Legal Articles and News

Buying an Existing Business: Part 1
Part 1 of this article will address why a person should consider buying an existing business. Part 2 of this article will address what a purchaser should consider when buying an existing business and Part 3 will address the legal impact of buying an existing business.

Why consider buying an existing business?

Many people dream about owning their own business and becoming their own boss. Many people believe that their dream is only possible through a start-up business. While establishing a new business or company is an option, it may actually be more risky than purchasing an established business that is for sale. Why not purchase a business with a proven concept, existing sales, and an established customer base?

Many of the pitfalls entrepreneurs and new business owners are challenged with relate to the finances of their businesses. In fact, 50% of businesses fail within the first 5 years.1 Of course, a business owner that has a well-planned business can be very successful. Our community, Gainesville and North Central Florida, have many examples of successful small business ventures.

Moreover, you may have a great idea or concept, but the upfront costs of actually starting the business may be too prohibitive. For instance, you will want to protect your new business from liability and therefore you will need to hire a competent business law attorney to establish your business as a LLC or other business entity. Further, you may have the upfront expense of purchasing inventory or equipment for the business. Before you know it, the business is in debt before it even earns any revenue.

Sometimes purchasing an existing business may be the most sensible solution. It also may be less risky, but this is not always the case. Of course, the market dictates what, if any, opportunities actually exist. An established business may provide the following benefits:

Goodwill (loyal customers, quality product offering)
Established profit and revenue streams
Necessary equipment (prior owner has already purchased)
Known brand
Property (owned or favorable lease terms)
Location
Permits and licenses (i.e., liquor and/or food license)
Training (generally, the prior owner will provide on-site training)

A new owner of a business can still make major changes to the existing business. For example, you may buy a pizza restaurant that is centrally located, established, and has strong sales, but only offers pizza. You may decide to increase its offerings, to say, calzones and subs, in order to increase the business’s profitability and its customer base. Alternatively, you may update a tired logo by trademarking a new one.

Ultimately, a purchaser must still do his or her due diligence before purchasing any business (see Part 2). This includes determining why the business is for sale in the first place. Is a business owner selling his family-owned seafood restaurant because Red Lobster has moved in across the street or is the business owner retiring? Furthermore, an existing business likely has a more costly price tag. However, financing the purchase of an existing business is generally easier because of its track record of success. Whether you are considering buying an existing business or starting a new one, the Office of Knellinger & Associates can help you with this process.

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1. U.S. Small Business Administration, Small Business Facts Advocacy, available at https://www.sba.gov/sites/default/files/Business-Survival.pdf.

Knellinger & Associates | 2815 NW 13th Street #305 | Gainesville, FL 32609 | (352) 373-3334

Common Questions about Independent Contractors

Many businesses that contract with individuals or businesses for goods or services are unaware of the potential liability that may arise under the contract. Under certain circumstances, the individual or business rendering goods or services to a business may actually be classified under Florida law as an employee, not an independent contractor, which may lead to a windfall of liability for the business when something goes wrong. It is important for a business to work with a competent business law attorney to ensure that it limits its liability when hiring contractors to perform any task.

What does it mean to be an independent contractor?

An independent contractor is not an employee of a business although at times it may appear that way. Rather, an independent contractor is hired by a business to provide goods or services.1 The goods or services are provided according to the terms of the contractor’s agreement with a business.2

Is an independent contractor self-employed?

Yes, an independent contractor is self-employed.3 Generally, a business owner or contractor who provides services to other businesses are considered self-employed.4

What are the benefits of using an independent contractor?

Generally, an employer is liable for any action taken by an employee if such action occurs within the scope of that employee’s employment. By contrast, an employer is generally not liable for the actions of an independent contractor.

It is in a business’s best interest to consult with a business law attorney before hiring a contractor for any major task. Although the contract on its face may deem an individual or business an independent contractor, an employer can still take certain actions before and after hiring an independent contractor that can actually nullify the contract’s effect.

What does Florida law look for when determining the status of a contractor?

Florida courts apply numerous factors to determine whether the individual or business is an independent contractor or employee. Most of these factors revolve around whether the employer had some type of control over the contractor and whether the contractor exhibited a substantial degree of independence.

Why is it important to consult with a business law attorney?

No two cases are alike and courts will determine liability on a case by case basis. It is imperative that a business owner takes preventative measures in both the screening and hiring process. For example, certain steps must be taken to ensure that the contractor a business hires is duly qualified. Further, the contract between a business and a contractor must be fashioned in a way as to limit the business’s liability. Lastly, an employer must not take certain actions while an independent contractor is performing.

The Law Office of Knellinger & Associates understands the needs of business owners in North Central Florida. We have helped business owners for over 40 years protect their businesses from liability. We are knowledgeable about agreements with contractors and we are here to assist your business with this process.

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1. Communications Workers of America, My Employer Says I am an Independent Contractor. What Does This Mean?, http://www.cwa-union.org/pages/my_employer_says_i_am_an_independent_contractor.what_does_this_mean (last visited Dec. 23, 2015).
2. Id.
3. Internal Revenue Service, Independent Contractor Defined, https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Defined (last updated Aug. 5, 2015).
4. Internal Revenue Service, Independent Contractor (Self-Employed) or Employee, https://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Independent-Contractor-Self-Employed-or-Employee (last updated Aug. 5, 2015).

