Planning for Business Owners

Planning for Business Owners
Client Scenario: 
The client used by example in these tips is burdened by taxes, due to the fact that she provides the main source of income for her family with the business she owns. Although the business’s success positively drips down to her earnings and retirement savings, she is always feeling short on time and sought help from us.

Action Plan: After reviewing the client’s goals and concerns, which include both family and business finances, we coordinated her advisors (CPA, attorney, etc.) to build a comprehensive strategy focusing on four key issues:

1. Taxes. Since the client owns a successful business, which, in turn, makes her a high-income individual, her tax burden is quite large. To help alleviate this expense, we worked on the following:

  • Strategies for tax efficiency
  • Taking advantage of tax-deferred income vehicles (such as retirement plans)
  • Opportunities for charitable giving
  • Risk mitigation tools for protecting assets (providing additional tax benefits)

2. Business planning. At certain points in their maturity, all businesses transition through different stages of operation. This client needed help managing certain critical components of her business’s life cycle: specifically employee retirement plan platforms, which may help her recruit and retain high-quality staff. To assist her with this issue, we:

  • Formulated a plan to help improve the efficiency of the client’s administrative responsibilities, maximize the benefits of her employee plans, and promote satisfaction
  • Developed a strategy to limit fiduciary liabilities, helping her manage the changing landscape of the regulatory environment
  • Coached the client in techniques pertaining to her employees’ retirement readiness
  • Offered analysis on provider fees and services to assess the fairness of plan costs

3. Financial security and asset protection. As important as they are to every client, financial security and asset protection are even more significant to business owners. For example, any disturbance to the client’s business will severely affect the “big picture” of the client’s financial situation. With this in mind, we discussed:

  • Insurance coverage, which includes advanced risk management options
  • Protection against multiple sources of personal and professional liability

4. Succession planning. Every business owner needs to be ready in case of an unfortunate turn of events, such as sudden death or disability, while also being prepared for a more positive future involving their retirement. Our client is no different from other business owners in this respect, and because of this, we developed contingency plans for various scenarios:

  • In the event of death or disability, we proposed a life insurance-funded buy-sell agreement. This will assure that an income tax-deferred pool of funds is provided immediately in the case of the owner passing away. Furthermore, a disability buyout policy protects the client if he can no longer run the business due to disability or sickness.
  • When the client retires and wishes to still accrue value on the business she leaves behind, there are a few options for succession, some of which include selling to external purchasers or even existing employees.
  • The client’s children may be ultimately interested in and capable of taking over the business. Due to estate taxes and the planning of estate distribution between children, this option can be complicated. We discussed strategies to minimize taxation such as gifting stock and a family limited partnership.


The preceding is a hypothetical case study and is for illustrative purposes only. Actual performance and results will vary. Past performance is no guarantee of future results. Fixed insurance products and services are offered by Robert L. Stern Financial Services.