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Buy-Sell Agreements for Closely Held Businesses: Redemption vs. Cross-Purchase, Valuation Methods, Tax Implications

Note: CLE credit is not offered on this program

Recording of a 110-minute CPE webinar with Q&A

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Conducted on Wednesday, April 19, 2023

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This webinar will cover key considerations of buy-sell agreements for closely held businesses. Our panel of estate and wealth transfer experts will discuss the tax implications of redemption and cross-purchase agreements for tax professionals working with small businesses and their owners.

Description

Buy-sell agreements are a critical planning tool for closely held businesses. They can ensure a business remains in the hands of family or current owners and provide liquidity to transfer ownership and pay estate taxes. There are two types of agreements. A redemption agreement is between the owner and the business while a cross-purchase agreement is between individual owners. A buy-sell agreement is triggered by death, divorce, disability, or other threats to a business' continuity.

Often funded with life insurance, the tax ramifications of buy-sell agreements are complex and vary based on the type of agreement. Whether a basis step-up is received at transfer depends on whether the shares are acquired by the business or the individual owners. The valuation method selected can significantly impact the taxation of the deceased owner's estate. Properly planning for a streamlined transfer of a business interest can mitigate both taxes and future complications.

Listen as our panel of estate planning experts identifies clients who are candidates for these agreements, primary differences in redemption and cross-purchase agreements, and liquidity and valuation considerations for trust and estate advisers working with closely held businesses.

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Outline

  1. Types of buy-sell agreements
  2. Triggering events
  3. Valuation
  4. Funding
  5. S corporation issues
  6. Tax considerations

Benefits

The panel will review these and other critical issues:

  • Understanding the tax implications of redemption agreements
  • Using life insurance to fund buy-sell agreements
  • Tax implications of valuation methods used in buy-sell agreements
  • Obtaining a basis step-up when an interest is transferred

Faculty

Edmondson, S. Gray
S. Gray Edmondson
Partner
Edmondson Sage Allen

Mr. Edmondson practices in partnership, corporate, and individual tax planning; business transactions, including...  |  Read More

Husbands, Joshua
Joshua E. Husbands
Partner
Holland & Knight

Mr. Husbands is a partner in Holland & Knight’s Portland office and a member of the firm's Private...  |  Read More

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