As an entrepreneur, your money usually sits where it works: in your own firm. That's right, and at the same time it carries a risk. Because if all of your wealth is tied up in the company, your future rests on a single asset, too.
The short answer. As an entrepreneur, you build wealth in three steps. First, deliberately separate your private assets from the company, so that not everything hangs on a single asset. Second, sort out your retirement provision beyond the firm, with a Basisrente (tax-deductible basic pension, “Rürup pension”), a broadly diversified fund portfolio and a liquidity buffer. Third, choose the right tax wrapper, depending on your legal form and together with your tax adviser.
I'm Eduard Strekert, financial advisor for Deutsche Vermögensberatung AG (DVAG), tied agent, based in Lüdenscheid, and I support entrepreneurs, the self-employed and practices in the Märkischer Kreis region. Let's take a calm look at the roadmap behind it.
Why is wealth building different for entrepreneurs?
An employee saves from their salary and builds up privately on the side. For you as an entrepreneur, most of it flows back into the firm, into machinery, staff, growth. That's often the best return you can get. But it means your prosperity depends almost entirely on the company.
If a weak year comes along, a slump in orders or a shift in the industry, it hits both at once: your income and your wealth. That's exactly why wealth building for entrepreneurs isn't only about growing but about separating. A part of your wealth should deliberately stand apart from the firm.
Step 1: How do you separate private assets and the company?
The most important step sounds unspectacular: build up wealth that doesn't sit in the firm. Experts call the risk of putting everything on one asset a concentration risk. You know it from investing: you diversify broadly instead of betting everything on a single security. For the entrepreneur, the firm is that one position.
Separating doesn't mean believing in your company any less. It means regularly transferring a fixed part of your profits into your private assets and investing it there with broad diversification. This creates a second pillar that holds even when the firm is going through a dip. That's the core of healthy wealth building for entrepreneurs. How you keep the firm's liquidity stable in the process, I show you on the liquidity for entrepreneurs page.
Step 2: How do you build retirement provision as an entrepreneur?
Many entrepreneurs firmly count on selling the firm as their retirement provision. That can work out, but it's uncertain, because nobody knows today what your company will be worth in twenty years. Solid provision therefore stands on several legs.
- State-supported basic provision. A fund-based Basisrente, often called Rürup, you can deduct as special expenses, up to an annual maximum. The catch: the capital is locked in until retirement and the later pension is taxed. So it's a tax deferral, not a tax gift.
- Occupational pension as a GmbH managing director. If you're the employed managing director of your own GmbH, options are open to you that a sole proprietor doesn't have. This can be structured, but it's complex and belongs in expert hands, often in interplay with your tax adviser.
- Broadly diversified fund portfolio. The flexible centrepiece. Here you build capital outside the firm. You can access this money when you need it. For context: investment funds and ETFs aren't opposites but two ways of investing with broad diversification.
- Liquidity buffer. As an entrepreneur, you need a reserve that cushions fluctuations without you having to touch your provision. This buffer isn't a return component but your peace-of-mind cushion.
How you weight these building blocks depends on your firm, your age and your appetite for risk. There's no standard solution here that fits everyone.
Step 3: Which wrapper fits your legal form?
How you invest is one question. What you invest through is another. As a sole proprietor, almost everything runs through your private assets. If you run a GmbH, a second level is added, because the company itself can also build up assets.
Which route makes sense for tax purposes, investing privately or through the company, can't be said in a blanket way. It depends on your legal form, your withdrawal strategy and your tax burden. This is exactly where we work closely with your tax adviser. This article doesn't replace tax or legal advice; it places the building blocks in context so you can ask the right questions.
A model case from practice
Take Thomas, 44, shareholder and managing director of a small IT GmbH in Lüdenscheid. The firm is doing well, but almost all of his wealth is tied up in the company. Privately, he has set aside little so far.
In my advisory work in Lüdenscheid, we calmly turn that around. Thomas transfers a fixed monthly amount from the firm to his private assets and invests it in a broadly diversified fund portfolio. In parallel, with his tax adviser we examine a fund-based Basisrente for the tax advantage and a route via his GmbH for retirement provision. A liquidity buffer sits alongside as a reserve.
How high the individual amounts are depends on Thomas's profits, his withdrawal strategy and his tax rate. That's exactly what we work through for his case, instead of using a blanket figure. This creates wealth that stands beside the firm and not only inside it. A solution that really fits his company.
Wealth building for entrepreneurs isn't a product you sign quickly. It's a structure: one part works in the firm, one part deliberately stands beside it. Anyone who separates this early becomes less dependent on a single good or bad year. That's exactly what we look at together before anything is decided.
Frequently asked questions about wealth building for entrepreneurs
Isn't selling my firm enough as retirement provision?
It can be an important building block, but it's uncertain. What your company will be worth in twenty years, nobody knows today. Wealth beside the firm makes you less dependent on that one event.
What does concentration risk mean for me as an entrepreneur?
It means that almost all of your wealth hangs on a single asset, namely your firm. If a weak year hits it, it hits income and wealth at once. A second pillar outside the firm lowers this risk.
Should I rather reinvest profits or invest them privately?
Both have their place. Reinvesting often brings the highest return but increases concentration risk. A fixed part that regularly flows into your private assets provides balance. How you choose the split, we clarify together.
Is a Basisrente worthwhile for entrepreneurs?
It can pay off, because you can deduct the contributions as special expenses. In return, the capital is locked in until retirement and the pension is taxed later. Whether and how strongly it fits you depends on your situation.
Can I provide for old age through my GmbH?
As the employed managing director of your GmbH, options are open to you that a sole proprietor doesn't have. This can be structured, but it's complex and belongs at the table with your tax adviser.
Do you also advise entrepreneurs in person in the Märkischer Kreis region?
Yes. I'm based in Lüdenscheid, advise in person or via video, and support entrepreneurs, the self-employed and practices across the entire region.
Your next step in the Märkischer Kreis region
You don't have to solve this alone, and certainly not between two client meetings. A first conversation doesn't tie you to anything. It means you'll know what wealth beside your firm can look like and how your retirement provision fits with it.
I'm Eduard Strekert, financial advisor for Deutsche Vermögensberatung AG (DVAG), tied agent, based in Lüdenscheid. I support entrepreneurs and the self-employed in the Märkischer Kreis region in building wealth with structure, at their own pace. There's no need to rush anything. Next step: book a free initial consultation, and we'll look at your firm and your wealth together.
Related reading:
- Retirement planning for the self-employed: how to build it without an employer
- Occupational pension for medical practices: retain your team and provide for yourself
- Advisory for entrepreneurs: liquidity, employees and risks
- Financial advisory for the self-employed in the Märkischer Kreis region
Eduard Strekert is a financial advisor for Deutsche Vermögensberatung AG (DVAG), tied agent. This article is general information and does not replace personal advice. It does not constitute investment or tax advice.