Struggling to Keep Personal & Business Wealth Separate? We’re Here to Help.
- Interchange Capital Partners
- Sep 29, 2021
- 5 min read
Updated: Jan 27
September 30, 2021 by Interchange Capital Partners
By Brian Baum, CFP® and Kendra Reilly, CFP®, CIMA®
As a second-generation leader in our family business, I understand the challenges of balancing personal and business wealth. Most business owners I work with have the majority of their net worth tied to their companies - which creates both opportunities and complexities.
This concentration of wealth raises important questions: How do you maintain appropriate separation between business and personal assets? When might it make strategic sense to keep them connected? What governance structures best serve both the business and family interests?
Through our work at Interchange Capital Partners and my own experience in our family's business transition, I've found that success often depends on having clear frameworks for managing these intersecting priorities. Let me share some key considerations we explore with our family business consulting clients.
Reasons to Keep Personal and Business Wealth Separate
The biggest benefits of keeping personal and business wealth separate include increased clarity and reduced complexity. When your business wealth is separate from personal wealth, it’s clear who has ownership over certain assets. You can clearly see what belongs to you and what belongs to your business, and ultimately, this makes things easier for you and your business. This separation will also help you know what your business is worth, a critical aspect of business planning.
When your family wealth is tied to the success of your business, there are inherent risks that become part of your family’s portfolio. Thus, depending on your specific circumstances, you may want to pull capital out of the business to build your family’s wealth through investments outside of the business.
Clear separation may also reduce the risk of scrutiny by regulatory bodies like the IRS and protect your personal assets against any liability that may arise due to the business.
Challenges in Family Wealth & Business Wealth
When it comes to family businesses and intergenerational wealth, the concept of fairness often creates complexity. This makes governance frameworks essential - both for the business and the family. For instance, a completely equal distribution of ownership may not align with business objectives when some family members take active management roles while others do not. Effective governance structures need to address these nuances while clearly defining equity distribution among stakeholders.
Navigating these decisions requires careful consideration of business strategy, family dynamics, and long-term sustainability. At Interchange Capital Partners, our family business advisory team brings decades of experience helping companies develop governance frameworks that balance business objectives with family harmony. Through our Clarity Foundation™, we collaborate with families to create structures that support both business growth and family relationships.
Reasons to Combine Personal and Business Wealth
The line between business and personal wealth often blurs, especially as you think about transitioning ownership. We've seen this firsthand in our family business and with countless clients over the years.
Many business owners tell us, "I'll start planning when I'm closer to retirement." But here's the reality - understanding how your business wealth converts to personal wealth takes time. It involves careful consideration of business valuation, tax strategies, and family dynamics. The families we work with who start this process early typically have more options and flexibility in how they structure their transition.
Sometimes, keeping business and personal wealth interconnected actually makes strategic sense. Take asset protection, for example. Business entities may offer stronger protection against creditors than personal ownership structures. This is where working with experienced advisors becomes critical - the strategies that worked for your parents' generation might not be optimal today.
Family Business: A Balance of Personal and Business Wealth
After years of working with family businesses, including our own, we’ve learned that success comes from understanding the four interchanges at play: individual, family, business, and ownership. Each has different goals and priorities that need to be considered and balanced.
Think about it - when you make a business decision, it ripples through your family relationships. When you make a family decision, it impacts business operations. We've seen how these dynamics play out across generations, and that's why we developed our Clarity Foundation™. It helps families recognize and navigate these interconnected relationships.
How Our Family Business Advisory Firm Helps
At Interchange Capital Partners, we understand the complexity of having significant wealth tied to your business - because we live it too. Our team brings decades of experience helping families develop strategies that consider all stakeholders while respecting both business and family objectives.
Through our business consulting services, we help families:
Navigate the four interchanges
Create clear communication frameworks
Build governance structures that support family harmony and business growth
Develop transition strategies that consider all perspectives
Ready to discuss your family business dynamics? Contact us at team@interchangecp.com or 412-307-4230 to schedule a conversation about your situation.
About Brian
Brian Baum is the CEO & President of Interchange Capital Partners, where he leads the development of innovative strategies tailored to the unique needs of private and multi-generational companies. Early in his career, Brian conducted over 1,000 interviews with CEOs, Presidents, and Chairmen of privately held companies, uncovering a critical insight: the larger the company, the more likely the owners were to struggle with complex family, business, and ownership dynamics. Even more striking was the realization that many of these business leaders were unaware of these complexities and the sophisticated level of advice needed to effectively navigate them.
Armed with this understanding, Brian has been instrumental in reshaping Interchange’s focus, aligning its services with the lifecycle of generational transitions. His approach provides owners with expert guidance through the critical phases before, during, and after an ownership change, addressing both the immediate needs and the long-term vision of the business and family. Under Brian’s leadership, Interchange has become a leading resource for business owners seeking to solve intricate challenges and create lasting value.
Brian's vision extends beyond traditional financial advice; he positions Interchange as a family business advisory firm, recognizing the interconnectedness of family and business in creating enduring success. His leadership is not only about working to optimize financial outcomes but also about enhancing the overall well-being of the families he serves. Interchange’s work involves coordinating all aspects of a family's financial, business, and ownership strategies, akin to managing an outsourced family office, ensuring that no aspect is overlooked.
Brian’s educational background includes a Bachelor of Arts from Penn State University, where he majored in Psychology and minored in Business. He is also a Certified Exit Planning Advisor (CEPA) and a CERTIFIED FINANCIAL PLANNER™ (CFP®).
Outside of work, Brian enjoys spending quality time with his wife, Natalie, and their two daughters, Quinn and Blair. He is an avid golfer and enjoys the occasional scotch and cigar. To learn more about Brian, connect with him on LinkedIn.
Interchange Capital Partners, LLC, (“INTERCHANGE CAPITAL PARTNERS”) is a registered investment adviser with the Securities and Exchange Commission providing investment advisory and financial planning services. Any reference to the terms “registered investment adviser” or “registered” does not imply that INTERCHANGE CAPITAL PARTNERS or any person associated with INTERCHANGE CAPITAL PARTNERS has achieved a certain level of skill or training. A copy of INTERCHANGE CAPITAL PARTNERS’s current written disclosure (ADV 2A Firm Brochure) discussing our advisory services and fees is available for your review upon request. INTERCHANGE CAPITAL PARTNERS, in addition to providing investment advisory and financial planning services, provides business consulting services. In connection with its business consulting services, INTERCHANGE CAPITAL PARTNERS does not provide tax or legal advice.
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