Contributed by Cassandra Jones, Esq.
Houghton Jones, A.P.C.
A Buy-Sell Agreement is the contract for sale of a business. It is vital that the agreement is clear, and written down. By carefully discussing key points, you and the other party can avoid conflict now. It may seem like overkill to consider some of the details below, but as an attorney with over nine years’ experience in litigation, estate planning, and business law, I know that vague contracts are usually the ones where problems arise.
First, your agreement must be in writing. Don’t do anything on a handshake. This is your livelihood and your business. Why would you risk the roof over your head (or over your kid’s head, or over your employee’s head) when it is simple enough to put words to paper. The other party may sound reasonable in trying to waive this off. “Oh, don’t worry about it! I trust you…” This kind of response can see reasonable, even friendly, especially if the other party is a friend or family member. But, if they take this kind of loose attitude towards what is probably one of the biggest financial transactions in your life, then what kind of loose attitude have they taken in running the business? Or in helping you run the business in the future?
Second, look at the books. It is vital that you actually look at the filed tax returns, profit and loss statements, and balance sheet for the last three years, and the year-to-date. These form a financial snapshot of the company. They will show you how the company has been run, whether it is growing or not, and where you might be able to adjust the budget. From these disclosures, you should project a budget moving forward to ensure that what you are buying is going to be viable in the future. If the other party balks at giving you this information, then I suggest walking away. Whatever their objection is can be worked around. But you buying a business and being in the dark regarding its finances is simply unacceptable.
Third, get key man insurance to secure any loan. Many buy-sell agreements are financed by the original owner carrying a loan that the buyer will pay off over time. What this means is that the original owner continues to carry the risk if the business fails. If you choose to carry the loan, then you should at least require that the buyer obtain a life insurance policy sufficient to cover the balance of the loan and the debts of the business. In this way, if he dies suddenly, there will be enough liquidity to close the business and pay off its debts – including the purchase loan owed to the seller.
Negotiating the sale, or purchase, of a business is nuanced transaction. There are many, many things to consider in such an agreement that I have not even touched upon here. It is vital that, prior to considering such a big transaction, that you seek wise legal and accounting advise. But, if the ball is already rolling, be sure that you at least consider the above pointers.
For legal assistance with your Nevada entity contact Cassandra Jones, Esq. directly at (775)882-1777.
To find out more about Houghton Jones, A.P.C. visit http://www.hou2plan.com
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Jun 26, 2012
Jun 19, 2012
What's Your Business Exit Strategy?
Contributed by Cassandra Jones, Esq.
Houghton Jones, A.P.C.
You have worked hard to build your business. As you approach retirement, or the need to leave your business for other reasons, you should have a plan in place to wind up your business. There are several different types of exit strategies. Which one is right for you depends on factors like your customers, finances, your family, and your employees.
The most obvious strategy is simply to close down the business. When you close down the business you must be certain to properly wind down the business’ affairs. Just because you have decided to leave the business does not mean that the business’ responsibilities and obligations immediately cease. Final taxes must be filed and paid. Outstanding vendors must be paid. There should be a filing with the Secretary of State indicating that the business has been closed. Failure to properly wind down the business may expose you individually. For example, if the business has any unpaid debts, its assets should be used to satisfy those debts. If you take the assets without paying the debts, you may be risking future creditor’s efforts against you personally to recoup those assets.
Another exit strategy is to sell the business. Someone from inside or outside the business takes over the day-to-day operation of the business, while you are released from the business. In selling a business, the challenge is deciding on a sale price and the terms for payment. You must negotiate with the buyer to determine the price. Then the buyer must be able to buy the business. He may do this by paying cash, taking a loan from a bank, taking a loan from you, or a structured payment plan over time based on the company’s profits. The terms of a buy-sell agreement, and how the money is paid, are as various and negotiable as you want to make them. However, they should be clearly defined in a written agreement so that no one is surprised and to protect all the parties in the future. You want to be certain that in selling your business, you do not end up fighting later about getting paid.
