Secure your business’ future: Planning made easy

Whether it was the influx of radio commercials or the emails from your accountant flooding your inbox, you’ve probably realized by now that tax season just past. For business owners, while the last thing you’re probably thinking about right now is the next filing season, this is actually the ideal time to plan ahead. After all, you’ve got all of your key numbers right in front of you.

When you first begin to dig in, it can seem overwhelming, but if you direct your focus to three main areas it will set not only you, but your business, up for success in the year to come.

Choose Your Fighter(s)

The first step to take is always creating a strong financial plan. Not sure where to begin? One way is to connect with an expert, such as a wealth management team, to help map out, and subsequently monitor, your progress over time.

When actively running a business, planning for the future can often seem less urgent than dealing with more present issues but, in the long run, this planning is the best thing you can do for yourself, the business and your family. Your team will first start by creating a comprehensive plan that measures your assets and liabilities and then forecasts the outcomes for both your personal and business growth over time. This will give you a bird’s eye view of what your business can expect to do in the upcoming year and how any potential deviations might impact your projected earnings and performance.

Set Up Your Game Plan

Once your financial plan is created, the next step is to make sure that both you and your team members are set up for a strong financial future. As a business owner, based on the 2022 401(K) contribution limits, you have the ability to put $20,500 to $61,000, with profit sharing, into your personal retirement plan. In an effort to benefit both you and your employees, there are a host of 401(K) plan features to choose from.

Some of these options are:

· Safe Harbor: This popular 401(K) plan can help business owners maximize their annual contributions by automatically vetting them to ensure that highly-paid employees are not unfairly benefited in a top-heavy way. In order to qualify, the business must contribute one of the following:

– Matching Contribution: Either a 100% match on the first 3% of deferred compensation plus a 50% match on deferrals between 3 to 5% or making a more generous match often equating to 100% match on the first 4% of deferred compensation.

– Nonelective Contribution: 3% or more guaranteed match of compensation, whether or not the employee contributes.

· Roth: This type of plan allows your employees to make salary deferrals, after taxes, and at their own discretion.

· Automatic Enrollment: You can automatically enroll your employees that do not opt to make a salary deferral on their own. This encourages participation, which helps your business qualify as a Safe Harbor plan.

· Profit Sharing: This option allows the business to give a contribution to any plan participant, regardless of if they make a pre-tax or Roth deferral.

· Discretionary Match: The business can match a percentage of deferrals, whether they are pre-tax or Roth, for its employees.

Secure Your Future

While it’s not the most pleasant topic, a large part of planning for the future is deciding what happens when you’re no longer here. With all of your documents now in front of you, it’s the ideal time to review your Will and make any necessary updates. Under the present federal tax law, you can gift items or businesses to your beneficiaries, either while you are here or through your Estate. Keep in mind these rules are subject to change, so it’s wise to consult with a professional first. It is also important to make sure you regularly review and update your Trust and Estate plan, especially if a large transaction might be in your future.

While this time of year can be stressful, both personally and professionally, it is the best time to think about the future. By connecting with wealth management professionals and having the tough talks, the heavy lift of gathering all of your information, putting together a comprehensive financial plan and actively reviewing said plan as the next year progresses is taken off of your shoulders, allowing you to put more energy into your business on a daily basis. This way, you can plan your work and work your plan.

Francis Post is senior vice president and managing director at Tompkins Financial Advisors.