Protection for your business
If the business depends on you, on your partner, or on two or three specific people, losing any one of them is a financial risk you can structure around. Here are the arrangements that get used and when each one makes sense.
What you're protecting in a business
In a small business the value isn't in a building: it's in the people. The one who brings in the clients, the one who knows how to price the job, the partner who put up the capital. When one of them is gone, the first thing that breaks isn't operations, it's cash flow.
Life and disability coverage are used to put money exactly where that hole opens. It isn't a different product: it's the same coverage, structured with the business as owner or as beneficiary depending on the goal.
The three arrangements used most are key person, which gives the business the cash to get through the transition and replace whoever is gone; the buy-sell agreement, which gives the remaining partners the money to buy out the departed partner's share from their family without pulling it out of operations; and protecting the owner's income, because in a one-person business that person's disability is what shuts off the till.
On top of that there are employee benefits: life and accident coverage offered to the team, which in Puerto Rico counts for more than you'd think when it comes to keeping good people.
How it works, no fine print
Before talking about policies we have to identify who holds up the business's income and what would happen to the payables if that person were gone for six months. That conversation takes 20 minutes and clears up most of it.
A policy held by the business, held by the partners between themselves, or held by the individual are three different things. That decision sets who collects, who pays and how it's treated for tax.
Key person coverage is sized on the person's real contribution to income; buy-sell on the valuation of the stake. They're different calculations and both have to be done before anyone quotes.
A buy-sell agreement is a legal document: the policy funds it, it doesn't replace it. I work alongside your accountant and your attorney so that what gets signed and what gets issued say the same thing.
- Businesses with two or more partners and no funded buy-sell agreement.
- Owners whose family couldn't keep the business going without them.
- One-person businesses where the income depends on that person working.
- Companies that want to offer the team a real benefit without building a complicated plan.
- Anyone preparing to sell the business or hand it to the next generation.
- The tax treatment of the premiums and the benefit changes depending on who owns the policy and how the agreement is worded. I don't give tax advice: that gets settled with your CPA before anything is issued.
- An unfunded buy-sell agreement is just paper: it obliges the partners to buy, but gives them nothing to buy with. The policy is what puts the money there on the day it's needed.
- In a key person arrangement the employee is the insured but the business is the beneficiary. That has to be discussed and consented to by the person, not done behind their back.
- Valuations change. An amount that was right five years ago has probably fallen short by now, so these structures get reviewed periodically.
- All coverage is subject to the underwriting and approval of the insurance company concerned.
Let's look together at what your cash depends on
I walk you through your options openly, compare the insurance companies I work with, and tell you plainly if a different coverage suits you better. No obligation and no pressure — the decision is always yours.
About protecting your business, specifically
No — if anything it's the reverse: the smaller the business, the more the risk sits on one or two people. A three-employee business where the owner is the one who sells is far more exposed than a company of fifty. I work with businesses from a single owner upward.
It's a contract between the partners setting out what happens to one partner's stake if they die or become disabled: who buys it, at what price and on what timeline. The life policy comes in as the mechanism that puts the money in the remaining partners' hands, so they can buy the share from the family without draining the business or ending up with an heir as a partner who doesn't know the trade.
It depends on the structure, and it isn't an answer I can give you, because I'm not your accountant. What I do is explain how each option is set up and sit down with your CPA so they can determine the treatment before anything is issued.
S Sekulits LLC holds lines of authority that include Property and Casualty alongside Life, Disability and Health Services. On this page I focus on life and disability structures because those are what I work with daily. If you need coverage for the premises or liability, write to me and I'll tell you plainly whether I handle it myself or refer you to someone who'll do it better.
For key person it's estimated on what that person contributes to income and how long they'd take to replace. For buy-sell it's calculated on the valuation of the stake. Two different calculations, and neither comes off a generic table: you have to sit down with the business's numbers. That's what the consultation is for.