one way cross purchase buy sell agreements - bsi一种交叉购买买卖协议bsi课件

BusinessSuccessionPlanningfortheSoleOwner One WayCross PurchaseBuy SellAgreements OLA19570509 Thismaterialwasnotintendedorwrittentobeused andcannotbeused toavoidpenaltiesimposedundertheInternalRevenueCode Thismaterialwaswrittentosupportthepromotionormarketingoftheproducts services and orconceptsaddressedinthismaterial Anyonetowhomthismaterialispromoted marketed orrecommendedshouldconsultwithandrelysolelyontheirownindependentadvisorsregardingtheirparticularsituationandtheconceptspresentedhere TheSoleOwner DifferentfromMulti OwnerCompanies Problematic incapacityorprematuredeathNoco ownerstoruncompanyininterimNoobvioussuccessorMaycauseterminationofentityLossofstreamofincomeforfamilyFireSale lossofsignificantpercentageorALLvalue Whathappensatowner sdeath TerminationofbusinessSoleProprietorshipsPartnershipsProfessionalCorporationsManagedbyExecutorSCorporationsCCorporationsLimitedLiabilityCompanies BequeathingBusinessviaWill Commonapproach butwhyisthisaproblem Familymembers ChildrenoftennotinvolvedinbusinessExecutormaynotwanttorunbusinessSuccessornotfullytrained mentoredMaynotbequalified lackprofessionalcertificationOwnerassociatedwithEntityLossofownerresultsinlossofgoodwillPersonalrelationshipswithclientsPersonalizedserviceonlyownerprovided Analternativestrategy TheownerwillhavenegotiatedasaletoaselectedbuyerpriortodeathAsaleisagreedtoatasetpriceatatriggeringevent death retirement disability specifieddate etc Entityredemptionnotanoption entitycannotexistwithoutanowner managerofoperations One WayCross PurchaseBuy SellAgreement One WayCross PurchaseBuy SellAgreement PotentialBuyer KeyEmployee Relative Competitor Friend Colleague UnrelatedThirdParty PoolofPotentialBuyers Buy SellAgreementcontractsvaryinterms butallcontainfollowingmandatoryprovisions One WayCross PurchaseBuy SellAgreement Theowner orhis herestate willselltothespecificbuyer andthebuyerwillpurchasethebusinessinterestfromtheownerAnagreeduponpriceorformulatovaluethebusinessSpecifiedlistofassetsandliabilitiestobetransferredAmeansoffunding suchaslifeinsurance ischosensobuyeriscapableofmakingpurchase FundingtheAgreement Termvs Perm Partiestoagreementoftenwanttofundwithterminsurance duetolowerpremiums butpermanentinsurancemaybemoreappropriatebecause Triggeringeventforbuyoutoftenoccursforreasonotherthandeath e g retirement disability specifieddate BuyercanusecashaccumulationinapermanentpolicytofundalifetimebuyoutPermanentpolicywithcashvaluebuild upworksbetterforalongheld well establishedbusinessLengthofagreementmayextendbeyondtimethattermisavailable getstoocostlyafteracertainage Attimeparticipantswanttoswitchtopermanent insuredmaybeinpoorhealthoruninsurable Candidatetoreplaceowner KeyExecutiveinBusinessAssalariedemployee maylackfundsforbuyoutOwnercanimplementExecutiveBonusarrangementtofundpolicyPremiumsarepaidthroughtaxablebonustoexecutiveEmployerreceivesa 162mdeduction ascompensation ExecutivepurchaseslifeinsurancepolicyExecutiveisownerandbeneficiaryofpolicyEmployermayadd doublebonus tocoverestimatedincometaxliabilitytoExecutiveonbothbonusesPremiumsarenottaxdeductibleforExecutiveWithaRestrictedBonus executivehaslimitedaccesstocashvalueofpolicybasedoncertainevents e g disabilityofowner KeyExecutiveasBuyer ExecutiveBonus