A P L A N N I N G G U I D E F O R A S U C C E S S F U L E X I T S T RAT E GY

PERPETUATING YOUR BUSINESS

Gerald McMichael Jeff Shupe

PERPETUATING YOUR BUSINESS

• A Shareholder Agreement is ESSENTIAL• Addresses the transfers of shares•Typically accomplished through stock redemption•Covers what happens in an involuntary departure of shareholder such as:

• Condition of shareholders:1. Death of shareholder2. Disability of

shareholder

• Financing Method:1. Life Insurance2. Disability Insurance

• Insurance for key employees• Key-Man Life Insurance• Business Overhead Insurance

FIVE BASIC METHODS OF PERPETUATION:

• Method: • Transfer/Sell to family member……………….36%• Sell to a 3rd party……………………………..…42%• Transfer to existing partner……………………17%• Merge, then retire………………………………..2%• Retain business until death…………………….6%• Other…………………………………………..…...3%

CLAIMS-MADE POLICY EXAMPLE

3/1/2008 Retro Date

8/1/2011-8/1/2012 Current Policy

Term

(12 Months) If Purchased

Extended Reporting Period

DIRECTORS’ AND OFFICERS’ LIABILITY POLICY BENEFITS

• Covers “Wrongful Acts”• Covers business interference and market

misrepresentation• Coverage for breach of contract and fiduciary duty• No discrimination exclusion applies in standard policy• Provides defense for wrongful enrichment claims• Provides defense coverage for claims related to fraud,

criminal, or willful conduct until proven• No built in exclusion for professional services• Definition of insured includes directors and officers,

spouses and domestic partners, and employees• No retention applies if no finding of liability