Are you Ready for Funding? #2

from Entrepreneurship Education.com 7/10 enhanced by Peter/CXO Wiz4.biz 7/13

Other Forms of Intellectual Property. What other properties do you own or have contractual rights to? Do you own or have leases for real property? Do you own your equipment or are you leasing the same and if so, what are the terms of those leases? Often, having personal property leases can tie a company down to outdated technology.

Other Contract Issues. If you have employees, you should be examining your employment agreements. What sort of rights do you have to a key employee? Do you have key man insurance? What sort of “non-compete” & “confidentiality” agreements do you have? Are your restrictive covenants valid (in some states they are either not or are severely restricted)? Have you entered into agreements with third parties to “outsource” work and if so, what are the terms of those agreements? Have you licensed or otherwise granted rights to any intellectual property and if so, what are the terms of those agreements? Do you have outstanding obligations to lenders, equipment vendors or others? This is related to the subhead “Other Forms of Property.” Do you have joint venture, partnership, affiliate agreements and if so, what are the terms of those agreements? How tied in are you to these agreements and is that a good or a bad thing?

Corporate Issues. If you are a corporation or even a Limited Liability company [LLC], are you currently in good standing in your state? Have you issued stock if a corporation, even if privately, and if so, do you have all the necessary permits for those transactions? Are there parties that have rights to your stock such as in the form of options, warrants and the like? Are your “minutes & by laws” current, reflective of all the appropriate transactions that may have occurred?

Financial Issues. Do you have all the latest financial information about your business? Are you obligated as a borrower or guarantor on any notes? Do you have a plan for the long-term and a budget for the current and near term? What sort of “Exit strategy” have you developed? Have you broken out your gross & net income by category of product/service you provide and do you know all your margins?

Conclusion: There are clearly many other issues that must be faced that may vary with the particulars of your business. 1) This article is not intended to be at all exhaustive. Rather, the purpose here is to point out that it is the wise entrepreneur who examines the foundation before trying to sell the house. If the seller does not do this, the seller can be certain a wise buyer will. Best uncover the defects before presenting the business to a potential investor. 2) This article is not intended as a substitute for legal advice. The specific facts that apply to your matter may make the outcome different than would be anticipated by you. You should consult with an attorney familiar with the issues and the laws.

Comments: Is there anything else needed to prepare for Funding?