Financial planning for incorporated professionals is often two-sided- planning for the practice and personal financial planning. A few things to keep in mind for professionals are:
- Professionals are typically in the highest income tax bracket, therefore incorporating their practice can help manage and defer taxes at a lower corporate tax rate.
- By incorporating- professionals can have access to dividends from their corporation, shareholder loans, corporately held life insurance and since money can be left inside a corporation- this money can be used in years where there are life changes such as pregnancy, buying a home or retirement.
- Professionals should also ensure that they have access to health benefits.
- Debt for a professional is not unusual, given the costs of education and equipment, therefore working with an advisor and accountant can help an incorporated professional find a way to balance their cash flow.
Why do you need a Financial Plan?
- Worry less about money and gain control.
- Organize your finances.
- Prioritize your goals.
- Focus on the big picture.
- Save money to reach your goals.
For an incorporated professional, personal and practice finances are connected. Therefore both sides should be addressed: Personal and your Practice.
What does a Financial Plan for an Incorporated Professional include?
There are 2 main sides your practice’s financial plan should address: Growth and Preservation
- Cash Management- Managing Cash & Debt
- Tax Planning- Finding tax efficiencies
- Health Benefits
- Investment- either back into the business or outside of the business
- Insurance Planning/Risk Management
- Retirement Planning
What does a Personal Financial Plan include?
There are 2 main sides your financial plan should address: Accumulation and Protection
- Cash Management – Savings and Debt
- Tax Planning
- Insurance Planning
- Health Insurance
- Estate Planning
What’s the Financial Planning Process?
- Establish and define the financial planner-client relationship.
- Gather information about current financial situation and goals including lifestyle goals.
- Analyze and evaluate current financial status.
- Develop and present strategies and solutions to achieve goals.
- Implement recommendations.
- Monitor and review recommendations. Adjust if necessary.