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"I am a big believer that going down that path and entrepreneurship in general is a wonderful way to build wealth but that's not going to happen on its own, right?" - Grant Bledsoe
I had the privilege of discussing with Grant Bledsoe, a financial services industry wizard who specializes in helping business owners like you navigate the complex world of taxes and business setup. In our conversation, we delved into the importance of setting up a business entity, the significance of having an operating agreement, and the need for financial planning for business owners. Let's dive into the key insights from our discussion.
The Importance of Entity Selection and Operating Agreements
Grant kicked off our conversation by highlighting a common mistake made by business owners: focusing solely on their business success without considering their personal finances. He emphasized the importance of taking care of personal wealth alongside business success.
When starting a business, Grant suggests that entity selection is crucial. For a side gig, a DBA filing might be sufficient, but for a full-time commitment, forming an LLC is recommended for asset protection and liability purposes.
We also discussed the significance of an operating agreement, especially when there are partners involved. This agreement outlines important details such as distributions, dispute resolution, and what happens in the event of divorce or death. Grant advises consulting an attorney to customize the agreement based on the business structure and intentions.
Building a Team of Experts and Managing Cash Flow
As a business owner, it's crucial to build a team of experts, including a financial advisor and an attorney, to provide specialized knowledge and advice in different areas. Relying solely on internet research can lead to mistakes and missed opportunities.
Grant also suggested creating a plan for handling cash flow and paying oneself. He recommends opening a separate bank account for the business to keep track of expenses and simplify bookkeeping. He also emphasized the importance of having a working capital fund, which acts as an emergency fund for the business.
Insurance Products and Tax Strategies for Business Owners
As businesses grow, risk management becomes more important, and insurance coverage starts to make sense. Grant mentioned some essential insurance policies like errors and omissions insurance, worker's compensation insurance, and life insurance for partners.
We also touched on the topic of taxes. Grant provided strategies for business owners to minimize their tax payments. He explained the difference between pass-through entities like sole proprietorships, partnerships, and S corporations. He suggested considering an S corporation structure, where the business owner pays themselves W-2 wages and distributes the remaining profits differently. This strategy can help save on personal taxes.
Diversifying Investments and Retirement Planning
Grant emphasized the importance of diversifying investments outside of the business, as not all businesses will be sold for the expected value. He suggested setting up qualified retirement plans, such as a 401(k) or SEP IRA, to save for the future. Contributions to these plans are generally tax-deductible, providing another way for business owners to save on taxes.
The Rich and Taxes
We also discussed the belief that the rich don't pay their fair share of taxes. Grant responded by stating that while there are favorable loopholes for wealthy individuals, he doesn't fault billionaires like Elon Musk or Jeff Bezos for taking advantage of the existing system. He believes that it's the risk-takers and entrepreneurs who drive employment and pay taxes, and the government's role is to partner with them and provide tax benefits.
Our conversation with Grant Bledsoe was insightful and informative, providing valuable advice for business owners on financial planning, tax strategies, and the importance of having a solid operating agreement. For more information on tax preparation and financial wealth, check out Grant's website, Three Oaks Wealth and also connect with Grant on his social media accounts below: