We are aware that our agent base works with a variety of clients that have varied income ranges and cover a wide spectrum of businesses; as such we would like to take this opportunity to inform you of the various options available to the business owner segment. 

The article below briefly identifies solutions for business owners to grow their business through retirement and personal estate planning solutions as well as examines ways to successfully protect wealth and achieve long-term financial prosperity.

Business Organization Types

There are many ways a business can be structured. Some solutions work better for particular types of businesses. Generally, businesses are structured as one of the following six types:

1. Sole Proprietorship

2. Partnership – general or limited

3. Limited Liability Company

4. Sub S Corporation

5. Regular C Corporation

6. Professional Corporation - limited to licensed professionals

The chart below describes a number of estate planning solutions with a brief description of the objectives and the types of businesses appropriate for the plans.

  

Application	Description	Objective	Premium Payer	Business Types
Key Person	Protect business against loss at death of owner or key person.	Provide tax-free dollars to business so it can hire and train replacement.	Business - non-deductible premiums.	1,2,3,4,5,6
Buy-Sell Cross Purchase	Each owner obtains insurance on other owner(s) to buy their business interest at retirement or death.	Insurance proceeds buy business interest from deceased owner's estate.	Each owner pays for policy on life of other owners party to agreement.	2,3,4,5,6
Buy-Sell Entity Purchase	Business obtains insurance on the owners to redeem owner's business interest at retirement or death.	Insurance proceeds buy business interest from deceased owner's estate.	Business Entity	2,3,4,5,6
Sec. 303 Stock Redemption	Business obtains insurance on owner(s) to partially redeem stock from decedent's estate.	Provide tax-free dollars to business so it can hire and train replacement.	Corporation - nondeductible premiums	3,4,5,6

The following chart describes a number of retirement planning solutions with a brief description of the objectives and types of businesses appropriate for the plans.

Application	Description	Objective	Premium Payer	Business Types
Executive Bonus	Employer pays premiums for insurance on key people/owners.	A perk to retain valuable employees by providing permanent death benefits and a tax-deferred product for retirement.	Business - deductible as salary; employee reports premiums as taxable bonus.	1,2,3,4,5,6
Nonqualified Deferred Compensation	Promise to pay supplemental retirement income or death benefits to key employees.	Personal insurance held by business to informally fund business's obligations to pay benefits.	Corporation - nondeductible; benefits deductible as salary is paid.	3,4,5,6
Split Dollar - Endorsement	Employer buys insurance on employee's life premiums and death benefits shared.	Provide life insurance with business dollars at minimum cost to key employee.	Business; employee makes contribution equal to economic benefit.	3,4,5,6
Split Dollar Collateral Assignment	Employee buys insurance on own life premiums, death benefits, and cash values are shared with employer.	Provide life insurance with business dollars at minimum cost to key employee.	Business - nondeductible premiums; employee makes contribution equal to economic benefit.1	3,4,5,6

 

Life Insurance

Life insurance provides unique benefits as a funding vehicle for business owners. The following are some of the benefits provided by life insurance:

• Large, immediate death benefit value

• Tax-deferred accumulation of policy cash values

• Potential for tax-free withdrawals or loans if policy is not a Modified Endowment Contract (MEC)

• Highly valued by banks as business collateral

• Generally, death benefits are received income tax free (Alternative Minimum Tax exceptions)

• Affordable

• Premium payment flexibility

Business Owners have unique needs. Solve them with the unique benefits of life insurance!

This sales concept has been prepared to provide general information in regard to the subject matter covered. It should be used with the understanding that Columbus Life is not rendering legal, accounting or tax advice. Such services should be provided by your own advisors.

1New Regulations may impact taxation of benefits. You should consult with tax and legal advisors.

The information and content provided is general and educational in nature. It is not intended to be, and should not be construed as, legal or tax advice. Columbus Life does not provide legal or tax advice. Laws of a specific state or laws relevant to a particular situation may affect the applicability, accuracy, or completeness of this information. Federal and state laws and regulations are complex and are subject to change. Columbus Life makes no warranties with regard to the information or results obtained by its use. Columbus Life disclaims any liability arising out of any person’s use of, or reliance on, the information. For specific tax information, consult your attorney or accountant.