FREQUENTLY ASKED QUESTIONS
BUYING AND SELLING A BUSINESS
The first step in buying or selling a business is for the buyer and seller to agree upon the important business terms of the acquisition. This agreement is usually set forth in a letter of intent that is signed by both parties. Our firm can assist you in negotiating the letter of intent and drafting it so it is not binding. This is important because changes may be necessary based upon information learned during the course of investigating the business.
The buyer usually requests the seller to disclose information in areas including, but not limited to:
- corporate formation
- governing documents
- financial statements
- real property
- personal property
- accounts receivables and payables
- intellectual property
- environmental issues
- equipment and affiliates
Our firm can provide advice about the specific documents and information to request in each of these areas.
INVESTING IN A BUSINESS
The next important step is to agree upon the important business terms of the investment. This agreement is usually set forth in a term sheet that is signed by both parties. Our firm can assist you in negotiating the term sheet and drafting it so it is not binding. This is important because changes may be necessary based upon information that is learned during the course of investigating the business.
A term sheet for investing in a business should cover areas including, but not limited to:
- amount of investment
- means of investment (equity or debt)
- post-investment capital structure
- distributions during the course of the business
- conditions for selling the business
- conditions for selling existing ownership interests in the business
- conditions for issuing new ownership interests in the business
- management and control of the business
- protection of holders of minority ownership interests
- ancillary agreements (such as employment agreements and non-competition covenants)
- restrictions on offering the business to third parties during the course of negotiations between the buyer and the seller
Our firm can assist you in negotiating specific terms in each of these areas.
COLLABORATING WITH OTHERS TO FORM AND OPERATE A BUSINESS
The first step in any joint business venture is for one or more of the parties to meet with an experienced business attorney and a good CPA to consider the multiple options available for the enterprise. This should be done even before the parties attempt to draft a letter of intent. There are many legal, tax and accounting issues to consider at a preliminary level first.
Thereafter, the parties should do their best to outline the key business terms on their own before returning to consult with their attorney(s) for the preparation of a formal letter of intent or term sheet. Our firm can assist you with the preliminary discussions about the new business idea and with the preparation of a formal letter of intent or term sheet.
During the optimistic stage of starting a new business enterprise, most business persons fail to adequately address what will happen if a significant unexpected adverse event occurs to the business or to one of the owners of the business.
Our firm can assist you in addressing these issues in a buy-sell agreement or by appropriate terms included in a limited liability company agreement or a stockholders agreement. It is important to address death, disability, divorce, dissolution and deadlocks before any of these terrible events actually occur.
PROFITING FROM BUSINESS IDEAS
When a business has an invention or a proprietary good or service, it needs to craft an effective plan for monetizing this advantage. The business can (1) make it or provide it, and then sell it; (2) pay a third party to make it or provide it, and then sell it; or (3) identify a third party willing to buy the right to make it or provide it. To earn revenue from your business innovation, our firm can assist you with distribution, supply and marketing agreements, with third party contract manufacturing and services agreements and with licensing and intellectual property transfer agreements.
The first step in filing a trademark is to perform a search to determine whether other businesses may already be using the same trademark or a similar trademark. Our firm can assist you in performing such a search and in analyzing the search results.
Drafting a well-tailored description is critical for minimizing the possibility that the U.S. Trademark Office or a third party will object to the trademark application. Any such objection can substantially increase the legal costs of obtaining a registration of the trademark. Our firm can assist you in drafting an appropriate description of the goods or services associated with your trademark.
ENDING A BUSINESS OR A BUSINESS RELATIONSHIP
When a business relationship is not going well, whether it is a relationship with an employee, consultant, vendor, customer, licensee/licensor, lender or co-owner, it is likely that the agreement underlying the relationship does not adequately address how to handle the pain of continuing the status quo. In such a situation, either the relationship needs to be modified, or it needs to end. In either case, our firm can assist you with preparing a new agreement to either modify the terms of the existing relationship or to clearly state how to smoothly wind down and terminate the relationship.