If you are like the majority of small business owners, you view selling your business as a large piece of your retirement plan. While your business probably holds value, you may not know what that value is, how to sell your business, or have a succession partner in place to take over in your absence.
While using your business as a retirement plan can make good sense….it is a mistake to use it as your only retirement plan. You could be missing the boat on good opportunities to limit your federal income taxes by not taking advantage of a wealth stacking system. Keep these 3 things in mind for your business.
1. Set up a tax deferred retirement plan. 401K, SEP IRA, SIMPLE IRA, SOLO K, PROFIT SHARING PLAN. These are all fantastic ways to start stashing money away for yourself, and possibly allow your employees to put money away tax deferred as well. You need to seek advice on which plan to use, because it will depend on the number of employees that you have, how much you want to save, and how much you want to contribute for your employees. One of these strategies can save you money in federal income taxes each year when used properly.
2. Look in to putting together a buy sell agreement. Once you find a succession partner, you can put together an agreement that allows them to take the business over if something happens to you and/or buy you out when you are ready to retire. The great thing about this, is that you might be able to fund a buy sell agreement with something that builds cash value for yourself when you eventually retire….and it might be creditor protected!!!!
3. Non-Qualified deferred compensation is another great way to build wealth for the future. Much like a qualified tax deferred plan, non-qualified deferred compensation can allow you to chunk away large portions of money every year and put it toward your retirement. In addition, you can typically set these up to provide benefit to your family or someone else in the event of an untimely death.
These are just three of many ways that you LEVERAGE your ability to retire….and possibly save income taxes and protect your family at the same time. Consider talking to someone about a wealth stacking system for your small business.