches to market dominance. SolarCity, founded in 2006, revolutionized residential solar by offering leasing and financing options that made solar panels accessible to homeowners. First Solar, established in 1999, focused on manufacturing thin-film solar panels and supplying large-scale utility projects. Let’s take a look back at the history of competition between the two companies.

Key Takeaways

• SolarCity revolutionized residential solar by offering leasing and financing options, allowing homeowners to install solar panels with little upfront cost.
• First Solar, founded earlier, focused on manufacturing thin-film solar panels for large-scale utility projects, offering lower production costs and better performance in high temperatures.
• SolarCity’s reliance on a financing model led to financial risk, and despite rapid growth, it faced challenges that culminated in its 2016 acquisition by Tesla.
• Post-acquisition, Tesla integrated SolarCity into its energy division.
• First Solar continues to thrive as it’s own company and has expended to international operations.

Understanding the Companies

SolarCity was founded by Lyndon and Peter Rive, cousins of Elon Musk, with the goal of making solar energy accessible to homeowners. The company capitalized on federal and state incentives while pioneering a leasing model that allowed customers to install solar panels with little to no upfront cost. With its aggressive sales tactics, the company became the largest residential solar installer in the U.S. by the early 2010s.

First Solar, on the other hand, took a completely different approach. Established in 1999, the company focused on developing and manufacturing thin-film solar panels using cadmium telluride technology. This alternative to traditional silicon-based panels allowed for lower production costs and better performance in high-temperature environments. First Solar’s emphasis on cost efficiency and large-scale projects made it a preferred partner for utility-scale solar installations, helping secure contracts with major energy providers worldwide.

Understanding the Business Models

One of the most defining differences between SolarCity and First Solar was their business models. SolarCity relied heavily on a leasing and financing model that enabled homeowners to install solar panels without an upfront investment. Customers would pay monthly fees, often lower than their existing utility bills, while SolarCity retained ownership of the panels. This model allowed for rapid adoption, but it also meant that SolarCity took on significant financial risk by financing these installations and relying on long-term customer payments in order for the company to make money.

First Solar focused primarily on manufacturing and selling solar panels rather than financing or installing them for consumers. The company specialized in producing thin-film photovoltaic panels and selling them to large-scale energy developers. This approach allowed First Solar to generate revenue without being tied to long-term customer contracts.

Differences in Solar Panel Technology

A key differentiator between SolarCity and First Solar was their approach to solar panel technology. SolarCity did not manufacture its own solar panels but instead relied on third-party suppliers. The company focused on delivering and financing installations rather than innovating new panel designs. As we’ll talk about later, this strategy shifted once SolarCity was later acquired by Tesla.

First Solar was more of an innovator in solar panel manufacturing. Its thin-film technology was a major departure from the industry’s dominant crystalline silicon panels. The advantage of thin-film solar was its lower production cost and better performance in high temperatures and low-light conditions.

Note

There was controversy with the Solarcity/Tesla acquisition, as leadership between the two companies were related and of the same family.

The Tesla Acquisition of SolarCity

One of the most pivotal moments in SolarCity’s history was its acquisition by Tesla in 2016. At the time, SolarCity was facing mounting financial pressure, with increasing debt and slowing customer growth. Elon Musk, who had been a major supporter of SolarCity due to his family ties and belief in clean energy, orchestrated a merger between Tesla and SolarCity. The move was framed as a way to create a vertically integrated clean energy company, combining Tesla’s battery technology with SolarCity’s solar installations.

The acquisition was controversial, with critics arguing that Tesla was bailing out a struggling company at the expense of its shareholders. Many questioned whether SolarCity’s financial troubles could drag down Tesla, which was already facing its own challenges in scaling electric vehicle production. However, Musk defended the deal, arguing that integrating solar energy with Tesla’s Powerwall batteries and electric vehicles would create a seamless renewable energy ecosystem.

Post-acquisition, SolarCity was effectively absorbed into Tesla’s energy division, and the brand was gradually phased out. Tesla shifted focus away from SolarCity’s traditional leasing model and instead prioritized the development of the Tesla Solar Roof. This transition marked a significant change in strategy, moving from rapid expansion through financing to a more product-focused approach centered on innovation and in-house technology.

First Solar’s Strategic Positioning

As SolarCity struggled with financial viability, First Solar continued to adapt its strategy to maintain its leadership in utility-scale solar. One of its key moves was its ongoing investment in improving thin-film solar panel efficiency. Another strategic shift was First Solar’s expansion into international markets. As solar adoption grew worldwide, First Solar positioned itself as a reliable supplier for large-scale projects around the world, shipping to more than 45 countries as of 2025.

First Solar also focused on integrating energy storage solutions into its projects. With the rise of battery storage technology, pairing solar farms with large-scale batteries became a key trend in the renewable energy industry.

Who Ultimately Won the Competition?

In hindsight, First Solar probably emerged as the more financially sustainable and strategically resilient company. While SolarCity initially disrupted the residential solar market, its reliance on debt-financed leasing made it vulnerable to economic fluctuations and policy shifts. The company’s rapid rise was met with an equally rapid decline, ultimately leading to its absorption into Tesla and the end of its independent operations.

First Solar, on the other hand, continued to grow and evolve. Its emphasis on technological innovation ensured that it remained a leader in utility-scale solar, even as new competitors entered the market.

What Was SolarCity’s Approach to the Solar Power Market?

SolarCity’s approach to the solar power market focused on making solar energy accessible to homeowners through leasing and financing models.

What Was First Solar’s Approach to the Solar Power Market?

First Solar, founded in 1999, focused on manufacturing thin-film solar panels using cadmium telluride technology. The company targeted large-scale utility projects rather than residential installations, positioning itself as a supplier of solar panels to energy developers.

What Technological Differences Existed Between SolarCity and First Solar?

The key technological difference between SolarCity and First Solar was that SolarCity did not manufacture its own solar panels, relying instead on third-party suppliers. SolarCity focused on financing and delivering installations, whereas First Solar specialized in manufacturing thin-film solar panels.

What Was the Outcome of the Tesla-SolarCity Acquisition?

Following Tesla’s acquisition of SolarCity, the company’s operations were absorbed into Tesla’s energy division, and the SolarCity brand was gradually phased out. Tesla shifted its focus from SolarCity’s leasing and financing model to an emphasis on product innovation, particularly with the development of the Tesla Solar Roof.

The Bottom Line

SolarCity focused on making solar accessible to homeowners through financing, while First Solar specialized in large-scale projects and manufacturing efficiency. SolarCity’s rapid growth led to financial challenges and a Tesla acquisition, whereas First Solar’s stable approach ensured its long-term presence in the industry.