Most entrepreneurs we meet can easily recite figures about business revenue and margins. But with all the focus on growth, it's easy for wider financial planning to be missed.
In our experience, three areas tend to be overlooked, and the consequences can be dramatic.
Asset rich, option poor – the problems with wealth concentration
It’s natural for business founders to concentrate the bulk of their net worth in one company – but does this indicate conviction or undue risk? The drawback is that assets can become illiquid and tax-inefficiencies appear outside the business, and can give rise to complex wealth succession issues for your family.
There are ways to de-risk your position without the need to dispose of the business assets in full, improving your personal position while retaining control.
One such example is pensions, which can be an extremely tax-efficient tool and are too often underutilised as they allow Corporation Tax-deductible contributions, with a £60,000 standard annual allowance per employee and carry forward possibilities.
Family matters – wealth transfer and Inheritance Tax
Over the next 30 years in the UK, it’s expected that up to £7 trillion will be transferred from ‘baby boomers’ to the next generation1!
Succession planning can be a highly complex and emotionally sensitive area of financial planning, with each situation being unique. You’re likely to have questions such as; Will your children want to run the business? How do you treat active and non-active heirs fairly? When does it make sense to gift shares? How might changes to Business Relief affect your family's position?
Significant changes have been announced by the Government that could impact on your plans, and finding the right financial advice can make a huge impact on your business and your family. We can help with planning opportunities that will help you, your business and your family plan for your future objectives in the most appropriate way, whether that be gifting, using the available tax allowances, trusts of other investment structures, to ensure maximum flexibility, efficiency and control.
Contingency planning – the importance of protecting your family’s assets
You wouldn’t consider leaving your company premises uninsured, but what about your key staff members? If you were unable to work for a prolonged period, what happens to the equity you’ve built, and could this jeopardise a future business sale?
Business protection is one of the most common blind spots we encounter, and a lack of appropriate cover could have severe and lasting financial consequences. The good news is that there are many options available to ensure that your business protection requirements are provided for.
Conclusion
Entrepreneurs are exceptional at identifying opportunity, but spotting personal financial risk is a different skill. Protecting your accumulated wealth – whether held within the business or personally - safeguards what you've built for both you and your wider family, and gives you the confidence that you can keep growing your business and maximising the available opportunities.