Great businesses are built on great ideas. Establishing, growing and ultimately choosing to sell your business is a colossal undertaking and truly a life’s work. For those with the passion and determination to pursue it, the results can be highly rewarding both personally and professionally.
If you have a great idea and are ready to see what can become of it, our commercial law team at Silverberg|Brito, PLLC is here to help by offering expert legal guidance and support for all your business needs.
In this article, we’ll discuss important steps you should take during the formation of your Florida business, as well as legal documents you need to stay on top of to protect yourself and your business during each phase of your business’ evolution. We’ll also discuss what to consider before acquiring another company or choosing to sell your own business.
What to Know When Starting a Business in Florida
Whether you’ve been nurturing a passion project for a few years and are ready to turn that side hustle into something more or you’re at a point where you’re ready to take the leap with your small business, there are important action items you need to tick off your list before it can become official with the state.
While you’ve likely been thinking long and hard about your big picture business goals for quite some time, you want to be sure you don’t overlook any of the smaller details as you register your business and set up your structure.
Before you get too far into the process, you should consult a small business attorney for guidance. Seemingly small missteps early in a business formation can have lasting legal repercussions. Contact us at Silverberg|Brito, PLLC to set up a free consultation.
Steps to Launching a Business in Florida
Launching a new business can feel akin to helping your child pedal down the sidewalk without training wheels for the first time. It takes a little courage, some preparation to make sure everything is set to go, and one final push to give them the momentum they need to take off.
Before your business can get up on wheels (to keep the bike analogy rolling), there are some basic steps to take including taking care of some important documentation related to the following areas:
- Develop your business idea – Creating a business plan helps you organize your ideas, goals and financial plan. Writing a business plan involves clarifying certain aspects of the business, including identifying what service or product you will be selling and how it will be unique from others in the market. As part of the process, you’ll also need to determine the type of roles you need to fill and any partnerships you may need to establish. Importantly, you need to understand your financial plan – what type of cash flow do you need to remain profitable, and do you need any up-front capital to open your doors?
- Explore funding options – Once you’ve identified how much money you need to operationalize your business, you may need to secure outside funding or tap into personal savings. Exploring small business grants and loans as well as outside investors or business partners can help you raise the money you need to get started.
- Name your business and establish its structure – Select a name for your business (one that has not already been claimed and determine the appropriate structure for your business – a sole proprietorship, LLC, corporation or non-profit. Discuss the pros and cons of each with a professional before determining the right business structure for your organization.
- Register your business with the State of Florida – For additional information about registering your business with the Department of Revenue and the IRS, you can review the resources here. You’ll also want to apply for an Employer Identification Number (EIN) for tax purposes.
- Protect yourself and your business – Establish contracts and agreements. Ensure you have the right insurance, licensing and permits. Set up business banking accounts and hire an accountant. All of these steps are intended to protect you in the event that problems arise down the road with your business.
- Market your business – Once your business is established, it’s time to promote it. Set up a website, develop a promotions strategy and spread the word.
Your Business is Official. Now What?
Filling out a few forms and checking some boxes may make your business an official entity in Florida, but it doesn’t guarantee that your business is protected or in the best possible position for success.
For that, you want to ensure that you’ve consulted with a lawyer on all the important contracts and agreements you need to safeguard your business and rights. Contracts are sometimes considered an after-thought…until they are far from that – until they are staring you in the face with serious legal and financial repercussions.
While just a simple piece of paper (or electronic document), business contracts put important protections in place for both you, your business partners and clients, as well as specify the nature of the business relationship. They are not hard to complete and should always be a first step when entering any type of working relationship.
Several important contracts and agreements you should have for your business include:
- Shareholder’s Agreement
- Non-Disclosure Agreement
- Non-Compete Agreement
- Client Service Agreement
- And many more depending on your business
With a contract, if for some unfortunate reason, a client was to come back to you with legal threats or if you needed to take action to seek payment or protect proprietary rights, your signed contract could be used in court. The relatively small amount of money it costs for a business attorney to help you create your contract is peanuts next to the legal fees you could end up facing. Moreover, contracts may make it easier to resolve disputes without going to court [Jan. How to resolve contract disputes without going to court].
