SUMMER 2017

IRAs for just about any business

IRAs for just about any business

A sponsored IRA might be just the thing to help your staff save for retirement

If you haven’t yet thought about setting up a retirement plan for your employees, you’re not alone. The task didn’t make the to-do list of nearly a quarter of the 1,600 owners of small and medium-sized businesses recently surveyed by Pew Charitable Trusts. Those surveyed cited expense (71%) and lack of resources to administer a retirement plan (63%) as the top challenges to getting started.

Business owners in the 2017 Pew survey said they would be more likely to offer a plan to workers if it led to greater profitability, and it just might. The main benefits for employers include tax savings (including a possible $500 tax credit for some plans in addition to any deductions for contributions) and the ability to attract and retain top talent. The key is to find the right plan, whether it’s a 401(k), pension or individual retirement account (IRA). Yes, there are employer-sponsored ones available. Here’s a closer look at how IRAs can help you help your employees save for retirement.

SEP IRA

Pro: The Simplified Employee Pension plan was created for small businesses and the self-employed, with an easy, no-cost setup and flexibility in how much an employer contributes (employees can’t make contributions).

For businesses concerned about cash flow, the ability to increase, decrease or suspend contributions is appealing, and employer contributions are tax deductible. All investment, distribution and rollover rules of traditional IRAs apply here.

Consideration: Because you must contribute the same percentage amount to other employees as you do yourself, you may need to switch to a different plan as the number of workers grows. Also, those who are self-employed may be able to contribute more money to an owners-only 401(k). Talk to your advisor about what makes sense for your own retirement planning as well. 

SIMPLE IRA

Pro: A popular option for businesses with fewer than 100 employees, this type of IRA has been described as a “starter 401(k)” because it’s designed to be set up quickly at a low cost. Employers must make matching or non-elective contributions and offer all workers a chance to participate. Employer contributions are tax deductible and employee contributions are pretax.

Consideration: These plans are generally less flexible than 401(k) plans, with lower contribution limits.

MyRA

Pro: MyRA isn’t an employer-sponsored plan. All an employer would do is offer the information and allow workers to set up payroll deductions. It’s a Roth IRA designed by the government for workers who don’t have access to or aren’t eligible for employer-sponsored plans, and allows employees to save in a limited fashion. 

Considerations: The only investment option is government bonds, and the maximum an employee can save in the account is $15,000 before it must be transferred to a private-sector Roth IRA. However, if you want a plan with no cost and no administration tasks, this is it. MyRA has other limitations, including the fact that employers can’t make contributions. However, if an employer-sponsored plan isn’t right for your business and you want to offer a way for workers to save, this is one solution. You can always switch to a different savings plan as your organization grows.

With people living longer and retirement stretching to 30 years for some, saving has never been more crucial. However, only a third of Americans are contributing to an employer-sponsored retirement plan, a recent analysis of tax data by Census Bureau researchers shows. By working with your advisor to set up a plan, you can boost your financial well-being and that of your employees. 

Next steps:

  • List the retirement plan features that will best fit your needs, budget and business model
  • Gauge what options employees might find most appealing
  • Schedule an appointment with your financial advisor to review your choices

*Withdrawals from retirement accounts may be subject to income taxes, and prior to age 59½ a 10% federal penalty tax may apply. Any SIMPLE IRA distributions made to a participant under age 59½ during the two-year period beginning with the employee’s initial participation date will be subject to a 25% premature penalty. Unless certain criteria are met, Roth IRA owners must be 59½ or older and have held the IRA for five years before tax-free withdrawals are permitted.

Primed to sell

Primed to sell

A look inside each stage of preparing your business for sale

When it comes to selling a business, timing is everything. That’s why it’s important to know how long the process takes and what’s involved. Here’s some advice from seasoned bankers who’ve successfully gone through the process. If you feel the exit conditions are favorable for your business, reach out to your financial advisor for an objective opinion about the market and what opportunities might be available.

18-24 Months – Research and Readiness

Have a clear view of your business as well as an understanding of the underlying market. Start meeting  with industry participants – investors, bankers, etc. – to evaluate what constitutes a good sale price.

