Are you thinking of starting a joint venture in Florida? If you are considering a specific business opportunity with another person, a joint venture may be the best fit for you. A joint venture is any kind of business partnership formed between two or more individuals. These business partnerships are memorialized in a Joint Venture Agreement. People can form joint ventures for long-term business purposes, like launching an ongoing marketing campaign together. They can also form joint ventures for short-term projects, like putting on one specific event together. The great benefit of a joint venture is its flexibility. It is well suited to situations that are more complicated than simple sale-and-purchase transactions. Business Organizations Attorney Trevor Brewer In a Joint Venture Agreement in Florida, the parties can outline the terms of their relationship. There are several important terms to include in a Joint Venture Agreement. Key Provisions In A Joint Venture Agreement The following key provisions must be included in a Joint Venture Agreement for both parties to protect themselves. The Parties’ Contributions. Among the most important elements of a Joint Venture Agreement are the parties’ specific contributions. In other words, what is each party bringing to the joint venture? Here, you can discuss both monetary contributions and work contributions. The Joint Venture’s Purpose. Why are the parties entering into their joint venture? Although it may seem basic, outlining the purpose of the joint venture in Florida is extremely important so that each party is on the same page. The Term. How long will the joint venture last? Is there a set end date? Are there deadlines that the parties need to meet in the middle? These are all important questions to answer in your Joint Venture Agreement in Florida. The Profit/Loss Split. Will the parties split the profits and losses 50/50? Or will they earn money and split loss based on their contributions? Set this out clearly to avoid disputes down the line. Intellectual Property Ownership. Who owns the intellectual property associated with the joint venture? If both parties do, will there be rules on who can use what? Will the trademarks and copyrights be registered federally? Depending on the particular joint venture, the intellectual property can be the most valuable part. It’s important to answer these questions before the joint venture gets started. How to Handle Someone Leaving. What if someone wants to terminate the parties’ agreement before the purpose of the joint venture is complete? How will you handle that, and what will happen to the joint venture? Include the answers to these questions in the text of the document to handle this unexpected situation. Dispute Resolution. If the parties find themselves in a disagreement that they can’t work around, what will they do? Will they mediate or terminate their agreement? Disputes between the parties will happen in a joint venture, so it’s important to work out how to handle them early on. Along with including all of these terms, it is also important to customize your Joint Venture Agreement. In other words, it’s not a good idea to simply pull a template document online and try to figure it out yourself. It’s much better to contact an experienced business law attorney to help you draft your Joint Venture Agreement. Duties The Parties Owe Each Other In a joint venture, the parties owe each other specific duties. They include: The duty of loyalty, The duty of good faith, and The duty of fairness and honesty. These duties are relatively straightforward. The joint venturers must act with loyalty towards each other, act in the best interest of the joint venture, and act with fairness and honesty. Contact an Experienced Business Law Attorney in Florida If you’re ready to enter into a joint venture in Florida, contact an experienced business law attorney. At BrewerLong, we’ve helped many clients draft comprehensive and binding joint venture agreements. Get in touch with us today.
In a promissory estoppel situation, there are two parties who essentially acted as though there was a contract. These situations arise more frequently than you would think according to Business Disputes Attorney Michael Long. It happens all the time, where one or both parties act like a contract is done and settled before it actually is. In those cases promissory estoppel might be the best legal cause of action for a damaged party. Business Disputes Attorney Michael Long Usually, one party is claiming the other party made them a promise and then did not deliver on that promise. Promissory estoppel in Florida is a claim that someone can bring when there are no contract claims available. These types of claims are also known as “detrimental reliance” claims. In practice, the party seeking relief will bring a promissory estoppel claim because the court has already determined that there are no contract claims available. In other words, the situation is such that the parties have not formed a viable contract. Promissory estoppel is technically an exception to contract law. There may be good public policy arguments for this type of claim. After all, parties make promises to each other in the real world all the time without fully formed contracts. If one of the parties acted based on something they expected the other party to do, they might be in a tough situation through no fault of their own. Elements of Promissory Estoppel in Florida There are three specific elements of promissory estoppel in Florida: The defendant promised the plaintiff something and should have expected the plaintiff to act or not act based on that promise (called “affirmative representation”); The plaintiff actually relied on the defendant’s promise and did or didn’t do something (called “detrimental reliance”); and Enforcing the promise is necessary to avoid injustice to the plaintiff. If a plaintiff is able to show these elements to a court of law, they may be successful on their promissory estoppel claim. Damages Available for Promissory Estoppel in Florida Usually, in a promissory estoppel case, the court will award the plaintiff reliance damages instead of expectation damages. Expectation damages are those that put the plaintiff in the position they would have been in if the defendant had completed their promise. For example, imagine the defendant offered the plaintiff a job. The plaintiff then moved to a new state in reliance on that job. Expectation damages might include the salary the plaintiff would have received. Reliance damages, in contrast, are those that put the plaintiff back in the position they were in before they relied on the promise. In the example above, reliance damages would mean, perhaps, the moving expenses that the plaintiff incurred, but not the salary they were expecting. Courts mostly award reliance damages for promissory estoppel cases. Defenses to Promissory Estoppel The defendant may have several options available to them in a promissory estoppel lawsuit. They may argue that there was an actual contract between the parties. If a contract does exist, then a promissory estoppel claim cannot go forward. They may also argue that they did not clearly make an affirmative representation to the plaintiff. The defendant could also say that there is no detrimental reliance. Finally, the defendant could argue that there is no injustice, even if they didn’t keep their promise. Contact an Experienced Contract Attorney in Florida If you have relied on someone’s false promises, it’s important that you contact a knowledgeable contract attorney. The attorneys at BrewerLong have years of experience in contract law. You will receive professional service and personal attention to help you navigate your promissory estoppel claim. Get in touch with us today.
