Buying or selling a business of any size can be a daunting and complex process. Depending on the circumstances of the business purchase or sale, there are important pre-sale tasks that must be done (see below). There are also voluminous documents that need to be prepared, reviewed and signed–all of which place binding obligations on both the buyer or seller.
What Are The Legal Costs of Buying or Selling a Business?
The legal costs associated with buying or selling a business are typically related to the dollar value of the transaction – at least that is how we approach legal fees at Burns Law Firm. Why? A business being sold for $5M is likely to require (1) more document preparation, (2) more diverse assets for which title needs to be transferred and (3) broader and deeper due diligence than a business being sold for $50K.
Many other factors also impact the cost of buying or selling a business, some of which include: (1) is there a state, federal or municipal license or permit involved (e.g. liquor license, commercial fishing license), (2) seller’s preparation for the sale (has the seller gathered all the documents necessary or must the lawyers do so), and (3) are there liens, UCC filings or other encumbrances on the business assets.
Using Confidentiality / Non-Disclosure Agreements to Protect Your Business
The seller of a business will often refuse to disclose certain business information (such as financial documents) to a potential buyer until that buyer signs a confidentiality agreement / non-disclosure agreement and/or pays a deposit of some amount. This helps to protect you and your business from snooping competitors or others with no intention of buying the business.
The Importance of Hiring an Independent Attorney
Not only is it extremely important that a lawyer draft the appropriate purchase and sale documents, it is equally as important that both the business seller and business buyer know and understand the substance of such agreements before signing any. Therefore, even if you have not used an independent lawyer for the entire purchase and sale process, you should absolutely consult an attorney before signing any documents.
Pre-Sale Tasks: Business Valuation & Due Diligence
There are many pre-sale tasks that need to be completed in preparation for the purchase and sale of a business: business valuation and due diligence, which includes the review of profit/loss statements and tax returns, cross-referencing business bank statements, review of customer lists, review business contracts, search the UCC, cataloging inventory, verifying ownership of trademarks, copyrights and/or patents as well as numerous other tasks that may be specific to the type of business you are buying or selling.
The Attorneys at Burns Law Firm provide the following specific legal services for the purchase or sale of a business:
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Sale Price Negotiation Assistance and Support
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Entity Formation
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Purchase Price Adjustment for Prorated Items Such as Rent, Utilities, and Inventory up to the Date of Closing
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Draft and Review All Purchase and Sale Documents and Due Diligence
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Promissory Notes – Prepare, Draft and Review (applicable when the seller finances all or part of the buyer’s purchase)
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Security Agreements – Prepare, Draft and Review (applicable when the purchase of a business is financed by any party)
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Regulatory Compliance Review at the Local, State and Federal Levels (where applicable)
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License Review (ensure the seller’s licenses transfer to the buyer, or buyer is able to acquire all necessary licenses to operate)
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Uniform Commercial Code (UCC) Financing Statements – Prepare, Draft, Review and File (applicable when the purchase is financed)
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Assumption of the Business’ Existing Lease – Prepare, Draft and Review All Necessary Documents
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Transfer of Business-Owned Vehicles – Prepare, Draft and Review All Necessary Documents, Including a Bill of Sale
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Verify and Transfer the Business’ Intellectual Property Assets (all Patents, Trademarks, and Copyrights)
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Review Franchise Documents (where applicable)
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Prepare, Draft and Review Non-Compete and Confidentiality / Non-Disclosure Agreements
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Prepare, Draft and Review the Closing or Settlement Sheet
The Attorneys at Burns Law Firm Are Your Full-Service Business Sale / Business Purchase Attorneys.
Legal Representation is a near necessity for the purchase and sale of any business. The Attorneys at Burns Law Firm advise and assist investors, entrepreneurs, businesses and individuals throughout the process of buying a business or selling a business.
