After deciding to purchase a business, you will investigate specific businesses to buy. You can find them through the internet, various brokers, or via your own personal and professional connections. Once you’ve settled on a target, you will have to go through a series of actions to complete the sale. Read on to learn how to buy a small business in New York.
Investigating the Business
You want to know that you’re getting a fair price for the business; you also want to know every facet about the business if some unknown factor could have a negative impact. Therefore, any buyer will perform due diligence before proceeding. This involves heavy investigation, including checking on tax returns, liens, leases, asset lists, permits and licenses. Looking into the employees, any violations or lawsuits should also be part of the process.
Negotiating the Terms
This is dealt with primarily in the “term sheet” or letter of intent, which puts in writing the basic terms of the deal before the drafting and negotiating of the sale agreement. The term sheet:
- Shows intent; it lets the seller know that you’re serious about purchasing the business.
- Avoids future negotiation impasses about major issues when the parties have already spent much time and money on the transaction.
- Acts as a guide for the attorney when they draft the sales agreement.
Documentation of the Deal
These are key documents when transferring the business to the seller:
- Sales Agreement: Sets forth the major terms and conditions of the transaction and is often executed days or even weeks before the closing.
- Promissory Note: Sets forth the purchase price owed, the dates for the remaining payments, interest on any outstanding payments, and makes it easier for the seller to collect from you if you default a payment.
- Security Agreement: Seller may ask for a security interest in the assets being sold to you. Then, the seller may foreclose on the business assets in case you default on payment.
- Bill of Sale: Transfers ownership of the tangible assets of the business from the seller to the buyer, including furniture, supplies, inventory, equipment.
It’s time for everything to culminate in the closing. This is the end of the process of the purchase when the parties and their attorneys come together to exchange money and property and complete the remaining documentation. Typically, the when and where of the closing is set forth in the sales agreement. It’s best if the closing goes on without incident, but there may be last-minute issues. Perhaps some closing conditions haven’t been met, or there are changes to the documents that need to be addressed, but hopefully the parties are fine with going ahead with the transaction regardless.
Get Help with Buying a Small Business in New York
Many closings will go off without a hitch due to careful planning and willing cooperation between the parties. You will need an experienced attorney at every stage of the process when you make your small business purchase. They can help you handle barriers that arise in the due diligence process, prepare the paperwork, and deal with last-minute negotiations that occur during closing. Act in your best interest and connect with one of our skilled MOWK Law attorneys. Contact us today.