Building a business, raising a family and saving for retirement can be a lot to manage all at once. Pierre Letourneau, Business Succession Advisor, TD Wealth, speaks with Anthony Okolie about some of the things business owners might want to consider as they try to balance it all.
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[MUSIC PLAYING]
- It's no secret business owners have a lot on their plates. Add raising a family into the mix and trying to save for retirement, and it's a lot to manage. TD recently shared the story of Nick and Justina, who have been navigating just that.
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- I still don't see myself as a businessman. I like to get my hands dirty. So I'm always in the mix there.
- It makes me laugh when he says, I'm not a businessman. What do I know? He's got a successful business that he's been running for almost 20 years now.
NICK (VOICEOVER): But in the beginning, it was tough.
JUSTINA (VOICEOVER): When he was struggling, I would have the stable paycheck.
- If she wasn't there, I don't know where I would be right now, or even the family. Being a business owner, money was always tight. I never felt comfortable. For me, it's just the worry of not having, where I can't put food on the table or provide, because there might be a hiccup down the road that you don't see.
- With some considerations for business owners trying to balance their business and personal finances and plan for the future, we're joined by Pierre Letourneau. He's a business succession advisor with TD Wealth. Pierre, welcome.
- Thank you. Thanks for having me.
- First off, why is it important to have clear boundaries between your personal finances and the finances of your business?
- Yeah, that's very important. For most business owners, they are incorporated. So they have a corporation, which is a separate legal entity. So because you've got the two different entities-- the individual and the corporation-- it's important to really separate that, because if you don't separate the finances, you may run into some tax issues and legal issues down the road.
- OK. So you talk about separating the finances. What do clear boundaries look like for a business owner?
- Right. So it's essentially treating them as two separate entities, making sure that you account for the assets that are the corporation's assets and your personal assets. Same with cash flows. And if there are cash flows that go between the two entities-- that those are accounted for.
For example, if you're taking money out of the business, you want to make sure that it's accounted for as either salary, a dividend, or a loan from the business. Those three different ways of taking money out of the business have their own tax treatment. So it's important to get good tax advice as well, too, when you start taking money out of your business.
- OK. Let's talk a little bit about business succession planning. Why is it important to start thinking about business succession planning relatively early?
- Yeah, I'm a proponent of, it's never too early to start that sort of planning. And I think the major reason is, for most business owners, the business is the most valuable and important asset. And so you want to have a plan in place to help protect that asset. It also provides flexibility down the road to be able to transfer that asset more efficiently.
- How does business succession planning go hand in hand with retirement planning?
- Yeah, they do. They're closely linked. And I think that both those plans need to be done together. And the reason for that is, one can impact the other, right? If you don't have enough assets for retirement, then that may impact your ability to transfer your business and vise versa. So you need to really do that together so that both plans work.
- And for business owners who want to sell their business-- maybe their children don't want to take over that business, so they're looking to sell that business-- could they rely on the sale of that business to help fund their retirement?
- Yeah, and most do, because as I said, for most business owners, that business is their most important asset. They've put in all their financial resources, all their efforts into building this business. So it is an important asset that could lead to capital that will help fund their retirement. But as we do with any assumptions in a retirement plan, we need to be conservative when we take account for that assumption. So with the valuation of the business, we want to take a conservative outlook on that valuation to develop a retirement plan.
- Pierre, thank you very much for being here.
- Thanks for having me.
[MUSIC PLAYING]
- It's no secret business owners have a lot on their plates. Add raising a family into the mix and trying to save for retirement, and it's a lot to manage. TD recently shared the story of Nick and Justina, who have been navigating just that.
[MUSIC PLAYING]
- I still don't see myself as a businessman. I like to get my hands dirty. So I'm always in the mix there.
- It makes me laugh when he says, I'm not a businessman. What do I know? He's got a successful business that he's been running for almost 20 years now.
NICK (VOICEOVER): But in the beginning, it was tough.
JUSTINA (VOICEOVER): When he was struggling, I would have the stable paycheck.
- If she wasn't there, I don't know where I would be right now, or even the family. Being a business owner, money was always tight. I never felt comfortable. For me, it's just the worry of not having, where I can't put food on the table or provide, because there might be a hiccup down the road that you don't see.
- With some considerations for business owners trying to balance their business and personal finances and plan for the future, we're joined by Pierre Letourneau. He's a business succession advisor with TD Wealth. Pierre, welcome.
- Thank you. Thanks for having me.
- First off, why is it important to have clear boundaries between your personal finances and the finances of your business?
- Yeah, that's very important. For most business owners, they are incorporated. So they have a corporation, which is a separate legal entity. So because you've got the two different entities-- the individual and the corporation-- it's important to really separate that, because if you don't separate the finances, you may run into some tax issues and legal issues down the road.
- OK. So you talk about separating the finances. What do clear boundaries look like for a business owner?
- Right. So it's essentially treating them as two separate entities, making sure that you account for the assets that are the corporation's assets and your personal assets. Same with cash flows. And if there are cash flows that go between the two entities-- that those are accounted for.
For example, if you're taking money out of the business, you want to make sure that it's accounted for as either salary, a dividend, or a loan from the business. Those three different ways of taking money out of the business have their own tax treatment. So it's important to get good tax advice as well, too, when you start taking money out of your business.
- OK. Let's talk a little bit about business succession planning. Why is it important to start thinking about business succession planning relatively early?
- Yeah, I'm a proponent of, it's never too early to start that sort of planning. And I think the major reason is, for most business owners, the business is the most valuable and important asset. And so you want to have a plan in place to help protect that asset. It also provides flexibility down the road to be able to transfer that asset more efficiently.
- How does business succession planning go hand in hand with retirement planning?
- Yeah, they do. They're closely linked. And I think that both those plans need to be done together. And the reason for that is, one can impact the other, right? If you don't have enough assets for retirement, then that may impact your ability to transfer your business and vise versa. So you need to really do that together so that both plans work.
- And for business owners who want to sell their business-- maybe their children don't want to take over that business, so they're looking to sell that business-- could they rely on the sale of that business to help fund their retirement?
- Yeah, and most do, because as I said, for most business owners, that business is their most important asset. They've put in all their financial resources, all their efforts into building this business. So it is an important asset that could lead to capital that will help fund their retirement. But as we do with any assumptions in a retirement plan, we need to be conservative when we take account for that assumption. So with the valuation of the business, we want to take a conservative outlook on that valuation to develop a retirement plan.
- Pierre, thank you very much for being here.
- Thanks for having me.
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