Whether you are starting a small business or running an established company, it is vital to understand business laws and regulations. But that is easier said than done. My goal is to provide business-related legal services so that you can spend more time dealing with the actual business and less time with legal intricacies of operating your business. My services include:

Business formation

You have a new and innovative product or service and you are interested in forming a new business. You may have concerns about liability, taxes, investors and other considerations. As your small business lawyers, we will assist you in deciding whether your startup business should organize as a limited liability company (LLC), partnership, S corporation or C corporation. We will form the most appropriate business organization for your new business and register the business in all jurisdictions in which it will conduct business.

Mergers and acquisitions

If your business is fortunate to thrive and become a merger or acquisition target, we can represent you as the seller; or if you are on the other side and looking to acquire a business, we can assist with the due diligence in purchasing a business. We will review various approaches in purchasing a business through merger or acquisition. We will discuss with you various structures in purchasing the stock or purchasing the assets of an acquisition target. In either case, your business will need thoughtful and comprehensive representation in all aspects of a merger or acquisition.

Government contracting

Government contractors face numerous issues when contracting with the government. And with a hands-on approach and substantial experience, we will help you navigate those legal issues. We prepare teaming agreements, subcontracts and joint venture agreements and can handle a variety of other government contract matters. As government contract lawyers for your small business, we can assist you in applying for programs for HUBZones, service-disabled veteran-owned small businesses or women-owned businesses. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Business transactions

Once you have an ongoing business, however organized, you will have a host of various commercial transactions. We prepare agreements with lenders, lessors, partners, customers, employees, and consultants. We provide business legal services for your company, preparing confidentiality agreements, nondisclosure agreements, licensing agreements, distribution, employment agreements, independent contractor agreements, lease agreements, and many others. We will help you understand what each part of these agreements require and make sure that these agreements provide protection to you and your business.

Corporate law

Once your startup business has been created, your company will have ongoing requirements to maintain its separate status. We will assist in guiding you on how to prepare corporate minutes or resolutions of the company to maintain the corporate form and other steps to protect the limited liability of your company. You will also have to make sure that your bylaws or operating agreement continues to reflect the needs of the business organization. We are available to assist you in addressing these issues. And once your company is ready to raise additional capital from investors, we can work with you to determine whether you are subject to securities laws or fall within one of the exemptions.

Business disputes

Few businesses are immune to business disputes. If your small business was well-advised, you have an agreement that will provide guideposts on how to resolve your business dispute. If you are unable to settle your dispute, you may have a dispute resolution mechanism such as mediation or arbitration in the agreement. An alternative dispute resolution mechanism such as arbitration or mediation generally can provide a relatively quick resolution of your business dispute. If not, then you may have to consider litigation. We handle business disputes, including pre-litigation matters, mediation, arbitration and litigation.

Anti-corruption compliance

Every company should have procedures and policies to minimize its exposure to allegations of corruption or bribery. An integrity compliance program (ICP) is essential for businesses doing work internationally for the United States government or work financed through one of the development banks. We can assist in reviewing or preparing an ICP to assure that is consistent with the anti-bribery and anti-corruption guidelines from the World Bank. If your company is facing debarment or suspension because of allegations of corruption or bribery, we can assist in your defense before the U.S. government or the World Bank.

Non-profit law

We work with organizations to obtain their tax exempt status under Section 501(c)(3) of the Internal Revenue Code. There have been recent changes to obtaining 501(c)(3) status and we have worked with organizations in submitting successful applications on the simplified track by filing a 1023-EZ and the more rigorous 1023 application for larger organizations. Nonprofits also face similar legal challenges to assure that they comply with business requirements and additional requirements to assure that they do not jeopardize their tax exempt status. As a law firm for nonprofits, we work with nonprofit organizations to guide them through these issues.

FAQ Small Business Attorney in DC

What is considered a small business?

Almost all our clients fall within the definition of small business/startup as determined by the Office of Advocacy of the U.S. Small Business Administration. Under this definition, a small business has fewer than 500 employees. Small businesses encompass about 99.9% of all business organizations in the United States.

Which industries do you serve as a small business attorney?

