The sale of a business can be a complicated process with many legal and practical considerations. Without proper legal representation, potential deals may collapse, litigation may ensue, and the parties may expose themselves to unnecessary liability.
At the TK Law Firm our business law attorneys represent both Buyer's and Seller's in business purchases.
Our goal is to help make the sale of a business run as smoothly as possible, to inform our clients of practical as well as legal considerations, and to eliminate the risk of future litigation between the parties.
Speak with an experienced Florida attorney at our firm today.
Call 855-Kramer-Now (855-572-6376).
Seminole County Business Transactions Lawyer
At the TK Law Firm we often represent the buyer in business purchases. In addition to representing Buyers, the business transaction attorneys at the TK Law Firm also represent Seller's in the sale of a business. Call us today at 855-572-6376.
Many of the transactions that we handle are asset purchases, although we are occasionally involved in stock purchases as well. At the TK Law Firm, our goal in business transactions is to assist our clients in understanding the practical and legal aspects of a business purchase or sale.
As the objectives of buyers and sellers are quite different, our role in business transactions may be dramatically different depending on who we represent.
Buying a Business
Buyers need to know how much liability they are exposing themselves to. Buyers also need to determine whether they will make the money that they expect, before the deal is done.
With that in mind, one of the most important steps for the Buyer is determining whether the business that they want to purchase has any liens or other debts. There is no worse feeling than purchasing a business and discovering that the business is essentially worthless because of tax liens, judgments, or other obligations.
The Buyer needs to have as much information as possible to determine whether the Buyer will be able to duplicate or improve the performance of the Seller's Business.
Therefore, it is important that Buyer's carefully review the records of the business with an attorney and qualified accountant to consider all of the variables, including financial and legal considerations.
The Purchase Agreement
Usually the Buyer prepares the purchase agreement and submits it to the Seller. The Buyer may be at a disadvantage if the Seller prepares the purchase agreement. The purchase agreement should include an inspection period of between 15- 30 days.
The Seller should be required to turn over the relevant documentation and records to the buyer within five days of the execution of the purchase agreement, to ensure that the Buyer will be able to utilize the full inspection period. The inspection period should allow the Buyer to conduct due diligence, including reviewing the business books and records, discussing the business with the Seller, and reviewing existing contracts.
The Buyer will want to reserve the right to terminate the purchase agreement for any reason during the inspection period. If the Buyer terminates the agreement during the inspection period, the deposit should be fully refundable. For this reason the deposit should be held in escrow pending closing.
The Buyer should understand that it is all but impossible to be absolutely protected against tax liabilities of the Seller, including sales tax. This is because Florida law places the burden upon the Buyer to determine that the Seller has paid its sales taxes. This is usually not a consideration with businesses that solely provide services.
For the Buyer's protection the Buyer should obtain some amount of financing from the Seller. By having a payment obligation to the Seller and by including a right of set-off in the event of a breach or default by the Seller, the Buyer may apply any damages they suffer against the amount they would otherwise owe.
Buyers may consider making part of the purchase price contingent on obtaining a certain level of sales or revenue benchmarks during the first year after the purchase. This is especially true where the Buyer is relying upon the past performance of the Seller in determining the purchase price.
When purchasing a business, Buyers should also make sure that either the purchase agreement includes a properly drafted non-competition clause or that the parties enter into a separate non-competition agreement. This will help in preventing the Seller, its officers, directors and shareholders from competing with the business after the sale.
An attorney at the TK Law Firm can help draft a non-compete agreement or incorporate a non-competition clause into the purchase agreement.
The purchase agreement should establish a period where the Seller will train the Buyer on how to operate the business effectively. This period should be at least two weeks. It may be a good idea to have the Seller remain as an employee or consultant for a longer time period.
In such a situation a separate employment agreement or consulting agreement should be drafted along with the purchase agreement. Also, if there is an employee of the business who is critical to the success of the business, the purchase agreement should be contingent upon entering into a separate employment agreement with that employee for a reasonable period of time.
If the Seller is a corporation, limited liability company, or other entity, the owners of the business should personally guarantee the purchase agreement, as the entity will usually dissolve after the closing.
Buyers should seek legal advice and tax advice as to whether the purchase agreement should allocate the purchase price among the various assets. Failing to address this consideration often results in disputes before closing, or after the sale of the business, as the parties become aware of the tax ramifications of the allocations or failure to allocate.
Buyers should also seek a full and complete list of representations and warranties from the Seller and its owners.
Intellectual Property
Buyers should also know that often the most valuable asset a business owns may be the goodwill, intellectual property, and going concern value, rather than tangible assets.
Therefore, Buyer's should make sure that the attorney that they are working with understands intellectual property concerns, and is capable of addressing any intellectual property concerns such as the licensure or transfer of intellectual property, including trademarks, copyrights, and trade secrets, from the Seller to the Buyer.
Selling a Business - Preliminary Considerations
There are many legal and practical considerations for anyone selling a business to consider. A business transactions attorney at the TK Law Firm can help anyone selling a business address these considerations.
For example, Sellers should need to make sure that they do not make unreasonable or inappropriate representations or warranties; these representations and warranties can lead to future conflict and litigation. Because the Seller generally knows the problems with the business, it is best to identify and resolve the potential issues before listing the business for sale.
An attorney at the TK Law Firm can help identify and resolve issues that may complicate the sale of a business or lead to future litigation. The Seller should also consult with a certified public accountant or business broker prior to listing the property to determine the value of the business.
The Seller may also want to obtaining an appraisal prior to listing the business. The Seller should also consider whether they are willing to offer financing and if so what under what terms.
A business transactions attorney at the TK Law Firm can assist Sellers in drafting financial documents, including a promissory note, security agreement, a personal guarantee and any other necessary documentation.
Speak with an experienced Florida attorney at our firm today.
Call 855-Kramer-Now (855-572-6376).
The Purchase Agreement
The Seller should conduct a judgment and lien search on itself and its owners to insure that there are no problems which may be discovered by the Buyer. Even the appearance of an unresolved problem may cause a potential sale to fall apart.
If the Seller is a business entity, the Seller should make sure that all of its documentation, such as corporate filings or annual minutes, is up to date. The Seller should also make sure that all state, county, or city licenses are in good standing and that any other legal obligations are satisfied. In order to expedite the sale process the Seller should gather all financial data, tax returns, financial statements, and other relevant documentation.
Sellers should consult with a business attorney prior to issuing any representation or warranty. An attorney at the TK Law Firm can help Sellers make sure that any representations or warranties are reasonable and appropriate and that they are carefully worded to avoid future liability.
Closing Documents
The preparation of the closing documents may be accomplished in a variety of ways. Often the Buyer's attorney will prepare the bill of sale, employment or consulting agreement, and closing statement. The closing documents should include the judgment and lien search documents, uniform commercial code searches along with any other relevant documents.
If the Seller is providing any financing to the Buyer, usually the Seller's attorney will prepare a promissory note, security agreement, and any other necessary documents. However, the Buyer's attorney should review those documents to insure that they are accurate and that the terms are reasonable.
A closing attorney at the TK Law Firm can assist in the preparation of closing documents necessary for the sale of a business.
Contact a Seminole County Business Transaction Lawyer at the TK Law Firm
Make sure you understand the practical and legal issues involved with the purchase or sale of a business plan. Contact a business transactions attorney at the TK Law Firm at (855) 572-6376 in Seminole County, Florida to discuss your business transaction needs.