Sagemark Consulting
Sagemark Consulting Private Wealth Financial Partners
PLANNING LESSONS FROM THE CLIPPERS:
is an affiliate of Sagemark Consulting
THINGS TO CONSIDER
…we help define your future! www.PWFPartners.com
Contact Details Duncan Eng 2105 S. Bascom Avenue Suite 300 Campbell, CA 95008 (O): 408.879.4217 (F): 408.559.1620 [email protected]
Edward C. Rusnak 3000 Executive Parkway Suite 400 P.O. Box 5154 San Ramon, CA 94583 (O): 925.659.0372 (F): 925.275.0999 [email protected]
Jeff Gustafson 2105 S. Bascom Avenue Suite 300 Campbell, CA 95008 (O): 408.879.4224 (F): 408.559.1620 [email protected]
Basketball season is wrapping up, and although the perpetually rebuilding Los Angeles Clippers made the playoffs, much of sports talk is instead focused on Donald Sterling, the longtime owner of the Clippers. Donald Sterling recently made disparaging comments about African Americans, and the NBA is seeking to force him to sell the team as public outrage continues. The Clippers saga reinforces many lessons in buy-sell planning that I believe are useful for my business owner clients. 1. A written buy-sell agreement is an indispensable tool in situations where a business has multiple owners. The Constitution and By-Laws of the National Basketball Association (the NBA’s constitution) is the legal document that could determine the fate of Donald Sterling’s ownership interest in his NBA team. This constitution is essentially a contract among the teams and their owners, and it lists the obligations for the owners and the teams in the NBA—including buy-sell obligations. Article 13, “Termination of Ownership or Membership” is the relevant part of the NBA’s constitution, which states: The Membership of a Member or the interest of any Owner may be terminated by a vote of three fourths (3/4) of the Board of Governors if the Member or Owner shall [affect the Membership adversely]. Without the written agreement, the NBA would have a very hard time expelling Sterling from the league. If one of the owners of a closely held business was featured in the headlines in a negative way, would it be helpful to the other owners if a prior written agreement forced the transfer of the outlaw owner’s business interest?
1. Agree to a fair valuation method and reasonable buyout mechanism in the buy-sell agreement in the event a buyout is triggered. One of the issues in the Sterling case will be whether Donald Sterling will be able to get a fair price for his ownership interest in a reasonable period of time. To the extent closely held business owners are able to agree to valuation and method in advance of a triggering event, it lessens the possibility of a future fight over such issues. 2. Get the business owners’ spouses to sign a consent to the buy-sell agreement. Shelly Sterling, Donald’s wife, has taken the position that she shouldn’t have to give up her rights to the Clippers team based on Donald’s conduct. If she consented to the NBA constitution, that legal position would be more difficult for her to take. In a closely held business, it’s a good practice to have the owner’s spouses join in the buy-sell agreement. Have you made written plans for the continuation of your closely held business? Are those plans complete and up-to-date?
AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE OR OTHER FINANCIAL SECURITY ISSUES OF CONCERN.
Any discussion pertaining to taxes in this communication (including attachments) may be part of a promotion or marketing effort. As provided for in government regulations, advice (if any) related to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue code. Individuals should seek advice based on their own particular circumstances from an independent tax advisor. ›
Duncan Eng, Edward Rusnak, and Jeff Gustafson are registered representatives of Lincoln Financial Advisors Corp.
›
“Securities offered through Lincoln Financial Advisors Corp., a broker/dealer. Member SIPC.
›
“Investment advisory services offered through Lincoln Financial Advisors or Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor.”
›
Insurance offered through Lincoln affiliates and other fine companies.”
