Purchase or Sale of a Business

A buy-sell agreement is sometimes more aptly referred to as a buyout agreement. These agreements are binding legal contracts between business co-owners that dictate when owners can sell their interest in the business as well as who is permitted to buy an owner’s business interest and the price for that particular share of the business interest. These agreements are entered into by the owners of a business in order to establish some boundaries for what will happen to an owner's share of the business upon the happening of a specified event, such as the death or disability of an owner.
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Building a business is something to be proud of. You have likely poured time, money, and resources into your business. When the time comes to sell your business, you will want to do what you can to maximize its value and also to protect yourself. This requires advance preparation.

What to Do Before Selling Your Business

It is often difficult for a business owner to be impartial in evaluating his or her own interest.
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Selling your company can be a bittersweet experience. The business you worked hard to build has become a success, but it is time for you to move to the next phase of your career or life. Before you place your company on the market, you want to ensure you consider several factors, so that your company is ready to be sold for top dollar. An Austin business lawyer can help you during each phase of the business transaction, including discussing the initial factors below.

Six Things to Consider As You Prepare to Place Your Company on the Market

1.            Hire Advisors and Professionals Immediately

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Will 2019 be a strong year for business buyers and sellers?

As the year 2019 churns off to a strong start, those in the business industry may be wondering what this new year will hold for buying or selling a business.  After all, the purchase or sale of a business is often heavily intertwined with economic, technological, and even political factors. Our Austin, Texas business law attorneys discuss some factors to consider in this coming new year if you will be purchasing a new business or selling your existing business.
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How long does it usually take to find the right business to purchase?

Buying a business is a big decision. The purchase of a business will involve a significant outlay of capital and time. With so much at stake, you want to make sure you select the right business which will earn a return on your investment and achieve success in the long run. Anyone starting out in the business buying process will want to avoid making the mistakes discussed below.

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What surprises might await you when you purchase property for your new business?

A news story that appeared recently thanks to an anonymous whistleblower in Lubbock, reminds us all that buying a local business can be trickier than it first appears. This is why, no matter how savvy you think you are, you should always hire a skilled, knowledgeable business attorney before purchasing a business.

Case of Uncommon Building Codes

In the case mentioned, a local business owner approached KLBK and EverythingLubbock.

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Is purchasing a franchise a good idea for you?

For people who want to start businesses but are worried about the risk involved, franchises may sound like the answer to their prayers. Theoretically, franchises follow well-established, successful models that have already proven to be effective. The franchisee is supposed to be supplied with the appropriate quantity of tried and true products and accessories necessary to create a successful business. He or she feels assured of customers because production, pricing, advertising, and marketing strategies are already in place.

Unfortunately, while starting a business from scratch is risky, purchasing a franchise can be risky too.

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How can I ensure the continuity of my small business?

Launching a small business involves a number of critical decisions such as selecting the right business structure and putting in place agreements that clarify the relationship among the owners and/or partners such as partnership and shareholder agreements. If the business is structured as a partnership or a small LLC, it is also crucial to institute a buy sell agreement.

This legal document specifies how the ownership interest will be redistributed in the face of unexpected events such as the death, disability, bankruptcy, or divorce of one of the owners. In short, a buy sell agreement affords the surviving owners with a means of redeeming the stake of the departing owner.

Types of Buy Sell Agreements

There are three types of buy sell agreements: cross-purchase agreements, stock-redemption agreements and hybrids.

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How Can I Get Better at Negotiation?

Negotiation is a key skill in business. Done properly it can save you money, result in higher profits and help you seal the deal to obtain the right employees, suppliers and contractors. Like any skill it can improve with practice and some good advice.

A recent article in Entrepreneur shares some great tips for improving your negotiation skills. 

1. Prepare

Psychology plays a crucial role in negotiations. If you are better prepared than the other party, you may put them back on their heels and put yourself in a better position. Take time to learn as much about the other party as possible so you can capitalize on your company’s strengths and the other party's weaknesses. 

 2. Find Leverage

Take maximum advantage of your strengths. If you are the only source of a product or service, or what you offer is of much better quality or much lower price than the competition, run with that. If there is great demand and not much supply for what you sell, you are in a strong negotiating position. 

3. Be Willing to Walk Away

If you are in the position where you absolutely need an agreement, you have no leverage and you are not really negotiating. You are just setting the terms of your surrender. If the other side’s final offer is simply unacceptable or the people you are negotiating with are arrogant, demanding or inflexible, is it really worth the effort?

4. Both Sides Need a Win

If there are no benefits for the other side, there is no reason for them to agree and negotiations will be a waste of time. Be proactive and creative. Ask questions. What are they looking for and what will be acceptable to them? If you were in their shoes, what would you really want and what would you be willing to do to get it? 

Sell them on how the deal that you want will benefit them. If you see negotiations as strictly a power game where you impose your will to the maximum detriment of the other party, you probably will not come to an agreement and if you do, it will likely be the last one they ever sign with you.

5. Close the Deal

Have the endgame in mind as you negotiate. If there are several issues to be negotiated, work on the ones that will be easiest to agree on first. Once you start getting those out of the way, negotiations will build up momentum. The parties will feel more comfortable with each other. Each side will be more willing to compromise to close the deal because they do not want to have wasted all the time and energy spent in resolving the lesser issues. 

If you need help negotiating a contract in the Austin area, call business law attorney Sanjeev Kumar at (512)960-3808 for a consultation today.

 

For some, owning a business is a lifelong dream.  While starting a business from the ground up can be difficult, buying an existing business can make this goal much more attainable.  Purchasing a business is a serious matter which should not be taken lightly.  It is important to do the appropriate leg work in order to be successful in this type of transaction and with the purchased business in the future.

The first step is deciding which industry you are interested in and what type of business you want to operate.  For example, if you are interested in the technology field, do you want to manufacture a good or provide a service or both?  Narrowing down your area of interest will greatly increase the chances of finding a business that suits your needs.  After you decide on a specific business type, the search for available businesses can begin.  This can be a drawn out affair and it is best to utilize contacts within your network to assist you in finding a good fit.

Once you find an appropriate business for sale, you can then begin your investigation into the businesses circumstances.  You want to know everything you can about the business before you make an offer to purchase it. You should obtain all financial information, including balance sheets, tax returns, and any other financial reports or documents that may help you assess the business’s past, present and future financial situation.  You also want to inquire as to the business’s liabilities, including current contracts and agreements for things such as real property, service providers and employees.  You might also want to take a look at its legal history and inquire about its reputation to get an idea about where this business stands in the community.  Please note, this is not an all encompassing list of inquiries and that depending upon the business you are interested in, different concerns can and will arise.

It is important to valuate the business as you want to know how much the business is worth before making an offer or entering into any agreement.  So you should use one of the various methods for valuation, including looking at the business’s capitalized earnings or tangible assets.  You should seek the advice of an experienced business law attorney and accountant to assist you with this as it can be a confusing assessment. 

After you determine how much the business is worth, you should make an offer.  Once the offer is accepted, you will be asked to enter into a sales agreement or contract.  The sales contract is the document that will govern the transaction from start to finish and it is therefore important that it is carefully negotiated and drafted.  It is imperative that your consult with a business law attorney during this stage.

If you are considering the purchase or sale of an existing business, you should retain a seasoned attorney to guide you through the process. Call Austin, Texas business law attorney Sanjeev Kumar at (512)323-6060 to schedule a consultation today.