Holding companies can be a great tool for successful small business owners. Holding companies, or Hold co.’s, provide business owners with an opportunity for additional asset protection and tax savings. Unlike Operating companies, or Op co,’s, holding companies are not used in active business and are not revenue producing. They are mostly used for tax purposes as dividends can usually be transferred between corporations’ tax free. This allows for operating companies and holding companies to work together for business owners.
Thanks to their size, small businesses usually rely on a few key people to keep operations running smoothly. Whether it is a front-line supervisor that runs the crews, a senior leader for slightly larger business, or the founder and owner of a company, the absence of key people can really cripple short-term results which can potentially place long-term business viability at risk.
Key Person Insurance is a risk management tool that helps to cover the loss of a valued contributor due to death or disability.
Effective January 2019, new tax rules will come into effect that will have a dramatic impact on some small business owners. Starting in 2019, the Small Business Deduction Limit will be reduced by $5 for each $1 of passive income that exceeds $50,000 and will reach zero once $150,000 of passive income is earned in a year. This new tax rule may be leaving business owners wondering how they can redirect a portion of excess cash flow that would traditionally produce passive income, and subsequently some unfavorable tax consequences.
Corporate owned life insurance can offer a “two bird one stone” solution to business owners. If used appropriately, strategies such as these are a viable option for a private corporation with a substantial amount of excess income and a life insurance need. The information below provides an elementary overview of how life insurance can be used to defer tax and grow the corporation’s estate.
Many business owners understand the important role that life insurance plays in effective corporate planning. Whether it is the funding of a shareholders’ agreement, life …