2023 Essentials of Business Law

Lawyers are always (or almost always) involved in documenting fundamental transactions for smaller businesses and the number of these transactions is increasing over time. Think of sales of businesses, mergers, changes of control and/or redemptions of equity as fundamental transactions. It is difficult to come by actual data on the number or dollar value of sales of U.S. businesses valued at $50 million or less. However, we know from surveys of business brokers that the deal volume they were experiencing in Q3 of 2021 had rebounded to slightly above pre-pandemic levels and that the multiples of EBITDA which sellers were commanding was being maintained in smaller value deals and going up slightly in larger value deals. The multiples of EBITDA commanded by sellers increase as the size of the business being sold increases. Transactions involving these smaller businesses typically involve a single lawyer or a team of 2-3 lawyers in a single firm on each “side” of the transaction. While a larger transaction may provide more opportunity for a law firm to only represent the entity while other law firms represent the board or the majority equity holder, the seller’s legal team in a smaller transaction prepares the documentation and may represent both the majority (or sole)equity holder who makes the decision to sell as well as the business entity being sold.

This is the slide deck for the PowerPoint presentation.

A client comes to you with the prospect of selling her business for a given dollar amount. The client is excited at the possibility of a sale but wants to know what she will walk away with, dollar-wise, at the end of the day. You ask her how the deal is structured. The client indicates she isn’t sure and would like your advice on how to structure the sale from a tax perspective, with the goal being that she take away the highest dollar amount at the end of the day. She also mentions that she might be interested in rolling over some of her equity in the sale and that her business is currently an S corporation for federal income tax purposes, but the prospective Buyer is not. In order to even begin to arrive at an answer to her question, you call your favorite, friendly tax lawyer to help you get started on the analysis. She starts to explain as follows.

An earnout is a contractual provision stating that the seller of a business is to obtain additional compensation in the future if the business achieves certain financial goals, which are usually stated as a percentage of gross sales or earnings. For example, if an entrepreneur seeking to sell a business is asking for a price more than a buyer is willing to pay, an earnout provision can be utilized. In a simplified example, there could be a purchase price of $1 million plus 5% of gross sales over the next three years.

When business enterprises undertake to evaluate a proposed transaction, the parties will usually begin by negotiating the terms of a non-disclosure agreement. That non-disclosure agreement will serve as the frame work that allows the parties to share confidential and proprietary information necessary to fully evaluate, negotiate, and consummate a proposed transaction, while sufficiently protecting against unauthorized disclosure. Set forth below is a discussion of a few key considerations when negotiating non-disclosure agreements in business transactions.

This article describes the difference between a simultaneous and split signing and closing structure in M&A transactions and provides drafting and practical considerations and sample provisions for M&A practitioners. Practitioners have many options to address the risks posed by a delayed closing, some of which can be complex and specific to the idiosyncrasies of a transaction. Therefore, this article seeks to provide an introductory overview to some of the key provisions utilized to address the risks of a delayed closing

This paper is designed to help employees prepare for depositions. A deposition can be a significant event in litigation, and a company should always want to make sure that their employees are thoroughly prepared for same. There are several stages in deposition preparations. First, especially if the employee has no experience or limited experience with a deposition, the employee should be instructed on how they work, who will be there, and what will happen – basically, the employee needs to be told what to expect during the deposition. Second, the employee should discuss with the attorney what facts and issues may be discussed. Third, to prepare for the actual deposition,the employee should be presented with likely questions that may be asked of the deponent. This can also be called“role-playing” and/or “woodshedding.” Fourth, the employee should be provided various tips on various situations that could happen during the deposition unrelated to the questions and answers. This paper will focus on all of these topic areas to try to provide you with as much information as possible to try to best prepare employees for depositions.

Following the acquisition of all or a significant part of the business and properties or equity interests of a target company, whether by merger, consolidation, purchase of stock or other equity or otherwise (an “M&A transaction”), the parties often make contractual promises to each other to take, or to not take, certain actions after the closing of such transaction. These promises, commonly known as post-closing covenants, are typically contained in a definitive agreement between the seller and the buyer with respect to the M&A transaction (an “M&A agreement”). Such post-closing covenants may relate to transitioning the acquired business from the seller to the buyer, continuing arrangements between the parties or allocating responsibilities among the parties, among other things. They play an important role in completing the M&A transaction and carrying out the intent of the parties.

This paper is comprised of excerpts from Waks, Whitlock, Texas Practice Guide—Business Transactions,Chapter 1, Contracts (Thompson Reuters, 2022). Section references are to the particular section from the Chapter where the excerpted material is located.

The purpose of this article and the accompanying presentation by the authors is to present a high-level overview of legal considerations involved in counseling clients forming a new business. In an attempt to be clear and truly fundamental, we have assumed that the reader or listener has little or no prior knowledge of the laws in this area. The topics covered consist of a description of types of entities, ethical considerations, fundamental tax considerations,choice of jurisdiction, securities laws and choice of entity. Each of these topics could be the subject of a longer, in-depth article or a whole program and indeed whole books and whole programs have been written and sponsored on almost all of these topics. It is our hope that these materials will provide a useful introduction and we have attempted to include footnotes with references to more in-depth materials for the practitioner wishing to take a deeper dive. At the end of the article, we have provided lists of documents a lawyer would need to prepare to form a general partnership,a for-profit corporation, a limited partnership and a limited liability company under Texas law. While it is not practical to provide examples for each of these documents, because some of these documents are highly dependent upon the business terms agreed to by the parties, we have provided models and resources where we felt it appropriate.

When corporate lawyers say that a traditional law school education does little to prepare you for a transactional practice, due diligence often comes to mind. It is fundamentally a business skill that requires the ability to understand the client’s commercial objectives, analyze industry documents, identify key business issues and present relevant information in plain English. For this reason, many will say that the best way to learn howto conduct a due diligence review, is to do it. The authors of this paper do not disagree; we note here only a few key considerations that may provide some helpful context for learning this essential skill in the practice of business law.

Being a lawyer in Texas is not easy. This paper provides some basic information and tools to help lawyers understand and address the serious stress, mental health and substance use issues which so many attorneys face.

This is an introduction to the most often used provisions of the United States Bankruptcy Code (“Code”). I touch on simple concepts that a business lawyer should be generally familiar with in order to prepare his/her client for a Chapter 11 bankruptcy reorganization. Additionally, I discuss reporting requirements for small business debtors, general administration of a case, augmenting the bankruptcy estate through avoidance actions and confirming a plan of reorganization. This paper focuses on Chapter 11 from the viewpoint of the small business debtor who has elected to be treated under Subchapter V, Small Business Debtor Reorganization of 2019 (“SBRA”), the most recently enacted amendment to the Code.

This document contains a set of forms for arranging fee agreements with clients. Sample forms are provided.