Business and Corporate Law

Most commercial disputes are decided by documents drafted years before anyone contemplated a dispute. The operating agreement nobody amended, the contract signed without the limitation clause being read, the succession that was discussed but never recorded. Our work is concentrated at that earlier stage, because that is where the outcome is actually determined.

Formation and the choice of entity

The choice between a limited liability company, a corporation and a partnership determines how the business is taxed, how profits are distributed, what formalities must be observed, and how readily an ownership interest can be transferred. It is a decision most easily made at the outset and expensive to revisit later.

For most closely held businesses in Missouri the limited liability company offers the useful combination of limited liability with flexible tax treatment and few mandatory formalities. Where outside investment is contemplated, or where ownership will be widely held, a corporation is frequently the better structure. There is no universally correct answer, and we would rather spend an hour understanding what the business is intended to become than file a document that has to be undone.

Formation is more than a filing with the Secretary of State. Limited liability protects owners only where the separation between the business and its owners is genuinely maintained: separate accounts, adequate capitalisation, proper records, and contracts executed in the name of the entity. Where that separation is not observed, a creditor may seek to disregard the entity and reach the owners personally.

The agreement among the owners

The single document that most often determines whether a business survives a disagreement is the one governing the relationship between its owners: the operating agreement of a limited liability company, or the shareholder agreement of a corporation. It is also the document most frequently omitted, because at formation the owners are in agreement and the exercise feels unnecessary.

The questions it must answer are the ones nobody wishes to discuss at the beginning. What happens if an owner wishes to leave, and how is their interest valued? What happens if an owner dies, becomes incapacitated, divorces, or is made bankrupt? Who may bind the business? How are deadlocks broken where ownership is held equally? May an owner compete after departing? On what terms may an interest be sold to a third party?

Answering those questions while the owners are still in agreement costs a fraction of what litigating them costs afterwards. Where no agreement exists, the default provisions of the statute apply, and those defaults are rarely what the owners would have chosen.

Contracts

We draft and review the agreements a business depends upon: supply and distribution agreements, service contracts, terms of business, employment and contractor agreements, confidentiality agreements, licences and leases.

The provisions that determine the outcome of a dispute are ordinarily the ones given least attention at signature. Limitation of liability. Indemnity. Which state's law governs and where proceedings must be brought. What constitutes a breach and what notice must be given before termination. Whether disputes go to arbitration. Whether the agreement can be assigned on a sale of the business. These clauses look like boilerplate and are the opposite of it.

Purchase and sale of a business

A transaction is structured either as a sale of assets or as a sale of the ownership interest, and the choice has substantial consequences for tax and for the liabilities that transfer. A buyer ordinarily prefers to acquire assets, taking the value while leaving unknown liabilities behind. A seller ordinarily prefers to sell the entity and be free of the business entirely. Where the parties finish depends on negotiation informed by diligence.

We conduct and respond to diligence, draft and negotiate the purchase agreement, deal with the treatment of employees, real property, intellectual property and existing contracts requiring consent to assignment, and manage the closing. Where the price is partly deferred or contingent on future performance, we give close attention to how that is measured and secured, because an earn out drafted loosely is a dispute waiting for a date.

Disputes

Where a dispute cannot be avoided we act in it, in the state courts of Missouri and in the United States District Court for the Western District of Missouri. Commercial matters we handle include breach of contract, disputes among owners, claims of breach of fiduciary duty, enforcement of restrictive covenants, misappropriation of trade secrets, and collection of substantial receivables.

Our advice on whether to litigate is given in commercial terms. Proceedings consume management attention as well as money, and a dispute worth pursuing on principle may not be worth pursuing on the numbers. Where that is our assessment we will say so, notwithstanding that the advice reduces our own fee.