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Three financial questions for business owners

Tracy Tutag and Jeffrey Apps
Vail, CO, Colorado

Business owners present unique challenges in the field of financial planning. The following are a few of the most commonly asked questions.

Q: How will I pay for my retirement?

A: Many business owners hope that the sale of their business will fund retirement. This is not always the case. Small business owners have a range of options for funding their retirement, but often don’t take advantage of them. The owner or owners might be so intent on putting every dime back into the business that they may overlook the current tax advantages and long-term security of funding their retirement now.

If there are employees, there are defined contribution plans, including profit sharing, SEP and SIMPLE IRAs, and a variety of 401(k) plans to suit specific business requirements. Defined benefit plans are particularly valuable for owners who are older and need to catch up on retirement contributions quickly.

If you are self-employed, one of the best retirement options is the recently enacted Owner’s 401(k). It is easy to set up, allows larger contributions than other plan types and is extremely flexible.

Of course, all qualified retirement plans let you deduct your full contributions, thus reducing your taxable income, and grow any investment earnings tax-deferred. Most important, they help provide you with income after you retire.

Q: How can I ensure the future of my business partnership?

A: Consider what would happen to your business if a co-owner wanted to give up the business for retirement or other reason. What if that person were to become seriously disabled of die? If he or she got divorced or went bankrupt? Would your business survive?

If you don’t know the answers to these questions, you may need a buy-sell agreement. This document defines the events that would transfer business ownership and the way the business would be valued if a trigger event should occur.

Having a funded buy-sell agreement in place offers numerous benefits including:

They can prevent disruption or forced sale.

They can prevent unwanted ownership (such as an ex-spouse).

They can assure customers, creditors and employees of business continuity.

They can provide heirs with a fair price and fast settlement of an estate.

Q: How can my business compete for the best employees?

A: Your star performers are the ones who may be approached by other companies or may decide to set up their own shops.

To protect your business operations, it’s prudent to cultivate the type of work environment that can help avoid key employee turnover. Top executives often thrive on autonomy, a sense of job ownership.

In many ways, these people are entrepreneurs who just happen to work for you. If possible, give your top employees autonomy by passing on more responsibility and then compensate them to a large extent on the basis of their performance. Another important tool in retaining key employees is a compelling benefits package. Many small businesses offer cost effective options like retirement plans, health plans and disability insurance that help increase employee loyalty and affinity to your company.

Jeffrey Apps and Tracy Tutag offer securities and investment advisory services through AXA Advisors, LLC (member NASD, SIPC), 1290 Avenue of the Americas, New York, NY 212-314-4600 and offers annuity and insurance products through an insurance brokerage affiliate, AXA Network, LLC and its subsidiaries. They can be reached at 926-0601 or tracy.tutag@axa-advisors.com.


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