Financial Planning for Incorporated Professionals
Financial planning for incorporated professionals involves both practice and personal financial management. Professionals often fall into the highest income tax bracket, making incorporation a strategic move to manage and defer taxes at a lower corporate rate. Incorporation also provides access to dividends, shareholder loans, corporately held life insurance, and funds that can be used during significant life changes such as pregnancy, home buying, or retirement.
Additionally, ensuring access to health benefits is crucial, and managing debt with the help of an advisor and accountant can balance cash flow effectively.
The Need for a Financial Plan
A financial plan helps incorporated professionals worry less about money, gain control, organize finances, prioritize goals, focus on the big picture, and save money to reach their objectives. Since personal and practice finances are interconnected, it’s essential to address both aspects.
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Components of a Financial Plan for an Incorporated Professional
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Practice Financial Plan​
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Growth:
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Cash Management: Managing cash and debt
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Tax Planning: Finding tax efficiencies
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Health Benefits
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Preservation:
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Investment: Back into the business or outside it
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Insurance Planning/Risk Management
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Retirement Planning
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Personal Financial Plan
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Accumulation:
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Cash Management: Savings and debt
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Tax Planning
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Investments
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Protection:
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Insurance Planning
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Health Insurance
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Estate Planning
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Financial Planning Process
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Establish and define the financial planner-client relationship.
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Gather information about the current financial situation and goals, including lifestyle goals.
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Analyze and evaluate the current financial status.
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Develop and present strategies and solutions to achieve goals.
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Implement recommendations.
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Monitor and review recommendations, adjusting if necessary.
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By addressing both personal and practice finances, incorporated professionals can ensure comprehensive financial stability and growth.
