The Complete Guide to Buying a Business

Introduction

• Your Companion for Buying a Business
• Is This Book for You?
• Will You Need to Hire Lawyers, Accountants, or Other Professionals?

Part 1

Overview of the Process

1. Thinking About Buying a Business

• Business-Buying Worries
• Which Kind of Buyer Are You?
• Three Ways to Become a Business Owner
• The Basics of Buying a Business
• Key Steps in Buying a Business

2. The Key Legal Issues in Buying a Business

• Understand the Differences Between Buying a Business Entity and Buying Just Its Assets
• Consider Forming a Corporation or LLC to Buy the Business
• Be Clear on What You'll Buy and What the Seller Will Keep
• Pay Special Attention to the Transfer of Intellectual Property
• Know the Legal Consequences of Not Making Installment Payments on Time
• Assure That There Are No Liens on Business Assets
• Protect Yourself From Competition by the Seller
• Limit Your Legal Liability for Past Obligations of the Business
• Comply With State and Local Laws That May Affect Your Purchase

3. Tax-Saving Strategies

• Understanding Business Write-Offs
• Buying Assets vs. Buying the Entity
• Allocating the Purchase Price in an Asset Sale
• Writing Off Purchase-Related Expenses

4. Finding the Right Business for You

• Before You Begin
• Attractive Businesses May Be Nearer Than You Think
• You May Be a Strategic Buyer
• Finding a Business by Word of Mouth
• Finding a Business Through Advertising -- Yours and Theirs
• Business Brokers Can Help Find Sellers
• What Sellers Want to Know About You

5. What's the Business Worth?

• There's No Universal Pricing Formula: Many Factors Affect Price
• Sales of Comparable Businesses
• The Asset-Based Approach
• The Income Valuation Approach
• Industry Formulas and Rules of Thumb
• How Appraisers and Other Experts Can Help You Decide on a Fair Price
• Putting Together All the Information

6. Working With Lawyers, Accountants, and Brokers

• Lawyers
• Accountants
• Business Brokers

Part 2

Getting Ready to Buy

7. Financing Your Purchase

• Lump Sum Purchase
• Installment Purchase
• How Sellers Try to Protect Themselves in an Installment Sale
• Show Me the Money: Where You Can Get Funds for a Lump Sum Purchase or Hefty Down Payment
• The Difference Between Loans and Equity Investments

8. Structuring Your Purchase

• Asset Sale vs. Entity Sale
• The Seller's Future Role
• Restrictions on the Seller: Noncompete Agreements
• The Future of Key Employees

9. The Investigation Stage: How Buyers and Sellers Check Each Other Out

• Your Investigation of the Seller's Business
• Paperwork the Seller Should Provide
• The Role of Confidentiality Agreements
• Information to Garner From Other Sources
• Why and How the Seller May Check You Out

10. Drafting a Letter of Intent

• Why Use a Letter of Intent
• What to Put in Your Letter of Intent
• Why You Should Only Sign a Nonbinding Letter of Intent
• Format for a Letter of Intent

Part 3

Preparing the Sales Agreement

11. Preparing the Sales Agreement and Other Legal Documents

• Overview of Your Sales Agreement
• Related Legal Documents
• Well-Drafted Documents Are Crucial
• Preparing Your Sales Agreement and Related Legal Documents
• How to Prepare Attachments to Your Sale Agreement
• Steps in Finalizing Your Sales Agreement and Other Documents
• Amending Your Sales Agreement

12. Who's Selling, Who's Buying -- And What Is Being Purchased

• Naming the Parties
• Identifying the Business and What You're Buying in an Asset Sale
• Identifying the Business and What You're Buying in an Entity Sale

13. The Sales Price and Terms of Payment

• Sale Price: Asset Sale
• Inventory: Asset Sale
• Dealing With the Purchase of Accounts Receivable: Asset Sale
• Sale Price: Entity Sale
• Deposit
• Payment at Closing
• Promissory Note
• Security for Future Payment: Asset Sale
• Security for Future Payment: Entity Sale

14. Dealing With Liabilities and Representations

• Liabilities in an Asset Sale
• Liabilities in an Entity Sale
• Representations: What They Are and Why They Matter
• Seller's Representations
• Buyer's Representations

15. Payment for Noncompete Agreements and Consultant Deals

• Seller's Agreement Not to Compete With the Business After the Sale
• Seller's Agreement to Work for Your Business After the Sale
• Current Employees of the Business You Are Buying

16. Other Important Legal Language for the Sales Agreement

• Contingency Clause
• Closing Arrangements
• Dispute Resolution Clause
• Technical Contract Clauses
• Additional Optional Clauses

17. Signatures on a Sales Agreement

• Required Signatures for Sole Proprietors on a Sales Agreement
• Required Signatures for an Entity on a Sales Agreement
• A Spouse's Signature on the Sales Agreement
• Signature Clause in a Sales Agreement
• Typical Formats for Signing a Sales Agreement
• Accepting Personal Responsibility for Commitments in a Sales Agreement
• Signing the Sales Agreement

Part 4

Preparing the Promissory Note and Other Sales Documents

18. Promissory Notes and Other Installment Payment Documents

• The Promissory Note
• The Security Agreement
• The UCC Financing Statement
• Escrow Agreement for Entity Sale

19. Bill of Sale, Lease Assignment, and Other Documents for Transferring the Business

• Bill of Sale: Asset Sale
• Bulk Sales Compliance
• Assignments in an Asset Sale
• Transferring an Entity
• Assignments in an Entity Sale
• Your Entity's Approval of a Business Purchase

20. Documents for Noncompete and Future Work Commitments

• Covenant Not to Compete
• Contract for Employment
• Contract for an Independent Contractor

Part 5

Closing the Deal

21. Preparing for a Smooth Closing

• Where and When to Hold the Closing and Who Should Attend
• Documents for Transferring Assets
• Documents for Transferring an Entity
• Handling Last-Minute Problems
• Looking Ahead

22. Running a Small Business: Some Legal and Tax Basics

• Entity Concerns
• Safe Business Practices for Your Corporation or LLC
• Tax Basics
• Insuring Your Business
• Negotiating a Favorable Lease
• The Road to Success

Appendixes

A. How to Use the CD-ROM

• Installing the Form Files Onto Your Computer
• Using the Word Processing Files to Create Documents
• Using Government Forms
• List of Forms on the CD-ROM

B. Sample Sales Agreements

• Sample #1: Asset Sale of a Restaurant by One Sole Proprietor to Another
• Sample #2: Entity Sale of a Bookstore by the Two Shareholders to an Individual
• Sample #3: Asset Sale of a Landscaping Business by a Single-Owner LLC to a Partnership

C. Forms

• IRS Form 8594,
• Asset Acquisition Statement and Instructions
• UCC Financing Statement and Addendum

Index