| Business Planning
This service is intended to assist companies and owners in planning for present and future business.
Business Continuation
The Problem: Following the death of a business owner, the remaining owner(s) face serious decisions and few alternatives. Their own business future may be in jeopardy. Surviving owner(s) face four alternatives:
- Accept Heirs into the Business
- Accept Outsiders into the Business
- Sell to Heirs
- Buy out Heirs
How do you fund for Key Person Indemnity?
• Treat Loss as Current Expense
- Will profits at time needed be sufficient to absorb loss?
- Dollars needed come from company funds.
- Profits may be needed to fund other growth projects.
• Accumulate Fund to Cover Loss
- If a key person dies soon, fund may be inadequate to cover loss.
- Earnings on fund may be subject to income tax.
• Purchase Life Insurance
- Cash available exactly when needed.
- Money generally received income tax free.*
- May be less expensive than building a fund.
- Cash value is an asset on balance sheet.
Business Valuation
Problems business owners may face at death, disability or retirement include:
- Paying business debts
- Paying personal debts, especially personal guarantees for the business
- Having sufficient funds to pay estate taxes
- Leaving behind a stable business Preserving the value of business assets for heirs
Buy-Sell Planning
A Buy/Sell agreement may provide for the sale of the owner's business interest at death, disability or retirement. It may...
- Assure the transfer of the business at a price and on terms acceptable to all parties. A forced sale or liquidation can be involved.
- Provide liquidity. A disabled or retired owner can diversify investments and generate income. At death, purchase money helps pay estate taxes, and other debts and administration expenses.
- Maintain control of the business. Heirs (such as the deceased's spouse) will not take control, or conflict with the remaining owners' objectives.
- Help retain key employees. At death, disability or retirement of owner, business will continue. Key employees hopefully will remain employed and be better workers.
- Establish value for estate taxes. If agreement properly drafted, IRS may accept business value for estate tax purposes.
We recommend that you consult with your own tax or legal advisors for counsel about the concepts presented in these materials. Neither the insurer nor your agent may give you legal or tax advice.
|