Most of our clients are service providers such as consulting companies, law firms, accounting and bookkeeping services, cybersecurity consultants, video production companies, and lobbyists, just to name a few. We also represent foreign and domestic manufacturers and software developers.

As a small business lawyer in DC, we represent some retail operations, such as bookstores and restaurants. We also represent numerous nonprofits with varying missions. Our government contractors clients hold various IDIQs (Indefinite Delivery, Indefinite quantity Contracts) and GSA schedules.

In which areas of the law does a small business or startup need legal assistance?

Most times, small businesses/startups need the services of outside general counsel. As outside general counsel for small businesses, we can handle most matters as a small business attorney that small businesses generally encounter. Usually, anything with the word agreement or contract is within our practice areas. This includes operating and shareholder agreements, which are used for small businesses and startups that are formalizing their relationships with their owners. Once a business is formed, then we prepare and review a host of other agreements, such as service agreements (which may be referred to as client agreements or consulting agreements), independent contractor agreements (which may be referred to as subcontracting agreements), employment agreements, teaming agreements, purchase and sale agreements, merger agreements, option agreements, license agreements, lease agreements, and the list goes on.

What factors should a small business and startup look for in retaining the services of a lawyer for small businesses?

With our extensive experience of working as a small business attorney in DC for decades now, background and experience should come right at the top of the list when looking for a small business lawyer. We think that accessibility and communication are essential for a successful relationship between an attorney and a client. Hourly rate is important but not as important as quality of service.

What kind of experience do you have in advising small businesses as an attorney?

Keith Rosten has not only legal experience but also business and practical experience that allows him to relate to the trials and tribulations of a small business owner. Keith has BigLaw experience before working for small and medium-sized businesses, first at his own law firm focused on small businesses and then with Berliner Corcoran & Rowe LLP.

Keith has substantial business experience. He received an MBA from the Tuck School at Dartmouth College. During his business studies, he worked on several group projects with small businesses, including a furniture manufacturer, a manufacturer of leak location precision equipment, real estate developer. After business school, Keith operated a successful real estate business in California and overcame numerous issues, such as asbestos abatement and underground storage tank remediation.

Keith worked as a legal adviser to a government contractor and was a legal adviser to a major initiative in Russia. Keith ran another small business, selling and marketing solar energy equipment. The business had an e-tailer component, hosted the largest solar energy forum online, and sold solar energy equipment to the government. Keith negotiated two GSA schedules for the business and obtained HUBZone certification for the business. Keith was also president of the Dartmouth Entrepreneurial Network – Washington, a networking organization for small businesses in the greater Washington, DC community.

Keith has also volunteered for Compass Pro Bono, working with local business professionals to conduct long-term consulting engagements for local nonprofits in fundraising, governance, and strategy.

With this breadth of legal and business experience, Keith is attuned to some of the challenges facing small businesses, which allows him to provide effective advice and guidance.

As a small business lawyer, do you take in-person meetings only?

Yes. We are located in downtown Washington DC and host many of our clients. For those clients who cannot come into our offices, we usually meet over Zoom or by telephone.

How do you charge for your services as a small business attorney?

We charge our clients based on hourly fees. We usually provide a budget of how much certain matters cost so that startups and small businesses know in advance the ballpark cost of the matter.

What if a client does not like our services?

Clients can terminate our services anytime if they don’t find it satisfactory.

Should my small business lawyer or startup lawyer be in the same state as me?

No, not always necessary and may depend on multiple factors. For example, though we are an expert small business lawyer in DC, we have also provided consultation to other cities’ clients.

Separating the purchase of goodwill from the tangible assets of a business

If you are buying a small business, the price you are willing to pay is usually more than the book value. The premium associated with the purchase price over the assets is generally considered the company’s goodwill. The amount of goodwill may affect the tax burden on the buyer and seller. It may also influence the ability of the seller to compete after the transaction. This article discusses goodwill in sales of small businesses.

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Goodwill: hard to get your hands around

Goodwill is an intangible asset. The benefit of a brand name, technology, or process is generated when one company purchases another business. Things such as a company’s good reputation, loyal customer or client base, workforce, and proprietary technology are all considered goodwill. These things are all valuable assets of a company. However, they are neither tangible nor can their value be precisely quantified.

