Financial Planning for Business Owners

Financial Planning for Business Owners

As a business owner, you have fantastic options available to you in relation to “Tax Efficient Financial Planning”

The following 3 areas are important to most business owners (and can be paid for TAX EFFICIENTLY!!):

  • LIFE COVER – If you die early
  • INCOME PROTECTION If you become ill while working
  • PENSION – When you stop working
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Company Investment Opportunities for Retained Earnings

What about money in your business sitting in a current account with 0% yield?

Its understandable that you need a rainy day fund for an unexpected downturn in the economy and whereby most high yield deposit account lock your money away without access, the high interest rate environment has brought about interest in Irish Government bonds because the capital portion matures with no taxes payable and because, they are accessible before maturity.

Also, with high interest rates environment comes opportunity to invest with up to 100% of your capital invested. This provides an opportunity to invest in risk asset with a floor on your return

Also, its noteworthy that where an individual can invest in a life insurance investment bond and suffer tax @ 41% of the growth in the investment, a company suffers a much reduced rate of 25% and can choose the investment make up to suit risk profile of the company.

Talk to us about the benefits of a CORPORATE INVESTMENT BOND

Another opportunity for company investment is purchase of Irish dividend paying shares which can provide tax free income into the company, however careful tax planning is recommended in relation to this. Also, be mindful of distributing this income from investing company within relevant time frames to avoid close company surcharge

Have you ever considered what happens to the shares in the business if one of the owners suffers an untimely death? Speak to us about SHAREHOLDER PROTECTION

Shareholder protection is a type of business protection insurance that helps to preserve the ownership and continuity of a business in the event of the death or critical illness of a shareholder. It allows the remaining shareholders to buy out the shares of the affected shareholder from their estate, and provides the estate with a fair value for the shares.

Shareholder protection can prevent the disruption of the business operations, the loss of control over the business decisions, and the potential conflicts between the surviving shareholders and the heirs of the deceased or ill shareholder.

Shareholder protection consists of three main components: a life insurance policy for each shareholder, a trust agreement that holds the policies in trust for the benefit of the other shareholders, and a cross-option agreement that gives the option to buy or sell the shares in the event of a claim.

The amount of cover and the term of the policy depend on the valuation and role of the shareholder, and the needs and goals of the business.

Shareholder protection can be taken out at any stage of the business lifecycle, and can be tailored to suit different types of businesses, such as private limited companies, limited liability partnerships, or partnerships. Shareholder protection is a valuable tool to protect your business from the unexpected loss of a key shareholder. It can help you to safeguard your business interests, secure your future growth, and ensure your peace of mind.

What would happen to your business profits one of your key members of staff (director or employee) suffers an untimely death or serious illness? Speak to us about KEYMAN PROTECTION

Keyman insurance is a type of life insurance that protects a business from the loss of a key person.

A key person is someone who is vital to the success and continuity of the business, such as a founder, a partner, a manager, or a specialist. If a key person dies or becomes seriously ill, the business may suffer from reduced profits, increased costs, disrupted operations, or loss of customers.

Keyman insurance can provide a lump sum payment to the business to help cover these losses and expenses. The business can use the money to hire a replacement, repay debts, buy out shares, or maintain cash flow. Keyman insurance can also help to reassure lenders, investors, and suppliers that the business can survive the loss of a key person.

Keyman insurance is different from personal life insurance, which pays the benefits to the family or beneficiaries of the insured person. Keyman insurance pays the benefits to the business, which is also the policy owner and the premium payer. The key person is the insured person, but not the beneficiary. The amount of cover and the term of the policy depend on the value and role of the key person, and the needs and objectives of the business. Keyman insurance can be taken out at any stage of the business lifecycle, and can be tailored to suit different situations and scenarios.

Keyman insurance is a valuable tool to protect your business from the unexpected loss of a key person. It can help you to safeguard your business interests, secure your future growth, and ensure your peace of mind.

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Why is a “Limited Company” so good for pension funding?

Do you want to retire at the state pension age (currently 65) or would you prefer to retire as early as age 50?

One of the most important reasons for switching from sole trader/partnership is the ability to fund pensions on a massive scale from company profit and earnings. Company directors therefore have the infrastructure to save for retirement in the most tax efficient manner.

Using myself as an example, I was a sole trader in 2010 and formed a limited company in 2020. When this happened, my pension funding capability was much greater, in fact over 4 times greater.  Also, my pension contributions into my company pension plan was made directly from my company, sheltering 100% of taxes. My previous scenario as a sole trader was not quite as tax efficient, whereby I was getting 40% tax relief on pension contributions but I couldn’t shelter PRSI and USC with a personal pension plan.

The 2022 Finance Bill charged the landscape for company pension funding by removing BIK on company contributions into PRSA arrangements, commencing from 1/1/23. This means that a pension contribution up to €2 million can be made for a director/employee provided that the beneficiary is a bona fide employee.

For directors looking to start a company pension today, the PRSA and Executive Pension plan can provide massive scope for extracting personal wealth from company profit.

We specialise in bespoke arrangements to suit each client whether you require a specific self-administered pension arrangement to purchase an investment property via a unit trust with pension funding or maybe you want a self-directed pension that permits purchase of shares, structured products, EFT on a pension platform in a tax efficient manner.

For those that require minimum personal involvement in their investment outside initial risk selection and annual review, we can assist by recommending a life company that suits your investment profile.

How to Get Started

Are you a Business Owner? Are you interested in Financial Planning? Follow the steps below to get started with Mark Cahill Financial Services.

Alternatively, if you’re interested in Personal Financial Planning, you can find out more HERE.

Step 1: Contact Us

Contact us and Speak to Mark Cahill.

Step 2: Information

Provide us with some information on your current situation and what you're looking for.

Step 3: Advice & Next Steps

We will provide you with advice and next steps to get started.

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