By: Thomas Law Group On: November 16, 2022 In: Business/Employment Comments: 0

Purchasing a business can be a very exciting time, but as with any major investment, it should be done with careful thought and professional assistance.

Either prior to locating the potential business for purchase or at the latest once that business is identified, the purchaser should assemble their professional team. This team should minimally consist of both a tax adviser and legal counsel who are each experienced with business transactions, as well as the purchaser’s financial adviser.

Early in the process and prior to any contractual documents being signed, the purchaser should have lined up potential lending sources, if the purchaser is not able to fund the purchase with his/her own cash. If third party lending is necessary, then several lenders should be considered so an acquisition loan should be “shopped” and the purchaser should consider, in addition to the terms being presented for the loan, things like whether a long-term relationship with the lender is possible and the lender’s knowledge and experience with the type of acquisition and its industry. Often the purchaser’s professional advisers will be able to make several recommendations for consideration. Securing the essential financing early in the transaction process is not only a key element but many sellers often require proof of such financing by a certain date during the negotiation process.

While the majority of small business and professional practice purchases involve the sale and purchase of the business assets only, it is possible and, in some cases, and industries desirable, for the purchaser to acquire the stock or membership interest in a business from the selling party. Each of these business sale/purchase models have their own pros and cons and each result in different tax consequences primarily for the purchaser. Generally, the asset acquisition results in the most favorable tax consequences to the purchaser. These matters as well as the negotiation of the terms of the transaction should be fully discussed with the purchaser’s advisors.

Purchasers can also expect to be required to sign a non-disclosure agreement before the selling party will provide any of the confidential information of the business to the purchaser in order for the purchaser to complete his/her due diligence on the business. All documents the purchaser is asked to sign, should be reviewed by purchaser’s legal counsel.

Should you need any assistance with the acquisition of a business, do not hesitate to contact the attorneys at Thomas Law Group. We have years of experience assisting both purchasers as well as sellers in these transactions.