Buying or Selling a Business in Michigan

For many years my law firm has represented both buyers and sellers of small to medium sized privately held businesses in Michigan. Although “hybrid” options are available, in general, there are normally two options in a structured sale of a business. Business sale transactions consist of either an asset or stock/membership sale.

Asset Sale: In an Asset Sale, specified assets (some or all) are transferred from the entity to the purchaser while the corporation and/or limited liability company entity that sold the assets remains in place and continues to be owned by its owners. Often times, although agreements can be modified accordingly, although assets are sold to a buyer, the entity who sold the assets still retains the liabilities. In most cases, depending on the facts, buyers generally prefer the asset purchase method since they will not be taking on past liabilities and the buyer can normally use the purchase price of the assets as the assets basis for tax purposes.

Stock Sale: In a Stock Sale, the buyer purchases the equity (stock or membership) interests from the owner(s) of the entity to be sold. There is no change in the status of the entity itself and the new equity owners take on, unless otherwise agreed to, all of the entity’s liabilities and contracts and the assets remain with the entity. Government authorizations, permits and licenses may not be transferable, and, therefore, in some industries because of the restrictions, a stock sale may be the preferred method amongst the parties. In most cases, depending on the facts, sellers generally prefer the stock purchase method as, unless otherwise agreed to by the parties, the seller will no longer be liable for the entity’s liabilities.

This article is a mere synopsis on the types of transactions that are normally done in a privately held sale of a business in Michigan. Generally, facts will dictate the type of sale that should be contemplated. This is just one area of discussion when contemplating a sale of business transactions and many other facets are involved in such a transaction. It is important to seek legal and accounting professionals when contemplating a business sale or purchase. Seth T. Seidell, Attorney at Law, concentrates his legal practice in the area of business law.

Pre and Post Employment Documents that should be reviewed by an Attorney

The following are a non-exhaustive list of Michigan related employment documents that employees should consider having reviewed by an attorney before executing them. These types of documents normally involve pre and post-employment matters and can often involve intricate legal terms of art which the general lay person may not understand. Having an attorney review these legal documents to assist in the negotiating process, which may include proposing modifications and changes to the documents or to merely consult with the employee on what all the terms and conditions mean would be a wise decision for any lay person.

  • Restrictive Covenant Agreements:  Restrictive covenant agreements commonly involve a written document drafted by the company or their legal counsel which  normally encompass clauses pertaining to confidentiality, non-solicit, non-disclosure, trade secrets, innovations and non-compete and are commonly often required to be signed in conjunction with an offer of employment.  These types of agreements restrict an employee’s ability to do certain things while employed and after employment.
  • Employment Contracts:        Employment contracts are commonly found in areas involving highly compensated individuals or those who will hold upper management positions or who have professional degrees.
  • Severance Agreements:         Severance agreements are commonly offered at the time of separation of employment. Severance agreements will normally provide additional money to the employee in exchange for a release by the employee not to sue the employee for any reason involving their past employment with the company. Severance agreements may also include restrictive post-employment covenants.

 

Business Insurance

During my many years of legal practice in Michigan I have come across numerous situations where businesses lacked insurance coverage when they tried to file a claim with their insurance carrier and/or was denied coverage when a claim was filed because it was excluded from their policy. Many of the owners have asserted to me an “I didn’t know I didn’t have the coverage, my insurance agent never told me that my policy wouldn’t cover the type of claim involved or my insurance agent didn’t advise me that I needed additional coverage for certain types of potential claims.” In many instances, I have come to the realization and conclusion that the business owner merely didn’t want to pay for the additional coverage or didn’t think that type of coverage was needed. I always tell my business clients when they plan on purchasing business insurance they should review the policy in its entirety before signing on the dotted line, and to especially review and take notice of the area that usually is entitled “exclusions” from the policy. In many instances, and depending on your state’s insurance statute, an insurance agent must inform you of all coverages available to the business. Many insurance agencies and agents are now requiring you to fill out waiver forms if you do not wish to take certain additional coverages for your business so they can avoid potential malpractice claims. Depending on the type of industry a business is involved in may determine the type of extra or additional coverage the business should look into.  A business owner would be wise to spend time reading a property and casualty policy or any other business related policy in advance of binding coverage with the insurance carrier in order to verify what is covered and what is excluded from coverage.

