Buying a business requires numerous legal considerations. It is all too common for a buyer to see the perfect opportunity with an asking price that seems reasonable given the market, location, revenue, and rent. You can run the numbers, do some due diligence, and verify that it is a profitable business. But are you familiar with the wide variety of issues that can arise during a business acquisition? An attorney with extensive experience can recommend proactive measures that will mitigate your risk before you sign on the dotted line.
An experienced business attorney would negotiate the following terms to protect the buyer of a business:
- A closing date at least 60 to 90 days after the contract date rather than just one month
- A clause requiring the seller to hold some of the purchase price in escrow until the buyer can confirm that the business doesn’t have any unpaid taxes or other debts
- A clause allowing the buyer to form a corporation or limited liability company to act as the purchaser of the business
- A clause allowing the buyer to conduct due diligence on the business before closing
- A clause allowing the buyer to back out of the deal and get her deposit back if:
- Due diligence reveals aspects of the business that make it undesirable.
- A bank refuses the buyer a loan to pay the purchase price.
- The government denies the buyer any licenses or permits required to operate the business.
- The landlord denies the buyer a lease with reasonable rent and other terms (clearly spell out the terms).
To negotiate terms that are fair and favorable to you, consult with an attorney before you begin meeting with a potential seller. The most cost-effective way to handle a business acquisition is to retain a trustworthy and knowledgeable business attorney on a flat fee. Such an attorney will provide a range of services that are vital to a business deal.