Buying an existing business (which, along with sales, is known as, “mergers and acquisitions”, “asset purchase” or “stock purchase”), can be an excellent way to expand your business or give you a head start into the business world with an established name, brand, product and system. Although some business owners want to build their brand organically from the bottom up, some find that well-established markets with big brand names can be tough to break into. That’s where buying an existing company makes the most sense (especially given that 50 percent of all new businesses fail, according to the U.S. Small Business Administration). You’ll need a Lake Mary business attorney experienced in Florida business sales and purchases to ensure you’re getting the best deal and your assets are protected.
No matter how small the company, buying or selling a Florida business is often far from simple and a lawyer should always be consulted. As a Lake Mary business attorney, I have seen many cases where the buyer purchased a company that they thought was profitable only to find out it was a money pit with lots of debts and liabilities because they didn’t perform the proper due diligence prior to executing the sales agreement – particularly among small business owners (sellers or buyers) who tried to do it themselves without a lawyer and an accountant.
Why You Need Lake Mary Business Lawyer When Buying, Selling Florida Business
Trying to negotiate the right price for the sale or purchase of a company is just one element. You first need to conduct proper due diligence of the company, which often times include a complete valuation of the company, estimated growth, seasonal fluctuations, tax ramifications, the overall health of the business and general financial state. These aren’t all the things with which a Lake Mary business attorney can assist, but he or she should be part of the buyer or seller’s team working to prepare information needed for offering the business and for buying it.
Your business lawyer will need to carefully examine the business’s contract rights and obligations and potential lawsuits as part of their due diligence process as well. These include things like:
- Real estate
- Leased equipment
- Shareholder agreements
- Supply contracts
- Employee agreements
- Distribution agreements
- Intellectual property rights
- Employee benefits plans
- Current or potential lawsuits
- Environmental risk assessment.
Be wary of Lake Mary business attorneys who advertise a broad range of legal services, like personal injury law, criminal defense and business law. It can be doable for large law firms, but at small- to- mid-sized firms you want to go with a firm that specializes in this area of practice because otherwise, they won’t be as experienced in the kind of legal advice and plan YOU need.
Selling a Florida Business – Top Seller Concerns
Many times, one of the primary issues about which business sellers are concerned is whether they might get stuck with the bill if the buyer tanks or decides to fail. This will be the case if the seller stays on as the guarantor for any debt the buyer assumes. Best way to avoid that is to decline to a sale that relies – even partially – on seller financing or guarantee of debt. That could take a few offers off the table and drop your overall business valuation, but it would protect you from being held responsible if the buyer runs the business into the ground after you hand over the keys.
Another thing sellers (similar to buyers) are highly interested in is the value of the business. One mistake many sellers make is assuming that what they have put into the business will directly reflect its market worth. This gets even more complicated when small companies haven’t been meticulous with records or in accounting with business and personal expenses.
Pitfalls in Florida Existing Business Purchases
If you are the buyer, you too will have a strong vested interest in the value of the company and will want an attorney who can help you with due diligence. Sometimes even when a company is showing a profit, there may be certain unforeseen issues – liabilities/ debts, market changes, etc. It’s important also to be certain there are no outstanding tax penalties or interest owed to the Florida Department of Revenue, as you could be responsible to pay once you take over the business. This is done via request to the seller or to the state for a Certificate of Compliance.
Your Lake Mary business lawyer will help you determine exactly why the business is being sold (so there are no surprises), help determine the true valuation and avoid costly mistakes (such as signing contracts in your own name, leaving you and your assets personally on the line if the business fails).
Contact the Lake Mary, Florida business attorneys at The Chidolue Law Firm, serving Orlando and Lake Mary, by calling (407) 995-6567 or email us.
Consumer Pamphlet: Legal and Binding Contracts, The Florida Bar
More Blog Entries:
DO MY CONTRACTS ALWAYS NEED TO BE IN WRITING?, April 27, 2017, Lake Mary Business Attorney Blog