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...Corporate Code on the rights of shareholders (all of which are first-year law ... monitor the case monthly. In most lawsuits, legal fees outweigh the cost of ...

... This content has not been rated yet. At one time or another, many agents become involved in litigation surrounding the agency or its principals and will require the professional support of a consulting organization that specializes in valuation litigation support services. Why might a valuation expert be required? In the case of a divorce, the equity in the agency is considered part of the common marital property; a minority shareholder no longer employed by the firm may file a dissolution action to force a buyout; the agency may be damaged by the violation of a non-compete agreement and consequently lose a book of business. In all these cases, an equity claim being litigated needs a determination of fair market value. The parties may even reach a settlement-but typically not until after a fair market valuation report has been rendered. ... any biases the experts might have in favor of their respective clients-the judge or jury renders a conclusion with regard to a final award. Working With a Valuation Expert: The valuation expert should be viewed as part of the litigation team. These are some of the issues which agency principals should focus on if and when it becomes necessary to hire a valuation professional: If your agency becomes involved in a lawsuit, your lawyer will typically ask its principals whether they know a consulting organization that specializes in the insurance industry. The principals' first thought may be to contact the agency's accounting firm-but one soon finds that most small accounting firms do little or no valuation work. At Harbor Capital Advisors, we often receive a call from a client for whom we've done some work in the past, or directly ...

...rporation, owned by one or more shareholders. The corporation may be a 'C' cor...ferred rollovers are available for shareholders selling 30% or more of the sto...

...on marital property; a minority shareholder no longer employed by the firm may...

... , FMV assumes the buyer is an arms-length, financial and not a strategic buyer. A strategic buyer is a buyer who could bring value-added benefits that would enhance the agency and/or enhance the buyer's other business activities through the acquisition. Examples of a strategic buyer who could bring value-added benefits are another insurance agency, an insurance company, or a bank. Also excluded are buyers who are already shareholders, or related or controlled entities that might be willing to acquire the interest at a higher or lower price due to considerations not typical of the motivation of the arms-length, financial buyer. Other common FMV assumptions include: 1. The business will continue as a going concern and the current owners, if they're managers, will be replaced upon the sale of the agency. 2. The Appraisal ... (s ) might cause non-controlling shares. In other words, small shareholders should get the same price for their shares as majority shareholders. Under FMV, the valuation industry and the IRS generally recognize that the per share value of small stockholders of private and closely-held companies is worth less than that of majority or controlling shareholders because the controlling shareholder controls the corporation. Uses Fair value is often used in lawsuits, particularly divorces and minority shareholder suits. Strengths Fair value protects minority shareholders, spouses, and non-controlling shareholders from getting poor values for their stock, even if the poor value is the fair market value. Weaknesses Fair value isn't as well defined as FMV. So before using it, an attorney should help draft the specific definition for the situation. The definition of fair value can literally change ...

... these five major criteria of a workable perpetuation plan: Desire. The current owners must want an internal sale badly enough that they're willing to take a discount on the selling price off what they might get from an outside buyer. If necessary, they must agree to fund the purchase over an extended buyout period. Time. There must be a reasonable amount of time between the initiation of respective major shareholder retirements so the age spread and personal-retirement desires of the principals must be noted and incorporated into the plan. Even in very profitable agencies, it will take at least seven years of cash flow to buy out a shareholder who has more than 50% of the ownership. Most experts recommend that you plan on a 10-year payout to provide a cushion in case there are a couple of down years ... basis. For events that can be funded by insurance, such as death and disability, there's often a higher valuation formula than for other occurrences. And a good argument can be made for paying less for the ownership if the individual is terminated before natural retirement or in the event of a divorce. Circumstances of the termination may also have a bearing on the valuation formula. Considering the number of lawsuits that have arisen over such issues, it would seem to make sense to be as detailed as possible in spelling out the terms for each type of buyout. Buy-sell agreements that were drawn up more than 15 years ago may lack the level of detail necessary to cover situations that can occur in today's more mobile, complex, and litigious environment. Most important, older agreements may have outdated valuation ...

... taxation of a partnership. An LLC's members' are similar to a corporation's stockholders, and can even manage the LLC directly from the bottom up by voting on all matters. Alternatively, they can set up managers at the top to run it, which are comparable to the officers and directors of a corporation. The LLC agreement itself combines many provisions found in a corporation's articles and bylaws and in shareholder buy/sell agreements. It's important to note that LLCs aren't the same as limited liability partnerships (LLPs) . LLPs are mostly for classic professional' firms, such as those comprised of CPAs or attorneys. They don't protect members from commercial-type debts, such as a premises lease, or from their own professional malpractice; but they do provide protection from cross-liability for E&O and torts ... LLCs in a number of ways: Consider using one instead of a partnership or sole proprietorship to hold real estate (such as your agency office building) . Benefits include tax, cash and profit allocation opportunities, and Liability protection. Consider them as one asset-protection strategy. For example, clients often place individual apartment buildings into a series of separate LLCs to compartmentalize their investment portfolio in case of catastrophic lawsuits or under-insured losses involving any of their buildings. They're a good way to shield owners of raw land from runaway jury awards to trespassers or the like. In joint-venture situations, they can make dissolution ( 'divorce') of the LLC's members easier and more tax efficient. LLCs can be very effective in estate planning. Members can achieve a step-up in basis at death. LLCs can also ...

...ment, death, or disability of a shareholder, owner, or partner. When a valuati...he other extreme, the new minority shareholder could be a nonagent buyer with ...