An entrepreneur forges their own path. One of the biggest advantages is that you only have to answer to yourself. A con, however, means you are in charge of the big decisions. However, if you are well-educated and have proper guidance, this can also be a positive for small business owners.

Here are three wealth management basics to understand as a small business owner.

Saving for Retirement

Many people are used to the 401(k) plans offered by their employers. But if you’re a small business owner, it’s on you to find an investment vehicle to save for your retirement. 

SIMPLE IRAs, or savings incentive match plans for employees, are retirement plans available to small businesses. This is a great option if your business has employees.

Small businesses and their employees may also contribute to simplified employee pensions (SEPs). Similar to a SIMPLE IRA, a SEP allows small business owners to make tax-deductible contributions on behalf of eligible employees, and employees won’t pay taxes on the amounts an employer contributes on their behalf until they take distributions from the plan when they retire.

IRAs are an option if your company doesn’t offer retirement benefits to its owners or employees. A Roth IRA lets you contribute after-tax dollars and take tax-free distributions in retirement, whereas a traditional IRA lets you contribute pretax dollars, but you’ll pay taxes on the distributions. 

Communication is Key

At Hiley Hunt, we strive to be educators and partners in our client’s wealth management. We want our clients to have an active role in their financial and investment decisions, and we have open communication to ensure they have all of the information they need. 

Wealth management consists of complex products and strategies. We work with our clients to simplify complex information and help them navigate life events that can have a financial impact. While we have recurring touchpoints with our clients throughout the year, we always encourage clients to reach out to us whenever they have something to discuss or get our input on a financial decision. 

We know what it’s like to run a small business. There can be lots of tasks to juggle and time can quickly pass by. We know your time is valuable, but we want to make sure you are up to date on your investments and can access us at your convenience for any questions or discussions. It could be to your advantage to set a recurring task on your calendar once a month to check in on your investments and brainstorm any financial questions to might have for us. 

Tax Advantages

You should consult with a tax professional for personalized advice. This article is not intended as recommendations or advice and is for informational purposes only.

As a small business owner, you have certain opportunities to get the most out of your tax planning. There are several options for structuring your company. Depending on your needs, you may choose to operate as a sole proprietor, partnership, limited liability company (LLC), S corporation, or C corporation. Tax implications vary depending on the business structure.

Changing your business’s structure might be an option if the one you have now no longer suits your business. For example, LLCs can elect to be taxed like a C corporation by filing Form 8832 with the IRS.

Businesses that are “pass-through”, such as sole proprietorships, partnerships, LLCs and S corporations, are not subject to corporate income tax. Instead, the company’s net income “passes through” to the owner’s individual tax return, where the highest tax bracket is 37%. For LLC members in the top tax bracket, a tax status change may result in significant tax savings.

Of course, tax savings aren’t the only factor that goes into selecting a structure for your small business. Before changing your tax status, consult with a tax professional who can help you crunch the numbers and run a cost-benefit analysis.

Owning a small business brings a range of emotions. From exciting and fulfilling to overwhelming. If you’re a business owner who needs some financial guidance on your wealth management, we’re here to help. Contact us at 402.504.9347 to set up an introductory meeting today.