Company Ownership options

[mrspez07]

PDQ, will DD later
**POOF**

[sdlaura]

My situation is a little different in that the process of buying down the founder had already begun when I became a shareholder, and we're larger/I have a relatively small ownership percentage. I've been a shareholder of my company for 7-ish years. When I joined, we had under 100 employees, and now we have over 200, so small but not as small as yours. Founder is still involved and employees have been buying him down over time (now he owns around 25%). We're an S-corp. There's a minimum ownership amount that you can purchase when you're nominated to be a shareholder, and under our rules you can take a loan for up to half of it with a very low interest loan (there's some kind of government minimum interest rate), and then pay it off over 5 years. You write a check for the other half. Only major downside is that when we grant equity to someone as a bonus, when it vests it's taxed like income (so my tax rate is 30%+ and I have to write a check for that/have my pay or cash bonuses diminished to pay for it). But that wouldn't be one of your immediate concerns, I imagine. We're evaluating becoming an LLC because an S-corp can only have 99 shareholders and now we're up to 72 (most very small).

In my industry it's common for the next generation to take a loan from a bank/investor to buy out a founder and then pay it back over time with the revenues of the business. We also acquired a smaller firm a couple years ago because the founder wanted to start to transition out, but the next generation wasn't in a position to buy him out.

[186momx]

How is the company set up. Partnership, S-Corp, or C-Corp. Each of those will change my answer.

DH would love to buy a % of the company he works for. It is DH, his boss, admin, and boss's wife. Company is a C-Corp. There are no perks for DH to buy into it. His boss already pays 100% of his health insurance, he gets 3 weeks paid vacation, and by becoming an owner DH would loose his works comp coverage and he does physical labor.

My dad and I bought out our old boss. Like we purchase price for assets, goodwill, Covent not to compete and she carried the contract for the first 18 months and then we decided to take out personal loans at a lower interest rate. We created a new company as it worked best for us.

[mrspez07]

Mar 24, 2021 17:37:46 GMT -5 186momx said:

How is the company set up. Partnership, S-Corp, or C-Corp. Each of those will change my answer.

It is an LLC sole proprietorship I believe (likely a partnership previously)