Business assets are any assets owned and controlled by a business entity instead of a private individual. A business can acquire assets through the course of business operations. Assets may assist the business in achieving its goals. The accumulation of assets can lead to significant growth for that business.
Examples of business assets may include:
- Real or personal property;
- Monetary property; or
- Non-tangible goods.
Monetary property of a business may include:
- Start-up capital;
- Investment accounts;
- Donations; or
- Any other sources of funds.
Non-tangible goods of a business may include:
- Copyrights; or
- Other forms of property.
Business assets are required for a business to successfully operate. They can often, however, be a source of legal disputes. Because of this, they are usually addressed in the bylaws of the business or in separate contracts.
What are Common Disputes over Business Assets?
Common disputes regarding business assets may include:
- Classification of assets;
- Management of assets;
- Use of assets; or
- Transfer of assets.
Disputes over profits are common. They may include the distribution of profits among members following a business sale.
The classification of assets can cause disputes because those assets need to be properly identified and classified. This is done to avoid commingling business funds with personal funds.
Disputes over the management of assets may occur over which members of the business can access or control various assets. Similar to these disputes, disputes over investments of the assets are also common.
Disputes also occur over the use of the business assets. These assets must be used in accordance with federal and state business guidelines. The assets should be used to further the goals of the business and not for personal gain of the members.
The transfer of business assets must generally be present to and approved by the business board. For example, if an individual transfers a business in their will, it can lead to problems regarding the business assets.
There can also be many other types of disputes regarding business assets. Disputes may arise when there is a change of management or organization of the business board. Newer business officials should be informed of any existing assets that may play a role in the operations of the business.
What is a Sale of Business Assets?
A sale of assets occurs when a business entity sells some or all of its assets. A sale of business assets may include the sale of tangible property such as merchandise. In many cases, a sale of business assets includes the sale of non-physical goods such as:
- Licenses; or
- Stock holdings.
For example, a business may purchase another business in an acquisition. An acquisition generally means that all of the business assets are being sold and transferred as a whole to the purchasing business.
A sale of business assets is usually treated differently than the sale of consumer goods. A buyer must usually be fully informed of the nature and quality of the types of assets being transferred in a sale of business assets.
What Types of Business Assets can be Sold?
In general, any type of asset held by a business may be sold, as long as the sale is legal. Depending on the type of business, the owners or shareholders may be required to consent to the sale of the business assets.
The types of business assets that are usually the subject of a sale include:
- Real property, including the building where the business is located;
- Other types of physical property, including:
- furniture; or
- Non-physical items, such as:
- business names;
- insurance policies;
- contracts; and
- future interests;
- Stocks, trust funds, or other types of securities.
Are There any Special Considerations for a Sale of Business Assets?
Yes, the sale of business assets can be very complex, especially if those assets have a high market value. Whenever a sale of business assets takes place, the business usually drafts a sale of assets agreement. This is a business contract that includes:
- How the sale of assets will be organized or conducted;
- What assets will and what assets will not be transferred;
- How the purchaser will fund the payments;
- Details regarding approval from a shareholder or shareholders, if necessary; or
- Provisions regarding any debts or liabilities of the selling company.
If the sale of business assets occurs through an acquisition, the sales agreement is usually known as a broad transfer agreement or broad transfer provision. This type of agreement specifies that the purchasing company is acquiring the company being sold by a transfer of all assets in full. Other considerations during a sale of business assets may include:
- Tax laws;
- Gift tax laws;
- Shareholder laws; or
- Any other rules regarding non-sale clauses.
What Issues may Arise when Transferring a Business in a Will?
Although transferring a business through a will is advisable, it may come with drawbacks or considerations. An important concern when transferring a business through a will is the existence of the estate tax, also known as a death tax.
Estate taxes are those taxes owed and paid by an individual’s estate when they pass away. These taxes are imposed by the federal government and, as of 2020, are generally only paid if the estate is worth more than $11.58 million. An estate tax rate can be up to 40% depending on the size of the estate.
If the estate or business being transferred is large enough, heavy taxes can be imposed upon the individual receiving the business. Because of this, it is not uncommon for family members who inherit a business to sell it so they can pay the estate taxes owed on the transfer of the business.
Another common issue that arises when a business is transferred through a will is succession. Succession refers to which individual or individuals will continue operating the business once it is transferred.
If the parties who are to operate the business once transferred are not explicitly stated in the will, there will likely be confusion as to who should receive the business as a beneficiary and who should be responsible for the day to day operations of the business. It is extremely important to use clear and detailed language in a will regarding business transfers to avoid disputes whenever possible.
What If I Have a Dispute over Business Assets?
There are different aspects that need to be resolved in order to resolve business asset disputes. First, the local, state, and federal business laws may have a drastic effect on how the business dispute is resolved. Depending on the jurisdiction, the nature of the business, or the types of assets involved, different legal mechanisms can be used to resolve the dispute.
Second, a large amount of business assets are obtained or managed in accordance with contracts that were drafted specifically regarding that particular asset. If that is the case, the contract must be reviewed in order to determine precisely what the business parties agreed to regarding that business asset.
For example, a contract for a business asset may specify how the asset should be sold in the long run. Violation of any enforceable contract terms may lead to a civil lawsuit to recover damages for that breach of contract.
Do I Need a Lawyer for Assistance with Business Asset Disputes?
Yes, it is important to have an experienced business lawyer if you find yourself involved in a business asset dispute. Business assets are essential to the life of a business. Proper management of those assets can affect many people.
A lawyer can review the facts of your case, including any contracts that may apply to the asset. They can also review local and relevant laws affecting the asset. An attorney can represent you during any court proceedings, if necessary. It is important to remember that a lawyer can also review any documentation or contracts already in place to help you avoid a future business asset dispute.