LifeInsurancePurchase Executiveusesbonuspayment minusincometaxes topurchaselifeinsurancepolicy AccessingBenefits Executivehasaccesstopolicy scashvalueatpredeterminedtimeorspecifiedevent Executivereceivesdeathbenefit usedtofundbuyoutofowner sbusinessinterest BonusPayment Employermakestaxablebonuspaymenttoexecutiveandreceivescorrespondingincometaxdeduction 1Executivereportsbonusasadditionalincome LifeInsurance Employer Executive ExecutiveBonus Here sHowitWorks 1Providedamountofbonusisreasonableandemployerretainsnoownershiprightsorbeneficialinterestinthepolicy Settingupthebuy sellagreementwithanEscrowasintermediarycanservemanypurposes EnsuresenforcementofthearrangementPreventslikelihoodofbuyerunilaterallybackingoutofagreementafterowner sdeath andkeepingpolicyproceeds CustodianoflifeinsurancepolicyEnsurespaymentofpremiumsPreventsaccessbycreditorsPreservesintegrityofpolicy preventspolicywithdrawals whichcouldcauselapse UsinganEscrowedBuy SellArrangement One WayCross PurchaseBuy Sell Here sHowitWorks Example Felixownscleaningservice soleproprietorshipAthisdeath companywouldliquidateGoals Toensurehiswifeandchildrenaretakencareofafterhisdeathwithalumpsumorstreamofincome Felix sCleaningServiceFelix SoleProprietor HowitWorksExample Felix sCleaningService Example OscarwasonceoneoftheworstemployeesAftermanyyears Oscarhasshapedupandisthebest andmanagesalltheothercleanersGoals FelixdecidestochooseOscartotakeoverthebusinesswhenheleaves Oscarjumpsatthechance Oscar HeadCleanerKeyEmployee HowitWorksDiagram Felix sCleaningService Buyer Oscar KeyEmployee SoleProprietorship CleaningService SoleProprietor Felix Felix sEstate IRS TransamericaPolicy onFelix I DuringFelix sLife 1 Buy SellAgreement 2 EmployeeBonus EmployerDeduction 4 Premiums 3 IncomeTaxonBonus HowitWorksDiagram Felix sCleaningService IRS II AtFelix sDeath 7 BusinessInterest 6 SaleProceeds 5 DeathBenefit 8 IncomeTaxonIRD Buyer Oscar KeyEmployee TransamericaPolicy SoleProprietorship CleaningService SoleProprietor Felix Felix sEstate TaxConsequences Ifemployeebonusused DeductionallowedforbusinessIncomemustberecognizedbyKeyEmployee BuyerGenerally policydeathbenefitfederalincometax freeOwner sestatereceivesstep upinbasisatdeath sonocapitalgaininbusinesslikelytoberealizedIncomeinRespectofaDecedent ex notes accountsreceivable commissionsreceivedafterdeath substantiallyappreciatedinventory Nostep upinbasisatdeathSubjecttoordinaryincometaxIfbuyerpredeceasesowner valueoflifeinsurancepolicyisincludedinbuyer sestate EffectofEstateBasisStep Up Advantages SoleOwner KeyExecutive Buyer KnownbuyeratdeathorretirementPlanformanagementofbusinessatdeathorretirementSaleproceedsasourceofincomeforfamilyPeggedvalueofbusiness OffertoownbusinessFunding lifeinsurance topaypurchasepriceBasisinbusinessinterestequaltopurchaseprice TransamericaLifeInsuranceCompany TransamericaFinancialLifeInsuranceCompany collectively Transamerica andtheirrepresentativesdonotgivetaxorlegaladvice Thismaterialisprovidedforinformationalpurposesonlyandshouldnotbeconstruedastaxorlegaladvice Youshouldrelysolelyuponyourownindependentadvisorsregardingyourparticularsituationandtheconceptspresentedhere Discussionsofthevariousplanningstrategiesandissuesarebasedonourunderstandingoftheapplicablefederaltaxlawsineffectatthetimeofpresentation However taxla