Insurance & Employee Benefits
There are several reasons for business owners to enter into buy-
Most business owners think of buy-
Next to death, the most common triggering events are total and permanent disability (usually following a one-
There are a number of ways to value a closely held business in a buy-
owner where he or she receives at least one payment after the close of the taxable year in which the sale occurs.
The down payment must also be specified. In most cases where the buy-
In installment sales, an interest rate must be specified. For buy-
Funding the Buy-
Guaranteeing sufficient funds with which to purchase the interest of a deceased, disabled or withdrawing business owner is an important part of buy-
First, the funds can come from the business’s assets or operating profits. However, most successful business owners do not keep large sums of liquid assets on hand. Instead, they put their money to work in their business.
Second, a sinking fund can be established. But such a fund may be inadequate if a business owner dies prematurely. In addition, for C corporations, establishing such a fund may expose the corporation to an accumulated earnings tax problem.
Third, the business can borrow the funds from a bank. The problem with borrowing, however, is that the loss of a key person might impair the business’s credit-
Fourth, the business can pay the purchase price on installments. This approach presents the same problems for the business as borrowing from a bank. Moreover, the seller runs the risk that the business may fail and the payments stop.
The fifth and final method of funding a buy-
A properly designed and funded buy-
Source: from ArticlesFactory.com
ABOUT THE AUTHOR
Julius Giarmarco, J.D., LL.M, is an estate-
For more articles on estate and business succession planning, please visit the author’s website, http://www.disinherit-
Some of the Carriers We Represent:
John Hancock Life
Mass Mutual Life
William Penn Life
Genworth Life, etc.