Buying a business is not an easy decision to make. You as the potential buyer need to ensure that you’ve done your due diligence on the business and have had enough time to look over all the business records and accounting. By doing due diligence you will know exactly how well the business is performing and how well it should perform in the future, instead of taking the current owner at his or her word. To follow proper due diligence and ensure that everything is done correctly, hiring the services of a legal professional as well as Certified Public Accountant will aid in you in this process. A legal professional will certify that all regulatory issues are addressed as well as go through the nitty gritty of the purchase contract.
Steps to Buying a Business
Buying a business is a great thing, but don’t go into an industry you are not familiar with. Do your research on the specific industry and speak to your legal advisor about any concerns you may have.
Negotiating a business takeover can be difficult, without a lawyer at your side you will be at a disadvantage. Your legal professional will ensure that the terms and conditions of the sale contract are in your favor, should anything go wrong during the acquisition.
You need to have all the documentation in order. With a legal advisor at your side, you won’t forget to have everything in order nor will you be blindsided by unforeseen circumstances or breach of contract. Documentation that you need to review includes:
- Key Elements of the Sale
This is also known as a letter of intent. It outlines the key elements of the sale such as confidentiality period, payment agreements, responsibilities. While this document is not legally binding, it will act as an outline for the actual sale and purchase contract as it will define the terms and conditions of the payments.
- Financial Documentation
This will provide you with an overview of the businesses’ current financial situation as well as make you aware of any existing debts, obligations or liabilities that the business has.
- Current Employee Contracts
When taking over an existing business, you will need to re-evaluate the employment or contracts of current employees. A legal professional can aid you with this task by ensuring that everything is not only above board but fair to everyone involved.
- Current Supplier Contracts
Depending on the industry, the business could already have contracts or trade agreements in place with certain suppliers. Before choosing your own suppliers or switching to suppliers with favorable prices, have your lawyer check all contracts with the current suppliers. Doing this will cover you against breach of contract, if the previous owners had signed contracts with their suppliers.
- Equipment and Asset Documentation
When buying a business, you need to know exactly what equipment is in use and what is on the premises. A lawyer will help you take inventory of all the assets and in the contract, it will state what equipment or assets are part of the deal.
- Sale and Purchase Agreement
This is a legally binding contract that contains every aspect of the sale and the terms and conditions that need to be followed to avoid breach of contract. A lawyer will ensure that the terms are fair to both parties and the transfer of ownership will be done to have the business registered under your name once you’ve completed the payments or as set out in the terms and conditions of the sale.
- Key Elements of the Sale
Don’t make the mistake of attempting to buy a business without professional legal advice. You don’t want to risk losing your investment to a fraudulent business deal. For legal services you can count on, contact us today!