One of the most significant challenges facing owners of design firms today is the need for a strong pool of creative talent – not only to service client needs in a growing industry, but also to serve as a market for the future buy-out of existing owners upon their retirement from the firm. Many states have licensing requirements whereby only licenses professionals become owners in a professional design firm. These requirements can significantly limit and owner’s transition alternatives.
Absent a market of key employees who are taking an active role in the firm, one of the more common ownership transition techniques is to provide for a redemption of an owner’s interest upon retirement. Whether stipulated in a firm’s buy/sell agreement or structured on an informal basis, stock redemptions can often lead to unexpected tax implications if not considered carefully.
The principals at Dannible/McKee and Associates, Ltd. are experts in structuring stock redemptions to avoid the tax pitfalls that often rise in such transactions. Our analysis not only includes the structure of the transaction, but also the feasibility of the transaction as it relates to the impact on the cash flow of the firm, the selling owner and remaining owners.
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