Business buyers and business sellers have competing interests. Buyers want to buy a business for as little as possible and with as little financial risk as possible. Sellers want to sell for as much as possible and with as little tax liability as possible.
However, whether you are a buyer or a seller, you want certainty and a smooth transaction. Our business attorneys help buyers and sellers identify their goals, do due diligence, negotiate buy-sell agreements, and confidently close on the purchase and sale of Missouri businesses.
What to Think About Before Buying or Selling a Business
People selling a business are often concerned about:
- Finding the right time to sell
- Selling their business for top dollar
- Finding the right person(s) to run their business and continue the business reputation
At the same time, business buyers often think about:
- Whether they are buying the business assets or the entire business
- Purchasing the business for fair market value and not overpaying for the business
- Who will be responsible for business debts after the sale
- Learning as much as they can about the business before they decide to buy it
- What training the seller will provide before and after the sale
As a buyer or a seller, it is essential to identify your priorities before moving forward with the purchase or sale of a Missouri business.
Asset Purchases and Stock Purchases
Most business sales are either asset purchases or stock purchases:
- Asset purchase. The buyer acquires some or all of the business assets. Some buyers prefer this arrangement because they buy the business’s physical equipment and assets without incurring the business’s debts or liabilities.
- Stock purchase. The buyer purchases the seller’s stock interest in the company and thereby purchases debts and intangible business assets. Sellers often prefer this arrangement because the buyer takes over the seller’s debts.
Both asset and stock purchases follow the same general steps.
How the Business Buying and Selling Process Works
There are four essential steps to buying and selling a business. These steps include:
- Preliminary negotiations. During this stage, sometimes known as due diligence, the buyer investigates the business to determine what they consider to be a fair value for the business. Other factors, such as whether a board of directors’ approval is necessary, whether any government or third party document or contract reviews are necessary, and whether some employees will continue working for the business, may be discussed. At this point, the buyer and seller may enter a letter of intent for the business’s purchase.
- Drafting an agreement. The agreement should include: (1) a description of the business property, goods, and services included in the sale; (2) the purchase price, date, and manner of payment; (3) whether the buyer has the right to an inspection and the date by which that must be completed; (4) any warranties included by the seller; (5) the date when the business will change ownership and (6) other material clauses important to the business’s purchase and sale.
- Pre-closing review. Both parties will have a chance to review the agreement and negotiate any proposed changes to the agreement before closing.
- Closing. At the closing, all necessary papers will be signed to transfer the business from the seller to the buyer.
After the closing, any required documents will be recorded with the appropriate government offices.
Give Your Business a Strong Legal Foundation with Our Business Law Attorneys
Quality legal representation is an investment in the future of your business. The team at Layton & Southard serves business owners throughout Southeast Missouri and Southern Illinois from our Cape Girardeau and Perryville offices. Please contact us online or call our Cape Girardeau office directly at 573.335.3359 to schedule your initial consultation.