Buying or selling an existing business can be extremely stressful for both parties. The buyer is making a large investment and potentially taking on a great deal of exposure to liability. Meanwhile, the seller wants to get the best possible deal. In some cases, the deal can become adversarial. But that does not have to be the case.
Developing a plan to buy or sell a business can help both parties feel assured that they are making an informed decision, that the deal is fair, and that both sides can feel confident that they are minimizing exposure to liability. The end result can be an amicable deal in which the buyer and the seller can each sleep soundly at night knowing all their questions were answered and all their goals achieved.
Coming up with a framework for the anticipated agreement from the outset not only lets both parties know they are serious about negotiating a deal, but helps establish a roadmap going forward. The parties can agree to provide access to information about the business, while also protecting the parties in case the deal falls through by committing to keep information confidential.
The due dilligence period allows an inspection of the business records and other documents so that the buyer can enter into the agreement with eyes wide open. Any liens, violations, pending litigation, contracts or employment agreements would come to light and could be factored into the sale price. This also gives the buyer an opportunity to examine tax records, regulatory filings, and other documents that can indicate the health of the business.
Finally, prior to the closing, the state Division of Taxation will receive notice of the sale and notify the parties how much tax is due from the seller. That amount can be placed in escrow at the closing to satisfy any taxes that are due, protecting the buyer from taking on any tax liability.
With a thorough and well thought out plan, the purchase and sale of a business can be a transparent, smooth process that benefits both the buyer and seller.