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Modern Buy-Sell Planning: Using LLC and Life Insurance

  • April 27, 2021 10:00 AM
    Message # 10371081
    Anonymous

    Modern Buy-Sell Planning
    Using LLC and Life Insurance


    A Limited Liability Company (LLC) is an entity that offers business owners the liability protection of a corporation and the flexible tax characteristics of a partnership. Planners are putting LLCs to ever-greater use to help their clients address a wide variety of needs, from asset protection to estate planning. One area in which LLCs have shown themselves to be particularly useful is buy-sell planning for business owners in a manner that not only addresses the potential death of an owner, but retirement as well, in a tax-efficient manner. This paper will describe how businesses can utilize an LLC and cash value life insurance to formulate a comprehensive buy-sell plan.


    The Need for Buy-Sell Planning


    In a buy-sell agreement, business owners agree to transfer their interests in the event of death, retirement, disability or other designated events. Without such an arrangement, departure of a principal can result in economic and emotional uncertainty. For example, if an owner dies and leaves his interest to someone currently outside the business, a substantial question exists as to whether that individual has the skill, energy, and experience to carry the necessary load. Even if coowners have an informal buy-out understanding, the deceased's family may not be willing to sell the business interest to remaining owners at a reasonable price. An owner might also simply leave, selling his interest to an outside buyer, who might disrupt operations by seeking more salary, higher dividends, or other  changes.

    Click on the attached PDF to continue reading.


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