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Small Business Solutions

Owning and operating a small business can be hard. While the rewards can be great—independence, being your own boss, following a passion or a dream—running a successful small business requires much work and sacrifice.

The Wealth Defender understands what’s at stake for small business owners like you. This is why we focus much of our work on efficient tax planning and income planning solutions. Unnecessarily losing revenue to tax liabilities not only costs you money in the short term, it can place a drag on growth and profitability.


Our Business Solutions Include:

Risk Management


Risk management is a broad term that refers to a number of strategies and solutions aimed at minimizing risk and liability. Because owners are so focused on the daily operating tasks of their companies, risk management often gets overlooked. However, it can be an important process to protecting the life of your business.

Buy-Sell Agreement


A buy-sell agreement is an arrangement between partners or shareholders that defines how ownership stake in a business is transferred upon a qualifying event. Usually this event will be death, but can include disability and retirement as well. Most buy-sell agreements use life insurance to fund the structure. When the qualifying event occurs, the remaining partners use the life insurance benefits to purchase the departing partner’s ownership stake.



Many businesses rely on a handful of key employees. Losing a key employee due to death, disability, or retirement, can place financial and operational stress on a company. A key-man insurance policy protects a company by providing a benefit in the event of a qualifying event. The company is both the purchaser and beneficiary of a life insurance policy made on a key employee.


Group Life Insurance


Group life insurance is not just for large corporations. For small-to-mid-sized business, group life can be an effective way to reward and retain quality employees.


Employer Retirement Solutions


As a small business owner, you may feel that retirement solutions—such as the kind you would find with a larger, established business—are out of reach for yourself and your employees. However, there are numerous solutions available to you that can help build a retirement source.


Exit Strategy Planning

While you focus on the life of your business, it is important to consider your exit plan. What does this mean? An exit plan simply outlines what will happen to your company when you retire and how you redeem value out of what you have built over the years. Will you sell the company? Transfer it to a key employee or family member? Your choice of exit plan will involve documentation and tax considerations. We are here to guide you through your options.



SEC. 162 Plans (also known as Executive Bonus Plans)


IRC Section 162 refers to the part of the IRC that allows for business deductions. Although a lengthy section, the relevant passage for most businesses is IRC Section 162(a), which states:


“IN GENERAL, There shall be allowed as a deduction all the ordinary and necessary expenses paid or incurred during the taxable year in carrying on any trade or business…”


This structure allows for businesses to craft non-qualified compensation plans, while also reaping tax benefits. These plans are often referred to as Executive Bonus Plans because they are generally used to reward or entice key executives.


Arrangements can be structured between the business entity and business owner, allowing some self-employed individuals a way to leverage business profits and build a supplemental retirement plan. Unlike 401(k)s or other types of deferred qualified plans, executive bonus plans are not subject to plan limits. Generally, the mechanism used in this strategy is a life insurance policy, such as an Indexed Universal Life policy. A related strategy is Overfunding an IUL, Paid with Dividends. [Link to next page]


To learn about how The Wealth Defender can optimize your business, contact us at 610.633.0202.



Small Business Solution Concept:

Overfunding IUL, Paid with Dividends





As a business owner, you are constantly looking for efficient solutions that help your company grow and benefit you personally for your hard work. The truth is that many owners focus so much on the needs of their business, they overlook their individual needs. While you may forgo drawing a salary early in the life of your company, you will need to eventually make money for yourself and not just for the business.

One solution that can benefit you individually and your business is an overfunded Indexed Universal Life Insurance policy purchased with dividends.


How It Works


This strategy is predicated on two premises: that your business is a pass-through (or flow-through) entity and that you split your income into salary and dividend components.


Many common small business structures—such as sole proprietorships, LLCs, and S-corps—satisfy the first requirement. Since the owner, not the business, is taxed, this avoids a broad double taxation situation.


As for the second premise, the dividends may be subject to capital gain taxes, but by using them to fund an Indexed Universal Life Insurance Policy, you will have a source of funds that grows tax-free, can be accessed tax-free, and a death benefit that passes to beneficiaries tax-free. This creates a pipeline of non-qualified funds that mirrors many of the same benefits as qualified retirement plans, without the same restrictions.



Compared with qualified retirement plans, like pre-tax accounts such as IRAs, 401(k)s, and SEPs, an Indexed Universal Life Policy carries no contribution maximums. This means that you can contribute as much as you like, up and over the cost of insurance (i.e. overfunding).


The value within the IUL contract accumulates based on the performance of a specific stock market. While crediting options vary, this allows for upside potential without direct market exposure.


The amount is accessible through cash withdrawals and policy loans, which can then be used for a variety of needs, personal or business. Some individuals even use their IUL cash value as a source of retirement income. The point is, you have a growing source of funds that are easily accessed, tax-free. More importantly, you can access it anytime. Unlike the qualified retirement plans mentioned above, you do not face a tax penalty for early withdrawals from an Index Universal Life policy.




How you divide your income into salary and dividends is a significant concern. For one, you want to make sure the amount you allocate toward dividends is appropriate for the scale and profitability of your business.  You will also want to retain enough earnings to cover immediate business needs and goals.  Additionally, paying yourself too much in dividends can attract the attention of the IRS.


As with all financial strategies, what will work best for you will depend on your unique situation and needs. The difficulty with this strategy is determining a salary/dividend split and how much insurance you should (or are able) to purchase. The Wealth Defender can provide the insight and guidance needed to execute this strategy for you and your business.

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