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Our business and entrepreneurship law practice group includes lawyers who provide legal advice and representation to businesses and corporations. We assist clients in a wide range of legal matters including:
Corporations and limited liability companies (LLCs) are separate and distinct business entities. And they have key differences in terms of structure, management and taxation.
Corporations. A corporation is a separate legal entity from its owners. It can enter into contracts, sue or be sued, and own property in its own name. Corporations have shareholders who own the company and elect a board of directors to oversee the company’s affairs. Corporations that have not elected to be taxed as “S” corporations are subject to double taxation, meaning that the corporation pays taxes on its income, and then the shareholders pay taxes on any dividends received from the corporation.
Limited Liability Companies (LLCs). An LLC is a hybrid legal entity that combines the personal liability protection of a corporation with the tax benefits of a partnership. LLCs have members, not shareholders. The members own membership interests, not shares of stock. They also have a manager rather than a president, although an LLC can dispense with a manager and just have the members run the company, typically by majority vote. Members of an LLC have limited liability, just as shareholders of a corporation do. LLCs can choose to be taxed as a corporation or a partnership, and in some cases will be treated as a pass-through entity for tax purposes. When taxed as a pass-through, the profits and losses are passed through to the members and are reported on their personal tax returns, avoiding the double taxation of a corporation.
Our attorneys work with our clients to determine which entity form best benefits the client, in advance, before the entity is formed, typically working collaboratively with a client’s tax advisor in making this determination.
We regularly represent our business clients in the purchase of businesses. Some basic elements of these transactions are:
Due diligence is the process of investigating and evaluating a business that is being considered for acquisition. The purpose of due diligence is to assess the legal, financial and operational condition of the target and identify any potential risks or issues that may impact the value of the business.
During the due diligence process, our attorneys and other professionals, such as tax advisors, will help our client obtain and review a wide range of information about the target business including:
The due diligence process can be time-consuming and, at times, expensive. However, it is an essential step in the acquisition process because it allows the buyer to make an informed decision about whether to proceed with the acquisition, and at what price. It is important to note that the scope and depth of due diligence depends largely on the target’s size, complexity and type of business as well as the laws and regulations relevant to both the target and acquiring companies.
As with clients purchasing businesses, our attorneys also advise and represent clients who are selling their businesses. This can occur because the business has been made ready for sale, the owner is transitioning to a new line of business, or the owner wishes to retire.
We assist our clients in selling their businesses in a variety of ways, including:
A stock purchase agreement and an asset purchase agreement are two different types of agreements used to complete a business acquisition. The main difference between the two is the nature of the assets being acquired and the liabilities assumed.
A stock purchase agreement is used when the buyer is acquiring the stock or shares of the target company. When a stock purchase agreement is used, the buyer is acquiring the target company as a whole, including all of its assets and liabilities. The target company remains in existence and continues to operate under its current name, but the buyer becomes the new owner of the company.
On the other hand, an asset purchase agreement is used when the buyer is acquiring only certain specific assets from the target company. Under an asset purchase agreement, the buyer only acquires the assets specified in the agreement and does not acquire the entire company. The buyer typically assumes only those liabilities, if any, related to the assets it is acquiring. The target company may or may not continue to operate under its current name, while the buyer may use the assets purchased to form a new entity or add them to their existing one.
It is important to note that the choice of which type of agreement to use will depend on the specific circumstances of the acquisition and the goals of the buyer and the seller. A stock purchase agreement may be more appropriate if the buyer wants to acquire the entire company and its existing customer base, while an asset purchase agreement may be more appropriate if the buyer only wants to acquire specific assets, such as a product line or real estate. Our attorneys work with our clients to determine the most favorable approach for their business. Reach out to us anytime at firstname.lastname@example.org or 716.839.9700.
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