How Would a Business Transaction Lawyer Help Me?
A Florida business transaction lawyer can help you with a wide variety of situations you may encounter in business. They can assist with setting up a new company, or selling or dissolving an old one. If you run into disputes with other businesses or individuals, a business lawyer can help you work them out. In some situations, you may need assistance dissolving a partnership or otherwise changing the ownership structure of your business. Your business transaction lawyer can help with drafting and negotiating contracts, to reduce the risk of legal problems in the future, as well as making sure loan paperwork is properly processed and saved.
Starting a New Business
Making the decision to start a business can be exhilarating, but it can also be confusing. There are so many questions that arise immediately. What business structure should you choose? Should you be a sole proprietor or should you form an LLC? What about incorporation, and which type of corporation can you start with? Can you change it later if need be? What paperwork do you need to file to protect your business, intellectual property, etc.? These are just a few questions a Florida business transaction attorney can help you answer. Your lawyer should take the time to ask questions about your business and your plans for the future, then advise you on your options so you can make an informed decision.
Buying or Selling a Business
While starting a new business can be exciting, there are also advantages to buying an existing business. Everyone has different skills and abilities. While some people may excel at coming up with new business ideas, others may be better at taking an existing company and growing its sales. There may also be less risk in purchasing an already solvent business than in starting a new one on an unproven idea. However, there are also many things to consider before choosing a business to buy:
- Due Diligence. In general, this part is easier if you have some knowledge or understanding of the industry the business fits in. You will need to thoroughly research the company, its positioning in the market, its financing history, its target market or customer base, etc. You’ll also need to know about potential debts or other liabilities, such as pending lawsuits against the company. Additionally, you need to know all about its assets—intellectual property like patents and trademarks, leased equipment, current inventory, company vehicles, buildings or other business holdings, etc.
Financial and tax records may be complex and difficult to understand for the layperson, even if you’re familiar with the industry itself. Your lawyer may be able to notice inconsistencies, or they may recommend you retain a forensic accountant to ensure you’re getting a clear picture of the business. Next, you need a list of current contracts, the business’ biggest customers, current marketing plans, and purchasing policies. Don’t forget tax records, professional associations, and publicity or news mentions.
Personnel is important too. You’ll want a list of employees and their compensation—salaries, benefits, workers compensation, unemployment claims, and any history of labor disputes within the company.
The hope is that the seller will be forthcoming about these issues, but that isn’t always the case. Your Florida business transaction lawyer can help you do a thorough job of checking out whatever info you’re given and learning what you need to know about the business.
- Business purchase vs. asset purchase. It is important that you consider whether you want to purchase the entire business entity or solely the assets of the business. Your Florida business lawyer should be able to assist you in understanding the differences and ramifications of each of these types of transactions, and discuss the alternatives and terms to assist you in making an educated decision.
- Zoning Issues. With a brick-and-mortar store location or factory, it’s important to make sure the location is zoned for the type of business being run there. Just because the current owner hasn’t had any problems doesn’t mean you won’t. If officials find out the business isn’t properly zoned after you buy it, it becomes your headache.
- Licenses and Permits. These don’t always instantly transfer to the new business owner. In some cases, you personally will need to get licensed to operate a specific kind of business. This is especially common with tightly regulated industries such as any business that sells or serves alcohol or tobacco products.
It’s not uncommon for clients who are very knowledgeable about a specific area of business to be less informed about licensing or zoning issues, especially if they previously had a partner who handled those issues. It’s also important to remember that zoning and licensing requirements vary based on county and city statutes, so what you did at a previous business in, say, Stuart may not work for a new business situated in Port St. Lucie. Fortunately, a business transaction attorney can help you understand what you may need to do to operate a business legally in your local area.
- What Resources You’ll Have to Start. Will the seller offer any training on how to run the business? Or are you expected to figure it out yourself? If the seller promises help, this should be spelled out in the purchase agreement.
- Concerns About Escrow and Refunds. You may want to ask for the right to cancel the sale during a specified period of due diligence, with your money held in a refundable escrow account during that time. This may protect you if you find out something alarming during the due diligence phase.
- Financing. You and your attorney should discuss whether you want to seek financing from the seller or a financial institution.
- Non-Competition Clauses. These give you peace of mind that the buyer won’t start a competing business right after selling you their old one or would go to a competitor and work for them. They can be particularly important in situations where the business isn’t based on some copyrighted or otherwise protected intellectual property, such as retail stores that sell goods purchased from other companies. They are also important if your company is in a small area where both the business and its owner are popular and well-respected. Notwithstanding, non-competition covenants are also important if you are trying to protect relevant information that you acquired with the business.
