Sole Proprietor Buy-sell Plans -

: The business often "bonuses" the premium payments to the employee, who then pays the insurer. Tax Considerations :

: Premiums paid as bonuses are taxable income to the employee.

: Business-paid premiums are generally not tax-deductible. Essential Plan Components sole proprietor buy-sell plans

: The buyer (e.g., the key employee) typically owns the policy on the life of the proprietor and is the named beneficiary.

Life insurance ensures the buyer has the funds to fulfill their legal obligation to purchase the business. : The business often "bonuses" the premium payments

: The buyer agrees to purchase the business from the owner's estate at a predetermined price or formula upon a "triggering event" (usually death or permanent disability).

: Death benefits paid to the buyer are generally income-tax-free. Essential Plan Components : The buyer (e

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