|Ad Hoc Plan||Formal Self-Insured Plan|
|Net Profit||$33,000||Net Profit||$20,000|
|Tax on Dividend||$1,200||Net||$13,000|
I would like to recommend that you look into a formal sick-pay plan for you and possibly some key people at your business. There is virtually very little or no cost in adopting such a plan. The process will also give the you a clearer picture relative to your own family's financial security should a serious illness or accident render you unable to earn an income for any specific period of time.
The Qualified Sick-Pay Plan (QSPP) is a formal program for continuing one's wages (including stockholder-employees) in the event of a disability. While QSPP's do not have to be, may business owners elect to fund the disability payments through disability insurance, thus transferring the potential unknown "cost" of a long term convalescence to a manageable and predictable " known" in the form of an insurance premium. I suggest that you refer to Section 105 and 162 of the Internal Revenue Code or your tax advisor, as premiums for the QSPP's insurance may be tax-deductible as a necessary business expense.
Important Note - The information on this site is general in nature. Any description of coverage is necessarily simplified. Whether a particular loss is covered depends on the specific facts and the provisions, exclusions and limits of the actual policy. Nothing on this site alters the terms or conditions of any policies. You should read the policy for a complete description of coverage. Coverage options, limits, discounts and deductibles are subject to availability and to individuals meeting underwriting criteria. Not all features available in all areas.