A Florida benefit corporation is a relatively new entity that is available for companies that benefit the public. Under Florida state law, a Florida benefit corporation must have “a material, positive effect on society and the environment, taken as a whole.” This type of corporation was only recently created in Florida in 2014. The goal is to allow companies to focus on charitable causes and the betterment of society or the environment. If you would like to form an organization for social or environmental purposes, you may wish to consider a Florida benefit corporation. Here, we will discuss the advantages of a Florida benefit corporation, as well as how to form one. Florida benefit corporations were created to give business leaders a middle path between tradional for profit corporations and not for profit corporations. Florida Business Attorney Ashley Brewer Advantages of a Florida Benefit Corporation The main advantage of a Florida benefit corporation is that board members receive protection from lawsuits for considering things beyond the interests of the stockholders. In a traditional corporation, the interests of the stockholders are paramount. In a benefit corporation, the board can consider their stated social or environmental cause when making decisions. Additionally, Florida benefit corporations are eligible for certification by B Lab, a global nonprofit organization aimed at promoting the highest standards of social and environmental performance, public transparency, and legal accountability. While certification requires paying an annual fee and re-certifying every 3 years, Certified B Corporations are permitted to use the “Certified (B) Corporation” logo. However, certification is not a requirement to maintain a Florida benefit corporation. What Are the Requirements of a Florida Benefit Corporation? There are three key characteristics of a Florida benefit corporation. 1. The Corporation Is Designed to Engage in Specific Benefit Activities. A benefit corporation must generally have a positive impact on society. The benefit corporation may also outline specific public benefits in its Articles of Incorporation that it wishes to focus on. 2. The Officers and Directors Have a Statutory Mandate to Consider the Corporation’s Public-Benefit Goals. Instead of just considering the interests of its shareholders, as noted above, the officers and directors of a benefit corporation must keep their stated public benefit in mind when making decisions. This can be considered the primary advantage, as most incorporators will want to focus on their cause during the life of their business. 3. The Corporation Must Make a Mandatory Annual Report to Its Shareholders Discussing Its Efforts Toward Its Public-Benefit Goals. This is more than just a financial annual report. This annual report considers everything the corporation did during the year in furtherance of its charitable goals. How to Become a Benefit Corporation The process of filing as a Florida benefit corporation is very similar to starting a regular C Corp or S Corp in Florida. 1. Choose a Business Name. The name for your corporation must be unique. You can search for a corporate name on the Florida Division of Corporations’ website. 2. File Your Articles of Incorporation. You will then file your articles of incorporation with the State of Florida. Your articles will give important information about your benefit corporation to the state, such as: The business name, including a business designator like “Inc.” or “Corp.”; Principal and mailing address; General and/or specific public benefit; Shares of stock; Registered agent information; Name and address of the incorporator; and Optional information about benefit directors and officers, as well as benefit director qualifications, if any. 3. Draft Bylaws. Your Florida benefit corporation will need a set of bylaws to detail information on the board of directors, meetings, and stock information, among other things. 4. Keep Up With Your Annual Reports. As discussed above, the specific requirements for a Florida benefit corporation annual report are different than the requirements for a for-profit corporation. After your benefit corporation is formed, make sure to keep up with your annual report filing every year. Additional Details About Your Florida Benefit Corporation Benefit corporations in Florida can elect to be taxed as a C Corp or S Corp, just like all other corporations in the state. You may notice several marketing and human resource benefits to having a Florida benefit corporation, such as: Attracting talent in line with your cause, Maintaining employee engagement over time, and High-speed growth because of your appeal to social consciousness. Overall, a Florida benefit corporation can be a wonderful way to make a contribution to society or the environment. Contact Us If you are considering starting a Florida benefit corporation, BrewerLong can help. This type of corporation is an immensely fulfilling way to do business. For any questions or help getting started, give us a call at 407-660-2964 or contact us online.
