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Financial Planning for Small Business Owners

Financial Planning for Small Business Owners

July 21, 2020

Owning a small business is a lot of things; hard work, challenging, rewarding, and (ideally) profitable. In the beginning, many business owners will have a near-term outlook as they focus solely on growing the business. But once the company is established and the owner(s) begin to generate more wealth, this leads to a new set of challenges - protecting the business while planning for the future. Starting a conversation with a financial advisor or attorney with a wealth management background about tax reduction strategies, estate planning, and business continuity is the first step.

Here are a few areas, from a high-level, about or which business owners should be considering:

Retirement Planning

Don't assume that having a successful small business will provide a lifetime of desired wealth. Even if you love what you do and generate more income than expected, there are no certainties (Covid-19 proved that). As a business owner, you should approach personal financial goals in the same way you approached starting a business - with a plan. Defining your financial goals and setting up a portfolio of investment vehicles will gradually build your assets and, in time, provide a steady flow of income during retirement. Investment options such as a traditional IRA, Roth IRA, or SEP-IRA all have tax advantages that a trusted advisor can explain and set up. Diversification of assets is essential too. Many owners put extra money back into the business for further growth, but diversifying assets can help manage risk while creating additional income streams.

Estate Planning 

Business owners might feel invincible when first starting, but the reality is that something unforeseen could happen. Once you have substantial assets, you have exposure to a significant loss. Failing to create a plan that considers sudden death or disability can make your business, business partners, and family members liable in a messy transition with a big tax bill. Business owners should have an updated Will that accounts for both personal and business-related assets. 

To minimize the tax consequences following a death may require restructuring the business to include family members as owners. Succession planning, especially when there are multiple owners or heirs, should be considered earlier rather than later. If you want your business to be multi-generational, then speak with a professional who understands tax implications, trusts, and insurance products to help shield and smoothly transfer the company.


Business owners need a lot of protection and safeguards. Most individuals need life, property, and possibly disability insurance. But owning and operating a business comes with added risks, which require additional coverage. Specialized coverage can protect you from business interruption from natural disasters, property loss, lawsuits from customers, and worker's compensation.

Starting a business takes a strong will, a risk-reward mentality, and creating and carrying out a plan. A great business owner's hallmark is deciphering what they can accomplish individually and in what areas they need expert advice. Don't leave room for questions and assumptions about the future. Harness the wealth you've created and put it to work. Know that at some point, the reigns will be passed and make sure a structured plan exists. Select an advisor who has experience managing the wealth, tax strategies, insurance, and investments of people in your shoes to help you reach your specific goals.