Name: Live Webinar: Intra-Family Succession
Uploaded: 2025-10-08T18:46:11.016Z
Duration: 1 h 29 min 32 s
Description: Live Webinar: Intra-Family Succession

Transcript for "Live Webinar: Intra-Family Succession": Good afternoon, and welcome to the first session of our Private Business Owner Succession Academy webinar series, Intra Family Succession, hosted by PKF O' Connor Davies. Before we get started, I'd like to go over a few housekeeping items so you know how to participate in today's call. We're pleased to offer live closed captioning throughout the webinar. To access the captions, please use the StreamText link located in the chat section of your attendee panel. You will have the opportunity to submit text questions to today's presenters by clicking on the q and a tab on the right hand panel. You may send in your questions at any time during the webcast. We have a lot left here to cover, and if time permits, we will make an effort to respond. If we cannot get to your questions, a response will be sent post event. This webinar is offering 1.5 CPE credits in specialized knowledge. Polling questions will be launched in the polls tab on your right hand panel, and you will need to respond to five of the polling questions to receive credit. CPE certificates will be issued within eight to ten days via email. A copy of the PowerPoint slides and a recording of today's webinar will be made available to you via email four business days post event. As we near the end of the webinar, we do have a very short survey which will be prompted and your response is greatly appreciated. Please note that any legal or tax information discussed during today's presentation is provided for general information purposes only and does not constitute legal or tax advice. At this time, I would like to introduce Stephen Fasano, partner in charge of PKF O'Connor Davies Center for Private Business Owners. Steve? Thanks, Arlene. Good afternoon, and welcome to our second annual Center for Private Business Owners Succession Academy. Thanks for joining us. Today, we hope that you'll walk away from the academy with an understanding not only of the succession planning process, but how important it is to be proactive. In some instances, depending on your particular situation, the implementation can actually take a number of years. So understanding what it will take, is critically important. We hope you're also gonna understand that the process requires a multidisciplinary team of expert advisors to develop and implement the plan. You'll see today, we have a number of financial tax legal experts that will contribute to discussion and decisions that were made in our case study, and you'll note that your personal and business needs are very much intertwined in this process, and both areas may impact the decisions you make. And finally, we hope you'll have a better understanding of the issues and challenges you may face when you're developing your plan. Academy and the three webinars are organized around three options that most private business owners have. First is the opportunity for intrafamily transition if you have a family business. The second is a transition to partners or employees, and we'll be discussing the esoph value proposition as part of that. And thirdly, it's the direct sale of the business. We also will be discussing the need to assess your readiness for this process, which is critically important and involves both your personal needs and the needs of the business. As Harleen mentioned, today we'll be focusing on the intrafamily transitions. I'll be joined by two of my partners, doctor Cynthia Adams Harrison and Chris Migliaccio, and two partners from the law firm Norris McLaughlin, Jeffrey Cassin, and Nichole Cipriani. Could we move forward, Cindy? The topics we'll be covering today fall into four major areas, which correspond to the process that we follow. First, it's important to understand the family business and family dynamics as well as the challenges they both face. We need to understand the leadership needs of the business and potential successors. And there's a need to develop a detailed transition plan that may include more individuals and management team members than just the owner. Finally, an ownership transition plan, which will require an understanding of the owner's needs both personally and professionally. And this will really require that deep dive into a number of financial, legal, and tax considerations. And then finally, we're gonna present a case study that we as a team actually worked on. So with that, I'm gonna turn it over to Cindy. Hi. Welcome, everyone. We're so glad that you're here with us today. We appreciate your time, certainly, and we will jump right into the program right now. So there are some key considerations as you contemplate an inter family transition. And you might be asking yourself, what do I need to begin this process? And, certainly, there are a lot of things you need to think about as you begin to create a road map for your inter family transition. And a number of those things have to do with preparing the next generation for leadership. You will need to think about, again, all of the financial, legal, tax implications. We are going to cover quite a bit of those today, and also, the governance process. And we need to also highlight to get professional advice early. As you begin to to roll out your your road map, you're going to want to make sure that you get the most appropriate advisers to help you figure out what your plan is going to look like. Planning is essential for a successful intrafamily transition. And, again, when we look at governance structures to assist with the transition process, we look at perhaps a family assembly, family council, boards of directors, and it or advisers, and this can support the family and management through transition. We are going to get into this in a lot more detail as we move into our case study. And we're going to also assume that the current management of the business may need to be tweaked to support the growth of the business going forward. Again, what may have worked for a private business owner to get to this point of success to contemplate an intra family transition is oftentimes not what is necessary moving forward. So leadership teams may change. Obviously, preparing the next generation for leadership is of greatest concern when we look at the the management structure of the business as you move forward. You're going to need time, patience, and ongoing evaluation to mentor these key leaders and roles as they transition. So time is also going to be something that is planned and appropriately evaluated as you begin to put these next gen leaders into position. Also, formally planning the succession process, as I just mentioned, and creating the road map will be integral to success. Trying to piecemeal this process together does not always accurately help the process proceed effectively. We're gonna be looking at a three circle diagram, which is a wonderful way to look at family roles within this process. And we can have basically a number of different dynamics occurring at the same time. We can have family members here who are are not in line in any way with the business, not involved in the business whatsoever, and they may also not have ownership roles. So family members can oftentimes be guided as we will talk again in a little while through governance processes to be involved and to have some input in what happens going forward in terms of continuity and legacy building. When we look at the business, we can have family members again who have business roles in the in the business itself. They can also be owners in the business. So you can have an ownership role as a family member, but not be employed in the business. And then we have a much more dynamic role where you are a family member, you are working in the business, and you do have an ownership role. So this is a really nice way to sort of slice and dice what potential roles may be. When we look at succession variance, this is a very important, process dynamic that also occurs. One of these dynamics looking at the controlling owner, the owner is really the one that began this business with passion. And so trying to replicate that is very difficult when we move into a sibling partnership. So the siblings do not their their peers. We have an authoritarian role here as the controlling owner. The siblings will always be a peer group and always be subordinate to the controlling owner. And they are somewhat one step removed potentially from the passion of which this controlling owner has established this business. Moving down into the cousin collaboration, this is where we see quite the challenge of extending a legacy business and that, again, we are now two times removed from the controlling owner. Now we have branches of the family, could be controlling owners, brothers, sisters. Now we have a a cousin collaboration, which can be challenging when we break it out through branches within the family. We always have to pay attention to these succession variants and make sure that we are advising appropriately given these dynamics. And key family business challenges that that are something to keep in mind, we have generational succession that is quite interesting in that potentially one third of all family businesses make the transition from a g one to a g two transition. That would be a founder to a sibling group. And so that would that also means that two thirds do not necessarily have the opportunity either through having appropriate leadership available and or the financial means to transition a business. So the family also has potentially some some conflictual family interests, and we wanna make sure that, you know, the sibling group, and leadership group are all communicating effectively. They