How to strategically build your personal assets as early as possible as an entrepreneur?
As an entrepreneur, growing and running a business involves mobilizing your resources, energy, time and capital. However, protecting yourself and your family financially also deserves special attention.
It is therefore essential to build up your personal assets as quickly and in its entirety as possible!
Often, entrepreneurs must inject their personal capital to cope with a particularly difficult situation. For young business leaders, professional assets represent more or less the main component of their assets.
How then can you separate your assets from those of your business? What are the steps to follow to build private assets? And how can you grow your private assets effectively?
Advisors in wealth and estate planning at Impact Financial Engineering (Impact FE) we offer you steps to follow to effectively structure your assets as well as our expert advice to achieve this.
What are the steps to building private assets as an entrepreneur?
1. Separate your personal and professional assets
Separate the company's assets from private assets to avoid the consequences of a professional loss on private wealth. To protect your personal assets in the event of financial concerns for the company, the first step is to create a legal structure for your company, such as an LLC or SA.
Keep in your private assets the part of the capital which is not essential to the company. In Switzerland, entrepreneurs can take advantage of private banking options to keep their private assets.
2. Establish a personal financial plan
Your personal financial plan will allow you to determine your long-term financial goals and make informed decisions to finance your personal projects. Building up your assets requires adapting and aligning your financial means with your personal objectives.
An optimal private wealth plan must:
- guarantee old age provision and retirement savings, for maintaining an adequate standard of living in retirement;
- carry out private placements;
- facilitate estate planning and
- reduce financial risks linked to unforeseen situations.
3. Diversify your investments
Don't put all your eggs in one basket. With a well-diversified portfolio you will be able to minimize risks, increase the value of assets, and maximize return opportunities. Examine the different solutions available, such as real estate, index funds, bonds and stocks while taking into account the entire asset situation, in particular
- old age provision,
- risk analysis,
- the liquidity plan and
- assessment of the tax burden.
4. Establish an emergency reserve
Create an emergency reserve that will allow you to deal with financial unforeseen events. This must cover at least six months of your monthly expenses.
5. Avoid excessive debt
Avoid excessive debt, especially high-interest debt, which can quickly add up and cost you a lot of interest.
6. Prepare for business transfer
In the perspective of the business succession, the regular withdrawal of excess capital from the company proves beneficial for organizing the settlement of the transfer. A lean balance sheet can reduce the sale price of the business, which encourages inheritance within the family or transfers to third parties.
Another advantage: you accumulate more private assets and have greater room for maneuver to compensate for the non-participation of children in the company's activity. In addition, private assets and pension capital reduce sometimes optimistic expectations about the company's selling price.
How to grow your private assets effectively? Our expert advice
Plan early enough
Start financial planning early enough by making investments. A comprehensive plan accompanied by an overall analysis of your assets, your objectives, the different investment options with an optimal tax advantage results in an effective and successful implementation.
Build up capital for your old age provision
Here we remind you of the importance of 2e and 3e pillar. Personalized retirement plans for executives under occupational pensions (LPP) increase savings contributions and lead to tax-advantaged redemptions.
Optional insurance within the framework of 3e pillar is even more advantageous. We advise our clients to pay the maximum tax deductible amount under Pillar 3A (linked to ordinary retirement age). 3A pension solutions are not only tax optimized, but also offer better return prospects in financial markets.
Plan the liquidity of the company to have safety cushions
The pandemic has highlighted the need for liquidity and capital to cover risks in the event of a slowdown in activity. This is an important part of the company's overall wealth strategy. Short, medium and long term liquidity levels allow the valuation of funds that are not immediately essential for operations and those that are. These funds can possibly be transferred to private assets (repayment of shareholder debts or planned dividends).
In this regard, build up safety reserves to prevent capital already withdrawn from being reinjected into the business to deal with short-term crisis situations due to a lack of liquidity. In the event of capital withdrawal, the legal form of the company plays a determining role in being subject to tax and social security.
Build private wealth that creates balance with the business
This reduces risks to overall assets linked to the company's activity. Typically, private investments should represent about half of overall assets and, in principle, should not correlate with the company's asset components.
Get professional advice
Do not hesitate to call on financial advisors to help you structure your assets. It will be wise to confide the overall structuring of your various assets to independent financial advisors such as Impact FE.
Our team of highly competent advisors in wealth management, financial planning and succession can support you at every stage of setting up corporate and private assets. We offer you complete solutions after evaluating your personal assets and taking into account your professional situation.
Call us now to discover the strategy that suits you best.
