If you own a business, congratulations: your finances may resemble a Rube Goldberg machine: pull one lever over here, say, how much salary you pay yourself, and somewhere over there, a tiny flag pops up affecting your retirement contributions, your tax bill, and, possibly, your will to live.
Unlike a typical W-2 employee, your income isn’t a single tidy number on a pay stub. It’s a blend of salary, distributions, retained earnings, and retirement contributions, all tangled together like last holiday’s string lights. You’ve got two key professionals in your corner, a wealth advisor and a tax accountant, plus a third, often-overlooked voice that needs to be in the room: yours.
The question is whether all three of you are talking, or whether your advisor and accountant communicate through you, with neither of them having a clear enough picture.
It Starts With How You Pay Yourself
For most employees, an advisor takes a salary number and builds a plan around it. Done. For a business owner, that same exercise requires understanding a dozen variables no W-2 employee ever has to think about.
How much you pay yourself in salary versus distributions affects:
- Your payroll taxes
- Your future Social Security benefits
- How much you can contribute to accounts like a SEP IRA or Solo 401(k)
Maybe the business is having a great year and you want to reinvest the profits, which changes the number your accountant works with, which then changes what your wealth advisor can realistically plan around. If nobody’s relaying that (including you), you get a retirement plan that looks fantastic on paper and collapses the second you try to fund it.
And That Same Decision Shapes Your Whole Structure
That compensation question doesn’t exist in a vacuum, it’s downstream of how your business is structured, how income flows to you personally, and how much flexibility you have year to year.
Your accountant usually steers this ship, often with an eye on minimizing this year’s tax bill. But you’re the one who knows whether you’re planning to sell in five years, bring on a partner, or expand into that storefront that’s been sitting empty since the pandemic.
Your goals can pull the entity structure in a completely different direction. Meanwhile, your wealth advisor is building a financial plan around assumptions about your income, your growth plans, and your timeline that nobody has actually shared with them. Which means the plan could be wrong in ways that won’t show up until you need the money.
Which Brings Us to Retirement Planning
Your pay structure and your entity structure feed directly into how much you can actually put toward retirement each year, since contribution limits are based on business income and how you’re paid.
Your wealth advisor knows the investment side. Your accountant knows the allowable plan contributions. But only you know whether next year’s revenue can really support a larger plan contribution, or whether that cash is already spoken for by a new hire or that one client who still hasn’t paid you since March.
Left out of the loop, you end up with a plan contribution that’s either too timid or too ambitious, turning 2 a.m. into your new least favorite time of day.
And Timing Ties It All Together
Layer on timing, and things get spicier.
Maybe:
- You’re accelerating a big purchase this year
- Your accountant wants to defer income into January
- Your wealth advisor is plotting a tax-loss harvest around year-end
Individually, all smart moves. Executed without anyone checking with anyone else, a potential financial demolition derby.
Your advisor assumes cash you’ve already earmarked for equipment, your accountant defers income for unrelated reasons, and you find out about all of it in April.
The Bottom Line
Your pay, your entity structure, your retirement plan, and your timing decisions are all part of a single connected system, not four separate conversations.
A wealth advisor and tax accountant who talk to each other, and to you, catch conflicts before they get expensive.
So here’s your homework: have the three of you ever actually talked, together, about your situation? If the honest answer is “no” or even “I have no idea,” change that, ideally before tax season, and definitely before that gap turns into a gap in your bank account.
If you are talking, keep it up. Your business changes, your goals change, and a plan built on last year’s picture may not fit this year’s reality.
Work With SingerLewak
Every business faces its own set of challenges, and the right approach depends on the specifics of your situation. SingerLewak’s advisors work closely with business owners and leadership teams to translate complex financial and tax considerations into practical strategies that support both near-term decisions and long-term goals.
If you would like to discuss how the topics covered in this article apply to your organization, please contact our team. We are here to help.
