Deal Value, Regulatory Change and the Private Company

Most privately held businesses in Georgia do not look closely at their governing documents, tax structure or employment agreements until a buyer or investor asks to see them. By then, the documents are usually several years old and were written for a company that looked quite different.

This year gives owners good reason to look sooner. The Georgia General Assembly amended the corporate code, cut the state income tax rate below 5% and gave businesses a new way to support independent contractors. At federal level, the 2025 tax legislation changed the economics of owning and selling a company, the Federal Trade Commission abandoned its nationwide non-compete rule in favour of targeted enforcement, and FinCEN ended beneficial ownership reporting for domestic companies.

Taken together, these changes bear on the three questions that matter most in any private company transaction: how much of the price the owners will actually keep, who can approve the deal, and whether the people and relationships behind the valuation will still be there after closing. This article considers developments through September 2026 from the perspective of the founders, family owners, management teams and private equity sponsors who drive Georgia’s middle-market deal activity.

The price is not the proceeds

A headline purchase price says little about what a seller will actually receive. Earnouts, rollover equity, seller notes and working capital adjustments can each move real money from one side of the table to the other, and all of them are settled in the drafting.

Earnouts

Earnouts remain a common way to bridge a gap in valuation. Industry data published in 2026 by SRS Acquiom, covering private-target transactions closed through 2025, found earnouts in roughly 29% of lower middle-market deals with closing payments of up to USD50 million, and in about 35% of deals of up to USD25 million.

The difficulty is that the seller gives up control on day one, while the buyer’s decisions determine whether the earnout is paid. A well-drafted earnout addresses four points.

• The metric – revenue, gross profit and EBITDA can produce very different results from the same year of trading. The parties should run worked examples covering returns, bad debts, shared overheads, pricing changes and customers moved between affiliated businesses. A definition that simply refers to “the buyer’s accounting practices” leaves too much open.
• Operating covenants – if the buyer changes staffing, discontinues a product line or folds the business into a larger platform, the agreement should say how that affects the calculation.
• Information – the seller needs access to the records behind each calculation.
• Timetable – there should be a clear deadline and procedure for objecting to a calculation, so that questions are resolved while the numbers are fresh.

Rollover equity

Private equity buyers frequently ask founders to reinvest part of their proceeds in the buyer’s holding company. Rollover aligns interests, but it also turns the seller into a minority investor in a business they no longer control. The seller should understand how the rollover is valued against the sponsor’s own investment, whether it can be structured to defer tax on the rolled portion, and what protections come with it: information rights, tag-along and drag-along terms, pre-emption rights on future issues, and what happens to the equity if the founder’s employment ends.

Seller financing and working capital

A seller note is only as good as the buyer’s ability to pay it. The seller should look at the buyer’s assets, existing debt and cash flow, and negotiate security and guarantees where the credit profile warrants them. The security agreement, lien searches, perfection filings and any subordination agreement with the senior lender belong on the closing checklist, not on a list of things to tidy up later.

Working capital deserves the same early attention. The parties often have different assumptions about how much cash, inventory and receivables stay in the business at closing. Settling the target, the accounting policies and the treatment of aged receivables at the letter of intent stage avoids a renegotiation at the point where the seller has the least leverage.

Tax: structure decisions now carry more weight

Federal changes

The federal legislation enacted on 4 July 2025 made several changes that bear directly on exit planning. The most significant for founders, particularly in Atlanta’s technology sector, is the expansion of the qualified small business stock (QSBS) exclusion under Section 1202 of the Internal Revenue Code. For stock issued after 4 July 2025, non-corporate holders may exclude 50% of qualifying gain after three years, 75% after four years and 100% after five. The per-issuer cap has risen from USD10 million to USD15 million, and the gross-asset ceiling for a qualifying corporation from USD50 million to USD75 million, both indexed from 2027.

The benefit is real but conditional. The stock must be acquired at original issue from a C corporation carrying on a qualifying business, and many professional service businesses are excluded altogether. For a new venture, QSBS makes the choice between an LLC and a C corporation a genuine question again. For an established company, converting shortly before a sale rarely works: a change of entity or tax classification can itself trigger tax, and the owners’ basis, the company’s debt and its historical elections all affect the outcome.

The 2025 legislation also permanently restored 100% bonus depreciation for qualifying property acquired after 19 January 2025, made the 20% deduction for qualified business income under Section 199A permanent, and reinstated immediate expensing of domestic research and experimental costs. Bonus depreciation in particular increases the value of an asset purchase to a buyer at federal level, which gives sellers a stronger basis for asking for a higher price.

