BACKGROUND

• LLC valued at $10 million
• 100% owned by Revocable Family Trust
• Approximately 160 employees
• Company specializes in supply chain shipping and receiving

GOAL

• Owners want to transition out of the business over the next 3-7 years
• Transition to management/family
• Minimize overall tax burden
• Evaluate future of defined benefit plan
• Provide estate plan liquidity

SOLUTION

• Convert to an S Corporation and install an ESOP Trust
• Prior to conversion the LLC paid out previously taxed retained earnings and accounts receivable to members
• Company borrowed the amount needed to fund the ESOP with seller debt
• Owners sold 96% of their company stock to the ESOP in exchange for cash and notes o Warrants were issued as part of seller notes exercisable when debt paid off
• Company will make payments to owners who will hold stock as collateral

BENEFIT TO CLIENT

• Over the next 10 years the company will save $17,500,000 in federal and state taxes
• Selling Shareholder may maintain control and continue to work entering into long term contracts
• Once senior debt is paid, Selling Shareholder can sell remaining shares to ESOP and convert to 100% ESOP owned S Corp
• Based on forecast sellers will receive $6,000,0000 when warrants are exercised