business planning
For most business owners, the business is their most significant asset, and the financial success of that business has an immediate impact on the economic security of their families.
Without proper planning, you may have difficulty tapping the value of your business to support your retirement, or your family may lose the value of your business at your death.
Business decisions can impact not only the business itself, but may also influence the business owner’s overall financial well-being. While you may be extremely capable of running your business, you may lack the knowledge of financial strategies and nuances designed to help maximize the stability, continuity, and profitability of your practice.
Business planning and personal financial planning are often intertwined. We take a close look at both—examining operational issues, risk management, succession planning, and executive compensation. We also look at benefit packages, key employee insurance, and valuation.
Business planning is a critical component of wealth management, and a sophisticated plan for your business will be well-coordinated with your overall plans for taxation, investments, insurance, estate, and retirement.
Executive compensation
Executive compensation focuses on both cash and non-cash approaches. The size and structure of the business significantly influences your compensation systems. Large businesses tend to provide owners with sophisticated and sometimes complex compensation formulas. Small businesses tend to adopt a more straightforward compensation approach. Examples of compensation include insurance benefits, qualified retirement plans, stock options, personal performance initiatives, and other tax-advantaged non-qualified plans.
BUY/SELL AGREEMENTS
A buy-sell agreement is an arrangement between you and a prospective buyer of your business. An important step in business succession planning, it gives your family a guaranteed buyer for your business interest at an agreed-upon purchase price. This written document outlines the terms if an owner should die, become disabled, retire, or otherwise leave the business. When a life insurance policy funds the agreement, it can provide an immediate income tax-free pool of funds at an owner’s death.
Succession planning
Succession planning focuses on the transition of a business from an existing owner to a new owner. Although key factors vary extensively with business type and industry, there are some factors common to all business transitions, including the creation of a sellable business and the formulation of specific transition mechanics at time of sale.
FAMILY BUSINESS PLANNING
As you prepare for the family business succession/transition process, it’s important to address the underlying issues at play. Family members either may not be qualified to take a role in the business or they may not want to be involved. Your vision for your business, the objectives you hope to achieve from the transition, and whom you choose as a successor—a family member or someone else—are ultimately what will drive a business and succession plan and its execution.
This material has been provided for general informational purposes only. Investors should consult with a business planning professional regarding their individual situation.