If you are considering selling your business, you may know that there are many steps involved. There are several things to do long before the parties execute a comprehensive contract. There are negotiations and preliminary documents. A letter of intent to sell your business is one of these preliminary documents. Though it may not be binding, the letter of intent is still a critical part of the business sale process. The letter of intent is the key document when it comes to negotiating a business sale transaction. It’s the working draft of the final purchase agreement. Business Transaction Attorney Trevor Brewer In this article, we’ll discuss letters of intent, also called LOIs, from the seller’s perspective. We’ll also include several tips that will help in the sale of your business. What is a Letter of Intent? A letter of intent is a preliminary document in the sale of a business. It usually comes after a buyer and seller have already had significant discussions. In the sale process, the LOI comes after the parties have already decided on the basic terms but before the final contract. In an LOI, the buyer and seller can outline their expectations before crafting and executing a binding written agreement. Usually, LOIs are non-binding. However, there may be terms contained within the LOI that should be binding, discussed further below. After the parties sign an LOI, the buyer will then complete their due diligence. If everything goes according to plan, the terms of the LOI generally turn into the terms of the final contract. Sometimes, an LOI may come with a deposit from the buyer. This may happen at the seller’s request if they wish to gauge the seriousness of the buyer’s interest. Generally, however, at the LOI stage, it is clear to the parties that they both wish to finalize the sale. Important Tips for Your Letter of Intent You may be at the stage where it’s time to consider a letter of intent to sell your business. If so, there are several tips you should consider. 1. Hire a Lawyer. Much of the time, since a letter of intent for the sale of a business is non-binding, the buyer and the seller won’t bother with attorneys. However, it is a much better strategy to hire a lawyer at this stage. It generally won’t cost a lot to have an experienced business attorney draft your intent to sell letter. Additionally, hiring an attorney at this stage signifies to the buyer that you are a sophisticated seller. If you don’t have prior experience selling a business, an attorney can be an invaluable asset for you at this time. 2. Think It Through. Even though the letter of intent is generally non-binding, this is not the time to quickly throw together some terms without giving it a lot of thought. Between sophisticated buyers and sellers, changing the terms of the letter of intent before the final written contract is not viewed favorably. In other words, although the document may not technically be legally binding, it is an extremely significant document between the parties of the sale. This is another reason to seriously consider getting an attorney to help you with your letter of intent. An attorney can help you make sure you’re not leaving important terms out of the LOI. 3. Keep Your Negotiating Power in Mind. For a seller, the period just before the letter of intent is signed is the best time for negotiating. After the basic terms of the deal go into the letter of intent to sell your business, you won’t have as much leeway to negotiate. Therefore, if there are terms that are extremely important to you, now is the time to discuss them with the buyer and have them put into the LOI. Additionally, don’t sign the document too quickly and give the impression of being overeager for the deal. 4. Include Some Provisions That Are Binding. Although the specific terms of the sale may not be binding, you should include some provisions in the letter of intent that are binding. For example, the buyer may wish to have a no-shop clause, so that they don’t have to worry about competing offers during their due diligence. As a seller, you will likely want to have a confidentiality provision to protect yourself if the sale doesn’t go through. You also may want a clause that details the parties’ exclusivity in the negotiating process. 5. Make Clear Which Provisions Are Binding and Which Are Not. To avoid having a court decide that your entire letter of intent is binding, make clear which portions are and aren’t. This should be drafted within the text of the letter of intent itself. 6. Consider Including Basic Legal Terms as Well as Business Sale Terms. You’ll want to include some of the same boilerplate terms you would include in a contract. For example, your buyer may wish to include terms about your non-competition after the sale. For the letter of intent itself, you will likely want to include a governing law provision, as well as a dispute resolution provision, in case the deal does not go through. Get Started with Your Letter of Intent Selling your business is a significant proposition. It’s one that often warrants the assistance of a lawyer. If you are considering the sale of a business, or are at the stage where you need a letter of intent drafted, contact BrewerLong. We have years of experience helping business owners through all stages of selling a business.
