The Blog - Where Business Collides with Human Nature

Ban the Phone Book Campaign [infographic]

There is now a ban the phone book campaign moving across America.  18 states across the US are now (in at least some parts) only delivering white pages phone books to those who ask for them.  San Francisco has even enacted “opt-in” legislation for the delivery of the yellow pages.  This infographic shows how the white pages have not only become unwanted but are a costly waste to taxpayers.

Topics: Phone Book Marketing Culture Change Ecology

Buying a Business – Key Legal Steps and Considerations

buying-a-business-legal.jpg

Buying a business is often perceived as a less risky option than starting your own business from scratch; however, without proper research, due diligence, and consideration for the key legal steps and potential liabilities involved – it can be a risky path to venture down.

For example, has the previous owner been in compliance with tax law? Is the business adequately insured? What are the terms of the seller’s commercial lease?

These are just a few of the questions that you need to ask as you pursue the purchase of a business. Follow the points below to learn more about the due diligence and legal aspects involved in buying an existing business.

The Due Diligence Phase - Research the Seller’s Business

The first phase of buying a business involves doing your research and identifying the right business (get more tips on this process in SBA’s tips for Doing Research before You Buy a Business). The second phase involves doing your due diligence, where you really poke your nose into the details of the business!

Areas to consider include:

  • Business Finances –A seller’s business finances should be thoroughly researched to ensure the business is truly viable and isn’t carrying too much debt. Work with an accountant to review audited financial statements, tax returns going back five years, cash flow and income statements. Find out if there are any outstanding debts, liens, or tardy accounts receivables. Take a close look at sales tax records too; some states will hold the new buyer responsible if the previous owner was delinquent on paying their sales tax.
  • Legal Issues –Learn as much as you can about the business's obligations and compliance with legal issues, including details about existing contracts, insurance policies, intellectual property rights, licenses, permits, employee agreements, and commercial leases. (Check, for example, if leases can be transferred to you).
  • Employees – Don’t put this off until after the sale, employees can often make or break your business. Instead request to see HR-related documentation, employee records, non-compete agreements, and so on and be sure your lawyer sees them too.
  • Business Structure – Each business structure has different legal and tax obligations. For example, corporations are highly regulated and must maintain proper records – check that your seller is in compliance.

Note that most sellers will require interested buyers to sign a confidentiality agreement to ensure that you won't use the information about the seller's business for any purpose other than making the decision to buy.

Determine What you are Buying

Businesses are sold either in their entirety (the entity and any stock in that business) or as assets of the business.  Asset-based purchases tend to be favorable to small business owners because the obligations and debt of the target business would be left with the seller. This should be backed up by a written agreement stating the terms of the asset acquisition (remember you don’t need to buy all the assets, only what you need.) You should also check whether licenses, business names and other intellectual property are transferable.

Consider Forming a New Legal Entity

Talk to your lawyer about this one, but it may be advisable to create a new entity that will acquire the assets of your target business.  As a general precaution, forming a corporation or an LLC to buy a business will minimize your personal risk for the business's past obligations.

Write Up a Letter of Intent

Once you’ve determined what you are buying and any employees, liabilities, etc. that you are taking on, you should draw up a letter of intent. This is a non-binding agreement outlining what is to be done when the buyer and the seller have generally agreed upon the terms of the transaction. 

Negotiate Purchase Terms

SBA has compiled detailed information on buying a business and negotiating the purchase. For example, to help you determine the value of the business or assets that you are buying read: Determining the Value of a Business. Next you’ll need to work with a lawyer to draft and sign the sales agreement, you should also push to get it into escrow as soon as possible to protect you from other buyers.

Bringing on Board Employees

Don’t assume that the employees will automatically be transferred to you. This decision can be made during the negotiation phase. However, if you are obligated by the sales agreement to keep employees on but intend to review headcount and employee costs and contributions after the sale, check with your state law regarding worker protection rules and the amount of calendar notice you need to provide. Read up on Employment Law as it pertains to layoffs and severance payments. If you don’t have one already and take on employees you will need to obtain an Employer Identification Number from the IRS.

Additional Resources

Topics: Start a Business Legal Buying a Business

Domain Bias in Web Search - Free Whitepaper

Ever wonder "what's in a name"?  This whitepaper from Microsoft shows how "domain bias" is a new phenomenon as people become more familiar with the Internet.  Now that using search has become a habit and a first consideration for solving problems, the mental elimination of domain names has begun.

Topics: Domain Names Search Engine

How Graphene Will Make Computers 100X Faster - Ainissa Ramirez

Computers could run 100 times faster in the near future.  Old pencils have a new twist.  It is not "lead" in those pencils, it is graphene. 

Topics: Technology

Save the World from Email

You are drowning in email and the many hours spent on email are generating more work for you, your friends and your colleagues.  You can reverse this spiral only by mutual agreement.

To this end, an Email Charter has been created...

Topics: Email Marketing

Time Management, Productivity, Project Tracking Software | RescueTime

"On average RescueTime 3 hours and 54 minutes worth of productive time per week per person."  RescueTime is a tool that allows you to easily understand and optimize how you and your team spends their time and attention. RescueTime gets it done with NO DATA ENTRY. RescueTime is all automatic.  You install a small application on the computers of choice and the software and web sites which are actively being used is automatically tracked.

Topics: Time Management Free Software Productivity

How Stress at Work Causes Death [infographic]

Stress is not only holding you back from being successful, it may be literally killing you.  If you are an employer, it is on your shoulders to stay very aware of the work environment to know the the staff is stressed.

What is interesting is that collaboration can reduce stress and by doing so, potentially save jobs and lives.

To this point, take note on the infographic which talks about how middle age workers who have poor relationships with their colleagues are 2.4x more likely to die sooner.  One solution is:  Go Power with Greenlight Thinking, to change the culture of your company.

That said, the data shows that bosses had no ties to an early death.  Sorry, I hope this is not dissapointing to you.

Topics: Guerrilla Marketing Human Resources