Planning:

Coordinating personal and business financial planning to set clear short- and long-term goals, for both the individual and the business, manage cash flow, identify and mitigate financial risk, invest appropriately, save for retirement, and facilitate growth. Who can benefit from this?

• Business owners

• With one or more partners

• Where their income is dependent on the business

• And when the business is their biggest asset contributing to their net worth.

Here are three example scenarios where personal and business planning make sense:

Scenario 1

• Single Owner

• Age 40

• Business Value is $2,000,000

• Motivation: Owner’s personal finances provide liquidity to the business and they can’t focus on the future growth of their personal finances.

• Solution: Start keeping track of business cash flow to help make more informed decisions. Create a budget to get a clear picture of where your money is going, identify where you can cut back, and ensure the effective use of funds. Create a plan for future liquidity that doesn’t solely rely on personal funding. Create a personal financial plan and investment strategy to allow for growth over time.

For illustrative purposes only.

Scenario 2

• Single Owner

• Age 50

• Business Value is $7,000,000

• Motivation: Owner hasn’t saved anything for retirement and has poured everything back into the business to grow the business more.

• Solution: Create a reinvestment plan that lines out how much to reinvest and how much to put aside for your retirement, effectively reaching both personal and business goals. Review retirement plan options, such as a Defined Benefit Plan, so you can get on track with your retirement savings. This could also translate to a tax deduction for the business.

For illustrative purposes only.

Scenario 3

• Single owner

• Ages 61

• Business Value is $10,000,000

• Motivation: Owner is retiring at 65 and wants to increase the value of the business to be able to maintain his current cash flow while in retirement.

• Solution: Increase the profitability of the company, with the assistance of an accountant, by analyzing financials to reduce costs and increase margins, and review tax planning strategies to create a better valuation to ultimately sell the business.

For illustrative purposes only.

A defined benefit plan is a sophisticated strategy that could potentially help lower your taxes and accelerate your wealth accumulation. Whether you can take advantage of a defined benefit plan depends on many factors. In general, though, these plans work best for:

• Business owners

• With high income

• Where the income is stable year-to-year

• And when there are no employees or only a few employees.

A defined benefit plan could allow you to defer income tax on $100k, $200k, or more annually. If you’re able to contribute these sums to a retirement plan on an annual basis, the potential tax savings could be significant.

Here are three example scenarios where a defined benefit plan could make sense:

Scenario 1

• Age 45

• 1 owner

• Earning $1,000,000 annually

• 6 non-owner employees

• Taxes are prepared as married filing jointly

• $250,000 is contributed annually into a defined benefit plan

$92,500 in annual tax savings could be realized.

For illustrative purposes only.

Scenario 2

• Age 55

• 2 partners

• Earning $750,000 annually

• 4 non-owner employees

• Taxes are prepared as married filing jointly

• $150,000 is contributed annually into a defined benefit plan

$54,543 in annual tax savings could be realized.

For illustrative purposes only.

Scenario 3

• Age 60

• 1 owner

• Earning $500,000 annually

• 2 non-owner employees

• Single tax filer

• $100,000 is contributed annually into a defined benefit plan

$35,000 in annual tax savings could be realized.

For illustrative purposes only.

A buy-sell agreement is an agreement between the business entity and the owners of the business which ensures the business will continue in the event of one of the owner’s death, disability, or retirement. Life insurance is often used to fund a buy-sell agreement. This type of an agreement is best used by:

• Business owners

• With one or more partners

• Where the loss of an owner will disrupt the flow of the business

• And when the business owners want to protect the business from death, disability, or retirement of an owner.

A buy-sell agreement creates a plan to ensure the business will continue if one of the owners was not there, has enough funds to pay employees and creditors, and will transfer to suitable owners as intended by partners. A buy-sell agreement will also ensure that each owner receives a fair price for their ownership share upon death, disability, or an exit from the business, can afford to retire, and can protect the value of their business investment.

Here are three example scenarios where a buy-sell agreement could make sense:

Scenario 1

• 3 equal owners

• Age 35-45

• Business Value is $3,000,000

• Motivation: What would happen to the business if one owner suddenly passed away

• Solution: The company establishes a buy-sell agreement which stipulates the business will purchase a $1 million level term policy on each owner, and for the next 20 years will pay a level annual premium for the coverage.

For illustrative purposes only.

Scenario 2

• 2 equal owners

• Age 55-66

• Business Value is $10,000,000

• Motivation: Owners are getting older

• Solution: The company establishes a cross-purchase buy-sell agreement which states the partners will purchase a life insurance policy on each owner and list themselves as the beneficiary. If one of the partners dies, the funds from the life insurance policy will be used to purchase the interest of the deceased partner from their estate.

For illustrative purposes only.

Scenario 3

• 5 equal owners

• Age 35-65

• Business Value is $35,000,000

• Motivation: To ensure the shares of the business stay within the family

• Solution: The company establishes an entity purchase buy-sell agreement which states the business will purchase the interest of a business owner based on a triggering event. The business entity is the owner and beneficiary of the insurance policies on the lives of each business owner. Upon the death of an owner, the business receives the death benefit and purchases the interest of the deceased owner from their estate.

For illustrative purposes only.