A breach of contract in Florida occurs when one party to the contract does not fulfill its obligations. Florida breach of contract does not have to occur between two big businesses: individuals and small businesses often find themselves in breach of contract situations. If you’ve relied on a contract and the other party breaches, you may find yourself in a tight spot. When the other party defaults, you may be scrambling to minimize your financial damages. A breach of contract in Florida can include failing to do something, like a service, or failing to pay. It can also include failing to deliver goods on time or failing to deliver the right goods. In many cases, breach of contract in Florida involves one party leaving a job unfinished, like a contractor or other service provider. If you think you have a Florida breach of contract claim, you’ll want to see an experienced contract attorney who can help you figure out what to do next. Was There a Valid Contract? Before assessing whether there was a breach, you must determine whether there was a valid contract in the first place. In Florida, a valid contract has the following essential elements: One party made an offer; The other party accepted that offer; Both parties gave consideration; There was enough certainty in the central or key contract terms; The parties had the capacity to enter the contract; and The contract terms were legal. In Florida, certain contracts must be in writing to be enforceable (under a law called the statute of frauds). The statute provides a list of contracts that must be in writing and signed by the party who would be the defendant. The list includes contracts: To answer for the debts of another; Made in consideration of marriage; Involving the transfer of interest in land; Which the parties cannot perform within one year; and Involving the sale of goods greater than $500. If you had a contract that falls under one of those categories, it must be in writing and signed by the defendant. Breach of Contract Elements Florida If you do have a valid contract, the next step is to decide if there was a breach. To show this, you’ll need to prove the following breach of contract elements in Florida: A valid contract existed (which we’ve already figured out); There was a material breach of the contract; and The breach caused you damages. To actually receive damages for a breach of contract Florida (in other words, to get the financial recovery), there are specific instructions given to the jury. These instructions require the plaintiff to prove the following: Plaintiff and defendant entered into a contract; Plaintiff did all, or substantially all, of the essential things which the contract required them to do, or the plaintiff was excused from doing those things; All conditions required by the contract for defendant’s performance had occurred; Defendant failed to do something essential which the contract required them to do, or the defendant did something which the contract prohibited them from doing, and that prohibition was essential to the contract; and The plaintiff was harmed by that failure. In layman’s terms, this means the plaintiff needs to show they fulfilled their obligations. Then, the plaintiff must show the defendant had everything they needed to fulfill their obligations, but they did not. What is a Material Breach? A material breach is a breach that goes to the essence of the contract. In other words, if the breach related to something minor like a typo or an administrative mistake or accident, that would not be a material breach. Material breach generally absolves the other party from needing to complete their contractual obligations. What Remedies Are Available? If there was a material breach of a valid contract, the next step is to figure out your remedy. In a Florida breach of contract case, there are several different types of remedies available. Rescission Rescission is a remedy that many plaintiffs seek for Florida breach of contract. It essentially undoes the contract. For example, consider a contract where one party agreed to manufacture goods, and the other party agreed to pay. If the party that agreed to manufacture the goods never does it, then the other party could ask for a rescission of the contract, so they don’t have to pay. Damages The most common type of damages available in a breach of contract action in Florida are compensatory damages. These seek to compensate the party who lost something as a result of the breach. There are two categories of compensatory damages. General damages General damages cover direct losses: what the plaintiff actually lost. For example, in a contract where the plaintiff didn’t get the goods they ordered, general damages might cover the difference between what they planned to pay and the replacement goods they needed to order from someone else. Special damages Special damages are those which flow out of the breach. They are not direct losses but losses that the plaintiff experienced because of the breach in another way. For the example above, if the plaintiff needed to order replacement goods, they might have lost profit on the original goods they could have sold. Those could be special damages. Punitive damages Punitive damages are rarely available in breach of contract actions. They punish the breaching party. The court will usually not award them unless the breaching party did something egregiously wrong, like committed fraud. Mitigating Damages Under Florida law, the non-breaching party must take reasonable steps to lessen or mitigate their damages. In the example above, if the plaintiff didn’t order replacement goods and continued to lose money, the defendant could say that they did not mitigate their damages. This could prevent them from getting any financial award in court. Breach of contract cases are about whether both parties to a contract got the thing that they bargained for. If not, the question is about how to make it up to the disadvantage party. BrewerLong Attorney Michael Long…
