Case Study: Entrepreneur

The many financial decisions that must be made can be daunting when launching a business. Navigation and guidance for these decisions is integral to making it a success.

How We Helped

After reviewing all her financials, we created a plan that addressed each of Ms. Shah’s concerns and provided valuable insights that would further ensure her success:

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Proper Business Structure

Ms. Shah was starting her business mid-year and previously had a corporate position. She had already maxed out her Social Security taxes through her job so we suggested a single-member LLC for the remainder of the year and then switching to a S-Corporation the following year. This approach helped her save thousands in self- employment, Medicare and Social Security taxes her first year; it also kept her tax filings simple. We also helped her find a suitable CPA for the filings and coordinated our strategy with the CPA so everyone was on the same page.

Retirement Plan Set Up

Ms. Shah was one of the few fortunate new business owners who would make a profit her first year. We helped her establish a Solo-401(k) in which she could put away almost $40,000 pre-tax; then we consolidated her IRA accounts into the Solo-401(k). Doing so created an avenue to contribute to a Roth IRA via a ROTH conversion, which could be done tax free. She was a high earner and, in the past, had never been able to contribute to a Roth; however, with this planning, she was finally able to deposit money in a permanent tax-free bucket.

Investment Management

Ms. Shah had accounts at five different custodians and didn’t have a true plan in place for retirement. We helped consolidate her accounts, which also simplified matters by condensing everything into one statement and login. We then used a sophisticated and dynamic asset allocation/diversification strategy to create a portfolio suited for her risk and financial goals. This included placing tax-inefficient investments in her IRA and tax-efficient investments in her non-IRA.

Retirement Planning

One of Ms. Shah’s biggest concerns was whether or not she could even start a business. How much leeway did she have if she started a business and lost her initial investment? To address this, we created a detailed retirement plan showing the outcomes if she invested X, Y or Z. This enabled her to see how much risk she could take with her business without having to put her retirement in jeopardy. The process gave her peace of mind and helped her determine her initial business plan.

Cash Flow Planning

With most new businesses, cash flow is an initial concern. In the IT services world, the challenge is that you hire people for consulting projects and you must pay them immediately, but your client may not pay the invoice for 60 days. Where does this cash flow come from? We helped Ms. Shah establish home equity lines of credit, margin (loan) access from her investment accounts, and laid out a withdrawal strategy from her investment account. This enabled her to see what the first year of business would look like from a cash-flow perspective.

Business Insurance

We don’t sell insurance, but we do offer unbiased advice so we provided Ms. Shah top-quality references for her business insurance needs. We also provided recommendations on the types of insurance she would need, ranging from workers compensation and general liability all the way to business disruption.

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We’re passionate about helping entrepreneurs grow their businesses and reach their financial goals. If you’d like assistance in this area, we’d love to help you.

* fictional name, but actual client

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