Key Issues in Succession Planning: Buy-Sell Agreements, Equity Grants, Profits Interests, Tax Considerations

There are several means to transfer ownership of a business. For example, a company may be gifted to or sold to family members, sold outright to an outside party, or purchased by key employees. Proper early planning is crucial to a successful and seamless transition, regardless of the method chosen.

A buy/sell agreement can facilitate the transfer of a business after an owner's death. The terms of the agreement may include a cross-purchase or redemption arrangement or both. Life insurance is often used to fund these transfers. Having a proper plan in place before death can avoid ownership challenges and operational issues after death.

A business owner might choose to convey the business to key employees. Offering a profit interest, restricted stock units (RSUs), or stock options are a few ways to reward employees. A profits interest, however, entitles the employee to a percentage of future profits rather than an equity interest or shares. RSUs encourage employees to stay until they are vested, but this choice transfers control gradually and is rife with tax complexities. Business owners and their tax advisers need to understand the options for transferring ownership of a trade or business to selected heirs.

Listen as our panel of knowledgeable legal advisers identifies the methods available to convey business ownership and explains the pros and cons of each approach.

I. Fundamentals of succession planning

A. Key issues

B. Overlooked basics

C. Tax issues

II. Buy/sell planning

A. Structure

B. Key provisions

C. Estate matters

III.  Key employees

A. Equity grants

B. The many flavors of equity grants

C. Profit interests

IV. Excessive compensation issues

The panel will cover these and other critical issues:

• Types of buy/sell agreements
• Transferring a business to key employees
• The tax implications of equity grants
• Excessive compensation issues in business succession planning

Learning Objectives

After completing this course, you will be able to:

• Identify types of buy/sell agreements
• Determine methods to transfer ownership to key employees
• Ascertain critical tax issues in business succession plans
• Decide how excessive compensation impacts business succession plans

• Field of Study: Taxes
• Level of Knowledge: Intermediate
• Advance Preparation: None
• Teaching Method: Seminar/Lecture
• Delivery Method: Group-Internet (via computer)
• Attendance Monitoring Method: Attendance is monitored electronically via a participant's PIN and through a series of attendance verification prompts displayed throughout the program
• Prerequisite:

  Three years+ business or public firm experience preparing complex tax forms and schedules, supervising other preparers or accountants. Specific knowledge and understanding of pass-through taxation, including taxation of partnerships, S corporations and their respective partners and shareholders.

  
  

Strafford Publications, Inc. is registered with the National Association of State Boards of Accountancy (NASBA) as a sponsor of continuing professional education on the National Registry of CPE Sponsors. State boards of Accountancy have final authority on the acceptance of individual courses for CPE Credits. Complaints regarding registered sponsons may be submitted to NASBA through its website: www.nasbaregistry.org.

IRS Approved Provider

Strafford is an IRS-approved continuing education provider offering certified courses for Enrolled Agents (EA) and Tax Return Preparers (RTRP).