Success and profits are in reach if you follow these crucial guidelines to have a meticulous, mistake-free business transaction. “An ounce of prevention is worth a pound of cure” (Benjamin Franklin). Whether you’re buying or selling a business, all it takes is one overlooked clause in a careless transaction to have your future finances and time sequestered into litigation expenses.
The experience and consequent foresight of professional counsel will save you incalculable business heartache and loss. Contract wording, structure, and execution are best understood with a law degree.Find an affordable firm and getting a lawyer will actually make you money, invalidating any preconceptions that a lawyer will be an inefficacious expense.
Someone’s word is not as powerful as their legally binding signature. Don’t ever accept an informal conversation as the future’s reality. Disputes will be much easier to resolve, and litigation will be straight forward i f all decisions are written concisely and reviewed with precision.
Whether you’re buying or selling, remaining open to different finance and payment plans can leave doors open. The most valuable buyers sometimes don’t pay in cash, meaning a seller’s most important qualification of potential buyers should be their reliability. If you check their credit scores, having a financed buyer could still be a positive experience. As a buyer, financing is a good option if you still have a substantial down-payment. However, recognize that any business interest purchase is a risk, so only invest money you can afford to lose. Explore SBA loans, seller financing, bank loans, and crowdfunding as purchasing options.
The due diligence process is beneficial to both the buyers and the sellers. As a buyer, knowing the makeup, asset integrity, and functionality of the company you’re joining will save you from tremendous frustration in the future. As a seller, being completely transparent to the buyer during due diligence saves you from future lawsuits and other conflict. This process includes understanding the company’s:
•Organization and standing •Financial information •Physical assets •Real estate •Intellectual property (IP) •Employees and employee benefits •Licenses and permits •Environmental impacts •Tax burdens•Material contracts •Product or service lines •Current Marketing (publicity) •Insurance coverage
One of the reasons lawyers are critical is they know all the obscure contractual additions that can be crucial to protecting and securing assets. Common sense and even online templates don’t encompass the numerous clauses and terms that can add great value to your transaction.
•A no shopping clause/Binding LOI •Nondisclosure/confidentiality terms •Business valuation with asset list •Covenant not to compete •Representation and warranties of the seller and buyer •Contingencies •Payment terms/plans •Promissory Note •Confession of Judgment •Personal Guarantee •Interest Clause – consider two percent (2%) clause•Attorney Fee Clause (may be critical) •Inclusion of all Appropriate Parties (including spouses)
•Confidentiality/Non-Circumvent Agreement •Purchasing only assets, not stock •Consult a professional business appraiser •Asset Purchase vs. Share/Stock Purchase Agreement •Consulting/Employment Agreement
Sumsion Business Law is equipped to handle all levels of business transactions. We have counseled in cases ranging from 100 thousand to 10 million. Our experience in construction, intellectual property, estate planning, and Chinese business law e quips us with the skills to assist you in all types and aspects of business transactions to ensure that your interests are protected regardless of whether you are the seller or buyer.