Buying a Business

Buying a Franchise

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Question:
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Category: Business Law
Location: NJ
Subject:  RE: LLC members

My husband and I are co-owners of a LLC.  He is a physician and I am a RN.  The LLC is a medical practice in the state of NJ.  My accountant is telling me this is illegal unless we are two physicians.  I cant prove this to be true or untrue.  He wants me to leave the LLC and be a paid employee.  Could you tell me if there is any truth to this claim?  My accountant seems to think he is our lawyer at times and I he is confusing us.  Thank you for your time.  I really appreciate it !


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Reply:
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Category: Business Law
Location: NJ
Subject:  Re: RE: LLC members

First, you are right; this matter should be discussed with your business and tax attorney. Normally, if the LLC is for rendering medical services, then licensed physicians would need to be the members. Nevertheless, careful structuring of the services and interrelated llc's may resolve the issue. See your lawyer!

I hope this helps!

Ron Cappuccio
www.taxesq.com

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Name: marc
Subject: taxes
Question: I am selling my small business. It is a s-corp. What can I expect to pay in taxes and is there any way to lower that amount.

Answer: Marc:  First, it is good that you have an S corporation rather than a C corporation for tax purposes. This means you will not be stuck with the burden of double taxation. If you sell the STOCK of your corporation, then you will have a capital gain. If you sell the assets, you may have depreciation recapture and ordinary income. You must have your tax attorney help you negotiate the transaction BEFORE you sign anything to assure the best tax treatment.

I hope this helps!

Ron Cappuccio
www.taxesq.com

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Name: lorraine

Subject: buying stock in an electrical compamy that is a corporation

Question: the owner says i can buy as little or 49percent of his stock and start a sub division of his business . My part would be set up in different location and different books kind like two businesses one license . The owner said my business would be mine and his is his . Is this deal truly possible also the owner is going to sign that he will sell me more stock up to 49 as i grow 

Answer: First, the arrangement seems a little odd. The current owner obviously wants control because of his retaining a majority of the shares. A carefully drafted Agreement to Purchase the shares, with a good Buy-Sell shareholder agreement can protect your rights.

Secondly, there are many ways to structure the transaction. After the deal is done what do you expect? What does the seller really want? A well-designed transaction can meet your goals and maximize the benefits for both parties. Remember, this is more of an economic partnership rather than a business acquisition. You and the seller must both be satisfied in order to start off your relationship properly.

I hope this helps!

Ron Cappuccio

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Name: Udi

Subject: Bringing in a partner into a existing business

Question: Curious; looking to bring in a partner into my business. A  few points of concerns;

1. How much percentage should I offer him?
2. Should I ask for a capital investment?  What if he doesn't have any $ to invest?
3. How do I protect myself if it doesn't work out?
4. How can we set his salary ( i can't afford his market value)


Any insights would be greatly appreciated. Also, if any books exist that can provide additional guidance, let me know.

Answer: Here is my answer:

1. How much percentage should I offer him?

ANS: It depends on what he brings to the table. Maybe, you should offer "phantom" stock with options to buy.

2. Should I ask for a capital investment?  What if he doesn't have any $ to invest?

ANS: Then why do you want him as a partner rather than an employee? What about a buy-in?


3. How do I protect myself if it doesn't work out?

ANS: A good Buy-Sell agreement and legal representation. Also, consider the form of your business. If it is a Limited Liability Company, then you can establish a different type of membership interest for the employee restricting his rights.


4. How can we set his salary ( i can't afford his market value)

Ans: Why not base his salary on performance rather than a fixed salary.



BEFORE you do anything, you need sophisticated legal assistance.


I hope this helps!


Ron Cappuccio

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Question:
Hello, I am actually reporting for FORTUNE Small Business Magazine's Ask FSB
online advice column. I came across a question from one of our reader that I
think is right up your alley. I'd really appreciate your expert input. I'll post the
question below:

< < I want to buy an existing business which (a meat and grocery store). How
do I know that the business is being priced correctly and all the financial
statements claimed by the seller are true such as gross sales and net profit? 
The seller said that it has $1.5M worth of gross sales and $14K of net
monthly. With regards to financing, is Bank the right way?

I'm a full time worker now with 48K annual salary. Do I need to leave my job
and manage the business full-time? And how can I get my lost wage back if I
run the store myself? > >

Also, if you have a phone number or email where I could reach you for any
further inquiries, that'd be great. You can reach me at the email and number
below if you have any questions. Thanks in advance for your help!

Best,
Winna Ironkwe

Answer: Thank you for the question and I am sorry for the delay in answering. First, you need to remember that a retail store requires you to be there FULL-TIME. Do not be surprised if your typical week is 70 - 80 hours! You need to forget about maintaining your present employment and running the store.

Also, do you have meat cutting experience? If not, does the store have a butcher who will stay on? The typical small store has a niche or boutique emphasis. What is this store's specialty?

You need expert assistance of a business and tax attorney to review the financial statements and tax returns. If this store has been in business for a long time, at least 5 years' statements and tax returns should be reviewed. Also, many small stores receive most of their inventory from a handful of suppliers. You should review their actual invoices and possibly confirm the purchases directly with the suppliers.

You need to have your attorney work with you to prepare a pro forma budget and business plan to help you determine how much capital you need. Banks are reluctant to finance a business unless the owner has a substantial investment. If your funds are limited, the bank may demand a SBA guarantee. This will cost you additional money but may be worth it.

If you have any more questions, please e-mail me directly.

I hope this helps!

Ron Cappuccio
www.taxesq.com