Category: Business Law

The Company Sale: Stock or Asset

September 30, 2020  |  Carole Clark Isakson

I have been handling sales and purchases of businesses for over three decades, and the first question I always have is whether the owners are selling their interests in the company (i.e. stock) or whether the company is selling its assets. The distinction here is CRITICAL and will impact how the deal is structured, how it is financed, how employees and third parties are impacted, and the tax consequences to the seller (and later, the buyer). Understanding the difference between a stock sale and an asset sale is an important first step for anyone wishing to buy or sell a business. Read on as we take an in-depth look at the company sale. Structuring the transaction While it’s best to leave the ultimate structure of the transaction you have in mind to your professionals, it is common practice for a buyer and a seller to agree on price and remain flexible on how the deal is organized until initial due diligence is conducted. Ideally a structure will be found that benefits both parties. For purposes of this discussion, let’s focus on a business operated by a corporation and the shareholders who own the stock in the corporation (the analysis would be roughly the same for a limited liability company). EXAMPLE: Tent Corporation is…

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Best Practices for Documenting Board and Owner Meetings

September 24, 2020  |  Carole Clark Isakson

The day to day operations of an entity can be conducted by the officers and executives in charge. However, companies should be mindful that formal action is required in many cases, especially when making decisions that are outside the ordinary course of business. Such decisions may involve taking out a loan, selling an asset, bringing in new investors, or liquidating the company. Formal actions are taken either by the owners of the company, or by the board, if the company has a such a committee. In addition to these special actions, companies also typically have meetings and elections on an annual basis to cover common tasks allocated to the owners and boards. Read on as we discuss best practices for documenting board and owner meetings. The nuances of company ownership When referring to “company,” the statement is generally applicable to corporations, limited liability companies, and partnerships. In turn, the term “owners” refers to shareholders (the owners of a corporation), members (the owners of a limited liability company), and partners (the owners of a partnership). The owners of a company may elect a board of directors or a board of governors; for instance, limited liability companies are not required to have a board. Additionally, this blog is a general statement of typical provisions. Before making…

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