Business Owner Tax Savings Fuels Exit Strategy

Does your business rely entirely on you to produce income? You don’t think selling it is viable,  or wont produce enough to fund your next plan?

Is there a way to smoothly create the income you need to leave the business behind and still have enough income to live that life you dream of? 

Because she wanted to make the most of the time she ran the business we created together a strategic plan.  Our plan was to max out the contributions she would make to her retirement account and generate an annual bonus to use personally to boost her net worth. Our role has been as an advisor and second opinion. She uses QBO, that gives us great access to the numbers.  We do a year-end tax planning session, designed to create her annual tax expense. I make sure that her tax bill is paid in her paycheck withholding.  Our rule is no unexpected tax bills with this lady. We set up her SEP contribution and discuss how the year has gone.

The facts:

  1. She owns and operates a training and editing company. She will not sell the business or bring on employees.  She maximizes her billing and is very good at what she does.
  2. We have worked with her since her startup in 2005.
  3. Business revenue runs from $170,000 to $200,000 with one strong year of $279,000.  Average is $198, 375.

The results:

  1. Over the 14 years her total gross revenue (Sales) of $2,780,000 has allowed us to pay her a salary of $1,722,800 (62% of sales).
  2. We have also funded $363,734  (13% of sales) in her SEP plan that has almost tripled over that time frame to $ 907,694.
  3. When her mortgage balance got down to $150,000 she started asking about paying it off.  It made sense and really helped her feel secure.  Together, we arranged for her to use the year end bonus to pay it down.  In less than five years she owned her home free and clear.
  4. She is currently building a portfolio of CD’s and index mutual funds outside the business, adding on average $25,000 each year.

How it feels:

I love seeing that payment gone.  She tells me “I feel much more at ease knowing that my finances are well organized and that my house is paid off.” 

And that is so awesome because the day she decides that she is done working, she can turn on the income from her investments.  And live happily in her paid for home.  She loves travel and  she is good to go at a moments notice.

The simple plan we have in place with her has her on track to replace her income from her assets, has paid off her home and saves her over $13,000 in taxes annually.

Total value $163,518 taxes saved.  


What have you done to improve your business this week? Book a 15 minute video call with me today.