Sole Proprietor Buy-sell Plans Apr 2026

: Business-paid premiums are generally not tax-deductible. Essential Plan Components

: The business often "bonuses" the premium payments to the employee, who then pays the insurer. Tax Considerations :

: The buyer (e.g., the key employee) typically owns the policy on the life of the proprietor and is the named beneficiary. sole proprietor buy-sell plans

Life insurance ensures the buyer has the funds to fulfill their legal obligation to purchase the business.

: Life insurance is the primary funding mechanism because it provides immediate cash when needed to activate the sale. How the Funding Works : Business-paid premiums are generally not tax-deductible

An effective agreement should be drafted by legal professionals and include: Funding a Buy-Sell Agreement with Life Insurance

: Premiums paid as bonuses are taxable income to the employee. Life insurance ensures the buyer has the funds

: Death benefits paid to the buyer are generally income-tax-free.