Situation: If you're an otherwise successful small-businessowner or professional practitioner, only three things can disrupt your financial security. You can die, suffer a disabling illness/injury, or fail to prepare adequately for retirement.
The basic types of business ownership arrangements are: 1) sole proprietorships; 2) partnerships; 3) "C" corporations; 4) Sub- "S" corporations; and 5) professional corporations (referred to as professional associations in some states). People in these markets are at or near the top of the income ladder. Protecting their incomes and business interests from the risks of premature death, disability, or under-funded retirement should be a top priority. Those are the same issues we all face, but being in business for yourself creates opportunities and problems.
Problem: There are risks associated with owning any type of business organization — the economy, industry trends, and demand for products or services. While these are all beyond the owner's control, there are other risks for which businessowners and professionals can, and should, prepare.
In addition to personal and family needs and wants, businessowners and professionals have a variety of business-related concerns:
- Business Continuation. Prudent businessowners and professional practitioners wouldn't open their doors without insuring against fire, theft, and liability. Yet, the unexpected or premature death, disability, or retirement of a businessowner, or key employee, can put the business at even greater risk.
- Executive Benefits. Salary alone isn't always enough to attract and retain the best people in the field. Company-paid benefits are often used as recruiting incentives and as "golden handcuffs" for too-good-to-lose employees. What's more, small-businessowners and professional practitioners often want to provide additional benefits for themselves, and selected employees, without having to invite everyone on the payroll to participate.
- Employee Benefits. Employee benefits have become a volatile, much-talked-about topic in recent years. Costs are skyrocketing and unions are demanding stronger benefit plans. At times, employers may become frustrated enough to consider eliminating all fringe benefits. Yet, in today's competitive environment, a good benefits package is a business necessity.
Solutions: All three problems can be managed very effectively with your products and services — in many cases, using tax-favored business dollars. Here's a brief look at these business solutions and the problems they address:
- Business Continuation Plans — With careful preparation, businesses, which are so hard to build, will continue if the owner or key employee can no longer continue working. Planning opportunities include:
- Buy-Sell Planning
- Key Person Insurance
- Business Overhead Expense Insurance
- Personal Life & Disability Insurance
- Split-Dollar Life Insurance
- Estate Planning
- Executive Benefit Plans — A variety of highly attractive "selective" Executive Benefit Plans are available, including:
- Executive Bonus Plans
- Simplified Employer Retirement Plans (SERP)
- Salary Continuation Plans
- Split-Dollar Life Insurance
- Group Carve-Out Plans
- Employee Benefit Plans — It pays employers to offer attractive — and affordable — benefit plans, including:
- Group Insurance Plans
- Voluntary Payroll Deduction Plans
- Qualified Retirement Plans
- Cafeteria Plans
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