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As a business owner, you have a lot of responsibilities – budgeting, marketing, selling, and countless other tasks. It is easy to put your own financial plans on the back burner for the sake of growing the business. But it is important for you to have a personal financial plan and to ensure it takes into account the unique considerations and opportunities of owning a business. Below are seven basic tips to start creating your personal financial plan:

1. Save for your own retirement.

The right retirement plan allows you to maximize your retirement savings, while also benefiting your transportation company and employees.

  • Example: You could implement a safe harbor 401(k) plan for your transportation company. This type of plan requires the company to contribute to employees’ savings accounts.  These contributions by the company are completely tax deductible. In addition, a safe harbor 401(k) plan automatically passes annual compliance testing, which will allow you as an owner to maximize your contributions to the plan.

A retirement plan only helps your retirement savings IF you choose to contribute to it. We recommend you maximize your contributions, or at least contribute enough to maximize your company’s matching funds. If you have a 401(k) plan, you can contribute up to $19,000 to it in 2019 (plus another $6,000 if you are over 50). 

2. Create key estate planning documents.

The first step to estate planning is to start with the documents:

  • Will
  • Power of attorney
  • Healthcare directive

Ensure these documents address what happens to your transportation business in the case of your death or disability. Well-executed estate planning documents ensure someone you trust inherits the business or manages business transactions on your behalf.

3. Purchase life and disability insurance.

As a business owner, you should have life and disability insurance policies naming the business as a beneficiary. This will guarantee an income stream to help keep the business operating in your absence.

4. Have a buy-sell agreement.

If your transportation business has multiple owners, you should have a buy-sell agreement in place. Buy-sell agreements specify who can buy an owner’s shares of the business, under what conditions, and at what price. Having this agreement in place now may reduce conflict and potential costs when a business owner exits the business.

5. Create a succession plan.

After completing basic estate planning documents, we recommend creating a succession plan. This lays out, in detail, how the business will prepare for a transition in ownership. If your succession plan includes transferring the business to a family member or key employee, it could be beneficial to start that transfer now.

In 2019, you are allowed to gift up to $15,000 to an individual without incurring a gift tax liability.  If you and your spouse own the business, each of you can gift $15,000. Likewise, if you are transferring the business to an individual and his or her spouse, you can gift each of them $15,000.  Transferring your transportation business this way allows you to transfer a significant portion of your business without any gift or estate tax liabilities.

6. Discuss your plans.

Once you have an estate or succession plan in place, make sure you discuss them with all parties affected. These may be hard conversations, but they are imperative to ensure everyone knows what is at stake. This can help avoid conflict and disappointment later.

7. Review and update your plans regularly.

Finally, you should review your plans regularly and update them as necessary. You may have a new family member or a key employee leave your organization. These things can drastically change your retirement, estate or succession plans. In addition, tax laws are constantly changing, so something that is tax advantageous in one year may not be in a different year. It is important your plan is always up-to-date to reflect your wishes.

Need Help?

Your future can be more secure with the help of a Smith Schafer advisor. We can help you determine the appropriate immediate and long-term retirement and estate planning strategies. The sooner you start planning, the better. We can help with:

  • Review Wills, Trusts & Retirement Plans
  • Asset Restructure
  • Estimate Estate Taxes
  • Identify Tax Savings
  • Succession Planning
  • Valuations
  • Gifting
  • Wealth Management

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Retirement Plan Guide

Transportation Industry

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