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Daily Business Review

The Hidden Financial Treasures and Pitfalls for Small-Business Owners
By Richard K. Newman, Newman & Cohen Financial Management

Managing the finances of business owners requires a great deal of analysis and planning. From insurance and taxes to estate planning and retirement savings, the financial landscape for business owners is significantly murkier than for others. Furthermore, it is replete with hidden opportunities.

Here are some of the areas that business owners may neglect or mismanage:

* Planning for the financial implications of the loss of key individuals - Businesses that rely heavily on the expertise and capabilities of several key individuals can be devastated by losing them to offers from competitors, health issues, accidental death, etc. It is critical for employers to create built-in incentives for continued long-term employment with the company in their compensation and benefits packages. Non-qualified, deferred-compensation plans with various options for vesting schedules can be one way of achieving this. Another consideration is the use of contracts with non-compete and confidentiality clauses to help guard against costly defections. The employer's goal is to financially deter employees from being lured to any competitors.

* Protecting assets - There are many steps that businesses and the business owner can take to protect their assets from claims. The classification of the business as a corporation, LLP, LLC, etc., plays a major role in this. However, regardless of the type of organization, business owners must move assets in a planned and systematic fashion.

* Succession planning - Think of this as estate planning for a business. When the owner dies, who will own the business and assume responsibility for its finances? Will the company survive after estate taxation? If the business is in debt, owners must plan for alternative means of payment.

* Employee benefits - Along with helping business owners provide competitive and attractive employment opportunities, benefits packages can also enable them to reduce their tax liabilities. In addition, group life and disability insurance plans typically provide better coverage and rates for business owners than they can obtain on their own. For this reason alone, it often makes sound financial sense to secure a strong life and disability insurance plan for the business. Pensions and 401(k) plans are also financially beneficial for both business owners and employees.

Successful business owners must closely gauge theft financial practices. By doing so and seeking the counsel of informed financial professionals, the rewards can be significant.

Richard K. Newman is a director and founder of Newman & Cohen Financial Management, a financial services firm with offices in Boca Raton and Miami that offers advanced financial strategies and consulting services to individuals and businesses nationwide. Newman is a state-licensed life, health and disability insurance agent and a registered representative of New England Securities. For more information, call (800) 966-9306 or visit.

www.newman-cohen.com

Securities products and Investment Advisory Services offered through New England Securities Corp., Boston, MA. Newman & Cohen Financial Management is not affiliated with New England Securities.