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BUSINESS 

LIFE PLAN

Keeping The Doors

Open for Business

 

Protecting Owner's Equity

SmartPlan™
for Business

Using Smart Planning expert concepts and solutions, disruptions can be thwarted and the company can remain profitable without scaling back assets or laying off employees. 

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Risk abatement that keeps the company operating like a fine-tuned watch.

BUSINESS LIFE PLANNING

Businesses have a unique set of challenges in remaining financially strong and viable.  This is particularly true for small businesses and family-owned businesses. 

The business must remain successful and this presents additional challenges for the business leadership and the employees.  For example:  What happens to the business if an owner or other key person becomes disengaged in the business due to health or other issue?  How does this impact sales and profit?  Can the company afford to continue paying their salary?  If so, how long can this continue before the business is no longer profitable?  What happens if a company is not profitable?   If an owner leaves the company, who will buy their shares and how will they pay for them?  What is the company worth in terms of real value?  How was that determined?

BUSINESS GOALS     

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INCREASE SALES & REVENUE

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INCREASE PROFITABILITY

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HIRE & RETAIN QUALIFIED STAFF

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CUSTOMER LOYALTY & RETENTION

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ESTABLISH BRAND RECOGNITION

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MAINTAIN HIGH QUALITY & SERVICE

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EXPAND MARKET REACH

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INNOVATION & NIMBLENESS

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CONSIDER

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Do you have a definitive business exit plan?

 

If something happens to you as a business owner or a key person, will the doors remain open and the business continue to prosper?

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If your business partner exits the business, can you afford to buy-out their shares?

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Under what circumstances will shares of ownership change?

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What is the value of your company?  How do you know?

 

Would you prefer to have the Government put a value on the worth of your company for tax purposes or would you prefer to determine the value?

 

If you rely on the company to pay your salary while you are off-work for an extended period of time, how long is it before the company closes the doors?

BUSINESS DISRUPTERS

 

 

OWNERSHIP TRANSFERS

 

LOSS OF BUSINESS, OWNER HEALTH

 

DISENGAGEMENT, OWNER

 

LOSS OF KEY PERSON(S)

 

STAFF REDUCTIONS

 

COMPETITION

 

UNAVAILABILITY OF CAPITAL

 

TAXES & REGULATIONS

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A key person or owner suffers a medical event and will be away from work for an extended period of time.

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Without a SmartPlan, the business will most likely see a drop in sales (revenue) and/or profit and the only recourse for remaining in business may be to reduce staff and other assets. 

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With a SmartPlan in-place, the business can remain financially viable during this difficult period with the same level of staff and assets even though sales or profit may, on the surface,  be lower.  When implemented properly, the sales may have actually increased.

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Smart Planning Makes Sense (Cents)!

TYPICAL BUSINESS SMART PLANNING TOOLS

 

Business Exit Planning

Key to Exit Planning is having succession strategies that allow owners to exit their business when they want and on their terms, while considering tax, legislative and business structure influences. 

 

What is your business worth?  Is there a market for selling it?  Do you have a succession plan in place? Exit planning is a customized process of setting business exit goals and implementing targeted strategies to achieve them.  A comprehensive plan will address your exit timeline, the proper value of your business and to whom you want to transfer your business.

 

Business Valuation

The assignment of a dollar amount value on a business entity or ownership interest - This is vital for the exchange of ownership for buy-sell purposes and also for  "pegging" the value of an estate for federal estate tax purposes.  

 

There are many methods by which a business may be valued.  Five of the most commonly used methods are described below:

 

Book Value

The value at which the business is carried on a balance sheet, with all assets adjusted for fair market value (fair market value may not be the same as the depreciated value for income purposes).

 

Straight Capitalization Method

The amount of capital that would have to be invested at a specified rate to yield the current average net annual earnings of the business.

 

Capitalization of Earnings Method

Assumes that part of earnings are attributed to the assets of the business (book value). Remaining earnings are capitalized at a rate consistent with the relative risk of the business. The result is then added to book value.