You may also choose to exit the business by giving ownership to a family member. Again, the business continues but you are released from managing it. For example, this is where a father hands the business down to his sons. This may include a buy-sell agreement, like that discussed above. Many times, the owner chooses to gift the business to his child or children. When this is done, it may create a federally taxable gift. You must have the business valued to determine whether any gift taxes are required, and then claim the transfer on a proper tax return.
This year, 2012, offers a unique opportunity to make such a gift. During this year, you can give up to $5 million; next year, it is only $1 million. That is a difference of $4 million. It is a use-it-or-lose it situation. If you are considering giving your business to your family, then the next few months offers us a unique opportunity to give the business to your family without having to pay gift or estate taxes on a significant asset.
As you can see, there are specific financial, tax, and legal consequences to any decision to exit your business. Whether you just close the doors, sell the business, or choose to gift it to someone, there are consequences and processes that should be followed to ensure compliance with the law, protect all involved, and minimize fees, costs, and liabilities.
For legal assistance with your business contact Cassandra Jones, Esq. directly at (775)882-1777. Visit her web site at http://hou2plan.com.
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Jun 18, 2012
Ten Tips for Business Success
Contributed by Sara Zaro, President
Elite Bookkeeping & Tax Services Inc.
Running a business, a department and a home are so complex, with so many people and government agencies pulling on you from all directions. With all the endless reports and duties, it’s amazing that anyone is actually able to get work done, to produce a product finish a project and raise a family. Yet, we do, don’t we? And we do it well.
In a workshop conducted for executive women, the universal complaint was their days were so full of interruptions that these women couldn’t get their own work done. By the end of the workshop, they had come to realize – the interruptions are the job. To manage interruptions and make your life less taxing, here are some guidelines.
1. Know what you want. Whether in life or business, have a goal. Have you ever seen people who seem to always get what they want? When the opportunity presents itself, they know what to ask for – and don’t hesitate to ask.
2. Have a plan. When outlining the steps to reach your goal, you’ll actually take those steps. It feels so good to cross off each step as you go along. Besides business plans can really save your hide when you get audited.
3. Care. Care about the people who live with you, work for you, with you, supply you and pay you. When you treat people well; when you listen to them; when you make each person feel they have 100% of your attention when it matters – you’ll have earned powerful loyalty, respect and love.
4. Know things. Learn the things you need to know to reach your goals so you never have to rely on others. In a pinch, or on deadline, you can step in to do the task, or quickly train someone to do it.
5. Delegate. Once you know the things you must know to run your business or project, hire the right people to do those things you prefer not to do. If you have any doubts before hiring them – keep looking.
6. Market yourself with finesse – not aggressiveness. Whatever you do, you’re always selling – whether it’s yourself, your company, your product, your services, or your ideas and passions. Don’t be overly modest. Learn to express your ideas or pitches succinctly and effectively.
7. Go to the top. Start with the president, CEO, or the person with the decision-making authority, at the company you want to pitch. To get past their executive assistants, just tell the assistant what you want to accomplish. Make the assistants your allies. They not only have the ear of the top boss – but also influence all the executives’ assistants. Let the boss and his/her aide introduce you to their operations executives or managers.
8. Don’t waste your advertising budget on big ticket, splashy ads unless you have unlimited funds. Those are good for the moment only. Use your budget and your customers’ word-of-mouth to establish a constant, visible presence.
9. Keep great records and comply with all government requirements – all levels. Not only will this make audits easier and give you information to keep your costs under control, good records reduce your taxes,
10. Have no competitors. Everyone in your industry does something just a little differently. So when someone else is a better choice for your customer or client – refer them. In fact, make the introduction. You’ll generate good will all around.
BONUS – Number 11. Never stint on quality. Make each product or project as important the 100th time as it was the first time.
Elite Bookkeeping & Tax Services have Enrolled Agents and Certified Bookkeepers. For assistance with your tax or bookkeeping needs, contact them directly Toll Free at (800)416-3820.
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Elite Bookkeeping & Tax Services Inc.
