One of the easiest ways to derail your Business Continuation Plan is not to prepare for the contingency of a short and/or long-term disability. In fact, I stated in a previous article the likelihood of a disability is far greater than a premature death. Although we discussed it before, it’s important to bring up a few other key points in helping you map out a Business Succession Plan. I’d like to offer you, the business owner, the concept of a Qualified Sick Pay Plan (QSPP).
What is a Qualified Sick Pay Plan? It is actually a provision of the IRS (Section 105) that enables your company to decide who will be paid, when the payment will occur, for how much and for how long. It is actually a formal document that you would keep with your tax returns or Minute of your company meetings. But why all the fuss?
To begin, the QSPP can save your business thousands of dollars in unnecessary tax dollars, potential lawsuits and IRS penalties. Many business owners do not realize that the IRS can and has disallowed the deduction of wages and also payments to Social Security on said wages to a disabled employee. This is because the IRS does not consider wages to a disabled employee a valid, necessary business expense UNLESS it is part of a written Qualified Sick Pay Plan. It other words, the employee has to be gainfully employed to allow the business owner a legitimate deduction.
In the articles that follow we will describe the documents necessary to make this plan work. We have all the forms and we stress you should discuss this plan with your accountant CPA and your Attorney. We will also talk about the necessary components of the Qualified Sick Pay Plan.