›
“The content of this material was provided to you by Lincoln Financial Advisors for its representatives and their clients and is for informational purposes only. We do not offer legal or tax advice. Seek the advice of a tax advisor prior to making a tax-related insurance/investment transaction.” CRN# 938768-060314
›
PLANNING LESSONS FROM THE CLIPPERS:
is an affiliate of Sagemark Consulting
THINGS TO CONSIDER
…we help define your future! www.PWFPartners.com
Contact Details Duncan Eng 2105 S. Bascom Avenue Suite 300 Campbell, CA 95008 (O): 408.879.4217 (F): 408.559.1620 [email protected]
Edward C. Rusnak 3000 Executive Parkway Suite 400 P.O. Box 5154 San Ramon, CA 94583 (O): 925.659.0372 (F): 925.275.0999 [email protected]
Jeff Gustafson 2105 S. Bascom Avenue Suite 300 Campbell, CA 95008 (O): 408.879.4224 (F): 408.559.1620 [email protected]
Basketball season is wrapping up, and although the perpetually rebuilding Los Angeles Clippers made the playoffs, much of sports talk is instead focused on Donald Sterling, the longtime owner of the Clippers. Donald Sterling recently made disparaging comments about African Americans, and the NBA is seeking to force him to sell the team as public outrage continues. The Clippers saga reinforces many lessons in buy-sell planning that I believe are useful for my business owner clients. 1. A written buy-sell agreement is an indispensable tool in situations where a business has multiple owners. The Constitution and By-Laws of the National Basketball Association (the NBA’s constitution) is the legal document that could determine the fate of Donald Sterling’s ownership interest in his NBA team. This constitution is essentially a contract among the teams and their owners, and it lists the obligations for the owners and the teams in the NBA—including buy-sell obligations. Article 13, “Termination of Ownership or Membership” is the relevant part of the NBA’s constitution, which states: The Membership of a Member or the interest of any Owner may be terminated by a vote of three fourths (3/4) of the Board of Governors if the Member or Owner shall [affect the Membership adversely]. Without the written agreement, the NBA would have a very hard time expelling Sterling from the league. If one of the owners of a closely held business was featured in the headlines in a negative way, would it be helpful to the other owners if a prior written agreement forced the transfer of the outlaw owner’s business interest?
1. Agree to a fair valuation method and reasonable buyout mechanism in the buy-sell agreement in the event a buyout is triggered. One of the issues in the Sterling case will be whether Donald Sterling will be able to get a fair price for his ownership interest in a reasonable period of time. To the extent closely held business owners are able to agree to valuation and method in advance of a triggering event, it lessens the possibility of a future fight over such issues. 2. Get the business owners’ spouses to sign a consent to the buy-sell agreement. Shelly Sterling, Donald’s wife, has taken the position that she shouldn’t have to give up her rights to the Clippers team based on Donald’s conduct. If she consented to the NBA constitution, that legal position would be more difficult for her to take. In a closely held business, it’s a good practice to have the owner’s spouses join in the buy-sell agreement. Have you made written plans for the continuation of your closely held business? Are those plans complete and up-to-date?
AS ALWAYS, PLEASE FEEL FREE TO CALL TO DISCUSS THESE OR OTHER FINANCIAL SECURITY ISSUES OF CONCERN.
Any discussion pertaining to taxes in this communication (including attachments) may be part of a promotion or marketing effort. As provided for in government regulations, advice (if any) related to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of avoiding penalties under the Internal Revenue code. Individuals should seek advice based on their own particular circumstances from an independent tax advisor. ›
Duncan Eng, Edward Rusnak, and Jeff Gustafson are registered representatives of Lincoln Financial Advisors Corp.
›
“Securities offered through Lincoln Financial Advisors Corp., a broker/dealer. Member SIPC.
›
“Investment advisory services offered through Lincoln Financial Advisors or Sagemark Consulting, a division of Lincoln Financial Advisors Corp., a registered investment advisor.”
›
Insurance offered through Lincoln affiliates and other fine companies.”
›
“The content of this material was provided to you by Lincoln Financial Advisors for its representatives and their clients and is for informational purposes only. We do not offer legal or tax advice. Seek the advice of a tax advisor prior to making a tax-related insurance/investment transaction.” CRN# 938768-060314
›
