Types of Contracts

AGREEMENTS

A substantial part of my practice is designing and negotiating contracts. While the General Counsel of a national software company, I negotiated contracts with over 50 Fortune 500 companies, including IBM, Unisys and the Federal Reserve Bank. It was my job to make sure that important terms were spelled out, to assure that the parties maintained a cordial relationship. A poorly drafted provision can result in endless bickering and damage to your business. I have held this philosophy for over 30 years of practice. So I have learned to discover each party’s needs and draft a document that gives each party what it needs, producing a win-win contract. The bottom line is more profits for both parties.

Don’t you deserve this quality of representation? Let me negotiate your important contracts, so that you get what you want. There are literally thousands of legal documents. Which do you need?

SALES, SERVICE,VENDOR, CUSTOMER, INDEPENDENT CONTRACTOR, EMPLOYMENT, LEASES, &LICENSING

BUSINESS ENTITIES: CORPORATIONS, LL’S, PARTNERSHIPS, CHARTERS, BYLAWS, OPERATING  AGREEMENTS, PARTNERSHIP AGREEMENTS, FRANCHISE

ESTATE: WILLS, TRUSTS,  NOTES,  CONSULTING,  RELEASES,  BILL OF SALE

FOCUS: BUY SELL AGREEMENTS

One important contract for a business with more than one owner is the buy sell agreement. A BSA can restrict the sale of an owner’s interest, require a terminated owner to offer his interest back to the business or other owners, provide who will buy your business if you die and specify the price. For example, the BSA may require the business to buy your interest upon your death, so your spouse receives cash while another owner ends up with the business. Life insurance can be purchased to provide the cash needed to make the purchase. If a business uses key man life insurance to pay for its redemption of stock, the alternative minimum tax (AMT) is a risk.

FOCUS: BUSINESS SALE AGREEMENT

Another form of contract I often work with is the business sales agreement. These agreements can be amazingly complex. Before entering into such an agreement, both parties must first discover all important facts, including several years of financial statements and tax returns. It is also necessary to inspect the premises and assets, as well as to talk to third parties doing business with the target. Lawyers and accountants should review all information, especially key contracts, financial statements and tax returns.

If the business to be purchased is a corporation, the buyer may buy stock or assets. The seller generally wants to sell stock because the sale results in capital gain to the seller. The buyer will want to buy assets so the buyer will have new assets to depreciate at the purchases price. It takes 15 years for a buyer to write off goodwill. These are only a few of the tax issues.

An experienced tax attorney has an advantage in working out a mutually beneficial deal.

One of the biggest questions in business purchase is the price. There are at least three major evaluation methods for business not publicly traded:

  1. Comparing sales of similar businesses
  2. Value of the assets less its liabilities
  3. The capitalization method forecasts the business’s earnings and sets the price so that those earnings represent a good rate of return on that price

Appraisers often mix methods and then adjust the value based on highly subjective factors.

 

 

About Wis Laughlin

I help clients with tax preparation and IRS representation, estate planning, and complex contracts, including LLC's. As a former IRS tax attorney in their National Office. Law.com picked Wis in 2017 and several prior years as one of the Top Tax and Estate Lawyers in Tennessee. I am your advocate, not your accountant. I don't tell you what you can't do. I show you how to do it.
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