Pursuing Financial Independence Legally

Achieving financial independence is the most important goal for business owners who want to exit their businesses successfully. The importance of achieving this goal is so great that it may be tempting to take legally nebulous routes to achieving it.

Let’s look at a brief story about a business owner whose advisors got him on the right track to planning a successful future.

Diamonds Are an Owner’s Best Friend

For years, Dylan St. Clair had run a successful jewelry business. Unbeknownst to anyone but him, he had begun the practice of underreporting the value of his inventory of fine diamonds.

During a routine audit, Dylan’s CPA, Jessica Steiner, noticed that something was amiss. After a round of golf, which Jessica won as usual, she confronted Dylan with her findings.

“I didn’t think anyone would notice,” Dylan said. “I’m just trying to grow my retirement fund a little more quickly so I can spend more time with my family sooner.”

“But if you do so illegally, and that is what you’re doing,” Jessica explained, “you might never get to spend time with them.”

Dylan asked Jessica what he could do to fix the situation.

“It will cost you in the short term, but we can make the numbers whole starting now,” Jessica said. “Then, we can start pursuing your goals the right way. The legal way.”

It Goes Without Saying

You should never, ever consider breaking or even bending the law to achieve financial independence. Instead, here are a few ways to pursue financial independence legally.

Become a Dispensable Owner

Often, achieving financial independence requires long-term strategies that fit within a business’ short-term goals. However, a challenge that many business owners face is that they begin this planning when they are ready to leave, unaware that the business is not yet ready for them to leave.

A common reason that businesses are not ready for the owner’s exit is that the owner is indispensable to the business. Briefly, this means that if the owner were to leave the business, the business would essentially cease to function well.

Though it may be a source of pride that the business relies solely on you, your indispensability may make it impossible for you to leave the business on your terms. Because if a business only runs well while you are in it, a buyer will expect you to stay in it to justify a sale price that allows you to achieve financial independence.

Take Advantage of Tax-Minimization Strategies

It may be possible to lower your tax burdens legally, which can position you to access more funds to put toward achieving financial independence.

Tax law is notoriously complex and can change quickly. To take advantage of tax-minimization strategies, it may be prudent to consult with a tax advisor in conjunction with your company’s CPA.

These advisors can help you determine the best way to minimize your taxes, as well as create plans that allow you to pursue tax-minimization strategies. However, some of these strategies may take time to implement, so a wise decision could be to begin early.

Invest Wisely

Though it’s likely that the sale of your business will comprise a large chunk of the money you need to achieve financial independence, it doesn’t have to be the only source of funds.

In many cases, a business sale combined with wise personal investing could help position you to exit more quickly and on your terms. Your financial advisor should be able to help you set up strong investment strategies to complement the strategies you’ll implement to strengthen your business for a top-dollar sale.

We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial advisor. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial advisor. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest.Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.

Park Avenue Securities LLC (PAS) is a wholly-owned subsidiary of The Guardian Life Insurance Company of America (Guardian). PAS is a registered broker-dealer offering investment products, as well as a registered investment adviser offering financial planning and investment advisory services. PAS is a member of FINRA and SIPC. Guardian, its subsidiaries, agents, and employees do not provide tax, legal, or accounting advice. Please consult your tax, legal, or accounting professional regarding your individual circumstances.