Business Planning Podcast (Clip 4 of 8) – Business Planing Concepts that can help business owners and Entrepreneurs

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Business Planning Podcast – With Strategic Capital

Adam D’Acierno takes a deep dive about some business planning concepts that make sense for their typical client mix. Some interesting discussion around sponsored plans, tax favored business tools, and other topics specifically tied to what is available from a business planning perspective for business owners.

Adam D'Acierno

Adam D'Acierno

Founding Partner - Financial Advisor

I specialize in helping businesses and business owners identify their needs, define success, and implement strategies to accomplish those goals.

Bobby Russell

Bobby Russell

Founding Partner - Financial Advisor

My comprehensive process embraces investments and insurance as an asset so that your whole financial life is magnified.

Chris Hernandez

Chris Hernandez

Founding Partner - Financial Advisor

I believe this combination of independence and teamwork is the best way to serve clients. It lets me provide you with the highest quality financial planning services, built for life long relationships with you.

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 Episode 2 Podcast/audio/video Clip 

What types of planning tools are available for clients who are working with Strategic Capital on Business Planning Strategies

With Adam D’Acierno – Business Planning at Strategic Capital

Adam D’Acierno discusses some ideas that business owners might be able to tap into to save money in their business, help employees, improve retirement options and increase efficiency in their business


Moderator: For sure, I appreciate you going into some of those concepts here because that gives us a good broad overview. I think there’s a couple of points that really stuck out for me, and specifically you know, between the two concepts that you laid out being: a solopreneur or somebody who’s sort of getting started, or maybe transitions from you know, the wage earner type; to somebody who’s now running a business, say, as a consultant, or as a contractor or something. To Major, you know other companies, and again, as somebody who runs a company for a thousand employees, let’s say. 

Moderator (continued): And those two things that kind of stick out to me – I’d love to get a little bit more in depth on some of those things – are one: that a lot of people who are maybe just starting their business or just starting to see some success in their business where they’re at that threshold of bringing in you know $200,000+, or $250,000, $300,000 in profit, let’s say. And: “We need to really start looking at how can we minimize some of the tax exposure and how can we maximize some of the value from a ‘business tool’ perspective?” – “(A) planning perspective to where we’re putting some more dollars off of our bottom line. And, strategically allocating those towards retirement or whatever.” 

Moderator (continued): Maybe… and the point of this discussion here is: I don’t think a lot of business owners understand that they can still access things like Defined Benefit Plans or non-lump sum (Defined) benefit plans. Sure, you’ve heard of a, you know, Defined Benefit Plan where it’s like: if you leave the employer, you can take it as a lump sum and then you’ve got some tax consequences or some weird carryovers that happen there. But a lot of businesses as you guys probably dealt with here at the last quarter of the year… I’m sure most businesses look at December 30th, and December 31st as the date to start their planning, right?  

Moderator (continued): And, I think the call to those that are listening to this, would be: you know it’s never a better time to start than January 1 or January 2 looking at especially Defined Benefit Plans, or looking at you know, allocating funds for tax mitigation, and other strategic purposes that would normally happen at the end of the calendar year; looking at them at the start of the year. 

Moderator (continued): At least from the smaller or medium business perspective and that’s one part that stuck out and I’ll talk a little bit about the second one and then maybe you can talk a little bit about some of those tools and things that you guys are using on a regular (basis). 

Moderator (continued): And the second being: you talked about really in the realm of a third party administrator you know, some of the compliance things; some of the discrimination testing, and stuff like that, and some of those that might listen to that first part, where you’re talking about some of the planning on the defined contribution plans and stuff like that, might have thought: “well, discrimination testing what does that have to do with anything?” Right? Like: “We don’t have any problems with that.” But, really it talks to the compliance aspects of having a sponsored plan or you know, a qualified retirement plan and when you mention the highly compensated employees… 

Moderator (continued): I think a lot of the time when you get into – especially if you experience high growth right(?) – and maybe not the Fortune 500 side or anything like that… But, as you’re experiencing high growth and getting say 100, 200, 400 employees, where you’re really ramping up from medium-sized or small sized business, up into the larger enterprise areas, I think there are some things that just happen so fast. There’s such a high churn in income and revenue that you’re not focusing on some of the things that really matter, if you’re trying to provide benefits to employees. Especially those that come into it with maybe not some of the holistic planning advice that you guys give. Whereas, you guys are looking at it from the very onset as: “Hey, we really need to be careful how we allocate funds from a highly compensated employee perspective, versus, you know, the the standard employee, so that we don’t run afoul of the compliance, and the laws and the legislations that are in place.” But also, I think a lot of people: just, things happen so fast in business sometimes, that you might go two years with huge growth and then you’re kind of left looking back at the situation, and saying: “Oh, now we’ve got to make sure we’re in compliance.” Right? Which is the whole reason why we have third party administrators. We’ve got specialty compliance consultants and auditors and we’ve got people like you guys who hopefully can get it started right from the ground level. So, can you talk to those two points that I brought up? Because I think sometimes you have a really… um, there’s no real gray area. 

Moderator (continued): I think when people are looking at planning, it’s because they either are running into a problem, or it’s because they’ve had a fair amount of success, right? Because both of those things give you a catalyst to say: “Oh, wow, I really need to take stock of what I have and move forward with a strategic plan!” And, neither of those times are the best times, to be looking at that, right? So, can you talk to that a little bit?