Running a business, a department and a home are so complex, with so many people and government agencies pulling on you from all directions. With all the endless reports and duties, it’s amazing that anyone is actually able to get work done, to produce a product finish a project and raise a family. Yet, we do, don’t we? And we do it well.
In a workshop conducted for executive women, the universal complaint was their days were so full of interruptions that these women couldn’t get their own work done. By the end of the workshop, they had come to realize – the interruptions are the job. To manage interruptions and make your life less taxing, here are some guidelines.
1. Know what you want. Whether in life or business, have a goal. Have you ever seen people who seem to always get what they want? When the opportunity presents itself, they know what to ask for – and don’t hesitate to ask.
2. Have a plan. When outlining the steps to reach your goal, you’ll actually take those steps. It feels so good to cross off each step as you go along. Besides business plans can really save your hide when you get audited.
3. Care. Care about the people who live with you, work for you, with you, supply you and pay you. When you treat people well; when you listen to them; when you make each person feel they have 100% of your attention when it matters – you’ll have earned powerful loyalty, respect and love.
4. Know things. Learn the things you need to know to reach your goals so you never have to rely on others. In a pinch, or on deadline, you can step in to do the task, or quickly train someone to do it.
5. Delegate. Once you know the things you must know to run your business or project, hire the right people to do those things you prefer not to do. If you have any doubts before hiring them – keep looking.
6. Market yourself with finesse – not aggressiveness. Whatever you do, you’re always selling – whether it’s yourself, your company, your product, your services, or your ideas and passions. Don’t be overly modest. Learn to express your ideas or pitches succinctly and effectively.
7. Go to the top. Start with the president, CEO, or the person with the decision-making authority, at the company you want to pitch. To get past their executive assistants, just tell the assistant what you want to accomplish. Make the assistants your allies. They not only have the ear of the top boss – but also influence all the executives’ assistants. Let the boss and his/her aide introduce you to their operations executives or managers.
8. Don’t waste your advertising budget on big ticket, splashy ads unless you have unlimited funds. Those are good for the moment only. Use your budget and your customers’ word-of-mouth to establish a constant, visible presence.
9. Keep great records and comply with all government requirements – all levels. Not only will this make audits easier and give you information to keep your costs under control, good records reduce your taxes,
10. Have no competitors. Everyone in your industry does something just a little differently. So when someone else is a better choice for your customer or client – refer them. In fact, make the introduction. You’ll generate good will all around.
BONUS – Number 11. Never stint on quality. Make each product or project as important the 100th time as it was the first time.
Elite Bookkeeping & Tax Services have Enrolled Agents and Certified Bookkeepers. For assistance with your tax or bookkeeping needs, contact them directly Toll Free at (800)416-3820.
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Jun 12, 2012
A Quick Overview of Nevada Business Entities
Contributed by Cassandra Jones, Esq.
Houghton Jones, A.P.C.
There are several types of business entities in Nevada. Each entity has its own specific benefits, and drawbacks. Which entity is right for your business depends upon many factors, including the size of your business, your goals, and the risk inherent in your industry.
Nevada offers limited partnerships. A limited partnership is an agreement between several people to operate a business. In a limited partnership, one partner – called the general partner – runs the business. As the person running the business, the general partner is directly liable and at risk for any of the company’s liabilities. Such liabilities might include broken contracts, bad debts, or claims for personal or property damage from customers or employees. However, the limited partners (i.e. any partner who is not the general partner) are insulated from such claims. Limited partnerships are taxed on a “flow through” basis, which means that the net profits of the limited partnership are reported on the partner’s tax returns directly.
Nevada also has limited liability companies. A limited liability company is owned by a member, or group of members. The rights and responsibilities between the members are defined by an operating agreement. Often, one or more members are singled out as the “manager,” or the person responsible for running the business. Although this looks very similar to a limited partnership, the manager of an LLC is generally not at personal risk for the company’s liabilities. Instead, under the protection of an LLC, there is a “veil” between the individual members and the business which protects the individuals from the business’s liabilities. Generally, an LLC is taxed on a flow through basis like a partnership, although the members can elect to have it taxed like a corporation.
