Business Planning

Planning and Protection for Business Owners

As a business owner, you drive every aspect of your enterprise’s success.

Planning Ahead to Protect What's Important to Your Business

It is often easy to blur the lines between your business goals and your personal goals for you and your family. Working with a Barnum financial professional who is knowledgeable in both the strategies you need to put in place to grow, protect, and transition both your business and in personal financial planning can help you be successful on both fronts.

Here are some of the areas you should address as a business owner:

Exit Planning

Leaving the business you have worked so hard to nurture is inevitable. To best preserve the value you have created, it is critical that you have a written strategy for you, your family, and your employees to help assure that when you are no longer in charge, everyone knows what will happen next.

We have a number of financial professionals who specialize in helping business owners develop an effective plan customized to your needs and desires, including your goals for the business, who will own and run it, and the financial implications of a buyout.

There are several exit options you can consider. Inside exit options include a sale or gift to family members, sale to an existing ownership partner or key employee, management buyout, and an Employee Stock Ownership Plan (ESOP). Outside exit options include a sale to a third-party, private equity sale, and liquidation of the business. All have pros and cons which your Divine Path Financial professional can help you weigh in the context of the business itself and your personal financial situation.

Saving For Retirement

There are two types of qualified retirement plans specifically designed for small businesses: a Simplified Employee Pension (SEP) and a Savings Incentive Match Plan for Employees (SIMPLE). Both are attractive alternatives because they’re easy to set up and inexpensive to administer. There is no complicated paperwork to file with the Internal Revenue Service (IRS). Because they are both qualified retirement plans, they can provide significant tax advantages for both you and your employees.

An SEP IRA is a written plan designed to allow your company to make contributions toward retirement for you and your eligible employees. Each is individually owned and controlled. Any type of business can establish an SEP IRA, including sole proprietorships, corporations (including S corporations), and non-profit organizations. Contributions are made directly into each IRA.

Designed for employers with fewer than 100 employees, a SIMPLE IRA is a written salary reduction arrangement that allows employees to make elective contributions into individual IRAs that are set up for the benefit of each eligible employee. They are not subject to complex discrimination testing or annual reporting requirements.

Key Person Insurance

Life or disability income insurance can compensate your business if certain key employees die or become disabled. The business pays the premiums and is the beneficiary of the policy. The coverage can help offset the potential adverse impacts of losing the critical contributions of a key employee. There is no set formula for putting a dollar value on the impact of the death or disability of a key employee. A Divine Path Financial professional who specializes in working with small businesses can help you decide based on your unique business situation.

Business Valuation

Most business owners have a very high percentage of their net worth tied up in their business. That is why it is important to know the current value of your business. It is an important factor in developing your exit plan and your retirement income strategy.

One of the most important components of the value of your business is it’s income replacement value, the value you need the business to be worth to maintain the standard of living you want in retirement. Your Divine Path Financial professional can hep you determine these values, identify if you may have a retirement income value gap, and develop strategies to try to close or eliminate that gap.

Factoring in Your Estate Plan

Your exit strategy can have a significant impact on your estate plan. This is especially true when ownership is being passed on to some, but not all, of your family members. Your Divine Path Financial professional can identify a combination of financial vehicles and strategies to distribute non-business assets to help address any inequities. The goal is to have your exit plan and estate plan work together to keep the business viable and ensure family harmony.

LIVING BENEFITS

FIND OUT HOW TO SECURE
YOUR FINANCIAL FUTURE

Achieving your financial goals doesn’t happen by accident. It takes patience and planning to create the kind of possibilities that money can buy.

CHAT WITH A FINANCIAL PROFESSIONAL

Life Insurance Solutions for Business Owners

As the driving force behind their businesses, the sudden loss of a business owner can have profound consequences on the company's operations, financial stability, and long-term success.

GET STARTED TODAY

5 Uses of Life Insurance for a
Business Owner

Loan and Debt Obligations

Life insurance can also be utilized to secure loans and debt obligations of the business. If the business owner has personally guaranteed business loans or has outstanding debts related to the business, life insurance can provide the necessary funds to repay those obligations, protecting the owner's personal assets and ensuring the financial health of their estate.

‍Protecting the Business

Life insurance can serve as a financial safety net for the business in the event of the owner's death. If the owner is a key individual who plays a vital role in the company's operations, their unexpected passing could lead to significant financial challenges, including potential loss of revenue, increased expenses, and even the risk of business closure. Life insurance provides a death benefit that can help cover outstanding debts, fund a smooth ownership transition, or provide liquidity to the business during a difficult period. In addition, Living Benefits policies, like those featured at Alliance Group, add an additional layer of protection to the picture. In the event that a covered business owner or a key partner is diagnosed with a serious illness or injury, such as a heart attack, stroke, or cancer diagnosis, Living Benefits can provide instant access to hundreds of thousands of tax-free dollars to help the business navigate that financial challenge, as well.

Business Continuity

Life insurance can ensure the continuity of the business in the absence of the owner. When used as the funding mechanism for a buy-sell agreement, the death benefit from a life insurance policy can be used to facilitate the transfer of ownership to a designated successor, such as a family member, partner, or key employee. It helps preserve the business's stability, maintain customer relationships, and provide a sense of security to employees, clients, and other stakeholders.

Key Employee Protection

Life insurance can also be used to protect the business from the loss of a key employee or executive. If the business relies heavily on the expertise, relationships, or unique skills of a particular employee, their death could have a significant impact on the company's operations and profitability. Having life insurance on key employees can help mitigate the financial consequences of their untimely passing, providing funds to recruit and train a replacement or address other business needs during the transition. Business life insurance for employees is popular for this very reason.

Personal Finance Protection

Life insurance can provide personal financial protection for the business owner's family and loved ones. If the owner's family depends on the income generated by the business, the death benefit from a life insurance policy can help replace lost income, cover living expenses, pay off debts, or fund future financial goals. It offers peace of mind and ensures that the owner's loved ones are financially supported in the event of their passing.

Protection with Living Benefits

Ultimately, life insurance for a business owner serves as a crucial risk management tool. It safeguards the business, supports continuity, protects key individuals, and provides financial security for both the business and the owner's loved ones. Choosing the appropriate type and amount of life insurance coverage should be done in consultation with insurance professionals and financial advisors who can assess the specific needs and circumstances of the business and the owner.

CHAT WITH A FINANCIAL PROFESSIONAL

Blog Posts

News & Insights

Our articles provide valuable tips and in-depth analysis to help you secure your financial future and make informed decisions. Whether you’re planning for retirement, protecting your wealth, or seeking strategies for sustainable growth, our blog is your trusted resource for achieving financial peace of mind and building a legacy of security and prosperity. Join us as we navigate the path to financial stability together.