could have differences when it comes to funding the succession. So as we move through generations, family interest can can be challenging. Again, now we look at balancing the financial returns. One of the things that is very difficult to do oftentimes is create a buyout and make sure that both the owner's needs financially and the NextGen who was supporting this buyout are financially set to make this happen. So that is something that is always of concern when we are creating a legacy transition. There can also be inter family conflict or disputes. Family members' interests may not be aligned. And in worst case scenarios, we can get some difficulty with any surviving spouse, that have is dissolved in a marriage situation. It can leave the company at risk with the spouse holding stock and even voting rights. This is why it's extremely important to make sure you have shareholders agreements that need to either be reviewed if they are in place or need to be designed if they are not in place. Again, a state inheritance challenges are also of concern. Without appropriate planning, the death of a family business member owner can trigger a number of different implications and probate delays. One of the things that we typically will ask an owner is do you have do you have a get hit by a bus plan? In case of an emergency, do you have all of your key estate planning in place to make sure that the family, the business is is safe going forward. So these are important questions to consider when you begin to look at this transition process. Some other unique interfamily succession challenges that we have just touched upon, ownership disagreement, conflicts, a lack of leadership. There may not be next gen leadership, and very oftentimes, you can create a a bridge leadership until that next generation is ready. So it it doesn't have to be the end all if the next generation is not prepared to lead the business going forward. Lack of communication is oftentimes a stickler when it comes to the transition process. We wanna make sure we have channels open and that people are prepared to communicate effectively throughout the transition process. Again, poor state planning is of concern. A lack of succession planning, shooting from the hip does not typically work in these situations. You need a road map and a plan to secure success. Again, moving from entrepreneurial leadership style to professionally managed business, this often comes with this transition in that founders have typically been amazing entrepreneurs and that's why they have gained such great success. Oftentimes, the business needs in terms of its its growth, the ability to then move into a more professionally managed business, which operationally takes care of many things that perhaps were not necessarily able to be paid attention to previously. So and then again, a lack of family and or corporate governance. Governance is the key to it's the structural base to secure the transition and and legacy going forward. So paying attention to these succession challenges is a primal need for any transition. And with that, I'm gonna turn this over to Stephen to move through these next slides. Thanks, Cynthia. So as we mentioned, understanding the leadership needs of the business is really critical to not only the identification, but ultimate selection of a successor. So a thorough and objective review of the organization really needs to take place. That includes the current organizational design, the various functions and skills required to be successful. There needs to be an assessment of the roles, responsibilities, skill sets, and how effective the actual current team has been. From there, you should be able to identify gaps in the overall management team, and you should be able to identify potential successors potentially for the owner, but also for additional positions. From there, you'd need to identify that team that's going to lead the business going forward. And as Cynthia mentioned, this may require training because the next gen may not be ready for that role. It may require an interim CEO, a bridge as she indicated, or some other solution depending on the circumstances. Next, Cynthia. This will actually lead to the creation of a very detailed management transition plan. This plan will potentially include development of new job descriptions, the identification of training needs for a number of different roles, transition of duties. It may even include an organizational change. And additionally, we'll need a thoughtful communication plan, not just to the management team, but to the overall organization. Next, Cynthia. From there, we'll focus on the development of an ownership transition plan. In order to develop truly an effective plan, it requires a review of the owners, both business and personal needs. We need to understand the financial implications of transitioning a family business to the family, to the employees, to the management. Can the business actually support it? Need to identify risks associated with that. What are the owner's personal financial needs? Have they actually been quantified? And Cynthia also mentioned examining their estate and wealth planning needs and what planning has been done to date is critically important. Additionally, a review of the owner's post transition plan is critical. This can be a very emotional time for many owners, founders, etcetera. And with longevity being a significant contributor to this decision making process today, which is often delaying the start of this process. People are living potentially thirty years beyond the time they transition the business. What are they going to do during that period of time? So a great deal of focus should be should be put on the needs of that owner, that founder, if you will, and not just the next generation taking it over. And then lastly, discussing governance structures that can support the process. We'll be going into a number of different family and business structures that can support this. Next. So in order to complete this analysis, we're gonna need to review, typically, the owner's personal financial statements and readiness, the financial health of the business, so historical data, current financial statements, metrics, benchmarking, cash flow projections. We wanna look at the growth strategy, the industry, competitive landscape and the strategic plan they have in place for five to ten years. And very often, you'll need evaluation. Next, Cindy. Turn this over to Jeff. Hello. Thank you, Cindy and, Steve, Nichole. If you could join me too, please. Nichole on stage. Nichole and I are with Norris McLaughlin. We appreciate the opportunity to speak with the people on this call here. This is a high level slide, two slides on legal considerations. We'll get into more in-depth on the, case study. But, you know, the interesting thing about the legal considerations is that they occur, for a number of people involved in the transaction. Of course, if you have a single owner and a single, operator, it's easy. Right? You just owe the duty to yourselves. But once you start having minority partners or you have, an executive team, executive teams, owe, depending on the legal structure, fiduciary duties to their boards or to their management group or to the owners or all of the above, and it gets more complicated. There are also duties that are owed by, majority, owners to minority owners, and depending on jurisdiction, there can be duties owed by, minority owners to majority owners. So there are, an a number of fiduciary duties that come into play when, considering what are we going to do to transition the business. So these this scenario, this presentation is about what happens when you are trying to transition it to the next generation. And, again, you get to more complexity as as Cindy alluded to on the slide that had, layers of siblings and layers of cousins. The further down you go into a generational chain, the more likely you are to have multiple stakeholders, and a fiduciary duty analysis will be needed at that, stage. Well so what happens if the owner at the outset, the founder owner who wanted to set this up not to sell, but to be a legacy family business for multiple generations, If he or she sets set up with a, game plan that, does not account for the future, you're going to need buy in from the the sibling generation to get it to the cousin generation. You're going to need those consents. So what are the ways of obtaining those consents? Most often, it requires collaboration. It most often requires, a, willingness from people who are inside the business and outside the business to recognize their different roles, responsibilities, and the benefits they're bringing to the business and what they're, taking out of the business and and how it should be properly allocated. An agreement needs to be reached. There are there are other ways that, someone in the process can force the issue. Of course, if you're the, owner operator at the beginning, you can you can handle it largely through contract, a contract that succeeds in generations. And Nichole will, talk about a type, through trust and state planning. But if you don't have that contract in place, and that's a situation where you don't have management planning, family succession planning through multiple generations, then, you're gonna have to work on ways of finding consent. And what happens if consent can't be obtained? Well, knock on wood, you will be able to obtain consent and everyone finds a a happy road. But in the end, what you will do is you'll work with a legal adviser and accounting adviser, and, the different stakeholders will, either negotiate a resolution or, you end up in a, potentially a, one-sided situation where someone has control, or a situation where you end up needing a business divorce. And that does happen in partnership