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Legal Considerations for Equity Transitions
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Legal Considerations for Equity Transitions
File Details- Added: July, 18th 2012
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SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Legal
Considerations
for Equity
Transitions
Succession
Planning
Conference
David E. Mainzer
Spolin Cohen Mainzer & Bosserman LLP
mainzer@sposilco.com
Los Angeles - Manhattan Beach
www.sposilco.com
310.586.2400
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based on your
particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it is. Receipt or
use of this presentation does not create any attorney-client relationship between the user and SCM&B.
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Overview
I.
EQUITY RELATED RIGHTS AND OBLIGATIONS OF BUSINESS
OWNERS
II. OPTIMIZING THE LEGAL STRUCTURE FOR GROWTH,
COMPENSATION AND TRANSITION - NOT JUST TAX
III. CONTRACTS WITH EMPLOYEES - PROTECTING YOUR BUSINESS
AND CREATING VALUE
IV. SUCCEEDING AT SUCCESSION - SALE OF YOUR BUSINESS -
INTERNAL AND EXTERNAL TRANSACTIONS
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
2
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
YOUR BUY-SELL AGREEMENT IS THE RULE BOOK
Corporations - Buy-Sell or Shareholders Agreement
Limited Liability Companies - Operating or Limited Liability
Company Agreement
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
3
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
SUCCESSION PLANNING - KEY TERMS OF THE BUY-SELL
AGREEMENT
Provide a clear road map for what happens upon:
Death
Disability
Voluntary Transfer of Equity
Divorce
Termination of Employment/Retirement
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
4
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
MAJOR CONCERNS UPON DEATH AND DISABILITY
Liquidity
Valuation
Protections for Departed Owner - preservation of value and
creditworthiness
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
5
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
WHAT HAPPENS IF YOU DON'T HAVE A BUY-SELL AGREEMENT
Meet Your New Partners
Meet Your New Partners' Lawyers
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
6
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Liquidity
Mandatory Purchase of Equity by Company or Partners
Timing
Alternative Buy-Out Structures
Puts and Calls
Seller Protections
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
7
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Valuation
Periodic Agreement on Value
Formula
Appraisal
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
8
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Funding the Buy-Out
Key Man Life Insurance
Seller Financing
Protections for Seller-Creditor
Third Party Financing
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
9
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Key Points:
Choose Your Partners
Liquidity - Define Rights and Obligations of Owners Upon
Death or Disability
Valuation - Agree on Valuation Methodology
Funding the Buy-Out-Specify Funding Mechanism
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
10
L AW Y E R S
Legal
Considerations
for Equity
Transitions
Succession
Planning
Conference
David E. Mainzer
Spolin Cohen Mainzer & Bosserman LLP
mainzer@sposilco.com
Los Angeles - Manhattan Beach
www.sposilco.com
310.586.2400
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based on your
particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it is. Receipt or
use of this presentation does not create any attorney-client relationship between the user and SCM&B.
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Overview
I.
EQUITY RELATED RIGHTS AND OBLIGATIONS OF BUSINESS
OWNERS
II. OPTIMIZING THE LEGAL STRUCTURE FOR GROWTH,
COMPENSATION AND TRANSITION - NOT JUST TAX
III. CONTRACTS WITH EMPLOYEES - PROTECTING YOUR BUSINESS
AND CREATING VALUE
IV. SUCCEEDING AT SUCCESSION - SALE OF YOUR BUSINESS -
INTERNAL AND EXTERNAL TRANSACTIONS
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
2
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
YOUR BUY-SELL AGREEMENT IS THE RULE BOOK
Corporations - Buy-Sell or Shareholders Agreement
Limited Liability Companies - Operating or Limited Liability
Company Agreement
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
3
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
SUCCESSION PLANNING - KEY TERMS OF THE BUY-SELL
AGREEMENT
Provide a clear road map for what happens upon:
Death
Disability
Voluntary Transfer of Equity
Divorce
Termination of Employment/Retirement
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
4
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
MAJOR CONCERNS UPON DEATH AND DISABILITY
Liquidity
Valuation
Protections for Departed Owner - preservation of value and
creditworthiness
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
5
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
WHAT HAPPENS IF YOU DON'T HAVE A BUY-SELL AGREEMENT
Meet Your New Partners
Meet Your New Partners' Lawyers
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
6
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Liquidity
Mandatory Purchase of Equity by Company or Partners
Timing
Alternative Buy-Out Structures
Puts and Calls
Seller Protections
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
7
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Valuation
Periodic Agreement on Value
Formula
Appraisal
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
8
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Funding the Buy-Out
Key Man Life Insurance
Seller Financing
Protections for Seller-Creditor
Third Party Financing
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
9
SPOLIN COHEN MAINZER & BOSSERMAN LLP
L AW Y E R S
Equity Related Rights and Obligations of Business Owners
DEATH AND DISABILITY
Key Points:
Choose Your Partners
Liquidity - Define Rights and Obligations of Owners Upon
Death or Disability
Valuation - Agree on Valuation Methodology
Funding the Buy-Out-Specify Funding Mechanism
(c)2012 Spolin Cohen Mainzer & Bosserman LLP ("SCM&B"). All Rights Reserved. This document is not legal advice and you should not rely upon it as a substitute for legal advice based
on your particular situation. This document may not be accurate, complete or up to date, based on the facts applicable to you, and SCM&B makes no representation or warranty that it
is. Receipt or use of this presentation does not create any attorney-client relationship between the user and SCM&B.
10
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