How a Financial Advisor Can Help a Small Business Owner

A financial advisor may seem like a luxury for many folks (though we would challenge you on that opinion). However, a trusted financial advisor, especially one who is a Certified Financial Planner like myself, is an essential partner a small business owner should not ignore.

Today, we’ll look at why a financial advisor can be so helpful to small business owners.

First of all, it’s essential to understand that all businesses have a life cycle…

In the beginning, there are decisions to be made like, “What form of business entity should I have? A corporation or an LLC?” for example.

“How much should I pay myself in salary?” Remember the IRS may be looking. This has to be reasonable and justifiable.

As a business owner approaches retirement, different questions need to be asked, but now I’m getting ahead of myself…

Good financial advisors should have a basic grasp of the life cycle of businesses, so they can partner with the business owner during all the different phases of the business.

A Good Advisor Will Recognize Tax Opportunities

A good financial planner should also be able to identify opportunities for tax savings or tax credits.

The ability of a financial advisor to assist small business owners with their finances is essential to making their lives much easier. And good advisors should be able to take the initiative to do this without prompting from the business owner. You as a business owner can’t just assume someone else is taking care of this, but it’s really nice to know your advisor has your back and is looking out for you.

The IRS tax code is vast and complex, yet it is full of little nuggets for small businesses. It’s impossible for small business owners to keep up with the code, but good advisors can point out little nuggets like these…

  • If you hire employees from certain ethnic backgrounds or socially impacted groups you can get a sizable credit on your payroll taxes.
  • Are you in an economically depressed county as recognized by the IRS? You probably don’t know it, but it could result in big tax savings.
  • Do you have kids? If they’re old enough to work in your business, you have a great opportunity to transfer income to them and have it taxed at a lower rate. Providing of course they actually are doing the work. And now you have earned income that can be invested in a Roth IRA on their behalf.

A Good Advisor Will Help With Retirement Plans and The Next Generation

Retirement plan options are probably one of the most important areas where a financial advisor can help small business owners.

Take Jeffrey. Jeffrey had been a client of mine for several years and had diligently funded his IRAs for years. Jeff’s business was taking off, and he was wondering about setting up a 401k plan for his employees. After careful examination, we determined that a SIMPLE IRA plan for Jeff’s business probably made more sense.

A SIMPLE IRA plan allowed for similar contributions without all the legal and regulatory compliance of a 401k. In this way, Jeff was able to provide his long-term employees with a retirement vehicle partially funded by Jeff, and he could now contribute more than double what he did before at a fraction of the cost of a 401k.

Jeff’s employees are now CSH clients who have a trusted source for financial education and information – an employee benefit that costs Jeff practically nothing. Maybe even one of those employees is a candidate to buy the business someday! (Keep reading for more on how financial advisors can help with business succession.)

One of the most important aspects of financial planning is dealing with the next generation who may one day run the business and take on the financial responsibilities that come with that new position.

The best small business financial advisors will not only focus on the current financial situation but also account for the ultimate transfer of wealth in the future.

Which gets us to another service a financial planner should provide to small business owners…

A Good Advisor Will Help You With Business Succession Planning

Thousands of businesses will close this year due to a lack of qualified buyers. Proper succession planning ensures the business has a life beyond the current owner and provides income for the future.

This lack of future financial planning can be mitigated through the use of a business financial advisor who considers all aspects of the future steps of a company.

A good financial advisor for small business owners can advise and smooth the transition from the old regime to the new one. For example, there are numerous tax traps in selling a business. What’s good for the buyer isn’t necessarily good for the seller. Knowing the pluses and minuses from both sides of the transaction creates goodwill and can facilitate the transaction.

There are many possibilities that a financial planner could provide for a small business that may have been overlooked without assistance. For example, do you have a profitable business with 20 or more employees? Maybe you could sell your business to an ESOP (employee stock option plan). An ESOP encourages employee retention and has major tax advantages.

Financial advisors for entrepreneurs are extremely crucial to the long-term success of a company.

Whether your company consists of just a few employees or many more, having the peace of mind to know that your finances are accounted for allows you to focus on what truly brought you to start a business in the first place.

Financial advisors should account for the fact that the primary focus of the small business owner should be ON its products or services, while the advisor handles the ins and outs of finances. In spite of the fact that many financial advisors may provide the bare minimum in terms of services provided and financial management, having the best advisors for your small business can help your business keep its finances in good order.

At CSH, our main focus is providing the best financial advisors for every small business owner who may be looking to the future for their business.

A Good Advisor Will Collaborate With Others

Finally, a good financial advisor should be comfortable working with other advisors: attorneys, accountants, and experts such as business valuation, or ESOP specialists.

The advisor’s role could be seen as a facilitator or financial quarterback. He or she should have a working knowledge of how all these pieces link together and advise their clients accordingly. This means that a financial advisor should not only be focused on their own success and maintaining the connections they have, but also on the individual success of the small business itself.

We believe it is important to take an active role in the success of every company we work with.

Within our firm, we provide support for small businesses who need a trusted financial advisor and partner, while also maintaining a strong relationship between our advisors and the small business owners who operate the small business.

Discover More About CSH Investment Management

At CSH Investment Management LLC our firm has over 50 cumulative years of experience in taxation and small business issues that complement our role as a wealth manager or investment advisor.

Call us today and schedule a time to chat about how we could help you and your business. Your first consultation is always free!

One of us will be happy to talk with you!