Are you thinking of licensing out something that you own, but aren’t sure about the various types of licensing agreements? There are a few ways to license intellectual property (or “IP”). To do so, you must first understand the different types of license agreements. Here, we’ll discuss what a license agreement is and how you can decide which is right for you. What is a licensing agreement? A licensing agreement is a legal contract by which one party that owns certain IP allows another party to use that IP. The party who owns the IP (the licensor) receives payment (a royalty) when the other party (the licensee) uses the IP. Licensing agreements can be broken down by the types of IP they license. They can be further broken down into exclusivity and duration. How to decide between types of licensing agreements 1. Decide which IP you need to license. Patent Licensing Patents cover science and innovation. Patent licensing agreements are the documents through which a patent owner allows someone else to use their patent. In practice, patent owners choose to license their patents so that they can have it manufactured and distributed widely. The individuals and businesses that create patentable material (like new inventions) aren’t usually the same parties that can easily manufacture and distribute it. It’s easier to allow someone else to handle the business side of the patent while continuing to earn royalty payments. These are generally the most complex types of license agreements because of everything involved in obtaining and maintaining a patent. Trademark Licensing Trademarks are signifiers of commercial source, namely, brand names and logos or slogans. Trademark licensing agreements allow trademark owners to let others use their IP. Most often, trademark owners license their trademarks for commercial goods, like clothing, iPhone cases, or food products. Copyright Licensing Copyright is the artwork of the IP world. Copyrights exist in, for example, works of visual art, like paintings, or movies, or songs. Copyrights also exist in characters, like Mickey Mouse. Copyright licensing agreements are often used for consumer goods, just like trademark licenses. They are also used for distributorships, such as with musical works or movies. Trade Secret Licensing Trade secrets are unique, in that they are not registered with the government. Patents, trademarks, and copyrights are most valuable when they have been registered with the federal government. Trade secrets are protected only through their secrecy. Two of the most famous examples of trade secrets are the formulas for Coca-Cola and the recipe for KFC chicken. Trade secret licensing agreements often come with non-disclosure agreements (or NDAs). NDAs state that the party receiving certain confidential information cannot share it with anyone. 2. Decide whether you’d like your license to be exclusive. Exclusive Exclusive licenses are those that create a unique relationship between the licensor and the licensee. In these types of licensing agreements, the licensor agrees that the licensee is the only one who can make use of the IP. These usually cost more for the licensee. Non-exclusive In a non-exclusive license, the licensor may be licensing the IP out to more than one licensee. These types of license agreements usually cost less for the licensee. Sole In a sole license, the licensor agrees to use just one licensee, but the licensor reserves the right to continue to use their IP, as well. 3. Decide on the duration of your license. There are also two different types of license agreement durations. Perpetual A perpetual license is one where the licensee buys the right to use the IP just once and then can use it for a lifetime. Often, these are the more expensive type of license because the licensor won’t receive ongoing royalties. Perpetual licenses can be seen most commonly in software. Term A term license is organized one of two ways: (1) the licensee can pay a one-time fee for a certain term or (2) the license can pay per use (these are traditional royalties). Term licenses are much more common across all industries. Although many people don’t think of it this way, when you pay Netflix each month, part of that fee is a license to use their proprietary digital software. According to BrewLong attorney, Ashely Brewer: “Licensing agreements are like lease agreements. A lot depends on the property involved and the relationship of the parties.” CONTACT BREWERLONG TODAY FOR YOUR LICENSING NEEDS As you can see, there are many types of licensing. An experienced IP attorney can help you figure out what type of license agreement you need, as well as what needs to go into that agreement. To schedule a consultation about your IP licensing, call our office at 407-660-2964, contact us online, or email us at firstname.lastname@example.org.
