Buying or selling a business should never be considered a do-it-yourself project. Whichever side of the table you find yourself on, it is crucial for you to have a comprehensive understanding of the agreements and contracts involved in your deal. An experienced business lawyer will collaborate with you in the negotiation phase of the transaction, and then educate you about the various contracts and agreements you will be asked to sign so you’re fully informed about how your deal works, and what your rights and responsibilities are. If you’re seeking legal counsel to buy or sell a business, please reach out to the attorneys at Woodward, Kelley, Fulton & Kaplan to schedule a consultation.
SELLING A BUSINESS
Having built your business over years, or even decades, an experienced business attorney should be consulted when you’ve decided that is time to sell and pursue other endeavors. Remember, that the intricacies of selling a company go well beyond just selling the tangible assets because a big chunk of your company’s value hinges on how you have structured the business, the goodwill you have created, and what systems and processes you have built into your company to ensure its survivability after you’re long gone.
BUYING A BUSINESS
When acquiring a business, your attorney is likely to shoulder an increased workload throughout the process. Their primary responsibility is to ensure that you carefully consider each factor before finalizing the purchase. Your lawyer will delve into researching the company’s liabilities, assets, and equity. Many business transactions come with specific conditions, and your attorney will scrutinize these documents, advising you on any potential adverse effects.
Drafting legal documents related to the sale is also within your attorney’s purview. Given the potential variability in contract terms, your lawyer will engage in negotiations to secure provisions that favor your interests. In certain cases, negotiations may extend to establishing a consulting relationship with the seller. If you require information and guidance from the seller post-sale, your lawyer can draft a separate consulting agreement, outlining the terms and duration during which the seller will provide assistance and training.
TYPES OF BUSINESS SALES
It’s crucial to recognize that there are two primary types of business sales. One involves selling the legal entity itself, such as when you own a business organized as an LLC, and you sell an interest in that legal entity or its shares. In this scenario, if the buyer acquires the entire legal entity, they also assume ownership of any corporate liabilities. Buyers’ attorneys in such cases carefully review documents to identify potential legal vulnerabilities.
Alternatively, there is the option of an asset sale, where the buyer purchases the business’s assets without taking over the legal entity. Opting for an asset sale allows the buyer to limit their legal liability. This approach is more prevalent in Florida, where buyers often feel more secure regarding legal exposure when acquiring assets rather than entire legal entities.
Acquiring a business involves legal implications and official requirements. Your attorney may need to communicate with state officials and submit forms to various agencies. Obtaining a specific business license may also be necessary, and your lawyer can assist in that process.
Whether you are the buyer or seller, your lawyer’s goal is to ensure that the contract minimizes the risk of court battles and costly litigation. They are adept at identifying potential legal pitfalls during the drafting and negotiation of terms to safeguard you from possible legal exposure.
THE BOTTOM LINE: PUT A GOOD BUSINESS LAWYER ON YOUR TEAM
Deciding to sell your business is a significant choice, and it’s crucial to ensure that the agreement acknowledges the hard work you’ve invested. On the flip side, buying a business marks a substantial step in a person’s life and represents a significant investment. Whether you’re the seller or the buyer, you should feel confident in both your decision and that your transaction was documented correctly and legally.
As always, if you have any questions about buying or selling a business or business law generally, please don’t hesitate to contact us!