structures, LLC structures, and even in certain core corporate structures where, a court, may get involved to, say, a business divorce is the the proper and fair outcome. So they you know, hopefully, you're going out and obtaining consents. There are other stakeholders. When considering succession planning, people often think, oh, I own x y, they own y. That's how we have to game plan it. But, usually, businesses are more nuanced than just the ownership group. You have, very frequently, you have, debt on the books, so you owe responsibility to your, lenders or creditors. Sometimes that's personally guaranteed, and a game plan needs to be done to address for that. Does the guarantee go to the next generation? Do they assume that? Is that a condition of them getting a transition of ownership stake? That those are questions that will need to be answered. Sometimes you have lenders who are not willing to move on to the next generation of owners, and you have to deal with those challenges. You may need to find a new lender, for example. You may have credit card debt. Credit cards are often personally guaranteed, and those are considerations you have to take as well. Also, this was alluded to by Cynthia and Stephen earlier, but, yeah, your customers, for a founder, owner, operator, she or he may have had a relationship that was driven by, long standing business practices together. Maybe they weren't even contractual in nature, but just the relationships between the parties. But what happens if you say, I'm transitioning this to a new owner. I'm transitioning this to a new executive. In those scenarios, you have to come up with a game plan that works for, yeah, the customers, the suppliers, and the other parts of the business. Again, every industry is a little bit different, but, there are other stakeholders that need to be brought in to make sure that the business continues successfully and can survive a generational transition. So there are a number of considerations that occur, and when, you know, when when looking at that, if you have a contract, you have to look at the enforceability of the contract. Sometimes a, a generational, starting point, says I'm laying out my plan for the next fifty, sixty, seventy, eighty, ninety, a hundred years. And there are rules against, contracts, that last for indefinite durations. There are rules about enforceability of certain types of provisions, and those would all have to get looked at and built into the plan too. And, of course, if you're trying to build an enforceable plan, you should work with an attorney and an accounting team to, make that happen. And and jurisdiction matters as well. I guess my last talking point before turning it over to Nichole is on, liability for operations. So, again, this comes up on from first, you know, if you have a owner operator business, the, the owner is often personally responsible for certain obligations involved in the business because they handled the either the handshake contracts or they personally guaranteed an item or they were personally involved in, a litigation matter. You know, unfortunate examples might include, you know, employment discrimination or, sexual harassment or, damages or torts or anything that could happen where there's liabilities. And the question is, how does that get transitioned to the next generation or should it? Well, the first first thing you should be checking, and I hope everyone on the call today is, being being well aware of what their insurance rights are, what their insurance entitlements are, what kind of protections they have under the insurance because that ideally is the first recourse. But if you have to look at the second recourse, you have to consider, is that a condition of taking on the ownership for the next generation? Do they take on that liability? I will tell you as an m and a attorney that, very frequently, you cannot pass on liability to a buyer of a business for something that you personally caused even if it's in connection with that business. But, the interfamily generational succession planning is different. You can condition who gets what and how on, the next generation taking that. And that and that is another reason why if you are in the next generation and you're thinking about receiving equity, either as an heir or recipient of the state or, or transition, but through transfer, in in any of the circumstances before you accept the asset, you should be, aware of the liability, what what risks and exposures you have by taking the ownership. Now I'm gonna ask Nichole to step, into the trust and estate planning considerations. Just to touch upon the fiduciary duties, piece of this slide before we move on to the the bulk of the estate planning. Your fiduciary duties vary, and you have to consider where the different hats you might wear. Right? So the same individual may be serving in different fiduciary roles, meaning you could be a trustee, you can be an individual shareholder, you can be a director of a company, and there may be a potential conflict of interest. So there's something, to be said for knowing what hats you're wearing and what decisions you're making. I'll touch upon the different types of trust, and entities, but, there could be, you know, an LLC New York LLC where you're a manager. You may be a trustee of, some kind of an s corp trust. There are many different ways, you could be making fiduciary decisions, without knowing that there's an inherent conflict. Next slide, please. So I just wanna talk talk about estate planning in general. When we talk about succession planning, one of the most critical components is integrating your trust and estate's documents. A lot of business owners I see over over the past twenty years and doing estate planning just have some simple wills. Right? They don't reference anything in particular, and they rely on the business documents for transition upon debt or disability. A well designed estate plan is gonna save you from a lot of different bad scenarios where you might end up in court or, have have probate or administration delays with regard to the service courts. It's very, very important to have your estate planning documents in order. That means at a minimum, a will, a revocable trust, which is preferred, and I'll touch upon that in just a minute, power of attorney, sometimes a power of attorney for business depending on how large your business is and if there's anyone else in the business, who can make decisions, and a health care directive, which we won't go into detail today. So a will governs when you pass away, the will takes over, but it has to be probated. So it has to be recognized by the surrogate courts or orphan's court in the county that you were docile in when you passed away as your last will. And, you know, depending on what state you live in, for those of you who are in New York, you may be aware if you've ever been involved with an estate that it can take months to a year to probate a will. Even just a will leaving everything to your two kids, right, if your spouse is deceased, or your spouse. A simple a simple probate proceeding can take months. The true the same is true in California, Florida, Arizona. Believe it or not, New Jersey is a dream as bad as we are. You know, I'm gonna sit in New Jersey right now, but as bad as we are for some things, probate is a is a dream. However, New Jersey has a ten day waiting period. So I've had a couple of business owners, who passed away recently suddenly, both heart attacks, unfortunately. And because of that ten day waiting period, there were pending things. There was a there was a loan pending where there was no one who could sign, for one. There was a payroll issue for another. Because of that ten day waiting period, there's no way to put something through emergently. The service courts are really not equipped in this state to put things through emergently. The same is true with Connecticut, not as bad as New York, but can take can take time. So we like to have a revocable living trust, which, you know, you may have heard it referred to as a living trust. What that is is, you know, it's a trust that you formed during your lifetime. You're often your own trustee or sometimes spouses are co trustees of each other's revocable trusts. You can revoke, amend, restate the trust in its entirety during your lifetime and it uses your Social Security number as its tax IDs. It's not a completed transfer for state or gift tax purposes, so the assets that it owns when you pass away do get a step up in income tax basis. I'll let Christopher talk about the income tax piece in a bit, but that's just something to know. So the revocable trust, instead of the will having all of the specific provisions of what happens to your business, what happens to your other assets when you die, the revocable the will becomes a very simple document that pours into the revocable trust the assets that you own at death. But the goal as a business owner would be to have your business interests owned by your revocable trust. Okay? And it's seamless again for you for income tax purposes, but what it means is when you at the moment you die, your successor trustee or your co trustee, if you decide to name your spouse or child at some point as a co trustee, can act without waiting for the court to take action on probate of a will. So there's no delay whatsoever. So I view it as very I view it as absolutely essential for a New York resident to have a revocable trust because of the delays there, and it is, strongly preferred in other jurisdictions. The power of attorney, power of attorney for business, health care directive, those are documents that are effective only during your lifetime. So while you're alive during the power in the power of attorney, you appoint someone to make legal and financial decisions for you. I