Tax Issues in Buy-Sell Agreements

Description

Buy-sell agreements are critical to protect a company, partnership or LLC against high-risk events that threaten the stability and survival of the entity, such as a member's or owner’s death, disability, retirement, termination, or sale of interest to a third-party nonmember.

Structuring a buy-sell agreement, involves complex income and estate tax planning at every stage of the process from the type of the buy-out, the funding mechanism, trigger events and price and payment terms.

LLCs and closely held corporations are often illiquid thus necessitating a reliable means of valuing both the entity as well as the member’s ownership interest. There are, however, hidden income and estate tax considerations that arise in valuation methodologies.

Listen as our authoritative panel of tax attorneys guides you through the critical components of a buy-sell agreement and how to structure the agreement for the best tax result.

Outline

1. Critical buy-sell provisions
   1. Structuring the buy-out: cross-purchase v. entity purchase; cross-insurance trusts
   2. Funding mechanisms: insurance, cash flow, loans, sinking funds, reserves, installment payments
   3. Trigger events: lifetime transfers, termination, retirement, disability, death
2. Purchase price and payment
   1. Key factors in determining price
   2. Payment terms
3. Valuation issues
   1. Valuation of company
   2. Valuation of ownership interest
   3. Methodologies and timing

Benefits

The panel will review these and other key questions:

• What are the tax implications for cross-purchase v. redemption forms of buy-sell agreements?
• What income tax ramifications arise in the various methods of funding the buy-out?
• What estate tax planning opportunities must be addressed when structuring buy-sell agreements?

Upon completing this seminar, you will be well prepared to address key tax components of buy-sell agreements, including valuation methodologies and timing. You will also learn the income and estate tax implications that you must consider when structuring buy-sell agreements.

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