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Most people are not aware of the fact that they have a silent partner in their business. The partner is called IRS. He demands a lion share of the profit though not involved in daily operation of the business. One of the most frequently used tools to defer the tax obligation is called 1035 exchange. The capital gain tax on a real property can deferred by acquiring a property of higher value. The tax is not due till the disposal of that property. You must seek professional help of an attorney and CPA.


There are several means of keeping ownership each has its own merits and setbacks. A good accountant and Attorney would be able to advise what may fit each client based on their specific need. The common classifications are:

  • Sole proprietorship: Where the owner is one person
  • Partnership: Owning with another person
  • Corporation: A non-person entity governed by the stock in the company
  • A Limited Liability company

Buy-Sell Agreement

A legal agreement employed by both partnerships and corporations to buy or sell their interest to the remaining party for a pre-determined price either due to a premature death or departure from the company. There are several advantages to have buy sell agreement in place:

  • It provides a guaranteed price for the share of ownership.
  • Guarantees an exit strategy without costly litigation.
  • It guarantees business continuation without interruption

Funding a Buy-sell agreement

The most common tool to fund a buy-sell agreement is through Insurance. As the life insurance proceeds are income tax free, in the event of a partner or shareholder’s premature death, per the agreement the shares are released to the surviving partner in exchange of a predetermined price which is paid from the Life Insurance proceeds.


Insurance is protection against unexpected loss against loss to property and Life. Generally business owners secure two kinds of insurance protection tailored to meet specific loss. Most property owners and lenders may require additional protection by adding various protection packages.

Fire and accident Insurance

This kind of Insurance deals with the property where the business is operated from. Common item is fire and destruction from the forces of nature. Rain, hail, wind, snow can cause damage the business may not be operable safely.

Liability Insurance

This kind of insurance protects a business and its operators from negligence of their own or the customers who comes to the location of Business.

Life Insurance

This protects the most valuable asset, the human life. Usually this kind of protection can be bought and funded through various kinds of life insurance.

Key person Insurance

For most neglected form of Insurance is Key man Insurance. Though easily seek coverage in the event of damage due to fire and flood, it only protects the replaceable assets. The most irreplaceable asset of a business is human life/ the ability to run the business which generates a continuous income to meet all aspect of business. Everything is centered on the decision maker the driver of the company to make sure the income is generated to keep the wheels rolling.

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