Legal Aspects of Buying a Business
It is important to be neither intimidated nor complacent of the importance of proper legal due diligence when you purchase a business. Make sure you involve an attorney that has relevant business experience and has worked on similar size business transactions before. When necessary, look for a recommendation from a business broker, or another business intermediary for efficient attorneys that are suited to assist you exactly with what you need.
An acquisition typically proceeds through the following four stages, and the usual involvement of an attorney is primarily during the latter three:
1. Preliminary negotiations and signing a Letter of Intent
2. Completing a detailed asset purchase or share purchase agreement based on the letter of intent
3. Due diligence investigations
4. Closing the transaction
If you work with an experienced business broker, or another seasoned business intermediary, you can rely on them guiding you through the process and providing directions to the attorney what is expected and necessary to be performed as legal due diligence.
Depending on the type of transaction and the complexity of the business, below are listed some tasks performed during the legal due diligence. All information provided is based on my experience as a business broker and intermediary participating in various business transactions, and does not constitute a legal advice:
Updating Corporation’s Minute Book
Corporation’s Tax Returns and Notices of Assessment Reviews
Landlord’s Consent to Lease Assignment
Non-Disturbance Agreements with Creditors
Payout Confirmation of Company’s Liabilities
Closing Liabilities Adjustments
Discharge of Security Interests
General Assets Conveyance
Transfer of Name Acknowledgement
Legal aspects of a deal is where you get out of your comfort zone and rely solely on the expertise of a specialist to navigate you through what is important and necessary. Assembling a good team that includes a business broker, accountant and an attorney that talk and cooperate with each other is a recipe for a successful due diligence and closing.