This agreement is a contract that establishes what will be done with the business in the event that an owner dies or becomes disabled. It is designed to provide benefits to the business. But how are you going to pay for this agreement? A policy is usually written with a life insurance company. This insurance can be term or whole life insurance. The buy and sell agreement is written differently for different types of business organizations. Likewise the insurance policies used to fund the agreement could be structured differently.
The premiums paid to fund the buy and sell agreement (the insurance policy) are not tax deductible for the business. The benefits paid upon the key employee’s death or disability is not usually considered as taxable income.
There are advantages of having the buy and sell agreement along with advanced planning. By purchasing adequate insurance coverage for your business you can keep the company operating without upsetting the delicate business balance. Let Minor Field Agency along with your accountant help you keep your business in business.
