by eclewis | May 20, 2015 | Business News
Financial Due Diligence
Whenever you are thinking about buying a business (or selling a business) it is expected that you will perform your due diligence before the sale is final to help decide whether or not the purchase is a good idea by verifying the material facts related to the transaction. This post discussing financial due diligence will be the first in a series discussing the different aspects of due diligence that should be performed prior to finalizing a transaction.
The idea behind financial due diligence is to help determine the value of the company you are buying by reviewing their financial documents. These financial documents should be audited independently to determine their accuracy.
- Financial statements for the past few years
- Income statements for the past few years
- Tax returns for the past few years
- Balance Sheets for the past few years
- Description and valuation of significant assets (including real estate and accompanying title and tax information, as well as information of depreciation schedule)
- Any current budgets, revenue projections, or other similar documents
- Any loan or other promissory note documentation (as well as any security interests against the business or its assets)
You want to be sure that nothing in these documents is questionable or raises any concerns about the current and future value of the company or assets that you are purchasing. You want to be sure that you have all the right information so that you can negotiate in a fair and informed way. If the other party is unable to produce these documents, that may raise a red flag as well, and you will want to be sure that you raise these issues with your professional advisors (attorney, accountant, etc.) to determine what the next course of action should be.
Big purchases can be very emotional, whether it is buying a home or a car, it can be easy to get emotionally attached to the prospective purchase. However, you don’t want to let yourself get so caught up in the emotional excitement of taking over a business that you lose site that this is a business transaction. You need to independently verify that everything is what the current owners say it is with regard to the business you are thinking about buying.
If you need assistance with legal help and/or document drafting for your business sale, please contact the Law Office of E.C. Lewis, P.C., home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Mar 18, 2015 | Business News
Consider Diversifying Your Business
Now that Spring is just around the corner, lets talk about one way of making an exciting new change to your business as part of some spring cleaning.
A while back there was some interesting speculation that turned out to become a reality, Google has launched a new program to comparison shop for auto insurance. The company set up an entity named Google Compare Auto Insurance Services Inc. and got licensed to do business in a majority of states (although they still appear to be working on their support for CO). Additionally, they built up relationships with several big-named insurance companies like MetLife, and Mercury Insurance. Google also appears to be working with CoverHound, an existing insurance comparison service. Google has already been offering insurance comparison shopping in the United Kingdom since 2012.
While Google is an enormous company, it is important to note how they have not lost their entrepreneurial spirit. Google has not been afraid to try new things and to diversify their company from everything from its search engine and web ads to developing cell phones and now getting into the insurance industry.
Understandably, smaller businesses may not have the resources or capital available to make big leaps or changes into other market sectors, but there are still important business principles and lessons to be learned. Fundamentally, that is that just like a good investment portfolio, diversifying may be key to your business’ long-term stable growth in the modern, dynamic economy. Even if you are not able to make big jumps into other business areas, you may be able to diversify in simpler or smaller ways that are less capital intensive and more closely related to what you already do.
Think about what your business does at its most fundamental level, then try to branch out into thinking about the areas that your does not do. Basically, what are your business’ current boundaries? Are there things that your business has to contract out to have done for it or that you have to refer your customers elsewhere to have accomplished? Remember that these areas can exist both vertically (such as part of your supply chain) or horizontally (such as related services). Try to evaluate practically what costs and concerns would be involved in branching out to some of these other areas. Which areas would be the easiest for you to try out?
After all, it was probably your entrepreneurial spirit that got you into starting your small business in the first place, and you should consider keeping that excitement alive by trying new things with your business. Nevertheless, it is imperative that you make these diversifying decisions carefully, after much thinking and discussion with your business partners, consultants, as well as legal counsel and other advisors, so you can get their opinions on the risks and other considerations involved.
If you are considering branching out to new areas with your business, do not hesitate to reach out for legal help and guidance from the Law Office of E.C. Lewis, PC, home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Feb 11, 2015 | Business News
Loving Your Small Business: A Valentine’s Day Perspective
As a way of celebrating Valentine’s Day in the small-business context, this post will focus on small business and loving it! That being said, a recent study found that adults who “feel younger” than their actual age lived longer. What does that mean to feel younger? It’s all about enthusiasm, excitement, and a generally positive outlook. The same kind of feelings as when you are in love! Owning your own business is an exciting opportunity that will no doubt spark that youthful enthusiasm, but even if your business has been around for a while, it is important to keep that love alive. Doing so may not only help keep your business around longer, but it may also keep you feeling younger.
Think about this. People that are working for themselves or even for small businesses generally take a lot of pride in the work that they do, and that is because they can directly see the results of their hard work. They get a chance to see their satisfied customers and are able to feel like they are a meaningful part of the company. Many who work for large companies miss out on this same satisfaction. Small business owners or their employees get more variety and flexibility with their daily work, which can help keep you interested and excited about what you are doing and loving what you do.
A survey found that people who own or start their own businesses are happy with what they do and want to keep doing it. One study showed that newly-minted MBAs are happier starting their own company or working for small business than their big corporate counterparts. Another survey found that entrepreneurs are among the happiest people in the world.
Sure, starting a business and keeping it going can be very challenging but keep thinking about these exciting positives to small business and you will start to love your business even more, which will no doubt bring benefits to you and your employees in both their careers and personal lives.
