Being self-employed offers freedom and flexibility—but it also comes with unique financial challenges. Many business owners focus on minimizing taxes, but a strong financial plan goes far beyond what you owe Uncle Sam.
Whether you’re a small business owner, solo consultant, or creative professional, your financial future depends on how well you prepare for the unexpected and plan for long-term goals. Here are five key questions every business owner should be able to answer:
1. Am I saving enough for retirement—and using the right account?
When you’re self-employed, retirement savings are entirely up to you. The good news? You have access to powerful tools with higher contribution limits than traditional employees:
- Solo 401(k): Combines salary deferral and profit-sharing (up to $70,500 in 2025, depending on income and age).
- SEP IRA: Simple to set up, allows up to 25% of net earnings (max $70,000 in 2025).
- Defined Benefit Plan: Great for high earners aiming to maximize pre-tax savings (up to $280,000, income-dependent).
Retirement planning is about consistency. Try to automate and maximize your contributions whenever possible.
2. Is my business structured for tax efficiency and long-term growth?
Your business structure affects more than just taxes—it impacts how you grow, pay yourself, and build wealth:
- Sole Proprietor / LLC: Simple, but profits are fully subject to self-employment tax.
- S Corporation: Lets you split income between salary and distributions, potentially lowering payroll taxes.
- Partnership / Multi-Member LLC: Offers flexibility for multiple owners but requires planning.
- C Corporation: Rare for small service businesses, but useful in specific cases.
Your business structure should evolve as your income grows and your goals shift – from tax efficiency to preparing for wealth transfers. Revisit your structure annually or when material changes to your business occur. The potential tax savings and wealth-building opportunities can be significant.
3. Do I have the right insurance to protect my income, health, and business?
Unlike traditional employees, you’re responsible for your own coverage. The right insurance protects your income, family, and business:
- Disability Insurance: Replaces income if you can’t work.
- Life Insurance: Protects your family and business if something happens to you.
- Health Insurance: Consider a high-deductible plan with an HSA for tax savings.
- Business Liability Insurance: Shields your business from legal claims.
Insurance needs evolve as your business grows. The more complex the business, the more insurance coverage you likely need. It is best to review your coverage annually to ensure you, your family, and your business remain protected.
4. Do I have a basic succession or estate plan in place to protect my business and family if I’m no longer able to run things?
Business continuity planning isn’t just for large companies, even small businesses need to think ahead. Your estate plan should reflect the dual roles you play as an individual and a business owner. Ask yourself:
- Can the business run temporarily without me?
- Who can step in to manage the business if I’m gone?
- Do I have legal documents in place to ensure my wishes are carried out?
Don’t let your hard work go to waste. Make sure your business and personal estate are structured to transition smoothly.
5. Have I built adequate cash reserves to manage irregular income and business slowdowns?
Irregular income can make personal budgeting feel impossible, but a few strategic steps can help:
- Establish a “base salary” from your business: Pay yourself consistently through owner draws or salary.
- Create a cash buffer: Build both personal and business emergency reserves to smooth over lean months.
- Separate accounts: Keep business and personal finances separate for clarity and control.
Let’s Talk About Your Plan
Running a business is demanding—but your financial life doesn’t have to be. With the right strategy, your business can be a powerful engine for long-term wealth and security.
We’re here to help explore how to align your business with your long-term financial goals. If you have any questions, please don’t hesitate to reach out to a member of our team for further discussion.