Buying a business is a wonderful alternative to launching your own business. If you have the capital then you can get a fully functioning company that you can then work to improve and make more profitable.
There are dozens of places you can look for a business to buy. Many people network their way into learning that a business is up for sale. Some work in the business for years and buy the business when the previous owners are ready to retire. Others find listings on the Internet or through business brokers.
You won’t need to involve a business attorney until you’ve identified a likely candidate. Once you have, it will be time to launch the “due diligence” process.
What is due diligence?
A due diligence is a thorough investigation into the business you want to buy. You’ll look into the company’s financial records, current legal issues, and liabilities. You’ll also look into the people and products you’ll be inheriting.
This process protects you and ensures that you don’t make a buy that’s going to cause you nothing but legal or financial headaches in the future.
This is a very, very short summary of what goes into the due diligence process. In reality there are mountains of documents to go through and a thorough investigation that will need to be conducted before you should feel confident about moving forward.
No business will just give you all the information you need just because you ask for it. To start the process, you and your attorney will generate a “term sheet,” a non-binding agreement which says you’re serious about purchasing the business. It’s a rough draft of an offer, should everything in the due diligence process come up good. Your attorney will enter some intensive negotiations on your behalf on what goes into the term sheet simply because it will eventually form the skeleton for the purchase agreement.
What happens after due diligence?
Your attorney will go back to the negotiation table after drafting the purchase agreement. You can expect these negotiations to go on for some time as both sides tighten up different terms and provisions of the agreement. Buying a business is not like buying a house, where you’re mostly worried about sales price, closing dates, move-in dates, and whether the roof is repaired.
When buying a business you also have to worry about what liabilities you’re assuming, and what the seller is and is not representing to you about their business. You’re going to want to make sure the seller isn’t just going to run out and start a new, competing business. These are just a few of the issues that might come up.
Closing the Sale
Once closing day arrives the process should run smoothly enough: you transfer the money, they sign over the business, and you’re the proud new owner of the business. You might expect to see a final adjustment of operating expenses, and in some rare cases there are last-minute negotiations that your attorney will have to help you navigate.
Even a cursory view of the entire process makes it easy to see why you’ll want an experienced business lawyer by your side from start to finish. Reach out to Scott Richman Law to get help today.
Submit this form to have your case reviewed by our attorney.
Meet Mr. Richman
SCOTT B. RICHMAN, ESQ.
Mr. Richman is the Managing Member and Founder of Richman Law Firm PLLC. In his role as Managing Member, Mr. Richman oversees the day-to-day operations of the firm and handles the litigation of the most complex legal matters across a vast array of practice areas and disciplines.