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Session 1—Picking the Right Entity Structure

Critical to proper buy-sell planning is selecting the most suitable entity structure to serve as the platform not only for the business but also for transition purposes. The choice of entity alternatives have grown in recent years to include C Corporations, S Corporations, Partnerships, Limited Partnerships, Limited Liability Companies, Limited Liability Limited Partnerships, and others. This session will focus on both the legal and tax implications of the available entities to best plan for ongoing ownership as well as ultimate succession planning. Conversion from one entity form to another on a tax-efficient basis will also be explored. Learn the foundation for how to setup and properly structure a “domestic” asset protection plan.

Session 2—Buy-Sell Structures – Cross-Purchase vs. Redemption

The transfer of ownership of any entity is accomplished by the owner either transferring the ownership interests back to the entity or directly to the successor owner(s). This session will explore the basic differences between the Redemption and the Cross-Purchase approaches to buy-sell structuring, the tax implications of each, and uses of insurance in each structure. In addition, as the number of owners in a company increases, the number of insurance policies increases as well, adding to the complexity of any Cross-Purchase structure. The presentation will review the trust alternative to Cross-Purchase planning through the use of a Cross-Purchase Insurance Trust.

Session 3—The Buy-Sell Agreement – Part I, The Triggers and Purchase Parameters

In order to ensure certainty of succession, at the core of any buy-sell plan is the Buy-Sell Agreement. More than just a form to address the possibility of death, this document must contemplate the entirety of succession contingencies. This initial presentation will focus on the variety of trigger events that must be contemplated in a comprehensive Buy-Sell Agreement as well as the parameters under which the ownership interest will be transferred. The parameters to be addressed will include the time frame for purchase, structure of the purchase, and funding options including life insurance and disability insurance, among others.

Session 4—The Buy-Sell Agreement – Part II, Valuation Provisions

Once the triggers and other parameters of the Buy-Sell Agreement are in place, the ultimate issue of pricing has to be determined. With the closely-held company, the valuation challenge can be a difficult one. This session will review the valuation options to be inserted into the Buy-Sell Agreement, including Agreed Value Clauses, Formulaic Clauses, Independent Appraisals, and combinations of each of these. In addition, the advisor will learn about adjustments to valuation using discounts, premiums, penalty pricing, and other mechanisms.

Session 5—Documenting the Buy-Sell Agreement

In order to gain a practical understanding of the implementation of the business transition plan, the advisor will be introduced to various documents used to govern the buy-sell structure. The presenter will review the stand-alone Buy-Sell Agreement, Shareholder Agreements, Operating Agreements, Ownership Certificates and Legends, as well as corporate resolutions. This will serve as an introduction into the integration of the operative documents as well as provide a structure for the advisor to understand current gaps in client documentation.

Session 6—Succession Planning for Ownership

The goal of business transition planning is to ensure a smooth succession of the business, which maximizes value while minimizing taxes and potential disputes. This presentation will review popular forms of transfer within the family construct, such as gifting, sale of ownership interest, sale of assets, and establishment of new entities with next generation owners. It will also explore the sale of ownership interests to third parties (employees and/or outsiders) using techniques such as straight sale, leveraged sale, ESOPs, and asset sales. Management transition, perhaps the most critical aspect to sustain the value of the company, will also be discussed.

Session 7—Life after the Transition

Not all transitions occur at death, so the advisor and the client should be prepared for the moment when the business is transferred and the client is sitting on proceeds with no or little involvement in the business. A routine and business purpose needs to be replaced, and the psyche of the entrepreneur needs to be tapered. This presentation will discuss the psychological aspects of the transition, subsequent business planning, managing the wealth received as its own business through a “family office” structure, legacy planning now that the business is gone, and related post-transition challenges.