Issue link: https://nebusinessmedia.uberflip.com/i/527454
8 • June 2015 On the buyer's side, issues include: Choice of business entity. This is often the first decision for a buyer, who should understand that there are fundamental differences between limited liability companies, corporations, and other entities. These include significant tax differences as well as varying levels of manager and shareholder/member liability exposure. Buyers should note that shares of corporate stock are generally not protected from an owner's outside creditors the same way an LLC membership interest is. The basic structure of the transaction. Whether this is a stock or an asset purchase is fundamental. Most often, buyers prefer to acquire assets, goodwill, and noncompete agreements from the sellers, whereas sellers often wish to sell their stock rather than their underlying assets. Tax implications to both parties are usually the main concern; however, liability issues, third-party contractual issues, and licensing and regulatory issues also affect this decision. Allocation of risk (known and unknown) and liability. These must be addressed in all business transfers. Indemnification provisions are not simply boilerplate and have important consequences if not dealt with properly. Labor and employment. Such matters as union contracts, qualified retirement plans and prevailing wage issues should not be overlooked. Co-ownership and business succession. Address these issues up-front. Mergers involve a myriad of highly detailed considerations. And if an acquisition is the tail end of the buyer's Section 1031 like-kind exchange transaction, several technical issues require attention. Many of the above issues are important to sellers as well. In particular, seller considerations include: Tax issues. The seller must fully understand how the transaction will be taxed and whether there are better ways to structure the transaction to minimize entity-level and/or individual-level income taxes. Assumption and/or allocation of liability between the parties. This may be critical to a seller who anticipates that the buyer will assume known and/or unknown liabilities and risks. Again, the indemnification provisions are critical in this area. Co-ownership and/or succession. This must often be addressed in connection with the sale of a business. Sale of a portion or all of an owner's stock to an Employment Stock Ownership Plan (ESOP). This can afford the seller significant tax advantages as well as ownership succession opportunities. Sec tion 1031 like -kind exchange advantages. These may be available to defer and/ or eliminate significant income taxes to the seller. Often these opportunities must be planned for in advance of the actual sale. Labor and employment. These issues may be critical to the seller as well, at least in terms of understanding what exposure may continue for the seller after the transaction is complete. Clearly, both buyer and seller have much to consider. The areas outlined above can be a minefield of potential problems if not properly considered and addressed in connection with the purchase or sale of a business. Expert legal representation can be of invaluable assistance to anyone considering the purchase or sale of a business. n Dennis F. Gorman, Esq., CPA, MST Flethcer Tilton Important considerations regarding business sales/purchases W hile the mechanics of handling a business sale or acquisition are fairly routine, underlying issues that must be identified and addressed, and they are crucial.