One business absorbing another entity in a big purchase or merger is not uncommon. Local businesses go into mergers and conduct acquisitions to compete with larger corporations, while corporations purchase smaller entities to stay competitive in their industry. Sometimes to stay afloat, a business might even dissolve an entity they own for its monetary value or to rid itself of sinking costs. Eventually, your business may purchase, merge with, or dissolve another entity to survive and thrive.
When purchasing, merging with, or dissolving entities, multiple details need to be considered. It’s rare for an entity to be made up of only a few people in an office or a singular patent. Entities are typically businesses as well. They have their own employees, retirement packages, long-standing contracts, and partnerships that you have to take into account.
These are not only the aspects of purchases, mergers, and dissolutions that you have to account for. This doesn’t include all the changes that will happen to your own business as you purchase, merge, or dissolve an entity. To account for everything that can and will affect your business, the Tennessee entrepreneurial law attorneys at Tressler & Associates can help you.
There are many reasons to purchase, merge with, or dissolve another business. They have a clientele that better suits your own, they have a patent that could improve your business operations, having too many competitors might not be cost-effective, or an entity in your business isn’t producing results. Whichever reason it may be, there are aspects of a merger that your documents and business need to account for.
Whether your business purchases, merges with, or dissolves an entity, this will change the assets your business is taxed for. You need to have legal documents to account for these changes for the IRS to avoid accidentally under or overpaying on your taxes.
With purchases and mergers specifically, you have to deal with new employees you’ve gained. Unless your employees are added to your partner’s plans in this merger, you have a lot to do for these new employees. You have to account for their retirement plans, current salaries, and benefits. If your partner in this merger offers or doesn’t offer clauses in their employment contracts that you don’t or do, your employees or their employees will have to be brought up to the norm to avoid internal lawsuits.
With purchases and mergers, you don’t have to lay off employees, but it’s common out of necessity. The business can’t always support the employees of your business and the new entity.
You need to be careful with the legality of what severance packages you can offer. You may have different contracts than the laid-off employees originally signed. Your business’s contracts may be standard, and they may work for you now, but you may be beholden to uphold the contracts they had before.
Or, if your contracts improve on what they had before the purchase/merger, they may want that. With dissolving entities, you should be able to utilize the severance package your business promised in their employment contracts already, but an attorney can review them to be sure.
Whether you’re purchasing, merging with, or buying, you have business partners who will be affected by a change in ownership. If you’re purchasing entities, you’re going to be taking on their business partners. This can mean suppliers, trading partners, or patent holders who help you operate the new portion of your business.
You’re also responsible for deciding whether or not you want to maintain relationships with partners who rely on you rather than the other way around. The budget to operate the new vertical of your business may not allow for you to continue providing for these business partners.
When you’re dissolving an entity, you’re more than likely going to sever all of the relationships that you held through that entity. This can lead to potential lawsuits that can stop you from dissolving an entity you can’t support anymore.
In all cases, there are contractual obligations you may need to escape or respect, and an experienced attorney can handle that.
If you’re purchasing or merging with an entity, you’re getting new properties that you need to account for. If your new entity comes with leases, it’s not assured that you’ll be able to relocate assets and employees before it needs to be renewed. You need to review the lease contract to assure that your purchase or merger doesn’t somehow affect it. If you don’t account for any effects on the lease, you can see progress and revenue stall.
While property valuations are incredibly important to purchases and mergers, the original owner or your new partner will do the valuations for you. They’re trying to sell you and give you a fair deal. When you’re dissolving an entity, you need to do the property valuations, make sure it’s fair, supported, and legal, and figure out how to retain as much revenue from the dissolution as possible.
There are contracts in every aspect of a business purchase, mergers, and dissolutions. Those contracts then intersect with contracts and documents you didn’t even know existed or connected to your business transaction. To protect your business, its interests, and the transaction that can seriously benefit the company, you need attorneys who will leave no stone left unturned.
Contact the Tennessee entrepreneurial law attorneys at Tressler & Associates so we can all get to work making sure your business transaction goes as smoothly as possible.
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