Purchasing an existing business has numerous benefits. The business, physical location, employees, and customer base are already established, saving the buyer the time and energy required to start a new company. However, a buyer should still carefully review the financial past of the business before taking any action. Before making an offer on an existing business, a buyer should thoroughly research the company’s financial and legal history.
When deciding to sell your existing business, you must be ready to commit some time to organizing all your financial documents and getting the business in order. Also, you should do your best to make sure that the company is not currently facing any legal problems or is at risk of being sued any time soon. That way, there will be no major disruptions during the transfer of the business from one owner to another.
We can assist on either side of the negotiating table.
Succession Planning and Buy-Sell Agreements
The typical business owner’s business interest, next to personal earning power, is probably their most valuable income producing asset. Both the owner and their family depend heavily upon it. It becomes important that they give careful thought to the business retention or disposition in the event of Death, Disability, or Departure. A buy-sell agreement funded by life insurance is usually the best solution to business continuation when a partner dies or when a triggering event occurs. A Buy-Sell Agreement is only as good as the financial arrangements that have been made to support it. The agreement may guarantee the right to buy and provide a binding contract to sell, and yet, when the time comes, if the surviving owners do not have the funds with which to make the purchase, the plan may collapse.
Entity Formations, Conversions and Dissolutions
Business organization, including counsel on the type of business entity and structure, preparation or proper corporate minutes, preparing shareholder agreements, buy-sell agreements, LLC operating agreements
LLC Operating Agreements/LLCs taxed as S Corp Operating Agreements
An LLC provides its members with so-called “limited liability” whether the business is ran out of the home or valued at multi millions of dollars. This means that you have no personal liability for any of the LLC’s debts, liabilities or other obligations. This limited liability protection is similar to that enjoyed by shareholders in a corporation. An LLC in Michigan is the easiest way of separating your personal life from your business life. The limited liability shield does not protect you from personal responsibility for all of your actions conducted on behalf of the LLC, however. You should consult with an attorney before setting up an LLC.
Both the LLC and S corporation are well liked among accountants and small businesses because of their “pass-through” tax treatment. Unlike a regular C corporation, both of these structures do not pay taxes on the business’s profits. Rather, profits are passed along to the owner(s) and reported on their individual tax returns. In addition, both structures also help to separate the owners from the business and provide liability protection. But there are some key differences as well. An LLC is typically much easier to run from an administrative standpoint. There are fewer state filings and forms, lower start-up costs, fewer formal meetings and documentation than with the C or S corporation. That’s usually a big advantage for small business owners who don’t want to be burdened by paperwork. When setting up or converting an LLC to be taxed as an S corporation, you need to prepare and file the appropriate IRS election form. But you must also carefully review and consider the various provisions of the LLC operating agreement and the state law LLC default provisions.
Commercial and Residential Real Estate Leases/Purchase Agreements
As landlords and tenants go about the process of negotiating a lease, each of the parties should strive to incorporate lease language that will protect them should the other party suddenly exhibit a lack of integrity or the relationship is affected by outside events, such as a flood or other natural disaster. Remember, landlords sell buildings and tenants have changes in personnel. The person across the negotiating table may not be the person you will be dealing with a year down the road.
We can assist in the drafting, negotiation and implementation of leases and real estate purchase agreements. Working hand in hand with your broker or real estate agent our team can help to decode the terms and lay out a great plan for you.
Creation/Update of Corporate Minute Books
One of the primary reasons to form a corporation is to insulate your personal assets from liability. In order to maintain that liability “shield”, you must follow the formalities set forth in the Michigan Business Corporation Act.
Those formalities include: Annual Shareholder Meetings, Annual Board of Directors Meetings, Annual Completion and Submission of Michigan Corporation Information Update. At your annual meetings your corporation should: Elect Officers, Elect Directors, Set salaries of employees and officers (if applicable), If required, set the per share price of stock for purposes of the buy-sell agreement, Ratify all action taken by the Corporation in the prior year.
The failure to follow these formalities may allow a potential plaintiff in a law suit to “pierce the corporate veil”. If a court agrees that the corporation has not followed the “rules” set forth in the Business Corporation Act and agrees that the corporate form has been ignored, your personal assets may be utilized to satisfy a judgment against the Corporation. Obviously, that is not a desirable alternative.