I am buying a business that has been lasting over 33 years. What should I prepare to purchase this business?

Asked almost 2 years ago - San Francisco, CA

I am buying a business that has been lasting over 33 years. The owner is retiring. He sells a high-end goods (over $7,000-8,000 average/piece) and has been very successful. I would like to know what kind legal documents I should prepare for this purchase. Although he seems a nice man, since I never have done this, I feel I should know all the basic necessary procedures. Thanks!

Attorney answers (7)

  1. Craig Trent Byrnes

    Pro

    Contributor Level 15

    9

    Lawyers agree

    Answered . You really need to hire an attorney to do this. If you are making a purchase of a business with a significant amount of money, don't risk it by trying to take care of the contracts yourself. That would be pennywise and pound foolish.

    No one on Avvo can tell you everything you might need, based on the limited information we can get from you here.

    Good luck with your purchase, and I wish you the best.

    Sincerely,
    Craig T. Byrnes
    www.ctblawfirm.com

    Disclaimer: Please be aware that I am not offering legal advice, nor forming an attorney-client relationship with... more
  2. Pamela Koslyn

    Contributor Level 20

    9

    Lawyers agree

    Answered . Business buy-sell agreements are very complicated, as are stock transfers, and you're obviously spending a lot of money on this purchase, so it's really unclear why you're not hiring a business transactional lawyer to handle this. That's who can explain what documents are needed and what they mean.

    "He seems like a nice man" is not the way to evaluate a business purchase. Have you done your due diligence?

    Avvo doesn't pay us for these responses, and I'm not your lawyer just because I answer this question or respond to... more
  3. Michael Charles Doland

    Contributor Level 20

    6

    Lawyers agree

    Answered . I concur with my colleagues. The list of essential issues is beyond the 4000 characters that Avvo permits.

    Whenever I perform these services I make sure that a CPA is part of the team. I also make sure tehre are no lapses in insurance coverage. Finally, I run a litigation search in the county where the business is located.

    Good luck.

    The above is general legal and business analysis. It is not "legal advice" but analysis, and different lawyers may... more
  4. Shawn Regis Jackson

    Contributor Level 15

    5

    Lawyers agree

    Answered . As to your specific question, at a minimum, you will want a Asset Purchase Agreement with the caveat that if the seller is a corporation, you will need a slightly different document. With that being said, the real work is in the due diligence...visit one of the webgsites below...

    By Grace...
    Shawn Jackson ESQ. (707) 584-4529
    Business Development Attorney EMAIL: Attorneys@CaliforniaBusinessDevelopment.com
    www.CaliforniaBusinessDevelopmentAttorneys.com
    www.CaliforniaBusinessDevelopmentCenter.com
    www.CaliforniaBusinessDevelopmentPlans.com
    www.CaliforniaBusinessDevelopmentIncubator.com


    No communication resulting herein shall create an attorney-client relationship unless a separate retainer agreement is signed by attorney and client. The information provided neither is legal advice nor is it conveyed in the course of an attorney-client relationship, but is intended merely as a general overview with regard to the subject matter covered. You should not act upon this information without seeking professional counsel such as any attorney in this office in a subsequent email communication (agreement) and the formation of an attorney client relationship.

  5. Dana Howard Shultz

    Contributor Level 20

    4

    Lawyers agree

    Answered . I agree with my colleagues that you cannot prepare the required documents on your own and that retaining a lawyer is essential. One of my clients, a year before engaging me, bought an individual's business based on a letter agreement. It turned out that the business had an undisclosed liability that ended up costing my client hundreds of thousands of dollars.

    Answering your question directly: You can start with a non-binding letter of intent. Then you, your lawyer and your accountant can conduct a written due diligence investigation. If you are satisfied with the results of that investigation, you can enter into a purchase and sale agreement for the business's assets or the ownership interest in the business (shares of stock, etc.), depending on the type of transaction that you and your advisors deem most appropriate.

    The foregoing is only a rudimentary summary; additional documents and procedures may be required.

    This information does not constitute legal advice and does not establish an attorney-client relationship.
  6. Matthew Lorin Kabak

    Contributor Level 4

    3

    Lawyers agree

    Answered . I agree with my colleagues that you should seek an attorney and a CPA. It is a great first step that you like the owner who has been successful. Next, you need to value either formally or informally the business to determine what is a fair price for the business. Additionally, you should conduct other due diligence to determine whether the business is a good fit for you and what is the likelihood of continued success..

    The basic business purchase agreements would typically include a nonbinding Letter of Intent, Asset Purchase Agreement, possibly a Bill of Sale. Additionally, it is very important that you consider the existing commercial lease terms, and obtain an assignment of lease with landlord's approval. You also want to consider what type of business entity you should form to hold the business assets, whether an LLC or corporation. In circumstances where there is no lease, but rather a purchase of commercial property, you would want a separate entity to hold the real property.

    Proper legal counsel on this transaction could save you lots of heartache and money down the road. Good luck with your decisions.

  7. Frank A. Natoli

    Pro

    Contributor Level 20

    4

    Lawyers agree

    Answered . Hi,

    Of course, I concur with my collegues that this is not a one-size-fits-all kind of issue. But you will want to consider how you will be buying the business. Will you by the stock or interest of the entity or the assets of the business? Anytime you consider a biz purchase you need to consider the due diligence first. Making sure you are not buying into a problem (whether known to the seller or not).

    I would be happy to chat with you. If you would like to discuss further over a free phone consult, feel free to contact me anytime that is convenient.

    304 Park Avenue South, 11th Floor
    New York, New York 10010
    (212) 537-4436
    (866) 871-8655
    Support@LanternLegal.com

    **We are proud to announce that Lantern Legal was awarded the prestigious 2012 Louis M. Brown Award for Legal Access (Meritorious Recognition) given by the American Bar Association's Standing Committee on the Delivery of Legal Services.

    The law firm of Natoli-Lapin, LLC (Home of Lantern Legal Services) offers our flat-rate legal services in the... more

Can't find what you're looking for? Ask a Lawyer

Get free answers from experienced attorneys.

 

Ask now

26,641 answers this week

2,978 attorneys answering

Ask a Lawyer

Get answers from top-rated lawyers.

  • It's FREE
  • It's easy
  • It's anonymous

26,641 answers this week

2,978 attorneys answering