By Brent Vandermeer, November 19, 2018

Small business owners have a lot on their plate, from growing their business to managing their employees, and sometimes their finances can take a backseat. But that shouldn’t be the case. Like it or not, finance is the backbone of every organization, no matter how big or small, and as a small business owner, it’s imperative you know what to be aware of. Here are five areas of your finances you need to ensure you’re on top of:

1. Investments

While small business owners typically don’t have pension plans, they have invested significant personal capital in their venture – precisely why they need a good financial advisor who can develop a customized personal pension plan savings strategy. With proper planning, business owners can often take advantage of different corporate structures to increase tax efficiency and accelerate asset accumulation.

An investment advisor who is acting as a fiduciary becomes a trusted partner for the small business owner to ensure they can attain their personal goals outside the business.

2. Legal

Many small business owners have partners and unfortunately these relationships can break down over time. Proper upfront planning and advice can save a lot of heartache down the road. Each partnership needs to have a shareholders’ agreement that covers what has to happen when a partner decides to depart or suffers a long-term illness, or when conflicts can’t be resolved. It also needs to account for a partner’ death, because without an agreement that plans for this scenario, the estate will become the surprise partner to the remaining shareholder(s) – likely not an intended consequence.

Proper planning and guided discussions can ensure that a whole range of potential problems are avoided, bringing peace of mind and allowing the business owner to stay focused on what matters – growing the business.

3. Succession planning

Many small business owners put succession planning off until the eleventh hour, not realizing it can be a very complex and time-consuming process. Particularly important is determining whether there’s a succession candidate emerging from within the business or if the company will be sold to an outside party.

An advisor can help with tax and legal structures, and provide guidance on how the succession buyout can be structured financially. Importantly, with the sale of the business the departing owner now has liquidity and investments to consider as part of their long-term financial plan.

4. Insurance

Small business owners are often so busy they overlook planning for their own disability or death. What would happen if the owner or key employees could no longer function as they do in the business? Covering these risks is very important and yet can often be overlooked or passed over due to cost.

A skilled and strategic advisor can build a risk management plan that balances proper coverage and cash flow needs. It’s a balancing act between covering the risk and diverting money away from growing the business.

5. Tax planning

Tax law seems to be changing frequently and the typical small business owner has no way of keeping up to date on these changes. When there’s a change to the tax rules for income or investment growth generated within an operating or holding company, the long-term plans that optimize withdrawals for the business owner need to be updated as well.

A good advisory firm can provide expertise from accounting professionals to help the small business owner optimize their after-tax income.

This article is a general discussion of certain issues intended as general information only and should not be relied upon as tax or legal advice. Please obtain independent professional advice, in the context of your particular circumstances. iA Private Wealth is a trademark and business name under which iA Private Wealth Inc. operates. iA Private Wealth Inc. is a member of the Canadian Investor Protection Fund and the Investment Industry Regulatory Organization of Canada.