Blog #202: LLC Buy-Sell Strategy for Owners of C or S Corporations (Part 2 – Loan-Regime Split-Dollar for C Corporation and LLC) | Bob Ritters Blog, ideas for financial service professionals
Summary
In that Blog, the two sole stockholders of a C corporation fund their Buy-Sell agreement with life insurance owned by a Limited Liability Company (LLC) they formed for that purpose. If an LLC that has elected partnership taxation (as most do) transfers the policy to a Member, the general rule is one of deferral when the distribution involves a K-1 tax form. Click here for a superb white paper by the Cleveland law firm, Cavitch, Familo & Durkin Co., L.P.A., on the subject of what they refer to as a Life Insurance Limited Liability Company (LILLC) used for funding a Buy-Sell. Harry Stafford, CEO, and Oliver Belmont, President, both age 45, are 50/50 stockholders and senior executives of SB Chemical Company, Inc. (SBCC), a C corporation with a combined federal and state income tax rate of 28.00%. I hope that the policyholder service division of all life insurance companies will ultimately bring this potential liability to those surrendering or lapsing policies, particularly those with 50% or more of the gross cash value subject to outstanding loans.
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