2012 will be here before we know it. Now is the perfect time to bring all of your business advisors together for a year-end financial check up.
You should set up a meeting with your accounting, legal, estate planning, investment and retirement planning advisors, as well as any partners in your business, at the end of each year to get a check-up of your business and personal financial health.
In this meeting, you should compare your current financial statements to past records and benchmarks in your industry. The comparison will help you determine where you stand financially, and help you plan the goals you want to set for 2012 and beyond.
This discussion is more important this year than ever before because Congress has yet to determine so many 2011 tax treatment issues. If you know your personal and business goals for the coming year, your team can help you determine contingency plans to help you reach your goals under various scenarios.
This meeting is also the perfect time to discuss any changes you see coming on the horizon. Are there rental or lease agreements expiring? Is there potential for large purchases or sales? Are legislative or regulatory changes coming? Do key personnel or business partners face retirement or a serious illness? Do you want to expand your business by purchasing another, or sell the business to someone else?
Is your business a medical practice or law or architectural firm? If your business operates as a Professional Service Corporation, make sure you address your special tax obligations. Any profit shown in a PSC will be taxed at 35 percent, so it’s important to correctly estimate your profits for the year and determine how those profits might be distributed through bonuses, profit sharing, dividends, salaries, benefits or other purchases.
The year-end check-up meeting is also a good time to discuss specific issues going on within the business, such as business procedures, routine office policies, personnel issues or even the potential hiring of additional staff members, to name a few.
Each partner in the business should review his or her will and estate plan at this time, too. Make sure the beneficiaries reflect any life changes such as a divorce, death or changes in your relationships.
If your company owns a life insurance policy on one or more key employees, review the policy to make sure it still reflects current employees or executives and an accurate value to the business. You can possibly convert outdated life insurance policies to revenue by selling them to a third party. This is known as a life settlement.
Just like you take steps help keep your body healthy, you should examine the financial health of your business to make sure it stays healthy, too. Ask your accounting professional, if he or she doesn’t ask you first, to help you coordinate a complete year-end review with your business partners and advisors.