The Legal Steps for Purchasing a Business
Purchasing an existing business is one of the more serious commitments you can make. Owning a business comes with tons of responsibilities. You have to contribute your time, money and sweat. Also, you'll have to evaluate the risks you face in comparison to the returns you need to make to ensure your firm succeeds. A key component in getting the best businesses for sale in Miamiis making sure you follow all rules and regulations. The following are some procedures to consider when purchasing a business.
1. Conduct Research
Don't make the purchase blindly. Identifythe strengths and weaknesses of the enterprise before sealing the deal. Also, identify exactly what is included in the sale. In simple terms, do thorough research to obtain information that the sellers may not share with you.Some of the documents you should review include: ● Financial records and statements● A list of all the suppliers and customers● A list of all the employees in the company, along with their contract terms and salaries ● Any legal documents and contracts pertaining to the business, such as lease agreements ● A list of all of the business’s assets and equipment● A list of all charges, liens, licenses, debts and liabilities
As you'll note, the information on these documents is highly sensitive. As such, the seller will probably request that you sign a non-disclosure form. The form restricts you from using the documents for any purpose other than thepurchase of the business. Have your lawyer review any documents before you sign them. The attorney will be able determine whether a form is necessary or not and will help make sure you're not signing something that could potentially have legal ramifications. In reviewing these documents, consider verifying the information on the various government sites available. They can help confirm the status of any liens, charges, or debts that the business may have. You'll also be able to determine whether or not the company has any outstanding tax liabilities.
2. Determine the Purchase Structure
Here, you'll need to determine the basic parts of this agreement. You should be able to identify who isselling the enterprise. Also, determine specifically what is included inthe sale and the sales price. The agreement should also state the manner and nature of the payment will be made. As you'll note, most businesses for sale are run by private companies. As such, important assets of this business may be owned by one of those private companies, which could include trademarks, patents and inventories. You may question whether you should purchase those assetsthrough your company or individually. It's very important that you make the purchases through the company. That will ensure you reap the tax benefits. Also, creditors may not come after your personal property or assets if something goes wrong. Additionally, you must decide whether you're buying the company’s assets or the shares of a company. In most cases, choose assets over shares. It will give you the control and freedom you need to effectively manage the company. With purchasing shares, there is the possibility of becoming the owner of a business with massive liabilities. And, when there are other shareholders, you’re not allowed to maintain control over what happens with the company’s assets, such as which workers to cut loose and which individuals to hire.
3. Negotiate the Terms of Purchase
Don't make the mistake of entering into blanket negotiations for everything in the business. Make sure you agree on every specific detail of these terms before signing the document. For instance, a seller may want you to retain all the employees the firm has. However, after the analysis, you may feel that the number of employees is too big. As such, you need to agree in detail on how the situation with the employees will be handled. The seller may fire all the employees on the eve of the purchase and require you to rehire them. In this case, it'll be simple for you if you don't rehire them. However, the owner may refuse to fire them. Then you'll have assumed their contracts, and firing them may result in huge severance costs, depending on the terms of their contracts. You may also want the seller to sign a Non-Compete Agreement. This contract would bar them from starting a competing business in the future. In most cases, the buyer has the responsibility of preparing all of the legal documents. As the buyer, you need to take your time before submitting any of these documents. Let your attorneys review them to ensure their completion, accuracy and legality.