like to have a power of attorney for business, especially for my clients with smaller businesses so that someone has the authority to make business decisions for you. It's very specific and can reference names and businesses, etcetera, so that there's no question about, you know, who can deal with the bank or all of those other issues if something happens to you and you're alive but incapacitated. So, you know, I mentioned heart attack, but Cindy mentioned earlier if you're hit by a bus. If you're hit by a bus and you pass away, your revocable trust or your will is gonna take over and say what you want to happen. But what if you're alive and you're in the hospital for a long period of time? Who's making those decisions for you? Your business documents may provide you may have a large enough business and good business documents that provide that, but it's also good on on the power of attorney side to address business decisions, personal business decisions. Alright. And then I just wanna I know maybe you're going out of order here, but I wanna touch upon irrevocable trusts or irrevocable trust. There's two ways to pronounce. If you want to make gifts, you can remove assets from your estate for estate tax purposes by moving interest out to irrevocable trusts. That would help with potential tax consequences if you're over the exemption amounts, but it raises income tax basis. So so we can touch upon that. Tax can be boring, but I just wanna give a brief overview of what our tax landscape is right now because it has changed radically over the past several years. So right now, each person has a $13,990,000 exemption from the federal estate tax. So together, a married couple has $27,980,000 you can leave to your children or to whoever else you're leaving money to tax free. Okay? When you leave things to your spouse, there's an unlimited marital deduction, but when it goes down to your kids, there's potential tax. This is incredible. Right? It's very generous, which is great And, hopefully, everyone has a very successful business and has to look at these numbers. This is this amount is scheduled was scheduled to sunset at the end of this year and go back down to 5,000,000 index for inflation, but it's actually now going to, after they sign the big beautiful act on July 4, it's going to increase to 15,000,000 per person in 2026. The New York exemption, just as an example, is 7,160,000.00. Connecticut matches the federal exemption. New Jersey doesn't have a state tax, but New Jersey has an inheritance tax. So if you're leaving assets to someone other than your spouse, parents, or a lineal descendant like a child or grandchild, there is inheritance tax in New Jersey. So these are just things to be aware of when you're thinking about how you're gonna pass your your business assets. Alright. The the gift tax. So if you're thinking of gifting, that 13,990,000.00 is a unified gift and estate amount. So if you gift if I make a gift of a business interest that's worth 2,000,000, I'm taking away the 2,000,000 I could 2,000,000 of the 13.9 and I can leave it there. So it's something to to be aware of. And then there's a generation skipping tax which would affect you know, we talk about g one, g two, maybe, you know, you as a business owner, g two as the kids, g three as the grandkids. There's a generation skipping tax when you gift to g three. Also with with its own separate exemption of 13,990,000.00 and a 40% tax rate. So these are all things to bear in mind. So jurisdiction matters when you're planning. When you're thinking about doing different types of trust, if you wanna gift, you know, we often talk about Delaware. Delaware is known for its direct and trust statutes and strong protection for trustees. New York may have stricter standards, but it's familiar, it's local, and you avoid the Delaware professional trustee fees. For those of you who have s corps, we often do QIST or ESBET, qualified subchapter s trust or electing small business trust, and we choose the right, you know, we wanna choose the right situs and governing a law and, you know, tax make the tax decisions so that we can have good asset protection, privacy, but also good, you know, efficient tax ramifications for the for the family. If we could touch upon gifting versus selling. Some family business owners like to gradually give shares of the business during their lifetime that would potentially lower your estate tax. Again, it's it's a little bit less of a concern now because our exemptions are so generous. And when you gift, the recipient of the gift takes a year of transferred income tax basis in the property versus when you die owning the asset, it gets a step up, to the date of death value. So it's something that has to be evaluated with your tax adviser before those gifts are made. We also sometimes use life insurance, to provide liquidity or cash to cover either a state tax or if you want to allocate cash or other assets to family members who are not inheriting business shares, we sometimes do that way. Okay? It's very important to make sure that you have the correct people in charge in your estate planning documents and that those individuals or entities are coordinated with your business documents, and that everyone knows who's wearing what hat, who's in charge so that there's not a mess or misunderstandings when you pass away. It's very important. I say put your cards on the table and make sure you've got everything laid out correctly so that when something happens to you, because we do, you know, say that death and taxes, they happen, that there's a plan, that everyone's there's communication, there's preparation, and, everyone knows what role they're serving. K. Next slide. Okay. So, Jeffrey, I think maybe you're coming back in on this with me? Yeah. It's on a the next slide is tax considerations for Christopher, but, this is slide 15? Okay. So, for ownership succession planning and transfer options, you know, there are a number of options. They and these are all, pretty much contractual in nature. So this is where you'd bring in your attorney. A company can redeem equity. So that can occur, again, at we talked about generation one as g one owner, g two, g three. You can have redemptions occur by the company. When those happen, you have to have the, evaluation done in some form or fashion, depending on who the stakeholders are. Yeah. That's the slide I was expecting to see. The, but the, and then the shareholder, shareholder bio, that is not done at the company level but done between the different owners of the company, and that can change the ownership composition, at a different time. If you're not doing a a gift, you know, Nichole went through the options, but they're here again, the trust, lifetime gifts, or requests. If you're not doing that but handling it through a, actually a direct sale, then in those circumstances, the, you would do it if you're what you know, it's referred to as a buyout agreement or share purchase agreement, equity check purchase agreement, depending on the type of entity. There are, different priorities, and, the different options. But, you know, one, you should always be checking what the existing documents are. Nichole touched upon this, but your bylaws, your shareholders agreement, your operating agreement, or specific of incorporation or, you know, other comparable agreements need to be evaluated, to make sure you're in compliance with them. You shouldn't take any action in compliance with it. That's or that's not in compliance. Otherwise, you're opening up yourself to a lawsuit. Evaluation, we touched upon, but I think we'll get touched upon a little bit further. And tax as well, I think that will go on to, Chris' topics. So actually, maybe I'll maybe maybe I'll stop here and transition it over to Chris. On on the same slide, actually. The these these are, these items, shareholder tax basis and beyond, I think, are all, tax accounting items. Thanks, Jeff. So let me talk a little bit about some of the tax considerations, when, you know, you're transferring a business into family. A lot of what I'm gonna touch on will will sort of focus on the the concept of the business being an s corporation for tax purposes. A lot of time, generally, family businesses are meant to be passed through, flow through businesses, so there's one level of tax. They're not c corporations in that regard. Means, generally, they're either a partnership or an s corporation. Commonly in these scenarios, what we see is is an s corporation. The reason why is that, for those who've been sort of working in that business for a long time, it allows there to be both a single level of tax and also the owner to take a salary. And, also, if we're talking about businesses that have been around a long time, you know, from a limited liability protection, s corps were really the only way to get a single level of tax up until about the mid nineteen nineties. LLCs are, you know, very popular now and LLCs can be partnerships for tax purposes. But LLC statutes really did not expand until, the mid nineteen nineties. And so the thing about s corps that's important to understand when we're talking about any of these issues in terms of a transfer is that they are, from a tax perspective, very inflexible vehicles. While we think of them like partnerships in a lot of ways because they're they have that single level of tax, they act in a lot of ways like corporations. And corporations that specifically in those rules can only have one class of stock, which limits our ability to be flexible, in both transfers and in a lot of other kind of considerations in talking about a a succession plan. And so there's a a a few things to sort of understand and and think about. Right? Nichole may sort of landed on one of those earlier. Right? Which is that, how am I going to transfer those