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TNCFB Lunch & Learn: Dana Holmes, Using Buy/Sell Agreements Generational Tr...

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Nashville Entrepreneur Center

41 Peabody Street

Nashville, TN 37210

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Structure and Funding Options for Successful Generational Transition: Using Buy Sell Agreements

This discussion will focus on considerations for a business owner who wants to sell ownership to the next generation. A buy-sell agreement can help make this a controlled, managed business transaction – everyone knows the plan, so internal family strife is held to a minimum. How can a buy-sell agreement be structured and funded for this “in the family” transaction?

Timing dictates structure – is this a transfer that happens when the business owner dies or is disabled – which can be funded by key man life insurance, for example; OR does the business owner want to transfer control to the next generation now, but wants the pricing to continue to provide income for his/her retirement – an alternative that may involve self-cancelling promissory notes, a private annuity, or profit share mechanisms? These options may allow the business itself to provide funding for the transaction – so no third party debt is incurred.

Active involvement dictates structure – how long will the business owner still be actively involved in the management of the business? When does the next generation take operating control? Is the buy-sell triggered in stages? Does equity ownership pass before voting control?

Tax planning dictates structure – should the transfer be accomplished through a trust structure (grantor trust or GRAT) to minimize tax on the transfer?


About the speaker:

Dana Holmes

Managing Member , 2nd Generation Capital LLC (an affiliate of KraftCPAs)
MBA, CVA, MAFF, CEPA

Dana has extensive experience as a principal and team leader in mergers and acquisitions (both buy-side and sell-side), strategic consulting, private placement of equity and debt instruments, work-outs and turnarounds. He has served in the president and managing partner role in advisory firms, as well as in CEO and COO roles in operating companies in both high-tech and computer-services industries. He has led strategic planning processes for both private and public firms in many industries. He is CEO of our broker/dealer subsidiary, 2nd Generation Financial, LLC.

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Nashville Entrepreneur Center

41 Peabody Street

Nashville, TN 37210

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