Planning for High Growth Private Companies: Keeping the Owner's Finances in Step With the Business
Planning for high growth private companies usually falls behind the growth itself. Revenue doubles, headcount climbs, the company expands into new states, and the systems that worked at a smaller size start to strain. The owners are often so focused on keeping up that their own finances, and the tax structure underneath the business, stay frozen in the shape they were in years ago.
That gap can be costly. Decisions made during rapid growth, such as entity structure, how capital is raised, and where the company operates, can shape taxes and options for years. And owners who reinvest everything may build a valuable company while leaving their personal balance sheet thin and concentrated. This article covers growth company financial planning from both sides: the business and the owner.
Start Here: A Complimentary Wealth and Tax Review
Fast growth makes it easy to postpone personal planning. Compound offers a complimentary, no-obligation wealth and tax review that may look at your entity structure, tax position, compensation, and how much of your net worth depends on the company. Request your wealth and tax review.
Business-Level Questions in Planning for High Growth Private Companies
Is Your Entity Structure Still the Right One?
Many companies start as an LLC or S corporation and never revisit the choice. As a company grows, considerations can change: outside investors may prefer a different structure, owners may want to retain earnings for growth, and some C corporation shareholders may be eligible for a federal gain exclusion on qualified small business stock if requirements are met. Changing structure has its own tax consequences, so the decision is worth modeling carefully with a tax professional.
Are You Keeping Up With Multi-State Tax Obligations?
Hiring remote employees, adding customers, or opening locations in new states can create income, payroll, and sales tax filing obligations. These are easy to miss during fast growth and can become issues later, especially during a financing or sale. Pass-through owners may also face state filing obligations personally.
Does Your Financial Reporting Support Decisions?
Fast-growing companies often need monthly closes, cash flow forecasts, budgets, and metrics by product line or location. Lenders and investors expect this, and it helps owners decide how much growth the business can fund internally. Compound's client accounting services can provide advisory support for scaling private companies that have outgrown basic bookkeeping.
Are You Capturing Available Tax Incentives?
Growth often involves equipment purchases, facility investments, and development work. Depreciation planning, credits for qualifying research activities, and state incentives may be worth reviewing. Each has specific eligibility rules, and timing purchases in a multi-year tax plan may help. Read more in business tax planning in Wisconsin.
How Will You Fund Growth?
Bank debt, equipment financing, outside equity, and acquisitions each change ownership, risk, and taxes differently. Raising equity dilutes owners. Debt may require owners to sign personally for the loan. Growing by acquisition adds integration and diligence work. For acquisition-driven growth, see financial advisory for acquisitive growth.
Owner-Level Questions: Growth Company Financial Planning for You
Build Wealth Outside the Business
Reinvesting heavily in a growing company is common and can be rational. But a plan that relies entirely on one future exit leaves little margin for error. Even modest, steady saving outside the company may add diversification over time. To see how regular contributions may grow under different assumptions, try the Compound calculator. Results are hypothetical and for illustration only.
Revisit Compensation and Distributions
As profits rise, the mix of salary and distributions, along with retirement plan design, affects both business and personal taxes. A plan with higher contribution capacity may become worth evaluating as the company grows, within annual limits. Pass-through owners should also plan for tax on profits retained in the business.
Start Estate Planning While Values Are Lower
If the company may be worth much more later, transferring some ownership to family members or trusts earlier, when values are lower, may be a strategy worth discussing with your estate attorney. These decisions require a qualified valuation and careful coordination.
Protect Against Personal Risk
Personal liability for company debt, key person risk, and concentration in one asset all affect your family's security. A buy-sell agreement among owners, coordinated with your attorney, and adequate liquidity outside the business can help. Insurance is one tool owners sometimes discuss with an insurance professional to fund buy-sell obligations or address key person risk, as part of a broader plan. It is also worth reviewing who would make decisions, and how your family would be supported, if you were unable to work for an extended period.
Our article on wealth planning for owners of fast-growing firms goes deeper on these owner-level topics, and financial guidance for rapidly evolving businesses offers a framework for the business side.
Planning Ahead for an Eventual Liquidity Event
Even if you have no plans to sell, growth often attracts interest from investors and acquirers. Owners who already have clean financials, a sound tax structure, and a personal financial plan are better positioned to evaluate offers on their own timeline. For a perspective on building enterprise value, see financial guidance for companies focused on equity value growth.
How Compound Can Help Growing Companies and Their Owners
Compound combines wealth management, investment management, tax planning and preparation, client accounting services, and business transaction services, so company decisions and personal planning are considered together. We work with growing companies and their owners throughout Wisconsin, including Milwaukee, Madison, Waukesha, Green Bay, Appleton, and Eau Claire, and in surrounding areas.
Growing fast? Request a complimentary wealth and tax review.
Frequently Asked Questions
What does planning for high growth private companies involve?
It typically covers entity structure, multi-state tax compliance, financial reporting, tax incentives, funding decisions, and the owners' personal wealth, compensation, and estate planning.
When should a growing company revisit its entity structure?
Common triggers include bringing in outside investors, expanding into new states, retaining more earnings for growth, or preparing for an eventual sale. Any change should be modeled with a tax professional.
What advisory support do scaling private companies usually need?
Many need stronger monthly reporting, cash flow forecasting, proactive tax planning, and owner-level wealth planning, often from advisors who coordinate with one another.
Should owners of fast-growing companies save outside the business?
Many owners choose to build some savings outside the company to add diversification and reduce dependence on a single future exit, even while reinvesting in growth.
Compound is a registered investment adviser. Registration does not imply a certain level of skill or training. This article is for informational and educational purposes only and should not be construed as personalized investment, tax, or legal advice. Tax laws are complex and subject to change. Strategies discussed may not be suitable for everyone, and there is no guarantee that any strategy will achieve its objectives or reduce taxes. Calculator results are hypothetical, are not guarantees of future results, and do not reflect any actual investment. Investing involves risk, including possible loss of principal. Diversification does not ensure a profit or protect against loss. Please consult your tax, legal, and financial professionals before acting on any information in this article. For more information, see Compound's Form ADV, available at adviserinfo.sec.gov.
About Compound Wealth
Compound Wealth believes many financial decisions benefit from being evaluated together rather than independently. The firm integrates tax planning, wealth management, accounting, and business advisory services to help clients navigate financial complexity through a coordinated planning approach tailored to their evolving needs.