 

Years' Purchase Method

A conservative rate (the pure money rate for an investment with generally accepted lower risk) is used to determine the earnings attributed to assets. The balance is assumed to be provided by goodwill. The earnings provided by goodwill are then multiplied by the number of years for which goodwill is expected to be valuable to a purchaser. The result is then added to the book value to obtain the valuation.

 

Discounted Future Earnings Method

 Projected future business earnings are forecasted, and then discounted using an appropriate rate which reflects the return from the next best investment opportunity with a comparable level of risk. The sum of the discounted future earnings is the current valuation.

 

NOTE:  The average of these five methods is NOT an acceptable method of valuation.

 

WOULD YOU RATHER HAVE AN INDEPENDENT EVALUATION OF THE VALUE OF YOUR OWNERSHIP OR

WOULD YOU PREFER TO HAVE THE IRS PROVIDE THAT VALUATION FOR TAX PURPOSES?

 

IT IS ALSO IMPERATIVE THAT THE VALUATION IS REVISITED AND COMPUTED ON AN ANNUAL BASIS TO REFLECT CURRENT VALUES.  OTHERWISE, THE COMPANY MAY EXPERIENCE POTENTIAL LEGAL ISSUES DOWNSTREAM WHEN EQUITY IS BEING TRANSFERRED.

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Business Protection

Implementing strategies to preserve, protect and promote the value of the business to better facilitate a subsequent transfer to family members, key employees, other owners or third parties.  

 

Buy-Sell Agreements

Arrangements between a business and its owners or potential buyers on terms for transitioning ownership of the business at a predetermined triggering event, such as death, divorce, remarriage, bankruptcy, disengagement (including retirement), disability, or an encumbrance on a personal loan related to an owner.  Funding the Buy-Sell Agreement is an imperative if the business is to survive!  Numerous types of buy-sell agreements can be established — including cross purchase, entity purchase, and various other designs.

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If the Buy-Sell Agreement is not properly structured AND funded, the remaining owners are at risk of losing the value of their equity in the company and maybe even control of the company.  Too often, the remaining owners do NOT have enough liquid funds or access to funds to buy the outgoing owner's shares - Then what happen?

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Why Businesses Need a Buy-Sell Agreement

Michael Vanderpool, Attorney

Key Person Disability Income Replacement Insurance


A disability insurance policy on a key employee in which the owner and beneficiary of the policy is the business. If a key employee is lost due to a total disability, benefits can be used for recruitment and training costs, temporary staffing needs and revenue replacement.
 

Key Person Life Insurance


A life insurance policy on a key employee in which the owner and beneficiary of the policy is the business.  This serves as a simple and effective way to protect the business against the loss of that key employee with tax-free death benefits. 
 

Business Overhead Expense (OE) Insurance

This type of insurance policy provides a business owner with needed funds to pay the immediate costs of keeping a business open in the event he or she becomes too sick or hurt to work.  Business overhead expenses may include such things as:

  • Salaries, fees wages, benefit payments and employment taxes for employees

  • Rent and lease payments for furniture, equipment and premises

  • Utility costs including phone, electricity, heat and water

  • Laundry, janitorial and maintenance service costs

  • Property, liability, malpractice and business insurance premiums

  • Professional, trade and association dues

  • Business property taxes

  • The greater of depreciation or principal payments on business loans on business property

  • Interest on business debt existing on the day your disability begins

  • Legal, accounting and similar business fees.

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Business Capital Loan Protection

Business Capital Loan Protection Insurance provides the owner with a reimbursement for a covered business-related loan obligation in the event that the owner becomes totally disabled.

Supplemental Employee Benefit Plans

Business owners and employees each have their own unique Personal Life Plan needs so that they can be active, inclusive, and productive in contributing to the business growth and success.

 

This is why business owners across the USA have found that providing employees at all levels with the opportunity to participate in a robust, low cost benefit program makes business sense.

