small business merger question (proprietorship, lawyer, CPA, corporation)

[Painbank]

I have a sole proprietorship, which I have tenatively agreed to be merged into or aquired as you might put it by a corporation. They are small and privately held.

I would continue to run my business as such within the new corporation as well as become involved with other aspects of the coroporation.

I would be given some ownership of the corporation in compensation for the merger.

A question.

I would expect to have some voting rights of sort in the new company, which has 'sort' of been okayed. Is there a way to ensure my voice is heard in the new company? I would essentially have 33% ownership.

Any other caveats or items I should be aware of, other than that shown above?

I expect to talk with my lawyer about this, but still, a heads up in advance would be cool!

[DENVERBULLDOG]

Originally Posted by Painbank

I have a sole proprietorship, which I have tenatively agreed to be merged into or aquired as you might put it by a corporation. They are small and privately held.

I would continue to run my business as such within the new corporation as well as become involved with other aspects of the coroporation.

I would be given some ownership of the corporation in compensation for the merger.

A question.

I would expect to have some voting rights of sort in the new company, which has 'sort' of been okayed. Is there a way to ensure my voice is heard in the new company? I would essentially have 33% ownership.

Any other caveats or items I should be aware of, other than that shown above?

I expect to talk with my lawyer about this, but still, a heads up in advance would be cool!

I hope you haven't signed anything yet. Consult a lawyer. You will want to make sure that your rights, as a minority owner, are negotiated and clearly stated when the new company is founded. Also, a big part of planning will be an exit plan. It is amazing how many people start companies and enter into agreements without considering what would happen if the arrangement/business changes or terminates. Beyond the issues of your rights within the company, there are also major tax implications.

Good luck.

[UpperPeninsulaRon]

Originally Posted by Painbank

I have a sole proprietorship, which I have tenatively agreed to be merged into or aquired as you might put it by a corporation. They are small and privately held.

I expect to talk with my lawyer about this, but still, a heads up in advance would be cool!

I would also opt for a review with a CPA. Number one, I hope that you have asked to look at at least three years of financial statements and have some idea of their future income streams. Is this really a good deal for you? What kind of corp is it? S-Corp? etc.The CPA will also discuss the exact nature of the stock that will become yours - how many shares, what value, voting rights, etc. Will you be an officer of the company? I'd watch out for oral promises that leave you in a bind.

[Bette]

My husband and I are both self employed. He is a CPA and has been contacted several times about merging, being bought out, etc. He gets excited about a deal and then....make sure you want to work for a corporation and can fit within their corporate structure. He decided not to sell/merge which was the right choice.

I also had a small business that grossed over 1 million dollars a year and employed 34 at its height (1980's, 1990's). Because of technology and people leaving, etc., we had 17 employees in 1995 when we sold/merged.
My business partner (stupidly) put out the number he would sell for. A year later, I found out that the parent company was buying a firm 1/8 of our size and paying 1/3 of what they paid us! I was sick, sick, sick. I learned a lot working for them but they closed our branch in 2000 and gave the employees 24 hours to make a decision to relocate. Because of my husband's firm, we did not do that.

I probably will never be able to recreate my old company. Its time has passed but I loved what we did, we had an amazing staff and were well regarded in the industry!

Also, like other posts said, contact your CPA and if you have one, an attorney to work out the details so you can get the best deal.

[jhlcomp]

Back in the dot com era we had so many offers, and, in hindsight, probably should have taken the leap. What stopped us, we wanted to maintain control of our business - we are a tech company specializing in high end training which we are still engaged in.

Follow the sage advice of the others here. You didn't mention what type of operation you have...just go carefully.

[pghquest]

Originally Posted by Painbank

I have a sole proprietorship, which I have tenatively agreed to be merged into or aquired as you might put it by a corporation. They are small and privately held.

I would continue to run my business as such within the new corporation as well as become involved with other aspects of the coroporation.

I would be given some ownership of the corporation in compensation for the merger.

A question.

I would expect to have some voting rights of sort in the new company, which has 'sort' of been okayed. Is there a way to ensure my voice is heard in the new company? I would essentially have 33% ownership.

Any other caveats or items I should be aware of, other than that shown above?

I expect to talk with my lawyer about this, but still, a heads up in advance would be cool!

The only way to make sure you receive "voting rights" is to make sure you receive stock.

That being said, with 33% ownership, the other two can ALWAYS over ride you because they will have 67% ownership. There is nothing you can do to "force" them to listen without a controlling ownership interest.

[Niners fan]

I found myself in a similar situation recently except that my partner and I were retaining the majority of stock. However, I was concerned about how much power the minority partner would have.

If you have more than 25% of the stock then you would be assured a seat on the board of directors. The previous post that said you could always be outvoted is partially correct. You could always be outvoted unless you negotiated some specific decisions in advance that require a supermajority. These might include selling the company, increasing the CEO's compensation, etc.

It is good you have your own lawyer. They seem to be pretty good at coming up with all the ways that someone could work you over and then protecting you against that.

[virginiagguy]

I have a question about a business merger, me and my partner own a company 50-50, he put in most of the money but its considered 50-50 between the both of us were married, we both do half the work. Were thinking about merging with another company which will basically buy us out and we own a % of that company. Should me and my partner/ husband have different shares in the company? On paper it will show obviously but what about my say if i am working under them?