1400 Gables Ct #103 Plano, TX 75075
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Built to Sell: How a Dallas Business Lawyer Can Help You Structure Your Company to Facilitate Selling

Dallas business law attorney, Richard “Ric” Armstrong, discusses why structuring your business the right way can help attract buyers and get you more money.

When setting up a business, most people think in terms of convenience, simplicity, tax benefits, and liability issues—factors that benefit them directly. However, the company’s legal structure impacts the potential sale of a business, as well. In short, the corporate structure gives the seller more options, when selling the firm. Generally speaking, there are three ways to sell a company: asset sales, share sales and an exchange of shares (e.g. in a merger). Companies such as sole proprietorships and partnerships are likely locked into an asset sale. But corporations can choose any of the three, or perhaps a hybrid of these forms—

Which is important, because according to one study, just 18% of company acquisitions are asset sales.

• In an asset sale, you sell a company’s physical and intangible assets. Physical assets include any real estate, vehicles, equipment, supplies and inventory, while intangible assets include employees, contracts, trade secrets, intellectual property (e.g. trademarks and copyrighted materials), business goodwill and more. Assets are sold on the current market value (important for taxation), but it may be difficult to put a price on your assets—especially intangibles. That’s doubly so, if the business’ success is in large part due to the owner’s force and talent.

For a buyer, the main appeal of an asset sale relates to liability. In an asset sale, the original owner may still be responsible the business’s liabilities, and it’s up for negotiation which, if any, liabilities a buyer agrees to assume. 

However, a buyer may see drawbacks in an asset sale. It can mean vulnerability as third-parties often see a change in ownership as an opportunity to renegotiate contracts, or even void them altogether. Another concern for a buyer: It may be unclear what exactly is included in an asset sale. If the seller’s assets are used by more than one company, on a personal basis, or have other mixed ownership/use, those assets need to be identified, and either excluded from the sale or included in some form of licensing agreement.

• For corporate entities, a share sale (a.k.a. stock sale) is another option. In this case, you sell the ownership shares—up to  100% (i.e. all of the shares). By acquiring the shares, a buyer assumes ownership of all the company’s assets and liabilities. Therefore, it benefits the seller, because all liabilities are sold. It can benefit the buyer because transfer of shares is a much simpler process than transferring ownership of individual assets. This is particularly attractive if the company has many contracts or licenses that would each need to be assigned to the new owner.  Weighing against this, however, is that the buyer does not get to “step up” the depreciated basin in assets and get future depreciation deductions, as he would in an asset sale.

• In an exchange of shares, a corporate owner trades his shares for those of another company—for example, in a merger. Depending on the size of the exchange, this can zero out the original company, while giving the seller ownership in a new entity.

Correctly structuring a business can lead to benefits from the first day you open for business to the very last time you close your doors. To discover how an experienced Dallas business law attorney  might benefit your business, call Armstrong The Law Firm, P.C., today at 972-424-L-A-W-S (5297).

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Armstrong The Law Firm, P.C.
Plano Location
1400 Gables Ct #103
Plano, TX 75075

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5601 Bridge Street, Ste. 300
Ft. Worth, Texas 76112

Phone: (972) 424-5297