Succession Planning for Business Owners May 19, 2011 Ted A. Waggoner Peterson Waggoner & Perkins, LLP Law Firm

Contact Info Ted A Waggoner Peterson Waggoner & Perkins, LLP 125 E. Tenth Street Rochester, IN © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20112

What is Succession Planning? Planning to turn over the ownership or management to others. Leaving the business in the condition you want it to have. The best chance to create a peaceful transfer for family purposes. 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 3

Why Engage in Succession Planning? Family Needs – the basis of succession planning. Tax Minimization for you Business Continuation Facilitate Retirement for Owner Provide Leadership to Those Succeeding You © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20114

Succession Planning Steps What steps do we take to develop a good Succession Plan – Family discussions Those involved in the business Those not involved in the business – Discussions with Financial Planners, Accountants, and Trusted Advisors – Make the decisions © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20115

How do you do Succession Planning? Meet with your Attorney – Information you should have – Ideas you need to have considered Are you engaging the attorney early enough in the process where the education and experience can be of help? Do you have or need a team of planners? © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20116

Doing Succession Planning Who are “the best planners?” – Usually a team approach works best for larger business operations, with serious tax concerns. – Business lawyers who are familiar with the issue and with the client’s business and employees. – Planners who know the family dynamics © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20117

Making the Decision It is the goal of the process to make a decision Document the decision Discuss the decision with the people who carry out the decision Not necessary to discuss the matter with everyone – but include those most affected For those who will be disappointed, let them know, and that they need to deal with the decision. 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 8

Tools in Succession Planning Lots of tools can be used in Succession Planning: – Entity Structure – Outright Sales – Contracts to Sell – Estate Planning Documents – Gifts – Tax Laws © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/20119

What is the Most Critical Issue? Business Valuation Do you know what its worth is to sell? 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 10

How do we Sell a Business? One form of Succession Planning is to plan to sell the business to a competitor Another is to sell to one or more members of the family A third is to sell to members of the management team 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 11

What types of Sales can we use? Cash Sales Buy Sell Agreements Contract Sales 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 12

Other ways to transfer? Estate Planning Documents Gifts 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 13

Tax Laws Tax Laws in Succession Planning are complex – Many variables based on the entity – Variables based on the style of transfer Need to deal with those as the issues are addressed Family Limited Partnerships 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 14

Non-compete clause Three Reasonables in Non-Compete Clause – Reasonable in Scope – Reasonable in Time – Reasonable in Distance 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 15

Who should do your Planning? At Peterson Waggoner & Perkins, we suggest you hire the best planners you can find and can work with. 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 16

Reminder of Planners Those involved in the planning should include: – Attorney – Accountant – Business Valuation Expert – Human Resource director – Family members inside the business – Family members outside the business – Spouse 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 17

Further Questions? 5/19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 18

Contact Info Ted A Waggoner Peterson Waggoner & Perkins, LLP 125 E. Tenth Street Rochester, IN © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 5/19/201119

Thank You Ted A. Waggoner – Peterson Waggoner & Perkins, LLP 125 East Tenth Street Rochester, IN PH: /19/2011 © Ted A. Waggoner, Peterson Waggoner & Perkins, LLP 20