Options – Chartered financial planner Anthony Long explains why it ’ s vital to take expert advice to protect both your business and your family .
FINANCE
PLAN AHEAD
How financial planning can help business owners future-proof their finances
Being a business owner can mean working long hours and wearing multiple hats to ensure the business runs smoothly – from marketing to human resources .
This often results in the owner ’ s personal finances being pushed to the bottom of the pile . Working with a financial planner to build a long-term plan will not only manage your risk but will work alongside your business , complementing one another .
At Active Chartered Financial Planners , we have a number of clients who are business owners , from a variety of industries . Below are some of the key areas we look at when building a longterm financial plan for those running their own organisation .
Risk Many businesses rely on the owner as the sole or key person to generate profit for the company – but this can also be the case at home , with them also being the main breadwinner . Here , we look at how well both the company and the individual are protected in both the short term and the longer term . What if they were unable to work for several weeks ? How would that affect the cash flow ? Or if they were ill , leaving them unable to work for months or even years , how would that affect the business and the family ? Some tools to help with this include : > Insurance to provide the business with income over a short period or a lump sum for something more serious .
> An accessible investment the business could call on to help cash flow when required .
Tax Planning A good accountant will help a business proactively manage its cash flow and tax liability before HMRC comes calling . Limited companies can utilise tools to help reduce corporation tax liabilities while also providing the business owner with the ability to spread their wealth outside of the company .
Other options for business owners include : > Pension contributions – a deductible business expense that can help reduce the company ’ s tax liabilities .
> A business property held in a SIPP ( self-invested personal pension ) could be used to free up cash flow while the owner benefits from rental income .
> Providing benefits for the family of the owner through the business can improve the tax efficiency of the premiums .
Retirement / Exit Planning When planning for retirement , the most difficult question is often , “ How much will I need ?” Having a good financial plan in place will ensure you know if the business has sufficient value to provide the retirement you want , or if you also need to explore other , additional options .
This may also help reduce the risk of having all your eggs ( or assets ) in one basket ( ie ring-fencing money outside of the business ) and at the same time , it may help with the tax planning of the business .
A business sale may sound like the perfect default retirement strategy for you – but is it always the right one ? Some businesses may pass to the next generation but for some , all of the value may be in the current owner – without them , does it have the same value ?
The more this option is considered , the less reliance there may be on the business to provide everything needed for the owner to step away to start something new or begin their retirement .
The information provided here is a starting point . Working with a financial planner to build a long-term financial plan can give peace of mind – for you and for your business .
# TheClearAdvantage activefinancialplanners . co . uk The Financial Conduct Authority does not regulate taxation advice .
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