: The buyer (e.g., the key employee) typically owns the policy on the life of the proprietor and is the named beneficiary.
: Death benefits paid to the buyer are generally income-tax-free.
: Premiums paid as bonuses are taxable income to the employee. sole proprietor buy-sell plans
An effective agreement should be drafted by legal professionals and include: Funding a Buy-Sell Agreement with Life Insurance
: Life insurance is the primary funding mechanism because it provides immediate cash when needed to activate the sale. How the Funding Works : The buyer (e
Unlike traditional buy-sell agreements between multiple partners, a sole proprietor agreement usually involves an external buyer:
: Business-paid premiums are generally not tax-deductible. Essential Plan Components An effective agreement should be drafted by legal
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