Georgia changes

House Bill 463 reduced Georgia’s flat income tax rate from 5.19% to 4.99% from 1 January 2026, for individuals and corporations alike, and contemplates further reductions toward 3.99% if revenue conditions are met.

Georgia’s annual conformity bill, House Bill 1199, is selective. Georgia follows the enhanced QSBS exclusion, so a qualifying founder can exclude the gain from state tax as well. It does not follow federal bonus depreciation, which must be added back, and it keeps its own calculation of the business interest limitation. Federal and Georgia tax bases will therefore diverge for the same assets, and any model that assumes a federal deduction produces the same result in Georgia will be wrong. Georgia also has not adopted the higher federal cap on the deduction for state and local taxes, so the state’s pass-through entity tax election remains worth reviewing each year.

The letter of intent is the right moment to get legal, tax and accounting advisers in the same room. Purchase price allocation, retained liabilities, rollover equity and contingent consideration can each change the parties’ after-tax results significantly, and fixing a tax problem once the price has been agreed usually means reopening the commercial deal.

Real estate and franchise relationships

For many Georgia businesses, much of the value sits in the site and the brand relationship rather than the operating company alone.

Property

Founder-led and family businesses often hold their real estate in a separate entity that leases it to the operating company. That gives the seller a choice at exit: sell the property with the business, keep it and grant the buyer a new lease, or complete a sale-leaseback with a third-party investor. Each produces a different price, tax result and ongoing exposure, and the choice should be made before the letter of intent is signed.

Where the seller keeps the property, the new lease is effectively part of the purchase price. Rent, term, renewal options, repair and capital obligations, and whether the buyer’s parent will guarantee the lease deserve the same attention as the acquisition agreement. Where the business leases from a third party, buyers should check assignment and change-of-control provisions, existing defaults and any personal guarantees the seller will expect to have released.

For acquisitions and development projects, title, survey and zoning work should start early. Confirming that the current use is permitted, that certificates of occupancy are in place and that lender consents can be obtained avoids late surprises.

Franchised businesses

Buying or selling a franchised business brings a third party with its own rights into the deal. Most franchise agreements require the franchisor’s consent to a transfer, and many add a right of first refusal, a transfer fee and a requirement that the buyer sign the franchisor’s current form of agreement, which may carry different fees and territory terms. Cross-default provisions can also link several units. The franchisor’s approval process should be built into the closing timetable from the start.

Governance and capital raising

Officer exculpation

House Bill 1185, signed by Governor Brian Kemp on 11 May 2026 and effective from 1 July 2026, is the most significant revision of Georgia’s corporate statute in years. For private companies, the change with the widest practical reach is officer exculpation.

Georgia has long allowed a corporation’s articles of incorporation to limit directors’ personal liability for monetary damages. Under the amended Official Code of Georgia Annotated (OCGA) Section 14-2-202(b)(4), corporations may now extend the same protection to officers. It is not automatic: the articles must be amended with board and shareholder approval, and there is no protection for intentional misconduct, knowing violations of law, unlawful distributions, improper personal benefits or the appropriation of business opportunities. Georgia’s version is broader than Delaware’s, covering every officer appointed under the by-laws or by the board, and it should be reviewed together with existing indemnification agreements and directors’ and officers’ insurance.

Investor rights and approvals

Exculpation also changes the conversation with outside investors. A founder who asks for officer protection should expect an investor to ask for something in return, typically stronger information rights, a documented procedure for approving transactions with insiders, or both. The same review is a good moment to set separate approval thresholds for a sale of substantially all assets, a new class of equity and transactions with an owner’s affiliate. Limited liability companies fall outside the amendment, but the Georgia Limited Liability Company Act gives members wide freedom to address these points in the operating agreement.

Raising capital

Most private capital raises in Georgia rely on federal Regulation D. Georgia requires a notice filing for offerings under Rule 506, made through the North American Securities Administrators Association’s electronic filing system, which the Georgia Secretary of State has mandated since April 2025. Smaller in-state raises can use the Invest Georgia Exemption. Missed filings and loosely documented investments from friends, family and early employees are among the most common issues found in later due diligence, and they are far cheaper to fix before a sale process begins.

Regulatory scrutiny: less paperwork, sharper focus

The end of domestic BOI reporting

FinCEN’s final rule, published on 14 August 2026 and effective immediately, removes every entity formed in the US from the definition of a “reporting company” under the Corporate Transparency Act. Reporting now applies only to entities formed under the law of another country that register to do business in a US state, and they report only non-US beneficial owners.

