How to Buy a Business

December 5, 2012 - If it’s your dream to buy a business and channel your passion and energy to develop it into your vision, making smart decisions on the front end can ensure you are able to achieve your goals. There are some simple and not-so-simple steps to take on the road to buying a business to ensure you do not run into any speed-bumps along the way. Hiring a knowledgeable and resourceful attorney to help you navigate the buying process is a solid investment into your new business.

First, investigate the opportunity and the market. Explore opportunities to create efficiencies to improve the bottom line of the business and exploit unexplored prospects to expand the business. Consider your lifestyle and how you want to spend your time. You will also have to consider the investment you’ll be required to make and evaluate your willingness to take risks. Depending on the type of industry involved, there are specialized agents who market businesses for sale. A business plan, marketing model, or other tool may aid you in attracting investors or traditional financing as well.

Next, an attorney can draft a Letter of Intent setting out the major perimeters of the deal, such as the purchase price, earnest money deposit, and due diligence. Some detail should be given to how you plan to inspect the business and what must be kept confidential. Consider carefully what terms you would like in the Letter of Intent. It can be both a jumping off point for negotiations and a boundary in which you keep the seller caged.

Once a Letter of Intent is executed, you should dive into your due diligence, exploring the seller’s financials, physical plants, records, employee statistics, branding, intellectual property, and market and product share. An attorney should oversee this process to ensure you are given access to the most pertinent documents and materials you need to make an informed assessment of the business. Then, a Purchase Agreement will be negotiated and executed. An attorney will be vital to helping you negotiate not only the best price, but also the best terms. It is in your interest to find an attorney experienced in navigating the following issues:
- Financing

- Investors

- Options

- Rights of First Refusal

- Real Estate Considerations

- Exclusivity

- Intellectual Property

- Franchising

- Joint Venture Agreements

- Tax Clearance Letters

- Environmental Issues

- Title Issues

- Title Insurance

- Insurance

- Internal Governing Documents

- Regulatory Issues

- Government Contracts

- DBE Status

- Vendor Contracts

- Customer Base

- Large Customers

- UCC Liens

- Mortgages

- Personal Guarantees

- Investment Opportunities

- Manufacturing

- International Trade Issues

- Shipping

- Confidentiality Agreements

- Territories

- Indemnifications

- Representations and Warranties

- Consulting Agreements

- Vehicle Transfers

- Employee Issues

- WARN Act and State “Mini-WARN Acts”

The steps to close the sale will vary based on the type of business. Major concerns should be properly following the laws governing employee transfers, eliminating liens against the real and personal property to be sold, and negotiating effective Assignment and Assumption Agreements. When buying a business, you make your money both when you buy the business and, secondarily, when you run it. When you’ve found a suitable opportunity, make an investment into your business’s future by completing the process in an effective way. A knowledgeable attorney will help you pursue the business opportunity to make your dream come true.

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