If you’re a limited liability company (LLC) owner with a growing business, you may be wondering how to legally expand your business to other states. Most states, like Florida, require out-of-state LLCs to register before transacting business there. Here, we’ll walk you through the steps needed to register your established LLC in the state of Florida. What is a Florida Foreign LLC? A Florida Foreign LLC is an LLC formed in another state that wishes to transact business in Florida. In this case, “foreign” refers to the company being from another state, not from another country. The process for a Florida Foreign LLC to register to do business in Florida is called foreign qualification. “Transacting business” isn’t explicitly defined in Florida state law, although the Florida statues include a partial of activities that do not constitute transacting business in the state. If you have a physical presence (like an office or store) or employees within the state, you’ll likely need to apply for foreign qualification. How can a foreign LLC register to do business in Florida? Below is a step-by-step guide to foreign qualification in Florida. 1. Order a Certificate of Existence from your state. Florida requires the foreign LLC to file a Certificate of Existence. A Certificate of Existence is a document issued by your home state that shows your LLC is in good standing. “Good standing” means that you’ve met state requirements and paid the necessary fees. It’s a good idea to order your Certificate of Existence as soon as you decide to file for foreign qualification. 2. Make sure you meet Florida’s registration requirements. Florida requires certain items for their foreign LLCs. The requirements may be similar to the ones in your state. The name of the Florida Foreign LLC must be unique. It must contain the designation “Limited Liability Company,” “L.L.C.,” or “LLC.” The LLC must also appoint a registered agent, who can accept service of process. Additional requirements for the qualification include: The name and contact information of the individual responsible for the LLC application The name of the LLC in your home state The state where you initially organized your LLC If applicable, your Federal Employer Identification Number/Employer Identification Number (FEI/EIN) The physical address of your LLC The mailing address of your LLC, if it’s different The name, address, and title of all the members, managers, and authorized persons of the LLC 3. Fill out an Application for Authorization to Transact Business in Florida. Once you’ve gathered all of the information and made sure you’ve met the requirements, the next step is to fill out the application. This is called the Application by Foreign Limited Liability Company for Authorization to Transact Business in Florida. It is available online. It can be filled out online and printed, or printed and then filled out in pen. Finally, someone with authority for the LLC must sign the application, along with the registered agent. 4. File the application, along with the required fee, and a cover letter. Once filled out, you should mail the application, a cover letter, the Certificate of Existence, and the required fee to: Division of Corporations Registration Section P.O. Box 6327 Tallahassee, FL 32314 The basic fee is $125, which includes the filing fee and the designation of a registered agent. You can also get a certified copy or a Certificate of Status for additional fees. 5. Once registered, file an Annual Report each year before May 1. Once the LLC is registered in Florida, make sure you file an annual report each year. The first one is not due until the year after you’ve registered in Florida. After that, you must pay the $138.75 fee each year, along with filing the annual report, before May 1. If you don’t, you may lose your “active” status in Florida. According to BrewerLong attorney, Trevor Brewer: “Out-of-state companies that do business in Florida may face a big surprise if they are sued. Either pay all the annual report fees and late fees that they were required to pay or be prohibited from adequately defending itself in court.” Follow these steps to get started conducting business in Florida. If you’re looking for a little assistance, an experienced Florida attorney can help make sure your LLC is all set up and ready to go. CONTACT BREWERLONG FOR YOUR FLORIDA FOREIGN LLC QUALIFICATION To get some help registering your foreign LLC in Florida, call our office at 407-660-2964, contact us online, or email us at email@example.com.
If you’re like many Florida business owners, you may view retirement with both excitement and misgivings. Even as you look forward to having more time to enjoy favorite activities, the idea of moving on from your livelihood can be anxiety-inducing. One option that allows you to step away and still experience the benefits of retirement is bringing family into the picture. The formal requirements under the Florida Business Corporation Act aren’t too complicated, but there’s a bigger picture to consider when you transfer business ownership to a family member. As soon as you begin seriously thinking about retiring, time is of the essence to start planning. You’re in a better position to leave on your own terms, maintain control over the process, and reap the benefits of a steady retirement income. You should discuss the specifics with an experienced Florida business law attorney, especially three key topics that may guide your decision making. Your Company’s Value There are numerous factors to consider about your own retirement situation, but you may also have concerns about your company’s well-being and longevity in moving forward without you. For many closely held companies, there’s significant value attached to the people that built them. When your own unique, personal input is an asset to the business, you need to assess the extent to which the company can survive after you sell it – or whether it can maintain a good proportion of its value by transferring business ownership to a family member. The analysis starts with an unofficial business valuation, typically a basic review of assets, expenses, accounts receivable, and debts, along with the value of your personal reputation and good will. Then, you’d determine whether the total dollar figure could be enough for a comfortable retirement, exclusive of other savings, pensions, and investment income. If you’re convinced that your business would perform well without you at the helm, you need to work out an official business valuation through generally accepted accounting standards. Not only is this necessary for making a decision on transfer or sale, but also for the tax implications in evaluating your expected retirement income. Your Individual Retirement Needs Retirement is a major life transition for anyone, and even more so for someone who owns a business. When considering your