For example, if Bill sells his surf store in Stuart to Ted, then Bill goes and opens another surf store down the street, customers might flock to Bill. Bill has been in this area for years and the customers really respected him, his advice, and his knowledge. Sure, they could buy surfboards and wetsuits in a lot of places, but Bill could always recommend exactly what they needed. Some of them may have surfed with Bill and consider him a friend. In this kind of situation, many of Bill’s customers would likely follow him to his new store. Now Ted’s new surf shop is empty and most of the revenue it enjoyed when Bill owned it left the building with Bill. To avoid a situation like this, Ted could ask his Florida business transaction attorney about including a non-compete clause. Typically, these clauses are limited in scope, to a specific time frame, and location. So, Ted’s attorney might ask that Bill promise not to open a similar business within a thirty-mile radius of the store for the next three years. This would give Ted time to build his own customer base and create a rapport with them, the same way Bill did.
Non-compete clauses are easier to enforce in court if they are reasonable. Asking for too large a geographical area may be both unnecessary and legally problematic if the business consists of one physical location. However, if Ted was purchasing a business with multiple locations across the state, the clause might specify that Bill won’t open a similar business in the entire State of Florida. Because the business operates throughout the state, this would likely not be overreaching as it would for the single store in Stuart. In either situation, this non-compete clause shouldn’t be a problem for Bill if he plans to retire, to move away, or to go into some other business.
- Non-Competition Clauses. Similar to non-competition clauses, non-solicitation clauses would prohibit the other party from soliciting customers, employees, or other individuals. Your Florida business transaction lawyer would help you draft a non-competition provision that would address your concerns.
- Writing or revising the purchase agreement. It’s essential that you have the help of a business transaction lawyer for this part. If the contract is written by the seller, you may find some of the terms are unfavorable to you and should be negotiated over. For example, your attorney may be able to negotiate that the price is contingent on some numbers of sales/revenue within a specified period after the sale, like six months or one year. This can protect you in situations where you buy a business that regularly sees $100,000 a year in profits, but for some reason it only produces $20,000 the next year.
If you’re not a trained lawyer, trying to write your own purchase agreement is not recommended. There are far too many things to think about and address, and you don’t want to risk leaving out something important because you just didn’t think of it. Yes, there are preprinted forms you can buy or print off the internet, but they are one-size-fits-all and may not address important details of your specific situation.
Is Selling a Business Less Complicated Than Buying One?
It would be more accurate to say that selling a business is complicated in different ways. There are several legal considerations to keep in mind when selling your business, including:
- Tax Considerations. Often, the estimated revenue from a sale sounds a lot better before you realize how much of it you’re going to pay in taxes. It is important that your Florida business transaction lawyer assist you, together with your accountant, in having tax as a consideration when selling your business.
- Negotiations. Your attorney can help you negotiate the most advantageous deal and may revise the sales contract multiple times until you are happy with it.
- Closing Paperwork. When the deal is completed, there will be multiple papers you need to sign to legally transfer ownership of the business and the assets of the business. Your Florida business lawyer will ensure that all of these are properly signed, so there are no future difficulties for you or your buyer.
Avoiding Legal Disputes in the Future
Acquiring the services of a skilled business attorney for corporate transactions can also help reduce the risk of costly, time-consuming disputes in the future. By ensuring both parties are on the same page, a properly written contract can head off many disagreements before they start. Often, business disputes stem from a breakdown in communication or understanding between parties. By bringing various issues to your attention, your attorney can help you figure out what your expectations are for the transaction. The same is true of the other party or parties. Your Florida business lawyer may be able to work things out in negotiating the contract that you might have argued in court about later.
Selling or Buying Business Assets
Maybe you aren’t buying or selling a business. Your company may need many different assets to operate—real estate holdings, vehicles, various kinds of equipment, and supplies. For small things, you can go to a local store and charge what you need on the company credit card without too much risk. If you don’t like your new break room coffee machine, you can take it back to the store. But, with larger purchases, you may have some concerns. What if you buy a whole fleet of trucks for your delivery business only to discover most of them are falling apart and not in the condition advertised? What if your new building has undisclosed issues with the foundation, electrical grid, plumbing, etc.?
In the same way that buying or selling a business requires you to address multiple issues, so does buying or selling any large asset. Your Florida business transaction attorney will help you through many of the same steps noted above for your real estate purchase or sale, or any other large investment. In this way, you may be able to reduce much of the risk.
If you need assistance with your business transaction or have questions about any potential legal matter, please contact Apfelbaum Law for a consultation. We have offices in Port St. Lucie and Stuart, but provide legal services throughout the Treasure Coast and Florida.