Buying a business can be a big purchase. You are investing your money into something that you hope will make you more money. However, failing to lay out key elements in a purchase agreement can lead to disagreements, litigation or may mean that you get something different than what you thought you were getting. If you are buying a business, here are three important elements that need to be fully spelled out in a purchase agreement.
Whether You Are Buying Assets or the Business Entity
One of the first factors that needs to be laid out in a purchase agreement is whether you are buying the business entity or whether you are simply buying assets from the business. If you are buying assets from the business, you may be buying their fixtures, machinery, patents or licenses. If you are buying the business, you are buying the business as a whole, including its current assets, business name, website and other vital information. Always be sure the contract lists what you are buying and what you are getting for the money you are paying.
Key Information About Due Diligence
As a buyer, it is your job to complete your due diligence in researching the business. Prior to purchasing the agreement, you will be given a period of time to look over key business documents, including financial information, tax information, patents and copy rights. The purchase agreement should list when the due diligence period starts and when the period closes. It should also list what information the owner has to turn over to you to review. Many purchase agreements give you, the buyer, the right to back out of the purchase if you do not receive the information you need to review, or if the information does not match previous information you may have been given or lead to believe about the company.
The Terms of a Potential Non-Disclosure and Non-Compete Clause
Finally, a purchase agreement should detail the terms of any potential non-disclosure agreements and non-compete clauses. It is very common for you to ask the seller of the business to sign a non-disclosure agreement so they do not tell their trade secrets to your competitors. It is also common to ask a seller to sign a non-compete clause so they do not turn around and open up the same type of business that they just sold and increase your competition.
When you are buying a business, it can be extremely beneficial to you to hire a business litigation lawyer to review your business purchase agreement. They can also help you complete the due diligence process of checking out the business before the purchase is made. Contact a local business litigation lawyer to learn more about they ways that they can help you with a business transaction that you are considering completing.
Share10 October 2019
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