An essential element of creating any business plan is to include an exit strategy--the plan for how you will leave your business at some point in the future. Even if you expect to stay with your business for the long haul, an exit plan is crucial. The business succession planning process is in itself complex, and the personal, legal and tax implications of the various options can be difficult to navigate without the help of a qualified professional, especially if investors are involved. Investors will make their decisions based in part on the investment exit strategy that is included in your business plan. The experienced business lawyers at Carosella & Associates can advise you on which strategy (or strategies) may be right for your business. Exit Strategy Options Before you choose your exit strategy, it is important to understand the basics of each option. For each of the options you take into consideration, making a short list of the capabilities and resources you will need to have in place can help you decide which option to choose. IPO If you choose to do an IPO (initial public offering), a portion of your company will be sold in the public markets. Typically, you and your management team will remain in place for a period of years. Investors and managers are usually able to sell some stock, and your company will continue to operate much as it has in the past. Keep in mind that the company will have to adhere to additional regulations, such as Sarbanes-Oxley requirements, with Wall Street analysts and institutional investors scrutinizing your performance. Trying to go it alone with an IPO can be a grave mistake. It is absolutely essential to have qualified, seasoned business attorneys in your corner who can determine if an IPO is an appropriate exit strategy for you. Strategic Acquisition In a strategic acquisition, a company purchases your business, either with cash and/or stock in the acquiring company. The buyer may or may not retain you and your management team, and will sometimes make substantial changes in your company's operations, staff, and line of business. One benefit of strategic acquisition is liquidity. If you sell the company to a strategic buyer you may be able to sell most or all of your stock. A drawback of this exit strategy is that you will most likely relinquish operating control. Management Buyout In a management buyout you will sell the company to current managers. This type of transaction is frequently financed with some combination of debt and/or private equity investment. It offers immediate liquidity to the owner, early shareholders and investors, and allows the company to continue as a private enterprise. While this exit strategy marks a change of ownership, it gives shareholders some liquidity and can provide a smoother transition for the company, its employees and investors. By planning your exit early on, you are placing yourself in a position to steer your business toward its desired outcome. Carosella estate planning lawyers in Montgomery and Delaware counties can also help you determine which exit strategy will best protect your family’s interests, allowing you to focus on building a thriving business. #BusinessSuccessionPlanning, #ExitStrategy, #BusinessPlan
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Creating a partnership agreement is one of the most important things you can do before investing time and money in a joint venture. While it is legally possible to create a business partnership without a partnership agreement, entering into business without an agreement can lead to personal and financial issues between partners down the road. Enlisting the help of experienced contracts lawyers will ensure that the partnership agreement covers all elements of the business relationship among the partners. While every partnership agreement will be different, there are certain issues which are typically covered, including:
Initial Investment The first item in a partnership agreement includes the individual amount each partner has invested, including the building or other real property, as well as specialized equipment for the business. It is essential to itemize these types of investments. Roles and Responsibilities Another important element of a partnership agreement is to determine what the roles and responsibilities of each partner will be. Oftentimes the partner who invests the most does not want to have an active role in managing the business. On the flip side, partners may decide to determine control of the partnership based on the amount invested, or split control equally. Determining the roles and responsibilities of each business partner is vital, as the success and growth of a business often relies on the competency of its management. Profit Sharing and Financial Management Profit sharing and financial management are also key elements that should be outlined in any partnership agreement. Partners may opt to invest a certain percentage of profits back into the business, and partnership agreement will also determine whether managing partners will receive a salary and how much it will be. Seasoned business attorneys can help guide you through the process of what kind of compensation is fair considering your amount of investment. A few key questions to take into consideration when it comes to financial management of day-to-day operations are:
Managing Disagreements The partnership agreement should also include a method for managing disagreements. While partnerships are often started by friends or colleagues, disagreements happen, and it can be helpful to determine how the partners will work out these disagreements ahead of time. A neutral mediator can be a constructive way to resolve issues. Death, Disability and Dissolution It is best to be prepared with a business succession plan that is briefly outlined in your partnership agreement. It’s important to determine who you trust to make decisions on your behalf, who will inherit your shares of the company, and whether you want your beneficiaries to have a say in what happens to the business. Conversely, you should outline whether you would be willing to share power with your partner’s spouse or family member. It is also imperative to discuss what will happen if one of the partners decides to leave the business. Creating an exit strategy and putting it into the partnership agreement can save a lot of headaches down the road. The partnership agreement can provide details on the buyout process, including each partner’s investment and what rights departing partners will have if they want to start a similar business. A comprehensive and thoughtful partnership agreement can lead a business down the path to success and help it flourish Our experienced lawyers in Montgomery and Delaware counties can help you to map out all aspects of your partnership and get your business off to a running start. This post was originally published at https://carosella.com/do-you-need-a-partnership-agreement/ #Partnerships, #PartnershipAgreements |
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