Financial Insight and Considerations for IndividualsandSmall Business Owners

KORHORN FINANCIAL GROUP, INC.

Financial Insight and Considerations for Individuals

andSmall Business Owners

Michael Bernard CFP®, ChFC, CIC, EAKorhorn Financial Group, Inc.

Granger, IN


DisclosuresDisclaimer:

Information or opinions expressed today are subject to

change without notice, are for general information only and are not intended as an offer or solicitation with respect to the purchase or sale of any security or offering of individual investment advice. Past performance does not guarantee

future results. Please consult a financial advisor to assess your individual situation. Securities America and its representatives do not provide tax or legal advice. Any tax or legal information provided here is merely a summary of our

understanding and interpretation of some of the current income tax regulations and is not exhaustive. Tax-law is subject to frequent change;

therefore it is important to coordinate with your tax advisor. Securities offered through Securities America, Inc., Member FINRA/SIPC, Advisory services

offered through KFG Wealth Management, LLC dba Korhorn Financial Group. Mike Bernard Representatives. KFG Wealth

Management, LLC is not affiliated with the Securities America companies.


Korhorn Financial Group, Inc

KFG Insurance Agency, LLCKFG Wealth Management, LLC KFG Tax & Business Services, LLC

First State Investment Center Granger Tax & AccountingHarbor Country Tax & Accounting

Harger Accounting & Tax

Stonegate Insurance AgencyJohnson Insurance Agency

Core Services:Individuals:

Comprehensive Financial PlanningInvestment Management

Businesses:Retirement Plans

Financial EducationComprehensive Financial Planning


Personal Tax PreparationTax Planning

Businesses:Corporate Tax Preparation

PayrollAccountingConsulting


Home, Auto, Life, Health, Disability, LTC, Medicare Supplement

Businesses:Commercial Insurance, Work Comp

Health Insurance and Benefits


Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through KFG Wealth Management, LLC., KFG Tax & Business Services, LLC and KFG Insurance Agency, LLC are subsidiaries of Korhorn Financial Group, Inc. Korhorn Financial Group and its subsidiaries are not affiliated with the Securities

America companies. Securities America and its representatives do not provide tax or legal advice. Those services are offered in conjunction with qualified professionals. Tax services are offered through KFG Tax & Business Services, LLC..


6 Areas of Financial Planning

Estate Planning: Educating on how assets pass and the documents that are recommended for a proper estate plan, reviewing current estate plan to ensure it is consistent with wishes, and completing the implementation of beneficiaries to ensure consistent with the will.

Present Financial Position: Organizing assets and liabilities into a format that allows for monitoring of progress and

establishing, when necessary, a spending plan that if followed will help pursue

financial goals and work towards financial peace.

Securities offered through Securities America, Inc. Member FINRA/SIPC. Advisory services offered through KFG Wealth Management, LLC. KFG Wealth Management, KFG Tax & Business Services, LLC and KFG Insurance Agency are subsidiaries of Korhorn Financial Group, Inc. Korhorn Financial Group and its subsidiaries are not affiliated with the Securities America companies.

Securities America and its representatives do not provide tax or legal advice. Those services are offered in conjunction with qualified professionals. Tax services are offered through KFG Tax & Business Services, LLC.

Retirement Planning: Defining retirement goals/needs, evaluating current position, and adjusting variables in an effort to help ensure the successof the plan.

Investment Planning: Reviewing the existing structure of investment accounts and the appropriateness of current investment tools and making recommendations to ensure the structure and tools are consistent with retirement needs and personal tax situation.

Protection Planning: Reviewing financial risks and

how they are managed to ensure it is consistent with

Net Worth and need. Often entails a complete insurance

review.

Tax Planning: Analyzes current tax situation and determines opportunities to optimize situation in

light of all areas of your financial life.

Present Financial Position

Protection Planning

Tax PlanningInvestment

Planning

Retirement Planning

Estate Planning



3 Habits of Financially Successful

Business Owners


Habit #1: Choose how you want to be taxed


• Taxed as a Sole Proprietor:– No formal organization or as a single-member LLC– File on Schedule C of your individual tax return– Revenue – Expenses = Business Net Income– Net Income taxed:• Federal Income Tax• State and Local Income Tax• Self Employment Tax



What is Self Employment Tax?6.2% Social Security Tax

6.2% Social Security Tax

1.45% Medicare Tax

1.45% Medicare Tax

15.3% Self Employment Tax


Self Employment Tax - Example

• Let’s assume your business makes $125,000 and has $75,000 in expenses, making your net income $50,000

• Assume 25% Fed Tax and 5% State Tax

• Fed Tax: $50,000 x 25% = $12,500• State Tax: $50,000 x 5% = $2,500• Self Employment Tax: $50,000 x 15.3% = $7,650• TOTAL TAX = $22,650• Meaning you only get to keep $27,350 of your $50,000 income!


Is there a better way for you to be taxed?

