BUSINESS PLANNING CONCEPTS
A buy/sell agreement, also known as a buyout agreement, is a contract funded by a life insurance policy that can help minimize the turmoil caused by the sudden departure, disability or death of a business owner or partner. A buy/sell agreement gives employers peace of mind knowing that their business is in capable hands should they no longer be able or want to manage it.
It also can:
- Provide money to create a fair market value exchange Promotes equitable and orderly transfer of wealth, ownership and management
- Offer tax advantages
- Guarantee heirs a buyer for assets they may not know how to manage
- Provide heirs cash to pay estate debt, expenses and taxes
KEY-PERSON COVERAGE
Replacing a key person takes time and money − and could cost the business valuable clients during the transition. Key person life insurance offers a death benefit that can help cover financial losses that occur at the death of a key person. This helps assure continuity of the business for employees, customers and creditors. Establishing and maintaining a key person policy on your top employees also affirms their value to your business, strengthening the relationship.
Uses can be any of the following:
- The death benefit can be used to recruit and develop a replacement for the previous key employee
- Coverage is a business asset that enhances your company’s creditworthiness for commercial borrowing
- The policy’s cash value may be available to your business through a withdrawal or loan if needed
EXECUTIVE COMPENSATION
Companies use life Insurance as a way to reward and retain key executives. Because these plans are non-qualified, they can be offered selectively to key executives, whose contributions to the company's qualified plan, such as a 401(k), are limited by the maximum annual contributions or the income eligibility limits, or both.
Typically, the company and the executive sign an agreement that promises the executive a certain amount of supplemental retirement income based on various eligibility conditions that the executive must meet. The company funds the plan out of its current cash flows or through the funding of a cash-value life insurance policy. The money, and the taxes on it, are deferred. After retiring, the executive can withdraw the money and must pay state and federal taxes on it as ordinary income.
NO COST BUSINESS VALUATIONS:
Amazingly, over 98% of business owners do not know what their business is worth. We provide you with a secure, comprehensive and accurate business valuation, that is based on the financial information your client provides. Your clients will learn the value of their business, and easily see where they need to plan. You quickly become the advisor to help them with: Succession Planning, Buy/Sell Agreements, Personal Insurance, and Retirement Planning. There is no charge and no obligation, however, we hope you find value in this service and would be open to discussing how we can use the valuation report to help you achieve your goals.