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Drafting C and S Corp Stockholder Agreements, Part 1 - 2 CLE hours
Stockholders’ agreements define the relationship among stockholders and the relationship of stockholders as a group to the corporation. These agreements can control the economics of the entity – whose entitled to distributions, in what circumstances, and how much – and governance – who gets to vote, in what circumstances, and when. They are also crucial in creating a market for otherwise illiquid interests in the closely-held company. In the context of S Corps, protective provisions in these agreements are essential to preserve the entity’s S Corp election by preventing transfers to ineligible persons, preserving a single class of stock, and not breaching the maximum number of eligible holders. Stockholder agreements can also have a substantial impact on related estate and gift tax planning and employment agreements. This program will provide you with real world guide to drafting the major provisions of stockholder agreements for C Corps and S Corps.
Day 1 – February 17, 2015:
• Drafting C Corp & S Corp stockholders’ agreements – key provisions & their interrelationship
• Forms of stockholders’ agreements – contractual relationship among stockholders and corporation
• Information rights – access to operational, financial and tax information
• Voting rights – what events trigger a vote and by whom, and ensuring one class of stock for S Corps
• Economic rights – control and timing of distributions, and relationship to tax allocations
• Special considerations when an S Corp is operated through an LLC
Day 2 – February 18, 2015:
• Liquidity rights – what events trigger the right to sell, to whom, and for how much?
• Protective provisions for S Corps – preventing transfers to ineligible holders
• Provisions for terminating an S Corp election
• Valuation methodologies to avoid conflict – book value, fixed value, earnings formula, appraisals
• Employment provisions stockholders’ agreements: vesting, forfeiture, capital contributions
• Impact of stockholders’ agreement on estate and gift tax planning
Ronald A. Levitt is a partner in the Birmingham office of Sirote & Permutt, PC, where he has extensive business and tax practice focusing on closely held and family businesses. He counsels clients in business planning, succession planning, representation of S Corps, LLCs and other pass-through entities, mergers and acquisitions, purchases and sales of businesses, and healthcare law. He is a Regent of the American College of Tax Counsel and the co-author of the treatise “Tax Planning S Corporations,” published by Lexis-Nexis. Mr. Levitt received his B.S., cum laude, from the University of Alabama, his J.D. from the University of Alabama School of Law, and his LL.M. from the University of Florida School of Law.
Brian J. O'Connor is a partner in the Baltimore office of Venable, LLP, where he is co-chair of the firm’s tax and wealth planning group. He provides sophisticated tax and business advice to closely-held and publicly-traded businesses and their owners. Before joining Venable, Mr. O’Connor was an attorney-advisor in the Office of the Chief Counsel of the IRS, where he worked on high profile legislative projects, regulations and other published guidance relating to pass through entities. Mr. O’Connor received his J.D., magna cum laude, from Washington and Lee University School of Law and his LL.M. in tax law, with distinction, from Georgetown University Law Center.