Sole Proprietor Buy-sell Plans [2024]

: Premiums paid as bonuses are taxable income to the employee.

: Death benefits paid to the buyer are generally income-tax-free. sole proprietor buy-sell plans

: The buyer (e.g., the key employee) typically owns the policy on the life of the proprietor and is the named beneficiary. : Premiums paid as bonuses are taxable income

: Typically a key employee , a family member, or even a competitor. : Typically a key employee , a family

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

: Life insurance is the primary funding mechanism because it provides immediate cash when needed to activate the sale. How the Funding Works

For a sole proprietor, a buy-sell plan (often called a ) is a legally binding contract that ensures the business continues and provides liquidity to the owner's estate after their death, disability, or retirement. Without such a plan, the only options are often to dissolve the business or leave it to an heir who may not want to run it. Core Structure: The "One-Way" Plan