To emphasize the importance of this discussion, Tim relies on a recent experience in which O’Reilly Law Group in 2017 helped a client with the formation of a minimally capitalized start-up business.   Then, only a few short years later, guided the client through the sale of the business for nearly $200,000,000.00.

Whether you plan to own and operate your new business as a legacy for future generations or are open to a sale of the business in a few years, it is crucially important that you not only form your business observing all legal formalities but operate it in compliance with “corporate formalities”.  This requirement applies with equal force whether you are forming a corporation, limited liability company, or a partnership. This means holding meetings and documenting those meetings in the form of minutes and resolutions – even if you are the only owner.  It also means keeping accounting records consistent with Generally Accepted Accounting Principles (GAAP).

Document the decisions and the actions authorized or to be taken. Keep your records.  File your tax returns.  Authorize your attorney to keep all entity registrations and filings up to date. These steps are important not only in avoiding personal labiality (a different topic O’Reilly Law Group can discuss with you) but in demonstrating to a potential buyer that the business is healthy both financially and legally.

In the case study relied on here, O’Reilly Law Group formed the initial limited liability company and provided suggestions and templates for the client’s use in documenting decisions and actions -- despite the fact there was only a single member of the LLC.   It then annually ensured all necessary state filing were made and that the company minutes, resolutions, consents to action were documented and filed in the company books and records.

In 2021, our client was approached by a major international company in the same line of business that our client had entered only a few short years before.  Business acquisitions may take the form of an Asset Purchase Agreement, a Stock Purchase Agreement, or a Merger. Irrespective of the form of the transaction (O’Reilly Law Group has drafted and negotiated them all), a sophisticated buyer; one willing and able to pay $200,000,000 or more for your business, will insist on a deep dive due diligence.  Inevitably, the buyer will insist on Representations and Warranties (R&Ws) that the business was properly organized, is legally existing, and has observed all of those pesky legal, corporate, and accounting formalities. Then, the buyer will require you to provide the documents proving that compliance.

In the case study here considered, there was also substantial value in the client’s intellectual property such as its copyrights, tradenames, trade dress, logos, and trademarks.  O’Reilly Law Group is experienced in filing for and protecting those important intellectual property rights.  Fortunately, our client in this case study, had protected those rights – protection that became a significant component of the overall consideration paid.    

You do what you do best.  We will do what we do best.  O’Reilly Law Group helps you make sure our mutual efforts achieve their maximum return.  Whether you are in the process of starting your business or courting a potential buyer, we can help.  Our advice isn’t free, but we’re pretty sure you’ll find it’s worth it as did the client in this case study.