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|New Jersey Business
Lawyer | Business Formation
| LLC Limited Liability Company | IRS Tax | Business
Purchase | LLC Lawyer
People Overpay the
Government...But Certainly Not our clients!
J. Cappuccio, J.D., LL.M. (Tax)
Counsellor at Law
1800 Chapel Avenue West, Suite 128
Cherry Hill, New Jersey 08002 US
(856) 665-2121 Fax (856) 665-9005
men prefer the
calm of despotism to the tempestuous sea of liberty.”
Small and Emerging Businesses become more profitable!
|Business Transfers -
and Acquisitions - FAQs
Negotiation Question 1/11/07
Subject: Business sale transaction fees
Dear Mr. Cappuccio:
I am preparing an offer to purchase my employer. I would like to know
what a typical sales commission fee would be on a six million dollar
transaction as this will influence my offer. Thank you for your time.
Typically, the Broker's fee for the transaction would be about 5%. This
can vary depending on the type of business and work required. If the
matter is very complex, the fee can reach 10%.
I hope this helps!
of Intent 10/16/07
Subject: Letter of Intent
I saw your response to a question about due diligence and LOI's. I am
interested in any sample non-binding LOI's you may have. I am
considering entering into a due diligence period to acquire a company.
Any help is appreciated.
I know you think there are "magic forms," but I individually draft my
Letter of Intent documents based upon the client's circumstances. For
one, I use significantly different language when I represent a Buyer
vs. a Seller. I always want to do the drafting because I can best
represent my client that way.
Secondly, I prefer a "Memo of Understanding." This is UNSIGNED and is
an outline of the transaction. The big advantage is the ongoing
negotiation helps in the preparation of the Agreement of Sale and
I provide my clients with a business purchase checklist and I am sure
your attorney will do the same. I also prepare a spreadsheet modeling
the business and determining if it is financial affordable.
I am glad you are aware of the need for due diligence prior to
purchasing the business. It would just be better if your attorney was
involved from the beginning to protect your interests.
I hope this helps!
an Entire Product 10/1/07
Subject: Vendor Financing
QUESTION: VENDOR FINANCING
I need someone to negotiate (or coach me to negotiate) vendor financing
to start an invention-based, on line, wholesale/retail store. Questions:
Apart from the viability of the product and the trustworthiness of the
vendor, what are the basic principles that govern such negotiations.
Does it boil down to competitive bids? Is there a standard for
calculating compensation for such financing? How do you prepare for
“Is it feasible to negotiate an agreement to fund the
manufacturing of an entire project through a vendor who supplies the
parts, assembles & packages the product, and supplies the first
finished goods for distribution, in return for an exclusive
manufacturing agreement for a set-forth period of time.” (or
‘quantity of product’ - sic)
This seems to be exactly what I need. My new product (patent-pending)
is superior to the competition, can be cost-effectively manufactured by
fabrication of sheet acrylic in a relatively small quantity, in short
lead-time. It has a ready wholesale/retail channel in a major
product-sourcing, on line directory used by on line stores. I have
received quotations from seven contract manufacturers, two or three of
which I can negotiate with. The start-up costs are as minimal as one
can desire in such an enterprise. Cheers …
It is very hard to negotiate for yourself and you are right to state
you need help. When you have someone doing your negotiating, that
person can take positions that you might not be able to take. You
should read a really good book on negotiation. I have my law students
read "Negotiate This" by Herb Cohen. I am concerned that the proposed
deal could result in your business having all of its "eggs in one
basket." Is the vendor a US company? If not, particularly if the vendor
is in China or another country noted for ignoring patents and
intellectual property, you MUST PAY ATTENTION to Trustworthiness. I
would be happier if you had several vendors supply a discrete part with
the final assembly in your control.
I know you have suggested competitive bidding. As a small customer, you
might do a lot better negotiating with a vendor you can trust and with
whom you feel a high level of comfort. It is easier dealing with people
you know and like.
I really suggest that you should retain a good attorney to negotiate
the deal for you.
I hope this helps!
Ron Cappuccio http://www.taxesq.com
1. I reside in the West Indies. The manufacturer is American and has
signed an NDA and non-competition agreement before being allowed to
quote on the project.
1. Do you still suggest I use more than one supplier? 3. I was looking
for a rough formula to determine compensation due to a supplier for
financing. For example, the supplier can be paid more than they bid for
the job, proportionate to their exposure and for a pre-determined
number of parts, in return for supplying parts, raw materials, printed
materials, packaging etc. "up front".
Thanking you ….
If one supplier can do it faster and cheaper, it may be initially
better. Nevertheless, you still run the risk of losing your only
Secondly, the type of agreement you are referencing is similar to a
purchase order. For example, you may agree to purchase 100 units during
a 12 month period. You and the manufacturer could agree to release 10
products at a time with you just paying for those items received. This
is a common practice, although you will pay more than if you purchased
all 100 units because the seller is financing and storing the units.
I hope this helps!
call me at (856) 665-2121
Email me to discuss
financing for your business.
2007 Ronald J.
Cappuccio, J.D., LL.M.(Tax) 1800 Chapel
Avenue West, Suite 128 Cherry Hill, NJ 08002 USA (856) 665-2121