Last month, we looked at personal financial planning and explored different financial instruments such as 401Ks, IRAs, life insurance products and profit sharing plans for employers to attract and support employees. This month we take a look at financial planning for your business. Succession planning is an important factor that business owners need to address. For many owners, their business is their nest egg, and if this is the case, you need to have a plan to protect that value. If you plan to sell your business upon retirement, you will need to find a buyer that understands the value of your business. The best way to do this is grooming a successor – usually a key employee – that will take over the business. Developing a buy-out plan is key to get the value of what the business may be worth without restricting the successor from being able to successfully operate the business. In family businesses, there are tax advantages by transferring the business into a business trust that can be disbursed to successors who are family members. These types of transactions can save a lot of money in taxes as typically those who are buying ownership in a company are using after-tax dollars to purchase ownership and those who earn stock are also paying ordinary income taxes. Protecting your business from life events is highly important in any type of business that has multiple partners. Buy-sell agreements should be part of your financial plan to protect it from death, divorce, disability, or other events. The purpose of these agreements is to establish a plan for how ownership is transferred or protected from undesirable owners such as contentious spouses in a divorce or death, and a funding method to accommodate the value of the buy-out. These types of plans can be funded through life insurances, notes, cash, or business assets. The goal is to develop a plan that will create the least amount of strain on the business’s cash and assets so it can continue to prosper in these types of events. The biggest reason why people do not plan for the future is that they have no idea where to start. My hope is that this gets you thinking about the future and an introduction of where to begin. Consult with your CPA, attorney, and financial planners as they are the experts that can create the best plan for you. Don’t wait any longer; the best day to plan for your future was yesterday and the second best day is today! Best to your success! Sam Bruce NTCA President SamB@vctile.com