Are there any legal issues arising from the typed agreement received?

Asked over 1 year ago - Whitestone, NY

I am the accountant and I ran into an issue that is new to me. My client(my brother) purchased an exisiting Hair salon . It is an LLC, NY. The only doc received is a typed agreement made up of a few paragraphs that DOES NOT specify what the sale of the business includes. My brother says he gets the clients and the salon chairs. However, I dont know if he now owns the name of the business . He says there are no accounting records, no other documents he received. The agreement was not even notarized. My brother has been operating the business for a few months now. What are my legal implications if any? Note my brother purchases an Unincorporated business and received a personal loan with no interest. Are there any legal issues here? If the seller owes taxes is the buyer liable for them?

Attorney answers (5)

  1. Mark Michael Campanella

    Pro

    Contributor Level 14

    3

    Lawyers agree

    Answered . There are several issues. In order to protect his interests, your brother and the seller should not only execute a detailed asset purchase agreement that fully outlines the terms and what's included in the sale, but he should conduct full due diligence to determine whether this deal can/should be concluded. He really should speak with a qualified business attorney in his area before proceeding.

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  2. Michael Evan Greenspan

    Contributor Level 16

    2

    Lawyers agree

    Answered . As attorney Campanella indicated, your brother really needs to sit down with counsel to go over this transaction. Among the issues presented are whether he assumed any liabilities, did he purchase the LLC or shares thereof? If the business was unincorporated what is the LLC that you mention?

    There are tax considerations that need to be taken into account as well. We would be happy to speak to you and your brother to discuss this purchase.

    Answering this question does not create an attorney-client relationship between us. The answer given is for... more
  3. Jayson Lutzky

    Pro

    Contributor Level 20

    2

    Lawyers agree

    Answered . There should have been a purchase agreement, a search for judgment, liens and bankruptcy, a clearance from NYS department of taxation and finance, a restrictive covenant and more items. Your brother should consult with an experienced attorney to discuss the matter. Also, the lawyer should review lease and the loan agreement and security agreement if any.

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  4. Noah D. Cohen

    Contributor Level 10

    2

    Lawyers agree

    Answered . This sale should be done as an "asset sale" as opposed to the sale of the business entity (the LLC).

    This would keep your brother from being responsible for the taxes and other liabilities incurred by the seller, LLC.

    The purchaser would still have to get a release from the NYS sales taxes which could be done prior to or simultaneously with the closing (providing a suitable escrow would be deposited by the seller).

    Of course a competently drafted contract would address many other issues, including but not limited to the one which you brought up. What is included in the sale?

    You should retain counsel familiar with sales and purchases of business in order to review the documents signed in conjunction with this sale and to advise the purchaser going forward.

    Note: This response is for general informational purposes only. No attorney-client relationship is created. No... more
  5. Ray Beckerman

    Pro

    Contributor Level 12

    1

    Lawyer agrees

    Answered . We would need to review the document you're talking about, and then we would be able to answer your questions. A consultation of that nature (by email, phone, or in person) would cost in the neighborhood of $150 to $200. My phone number is 718-544-3434. My email address is ray@beckermanlegal.com

    I'm located in Forest Hills, Queens.

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