The role of attorneys in business deals is essential for businesses of all sizes. Without them, companies could be subject to unnecessary litigation and lengthy disputes that can cost money.
A lawyer will help you navigate all aspects of business law, from the formation process to closing a sale. Read on to learn more about what business lawyers do and why they are essential to your company.
Business Formation
A business is a legal entity created by a contract with the state or another entity. This contract establishes the rights and obligations of the company, as well as those of its owners.
Several business formations exist, including corporations, limited liability companies (LLCs), partnerships and sole proprietorships. Each type has its advantages and disadvantages.
The proper business form for your needs is essential. It affects your ability to raise money, taxes, personal liability and how you operate your business.
Choosing the correct entity for your business is an important decision requiring an attorney specializing in business like those from Underhill Law or accountant consultation. They will help you decide which type of business formation best suits your company’s needs and goals.
Contracts
Contracts are a way for two or more parties to formalize their relationship and outline their various legal obligations to each other. They are a vital tool for any business, big or small.
Many different types of contracts can be used in a variety of situations. Each has its benefits and pitfalls.
Bilateral contracts are the most common and involve an exchange of goods or services for money. They are easy to understand and can be helpful for businesses that need to work together to deliver projects or services that are valuable to both parties.
In addition to bilateral contracts, there are other options for companies that need to work together. One of these is aleatory contracts, which entail a triggering event that needs to happen before both parties are obligated to perform their part of the deal.
Due Diligence
Due diligence is a term used in legal and business contexts to refer to the research companies perform before entering a financial transaction. It is usually required by law to prevent liability.
In the case of a business deal, the process is often carried out after both parties have agreed in principle to the transaction but before it’s finalized. This ensures that both parties know the potential risks and can avoid a lawsuit before it’s too late.
Conducting due diligence can take several weeks, but it’s essential to do it correctly. It entails investigating and verifying all aspects of the business, including its finances. It also includes studying the company’s competitors and market. It’s essential to do all of this before you buy a business to know it has a strong future.
Buying or Selling a Business
Buying or selling a business involves several steps that require a lawyer’s skills and experience. These include performing due diligence, drafting contracts, and closing the deal safely and legally.
The legal costs for a business sale will depend on the property’s value and the transaction’s length. A $5M business will require more extensive document preparation and broader and deeper due diligence than a $50K business.
Investigating the business, you are planning to buy inside and out is essential, as examining all financial documents and tax returns for the past two to five years. It is also a good idea to reach out to customers, vendors, and team members and check their impressions of the business.
Business Transactions
A business transaction is any economic event that impacts a business’s financial position. Legal records, such as invoices, receipts and sale orders, can back these events.
A bookkeeper or an accountant makes a journal entry for each business transaction. The journal entry affects the accounting equation and balances assets, liabilities and capital.
When a business sells goods to a supplier, borrows money from a bank or pays rent to the landlord, the transactions are classified as external.
The transactions are recorded in the business’s books and summarized in its financial reports. Every transaction has a two-fold effect in the accounting equation, meaning an equal value is given for each value received.
