As you grow your company, you may find yourself asking two very big questions:
- How can I protect my business?
- How do I ensure I’m making money from my business?
This is where Business Protection comes into play.
Business protection is the set of actions and solutions designed to safeguard your organization from a variety of potentially damaging scenarios. Because business owners often use their company for retirement as well as income, they are especially vulnerable to financially damaging situations. Business protection planning can involve many processes and strategies. Typically it begins with assessing potential risks, determining the financial impact of these liabilities, and then implementing strategies that reduce risk and protect business assets.
Closely Held Businesses
Typically when a Mom and Pop shop wants to sell a business, insure against risk through buy-sell agreements, or transfer the company to next generation, there is a small army of professionals that need to be involved—such as lawyers, accountants, and business valuation specialists. Through Lonestar FS and our partners, you have access to the professionals you need for any number of business goals, from one source. We coordinate the planning process and facilitate the implementation of your preferred success solution.
Key Person Insurance
Many businesses, especially at the small business level, depend on a few crucial employees to keep the organization functioning. Key Person Insurance protects the company in the instance of a topline employee’s death, disability, or, in some cases, retirement. The basic process is that the company purchases a life insurance policy on the employee and designates the organization as beneficiary of said policy.
In a deferred compensation scheme, a portion of an employee’s income is allocated for a later date. This gives a current tax benefit to both parties. There are many different options to build a deferred compensation structure.
Split-Dollar Life Insurance
In a Split Dollar Life Insurance arrangement, the company and the employee split the costs of a life insurance policy. Not only are things like premiums split, so are the death benefits and cash value accumulation (if applicable). Many companies use a split dollar arrangement to offer life insurance as a benefit while reducing costs. This arrangement also provides protection in the instance of the insured’s death or termination.
401(k) retirement plans are a popular benefit with large companies. Many small businesses owners, however, are unaware that they can establish a 401(k) retirement program for themselves and their employees. One of the main benefits a business receives from a 401(k) program is that an employer is able to deduct contributions made to both an employee’s and his own account.
Business valuation is a very important component of many business planning and protection strategies. Many owners often over-estimate the value of their business, especially when they are considering selling it for the purposes of retirement. On the other hand, some owners aren’t aware of what their true assets are, and may overlook valuable resources contained within their company. Through Lonestar FS and our strategic partners, you have access to professionals that can properly assess the value of your company.