shares? So in the shareholder tax basis, likely, the basis in an s corp tends to hover around zero because the income goes up, it gets distributed. People tend to hover with about a zero basis regardless of how valuable a company is. And so a gift in life could lead our shareholder, our next shareholder, to take on a lower basis than a gift in debt where they might get a step up in base where they would get a step up in basis and be able to take on, a higher tax basis, which could be advantageous, especially if they're looking to sell the business down the line or simply, again, be able to extract distributions tax free. The other thing that's really important in terms of these questions, in terms of the the working versus nonworking shareholders and thinking about that is what are my options in terms of, transferring shares to the specific people I'm considering. Right? So for example, let's say that you're in a scenario where you have family members that you wanna take care of and be part of an ownership team, but you also have non family executives who you think have earned sort of that right to be to be part of the team. On the one hand, the family members, it it makes sense and that the tax rules are very friendly to the idea of making a gift of shares to them. Valuation becomes important in the gift tax rules with the exemptions, especially if you're getting close to those, exemption limits. But that's a fairly straightforward thing. I can give a gift to my family. I can't, however, give a gift to my 20 employee who's not related to me. Anything that goes to them is likely to be considered compensation and thus taxable. And so there's a bit of a tension there in that scenario where you have to consider, you know, who is being compensated is someone being compensated? And, thus, what is my tax consequence in making a transfer to them? Are they being put in the best possible position? To also take on I'm talking about the idea of, you know, compensation models and the the the the transfer options. You know, one of the sort of common, you know, comments I will get, when when working with families, let's say, or or close to help businesses just generally is they say, well, here I want you to figure out the tax plan for this, and I want it to be a win win for everyone. I I don't wanna benefit at their cost, but I also really I I don't wanna take a hit at the cost of my children or my employees or whoever it may be. And the issue is that the rules the tax rules tend to not support that. A lot of things tend to be a zero sum game. So we mentioned Jeffrey mentioned earlier, what if there is sort of cash that needs to be transferred as part of the transaction, the transfer of the shares? Well, you've got two ways you could do that with, an owner. The maybe the corporation could purchase the shares from the owner. Now that would be a capital gain to the owner. So that's a good answer from a tax perspective. That's a a 20% tax rate federally. But on the other hand, the corporation doesn't get a tax deduction, which means those next owners, the ones that are coming in, are going to be short cash, and they will not have gotten any sort of tax benefit from that acquisition of those shares. On the flip side, if the owner, the former owner, is mainly compensated for services, Let's say transition services and the work they're gonna do to transition the business. That's a deduction for the corporation. Great answer for the the new owners. Bad answer for the old shareholder who now has to pay tax at their ordinary income rates, which can top out at at 37%, so a significantly higher rate. That choice is very important, and it's a bit of a zero sum game. Right? You you can't have the best answer for the old owner aligned with the best answer for the new owner. And so, again, you can mix and match, what those compensation models are. You can look and maybe say, look. Actually, this business doesn't really need this deduction for whatever reason. Or the owner might say, well, I'll take a little bit of a higher tax rate. I've got these other things that might mitigate that. There's a lot of considerations there, but a lot of times, just the nature, especially if an s corporation means you can't have everyone win equally in that scenario. Go to other considerations. Right? We wanna consider the again, structural issues. Who is meant to be the owner? Who is the right owner? Importantly with s corporations, Nichole talked a little bit about this, but there's limited end types of trust that can be owners. And so you need to be very careful if if the right owner for you is a trust. You wanna understand that and make sure you're properly planning if the entity especially if the entity is an s corporation. Converting to from an s corp to an LLC, there are options available that where we might say, look. Maybe we need to do some planning here to put ourselves in a better position to issue shares to owners to new owners, especially non family members. Maybe we need to, do what's called in tax we call it an f reorganization. Maybe we need to have the operating business be actually below the s corp so that that entity could be a partnership where you're able to issue much more flexible types of of of, shares or ownership interests to the, to those new employees or, again, maybe even family members. Maybe depending on who we wanna give what to. It's that s corporations can only have a single class of stock, which means everyone's rights have to be the same, essentially. And so what if you wanna have one child who has very, very different rights to the shares or different rights to vote, for example, or different rights to compensation from the shares than another. Well, that's where, again, you might wanna consider reorganization, do some an extra level of planning there. Jeff, did you have any points around the the life insurance and the financing, or have you covered felt like you'd covered those before, you know, the beginning of the slide here? Well, actually, I think it is interesting, part to bring up, Christopher, which is that, and and Nichole touched upon this as well, which is that life insurance has a, it's a tool that you can be that can be used to help, in any buy, sell agreement. And if you're planning in advance for, a transfer with you know, this could be with business partners. It could be with, generations. But if you're planning in advance, with a business partner, or a successor owner, life insurance can be the tool to to, fund the the transfer to the next generation rather than using up a gift exemption or, waiting until someone passes away. The life insurance can have have independent value, and you can build build that value and use that as a tool for recovering it. And and it's very common in buy sell agreements also as a backstop, for if someone should pass away. Financing is is absolutely an issue. In all of the structuring and and when we get to the, when we get to the case study, it'll be become more current. But regardless of how you you know, assuming you're not doing a gift and assuming you're not doing it through, a succession through planning through, you know, what happens upon death. You know, we're we're working in assumption that people actually wanna retire, and, it's ideally not the hit by the bus or heart attack scenario. But in those senses where where there's a transfer, it's a transfer for value. And so you can obtain financing for different ways from that. It could be a traditional lender. It could be private equity. It could be, what's called seller finance, which is the where you do a voluntary note and get paid out over time, by the the the successor owner. And there can be advantages to all of those purposes. And, actually, I know that, one of the other panels in the series is the ESOP panel, and and ESOP is another way of financing, effectively seller financing, transition, but that in that case to employees more than next generation. Yeah. So I think it's an it's an important point, Jeffrey, because, like, you gotta consider those tax considerations in terms of the cash flow. Right? Even just to your example of the seller financing. Well, okay. I'll sell my business for a note so that I'm paid out over time. That sounds like a generous thing. Right? I'm gonna allow you to pay this this over a period of time. That gives you the opportunity to build up that cash flow, and that's true. But at the same time, that also means there's a period of time where the business cash flow is not being used for the profits for the owners, the people who are presumably in a lot of these scenarios working hard, but being used to pay off the owner. And so you need to be careful. Right? If I'm paying off a note at, you know, a million dollars a year, well, does the business cash flow support the idea that those current owners can pay tax on that income? Because they're gonna have to. It's a flow through business. They have to pay tax. And then also take that cash and hand it over to the owner while still having enough cash flow for themselves to take up at least a reasonable salary, something that supports them. And so, again, it comes at that sort of zero sum aspect, especially in an s corp where, you know, you do need to make sure that to support one side of things, you're not really disadvantaging the other side. Yeah. You're right, Chris. And it can affect growth if if you don't have the resources for growth and the next generation wants to do that, that that seller financing can be, you know, handcuffs on the business. So both the the founder and the next generation, need to give some serious thought as to how they want to handle that. And, you know, in some cases in some cases, a seller finance note isn't going to be ideal. Right. A few other tax considerations before we go on to look at the overall the case study. We