Articles posted by rosten
Buying a Business: Challenges Abound
Trying to acquire an existing business is not a sport for the short-winded. This is the first part of a two-part article on the challenges of buying a small business. I represented a prospective buyer for eighteen months, before he decided to give up the hunt. This article highlights key lessons learned from his experiences and observations about business acquisitions. The buyer's journey to acquire an existing business faced numerous challenges that ultimately derailed his efforts. This part of the article details the criteria that the buyer used to search for an existing small business: a business priced between $1-2 million that met criteria around risk, growth potential, transferability, and documentation. His main frustrations were not being able to afford businesses that matched their leadersh...
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Termination Not So Convenient: Small Business Government Contractors Hung Out to Dry
Contract termination for convenience is a critical aspect of government contracting. In theory, termination for convenience allows federal agencies to terminate contracts "for convenience" when it serves the government’s interests for whatever reason or for no reason at all. This mechanism provides flexibility for the government to adapt to changing needs, budgets, or priorities without breaching contractual obligations. Understanding the nuances of this process in this environment is essential for contractors to navigate potential risks and protect their interests. This article provides an overview of the consequences of a termination for convenience....
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Nonprofits and the Public Interest
President Donald Trump yesterday suggested another weapon in his battle against Harvard University. Invoking a decades-old precedent from the United States Supreme Court, he railed against what he called a “Sickness” presumably at Harvard. If you are associated with a nonprofit, then you undoubtedly know that the purpose of the organization must be exclusively for charitable purposes. The Supreme Court has also ruled that a nonprofit must be in harmony with the public interest....
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Government Contractors: Stop-Work Orders
The new reality in Washington is that every government contract is at risk and government contractors need to know what tools the federal government has and will use to curtail existing federal contracts. The first is what has been unveiled in the last couple of weeks. Federal agencies have blanketed government contractors with stop work orders. The next step will be the government invoking termination for convenience provisions in federal contracts. The federal government will also likely delay exercising options to extend existing contracts. And finally the government may starve existing contracts by not obligating funds to existing contracts. This articles discusses ways to prepare for and respond to the first of these measures: stop work orders....
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Beneficial Ownership under the Corporate Transparency Act: Substantial Control
Unless your company is exempt, you need to file a beneficial ownership information report with FinCEN. This article explores who qualifies as a beneficial owner under the Corporate Transparency Act. According to the CTA, a beneficial owner is an individual who either directly or indirectly: (1) exercises substantial control over a reporting company, or (2) owns or controls at least 25% of a reporting company’s ownership interests....
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Sale of a Business: Goodwill
If you are buying a small business, the price that you are willing to pay is usually more than book value. The premium associated with the purchase price over the assets is generally considered the goodwill of the company. 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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Non-Compete Agreements Banned by FTC
In the old days, you might see a small business owner requiring a low level employee, even an administrative assistant, sign a non-compete. Those days are thankfully gone as certain states have moved in to balance the equation by banning non-compete agreements and protecting employees. The Federal Trade Commission (FTC) issued a final rule to ban non-competes nationwide. The Rule was scheduled to go into effect before a federal court placed a temporary hold on the rule. If the rule eventually is allowed to go into effect, that will mean that entering, attempting to enter, enforcing, or attempting to enforce, and representing that an employee is subject to a non-compete agreement, will be prohibited. And in any event, employers nationwide should consider the rule when preparing employment contracts b...
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Sale of Small Businesses: Asset vs. Stock Purchases
This article summarizes the two main structures in purchasing a small business: asset purchases and stock purchases. Each has its advantages and disadvantages. Spoiler alert: in general the buyer favors an asset purchase, and the seller favors a stock purchase. The structure of purchasing a business is a major point of negotiation. Which road you travel will affect other critical issues such as the purchase price and timing of the transaction. Although the structure can be changed, the parties should consider and address the structure of a sale of a small business at the time that they negotiate a letter of intent. For most purchasers of small businesses, asset purchases are more advantageous. They provide greater safety in terms of liability and have tax benefits that stock purchases do not. There...
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Corporate Transparency Act: Every Small Business Owner Needs to Read This
The Corporate Transparency Act (CTA) went into effect on January 1, 2024. Over 30 million small businesses will be required to file beneficial ownership information with the U.S. government’s Financial Crimes Enforcement Network (FinCEN). This article highlights which companies are the reporting companies required to disclose beneficial ownership information; what information needs to be disclosed; and who qualifies as a beneficial owner. The article describes the stringent penalties that may be imposed on small business owners who fail to comply with the CTA....
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Rosten Interviewed on Latte with a Lawyer
Keith Rosten is a partner at a law firm in Washington, D.C. He was recently interviewed on an episode of Latte with a Lawyer, a podcast featuring stories of attorneys and their strategies and tactics for making an impact in their profession. During the podcast, Rosten discusses his perspective on working with startups and other small and medium-sized businesses through the various business development cycles. ...
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