Financial planning for business owners starts with one question most owners have never really answered: where does the business end and your personal wealth begin? Before John Shedenhelm’s team builds a plan for a business-owning client, they run a simple two-column test to find out.
Why Business Owners Need a Different Kind of Plan
A financial plan built for a salaried employee assumes a paycheck, a 401(k), and a retirement date. None of those assumptions hold for a business owner. Your income can swing year to year. Your biggest asset might be the business itself, not a brokerage account. And your retirement date might depend on finding a buyer, not turning a certain age.
That’s why generic financial advice for business owners so often misses the mark. It treats the business as a side detail instead of the center of the plan.
The Two-Column Test: Personal vs. Business Wealth
Here’s the exercise we run with every new business-owner client. Take a blank page and draw a line down the middle. On the left, list everything that’s truly personal: your home, personal savings, retirement accounts in your own name, and personal insurance. On the right, list everything that belongs to the business: business bank accounts, equipment, inventory, accounts receivable, and business debt.
Most owners can’t finish this exercise cleanly on the first try. Money moves between the two columns so often that the line gets blurry, personal expenses paid from the business account, business expenses paid from a personal card, retirement savings that only exist as “equity in the company.”
Did You Know? The IRS specifically looks at commingled funds as a red flag during audits of small businesses and can use it to challenge whether an LLC or S-corp structure should be respected at all.
Why Commingling Is a Bigger Problem Than It Looks
When personal and business money mix too freely, three things go wrong.
First, it becomes nearly impossible to know your real personal net worth, since the business’s cash flow masks how much you’re actually keeping. Second, it puts your personal assets at legal risk if a court decides your LLC or corporation isn’t being treated as a separate entity. Third, it makes it much harder to plan for retirement, since you can’t tell how much of your “wealth” is actually accessible versus tied up and illiquid.
Pro Tip: Pay yourself a consistent, documented salary or owner’s draw on a set schedule, even if the amount changes periodically. A clean paper trail between the business and your personal accounts protects you legally and makes every other planning conversation easier.
Building a Plan Around Two Kinds of Wealth
Once the two columns are honest, a business owner’s plan usually needs to answer four questions:
- How much personal wealth exists outside the business today? This is the foundation your retirement doesn’t depend on the business sale going perfectly.
- What retirement plan structure fits your business? Options range from a SEP IRA to a solo 401(k) to a defined benefit plan, and the right choice depends heavily on your income, age, and whether you have employees.
- How exposed is your personal wealth to business risk? This covers liability insurance, entity structure, and buy-sell agreements if you have partners.
- What is the business actually worth, and to whom? A rough valuation early on shapes every later decision about exit timing and tax planning.
Retirement Savings When Your Income Isn’t Steady
Business owners often struggle to save consistently for retirement because income varies. A useful approach is to save a percentage of revenue rather than a fixed dollar amount, adjusting contributions up in strong years and down in lean ones, while still hitting a minimum floor every year regardless of how business performed.
Retirement plan design matters just as much as the saving habit. A SEP IRA lets a business owner contribute up to 25% of compensation, capped at $72,000 for 2026. A solo 401(k) can allow more flexibility for owners with no employees, since it combines an employee deferral with an employer contribution under the same overall cap.
Did You Know? If you have even one part-time employee working over 1,000 hours a year, it can change which retirement plan options are available to you and what you’re required to offer them.
Tracking Personal Net Worth Separately From the Business
Once the two columns are clean, it’s worth tracking them on two separate sheets going forward, updated at least once a year. Your personal net worth statement should list only the left-column items: home equity, personal savings and investment accounts, retirement accounts in your name, and personal debts like a mortgage or car loan.
This matters because a healthy business can mask a fragile personal balance sheet. An owner can point to a business worth several million dollars while having almost nothing saved personally outside of it. That gap only becomes obvious, often too late, when retirement or a business sale doesn’t go exactly as planned.
Pro Tip: Set a target for personal, liquid net worth outside the business, and review it every year alongside your business financials. Watching that number grow independently of the business gives you a real measure of progress toward retirement that doesn’t depend on a future sale going well.
Protecting Business Wealth From Personal Risk (and Vice Versa)
The two-column test cuts both ways. Just as personal risk can bleed into the business, business risk can threaten personal assets if the legal structure isn’t respected or isn’t in place at all.
A properly maintained LLC or corporation, separate bank accounts, its own bookkeeping, and documented transactions between owner and company, creates a real liability shield. Umbrella liability insurance adds another layer of protection for personal assets against claims that exceed a business policy’s limits.
If the two-column exercise revealed how tangled your finances have become, that’s common, and it’s fixable with a plan built specifically around a business owner’s balance sheet, not a generic retirement calculator. John Shedenhelm and the team at Eagle Financial Solutions build that plan by starting with the same two columns described here, then coordinating with your CPA and attorney to keep both sides clean going forward.
Separating personal and business wealth isn’t a one-time cleanup. It’s an ongoing discipline that makes every future decision, retirement plan selection, tax planning, and eventually an exit, much easier to get right. Schedule a conversation with Eagle Financial Solutions to run the two-column test on your own finances.
FAQ
What is financial planning for business owners? Financial planning for business owners means building a plan around two separate pools of wealth: personal assets and business assets. It covers retirement plan selection, tax strategy, risk protection, and eventually exit planning, tailored to variable income and business ownership.
Why should I separate personal and business finances? Separating personal and business finances protects your personal assets from business liability, makes tax filing accurate, and gives you a clear picture of your real net worth. Commingled funds can also weaken the legal protection of an LLC or corporation.
What retirement plan is best for a small business owner? The best plan depends on your income, age, and whether you have employees. A SEP IRA works well for simplicity, while a solo 401(k) or defined benefit plan can allow higher contributions for owners with no employees and higher income.
How much can a business owner contribute to a SEP IRA in 2026? A business owner can contribute up to 25% of compensation to a SEP IRA in 2026, with a maximum contribution of $72,000. The exact amount depends
on total compensation and the plan’s contribution formula.
