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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Mergers & Acquisitions

Purchase and Sale of Business: Drafting the Business Purchase and Sale Agreement

Once you’ve nailed down the terms of the acquisition (usually in a letter of intent), it is time to begin putting the terms into a formal agreement usually referred to as a business “purchase and sale agreement.” This agreement will spell out the seller’s and buyer’s rights and responsibilities with respect to the transaction. We’re continuing our series on the Purchase and Sale of a Business by highlighting some of the major considerations when putting together the business purchase and sale agreement for your acquisition.

Structure of the Sale: What assets and liabilities are included?

As we discussed in a prior post in this Purchase and Sale of a Business series, you’ll need to sort out whether the sale will be an...

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Business Startup

Consideration and Enforceable Contracts

Consideration is a bargained-for exchange of something of legal value. “Something of legal value” ranges from a promise to do something or refrain from doing something, an action, or the creation, modification or destruction of a legal relationship. All enforceable contracts must have consideration.

For an example, Abel is need of a loan. Baker promises to lend Abel $1000 if Abel promises to return the $1000 along with $100 in interest. Abel agrees. This is consideration: Baker has promised to loan Abel $1000 as the price for receiving Baker’s $1100 in return and Abel has promised to give Baker $1100 in return for Baker’s promise of a $1000 loan.

In contrast, a promise to make a gift is not enforceable, because there...

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Contracts

How Can A Simple Noncompete Agreement Benefit Your Business?

Two of the most valuable assets of your business are the goodwill and the intellectual property that you’ve developed. A noncompete agreement can be instrumental in protecting these aspects of your business from a wide range of problems with departing employees, including the spread of trade secrets and other confidential information to your competitors. Today’s post will discuss the legal requirements you should keep in mind in order for your noncompete to be enforceable, and some of the potential benefits of using a noncompete agreement in your business.

Setting the Stage At some point during the life of your business, you will likely need to recruit, train, and rely on employees to help grow (or simply maintain) your business. You’ll have to...

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Mergers & Acquisitions

Due Diligence | Part 4 | Operational Issues

In today’s post we continue exploring the depths of the due diligence phase of purchasing a business. We’ve already discussed the financial issues and the legal issues, and today we’ll look at the operational issues surrounding due diligence. We’ve highlighted four important questions to answer regarding operational issues of a business you’re looking to purchase.

What products or services does the company offer? It may seem like a no-brainer to most, but it is important to acquire an in-depth knowledge of the products or services of the company you’re purchasing. In many cases, the purchaser is well aware of the products or services because it is the products or services of the company that attracted the purchaser to the deal. The better...

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Contracts

Former Amazon Exec Sued For Going to Work for Google

When you sign a non-compete agreement in exchange for $325,000 as part of a severance agreement, you should avoid going to work for your prior employer’s rival (at least for awhile).

Former Amazon executive, Daniel Powers, signed a severance deal that he would not go work for the competition for at least 18 months. In exchange, Powers received $325,000. Rather than avoiding the “competition” and enjoying his severance pay, four months later Powers decided to accept a new job with Google, as the director of cloud platform sales.

While non-competes are not valid in California, the lawsuit that was filed by Amazon on Friday will likely stand as it was filed in Washington’s King County Superior Court. In a similar case, a...

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Business Startup

Attention Business Owners: Here’s Why You Need an Operating Agreement

The most popular entity to form a business today is the LLC. Many business owners form an LLC by filing their Certificate of Formation with the Secretary of State. As far as forming a business, this is the proper first step, but the problem occurs when the second step isn’t taken. That second step is drafting an operating agreement to govern the internal affairs of the LLC. Today’s post details some of the benefits of drafting an operating agreement for your LLC.

What is an Operating Agreement? An operating agreement is a legal contract between the members of an LLC and the LLC itself. It typically spells out terms that detail the management of the LLC, distribution of profits and losses, and...

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Business Startup

What Should Your Employee Handbook Include?

An employee handbook can be one of the most important tools you can use to communicate with your employees. A carefully drafted employee handbook will detail your expectations for your employees, as well as what your employees can expect from the company. The handbook should describe your legal obligations as the employer and your employees’ rights. Today’s post details some of the most important sections you should include in your employee handbook.

Anti-Discrimination and Harassment Policies As an employer you are required to comply with equal employment opportunity laws, which prohibit discrimination and harassment, including the Americans with Disabilities Act. It’s important to include a section about these laws in your employee handbook to detail how your employees are expected to comply.

The...

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Business Startup

Moore v CAI: Non-Disclosure Agreement May Have Similar Effect to Non-Compete

In Moore v. CAI, a recent Washington Court of Appeals case, the Court discussed a number of important issues related to employment law.

Case Background Robert Moore worked at Commercial Aircraft Interiors LLC (CAI) as VP of sales and marketing. Moore was laid off by CAI in a general work force reduction. During his tenure with CAI Moore signed a document acknowledging that he understood and agreed to abide by CAI’s “policy of non-disclosure of any and all company policies, trade secrets, intellectual properties, and customer contacts to outside entities or persons.”

Moore sought employment from Volant, a CAI competitor. Volant was prepared to hire Moore, so long as CAI stipulated that such employment would not violate any agreement CAI had with Moore.

CAI...

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