The Hidden Financial Treasures and Pitfalls for Small-Business Owners
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February 22, 2002
Daily Business Review
By Richard K. Newman
Newman & Cohen Financial Management
 Managing
the finances of business owners requires a great deal of analysis and planning.
From insurance and taxes to estate planning and retirement savings, the financial
landscape for business owners is significantly murkier than for others. Furthermore,
it is replete with hidden opportunities.
Here are some of the areas that business owners may neglect or mismanage:
- Planning for the financial implications of the loss of key individuals
- Businesses that rely heavily on the expertise and capabilities of several
key individuals can be devastated by losing them to offers from competitors,
health issues, accidental death, etc. It is critical for employers to create
built-in incentives for continued long-term employment with the company in
their compensation and benefits packages. Non-qualified, deferred-compensation
plans with various options for vesting schedules can be one way of achieving
this. Another consideration is the use of contracts with non-compete and
confidentiality clauses to help guard against costly defections. The employer's
goal is to financially deter employees from being lured to any competitors.
- Protecting assets - There are many steps that businesses and the business
owner can take to protect their assets from claims. The classification of
the business as a corporation, LLP, LLC, etc., plays a major role in this.
However, regardless of the type of organization, business owners must move
assets in a planned and systematic fashion.
- Succession planning - Think of this as estate planning for a business.
When the owner dies, who will own the business and assume responsibility
for its finances? Will the company survive after estate taxation? If the
business is in debt, owners must plan for alternative means of payment.
- Employee benefits - Along with helping business owners provide competitive
and attractive employment opportunities, benefits packages can also enable
them to reduce their tax liabilities. In addition, group life and disability
insurance plans typically provide better coverage and rates for business
owners than they can obtain on their own. For this reason alone, it often
makes sound financial sense to secure a strong life and disability insurance
plan for the business. Pensions and 401(k) plans are also financially beneficial
for both business owners and employees.
Successful business owners must closely gauge theft financial practices. By
doing so and seeking the counsel of informed financial professionals, the rewards
can be significant.
Richard K. Newman is a director and founder of Newman & Cohen
Financial Management, a financial services firm with offices in Boca Raton
and Miami that offers advanced financial strategies and consulting services
to individuals and businesses nationwide. Newman is a state-licensed life,
health and disability insurance agent and a registered representative of New
England Securities. For more information, call (800) 966-9306 or visit www.newman-cohen.com
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