Last time, we mentioned that a Virginia-based mining company will be selling off parts of its business—including parts located in Kentucky—as part of its Chapter 11 bankruptcy filing. In this and our next post, we wanted to provide a brief overview of Chapter 11 bankruptcy and why it is important for businesses to work with experienced legal counsel when pursuing a bankruptcy.

When a business owner is working on selling his or her business, there is a lot of planning that goes into the process. One important aspect of selling a business is to work out a tax strategy. In any business sale, potential buyers are going to want to know about  the tax liabilities the company is carrying before they purchase the business.

Prior posts discussed the basic advantages and disadvantages of structuring a sale of a business as a stock sale or an asset sale, as well as the initial considerations in agreeing to structure a sale as an asset purchase. This series will continue to expand on these types of sales with the next step in the process, the documents by which these sales begin.

Closing a business can be a big undertaking from a financial and legal perspective. Not only must a business reach an agreement among owners that the company should be dissolved, it must also take stock of its assets, obtain a valuation, manage contacts and other obligations, cancel contracts, dispose of assets, pay off debts, and file the proper papers with the state.

In our last post, we began discussing the topic of business valuation, which is an important issue for those in business to have a grasp of when they approach the issue of selling their company or passing it on. As we noted, experts in the field identify several different approaches to business valuation. We’ve already briefly discussed the approach of the business’ assets or its income.

When it comes to selling or buying a closely held company, business valuation is an important issue. For sellers, the concern should be to ensure that one is able to receive a return on one’s investment, if possible. And buyers, of course, usually want to get a deal. Business valuation would be easier if it could be determined by a set formula, but as a recent article in The Lane Report notes, there is both a science and an art to business valuation.  

When purchasing or selling an existing business, both the buyer and the seller must determine whether it is advantageous to structure the transaction as a sale and purchase of the assets of a business ("asset sale") or of the ownership interest of the business (a "stock sale"). Understanding the basic differences between the two is the first step to structuring a deal that is most beneficial to you, whether you are the buyer or the seller.

According to Supreme Court decision for one particular state, dissolution of a corporation does not guarantee that liability will necessarily come to an end. Krafft-Murphy Company, Inc. was a company that had engaged in supplying and installing asbestos-containing products (presumably exposing it to liability). Krafft had also dissolved in 1999.

You started a business with your lifelong friend, family member or business acquaintance and everything is going great. The business is doing well and the owners see eye-to-eye on every major decision. But things will not run smoothly forever. Every business faces difficulties now and then. Some risks are foreseeable and the owners will put appropriate plans in place to deal with them. Other problems are more difficult to see, especially in the early stages of the company when the future looks bright and the owners are eager to work toward a common goal. What happens to the ownership interests of an owner upon his death? What rights do the company and the other owners have when an owner decides to sell her ownership interest to somebody none of the other owner know? What if the owners are equally split on a material decision and the disagreement cannot be resolved? Situations like these are inevitable and are the reason it is imperative that every business have a buy-sell agreement.

Small businesses are the bread and butter of America's economy. There are nearly 30 million small businesses in the U.S., and they make up a huge market share of the country's employers. That being said, though, the fact remains that (according to data provided by the Small Business Administration) about one-third of smaller companies don't make it past their first decade.