If you are going through a dissolution of marriage and you have a minor child from your marriage, you will be required to submit your proposed parenting plan to the court.

Parenting plans govern parental responsibility for your child, a time-sharing schedule, and other matters such as your child’s education, extracurricular activities, and communication with each parent.

The court will establish a parenting plan for you if you and your spouse are unable to reach an agreement or if you and your spouse’s agreement is not in the best interests of your minor child. This may lead to an unfavorable result for both you and your spouse. Thus, it is generally in the best interest of each party to have a competent family law attorney negotiate a parenting plan that is best for everyone.

More on this topic on our Time-sharing & Parenting Plans page

Florida has very strict laws as they relate to the rights of grandparents. In fact, for a long time grandparents almost had no legal right to actually visit their grandchild. This is particularly astonishing because many grandparents play an important role in their grandchildren’s lives. In some cases they actually care for their grandchild while the parents deal with divorce, domestic violence, addiction, or other such family law issues. Indeed, some grandparents are full time caretakers of their grandchildren until a divorce or other dispute causes a rift to occur between them and their children; causing the grandchildren to be removed from their lives.

On July 1, 2015, a new Florida family law went into effect that expanded, although only slightly, grandparents’ visitation rights. Section 752.011, Florida Statutes, provides that a grandparent may petition the court for visitation of a minor child when the minor child’s parents are deceased, missing, or in a persistent vegetative state and whose other parent has been convicted of a felony or an offence of violence evincing behavior that poses a substantial threat of harm to the minor child’s health or welfare.1  The statute is not clear whether a plea of guilty will be enough to act as a conviction under the statute.

After the petition is filed, the court must determine whether the grandparent has adequately met his or her burden of showing parental unfitness or significant harm to the minor child.2  Absent such a showing, the court will dismiss the petition.3  If the grandparent’s petition successfully shows parental unfitness or significant harm to the minor child, the court may appoint a guardian ad litem and refer the matter to family mediation.4

If the family mediation is unsuccessful, the court must conclude based on clear and convincing evidence that the visitation is in the best interest of the minor child and that the visitation will not materially harm the parent-child relationship.5  To determine the minor child’s best interest, the court will consider the totality of the circumstances affecting the mental and emotional well-being of the minor child by considering, among many other factors, the following:

•    The love, affection, and other emotional ties existing between the minor child and the grandparent;
•    The length and quality of the previous relationship between the minor child and the grandparent; and
•    Whether the grandparent established ongoing personal contact with the minor child and the grandparent.

Our family law attorneys at the Law Office of Knellinger & Associates have years of experience in family law. We can help you determine whether you have a right to visitation of a minor child. Our family law attorneys are also very knowledgeable about parental rights. Please contact us to find out how we can assist you with your family law matter.

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1. Fla. Stat. § 752.011 (2015).
2. Fla. Stat. § 752.011(1) (2015).
3. Id.
4. Fla. Stat. § 752.011(2) (2015).
5. Fla. Stat. § 752.011(2)-(3) (2015).

Link to part 1 of Moving with your minor children

Florida Statutes set forth the procedure one should follow in obtaining permission to move with a child. This procedure must be followed precisely in order to secure a hearing on the merits of the prospective move. One may ask for temporary or permanent permission to move, or both. The statutes set forth numerous factors which the Court must consider in exercising its discretion in permitting or preventing the move. The ultimate factor is whether the move is in the child’s best interest. One may call witnesses and present evidence to the Court on both sides of the issue. When the child is too young to testify, the Court may even order a social investigation to uncover aspects of the case which the Court may wish to consider in reaching its decision.

It is important to note that in some cases where there has been no prior order relating to custody, the relocation statute may not apply. Before you make a decision about moving or even discussing the issue with the other parent, you should obtain legal advice especially if you are pregnant. If you are the parent without a custody order you should obtain advice in taking steps to insure that the statute will come into play and that the Court will have a hearing on the matter. Good planning with your family law attorney can preserve and create rights you may not otherwise have.

In light of our highly mobile society, it is not surprising that one parent may want or need to move with his or her minor child leaving the other parent behind. The reason may be for new job opportunity for a parent or their new spouse. Depending on the distance involved, it may require adjusting the time sharing between the parents by hours, days, or even months.

In Florida, the legislature has determined that child relocation under statute involves a move beyond 50 miles from the existing residence for more than 60 days, not including time away for vacation, education or medical treatment. If the move meets this criteria one must either have the written agreement of the other parent to move, or they must ask the Court’s permission to do so. Relocating without that permission and without a Court order can result in dire circumstances including being held in contempt of court and being forced to return the children. That conduct may also be taken into account in any subsequent proceedings when the Court is determining whether the move is to be permitted or in restructuring time sharing between the parents.

