On the surface, Buy-Sell planning
is rather straightforward: Place insurance on all the owners so that their interest in the business can be bought out upon their death or disability. If there are more than two owners, set it up with the business as the owner and beneficiary of the policies to avoid having to purchase and manage an unwieldy number of policies.
If only it were that simple.
Surviving owners may be letting a significant opportunity slip through their hands all for the sake of perceived complexity. Shortsighted to say the least.
There is much more to the story than ownership and beneficiary designations. That one seemingly basic decision has potential tax ramifications for any surviving owner of the business.
understanding the tax implications of buy-sell agreements
When an owner dies, the probability that a business is going to be sold at some point in the future increases. One or more of the surviving owners is likely to want to walk away.
When that happens, cost basis will become a major factor in their eventual payoff.
How does the type of agreement come in to play?