Download - March WeMN Event Business Planning
Your Business Planning Roadmap: From Start-Up to Succession
Women Entrepreneurs of Minnesota
March 19, 2013
Adizes: The Corporate LifecycleSource: ttp://www.adizes.com (2012)
What We Can Learn fromThe Corporate Lifecycle Model
Businesses have predictable and repetitive patterns of behavior as they grow and develop.
The same methods that produce success in one stage can create failure in the next.
Problems are normal and desirable. Problems are the natural result of change.
As a leader, focus on accelerating your organization's ability to recognize and resolve problems.
An organization in Prime has achieved a balance between control and flexibility. A Prime organization knows what it is doing, where it is going, and how it will get there, enjoys both high growth and high profitability.
The founder’s “big idea”
Start-up company
Going Concern
Presented by:Margaret Cronin ([email protected])Jenna Bettes ([email protected])Leonard, Street and DeinardProfessional Association150 South Fifth Street, Suite 2300Minneapolis, MN 55402612-335-1500
Legal Lifecycle of a BusinessBi
g Id
ea
•Patents•Trademarks•Copyrights•Nondisclosure Agreement•Work-for-Hire Agreement•Joint Development Agreement
Star
t-Up
Com
pany
•Organizational Documents•Choice of Entity•Articles•Bylaws/Operating Agreement•Assumed Name
•Start-Up Financing•Self-Financed•Bank•Friends and Family•Private Placement: Outside Investors
•Angel Investors
•Adding Partners•Alignment•Division of Roles/Responsibilities
•Buy-Sell Agreement
•Hiring Employees•Employee vs. Independent Contractor
•Noncompete Agreement•Employment Agreement
Goi
ng C
once
rn •Third Party Litigation•Protection of Intellectual Property
•Disputes with Vendors and Suppliers
•Employees "Stealing" Ideas•Employees Joining a Competitor
•Firing or Laying Off Employees
•Partner Issues•Partner Disputes•Minority Shareholder Litigation•Buyouts•Exit Strategies
•Sales and Marketing•Social Media Compliance•Adapting a Competitor's Idea
•Financing Growth•Venture Capital•Private Equity•IPO
Legal Lifecycle of a BusinessBi
g Id
ea • Patents• Trademarks• Copyrights• Nondisclosure Agreement• Work-for-Hire Agreement• Joint Development Agreement
Trademarks What is a trademark?
– In short, it is a Brand Name.– May be a word, name, symbol, device, or
any combination thereof, used, or intended to be used, in commerce to identify and distinguish the goods of one manufacturer or seller from another, and to indicate the source of the goods.
– May also be a Service Mark.– May be international.
What a trademark is NOT.
Trademarks (continued) How to obtain a trademark?
USE! Trademarks are protected from their date of first public use.
If mere use creates a trademark, why would I register my mark with the USPTO? Additional legal advantages and
protection How do I register my mark
with the USPTO?
Copyrights
-What is a Copyright?- Form of protection provided to authors of “original
works of authorship”.- Original works includes the following:
- Literary;- Dramatic;- Musical,- Artistic;- Certain other intellectual works, both published
and unpublished.-What a copyright is NOT.
- Does not protect titles, slogan, or short word phrase.
Copyrights (continued)
- What does a copyright do?- Provides owner the exclusive right to reproduce the
copyrighted work, prepare derivative works, distribute copies, perform or display the work publicly.
- How do I obtain a copyright?- Again, use! By putting the work in any tangible form,
it is copyrighted.- Why would I register my work with the
Copyright Office?- Additional legal protection and remedies.- Puts the world on notice of your ownership to
prevent infringement.- How do I register my work?
KEY DISTINCTIONS:
• A copyright protects a form of expression, not the subject matter of the expression.– (EG: a written description of a machine can be
copyrighted, but protection only prevents unwanted copying of the description itself, not the making or using of a machine made using the written description.)
• The purpose of a trademark is to protect words, phrases and logos used in commerce.
Legal Lifecycle of a BusinessStart-Up
Company• Organizational
Documents• Choice of Entity• Articles• Bylaws/
Operating Agreement
• Assumed Name• Start-Up Financing
• Self-Financed• Bank• Friends and
Family• Private
Placement: Outside Investors
• Angel Investors
Legal Lifecycle of a BusinessStart-Up
Company• Adding Partners
• Alignment• Division of
Roles/Responsibilities
• Buy-Sell Agreement
• Hiring Employees• Employee vs.
