With the lack of qualified staff, uncertainty of Brexit, the impact of disruptive technology and the rising cost of materials, there are a lot of balls in the air for construction business owners to consider.
It is a useful time to dig out your business and personal plans to ensure that you are on track to meet both your long and short-term goals for 2019. Here are three tips to help you get started.
1. Put a business plan in place
• Cash is king
Stress test your financial forecasts regularly to ensure you have sufficient cash to meet your needs in the event of a debtor default or an unexpected increase in your cost base resulting from the current turmoil.
• Be ahead of the game
Consider alternative means of recruiting and retaining staff, using the latest technology to manage costs and projects is one, while partnering with overseas companies to recruit staff is another.
2. Protect your business
• Keyman and shareholder insurance
Insurance only becomes valuable when and if the event insured against occurs. It is only then that the real value of the premiums is highlighted. These type of policies are designed to inject cash into the company to help deal with the loss of a key person.
• Have a contingency plan
When times are good, put aside a pool of assets that will meet the day to day expenses should fortunes change. Segregate this capital (pensions/holding company) from the business to ensure that it is protected in the event of an unforeseen event.
3. Plan for the future
From a tax perspective there are a number of reliefs that allow the assets to pass to the next generation tax efficiently. Meeting the conditions for these reliefs and avoiding any Revenue tax avoidance rules requires careful planning. Some sensible structures to consider are:
• Consider establishing an investment company/partnership
Having a separate investment company/partnership can achieve the same outcome as the holding company but from an estate planning perspective, it creates a separate pool of assets. It can also ensure the effective transfer of the business to the next generation as many of the tax reliefs only apply to trading assets.
• Maximise your pension benefits
The pension structure is an alternative to the above and can bring additional benefits such as tax-free growth, creditor protection for trust-based schemes, and an effective cash extraction mechanism. With changes expected by 2022, 2019 is a good year to review your pension.
• Be the CEO of your wealth
For time-poor business owners, finding the opportunity to address these issues is often the biggest challenge. By working with your key advisers in a coordinated way, you can delegate the production of a personal financial plan which overlays a business plan. This strategy should allow you to act as a CEO of your overall wealth and ensure you’ll meet your and your family’s objectives.
Warning: The information in this article does not purport to be financial advice and does not take into account the investment objectives, knowledge and experience or financial situation of any particular person. You should seek advice in the context of your own personal circumstances prior to making any financial or investment decision from your own independent adviser. This information is based on Davy’s understanding of tax legislation in Ireland and is subject to change without notice. Please note that Davy does not provide tax or legal advice, nor accept liability for it. You should consult your tax adviser for the rules that apply in your own individual circumstances.
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You should seek advice in the context of your own personal circumstances prior to making any financial or investment decision from your own independent adviser.