Purchase or sale of a business is a complicated process for which experienced legal counsel is essential. When representing clients in such transactions, we start the process by learning as much as possible about their objectives in the transaction in order to advise them on a comprehensive set of issues ranging from business matters and financial risks to legal hurdles. Our goal is to anticipate challenges to proactively solve problems, from negotiations and due diligence phase to final closing.
There are two primary methods of transferring ownership of a business, either by sale of the businesses assets or by the transfer of ownership of the entity itself:
Asset Purchase Agreements (APA)
This is a form of a business sale where instead of purchasing the stock of the company, the buyer purchases specific assets of the company and assumes specific liabilities. There are a number of issues that can arise in such transactions such as inventory, accounts receivable and payable, condition of assets, and lease of premises that must be addressed in the agreement.
Stock Purchase Agreements
In a stock purchase agreement of a business, the purchaser is buying the shares from the shareholders of the company.
Purchasers will often require a provision in the Agreement which prohibits the sellers from competing with the business after the sale. The duration and geographic limitation of such provisions are negotiated by the parties.
In addition to negotiating, drafting and reviewing business sale offer letters and agreements, we advise and assist business owners and investors in a wide range of issues including:
- Advising on practical business and financing issues related to the transaction
- Assisting with the selection of the right business entity, such as partnership, Limited Liability Company, S-Corporation or C-Corporation
- Advising on discovering and managing liens and other corporate liability issues
- Advising on the laws of local jurisdictions affecting the business as well as any applicable licenses and permits required for legal operation of the business
Other important matters to consider include assignment of the business trade name, transfer of customer lists, training of new owners and staff, and introduction of new owners to important business contacts.
Given the complexity and scale of the issues involved in the sale of a business, it’s critical for both purchasers and sellers to retain an attorney with knowledge and expertise in such matters to guide them through the process and safeguard their interests.