Adelson & Associates, LLC: New law firm and address, but Continuity in my Growing Law Practice for 2020 and Beyond

We begin this new year 2020 with a new law firm and a new downtown Boston address, but, at the same time, with full continuity for my growing law practice, which saw its best year in 2019.

logo of Adelson & Associates, LLC

Here is more information on the new firm:

Continue reading “Adelson & Associates, LLC: New law firm and address, but Continuity in my Growing Law Practice for 2020 and Beyond”

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Getting the Benefits of Equity Compensation from Family Businesses through Phantom Stock

On September 6, 2017, CEOWorld magazine published an article I wrote on “Getting the Benefits of Equity Compensation from Family Businesses through Phantom Stock.

This article was designed for CEOs, C-suite executives and other senior executives who currently work in a family business or are offered a position in a family business and receive now or are offered NO equity compensation because most family businesses do not issue equity to non-family members.
Continue reading “Getting the Benefits of Equity Compensation from Family Businesses through Phantom Stock”

Family Business Transition and Succession Planning – 10 Questions

Family business – Hour-long radio program – on transitioning to the next generation; resolving family issues in and out of the business; planning for succession or sale of the business.

By Robert Adelson

This post is about  an hour-long radio show “Exit This Way” where I was the sole guest for the show’s host Kerri Salls, which show aired three times on Monday, March 18, 2013, on  www.urbusinessnetwork.com. The show was on the topic of Family Business Transition and Succession Planning.   To have a listen, go to http://www.thiswayoutgroup.com/wp-content/uploads/2017/06/Rob-Adelson-of-Engel-Schultz-LLP-on-Exit-This-Way-12-26-12-merged-3-segments.mp3. I hope you enjoy this radio show.  Let me know if you have any questions.

Continue reading “Family Business Transition and Succession Planning – 10 Questions”

Board Building: Assessing the Value Advisers Bring

Board of directors or advisors (even in informal), allow entrepreneurs and family business to tap marketing, production and personal experience and contacts.

Boston Business Journal , June 9-15, 2006. Page 48

By Robert A. Adelson

Are you an entrepreneur trying to build a startup company?  Do you feel your family business is stalled?

If you face hurdles in your early-stage company, or if you are in a family business and find the family expertise limits you, you may wish there was someone on your side to offer useful advice.

One way to get that help is to hire paid consultants.  Another is to recruit executives who have that experience.  However, both approaches can be expensive to an early stage company that must conserve its cash or to a family business not used to paying outsiders.  Also, if only one or two people can be hired or contracted with the breadth of experience needed, the hire may be insufficient.

There is another way: recruiting a board – a board of advisers or a board of directors, sometimes both.

Corporations must have a board of directors.  However, most entrepreneurs like to be their own boss and often regard a board of directors as a nuisance to be avoided.  So most early-stage companies have single-member boards.  That’s likewise true in even more mature family businesses, with either a single-member board or two or three members of the family, but no outsiders.

However, the board can be an asset to your business—to offer a key supportive resource.  A board can offer advice on an “as needed” basis, at a fraction of the cost of employees or consultants, with no long-term commitment, and if you choose your board carefully, a board can offer greater depth of experience.

To tap this resource, you don’t have to create a formal board of directors.  Many entrepreneurs start with an informal board of advisers that meets on an occasional basis.

When picking this board the entrepreneur should avoid friends and relatives and instead focus on filling in experience, gaining practical advice and opening doors, including:

◦Tips to build your organization and structure
◦Marketing and production advice to expand
◦Personnel references and contacts
◦Contacts and credibility to raise capital
◦Advice when unforeseen hazards arise
◦Independent advice on succession planning
Boards of advisers generally meet several times a year, often over a meal.  Initially, the board may meet and help for the cost of the entrepreneur picking up the cost of a good meal.  In time, stock options may be offered.  For the board member, advantages include the ability to help a colleague, and to do so with no liability or responsibility and with limited time commitment.

To get best use from this initial, informal board of advisers, the entrepreneur should value the time and advice offered: Prepare for adviser meetings, keep advisers informed on company developments and set limited terms for service to keep the board fresh.

The Voice of the Family
The board of advisers in family businesses also deals with interpersonal family issues that affect the business.  Thus, a family advisory board should have at least one member with professional expertise or knowledge and credibility within the family to lead resolution of interpersonal disputes.  This role can also be filled by a separate family council.

The adviser’s mission is to reconcile the family’s vision and direction with business needs.  Sound management, growth and profitability can clash with needs and ambitions of family members.   Non-family business also has issues with “office politics” and corporate greed versus meritocracy and system growth.  However, family businesses require special vigilance to check erosion of competitive position and personnel attrition over perceived family restrictions or nepotism.  They also require timely development of succession planning.

As the early-stage company takes on full-time employees, generates revenue and considers investment and expansion, selecting a board of directors can expand the reach and enable the entrepreneur to reach the next level.

With growth, knowledge gaps become more pronounced, the demands are greater and the need for real experience more acute.  In the family business, this can come when the knowledge and skills needed can only come from outside the extended family.  With growth, the entrepreneur may be more willing to share the burden of running the company.

Unlike advisers, directors take real responsibility and potential liability for management of the corporation.  The board of directors directs officers and governance.  Directors generally meet monthly, and instill financial accountability and appropriate record keeping in the business.  That discipline and the time board members invest can help the company avoid or overcome pitfalls, and it can put the company in its best posture to gain financing, forge alliances or make important hires.

