Keys to Investment Returns & Tax Planning for Business Owners
By Paul Lechner, Esq., CPA — Lechner Law Office, P.C.
Understanding investment returns requires more than financial modeling. Taxes play a critical role in shaping real outcomes and long-term wealth accumulation. The difference between pre-tax and after-tax returns — compounded over decades — can be staggering.
Tax-Favored Treatment
Tax-deferred accounts allow investments to grow without annual taxation on gains or income. This compounding advantage — where taxes are postponed until withdrawal — can significantly outperform taxable accounts over long time horizons. For business owners, the choice of entity structure also has profound implications for tax efficiency.
Capital gains rates are generally lower than ordinary income rates, making long-term investment holding strategies advantageous. Qualified dividends receive similar preferential treatment. The interplay between ordinary income, capital gains, and the 3.8% net investment income tax requires careful planning.
Alternatives for Business Owners
Qualified retirement plans — including SEP-IRAs, SIMPLE IRAs, and defined benefit plans — allow business owners to defer substantial income while reducing current tax liability. The right plan depends on business structure, income level, number of employees, and long-term goals.
Health Savings Accounts (HSAs), combined with high-deductible health plans, offer a triple tax benefit: deductible contributions, tax-free growth, and tax-free withdrawals for qualified medical expenses.
The Planning Approach
At Lechner Law Group, we integrate legal, tax, and financial strategy to help clients achieve long-term objectives. An attorney who is also a CPA can identify opportunities that a single-discipline advisor may miss — from entity structure and retirement planning to estate transfer and succession.
Schedule a consultation to review your tax and investment planning strategy. An attorney who is also a CPA can identify opportunities that a single-discipline advisor may miss — explore our tax and financial planning services to learn more. Being proactive is the best way. Some say the future cannot be predicted — others say the only way to predict the future is to create it.