• Skip to main content
  • Skip to header right navigation
  • Skip to site footer
Bautis Financial

Bautis Financial

Secure your Castle, Achieve your Dreams.

  • Schedule a Call
  • Podcasts
    • Agent of Wealth
    • Clear a Path
  • About
    • Our Approach
    • Our Team
    • Our Difference
  • Who We Work With
    • Individuals and Families
    • Small Business Owners
    • Retirees and Pre-Retirees
    • 401k Plan Sponsors
  • Insights
    • Blog
    • Business Valuation Advisor
    • College Planning Hub
    • Discover How
    • Learning Center
    • Risk Score
  • Client Access
    • Wealth Center
    • Orion
  • Facebook
  • Twitter
  • LinkedIn
  • YouTube
bautis financial secure your castle achieve your dreams

Small Business Owners

BautisFinancial Small Business Owners

Who hasn’t dreamed about starting a business?

Being the boss can be exhilarating, but there are also significant risks to going out on your own. Unfortunately, the failure rate of small business is high, as only 50% of new businesses survive for more than five years. The keys to success lie in proper budgeting, determining the right product for your market or audience, marketing that product, and then selling it at the right volume.

Often small business owners sometimes forget to adapt their own individual financial plans for the new realities and risks of being a business owner.  Comprehensive financial planning for an individual or couple generally involves tax planning, risk management, investment planning, retirement planning and gift and estate planning. For each of these areas, let’s consider how business ownership takes this planning to another level.

Sources

Tax Planning: The tax legislation passed late in 2017 changes the tax treatment of the various legal structures businesses use significantly. Business income that passes through to an individual from a pass-through entity and income attributable to a sole proprietorship will be taxed at individual tax rates after taking a deduction of up to 20% to bring the rate lower. To the extent that individuals and businesses have different marginal rates at different brackets of income, it is possible to coordinate the taxation of business and personal income in a way that provides the greatest benefit to both the business and its owner.

Risk Management: Most individuals need to plan for the financial risk of early death, disability, illness and infirmity, and liability or loss related to property ownership.  Once an individual owns a business, however, the risks multiply to include: interruption of the business due to a disaster; death or disability of a person key to the success of the business; loss of business property; and lawsuits resulting from negligence or defective products.  This last risk can be addressed in part by the legal structure of the business, but the others require specialized insurance coverage over and beyond what the owner holds for himself and his family.  If the business has employees, worker’s compensation coverage becomes necessary as well.

Retirement Planning:  It’s not uncommon for business owners to assume they will never retire.  After all, they’re presumably doing what they love, so why not continue indefinitely? Alternatively, they may see the business as the only retirement plan necessary – as a source of capital that will fund their retirement needs. Thinking along these lines is generally a mistake: If anything, a business owner may need more retirement planning rather than less, to prepare for the time when he no longer can or wishes to work, and/or the business cannot fully provide for his financial needs. The good news is that business ownership affords all sorts of tax-advantaged ways to save for retirement, and the ability to put aside amounts considerably larger than what is permissible to non-business owners.

Investment Planning: Most small businesses are self-financed by their owners, which results in the business becoming the owner’s major or only investment. Even when the owner has extra capital to make other investments, he may still prefer to put his money back into his business, where he feels he has the most control over his returns. Prudent planning nevertheless must be focused on diversification. Asset classes and investments must be carefully selected for the owner’s personal portfolio to offset the concentrated risk he is taking with the business.

Estate Planning: If a small business grows and becomes a valuable asset, simple wills or family trusts set up for personal affairs may no longer suffice for the transfer of the business. More sophisticated financial planning techniques will be necessary to ensure business continuity after death, reduce any estate taxes assessed for the business, and to provide liquidity to heirs to pay those taxes. A reorganization of the business might be advisable to create different types of ownership for family members, and to make full use of IRS-sanctioned discounts in valuing the business for purposes of gift and estate taxes.  Insurance trusts and charitable trusts can also play an important role in the efficient transfer of a small business.

Cash Flow Management: One point should be clear when it comes to financial planning for the small business owner: the do-it-yourself drive that helped you start your business will not serve you well when it comes to managing the many financial issues created by that business.  This is where professional expertise often becomes necessary.

Exercise your privileges as chief executive officer, and delegate these issues to qualified tax and financial planning professionals. Our advice can make all the difference in improving your chances of business success.  Bautis Financial can give you the peace of mind that your family’s finances are secure, so you can focus on growing your business.

Sidebar

Take the Guess Work Out of your Financial Future

bautisfinancial risk number

Get Your Free Copy

Latest Podcasts

Woman small business owner smiling while signing a government contract.

Episode 157 – How to Leverage Government Contracts for Small Business Growth With Richard C. Howard

May 26, 2023 By Bautis Financial

Discover strategic steps and insider tips on how to harness the power of government contracts, propelling your small business towards unprecedented growth!

Moving Abroad

Episode 156 – The Tax Implications of Moving Abroad With David Lesperance and Melvin Warshaw

May 19, 2023 By Bautis Financial

No matter your reason for moving, gain the knowledge you need to protect your finances, avoid costly mistakes, and unlock the hidden tax benefits of your new international chapter.

Business Taxes

Episode 155 – Tax Strategies for a Highly Profitable Business With John Briggs

May 12, 2023 By Bautis Financial

From game-changing deductions to innovative structuring techniques, embark on a journey towards sustainable business success!

More Podcasts

Bautis Financial Insights

Subscribe to Our Insights

Sign up to receive valuable financial insight and updates straight to your inbox each month.

Subscribe to Our Insights

Sign up to receive valuable financial insight and updates straight to your inbox each week.

Social

Follow along on social media

  • Facebook
  • Twitter
  • LinkedIn
  • YouTube

Contact

Bautis Financial
7 North Mountain Ave
Montclair, NJ 07042
Get Directions
862-205-5800

Navigation

  • Schedule a Call
  • Podcasts
    • Agent of Wealth
    • Clear a Path
  • About
    • Our Approach
    • Our Team
    • Our Difference
  • Who We Work With
    • Individuals and Families
    • Small Business Owners
    • Retirees and Pre-Retirees
    • 401k Plan Sponsors
  • Insights
    • Blog
    • Business Valuation Advisor
    • College Planning Hub
    • Discover How
    • Learning Center
    • Risk Score
  • Client Access
    • Wealth Center
    • Orion

Copyright © 2023 · Bautis Financial · All Rights Reserved · Powered by Mai Theme

Return to top