Brian's Blog

Don’t Let the Seller’s Liens and Taxes Stalk You

stalking liabilities

“Leave the gun. Take the cannoli.” Fictional mobster Peter Clemenza delivers this famous line in The Godfather after a drive into the country with the godfather’s driver Pauli. The driver betrayed his boss and Clemenza has just meted out justice.

Take the good stuff. Leave the bad stuff. That’s the main idea behind buying a business via an asset purchase. Here are a few pointers so you won’t find yourself pursued by the Seller’s unpaid taxes and liens.

What’s an asset purchase?

There are innumerable ways to structure the purchase of a business, but most deals are either asset purchases or equity purchases. In an equity purchase, the buyer purchases the equity of a company (often referred to as the “target”) from its equity holders — stock in the case of a corporation and membership interests in the case of a limited liability company. The buyer ends up with the entire company, along with all of its assets and all of its liabilities. In a deal structured as an asset purchase, on the other hand, the buyer purchases the company’s assets but leaves the corporate entity behind, along with some or all of the company’s liabilities.

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Instapaper — Resource of the Week

Instapaper

There’s an incredible amount of interesting and entertaining information on the Internet. There’s so much, in fact, that it’s a good idea to develop a usable workflow so you don’t drown in a sea of information.

In past Resource posts I’ve talked about using tools like Twitter and Feedly to set up a system for automatically bringing information from the web to you. Today’s post is about Instapaper, a tool that helps you easily save links to content so you can read the articles when and where it’s convenient for you.

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Don’t Buy a Business Without Looking Under the Hood

looking under the hood

Before you buy a business be sure you’ve done your due diligence. Even in the days of Carfax, you wouldn’t buy a used car without looking under the hood to make sure the car’s in good condition. You’d probably also take it to a mechanic to have it examined by an expert. If you’d do this for a car purchase, why would you making a life-changing investment without making sure the business you’re buying is in good condition?

If you’re smart, you won’t.

You’ve probably heard the phrase caveat emptor — “buyer beware.” It means that it’s the buyer’s responsibility — not the seller’s — to ferret out issues that could affect whether the buyer wants to go through with the deal. The onus is on the buyer to ask questions and challenge assumptions.

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Feedly — Resource of the Week

RSS feed aggregator

The best thing about web 2.0 — that is, social media, blogs, and the rest of the interactive Internet — is that you can have interesting information come to you. Using the right tools, you can set things up so great content comes to you while you’re doing something else. Then you can interact with it and with the content’s creators on your own schedule.

My last two Resource of the Week posts were about Twitter, as a tool for listening as well as a tool for connecting. Today’s post talks about RSS feeds and specifically Feedly, one of the most popular tools for harnessing the power of RSS.

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Asset Sale Vs. Stock Sale: Pros and Cons

how to structure a business acquisition

Although deal lawyers generally describe their practice as involving “mergers and acquisitions,” the sale of a small or medium-sized business is usually structured as either an equity sale or an asset sale. Which structure is right for you depends on your circumstances. This post discusses some of the pros and cons of each deal structure.

Two ways of structuring a business acquisition

In an equity sale, the buyer purchases the equity from the owner or owners of the target company — stock in the case of a corporation and membership interests in the case of a limited liability company. The business is transferred to the new owners, corporate (or limited liability company) entity and all, and the target (i.e., the business being purchased) becomes a wholly-owned subsidiary of the purchaser. There is no change in the status of the target entity itself, and its contracts, assets, and liabilities remain with the entity.

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SBA Cans the Personal Resource Test

SBA Cans Personal Resources Test

The final rule for the SBA 7(a) and 504 loan programs was published in the Federal Register today. One of the most significant changes is the elimination of the Personal Resource Test. The change is effective April 21, 2014.

The Personal Resource Test requires banks to certify that the borrower doesn’t have additional resources that should be used to support the business.

For commentary on why the SBA eliminated the rule, see Why SBA Wants to Eliminate the “Personal Resource Test” on the Coleman Report. According to Bob Coleman,

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Twitter As a Tool for Connecting — Resource of the Week

Twitter

Last week I wrote about using Twitter as a tool for discovering interesting and relevant information. This week I’m writing about connecting with others through Twitter.

When you use Twitter as a tool for discovery, you’ll follow people who tweet about information that’s interesting to you. And their tweets will populate your timeline, where you’ll find links to interesting articles in your industry or other fields of interest, as well as videos, photos, and more.

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Buying a Sole Proprietorship

buying a sole proprietorship

Sole proprietorships pose unique issues when they are bought or sold. Sole proprietorships are businesses that are owned by a single individual rather than by an entity such as a corporation or limited liability company.

Most businesses are held and operated by companies rather than by an individual. Entities such as corporations and limited liability companies are created under state law by filing a document with the secretary of state and are treated under state law as a legal person separate from their owner(s). When the business is sold, the buyer’s focus is mostly on the entity: because the business assets and liabilities are contained within the entity, the buyer’s due diligence is focused on the entity’s assets, liabilities, and contractual relationships.

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Twitter as a Tool for Listening — Resource of the Week

listening

Twitter is a great tool for easily finding new information about topics that interest you.

When I was first introduced to Twitter, I didn’t have any use for it. I didn’t see the point of trying to get people to follow me just so I could broadcast whatever was on my mind. Plus, why would I want to follow people to hear about what they had for breakfast?

But I was looking at Twitter backwards. Twitter isn’t about broadcasting inanities. It’s about creating a simple system for allowing interesting information to come to you. Set things up right and you’ll have easy access to breaking news, items of personal interest, current happenings in your industry, interesting events in your town, and — if you choose — personal trivia like what people are eating or their recent workouts.

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Summary of SBA 7(a) Loan Rules

SBA lender

SBA loans can be a great way to finance a small business acquisition. Like most government programs, SBA loan programs have plenty of rules. In this post, I summarize the highlights of the rules for SBA 7(a) business acquisition loans.

There are three key sources of information about SBA loan rules: the U.S. Code of Federal Regulations, the relevant SBA SOP, and the SBA website. The SBA’s authorization boilerplate is another source of information about SBA loans, and it supersedes the SOP if there’s a conflict. Some of the text below is taken directly from the government sources but not set off in quotes to enhance readability.
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