We talked a little bit about some of these already and kind of going through that that last slide. But you wanna consider how is the transfer of ownership gonna be taxed if at all. Right? So I could do a gift potentially. That would be a nontaxable option on on day one. Or potentially, again, if I have a partnership, I'm able to issue what are called profits interest, which might not incur a tax on the first day. But a lot of other times, if I'm issuing shares with value, I really have to consider, is there gonna be a taxation event? Again, if I have an employee that I'm gonna give shares to along with everyone else, they're probably gonna have a tax event. And along with that, again, how am I is there gonna be cash involved? If there's gonna be cash involved, how is that cash gonna be taxed? Is it gonna be ordinary income, or is it gonna be capital gains depending on the scenario? And, again, you can a lot of times, you can make the choices in advance to plan into one or the other, but you wanna be careful about what you're doing and think about the the implications of that. Jeffrey point before, where is the cash coming fund to fund the transfer of ownership, and how might that impact, you know, the tax considerations? You know, if you're using debt to fund the transaction, what is that debt going against? What is the collateral? Who is how again, how are we paying off that debt over time? All of those things are gonna, you know, factor into that. Because, again, it's a question of again, that that it all circles back to the original points that Stephen and Cynthia were talking about. Right? What is the owner's cash flow need? Right? Are they retiring? And, yeah, they they wanna transfer this. And and, frankly, they've they've got enough to support themselves if they get paid out over a long period of time versus, honestly, they gotta keep getting paid and get something else or else they're not gonna be in a good financial position for themselves. That's a a big part of this. That's gonna drive that this question, but then you need to then work through how is that gonna impact the the tax side of it as well. Going down, is evaluation necessary? This is important. Right? Depending on the path that you're going down, if you're looking to gift and you've got a potentially valuable business, you're gonna wanna know what the value of that business is. And, again, if you're looking to transfer it in other ways, if you're looking to, again, give shares, well, the gain the income that that comes along with that is gonna be based on what the value of those shares are. Well, you know, it can be very difficult to value a closely held business, But it can be a very important, exercise to really understand that so that when you're choosing a tax path, you're not subjecting yourself to undue risk because you said, well, it's not really worth anything. Well, alright. But it's been a business. It's been around for twenty five years. It has a strong name. People come to it. You know, maybe people will still come to it even though the owner has retired or maybe not. And this is it's part of it. It it can be a very difficult thing without evaluation. It can be a difficult conversation to have because you say, well, honestly, people just come because they know me. I can't guarantee that it's gonna be worth anything the next day. Well, is that true, or is your brand name and the the business you've built something that has a value beyond you? And and, frankly, answering that question is not something that's easy, I think, for the owners to do themselves. It can be something where you really need to bring in experts, again, especially if the tax planning that you're choosing relies on that. Right? That it relies on that idea because the valuation is meaningful to the tax consequences of the transaction. Finally, if the the transfer of ownership can be done without cash, can it be done in a tax free manner? So it ventures in in sub sub sub s corp taxation. We sort of had this a little before, but there's just a lot you know, it's a very common misconception with s corporations that, well, I can just simply give someone some shares. But no. Well, no. Those you're when you give an s corporation shares, you're giving that person that value right away. There's no concept like in a partnership where you can have a profits interest that's of zero value on that day. And if you take away anything from this, from this whole section I just talked about in tax, is that if you're operating as an s corporation and you're thinking about the transition of shares from you to that next generation, I guarantee it's gonna be more complicated than you're thinking right now. It's gonna be less user friendly and, you know, plug and play than than you're thinking because the s corp rules are just that strict and difficult. And, again, you're trying to make sure you don't wanna violate the s corp rules for, you know, your, the people who are gonna run this down the line. What if they're gonna look to sell? That can have a huge consequence for that, and that's a topic for another day. But I've dealt with that with family businesses where, you know, they don't have they maybe haven't taken good care of their s corporation elections and those rules, And that can be an issue for them on, you know, a sale process. So, turn it back to Stephen and Cynthia. We'll start talking through the, the the case study. Hi. Yes. Let's move along to the case study. We have a few minutes to go through this. So we will begin. Stephen, do you wanna give us an overview of Great. The exam? Thanks, Chris and Jeff and Nichole. So this case study was an actual engagement that we worked on as a team. So it was time sensitive. We started in q one of one year, and the family wanted this completed by December 31 of the first year. It was complex. We needed to help the family with both the challenges we discussed as it relates to the business and to the family dynamics issues that they were facing. It was a 100 year old family business transition from the fourth to the fifth generation, which means they successfully transitioned this business three times before on their own, which is quite a feat and and quite a success. This time, however, the third generation, the grandparents of g five and the parents of g four, had just passed away. This is often a catalyst for change for this next generation g four. They no longer have parents guiding the process, and their individual needs and goals can be expressed freely. Often, they are not. The fourth generation included four siblings, three women, one man, who worked in the business for twenty five years, and they equally owned about 85%. Two of the siblings wanted to exit the business by year end. Only three of the 11 grandchildren in g five were working in the business, and they were very interested in taking it over. Two had been working there for close to ten years, and the third only for three years. However, all of the grandchildren in g five had a 1.37 interest ownership that had been gifted to them by their grandfather. So the first step in this process, as we've discussed before, was to really understand the family and the family business. So, Cynthia, can you next slide. Great. So we went through a process of creating a family tree, and we discovered that there's actually g six. And all of the family members that were alive today were interested in considering, you know, the future, you know, of the family beyond themselves. So that was completed. We discussed this with the family. Believe it or not, when we discussed it with them, they forgot to tell us about several of the new grandchildren or great grandchildren. And, next, Cynthia. As I said, the, current ownership was the four siblings who equally owned about 85% and then G5 owned approximately 15%. Next. We discussed their vision for the future. We discussed the purpose of the business. Next, Cynthia. The guiding principles behind the business, and the family uniformly agreed on all of these things. They were extremely proud of the family's legacy, their name in the community, what it represented for the last hundred years. Next. But as Cynthia said, this is a very interesting process to go through to understand the different needs, goals of the various stakeholders, family members that are just owners, family members that are owners and work in the business. And the fifth generation had many demands and many issues, including how much should be paid to each of the four siblings, their parents. Of the three that worked in the business that want to take it over, two were siblings from one of the four parents, and one was from another. So they also had different interests and opinions about their uncles and aunts and how much they should be paid. We actually went through discussions where the most senior member of the fifth generation stomped out and said, you know, if it doesn't go this way, I'm just gonna start my own business. So we were able to help the family navigate through those issues in a number of different kind of mediation sessions with that. Because I'll just chime in chime in or see there, you know, it was it was this is more than compensation with respect to the value of their equity. This is these are insider operators, who are getting paid different levels of salaries, for different layers of roles. Right? There can only be one CEO, and, you know, one CTO, and they all had different layers of roles in the business, and were, you know, compensated different ways. So they had they had feelings not just on the value of the company, but on what they were paid for salaries for the past, that and for the the future. So they opted and everyone had their own sense of what was right and what was wrong. Although I think your last diagram was right that in this particular family, we