Category Archives: Contracts

In November, we celebrated National Entrepreneur’s month across the country. It’s a great time to celebrate the successes you may have had an entrepreneur or those successes of your family or friends. As the year comes to a close, many businesses look towards planning for the upcoming year(s). In that same vein we thought it would be helpful to look at something that many business owners often overlook: Getting ready to sell your business. Even if you’re not currently thinking about selling your business, it’s important to start preparing and take the right steps to get you ready. In fact, many of the steps are best practices for businesses no matter how old they are.

While it’s a bit old, Entrepreneur magazine had a fantastic article on what steps you should take to make sure you’re prepared. Inevitably, your business will have additional steps you need to complete, but this is a very good basic start:

1. Get a business valuation
2. Get your books in order
3. Understand the true profitability of your business
4. Consult your financial advisor
5. Make a good first impression
6. Organize your legal paperwork
7. Consider management succession
8. Know your reason for selling
9. Get your advisory team in place
10. Keep your eye on the ball

As you can see, many of these things are best practices that every business should be doing regardless of the stage the business is in.

We recommend that the first thing you do is to put together a good team to work on your behalf. Most likely you’ve got these people already available to you and are already working with them. The three key people are your accountant, your attorney, and your personal financial advisor. You want those three people to work as a team for you. They each will be able to help you with parts of your preparation for a sale, but you most likely don’t have a financial planning, legally trained accountant.

Often times one of these steps will lead to another and your team will need to work together. For example, as your accountant is developing the valuation, the way that your company is structured can have a significant affect on the value of the business. How well you have kept your corporate records can change the type of sale you will be able to complete. Will it be a stock purchase or an asset purchase? Are you in good standing with the state and have you filed your meeting minutes with the state if you are an LLC? You may also want to look at any contracts that you may have and how that positively or negatively affects the valuation.

Once you do get that valuation, you’re going to want to understand how that will affect your personal finances. You will want to make sure that you have the appropriate accounts in place and strategies for what to do with the money that you have worked so hard for. We don’t bring all of this up to scare you, we bring it up because this is our area of expertise. You have worked hard to build your business and that is your expertise, but we strongly suggest working with people that know all the rules, regulation, tips and tricks when it comes to selling a business. You have trusted advisors that work in this field, it’s worth it to use them to make sure you get the best result possible.

This month, Kiecker Law is celebrating National Entrepreneurs Month. A couple of weeks ago, we talked about what goes into starting a business from a legal standpoint. Today, we want to talk about other legal issues for business owners. We’ll talk about two main topics: keeping your legal structure up to date and the contracts you use within your business.

Keeping Your Legal Structure Up to Date

What do we mean by keeping your legal structure up to date? Assuming you set up a legal entity, the state requires you keep your records up to date and renew your business filings on a yearly basis. Essentially, that means that you need to have meeting minutes xxxxx, and xxxx for you to be considered a legal functioning business. You also need to file an annual renewal with the State of Minnesota.

So, what happens if you don’t file the necessary paperwork? Essentially, the State of Minnesota will dissolve your business entity and will no longer recognize you as a business. That means that someone else could file paperwork for a business of the same name and they would have rights to your business name and all the protections that go along with it.

Next month, we’ll talk about how not having the appropriate paperwork filed can affect you when you’re ready to sell your business. It’s safe to say, that it is in your best interest to make sure that you are keeping your business filings up to date with the state.

Business Contracts

The other part the legal aspect of your business that we want to discuss are the every day contracts that you agree to and use. Inevitably, you will be asked to sign contracts to do business with other companies. If you own a retail store, one of your vendors may ask you to sign a contract that allows you to be the only seller of their products in a 30 mile radius. That may seem like a great deal, but when you get something you’re always asked to give something up as well. Those contracts may prohibit you from selling certain other products as well. Is that really something that you want to agree to? Or maybe the vendor requires you to provide prime shelf space. Is that really the best thing for your business? As they say, the devil is in the details on these types of contracts and often times you will be required to give up something that you do not really want to. It’s essential that you carefully consider all of your options before signing a contract.

Another scenario might include you growing your business so much that you need to add on to your building. If so, that’s great, but you’re likely going to want to hire a construction company or contractor. In that case, you may want to add deadlines for when things need to be done by or your business could be more adversely affected that you are willing. Again, reviewing those contracts is essential. Many times it’s in your best interest to have an attorney review them first just to make sure the contract is saying exactly what you want it to.