Struggling to Keep Personal & Business Wealth Separate? We’re Here to Help.

By Brian Baum, CFP® and Kendra Reilly, CFP®, CIMA®

We all know that running a business is tough. And as a business owner who has much of your personal wealth tied to the business, it’s critical to take proactive steps to ensure you’re on track to meet all your financial goals—from growing your business value, achieving the life you want in retirement, to preserving your family legacy.

Running a family business can add an entirely new level of complexity and potential pitfalls. Therefore, it’s critical to have a clear and comprehensive financial strategy that meets the needs of all your personal, family, and business goals.

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 to 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 also reduces the risk of scrutiny by regulatory bodies like the IRS and protecting 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 can come into play. This makes it essential to have a clear governance framework. For instance, a completely equal distribution of assets may not make sense for a family business if there is one family member who does not have an active role in managing the business. Business governance and family governance frameworks need to clearly articulate the share of equity across stakeholders.

Figuring out what’s best for you and your family can be a challenging process. That is why partnering with a financial advisor with extensive experience helping business owners and families navigate complex financial decisions can be pivotal to your success.

Reasons to Combine Personal and Business Wealth 

It’s not always feasible for your business wealth to be completely separate from your personal wealth. This is particularly the case as you begin exit planning. 

It’s never too early to begin planning a successful exit strategy, even if that day seems far away from now. When it comes time to successfully exit, you will need to know how much of your business wealth you will transfer into personal wealth. Part of this also includes strategies to preserve the value and growth trajectory of your business, managing tax impact, and ensuring your family is ready for this transition.

There may be other reasons where combining personal and business wealth make sense for you, like when considering asset protection strategies. In general, businesses offer higher asset protection against creditors. Your personal assets may have more protection if they are sheltered in one or more entities.

Family Business: A Balance of Personal and Business Wealth

As a family-owned business, you have a higher likelihood of success when you proactively anticipate challenges and address them early. Decisions that impact the business need to have input from all stakeholders. At the same time, a family business impacts the dynamics across the family (spouses, children, etc.). As a business owner, it’s important for you to understand the interchanges between family, business, and financial dynamics. By taking all three into consideration, you can build an action plan that balances the interests of the business while securing the future for you and your family.

We’re Here to Help

When much of your wealth is tied to your business, it can be challenging to know how to preserve and grow your wealth while maintaining the value of your business. At Interchange Capital Partners, we offer a wealth management strategy that allows you to grow, protect, and transfer assets in a way that is consistent with your business objectives and personal desires. 

If you’re struggling to maintain separation between personal and business wealth, reach out to us. Send us an email at team@interchangecp.com or call our office 412-307-4230 to schedule an introductory appointment. We’ll work alongside you every step of the way to ensure that you have a plan that secures your own future and the future of your business.

About Kendra

Kendra Kasznel Reilly is the senior director of relationship management at Interchange Capital Partners, an independent registered investment advisory firm providing collaborative and comprehensive planning and disciplined wealth management. Kendra has 10 years of industry experience and spends her days building relationships with her clients and providing advice and strategy around the five key areas of wealth management: investing, wealth enhancement, wealth planning, wealth transfer, and charitable giving. She is known for her holistic approach that allows her to spot opportunities, identify gaps, and make recommendations to enhance her clients’ overall plan. Kendra is passionate about making sure her clients are on track to achieve financial security as she acts as their partner for all things financial. 

Kendra graduated Cum Laude from the University of Pittsburgh with a double major in communications and English writing. She completed the Executive Certificate in Financial Planning program through Duquesne University and successfully earned her CERTIFIED FINANCIAL PLANNER™ (CFP®) designation and Certified Investment Management Analyst® (CIMA®) credential. In her free time, Kendra enjoys traveling, cooking with her husband, and baking and decorating cakes. You can often find her hiking with her dogs or spending time with her family and friends. She has been involved with Big Brothers Big Sisters of America (BBBS) for many years and is a member of the Young Professionals Advisory Committee for the Pittsburgh Foundation. To learn more about Kendra, connect with her on LinkedIn.

About Brian

Brian Baum is managing director of Interchange Capital Partners, an independent registered investment advisory firm providing family office and transition planning services to family businesses. With almost 10 years of experience, Brian spends his days working with his clients to determine ideal strategies to simplify and optimize their processes and the future of their business. He is known for his attention to detail and going the extra mile to become familiar with the dynamics surrounding each situation so he can offer customized and creative guidance. 

Brian has a bachelor’s degree in psychology with a minor in business from Penn State and is a  Certified Exit Planning Advisor (CEPA) and CERTIFIED FINANCIAL PLANNER™ professional. Brian is also the president of the Pittsburgh Exit Planning Chapter, which he helped found in 2019. The chapter’s mission is to give business owners a forum to become educated on how to build a valuable and transferable business through a proven process. Outside of work, Brian enjoys spending time with his wife, Natalie, and their daughter, Quinn. He is also an avid golfer and likes the occasional scotch and cigar. To learn more about Brian, connect with him on LinkedIn.