Buying and Selling a Business

Purchase or sale of a business is a complicated process for which experienced legal counsel is essential.  When representing clients in such transactions, we start the process by learning as much as possible about their objectives in the transaction in order to advise them on a comprehensive set of issues ranging from business matters and financial risks to legal hurdles.

Our goal is to anticipate challenges to proactively solve problems, from negotiations and due diligence phase to final closing.

Buying and Selling a Business

10 Business Start Up Tips

Thinking of starting a business or formalizing your business entity? Have you been afraid or not quite ready to take the risk? Fear not! America thrives on the contributions of small businesses. Follow the legal and regulatory steps below to be sure you start growing your business from a solid foundation.

  1. Select Business Structure

    One of the first steps in organizing any new business is to determine which type of business entity should be formed. When considering the type of business, you need to evaluate both present and future needs of the business and its owners in legal, financial, and tax related aspects. Did you know when operating as a sole-proprietorship, you are entirely and personally responsible for the actions of the company? The best way to really protect your personal assets is to form a corporation or limited liability company (“LLC”).

    There are four common types of business entities:

    Sole Proprietorship

    The sole proprietorship is the simplest form of business structure, however provides the least amount of liability protection. This is not a separate legal or tax entity. The business owner is personally liable for all taxes and liabilities of the company. Many people mistakenly believe the use of “Doing Business As” (D/B/A) designation as the formation of a separate entity. It is not, and it does not afford the owner any liability protection.

    Partnership

    A partnership is an organization or association of two or more owners who operate a business together and allocate the ownership and profit/loss aspects according to their contractual terms. This partnership is a separate entity for legal and tax filing purposes, but not tax paying. Rather it is a form of a conduit where income, losses, credits, and certain deductions are passed along to each partners' tax return. There is no liability protection for the general partners.

    Corporation

    A corporation is a separate, legal entity formed through a state charter using Articles of Incorporation. It is authorized to perform primarily all the business activities an individual can, including such things as filing and paying taxes, signing contracts, and making loans. It is formed through the issuance of stock or securities.

    Limited Liability Company (LLC)

    A limited liability company (LLC) is often described as the combination of a partnership and a corporation. This is because an LLC combines the tax advantages and management flexibility of a partnership with the liability protection of a corporation.

    Forming an LLC has become a popular alternative for sole proprietors and partnerships that have thought about forming a corporation in order to protect personal assets. LLCs also avoid "double taxation" because the income of the LLC itself is not taxed at the company level. Like a partnership, taxes on profits and deductions of losses are passed through to the individual on the personal tax return of each LLC member (owner).

  2. Determine State Business & Professional License Requirements

    The State of Florida regulates certain industries and professions. You may verify if your profession is regulated by visiting MyFlorida.com.

  3. Name the Business

    Availability may be determined via State of Florida’s (Sunbiz.org) entity name registration and/or the US Patent and Trademark Office database.

  4. Register with the Florida Department of State, Divisions of Corporations

    All legal entities, with the exception of sole proprietors operating under their owner’s full legal names, must file with the State of Florida, Division of Corporations (Sunbiz.org). A Fictitious Name Registration is also required of individuals who do business under any name other than their full, legal personal name or a properly registered corporate name, partnership, trademark, service mark or limited liability company.

  5. Apply for your Federal Tax ID number

    It is commonly recommended that a Florida business apply for a free Employee Identification Number (EIN) number with the IRS. If your corporation or LLC will be electing to be taxed as an S- Corporation, you will make this election with the IRS as well, using Form 8832 and Form 2553.

  6. Register with Tax Authorities

    In addition to federal & state payroll taxes, employment taxes, sales taxes are handled at the state & county levels. If you will collect and remit taxes to the State of Florida, you will additionally need to file Form DR-1 at MyFlorida.com.

  7. Establish Financial Relationships

    As soon as possible, open a separate business bank account and set up your accounting system. Even small businesses are strongly recommended to open separate accounts. This will demonstrate the observation of the corporate formalities required for liability protection to be afforded & greatly reduce the time and expense on bookkeeping or accounting.

  8. Protect Your Investment

    There are several protective measures that you can take for your business. First, make sure to copyright any original works of authorship (books, drawings, designs, etc.), trademark any branded names used, and patent any inventions. Also, to protect yourself from any potential litigation, you may wish to seek out business liability insurance.