© 2006 Robert A. Adelson

________________________________________________________________

To follow-up this “Building Boards” article, if you have questions or needs –

◦For a start-up, early stage or maturing business? Or a family business?
◦Concerning a board of advisors or Board of Directors? Or both?
◦Over formation, recruitment or management of the board?
◦Over liabilities, responsibilities and corporate governance?
◦Over how to compensate board members? Other issues?
Below is contact information for the author –

Robert A. Adelson, Esq.

Engel & Schultz, LLP

265 Franklin Street, Suite 1801

Boston, MA 02110

Telephone: 617-951-9980 ext 205

E-mail: radelson@engelschultz.com

Business Succession Planning: For the Family Business, For the Closely Held Business

Family business owners need to develop and implement a tax efficient plan to continue the business to the next generation if possible or for an orderly internal or external sale if not.

Foundation for Continuing Education , June 11, 2008

By Robert A. Adelson, J.D., LL.M.

A.      Business Succession Planning:  Overview
1.Why plan – Circumstances giving rise to Necessity
◦Death or Disability of owners
◦Retirement of owner or business owners
◦“Hastened” Retirement – revolt in the ranks
2.  How to plan – Alternative choices for succession

◦Internal Transfer one Generation to the next and Continuation of existing Business
◦External Sale of Business to outside third party
3.  What we seek – Goals to try to accomplish

◦Continuation / survival of the business
◦Retirement and Liquidity for the owner(s)
◦Fairness / Inheritance for non-owner family members
◦Maximization of value & favorable sale terms
◦Efficient tax planning
B.      Internal Transfer and Continuation of Business
1.Case Example – Bonanza Lumber, Inc. (Hypothetical)
2.   Planning for Continuation

◦Identification of able employees
◦Training of family members
◦Recruitment and Utilization of employees outside family
◦Provision of capital / means for success
3.  Transfer to next Generation

◦Employment agreements
◦Buy-sell agreement terms
1)   Functions

2)   Advantages

3)   Triggering Events

4)   Structure – Cross Purchase, Redemption, Hybrid

5)   Valuation

◦Life-time Stock Transfers
1)      Intrafamily Installment Sales

2)      Private Annuities

3)      Self-Canceling Installment Notes

◦Gift Transfers
1)      Gift Tax and Annual Exclusion

2)      Estate Freezes

3)      FLPs / LLCs for Discounts

4)      GRAT, CRTS, Grantor trusts

◦Non Family key employees
1)   Phantom Stock &  Employee Incentives

3)   LBO – Zenz “bootstrap” sale

4)   Sale to ESOP

4.   Providing for non-operating family members

◦Separation of real estate / non-operating assets
◦Corporate separations
◦Life insurance to equal out interests
◦Buy-sell agreement / to provide buyout terms
◦Voting and non-voting shares
◦Springing interests
5.   Further Planning for Estate Taxes

◦IRC §303 redemption to pay taxes
◦IRC §6166 to defer taxes
◦IRC §2057 Family Business deduction
C.      Desiring Internal Transfer vs. Facing External Sale
1.80% of Family Businesses do not succeed to next generation
2.  Recognition that continuation not possible

◦Inability or disinterest of next generation
◦Sale at peak price rather than fire sale
◦Owner liquidity & preservation of estate
3.  Preparing business for sale

◦Maximize value of business
◦Maintain good business records
◦Engage key consultants
◦Develop contracting process
◦Confidential information memorandum
◦Auction atmosphere
D.      External Sale of Business to Outsiders
1.Case Example – El Tiante Sports Shoe Co. (Hypothetical)
2.   Purchase and Sale of Corporation – Key Business Issues

◦Liabilities
◦Tax Issues  – Basis, Character of income, Deferral
◦Purchase Price / Earn Out
◦Warranties
◦Covenants
3.   Structure of sale

◦Sale of assets
◦Sale of stock
◦Nontaxable sale
◦Bootstrap sale / Redemption
◦Corporate separation
4.   Implementation and Documentation of Sale

◦Letter of intent
◦Due Diligence
◦Sale Agreement
◦Closing
◦Post closing obligations
5.   Estate & Family issues

◦Tax Planning for Year of Sale
◦Calibrate income and loses
◦Acceleration of deductions
E.      Conclusions – Implementing a plan
◦Beginning and continuing succession plan
◦Determining a direction / hedging bets
◦Engaging the parties concerned
◦Communication, involvement, ownership
◦Committing the plan to writing
◦Perils, pitfalls and dispute resolution
◦Updating over time
◦Working with consultants
**  This outline was for the presentation by Attorney Robert Adelson,  a 4-hour seminar course he offered for attorneys, accountants and other professionals, for continuing professional education credit, sponsored by Foundation for Continuing Education.
Questions on this presentation or the subjects covered, including any questions by

Owners or participants in family businesses or closely held businesses on buy-sell agreements, estate freezes, gifting plans, phantom stock, employment and bonus plans, and other issues concerning business succession planning or the sale of a business,

may be directed to the author and speaker at his current law firm, as follows:
Robert A. Adelson, Esq.

Engel & Schultz, LLP

265 Franklin Street, Suite 1801

Boston, MA 02110

Tel:  (617) 951-9980 ext 205

E-mail:  radelson@engelschultz.com