Purchasing a small business might be a fascinating prospect. Usually, the buyer has access to an established business and an existing cash stream while the seller is a seasoned entrepreneur either content with retiring or seeking their next challenge.
Many prospective buyers are familiar with the importance of reviewing all the target business’s financial information to determine the value of the business, doing thorough due diligence on all aspects of the target business, the need for a purchase and sale agreement, etc.
But here are some additional and still critical points that buyers may not always (but should) consider:
1. The Organizational Structure
You should be aware of the company structure before buying the business. Especially in a stock purchase, remember you’re potentially purchasing everything, including the legal entity. Your diligence should therefore include a review of the business’s corporate structure, corporate records, operating agreement, etc.
2. Acquiring Stocks or Assets
Speak with your attorney and accountant to understand the distinction between purchasing stock and assets. Each option has different implications – ranging from tax, liability, business licensing and other consequences.
3. Seller's Transition
Buyers may need to decide whether they need the seller to assist with transitioning the business to the buyer. This is particularly critical for businesses where the seller has been at the forefront of the business long-term and has most of the institutional knowledge. If the seller, agrees, the buyer and seller can negotiate a transition services agreement where the seller agrees to stay on for a specific period of time to help transition the business to the buyer.
4. Details on Financing
Many buyers may require financing to buy a business. Buyers could look at personal savings, bank loans, or SBA-backed loans, among other options. In order to qualify for certain funding, buyers should be prepared to provide information to financial institutions regarding the buyer’s financial situation and the target business. Buyers that obtain financing will also need to work closely with lenders to ensure the lender has all they need to close the transaction.
Consult an Expert
A skilled attorney can navigate the complex legal landscape of a business purchase, ensuring a smooth and successful transaction. By hiring an attorney, you'll have a trusted advisor who can protect your interests, negotiate favorable terms, and identify potential risks. Don't let legal complexities derail your business goals. Let an experienced attorney guide you through the process and help you achieve a positive outcome.
Please contact Serna Legal Services at 312-601-9859 or info@sernalegalservices.com if you’d like to learn more about protecting your business's trade secrets. If you’re ready to protect your trade secrets, we can work with you to help you protect your valuable intellectual property!
This content is published by Serna Legal Services, LLC and is available for informational purposes only and is not considered legal advice on any subject matter. By viewing this content, the reader understands there is no attorney-client relationship between the reader and the publisher. The content should not be used as a substitute for legal advice from a licensed professional attorney, and readers are urged to consult their own legal counsel on any specific legal questions concerning a specific situation
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