A corporation is a business that is owned by shareholders. The shareholders vote to elect a board, and the board runs the business. Corporations have the strongest legal protection in that it shields the shareholder-owners from the liabilities of the business. However, corporations are often highly structured with required annual meetings and may have complicated by-laws. Additionally, corporations are directly taxed so that any income paid out to a shareholder as dividends often experiences a double taxation – once as profit for the corporation, and second as dividend income to the individual. Such taxes, however, can be planned for and often minimized.
Which business entity is best for you depends on a myriad of factors. The level of protection you might need from business liabilities, the best way to minimize taxes, and the best structure for flexibility all need to be considered when forming a business entity. There is no one-size-fits-all company.
For additional information and legal assistance with your Nevada entity, visit Houghton Jones, A.P.C.
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Houghton Jones, A.P.C.
There are several types of business entities in Nevada. Each entity has its own specific benefits, and drawbacks. Which entity is right for your business depends upon many factors, including the size of your business, your goals, and the risk inherent in your industry.
Nevada offers limited partnerships. A limited partnership is an agreement between several people to operate a business. In a limited partnership, one partner – called the general partner – runs the business. As the person running the business, the general partner is directly liable and at risk for any of the company’s liabilities. Such liabilities might include broken contracts, bad debts, or claims for personal or property damage from customers or employees. However, the limited partners (i.e. any partner who is not the general partner) are insulated from such claims. Limited partnerships are taxed on a “flow through” basis, which means that the net profits of the limited partnership are reported on the partner’s tax returns directly.
Nevada also has limited liability companies. A limited liability company is owned by a member, or group of members. The rights and responsibilities between the members are defined by an operating agreement. Often, one or more members are singled out as the “manager,” or the person responsible for running the business. Although this looks very similar to a limited partnership, the manager of an LLC is generally not at personal risk for the company’s liabilities. Instead, under the protection of an LLC, there is a “veil” between the individual members and the business which protects the individuals from the business’s liabilities. Generally, an LLC is taxed on a flow through basis like a partnership, although the members can elect to have it taxed like a corporation.
A corporation is a business that is owned by shareholders. The shareholders vote to elect a board, and the board runs the business. Corporations have the strongest legal protection in that it shields the shareholder-owners from the liabilities of the business. However, corporations are often highly structured with required annual meetings and may have complicated by-laws. Additionally, corporations are directly taxed so that any income paid out to a shareholder as dividends often experiences a double taxation – once as profit for the corporation, and second as dividend income to the individual. Such taxes, however, can be planned for and often minimized.
Which business entity is best for you depends on a myriad of factors. The level of protection you might need from business liabilities, the best way to minimize taxes, and the best structure for flexibility all need to be considered when forming a business entity. There is no one-size-fits-all company.
For additional information and legal assistance with your Nevada entity, visit Houghton Jones, A.P.C.
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Jun 5, 2012
Protect Yourself from Your Small Business
Contributed by Cassandra Jones, Esq.
Houghton Jones, A.P.C.
Despite the economy, I have seen many people endeavoring in a small business lately. According to the US Census Bureau, Nevada has nearly fifty thousand businesses. Over 55% of those businesses have four or fewer employees. Small business really is the backbone of our community. Many people work hard to operate their business, and to take care of their employees and family.
What many small business fail to do, however, is to take advantage of the different business entities available in the state of Nevada. Instead, these small businesses operate as sole proprietors or general partnerships. A sole proprietor is any individual operating a business directly, without forming a business entity or registering with the secretary of state. Similarly, a general partnership is a group of people directly operating a business, without forming a business entity or registering with the secretary of state. A general partnership may or may not have a contract defining the rights between the partners.
As a sole proprietor or general partnership, there is nothing that distinguishes the business from the individual. The individual must pay all the income and employment taxes directly. It leaves the individual little flexibility to minimize income taxes. On the other hand, a business entity often empowers the individual to plan their business and expenses in a way that minimizes the taxes owed to the government.
