: The business often "bonuses" the premium payments to the employee, who then pays the insurer. Tax Considerations :
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 sole proprietor buy-sell plans
: Premiums paid as bonuses are taxable income to the employee. : The business often "bonuses" the premium payments
An effective agreement should be drafted by legal professionals and include: Funding a Buy-Sell Agreement with Life Insurance Core Structure: The "One-Way" Plan : Premiums paid
Life insurance ensures the buyer has the funds to fulfill their legal obligation to purchase the business.
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