As a business owner, you understand risk because you deal with it on a daily basis. But what about the risks of owning your business beyond day-to-day activities? What happens to your business if anything should happen to you or perhaps a partner or key associate? Have you taken steps to fulfill your vision for your business after you retire?
Let us help you identify and address risks that threaten not only your business, but the financial security of you and your family.
Key Person Insurance
Your top salesperson passes away. Or perhaps your indispensable technical expert becomes permanently disabled. What do you do to protect your company from a possible loss of sales or the costs incurred to hire and train a replacement?
Most companies wouldn’t think about doing without fire, theft or liability insurance, but many neglect to insure their most important asset – their people. With key person insurance, you can indemnify your business against the loss of a critical employee due to death or disability.
Your business partner becomes disabled and demands income from the business to meet expenses. Your late partner’s relative suddenly becomes your new partner, while other family members take over responsibility for key business functions.
The death or permanent disability of a partner can leave your business in disarray, if you and other partners have not taken measures to protect yourselves against the potential consequences. To obviate these possibilities, many business partners enter into a buy-sell agreement. With this arrangement, partners acquire insurance to indemnify one another from these risks.
Cash bonuses are fully taxable and may only serve to retain employees until after they cash their check. An Executive Bonus Plan, however, offers a greater incentive to remain with the company, namely life insurance benefits paid for by the company.
With this plan, your company pays premiums on a permanent life insurance policy owned by the key employee. If the employee dies, the policy death benefit goes to his or her beneficiaries. While the employee is alive, he or she has access to any cash value generated by the policy.
Premium payments are tax-deductible to the business, while the eventual death benefit is income tax-free to the employee’s beneficiaries.
Sometimes referred to as “golden handcuffs,” deferred compensation plans are especially appealing to highly compensated employees who are subject to a high income tax rate on any current compensation they earn. By accepting deferred compensation, the employee puts off tax liability until he or she actually receives the compensation, generally at retirement when his or her tax rate may be lower. To fund this arrangement, companies often purchase a permanent life insurance policy on the life of the key employee. When the employee dies, the death benefit is paid to the business, thereby reimbursing it for part or all of the cost of deferred compensation payments.
Sooner or later, most business owners transfer the reins to family members, sell their interest or simply close up shop. No matter which of these alternatives you’re contemplating, the time to start planning is now – at least two years before you make your exit.
We’ve developed a comprehensive process that can help you plan, implement and adjust to this important life transition. And importantly, we can show you alternatives for selling or transferring your business that can result in fewer tax consequences, less family turmoil and more satisfaction that you’ve made the right decisions.
Unlike many business retirement plans, 401(k) plans do not require you to make contributions on behalf of employees each year. These popular plans can increase employee loyalty, while providing you with a tax-favored way to save for your own retirement. We can help you establish and administer your plan without diverting your focus from day-to-day business issues. In addition, we help educate employees on the specifics of your plan, as well as retirement planning in general. Our involvement can help you boost employee participation and provide a meaningful benefit that will help you attract and retain talented employees in today’s competitive marketplace.
Business Overhead Expense (BOE)
Just as disability income insurance pays you benefits in the event you can’t work due to illness or accident, business overhead expense insurance pays your business’ expenses if you become disabled. These expenses may include rent or mortgage, other debt, taxes and even wages, so that your business can continue to operate, even if you’re out of commission for an extended period of time.