Business Ownership Strategies

  

Click on the link above to assess your business ownership strategies. We can help in any area that you feel either risk or opportunity.

Business ownership strategies include planning that protects the business enterprise. Also known as business continuation planning, or strategies that help companies to attract, retain and reward key employees, shareholders, owners and executives. Included are:

Employee Stock Ownership Plan (ESOP) Repurchase

  • Life insurance may be an ideal tool to provide the liquidity necessary to fund the employer's repurchase obligation of stock distributed to employees through an ESOP.
  • All privately held companies have a statutory obligation to repurchase ESOP shares from separated employees.
  • One of the dictates of an ESOP is to provide a market and liquidity for the purchase of company stock.
  • Thoughtful planning and funding of the repurchase liability can be a strong factor for maximizing the value of an ESOP.

Exit Planning Solutions

  • Cross Purchase Buy-Sell - An agreement between business owners where each agrees to be both owner and beneficiary of an insurance policy on each of the other owners. Upon a triggering event, the remaining owners purchase the interest of the deceased owner.
  • Entity Purchase Buy-Sell - An agreement between the business and owners where the business is both owner and beneficiary of an insurance policy on each of the other owners. Upon a triggering event, the business purchases the interest of the departing owners.
  • Multi-Owner Buyout - The multi-owner buyout is an exit funding strategy which leverages a combination of cash value life insurance and a sinking fund. Owners enter into a buy-sell agreement with the business. Upon a triggering event, the business purchases the departing owner's interest.
  • Business Valuation - This informal assessment of the value of an entity or ownership interest is vital when determining the proper insurance for buy-sell purposes or "pegging" the value of an estate for federal estate tax purposes.
  • Business Continuation General Partnership - A flexible structure to fund business continuation that combines the advantages of other buy-sell techniques, while permitting owners to accumulate cash on a tax-deferred basis for retirement.
  • Wait & See Buy-Sell - This agreement postpones the identity of the eventual purchaser of a deceased or departing business owner's interest until their exit. Although the owners of the business can hold the insurance, this technique allows the owners to determine whether the business or the remaining owners are the most practical buyer.
  • One-Way Buy-Sell - An agreement in which the sole owner commits to sell, and the purchaser commits to buy, the business at some agreed value upon the occurrence of a specified event.
  • ESOP (Employee Stock Ownership Plan) - An ownership plan that is designed to invest primarily in employer stock. It can provide liquidity for departing owners to effectively exit their business in a tax-advantaged manner.

Key Person Life Insurance

  • A simple, effective way to protect a business against the loss of a key employee.
  • An employer is the owner and beneficiary of a life insurance policy on a key employee or owner, which pays tax-free death benefits upon death.
  • Provides cost-effective liquidity to help the business function after losing a key person.
  • Most efficient type for this coverage is term, universal life and variable universal life.
  • If permanent insurance is used, policy cash values appear as an asset on the balance sheet.
  • Policy values can also be used to fund executive benefit programs.

Stay Bonus

  • A technique to provide key employees a financial incentive to stay with the business following the death of a business owner.
  • Helps to facilitate a smoother exit strategy for the owner.