Insurance LLC setup & administration
Insurance LLC setup and administration, handled.
You approve the big decisions. We coordinate the professionals, records, notices, and annual filings that keep the structure working.
The 10-second version
Why it exists
Connelly exposed the risk in company-owned buy-sell funding.
When a company owns the life insurance that funds its buy-sell, the Supreme Court says those proceeds inflate the company’s value at death.
Why it’s hard
The fix has moving parts.
An Insurance LLC can address the policy-ownership problem when properly drafted, funded, and administered — if attorney, broker, CPA, and compliance calendar all line up. Most audit failures are operational, not structural.
What we do
We coordinate the operating workflow.
We coordinate setup with your attorney and broker, then administer the LLC every year after.
The structure
The operating company never touches the policies.
The authority
“A corporation’s contractual obligation to redeem shares at fair market value does not reduce the value of those shares in and of itself.”
Connelly v. United States, 602 U.S. at 6 (2024)
What BuySell LLC handles
Two engagements. One partner.
Engagement 01 · Weeks 1–8
Setup
- Discovery and fit assessment
- Attorney coordination for drafting
- Broker coordination for underwriting
- Entity registration and formation
- §101(j) Notice and Consent before policy issue
- Capital account setup and opening records
- Policy ownership and beneficiary records
Engagement 02 · Every year after
Administration
- Form 1065 partnership return and K-1s
- Form 8925 coordinated with operating return
- §101(j) consents for new or replaced policies
- Capital account tracking
- Annual operating agreement audit
- Premium scheduling and beneficiary verification
- Annual compliance summary to your full team
The line we do not cross
We coordinate. They render the licensed opinions.
BuySell LLC is not a law firm, an insurance broker, or a CPA firm. We coordinate the operating workflow across the three licensed professionals in your engagement. Each professional is responsible for advice and work within their own discipline.
| Role | What they do |
|---|---|
| Attorney | Drafts the buy-sell agreement, the Insurance LLC operating agreement, and the funding documents. |
| Broker | Places and services the life insurance policies. |
| CPA | Advises on tax treatment, prepares Form 1065 / K-1s when applicable, and helps evaluate §101(j), §6039I, and Form 8925 reporting. |
| BuySell LLC | Coordinates setup across the three professionals, maintains the records, runs the notice-and-consent calendar, packages Form 8925 data, and keeps the annual compliance calendar. |
Fit check
Worth a closer look if…
- You have three or more owners in a closely-held business.
- Combined EV is near or above the federal estate tax exemption.
- There is a meaningful age or health spread among owners.
- You use permanent life insurance to fund your buy-sell.
- You have an entity-redemption agreement today, reviewing post-Connelly.
Alternatives
How the Insurance LLC compares.
Five common buy-sell funding structures. Only three are genuinely viable after Connelly. The Insurance LLC is often worth evaluating for three or more owners in the taxable-estate range.
| Structure | Connelly risk | Admin burden | Best for |
|---|---|---|---|
| Cross-purchase Owners buy policies on each other |
None | Very high | 2-owner businesses |
| Entity redemption Company owns the policies |
Severe | Low | Below-threshold estates only |
| Insurance LLC Separate partnership-taxed entity holds policies |
None | Medium | 3+ owners, $2M–$50M EV |
| Partnership-owned Use an existing LLC or partnership |
None | Low–medium | Multi-entity families |
| Unfunded + note No insurance; buyout over time |
Carve-out only | Heavy post-death | Uninsurable owners |
Questions
Frequently asked.
Do you help with setup, or only ongoing administration?
Both. Most clients engage us for both — setup with their attorney and broker, then annual administration. Some come to us already-formed and only need administration.
What if I already have an attorney or broker?
Bring them. We work with whoever you’re already working with. No referral fees either direction.
How long does setup take?
Six to eight weeks typical. Life insurance underwriting is the gating factor.
Will the death benefit be in my taxable estate?
That depends on policy ownership, incidents of ownership as defined in IRC §2042, and how the LLC is drafted and operated. The Insurance LLC structure is designed so insured members do not hold rights that trigger estate inclusion — for example, by using an independent manager and documented operating procedures. Your attorney and CPA should confirm the estate-tax treatment for your specific facts.
Can the IRS disregard the Insurance LLC?
The risk depends on whether the LLC has independent economic substance. Structures designed to address this concern often hold secondary income-producing assets to document genuine activity. Your attorney should advise on the specific facts and drafting.
Do surviving owners get a step-up in basis?
In a properly executed cross-purchase funded through an Insurance LLC, surviving owners generally acquire the deceased’s shares at purchase-price basis rather than inherited basis. Your CPA should confirm the basis result for the specific transaction, including any allocations under IRC §743(b) if the LLC holds partnership assets.
What typically causes these to fail in an IRS audit?
§101(j) consents not executed before policy issuance, stale handshake valuations violating IRC §2703, capital account drift, and lack of independent economic substance.
What’s still unsettled — for advisors and the tax-curious
The Insurance LLC, properly administered, is the best available post-Connelly answer for most multi-owner closely-held businesses. It’s a best-practices structure, not a statutorily blessed one.
No binding IRS guidance. PLR 200747002 signaled favorable treatment, but PLRs aren’t precedent. Rev. Proc. 2023-3 places Insurance LLCs on the IRS no-rule list.
§2703 attack vector remains live. The Supreme Court didn’t analyze §2703.
Connelly footnote 2. The Court left open whether a redemption funded by liquidating operating assets might decrease company value.
Higher permanent exemption, same Connelly math. The One Big Beautiful Bill Act (July 2025) made the federal estate tax exemption permanent at $15 million per person / $30 million per couple starting 2026. Smaller estates now fall outside the concern set. For estates above those thresholds, entity-owned insurance still inflates the corporate value at death, and the ~$900K hit from Connelly scales with the policy size, not the exemption.
Next step
A 30-minute conversation.
Whether you’re thinking about setting one up or already running one, we’ll tell you plainly whether an Insurance LLC is the right structure and whether we’re the right fit to run it for you.
Questions
For CPAs & attorneys
Engagement model
Nothing on this page is tax or legal advice. Work with your attorney and CPA on structure decisions; work with us on setup and ongoing administration.