Adam D’Acierno (Business Planning – Strategic Capital): Yeah. Great questions. So, I’ll touch on your question about the entrepreneur transitioning from maybe a W-2, over to receiving 1099 income, or just other types of Revenue, and then I’ll parlay that into your question about the discrimination testing, and the planning that goes on from a more so, TPA mindset. So, I’ll give you a specific example where most entrepreneurs or business owners, you would think when you’re working with a CPA, or an accountant, that they’re being very proactive, versus just kind of taking orders, and you telling them: “Hey, here’s everything!” So, for example we had a business owner that we were working with, and they were bringing in 700 plus thousand dollars of net income every single year; they were filing their taxes as a sole proprietor. I’m not a CPA or an accountant, so I won’t go into all the inner workings of the election that can be made, and how all of it works, but if that individual would decide to file their taxes as an S corp, so make the election to become an LLC, and file taxes as an S corp, versus file taxes as a sole proprietor – they save themselves quite a bit in taxes and so that’s really one of the first areas that we advise entrepreneurs, is: “Hey, if you haven’t asked your CPA or accountant what the most efficient tax classification for your business is, that needs to be the first thing you do – first and foremost – because, that’s the easiest way you’re going to increase your bottom line. It’s just the paperwork that needs to be done at the end of the year… or throughout the year… excuse me. Because, when you’re a business you have to pay your own taxes, everything like that, on a quarterly basis, so, really what we’re looking at first, is: are you the most efficient business that you can be, from a classification standpoint. And then we’re able to go in and start doing work.

Adam D’Acierno (continued): So, to your next point of the question is: when is the best time to start implementing these plans? Well, with recent legislative changes, we’re able to do things now retroactively, and get these plans in place a little easier. Let’s just say it’s 2023 – we still have time to do things for 2022 in that tax year up until your tax filing for that tax year. So, if you’re looking to do something for last year – what better time to start evaluating what we’re going to do for the year upcoming, right now?  So, we do still have clients that are rushing in last minute; trying to still do things for 2022 and when they come in they start asking us for help for 2022, that’s where we start looking ahead to 2023, and saying: “Hey, okay, here’s what we can do for 2022 – we’re kind of limited with our options based on the timeline of this, but if we start planning for 2023 now, while we’re still in January of 2023, we open up a whole world of opportunity – of resources that we can implement for your business that can then benefit you personally

Adam D’Acierno (continued): Then following right along talking about the TPA (third party administrator). I, and we, are not a TPA, but our work, or my work specifically, that I do in plan design, aligns with a TPA closely so I’m also a Qualified 401K Administrator. That’s a designation you would see more TPAs get even though I’m not a TPA I just like having the knowledge to be able to speak, and have conversations with my clients, and then be able to be an intermediary between the third party administrators that we utilize in administering our 401K plans. And what that allows for me to do is: I’m able to then take a (forward) look into the future and start designing plans today, based on where we will be tomorrow. So, for example, we talked about anti or non-discrimination testing… inside of a solo 401K there is no discrimination testing because you are the only participant in the plan. But in having our conversations of where your business is today, and where your business is going in the future; if you identify to me that you are going to be hiring on employees down the road I’m going to design the plan differently based on if you want those employees to be able to enter into the plan immediately, upon hire, or if we want to set some restrictions based on the limits that we have, set forth for us through the Department of Labor and the IRS. 

Adam D’Acierno (continued): So, where I might meet with a business owner that says that they’re never going to hire another employee they’re just starting their business today I might get them set up with a retirement plan that has no eligibility requirements. But, if I’m working with a business owner who’s been in business for two years, and they say they’re now at the part where they think that they’re going to start hiring employees in the next two or three years, then what I’m going to do, is I’m going to make that plan if that employee or that owner only wants to continue to try and benefit himself as long as possible, I’m going to set an eligibility requirement of one year; have to be 21 years old; and have to work a thousand hours inside of that year in order to be eligible. So, that’s going to buy that business owner some time without having to actually make any contributions or having that employee eligible for the plan until they’ve hit those eligibility requirements. So, not only are we looking at where the business owner is today but then where the business owner could be in the future, because, if we can build into the plan and immediately upon inception that we want to have these changes or these Provisions in place knowing that we’re going to hire employees in the future – well now I don’t have to go in and amend my plan to change eligibility requirements. I’ve already thought about that on the front end, so that’s again, helping the business owner: one, save time because they’re not going to have to spend the time that you need them to sign the documents to make the amendment and then, two, they’re not going to have to pay a fee to amend the plan document.

Adam D’Acierno (continued): So, that’s kind of how we look at entrepreneurs coming in; how we look at building plans for entrepreneurs, or just businesses in General. Looking at today; looking at tomorrow, and three years down the road, so that we can implement these plans today with the idea and knowledge of where we’re probably going to be going in the future. 

Adam D’Acierno (continued): I think one of the other biggest areas that we’re receiving a lot of traction on right now from business owners are from business owners who realize that they are going to start having a large tax bill due for 2022 (or a given year), and they’re looking for strategies, and ways that they can lower that tax bill. One strategy that we’ve been implementing heavily, is in utilizing types of retirement plans that afford you to save two, three, four, five-times higher than the limits of what your standard 401k will allow for you to save. So, those plans are what we’re looking at implementing for those business owners that are looking for high amounts of money to stash away, so that they can get those deductions that they’re looking for. Or, just save a bunch of money in general; especially right now, while the market is down in the position that it is in currently.