April 2017

Minding Your Business

I recall reading that Cornelius Vanderbilt liked the phrase "mind your business" as summing up how to be profitable and stay out of trouble. In our practice, we see more business owners selling every year. Some start spending a lot more time at the beach or mountains. A few take positions with the buyer, at least temporarily. The markets are currently favorable for most industries and this cycle comes close enough on the heels of the Great Recession that almost everyone remembers it's not always a good time to sell. In fact, there are times when it's hard to find buyers at any price. Below is what has become our annual nudge to encourage business owners to "mind their business" and keep the company's records in good order knowing that a day may come when they want to open their books to prospective buyers.

Well-qualified buyers will have a thorough Due Diligence Checklist to help ensure that your business is one that they want to own and that it is worth the sales price. Some particular areas for attention:

  • Are eou qualified in all states where you do any business? Is your tax reporting compliant with all applicable state requirements?
  • Are shareholders and their holdings properly documented?
  • Does an owners' agreement (e.g., Shareholders' Agreement) give the majority owner power to force minority owners to sell also?
  • Do the zoning laws allow all of your current property uses?
  • Are your contracts with customers, vendors, employees and independent contractors in good shape? Are they drawn to permit easy transfer to a purchaser?
  • Is all of your intellectually property protected? Can all of this be transferred in its present form?

Keeping corporate records in order is an activity that it may feel you never have enough time to do. However, if there's a day when you market your business to others, you'll appreciate this effort as it will clearly demonstrate your company's value proposition and its ability to transfer this value to an interested party. Minding his business worked well for Vanderbilt and it will work for you too. We're here to help with any aspect of this.