  9. Develop Internal Agreements

    If more than one person will be involved in the ownership and management of the firm, or if you are developing an LLC, Corporation, or partnership, it is recommended that you seek legal advice in the development of internal agreements.

  10. Hire Employees and Outsource

    Your time is valuable! Focus on your core business and outsource accounting, administrative, and legal work to expert and staff.

     

Koontz & Associates has helped form many new businesses in Sarasota and around the state. We work with local residents and international clients looking to move to Florida. Start the conversation about your new business with us by requesting a consultation with Jo Ann Koontz, Attorney / CPA - 941-225-2615.

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Business Law

Related Topics: Business, Business Law

Our firm advises and represents companies and entrepreneurs with a broad range of business related services.  We advise our clients on business law, start-up assistance relating to the formation of an entity, and assist with buying or selling a business.
 
Business Startup Services

Starting a business requires thorough planning. Our firm assists business owners in the formation of legally sound business entities and helps entrepreneurs devise business strategies that help them achieve their goals.  We advise on the business startup and formation process including issues related to selection of entity type and jurisdiction.

Our practice includes providing services in the following areas (as well as many others):

  • Choice of Entity – Sole proprietorships, limited liability companies (LLCs) partnerships, corporations
  • Entity Formation - Formation of new business entities including limited liability companies, corporations, partnerships, joint ventures and other business entities, and the drafting of agreements amongst their owners
  • Elections regarding taxation of entity – S corporations, disregarded entities, partnerships, corporations
  • Purchase or Sale of Business Assets
  • Purchase or Sale of Business Stock
  • Small Business Plans
  • Operating Agreements, Corporate Bylaws, Shareholder Agreements and Partnership Agreements
  • Buy Sell Agreements
  • State, Local and Regional licensing requirements
  • Minority Business Enterprise Applications
  • Application for Employer Identification Number (EIN) or Individual Tax Identification Number (ITIN)

We also consult with business owners and draft shareholder agreements or partnership agreements as part of the entity formation process.

Buying and Selling Businesses

Our firm can guide business owners in the multi-stage process of buying or selling a business including:

  • Advising on the structure of the transaction
  • Negotiation of terms and drafting of the deal memorandum
  • Advising sellers on legal strategies to address issues raised during the due diligence process
  • Advising buyers on conducting legal due diligence
  • Drafting, reviewing and negotiating the extensive documentation involved in a business transaction, such as asset purchase agreements, stock purchase agreements and security agreements
  • Purchase or Sale of Franchises
  • Review and Negotiation of Franchise Agreements

Preparation and Review of Business Contracts

Our firm consults with business owners to draft, review, and negotiate contracts related to various business activities, including:

  • Buy-sell agreements
  • Lease agreements
  • Service contracts
  • Releases and waivers
  • Property agreements
  • Shareholder agreements
  • Operating agreements
  • Customer and Clients Contracts
  • Vendor Contracts
  • Consulting Agreements
  • Management Agreements
  • Restrictive Covenants
  • Covenants Not To Compete
  • Non-Solicitation and Non-Disclosure Agreements
  • Confidentiality Agreements
  • Commercial Leases
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Preparation and Review of Business Contracts

Related Topics: Business

Our firm consults with business owners to draft, review, and negotiate contracts related to various business activities, including:

  • Buy-sell agreements
  • Lease agreements
  • Service contracts
  • Releases and waivers
  • Property agreements
  • Shareholder agreements
  • Operating agreements
  • Customer and Clients Contracts
  • Vendor Contracts
  • Restrictive Covenants
  • Covenants Not To Compete
  • Non-Solicitation and Non-Disclosure Agreements
  • Confidentiality Agreements
  • Commercial Leases
...Read More

Buying and Selling Businesses

 

Purchase or sale of a business is a complicated process for which experienced legal and tax counsel is essential.  When representing clients in such transactions, we start the process by learning as much as possible about their objectives in the transaction in order to advise them on a comprehensive set of issues ranging from business matters and financial risks to legal hurdles.  Our goal is to anticipate challenges to proactively solve problems, from negotiations and due diligence phase to final closing.

There are two primary methods of transferring ownership of a business, either by sale of the businesses assets (Asset Sale) or by the transfer of ownership of the entity itself (Stock Sale):

Asset Purchase Agreements (APA)
This is a form of a business sale where instead of purchasing the stock of the company, the buyer purchases specific assets of the company and assumes specific liabilities.  There are a number of issues that can arise in such transactions such as inventory, accounts receivable and payable, condition of assets, and lease of premises that must be addressed in the agreement. 