Goodwill calculation: get your calculator out

Goodwill is the difference between the price paid and the value of the company’s net assets on its balance sheet. For example, if a company has $200 in assets but you pay $300 for it, the goodwill of the company is $100. Goodwill is almost always positive. You are likely to pay more for the extra benefits that come with the company.

Acquiring goodwill

There are several ways in which goodwill can be acquired in a merger or acquisition. The most common is through the acquisition of valuable intangible assets, such as patents, trademarks, and reputation.

Another way is through the acquisition of a complementary business. By acquiring a business that has a strong customer base or network, you can gain access to new markets or customers that might have been inaccessible on your own. This results in increased revenue and profitability.

Goodwill can also be acquired through the acquisition of key personnel. Acquiring a company with an experienced workforce, especially in industries where talent is in high demand or limited, may be a valuable asset.

Finally, goodwill can be created through synergies of the acquired company. Synergies are when the acquired company complements the acquiring company, leading to greater efficiencies or cost savings than either company could have achieved on its own. Synergies can be achieved through different ways, such as consolidated operations, elimination of redundant positions, or combining the strengths of both companies to create a more competitive business.

Tax considerations

There are many important tax considerations connected to goodwill. The most important of these considerations is the amortization of this intangible asset. Private companies can elect to amortize goodwill on a straight-line basis over 15 years. This enables private companies to forgo the annual impairment tests that are required of public companies. However, the election is not required if not desired.

Amortization of goodwill is important because of the annual impairment test required for goodwill. Impairment is when an asset’s fair value is less than its carrying value on the balance sheet. Assets are tested for impairment to prevent overstatement on the balance sheet.

Goodwill is subject to periodic impairment testing at least on an annual basis and further testing is required if the company determines that it is more likely than not that its fair value is less than what it should be. As a way to avoid any complications regarding impairment, private companies are allowed to amortize their goodwill.

When you amortize goodwill, no cash is paid out. However, it is shown as an expense on the income statement, which means lower earnings. This is something to consider when determining the pros and cons of amortizing goodwill.

Negotiations over goodwill

There are numerous issues relating to the purchase of a business.

Related articles:

Selling a Small Business: Not as Easy as you Thought

Sale of Small Businesses: Asset vs. Stock Purchases

In an asset sale, the buyer and seller usually negotiate the allocation of the purchase price to the various assets. This allocation can have a major impact on the taxes that the buyer and seller will have to fork over to Uncle Sam.

It is in the buyer’s interest to allocate as much of the purchase price to tangible assets such as equipment and furniture. The buyer will receive a stepped-up basis on these tangible assets.

The seller may have depreciated these assets down to zero, but the seller gets to start all over and adjusts these assets on the buyer’s balance sheet to the fair market value. This can result in depreciation recapture to the seller.

It is in the seller’s interest to allocate as much of the purchase price to goodwill. Goodwill is a capital asset. The sale of goodwill is normally treated as a capital gain, subject to a lower tax rate in comparison to the rate on ordinary income.

Separate agreement for sale of personal goodwill

In certain circumstances, it is beneficial to separate the goodwill of the company from the goodwill of the owner of a company. An owner of the company such as a shareholder in a corporation or a member in a limited liability company may also have personal goodwill.

Personal goodwill can be present when the owner’s reputation, expertise, skill, knowledge, and relationships with customers are critical to the business’s success and value.

Separating personal goodwill can be particularly advantageous in the sale of a C corporation (or a LLC taxed as a C corporation), which pays a double level of tax. The payment for personal goodwill directly to the owner may eliminate one level of taxation. The payment for personal goodwill is taxed at the individual level only as a capital gain.

Conclusion

Goodwill is an important intangible asset that can represent a significant portion of a company’s value. It can come in many shapes and forms and should be considered when engaging in a merger or acquisition. Once you have acquired goodwill, it is important to take into consideration the tax and accounting implications of the intangible assets. You should consult with an accountant, tax lawyer, or small business lawyer when considering a merger or acquisition and how to treat goodwill.