own needs for income, you must assess how far your retirement will go for a wide range of expenses, such as: Your basic needs, including your mortgage, utilities Health insurance and medical costs; Car leases; Services you’re used to gaining through the company, such as tax preparation, and club memberships; and, Other expenses that you’ll now be responsible for covering yourself. You must also consider how to apportion your retirement income to cover these costs, especially the amount that comes from transferring your business as compared to your income from investments and other assets. For this reason, as early on as possible in your planning, you should be contributing to a retirement fund that will suit your needs – aside from what you’d make through a sale of your business or transfer to a family member. Keep in mind that you could make arrangements to stay on and play a role with your company when you transfer ownership to a close relative. Many former business owners can serve on the board of directors or in a consultative role, enabling them to make an income without taking full control of operations. You can make an important contribution if you’re serving and maintaining relationships with customers who have been dealing with you directly for years. Options for Structuring the Transfer If you’re leaning toward transferring ownership of your business to family members or trusted employees – as opposed to a third party – there are multiple options and structures to consider. You should discuss the specific pros and cons with a business law attorney, but you might look into: Gift Transfer: You could transfer ownership to the other party as a gift, with the caveat that you’ll earn income form the new owners. As of 2017, the Internal Revenue Code allows you to claim an individual gift exemption of $10 million – or $20 million if you execute the deal with a spouse. Because the laws allow for annual adjustments for inflation, the exemption is $11.4 million and $22.8 million for 2019, respectively. The amounts increase for the next few years. This means you could leverage the business transfer as a gift without adverse tax implications, in some cases. Once the business is no longer part of your estate upon your death, you won’t incur tax liability when the company expands Financed Sale: You may opt to act as a lender in transferring the business to a family member, and there are many ways to structure the transaction. Through a promissory note, you can obtain payments directly from the buyer based upon an amortized schedule – or installment payments followed by a balloon. During the pendency of the arrangement, you’ll make a steady, regular income to maintain a comfortable retirement lifestyle. Partial Sale & Lease Back: If your company has considerable holdings in real estate, a building, or other property, you could sell the business – but retain ownership over these assets. Then, you can rent them back to your family members as new owners of the company. There are tax advantages, but the key benefit is that you can fund your retirement through the lease payments. Keep in mind that you need to include specific provisions when drafting the documents to transfer your business, as disputes can arise when family members are caught off-guard by a lease relationship. “Succession planning, particularly where it involves transferring ownership or operation of a business to children or other family members, must start with the question: ‘What is the best interest of each party?’ Sometimes its easier to jump ahead to talking about available structures before having complete understanding and agreement on the goals.” BrewerLong Attorney Trevor Brewer Contact an Orlando, FL Business Law Attorney for Help…
If you’re new to commercial leasing, you’re probably quite amazed by the highly technical, meticulous nature of the contract. Leases for these spaces are very different from residential agreements, especially since landlords may require you to pay an amount in addition to your actual rent. This payment often covers taxes, maintenance, and insurance (TMI). When you find out that you’re obligated to pay, it could have a significant effect on whether the space is affordable. A Florida contract attorney can explain the details, but it’s helpful to review some answers to frequently asked questions about TMI in a commercial lease. What’s included in TMI? In most cases, the bulk of your TMI will go toward your landlord’s property taxes and some insurance costs. Beyond these amounts, you might think of TMI as including many of the same maintenance costs that you’d pay as a homeowner in an HOA. Examples include: Landscaping, waste removal, and cleaning of common areas; Paying for building management costs; Administrative fees; and, Ongoing repairs and maintenance for the roof, HVAC, plumbing, and related costs. “The division of maintenance obligations is one of the most significant items requiring negotiation and attention to specifics.” BrewerLong Attorney Ashley V. Brewer In addition, Florida imposes sales tax on leases of commercial property, so some of these amounts are also built-in to TMI. Why is TMI separate from the base rent? It’s a common practice for landlords to present their monthly rent in terms of a price per square foot, so tenants like you can compare different spaces. Companies separate out TMI in leases because the tenants are the actually using the property and taking advantage of the features that additional rent supports financially – usually in the form of more customer traffic due to the enhanced appearance of the space. How does the landlord calculate TMI? Usually, your landlord will add up the total costs for annual taxes, insurance, and maintenance, and then divide it by the total square feet of the building. From there, the company multiplies the per square price by the number of square feet in your individual space. The total is the amount of TMI that you’ll be responsible for paying, though the formula may vary depending on your circumstances. Does TMI fluctuate over time? Because property taxes make up a good proportion of the total TMI amount, you can expect your additional rent payments to increase or decrease. As key systems age, including the roof, HVAC, and plumbing, the costs may also fluctuate. Can I negotiate TMI? It can be challenging for a prospective tenant to negotiate changes to TMI. Landlords know that their tenants talk, and they don’t want to create conflict by offering one business a lower TMI as compared to others. Discuss Commercial Leases with an Orlando, FL Contract Lawyer If you have additional questions about TMI in a commercial lease, please contact BrewerLong. Our team advises business owners through Central Florida, including Orlando, Sanford, and Winter Park. We can schedule a free consultation to provide more information on commercial leasing issues.
