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Planning for Tomorrow

When business owners want to sell their companies to non-family purchasers, they have a number of ways to achieve this goal. First, get a current business valuation. Make sure your company’s books are in order, as well as contracts that involve future business and income.

INSIDE OR OUT?

If you have partners who want to remain in the business after you leave, work with an attorney to draft a buy-sell arrangement. Another way you might keep the business in familiar hands is to explore the use of an Employee Stock Option Plan. Your tax and legal professionals can provide the details for each approach.

Then, if you want to still sell your business on the open market, work with your tax and legal professionals to establish the optimal price and purchase agreement.

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Still Time to Reduce Your 2024 Tax Bill

One simple move can lower your tax bill and increase your retirement savings. Contributing to an eligible retirement account by the April 15, 2025 income-tax deadline will reduce your 2024 taxable income by the amount you contribute.

INDIVIDUAL RETIREMENT ACCOUNT (IRA)

An IRA offers you the flexibility to choose various investments to hold in your account. For 2024 and 2025, you can contribute up to $7,000 to an IRA—$8,000 if you’re age 50 or older. You must have “earned income,” including money from wages, salaries, tips, bonuses, commissions, or self-employment, to contribute to an IRA. Your spouse can contribute to an IRA as well.

SIMPLE IRA

A Savings Incentive Match Plan for Employees, or SIMPLE IRA, is a retirement savings plan designed for small businesses with 100 or fewer employees.

Employers must match employee contributions dollar for dollar—up to 3% of an employee’s compensation—or make a fixed 2% contribution for all eligible employees, even if an employee chooses not to contribute.

As with a traditional IRA, you can contribute to a SIMPLE IRA until April 15, following the end of the tax year, and benefit from the tax deduction.

SOLO 401(K)

Solo 401(k) plans are designed to cover a business owner with no employees and his or her spouse. You can make elective deferrals of up to 100% of your earned income, or the annual contribution limit, plus employer nonelective contributions of up to 25% of compensation.

Contributions can be made until the company’s tax return deadline, including extensions.

Financial and tax professionals can help you determine which plan is right for you.

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February 2025 Client Line Newsletter

Still Time to Reduce Your 2024 Tax Bill – one simple move can lower your tax bill and increase your retirement savings.

Planning for Tomorrow – when business owners want to sell their companies to nonfamily purchasers, they have a number of ways to achieve this goal.

All In The Family – three ways business owners can turn younger family members into eventual company owners.

February 2025 Client Profile

Family-Owned Businesses – statistics of the family-owned businesses.

When Fixed Annuities Make Sense – when do fixed annuities make sense.

February 2025 Question and Answer

Slicing the Inheritance Pie

Boost Retirement Savings – finding the money to help pursue your financial goals can be challenging but not impossible.

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6 Ways to Find More Money to Budget

Do you ever wish you could find extra money for your child’s college expenses or retirement? Maybe you would like to take a bucket list vacation or buy a larger home. Whatever your financial goals, finding the money to help pursue them can be challenging but not impossible. Here are some ways to find more money:

  1. Eliminate one designer cup of coffee per week. At $4 per cup, you’ll save over $200 for the year.
  2. Skip one monthly $70 restaurant outing and save more than $800 annually.
  3. Clean out your basement or garage and sell unwanted items online, through an app, or yard sale.
  4. Keep your car or SUV an extra year or two. When your car loan payments end, you could save thousands if you keep your vehicle and avoid another car payment.
  5. Review your television and smartphone apps to eliminate paid services and features you don’t use. You might stream rather than watch TV through more traditional outlets, which can save you a bunch.
  6. Find ways to exercise at home and cancel your gym membership. Save hundreds.

Find money in these and countless other ways and establish an emergency fund to ensure surprise expenses don’t get in the way of your plans.

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Stick to the Basics

History shows that every investor needs to cling to these well-known fundamentals to build toward their financially-secure future.

Remain Calm.

Resist the urge to overcorrect when the market drops. Selling in a panic means you could miss out on any potential recovery.

Stay Invested.

Even the experts cannot predict when markets may turn. Trying to “time the market” usually leads to poor decisions.

Stick to Your Strategy.

Stay the course by maintaining a balanced mix of assets aligned with your needs, goals, time horizon, and risk tolerance.

Diversify.

You can create a somewhat shock-resistant portfolio by owning a diverse variety of assets.

Rebalance.

Market fluctuations can throw your investment mix out of line with your objectives. This means you may have to buy or sell assets to maintain your desired level of risk.

