Salary (Wage) Continuation or Deferred Compensation?

Non-Qualified Deferred Compensation (NQDC) often plays a role when structuring either a sale to insiders or a transfer of the business to children in the business. It is a type of retirement plan that allows highly compensated employees (in this case the exiting owner) to realize tax advantages by deferring a percentage of their compensation (and current income taxes) beyond what is permitted by the IRS in a qualified retirement plan (i.e., 401K). In essence, it is paying out INCOME EARNED at some point in the future, with a primary goal of minimizing income taxes.