Buy a Texas Business? Now is the time
If you’re looking to buy a Texas business, despite conventional wisdom, now is a great time. There are plenty of Plano-based companies that can be obtained at bargain prices right now because their owners are panicking due to the recession.
Many are overextended in their personal finances (mortgages, kids in college, luxury car leases, etc.). With a bad economy, they’re looking for a way to get their hands on some quick cash. Baby Boomers are really panicking because they’ve watched their retirement savings dwindle to a point where “retirement” may not be in the picture soon.
However, if you’re looking for a Plano business to invest in, don’t pay too much for it. Entrepreneurs tend to have a distorted sense of the value they’re bringing to the table when it comes time to sell. Ego gets in the way of accurately measuring fair value.
Pay for what an enterprise is worth to you, i.e. there must be a reasonable return on investment (ROI) when making projections on future income from a company rather than the inflated numbers a seller will pitch to you based on changes that you could make to the business after you buy it. Don’t pay twice for changes that you’ll have to make post-purchase – once to the seller who never made them and a second time when you incur the expenses to make them.
Remember to avoid deals that involve Plano companies that keep two sets of books. The seller in this type of situation will brag about using one set of numbers to pay federal income taxes and another set (the “real ones”) to base his asking selling price. This type of business is loaded with potential tax fraud liabilities and other exposure that you just don’t want. Even if the deal seems good based on the numbers, why take the risk? The seller, who was willing to risk jail while owning the company, isn’t going to be around to take the fall when his misconduct is uncovered by the Internal Revenue Service, a customer who received a defective product, etc.
Be sure to consult with your Plano business attorney and your accountant to minimize your risks before making a purchase.
Does Your Texas Business Lawyer Know Internet Law?
Because the Internet is an important medium for marketing your business, you’ll want to make sure that your business lawyer knows something about the laws that govern websites and ecommerce.
Unfortunately, many Texas business attorneys don’t know anything about Internet laws. Being an Internet lawyer is a niche. Just like many Plano, Texas dentists aren’t orthodontists, most business lawyers don’t practice Internet law.
In other words, if you’re either doing business online or considering it, you’ll want a Texas business lawyer who knows how to protect your interests offline and online. Don’t be fooled by a law firm that claims that it does a lot of things (ranging from estate planning to criminal defense to Internet law). In many cases, this type of law firm is a jack-of-all-trades that will take almost anything that comes in the door. This is bad because you’ll be overpaying for a generalist to learn something that a good business lawyer with Internet experience can already do for you.
Texas Joint Ventures
A Texas joint venture (JV) is a partnership formed by at least two people or businesses in order to complete a single project. You and your joint venture partner share the risks and rewards of the JV. This includes responsibilities for the project plus any profits or losses generated by your joint venture.
It rarely makes sense to enter into a Texas joint venture unless your JV partner brings something important to the table that you don’t already have or can’t acquire by outsourcing to an independent contractor.
In addition, there’s also the risk with a JV that your joint venture partner will do something stupid that creates potential liability for you. Prudent Plano business owners often use a Texas limited liability company or a Texas corporation as the JV partner in these types of deals in order to reduce personal liability if things go wrong.
Before you enter into joint ventures, make sure you talk with a Plano business lawyer first. You’ll want to maximize your chances of success in any JV plus reduce risk with the right joint venture legal documents in place.
Texas Partnerships
A Texas partnership can be formed when at least two people own and operate a business together. Although wise business owners use a written partnership agreement to state the rights and obligations of each partner, there are at least two other ways you can form a partnership: (1) through your actions; and (2) what you agree to when talking with your partner.
The most common type of Texas partnership is a general partnership. As a general partner, you typically split profits and losses with your partner equally. While this may seem fair, general partnerships also carry some risks. For example, you could be held liable for the misconduct of your partner even though you had nothing to do with his actions. When lawyers are looking to sue general partners, they’re concerned with getting paid (i.e. who has the assets to satisfy a court judgment) – not which partner actually did the bad stuff that caused the lawsuit in the first place.
Because of this risk, some Plano business owners choose to use Texas limited partnerships or Texas limited liability partnerships to run their businesses. There typically are fewer risks with these types of entities than with a general partnership.
