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OK at Work, hosted by Offit Kurman attorneys Russell Berger and Sarah Sawyer, is a weekly podcast that discusses current events and legal issues impacting business owners. From updates on the ever-changing employment law landscape to the risks and benefits of integrating AI into your workplace, subscribe to stay up-to-date on issues and events that may impact you and your business.
Sarah Sawyer: Welcome to this week's
OK at Work with myself, Sarah Sawyer,
my colleague Russell Berger, both
attorneys at Offit Kurman, and today we
are talking about selling your business.
A lot of our clients, obviously
always buying, selling businesses and
both might be familiar with the due
diligence process, which means, taking
a look at the business and seeing,
when you're going to buy something.
Well, let's see what kind of shape
it's in, what kind of risk there is,
what are the other considerations?
A lot goes into that, but one
thing to keep in mind, leading up
to that is, if you are gonna sell
your business, is it in good shape?
And are you well positioned to sell it?
So what are some things that business
owners should be considering when they're
asking themselves that question, Russell?
Russell Berger: Yeah.
So just as a overall starting point.
Think of it as a long runway.
You don't want to necessarily be
in the position where you decide
you're gonna sell and you're
trying to do it three months later.
It doesn't give you a lot of time
to correct, adjust, adapt, catch up.
Not that it doesn't happen,
but it makes it harder.
And that might be reflected in a
purchase price, which is ultimately,
one of you're really gonna
care about it in a transaction.
So, number one, start early.
Give it plenty of time.
Number two, a good place to start is just
with your general business operations.
Are we doing things the right way?
Our corporate compliance is that in
order, do we have all that buttoned up?
Same thing, you just go down the list.
Are our contracts with
customers in good shape?
Are they protected?
Have we done the right things
on the employment side?
Are we compliant?
Do we have the right restrictive covenants
in place so that if someone comes in and
buy this business, they're not worried
about employees running out the door.
These are all things that we would say
generally are a good thing for a business
to do, a checkup on once a year as well.
So it's nothing really that wild
or that specific to a transaction.
I think you start by, are
we running a tight ship?
Can we be more efficient?
Are we doing the things we're supposed
to do from a compliance perspective?
As well as from creating the right
foundation to grow our business on.
Sarah Sawyer: One thing that I've found
too, that people don't always think
about is , what does the ownership
of my assets look like as well?
And a lot of times you think about assets
as a truck, equipment, a building you
own like widgets, whatever it might be.
But there's also other types of assets,
like, IP assets like your brand.
So that's something that might be
a little more cumbersome than some
of the things that we're describing
initially here, but do you own your IP?
Do you own your brand?
Have you trademarked things that you
need, that you might be transferring?
Like those types of things as
well, which maybe people don't
think about quite as much.
And we find this come up also
in the restrictive covenants and
employment agreements, well, that
could be true depending on what
type of business you have as well.
What kind of work for hire language
you have in those contracts?
Have the things that people
have been creating for the
business going to transfer
appropriately to the next business.
A lot of it's gonna depend,
obviously, on the type of business
and what's your selling and what
the commodity is and what goes along
with that and the deal structures.
They get up and running.
You start out small and then all of
a sudden you grow and maybe these are
things you hadn't thought about when
you first started out, or you didn't
wanna spend the money on it, you didn't
wanna spend the money on getting that
great agreement with the work for
hire language and all of that in it.
You didn't want to, trademark right away.
And, cleaning some of those things up,
once you've gotten to that point and
make sure that you have everything.
Russell Berger: Yeah.
And I'll add to that list too is that
every deal is heavily impacted by taxes.
Developing a tax strategy and
planning for that is a very important
step in this process as well.
Some things are done, as you
approach closing and you don't
have to do 'em years in advance.
But other things, from, are we
the right structure to residency?
What states are we in?
Am I in the right county?
There are all sorts of tax implications
that can be floating around out there.
And so these are, good questions to ask to
the accountant, ask to the tax attorney.
What should I know?
You know my business.
What should I be doing
differently if I'm preparing for
a sale from a tax standpoint?
Sarah Sawyer: Yeah,
and that's a great one.
Especially because there could be some
lead time on that, as you mentioned.
Well, thanks Russell, and
we'll see you next time.
Russell Berger: Thanks, Sarah.