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Five strategies to use for business success

December 28, 2023

By Jim Denton, CPA/PFS, CGMA

Owning a business offers a unique opportunity to shape your family's
financial future. Let's explore five key strategies for financial success:

1. The Profitability Bucket:
Profitability is the cornerstone of wealth creation for business owners. By generating profits and distributing them to yourself, you can enhance your personal wealth. Diversifying your investments beyond your business helps mitigate concentrations of risk.

2. The Retirement Bucket:
Consider establishing qualified retirement plans like a 401(k) for yourself and your employees. Beyond the ubiquitous 401(k), there are additional plans that owners can implement to contribute more for their retirement in certain cases. While these plans offer tax advantages and promote long-term wealth accumulation, such retirement arrangements may increase costs as well as lose value in the investment markets.

3. The Leased Asset Bucket:
Whether you lease or buy assets like property or equipment, it's a tax-advantaged way to accumulate wealth. Buying them outside of the main business entity allows for fair and reasonable leasing agreements that can provide asset protection and continue generating income even in retirement.

4. The Life Insurance Bucket:
Life insurance plays a vital role in securing your business and family's financial stability. It can fund buy-sell agreements as well as ensure a smooth transition in the event of a key person's passing. Some premiums may be tax-deductible, and death benefits are often tax-free. A paid-up permanent life insurance policy is a great retirement benefit for a departing owner.

5. The Business Succession Bucket:
Profitability is key to making your business an attractive prospect for successors. Effective succession planning is essential. Business succession requires clearly defined goals and plans, ensuring a seamless transfer of ownership. The aim is to sell for substantial proceeds and reduce the concentration of your assets in a single business.

In conclusion, these five financial strategies can help provide distinct avenues to help with your family's financial story. Properly executed, they can lead to long-term wealth and financial security.

Jim Denton, CPA/PFS, CGMA is Partner Emeritus of Arledge & Associates, PC where he is responsible for providing leadership to the firm’s Wealth Management firm, Summit Capital Advisors, LLC. Mr. Denton empowers his clients, so they may live their best life. He may be reached by email at jim.denton@arledge.cpa