If the business you love is in need of some legal assistance, or if you are ready to start your own, do not hesitate to reach out to the Law Office of E.C. Lewis, PC, home of your Denver Business Attorney, Elizabeth Lewis, at 720-258-6647 or email her at elizabeth.lewis@eclewis.com.
by eclewis | Sep 29, 2014 | Business News
If you are thinking about starting a new business, or just thought of an idea for a business, many people think someone out there is already doing it and that they should not bother. Instead of stopping there, why not spend just a few moments putting this idea to the test? By taking some simple steps, you can get a basic answer to the question of whether or not someone is doing the idea that you thought of. Be sure and also take a look at How to Research Your Business Name.
Step one is easy enough, run a few searches online, with your preferred search engine, of your business idea, to see if there is someone out there using it already. If you do find something similar or related to what you had in mind, it is important to take note of just how alike these findings are to your idea. Also look at whether or not they are actively using the idea and what areas of the country they are located in. If you do not find anything using broad terms or find too many results to manage, consider narrowing your search with more specific terms or with geographical terms, to give you more precise results.
Step two is a little more tedious, but it can give you some of the most important information of all. Visit the U.S. Patent Office website to search trademarks and patents, to see if anyone has any federal protections on ideas for slogans, symbols, inventions, and others.
To search through the trademark database, go to http://tmsearch.uspto.gov and run some Basic Word Mark searches. If you find something similar to your idea, follow this up with a normal online search to see if they are still an active company. You want to look and see whether or not they are actually selling or doing whatever it is they claimed is associated with the trademark. This is only the federal registry, so you will also want to take a look at your state’s registry too. Colorado’s can be found at http://www.sos.state.co.us/biz/BusinessEntityCriteriaExt.do, and this will search business names and trademarks. Remember that when it comes to trademarks, there are federal, state, and common law protections available to be considered.
To search the federal patent register, go to http://appft.uspto.gov/netahtml/PTO/ and click on Quick Search under Patents. Now try running different terms based on your business idea to see if someone has already patented what you had in mind. Remember that in order to be patentable, the idea must be an invention or improvement to an existing invention that is useful, novel, non-obvious, adequately described or enabled, and claimed by the inventor in clear and definite terms.
Copyrighted works can also be useful things to search through if your business idea involves any creative works. You can visit http://copyright.gov/eco/ and search their database. This database will only search the national registry, meaning someone must have registered their copyright for it to be here (which is not required), so it is important to note that this search is not exhaustive. However, this is still an important place to check regardless.
If you do not turn up any results that are similar using the various search engines and techniques described here, this is good news, but keep in mind that these are basic searches and it is recommended that you speak with an attorney to discuss if more thorough searching is necessary. Nevertheless, the information you obtained will still be helpful in determining what your next step should be.
On the other hand, if you did find someone is already doing what you had in mind, do not give up! Start thinking about a different approach to whatever the existing business is selling or doing, so you can continue refining your entrepreneurial ideas. Keep in mind that you can always consider sitting down with an attorney to explore the level of differences necessary to move forward with your business and protect you against related businesses already operating.
If you have any questions about your findings or you are ready to take the next step in starting your business or protecting your business idea, contact the Law Office of E.C. Lewis PC, home of your Denver Business Lawyer, Elizabeth Lewis, 720-258-6647 or email her at Elizabeth.Lewis@eclewis.com.
by eclewis | Sep 23, 2014 | Business News
What Are Benefit Corporations—and Why Colorado Businesses Should Care
Last year, Colorado, with the passage of HB 13-1138, the “Public Benefit Corporation Act of Colorado,” joined a growing minority of states that have passed legislation enabling the incorporation of “benefit corporations.” Benefit corporations are a corporation that can be structured as a C-corporation or S-corporation but are specifically committed to benefitting the public, in addition to making profits. Directors of benefit corporations are charged with balancing the interests of shareholders with the interests associated with supporting public benefits. This legislation allows both new and existing corporations to become benefit corporations.
These public benefits can include educational, environmental, charitable, religious, cultural, scientific, and other types of publicly beneficial causes. However, benefit corporations are able to state more than one cause that they wish to support. This can allow for some flexibility within the company in the kinds of goals they will support.
Some well-known examples of benefit corporations include Patagonia, Etsy, and Warby Parker. Here in Colorado, GoLite, a Boulder-based outdoor apparel and equipment company, New Belgium, the Fort Collins-based brewery, and others have decided to become benefit corporations.
While many corporations feel that charitable giving is part of their social responsibility and choose to give to such causes without being a benefit corporation, shareholders of benefit corporations are given the unique power to take legal action against the management of the benefit corporation if they are not producing public benefits. Conversely, it is rare, if not impossible, for shareholders of regular corporations to be able to take such legal action over charitable or public benefits foregone by a regular corporation.
Some see the development of benefit corporations as an exciting new era that demonstrates a commitment to corporate social responsibility. Others view them as potentially tying the hands of corporate management, especially if the company hits hard times, since regular corporations can still choose to give charitably. As a result, it will be interesting to see how these benefit corporations change the corporate world and how it will effect how companies try to generate both profits and public benefits.
If you have questions about setting up a corporation of any kind, be sure to contact the Law Office of E.C. Lewis P.C., home of your Denver Business Lawyer, Elizabeth Lewis, 720-258-6647 or email her at Elizabeth.Lewis@eclewis.com.
