: The business often "bonuses" the premium payments to the employee, who then pays the insurer. Tax Considerations :
Unlike traditional buy-sell agreements between multiple partners, a sole proprietor agreement usually involves an external buyer:
: Typically a key employee , a family member, or even a competitor. 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.
: Premiums paid as bonuses are taxable income to the employee. : 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).
: Business-paid premiums are generally not tax-deductible. Essential Plan Components : Premiums paid as bonuses are taxable income
: Death benefits paid to the buyer are generally income-tax-free.