Consider being taxed as a corporation


• Taxed as a S Corporation:– As a single-member LLC or a S Corp– File an 1120 S in addition to your individual tax return– Pay yourself a salary just like other employees– Revenue – Expenses = Business Net Income– Net Income taxed:• Federal Income Tax• State and Local Income Tax• NO Self Employment Tax



What is Self Employment Tax?6.2% Social Security Tax

6.2% Social Security Tax

1.45% Medicare Tax

1.45% Medicare Tax

15.3% Self Employment Tax

Employee Portion

Employee Portion

Employer Portion

Employer Portion

FICA

Payroll Tax


Taxed As S Corp - Example• Let’s assume your S Corp makes $125,000 and has $75,000 in

expenses, and in addition you take a $25,000 salary, making your net income $25,000


Your $25,000 Salary is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250

FICA: $25,000 x 7.65% = $1,912.50Payroll Tax: $25,000 x 7.65% = $1,912.50

Total Tax = $11,325

Your $25,000 Net Income is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250

Total Tax = $7,500

Total Tax = $18,825 $3,825 less tax!


Taxed As S Corp - Example• Let’s assume your S Corp makes $150,000 and has $75,000 in



Your $25,000 Salary is taxed:Fed Tax: $25,000 x 25% = $6,250State Tax: $25,000 x 5% = 1,250

FICA: $25,000 x 7.65% = $1,912.50Payroll Tax: $25,000 x 7.65% = $1,912.50

Total Tax = $11,325

Your $50,000 Net Income is taxed:Fed Tax: $50,000 x 25% = $12,500

State Tax: $50,000 x 5% = 2,500

Total Tax = $15,000

Total Tax = $26,325 $7,650 less tax!


• Be Aware…– To be taxed as a corporation subjects you to other tax

filings and other requirements (940, 941, UC1, etc.)• Thus you probably should not choose this if your business

income is less than $50,000

– You must set your salary at a fair and reasonable level– Use an attorney to help you select the right entity and

get it established– Use a CPA firm to help with your taxes and filings



Habit #2: Set up a retirement plan for the business


1) Tax Sheltered Saving2) Help you take money out of the

business

Why start a retirement plan for the business?


1. SIMPLE IRA2. 401(k)3. SEP IRA

What are your options

SIMPLE IRA• $12,000 max contribution• $2,500 additional contribution if

50 or older• 3% company match contribution• Easy to administer, no annual

filings• Must cover employees that work

more than 1,000 hours per year




401(k)• $17,500 max contribution• $5,500 additional contribution if

50 or older• Various company match

contribution options• Difficult to administer, annual

filings required• Must cover most employees who

are at least 21 years old




SEP IRA• No employee contribution• Employer contribution only• Must contribute the same

percentage to each employee• Easy to administer, no annual

filings• Can make contribution up to tax

filing deadline


Taxed As S Corp WITH SIMPLE IRA• Let’s assume your S Corp makes $150,000 and has $75,000 in


• You contribute the maximum $12,000 to your SIMPLE IRA

Your $25,000 Salary is taxed:Fed Tax: ($25k - $12k) x 25% = $3,250

State Tax: ($25k - $12k) x 5% = 650FICA: $25,000 x 7.65% = $1,912.50

Payroll Tax: $25,000 x 7.65% = $1,912.50Total Tax = $7,725

Your $50,000 Net Income is taxed:Fed Tax: $50,000 x 25% = $12,500

State Tax: $50,000 x 5% = 2,500

Total Tax = $15,000

Total Tax = $22,725 $3,600 less tax!$11,250 less tax than

original example!


Habit #3: Work with a Comprehensive Financial Planner


They can help you with…• Reviewing financial statements• Budgeting and forecasting• Guidance on insurance coverage needs• Tax planning for when things go right, and

when they don’t• Starting and managing a retirement plan• Corporation (filings, establishing salary, etc.)• Etc.

Why work with a Comprehensive Financial Planner?


3 Habits of Financially Successful Individuals / Families


Habit #1: Have a spending plan


Budgets are restricting!


Budgets are freeing!


• Purposes of a budget:– Tracking• Knowing where your money is going

– Discipline• Awareness of how much you can afford to spend in an

area, and when you’ve reached that level



• Best Practices– Update your actual spending compared to budget

once a week• Helps you monitor whether you’re over or under for

the month

– Embrace technology• Consider using Mint.com, Quicken, etc to help with

monitoring, categorizing, alerts



Includes the right bank account structure



ImmediateSpending

DelayedSpending

EmergencySpending

#1 #2 #3

The 3 Bank Account System


Habit #2: Use tax sheltered accounts to save up for retirement


Types of tax shelter account…

Traditional IRA

Roth IRA

401(k)

SIMPLE IRA



Pre-Tax Post-Tax

Traditional IRA Roth IRA

Taxable

Withdrawals Tax Free

WithdrawalsAfter Tax

ContributionsTax

Deductible

Contributions


Is it really that important?

Insert Guide to Retirement Slide


• Best Practices– Use your 401(k) to get a match from your

employer– Use the Roth IRA if you’re in a low tax bracket– Consider a Roth Conversion if you’re in a low tax

bracket– Beware of contribution limits and eligibility limits



Habit #3: Have a plan


The right plan and planning process gives you:

Habit #3: Have a plan

CONFIDENCE CLARITY


The right plan and planning process answers…• Am I saving enough for retirement?• Can I afford that much house?• Will my family be taken care of when I die?• Should I pay off my mortgage early?• Can I pay for my kids college?• Should I use an IRA or Roth IRA?• Am I missing tax deductions?

Why have a financial plan?


Habits for financially successful…

Businesses1. Choose how you want

to be taxed2. Set up a retirement plan

for your business3. Work with a

comprehensive financial planner

Individuals1. Have a spending plan2. Use tax sheltered

accounts to save up for retirement

3. Have a plan


Thank You!

Questions?

Financial Insight and Considerations for IndividualsandSmall Business Owners

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