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succession plan getting started

Business Succession Planning: Getting Started

The best time to have a succession plan in place is the day you start your business. If you do not already have a succession plan in place, today is the day. While many business owners believe getting started is difficult, it is quite simple. The majority of people think it can wait because it’s too big of a topic to cover. When creating a plan, remember to keep it simple and aim for progress, not perfection.

First, business owners need to consider what would ideally happen under two scenarios, retirement and death. The first is easier to think about for a lot of people, so we’ll start with that one and cover death in another post.

When considering retirement, business owners should think about it at least three to five if not ten to twenty-five years in advance. According to the Department of Labor, it is never too early to start planning for retirement. First, talk with your advisors and family, 3-5 years out. Your team of advisors should include your CPA, Attorney, and Financial Planner.

Conversation Starters for Your Team of Advisors:
  • What is my business worth today?
  • How much money do I need in retirement?
  • What can I do between now and my retirement date to build the business valuation?
  • What do I want to happen with the business when I retire?
    • Am I passing it to the next generation of family?
      • Will it be a gift?
      • Will it be bought with cash or over time?
    • Am I going to sell it?
      • Who are the potential buyers – individual buyers, financial buyers, or strategic buyers?
    • Should I let the management team run it, but I will own it still?
      • Are they capable?
      • What type of incentives do I need to put in place to make this work?
  • What am I going to do in retirement?
    • Am I going to stop working completely?
    • Will I do some consulting or gig-economy type work?

This is the starting point. Of course, there are many subsets of questions that will drive the conversation. Discuss these topics with your family to ensure everyone is aligned about what retirement looks like from a timing and lifestyle perspective. These questions can lead down many different avenues. Your team of advisors will guide you down the path that best fits your goals. Business succession planning is far from one-size-fits-all plan and more like a custom “one-size-fits-one”. Build a plan to satisfy your desires, needs, ambitions, employees, and family.

Not sure if you have the right team of advisors in place to help? Contact us today!

3 Tips For Successful Tax Planning

Tax planning can be the single most important thing you do for your financial stability when entering into a new year. The tax planning process is an intricate one that involves gathering information, organizing numbers and data, creating a comprehensive financial picture and charting the best course forward.

With tax season almost among us, take a look at the tips below. Use these tips as a guideline to help protect your financial interests and ensure a smooth, successful tax year.

Tip #1: Know The Basics

Before you begin your tax planning process, there are a few things to keep in mind. These may seem like no-brainers, but you’d be surprised at the number of people who sometimes overlook the obvious!

  • Your income – a key determinant of the tax rate you are facing
  • Your location – tax laws and guidelines differ from state to state
  • Your expenditures – how much are you spending and where?
  • Keeping a budget can help tremendously with this!
Tip #2: Work Closely With a CPA Firm

Maintaining a close relationship with your CPA is vital! Your CPA is there to help find approaches that work best for YOU. Some techniques are better suited for businesses, while others align better with educational institutions or nonprofits. Your accountant can help you identify specific financial areas that incur higher tax rates and form preventative strategies to avoid possible tax increases. With a professional accounting service, you lower the risk of making mistakes. Remember to communicate with your firm all year long, not just right before tax season.

Quarterly financial updates – Think about sending your CPA firm financial updates on a quarterly basis. When they evaluate your numbers regularly, your firm develops more accurate tax saving estimates.

Best practices – Inform your firm of all business decisions you’ve made throughout the year. If your CPA firm has all the correct information, they are able to provide you with the very best advice for the upcoming year.

Regulation changes – Tax laws change every year, sometimes several times within a year. Tax laws shouldn’t be a huge concern when filling out your tax forms, but they should be one of the first things you research before starting a new tax year. Your CPA can help keep you up-to-date with all regulation changes in order to better your financial plan.

Tip #3: Don’t Forget Retirement Plans

Everyone loves a tax decrease, but most folks overlook the fact that a retirement plan can be used as a tax-savings vehicle. Although your income is reduced when you contribute to your retirement plan, your taxes are reduced as well. Working with your CPA and wealth management advisor is a key factor in ensuring that you have the best plan in place. Don’t have a wealth management advisor? Don’t worry – your CPA can point you in the right direction.

Depending on your current standing with these factors, there are several tax planning strategies you and your CPA Firm might want to consider.

Standard and itemized deductions – You may want to consider itemizing your deductions if you pay a significantly high mortgage on an owned home.

Contribute funds to your retirement plan – The more money you make, the more taxes you pay. And the less money you make, the less taxes you pay. One of the best ways to lower your taxes is to decrease your income by contributing to your retirement plan. Your contribution reduces your income, which lowers your tax bill.

Want to learn more about securing tax-planning success? Contact us to start the conversation about your financial future with our firm – accountants who truly care about becoming a partner in your success.