Many entrepreneurs like the idea of buying a struggling business and turning things around by making better management decisions. After all, owners of distressed businesses are often willing to sell for cheap so they can recoup some of their investment and avoid further debt. This could be a great opportunity for experienced entrepreneurs with financial liquidity to buy a struggling business at a great price.

Of course, there are several legal and logistical issues to consider when buying a struggling business. You must conduct due diligence, do market research, and create a new business plan to ensure the business has a realistic chance at success under the right management.

Consult Legal Professionals

If you’re new to the process of buying a business, it’s a good idea to consult a few legal specialists before moving forward. A great lawyer will help you determine which questions you should ask the business owner to ensure this purchase is a smart move. This will help you get a clear sense of the strengths and weaknesses of the business you will be buying. You may also want to consult the intellectual property attorneys at Miller IP Law for questions about patents, trademarks, and copyrights.

Have a Business Plan

Writing a business plan will help you prove that you can achieve success with the business you intend to purchase. Your plan should include details regarding how you’re going to adapt the business to the current state of the market, including which new services or products you can offer to the existing audience. Perform an examination of the business's target market and the economics of the industry. The current business owner should be able to provide you with a lot of this information, but you may also be able to uncover data on the business by searching online.

Your business plan should also include a thorough evaluation of the business’ competitors. Perform a competitive market analysis on the business to identify gaps in the market that you could leverage to help the business get back on its feet. Be sure to research the competitors’ sales tactics to get an idea of the kind of competition you’re up against and how you might be able to target customers in a unique way.

Establish a Marketing Plan

Your business plan should also include a description of how you plan to market your new-to-you business. Do your research to ensure your marketing plan aligns with the business's existing customer base. A little rebranding is a great way to bring a fresh, modern flare to a struggling business, but you don’t want to go so far as to alienate customers who identify with the old brand. KickoffLabs suggests involving your customers in the rebranding process asking for feedback, suggestions, and concerns.

If you decide to rebrand the business, start by creating new graphics for the business website and social media pages. An eye-catching banner is great for highlighting a fresh, new brand image. You can hire a graphic designer to create a banner for you or save some money using an online banner maker to DIY your own graphics. Use a banner maker to find a Twitter, Facebook, or YouTube banner template you like and customize it with your own text and images.

Decide on a Business Structure

The business structure will affect the transfer of ownership when you buy the business. Sole proprietorships, for example, cannot be sold. The sole proprietorship dissolves and the buyer can use the assets for any new type of business structure. Even if the business is structured as an LLC, you may prefer just to buy the business’ assets to avoid hidden liability concerns. Purchasing the entire entity means adopting all loans, lawsuits, and other liabilities.

Unless you purchase an entire business entity, you will need to choose a structure for your business. LLCs enjoy several benefits over sole proprietorships. For example, LLC owners are not personally liable for their company's actions. LLCs are also pass-through entities, which means profits go directly to members instead of being taxed at the company level. If you decide to go this route, you can file an LLC yourself using an online formation service. Just be sure to review your state rules first!

Negotiate the Purchase Price

Before you make an offer to purchase a business, make sure you’re ready to negotiate the sale price. Beyond price, these negotiations should also include the details of the transaction, including warranties, liabilities, and other responsibilities. Do your own research to determine what the business is worth instead of taking the seller’s word for it. Consider why the seller is selling the business, whether they’re willing to stay on and help with the transition, the economic climate, what assets are included in the sale, and your reason for buying. Remember to also look at comparable sales.

Consider Your Funding Options

Unless you have cash on hand to buy a business, you’ll need to explore your funding options. The U.S. Chamber of Commerce lists several different financing options, many of which are often used in collaboration with others:

• Seller financing: The seller loans you the money that you pay back over time.
• Bank loans: These can be hard to attain for business acquisitions.
• SBA loans: Provide guarantees for banks, encouraging them to loan money for business acquisitions.
• Leveraged buyout: Leveraging some of the business’ assets to help cover the purchase price.
• Assumption of debt: You purchase both the business’ assets and liabilities.

Talk to a lawyer and a financial advisor for help deciding which funding method is best for your situation.

Rather than starting a business from scratch, buying a struggling business at a deep discount could help fast-track your path to entrepreneurship. Just make sure you do your research before jumping into this big investment. Talk to a legal professional, write up a business plan, do market research, create a rebranding plan, consider how you will structure the business, review your funding options, and learn how to negotiate. You can never be too prepared for a business acquisition!

If you're like many Americans, you may dream of owning your own business. However, if you don't have a lot of startup capital, you might think this dream is impossible. Think again! There are multiple resources to help people with limited funds get a business off the ground. This starter guide provides some tips and tools to help.

Look Into Cost-Efficient Business Models

An affordable business model will reduce your financial needs from the start.

