Bonus - LLC Member
Principal® Bonus - LLC Member is a plan designed to meet the needs of Limited Liability Company (LLC) members who want to ensure they have enough income for retirement.
This bonus plan provides death benefit protection and tax leverage without contribution limits or restrictions on compensation. The tax leverage comes with using life insurance to finance the plan, rather than it being based on a tax code provision.
This content is designed for use by financial professionals. Consumers may learn more about products and services on principal.com.
- Offering nonqualified benefits to non-owners (through nonqualified deferred compensation, executive bonus or split dollar plan) who also want a benefit for themselves
- Seeking to move capital from their business to their personal assets
- Who are seeking to use wealth accumulated through their LLC to meet their personal retirement and death protection needs
- Save more - While qualified plans and Roth IRAs offer tax benefits, they have limits on compensation and contributions that don't apply to this plan.
- Choose from contribution options - Any bonus contributed to this plan can be made from guaranteed payments or share of distributions based on the LLC operating agreement and/or applicable state statutes.
- Pay out distributions properly - If there's more than one owner, and bonuses are made from distributions, distributions need to be in accordance with the LLC operating agreement and/or applicable state statutes.
- Pay income tax now - Whether profits are distributed to LLC members or retained for business expansion, members are taxed at current ordinary income tax rates.
- Need to be healthy - LLC members must be able to qualify for life insurance if chosen as the financing option.
- Choose alternate financing options - If owners are unable to qualify for life insurance, other options for financing the plan are available. But these options will have different tax implications regarding accumulation and distribution.
Key materials listed below.
Before the Sale
During the Sale
Sample Proposal (BB9828) | Request for Proposal (DD2232)
A customized LLC Bonus proposal, with appropriate client cover information and illustration, can be created by the Business and Advanced Solutions Case Design team by using the Request for Proposal document.
View Sample Proposal (PDF) • View Request for Proposal (DOC)
Financial Models: Shows a sample of the financial model and illustration.
- Plan Design - Distribution Model (Active Member)
- VUL (BB9842VUL)
After the Sale
BMA Services Flyer (BB9441)
Outlines the added benefits employers and plan participants get from our administrative services through Business Market Administration (BMA).
Note: Sample agreements not necessary because Bonus - LLC Member plans are implemented by and for the owners of businesses.