Expert Weath Management: How It Helps Business Owners and Why

Business owners learn how professional financial planning wealth advisors can be so valuable to business owner interests and why consulting with a wealth financial planning expert can safeguard business interests with finances and security.

The following Q&A provides helpful insights to common questions about wealth management and financial planning solutions for business owners.

Q. How is wealth management and financial advice for business owners different from advice for people who don’t own businesses?

A. Business owners need to think about the financial security not just of themselves and their family, but also of their business. That means they need to talk with a financial planning consultant who has experience dealing with businesses to ensure that their business’s tax planning and investments, the special insurance needs of business owners, eventual business transition and other concerns are properly addressed. Business owners have enough on their plate from day to day – it can be hard to think about financial planning too. Talk to the experts at Dedicated Financial Solutions in Mississauga to learn more about what they can do to help with wealth management for you and financial planning for your business.

Q. I am one of two partners in a medium-sized business. What kind of insurance do my business partner and I need? Right now we don’t have any business life insurance, but we’ve been told that’s not a good idea.

A. You’re right, you and your business partner definitely need life insurance in your business. Each of you needs to have sufficient insurance to buy the deceased partner’s half of the business from their heirs, if that’s what the partners agree. In addition to life insurance, you may want to consider disability insurance so that the business is covered if it loses either of you to disability and has to hire people to replace you. Meet with a qualified financial advisor and an insurance representative who have experience dealing with business owners – they will talk with you to determine your specific needs based on your unique business and personal situations. Ensuring the business is in a position to continue is critically important should the unexpected happen to you or your business partner.

Q. My business has done very well over the past couple of years and we’ve built up a considerable reserve. How should we invest our business’s wealth so that it’s available if we need it but also earns a decent return? Do you have any other investment tips for businesses?

A. There are many things you need to consider when selecting an investment portfolio within a business. When will you need the money? Is it possible the business will need it to supplement working capital in the next couple of years or is it really surplus to the company? If there is a chance the business may be sold in the future, you will want to use your capital gains deduction if you sell the shares. To qualify for the capital gains deduction you cannot have more than 10% non-active assets at the time of sale. You may want to move the passive assets to a holding company for investing.

Are you likely to do an estate freeze in the future? When do you want your beneficiaries to receive their inheritance – when you sell the company or when you die? Do other family members work in the business or own shares? One of the more common reasons to realize a gain is to lock in the capital gains exemption while the company still qualifies – before it accumulates investment assets.

Talk with a qualified investment advisor to determine how passive investments may affect your tax and estate planning. It is important to deal with an accountant and financial advisor who have experience in these transactions and who understand your goals for the money.

Q. I am probably going to sell my business in a few years. What do I need to do to prepare? How can I maximize the value and pay as little tax as possible?

A. One of the main ways to reduce the amount of tax paid on the sale of a business is to take advantage of the capital gains exemption. There are three things to consider to ensure that you qualify for this exemption. The first is that the sale of the business needs to be a share sale rather than an asset sale. You should talk to your accountant about the other two points to ensure that you meet the qualifications while running the business. The first is that at the time of the sale, at least 90% of the fair market value of all assets in the business must be actively used to carry on business in Canada. The second is to ensure that within the past 24 months over 50% of the fair market value of all assets in the business must be actively used to carry on business in Canada.

Q. My friend sold his business a few years ago. I remember him complaining about the taxes he had to pay – he felt he could have avoided them. How can I prevent this from happening to me?

A. Your friend may not have been eligible to claim his capital gains exemption because his company didn’t meet the qualification of having over 50% of the fair market value of all assets in the business actively used to carry on business in Canada for the 24 months prior to the sale. Or he may have realized too late that he could have multiplied the capital gains exemption by using a family trust and having family members use their exemptions as well. The best way to ensure you maximize the after-tax value of the sale of your business is to consult advisors who specialize in this area. Create a plan early on. With expert help you can avoid pitfalls and maximize your tax savings.

Q. A friend of mine died in an accident. Even though he had a very successful business everything seemed to fall apart without him – his family hardly got anything from it. How can I make sure this doesn’t happen to my business if something happens to me?

A. Every business will eventually be sold, either by the owner or their estate. To maximize value and minimize taxes, you must consider what would happen if you died unexpectedly. Are you counting on the sale of your company to provide a legacy for your family? Ask an accountant with experience dealing with businesses what needs to be done to ensure your company is structured to facilitate a tax-efficient sale. Monitor your progress over the years. Make sure your accountant and other specialists are keeping you up to date as tax rules change. Your advisors should be providing estate planning advice that can take advantage of any changes in tax rules. Who will continue to run the business if you are disabled or die? Is all the information in your head? You need a structured business succession plan – work with advisors who have experience creating them.

Q: I am curious about personal wealth managing solutions what can you tell me about this?

A: To get the best results with personal wealth managing, the process is equally holistic and takes into account influencing factors, including such things as taxation implications, insurance and more. Dedicated Financial Solutions are financial planning wealth advisors that take this necessary integrated approach to ensure optimal performance in client goals. For more information on managing wealth, see the following articles.

  • Article about how to select the best private wealth management firm for your needs, click here.
  • Article about how to find the best high net worth wealth advisor, click here.
  • Article about why you may need an expert with estate and tax planning, click here.

Have More Questions?
Are you a business owner and have a question about optimizing wealth, insurance, security and or financial planning for your business? The experts at Dedicated Financial Solutions can give you the professional advice and guidance you need. Contact the Dedicated Financial experts via phone, email and or in person consultation. The office is located in Mississauga (Greater Toronto Area) Ontario Canada. Contact Dedicated Financial Solutions today!

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