Stock Sale Agreements
In a stock sale of a business, the purchaser is buying the shares of stock from the shareholders of the company.   Purchasers generally prefer not to buy stock in order to minimize both tax and legal liability issues.  Sometimes, this cannot be avoided, due to the nature of the business.  There are ways to limit liability - find out how.

Non-competition provisions
Purchasers will often require a provision in the Agreement which prohibits the sellers from competing with the business after the sale.   The duration and geographic limitation of such provisions are negotiated by the parties.  Courts will require such provisions to be reasonable so to not impinge on commerce and trade.

In addition to negotiating, drafting and reviewing business sale offer letters and agreements, we advise and assist business owners and investors in a wide range of issues including:

  • Advising on practical business and financing issues related to the transaction
  • Assisting with the selection of the right business entity, such as partnership, Limited Liability Company, or corporation - then deciding between S-Corporation or C-Corporation to secure the most desirable tax benefits and liability protection
  • Advising on employment matters attendant to business transactions including contingency on the continued employment of employees and relocation issues
  • Advising on discovering and managing liens and other corporate liability issues
  • Negotiating terms and structure of earn-outs as part of compensation for sellers
  • Advising on the laws of local jurisdictions affecting the business as well as any applicable licenses and permits required for legal operation of the business

Other important matters to consider include assignment of the business trade name, transfer of customer lists, training of new owners and staff, and introduction of new owners to important business contacts. 

Given the complexity and scale of the issues involved in the sale of a business, it’s critical for both purchasers and sellers to retain an attorney with knowledge and expertise in such matters to guide them through the process and safeguard their interests.

Our firm can guide business owners in the multi-stage process of buying or selling a business including:

  • Advising on the structure of the transaction
  • Negotiation of terms and drafting of the deal memorandum
  • Advising sellers on legal strategies to address issues raised during the due diligence process
  • Advising buyers on conducting legal due diligence
  • Drafting, reviewing and negotiating the extensive documentation involved in a business transaction, such as asset purchase agreements, stock purchase agreements and security agreements
  • Purchase or Sale of Franchises
  • Review and Negotiation of Franchise Agreements
...Read More

Business Diagnostics

Related Topics: Business

You’re an expert in your business. But the legal logistics of running a business? If you wanted to focus on that, you would have become an attorney. Luckily for you, that’s exactly what we did.

Your business operations serve as the heartbeat of your company. It’s important to check in and make sure you’re running as efficiently (and legally) as possible. When you meet with the team at Koontz & Associates, we’ll help you identify areas where you can strengthen your business. Here are some items we might address together:

  • Business structure — Your business entity type (ie. LLC or corporation) makes a big difference in the way money flows and how you’re required to pay your taxes
  • Tax structure
  • Ownership type (ie. individual or trust) — This could have an effect on your claims to business assets, the way the business is legally allowed to operate, and more
  • Goals & objectives — If you’re building your business to sell it, you should treat it differently than a business you plan to pass on to family or friends as a legacy
  • Operating and shareholders agreements — If you don’t clearly define expectations for your business, you could lose control over the decisions made down the road
...Read More

Business Startup Services

Related Topics: Business, New Business

Starting a business requires thorough planning. Our firm assists business owners in the formation of legally sound business entities and helps entrepreneurs devise business strategies that help them achieve their goals.  We advise on the business startup and formation process including issues related to selection of entity type and jurisdiction.

Our practice includes providing services in the following areas (as well as many others):

  • Choice of Entity – Sole proprietorships, limited liability companies (LLCs) partnerships, corporations
  • Entity Formation - Formation of new business entities including limited liability companies, corporations, partnerships, joint ventures and other business entities, and the drafting of agreements amongst their owners
  • Elections regarding taxation of entity – S corporations, disregarded entities, partnerships, corporations
  • Purchase or Sale of Business Assets
  • Purchase or Sale of Business Stock
  • Small Business Plans
  • Operating Agreements, Corporate Bylaws, Shareholder Agreements and Partnership Agreements
  • Buy Sell Agreements
  • State, Local and Regional licensing requirements
  • Minority Business Enterprise Applications
  • Application for Employer Identification Number (EIN) or Individual Tax Identification Number (ITIN)

We also consult with business owners and draft shareholder agreements or partnership agreements as part of the entity formation process.

...Read More