Purchase and Sale of a Business

The purchase and sale of a business is a complicated process for which experienced legal counsel is essential. When representing clients in such transactions, your attorney should start the process by learning as much as possible about your business and the objectives of the transaction to identify the comprehensive set of issues that arise. These range from business matters and financial risks to legal hurdles. Obtain guidance from your attorney on identifying possible challenges and putting safeguards in place to prevent issues that may arise in the future.

There are two primary methods of transferring ownership of a business, either by sale of a business's assets or by the transfer of ownership of the entity itself:

Asset Purchase. This is a form of a business sale in which the buyer purchases specific assets of the company and assumes specific identified liabilities, rather than purchasing the stock of the company. There are a number of issues that can arise in such transactions that must be addressed in the Asset Purchase Agreement, such as inventory, accounts receivable and payable, the condition of assets, and assumption of the lease of the premises. 

Purchase of  Shares. In a stock purchase arrangement, the buyer is purchasing the company's equity from its owners. Importantly, a purchase of the company's stock includes the assumption of the company's liabilities. To avoid the assumption of liabilities and to minimize legal liability, purchasers sometimes prefer to buy the company's assets rather than its shares.

Non-Competition Provisions. Buyers will often require a provision in the purchase agreement prohibiting the sellers from competing with the business after the sale. The duration and geographic limitation of such provisions are negotiated by the parties. Courts will require such provisions to be reasonable to avoid impinging on commerce and trade.

Claudia Pollak has experience in advising on the purchase and sale of a business, assisting business owners and investors with a wide range of matters, including:

  • practical business and financing matters related to the transaction
  • selection of the right business entity, such as a corporation or limited liability company, to secure the most desirable liability protection
  • employment matters attendant to business transactions
  • discovering and managing liens and other corporate liability issues
  • negotiating the business terms and structuring earn-outs as part of compensation for sellers
  • reviewing applicable local laws and the need for licenses and permits for the lawful operation of the business

Other important matters to consider include assignment of the business trade name, transfer of customer lists, training of new owners and staff, and the introduction of new owners to important business contacts. 

Given the complexity and scale of the issues involved in the sale of a business, it is critical for both purchasers and sellers to retain an attorney with knowledge and expertise in such matters to guide them through the process and safeguard their interests. Claudia Pollak is available to assist with these matters. Call (914) 908-6220 for a free consultation today.

© 2020 Claudia Pollak Law PLLC
75 South Broadway, 4th Floor, White Plains, NY 10601
| Phone: 914-908-6220

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