Businesses are rarely successful immediately and often come with stress for entrepreneurs; irregular work hours, lack of operating capital, employee issues, balancing work and family life, etc.
In the early stages of business, stress can wear entrepreneurs down if they don’t take care of themselves physically and emotionally. Ironically, sometimes when success finally happens, it can become a recipe for disaster when it comes to financial planning for the business and the entrepreneur. Strategic financial planning can help entrepreneurs plan for different milestones in their business – hiring employees, partnering with others, adding revenue sources, building a management team, and ultimately succession planning if the entrepreneur sells or passes. Family dynamics, mortality, and money from the business can create unique challenges. Here are things to consider if you are an entrepreneur:
The premature death of the business owner
Will the business transfer to family members, key employees, or be sold if the owner dies? Will the profits from the business liquidating provide enough money to pay back lenders? A solution for the premature death of the owner is a life insurance policy that pays the death benefit to the business entity or lender to ensure the business’ debts are paid. Life insurance is a must for entrepreneurs.
Business and personal tax planning
If you are fortunate enough to sell your business, your sale proceeds may pay out over multiple years. No longer will you offset income with business deductions, and your income may increase, resulting in a higher personal income tax bracket. Entrepreneurs may want to consider reducing your income in the early years of your business by contributing to a pre-tax retirement savings vehicle or an annuity that you fund over time. In addition, work with your business tax professional to determine a tax-savings strategy that makes sense for your situation.
Business succession planning
Because there are many types of business succession plans, yours should reflect what is best for YOU. Business succession planning should involve legal and tax professionals and financial professionals. The best time to plan how you want your business to continue after your exit is before the event occurs.
Leaving a business to co-owners
If your business has one or more owners, you might consider establishing an agreement that upon the death of any owner, their interest is automatically purchased by the other owner(s). Known as a buy-sell agreement, this arrangement can ensure that beneficiaries of the deceased owner (including spouses or other family members) don’t unintentionally become owners. Life insurance can help cover the financial obligations of buy-sell agreements and provide necessary liquidity.
Drafting business legal documents
Given the complexity of business law, a legal professional that specializes in corporate law can assist you with these business legal documents:
- A business will. A will determines the future of money and your property, in this case, your business. However, be mindful that your business becomes part of your estate. A will determines the future of money and your property, in this case, your business. However, be mindful that your business becomes part of your estate. If your business has outstanding debt, a business will oversee returning or liquidating the asset(s) to the lender.
- Authorized user or signer on your business accounts. Adding a business signer to your accounts will help ensure that the business’s bills are paid. Even if something happens to you.
- Business Power of Attorney. Giving someone associated with your business or a legal professional whom you trust the Power of Attorney over your business’s financial affairs ensures that day-to-day operations and assets will be managed as you wish in your absence, but not in death. The Power of Attorney right does not start until you are deemed unable to handle your affairs. Generally through a medical or physical condition, until legal proceedings occur.
As entrepreneurs, you must plan for your situation and business and work with financial, legal, and tax professionals. Contact our office if you have any questions regarding life insurance for your business. Or personal coverage or saving for retirement.
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Fixed Index Annuities are designed to meet long-term needs for retirement income, and they provide guarantees against the loss of principal and credited interest, and offer the reassurance of a death benefit for your beneficiaries
We specialize in providing strategies and guidance for those who are seeking a better lifestyle in retirement. Whether you have a retirement nest egg of five million dollars or $50,000, we can help you make sure it works as hard and as smart as you did in earning and saving it. At Carrio Financial Group, we know that it is your retirement, and you should have control over it. We offer our experience and knowledge to help you design a custom strategy for financial independence. Contact us today to schedule an introductory meeting!
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