Purchasing and Merging Companies

This great question here from Brian in Wisconsin. He says, I'm considering purchasing a real estate brokerage in Wisconsin. Non franchised. What are the pros and cons of purchasing the business versus purchasing the business assets? Okay, this is a great question. So for any of you buying a small business, you have two ways you can do it. You can do what's called a stock purchase, where you're buying, let's say the LLC ownership or the stock of the S corporation. And now you're just that, that corporation or LLC just stays. You're just the new owner of it. Now that's one way to do it. The other way to do it is you just buy the assets of the business. Let's. For the real estate brokerage, what's, what's, what are the assets of that? Okay, maybe it's the name, the customer list, the goodwill is what they'll call it, the assets, the furniture and stuff, if there's an actual physical office, all the, you know, inventory, if there's promotional items, whatever it may be. So the phone number, the website URL, like all that stuff you're buying as the assets of the business, but you're not buying the company. Now as a general rule of thumb, a buyer of the business is best off buying the assets because I don't know what's happened in that corporation. Let's say I go buy someone's corporation or LLC that was a real estate brokerage maybe a year ago, they have some wrecked deal that happened and some possible lawsuit brewing that's going to pop out of nowhere. And now you own the company and you're going to have to deal with it. If you buy the business and do a stock purchase, that's what's going to happen. But if you just bought the assets, you're not buying the liabilities too. I'm just buying the assets out. I'm going to set up my own S corporation or llc, depending on what your tax situation is. You got partners or not? For the new real estate brokerage, you take their name and they're going to have to give you a release of the name so you can refile under a variation of that with the state and you just carry on with the business. Got the assets, you got the good and you didn't take the bad.

Okay, I love it. Now this actually is ironic that we have a second question on purchasing a business. And this is it's very common in Main Street America where people will merge or, you know, go ahead and merge, you know, little Brian Regan, throwback there. But some people will merge their small business with another. They'll buy someone else. Maybe their kids are going to buy their business. So this is really common in your average lawyer or accountant that maybe you've been working with for years. They don't handle buy and sell transactions on a regular basis. So again, if they kind of look like deer in headlights or something. Doesn't feel right. Get a second opinion. It's okay. You're talking about thousands and thousands of dollars and, gosh, thousands of hours that you put into a business or you're going to if you're purchasing. So don't screw around trying to cut corners on the professional services in the transaction. There could be. I mean, heck, I've got a whole two or three chapters on this in financial freedom, just on the transactions between transferring a business to someone else. I mean, it's a big deal. So it's ironic here that we have another question on this from John in Washington State. And he says, I was approached. He runs and operates an accounting firm. Little love you, man. I was approached by another firm and we will be going through a merger. Okay. We will operate under their entity. Sounds good. They have a single member, pllc, taxed as an S corp. My understanding is. Sorry, yeah. My understanding is that it would be advantageous for the company to be an LLC or PLLC partnership with our own S corps owning their appropriate percentages. Yeah, John, you're right. I cannot emphasize how right you are. And the fact that this wasn't brought up in the first conversation of the merger scares the hell out of me. Who in the freak are you mergering with anyway? I want to do the deal, but I do not want to complicate things more than they will be. Are you kidding me, John? You go ahead and complicate the hell out of this. This is your business. And you're merging with someone that doesn't know what they're doing. Are you kidding me? Trust me. There's other accounting firms that would love to merge with you. Don't you got to make sure everybody out there. I got to say this. If there's a deal you're going into, whether it's real estate or an investment project or a business operation, and it doesn't feel good in your heart and your mind, stop, stop, drop and roll. Get out of there. Get a second opinion. Do not feel pushed. Do not feel pressure. You've got to wake up in the morning at peace with this. And if you're not at peace with it, you stop and talk about it. So, John, you're. And for everybody out there, if you're going to partner with someone, a partnership should, nine times out of 10, be an LLC. And if it's operational, each partner has their own s Corporation. It's efficient for tax planning purposes, for professional purposes. In this situation, it just makes sense. And for an accounting firm not to know this, John, it's just red flags for me. So you go ahead and complicate this. This is your life. This is going to be your business. And if you're running the operation through their name and it's their entity and all that, you're already giving up control in some form or fashion. I don't know all the facts, but you better protect yourself, bud. So be careful. Boom.

All right.

Sorry. Got excited, Mark.

Coming in hot there.

If you don't know what coming in hot means, you guys, you know what coming in hot means? I know some of you may be thinking you're 18 years old at prom, but no, this is coming in hot means you're in a plane. Corey appreciated that joke. Thank you, Corey. I love it. He's like, what are you drinking today? I mean, it's like, I never get him laughing out loud at my jokes.

This is.

Maybe I'm on fire. That's it. They're new.

Yeah.

Coming in hot means. And this could be a top gun. Another top gun analogy, okay, is when you're in a plane and you're coming in to land, and you're coming in on a greater velocity or angle because you got to come in hot. You're, like, in a hurry. And so in the good old days, when Matt and I would ride in a plane together, which our employees said we could never do again because they didn't.

Mark. With Mark attempting to fly.

Flying the plane.

I don't know. Let's just say he was in the

cockpit and Matt was back, you know, squeezing into the seat, making indentions with his fingernails. Yeah, those were the good old days. But you're coming in hot means you're coming in fast and hard in a landing in a small plane. There you go.

I thought it was like Ricky Bobby coming in for a pit stop a little too fast. Like, coming in hot.

That could be.

Could apply there.

Show me second place. Show me loser. I'm with you.

Yeah.

Okay.

All right.