The Cato Institute notes that while entrepreneurs create considerable wealth in the United States, they do so in the face of serious risks. Many of these risks are legal in nature, and a business transaction lawyer in Oklahoma may be able to mitigate them. Business lawyers may guide entrepreneurs through various transactions, and entrepreneurs may discuss their specific goals and priorities alongside My Estate Advisors. Reach out today to learn more about the legal implications of various business transactions in Oklahoma.
One of the earliest and most important decisions for any entrepreneur involves business formation. When starting a new company, entrepreneurs may structure their business in various ways. Three popular choices include LLCs, series LLCs, and corporations. Lawyers may be able to help entrepreneurs with business formation, corporate compliance, and record-keeping.
A Limited Liability Company or “LLC” is a popular choice for many entrepreneurs in Oklahoma. The Small Business Administration notes that this structure may be a “good choice” for medium-size businesses and high-risk endeavors. An LLC may shield personal assets from lawsuits or other liabilities while offering tax structure flexibility.
A series LLC is a singular LLC that consists one or more series. Each series holds separate assets and must keep financial records related to the series. This egg carton-like structure insulates each LLC from the lawsuits and liabilities of other series under the singular LLC.. This type of structure is particularly popular among real estate investors, as a landlord may attempt to handle individual tenant lawsuits without incurring losses across other properties.
Entrepreneurs who run larger enterprises often choose the corporation structure. While corporations are more expensive to maintain and form, they offer higher liability protection than LLCs. Unlike LLCs, C-corp corporations are subject to “double taxation.” First, an entrepreneur pays corporate income tax on company profits each year. Next, they pay personal income tax when accessing these profits through shareholder dividends. Entrepreneurs who wish to avoid double taxation may choose the “S corp” structure. However, S corps have various limitations – and entrepreneurs might want to discuss these limitations with a business lawyer.
Instead of starting a new business, entrepreneurs may simply purchase an existing business in Oklahoma. Due diligence is crucial in this scenario, and a business lawyer may be able to assist in various ways. They may review documents and ensure that the business is in good standing. Further, they may prepare or review any potential contracts or related agreements required to complete the purchase of the business. Business transaction lawyers may assist entrepreneurs who wish to sell their businesses. Selling a business is often the final step in an entrepreneurial journey, and this transaction may be highly profitable. Many entrepreneurs depend on these sales to fund their retirements, and it makes sense to carefully draft and review relevant contracts alongside an experienced lawyer. Trust administration becomes even more important with legacy trusts (also known as dynasty trusts). Oklahoma is one of a handful of states that allow perpetuities, which means a legacy trust could theoretically last forever in the Sooner State. If a grantor chooses a family member (or any other individual) as their trustee, what happens when they pass away? For a more long-term, stable solution, it makes sense to choose an organization rather than an individual. A third party trustee such as a bank or trust company can outlast the average adult, who may pass away within a few decades after taking on their role as trustee.
A key piece of business planning is determining ahead of time what will happen in the event of major events in the life of the business owners. Owners should contemplate what happens to the Owners’ shares in the event of their death, divorce, disability, or retirement. By planning ahead, these triggering events may be less traumatic to the health of the business. Further, this prevents the surviving business owners from potentially being in business with someone they did not otherwise plan to. Properly structured buy/sell agreements set forth the formula by which the business will be valued and mechanisms for funding the purchase upon a triggering event. Business owners often choose to obtain key man life insurance policies on the owners to allow for proper funding of the buy/sell agreement.
A business transaction lawyer may help create these agreements, and the primary goal of this transaction is to serve the best interests of all relevant parties. The shareholder must transfer their shares in a way that maximizes financial security, and the corporation must navigate this transfer without excessive interference with business operations.
According to the Federal Reserve Bank of Kansas City, Oklahoma offers extremely affordable real estate compared to most other states. The average price of a home in Oklahoma is much lower than the national average, providing new real estate investors with an obvious entry point. Even if an entrepreneur does not reside in Oklahoma, they may still create a real estate investment company to capitalize on this opportunity. Despite its affordability, the value of Oklahoma real estate is still rising at an attractive rate.
A key piece of business planning is determining ahead of time what will happen in the event of major events in the life of the business owners. Owners should contemplate what happens to the Owners’ shares in the event of their death, divorce, disability, or retirement. By planning ahead, these triggering events may be less traumatic to the health of the business. Further, this prevents the surviving business owners from potentially being in business with someone they did not otherwise plan to. Properly structured buy/sell agreements set forth the formula by which the business will be valued and mechanisms for funding the purchase upon a triggering event. Business owners often choose to obtain key man life insurance policies on the owners to allow for proper funding of the buy/sell agreement.
A business transaction lawyer may help create these agreements, and the primary goal of this transaction is to serve the best interests of all relevant parties. The shareholder must transfer their shares in a way that maximizes financial security, and the corporation must navigate this transfer without excessive interference with business operations.
A key decision in this process is choosing the right successor. The successor is the individual who will run the business after the current owner passes away or retires, and they often become CEOs or directors. Although it may be tempting to choose a family member to take on this role, entrepreneurs should remember to prioritize the financial health and well-being of the company. An unqualified or inexperienced successor could run the company into the ground within a few short years, eliminating a potential income source for the whole family.
The most effective business succession plans occur gradually over the course of several years. This process involves training and grooming existing staff to take on positions of greater leadership, and it may involve hiring new employees for executive positions. Some business succession plans are constrained by much tighter timelines due to emergencies. Although a gradual approach makes the most sense, businesses may need to act quickly if a key leader suddenly dies or becomes incapacitated.
Businesses exist in countless fields, and each may offer unique products and services. One of the most distinctive qualities of a successful entrepreneur is their ability to come up with new, innovative ideas. While this innovation may certainly be profitable, it often sends businesses into unfamiliar legal territory – and an experienced business transaction lawyer in Oklahoma may be able to guide businesses through this uncharted landscape. Contact My Estate Advisors – and continue this discussion during a consultation.