Taking Your Business to the Next Level
Scaling a business takes time, but there is one way to quickly grow and potentially double (or more) your book of business essentially overnight – and that’s to acquire another company.
Before you start eating up your competition, however, you want to really think things through. A good investment, if not executed well, could end up sinking your entire operation.
Here are a few key factors you should consider before buying another company:
- Evaluate the risks and rewards – Investing in a competitor’s business will strip away one more competitor in the marketplace and could position you advantageously from a sales perspective. But these rewards will require a gamble. There are a lot of unknowns with a merger, even when you plan meticulously well. For one, you will be taking on increased debt to fund the acquisition. Moreover, you’ll also take on the challenge of merging two companies. This can be difficult not only from a product perspective and integrating the two business lines. It can also cause tension among employees and lead to the potential loss of valued team members.
- Crunch the numbers (and then crunch them again) – Buying a competitor means you’ll be taking on their assets and their debt. You need to make sure you have done a deep, deep dive into the numbers and understand how things have been trending for the past several years before you commit to anything. Hire a third party to conduct an audit and be sure to conduct an audit yourself as well. Evaluating a company’s financials allows you to see an objective picture of the purchase without letting emotions skew your perspective.
- Understand why the competitor is willing to sell – If acquiring your competition is even an option, make sure you understand why the deal is on the table in the first place. While it is likely for very good reasons, it’s important to keep in mind that it could be for the wrong reasons too – and that’s a road you don’t want to go down.
- Evaluate market overlap – A good acquisition is one in which there is as little overlap as possible between your competitor’s clients and yours. This allows you to expand and grow into a nearby market rather than force your product on customers who already chose someone else.
- Consider the fit in terms of culture and values – While it’s a business transaction, there’s more to an acquisition than money. The company’s culture and values must also align with yours, and culture or fit is not something you can force. During an acquisition, it’s important to think about the people behind the business and ensure that the two companies’ missions and values are in relative alignment.
Successfully acquiring a competitor’s business will take time and money, but it’s worth doing the hard work upfront to avoid potential pitfalls down the road.
Alternatively, the converse of continuing to grow your business once it has achieved success is to sell…
Ready to Sell? How to Handle an Approach from a Competitor Looking to Buy Your Business
You’ve worked hard to grow your business, and now you’re in a strong position with options and negotiation leverage. If you’re sought after by a competitor looking to buy your business, what should you do?
The short answer is: proceed with caution.
First, Take a Gut Check
Whether you could sense an offer coming or were totally caught by surprise, you should always do a gut check first to see if you’re even interested in considering the proposition.
A deal may seem too good to pass up, but if you had other plans for your business, you should weigh how this deal fits into those plans before investing time and energy into a potential acquisition. After evaluating your own goals, you may decide that it’s a hard “no” on the offer, or perhaps you could be persuaded by a good deal.
Call Your Lawyer
Even if a business is just expressing interest, you should consult your business attorney right away to help you evaluate the legitimacy of the offer. A few red flags to look out for is if you are this business’ first acquisition or if the acquiring company doesn’t have its own M&A team. It’s important to remain cautious about any potential deals in case they are just fishing for insider intel.
Make Some Demands
As the company being acquired, you don’t have to simply roll over and accept the offer at face value. You are in a position to negotiate and make some demands. Consult with your attorney on the best strategy for your situation, but a few demands to consider are:
- Shortening the diligence period to 60 days without extension
- Requesting a break-up fee, which must be paid if the buyer does not follow through on their offer
- Asking for a draft of the purchase agreement early in the process rather than relying on whatever details are outlined in the Letter of Intent (LOI). This way if you do not agree to the terms of the purchase agreement, you will have time to negotiate and you will not have revealed too much in diligence.
Selling your business to a competitor may provide immediate financial reward, but you want to make sure it is a legitimate offer and not a veiled attempt to steal your business secrets.
The best way to minimize your risks and protect your assets is to consult closely with your business attorney.
Contact Our Team Today
At Silverberg|Brito, PLLC, we are ready to help your business take off, grow and experience continued success in Florida. For expert legal advice and guidance as you navigate your entire small business journey, get in touch with us.