Business Transactions
BUSINESS TRANSACTIONS
Business Entity Formation
When starting a business, consideration should be given to the most efficient means of limiting personal liability and how to obtain the most efficient tax treatment for your particular situation. The first step is evaluating whether to organize as a C corporation, S-corporation, limited liability company (LLC) or limited liability partnership (LLP).
Next, it is necessary to create the governing documents, such as the articles of incorporation and bylaws for a corporation. The creation of these documents can range from simple to very complex depending upon, for example, the number of shareholders, partners and employees. Often times the most important component is establishing the control and withdrawal rights between the owners of the business entity.
If you are making a significant investment in a start-up business it is important to bring on an attorney early in the process. In my experience, the initial expenditure on an attorney at the outset generates substantial cost savings in the future should issues arise.
Corporate Governance
Corporate governance involves the legal issues relating to the business management. For example, a corporation has a board of directors who in theory oversee the day-top-day managers (i.e., the officers) of the company. The relationship between and among the board of directors and the officers is addressed in the governing documents upon formation of the company, and is must be revisited from time to time in order to ensure that the operation is running smoothly. Many statutes including the California Corporations Code and Sarbanes Oxley provide guidance both mandatory and voluntary to most business entities.
Further, business owners need to ensure that certain formalities are being met, such as organizing meetings and properly documenting transactions that are not in the ordinary course of business.
Perhaps most importantly, business owners and managers must understand the impact of fiduciary duties owed to other constituents of the organization before making certain decisions that have an impact on the entire organization.
Contracts for the Purchase & Sale of Businesses, Real Estate and other Assets
There are many ways to structure and document the purchase and sale of a business, for example, initial considerations must be given to structuring as a stock sale or an asset sale. There are many legal issues that arise during a transaction including the very important aspects of the timing and manner of payment, the tax impact, the extension of liabilities post closing, and, of course, due diligence of both the buyer and the seller. Retaining an experienced lawyer at the outset of a transaction is crucial to a deals success, whether that success is defined by a smooth closing or backing out of a deal because of negative discoveries resulting from thorough due diligence.
Finance of Real Estate and Business Operations
Financing the purchase and management of real estate and business operations generally requires a relatively lengthy process involving due diligence, negotiation and documentation. Whether you are seeking financing for your individual or business needs, the prudent approach would include the retention of an experienced attorney.
Ancillary Agreements
In addition to the main deal documents, often times there are many other documents that investors, businesses and individuals require in the investment and business endeavors. These documents include non-compete agreements, non-disclosure agreements, and non solicitation agreements, to name a few. The impact of these ancillary documents must be considered into the foreseeable future. An experienced attorney will raise many potential consequences that could result from provisions in these documents.
Employment Agreements
When deciding to offer or accept employment, each party must consider the legal consequences resulting from the relationship. As with all other agreements, experienced legal counsel will raise issues that you have not thought about and that are likely to result in more favorable contract terms for you.
Formation of Tax Exempt Entities
Forming a 501(c)(3) tax exempt entity requires an understanding of the relevant sections of the tax code, the application process and the perspective of the Internal Revenue Service (IRS) upon receiving the application. The retention of an experienced attorney should help you save time and provide you with the confidence that the IRS will receive your application favorably.
