Contracts

The Business Purchase Letter of Intent

Today’s post discusses an important early step when you are purchasing a business: drafting and negotiating a business purchase letter of intent. The process of drafting and negotiating a business purchase letter of intent generally follows the initial negotiation of the major business purchase terms. Those material terms—price, payment method, closing timing, and basic conditions to the sale—are generally negotiated directly between the parties on smaller business purchase and sale transactions. On larger transactions, the parties and their brokers and investment bankers negotiate those terms.

After you agree on what each party is going to do as part of the business purchase, one party (often the buyer) will distill those main business terms into a written document that is the business purchase letter of intent....

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Mergers & Acquisitions

Business Purchase and Sale: Considering Employees

One of the most important parts of a business is the people doing the day-to-day work. When looking into purchasing a business, it’s important to identify and understand the needs and rights of key employees, review existing employment agreements, and consider any employment related successor liability issues that may come up as part of the transaction. We’re continuing our series on the Purchase and Sale of a Business by highlighting important employee related considerations when purchasing a business.

Identifying (and Locking Up) Key Employees

Does the business you’re purchasing rely heavily on a few key employees? Especially for service-based businesses that rely heavily on relationships, these key employees can be one of the most valuable assets for the business. Making sure you...

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Commercial Real Estate

Understanding Your Commercial Lease: Insurance, Subrogation, and Indemnification

In this latest post in the Understanding Your Commercial Lease series we’re going to discuss insurance, subrogation, and indemnification. (Subrogation will often be grouped under the insurance provision in your lease.) The insurance, subrogation, and indemnification provisions of your commercial lease allocate risk between the landlord and the tenant (and each of their insurers).

Insurance

In nearly every commercial lease you will find robust insurance requirements for the tenant that are mandated by the landlord. The tenant is going to be required to pay for insurance that will include general liability insurance, property damage insurance for the tenant’s property, business interruption insurance, automobile liability insurance, worker’s compensation insurance, and then often an umbrella policy. The landlord will often ask the tenant for insurance the...

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Mergers & Acquisitions

Five Key Securities Issues in Due Diligence of M&A Deals

In business acquisitions, and especially in business acquisitions structured as stock purchases, there are a number of securities issues you’ll want to be on the lookout for. For the purposes of this post, you can think of a security as the stock or other equity interest in a company like an option or warrant. (You can check out this post for a more detailed discussion of what a security is.) Below I’ve listed 5 key securities-related due diligence issues for you to consider when purchasing a business.

We’ll start with the two key issues that are important for acquisitions of both stock and assets; we’ll finish with three key issues that primarily affect stock acquisitions:

Issues for acquisitions of either stock or assets

Two issues are of...

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Commercial Real Estate

Understanding Your Commercial Lease: Damages, Destruction, and Business Interruption

This latest post in the Understanding Your Commercial Lease series discusses damages, destruction, and business interruption. The damages and destruction provisions of your commercial lease will detail who (between the tenant and landlord) will be responsible for damages to (or destruction of) the premises, the building, and the entire real estate complex. Business interruption is often closely associated with damages and destruction as those events often interrupt the tenant’s business, but business interruption can also come about in the context of repairs, maintenance, and utility-related issues. The language in your commercial lease that discusses “smaller” damages is often included in the repairs section of the lease, and the destruction clause (sometimes called the “casualty” clause) will generally cover major damages.

Damage

Damages...

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Business Startup

How to Dissolve Your Washington Business

If you’ve decided to move on from the business you’ve started and it doesn’t make sense to sell it, you’ll likely want to dissolve your Washington business. To do so, you’ll need to consider the following steps:

Dissolving a Corporation 

To voluntarily dissolve a Washington corporation, generally the corporation’s board of directors will propose dissolution and submit the proposal for a vote by the shareholders. Two-thirds of the authorized shareholders then must approve the proposed dissolution. The initial directors, incorporators, or board of directors may also dissolve the corporation by majority vote under certain circumstances, like when no shares have been issued.

Following the vote to dissolve, the corporation must file Articles of Dissolution with the Secretary of State to notify the state of the corporation’s intention to...

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Business Startup

Changes to the Washington Limited Liability Company Act

Earlier this year, the Washington state legislature unanimously passed and the governor signed legislation making changes to the Washington Limited Liability Company Act—the most sweeping changes to Washington LLC law in recent history.

The Washington State Bar Association requested that the state make changes to the Washington Limited Liability Company Act. The bar association’s goal was to make the law easier to understand and more flexible by modifying provisions that the association described as creating pitfalls and unnecessary problems. The Washington state Senate and House eventually passed legislation making those changes, and Governor Inslee signed the law on May 7, 2015. The new changes will go into effect on January 1, 2016.

Some of the major changes to the Washington Limited Liability...

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Mergers & Acquisitions

Archive Series | Due Diligence in the Purchase and Sale of a Business

If you are considering buying or selling a business, it is helpful to understand the due diligence process. This series from our archives provides a basic overview of the legal issues you should consider (that is, the due diligence you should consider doing) when buying or selling your next business:

An Introduction to Due Diligence Legal Issues Financial Issues Operational Issues Intellectual Property Material Contracts and Information Miscellaneous Issues

Photo: shrinkin’violet | Flickr

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Business Startup

LLC Basics: Appealing Characteristics of LLCs

Over the last 20+ years, LLCs have become one of the most popular types of business entity. Entrepreneurs find LLCs appealing because they offer limited liability, pass-through taxation, flexibility in management and operations, and have relatively simple statutory requirements. We’ve highlighted the “LLC basics” in today’s post.

Limited Liability Protection

Like corporations and other limited liability entities, limited liability companies offer owners (also referred to as “members”) protection against personal liability. If the owner of a sole proprietorship or general partnership gets sued, then their personal assets  are at risk. But if the owner of an LLC gets sued, the business assets would be at risk, but their personal assets will generally not be subject to the lawsuit.

Pass-Through Taxation

The federal government does not...

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