AboutRonald J. Cappuccio, J.D., LL.M.(Tax) Expertise I have extensive experience in negotiating emerging business contracts and agreements, joint ventures, limited laibility company buy-sell agreements and buying and selling businesses. My approach is from a legal, tax and business prospective gearing my negotiations to practical solutions rather than merely drafting impractical documents
Experience I have have been an attorney since 1976 emphasizing business and tax law issues. I am an adjunct law professor in negotiation and alternative dispute resolution.
Organizations American Bar Associtiation
New Jersey State Bar Association
Camden County Bar Association
Question I am considering buying shares in an existing "S" Corporation owned and operated by a friend of mind. He has quoted me a figure for the 33% ownership I would be buying and is flexible on payment schedule. What other important "agreements" and "documentation" should we have in place to be sure this good working relationship.
Answer Jeff:
First, Friends, Family and business frequently do not mix. Right now I am representing one member in the disintegration of a family business that is hurting the economics and destroying the relationships of the family.
Second, you need to do the same "due diligence" in purchasing any business. You need at least the following information:
1. 5 year's tax returns
2. current P&L
3. Listing of machinery, equipment and inventory
4. Listing of debts and potential liabilities
5. Copies of leases and other financial obligations
6. Business projections and budget for the next year.
Your business and tax attorney should help you negotiate the price, terms and most importantly your role and control in the company. Unless it is spelled out in the corporate Buy/Sell Agreement, you may have no right to salary, control, or even a "say" in the business. Also because it is an S corporation, you could be stuck with phantom income (income for tax purposes but no cash.)
Do not sign anything without consulting a good business and tax attorney.