• Research business models that require minimal investment, like a personal assistant service.
• Avoid the cost of commercial rent by trying a home-based business, like starting an Etsy shop or drop-shipping.
• Skip the cost of hiring a team with one-person business models, like online tutoring.

Find Innovative Ways to Reduce Startup Costs

Here are some hacks for reducing overhead expenses.

• Create a small business budget and stick to it, avoiding overspending.
• Look into software products that help your business save money, such as cybersecurity and project management tools
• Set up a business strategy meeting to make sure you're not wasting resources and are primed for success.

Embrace Diverse Funding Options

In addition to traditional business loans, there are many funding options available.

• Use online networks to find angel investors who can put up capital for your business.
• Try crowdfunding platforms as a means of raising capital.
• Consider hosting a fundraising event to get donations for startup capital.

Invest In Low-Cost Marketing

Marketing will attract customers—but it doesn't have to cost a lot.

• Create your own small business website using a DIY website builder.
• Leverage low-budget marketing techniques like blogging to promote yourself.
• Use a free image background remover to create marketing materials like logos and branded pamphlets cheaply.

You don't have to have hundreds of thousands of dollars in the bank to start a business of your own. There are many resources that can help if you have limited capital. The above guide provides some tools and tips to get you started.

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Deciding to form a Limited Liability Company (LLC) for your business structure can help you set up the right foundation. Be it a small or a medium-sized business, an LLC enables you to take advantage of the liability protection afforded to its owners

After you choose a name and Registered Agent for your LLC, one of the next things to decide is how your LLC will be managed. There are two types of management for LLCs: Member-managed LLC or a Manager-managed LLC.

Which you'll decide largely depends on the size of the business and the level of independence the owner(s) wants in managing daily operations. 

For instance, you want to start an LLC in Florida. You can start by naming your LLC and hiring a Registered Agent in Florida. Next, you'll want to decide if you want your LLC to be Member-managed or Manager-managed.

LLC Management

Again, there are two types of LLC management: a Member-managed LLC and Manager-managed LLC. As the name suggests, a Member-managed LLC is a structure where the Members, i.e., the owners, handle the LLC daily. On the other hand, a Manager-managed LLC is a structure where a manager, or a group of Managers, runs daily operations and enters into contracts on behalf of the LLC.

The LLC can choose between the two management structures. Regardless, a person responsible for managing an LLC can take the following decisions on behalf of the business:

• Make legal decisions about the business
• Make financial decisions about the business
• Enter into agreements and contracts on behalf of the LLC
• Open a bank account for the LLC
• Arrange financing or debt for the business
• Hire employees, staff, and independent contractors for the business
• Buy and sell assets for the LLC

What is a Member-managed LLC?

A Member-managed LLC is when the owners have the power to manage the LLC, enter into contracts for the LLC, and handle the day-to-day operations of the LLC. Most small businesses choose a Member-managed structure due to their small size and the level of control the owners want to have over it.

Member-managed LLC: By Default 

Suppose you form an LLC in a state that does not specify the management structure in the documents filed for its formation. Further, there is no signed Operating Agreement.  

In that case, the state statute would apply to the business. In such a scenario, the state, by default, usually assumes the business to be a Member-managed LLC.

What is an LLC Member?

An LLC Member is the owner of the business. There is no limitation on the number of Members an LLC can have. An LLC Member can own any percentage of the business. All states allow an LLC to have one Member or multiple Members.

Pros and Cons of Member-managed LLC:

The pros and cons of Member-managed LLC are as follows:

Pros

• All owners have a say in daily business operations.
• It is easy to manage small businesses under this structure.
• This is the most common type of LLC management.

Cons

• There are really no cons to this management structure, however, if one person wants more management control, then you should consider a Manager-managed LLC.

What is a Manager-managed LLC?

A Manager-managed LLC is an LLC where one or few designated Managers handle the day-to-day operations of the LLC. These Managers can also enter into contracts on behalf of the LLC.  

In this structure, the owners expect the designated Managers to make decisions related to the day-to-day management of the business. The owners (Members) are not active in the day-to-day management of the business.

The owners can select the designated Managers responsible for managing the LLC and they have the power to remove them. Once the Members choose the Managers, they expect them to manage the LLC.

There are some LLCs that also have some Members as the Managers. The business needs to specify the management structure of the LLC and must list the information in the LLC formation documents in some states. 

Additionally, there are two types of LLC Operating Agreements generally drafted. Once specific to Member-managed LLCs and one specific to Manager-managed LLCs. So you'll want to choose the correct template to work from and then edit anything that needs to be specific for your business.

The LLC formation documents are usually called the Articles of Organization. However, they may also be called Certificate of Organization or Certificate of Formation, depending on the state. 

