Reforming as a New Entity Can Be Good Business

Reforming as a New Entity Can Be Good Business - Dissolve Corp

Reforming as a new entity can be good business here in San Diego and across California.  There are situations where it makes sound business sense to dissolve a corporation or LLC and reform under a new trade name and entity.  In some cases it makes sense to simply close down the operations of a company, sell the assets to other businesses using an asset purchase agreement, retire any debts and close the doors.  In others, the mergers and acquisitions attorneys at the Watkins Firm have more than 40 years of experience in stock purchase transactions or merging your company with another entity.

In other cases a former business may have been closed but the market knowledge, relationships and skills obtained from the prior business present new opportunities.  Should you revive the old company, or close down your business and reform as a new business entity?

If your existing business is burdened by cumbersome debt, it is possible to dissolve your company and complete agreements with all creditors allowing the business to close.  The experienced business attorneys at the Watkins Firm have 40+ years of experience serving the business, science and tech, real estate and medical / healthcare communities here in San Diego and across California.  We can help you to dissolve the existing corporation, and bring existing obligations and operations to a legal and secure end.  This can ultimately release you to reform as a new business entity to enter new relationships and eventually develop new asset and debt structures.  It may be difficult to obtain credit in some circumstances, but it can and does work.

Another example to consider would be opportunities that may be afforded through the acquisition of a failed business.  Perhaps the original owners were underfunded, or lacked appropriate business, management and development skills.  How should you approach the situation?  Should you attempt to revive the company that was dissolved, or reform as a new business entity and build new brand awareness and goodwill?

Dan Watkins Founding Partner of the Watkins FirmPro-Tip: “Asset purchases are the most preferred way to buy a company and to sell a company. There’s some tax advantages to asset purchases, and there’s some liability limiting aspects to asset purchases. So I would say 80 to 90% of our agreements are asset purchases where you’re coming in, you’re going to buy the physical assets and the Goodwill all under a contract written for you by your lawyer. And it’s going to hopefully limit liability from vendors the company used to have that come back out of the woodwork from people that say that the company did something bad a long time ago, that you didn’t know about that come out of nowhere. Those are the kind of issues we look for. And that’s why we like asset purchase agreements a little bit more than stock purchase agreements.

Most people think it’s thinks it’s just ending something, or merging two things, but sometimes we merge companies with locations in 10 different states and eight different entities. So a merger can occur, or a business dissolution and reformation might be appropriate. For example, let’s say you’re buying a company and they have a division of highly skilled workers that you can’t live without, but there are also owners too. So you have to have some type of merger. That’s a combination of a stock purchase and an asset sale. And so when just a basic stock purchase or asset purchase is not enough, and you still want to do business, you want to come to your experienced lawyer that has a menu of multiple different ways of getting the job done and making everybody happy and closing the deal besides your basic stock and asset purchase.” – Dan Watkins, Founding Partner

The decisions surrounding a business that is struggling with heavy debt or closing your business can be quite heavy and emotional.  Our experienced lawyers serve as business coaches, helping you to review options, discuss alternatives and develop a strategy to move through business challenges and come out ahead.

We invite you to review the strong recommendations of our clients and contact the Watkins Firm or call 858-535-1511 for a complimentary consultation today.