No-sell Buy Sell Agreement

The No-sell Buy Sell Agreement has the ownership of the company restructured into 1 Voting share per owner and 99 non-voting shares per owner. An agreement is formed between the owners to purchase the voting or management share while the remaining portion of the owner's share will go to her heirs or estate. In this way, the management control of the business will remain with the remaining owners, but the family of the deceased owner will continue to benefit from future upsides of the business. Each owner also creates an irrevocable life insurance trust and funds it with gifts each year. That trust pays premiums on a life Insurance policy equal to the value of the owners share of the business. On the death of that owner, the Insurance will be provide liquid assets to maintain the family and handle estate related costs.

Basic Advantages:*

• Surviving Owners will retain control of the business.
• The deceased Owners family will continue to benefit from the future upside of the business.
• Funds are available to support the family from the life Insurance trust.
• The company can pay the premiums as compensation to the Owner and then deduct them for tax purposes.
• Split Dollar Funding can be used between the trust and the business to fund the insurance premium.
• In some instances, favorable tax treatment may exist.

Common Concerns:*

• Personal after tax funds are used to purchase the insurance and the premium is not tax deductible.
• The surviving owners will not own 100% of the business.

Note: Split Dollar Funding may be used to allow the business entity to assist the owners in purchase of the insurance policies. Under a Split Dollar Funding program, the business agrees to pay most or all of the insurance premium. The business can then reflect the security interest in the cash value of the plan as an asset. When the policy pays benefits, the company recovers what it paid in premiums. The down side to this is that the longer the policy is in force, the larger the portion that will go to the company rather than for the intended use. In some circumstances, the remaining amount may not be sufficient to make the designated purchase. This can be avoided through use of an adjustable or scheduled term rider or similar features that allow the policy amount to increase with time.

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* - These are some common consideration but by no means an exhaustive list of considerations. There are a number of tax and legal issues that can only be addressed by a careful examination of your specific situation by a qualified professional.