This week, I had the chance to sit down with Bill Hufnell and ask him about the challenges business owners face in managing their business and personal finances. As a business owner himself, Bill has personal experience as well as professional expertise to help clients through these challenges. Read on to hear what he has to say.
- What are the most common concerns of the business owners that you work with? They are usually good at knowing and running their businesses, but there is a concern over what happens to their family if something happens to them or to the cash flow of the business. Also, the business is usually making a lot of money, but they haven’t figured out how to manage the cash flows and take regular distributions and deal with the associated tax consequences of this.
- Are there any mistakes that you often see that could be avoided? They are often times taking significant amounts of compensation as W2 wages when, from a tax perspective, it would be better to take as distributions. Also, understanding when to take certain deductions on their corporate and personal returns. For example, one client was taking an immediate write off of a capital expenditure in a year when the company had low profit. So they lost nearly all of the tax benefit. By taking it as normal deduction, they could have deferred it into a year when they were at the highest income bracket and gotten a much better tax benefit.
- What has your company done to help business owners get on track? We sit down with them and create a personalized plan to address some of the major deficiencies we find, such as no continuity plan, no succession plan, no distribution plan. And then we coordinate with other professionals, such as the attorney, insurance agent, and their CFO, to get their plan implemented.
- Why is having a fee-only planner good for business owners? We don’t have a vested interest in any particular products, so we are not driven by a product solution, but by finding the best possible solutions for our clients. Our approach is comprehensive and takes into consideration all the interdependencies of their business planning needs and their personal planning needs.
- If you could give business owners one piece of advice, what would it be? There is a tendency for business owners to be extremely busy, so they usually defer on these issues. Often they have been doing this a long time, so by the time we see them, they have significant risk, particularly related to protecting their families, and we’ve seen some terrible consequences of this. So, my advice is to take care of these things immediately.
We hope you found this interview helpful. For more information, come to the Business Owner’s Dilemma workshop on June 22. See all the details on our events page.