Link to part 2 of Moving with your minor children

Whether you have just obtained your medical license or wish to change your practice of twenty-five years, there are various factors you should consider before joining a practice. The first question is whether you will be employed or will be a principal in the firm.

If you are to be employed you must decide whether you will be an employee or an independent contractor. That determination is frequently negotiated because it will have far reaching consequences for both parties.

An independent contractor is responsible for paying his or her own taxes on the income earned, paying workers’ compensation premiums and perhaps solely responsible for his or her own professional liability. These additional responsibilities may affect the compensation paid for services rendered. There are factors which are used to determine which category you should be in principally revolving around whether you exercise control over your actions. They include whether you control your own hours and place of work, whether you may hire a substitute or additional service providers to perform your work, whether you control the methods and procedures of your work and whether you provide the tools and facilities to provide your services. This list is not inclusive. If the Internal Revenue determines that you have categorized your position incorrectly, the employer may suffer somewhat drastic consequences including punishment for the failure to withhold and pay taxes on the employee’s behalf especially if the employee has failed to pay taxes. The employment contract should be specific in addressing these and other issues in order to minimize risks to both parties. Next up: What else should you include in your contract?

Link to part 1 of How to Retain Wealth in Divorce

Business ownership may be the largest single asset in a divorce. Florida law seeks to maintain the business as an operating entity in favor of the party who runs it. When the Court exercises its discretion in equitably distributing assets and debts of the parties, it will set a value of the business as well as all other assets based upon appraisals. The law in Florida currently varies from Court to Court in whether the Court will set off from the value of the business an amount equal to the value of a non-compete agreement of the principal in the business. This can change the value of the business very significantly. You need to discuss this feature of the law with your family law attorney to be sure that you understand the impact this may make on your settlement or the outcome of trial.

Tax effects of business and other assets should be considered in your plan of equitable distribution. For example, if you have a marital home with equity of $100,000.00 and a pension plan whose yearly statement reflects a value of $100,000.00, they look like the same value but they are not. There is no tax due on the sale of the marital home in most circumstances but there is an unpaid tax burden on the pension which must be paid at some point. It could make a difference of 18-35% in value.

Finally, businesses have an advantage in that they can employ legitimate strategies that affect not only their value but the ability of the Court to divide their assets. Consult with your attorney about how to address and respond to these opportunities and challenges.

Divorce can be costly emotionally and financially. In some cases the emotional toll is so significant it can affect the ability of parties and their family law attorneys to reach an amicable resolution. If a party uses the judicial system to hurt the other party, it means that attorneys have to prepare pleadings and motions which then have to be heard by the Court. A single motion may take months before it can be addressed by the Court. During that time emails are exchanged between parties and their attorneys and between attorneys creating a costly dialog. The Court may require that the parties undertake mediation before it will set the hearing, adding another level of expense. Where there is violence or threats there may be no option except to meet these threats head on.

But where this is not the case, how can you minimize the emotional and financial toll in your divorce?

When you undertake your divorce, discuss with your attorney realistic goals and how best to achieve them. Evaluate candidly your spouse’s positive contributions to the marriage and do your best to set aside feelings of animosity. Seek counseling either together or alone so that your decisions are well grounded emotionally. Your attorney is your legal counselor but a therapist is your mental health counselor. Frequently, the cost of a therapist is covered by insurance while the attorney’s services are not. Every dollar spent on litigation is that much less the parties have to divide between them.

Link to part 2 of How to Retain Wealth in Divorce

On June 26, 2015, the United States Supreme Court ruled that same-sex couples have a fundamental right to marry and divorce in every State, including Florida. Florida’s longstanding public policy has firmly been against same-sex marriage, but with the United States Supreme Court’s recent decision, Florida’s laws now must give way to the rights of same-sex couples under the United States Constitution.

Ideally, the State of Florida will allow same-sex couples to exercise their rights without complication going forward. However, the State of Florida has not historically favored allowing same-sex couples to marry or the recognition of same-sex marriages, same-sex couples. Since 1977, the Florida Statutes have explicitly prohibited gay marriage and, since 1997, have explicitly prohibited the recognition of same-sex marriages for any purpose. Additionally, in 2008, the Florida Constitution was amended to restrict the definition of marriage to include only a marriage between a man and a woman. Consequently, with same-sex marriages only recently established as a right nationwide, gay Floridians have a period of transition ahead of them while the State deals with rapid change. Same-sex couples should thus be prepared for complications when applying for a marriage license, getting married, attempting to reap the legal benefits of marriage, or obtaining a divorce.

The Law Office of Knellinger & Associates provides legal advice and representation for individuals, entrepreneurs, and business owners in Gainesville, Florida, and communities throughout north central Florida, including cities such as Ocala, Starke, Palatka, Lake City, Middleburg, Trenton, Bronson, Lake Butler, Cross City, Williston, Chiefland, Alachua, Jasper, Live Oak, and Jacksonville, Florida.

Alachua County ● Putnam County ● Clay County ● Bradford County ● Union County ● Columbia County ● Gilchrist County ● Levy County ● Marion County ● Hamilton County ● St. Johns County ● Dixie County