were lucky because this isn't always the case in these situations. They did align on the values, the maintaining of the family business within the family and the and the value of, rewarding the people who were actually doing the work, over those that were, generationally beneficiaries through gift or other means. So so but but it had had a lot of layers of complexity as a result of all of that. Absolutely. Absolutely. Next, Cynthia. And as Cynthia pointed out before, we are in that orange cousin collaboration stage. So there were also differences of opinion in terms of, the organization, the management transition, the need for training. We talked about how very often a founder's business is entrepreneurial and is not really as professionally managed as it could be. And at least one of the individuals, who would be taking over the business had prior experience in other companies and was able to, you know, bring, you know, that type of education and experience to the table. But it was not necessarily always accepted by the other two. So, again, another level of complexity. Cynthia? Even the structure of the business, 1925 when it started, it was a c corporation. In 1989, it became an s corporation. So as we went through this discussion, we looked at whether or not it should remain as an s corporation or whether it'd be more effective as an LLC. Ultimately, we recommended that it remain an s corporation. Next. And then in terms of the organizational structure, as I mentioned, you know, we looked at the organizational, design. We looked at the roles of each individual and the four siblings, which were essentially the management team who wore multiple hats. There was no clear, you know, singular role that each of them had. And that was also the case for g five. They had learned many different roles within the business. However, clarifying what their roles would be in the future, determining how long the two siblings would remain in the business and would be available to help, you know, the fifth generation, you know, with the management was critical. And that was all well documented. Job descriptions were put in place. The identification of new talent, hires, etcetera were, incorporated into the management transition plan. The other interesting decision that was made by the grandfather many years ago was to gift that 1.37% to his 11 grandchildren. Well, during this process, the family, and it was driven by the fifth generation, agreed that no one should own any part of the business unless they had worked within the business currently and that they shouldn't start to be, shareholders until they had worked there for at least ten years. So, essentially, then we had to put a process in place to repurchase all the shares from the, grandchildren that were not working in the business. So with that, Cynthia, next. And we'll turn it over to Jeffrey. So, you know, first off, this this particular, case study is an example where consent was, secured. It's not that a backup plan wasn't considered. As as Stephen Stephen mentioned, there was a, there was a possibility of a backup plan being executed, and one that may have been disadvantageous to multiple parties. But we we look for the win wins. And sometimes that means you you have to give up something as Christopher noted, but but in the end, it can make the the the whole stronger than, if if there had been a business divorce. So in this situation, we we're we're we're, given we you know, obviously or or not. Maybe not, obviously, but we, you know, Nichole and I and my team, we and the team were not involved in the, generation one through three transfers. We we had legacy documents to work with. And the legacy documents, had had an s corp, and we had to work with within that scenario. So we started with an analysis of what what what is the lay of the land. And, of course, you look at what is the best alternative option in negotiated agreement for the different parties, and, what that hit scenario can look like in the best case and in the worst case. And it and and then helped, broker a compromise that stemmed from that analysis that we we we collectively did together with the the stakeholders in this transaction and, and together as a PKF O'Connor Davies and Norris McLaughlin teams. So, here, it was an s corp. We had a shareholders agreement. And, and it was, let's just say, it required updates. It needed to be, updated for the the new, leadership, requirements. It needed to be updated for the desires for the businesses for going forward and really to plan for what happens for the next transition, for g g six, maybe even g seven, depending on how that how this one goes. But all of those documents required an analysis. And when that happens, you also spot things that, you know, because of the change of time, Christopher mentioned changes of in law, that actually cause people to tend to favor LLCs over s corps in many situations now. But, you know, we had an s corp and it was for many, many years ago. We had to update the agreements to reflect that. So, we also had buy buyback provisions, buyout provisions that were within the document, but weren't exactly what the parties intended for this transaction or for the going forward transaction. So, you know, we can amend that, if there's agreement. If there was an agreement, we would have had to work with what was on the table. But we we're able to come to agreement in part because, they had neutral advisers here. They had advisers that were representing the company, not, which effectively meant the family group, not any end of you know, although each of them were entitled to their own, tax accounting and legal advisers, They had advisers here that were trying to present a fair fair result, and that's the result they ultimately relied on. That was important for the valuation part, especially because the people who were being bought out, the ones that were, getting, a gift to you know, or getting consideration paid paid for the 1.37 they received from their grandfather, they had to know that they were getting fair value. It wouldn't be fair to them. They got that gift from their grandfather, you know, totally legit to legit gift for the grandfather to give. They deserve fair value for what they were receiving. So even though we were trying to accomplish everyone's objectives, you know, we wanna make sure everyone was treated fairly in that process, and that was the benefit of having neutral advisers here. Although, we, you know, again, encourage everyone to consult with their own legal tax and financial advisers to make sure that they agreed and understood the neutral analysis was the fair analysis moment, and that was what happened here. I'll note, Jeffrey. One thing just in in these family dynamics, I think, is important to what you just said is sometimes it's important to sort of elevate fairness to avoid any lingering concerns by any of the parties that there's been unfairness. Right? Sometimes I I worked in a lot of these scenarios where you just, like, you have to be able to sort of lay out why what's being done is kind of fair to everyone so that there's not you just don't have that lingering tension if someone's like, well, are my I really get the right amount for these shares? Like, no. We've been able to sort of show you that this is fair. Yeah. And the the last part on this slide I'll just, mention is that, when we form a business entity, sometimes it's pie in the sky. You never know where where it's going to go. But lawyers and, accountants will often oh, well, we're running out of time. I'll be faster. We we look at, at at the stage of startup, things like rights of first refusal tag along and drag along provisions, protections from both majority and minority owners at the outset of formation so that when these situations come up, the documents are clear. Is it always perfect? No. You know, and they're negotiated. So when something is negotiated, sometimes there's give and take, and and, you know, you have to evaluate it both at the time you create it and at the time that, occurs later on. But given where we are, I will suggest moving to the next slide. Happy to take follow ups too. But, yeah. Next few slides are tax. So Cynthia or Steve, do you wanna move through how you wanna go through the rest of this? Yeah. Maybe we just pull up the next I think the one next slide just goes to a question that we got about, the tax ramifications of redeeming shares versus the shareholders buying one another out, while the consequences to the selling shareholder can be quite can be similar. In this slide, again, I don't know if we have time. I'll I'll turn it over to Stephen Cynthia if you wanna talk. Just pointing out here, if you go to this, this kinda talks about the differences in the treatment of the a shareholder buyout versus the company doing a redemption, they have a lot of different implications both for the owners the people who are following along as owners and for the overall sort of tax, attributes of the company. So they can there can be important differences. And, again, you really gotta analyze the scenario of play to figure out kind of what's going to be important, given these parameters of of the actual, you know, and see that you're looking at. Cynthia, I can go directly to governance. One of the obvious, hopefully, to you now, all of you, considerations for these families is to make sure that they are knowledgeable in terms of their family governance and their corporate governance. Now family is really the business of the family, and and how they can arrange structure themselves around a number of different aspects to help the family stay united, be cohesive about all things family that concern themselves with the the business. Typically, as you saw in the three picture diagram, which is very interesting, family governance can