Business Owner Planning Needs Checklist
Executive Compensation for Business Owners
In a small business setting, it could take years to find or develop the executive talent needed to build the business to the next level. Executive talent is hard to come by, and it is even more difficult on the business when it walks out the door in pursuit of another opportunity.
When key executives are presented with a strong monetary incentive package, they are more likely to stay and utilize their talents where they feel appreciated and appropriately rewarded. Structured incentive plans can help keep key executives in place and motivate them to higher levels of performance.
Business Succession Planning
The death of a partner or major stockholder in a business can have devastating effects on both the business and the deceased partner’s surviving family. The business is concerned with gaining control of the deceased partner’s interest at a fair price so that it can continue operations without interference from the surviving family members. The family members are most concerned with receiving as much money as possible for their interest in the business and for capital that may be needed for estate settlement purposes.
Planning for Business Owners
Growing a business is a difficult undertaking today as business owners must confront a myriad of tax laws and regulations while trying to effectively create products or services, manage their employees, develop and cultivate clients, and do so profitably.
Often times business owners are too absorbed in their business to tend to their own financial needs, and they may also overlook key planning considerations that could help their business grow and prosper. Also, the livelihood of a business owner can be imperiled when unexpected events occur that adversely affect the bottom line of the business.
Small Business Retirement Plans
The creation of the Simplified Employee Pension (SEP) and the Savings Incentive Match Plan for Employees (SIMPLE) affords smaller businesses with a way to offer their employees a retirement plan. The SEP and SIMPLE were designed for businesses with less than 100 employees and y are less costly to administer than a 401(k). For the employees, they are both easy to understand and provide a convenient way to save for retirement.
As qualified retirement plans, SEPs and SIMPLEs enjoy the same tax treatment as other plans. Contributions by employees and employers are tax deductible or made on a pre-tax basis. The accumulation inside the accounts grows tax deferred. The many of the same restrictions apply as well. Withdrawals made prior to age 59 ½ may be subject to a penalty.