Most business owners protect the business but not themselves. This guide covers the gaps — income protection, succession, retirement, and heritage planning.
Whether you are running a 5-person shop or a 50-employee operation, these four areas determine whether your business becomes a heritage — or a liability you leave behind.
As a business owner, your income does not continue automatically if you are sick, injured, or unable to work. Disability income protection is the gap most business owners discover too late.
What happens to your business if you die, become disabled, or want out? A written succession plan backed by the right financial tools keeps your business — and your family — protected.
The day you sell or transfer your business is the biggest financial event of your life. Most owners leave significant value on the table because they start planning too late.
Business owners have access to wealth-building strategies employees never see — executive bonus plans, cash value life insurance, and tax-advantaged retirement vehicles built for owners.
These articles answer the specific questions business owners ask most — plain language, no upsell.
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25 straight answers. No products, no pitch — just how it works.
A family limited partnership (FLP) is a legal structure where parents transfer assets — a business, investment portfolio, real estate — to a partnership in exchange for general partner (GP) and limited partner (LP) interests. They then gift LP interests to children at a valuation discount of...
An HRA is an employer-funded account that reimburses employees tax-free for qualified medical expenses and health insurance premiums. The employer sets an annual allowance, employees purchase their own coverage or pay medical bills, then submit receipts for reimbursement up to the limit.
A SEP-IRA (Simplified Employee Pension) lets self-employed individuals and small business owners contribute up to 25% of W-2 compensation or roughly 20% of net self-employment income — with a 2024 cap of $69,000. Contributions are deductible, go into a traditional IRA-style account, and can be...
An installment sale (seller financing) lets you sell your business and receive the purchase price in payments over several years instead of a lump sum. Each payment is divided into a return of basis (not taxed), capital gain (taxed at 0–20%), and interest income (taxed as ordinary income).
An S-corp saves taxes by splitting owner income into a salary (subject to 15.3% payroll/SE tax) and distributions (not subject to self-employment tax). A sole proprietor earning $200,000 pays SE tax on the full amount — roughly $28,000.
Disability insurance pays a monthly cash benefit — typically 60–70% of your gross income — if an illness or injury prevents you from working. Benefits from a personally owned and premium-paid policy are received income-tax-free.
EBITDA valuation takes your business's earnings before interest, taxes, depreciation, and amortization, then multiplies by an industry-specific number (the "multiple") to arrive at an estimated enterprise value. For most small businesses, EBITDA multiples range from 2–6x.
Group term life insurance is a single master policy that covers all eligible employees under a group benefit plan. The employer pays premiums (fully deductible) and the first $50,000 of coverage per employee is tax-free.
An LLC is a legal structure that provides liability protection, but the IRS doesn't recognize "LLC" as a tax classification. A single-member LLC is taxed as a sole proprietorship by default (all profit on Schedule C, subject to 15.3% SE tax).
Section 179 lets businesses immediately deduct the full cost of qualifying equipment, machinery, vehicles, and software in the year of purchase instead of depreciating it over 5–7 years. The 2024 limit is $1,220,000, with a phase-out starting at $3,050,000 in total purchases.
Split-dollar life insurance is an arrangement — governed by a written agreement — where an employer and employee jointly participate in a permanent life insurance policy, splitting the costs, cash value, and death benefit according to negotiated terms. It is primarily used as an executive...
A business exit strategy is a deliberate plan for how you will transfer ownership and monetize the value you've built when you're ready to leave. Options include selling to a third party, transferring to family, selling to employees (ESOP or management buyout), or liquidating assets.
A buy-sell agreement is a contract between business co-owners that determines exactly what happens to an owner's share if they die, become disabled, retire, or exit. It sets a valuation method and buyout price upfront, and is typically funded with life insurance so the surviving owners have cash...
A captive insurance company is a licensed insurance subsidiary created by a business to insure the business's own risks. The operating company pays premiums to the captive — a deductible business expense.
A cross-purchase buy-sell agreement is structured so each co-owner personally owns and pays premiums on life insurance policies insuring the other owners. When an owner dies, surviving owners collect the insurance proceeds and buy the deceased's interest directly.
A deferred compensation plan lets executives and business owners defer receipt of salary or bonus income to a future year — paying income taxes when they receive the money, not when they earn it. Nonqualified deferred compensation (NQDC) plans under IRC 409A have no contribution limits (unlike...
A defined benefit plan is a pension plan funded entirely by the business that promises a specific monthly retirement benefit — typically the lesser of 100% of average compensation or $275,000/year (2024 limit). An actuary calculates required annual contributions, which for a 55-year-old owner...
A nonqualified deferred compensation (NQDC) plan lets highly paid executives defer income into a future year without IRS contribution limits. Unlike a 401(k), there's no cap on how much can be deferred, no discrimination testing, and the plan can be selective.
A profit sharing plan is an employer-funded retirement plan where the company contributes a discretionary amount each year — up to 25% of eligible compensation per participant, with a $69,000 per-person cap in 2024. There's no requirement to contribute every year, making it ideal for businesses...
A Solo 401(k) is a retirement plan for self-employed individuals and business owners with no full-time employees other than a spouse. You can contribute up to $69,000 in 2024 ($76,500 if 50+) by making contributions as both the "employee" and the "employer" — far exceeding what a traditional IRA...
Business overhead expense (BOE) insurance reimburses a business for fixed operating costs — rent, staff salaries, utilities, equipment leases, loan payments — when the owner becomes disabled and cannot work. It's separate from personal disability insurance, which replaces your income.
Business valuation is the formal process of determining what a company is worth. It's used when selling a business, establishing buy-sell agreement pricing, estate planning, SBA loan applications, divorce proceedings, and gifting equity.
Reasonable compensation is the salary the IRS requires S-corp shareholders who work in the business to pay themselves. It must reflect what a third-party employer would pay for the same services.
Self-employed individuals can deduct 100% of health insurance premiums paid for themselves, their spouse, and dependents directly from gross income on Form 1040 — no itemizing required. This "above-the-line" deduction reduces adjusted gross income (AGI), which can lower your overall tax bracket...
Working capital = current assets (cash, receivables, inventory) minus current liabilities (accounts payable, short-term debt). Working capital management is the ongoing process of ensuring the business has enough liquidity to meet short-term obligations while not holding excessive idle cash.
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