Purchase or sale of a business is a complicated process for which experienced legal counsel is essential. When representing clients in such transactions, I start the process by learning as much as possible about the buyers’ objectives in the transaction in order to advise him or her on a comprehensive set of issues ranging from business matters and financial risks to legal hurdles. My goal is to identify possible challenges and put safeguards in place to prevent issues that may arise in the future, from negotiations and the due diligence phase to the final closing.
There are two primary methods of transferring ownership of a business, either by sale of the businesses’ assets or by the transfer of ownership of the entity itself:
ASSET PURCHASE AGREEMENTS
This is a form of a business sale where instead of purchasing the stock of the company, the buyer purchases specific assets of the company and assumes specific liabilities. There are a number of issues that can arise in such transactions such as inventory, accounts receivable and payable, condition of assets, and lease of premises that must be addressed in the agreement.
SHARE SALE AGREEMENTS
In a share sale of a business, the purchaser is buying the shares from the shareholders of the company. Purchasers generally prefer not to buy shares in order to minimize both tax and legal liability issues.