Michigan Unemployment Misrepresentation and Fraud

Between 2013-2015 the Michigan Unemployment Agency assessed thousands of Michigan workers with claims of fraud pertaining to unemployment benefits. Although the state claims it was doing everything by the book, those who have filed suit against the state of Michigan and Michigan legislators have indicated that the problem with improper adjudications pertaining to unemployment matters started when the state switched over to a new computer system and laid off approximately 400 people in the process. Estimates indicate that approximately 60,000 filed claims during this period should be re-reviewed by in person unemployment adjudicators. A high percentage of the Michigan unemployment fraud cases brought before administrative law judges have been summarily dismissed on multiple grounds.

The law firm of Seth T. Seidell, has specialized in Michigan unemployment matters since 1998, including many cases involving misrepresentation and fraud. Although each case is unique based on its own facts, the Seidell law firm has been highly successful in winning many of those cases. If you believe that you have been mistakenly charged with fraud and/or misrepresentation by the Michigan unemployment agency, and whether or not your appeal period has run out, you may still be entitled to a review of your claim by a state administrative law judge or otherwise.   

Human Resource Functions Critical To Any Business Operation

A human resource individual can be described as a person who “professionally” oversees the organization’s human resource management functions. This includes a wide spectrum of managing the entire employee-employer relationship, including outside forces that interact, and employment laws applicable to the workplace.

Employees are a businesses’ “most valuable asset!” Whether you have just one employee or many, the success of any business operation lies with its employees. Attracting and retaining employees is critical to any businesses’ operational success. Unfortunately, many business owners unwisely leave human resource functions to individuals who are not qualified in the area (e.g. receptionist, office manager, accounting, etc.), because the individual lacks the proper education, experience, or otherwise, which leaves the business operation vulnerable to employee litigation, increased turnover, and unhappy employees. Business operators should use a qualified individual to manage key internal human resource functions. There are three (3) key areas of human resource management which can be summed up into the following categories:

  • Employee Recruitment and Retention: includes by way of example, but not limitation creating organizational roles, interviewing, job descriptions, selection and placement, assessments, and background screening
  • Employee Retention and Engagement: includes by way of example, but not limitation on boarding of new employees, training and development, compensation and benefits, career and/or succession planning, performance management, and employee related issues
  • HR Policies, Procedures, and Law Compliance: includes by way of example, but not limitation, HR strategy, HR tools, HR policies (e.g. employee manuals and forms), compliance with local, state, or federal employment laws, HR training, education, and certifications.

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Restrictive Covenant Agreements-“Buyer Beware!”

Restrictive Covenant Agreements

 

            Restrictive covenant agreements are a useful tool for any business wanting to protect their interests and assets with current and past employees.  These types of agreements commonly involve matters concerning trade secrets, non-disclosure, non-solicitation, confidentiality, and non-competition clauses. Some of these types of agreements are stand alone or are a part of an employment contract or severance package. So long as reasonable, Michigan law allows for non-compete agreements in employment (See Michigan Antitrust Reform Act, MCL 445.774a). In general, restrictive covenant agreements attempt to restrict employees who are currently employed and after a separation of employment from doing something or not doing something that they otherwise may have had a legal right to do. The most common practice of employers is to provide a restrictive covenant agreement at the time of the offer of employment or hire, but, under current Michigan case law, employers can require employees to sign a restrictive covenant agreement after the employee has already been hired. Far too often, employees are too eager to take an offer of employment and/or want to continue their employment with a business and, unfortunately, employees do not spend enough time reviewing these restrictive covenant agreements, and, it’s not until they separate their employment with a business do they realize the quagmire they might be in, especially in cases involving non-competes. Before signing any of these types of agreements, individuals should seek legal counsel for advice.  .