Some states allow you to choose internally between the two management structures. In these states, you don't need to include management info in the documents you file to form the LLC. Instead, the management would be chosen, and explained, in the LLC's Operating Agreement.

What is an LLC Manager?

An LLC manager is a designated person that LLC Members have authorized to enter into contracts on behalf of the LLC and handle the daily operations of the LLC. 

An LLC manager is not the same as a usual general manager or a procurement manager, in the traditional sense. Instead, an LLC manager is a position governed by state LLC laws that specifically have to do with the internal affairs of an LLC.

Pros and Cons of Manager-managed LLC

The pros and cons of a Manager-managed LLC are as follows:

Pros

• It may be easier for investors to invest in such a business structure.
• It is suitable for medium and large businesses.
• As the decision-making process is with a single or a group of Managers, the decision-making is often more streamlined and efficient.
• Managers have active control of the business without interference from Members or owners.

Cons

• All owners of the business cannot participate in day-to-day business operations.
• The manager’s authority needs to be defined clearly in the Operating Agreement.

Final Words

While you can change the management structure of your LLC at a later date, it's easier to figure it out up front. One must consider how much control and authority the LLC Members (owners) want.

If all the Members of the LLC want full control and authority, then a Member-managed LLC is usually the way to go. On the other hand, if the Members want to delegate their authority to one, or a few, designated Managers – and they prefer to take more of a "back seat" role – then a Manager-managed LLC is usually the way to go.

Author Bio:

Matt Horwitz is the founder of LLC University, a website that teaches people how to form LLCs. Matt is the leading authority in LLC education and is featured in CNBC, Yahoo Finance, Entrepreneur Magazine, and the US Chamber of Commerce. Matt holds a Bachelor's Degree in business from Drexel University with a concentration in business law. LLC University®, established in 2010, was the first company to create free LLC courses in all 50 states.

If you have a unique idea for a business but lack the confidence needed to go from employee to entrepreneur, you’re not alone. According to Small Business Trends, many Americans hesitate to start businesses due to financial concerns and a lack of confidence in their ability to succeed in business ownership. While understandable, it’s a shame considering the positive effect entrepreneurs have on the economy.

To conquer your startup fears once and for all so you can successfully go from employee to entrepreneur, check out these tips from Miller IP Law. You’ll learn how to prepare a business plan, find the funding you need, protect your intellectual property, and prevent and recover from cyberattacks.

Have a Great Business Plan

Planning is your first step toward entrepreneurship, as a well-drafted business plan will walk you through the different steps that need to be taken in order to achieve your business goals and objectives. As your written roadmap, a business plan will describe the products and services you’ll offer, your marketing strategy, financial plans, executive summary, and more.

For help with creating your business plan, start by using a free online template or working with a free or paid business mentor. Business planning apps and tools are also available, so you’ll never have to go at it alone.

Find the Right Funding

If your finances are holding you back from starting a business, fear not. Business loans, grants, and your personal savings aren’t your only options for funding: You could also try crowdfunding, venture capitalists (VCs), angel investors, or invoice financing. Having a business plan will increase your chances of securing business funding, so be sure to have this handy when completing applications and meeting with banks or investors.

Protect Your Intellectual Property

Once you have a business plan, startup funding, and lots of great ideas to put into action, you’ll want to take steps to protect your intellectual property (IP). Intellectual property theft occurs much more frequently than you’d expect, and it’s important to protect your ideas, products, and inventions to ensure that no other individual or organization can act on these ideas before you do.

Miller IP Law offers a variety of intellectual property services such as patents, trademarks, copyrights, and LLC formation. Schedule a free Zoom call to learn more about how IP protection can provide you with the peace of mind needed to put your business plans into action.

Prevent Cybersecurity Attacks

While protecting your intellectual property is important when preparing to start a business, you’ll also need to take steps to prevent and recover from potential cyber attacks that could damage your finances and reputation. Businesses are commonly victimized by phishing, ransomware, data theft, and other types of threats, but there are steps you can take to reduce your risk and recover from attacks much more easily:

• Develop a recovery plan so you’ll be able to recover lost data and resume operations much more quickly after an attack.
• Set up firewalls and keep your company Wi-Fi private and password protected.
• Automatically back up all files and data at least daily or weekly.
• Train all employees on cybersecurity.

Starting a Business Can Be Scary, but Help Is Available

It’s normal to experience some level of anxiety and fear prior to starting a business, but there’s a reason why millions of small businesses exist in the U.S. alone: It’s because business ownership is possible. Many new businesses start out as side hustles, however, so don’t be afraid to pursue entrepreneurship in your spare time if you’re not quite ready to take the plunge. With help from a business mentor, IP attorney, or your local office of the Small Business Administration (SBA), you’ll get there one step at a time.

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