  • Get your financials in order. Collect the data and build a full financial picture of your business.
  • Forecast your business’s future. Give potential buyers a 3- to 5-year look ahead, not just a budget.
  • Get a third-party audit. Hire an independent firm to conduct  a 2- to 3-year financial audit.
  • Create a marketing deck. Pull together a brief overview to jumpstart your thinking on how you’ll pitch your business to potential buyers.

12-18 Months – Meet the Bankers

Now it’s time to start looking for the right partner to help you make the sale. When evaluating investment banks, remember that a good social dynamic and cultural fit are key. The better they know you and your business, the more effective they’ll be when it comes time to market to buyers. 

Look for a banker with:

  • Client-first mentality
  • Transaction experience
  • Industry knowledge and expertise
  • Knowledge of the buyer universe
  • Communication style and responsiveness

6-12 Months – Engage a Banking Team

After you’ve narrowed the field, engage the investment banking firm that aligns best with your strategic objectives.

  • Evaluate similar deals. Each bank should have completed deals comparable to yours. Ask them to describe their results.
  • Ask for references. Ask for the names of the business owners involved in the similar deals. Reach out and get their perspectives  on the bank’s performance.
  • Deepen relationships. Get to know the entire investment banking team. Ask yourself how confident you are in their ability to skillfully sell your business and ensure a competitive price. 

3-6 Months – Prime Position and Readiness

Now that you have your team in place, there are a few final elements for you and your bankers to refine before your business is market-ready.

  • Develop the positioning. Your banking team will work to  determine the best way to position your business to buyers  and compile analysis to use as part of the diligence process.
  • Spend some time with the buy side. You and your banking team should meet with a few potential buyers. Using feedback from the buyer pool, you can refine your pitch before you officially put your business up for sale. 

If the time is right, reach out. Talk to your advisor about these and other important considerations when preparing to sell your business.

Raymond James does not render advice on tax or legal matters. You should discuss any tax or legal matters with the appropriate professional.

Be the change

Be the change

Nonprofits benefit when you invest your time and talent

With almost 2 million active charities in this country alone –  according to guidestar.org – it can be hard to figure out which one is truly committed to your cause. Of course, there are websites and apps to help you perform your due diligence on a wide range of charitable organizations, evaluating the financial responsibility, accountability and transparency of each.

But, a more personal way to assess your favorite charity is to donate your time and talents in lieu of (or in addition to) money. Volunteering can remove the veil of uncertainty and give you an insider’s view of the organization, its people and practices. Moreover, you get to see firsthand the value and appreciation of your charitable gifts at work.

Perhaps most important, there’s the feel-good aspect. You’re putting your skills and effort to use on behalf of something that benefits the world in some way. And, you get to see for yourself where change is needed and how you can make it happen. So when a family comes in to “shop” at the food bank you helped set up, you can directly see the impact your work has on people in your community. 

Leverage your unique skills

Volunteering isn’t necessarily hard labor either. It could mean canvassing, fundraising or serving on the board to help keep the organization accountable. There are even scientific institutions looking for volunteers and computer processing power to advance their projects (e.g., Berkeley Open Infrastructure for Network Computing).

Then there are nonprofits of all kinds seeking professionals  who can donate the financial, marketing, business and other  skills to complement what its staff already does. If you have a particular expertise or talent, say accounting or web design, you may be called upon to deploy that skill to further the nonprofit’s mission. And you may discover a new and meaningful way to apply your talents or keep them fresh once you retire. Several websites can help match your skills and interests with a nonprofit agency, including linkedin.com, volunteermatch.org, createthegood.org and catchafire.org.

Further a charity’s bottom line

Generously dedicating your time and energy to charitable causes can provide enormous monetary value, as well. According to the Corporation for National and Community Service, about 62.6 million Americans – about 25% of all adults – volunteered for 7.8 billion hours in 2015. That work is worth $184 billion to nonprofits. Clearly, volunteering makes a difference, and one that boosts charitable groups’ ability to do good.

Volunteering can help you:

  • Develop new skills
  • Find a lifelong passion
  • Network among like-minded people
  • Leverage your current skill set

Next steps:

Talk to your advisor about:

  • Budgeting for charitable giving
  • Starting a donor advised fund
  • Updating estate planning documents

Material prepared by Raymond James for use by its advisors. Raymond James is not affiliated with any companies mentioned in this material.