7281 Pymbroke Circle, Fishers, Indiana 46038

Buying and Selling a Business

Here are a few things to consider throughout the process of buying or selling a business.

  • Business Broker? If you have a business broker/investment banker helping you, I’ll coordinate with them.
  • Brokers/bankers can be very helpful. But you need to make sure you get the right one for your needs and that you get a fair contract.  If you don’t have a broker/banker and want one, I offer a special service for a fixed $750 fee to help with that.  Please click here to see why people often don’t get an attorney to help with this and why that isn’t very smart (and to see what I can do for you).
  • Simple or Not So Simple Deal – – How Much Attorney Help Do You Need?
    • For example, if the business is a franchise, the legal services-side of things may tend towards the simple, because much of the process and agreements may be dictated by the franchisor or by the informal customs that have developed among franchisees over the years.
    • On the other hand, an example of a deal that tends towards more complexity would be a business that has important contracts that may include terms that make the contracts hard to be transferred to a buyer in certain acquisition structures. As another example, significant tax planning circumstances, while being opportunities to create value, can add complexity.
  • Letter of Intent or Jump Right to a Purchase & Sale Agreement? I’ll walk you through the pros and cons of signing a non-binding letter of intent, instead of moving right to a Purchase & Sale Agreement.  A letter of intent can be a good sign of psychological commitment of the parties to the deal.  And it can be the impetus to discuss and reach an informal understanding on a few major issues early on, rather than spending a lot of money and time only to later find out that a particular issue is a deal-killer.  But it all depends on the circumstances you’re in.  I’ll help you evaluate what best fits your transaction.
  • Confidentiality; Non-Competes; Non-Solicits & Non-Circumvents: I’ll help you sort through confidentiality, non-circumvent, non-competition, and non-solicitation agreements – – in terms of (a) what arrangements are in place at the company today (for example, if you are the buyer, are the acquired company’s employees bound by adequate restrictive agreements), (b) what protective arrangements will be in place after the purchase is completed, and (c) what protections need to be in place throughout the sale and acquisition process (these item (c) protections are often included as binding terms in an otherwise non-binding letter of intent)?
  • Due Diligence; Representations & Warranties; Indemnity; Holdbacks: How much due diligence investigation of the business should a buyer want and how should a seller respond to due diligence requirements?  How, if at all, does due diligence affect the representations and warranties a seller typically provides?  What do representations and warranties and hold harmless/indemnity clauses really mean anyway?  Representations and warranties are not so much about what is true or false, but rather they are used to allocate risk between a buyer and a seller as to things that might be wrong with the business now or in the future (and who is or isn’t responsible for them).  Hold harmless/indemnity provisions are risk-allocators as well.  I’ll fill you in on “purchase price holdbacks/escrows”.
  • Explain the Terms of the Purchase & Sale Agreement; Help Negotiate: I will go over the purchase and sale agreement with you to make sure you understand where you’re protected (or not) and what risks you’re taking (or not).  Where appropriate, I can help you negotiate the terms.
  • Tax planning:
    • Seller financing is often used to help get deals done, but there’s a potential tax trap for the unwary seller if the buyer defaults on the promissory note and the seller gets the business back.
    • Why do sellers typically want to sell “stock” and buyers typically want to purchase “assets”. When is this not the case?  If you buy “stock”, you’ll want to do more due diligence than if you purchased assets.
    • Would it help in your circumstances to buy the stock of the target, but elect, for income tax purposes, to treat it as an asset sale (called a “§338 transaction”).
    • In an asset sale/purchase, I’ll walk you through the IRS purchase price allocation process.
    • Does a tax-free merger/reorganization structure work in your case?
    • How do earn-outs (as part of a purchase price) get taxed?
    • Is it possible for the owner of the selling business to sell personal goodwill at the same time the business, itself, is being sold (which, if it fits, will reduce the overall tax liability of the seller)?
    • Using IRA funds to pay the purchase price (“ROBS” transactions)
  • Work-in-Progress as a Purchased Asset: How to handle work-in-progress that is sold as part of the business, including using purchase price adjustments after the closing of the purchase/sale.
  • Unemployment Tax Issues & Planning: Indiana unemployment tax / Indiana Department of Workforce Development matters and filings.
  • Buyer Financing arrangements and documents.
  • Project Timeline and “To Do” Lists: I’ll make sure we have a “to do” list and that it is frequently updated.  I’ll work with you and others involved with the deal to agree upon a timeline with you.  These help get the deal done in a timely and accurate manner.
  • Business Exit or Succession Planning is a hot topic these days. Pre-planning the sale of your business (or other exit) does make sense.  That’s a case-by-case, business specific and personal process though.  And if you’re not careful, the process gets a bit over-blown and becomes crowded with lots of advisors and unnecessary complexities.  How about a free consultation over a cup of coffee with me and Brian Rider? Brian is a solo practicing attorney and is also a CPA at Rider Kenley & Associates and frequent collaborator with me on business sales and acquisitions.  You’re going to need to ease yourself into this one.  Focus on what you want to have in place before you sell or otherwise give up control of your business.  (Brian and I collaborate as independent professionals, not as partners)
  • Fee Arrangements: For sales and acquisition work, I typically work on an hourly rate basis, but once I get to know you and your transaction, in many cases I am happy to consider a flat fee, not-to-exceed, or other alternative fee arrangement.
  • Please contact me to talk or to set an appointment. I don’t charge for our first meeting.

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