Small Business Life Insurance Checklist

The checklist covers four main categories: key person insurance to protect against losing essential employees, buy-sell agreement funding to ensure smooth ownership transitions, executive bonus plans for attracting top talent, and business loan protection. Each section includes specific action items for Tennessee business owners.

The checklist includes formulas for calculating key person coverage based on the employee's contribution to revenue, replacement costs, and training time for successors. Typical coverage ranges from 5-10 times the key person's annual compensation, but varies by role and industry.

Yes, life insurance is the most common and effective way to fund buy-sell agreements. Without it, surviving partners may lack funds to buy out a deceased partner's share, potentially forcing a business sale. Our checklist walks through cross-purchase vs. entity-purchase arrangements and helps you determine the right structure.

Yes, and Tennessee's no-state-income-tax status makes certain strategies even more attractive. Key person premiums aren't tax-deductible, but death benefits are generally tax-free. Executive bonus plans allow business deductions while providing employees with permanent coverage. The checklist outlines tax implications for each strategy.

The checklist is valuable for businesses of all structures. Sole proprietors benefit from sections on business debt protection and succession planning. If you have employees, the key person and executive bonus sections apply regardless of your legal structure. We include specific considerations for LLCs, S-corps, and sole proprietorships.

The checklist is designed to facilitate conversations with your professional advisors. Take the completed checklist to your CPA to discuss tax implications and to your attorney for buy-sell agreement drafting. Many Tennessee business owners find it helps ensure all aspects of business protection are addressed systematically.