Business Owner Protection: Buy-Sell Agreements, Key Person Insurance, and Essential Coverage Plans
Buy-Sell Agreements With Life Insurance
Ensure a smooth transition in business ownership when a partner unexpectedly leaves or passes away. Here’s how they work:
Cross-Purchase Agreements: Each business partner buys life insurance on the others. If one partner dies, the surviving partners use the payout to buy out the deceased’s share.
Entity Purchase Plans: The business itself buys life insurance on each partner. If a partner dies, the business uses the death benefit to purchase the deceased partner’s ownership stake.
Nonqualified Deferred Compensation Plans
Often used by employers to attract and retain key employees. It allows you to defer a portion of your income until a future date, such as retirement or another milestone. This is an agreement between you and your employer, giving you the flexibility to postpone income and its associated taxes until later, potentially when you're in a lower tax bracket. It’s a strategic financial tool for both compensation management and tax planning.
Key Person Life Insurance
Protects your business financially if a crucial team member passes away unexpectedly. Instead of focusing on family protection like personal life insurance, this policy's beneficiary is your business. The payout can help cover lost revenue, assist in finding a replacement, or provide funds to keep the business stable during a tough transition period. This ensures that the company can continue operating smoothly even after the loss of a key employee.
Disability Insurance
Disability insurance is essential for business owners to protect against financial hardships if they are unable to work due to injury or illness.