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Picking up on yesterday’s discussion, how can a PEF reconcile its preference to acquire a depreciable or amortizable basis for its target’s assets while, at the same time, affording the target’s owners the opportunity to roll-over a portion of their equity in the target into the PEF HC on a tax-favored basis? The answer is hardly simple, and it will depend upon a number factors.
Continue Reading Rolling Over Target Equity Into A PE Fund: Part II

For many business owners, the final step of a successful career may be the sale of their business. At that point, the investment into which the owners have dedicated so much time, effort and money is liquidated, leaving them with what is hopefully a significant pool of funds with which to enjoy their retirement, diversify…

In today’s cautionary tale, we hear about a doctor, his self-directed simplified employee pension (“SEP”) individual retirement account (“IRA”), the investment of IRA funds in a business, and the consequences of crossing over the perilous line between “direction” and “control.”

The Facts

Dr. V., an anesthesiologist, ran a medical practice with three partners (the…

“One Day, Lad, All This Will Be Yours.”

Many a closely-held business was created before its founder became a parent or when the founder’s children were still very young. As the business grew, and as the founder’s children matured, the founder may have entertained the notion of eventually having her children take over the business.…

Incentive Compensation

It is not uncommon for a closely-held business to provide an economic incentive to its key employee. Often, the incentive takes the form of an annual cash bonus. Alternatively, the business may provide the key employee with a longer-term incentive, in the form of a deferred compensation arrangement that may be payable on…

A taxpayer has the legal right to minimize his or her taxes, or to avoid them completely, by any means that the law allows. However, this right does not give the taxpayer the right to structure his or her affairs by using “business entities” that have no economic reality and that are employed only to…

Our last post described the portions of an executive employment agreement that may be impacted by Section 409A.  However, Section 409A may also impact the structure of other, less traditional compensation paid to key employees.  In the context of a closely-held business, two commonly-encountered alternative compensation arrangements used outside of the context of an individual…

Ask most closely-held business owners what words come to mind when they hear the names “Enron” and “Worldcom” and many would say things like “bankruptcy,” “failure,” “scandal” and “greed.”    Ask those same business owners what impact those two names had on the ways they are able compensate their key employees and most would likely say…