Each business operation has its own legal and tax characteristics that determine its relationship to the individual owner(s) and to society in general.

Planning is needed for:

	Continuation of the Business: Absent a provision in the will giving the executor permission to continue the business or a buy-sell agreement, a sole proprietor's business can only be continued after death by the executor with the court's permission. In most cases, the court orders the executor to liquidate the business, which results in a loss of business values to the estate.
	Tax-Sheltered Fringe Benefits: The proprietor and/or employees can realize tax-deferrals and savings through systematic tax-deductible contributions to retirement plans.
	Individual Insurance: Many sole proprietors routinely provide life and disability insurance coverage for themselves and their key employees.

Planning considerations include:

	Partnership Continuation (Buy-Sell): A partner's death terminates the partnership. A partnership buy-sell agreement (either an entity purchase or cross-purchase) will ensure both business continuation and fair treatment of the decedent's family.
	Tax-Sheltered Fringe Benefits: The partners and/or employees can realize tax-deferrals and savings through systematic tax-deductible contributions to retirement plans.
	Individual Insurance: Since a partnership acts as a conduit for tax purposes, life insurance and disability policies for the partners may be financed by cash withdrawn from the partnership or an executive bonus plan.

If an S corporation election is made, income (loss) is taxed directly to the shareholders since an S corporation is only a conduit for tax purposes. Regardless of its status for tax purposes, corporations provide shareholders with the advantages of limited liability and an independent legal existence apart from its owners.

The existence of a separate entity presents the opportunity to use business dollars to help meet the financial, retirement and estate liquidity needs of stockholder-owners. There are a wide variety of tax-favored fringe benefits programs, which can be advantageously funded through life insurance products.

Learn more by contacting a Financial Professional