Be Patient.

Recoveries to new highs historically follow significant stock market declines. Sometimes, it takes weeks, and sometimes, years.

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January 2025 Question and Answer

QUESTION:

I worked as a ride-hailing driver for the first time in 2024. What will I have to pay tax on?

ANSWER:

Ride-hailing drivers are considered to be independent contractors. You can deduct expenses paid for your car, including gas, maintenance, and insurance. You may also include depreciation or lease payments. Keep accurate records.

Alternatively, you can take the standard deduction and deduct 67 cents per mile in 2024, but be sure you track mileage explicitly driven for business.

While employees split Social Security and Medicare taxes with their employer, independent contractors are responsible for the entire amount — 15.3%. Self-employment income only applies to your net earnings or profit.

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A Win-Win Planning Solution

Looking for a tax-efficient way to support your favorite charities while providing for your heirs? A charitable lead trust (CLT) may be a solution. With a CLT, you can make a meaningful impact on causes you support while potentially reducing your tax burden.

WHAT IS A CHARITABLE LEAD TRUST?

It’s a legal arrangement that allows you to transfer assets to a trust, which makes annual payments to the charity of your choice for a specified period. Once that period ends, the remaining trust assets can be passed on to your heirs or beneficiaries.

A charitable lead trust is an irrevocable trust that aims to reduce a beneficiary’s potential tax liability.

A UNIQUE OPPORTUNITY

A key advantage of a CLT is its ability to generate tax savings for you. Trust funding can offset some of your income, estate, and gift taxes. Additionally, any appreciation of the trust assets during the charitable period won’t be subject to estate or gift taxes when passed on to your heirs. This can effectively transfer wealth to future generations while supporting causes that matter to you now.

Creating a charitable lead trust is a complex financial decision that requires careful consideration and the advice of tax, legal and financial professionals.

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Money Hacks

Life is busy, so we often can’t find the time to manage financial tasks, whether big or small. Consider these ways to save time.

MODERNIZE

Most financial institutions offer apps that let you see statements and make deposits. If you direct deposit your paycheck, ask your bank to automatically transfer a set amount to savings each pay period.

Use budgeting apps to help track your expenses.

BUNDLE SERVICES

Most insurance companies offer discounts when you buy multiple policies, such as home and auto insurance.

Also, eliminate less-used subscriptions and when possible, bundle other services to find savings.

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January 2025 Client Profile

Mike is looking for creative solutions to recruit and retain employees, which has become an issue for him. What are some helpful ideas?

The first step is to identify the real cause of your staffing shortage. Are you paying competitive salaries and recognizing employees for accomplishments? Is there room for advancement?

Once you have identified any blind spots, address them. Additionally, you could add some benefits that they’d appreciate.

Some popular perks to consider include: additional paid vacation days, educational opportunities, alternative schedules that allow employees to work early or late shifts, or even four 10-hour days, which promotes work-life balance.

Another option may be remote work. Some employees may be more productive at home, saving you office space costs. Others may appreciate a hybrid approach, working remotely certain days of the week.

Client Profile is based on a hypothetical situation. The solutions discussed may or may not be appropriate for you.

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Disability Insurance for Business

Do you know there is a type of insurance that may can help keep your business afloat in hard times? Business Overhead Expense (BOE) insurance is particularly suited for a smaller company or practice that depends on a few people for most of its ability to operate successfully.

WHAT IT DOES

When a person crucial to the business’s success can’t work because of a disability defined by the insurance contract, BOE insurance can cover certain everyday expenses. These expenses can range from employee salaries and employment taxes to mortgage or rent payments, utility bills, and insurance premiums. The policy will typically have a monthly cap for what it will pay.

BOE insurance may have an elimination period of 30 to 90 days or longer before it begins paying benefits.

Policies typically have a maximum term during which benefits are paid, with the most popular being a year or two, although some are longer. This differs from disability income insurance, from which payments can last until age 65 or beyond, depending on the policy terms. Premiums for BOE are generally tax-deductible, but benefits are taxable. Remember, though, that the benefits typically pay for expenses your business may still deduct.

THE DIFFERENCE

While BOE insurance benefits protect your business financially by paying many fixed expenses, it may not pay for the owner’s salary. That’s where disability income insurance comes in.

Disability can happen to anyone. According to the Social Security Administration, more than one in four 20-year-olds will become disabled before reaching retirement age. Talk to your insurance professional to learn more.