testimonial

Purchasing or selling a business

Buying or Selling a Business

The purchase or sale of a business involves many aspects of law.  Corporate structure, employment law, contract law, accounting and taxation procedures are all areas that must be considered whether you are buying or selling a business.

The reasons people buy or sell a business can vary greatly but often involve the following:

Reasons To Sell:

  • Conflict with other owners
  • Opportunity for big profit
  • Tired/worn out
  • Not making enough money

Reasons To Buy:

  • Obtaining new product lines or geographic areas
  • Buying unique assets such as patents, trademarks or real estate
  • Buyer needs a job
  • Buying more market share

There are many other reasons why to buy or sell.

Mark The Lawyer's Approach-

I often deal with small family owned businesses.  I like to meet with client's before the process begins so that they can evaluate all of the different decisions that will have to be made.  Having a plan before attempting to buy or sell is crucial.  Below, I outline some areas we evaluate:

Buyer's Issues:

  1. What method should be used to determine how much to offer the seller?
  2. Should the Buyer acquire the business assets or the stock shares of the Corporation?
  3. What financial information is needed to verify Seller's claims of income, debts and profits?
  4. What is the status of lease for the business (if renting)?
  5. If purchasing real estate, How much of the value should be allocated to the real estate versus the business?
  6. Should existing employees be fired before the purchase?
  7. What is the status of any employment contracts or employment benefit plans?
  8. Can the Buyer obtain financing for the purchase or will the Seller "hold paper"?
  9. How should the Buyer own the business:  Sole Proprietor, Corporation, Partnership, or LLC?
  10. What liabilities is the Buyer accepting when buying a business?

A Word of Caution:   Many Buyer's of small businesses will use a "standard" contract provided by a business broker or real estate agent.  There is no such thing as a "standard contract" for the purchase of a business.  Do not make the mistake of diving into a transaction by having the business broker or real estate agent fill in some blanks on a form with the understanding that "your attorney can change things later".  I think that is a huge mistake and can significantly affect negotiations later on.

There are just too many issues to carefully consider before writing an offer to buy a business.  I strongly believe it is advisable to have your attorney draft the offer.  Your business broker or real estate agent may not want to hear that, but it will be better for you and them.  I urge you to get a copy of my report titled:

          "Key Considerations Before Buying A Business!"

Seller's Issues:  

  1. How should I determine the asking price for my business?
  2. What equipment/fixtures go with the sale?
  3. What liabilities or contracts can the Buyer assume?
  4. If I am holding a note for part of the sales price, what security should I get?
  5. Can I start another similar business or compete with the Buyer?
  6. Will I remain liable for the remainder of my lease?
  7. How should I operate the business from the date of contract until closing?
  8. How much tax will I have to pay upon the sale?
  9. What and when should I tell my customers?
  10. What happens to the inventory of the business?
  11. What kind of financial statements or representations must I provide?

I gladly will consult with your accountant to put a strategy in place to minimize the amount of taxes you will have to pay.

Cost Factor:

The fees I charge to represent a buyer or seller of a business does vary greatly.  Most will fall in the $750 to $2,000 range.  Factors that affect it include:

  • The type of business
  • Negotiations with Buyer/Seller
  • Whether real estate is included or not
  • Modifying contracts that I don't draft