Additionally, there is nothing that keeps the liabilities of the business separate from the individual. There are many reasons that a business may have liabilities. These liabilities may arise from a contract – like a lease or loan –- or from personal injury – like a claim for damage from a customer, or a worker’s compensation claim. As a sole proprietor or general partnership, if the business is sued then so is the individual. The individual’s assets and lifestyle are directly at risk of the business. This risk is magnified in a general partnership, where the acts of one partner exposes each and every individual to personal risk. However, by forming a business entity there is a “veil” placed between the individual and the business. This veil is a protective barrier that keeps the individual’s home and lifestyle separate from the business’ liabilities.
For example, many small businesses sign leases. If the lease is in the name of the business alone (and not personally guaranteed by any individual), then only the business entity is liable in the event that there is a breach of contract. Likewise, with a properly formed business, if the business is sued because a customer slips and falls, or because an employee unintentionally causes damage, then the business owner – an individual – is not at risk of being personally and individually responsible for the injury.
There are several types of business entities in Nevada, including limited liability companies and corporations. Each entity has its own specific benefits, and which one is right for your business depends upon your specific needs. If you are operating a small business as a sole proprietor or general partnership, you should seriously consider forming a business entity to take advantage of the tax flexibilities and protection built into them.
For additional information or legal assistance with your Nevada business, contact Casandra Jones, Esq. at (775)882-1777.
Visit her web site at http://hou2plan.com/
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
Houghton Jones, A.P.C.
Despite the economy, I have seen many people endeavoring in a small business lately. According to the US Census Bureau, Nevada has nearly fifty thousand businesses. Over 55% of those businesses have four or fewer employees. Small business really is the backbone of our community. Many people work hard to operate their business, and to take care of their employees and family.
What many small business fail to do, however, is to take advantage of the different business entities available in the state of Nevada. Instead, these small businesses operate as sole proprietors or general partnerships. A sole proprietor is any individual operating a business directly, without forming a business entity or registering with the secretary of state. Similarly, a general partnership is a group of people directly operating a business, without forming a business entity or registering with the secretary of state. A general partnership may or may not have a contract defining the rights between the partners.
As a sole proprietor or general partnership, there is nothing that distinguishes the business from the individual. The individual must pay all the income and employment taxes directly. It leaves the individual little flexibility to minimize income taxes. On the other hand, a business entity often empowers the individual to plan their business and expenses in a way that minimizes the taxes owed to the government.
Additionally, there is nothing that keeps the liabilities of the business separate from the individual. There are many reasons that a business may have liabilities. These liabilities may arise from a contract – like a lease or loan –- or from personal injury – like a claim for damage from a customer, or a worker’s compensation claim. As a sole proprietor or general partnership, if the business is sued then so is the individual. The individual’s assets and lifestyle are directly at risk of the business. This risk is magnified in a general partnership, where the acts of one partner exposes each and every individual to personal risk. However, by forming a business entity there is a “veil” placed between the individual and the business. This veil is a protective barrier that keeps the individual’s home and lifestyle separate from the business’ liabilities.
For example, many small businesses sign leases. If the lease is in the name of the business alone (and not personally guaranteed by any individual), then only the business entity is liable in the event that there is a breach of contract. Likewise, with a properly formed business, if the business is sued because a customer slips and falls, or because an employee unintentionally causes damage, then the business owner – an individual – is not at risk of being personally and individually responsible for the injury.
There are several types of business entities in Nevada, including limited liability companies and corporations. Each entity has its own specific benefits, and which one is right for your business depends upon your specific needs. If you are operating a small business as a sole proprietor or general partnership, you should seriously consider forming a business entity to take advantage of the tax flexibilities and protection built into them.
For additional information or legal assistance with your Nevada business, contact Casandra Jones, Esq. at (775)882-1777.
Visit her web site at http://hou2plan.com/
Find out more about the Business Achievement Center at our web site http://www.BusinessAchievementCenter.com. Our group of Strategic Partners are here to help businesses from start-up to expansion with our experience and expertise.
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