How Business Owners Can Build Wealth and Protect It: A Financial and Legal Guide
Building a business is one of the most rewarding things you can do — but it also comes with financial risks that most people don’t learn about until it’s too late. At a recent event, financial advisor Kerry Lawing and estate planning attorney Daniel Schowengerdt sat down to share what every business owner needs to know about building wealth and protecting it. Here’s what they covered.
Part 1: Building Wealth as a Business Owner
The Foundation: Separate Your Money
The single most common financial mistake business owners make is mixing personal and business finances. The fix is simple — open two accounts: one for the business, one for you personally. Move a set amount from the business account to your personal account each month. That’s what you live on. Keep them separate.
Alongside that, every business owner needs a personal emergency fund — three to six months of expenses set aside in a high-yield savings account. Not a checking account earning zero. Not money you’re planning to spend. An actual financial cushion that lets you sleep at night when business is slow.
The Biggest Financial Mistakes to Avoid
- Saving to spend. Building up savings only to drain them on non-essentials defeats the purpose. Have goals for what the money is actually for.
- Chasing “can’t lose” investments. If it sounds too good to be true, it usually is.
- Trying to time the market. Consistency beats timing every single time.
- Not protecting yourself. You are the income machine. If something happens to you — an accident, an illness, an unexpected disability — your business and your family feel it immediately. Make sure you have appropriate life insurance and disability coverage in place.
The Power of Compounding — Why Starting Early Matters
Here’s a number that puts it in perspective: if you’re 40 years old today and want to have $1 million by age 65, you need to save $800 a month. Wait until you’re 50 to start, and that number jumps to $2,500 a month. The math doesn’t lie — time is your greatest financial asset.
And $1 million at retirement? It generates roughly $40,000–$50,000 per year in income at a conservative withdrawal rate. That’s not much by today’s standards. The real target for most business owners is $3 million or more — which at 40 requires saving $2,500 per month over 25 years.
The lesson: start early, save consistently, and let compounding do the heavy lifting.
Pick the Right Account for the Right Job
- Short-term savings (emergency fund): High-yield savings account
- Retirement savings: Solo 401(k) — allows up to $70,000 per year in tax-deductible contributions, far more than a traditional IRA’s $7,000 limit
- Long-term growth: Managed investment accounts, real estate, private equity
- Business retirement: SEP-IRA or Solo 401(k)
Don’t put all your eggs in one basket. Markets run in cycles. Diversification isn’t just a buzzword — it’s protection.
Part 2: Protecting What You Build — Estate Planning for Business Owners
Why Business Owners Need an Estate Plan
You’ve spent years building something. Without the right legal documents in place, that wealth can be lost to probate court, unnecessary taxes, family conflict, or worse — a judge making decisions about your children and your assets that you would never have made yourself.
Estate planning isn’t just for the wealthy. It’s for anyone with minor children, a home, a bank account, or a business.
The Probate Problem
Probate is the court process that happens when you die without a proper estate plan in place. It’s public, expensive (typically 2–4% of your estate), and slow — averaging 6 to 18 months. On a $1 million estate, that’s up to $40,000 in attorney fees. An estate plan typically costs $3,500–$4,000. The math is obvious.
A real example: a mother and father died in a car accident, leaving behind their 10-year-old son. Because they had no estate plan, the boy spent 16 months in a bitter custody battle between his aunt and uncle — both of whom believed they were honoring the parents’ wishes. Each side spent over $100,000. The family was destroyed. And it was entirely avoidable.
Trust vs. Will — Which Do You Need?
A will is a set of instructions to a judge. It names guardians, lists your wishes — and then sends your family straight to probate. A will does not avoid probate. It’s easier for you now and harder for your family later.
A trust keeps your family out of court entirely. It’s private, fast, and flexible. A trust is a little more work to set up (you have to actually transfer your assets into it — about 80% of trusts in the U.S. are never funded), but a lot easier for your family later.
Trusts also offer benefits a will can’t:
- Privacy — unlike probate, a trust is not part of the public record
- Creditor protection — assets in trust are shielded from lawsuits against your beneficiaries
- Divorce protection — undistributed trust assets can’t be split in a divorce
- Business continuity — if you become incapacitated, your trustee can step in and run your business, potentially preventing a forced liquidation
What Age Should Your Kids Inherit?
If you do nothing, minor children inherit at 18. Most parents don’t actually want that — and for good reason. An 18-year-old who receives a $300,000 inheritance is statistically likely to buy a car. That same $150,000 invested from age 18 to 60 at 7% interest grows to $2.75 million. At 10%, it’s $8.5 million.
A trust lets you decide when and how your children receive their inheritance. A common structure — what Daniel calls the “gold standard” — distributes assets in thirds at ages 30, 35, and 40, while providing for health, education, and basic needs in the meantime. It protects your children from themselves while still caring for them.
Don’t Forget Incapacity Planning — It’s for You
Wills and trusts protect your family after you’re gone. Incapacity planning protects you while you’re still here.
If you became unable to manage your finances or make healthcare decisions tomorrow — due to an accident, illness, or cognitive decline — who steps in? Without the right documents, your family has to petition a court for guardianship, which is expensive, slow, and publicly humiliating. The solution has to be set up before you need it.
The documents every adult needs:
- Financial power of attorney — authorizes someone to manage your finances and act on your behalf
- Healthcare power of attorney — authorizes someone to make medical decisions for you
- HIPAA authorization — allows designated people to access your medical information (critical for parents of adult children — once your child turns 18, you lose automatic access to their health information)
- Living will / advance directive — documents your end-of-life care wishes so your family doesn’t have to make that impossible decision alone
The Bottom Line
Building wealth takes discipline, consistency, and the right professional guidance. Protecting it takes the same. The two go hand in hand — and neither one should wait.
Whether you’re just starting to get your financial house in order or you’ve been building wealth for years without the legal framework to protect it, now is the right time to put both pieces in place.
If you’re in Kansas or Missouri and want to talk through your estate plan, our team at Schowengerdt Law is happy to help. Schedule a complimentary consultation at djslaw.us or call 913-744-0900.