However, it is far more common for Plano companies to operate as either a Texas corporation or a Texas limited liability company instead of as any type of partnership. When deciding whether to use partnerships, limited liability companies, or corporations for your business interests, you’ll want to talk with your Plano business attorney and your CPA first.
Texas Corporations
If you set up a Texas corporation for your Plano business, from a legal standpoint, it will probably be considered a separate “person” from you as the owner (shareholder). Why would you want to set up a corporation?
Many Plano corporations were created to protect assets, for tax savings, and even to raise venture capital by selling shares.
There are two common types of Texas corporations referred to by their federal income tax status – C corporations and S corporations.
Privately owned Plano C corporations are rare because the income is double-taxed by the federal government: (1) at the corporate level, and (2) at the shareholder level as personal income (on distributions).
Texas S corporations are frequently used instead because income can be taxed once by the federal government after distributed to the shareholders instead of taxed at the corporate level first (like a C corp.).
This is why Plano, Texas-based C corporations are usually large publicly traded companies but S corporations are often privately owned.
However, you should consider other types of business structures for your Plano company. For example, many entrepreneurs prefer to use a Texas limited liability company because it has many of the same tax and asset protection benefits of an S corporation without as many legal hoops to jump through when operating the business.
Texas Limited Liability Companies
When operating your business in Plano, Texas, you should consider using a business entity other than a sole proprietorship. Running your venture as a Texas limited liability company (LLC) gives you asset protection like a corporation. In addition, an LLC can be taxed like a partnership (or a sole proprietorship if you’re the only owner).
Similar to a Subchapter S corporation, your Texas LLC can have single federal income taxation. This avoids double taxation at both the corporate and shareholder levels (like you’d face with a C corp.).
One of the key reasons Plano companies choose to become limited liability companies instead of S corporations is because LLCs require less legal paperwork to operate. Forget all those shareholder and directors meetings. With an LLC, you can do most of what you need to do with a simple owner’s operating agreement.
Just remember to talk with your CPA and your Plano business lawyer before making any changes to your business structure.
Plano Business Attorney: 5 Things to Consider When You Hire One
When hiring a Plano business attorney to represent your interests, here are five key issues you should consider.
1. Is the business lawyer actually based in Plano, Texas, or is he based in Dallas and is trying to trick you into thinking he’s based locally?
2. When you look at the attorney’s advertising, does he accept every type of case that comes in the door? Do you really want someone who handles divorce and criminal law cases trying to figure out what Texas laws apply to your unique situation?
3. How experienced is the attorney? Has he been practicing for only a few years? If so, will you be paying for his real world education as he bills you by the hour for it.
4. Where there are no negotiations involved or open-ended research to be done (such as drafting a legal template for you to use in your business), does the lawyer charge a flat fee or does he insist on billing you by the hour?
5. Will the lawyer truly care about your company beyond simply handling legal matters? If the opportunity arises, will he refer business to you?
If you want a Plano business attorney to handle your legal issues, take the prospective client prequalification quiz right now.
Plano Corporate Lawyer
With an experienced Plano corporate lawyer, you can have your business interests properly represented without the hassle of dealing with a big downtown Dallas law firm.
This saves you both time and money because you won’t be traveling back and forth to the inner city, struggling to find decent parking, and then overpaying a lawyer at a large impersonal law firm with a scenic view from a high rise office building. And you won’t have to wonder if your legal work has been farmed out by the lawyer you speak with to a new attorney who will learn business law while billing you for it.
The right corporate lawyer does more than legal documentation for your business. Instead, he becomes a trusted adviser and confidant that you can rely upon long-term to help you both protect and grow your business.
In fact, the term “corporate lawyer” is somewhat misleading because your Plano corporate lawyer may in fact advise you to use another type of business entity instead of a corporation if it makes sense for you to do so.
When selecting the right corporate lawyer to serve your business needs, be careful to avoid attorneys who are jacks-of-all-trades. A good business lawyer needs to focus primarily on representing businesses rather than handling every type of case that comes in the door.
If you’re looking for a business lawyer in Plano, Texas to represent you as a trusted adviser, you’ll want to take the prospective client prequalification quiz right now.