Business Owner Financial Planning Guide
Financial Planning for Business Owners in Harford County, Maryland
Your business is your largest asset and your retirement plan at the same time. Our guides cover exit planning, buy-sell agreements, owner compensation, and retirement strategies for self-employed business owners in Harford County and the Baltimore metro area.
How should a business owner plan for retirement and eventual exit when most of their wealth is tied up in the business?
Business owner financial planning addresses the unique challenges of building wealth when most of it is tied up in a private business. It covers owner compensation strategy, retirement account options available to self-employed individuals, business exit and succession planning, key-person insurance, buy-sell agreements, and how to convert business equity into personal retirement income.
Start here Cornerstone
Financial Planning for Business Owners: The Complete Guide
A business owner's plan must coordinate five areas at once: retirement saving, tax strategy, an exit plan, estate planning, and risk protection, because the business is the income, the biggest asset, and the retirement plan all at once.
Frequently asked questions
What retirement accounts are available to self-employed business owners?
A Solo 401k allows self-employed individuals with no full-time employees other than a spouse to contribute up to $23,500 as an employee deferral, plus up to 25% of net self-employment income as an employer contribution, for a combined limit of $70,000 or $77,500 with catch-up contributions for those 50 and older.
What is a buy-sell agreement and does every business owner need one?
A buy-sell agreement is a legally binding contract between business co-owners that governs what happens to an owner's share if they die, become disabled, retire, or want to exit. Without one, a deceased owner's interest can pass to heirs who have no business role.
When should I start planning my business exit?
Business exit planning begins years before a sale, typically three to ten years out. The earlier you start, the more you can do to raise the sale price, build a management team, and structure the deal tax-efficiently.
How does my business entity type affect my taxes?
The tax structure of your business entity has significant implications for how you pay yourself. S corporations allow owners to split income between a salary and distributions, potentially reducing self-employment tax.
What is key-person life insurance?
Key-person life insurance pays a benefit to the business if a critical owner or employee dies. It protects the business from financial disruption and can fund a buy-sell agreement. The business owns the policy and is the beneficiary.
How should a business owner pay themselves?
Owner compensation strategy involves deciding how much to pay yourself as a salary versus taking profits as distributions. The optimal approach balances payroll taxes, retirement contribution limits, health insurance deductibility, and overall tax efficiency.
Managing Partner of Chesapeake Financial Planners in Forest Hill, Maryland, serving families and business owners across Harford County and the Baltimore metro area.
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