The terminology can mislead. A Delaware company registered in Georgia is a “foreign” entity for Georgia registration purposes but a domestic entity for FinCEN, with no reporting obligation. The test is where the entity was formed. Federal relief also leaves state compliance unchanged: Georgia annual registrations are due by 1 April each year, and a failure to file can lead to administrative dissolution. Companies should remove or update Corporate Transparency Act covenants in their governing and loan documents, and keep capitalisation records that reconcile every issued interest with the subscriptions, transfers, options and conversion rights behind it.

Targeted non-compete enforcement

The FTC’s 2024 rule, which would have banned most post-employment non-competes nationwide, is gone. The Commission withdrew its appeal in September 2025 and formally removed the rule in February 2026. It has instead moved to case-by-case enforcement, and one of its most prominent actions involves an Atlanta company. In June 2026, the FTC approved a final consent order requiring Rollins, Inc, the pest-control group, to stop enforcing non-competes against more than 18,000 current and former employees nationwide and to tell them they are free to compete. Employers should know which employees are restricted and why, and be able to explain the business interest each covenant protects.

Under the Georgia Restrictive Covenants Act (OCGA Section 13-8-50 et seq), a restraint of two years or less on an employee is presumed reasonable. In connection with the sale of a business, the presumption extends to five years, or to the period of any payments to the seller, if longer. The Supreme Court of Georgia confirmed in 2024 that a covenant does not always need an express geographic term, provided the implied scope is reasonable.

For a business preparing for sale, covenants are part of the value the buyer expects to acquire.

• Covenants signed years ago may no longer match an employee’s current role or customer contact.
• Sale-of-business covenants and employment covenants should be kept separate where a selling owner is staying on, so that each benefits from the correct presumption.
• A covenant does not automatically transfer in every deal structure. The buyer should check the parties and the assignment language, and allow time to put new agreements in place where needed.

Independent contractors

House Bill 987, the Voluntary Portable Benefit Plan Act, was signed on 11 May 2026. It allows businesses that engage independent contractors to contribute voluntarily to portable benefit accounts for retirement savings, health insurance, disability cover and life insurance, and provides that those contributions cannot be used as a factor in deciding whether a worker is an employee under Georgia’s wage, unemployment insurance, workers’ compensation and other employment laws. For construction, healthcare staffing and technology businesses in particular, this is a practical recruitment tool. It does not change the federal tests applied by the Internal Revenue Service or under the Fair Labor Standards Act.

Technology and AI contracts

Many businesses now rely on software suppliers and artificial intelligence services for customer service, document processing and financial operations. Before signing, a business should know what data the supplier will receive, whether it can use that data to train its models, which subcontractors will have access, and how the data comes back when the contract ends. The liability cap should be tested against a realistic loss. In due diligence, buyers need to know whether key technology can be used after closing, whether third-party consents are required, and whether the target actually owns what it describes as proprietary.

Succession planning

The federal estate and gift tax exemption is USD15 million per individual for 2026, indexed for inflation and with no scheduled sunset. That removes the pressure behind many hurried transfers of business interests in 2024 and 2025, but it does not answer the harder questions: who will run the company, how a departing owner will be paid, and whether the business can get through an unexpected transition.

A useful succession plan starts with the operating business. Someone must have the authority to sign contracts, access bank accounts and run payroll if a key person becomes unavailable, and that authority should be consistent across the bylaws or operating agreement and the owner’s estate planning documents. Buyout provisions need a funding mechanism the company can actually afford, and where children or employees will become owners, voting and economic rights should be considered separately. Owners should also check that old buyout obligations, transfer restrictions or consent rights will not get in the way of a later sale to a third party.

Looking ahead

Georgia’s 2026 legislation reflects a deliberate effort to make the state a better place to own and run a business: lower tax rates, a more modern corporate statute and more flexibility for companies that rely on independent contractors. Combined with the federal tax changes of 2025 and the end of domestic BOI reporting, the planning environment is meaningfully different from what it was two years ago.

For a Georgia company considering investment, succession or sale, the most valuable preparation is a co-ordinated review: confirm ownership and authority, test the proposed payment terms against realistic trading conditions, settle the tax and real estate structure before the commercial terms harden, and identify the people, contracts and approvals the business needs after closing. A company that can explain clearly who owns it, who can bind it and what supports its value will negotiate faster and close with fewer surprises.