Buy Sell Plan
An
entity purchase buy-sell agreement is a plan that provides for an
orderly change of ownership when a business partner or stockholder
in a closely-held corporation dies or becomes disabled. A funded
buy-sell agreement can solve many of the problems arising at death
or disability of a business owner such as:
- Predetermine the price at which the business agrees to buy,
and the business owners agree to sell their interests in the
business;
- Create a market for each owner's business
interest;
- Establish a value of each owner's business interest for
federal estate tax purposes;
- Assure creditors and employees of the continuation of the
business in the event of an owner's
- death or disability;
- Provide continuous income to a disabled business owner
without adversely affecting the business'
- working capital; and
- Provide money to fund the plan at exactly the time that it
is needed.
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Deferred Compensation Plan
Deferred Compensation gives a business a big edge when it
comes to attracting and retaining key people. It can provide
retirement benefits on a selected basis, over and above benefits
provided in a traditional qualified retirement plan. Deferred
Compensation is ideal for highly compensated individuals. These Plan
defer income from peak earning years to a future date, usually
retirement, when the highly paid executives are likely to experience
a decline in cash flow. Therefore, a well designed Deferred
Compensation plan can level out an executive's compensation over the
working and non-working years.
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Executive Bonus Plan
An
Executive Bonus Plan provides for the purchase of tax-deductible
life insurance for either a business owner or selected employees.
The mechanics are as follows: the company agrees to bonus the
employee the premium cost of the life insurance policy, and
therefore, the premium is fully tax deductible to the company.
Please note that in this agreement, the bonus is fully taxable to
the employee, however, many companies choose to also bonus the
accompanying taxes due on the bonus.
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Key Person Plan
Key Person insurance is a plan to indemnify a business for
the death of a key person and the loss of that individual's skill
and experience. This type of insurance can be used to help replace
lost profits; provide the funds to recruit, hire, and train a
suitable replacement; help assure customers, creditors, and
employees of the business' continuity; and pay a tax deductible
death benefit to the employee's family.
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Stock Redemption Plan
A
Section 303 Stock Redemption Plan is a tax favored partial stock
redemption available to an estate or heir, provided: the value of
the stock makes up more than 35% of the deceased's adjusted gross
income, and the shareholder whose stock is redeemed (estate or heir)
is responsible for paying death taxes and certain other death costs.
One of the biggest problems arising at death is a liquidity problem.
A Section 303 Stock Redemption allows your family to sell back to
the corporation enough stock to meet final expenses. More important,
since it is a partial redemption, your heirs can retain control of
the business. But, unlike other partial stock redemptions, the money
your heirs receive from a Section 303 redemption will not be taxed
as a dividend - provided the dollar amount of the redemption is
limited to the above expenses.
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Split Dollar Plan
A
Split Dollar Insurance Plan is a method whereby an employer can help
an employee purchase large amounts of life insurance at little or no
cost to the individual. In essence, the premiums are shared by both
employee and employer. For that promise, the employee agrees
contractually to reimburse the employer for the employer's share of
the premiums at some future date, usually retirement. The cost of
such a plan can be minimal or zero to the employer (only time value)
and it allows the employer to attract and keep key executives. Split
Dollar insurance can help an employee pay estate taxes at death;
replace needed family income lost at the employees death; and help
redeem any ownership interest that the employee may have had in the
business.
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www.lsmfinancial.com 7600 Leesburg Pike, Suite 120 East, Falls Church, VA 22043