When you’re buying or selling a business, some of your main considerations will be price, the structure of the transactions, complying with transfer regulations established by the Florida Division of Corporations, and related details. One key issue that may not cross your mind is an exclusivity period. This prohibits a seller from dealing with any other potential buyers while the transaction is still pending. To determine whether you’d want one, you should understand what exclusivity means, learn about the key clauses, and consult with a Florida business law attorney about the pros and cons. Overview of Exclusivity Clauses in Business Transactions An exclusivity provision defines a length of time, typically 1-2 months, where a seller cannot deal with any party other than the prospective buyer regarding the sale of the business. Exclusivity covers a wide range of activities involving a transaction, including: Advertising the business as being for sale; Entertaining an offer made by another party; Entering into negotiations regarding the sale of the business; or, Accepting an offer. The specific terms, including the duration and itemized list of prohibited activities, will be included in the exclusivity section of the letter of intent executed by the buyer and seller. Purpose of an Exclusivity Period These provisions are essential to protect both buyer and seller in a transaction involving sale of a business. In generally, the transaction doesn’t proceed in the same fashion as the purchase of a home or car. There are formalities, due diligence periods, and other tasks that cannot be accomplished overnight. That means exclusivity periods offer advantages to both parties to the transaction. Buyer Benefits: As a potential buyer, you need time to go through the books of the target business and conduct your own assessment of whether the deal is fair. Reviewing the essential information takes time, and you don’t want to feel rushed. Seller Benefits: If you’re on the other side of the transaction, you don’t want to go through the effort and time in selling your business – only to have the buyer proceed lackadaisically or dwell on minute details. After all, even though you have a letter of intent, you don’t have a complete agreement. If the buyer ultimately backs out, you’ll have to start the entire process from scratch, which could affect your business value and bottom line. For this reason, sellers have power to negotiate a reasonable amount of time for the exclusivity period. “A carefully drafted exclusivity provision—as part of a purchase offer, Term Sheet, or Letter of Intent—is key to the negotiation process. It gives the parties time and space to work out the details of a transaction, and even decide whether a transaction can happen, without either party risking terrible consequences.” BrewerLong Attorney Trevor Brewer Key Provisions in an Exclusivity Agreement Though they’re usually part of a larger document as the letter of intent, there are several key clauses that comprise the exclusivity arrangement between a buyer and seller. Some of the more important provisions include: No Shop Provisions: The crux of an exclusivity agreement is the seller’s promise to not solicit, negotiate, or enter into agreements regarding alternative transactions with other prospective buyers. It’s also possible to include the requirement that the seller end any existing sale discussions with third parties. Exclusivity Period: The start and end dates are the key details for this section of the agreement. Usually, the period begins when the buyer has a meaningful indication of interest, often by signing a letter of intent. However, there are other documents that can contain exclusivity clauses, such as a term sheet or offer for sale. The end of the exclusivity is typically marked by both parties’ signatures on an acquisition contract or bill of sale. Obviously, a buyer will want a longer period to address due diligence, but a seller may want to negotiate a shorter duration – such as 1-3 weeks. Termination: Both parties should give themselves an “out” in case the transaction doesn’t measure up to expectations. As the buyer, you may uncover issues that affect the sale price or intentions for the business. The seller could negotiate terms that terminate the exclusivity period if the buyer isn’t making progress toward completing the transaction. Duty of Good Faith: Any purchase agreement should require parties to act in good faith throughout the exclusivity period. A failure to include such terms – or refusal to sign – demonstrates that either the buyer or seller isn’t committed to completing the deal. Consult with an Orlando, FL Business Law Attorney About Exclusivity Issues For more information on how exclusivity periods work in the sale or purchase of a business, please contact BrewerLong. You can set up a free appointment by calling 407.660.2964 or visiting us online. Our team serves business clients in Orlando, Sanford, and throughout Central Florida, and we’re happy to advise you on the key legal issues.