Owners' personal finances tied to company success

Here’s a brief checklist of some of the most important items for business owners to consider, and an explanation of how each fits into the big picture.

• Qualified Retirement Plans. To help you with the all-important task of retirement planning – both for yourself and your employees – a qualified retirement plan allows you to build a portion of your wealth independently of your business.

Such a plan can help reduce personal taxes through contributions to a retirement plan. Additionally, these plans allow for tax-deferred growth on your plan investments that may provide a significant amount for retirement.

Aside from individual benefits, there also may be a business tax deduction for the cost of establishing and maintaining the plan, and for the employer contributions to employees’ accounts. A good retirement plan will help attract, reward and retain good employees, which could prove to be a competitive advantage for the business.

• Compensation. A qualified retirement plan may not address all needs and objectives for building retirement wealth. In some cases, you may need to provide additional options for the owners or other highly compensated individuals within your business. Though they only apply in limited circumstances, nonqualified deferred compensation plans allow you to address these unique needs through several options.

Some plans let executives defer a portion of their compensation, while others let employers provide tax-deferred compensation to this select group. There also are excess deferral plans for highly compensated individuals who may be subject to contribution limits with qualified plans.

Beyond the salary and deferral issues, there are several other elements that comprise total compensation. You may want to provide life insurance as an employee benefit. Group term life insurance, individual and group disability insurance and individual and group long-term care insurance are additional benefits that could be offered to employees. You might consider 529 college savings plans, which can help employees save money to send their children to school.

• Insurance. In business, you face many risks you cannot control. In that light, it only makes sense to try to reduce the effects of those risks as much as possible. Remember, one of the most valuable assets of the business is you, the owner. Make sure you have adequate life and disability insurance for yourself in order to provide financial security for your family.

If a business owner or key employee dies unexpectedly, the business may suffer as a result. Key-person insurance can provide cash to help your business operate in difficult times. It may surprise you how affordable it is to effectively reduce a serious risk to your business.

While these are just a few of the major concerns business owners face, take time to consider the options available to address them.

A financial consultant can be a key member of your team to help put your finances in order, so you can spend time doing what’s most important – building your business.

Timothy M. Reese is senior vice president-investments with A.G. Edwards & Sons Inc. Member SIPC. He can be reached at timothy.reese@agedwards.com.