Ownership Transfer and Business
Ownership Transfer vs. Business Succession
• Ownership transfer can occur with or without a
change in management through the use of
voting and nonvoting shares.
• Business succession can be planned with or
without an immediate ownership transfer
• Business succession begins be assembling a
management team and spreading the
concentration of management responsibility
Why Consider It Now?
•Business valuations historically low
•Interest rates low
•Bonding is more difficult
•Having a succession plan in place is attractive
•Owner estate tax planning
General Succession / Transfer Strategies
• Sale to an outside buyer
• Employee Stock Ownership Plans (ESOP)
• Transfer at death or disability through an
• Developing buyer(s) from within / becoming a
Succession Organization. Hardest part usually
is finding and developing the new leader
Outside Sales and ESOPs Harder To Do In Today’s
• Limited market for construction companies
• Contractor consolidators out of business
• Venture capital firms generally not interested
• Employee Stock Ownership Plans (ESOPs)
are less viable today than they once were.
Ownership Transfer Methods
• Create new company / Wind down old company
• Insurance funded transfer at death or disability
• Bargain sale
• Significant bonuses to buyer used to purchase
• Phantom stock or nonqualified deferred
• Gifting using annual and lifetime gift exclusions
Grantor Retained Annuity Trusts (GRATs)
• An estate planning transfer technique
• Not a new strategy, but one that fits well in today’s
• Transfer of shares from one shareholder to other(s)
• Utilizes IRC 7520 rate for month of transaction.
• Death during term results in estate tax inclusion.
• Not a good technique for transfer to grandchildren as
GST allocated at end.
• Can zero-out, resulting in no gift.
• Authority for GRATs is defined in IRC.
• Valuation self-adjusts.