30 Ways to Transfer Ownership to a Successor
Succession planning is serious business but many owners fail to prepare, either through inaction, disinterest, not knowing how to start or what to do, or other priorities. What they do is their concern even though lack of a plan combined with a sudden death or disability can cause much disarray for stakeholders or dissipated value for the owner’s family.
For those that want to know somewhat how the process works, here are 30 ways ownership can be transferred to a successor. The following was abstracted from a speech I regularly present with this blog’s title.
- Sell the stock
- Gift the stock
- Stock given as additional compensation
- Stock and cash given as additional compensation
- Nonqualified stock options
- Incentive stock options
- Restricted stock issuance
- Stock options or restricted stock issued in tandem with cash
- Golden parachutes
- Phantom stock
- Shareholders’, members’ or partners’ agreements
- Clauses in compensation agreements
- Setting up a new business
- Clauses in a will
- Living trust combined with an option
- Stock redemption
- Installment sale
- Self-canceling installment note
- Installment sale to a “defective” grantor trust
- Charity remainder trust
- Grantor retained interest trust
- Employee stock ownership plan
- Sale-Leaseback
- Preferred stock recapitalization
- S election
- A B stock recapitalization
- Private annuity
- Stock Split Up
- Family Limited Partnership
- Leveraged buy-out
Many of the above methods are usually used in combinations. Additionally, many can be done pre or post death – it just needs the proper contractual agreements. This list runs the gamut of simple to complex but there is always a way to get it done for a willing client.
A word of caution is that many of these methods are highly technical and provisions of the Internal Revenue Code and Regulations must be strictly adhered to. Additionally, in some cases it might be desirable to secure an IRS ruling.
The above should give you an understanding that these things do occur. It just needs the owner to initiate the process.
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