Ten Questions to Ask Your Attorney If You Are Buying a Business

You may be thinking you have found the perfect business to buy. Everything looks great, you have your financing lined up, and the current owner seems to be dealing straight with you. Unfortunately, there may be legal considerations you have not thought of.

If you are planning to purchase an existing business, one of the smartest investments you can make is paying for a couple hours with an experienced attorney. If you are still not convinced you need an attorney, consider the following ten questions and how you would answer them.

1. What will happen if there are legal considerations not mentioned by the previous owner such as building or health code violations?
2. Can I be held responsible for debts made by the previous owner?
3. How can I make sure there are no outstanding taxes owed by the business?
4. Can I be held liable for actions of the previous owner in discrimination or employment lawsuits?
5. Can I keep the old owner from starting another similar business?
6. Does owning this business violate a previous no compete agreement I already signed?
7. What is the best legal structure for the business?
8. What licenses will I need?
9. Are there any former employee obligations that I will inherit such as COBRA coverage if I buy the business?
10. If I purchase the inventory of the business, can I be held responsible if the previous owner still owes money for it?

There are many reasons to get the advice of an attorney when going into business, but this is never truer than when you are purchasing an existing business. There are many pitfalls that can bury your business before you even get started and a good attorney can help you avoid them.

This list should not be considered complete; your attorney will ask his or her own questions and offer specific advice depending on your exact circumstances. This should also not be mistaken as legal advice, only a licensed attorney can provide that.

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Business Attorneys - What Is Their Role When Buying And Selling A Business?

Competent business attorneys are a great addition to your team of advisor's when buying or selling a business.

Attorney's can cover your assets and help make a well structured deal, air-tight. When it comes time to draft agreements and close a deal you have to take precautions that you are not leaving any loose ends. You do not want any loopholes left open in your purchase agreements, stock sales, leases, or otherwise have any business liabilities that could come back to haunt you in the future.

When looking for a business attorney to help you with the purchase or sale of a business it is a wise choice to use an attorney with acquisitions or corporate transaction experience.

Oftentimes a party will have a relationship with the family attorney who does a great job handling matters of taxes, real estate, wills and things of this nature, but will end up winging-it when assisting a buyer or seller of a business. Buying or selling a business requires a specialist.
Corporate transaction attorneys will help you with your letter of intent, employment agreements, and non-compete agreements. They will guide you in due diligence by reviewing loans and leases.

The buyer's attorney will customarily draft a purchase and sale agreement and take care of the closing procedures for his party.

If you're retaining a general practice attorney to handle this for you, you're really just paying for your attorney's education. Just like there are doctors that specialize in all forms of medicine. The vast areas and specialties of law keep any single attorney from being good at all of it.

A real estate attorney will seem like a natural choice as well, from the sense of "Closing" a deal, especially in the case where smaller business a real estate broker is representing a party, but you still have to answer the question of competence handling the sale of a business or corporate entity.

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Get Your Business Off on the Right Foot


Nearly everyone dreams about being self-employed at some point in their life. If you're contemplating launching a new business venture, you need to think about more than the business itself. There are many legal dangers associated with owning your own business. If the business is sued for any reason, what happens to your personal savings, bank accounts, home and so forth?

If your insurance does not cover enough of a liability, how much of it will become your personal problem? If you have a partner are you responsible for his actions? What if he wants to leave or dies? Business laws vary in different states and countries, so it's important to consult a business lawyer before undertaking a new business venture.

There are certain advantages to making your business a corporation. A corporation's credit rating is separate from the founder and it's profits are its own. Liabilities and debts are solely the responsibility of the corporation. The chief executive officer, who could be you, has management control of the corporation. The articles of incorporation name a board of directors that includes a president, vice president, treasurer and secretary who oversee general business matters.
Instead of focusing on protection, a general partnership defines the terms of a partnership. In this case, each person has management control, shared rights on use of property, and shared profits. Each partner is liable for the debts, taxes and any litigation not covered by insurance. In the ordinary course of business, general partners each have the authority to enter into contracts with third parties without direct permission from the others.

While similar to a general, in a limited partnership there must be at least one general partner and one limited partner. The partners roles and liabilities are unchanged from a general partnership. The limited partner is treated much like a shareholder in a corporation. He has limited liability, and no management authority.

His pay comes as a return on his investment that's defined in the partnership agreement. Limited liability companies limit financial liability to a specified fixed sum. Often this sum is equal to a personal investment in the company. After this threshold is reached, owners and investors are protected from further debt and litigation liability.

As would be expected, in a sole management situation, an entrepreneur has sole management discretion. However they are completely liable for debts, taxes, and any potential litigation that could happen. Personal accounts and property may be seized to satisfy debts or taxes if you are unable to settle them through the business. In spite of these considerations, a sole proprietorship can still be attractive.

After you've decided which structure best fits your business there are other issues to address. There might be zoning issues or permits necessary, you might need an accountant, and you need to find out about local, state and federal taxes. Due to these complexities, consult an employment and business attorney before making any decisions regarding your new business. Starting on the right foot will ensure your success.

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