Denne Posted February 15, 2010 Report Share Posted February 15, 2010 I am still trying to figure out whether there is a difference in the handling of a Life Insurance policy between a Sub S and and LLC. The members are interested in changing from an LLC to a Sub S for the SE savings. They currently have a life insurance policy that would pay a percentage upon the death of either member to the business and the remainder of the policy to the spouse. The agent told them that a corporation would be required to pay the insurance benefit to the spouses by way of wages or a taxable distribution. Is there a reason that the policy can't just state they are the beneficiary and pay them directly. I am not sure why the agent feels that the handling would be different between an LLC and a Corporation.....am I missing something? I appreciaty your assistance on this matter........ Quote Link to comment Share on other sites More sharing options...
OldJack Posted February 15, 2010 Report Share Posted February 15, 2010 I would guess that the insurance agent is trying to say that the tax-free proceeds received by a LLC-Scorp would possibly be taxable when paid out to the spouse. I don't believe that would be true since it is tax-free to the LLC-Scorp and distributions of income are tax-free from a LLC-Scorp. Quote Link to comment Share on other sites More sharing options...
Denne Posted February 16, 2010 Author Report Share Posted February 16, 2010 I would guess that the insurance agent is trying to say that the tax-free proceeds received by a LLC-Scorp would possibly be taxable when paid out to the spouse. I don't believe that would be true since it is tax-free to the LLC-Scorp and distributions of income are tax-free from a LLC-Scorp. Thanks Jack..... You are seeing it the same way as I am. I see no reason there can't be more than one beneficiary to begin with, but still see no reason they would need to pay income taxes just because they are a Corporation, even if the Corporation is the primary beneficiary. Thanks again ;~) Quote Link to comment Share on other sites More sharing options...
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