Independent Contractor
• Noncompete Agreement
• Employment Agreement
Top Tips About Starting Partnerships
Think very carefully before taking on a partner
Could you hire someone to perform the role that you need from the partner?
Don’t jointly and severally guarantee any debt you couldn’t cover individually
How will you handle a need for additional capital?
Start with the dissolution – while things are amicable and collaborative – and consider every contingency
Write it down in your Partnership Agreement, Buy-Sell Agreement or Member Control Agreement
Legal Lifecycle of a BusinessGoing
Concern• Third Party
Litigation• Protection of
Intellectual Property
• Disputes with Vendors and Suppliers
• Employees "Stealing" Ideas
• Employees Joining a Competitor
• Firing or Laying Off Employees
• Partner Issues• Partner Disputes• Minority
Shareholder Litigation
• Buyouts• Exit Strategies
Legal Lifecycle of a BusinessGoing
Concern• Sales and Marketing• Social Media
Compliance• Adapting a
Competitor's Idea
• Financing Growth• Venture
Capital• Private
Equity• IPO
Components of Business Succession and Exit Strategy Planning
Contingency Plan
•How do we plan for unexpected events in the business?•E.g., Death, disability, divorce, bankruptcy of owners•Contained in Buy-Sell Agreement and Estate Plan
Succession Plan
•How do we create and implement a plan for transferring ownership of the business to a new ownership group so that the business can continue?•E.g., Gift/sale to family members, sale to partners, sale to employees
Exit Strategy
•How do we plan to maximize the business for sale to a third party?•E.g., Sale to competitor, sale to individual or small investor, sale to strategic acquirer, sale to private equity firm, IPO
Initial Considerations
• Who are the key players in your business?• How sustainable is your business model?• What is your time frame for transferring
ownership?• What advisors should you have at the
table?
Goals and Objectives
Financial Security of Owners, Spouse and Children
•Providing stream of income or note payments•Reviewing possible strategies
Retirement Planning •Reviewing corporate-owned retirement plans•Coordinating financial plan with plans for business
Estate Planning •Minimizing estate taxes •Providing for equality among heirs
Liquidity Planning •Creating liquidity for compensation•Creating liquidity for estate taxes
Protection of Minority Shareholders
•Reviewing share transfer restrictions in Buy-Sell Agreement•Reviewing governance provisions in Bylaws
Succession of Business •Deciding who will own and control the family business•Working through family conflict
Legal and Tax Considerations
Structure of Entity• Is the entity a corporation (s-corporation or c-corporation), limited liability company, partnership or other
entity?• How are the interests currently owned?
Tax• If business interests are transferred by sale, what are the capital gains tax consequences?• Will depreciation and recapture cause gain on sale of assets to be taxed as ordinary income?• If business interests are transferred by gift, have the estate and gift tax consequences been examined? Compare step-up in basis to capital
gains tax upon future sale. Be mindful of retained control or enjoyment.
Regulatory Compliance• Do the successor(s) have the appropriate licensure to continue the
business?
Valuation• If discounts are applied to the value of the ownership interest, were these
discounts obtained through a qualified valuation?
Legal Documents• Are legal documents in place, such as Employment Agreements, Noncompete and Confidentiality Agreements, Stock Purchase Agreements and
a Buy-Sell Agreement?• Are the corporate Bylaws/Operating Agreement and Minutes up-to-date?• Have prior loan documents and Lease Agreements been reviewed?
Matrix of Options
Sale
Sale of Assets to Third Party
Sale of Stock to Third Party
Installment Sale of Stock to Family Members
Installment Sale of Stock to Defective Trust
Sale of Stock to Partner(s)
Sale to Employees using ESOP
Gift
Outright Gift of Stock
Gift to Irrevocable Trust
Grantor Retained Annuity Trust
Family Holding Company
Other
Stock Redemption
Corporate Division
Your Business Planning Roadmap
Begin with the end in mind: what is your
best possible result in your current phase?
Work backwards: what needs to
happen in order to achieve this result?
Create a plan: seek input from
advisors to create a strategic plan
Implement the plan: this may take several stages
depending on the readiness of the
company
Reevaluate the plan:Is it working, and is
the desired outcome still achievable?
Transition smoothly: Be prepared to
consult, and ready for your next phase
Thank you!Margaret Cronin ([email protected])
Jenna Bettes ([email protected])Leonard, Street and Deinard
Professional Association150 South Fifth Street, Suite 2300
Minneapolis, MN 55402612-335-1500