Does your business have a will?
If you are a business owner, you need to ask yourself a very important question with regard to your company, and that is, "Does your business have a will?" Although it may seem like a strange thing to ask, the truth is that while most business owners are focusing on their business for today, they really need to be focusing on an exit plan.
In fact, every owner of a privately held business should have an exit strategy plan that helps to ensure that both the company and the business owner will achieve the goals that have been set out for each.
There are a number of ways to create an exit strategy for your business, including:
One retirement strategy that many business owners consider is that of deferred compensation. Using this strategy, the executive can defer income that is essentially earned now and defer its receipt and therefore the income taxes that will be due until a later date in the future.
By going this route, the business owner can use the income at a later point in his or her life when they are likely to be in a lower income tax bracket. There are a number of pension and stock option plans that can help in achieving this particular goal.
Buy / Sell Agreement
If you own a business with other owners or partners, you should consider the use of a buy / sell agreement. Typically, when there are two or more owners of a business, the sudden passing away of one of those owners can cause a great amount of financial hardship for the entire business.
When setting up a buy / sell agreement, each of the business owners purchases a life
insurance policy on the other(s). Then, should one of the owners pass away, the life insurance proceeds can help in providing the necessary funds for the remaining owner(s) to purchase the decedent's portion of the business. These funds can also allow the business to continue running during this time of transition.
Buy / sell agreements can also assist the family members and other survivors of the decedent as well. In this case, these individuals can be assured that funding will be available for the other owner(s) to purchase the business and the funds that are paid out to the survivors could then be used for paying final expenses as well as to provide ongoing income to the decedent's loved ones.
Key Man Insurance
There are many ways in which businesses have a similar need for life insurance as individuals for the protection against the unexpected death of an owner, as well as the need for funds in order for its survivors to go on. Using a key man life insurance strategy will allow a business the protection that it needs in the event of the passing of a key executive.
The proceeds from the key individual's policy can be used for the company to continue on with its operations while a replacement is sought or other alternative strategies are implemented. These funds can be the difference between the survival of the business or it going under after the loss of an important member of the company.
There are a number of pension plans that can be set up in order to provide business owners with the exit strategy that they need in order to make a smooth transition from company executive to retiree. The one that is right for you will depend upon your business and ultimately your future financial intentions.
The structuring of such strategies takes the careful analysis of a qualified professional who can guide you through the process of setting up the plan, funding it, and then carrying out its successful implementation. Let us help you!
At Romero Insurance, we build strong relationships with our clients. We take a personal approach in order to understand exactly what our clients are hoping to achieve and then we build a plan around those goals.
We are not tied to any one insurance carrier, therefore ensuring that you will receive unbiased advice on the plan and the strategies that will work best for your unique situation.
For additional information on how to coordinate your business with your personal retirement plan, contact us today: