: Typically a key employee , a family member, or even a competitor.
: The business often "bonuses" the premium payments to the employee, who then pays the insurer. Tax Considerations :
: Death benefits paid to the buyer are generally income-tax-free. sole proprietor buy-sell plans
Life insurance ensures the buyer has the funds to fulfill their legal obligation to purchase the business.
: Premiums paid as bonuses are taxable income to the employee. : Typically a key employee , a family
: 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).
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 Life insurance ensures the buyer has the funds
Unlike traditional buy-sell agreements between multiple partners, a sole proprietor agreement usually involves an external buyer: