Financial Planning for Corporations

Private corporations (CCPCs) have various financial needs and opportunities.

  1. buying out a shareholder
  2. corporate insured annuity
  3. freeing "trapped" surplus
  4. providing retirement income for a key person
  5. providing collateral for loans
  6. replacing a key person
  7. shared ownership
  8. shareholder estate planning

Tax is a threat.

Buying Out A Shareholder

Funding a buy/sell agreement upon

  • death of a shareholder or
  • a living buyout at disability or retirement

so surviving shareholders maintain ownership & control

Corporate Insured Annuity

  • increases returns on fixed income
  • increases shareholder after-tax estate value
  • reduces capital gains tax on deemed disposition of shares at death of shareholder

Freeing "Trapped" Surplus (most common)

  • using surplus funds (not needed to run the business) to
    • earn tax-free investment growth
    • provide a tax-free death benefit

Providing Retirement Income For A Key Person

Providing Collateral For Commercial Loans

  • repays loan upon death of shareholder or key employee

Replacing A Key Person

  • reimburses the company for financial loss of a key person upon
    • death
    • disability, or
    • critical illness

(profits lost, cost of replacement)

Shared Ownership

  • corporation owns & pays for death benefit
  • life insured owns & pays for tax-deferred investments

Shareholder Estate Planning

  • uses cheaper corporate dollars to cover shareholder’s capital gains tax, etc

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