How to Use Your Small Business as Your Retirement Plan

Robert Powell, CFP®

By working faithfully eight hours a day you may eventually get to be the boss and work twelve hours a day. - Robert Frost

If you’re a small business owner, you may have visions of IPOs or a big sale to a giant company like Apple or Google.

However, Jason Hull, CFP®, who has both sold a company as well as been involved in the purchases of several companies through the private equity group he founded, Broadtree Partners, says that selling a company isn’t the only way to get to the promised land of having enough money set aside to be financially independent.

Hull outlined in an interview several ways in which small business owners can create personal wealth along the way.

· Salary: most business owners forget that the biggest driver of their own personal wealth is the salary that their business can pay them. Furthermore, those payments can come as distributions, which may have better tax treatment than W-2 wages.

· Getting tax deductions that are not available to employees. Cell phones, cars, home offices, and other expenses can be deducted, creating, effectively, a discount on the things that a business owner would pay for anyway.

· Retirement contributions: small business owners have access to some tools, such as solo 401(k) plans or top hat plans, that employees do not have. Read Small Business Retirement Plan Options.

· Selling the company. This can be a huge liquidity event for some small business owners.

Hull suggests that you consult with your tax advisor and/or an hourly, fee-only Certified Financial Planner before going too deep into these areas.

Do you want to know how to position yourself to sell your company and how to find a buyer? Hull and Robert Powell, CFP® get into the nitty-gritty of how to accomplish that goal in their Retirement Daily on TheStreet discussion.


Planning for & Living in Retirement