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When acquiring or selling a company, many nuances exist in various stages of the process, some of which are not readily apparent on their face. One of those nuances is the interplay between accounts receivable and working capital.

Often, in an acquisition, a portion of the purchase price will essentially remain in the target company’s bank account as “working capital.” Working capital is the amount of cash required for a company to operate over a set period of time. The amount of working capital typically will not be a set number, rather, there will be a working capital target on which to base the purchase price on, and the final working capital will be delivered at closing, or determined post-closing.Continue Reading Working Capital and Accounts Receivable

Too often, entrepreneurs (who intend on starting the next IPO) pay little to no attention to their organizational documents. This is quite intriguing, as it is similar to buying a house, and not paying attention to whose name is on the title, or what is in the covenants, conditions, and restrictions or neighborhood association bylaws; or getting married and not discussing prior to such marriage who will pay the mortgage.Continue Reading Business Partner or Spouse? Why Organizational Documents Are So Important

When a couple that is in love decides to get married, no one wants to think about how it might end in divorce but to protect their assets, sometimes a pre-nuptial agreement is necessary. No one should avoid making major business moves while they are in the honeymoon phase because the future is ultimately unpredictable—this is just as true for business partnerships as it is for traditional marriages.Continue Reading The Practical Approach to Business Partnership Disagreements