Businesses
Business Planning
As job creators, idea innovators, and wealth builders, business owners are by nature self-driven, responsible, take charge, make-it-happen people. Yet, in the rush of day-to-day business activities, many business owners become so engrossed in running their companies, they inadvertently put their personal finances on the back burner.
With much of their wealth locked into business assets, business owners need financial planning that understands and respects this reality. That's why we initiate the planning process by focusing on your largest asset, your business, and use those strategies available to your business to help you pursue your personal financial goals.
Employee Benefits
Attract, Retain and Reward Key Employees
If you own a small business, you may be finding it increasingly necessary to implement a benefits program to attract and retain employees. For small businesses, benefit plans generally consist of some of the major insurance benefits, discussed here, as well as employer-sponsored retirement plans.
Health Insurance
Two of the main reasons why employers offer group health insurance are to attract new employees and to retain existing employees. Unfortunately, many employees overlook the value of group health insurance until they have to find health coverage on their own. Almost without exception, group coverage usually offers better, more comprehensive benefits at a lower cost than individual policies. And while employers are not required to provide health benefits, beginning in 2015, the Patient Protection and Affordable Care Act (PPACA) does impose penalties in some cases on larger employers (50 or more workers) that elect not to provide coverage for their employees, or that provide insurance that is unaffordable.
Dental Insurance
This benefit has grown in popularity among small businesses. Dental insurance is highly valued by employees, because dental procedures are often among the most expensive medical charges an individual will incur in a given year.
Group Term Life Insurance
Group term life insurance is another popular benefit offered by more and more small businesses. For an employer, group term life insurance is a convenient way to offer employees easy-to-buy, affordable life insurance coverage. Typical group life plans offer employees insurance in either a set amount (e.g., all employees receive $10,000 of insurance, regardless of income level) or an amount based on their salary level (e.g., each employee receives insurance equal to two times current salary).
Short-term and Long-term Group Disability Insurance
A disability plan is designed to provide an employee with an income stream should he or she become disabled. Short-term disability plans provide benefits (usually a fixed percentage of the employee's salary) for a set number of days. After that period of time, assuming the employee is still disabled, long-term disability insurance kicks in, and the employee receives benefits under that program until he or she is no longer disabled. When your business offers a group disability plan to its employees, it must choose a specific range of coverage, a funding method for the plan, and the eligibility criteria for participants. The cost of group coverage is often less expensive than the cost of individual coverage, making it an attractive benefit for employees.
Employer Sponsored Retirement Plans
If you are self-employed or own a small business and you haven't established a retirement savings plan, what are you waiting for? A retirement plan can help you and your employees save for the future.
Tax advantages
A retirement plan can have significant tax advantages:
- Your contributions are deductible when made
- Your contributions aren't taxed to an employee until distributed from the plan
- Money in the retirement program grows tax-deferred (or, in the case of Roth accounts, potentially tax-free)
Types of plans
Retirement plans are usually either IRA-based (like SEPs and SIMPLE IRAs) or "qualified" (401(k)s, profit-sharing plans, and defined benefit plans). With IRA-based plans, your employees own ("vest") your contributions immediately. With qualified plans, you can generally require that your employees work a certain number of years before they vest.
Executive Benefits
Protecting Your Business Against Loss of Key Employees
You've got a great group working for you now, and business is good. You know that much of that success is due to one or two key people with both skills and personalities that are hard to match. Suppose they were injured and out of work for a while, or suppose they died? Would your business survive? Key employee life and disability insurance coverage can help make sure that it does.
When bad things happen to good people
Your key employees are those special people with such unique skills and talents that they contribute greatly to the financial success of your business. If a key employee were disabled and out of work, or were to die, your business would suffer a financial loss. Here are some possibilities:
- While the employee is out of work, the revenue that he or she generates may substantially decrease
- You'll incur unexpected expenses recruiting and training a temporary or permanent replacement
- Less capable or inexperienced employees trying to fill in can make mistakes or cause delays that cost you money
- If a key person dies, a business loan may come due
- Customers or even other employees may look elsewhere, concerned for the future of the business after the loss of a key employee
Key employee life and disability insurance policies can help soften the impact of these blows.
Buy/Sell Agreements
As a successful business owner, a funded exit strategy can help you harvest the value of your business when you leave the company. Through a buy-sell agreement, you select a buyer, determine the purchase price and the funding source for the future sale of your business. It can be triggered at retirement or in the event of your death or disability, and it helps to ensure that you and your family will receive full and fair value for your business.
Exit/Succession Planning
As a business owner, you're going to have to decide when will be the right time to step out of the business and how you'll do it. There are many estate planning tools you can use to transfer your business. Selecting the right one will depend on whether you plan to retire from the business or keep it until you die. Perhaps you have children or other family members who wish to continue the business after your death. Obviously, you'll want to transfer your business to your successors at its full value. However, with income, gift, and potential estate taxes, it takes careful planning to prevent some (or all) of the business assets from being sold to pay them, perhaps leaving little for your beneficiaries. Therefore, business succession planning must include ways not only to help ensure the continuity of your business but also to do so with the smallest possible tax consequences.