 

When done properly, there is no downside for the business regarding cash flow or expenses.  

 

It has been shown that some of these programs may have a significant residual benefit of lowering workers compensation rates.

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These types of programs are also great tools for recruitment and staff retention..

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Typical coverage includes:

  • Income Replacement insurance

  • Supplemental Medical insurance

  • Supplemental Life insurance

  • Supplemental Dental insurance

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Employee Stock Ownership Plan (ESOP) Insurance

An ownership plan that is designed to invest primarily in employer stock.  It can provide liquidity for departing owners to effectively exit their business in a tax-advantaged manner.  The process of using life insurance to provide the liquidity necessary to fund the employer's repurchase obligation of stock distributed to employees through an employee stock ownership plan (ESOP).

 

Executive & High Income Protection Plans

Custom income-protection programs designed specifically for High Income Executives and Professionals.

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Executive Bonus (Funded with Life Insurance)

A plan that provides the spouses of select employees or owners with a tax-free death benefit.  It may also provide a current tax deduction for the business. 

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Endorsement Split Dollar

A plan that provides valuable key person death benefits to a business and personal death benefit protection to a key employee's family.  Life insurance policy premium payments and benefits are divided between two parties — usually a business and an employee, but sometimes two individuals or an individual and a trust. 

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Disability Retirement Security

An insurance policy that helps you continue to save for retirement if you become too sick or hurt to work and are no longer collecting a paycheck or contributing to a retirement plan.

 

Stay Bonus

A technique employed to provide key employees with a financial incentive to stay with the business following the death of a business owner.  

Do You Have a 21st Century Plan?
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Contact Sterling today to discuss your situation and receive a complimentary evaluation!

THE  SECRET

COMPOUND INTEREST THAT GROWS BASED ON STOCK MARKET

PERFORMANCE WITHOUT THE FEAR OF FINANCIAL LOSSES!

Use the MARKET WITHOUT BEING in the MARKET!

EXAMPLE:

Sevings account A and savings account B each have $100,000 cash balance in January 1996.

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Account A earns interest based on the performance of the S&P 500 stock market index, both gains and losses.  If the index exceeds  0%, the interest credited to the account balance is the growth of the index.  If the index is less than 0%, the account is adjusted  by the negative interest and the principle balance changes accordingly.

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Account B earns interest based on the performance of the S&P 500 stock market index  also but has a floor.  If the index exceeds  3%, the interest credited to the account balance is the growth of the index less 3%.  If the index is 3% or less, the account balance receives no interest and the principle balance does NOT change.

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Using this example over the period 1996 through 2016, Account A would end the period wilh a gross principle balance of $304,567.  Over the same period, Account  B would have a gross principle balance of $551, 921.

21st CENTURY INNOVATION

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INDEXED UNIVERSAL LIFE INSURANCE (IUL)
THE NEW STANDARD IN WEALTH ACCUMULATION AND PROTECTION

IT JUST KEEPS GETTING BETTER!

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Leading Carriers Have New and Improved Performance Options that Opens the Maximum CAP on Accrued Compounded Interest to Unlimited Growth.

IUL - Indexed Universal Life Insurance

Alliance Group

Frequently Asked Questions

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How does IUL compare to a normal investment savings plans (e.g., 401K, Roth IRA, 403b -457 plans, pensions, or mutual funds) in terms of performance,  flexibility, taxes, & risks?  The answer will likely surprise you!  

 

What appears on the surface to make sense in these normal investment portfolios may actually degrade your ability to achieve your goals - You will most likely have a higher probability of OUTLIVING your available money!

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What If I have already have some of these plans in-place?  Sterling Secure's Strategic Life Planning will help you to align all of your assets that works best for your short-term and long-term needs and goals.

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Contact Sterling to get the amazing details!

612-819-2460

Performance - Flexibility

Safety - Freedom

INCOME - EQUITY PROTECTION GROUP
Accelerating Results

612-819-2460

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Accelerating Results!

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