Buying a business is rarely a straightforward process. The seller typically knows every nook and cranny of the enterprise that he or she has developed over the years. The buyer usually has only a limited period of time within which to investigate and evaluate every important aspect of the business. Thus, buyers and their financial and legal advisers must be vigilant in determining all the strengths and weaknesses of the business.
Am I Buying A Company Or Its Assets?
A threshold question is how to structure the deal. Many factors come into play, but the purchase of a company, as opposed to the purchase of its assets, can have dramatically different consequences for the income tax and the liability aspects of the transaction. Tax and legal advisers are essential when buyers confront this issue.
Do I Want A Letter Of Intent?
Letters of intent are traps for the unwary. Some wind up as contracts that can bind the parties. Others are a nonbinding expression of terms on which the parties have tentatively agreed. Still others are a combination of binding and nonbinding provisions.
What Do I Want To Know About The Business?
Buyers and their advisors usually want to know all they can about the businesses under consideration. Each business is unique and requires an investigation peculiar to its operations, but common questions include the following:
- Have you started with an internet search to find out about claims, unfavorable reviews or other negative information about the business you are evaluating?
- Are all corporate or LLC minutes and resolutions up to date? Have the company managers been authorized to make the decisions that they have?
- Does the company hold federal registrations for all trademarks and slogans used in promoting its goods or services?
- Does the company hold patents for any essential technology?
- Do clear, firm contracts exist with key suppliers and customers?
- Do clear, firm leases exist for all facilities used in the business?
- Do employment agreements entice key employees to remain, and prohibit them from, competing with the business or soliciting its customers?
- Do solid agreements bar all employees from disclosing confidential information?
- Are all state corporate or LLC filings current?
- Have all tax returns been filed and all taxes paid? Buyers will be liable for any sales taxes that the seller may have failed to pay, unless they go through a special clearance process before closing.
- Are the employee handbook and related personnel policies complete and up to date?
- Do all financial statements comply with generally accepted accounting principles and fairly and accurately reflect the financial condition of the business?
Understanding the business is only part of the process. We also help clients to make certain that the contract of sale will, insofar as possible, obligate sellers to deliver the business in the condition that purchasers expect. Helping buyers to negotiate contracts that will protect their interests is a key step in the process.
At Chipman Mazzucco Emerson LLC, we understand the complexities of purchasing or selling a business. With decades of combined experience, our attorneys can help ensure you have a solid agreement that is enforceable. As a firm that strives to stay on the cutting edge of business law, we will examine your situation from all angles to ensure the final agreement is in your best interests and can guide clients through the challenging, yet rewarding, process of buying a business.
Schedule A Consultation To Discuss Your Business Transaction
Call one of our lawyers in Danbury to find out how we can help at 203-744-1929 or complete an online contact form.