Wealth Management News & Resources
Time To Work With Your Financial Professionals To Optimize Your Situation
I know, you never knew there was a “Planning Season.” You know about “Tax Season,” but never knew there was a season for planning.
As we further integrate accounting, tax and wealth management services, we want to encourage people to take the time to meet with their team of professional advisors now to see if there are strategies and tactics to improve your situation.
Planning season is exciting for all of us at Eckhoff affiliated companies – Eckhoff and Company (EAC) is diligently working on clients’ tax planning while we at Eckhoff Wealth Management (EWM) are working on financial planning, estate planning, and investments. For clients who are working with both firms, we work in tandem to create one cohesive plan.
It’s exciting because it’s the time of year when we see clients taking action to make their impact on the people and causes they care about deeply. As a reminder, our mission is to do just that. We make our impact by helping people in the community make theirs.
The fourth quarter of the year is an ideal time to review your affairs because if our team finds opportunities for improvement that could positively or negatively impact your current year situation we still have time to take advantage of the opportunities and hopefully correct the problems.
It is very difficult to engage with your tax professional prior to October 15, while they are still buried with preparing taxes for clients on extension. And trying to connect with them for complex planning after February 1 will be…well, let’s just say difficult to say the least.
Outside of some relatively small IRA strategies, once December 31st comes and goes, planning opportunities for the current year are pretty much done. Of course, this doesn’t mean you will be blocked from implementing strategies you qualify for on January 1, but it does mean that most of the opportunities for the previous year have gone away.
Sole Proprietors and Small Business Owners Especially
Far too often we find sole proprietors and small business owners are simply not aware of their planning options. They are busy running their businesses, taking care of the customers and living a fulfilling personal life. Many of these strategies are out of their prevue and, in many cases, out of their comfort zone.
Obviously, there is not enough space to name and go into all the details of all the available options for these folks in a blog. Depending on your situation and the opinion of your tax professional, please know that many of these options are implemented in one or a combination of tactics to potentially help clients:
• Reduce business tax exposure,
• Reduce personal tax exposure,
• Help the owners save for their own retirement at an accelerated rate,
• Provide additional benefits for employees,
• Reward key employees,
• Reduce exposure to liability and creditors,
• Plan for business transition,
• More, depending on your situation.
EAC is now contacting several clients who are sole proprietors, 1099 employees, and independent contractors filing a Schedule C on their taxes. The reason for the outreach is to help them understand their opportunities, should there be prospects to improve their situation.
Many of these people make six and seven figures in net Schedule C income. Depending on their overall situation and specific goals, we may be able to help them with many of the items on the bulleted list above.
Consider an example of a sole proprietor making seven figures (this applies to much lower levels of income as well). The only thing he was doing to reduce his tax exposure was contributing to a SEP-IRA. That is a good plan, but it also has very limiting rules for the contributions to the plan, which will, of course, reduce the tax deduction he can receive for those contributions.
When we do our analysis and design plans for people like this, EAC and EWM work in coordination so we can illustrate the new plan scenarios with numerous reports to show the impact of the changes on their company and their personal finances. Very often we can show them how they are allowed to contribute a much higher percentage than they are contributing to their current plan. That type of change has the potential to make a dramatic difference.
There is an art and science to entity structuring. While we are not attorneys here, we do work with our clients’ attorneys to design and illustrate the changes and their impact. Many small business owners do not realize they have the chance to structure their company just like a large organization if that makes sense for their company.
I write about this in great detail in my book, The 7 Biggest Financial Mistakes Made by Successful Entrepreneurs, but I’d like to just mention here that as your business evolves, grows and builds larger teams, your exposure to liability may also grow.
Entity structuring may help you to reduce this exposure.
Also, certain entity types may give you the opportunity to deploy other employee/employer benefit plans to help with your goals and the goals for your team.
Finally, certain entity types may enable you to offset other family income being received from your spouse’s W-2 income.
Entity structuring should only be as complicated as need be for your firm, your industry, and your goals…no more.
Mid-Size Business Owners, Too
Owners of mid-sized private companies will also want to meet with their team of trusted advisors.
Business owners of companies this size may already have many of the strategies in place mentioned above. However, we see every day that many don’t.
Having said that, we still want these owners meeting with their advisors to be sure their plans are up to date. Frequently the rules of these plans change. In 2018 we had significant tax law changes as well.
It only makes sense to meet with your professionals and see if things are where they should be based on:
• Current law,
• Current status of the company,
• Current goals of the owners collectively, and
• Current personal goals/situation of each of the owners individually.
As baby boomers become senior citizens they are looking more and more into options for transitioning their business. Often this means to the next generation of family members or current employees. In other cases, it is to an outside party.
Whatever your plans for transitioning your business you will want to start the preparation process as soon as possible. Getting the firm ready for a transition may be a multi-year process, but in some cases we see owners wanting or needing to sell in the near term.
Either way, you will want to meet to be sure there isn’t anything that should be done prior to yearend to help facilitate whatever your particular transition plan may be.
Fall Is Not Just For Baseball Playoffs and Football
As the leaves turn colors and start to fall in the northern hemisphere, it’s not just time to cheer on your favorite team, but it is time to think about your finances.
Meet with your team of trusted advisors to update your plan and get their input on whether or not there are opportunities to improve your state of affairs.
• Things may have changed with you and your family.
• Tax laws may have changed that you can take advantage of implementing.
• Things may have changed with your company.
• The market, business or economic climate may have changed since you first created your business structure or strategies.
Whatever your situation I strongly suggest you check in with your financial planner and your tax professional at the very least. Even if the meeting lasts only 20 minutes, you will most likely feel better that you’re up to date.
Advisory services offered by Eckhoff Wealth Management, LLC a Registered Investment Advisor in the State of California. CPA products and services offered by Eckhoff and Company, an affiliated company. Eckhoff Wealth Management, LLC and Eckhoff and Company do not provide legal advice. Consult legal or other professionals for information regarding your individual situation.
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