support all of the different three circle family members. Typically, all family members are invited to what's called a family assembly. That is typically the first structure that we will create. And then within the family assembly, that's really a a a place where family members communicate. They learn about the business. They set up their own protocols for how they're going to move forward as a family with concerns of the business and their roles potentially. And they also then can vote to have a another governing body called the family council, which is really the decision making body that represents the family assembly. And this also is the voice that ultimately, if there is a board of directors that are there to support the corporate governance, sometimes this can be a board, sometimes it can be a board of advisors. If it is fiduciary board, it is a board of directors. The family council's role within that board is to exchange their wishes, their ideas with the board. So it's a very structured, seamless, potentially, way that family members can also gather themselves, but also communicate effectively within the corporate governance realm. And, again, the business of the family would be the family assembly, planning family meetings, promoting shared values, creating mission statements, supporting educational opportunities, family policies, and engaging in shared philanthropy, another wonderful aspect that the family assembly can gather around. And family governance is, again, the processor system to educate and facilitate all communications between family members. We look at corporate governance as the governing body. It's the system of rules and practices and processes by which a firm is directed and controlled. Do you need this? Families need governance to create continuity process to elicit legacy of their family businesses. It's very important. How formal they become is up to the family, but that they are able to gather and learn, is really of a central consequence. Stephen? Yep. And lastly, we develop, as Cynthia referred to it, a road map, very detailed action plan. This is just a summary of it. But as we said from the beginning, it will incorporate the ownership succession plan, which can has business, personal, financial, tax, and legal considerations that must be addressed. We will specifically identify a leadership succession plan and a management transition plan. Cynthia just discussed, we'll review with the family, both the family and corporate governance structures that can support the process, And then it'll be critical to actually tie this back into their estate and wealth preservation plan. So with that, I think we're gonna move to q and a, Cynthia. Certainly entertain any questions you may have at this time. Certainly, any other points that presenters want to make about the case study, things that we may not have we may have skipped over a bit as we got through the material. But, please, if there are any questions that people have out there, please forward them on to us and we'd be happy to address those. And if there are any other further points that presenters want to make, please feel free to do so. Yeah. I'll I'll reemphasize a point that I, glossed over earlier, which is that in any of these scenarios, whatever generation you're looking at, it's the people who are in control of that time, whether through contract or through ownership, that ultimately get to make decisions on what, happens, for, the business. And if there is a breakdown, if if if people split and, don't agree, then very likely you're looking at one of the other exit strategies that is going through in this, seminar. I think we started with this, particular one because, you know, for for family businesses that are tight, there's often a desire to keep it within the family, and can be a source of generational wealth and sustain for multiple family members for years. And in this particular case study, you know, we were dealing with, I don't know, 40 or 50 people who, made their livelihoods out of the business in some form or fashion or another. You know, that's not always the case for every business. Sometimes it's mom and pops and they need to transfer to, you know, just, their, you know, their next kid, one maybe they have one kid in the business, one kid out of the business. But if but if there's a breakdown, if you if you can't do this, you're looking at a sale. You're looking at an exit transaction or you're looking at, you know, maybe a sale to employees, maybe sell to a third party. But, you know, again, all of the analysis, everything is shaped by what what can you or what can the decision makers do, if they don't come to terms to make it into a multigenerational family business. And in in my view, a multigenerational succession plan that gets as far as g four or g five is tremendous success. I don't think we have a stat on this particular presentation, but in the last one we did, I think we showed the percentages of, that go from g one to g two and g two to g three, and it is a rapidly declining number. And to get to g five to g six, I think you're in the one percentile already. So, yeah, I I I think those are interesting observations. One other thing I'd add just, while we're chatting here. You know, we've talked, you know, kind of primarily about sort of an and ownership transfer, as if it was kinda going to be, like, kind of a singular moment. You know, an interesting thing that can happen is if you've got even this family that wants to retire at different times. Right? So let's say I've got siblings, one's seven years younger than the other, and the older sibling wants to retire first. That can be a very difficult thing to deal with because, ultimately, the position of the other siblings is to fund the retirement of the first. And and and what happens? How do you protect the people in the business, as well as you need to who are gonna continue while also giving enough of a retirement benefit can also be a kind of a very difficult, balancing act. And I'm dealing with a situation right now where, you know, not family, but the owners had someone retire, and they felt like they were paying them too much. So they rewrote their policy. And as we were looking at it now, we're like, well, now there's no protection for the retiring owner. They could end up in a very bad position depending on the the way the certain facts played out. So trying to balance that can be a very, very difficult thing and something, you know, we we deal with a lot. And and, again, it sort of adds on to all the issues we discussed. There's a question here for Nichole, I believe, and and, someone's asking about domestic asset protection trust. Is that something, Nichole, that you can speak to? Yes. And there's many ways you can do that. You know, domestic means here in The US, we we used to do a lot of asset protection trust offshore, Cayman Islands, Bermuda, but now Delaware. Delaware was part first first state we did asset protection trust. The trustees are more expensive in Delaware, so a lot of clients are doing South Dakota or Nevada trust. And then, again, I'd be happy to talk about that offline, but there's there's there are many ways to structure them. That is a type of trust where there's creditor protection. So, unlike a revocable trust, where you retain the right to revoke amend during your lifetime and it's included in your estate and asset protection trust, is irrevocable, but there are different ways to set it up for income tax purposes. That would get that could be a whole hour and a half we could talk about, but it is it is an option. It's probably best discussed offline if you're looking at certain scenarios because there's ways to do non grantor ones, there's ways to do grantor ones. We you know, it depends on what the goals of the family are with regard to income tax status and then estate tax. Is it gonna be a completed gift? So it's out of your estate, or do we wanna get this stuff up in basis and it's in your estate, but that's absolutely an area that comes up too. Mhmm. Yep. Wonderful. Thank you. Any closing comments? We have a number of questions that Jeff has addressed online here, and we can get that material to you to everyone as well. Any closing comments from presenters as we move through the rest of the q and a. Yeah. Thanks for having us. We appreciate it. Well, I think, the important takeaways here are certainly that there is plenty of work to do to get your house in order as you consider a succession transition process, and the benefits far outweigh the work involved in terms of sustaining your legacy, really taking a a deep dive into what is gonna be most beneficial for your family, and always to understand that there are advisers that are available to help you with this process. You do not have to do it alone, and there are people that can certainly step in and be your guide to secure not only your family's future, your financial future, but but your legacy, and that is what's most important. So we hope that you were able to, get a little bit out of this presentation, and, certainly, all of the materials will be available as Harleen indicated in her opening remarks. So, Harleen, we'll leave it with you. Thank you, Cynthia, and thank you everyone for attending today's webinar. Just a friendly reminder that if you have not completed it already, we have launched a survey located in the survey tab on your panel. It should automatically pop up on the right hand side. In addition, a copy of the PowerPoint slides and a recording of today's webinar will be made available to all attendees via email, four business days post event. If you are interested in CPE, CPE certificates will be issued within eight to ten days via email. Thank you, everyone, and have a great rest of your day. Thank you. Thank you for being here. Thanks, everybody.