When you're a small business owner, you need to pay extra careful attention to both your business and
personal finances. Your financial planning strategies should simultaneously encourage the success of
your business while also working towards safeguarding your personal finances. To pursue that balance,
check out these tips.
Separate Your Business and Personal Goals
As a small business owner, you eat, sleep, and breathe your business, and in most cases, your personal
finances are strongly dependent on the success of your business. However, you need to establish
separate business and personal financial goals.
Take time to think about what you want your business to achieve and to outline your revenue and profit
goals, but also look at your personal goals. Think about how you want to live, investments you want to
make, when you want to retire, and other personal financial goals. Then, make sure your small business
strategy supports those personal goals.
Be Careful About Financing Your Business Personally
A lot of entrepreneurs finance their own businesses, and of course, using savings or personal loans and
credit cards is often essential as you try to get your business off the ground. But ultimately, you want to
avoid carrying personal liability for business debts.
Try to explore less risky funding options such as bringing on investors who put money into the business
in exchange for a share of the profits. Additionally, consider incorporating or establishing your business
as a Limited Liability Company (LLC). Then, you can take out loans in the business's name without
incurring personal liability.
Tax Plan Strategically
As a small business owner, you have to think about your personal and business tax liability. Work with
an accountant for a financial planner and be proactive about lowering your taxes. Depending on the
situation, you may want to elect to have your sole proprietorship taxed as an S-corp. You may want to
make purchases strategically so that you can claim Section 179 deductions. Those are just two basic
ideas — the right tax strategies vary dramatically depending on your situation.
Don't Forget to Diversify Investments
Small business owners often just want to pour all their extra funds into the business, and ultimately, you
should try to reinvest as many of your profits as possible. But at the same time, you cannot forget to
diversify your personal investments.
No matter how hard you work, all small businesses come with significant financial risks. To help
safeguard your family and personal finances, you should make other investments. A financial
professional can help you narrow in on the most appropriate investment strategies for your situation.
Plan for Risks
In both your personal and business life, you need to plan for risks. Personally, that often means investing
in life and disability insurance, but with your business, you have to consider other risks.
What if someone brings a lawsuit against your business? What happens if your business property
sustains damage? What if a natural disaster forces you to close your door? Think about those types of
issues and make sure you have insurance policies and risk plans in place to preserve your business.
Important Disclosures
The opinions voiced in this material are for general information only and are not intended to provide
specific advice or recommendations for any individual. To determine which investment(s) may be
appropriate for you, consult your financial professional prior to investing. All performance referenced is
historical and is no guarantee of future results. All indices are unmanaged and cannot be invested into
directly.
No investment strategy or risk management technique can guarantee return or eliminate risk in all
market environments.
The information provided is not intended to be a substitute for specific individualized tax planning or
legal advice. We suggest that you consult with a qualified tax or legal advisor.
LPL Financial Representatives offer access to Trust Services through The Private Trust Company N.A., an
affiliate of LPL Financial.
LPL Tracking #1-919989 (exp. 12/21)
Source
https://www.entrepreneur.com/article/290796
https://www.forbes.com/sites/davidrae/2018/03/19/tax-saving-small-business-owner/
https://www.investopedia.com/articles/financial-theory/09/risk-management-business.asp