familyownedbusinessblog

Razing Roadblocks: Preparing Your Business for Sale

Often business owners overlook the fact that selling their business is like selling their home.  It requires the right presentation and correction of problems to increase its value to a buyer.  After the signing of an offer or term sheet, the buyer will begin to review everything about the business in a process known as “due diligence.”  You must anticipate and expect that the buyer will find roadblocks to closing the sale.  You should predict the potential roadblocks and raze them in advance.  The closing will not occur until the buyer and seller have resolved these roadblocks through negotiation.  If you wish to be prepared for that inevitable negotiation, you should consider and understand the nature of the seven principle roadblocks which are discussed below:

1. Valuation:  Obtain an independent valuation report or at least a detailed report on comparable business sales to assist in valuing your business.
2. Changing Business Conditions:  Prepare a business plan that will identify strategies and market conditions, which will allow you to intelligently answer business condition inquiries.
3. Financial Status:  Obtain a financial review or audit of the business financial records so that you may credibly present them to a buyer.
4. Presentation – Internal Documentation:  Create employment agreements, proprietary rights and confidentiality agreements, as well as other written business agreements and policies, which will be shared with the buyer and will clarify your business practices.
5. Legal Issues:  Organize vendor and vendee contracts, licenses and permits; clarify loans and transactions between you and the business, asset ownership and related debts, and all other items that are typical for a legal due diligence checklist, which may be obtained from your legal counsel.
6. Entity and Structure:  Seek legal advice regarding your present legal entity and the tax and legal consequences of each type of sale structure (stock, assets, merger, etc).
7. Management Succession:  Consider whether you or other employees are necessary to ongoing operations and whether you wish to remain in the business.

Just like there are experts that can assist you to sell your home, your legal and financial advisors can help you identify and answer these questions, as well as many others, to better present your business for sale and to receive the greatest value.

Oregon Updates: Trusts and Estates

Following are some important updates affecting Oregon trusts and estates.

1. Estates subject to probate may file a short form (Affidavit of Claiming Successor) for estates of $275,000 or less so long as the personal property value does not exceed $75,000 and the real property value does not exceed $200,000.

2.  Oregon has now joined virtually all states by allowing springing powers of attorney. The so-called springing power of attorney provides in the document itself that the agent cannot act unless and until the principal is incompetent or incapacitated. The principal may also appoint a third party to determine when the principal is disabled or incapable. For example, "This Durable Power of Attorney shall be exercisable on my disability or incapacity, and only if accompanied by a written certification signed by my personal physician, or a physician designated in writing by my personal physician, stating that he or she has personally examined me and, in his or her opinion, I am unable to effectively manage my financial or other affairs.   My personal physician is __________, located at ________."

3. Starting on January 1, 2011, the surviving spouse's election against the estate of the deceased spouse will include an augmented estate. The augmented estate includes probate and nonprobate assets and any transfers to the surviving spouse whether by probate or nonprobate. Currently, the election is against probate assets. For long-term marriages, the elective share is 33% (currently 25%). For shorter-term marriages the percentages is lower. Continuing is the ability for spouses to waive their right to the election (frequently done in connection with premarital agreements).

4.  A settlor of a trust now has the ability to name a person to be an adviser with regard to certain trustee acts such as choosing how to invest trust assets or when to make distributions. The named trustee is not liable for the acts of such adviser except in cases of reckless indifference on the part of the trustee. The trust instrument may absolve the adviser from any fiduciary duty.

6.  Another change in the administration of trusts allows the trust to be modified without court approval even when the settlor is dead so long as all beneficiaries agree upon the modification.

7.  New also is the change in who needs to be notified. If a beneficiary is entitled to receive a specific gift and does so within 6 months of the date it is due to be made, the trustee has no obligation to furnish a copy of the trust instrument or the financial information to that beneficiary.