3.1 Understanding Business Entities

An advisor must be conversationally competent regarding each of the topics addressed with the business owner. This module will define the different types of business entities. We will introduce terms regarding taxation, compensation, ownership and liability issues, among others.

Multiple Types of Business Entities

  • Proprietorship, Partnership, S Corp, LLC, C Corp
  • Pass Through & Non-Pass Through
  • Advantages & Disadvantages
  • Which One Can Do What Plans

3.2 Succession Planning

An advisor must be conversationally competent regarding each of the topics addressed with the business owner. This module will discuss the elements of a buy-sell arrangement and the important choices to be made when structuring the agreement. It will introduce considerations not typically discussed and therefore will improve engagement of the client in the process. By exploring funding options, most clients will conclude that life insurance is the best funding tool. We will also discuss the purpose and meaning of multiple triggers within an agreement to make it more effective.

4 Steps to Developing an Exit Strategy

  • Parties - Identify Buyer & Seller
  • Triggers - Events that cause transition
  • Design - Cross-Purchase vs Entity Plans, one way, etc.
  • Payment Options - Sources of funding

3.3 Key Person

An advisor must be conversationally dangerous regarding each of the topics addressed with the business owner. This module will define the concept of Key Person exposure and coverage. Every company has one or more employees who are key to the financial success of the organization. The loss of a key employee could jeopardize the financial future of the business and cause a negative economic impact on the business. You will learn how to address this issue and protect the company from this loss.

Why: Could Jeopardize Future of Company and Could Suffer an Economic Loss

Apply the Rule of 3

  • 3 Implications - Difficult to find a replacement, business earnings are reduced, employees become concerned
  • 3 Valuation Methods - Replacement cost, discount or loss of value, multiple of salary
  • 3 Funding Alternatives - Savings, current profits, life insurance

3.4 Executive Benefits

An advisor must be conversationally dangerous regarding each of the topics addressed with the business owner. This module will define the different types of executive benefit plans designed to attract and retain the best talent in lasting ways beyond just traditional compensation. Each plan is used to satisfy the employer’s goals of retention, cost of plan and cost recovery opportunities.

Why: Reward, Retain & Attract

3 Basic Designs

  • Executive Bonus
  • Split Dollar
  • Deferred Compensation

3.5 Taxation of Life Insurance

An advisor must be conversationally competent to go into the field with an accurate understanding of how life insurance products are taxed, in order to best serve clients with appropriate strategies. Thanks to generous tax treatment by the IRS, life insurance finds itself in a very unique situation. This module will break things down topically by focusing on 4 specific areas of life insurance taxation rather than jumping into the IRS code sections.                                                                                                                            .

4 specific areas of life insurance taxation

  • General Life Insurance Taxation
  • Modified Endowment Contracts (MEC)
  • Transfer for Value Rules
  • Notification and Consent Rules

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