The business currently operates entirely online. Expenses are minimal, mainly home office and advertising. Previously they were claimed on our personal returns, now, yes, we will be shifting them to the corporation. As such, it also requires minimal investment to operate. Financial resources of the business will have little to no impact on its growth.
The life insurance things is really weighing on me right now. I'm uncertain of if it is a better option than just pulling the money and investing it personally. I see the tax free aspect of it, and how the cash valuation can grow, but I'm uncertain if that will play into the timeline correctly
Premium would be just under 10K for 20 years, so it's neither cheap, nor short term. I know pulling out early would be a waste, but I also know getting in at a young healthy age is advantageous. The cost isn't a concern in the sense of not having the money or impeding cash flow - it's that it's large sum that would have to be committed long term - and I'm unable to determine if that's a better play or not. Again looking to be FI in 12-13 years, so I don't know if drawing on other investments before that matures would make it work, or if it's not going to work, but I keeping hearing if you can affording it, it's got a lot of pros. Trying to get an unbiased assessment from someone educated enough to speak about it, but not trying to sell it to me!! :D
Hi Cowboy -
An unbiased opinion on insurance? What's that??? Haha.
It's a tough question in fairness and is only partially tax oriented but I will give it a go in better detail for you.
1) You're insured early and at low mortality rates
2) Ability to borrow against the plan value tax free (and repay upon demise through the estate)
3) The life insurance upon demise is tax free
4) It can be highly valuable if the business remains active for decades
1) Once you're in - you're in
2) It is somewhat expensive
3) Uncertainty regarding future performance of the business
4) Uncertainty that this loophole may be closed in future (possible, but the insurance lobby is quite strong)
The perfect candidate for this plan is a young professional (doctor, lawyer, etc.) who just started their practice. They have decades of practice ahead of them, consistent high earnings, and certainty of cash flow. In addition, they have tremendous job security (as the boss) and will continue to practice until late in life. People always need Doctors and Lawyers and (hopefully) Accountants.
By contrast, you have a one year-old online business with little overhead and high profitability. It could be a flash in the pan one-off business, or it could be a thirty year profit generator. It's harder to say, but with what little information I have, I'm more likely to lean on the former versus the latter.
In this case, committing to a plan two decades out doesn't seem like it is in your best interests. Remember you can always adjust this in a few years after you see more consistency in earning potential, maybe then it would be worthwhile.
The more consistent the business, the longer you plan to operate, the better this insurance "scheme" works.
Hopefully this helps!