“Before you go to market, the seller should do a due diligence review. Hire an ERISA lawyer, get the paperwork together, and see what’s going on.” – Meredith Sesser, Owner of Sesser Law
In today’s episode of The Ripcord Moment, Meredith offers her expertise on the nuances of retirement plans, ERISA (Employee Retirement Income Security Act), and ensuring your business is in good legal and fiduciary standing before selling.
While owners may feel overwhelmed by the concept of conducting an audit or due diligence review, it is easier than you may think. Meredith usually asks clients to send her documents related to retirement, like pension plans, 401(k) plans, and profit-sharing plans, through Dropbox. Buyers will see the same documents, so it is wise to ensure there are no liabilities or mistakes that need to be fixed before the buyer assesses them.
Because there are so many employee-related elements in a sales agreement to consider beyond a 401(k), like non-qualified retirement plans, deferred compensation, health benefits, etc., an M&A lawyer should request an ERISA lawyer to review these parts thoroughly. Proactively communicating with your third-party administrator about important decisions, like adding a new partner to the firm, is crucial so steps can be taken to update certain documents and avoid problems that can potentially become legal burdens.
Lastly, she shares two action items for owners:
1. Prevention can save owners significant amounts of stress and money. Engage an ERISA lawyer to conduct a due diligence review to ensure there are no liabilities or fiduciary breaches.
2. If there is a problem, fix it before you go to market. A few thousand dollars to fix a mistake is always better than having the IRS get involved later. It also lessens buyers’ hesitation/risk when considering your business.
Disclosure: Information presented herein is for discussion and illustrative purposes only. The views and opinions expressed by the speakers are as of the date of the recording and are subject to change. These views are not intended as a recommendation to buy or sell any securities, and should not be relied on as financial, tax or legal advice. You should consult with your attorney, finance professional or accountant before implementing any transactions and/or strategies concerning your finances.
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